Review and evaluation of E-commerce solutions for SMEs - Dissertation Example

? DECLARATION I declare that the work carried out in this dissertation proposal is in accordance with the regulations of the I also affirm that the work is original and has not been submitted before to any other university. Any views portrayed in the dissertation proposal, in no way represent the views of the university. This dissertation proposal is being submitted for the degree of B.Sc. Computing Portfolio. Signature Name Date Student Number Review and evaluation of E-commerce solutions for SMEs Table of Contents Table of Contents 3 1.0 Introduction 4 Background 4 E-Commerce: A Brief Overview 4 Rationale of the Study 5 Research Objectives and Questions 6 Background Literature 7 2.0 Research and Development Methodology 12 Research Philosophy and Approach 13 Research Strategy 14 Data collection Methods and Sampling 15 Reliability and Validity 16 Limitations of the Study 17 Ethical Consideration 18 Data Analysis 18 3.0 Resources and Planning 18 Gantt chart 18 References 20 1.0 Introduction Background The Small and Medium Enterprise (SME) sector is one of the vital components of the economic backbone of a country. Government as well as the private sector companies have put in tremendous efforts and invested large sums of money assist the growth of SMEs. Apart from that SMEs have been also supported with financial assistance, management training, legislative & policy support, and counselling services. The SME sector of a country is considered as one of the pillars of the economic growth of a country. The statement SMEs are a major source of entrepreneurial skills and creativity and contribute to economic and social cohesion. They hold the key to innovation and are also emerging as global players, by participating in worldwide production and supply chains made by the Deputy Director- General for Enterprise and Industry clearly reflects the importance of SMEs in a country. According to reports SMEs contribute significantly towards the total GDP of a country and are also responsible for generating large number of employment opportunities. The definition of SME however differs from one country to the other. In simple terms the criteria for a company to fall in the category of SMEs differs from one country to the other (Asia Pacific Economic Cooperation, 2004). In order to ensure growth of this sector, government as well as the private sector played active roles. There have been several programs in the past initiated by different establishments to ensure growth of SMEs. In addition, adoption of different technologies by the SMEs is also another obvious factor. The latest to this is the implementation of e-commerce technology by several small and medium sized companies. The principal reason behind the implementation of this technology is to drive growth and profitability. However before getting further deep into the study, a brief overview of the e-commerce technology is provided below. E-Commerce: A Brief Overview Over the past few decades, e-commerce has evolved as one of the fully functional application for carrying out business transaction through electronic medium. During the early days of internet commercialization, the data transmission speed used to be extremely slow. It used to be characterized with the slow dial up connections. At that time, Netscape came into light and changed the scenario of internet browsing. Along with increased data transmission speed, it also succeeded to provide great internet surfing experiences to the user. Thus, several eminent scholars and individuals of the online business industry consider Netscape as the reason for the arrival of this new business dimension. This development has also led to the concept of e-commerce, where people can carry out business transaction over the electronic network. Thus, e-commerce is defined as a system of conducting business activities with the help of internet and other information technologies (Zongqing, 2004). Moreover, considering the current business environments, a number of scholars believe that companies must incorporate technology to streamline business process and increase productivity. Therefore, from the above definition it is evident that technology is an integral part of business. One such technology is the implementation of e-commerce which provides companies with the opportunity to increase sales volume and profitability. According to Zongqing (2004), information technologies such as e-commerce play an imperative role in meeting the wants and needs of the companies along with making profits for the company. Companies such as eBay and Amazon clearly reflect how e-commerce has the ability to drive an entire business. Apart from that several companies, which have physical operations also started carrying out business transactions over electronic mediums. Now, the biggest question is whether e-commerce has the capability to provide equal benefits to the small companies. Rationale of the Study This study is therefore aimed to analyse the importance of e-commerce for a company belonging to the SME sector. In other words, the report will try to underpin how and what benefits are provided by e-commerce technology to the SME sector. Although there have been large number of studies carried out previously that involved SMEs or e-commerce, but there are hardly any studies that tried to uncover the benefits provided by e-commerce to the SME sector or how e-commerce technology can drive growth of the SMEs. This study therefore holds utmost importance