Influence Of E-Commerce On The Performance Of SMEs

Project and Seminar Material for Business Administration and Management BAM

Abstract

The study examine the influence of E-commerce on SMEs performance in Imo State. 311 questionnaire were randomly administered to business owner, co-partner and employee in Imo State out of which 298 were completed and returned. The study adopted a descriptive research design. Descriptive statistics of mean, simple and multiple linear regression were employed to analyze the data retrieve from the questionnaire. Among the findings were: e-commerce investment have positive and significant effects on growth of SMEs, e-commerce infrastructural challenge have negative and significant effect on the customer satisfaction. The following recommendation were put in place: SMEs in Imo State should make E-commerce investment as part of their yearly plan and government should also rally behind SMEs seeing as they contribute to half of the country’s GDP so as to reduce the financial burden by creating an environment that promotes innovation and creativity for SMEs. It was finally concluded that there is need for the SMEs to invest on E-commerce by putting all the needed infrastructures in place as this will increase their performance. Lastly, Countermeasures should be put in place to tackle the issues of e-commerce security challenge. Failure to effectively tackle this challenge will results in declined organizational performance.

Chapter One

Introduction

1.1 Background of the Study

Globally, the invention and development of data technologies has improved daily living and also changed the scope and dynamics of the business world. This has made things that were once thought impossible become possible. Furthermore, it has made business processes that were once strenuous and complex become easy and more efficient. It has further enhanced the visibility of businesses and improved consumers, accessibility to goods and services being offered like never before. This development has turned the world into a ‘global village’ where trade can take place between two parties geographically distant from each other. This particular feature is known as e-commerce. Likewise, Nigeria has not been left out of growing e-commerce trends as many companies in Nigeria have capitalized on the growth of information technology to improve their visibility and accessibility. In the same vein, Nigerian Small and Medium Enterprises have been able to capitalize on e-commerce to improve their business functions and make themselves visible to consumers despite having few resources. This has made e-commerce to be seen as a modern day ‘industrial revolution’ (King, 2016)

The word ‘e-commerce’ is a combination of two words electronic and commerce (Lair, 2014). Hassan and Muljadi (2015) stressed that although e-commerce was a concept introduced over 40 years ago the research interest in it is only recent. Miva (2011) described e-commerce as the buying and selling of goods or services through the internet. Furthermore, Kareem, Owomoyela and Oyebamiji (2014) described e-commerce as the use of communications technology particularly the internet to buy, sell and market goods and services to customers. Tang, Powell, Worlock and Bingham (2000) concurred by describing as the manner by which business is conducted with the assistance of telecommunication itself and telecommunication tools. Furthermore, Hassan and Muljadi (2015) also defined e-commerce as activities that look to enable arm’s length transactions between firms and individuals. According to OECD (2015) it is the invention of a new kind of commercial world in an electronic environment.

In the today’s world, e-commerce continues to grow with new technologies and inventions which has improved its functionality and efficiency. A major advantage that e-commerce has in contrast to a traditional business is that it can be assessed at anytime and it has a worldwide reach (Chen & Zhang, 2015). Okeke, Ezeaghaego and Oboreh (2016) opined that the e-commerce has its influence over many aspects of the world market either directly or indirectly. According to them this has removed the limitations of the accessibility of information and ensure that it can be reached anywhere by anyone accessing the Internet. Furthermore, Kareem et al (2014) opined that the advent of e-commerce has opened new opportunities to retailers as it has reduced the importance of location and improved their reach to consumers that are in need of their services. Major companies in the world today have capitalized on the use of e-commerce to improve their profitability and business performance. Companies like Amazon, Alibaba and Walmart have become large corporations due to the integration of e-commerce into their business models (Ledley, 2014). Therefore, they have been able to expand their market share from their local market to global markets.

Nigeria has also been experiencing growth in the use of e-commerce by businesses as various online businesses are growing. The rapid growth of information technology in Nigeria has boosted the activities of e-commerce. It has made it possible for people around the country to shop at the comfort of their homes through emailing, online order, texting and calling. Major companies that have thrived on the use of e-commerce include Jumia and Konga who have been the forerunners of e-commerce in Nigeria (Okeke et al, 2016). Furthermore, Okeke et al (2016) noted that e-commerce has also afforded opportunities to Small and Medium Scale enterprises to improve their business functions and experience rapid growth. SMEs like Yudala, Hello Foods and Uber have experienced rapid growth due to the fact that they adopted business models that involved e-commerce.

