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E-commerce has essentially changed the way business is done. In the last decade, East Asia Pacific countries witnessed a rapid development in e-commerce. Enormous benefits have been reaped by those first-movers in e-commerce. However, the e-commerce participants are mainly large companies. Small and medium-sized enterprises (SMEs) have been slow in adopting e-commerce. The thesis aims to examine the main factors that have retarded the SEMs’ e-commerce adoption in East Asia Pacific countries.
This paper starts with a general review of e-commerce and SMEs. In this paper, e-commerce is defined as sharing business information, maintaining business relationships, and conducting business transactions through the Internet. SMEs play a significant role in the economy of East Asia Pacific countries. E-commerce is supposed to be able to bring SMEs great benefits. To encourage SMEs to adopt e-commerce, it is imperative for the governments of these countries to identify the factors that have hampered SMEs’ e-commerce adoption and then take measures accordingly.
To identify the impediments hindering SMEs’ e-commerce adoption in
Key Words: E-Commerce, SMEs,
The fundamental of competition are changing as a result of the growth of global markets, the increased speed of commoditization, the technological revolution and continued change in customer expectations. What is more the growth, integration, and sophistication of information and communication technologies (ICTs) is significantly impacting our society and economy. Today, computers and other electronic devices increasingly communicate and interact directly with other devices over a variety of networks, such as the Internet.
Consumers and businesses have been particularly quick not only to recognize the potential but also to attempt to realize the benefits of adopting new computer-enabled networks. For instance, consumers now routinely use computer networks to identify sellers, evaluate products and services, compare prices, and buy and sell products and services. Businesses are using networks even more extensively to conduct and re-engineer production processes, streamline procurement processes, reach new customers, and manage internal operations this is known as the electronic commerce (e-commerce) evolution.
The e-commerce revolution has affected all organizations but of particular interest is its effect on small and medium-sized enterprises (SMEs) since we can observe an interesting duality where these companies are most likely to benefit from the opportunities afforded by e-commerce (since through e-commerce it is possible to level the playing field) and yet they appear to be slowest in embracing many of these e-commerce possibilities. On several social and economic grounds, SMEs are of overwhelming importance in most Asian countries. In fact, they comprise well over 90% of all enterprise in this region and provide employment for over half of the region’s workforce (Wattanapruttipaisan, 2002; APEC, 2001). Typically, the SME sector accounts for upwards of 90%of all firms outside the agricultural sector of East and South-East Asia, and of
Given the importance of SMEs to this region, it becomes crucial to understand the obstacles they are facing and thus understand why e-commerce adoption has been slow, if at all, for these SMEs, and then, suggest changes to policy that may enable the alleviation of such obstacles and hence encourage the successful embracing of e-commerce for these SMEs.
This paper attempts to do just this by describing the key factors that are hindering SMEs’ participation in e-commerce and the obstacles to SMEs for e-adoption in the East Asia Pacific region based on a literature review and case studies.
There is no single definition of an SME. Almost every country has its own definition of what constitutes an SME. Some of these definitions are based on quantitative measures such as staffing levels, turnover, or assets, while others employ a qualitative approach (Jafari M. et al., 2007). Meredith (1994) points out that any description must involve a quantitative element that takes into account staff levels, turnover, and assets together with financial and non-financial measurements, but that the definition must involve a qualitative element as well that delicates how the business is constructed and how it works. In February 1996, the European Commission adopted a communication setting out a single definition of SMEs to be applied to programs and proposals dated from December 31, 1997(Small Business Definitions, 2009). On 6 May 2003, the Commission adopted a new recommendation in order to take account of economic developments since 1996 (Commission, 2003). It entered into force on 1 January 2005 and will apply to all the policies, programs and measures that the Commission operates for SMEs (Commission, 2003). For Member States, adoption of the description is voluntary, but the Commission is inviting them, integrated with the European Investment Bank (EIB) and the European Investment Fund (EIF) to apply it as broadly as likely (Commission, 2003). This recommendation defines SMEs based on three criteria: staff headcount, annual turnover and annual balance sheet. Though, this definition has not been widely accepted yet, and it has been universally applied throughout the world. In
Meanwhile, there have been many studies in the literature that have attempted to identify the definitions of SMEs. SMEs are not simply scaled-down versions of large businesses (Wynarczyk, et al., 1993). Although size is a major distinguishing factor, SMEs have a number of other unique features that set them apart from large businesses. There have been various studies carried out in order to isolate these features (Bunker&MacGregor, 2000; Dennis, 2000; Hill&Stewart, 2000; Miller&Besser, 2000; Reynolds et al., 1994; Tetteh& Burn, 2001).