and is also important in the field of business research. Moreover, one of my tutors also asked me to conduct a study on this area and I also have great interest on subject which involves the use of information technology. I believe, the reason behind less attention given by scholars to this area is due to the low e-commerce adoption rate of the SMEs. Hence, this study will try to fill that gap and come up with a meaningful conclusion. Research Objectives and Questions The principal objective of the study is to know how e-commerce technology can benefit SMEs and drive growth. In addition, the study also has some other objectives. The objectives are detailed below: - To shed light on how e-commerce can benefit the companies belonging to the SME sector. To shed light on the advantages and disadvantages of e-commerce technology. To shed light on the possible ways by which e-commerce can increase the profitability of the firms falling into the category of SMEs. To shed light on the reasons behind low adaptability rate of e-commerce by the SMEs. Research questions are considered as one of the vital elements of a research. This is responsible for providing right direction to the study. On the basis of the objectives, the study has formulated the following research questions. Q1. How e-commerce can benefit the companies belonging to the SME sector of a country? Q2. What are the advantages and disadvantages of e-commerce technology? Q3. What are the possible ways by which e-commerce can increase the profitability of the firms falling into the category of SMEs? Q4. What are the reasons behind low adaptability rate of e-commerce by the SMEs? In order to address and assess the aforementioned research questions, the study will carry out both primary as well as secondary research. The secondary research will be in the form of literature review. On the other hand, the primary research will involve collection of data directly from the market. The rest of the section will therefore put emphasis on the literature about the area of concern and will highlight about the methods to be put into practise for collecting and analysing the primary data. The next section will now review the literature about the importance of e-commerce for the SMEs. Background Literature Literature review is considered as one of the most essential elements of a research study. It helps in reviewing the theories proposed by scholars about the area of concern previously. In addition, the validity of those theories can also be tested in the present context. For this study, the literature review will be carried out with the help of books, articles, journals, and authentic electronic sources. The growing internet base and increased use of internet around the world has forced to implement information technology in their system of operation. The trend of using internet and other communication technology remains mainly constrained with the large companies. However, in the recent past there is a drastic shift in the use of technology by the small firms. These days even small companies are relying on technology for growth and development. Several scholars have emphasised on the benefits of e-commerce but there are few studies carried out on this subject. However, it is believed that substantial amount of literature can be found about the area of concern. Theoretical Framework According to OECD (2000), the introduction and commercialization of internet has opened up new dimensions for the business houses around the world. Similarly, with the arrival of e-commerce technology several new opportunities have come up for the organizations. The opportunities are however not limited with the large companies, but small and medium firms hold equal opportunities. Some of the obvious ones are entering into new market, expanding the base of customers and rationalize the business. In the OECD countries, SMEs are actually bridging the gap in technology use with the larger firms. The technology use and implementation by the SMEs mainly remains constrained with information and communication technologies (ICT). However, due to the lack of proper measurement tools, it is difficult to measure the rate of e-commerce adoption by the SMEs. Although, there is a surge in the use of internet by the SMEs for production related and commercial purposes, they have limited understanding and awareness about the full range of benefits offered by the e-commerce technology. Hence, the lack of awareness about the technology can be considered as one of the barriers of e-commerce adoption by the SMEs. Apart from that some of the other factors that acted as a barrier for the SMEs to implement e-commerce technology are high initial investment, inadequate investment skills, and lack of technical skills. This situation is a cause of serious concern as it is actually hindering the growth of SMEs. Moreover, in this age of business companies have no option other than implementing technology for witnessing growths. A number of important efficiency gains are associated with the implementation of e-commerce for a company. For example, a company belonging to the SME sector will be able to reduce business cost, streamline the business process and has opportunities to increase sales. Apart from these static gains, SMEs can also employ e-commerce technology to create add on value by new product development, adopting to a new business practise, and improving the process of interaction both internally and externally. However, the realization of these opportunities depends heavily on how the firms