However, despite the evidence from these companies the adoption of e-commerce among SMEs remains low. This is concerning because according to Kareem et al (2014) SMEs are vital to the development of the economy and as such, opportunities such as e-commerce that can aid their growth and development should be seized upon. Therefore, this study will aim to find out the influence of e-commerce on the performance of small scale enterprises.

1.2 Statement of the Problem

Small and medium enterprises play very significant roles in the economic growth and development of countries. Furthermore, Onugu (2014) suggested that small and medium enterprises are a significant part of the nation’s economy as they are vital to creating employment opportunities in the country thereby creating wealth for middle class and reducing the economic burden on the country. According to Okeke et al (2016) they account for 60 percent to 70 percent of jobs created in both developed and developing countries all over the world. This has ensured that several countries in Africa prioritize their investment in small scale enterprises (Gordon, 2003). Therefore, their development and growth is vital to the development of the economy. According to Raheem et al (2014) despite the fact that the adoption of E-commerce presents many chances for SMEs to grow in Nigeria, most SMEs seem reluctant to adopt e-commerce in Nigeria.

According to Munair (2013) the major reason for the lack of adoption in Nigeria is its cost of adoption. According to Raheem et al (2014) a lot of SMEs in Nigeria cannot afford to integrate e-commerce into their operations due to their lack of accessibility to finances. According to Garba (2015) apart from the lack of adequate finance many SMEs are not willing to spend such a huge amount of money investing in e-commerce as they cannot assure that it enhances their growth.

Furthermore, according to Nasir (2009) the infrastructural challenges in Nigeria have affected the smooth implementation of E-commerce in Nigeria. According Lolade (2015) this has seen many e-commerce companies in Nigeria struggle to satisfy their customers. For instance, customers of Jumia, Konga, Hello Foods and Uber constantly complain of the timing of their deliveries, or the timing of arrival time of the service. In Uber’s case many customers have complained of the late arrivals of drivers and unnecessary cancelation of trips (Lamido, 2014). Many times these delays are caused by the holdups due to bad roads and poor drainage systems (especially in Lagos). Furthermore, the challenge of access to good internet has slowed down many companies’ operations and ensured that they are not able to satisfy their customers appropriately. For instance, many indigenes in Imo state, precisely Owerri have many time complained about the lack of internet accessibility and poor connectivity that they experience. This has discouraged other SMEs from adopting e-commerce.

In addition, there have been security challenges associated with the adoption of e-commerce in Nigeria, has such it has been difficult to implement e-commerce operations in Nigeria. As recently as September, an Uber driver was arrested in connection of the death of Gulder Ultimate Search Winner (2006) Jobarteh. Furthermore, in August an Uber Driver was murdered by armed robbers in Lagos (Banjo, 2017). This has dented the image of the brand and forced other Uber customers and drivers to rethink the usage of the platform (Gbenga, 2014). This serves as a discouragement to SMEs and has added to their reluctance to adopt e-commerce.

Therefore it is against this backdrop that this study will aim to investigate the effect of adoption of e-commerce on performance of SMEs in Imo State.

1.3 Objectives of the Study

To determine the influence of E-Commerce on the performance of SMEs in Imo State, Nigeria.
To establish the extent to which SMEs in Imo state, Nigeria have implemented E-Commerce.
To establish the drivers to the adoption of E-Commerce by the SMEs in Imo State, Nigeria
To establish the barriers to the adoption of E-Commerce by the SMEs in Imo state, Nigeria.

1.4 Research Questions

What is the influence of E-Commerce onthe performance of SMEs in Imo state?
To what extent hasSMEs in Imo state implemented E-Commerce?
What are the drivers to the adoption of E-Commerce by the SMEs in Imo state?
What are the barriers to the adoption of E-Commerce by the SMEs in Imo state?

