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South Africa
Abstract
This paper reports on research that was undertaken in Information Systems at the University
of Cape Town on the acceptance and adoption of e-commerce amongst small businesses in
the manufacturing sector. It addresses how these small businesses in a developing country
perceive the potential benefits of e-commerce and looks at their consequent adoption of ecommerce activities in their own organisations. This includes the businesses perception of
the benefits and opportunities of e-commerce activities and to determine whether these
businesses have the necessary technological capabilities for e-commerce adoption in place.
A secondary aim of this research was to determine the current level of e-commerce adoption
by small manufacturing businesses in the Western Cape. This was achieved by circulating a
questionnaire to test the perception of e-commerce benefits and e-commerce adoption levels
amongst small manufacturing businesses in the Western Cape. If the global usage of the
Internet for electronic commerce by SMEs is compared with the South African case, this
research clearly indicates that the available technologies are not adopted to the extent that is
necessary for survival in a rapidly changing environment.
Keywords: e-commerce, adoption of e-commerce, SMEs, manufacturing industries
Acknowledgements
The authors acknowledge and appreciate the work done by Steven Davies, a part-time
honours student who has been involved in a similar research project (Davies, 2002).
1.
THE ACCEPTANCE OF E-COMMERCE
Many studies have researched the benefits of the adoption of e-commerce in an organisation.
While the potential benefits have been established, a number of inhibitors to the adoption of
these new business models still exist. For small businesses the advantages of e-commerce
adoption are often not perceived to be applicable and few success stories are available to
convince owners of such firms that e-commerce offers a real benefit to their organisations.
Although previous research on e-commerce and SMEs (small to medium sized
enterprises) incorporates small businesses, there is little research done on small businesses in
particular. Although the classification of enterprises is normally based on size, turnover and
number of employees, the definition of an SME differs in the literature and no fixed
definition therefore exists. For this research we classified a business as an SME if it has a
single CEO and not more than fifty employees.
The objective of this study is to focus on small businesses in the Western Cape
Province of South Africa. Moreover, being e-ready can support the elimination of barriers
that have traditionally stifled the flow of information and goods to and from developing
The Electronic Journal on Information Systems in Developing Countries,
http://www.ejisdc.org
nations. With e-readiness being considered a prerequisite for successful e-business thereby
enabling these opportunities to be harnessed (McConnell International Report, 2000).
The focus of this study is on the small manufacturing sector due to the fact that these
firms traditionally lagged behind those in other industries with regards to technology
adoption (Poon and Swatman, 1999, Turner, 1999). We further decided to look specifically at
only this sector in order to gain a better understanding of the industrys perceptions towards
and adoption of e-commerce. This study therefore aims to discover the consequent ecommerce adoption levels among these businesses.
There has been a marked change in perceptions towards e-commerce before the
dotcom crashes of 2000 and thereafter (Agrawal et al., 2001, Schneider and Perry, 2001).
This research provides insight into the current perceptions of small manufacturing businesses
in the Western Cape towards e-commerce and helps to determine to what extent e-commerce
will be adopted in the future.
It is a well-known fact that e-commerce and Internet technologies can benefit an
organisation (Akkeren and Cavaye, 1999). This is particularly true for SMEs due to the fact
that e-commerce improves an SMEs ability to compete with larger organisations and operate
on an international scale. E-commerce can deliver the tools to provide cost effective ways for
SMEs to market themselves, launch new products, improve communications, gather
information, and identify potential business partners. The obvious aim of these e-activities is
to extend their capabilities to higher turnovers and larger markets. Despite these potential
benefits of e-commerce to an SME, there seems to be a perception by owners of SMEs that
there is a lack of business benefit, if the input is weighed against immediate returns (Harrison
et al.,1997). Due to the fact that the ownership and decision making power in an SME is held
by just one or two people, adoption of e-commerce into such an organisation is heavily reliant
on these peoples acceptance of the technology. It is important, therefore, to understand what
factors lead to an individuals acceptance of a technology. The Technology Acceptance
Model (TAM) (Davis, 1986) is an appropriate tool for this study.
Usefulness
Intention/
External
Variables
Attitude
Ease of Use
easily measured but rather have a positional effect on the business, e.g. customer loyalty and
goodwill as a result of added value and services provided online.