Chart 1 SMEs Industry Distribution
Source:
From the chart, it can be said that:
1.
2. Unlike SMEs in developed countries, which mostly engage in service industry,
3. While SMEs in developed countries tend to have a limited business coverage range,
4.
SMEs play a much more significant role in
This thesis is divided into four sections. Section 1 is a brief literature review. The content in this section comprises two parts. In the first part, some general knowledge about e-commerce, including the definition of EC, categories of e-commerce and the impacts of e-commerce on economy, will be introduced. In the second part, knowledge of small and medium size enterprises (SME) will be presented, followed by a presentation of impacts of e-commerce on SMEs and a review of the literature dealing with SMEs’ e-commerce adoption in Asian countries. In Section 2, the obstacles to SMEs’ e-commerce adoption will be examined through a few case studies. Section 3, based on the proceeding section, suggests some measures to encourage the e-commerce adoption by SMEs in Asian countries. Section 4 concludes this thesis by giving a summary of this paper.
Over the thousands of years that people have engaged in commerce with one another, they have adopted the tools and technologies that became available. For example, the advent of sailing ships in ancient times opened new avenues of trade to buyers and sellers. Later innovations, such as the printing press, steam engine, and telephone, have each changed the way in which people conduct commerce activities. In last decades, with the advancement in information and communication technology (ICT), especially the Internet, people are starting to do business in completely different ways from those adopted in traditional business activities. The Internet has changed the way people buy, sell, hire, and organize business activities in more ways and more rapidly than any other technology has in the history of business. Such ICT-and-Internet-based business activities are called electronic commerce (e-commerce).
Since electronic commerce and its participants are so numerous and their intricate relationships are evolving so rapidly, different parties have a different understanding of what electronic commerce means. Actually, there are nearly as many definitions of e-commerce as there are contributions to the literature. Turban et al. define e-commerce as "an emerging concept that describes the process of buying, selling or exchanging services and information via computer networks"(Turban et al., 2000). Choi to al. (as cited in Turban et al.) draw a distinction between what they term pure e-commerce and partial e-commerce. According to Choi et al., pure e-commerce has a digital product, a digital process, and a digital agent. All other interactions (including those that might have one or two of the three nominated by Choi et al.) are termed partial e-commerce. Raymond defines e-commerce as “functions of information exchange and commercial transaction support that operate in telecommunications networks linking business partners (typically customers and suppliers)” (Raymond, 2001). Damanpour, in comparison, defines e-commerce as “any ‘net’ business activity that transforms internal and external relationships to create value and exploit market opportunities driven by new rules of the connected economy”(Damanpour, 2001). Kalakota and Whinston define EC from these perspectives (Kalakota and Whinston, 1997):
From a communications perspective, e-commerce is the delivery of goods, services information, or payments over computer networks or by any other electronic means.
From a business process perspective, e-commerce is the application of technology toward the automation of business transactions and work flow.
From a service perspective, e-commerce is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.
From an online perspective, e-commerce provides the capability of buying and selling products and information in the Internet and other online services.
What is common in all these definitions is that electronic commerce involves some kind of ICT-based networks in at least one phase of the business activities—marketing, selling, delivering and customer relationship maintaining. As we know, ICT includes a variety of technologies, such as telephone, the fax machine, the television, radio, the Internet and mobile phones. That is to say, all the business activities involving some of these technologies in one or more phases of the business activities can be labeled electronic commerce. From this perspective, e-commerce has existed for many years.
Electronic data interchange occurs when one business transmits computer-readable data in a standard format to another business. Notwithstanding, it was only after the emergence of the Internet that the notion of electronic commerce became understandable to the public. The reasons are simple. As entire transactions can take place via the Internet, individuals could all of a sudden conduct business without knowing either their client or business associate outside of an electronic reality. Moreover, the Internet is a more convenient tool than other aforementioned instruments, as it offers a more efficient and cheaper way to conduct business, extending benefits to both potential merchants and consumers. While the other instruments offer cheap and efficient services, each exists as a minor modification of traditional business and not as something new not as what one would like to think of as electronic commerce. That said, it should be noted that the five instruments are still widely used. In fact, the use of the Internet itself can sometimes be combined with the use of a telephone, a fax machine, or even with traditional non-electronic methods of transaction, like the shipping. However, this only shows that the existence of the Internet offers more choices for consumers. As the Internet is the main instrument for the evolving electronic commerce, it is thus the purpose of the present study to focus on commerce conducted through the Internet.
