Essay, Pages 12 (2865 words)
Selection of Companies
The Directorate of industries at Chepauk, Chennai provided the researcher with a list of registered and functioning Small and Medium Enterprises in Chennai. The list was divided into manufacturing and service sector for Small and Medium enterprises. TANSTIA (Tamilnadu Small and Tiny Industries Association) also provided the researcher with a list of small and medium industries in Chennai. The researcher also collected information from two trade fairs that were conducted exclusively for SMES at Chennai trade Centre. The following are the exhibitions.
SMEs in Chennai are found in clusters only due to shortage of working space. Hence the Guindy industrial estate, Ekkaduthangal area and Ambattur Industrial estate are covered.
As per the secondary data source, the study area consists of 18,822 registered SMEs (Source: Directorate of Industries, Chennai). Since the population is known, the researcher adopted simple random technique from the normally distributed population.
This research study looks up on E-Commerce business benefits to small and medium enterprises in the city of Chennai.
Various research studies of E-Commerce focused on large and medium enterprises.
Elizabeth danie (2002) studied E-Commerce usage by small and medium enterprises and identified important aspects of doing E-Commerce in Business in United kingdom. Margihevy and Philippowel(2002) studied the use of internet in small and medium business enterprises. By use of E-commerce business grow faster and small enterprises and its entrepreneurs focus on use of technology for development of business.
Judith Payne (2003) focused on E-commerce business usage in developing economics. This study says that small entrepreneurs and critical for development of economy of developed as well developing countries.
Hussin (2008) tells that the usage of new E-commerce model for small entrepreneurs in Malaysia and they become innovators and have bigger vision for business and economic engine and growth.
These studies reveals that E-Business and commerce is vital methodology worldwide in order to reach out dealers, manufacturers and customers.
In India for E-commerce business development and usage is assisted and helped by ministry of small and medium enterprises. This study works for identifying usage and benefits of E-business and commerce by small business houses especially in Chennai.
Area of Study and Selection of Companies:
This study is conducted in usage and benefits of E-commerce by small and medium entrepreneurs in the metropolitan city of Chennai. The primary data is collected by the use of questionnaire by getting information of profile of business, E-commerce usage of smsll entrepreneurs and benefits attained by them.
Significance and Benefits of E-commerce to small and medium entrepreneurs:
- Easy acessability to a wider and global markets.
- Create and generate potential business and global partnerships.
- Flexible way of doing business, making administration, management and communication faster and easier.
- Significance of E-business is the accumulation of Global market information.
- E-commerce and business improves consumer services.
- E-business facilities lower transaction costs.
- E business is helpful for differentiation of products and services to global business community.
- E-business helps for easier supply chain management with MNCs and large scale enterprises in India and Abroad.
Caroline Chappel and Sylvie (1999) highlighted benefits E-business to small business entrepreneurs.
- E business provides quick market access coupled with markets and lower personnel costs.
- E business improves consumer relation,minimal logistics costs and faster processing business orders.
- E commerce minimizes storage cost and improved information flow.
- E commerce facilitates lower cost involved in payment transfer, faster payments and improved availability of products and services.
Data Analysis and Interpretation:
This study uses statitical tools such as Anova in order to arrive and understand as well observe E-commerce benefits to SMEs in Chennai.
Analysis of Variance for Factors of Business Benefits and Nature of Business
Business benefit from applications of E-Commerce in the form of improvement in company profile, increase in sales due to online transactions and speeding up of processes leading to process enhancement.
Nature of business refers to the classification into which SME business can be grouped. SMEs can be grouped into manufacturing units, service units and intermediary units.
The following table analyses the relationship between the benefits of business due to E-Commerce and the nature of business.
- Table 2 Analysis of variance for business benefits and nature of business
- Company profile Sum of Squares df Mean Square F Sig
- Between Groups 59.774 3 19.925 29.646 0.000
- Within Groups 213.048 317 0.672
- Total 272.821 320
- Sales augmentation Between Groups 52.834 3 17.611 21.207 0.000
- Within Groups 263.248 317 0.83
- Total 316.082 320
- Process enhancement Between Groups 41.163 3 13.721 16.569 0.000
- Within Groups 265.512 317 0.828
- Total 303.676 320
Source: Primary Data
From the above table of analysis of variances, it is found that company profile (F=29.646, p=0.000), Sales augmentation (F=21.207, p=0.000), Process enhancement (F=16.569, p=0.000) differ significantly with respect to nature of business.