integrate e-commerce into the business process. Hence, it can be sated that formulation of effective e–commerce strategies is extremely important for the success of SMEs in the market place. According to a study carried out by OECD, the SMEs mostly carry out e-commerce activities in three different ways. The main uses of e-commerce for the small firms are mainly for creating value added service, creating new services and for also creating new business model. On the other hand established players make use of electronic commerce for the purpose of expanding their business in the international boundaries and to increasing the effectiveness of the production (OECD, 2000). According to Jentzsch and Miniotas (1999), e-commerce is one of the strong elements that can drive growth for the small and medium companies. In this context he mentioned that “Electronic commerce (e-commerce) is purported to be a “silver bullet” for businesses whether they are large or small to medium enterprises (SMEs).” The author further added that, with the use of ecommerce technology, SMEs will be able to remove geographic boundaries and can open new markets for themselves. Despite these benefits offered by the e-commerce technology, the uptake rate of e-commerce by the SMEs was relatively slow and hence it raised a big question i.e. “is e-commerce really a “silver bullet” phenomenon and is it for all businesses?” Along the same line eminent scholars such as Al Qirim (2004), believes that emergence of e-commerce can provide a number of opportunities to the small and medium sized enterprises. According to the author, e-commerce technology may be highly effective in overcoming the challenges of SMEs pertaining to environmental, technological, managerial and organizational inadequacies. However, the recent studies reflect a gloomy picture about the adoption of e-commerce by the SMEs. Thus, it can be concluded that the application of e-commerce is two-fold. E-commerce is characterized as embryonic but is growing at a robust rate and has fragmented across every business segment. Thus the task of assessing the effectiveness and adaption rate of e-commerce technology becomes a difficult task. Hence, this research aims to shed light on the adoption rate of e-commerce by the SMEs. Along with that, some grey areas of e-commerce implementation in SMEs will be also emphasized. According to a report published by the employee, a division of the clarion technologies, the advent of ecommerce technology has provided ample opportunities for the SMEs to grow and improve the business process. The authors also portrays that the despite of the prevailing opportunities, most of the SMEs have embraced information and communication technology and thus the adoption rate of e-commerce is extremely low. Similar, to the findings of OECD, this establishment also believes that lack of awareness about the application of e-commerce is one of the major causes of slow adoption rate. In addition, this report has also found some of other interesting fact that hinders the application of e-commerce in the SMEs. Some of the most common ones are scarcity of skilled personnel and capital, core structure of SME’s, and the under stated cost of e-commerce application (Clarion Technologies, 2011). On the basis of that, the following diagram will clear the capability of SMEs to adopt e-commerce. Figure 1 – Capability of SMEs to implement e-commerce into their system of operation (Source: Clarion Technologies, 2011) Hence from the discussion and the review of literature about the implementation of e-commerce into the operation system of SMEs, it has been clearly identified that the adoption rate is extremely low despite the large numbers of opportunities provided by e-commerce. In addition, another interesting finding was that lack of awareness about the applications and benefits of e-commerce is a major cause of the low adaptability rate. Advantages and Disadvantages of E-commerce application Another objective of the study was to shed light on the general advantages of using e-commerce by the business houses. In addition, to this the disadvantage of using e-commerce in business will be also stressed. In order to address this objective again several secondary sources will be considered. Advantages of using E-commerce E-commerce is not a mere tool to automate the process of operation for a company, but also involves the birth of new business processes. However this has been solely made possible by the development of internet and other communication technologies. In simple words, e-commerce has changed the way business houses carry out their operation. Apart from that it also played a crucial role in restructuring the way in which organizations interact with their business associates and employees (Sun and Finnie, 2004). The major advantages of using e-commerce technology are as follows: - From the perspective of a business, e-commerce facilitates faster buying and selling process and makes the product browsing an easy step. It allows business houses to carry out business operation for 365 days in a year. It also allows companies to reach more customers, by expunging the limitation of geographic distance. E-commerce reduces the operational cost of a company and helps them to offer quality services to the customers (Kumar and Petersen, 2006). If a company only carries out its business over the online platform, then there is no need of setting up a physical company. Hence e-commerce reduces infrastructure cost to a great extent. E-commerce technology also provides a number