ICT3261 Chapter 4 E-business strategy for small and medium-sized enterprises (SMEs) Paula Goulding.

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Chapter 4Chapter 4

E-business strategy E-business strategy for small and medium-sized for small and medium-sized

enterprises (SMEs)enterprises (SMEs)Paula GouldingPaula Goulding

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Learning objectivesLearning objectives

Appreciate the contribution and Appreciate the contribution and importance of small and medium-importance of small and medium-sized enterprises (SMEs) to a sized enterprises (SMEs) to a healthy national economyhealthy national economy

Appreciate the nature and Appreciate the nature and distinguishing characteristics of distinguishing characteristics of SMEs, their use and adoption of IT, SMEs, their use and adoption of IT, and the attitude of the owner-and the attitude of the owner-manager to IT innovationmanager to IT innovation

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Understand the risks if SMEs do not Understand the risks if SMEs do not adopt e-business and some of the adopt e-business and some of the reasons why SMEs have been reasons why SMEs have been comparatively slow to adopt comparatively slow to adopt e-businesse-business

Understand some of the problems Understand some of the problems associated with a lack of planning of associated with a lack of planning of e-business requirements and e-business requirements and initiatives in SMEsinitiatives in SMEs

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Understand the need for SMEs to undertake Understand the need for SMEs to undertake careful planning and strategising before careful planning and strategising before adopting adopting e-businesse-business

Understand a framework presented to Understand a framework presented to support visioning and thinking about e-support visioning and thinking about e-business strategy for SMEsbusiness strategy for SMEs

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Definition of SMEDefinition of SME

Government definitions typically rely on industry Government definitions typically rely on industry type, number of employees, ownership, annual type, number of employees, ownership, annual turnover, and the liketurnover, and the like

SMEs can be defined by characteristicsSMEs can be defined by characteristics– Relatively small share of marketRelatively small share of market– Managed in personal & idiosyncratic way, free from Managed in personal & idiosyncratic way, free from

external influence or control over decision makingexternal influence or control over decision making

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Small Business – The FactsSmall Business – The Facts

Typically defined in Australia by number of Typically defined in Australia by number of employeesemployees– 1-4 Micro1-4 Micro– 5-19 Small5-19 Small– 20-200 Medium20-200 Medium

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Why focus on SMEs?Why focus on SMEs?

Australia & many countries in region are heavily Australia & many countries in region are heavily dependent on SMEs for wealth creation, growth & dependent on SMEs for wealth creation, growth & prosperityprosperity

96% non-agriculture private sector <20 employees96% non-agriculture private sector <20 employees– 75% of these in service sector75% of these in service sector

Employ Employ 2.5 m (33% of workforce) 2.5 m (33% of workforce)– 85% are micro businesses (<5 people)85% are micro businesses (<5 people)

Contribute 1/3 non-farm gross productionContribute 1/3 non-farm gross production Small + Medium = 52% of workforceSmall + Medium = 52% of workforce

(ABS 2001)

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Significant contribution to social cohesion, Significant contribution to social cohesion, employment & production in this regionemployment & production in this region– Health of national economies linked to health of Health of national economies linked to health of

SME sectorSME sector– Crucial to national competitive development & Crucial to national competitive development &

innovationinnovation– Success of SMEs is contingent on remaining Success of SMEs is contingent on remaining

efficient and competitive, & responsive to efficient and competitive, & responsive to changing customer demandschanging customer demands

Concerns expressed about slow uptake of Concerns expressed about slow uptake of electronic commerceelectronic commerce


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SMEs yet to be persuaded of benefits of EC ?SMEs yet to be persuaded of benefits of EC ?– Relatively efficient & effective channel forRelatively efficient & effective channel for

Info provision & exchangeInfo provision & exchange Advertising, marketingAdvertising, marketing TransactionsTransactions Facilitating distribution of goods & services globallyFacilitating distribution of goods & services globally

Ignoring EC means potentiallyIgnoring EC means potentially– Risk becoming uncompetitive in long termRisk becoming uncompetitive in long term– Risk loss of market share to global competitorsRisk loss of market share to global competitors


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SME owner-managers yet to be persuaded about SME owner-managers yet to be persuaded about benefits of e-Commerce ?benefits of e-Commerce ?– Attitude of owner-manager critical to uptake of Attitude of owner-manager critical to uptake of

technologytechnology– Sometimes struggle to demonstrate ROISometimes struggle to demonstrate ROI

Clear benefits need to be demonstrated for business before Clear benefits need to be demonstrated for business before owner-managers likely to adopt owner-managers likely to adopt e-Commerce e-Commerce


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Small Business – 2004Small Business – 2004