This paper starts with a general review of e-commerce and SMEs in
The several categories of e-commerce in use today are classified based on the nature of the transactions, including business-to-consumer (B
l Business-to-Consumer (B
In B
l Business-to-Business(B2B)
B2B involves electronic transactions among and between businesses. This technology has been around for many years through EDI (Electronic Data Interchange) and electronic funds transfer (EFT). In recent years the Internet has significantly increased B2B transactions and has made B2B the fastest growing segment within the e-commerce environment. The reliance of all businesses upon other companies for supplies, utilities, and services has enhanced the popularity of B2B e-commerce. An example of B2B is an auto exchange formed by Ford, Daimler Chrysler, and General Motors called covisint (http://www.covisint.com). This system offers services in areas of procurement, supply-chain management, and collaborative development. Partners achieve build-to-order capability through connectivity among product the key lines of business and throughout an individual company's supply chain. Wal-Mart Stores are another major player in B2B e-commerce. Wal-Mart's major suppliers (e.g.,Proctor & Gamble, Johnson and Johnson, and others) sell to Wal-Mart Stores electronically; all the paperwork is handled electronically. These suppliers can access online the inventory status in each store and replenish needed products in a timely manner. In a B2B environment, purchase orders, invoices, inventory status, shipping logistics, and business contracts handled directly through the network result in increased speed, reduced errors, and cost savings.
l Consumer-to-Consumer (C
The C
l Consumer-to-Business(C2B)
Consumer-to-business (C2B) e-commerce involves individuals selling to businesses. This may include a service or product that a consumer is willing to sell. In other cases an individual may seek sellers of a product and service. Companies such as priceline.com, travelbid. com, and mobshop. com for travel arrangements are examples of C2B. Individuals offer certain prices for specific products and services.
This classification, however, does not serve this thesis well because this is a classification from the economics perspective. As this thesis concentrates on the enterprises, more accurately, the SMEs，a classification from the viewpoint of enterprises would be more applicable. Throughout this thesis, e-commerce refers to B
Electronic commerce has the potential to radically alter economic activities and the social environment. Already, it affects such large sectors as communications, finance and retail trade. The impacts of e-commerce on business can be summarized as follows:
Electronic commerce transforms the marketplace.E-commerce has changed the way business is conducted:traditional intermediary functions have been replaced by direct communication between buyers and sellers through the Internet,new products and markets have been developed,new and far closer relationships have been created between business and consumers.It has also changed the organization of work:new channels of knowledge diffusion and human interactivity in the workplace have been opened,more flexibility and adaptability are needed,and workers’functions and skills are redefined(OECD,
Electronic commerce has a catalytic effect.E-commerce serves to accelerate and diffuse more widely changes that are already under way in the economy,such as the reform of regulations,the establishment of network links between businesses,the globalization of economic activity,and the demand for higher-skilled workers(OECD,
Electronic commerce dramatically reduces the corporation cost.In general,it is less expensive to maintain a cyber-storefront than a physical one because it is always“open”,has a global market,and has fewer variable costs.For exclusively e-commerce merchants who maintain one“store”instead of many,duplicate inventory costs are eliminated.A key factor in reducing inventory costs is adopting a“just-in-time”inventory system and improving the ability to forecast demand more accurately.Both of these can be accomplished through the adoption of electronic commerce,which strengthens the links between firms.In what are increasingly knowledge-based economies dominated by sophisticated products,customer service and after-sales service are a major cost for many firms,accounting for more than 10 percent of operating costs.Through electronic commerce,firms are able to move much of this support online so that customers can access databases or“smart”manuals directly;this significantly cuts costs while generally improving the quality of service.Although shipping costs can increase the cost of many products purchased via electronic commerce and add substantially to the final price,distribution costs are significantly reduced(by 50 to 90 per cent)for electronically delivered products such as financial services,software,and travel.