of benefits to the customers and the most obvious one is the convenience. Thus, e-commerce also plays an active role in satisfying customers. It also allows companies to take feedback from the customers about the quality of products and services. Therefore, depending on the findings the company can accordingly modify their current strategies. Disadvantages of E-commerce Although e-commerce provides a number of benefits to the customers and business houses, similar to the other technologies it has some drawbacks. The major disadvantages of implementing e-commerce in a company are as follows: - Since the business is carried out over the online platforms, there is always a possibility of fraudulent activities. There is a high risk associated with the businesses carried out over the online platforms. In addition, some users also fear about the fact that their money may get lost due to technical errors. The product cannot be physically touched, hence from the perspective of the customers the quality of the products cannot be guaranteed. E-commerce is fully dependent upon the technology and internet is one of them. However, if the internet failure occurs the entire transaction may get disrupted. Moreover, there is also a possibility of financial loss due to incomplete transaction. There is always a doubt over the loyalty over the customers as the companies did not interact with the customers directly. There is always a risk of hackers who may steal personal information of the users and can carry out fraudulent activities. The secondary research has provided lot of information about the employment of e-commerce in small and medium sectors. It revealed that e-commerce provides several advantages to a company but still the adoption rate of e-commerce by the SMEs is extremely low. One of the major reasons behind low adaptability rate of e-commerce by the SMEs is the lack of awareness about the benefits and functionalities of e-commerce. In order to get in-depth understanding of the area, primary research is important. Hence, the study has also considered primary research. The next section will stress on the research design and how data about the area of concern will be collected from the market. 2.0 Research and Development Methodology In common parlance, research is referred to as process of searching knowledge. One can also define research as a systematic and scientific way of searching knowledge (Mukherji and Albon, 2009). In this section, the study will stress on the methodology to be adopted for collecting and analysing primary data. It will also shed light on the philosophy to be adopted for the research and the research strategy for the project. Research Philosophy and Approach The principal objective of the study is to uncover the effectiveness of e-commerce solutions for SMEs. Therefore, according to the objective of the study, research hypothesis will be developed. In addition, to accomplish the study successfully, the philosophical context of the project will be considered. Research philosophy can be defined as the way by which information about the area of study should be examined, collected and put into practise. However, it depends on the objectives and goals of the research. There are two types of research philosophies namely positivism and interpretivism. Positivism According to the researchers following of positivism approach believes that the reality remains stable and can be observed from the point of view of an objective. Thus, they believe that observations should be repeatable and phenomenon is isolated. However, it hardly gets obstructed from the phenomenon that has been already studied. The researchers belonging to this category also believes that reality can be captured with the help of certain instruments of research such as experiments and questionnaires. The principal intentions of a positivist researcher are always to present detailed explanation that leads to better control over the situation. Guba and Lincoln (2005), in this context believe positivism approach is the best way to get insights into the social world. They also stated that, researchers believing in positivism approach mainly use structured interviews and questionnaire survey to address the research questions and fulfil the research objectives. Interpretivism Interpretivism is another type of research philosophy, where the researcher believes that the behaviour of a human being is influenced by what they perceive about the given circumstances. The researchers belonging to the category of interpretivists, believes that the behaviour portrayed by human beings is the result of their interpretation of the existing situation. Interpretivists try to gather maximum information to understand “how people understand and see the world around them” (Saunders, Lewis and Thornhill, 2009). This is the reason why instead of gathering and recording statistical data, interpretivists try to get emotionally attached and discuss about the research area with the individuals. Some of the instruments that are used to collect data in this approach are unstructured interviews and in-depth interviews. Hence, it basically involves collection of qualitative data. Therefore considering the objectives of the study and putting emphasis on the research questions, it is proposed that the study will follow positivism approach. The rationale behind adopting positivism approach is that it fits with the objective of the research and moreover, the study also involves large amount of statistical calculation. Research Strategy Research strategy is