Sensis SB Index (July 2004)Sensis SB Index (July 2004) http://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdfhttp://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdf

– 94% (91% in 2002) of all small businesses own 94% (91% in 2002) of all small businesses own computers (100% medium; 97% in 2002)computers (100% medium; 97% in 2002)

– Spending on software has risen over the last 12 Spending on software has risen over the last 12 monthsmonths

– 86% (79% in 2002) of small businesses are 86% (79% in 2002) of small businesses are connected to the Internet (99% medium)connected to the Internet (99% medium) Majority by modem ( broadband growing amongst Majority by modem ( broadband growing amongst

medium )medium )

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Small Business: The Online Small Business: The Online Challenge 2004Challenge 2004

http://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdfhttp://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdf

SMEs see being online as a necessitySMEs see being online as a necessity– 45% of small businesses have web sites 45% of small businesses have web sites

(80% medium, down from 82%)(80% medium, down from 82%)– 13% (15% medium) have intention to get 13% (15% medium) have intention to get

one within yearone within year So, what are they using the internet So, what are they using the internet

for???for???

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http://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdfhttp://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdf

94% of those small businesses connected to 94% of those small businesses connected to the Internet see e-mail as being the most the Internet see e-mail as being the most essential internet applicationessential internet application

90% research90% research 88% looking for products and services88% looking for products and services

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http://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdfhttp://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdf Procurement – 56%Procurement – 56%– The portion of internet purchases of total The portion of internet purchases of total

purchasing activities has increased (45% 2003)purchasing activities has increased (45% 2003)– 12% do majority of purchasing online12% do majority of purchasing online

Payment – 59% (up from 23% two years Payment – 59% (up from 23% two years ago)ago)– 96% satisfaction level96% satisfaction level– Mostly computer software, flights, Mostly computer software, flights,

stock/merchandisestock/merchandise

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http://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdfhttp://www.eservices.com.au/sensis/sbc/production/sensis_eBusiness_July2004.pdf On-line sellingOn-line selling– 39% take orders online39% take orders online– Online sales represents >5% of total Online sales represents >5% of total

sales in 47% of businessessales in 47% of businesses Return on InvestmentReturn on Investment

– 59% indicated investment had already 59% indicated investment had already been recoveredbeen recovered

– Further 17% expected to recover Further 17% expected to recover investment in next twelve monthsinvestment in next twelve months

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Lessons learned about Lessons learned about e-Business needs of SMEs e-Business needs of SMEs

Inadequate knowledge of e-Business Inadequate knowledge of e-Business resulted in poor decision makingresulted in poor decision making

No clear business vision with respect to No clear business vision with respect to e-Business e-Business

Limited strategy with respect to e-BusinessLimited strategy with respect to e-Business Limited integration of e-Business vision Limited integration of e-Business vision

with existing organisational vision & with existing organisational vision & strategystrategy

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Lessons learned about Lessons learned about e-Business needs of SMEse-Business needs of SMEs

Limited appreciation of impacts on core Limited appreciation of impacts on core business processes of adoption of business processes of adoption of e-Commercee-Commerce

Limited understanding of need to change Limited understanding of need to change performance measurement systems performance measurement systems following adoption of e-Commercefollowing adoption of e-Commerce

Limited understanding of potential Limited understanding of potential changes to relationships with supplierschanges to relationships with suppliers

Limited attention paid to logistics Limited attention paid to logistics requirements following introduction of requirements following introduction of e-Commercee-Commerce

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Limited understanding of nature of e-Limited understanding of nature of e-competition & implications of entering a competition & implications of entering a global marketplaceglobal marketplace

Limited attention paid to effectively Limited attention paid to effectively managing customer relationshipsmanaging customer relationships

Limited attention paid to developing Limited attention paid to developing required resources & functional strategiesrequired resources & functional strategies

Insufficient attention paid to need for Insufficient attention paid to need for organisational change managementorganisational change management

Lessons learned about Lessons learned about e-Business needs of SMEse-Business needs of SMEs

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Towards a framework..Towards a framework..

Need for device to help structure & integrate Need for device to help structure & integrate thinking about diverse elements involved in thinking about diverse elements involved in e-commercee-commerce– planning & implementation issuesplanning & implementation issues

support a systematic & holistic approach to support a systematic & holistic approach to e-commercee-commerce

develop an e-business mindsetdevelop an e-business mindset

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Consideration needs to be given to:Consideration needs to be given to:– investment in appropriate IS/ITinvestment in appropriate IS/IT– appropriate re-engineering & redesign of business appropriate re-engineering & redesign of business

processesprocesses– effective marketing & customer relationship effective marketing & customer relationship

managementmanagement– efficient & effective acquisition & management of efficient & effective acquisition & management of

resources & relationshipsresources & relationships– development & management of efficient & effective development & management of efficient & effective

logistics or distribution capabilitylogistics or distribution capability

Towards a framework..Towards a framework..

