eCommerce

Internet Based Electronic Commerce and Small to Medium Enterprise in the Illawarra Region  

 Brendan Dowler and Michael Lawrence-Slater

School of Information Technology and Computer Science

University of Wollongong

Brendan@leisurecoast.com.au;Michael _Lawrence-Slater@uow.edu.au

Introduction

The role of Internet based electronic commerce (I-Commerce) in a changing business paradigm is the focus of this paper. I-Commerce can provide competitive advantage for early adopters, however time is running out for such advantage with this process quickly becoming a business requirement. The aim of this paper is to investigate the adoption rate among the largest sector of Australian business, Small to Medium Enterprise (SME).

Internet Commerce

Computer based commerce is not new, however, the application of the Internet to this electronic business process is having rapid and far reaching effects. A new business paradigm is in formation based on the utilisation of the Internet's open systems architecture as the transmission medium. This is in comparison to current methods that use closed systems such as proprietary networks and VANs (Value Added Networks). Figure 1 shows both the old and new computer based business processes that comprise the larger concept of E-Commerce and their relationship with respect to one another.

  The Survey

The basis of this paper is a survey of the SME sector in the Illawarra region. Surveys were sent to the approximately 800 organisations that are members of the Illawarra Business Chamber with 245 responses returned, a rate of approximately thirty one percent (31%). The Telstra (1998) study provides the basis for the questions in the survey allowing credible comparison of findings.

The survey consists of four sections. The first section is general information and includes questions about business characteristics and current use of computers and Internet technologies. The second section enquires to the respondents use, or interest in, the different levels of I-Commerce capability. Section three asks about the geographic location of customers and expectation by trading partners to introduce I-Commerce. In the final section a ranking of the perceived benefits and barriers is obtained. 

Characteristics of Survey Participants

All respondents to the survey  satisfied the criteria of a small to medium enterprise; ie: two hundred or less employees. Nearly half of the respondents were very small enterprise with forty seven percent having less than ten employees. The traditional industrial characteristic of the Illawarra region is reflect through the participants industry type with the largest group (28%) belonging to the manufacturing category. A change can be seen in this focus with a considerable contribution (22%) from business services type industries. Most respondents customers originate from the Illawarra area with sixty percent indicating their major customer base was from the local area.

Internet Characteristics

Connection

The Internet connection rate was higher among 'white collar' type respondents than traditional 'blue collar' industry like manufacturing and construction. Larger organisations also returned higher connection rates. Further to this the connection rate also increased in propensity to the enterprises distance from its customer base (96% overseas). E-mail is the most popular use of the Internet by seventy one percent of participants. Other popular uses were reseaerching (56%) and advertise/promotion with 25%.

Benefits of I-Commerce

"Utilising the Internet for Electronic Commerce allows small business to act like big business." (Poon and Jevons, 1997).

The following table, Table 1, presents the survey responses to five specified benefits of I-Commerce providing a ranking to respondents beliefs of potential impact on their organisation.

Table 1 shows that the Illawarra survey reflects the trends evident in the national survey. Both studies find expanded geographical coverage as the major perceived benefit. Competitive advantage and please customers were also identified by a large number of survey participants. Seen as less benefit were reduce selling costs and allow to sell direct to end user.

I-Commerce Issues

Barriers to I-Commerce

Table 2 presents the responses to nine specified drawbacks of I-Commerce providing a ranking to respondents concerns about the changes presented by I-Commerce.

The trends evident in the Illawarra findings are again reflective of national studies. The only change in the order of perceived drawbacks seen as a major concern are the top two responses, with lack of personal contact with customer and customers not prepared for financial transactions over the Internet switching positions. The former of these concerns received forty four percent as a major concern as did most customers not ready for E-Commerce and people being able to hack into system.

Of least concern was technology too new to be relied on, customers go direct to suppliers and cost of hardware and software. These findings agree with Crawford (1998) and Behrendorff (1996) who state that technological based issues are no longer a major drawback for the adoption of I-Commerce. Rather, as these figures show, societal issues towards customer perceptions and security are the major hindrance to adoption of I-Commerce.

Capability and Interest of Web Presence

I-Commerce Capability Levels

Table 4 shows the capability levels of respondents with an Internet presence. These levels are based on the criteria of Cooper and Burgess (1998); Promotion, Provision and Processing. These figures relate to the one hundred and twenty three respondents (50%) that indicated they have an Internet presence through a homepage. The most basic capability, promotion, recorded ninety three percent of all business with a home page and forty seven percent of all Illawarra organisations having this facility. The capability rate falls as the complexity rate rises with eleven percent responding to have the highest capability level of processing.

