Chapter 4 Ebusiness strategy for small and mediumsized
Chapter 4 E-business strategy for small and medium-sized enterprises (SMEs) Paula Goulding ICT 326 1
Learning objectives § Appreciate the contribution and importance of small and mediumsized enterprises (SMEs) to a healthy national economy § Appreciate the nature and distinguishing characteristics of SMEs, their use and adoption of IT, and the attitude of the ownermanager to IT innovation ICT 326 2
Learning objectives § Understand the risks if SMEs do not adopt e-business and some of the reasons why SMEs have been comparatively slow to adopt e-business § Understand some of the problems associated with a lack of planning of e-business requirements and initiatives in SMEs ICT 326 3
Learning objectives § Understand the need for SMEs to undertake careful planning and strategising before adopting e-business § Understand a framework presented to support visioning and thinking about ebusiness strategy for SMEs ICT 326 4
Definition of SME § Government definitions typically rely on industry type, number of employees, ownership, annual turnover, and the like § SMEs can be defined by characteristics – Relatively small share of market – Managed in personal & idiosyncratic way, free from external influence or control over decision making ICT 326 5
Small Business – The Facts § Typically defined in Australia by number of employees – 1 -4 Micro – 5 -19 Small – 20 -200 Medium ICT 326 6
Why focus on SMEs? § Australia & many countries in region are heavily dependent on SMEs for wealth creation, growth & prosperity § 96% non-agriculture private sector <20 employees – 75% of these in service sector § Employ 2. 5 m (33% of workforce) – 85% are micro businesses (<5 people) § Contribute 1/3 non-farm gross production § Small + Medium = 52% of workforce ICT 326 (ABS 2001) 7
Why focus on SMEs? § Significant contribution to social cohesion, employment & production in this region – Health of national economies linked to health of SME sector – Crucial to national competitive development & innovation – Success of SMEs is contingent on remaining efficient and competitive, & responsive to changing customer demands § Concerns expressed about slow uptake of electronic commerce ICT 326 8
Why focus on SMEs? § SMEs yet to be persuaded of benefits of EC ? – Relatively efficient & effective channel for § § Info provision & exchange Advertising, marketing Transactions Facilitating distribution of goods & services globally § Ignoring EC means potentially – Risk becoming uncompetitive in long term – Risk loss of market share to global competitors ICT 326 9
Why focus on SMEs? § SME owner-managers yet to be persuaded about benefits of e-Commerce ? – Attitude of owner-manager critical to uptake of technology – Sometimes struggle to demonstrate ROI § Clear benefits need to be demonstrated for business before owner-managers likely to adopt e-Commerce ICT 326 10
Small Business – 2004 § Sensis SB Index (July 2004) § http: //www. eservices. com. au/sensis/sbc/production/sensis_e. Business_July 2004. pdf – 94% (91% in 2002) of all small businesses own computers (100% medium; 97% in 2002) – Spending on software has risen over the last 12 months – 86% (79% in 2002) of small businesses are connected to the Internet (99% medium) § Majority by modem ( broadband growing amongst medium ) ICT 326 11
Small Business: The Online Challenge 2004 http: //www. eservices. com. au/sensis/sbc/production/sensis_e. Business_July 2004. pdf § SMEs see being online as a necessity – 45% of small businesses have web sites (80% medium, down from 82%) – 13% (15% medium) have intention to get one within year § So, what are they using the internet for? ? ? ICT 326 12
Small Business: The Online Challenge 2004 http: //www. eservices. com. au/sensis/sbc/production/sensis_e. Business_July 2004. pdf § 94% of those small businesses connected to the Internet see e-mail as being the most essential internet application § 90% research § 88% looking for products and services ICT 326 13
Small Business: The Online Challenge 2004 http: //www. eservices. com. au/sensis/sbc/production/sensis_e. Business_July 2004. pdf § Procurement – 56% – The portion of internet purchases of total purchasing activities has increased (45% 2003) – 12% do majority of purchasing online § Payment – 59% (up from 23% two years ago) – 96% satisfaction level – Mostly computer software, flights, stock/merchandise ICT 326 14
Small Business: The Online Challenge 2004 http: //www. eservices. com. au/sensis/sbc/production/sensis_e. Business_July 2004. pdf § On-line selling – 39% take orders online – Online sales represents >5% of total sales in 47% of businesses § Return on Investment – 59% indicated investment had already been recovered – Further 17% expected to recover investment in next twelve months ICT 326 15