Electronic commerce has a profound effect on the structure of organizations.The advent of e-commerce has seen a radical change away from the hierarchical-based philosophy. Organizations that were once housed within strict product-based boundaries are now having to operate and compete at a global level,and strict hierarchies appear less adept in the turbulent global market.Functions such as marketing that were once organizational and product based(i.e.,a select set of products was marketed by an individual organization)are now becoming inter-organizational and knowledge based(multiple organizations continually adjusting their operations to meet changing customer needs,and passing on information rather than products to their customers).The traditional multilevel hierarchies, with their inability to react to eternal change,are now being replaced by flatter structures that are adaptable to an ever-changing external environment.
Openness is an underlying technical and philosophical tenet of the expansion of electronic commerce.The widespread adoption of the Internet as a platform for business is due to its non-proprietary standards and open nature as well as to the huge industry that has evolved to support it(OECD,
Electronic commerce alters the relative importance of time.Many of the routines that help define the“look and feel”of the economy and society are a function of time:mass production is the fastest way of producing at the lowest cost;one’s community tends to be geographically determined because time is a determinant of proximity.E-commerce is reducing the importance of time by speeding up production cycles,allowing firms to operate in close co-ordination and enabling consumers to conduct transactions around the clock.As the role of time changes,so will the structure of business and social activities,causing potentially large impacts.
Internet-based applications are not specific to any particular level of the business value chain and can be used across a vast range of sectors and firms.Among early adopters of electronic commerce technologies in the United States,impacts have been observed in product design (shortening the design process,and leading to a higher level of product customization and standardization of parts),and in production and logistics(lower inventory costs,faster production,lower supply costs)(OECD,
Electronic commerce improves possibilities for production re-location.Product specifications can be developed where the company’s design/development work is carried out,while production can be undertaken at locations that offer the best framework conditions. Through electronic commerce applications,firms within supply and distribution chains which were not previously connected can now establish direct contact.An important source of efficiency associated with e–commerce could come from dynamic impacts.These occur when firms use electronic commerce technologies proactively to create new products,adopt new business practices and change their way of interacting in the marketplace,i.e.their relations with customers,suppliers,intermediaries and competitors.The strategic use of e–commerce allows firms to enter,maintain or improve their position along the sectoral value chain.
Realizing these dynamic gains depends to a large extent on the way in which firms integrate electronic commerce strategies into their business functions.Ideally,e–commerce technologies should be applied throughout the business value chain.One example comes from manufacturing industry,where product proliferation and shorter product cycles require greater speed and flexibility.In this environment,the key to success relies not only on price competition but rather on the ability to introduce sophisticated information links,forecasting capabilities and management systems.Competitive performance is driven less by how a company manages its assembly operations and more by how it manages the organization and logistics of its operation as a whole(from inventory to time to market).
There is no single definition of an SME. Almost every country has its own definition of what constitutes an SME.Some of these definitions are based on quantitative measures such as staffing levels,turnover,or assets,while others employ a qualitative approach.Meredith suggests that any description or definition must include a quantitative component that takes into account staff levels,turnover,and assets together with financial and nonfinancial measurements,but that the description must also include a qualitative component that reflects how the business is organized and how it operates(Meredith,1994).In February 1996,the European Commission adopted a communication setting out a single definition of SMEs to be applied to programs and proposals dated from December 31,1997.On 6 May 2003,the Commission adopted a new recommendation in order to take account of economic developments since 1996.It entered into force on 1 January 2005 and will apply to all the policies,programs and measures that the Commission operates for SMEs.For Member States,use of the definition is voluntary,but the Commission is inviting them,together with the European Investment Bank(EIB)and the European Investment Fund(EIF)to apply it as widely as possible.This recommendation defines SMEs according three criteria:staff headcount,annual turnover and annual balance sheet.According to this definition,small and medium-sized enterprises consists of enterprises which employ fewer than 250 persons and which have either an annual turnover not exceeding 50 million euro,or an annual balance sheet total not exceeding 43 million euro.This definition,though,has not been universally accepted yet,has been widely applied throughout the world.In Asia Pacific Region,the technical definition varies from country to country but is usually based on employment, assets,or a combination of the two.Some countries have different definitions for SMEs in the manufacturing and services sector and may exempt firms from specialized industries or firms that have shareholdings by parent companies.