Poon and Swatman (1997) also identified short-term and long-term benefits. Shortterm benefits should be realised within months, whereas long-term benefits may take longer
to be achieved and are unpredictable. Their research showed that SMEs are reaping
insignificant, marginal short-term benefits from e-commerce. They identified long-term
benefits as being the key motive for ongoing Internet activities. These might include
additional customer enquiry, forming new networks, and reaching previously untapped
markets.
Some additional benefits of e-commerce are listed below:
(Harrison et al., 1997 , Iacovou et al., 1995)
3.
ADOPTION OF E-COMMERCE
It is important to recognise that e-commerce activities range from entry- level activities such
as having web browsers, web sites, and email, to sophisticated activities such as online
payments, making purchases online, customer services, and video conferencing, amongst
others. Akkeren and Cavaye (1999) state that the adoption of e-commerce practices is a
progression, and therefore sophisticated technologies are unlikely to be adopted before entry
level technologies have been successfully adopted. These entry- level activities provide the
necessary technological infrastructure from which more sophisticated e-commerce activities
can be developed.
As an organisation progresses up the ladder it must undergo change and become more
sophisticated in its use of technology. As the business implements these new changes it is
ultimately able to improve business efficiencies.
Planning for Web presence can be summarised as three distinct stages:
Static pages for advertisement and e- mail communication with clients. External
communication will include enquiries and quotes from customers, procurement
processes between businesses and many other EDI1 exchanges.
The final stage involves fully-fledged e-commerce. This encapsulates all the
information processing of the previous stages, plus more interactive features,
personalisation and CRM2 tools, for instance.
The final outcome is the integration of all these activities with the internal processes
of a business. The focus is a customer service orientated e-business.
4.
FACTORS THAT AFFECT E-COMMERCE ADOPTION
The factors that affect e-commerce adoption are useful in determining the reason why an
SME is at a certain level. These adoption factors are a result of the owners business outlook
as well as the organisations characteristics (Courtney and Fintz, 2001):
Owner's Characteristics
Organisation's Characteristics
Contextual characteristics
The economic benefits of moving business transactions from fax, telephone and post
to the Internet are well documented in many publications (Davies, 2002). Wilde and
Swatman (2000, p.10) also noted that the forces of economic rationalism and
globalism have enhanced the market as the final arbiter of price and service with the
balance of power tilting from the manufacturer towards the consumer. Given this
erosion of margins, companies need to reduce costs, both in production and
transaction, in order to make their products and services more competitive. This again
points to the Internet as a vehicle to reduce costs and to assist in obtaining a
competitive advantage in the short term.
The traditional value chain has become virtualized to a great extent due to the fact
that users of the Internet are able to order products and services online, without
intervention of the purchasing department, while payment is made electronically
using electronic funds or purchase cards. The primary activities in the Porter Value
Chain, namely incoming logistics, outgoing logistics, marketing and sales, are being
redefined in terms of how they are carried out and interact with each other, as
technology provides for more sophisticated methods of business interactions (Walton
and Miller, 1995. Porter, 1985).
These chains have become virtualised as the Internet was increasingly used as a
binding agent (Davies, 2002). Dobbs (1999, p.2) describes value chain integration
as a process of collaboration that optimizes all internal and external activities
involved in delivering greater perceived value to the ultimate consumer. In the
process whole portions of the previous chain are being removed, redefined or
disintermediated.
It is however necessary to note that the integration of value chains does not solve all
problems. JIT (Just in Time) production is a methodology of reducing inventory stock
that has been used for many years and serves as an example to prove this point.
Critics of this method have pointed out that it merely forces the lower level
manufacturer to hold stock and deliver to the client as needed. This method does
however reduce stock holding costs throughout the higher levels of the value chain. It
is also interesting to note that the Internet plays an increasingly important role with
JIT ordering due to the ease of ordering at short notice.
Researchers have further identified a number of additional issues that impact the
adoption of e-commerce. These are summarised by Courtney and Fintz, (2001):
Low use of E-commerce by Customers and Suppliers. This means that there is little
incentive for SMEs to engage e-commerce until their customers and suppliers are
also using it.
Concerns about security aspects.
Concerns about legal and liability aspects.
High costs of development and computer and networking technologies commerce.
Limited knowledge of e-commerce models and methodologies.
Unconvinced of benefits to the company.
5.
