Chapter 12: E-Business

Development Issues in UK SME’s

Agny Ismaya

Agung Setyaji

Alfrina Mewengkang

Alif Zaki Mubarok

Almasari Aksenta

Andika Arif Sukrawan

Ari Triono

Arif Nurjaya

Managing IT in Government, Business & Communities

by Gerry Gingrich (ed)

Idea Group Publishing © 2003

Introduction

Methodology

e-Commerce Activity

e-Commerce Strategy and Manager Perception

Project Resources

Training and Support Needs

Conclusion

Future Direction

Introduction

– Agny Ismaya

This chapter traces some of the

current e-business development

issues in selected regions of the UK

and looks at the extent to which take-

up of e-business has been facilitated

by government initiatives.

The aim of the research is to present a pilot

study for situational analysis of e-business/e-

commerce development

• 3.7 million SMEs in the UK at the start

of 2000 (UK online for Business)

• 99% of the business had less than 50

employees and they provided 45% of

the UK non-government employment

and 38% of turnover

• This gives an indication of the relative

importance of SMEs to the success of

present UK government e-commerce

initiatives

• In 2000, only 1.7 million smaller firms were connected to the

Internet, and still less, 450,000 of them, were trading online.

• A later survey by the UK Office of National Statistics revealed

significant variations in e-commerce implementation across the

UK

• London and the southeast region "considerably" outpacing

Internet sales in other regions (Saliba, 2001).

• The UK bought $28.6 billion in

goods and services

• London-based companies

accounting for $7 billion

• the northeast and east Midlands

spending less than $1.5 billion

"significant variations" that were

of interest to the researchers in

this case

The research undertaken has

focused on the lower spending

regions to try to ascertain what

are the limiting factors for

companies in these regions

Consumer Online Spending at UK Sites 1997–2002

• The period 1997-1999 saw

exceptional e-commerce growth

within the UK through many new

"get rich quick" ventures

supported by significant venture

capital input.

• At the same time, established

businesses looked to Internet

technologies to support or

revolutionize their existing

business processes.

• After a series of dot.com collapses, 2000-2001

venture capital has largely dried up, but the

market has continued to grow steadily with many

mergers and acquisitions between new and old

economy firms each supporting the other by

exploiting their experiences and core

competencies.

• In September 1999, the Performance and

Innovation Unit (PIU) published a report, "e-

commerce@its best," which found that the UK

was the leader in e-commerce developments

within Europe, but still behind the USA, Canada,

Australia, and Scandinavia on key measures of

business e-commerce use.

Methodology

– Agung Setyaji

The approach to be taken was that of an in-depth

exploration of the factors that affect each of the

companies studied. It was decided that interviews

would be the most appropriate main data collection

method, with supplemental data being provided by

documentation related to each of the businesses.

Setting up and travelling to the interviews proved very

expensive in terms of resource time and meant that

one interview was eventually carried out over the

telephone to alleviate these problems.

• The interview consisted of 25 questions divided into three

key sections: e commerce strategy, project resources, and

technology;

• The interview combined open and closed questions, though

there was an emphasis on the need to draw out underlying

reasons and rationale for actions, so open questions were

more suitable.The interview combined open and closed

questions, though there was an emphasis on the need to

draw out underlying reasons and rationale for actions, so

open questions were more suitable;

Company A is a wine and spirit merchant based in the Midlands, employing 10 people

Company B is a pump manufacturer based in the West Midlands and employs 14 people;

Company C is a furniture retailer based in Yorkshire, employing 10 people and has a pure play business model

All of the case studies are three SMEs, there are:

Why choose these SMEs?

• In fact, two of the companies studied had

applied for UK Department of Trade and

Industry awards for excellence in e-business,

and one of the companies studied had won an

award for its Web site design and e-business

operation;

• All of the case studies are SMEs that have

established an e-commerce service in the last

18 months;

• All three of these companies are operating

successfully, though with different approaches

and attitudes.

e-Commerce activity

– Alfrina Mewengkang

• The UK has experienced a proliferation of business use of the

Internet in terms of the volume and variety of business

processes supported via e-mail, Web, and other means of

information distribution and dissemination (Duan, Mullins, and

Hamblin, 2000)

• All three of the case studies have access to the Web, a hosted

Web site, and external mail to communicate with customers,

which means that a comparison of their operations is likely to

provide interesting insights.

• All three Web sites are categorized as catalogue sites; however,

although this would normally equate with a situation where the

level of customer engagement is relatively low, two of the

companies relied heavily on the use of the telephone to build

customer relationships after the initial Web contact had been

made. In terms of historical technological issues, only Company

A actively sought the integration of legacy systems

• The findings to date suggest a lack of business to business

(B2B) e-commerce supported by integrated networks through

the supply chain.

• Company C, who deals with very large manufacturers down to

the individual artisan who makes a piece of furniture from

scratch in a little workshop, despite a stated wish for more

supply chain integration, this is not likely to be possible in the

near future

• Company A, where the customers did not want to see supply

chain integration mean this is a goal for the future rather than an

immediately achievable situation.

