Page 403 - Introduction to Electronic Commerce and Social Commerce

12.3 E-Commerce Strategy for Small and Medium-Sized Enterprises 391

12.3 E-COMMERCE STRATEGY Table 12.1 Advantages and disadvantages of EC for small and
FOR SMALL AND MEDIUM-SIZED medium-sized businesses
ENTERPRISES Advantages/benefits Disadvantages/risks
• Inexpensive sources of • Lack of funds to fully exploit
information. A the potential of EC
E-commerce can be one of the most effective business strate-
Scandinavian study found
gies for small and medium-sized enterprises (SMEs). The that over 90% of SMEs use
potential for SMEs to expand their markets and compete with the Internet for information
larger firms through EC is enormous. Some of the first com- search (OECD 2001)
• Inexpensive ways of • Lack of technical staff or
panies to take advantage of Web-based e-commerce were
advertising and conducting insufficient expertise in legal
small and medium-sized enterprises (SMEs). While larger, market research. Banner issues, advertising, etc. These
established, tradition-bound companies hesitated, some for- exchanges, newsletters, chat human resources may be
ward-thinking SMEs initiated online presence and opened rooms, and so on are unavailable or prohibitively
frequently cost-free ways to expensive to an SME
webstores because they realized there were opportunities in
reach customers
marketing, business expansion, cost-cutting, procurement,
• Competitor analysis is • Less risk tolerance than a large
and a wider selection of partner alliances. An example of an easier. A Finnish study company. If initial sales are
active SME is: The Mysterious Bookshop (mysteriousbook- found that Finnish firms low or the unexpected
shop.com). rated competitor analysis happens, the typical SME does
third in their use of the not have a large reserve of
Clearly, SMEs are still finding it difficult to formulate or
Internet, after information resources to fall back on
implement an EC strategy, mainly because of their inability search and marketing
to handle large volumes of products, lack of knowledge or IT • Inexpensive ways to build • When the product is not
expertise in the SME, and limited awareness of the associ- (or rent) a webstore. suitable or is difficult for
ated opportunities and risks. As a result, many SMEs create Creating and maintaining a online sales
website is relatively easy
static websites that are not used for selling. However, a grow-
and cheap
ing number of SMEs are adopting the EC strategy. SMEs can • SMEs are less locked into • Reduced personal contact with
join marketplaces such as Alibaba, Amazon.com, and Net-a- legacy information customers
Porter to sell their products there. According to TrueShip technologies and existing
(2016) consumers like to buy in marketplaces with the vari- relationships with
traditional retail channels
ety of products they can find there.
• Image and public • There is an inability to afford
In her article, Burke (2013) describes how a 15 year old recognition can be entry, or purchase enough
girl created a successful business inventing special flip-flops, generated quickly. A Web volume, to take advantage of
which are now sold online, in various off-line boutiques, and presence makes it easier for digital exchanges
at Nordstrom. For the future of EC for small businesses, see a small business to compete
against larger firms
Mills (2014).
• An opportunity to reach
Choosing an EC approach is a strategic decision that must worldwide customers.
be made in the context of the company’s overall business Global marketing, sales,
strategy. On the positive side, the nature of EC lowers the and customer support online
can be very efficient
barriers to entry, and it is a relatively inexpensive way of
reaching a larger number of buyers and sellers who can more
easily search for, compare prices, and negotiate a purchase.
However, there are also some inherent risks associated with and similar online directories that help small companies sell
the use of EC in SMEs. Table 12.1 provides a list of major globally. For details, see Vega (2014). Very important is the
advantages and disadvantages of EC for SMEs. advice provided by Alibaba Group (see Fan 2015).
For resources for SMEs going global, see sbecouncil.org/
resources/going-global.
Globalization and SMEs

In addition to increasing their domestic market, EC opens up Resources to Support SME Activities in EC
a vast global marketplace for SMEs, but only a small per-
centage of them conduct a significant part of their business SME owners often lack strategic management skills and conse-
globally. However, a growing number are beginning to use quently are not always aware of changes in their business envi-
EC to tap into the global marketplace in some way, but even ronment with respect to emerging technologies. Fortunately,
then, SMEs are more likely to purchase globally than to sell SMEs have a variety of private and public support options (e.g.,
globally. This situation is changing, thanks to Alibaba.com sba.gov, business.gov.au).