Table 3 Descriptives for Nature of Business
N Mean Std. Deviation Std.
Error 95% Confidence Interval for mean Min Max
Lower Bound Upper Bound
- Company Profile Manufacturing 229 3.7675 0.77532 0.05123 3.6665 3.8684 2 5
- Service 78 3.7188 0.58488 0.08442 3.5489 3.8886 3 4.5
- Intermediary 14 1.6429 0.77033 0.20588 1.1981 2.0876 1 2.5
- Total 321 3.6565 0.92335 0.05154 3.5551 3.7579 1 5
- Sales augmentation Manufacturing 229 3821 0.89805 0.05934 3.704 3.9179 2 5
- Service 78 3.75 0.58548 0.08451 3.58 3.92 3 4.67
- Intermediary 14 1.8571 1.02711 0.27541 1.2641 2.4502 1 3
- Total 321 3.7394 0.99386 0.05547 3.6302 3.8485 1 5
- Process enhancement Manufacturing 229 3.5895 0.92874 0.06137 3.4686 3.7105 1.75 5
- Service 78 3.5833 0.64687 0.09337 3.3955 3.7712 3 5
- Intermediary 14 1.8571 1.02711 0.27451 1.2641 2.4502 1 3
- Total 321 3.5249 0.97416 0.05437 3.4179 3.6319 1 5
Source: Primary Data
From the above table, it is found that the company profile is enhanced for manufacturing units (mean = 3.7675) when compared to intermediary units (mean = 1.6429). There is an augmentation of sales among the manufacturing units (mean = 3.821) but intermediary units (mean = 1.8571) derive the least benefit with regard to sales. As far as process enhancement is concerned manufacturing units derive the most benefit (mean = 3.5895) closely followed by service units (mean = 3.5833) but intermediary units (mean = 1.8571) derive the least benefit.
It can be inferred that Manufacturing units derive the most benefit out of E-Commerce applications in their businesses followed by service units and intermediary units in that order respectively.
Analysis of Variance for Factors of Business Benefits and Percentage of Transaction
Businesses benefit from applications of E-commerce due to improvement in company profile, growth in sales due to wired transactions and rapid processes leading to process enhancement.
SMEs carry on E-Commerce in varying percentages.Generally E-Commerce is adopted in stages and SMEs adopt it at varying levels depending upon the need and the financial resource availability.
The following tables analyse the relationship between the factors of business benefit and the percentage of transaction carried online.
Table 4 Analysis of variance for business benefits and percentage of transaction
- Company profile Sum of Squares Df Mean Square F Sig
- Between Groups 25.869 6 4.311 5.482 0.000
- Within Groups 246.953 314 0.786
- Total 272.821 320
- Sales augmentation Between Groups 17.759 6 2.96 3.115 0.006
- Within Groups 298.323 314 0.95
- Total 316.082 320
- Process enhancement Between Groups 35.639 6 5.94 6.958 0.000
- Within Groups 268.037 314 0.854
- Total 303.676 320
Source: Primary Data
From the above table of analysis of variances, it is found company profile (F=5.482, P=0.000), Sales augmentation (F=3.115,P=0.006),Process enhancement (F=6.958, P=0.000) significantly differ with respect to the percentage of business transactions carried out online.