• Comments from those interviewed included the following: "Our

suppliers are not geared up to extranet"; "We are not large

enough to support that kind of system and we don't have large

orders.―

• Amongst those reasons identified by the research were cost of

development, infrequency of orders, and fear of being tied into

to a stronger companies system

• Issues such as the availability of grants and other monies to

undertake development were also explored and it became

apparent that this is problematic

• Company A also did a considerable amount of trade with other

companies that did not wish to be tied to a minimum order

level or a minimum delivery period.

e-commerce strategy and

manager perception

– Arif Nurjaya

• The two click and mortar companies

managers: e-commerce strategy did not

take precedence because e-commerce

revenues remain relatively minor

• The pure play manager: e-commerce

and business strategy "are the same for

us."

The pure play manager: e-commerce and business strategy "are the same for us."

Manager Perception

harryvanyogya

@Harryvanyogya

The two click and mortar companies managers: e-commerce strategy did not

take precedence because e-commerce revenues remain relatively minor

Manager Perception

• Company C, as the only pure play, built its business

model on e-commerce

• Company A's key drivers were a combination of first

mover advantage and competitor pressure, sees any

business coming from the e-commerce operation as

purely "extra" or "over and above."

• Company B's key drivers were competitor pressures,

it has never pursued an aggressive e-commerce

strategy

Project Resource

Training and Support Needs

– Almasari Aksenta

• Resource that explain how to develop a

company projects.

• A project development is used to

improve the performance of company

business

• Company A, developing website

with connecting application that

resourced by 40% of business link

funding.

• Company B, developed by CEO’s

company.

• Company C, developed by CIO

who is contributed by IT business’s

friends.

• Development of company applications

common needs funding

• They know the funding avaibility, but didnt

know to get it

• Government’s planning just become

discussion but didnt accomplish fluently

• More offers of funding by Business Link with

the high taxes, so the company would prefer

bank with the low taxes.

• Funding becomes a problem for

website/applications development

• Getting the funding resources can be done

by funding loan which the low taxes.

• Not only rely on the funding, but also the

workers or CEO who have IT competence

contributed to developing

website/applications so that the company

spend relative small funding (no need for IT

services developer).

• Support need to using an application

• Make training for employees

• Spend an extra funding for training necessary

• Surely there are other companies that take advantage of

training, ex: IT training services

SMEs should be made more flexible (easy to use)

Conclusions

– Andika Arif Sukrawan

• The authors are aware that given the

small sample size interviewed here

• The three organisations have

produced some strikingly similar

results

• This encourages us to feel that these

issues are pertinent and can be

explored in greater depth in an

extension of the work to date; of those

interviewed there was a lack of

awareness of the options for

businesses

• Many organisations appear to be prejudiced from prior

knowledge or experience of having to buy into

expensive EDI network integration through traditional

hub and spoke models

• One firm in particular showed a lack of awareness of

Web alternatives to the expensive and standard

controlled EDI network configurations of the previous

decades

The research suggests that further

information about alternative technical

solutions and evaluation of implementing

these solutions is necessary, and that the

role should be facilitated by impartial

sources — possibly through more focused

government initiatives

• Individuals within the business had

no time to look at possible

initiatives.

• In particular, one individual

interviewed stated that the firm's

profit margin had decreased

substantially, an occurrence

throughout their industry resulting

in a fear of investing any funds or

human resource into a "blue sky"

project

• There is some evidence within these

preliminary findings that the actual e-

commerce development within SMEs may

rely very heavily on the personal networks

of the managers

• There was evidence from two of the firms

of heavy reliance on friends who work

within the IT industry or have an interest

in developing home networks.

Interestingly, this included the pure play

business

• The results to date suggest knowledge of government

and other independent initiatives for supporting e-

commerce development within SMEs, but a significant

number of poor experiences using these initiatives

• At least one company had accessed the government's

e-business support site, but found the site to be

unhelpful, all documentation superficial, and full of

unrealistic promises with no online support network

available

• Companies such as Business Link actively

approached at least one business on a monthly

basis, suggesting that SMEs are made fully aware of

initiatives offered by local and national government

• One company had such a bad experience with

government initiative support that they asked the

representative to leave the site. The main problem

appeared to be that the representative had not had

time to fully research the business environment and,

as a result, had failed to establish trust with the

managers of the business

future direction

– Ari Triono

• The initial pilot study has barely scratched the surface of the

myriad of reasons why e-commerce take-up may differ

regionally within the UK.

• It is intended to take the research further now by expanding

the number of SMEs interviewed, while trying to balance the

different categories already identified.

• The methodology chosen

has worked well, but as

each interview lasts in

excess of an hour,

consideration needs to be

given. One possible

solution is to reduce the

number of questions asked.

• Some balance here must

be preserved with the

richness of the data and the

previously mentioned

rapport that was found in

the interview situation.

• A further issue that has been highlighted has

been that we may be directed to the wrong

person.

• A more easily achievable approach is that of

using a methodology to assess the potential

benefits of using an e-commerce strategy

• Their methodology has been designed to

support businesses in their move from

what they term level 2 to level 3.

Hackbarth and Kettinger (2000).

• Strategic managers were aware of e-

business activities, but have not identified

stakeholders or mission

statements/objectives to meet through

any strategy development methodology.

• identified issues for two out of the three companies is a lack of knowledge

and understanding about UK government funding initiatives for e-commerce

development in SMEs

• the UK Department for Trade and Industry will be approached to discover the

full range of information and grants available to SMEs and to ascertain how

to make this information more accessible to those SMEs who are unaware of

what help is available.

One more thing…

– Any Questions?