The business Environment for E-Commerce

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What are the principal drivers and the principal barriers to the take-up of E-Commerce By small companies in the UK?

E-Commerce is a fantastic area of business marketing which is now becoming more popular and is an aspect of our century. All businesses, no matter the size or income, are turning to the internet as a way to communicate to the outer world, and prospective customers. E-Commerce is an asset to all aspiring people and all are welcome to use its facilities and uses. The internet has created more opportunities for new arriving businesses which may not be as big as the large corporate businesses who have already taken advantage of the Internet.

The internet consists of many drivers for companies looking to “convert” to the web, however it holds as many barriers for companies especially those who are smaller, due to lack of resources or money.

There are many drivers to the take up of E-Commerce which I have described below. Firstly, The internet is a sort of “encyclopaedia” which allows company’s to research into specific areas of the business for example products and services that previous companies in the same area of business, have undertook. The ease of information access is also a benefit for an SME, which as a communication channel, the internet allows the sharing of knowledge and data between a number of companies. SMEs can now access information, resources and knowledge which previously were only available to big corporations, such as global marketing tools, and distribution systems.

Another benefit would be that there is a rapid increase in numbers of people, who are buying, selling, and performing transactions over the web. People are now starting to depend on the internet to carry out tasks which would previously would have been done physically. Therefore, the popularity that the internet holds with the public (customers), is definitely a drive for SME’s. This is because it is now possible to target a wider range of customers over one wavelength of communication, which is proving to be continuingly popular.

Concerning SME’s which cater for a niche market, this over channel communication portal, allows people to come to you, rather then you chasing them to buy your product. This way, it ensures that you are not wasting much needed budget on advertisement and to attract potential customers, but customers themselves come to you, ensuring a good customer-business interaction, and a better turnout for both sides.

Another driver would be the cheaper, lower, overheads, for example “bricks and mortar”. The need for the simplest objects which are vital to the running of the company for example invoices, paper, stationary, etc, this is all decreased by online transactions which are a more efficient and instant method of web communication between the company and the customer. Changing from the traditional approach of word of the mouth, SME’s are now also gaining more publicity from the internet as publicity can be made in a variety of ways, for example referrals from other web organisations or just simply emailing.

Another advantage would be that the internet is an inexpensive source of information for the company and data can be easily exchanged between company’s of the same nature. EDI (electronic data interchange) is the sharing of data in the form of electronic mail for data such as invoices, order forms etc. and advantage would be that it provides good means of communicating with businesses interlinked within the SME for example suppliers. It makes communication more easily available as a majority of company’s worldwide use this facility. However, EDI has its drawbacks which are described further on.
Another advantage is that support can be available to small businesses who may be looking to expand. IBM provide technical support to companies charging a small fee. If the company is to go online, then technology and computers will be widely used within the business, so simply knowing that help is available when wanted is essential in the daily functions of the business. It is even possible for a government to support a business by encouraging small businesses to take advantage of the facilities that E-Commerce has to offer.

Along with the Drivers, the Barriers also play a vital role in the take up of E-Commerce. The barriers must also be taken into consideration by a company, as it may cause them to suffer consequences which could have easily been avoided.
Above, EDI is seen as an asset to any company. It shows them to be up-to-date in using the latest technology, as well being able to communicate further a field. However, EDI has its drawbacks as any technology does. Firstly, it is too expensive to even take up as it requires purpose built software which is too expensive to buy, and secondly, the payment to the VANS (Value added networks) who provide the connectivity between the businesses is far too high for a small business to cope with.

Another barrier would be that it is less than likely that the business would have a high level of expertise is specific areas such as law which is of great importance to any business, no matter where in the world it is situated. Legal issues which include aspects such as Privacy (Data Protection act), fraud, and Intellectual property rights, are a platform by which each company has to work alongside. It is vital that the company has the knowledge needed in this area as if the daily functions of the business do not comply with the law, the company could face serious problem which would amount to further problems.

Another barrier and potential risk is the budget of the actual SME. This leads to the company having a less risk tolerance then a larger company due to many reasons. One would be that the larger company has more money and a higher capital then the smaller one, and has the ability to be more than flexible with their budget and simply “buy off” any problems encountered. This is a setback for the SME as the larger company is competition, which has an advantages on its side…Money! That is why it is essential that the small business has a clear understanding potential information that could help them advance further. This would include knowing and understanding customers’ buying habits, anticipating cash flow, and the development of good inter communication between businesses.

Contact is the strong point for a business. Contact involving itself and the consumer. It allows the consumer to get to know the business and how it operates, therefore creating trust between the business and themselves. For a small business, contact is vital for a small business as on the internet customers are more than likely to just discard your website as it is not widely known by a large number of people. For example if you had to pick from Comet, the large electrical goods company, and Goods’r’us, almost by instinct we would shop at Comet as it has a well known reputation and we trust the name. Knowing who you are buying from allows the consumer to evaluate whether the person is trustworthy and respected, as they will be handling data of a personal nature.

Over the web, It is impossible for the customer to meet the face behind the computer screen who is actually handling data of personal relevance to themselves. It is virtually impossible to know what is happening with the data handed over, which may be handed to someone who has no relevance or is related to the businesses at all. Many customers may want to speak to someone rather then just hand over their credit card number over the net. This arises issues such as personal privacy and data protection. The lack of trust may actually lead the business to lose prospective customers.

SME’s may also lose the advantage of being a part of a local community. Within a close knit community, trust again is developed, and gradually, by word of mouth, business is created. Knowing the people you will be supplying to and having daily interaction is all part of the learning and developing side of the business, and about learning good communication skills on behalf of the employees.

Overall, SME’s in the UK, are benefiting from the advantages of the web and internet as many other businesses are doing worldwide, but it is incredibly important that a small business can effectively understand the barriers which are blocking their chance to expand in this ever developing “E-World” It is also important that they consider the external factors which may be included when deciding to employ the internet.

These factors would include: Research and Competition, good internal communications, the ability to create specific priorities relating to what is needed, and the ability to delegate with other companies. They must also take into consideration that accepting help and combining forces from companies like themselves, may also be of great use to them when conducting actual research for finding the best option to go online. The risks are just has high as the drivers, but it is up to the company itself to ensure that using the internet is making its money’s worth.


Publication Date: Thursday 20th May, 2004
Author: Miss Dipti Kerai View profile

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