CHAPTER 2: LITERATURE REVIEW
2.8. E-commerce capabilities
30 2.7.3. Overall comparison of e-commerce adoption in developing and developed countries
From the above, there are evident similarities in terms of e-commerce adoption in developing and developed countries. The following similarities are observed:
• SMMEs play an important role in the countries’ economies but lag behind large companies in terms of e-commerce adoption
• E-commerce adoption is linked to short rather than long term benefits
• Limited knowledge of e-commerce benefits
• E-commerce adoption by SMMEs is limited by the firm’s size, resources and budget
• SMMEs are still at the initial stage of e-commerce adoption
• Lack of strategic intent for e-commerce adoption
However, there are also disparities between developed and developing countries as depicted in the table below:
Table 2.5. Comparison of e-commerce adoption between developing and developed countries
Developed countries Developing countries
Sophisticated e-commerce infrastructure E-commerce infrastructure still at developmental stage
High rate of internet connectivity Poor internet connectivity (Datta,2010)
As explained earlier, e-commerce adoption is subjected to some pre-requisites. The following section analyses the required e-commerce capabilities in order to adopt e-commerce.
31 Cloete et al. (2002) define three stages involved in planning for e-commerce adoption:
Advertising static pages and e-mail for the purpose of communication with clients Database integration, which involves interactive web catalogues. This stage also
involves transaction processing through a website by means of shopping cart technology and secure payments
The final stage is fully fledged e-commerce. This includes all the information processing capabilities of the previous stages with additional features such as
“interactive features, personalisation and Customer Relationship Management”(Cloete et al., 2002:3)
Cloete et al. (2002) further argue that the following e-commerce technological capabilities are enablers of e-commerce adoption within the context of South African SMMEs as SMME businesses go through the above three stages:
Company electronic e-mail Company access to the internet
Computerised database of company customers Computerised database of company suppliers
Computerised inventory of company products and services
Moreover, they also identified that a company strategy for developing e-commerce is an impetus towards e-commerce adoption. In this research, the above technological capabilities and company strategy for developing e-commerce have been adopted in the researcher’s quest to assess whether the surveyed SMMEs have the necessary infrastructure for e-commerce adoption. As the research scope is limited to internet-based e-commerce, a company website has also been included as one of the e-commerce capabilities that are investigated in this study.
Akkeren and Cavaye (1999a:4) state that “sophisticated e-commerce technologies are not likely to be adopted before entry-level activities are used more readily”. Courtney and Fintz (2001) advocate that the scope of e-commerce activities ranges from entry level activities to more advanced activities. Courtney and Fintz (2001) identify five (5) potential steps that organisations may go through as they progress up the e-commerce adoption ladder. The five progressional steps could be used as an indicator of where a business is situated within the e- commerce adoption process. Although firms can leapfrog one or two steps, the adoption ladder can still be used to assess the extent to which e-commerce is adopted in a business. It may also give an indication of the readiness of a firm to adopt e-commerce. The following is a detailed description of these five steps:
32 2.8.1. E-mail
At the bottom level of the adoption ladder is e-mail. According to Tagliavani, Ravarini and Antonelli (2001), using e-mail effectively may help SMMEs to acquire new customers, get customers’ feedback, establish new business relationships with industry stakeholders, create brand loyalty and carry out market research. In this case, a company must have some means to connect to the internet via an internet connection line provided by an internet service provider.
2.8.2. Website
At the second level of adoption, a website increases the company exposure to potential customers by promoting its image, enhancing customer service quality. A website also allows SMMEs to differentiate themselves by narrowing their scope of activities to specific customer needs through web-based market research. Leong, Stanners and Huang (1998:2)also argue that the most important website objectives are “to enhance the corporate image, increase brand or product awareness and to provide better customer service”. The website may provide marketing-related information including prices and stock levels, allowing customers to check the availability of products and services online. In this case, a company will require expert skills in terms of website design, a domain name and web hosting providers in order to publish and maintain its presence on the World Wide Web (WWW).
In South Africa, a recent survey on SMMEs (SMME survey 2012) indicates that websites are key contributors to i) establishing contact with customers, ii) updating inventory, iii) company sustainability, iv) business growth, v) competing for market share (Goldstuck, 2012). In view of the increasing adoption of internet by South Africans, a web presence becomes an imperative for South African SMMEs (Goldstuck, 2012).
2.8.3. E-commerce
At this third level of e-commerce adoption process, a company moves from a simple web presence to online interaction between the business and its customers or a business and its suppliers for the placement of orders. In this case, the online interaction will determine the nature of the business undertaken such as Business to Business (B2B) in case of the interaction between the business and the suppliers and Business to Customers (B2C) in case of interaction between the business and the consumer. The online interaction may result in electronic payment through secure lines and/or issuing and receiving invoices. Although online payment processing optimizes business resources, Tagliavani, Ravarini and Antonelli ( 2001), Kowtha and Choon (2001) argue that enhancing a website with online processing facilities requires significant investments and skills.
33 Liu (2010) argues that firms that provide web functionalities that allow customers and trading partners to conduct online transactions are likely to have a successful e-commerce. In this case, the technological resources required become sophisticated.
2.8.4. E-business
In this case, e-commerce is used to support the business relationship between a customer and a supplier by means of interactive order progress tracking or online support (Turban et al., 2010).
There is also an online link with the suppliers as well as manufacturing and delivery though supply chain integration. The aim is to improve efficiencies and minimizing costs (Turban et al., 2010).
2.8.5. Transformed organisations
At this final stage, there is greater integration of all of the above activities with the internal processes of a business (Turban et al., 2010). In this regard, a company strategy is required as the integration demands greater coordination for the company to achieve its goals. The focus is on customer service.
E-commerce capabilities are not the only factors that contribute to e-commerce adoption. The following section investigates the determinants of e-commerce adoption i.e. factors that contribute to e-commerce adoption besides e-commerce capabilities.