Lessons learned about e-Business needs of SMEs § Inadequate knowledge of e-Business resulted in poor decision making § No clear business vision with respect to e-Business § Limited strategy with respect to e-Business § Limited integration of e-Business vision with existing organisational vision & strategy ICT 326 16
Lessons learned about e-Business needs of SMEs § Limited appreciation of impacts on core business processes of adoption of e-Commerce § Limited understanding of need to change performance measurement systems following adoption of e-Commerce § Limited understanding of potential changes to relationships with suppliers § Limited attention paid to logistics requirements following introduction of e-Commerce ICT 326 17
Lessons learned about e-Business needs of SMEs § Limited understanding of nature of ecompetition & implications of entering a global marketplace § Limited attention paid to effectively managing customer relationships § Limited attention paid to developing required resources & functional strategies § Insufficient attention paid to need for organisational change management ICT 326 18
Towards a framework. . § Need for device to help structure & integrate thinking about diverse elements involved in e-commerce – planning & implementation issues § support a systematic & holistic approach to e-commerce § develop an e-business mindset ICT 326 19
Towards a framework. . § Consideration needs to be given to: – investment in appropriate IS/IT – appropriate re-engineering & redesign of business processes – effective marketing & customer relationship management – efficient & effective acquisition & management of resources & relationships – development & management of efficient & effective logistics or distribution capability ICT 326 20
A framework for e-business strategy formulation Step 1: e-vision ICT 326 21
A framework for e-business strategy formulation § Step 2: Strategy development – Having established e-vision, SME can consider a number of themes to ensure successful adoption of e. Business § Investment in suitable IS/IT § Appropriate re-engineering & redesign of core business processes § Effective marketing & CRM § Effective & efficient acquisition & management of resources & relationships § Development & management of effective logistics capability ICT 326 22
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A framework for ebusiness strategy formulation Investment in IS/IT § planning IS/IT investment requires strategy formulation IS/IT impact, potential & technological breakthroughs Business Strategy Where is * mission & vision * objectives & directions * change IS Strategy * business based *demand orientated * application focussed § e-business implies even tighter linkages IT Strategy * supply orientated * technology focussed ICT 326 the business going & why What is required How it can be delivered 24
A framework for ebusiness strategy formulation § Investment in IS/IT – identify IS/IT functionality required for ebusiness initiatives – determine where to source expertise & technology § develop / bring in-house § adopt solutions from ISP / ASP § develop & manage outsourcing arrangements from a “whole-of-business” perspective ICT 326 25
A framework for ebusiness strategy formulation § Redesign of Business Processes – advertising, selling, interacting with customers, processing payments & orders online may imply need to modify existing business processes / create new processes – strategy formulation & strategic decisions will effect extent of redesign ICT 326 26
A framework for ebusiness strategy formulation § Logistics Capability – examine customer expectations of delivery of non-digital goods/services – review existing capability in terms of requirements of e-commerce – consider requirements for warehousing, packing, order fulfilment & distribution ICT 326 27
A framework for ebusiness strategy formulation § Marketing & CRM – need to consider and plan for the capacity of ecommerce to change & extend nature of organisation’s products/services & markets § § § market research & testing product & market extensions market exposure prospect generation & contact sales channel support post-sale customer support ICT 326 28
A framework for ebusiness strategy formulation § Sourcing of Resources – requires acquisition & integration of resources (human, physical, financial, etc) – consideration of development of alliances, partnerships, outsourcing relationships ICT 326 29
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E-visioning and e-business strategy development § Issues & Learning – Is this framework restricted to SMEs? § Applicable to large organisations as well? ICT 326 31
Summary § use framework to highlight concerns, develop understanding of broad range of issues – Encourages holistic, systematic & integrated thinking – Shape a “strategic conversation” § revisit strategy as learning occurs § ensure strategy suitable for e-commerce is developed – existing strategy may not “transplant” to new environments ICT 326 32
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