Table 5 Descriptives for percentage of transaction
N Mean Std Deviation Std Error 95% Cofidence Interval for Mean Min Max
Lower Bound Upper Bound
- Company Profile No Answer 48 3.5417 1.41359 0.2040. 3.1312 3.9521 1.00 5.00
- 0-10% 120 3.4542 0.96307 0.08792 3.2801 3.6282 1.25 5.00
- 10-20% 61 3.7254 0.61864 0.07921 3.5670 3.8839 3.00 5.00
- 20-30% 32 4.000 0.53882 0.09525 3.8057 4.1943 3.50 4.75
- 30-40% 8 2.7500 0.00000 0.00000 2.7500 2.7500 2.75 2.75
- 40-50% 32 4.0000 0.40161 0.07100 3.8552 4.1448 3.50 4.50
- >50% 20 4.2000 0.54772 0.12247 3.9437 4.4563 3.75 5.00
- Total 321 3.6565 0.92335 0.05154 3.5551 3.7579 1.00 5.00
- Sales Augmentation No Answer 48 3.4306 140071 0.20217 3.0238 3.8373 1.00 5.00
- 0-10% 120 3.667 1.09493 0.09995 3.4687 3.8646 1.67 5.00
- 10-20% 61 3.7432 0.72109 0.09233 3.5585 3.9278 3.00 5.00
- 20-30% 32 3.8333 0.50800 0.0898. 3.6502 4.0165 3.00 4.33
- 30-40% 8 3.3333 0.00000 0.00000 3.3333 3.3333 3.33 3.33
- 40-50% 32 4.2500 0.50090 0.08855 4.0694 4.4306 3.67 5.00
- >50% 20 4.1000 0.93095 0.20817 3.6643 4.5357 3.00 5.00
- Total 321 3.7394 0.99386 0.05547 3.6302 3.8485 1.00 5.00
- Process Enhancement No Answer 48 3.5000 1.41421 0.20412 3.0894 3.9106 1.00 5.00
- 0-10% 120 3.2500 1.02592 0.09365 3.0646 3.4354 1.75 5.00
- 10-20% 61 3.5574 0.71355 0.09136 3.3746 3.7401 3.00 5.00
- 20-30% 32 3.8125 0.21061 0.03723 3.7366 3.8884 3.50 4.00
- 30-40% 8 3.0000 0.00000 0.00000 3.0000 3.0000 3.00 4.50
- 40-50% 32 3.7500 0.64758 0.11448 3.5165 3.9835 3.00 4.50
- >50% 20 4.5250 0.45088 0.10082 4.3140 4.7360 4.00 5.00
- Total 321 3.5249 0.97416 0.05437 3.4179 3.6319 1.00 5.00
From the above table, it is found that company profile (mean=4.2) of an enterprise is enhanced to the maximum when more than 50% of transactions are carried out online. Sales augmentation (mean=4.25) can be seen at the maximum when transactions are between 40-50%. Process enhancement (mean=4.525) is accentuated when more than 50% of transactions are carried out online.
It can be inferred that the higher the percentage of internet transaction the higher is the benefit that the enterprise receives on account of improvement in company profile, augmentation of sales and enhancement of processes.
Data collection proves to be a difficult task as each enterprise has to be contacted separately. Questionnaire are sent to the respondents either by email or personally handed out to the respondents. Many respondents prefer the questionnaire to be read out to them. In some cases, the registered office is located in Chennai but the factory is outside Chennai. The researcher has to travel to Sriperumbudur, Oragadam to elicit the response of SME owners. The two SME exhibitions in Chennai prove to be very useful as the researcher is able to meet many SME owners and their representatives from different industries under one roof. It gives the researcher invaluable details about the working of SMES in the area of E-commerce.
A total of 340 questionnaires are circulated among the SME’s throughout Chennai city. Out of the 340 only 321 can be taken as valid questionnaires and the rest of them are rendered invalid either because the questionnaire is not completely filled or because the questionnaire itself remained unreturned in spite of repeated reminders.
Sample Size Justification
The sample size of the research 321 which is collected through simple random technique is statistically justified through factor analysis and other parameters mean and standard deviation. The author and the supervisor adopted a three stages approach during data collection at the sizes 100,200,300. In these three stages, the factor analysis is run for the variables pertaining to Likert’s five point scale to check meaningful segmentation of factors, At the stage of inception and at the second stage both author and the supervisor were not convinced by the factor segmentations and variable loadings. A Microscopic analysis on the primary data identified a consistency of responses in the sample unit. (So, it is decided to collect more responses from the population to increase the variance of all the variables in Likert’s 5 point scale. At the third stage, the variables related to potentials failed to meet the considerable variable loadings. Again the data collection process is proceeded to raise the sample size to 340. In this juncture, the researcher realized meaningful factor segmentation at a considerable rate of variance. It is also found the variables possess less than 5% admissible errors in the normal distribution. This process justifies the sample size of 321 out of the known population of 18,822 registered SMES.
Summary and Finding of the Study
Majority of enterprises feel that Familiarity with a brand will aid onlie sale. Customers are more comfortable purchasing a branded product on the net as it esures quality.