Interest in Alternative Levels of I-Commerce

Respondents that did not indicate an Internet homepage were asked to indicate their level of interest in the three stages of I-Commerce. The responses are provided in Table 4.

Interest in I-Commerce by respondents without an Internet presence can be seen to reflect the responses of those that do. Most interest is indicated in simple levels of capability, falling as complexity rises. This resistance to the highest level of capability is evidenced by 31% of participants responding no interest in pursuing business Processing capability through the Internet.

Key Survey Findings

Nearly half (47%) of the survey participants were very small in size, ie: 1-10 employees. The manufacturing sector was the largest (28%) of the seven industry classifications. The survey findings show that most respondents are located geographically close to their customer base. Local, ie: within a few kilometres (31%),  Illawarra region (29%) and Elsewhere in New South Wales (22%) were the three most popular origins of customers, and account for most respondents to the survey.

A high proportion (85%) of survey participants have an Internet connection, and the rate is higher among larger organisations. There is a general trend indicating traditional 'blue collar' industries like manufacturing, building / construction and wholesale / retail are less likely to have an Internet connection than 'white collar' organisations. Respondents more geographically removed from their customer base showed a higher Internet connection rate, eg: overseas - 96%. The main uses of the Internet were E-mail (71%), information retrieval (59%), and promotional activities (25%).

The major benefit is  allow expanded geographical coverage (59%). This result concurs with findings in the literature. However, fifty percent of Illawarra survey respondents indicated competitive advantage as a major benefit. This result is twenty percent above that of national findings. The major concern of respondents was customers not prepared for financial transactions over the Internet (50%). Other customer based concerns (44%) and security issues (44%) are also major drawbacks. Technological based drawbacks were of concern to comparatively few Illawarra organisations.

Half (50%) of respondents have a homepage, most with limited levels of capability. Only eleven percent facilitate order and payment transactions, indicative of the concerns expressed in I-Commerce. Similar feeling is expressed through interest ratings by those without a presence. There was high interest for the promotion and provision levels however, a significant (31%) number of survey participants responded no interest in processing capabilities.

Conclusion

Overall the results of the Illawarra survey reflect the findings of the literature, particularly the Yellow Pages Small Business Index (1998), upon which this survey was modelled. The same patterns are evident in Internet use, benefits, concerns, and Interest in adoption of I-Commerce. The major finding is that there is scepticism regarding the more sophisticated capabilities of I-Commerce, especially where financial transactions are involved, and is the major hindrance to its adoption.  

Future Research

With I-Commerce at an embryonic stage of development there is a lack of longitudinal studies to provide a balanced perspective. It would be beneficial if a study similar to this one were undertaken in the future to compare any changes over a given period of time. Collaborative research would also be beneficial for comparison. This project made comparison to national findings, however comparison to other regions at a given point in time, particularly those with similar characteristics, should be encouraged. Finally, there is a lack of reliable literature regarding different industries operational dynamic, and its impact on acceptance and adoption of I-Commerce. Concepts such as the commercial cycle of an organisation, and the appropriateness of I-Commerce in relation to it. A study of this type should focus on whether the issues discussed in this paper are pertinent to particular industries through more in-depth study of participants.

List of References

Behrendorff, G., Fisher, J., Goldsworthy, M. (1996) Advice on Electronic Commerce Programs for Small to Medium Enterprises, Prepared for the Department of Industry, Science and Tourism by the Centre for Electronic Commerce, Monash University

Cooper, J., Burgess, L. (1998), The Status of Internet Commerce in the Manufacturing Industry in Australia: A Survey of Metal Fabrication Industries, CollECToR '98 Conference.

Crawford, J., (1998) " Networked Enterprise Web Strategy: a project to Get Smaller Enterprises On-line", Report written for The Department of Industry, Science & Tourism and Tradegate ECA

[WWW Document]. URL:  http://www.dist.gov.au/infoind/busonline/gbo.pdf, accessed 28 July 1998

Marzbani, R., Wong, C., Holmes, M., Chick, H., (Consult.com) Ghassemi, K., Moore, P., (Department of Industry, Science and Tourism) (1998) "stats. electronic commerce in Australia"

[WWW Document]. URL: http://www.dist.gov.au/infoind/stats/ecostat.pdf, accessed 18 July 1998

Poon, S.  and Jevons, C. (1997) "International Entrepreneurship Opportunities For Small Business Using the Internet", Swinbourne University of Technology

Telstra (1998) Small Business Index, "Survey of Electronic Commerce in Australian Small and Medium Businesses"

[WWW Document]. URL: http://www.yellowpages.com.au/sbr/sbindex, accessed 15 June 1998