another important element of a study as it plays a crucial role in the re-recording of appropriate and authentic data from the market. Hence, the research strategy must be formulated properly to get the best results. In general there are large number of research methodologies have been identified. Some of the most noticeable ones are case studies, surveys, forecasting, action research and descriptive studies among others. The study has proposed that it will follow positivism approach. The research strategy to be put into practise for this study is survey. This study will therefore use techniques such as questionnaire surveys and focus group interviews. Moreover, adopting survey approach will allow researchers to collects in depth information about the area of concern. Data collection Methods and Sampling Data collection is one of the most important factors of a study. The type of data as well as the process to be employed for collecting data remains highly dependent on the research design, research approach and research strategy. In addition, the objective of the study also plays an influencing role in the process of deciding data collection method and sampling process. The basic requirements for collecting appropriate and authentic data for a study includes a data recording and measuring instrument, and an instrument to measure the validity of a data. Hence, the study needs to be designed appropriately to fit the research objective. As mentioned above the data collection instruments to be used for this study are questionnaire and focus group interview. Another important activity, in a research study is sampling. Sampling is a process by which a subset of population is selected from a large population and the feedbacks of those populations is used to generalize the findings. The principal rationale behind the use of sampling technique is to ensure the data collected from the respondents can be used to generalize the findings. Therefore along with selecting the group of respondents it is equally essential to select the sample size. In addition, the process employed to select the sample or the sampling technique is also crucial. For this study, the sample group will be the executives of the companies belonging to the SME sector. In addition, the study will also use another group of sample which is the IT team of those organizations. As they will be able to shed light on the cost associated and benefits associated with implementation of e-commerce. The sample size will be 10 for the executives and 5 for the IT personnel. The sampling technique to be used for this study will be simple random sampling. The reason behind going with this technique is that it gives equal opportunity for every individuals of getting selected. The methodologies to be adopted for this study are questionnaire surveys and focus group interviews. The detailed descriptions of both the methodologies are presented below: - Questionnaire Survey A questionnaire can be defined as an instrument of research that consists of a number of questions and used for the principal purpose of recording information from the respondents. Questionnaire surveys are mostly used when the sample size is relatively large, however in some cases when the respondents are not available for focus group interview sessions, questionnaire survey is the best alternative. In general there are two types of questionnaires namely open ended and closed ended. In open ended questionnaire, the users are not provided with any options. On the other hand, in closed ended questions, the users are provided with options. There are several advantages as well as disadvantages for questionnaire survey. The biggest advantage of using questionnaire survey is that the time required for collecting data becomes less and the process also becomes easier. Moreover, the process also becomes cost effective. On the other hand, the disadvantage of using questionnaire is that it fails to provide in-depth information about the area of study and at times participants may respond superficially which can negatively impact the quality of the research. However, as per the requirements and objectives of the study, it is believed that questionnaire survey for the executives is appropriate. Focus Group Interview Focus group interview is another way of recording responses from the participants of the study. In this process, the interviewer throws some questions to the interviewees and they are asked to present in-depth views about the question. The principal aim of carrying out focus group interview session is to ensure adequate data about the area of concern is recorded. In general, a focus group interview session continues for a period of half an hour to one hour. The biggest advantage of using focus group interview session is that it allows collection of in-depth information from the participants. However, its biggest disadvantage is that the time required for completing the task becomes lengthier and at times it becomes difficult to arrange the interview session. Despite of this, it is believed that, focus group interview session will provide good results and can be an effective instrument for this study. Reliability and Validity Reliability and validity are the two factors which ensure high quality data has been collected from the market (Miller, 2012). In order to successfully carry out a study, the quality of data needs to be of high quality. However, if the collected data turns out to be of low quality, it may adversely affect the quality of research. Miller (2012), also pointed out that the