There have been many studies in the literature that have attempted to identify the characteristics of SMEs.SMEs are not simply scaled-down versions of large businesses (Wynarczyk,et al.,1993).Although size is a major distinguishing factor,SMEs have a number of other unique features that set them apart from large businesses.There have been various studies carried out in order to isolate these features(Bunker&MacGregor,2000; Dennis,2000;Hill&Stewart,2000;Miller&Besser,2000;Reynolds et al.,1994;Tetteh& Burn,2001).An analysis of the features identified revealed that they could be classified as being internal or external to the business.Internal features include management, decision-making and planning processes within the organization,and the availability of resources,while external features are related to the market(products or services and customers)and the external environment(risk taking and uncertainty).
These characteristics may influence SMEs both positively and negatively.Their small size, small management make SMEs more controllable and flexible,and able to react faster than large companies.But due to their low revenue and balance sheet,they frequently have difficulties in obtaining capital or credit,particularly in the early start-up phase.SMEs are often confronted with market imperfections.Their restricted resources may also reduce access to new technologies or innovation.Their reluctance to take risk may make them miss business opportunities and lack of necessary expertise and avoiding sophisticated software or applications may retard their informatization and hinder their adoption of new technologies.
Unlike SMEs in developed countries,which mostly engage in service industry,China’s SMEs mostly engage in secondary industry.Most of them are in traditional labor intensive industries.As of 2006,Textile,universal equipment manufacturing, non-metal mineral products,medical raw material and products manufacturing, electric machinery and equipment manufacturing,agriculture and food processing, metal products manufacturing,plastic products manufacturing,garment,shoes and hats manufacturing and transportation equipment manufacturing industry are the top 10 industries attracting the most SMEs.
While SMEs in developed countries tend to have a limited business coverage range, China’s SMEs have much extended business coverage areas.Most China’s SMEs target the national market and more and more of them are beginning to exploit overseas markets.
Most SMEs in China are start-up firms.It is only 30 years since China began the economic reform and the transition to market economy in late 1970s.Most China’s SMEs were set up during the last 30 years.They are still at the early stage of development and have more urgent desire for market information and opportunities.
Most of
In recent years,small to medium-sized enterprises(SMEs)have been shown to contribute strongly to national economies.In the
In Asian countries(regions),it is estimate that SMEs account for over 90 percent of industrial establishments,generate between 20-40 percent of industrial value added,and employ over 50 percent of the industrial labor force.The latter figure can be as high as 80 percent in the less industrialized countries.Figure 3 illustrates the importance of SMEs to the national economy in a sample of Asian countries and regions.The contributions of SMEs to employment and the countries’gross domestic product(GDP)are by no means trivial.As of July 2006,close to 140 million SMEs in 130 countries employed 65 percent of the total labor force(World Bank,2006).
Moreover,SMEs are the driver of economic growth and innovation.The total number of SMEs in the economy depends on the rate of SME creation and rate of SME destruction. Profitable market opportunities increase the rate of SME creation.This increases the total number of SMEs in the country,which increases job creation and income per capita.As people become wealthier,they will increase their consumption,which in turn will open up new market opportunities that will entice the creation of more SMEs.Contrary to multinational corporations,the growth of SMEs directly benefits the country because most SMEs are domestic firms.This reinforcing dynamic generates economic growth.
The reinforcing loop of innovation also drives economic growth.As the number of SMEs increases,their knowledge of their product and industry increases.Their knowledge allows them to innovate on the product or process,which helps them form a competitive advantage to generate more profits.Again,market opportunity as captured by the profitability of SMEs will encourage more people to establish their own SMEs to capture the opportunity.
In addition,the development of SMEs can also help to achieve other development goals. SMEs can either provide goods and services in areas critical to development,such as health and education,or provide a source of income to disadvantaged people.For example,efforts to develop women entrepreneurs help increase gender equality by providing women with a source of income.
SMEs play a much more significant role in
The recent emergence of the Internet has revolutionized business activities(Abell and Lim 1996).The open standards of the Internet bring e-Commerce within the reach of the smallest of firms and help reduce the gap between large and small firms(Kalakota and Whinston 1996,MOC 1998).Small business Internet commerce is defined as“the use of Internet technology and applications to support business activities of a small firm”(Poon 1999).