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A framework for e-business A framework for e-business strategy formulationstrategy formulation

Step 1: e-vision

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A framework for e-business A framework for e-business strategy formulationstrategy formulation

Step 2: Strategy development Step 2: Strategy development – Having established e-vision, SME can consider a Having established e-vision, SME can consider a

number of themes to ensure successful adoption of e-number of themes to ensure successful adoption of e-Business Business Investment in suitable IS/ITInvestment in suitable IS/IT Appropriate re-engineering & redesign of core business Appropriate re-engineering & redesign of core business

processesprocesses Effective marketing & CRMEffective marketing & CRM Effective & efficient acquisition & management of resources & Effective & efficient acquisition & management of resources &

relationshipsrelationships Development & management of effective logistics capabilityDevelopment & management of effective logistics capability

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A framework for e-A framework for e-business strategy business strategy

formulationformulation

planning IS/IT planning IS/IT investment investment requires strategy requires strategy formulationformulation

e-business e-business implies even implies even tighter linkagestighter linkages

Business Strategy* mission & vision

* objectives & directions* change

IT Strategy* supply orientated

* technology focussed

IS Strategy* business based

*demand orientated* application focussed

Where is the business going & why

What is required

How it canbe delivered

IS/IT impact, potential &

technological breakthroughs

Investment in IS/IT

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Investment in IS/IT Investment in IS/IT – identify IS/IT functionality required for e-identify IS/IT functionality required for e-

business initiativesbusiness initiatives– determine where to source expertise & determine where to source expertise &

technologytechnology develop / bring in-housedevelop / bring in-house adopt solutions from ISP / ASPadopt solutions from ISP / ASP develop & manage outsourcing arrangements from a develop & manage outsourcing arrangements from a

“whole-of-business” perspective“whole-of-business” perspective



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Redesign of Business Processes Redesign of Business Processes – advertising, selling, interacting with customers, advertising, selling, interacting with customers,

processing payments & orders online may imply processing payments & orders online may imply need to modify existing business processes / need to modify existing business processes / create new processescreate new processes

– strategy formulation & strategic decisions will strategy formulation & strategic decisions will effect extent of redesigneffect extent of redesign



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Logistics Capability Logistics Capability – examine customer expectations of delivery of examine customer expectations of delivery of

non-digital goods/services non-digital goods/services – review existing capability in terms of review existing capability in terms of

requirements of e-commercerequirements of e-commerce– consider requirements for warehousing, consider requirements for warehousing,

packing, order fulfilment & distributionpacking, order fulfilment & distribution



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Marketing & CRM Marketing & CRM – need to consider and plan for the capacity of e-need to consider and plan for the capacity of e-

commerce to change & extend nature of organisation’s commerce to change & extend nature of organisation’s products/services & marketsproducts/services & markets market research & testingmarket research & testing product & market extensionsproduct & market extensions market exposuremarket exposure prospect generation & contactprospect generation & contact sales channel supportsales channel support post-sale customer supportpost-sale customer support



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Sourcing of Resources Sourcing of Resources – requires acquisition & integration of requires acquisition & integration of

resources (human, physical, resources (human, physical, financial, etc)financial, etc)

– consideration of development of consideration of development of alliances, partnerships, outsourcing alliances, partnerships, outsourcing relationshipsrelationships



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E-visioning and e-business E-visioning and e-business strategy developmentstrategy development

Issues & Learning Issues & Learning – Is this framework restricted to SMEs?Is this framework restricted to SMEs?

Applicable to large organisations as well?Applicable to large organisations as well?

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SummarySummary

use framework to highlight concerns, use framework to highlight concerns, develop understanding of broad range of develop understanding of broad range of issuesissues– Encourages holistic, systematic & integrated Encourages holistic, systematic & integrated

thinkingthinking– Shape a “strategic conversation”Shape a “strategic conversation”

revisit strategy as learning occursrevisit strategy as learning occurs ensure strategy suitable for e-commerce ensure strategy suitable for e-commerce

is developedis developed– existing strategy may not “transplant” to new existing strategy may not “transplant” to new

environmentsenvironments

ICT3261 Chapter 4 E-business strategy for small and medium-sized enterprises (SMEs) Paula Goulding.

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Transcript of ICT3261 Chapter 4 E-business strategy for small and medium-sized enterprises (SMEs) Paula Goulding.