two most common and significant measurement processes are testing the validity and reliability of the collected data. Both reliability and validity tests will be employed into the study in the following manner. Reliability Reliability of research can be regarded as the extent to which similar outputs or results can be obtained with the help of measurement techniques such as questionnaire, annova test etc. after repetitive trials. In other words it can also be referred to as the test of stability and consistency of the collected data for certain time interval. In this context of the study, i.e. to uncover the effect of e-commerce on SMEs, the collected data will be examined for a number of times. This will also ensure that the collected data is fully reliable. Validity The validity of the data collected for a research is extremely essential for addressing the research objectives and drawing a logical conclusion. The validity of a research examines whether the study has actually premeditated what it proposed to do. In this context of the study, i.e. to uncover the effect of e-commerce on SMEs, the study will consider statistical calculation in the form of t-test. Limitations of the Study The limitations of the study are as follows: - Financial Constraints: - Financial constraints can be one of the limitations. Information Availability: - Availability of information can acts as one of the major limitations for the study. Approaching the respondents: - Approaching the respondents can be one of the problems for the company. Ethical Consideration The study has considered the following ethical factors: - The study will ensure none of the participants gets physically injured or they are emotionally hurt. Prior to select respondents, consent from the concerned authority will be taken. Data Analysis The research design mentioned above is appropriate for addressing the research questions and fulfilling the objectives of the study. The collected data will be analysed with the help of statistical packages such as SPSS. However, basic excel will be also used to cover some analysis portions. 3.0 Resources and Planning This study requires the following resources: - Computer systems Application packages such as SPSS and Excel. Access to library databases for obtaining journals. Access to Book Library. Internet Connection. Capital. Gantt chart The importance of managing time cannot be denied. The importance of time management further increases if it involves a certain deadline. Hence, for this project time management was an essential part. In order to manage time, the study has considered Gantt chart. Gantt chart is an effective time management tool and allows pictorial representation of the tasks to be completed within a certain time interval. For this study also, the tasks were divided and accordingly time for accomplishing those tasks have been allotted. Activity Date Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13 Jan 14 Designing the Study                         Writing the literature review for the project                         Determining the research Methods                         Completion of the first proposal                         Submit proposal                         Approval of the Subject                         Collecting Primary data                         Data Analysis                         Review of Literature                         Submit the 1st draft                         Finish and submit final draft                         Final oral exam                         Approval of the research Project                         References Al Qirim, N. A. Y., 2004. Electronic Commerce in Small to Medium-sized Enterprises: Frameworks, Issues, and Implications. Pennsylvania: Idea Group Inc. Asia Pacific Economic Cooperation, 2004. Introduction. [online] Available at: [Accessed 04 April 2013]. Bhasker, B., 2006. Electronic Commerce: Framework, Technologies and Applications. 2nd ed. New York: McGraw-Hill Education. Clarion Technologies, 2011. E-Commerce for SME. [pdf] Available at: [Accessed 04 April 2013]. Ecommerce-land, 2004. History of Ecommerce. [online] Available at: [Accessed 04 April 2013]. Guba, E. G. and Lincoln, Y. S., 2005. Paradigmatic Controversies, Contradictions and Emerging Confluences. The Sage Handbook of Qualitative Research, 8, pp.191 – 215. Jentzsch, R. and Miniotas, A., 1999. The Application of E-commerce to a SME. [pdf] Available at: [Accessed 04 April 2013]. Kumar, S. and Petersen, P., 2006. Impact of e-commerce in lowering operational costs and raising customer satisfaction. Emerald, 17. Majumdar, S. K., Cave, M., and Vogelsang, I., 2005. Handbook of Telecommunications Economics: Technology Evolution and the Internet. Amsterdam: Emerald Group Publishing. Miller, M. J., 2012. Reliability and Validity. [pdf] Available at: < http://michaeljmillerphd.com/res500_lecturenotes/Reliability_and_Validity.pdf> [Accessed 04 April 2013]. Mukherji, P., and Albon, D., 2009. Research Methods in Early Childhood: An Introductory Guide. London: SAGE Publication. OECD, 2000. Realising the Potential of Electronic Commerce For SMEs in the Global Economy. [pdf] Available at: [Accessed 04 April 2013]. Saunders, M., Lewis, P. and Thornhill, A., 2009. Research Methods for Business Student. 5th ed. New Jersey: Pearson Education Inc. Sun, Z. and Finnie, G. R., 2004. Intelligent Techniques in E-Commerce: A Case Based Reasoning Perspective. Berlin: Springer. Zongqing, Z., 2004. E-commerce and Information Technology in Hospitality and Tourism. Connecticut: Cengage Learning. Read More