Accordingly,a business activity can be internally or externally oriented and of transactional or strategic nature. In general,the firms that enter electronic markets are either start-up firms specifically designed to operate in the Internet environment,or established firms that migrate to electronic commerce.The economic significance of Internet start-ups is very small,but is growing fast.The“scalability”of the Internet offers small niche players many of the advantages enjoyed by large firms in terms of expanding the range of e–commerce customers and transactions.This may be particularly important for small innovative firms entering the electronic market.
In principle,the advent of the Internet is helping to enlarge geographical and sectoral markets by cutting through many of the distribution and marketing barriers that prevent smaller firms from entering foreign markets.Smaller firms may particularly benefit from the opportunities offered by electronic commerce.They tend to be less locked in to legacy technology compared to larger firms,and they are normally unencumbered by existing relationships with traditional retail channels.Hence,they can adopt a business model that forces larger,established competitors to restructure their existing relationships.The Internet also provides opportunities for businesses to compete in new areas by creating new products or services.
Electronic commerce applications push firms to re-examine the cost structure of the value chain,and their competitive strategies by redefining functions and skills.The entire cycle of business operations may be affected:production planning and logistics and inventories,and change of value-added components(such as compression of business operating cycles by the replacement of traditional intermediary functions,or direct integration of different activities in the value chain).The flexibility and ability to innovate and adapt to rapid change of SMEs mean that they are well placed to take advantage of these opportunities.The flattening of organizational structures and the promotion of horizontal production and work structures (often open to both clients and partners),can suit their less hierarchical organization.
On the other hand,engaging in business-to-business or business-to-consumer e-commerce induces small firms to improve control of their business process organization.Business procedures that were previously conducted informally are rationalized and institutionalized, which means that the information is transmissible,including to workers at different geographical locations.The incentive to achieve more structured and formal organizational models given by electronic commerce could be critical for SMEs to the extent that such models are necessary for them to face increased competition in the global marketplace and to foster growth.It has been noted that similar positive effects on SMEs’organization result from the networking and partnerships that are occurring as the natural response to increasing global competition.
The networking and sharing of functions,typical of clusters and partnerships,enable firms to amplify the gains of electronic commerce.New opportunities for SMEs stem from the integration of supply and demand chains through horizontal inter-firm linkages between suppliers and customers and from the creation of production clusters.These forms of industrial organization allow SMEs to overcome their isolation by interacting and sharing information with partners. They can contribute to solving SMEs’problem of lack of resources and access to technology by promoting transfer of knowledge through the use of integrated processes or through system-wide interactions in R&D(user-producer,alliances, outsourcing,links to the scientific community).
The degree to which the use of e–commerce tools can be enhanced depends on the degree of skills,specialization and innovation of the firm.Since it is not only the size of the investments that counts but also the way the e–commerce applications are implemented,the development of a formal“e–commerce strategy”is essential for success.Preliminary evidence from case studies of e-commerce adoption and use by SMEs shows that strategies differ depending on companies’behavior in response to global competition.SMEs can develop effective e–commerce tools and use them proactively as part of their own strategies that increase their competitiveness in global markets.
SMEs also adopt e–commerce technologies as part of the top-down strategies of large global companies.When firms only adapt to top-down strategies rather than developing their own individual strategies,this may not be as favorable for them–especially if the re-organization of business along established value and supply chains leads to a narrowing of opportunities.
The challenge for small businesses lies in their timely adoption of e–commerce technologies, but also,and more importantly,in the strategic rationale behind their adoption and subsequent use of such technologies.First-mover advantages,the trend towards concentration of supply in some segments due to the dominance of a few firms or new business models,the need for greater firm recognition in market-led strategies are all factors that may reduce SMEs’participation in the global electronic marketplace.The development of effective e–commerce strategies is of fundamental importance for success in domestic and international markets.
Nonetheless,it is also possible that conditions of access to networks and connectivity, technical standards,institutional arrangements and the market power of well-known brands could pose barriers to entry that might impede SME involvement.This means that both governments and the business community must remain attentive to developments in the electronic marketplace in order to prevent or remove barriers to full SME participation.