RESEARCH R ESULTS
There are currently 230 small manufacturing businesses registered with the Cape Chamber of
Commerce. On analysis of these businesses, it was found that 35 businesses had been entered
twice into the Cape Chamber of Commerces database. Eventually 195 questionnaires were
sent out. 15 companies informed us that they had been incorrectly classified by the Cape
Chamber of Commerce and were not small businesses. A further 11 businesses appeared to
have closed down or changed their contact details and were therefore unavailable. Out of the
169 businesses in the sample, we received 34 responses. This is a 20% response rate. These
companies were supplied with questionnaires through e- mail, faxed or posted information.
Companies were furthermore contacted telephonically to confirm that they had received our
questionnaire and to encourage them to respond.
(a)
The first hypothesis tested whether small manufacturing businesses perceive the
potential benefits of e-commerce as important (Appendix 1).
By taking the total number of answers (10 benefits*34 small businesses = 340) and
calculating the total number of answers in each category, we were able to work out the
percentage of responses in each category. It was found that 50% (170) of the answers fell in
the important and very important section, 24% (81) of answers fell in the neutral category and
26% (89) of the answers fell into the unimportant section. It can therefore be concluded that,
overall, small manufacturing businesses have a positive outlook towards e-commerce and
view the benefits of e-commerce as important to their business.
Important
Neutral
61.7
38.2
Unimportant
0
44.1
29.4
26.4
61.7
20.5
17.6
61.7
14.7
23.5
61.7
17.6
20.5
44.1
29.4
26.4
61.7
23.5
14.7
17.6
35.2
47.0
52.9
20.5
26.4
32.3
8.8
58.8
(b)
The second hypothesis tested whether small manufacturing businesses have the
necessary technological capabilities in place for e-commerce adoption (Appendix
1).
For the purposes of this research, technological capabilities refer to entry- level ecommerce activities. In order to test whether small manufacturing businesses have the
necessary infrastructure in place for e-commerce adoption to occur, it was necessary to
observe current technological capabilities. The respondents were hence asked to base their
response on 5 criteria as in the survey. The results are indicated in Table 2.
Now
1Year
3Years
>3Years
Never
26.4
20.5
44.1
8.8
73.5
11.7
5.8
8.8
61.7
17.6
8.8
8.8
2.9
67.6
14.7
8.8
8.8
94.1
5.8
85.2
2.9
5.8
5.8
38.2
11.7
20.5
14.7
14.7
It is clear from Table 2 that the majority of businesses have adopted most of the
technological capabilities required for the adoption of more sophisticated e-commerce
capabilities. It is also noticeable that only 26%, (9) of these businesses have a strategy for
developing e-commerce in their organisation, despite the high level of infrastructure currently
in place.
(c)
The third hypothesis tests whether small manufacturing businesses in the Western
Cape have adopted the use of sophisticated e-commerce capabilities (Appendix 1).
1Year
3Years
>3Years
Never
64.7
14.7
11.7
8.8
17.6
20.5
35.2
20.5
5.8
14.7
14.7
35.2
14.7
20.5
23.5
17.6
26.4
17.6
14.7
20.5
23.5
38.2
11.7
5.8
55.8
2.9
26.4
2.9
11.7
(d)
Figure 2 summarises the individual analysis of each inhibitor that was tested in
this survey (Appendix 1). A clearer picture of whether or not respondents agreed
or disagreed with the identified inhibitor can be seen in some detail.
Inhibitors to E-commerce
10
15
20
25
30
35
40
Number of Respondents
Strongly Disagree
Disagree
Neutral
Agree
Strongly Agree
now up to the SMEs, with or without assistance from governmental or other incentives, to
use this technological tool to improve their business scope.
Hypothesis Two:
Small Manufacturing Businesses have the necessary technological
capabilities in place for e-commerce adoption.
The vast majority of small manufacturing businesses have the required technological
capabilities in place. This infrastructure can be used as a foundation on which to build more
sophisticated e-commerce capabilities, such as online ordering, payment and transactions.
Hypothesis Three: Small Manufacturing Businesses have adopted the use of e-commerce.
The majority of small manufacturing businesses have not currently adopted e-commerce
activities into their businesses. It was found that most of these businesses have plans to
implement e-commerce activities within the next three years.