Many enterprises feel search engines, recommendations, product information in shops, price comparison websites, review/opinions on websites are some of the important sources of online search.86.30% of the enterprises feel newspapers and magazines are not of help when it comes to online search.
Technical support offered by Internet Service Provider i.e., the quickness with which they resolve issueshelp SMEs in choosing an ISP.
Many SMEs do not use the services of a payment gateway as they still rely on traditional methods of receving payment or have adopted ebanking for payments.RTGS, Cheques and NEFT are the preferred payment methods adopted by SMEs. Most of the SMEs in the study area chose a bank for internet banking because they were already customers or they chose a branch specifically because it had internet banking.
At present the SMEs have website that are static in nature with basic web pages that contain basic information about the company and its products.
The Three benefits that emerge out of the analysis are
Company profile – E-commerce enhances the profile of the company as customer and supplier relationships are improved through E-commerce and it helps them to keep ahead of competition.
Sales Augmentation – E-commerce augment the domain of sales by bringing in more enquiries which in turn expands the customer base. E-commerce also helps SMEs to find out the current trend in the internet and adapt their sales accordingly.
Process enhancement – E-commerce enhances internal processes dynamically by reducing cost and speeding up processes through flexibility and convenience.
SMEs are at different levels of implementing Electronic Data Interface (EDI) in their enterprises to ease transactions. While some are already integrated with their suppliers and customers, there are other in the process of integrating, some have specific plans, and some do not have systems to link while some see no value in integrating. This could be because of the nature of their business which requires no such integration.
Pace setters incur running costs while enhancement pursuers and awareness entailers do not incur running cost due to the fact that higher the stage of adoption of E-commerce higher will be the running cost.
Factor analysis by principle component shows (E-commerce has the potential on 8 important aspects.
· E-commerce helps in entrepreneurship building by motivating SMES to be proactive and to think of new and innovative ideas to trade on the internet.
- E-commerce leverages technological capabilities of SMES as they believe it saves time and money and SMES understand that they need to update themselves technologically to stay in the business.
- SMES think E-commerce brings in better opportunities in the form of new and niche markets. SMES also believe that E-commerce helps in expanding existing markets and in creating new ones.
- E-commerce reduces cost as it eliminates middlemen and helps in pooling of available resources.
- E-commerce leads to better communication and relationship with trading partners as it enables Supply Chain Management (SCM), Enterprise Resource Planning (ERP) to complete transactions faultlessly and on time.
- E-commerce leads to greater turnover and profits as it leads to efficiency of transactions, as it brings in economies of scale due to new market intermediaries and brings in benefits because of organised exchanges in transactions.
- E-Commerce helps in economic growth of the country as it brings in competitive advantages and improves overall consumption.
- E-commerce clearly builds better customer relations as eCRM (electronic customer relationship management) to communicate with customers to understand their preferences. This enhances loyalty and satisfaction of customers buying on the internet.
Contribution to the Existing Body of Knowledge
There are a number of specific areas to which this research contributes. At the outset, there does not seem to be a systematic study in India to identify the challenges and potentials that E-commerce offers to SMES. This research has found the present applications of E-commerce and the impact it has on businesses. It has empirically tested the challenges and potentials of E-commerce through parameters drawn from previous research made outside the country. This research clearly points out that with a little help these SMES would be able to implement E-commerce in a big way. It suggests cloud computing as an intervention strategy to overcome all challenges and convert them into potentials.
India is one of the world’s fastest growing economies in the world. To achieve accelerated growth, it is imperative for India’s’ Industrial sector to embrace the latest technologies. In this globalized world, the internet is undoubtedly a game changing phenomenon. India is no longer in a sheltered cocoon. After globalization and opening up of her economy in the 1990’s there is a need to rapidly grow and a sure way to achieve this is the adoption of E- commerce. The SME sector has become one of the most important sectors in the country contributing formidably to its GDP. The challenges which they face in the area of E-commerce are plenty. It is imperative for them to overcome the challenges and tap the potentials of E-commerce. It must be remembered the potentials that E-commerce holds for SMES far outweigh the challenges posed by it. Systematic addressing of challenges and converting them to potentials through proper intervention strategies will certainly lead to increased growth of the economy.