Given the importance of SMEs in Asian countries and all the benefits afforded by e-commerce,governments of concerned countries have taken measures and formulated policies to encourage SMEs to go on line.However,various studies and surveys have indicated that SMEs are not as active in adopting e-commerce as are expected by the governments.In China,for example,it is estimated that only 2%of all the SMEs frequently engage in e-commerce as of 2005.Internet involving transaction volume is about 300 billion RMB,accounting for only 3.5%of all the SMEs’sales.This sluggishness in e-commerce adoption by SMEs has attracted attention in academic field also.Efforts have been devoted by researchers to identifying the impediments that have retarded SMEs’ e-commerce adoption in East Asia Pacific countries.
Chalermsak Lertwongsatien et al.studied the factors influencing e-commerce adoption in SMEs in Thailand in an empirical way(Chalermsak Lertwongsatien et al.2004).In this study,they identified three groups of factors influencing the variations of e-commerce adoption decisions in SMEs in Thailand.These factors are:organizational,technology,and environmental factors.Organizational factors include firm size,top management support for e-commerce and IT emphasis of firms;existence of IT department;technology factors include perceived benefits and perceived compatibility of this new way of doing business; while environmental factor is industry competitiveness.This study dealt with the e-commerce impediments from a perspective of decision-making.The authors attributed the sluggish e-commerce performance of SMEs mainly to the organizational factors that influence the decision making of e-commerce adoption,leaving the external factors unaddressed.Indeed,SMEs’tardiness in adopting e-commerce is a result of the conjunct influence from both internal(organizational)and external factors such as the national ICT
infrastructure and legal environment.
Hsiao(2000)presented a qualitative study of the barriers faced by SMEs to introduce business-to-business(B2B)EC in Singapore.The investigation employed an interpretative approach that draws in the theory of“technological frames.”The results of this study highlighted four key factors that explain the adoption difficulties:lack of familiarity(with technology),risk aversion,lack of trust,and incongruent cultural practice.This study, though reached this issue from an implementation perspective,still ignored some important factors which have little influence in Singapore due to the well developed infrastructure and sound legal environment in Singapore,but much in most other Asian countries where the infrastructure is underdeveloped compared with Singapore and legal environment needs to be improved or created. Using a case study from
Dedrick and Kraemer(2001)discussed EC in China.They found that although there is considerable interest in E,there are also significant barriers to establishing EC ventures. Limited diffusion of computers,high cost of Internet access,and a lack of online payment processes directly inhibit EC.Inadequate transportation and delivery networks,limited availability of banking services,and uncertain taxation rules indirectly inhibit EC.
Government policies promoting IT and EC and attacking software and intellectual property piracy are encouraging EC.Regulations in the areas of international contracts,foreign participation,and digital signatures and encryption is needed to continue encouraging E. In additionally,growing computer manufacturing and IT services industries are creating a technical base for supporting EC.
Both the above studies focused on the external factors that discourage SMEs’e-commerce adoption,while ignoring the organizational factors which are also need to be addressed. Given this literature review,in what follows,I will examine the factors,both internal and external,that have retarded e-commerce adoption by SMEs in most Asian countries through four case studies of SMEs from different Asian countries.
In what follows,four cases will be presented.After a careful study of these cases,some obstacles to e-commerce adoption by SMEs will be identified and analyzed in detail.Since the level of and obstacles to e-commerce adoption vary with different kind of businesses,the following cases are so chosen as to take different kind of businesses into account.The first two cases are export-oriented businesses,while the other two are domestically oriented.
G.S. Electricity Co. Ltd. commenced in
The company sees a wide and growing customer base (currently nearly 100) as an important feature of its operations, but is also working with Mitsubishi Corporation on Bio Coal technology, an initiative which may well account for a large portion of all sales if it is successful. Overseas sales now account for nearly 20% of total turnover. It is now seeking to expand the overseas market.
Most company employees are of a mature age and have limited IT experience. The management and staff are aware of the need to both improve staff computer skills and upgrade the IT facilities. Presently they have 11 computers, some of which are connected to a local area network and a rather slow network connection. They have a website that they use to accept orders for products and to provide online support. Their main use of the Internet at the moment, however, is as a tool to research the potential of e-commerce. As such, there is virtually no integration between their existing business and their “online” operations.
The most pressing current concerns relate to this need to further explore and eventually adopt an e-commerce capability, to lift the related skill level within the business, and to support more activities by recruiting someone with different language skills and knowledge of Chinese legal, cultural and commercial matters in