To advise these SMEs on the road forward, it might be interesting to note what
happened in the Australian case. Castleman and Cavill (2001, p8) reported on advice from
SMEs who had implemented electronic commerce:
7.
CONCLUSION
A number of factors affect e-commerce adoption. These are a result of the owners perception
and acceptance of e-commerce, characteristics of the organisation, and the context in which
the business finds itself. Various benefits and inhibitors to e-commerce adoption have been
identified. As e-commerce matured over the last few years, a growing awareness and
understanding of the benefits and uses of e-commerce among SMEs emerged.
On the other hand, Akkeren and Cavaye (1999), and Poon and Swatman (1999) have
found that many SMEs often perceive the benefits to be irrelevant or not appropriate to their
organisation. As a result of this lack of acceptance, they say the tendency is for SMEs to be
extremely cautious and hesitant when deciding to adopt e-commerce activities into their
organisation.
There has been a lack of research undertaken in South Africa to determine small
businesses perception of the benefits of e-commerce and the current leve l of e-commerce
adoption. This study has shown that manufacturing businesses in the Western Province of
South Africa have not yet adopted sophisticated e-commerce procedures and are unlikely to
do so, unless some organisational incentives or government assistance are offered. The study
also indicates the reasons why the deployment of e-commerce in this sector is slow. Further
research is strongly recommended to monitor e-commerce perceptions and adoption
strategies as an ongoing study, extended to a wider population to monitor and compare
regions in Southern Africa.
The Electronic Journal on Information Systems in Developing Countries,
http://www.ejisdc.org
8.
10
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11
This table calculates the Chi-squared value of 57,008 with a p-value = 0,0001. As p<0,05 we
can conclude that the result is statistically significant, and thus we reject H0 . Association
therefore exists between the benefits of e-commerce.
Association Test for Hypothesis Two
Correspondence Analysis was used to determine whether an association exists between the
technological capabilities require for the adoption of more sophisticated e-commerce
activities. The hypotheses are:
H0 : No Association Exists between the technological capabilities required for ecommerce adoption
H1 : Association Exists between the technological capabilities required for ecommerce adoption
12
The table below shows the statistical method used to test if an association exists between the
e-commerce capabilities tested.
Eigen Values and Inertia for all Dimensions (capabilities.sta)
Input Table (Rows x Columns): 7 x 5
Total Inertia=.36723 Chi=87.401 df=24 p=0.0000
Singular
EigenPerc. of
Cumulatv Chi
Values
Values
Inertia
Percent
Squares
1
0.508243 0.25831
70.34039 70.3404
61.47788
2
0.290488 0.084383 22.9783
93.3187
20.08316
3
0.152885 0.023374 6.36488
99.6836
5.56294
4
0.034089 0.001162 0.31644
100
0.27657
This table calculates the Chi-squared value of 87,401 with a p-value = 0,0000. As p<0,05 we
can conclude that the result is statistically significant, and thus we reject H0 . Association
therefore exists between the identified technological capabilities required for e-commerce
adoption.
Association Test for Hypothesis Three
Correspondence Analysis was used to determine whether an association exists between the
main capabilities of e-commerce. The hypotheses are:
H0 : No Association Exists between the adoption of e-commerce capabilities
H1 : Association Exists between the adoption of e-commerce capabilities
The table below shows the statistical method used to test if an association exists between the
e-commerce capabilities tested.
Eigen Values and Inertia for all Dimensions
(ecommerce.sta)
Input Table (Rows x Columns): 6 x 5
Total Inertia=.24566 Chi=50.115 df=20 p=.00022
Singular
EigenPerc. of
Cumulatv
Values
Values
Inertia
Percent
1
0.422238 0.178285 72.57399 72.574
2
0.224555 0.050425 20.52626 93.1002
3
0.116373 0.013543 5.51276
98.613
4
0.058372 0.003407 1.387
100
Chi
Squares
36.37018
10.28666
2.7627
0.69509
This table calculates the Chi-squared value of 50,0115 with a p-value = 0,0022. As p<0,05
we can conclude that the result is statistically significant, and thus we reject H0 . Association
therefore exists between the adoption of e-commerce capabilities
13
This table calculates the Chi-squared value of 35,035 with a p-value = 0,0394. As p<0,05 we
can conclude that the result is statistically significant, and thus we reject H0 . Association
therefore exists between the inhibitors of e-commerce adoption.