1.5 Scope of Study

The study will focus on the effect e-commerce on the business performance of SMEs in Imo state state State. The population for the study will be the 1394 SMEs in Imo state state state. The sample of the study which was drawn using the Taro Yamane formula will be 311. The study will adopt the simple random sampling technique in the data collection. The geographical location of the study will be Owerri, Imo state state State. Finally, the study would be carried out between September 2017 and April 2018 (8 months).

1.6 Significance of Study

The research will be useful to the following people:

Management:

It would further enlighten management of small scale business on ways which e-commerce can be exploited to achieve company growth, customer relation, profit maximization, customer satisfaction and so on.

Entrepreneurs:

Entrepreneurs who own existing business or want to start new businesses would be enlighten on ways to satisfy customers and maintain customer loyalty through the application of the findings of this study

Researchers:

The study will contribute to the expansion of the existing knowledge in this area of study. It would also provide useful referencing points for future researchers in this line of study and a sound basis for intellectual exercise.

Government:

The significance if ecommerce rubs on the government indirectly. Because the development of SMEs adds value to the national economy, ecommerce has been noted to be an opportunity if well exploited can act beneficial. So as the government is in charge of the economy, favor has been granted to the government by ecommerce influence.

1.7 Operational Definition of Terms

Small and medium scale enterprise:

The Central Bank of Nigeria (1998), defined small scale enterprises as organizations with work size of 11-100 or an aggregate cost of not more than N50 million including working capital but rather barring the cost of land..

Goal achievement:

It is a procedure of achieving a fancied outcome or achieving a coveted end points either individual or authoritative end point (Wilson, 2011).

Market growth:

Showcase development can be characterized as an expansion in the interest for a specific item or administration overtime (Bedimo, 2015).

Service quality:

An assessment that reflects the consumer’s insight on the dimension of service (Cole, 2014).

Customer relation:

It is a process of establishing and maintaining relationship with customers (Dugarry, 2015).

Customer satisfaction:

The procedure by which an item benefit comes to or surpasses the client’s desire and the client is fulfilled (Plesil, 2015).

E-commerce:

These are commercial activities conducted via the internet (Newton, 2016).

Internet:

According to James (2010) it is a global network providing various data and communication services, consisting of inter related networks using various protocols.

World Wide Web:

This implies ‘the systematic interlink of hypertext documents that operate over the internet (Holley & Hunton, 2016).

Commerce:

According to Gaurav (2011), commerce is a branch of business; it is concerned with the exchange of goods and services. It includes those activities which directly or indirectly facilitate that exchange.

Traditional business transactions:

It is the type of business which focuses on transaction of goods and services in a manual way. This is the type of commercial activity in which the customer has to be present i.e go to the market and buy goods and services.

Chapter Five

Summary of Findings Conclusion and Recommendations

5.1 Summary of Findings

The study clearly finds that respondents had a high level of education starting from Diploma and higher. The study also finds that most of the targeted SMEs have been in operation for a long period of time, above five years. The Head of ICT departments that were targeted by the questionnaire have worked for the firms for more than five years which gives them the required history to be able to provide credible answers. The study has established that most SMEs have adopted E-commerce and they use it to; track inventory from purchase to sale, receive orders, make enquiries, list and display inventory, fulfil orders, facilitate payments and engage customers. Using a scale of 1 to 5 where 1 was ‘not at all’ and 5 was a ‘great extent’ of adoption, the study found out that the extent of adoption of E- Commerce in these firms ranged from ‘moderate extent to a ‘great extent’.

The study revealed that the deployment of ecommerce is driven by the advantages it brings to the operations of the firm, compatibility of the system with the existing ones in the firm and external pressures whereby competing firms have adopted the same. Reduction of costs is also established to have led the firms to adopt E-commerce as well as the ease of use of the E-commerce platform. The size of the organization moderately leads to adoption of E- Commerce. Further the availability of technical staff to rollout E-commerce and the level of external infrastructure development such as internet and smartphone penetration motivates the adoption of E-Commerce. Adoption is also driven by the need to enhance security of customer transactions and the high level of readiness by customers to use the ecommerce platform.

This study has established the barriers to the deployment of E-Commerce by the SMEs are; Resistance by employees to adopt to the system, inadequate financial allocation and staff to support the system and lack of technical know-how to deploy the system. Lack of proper infrastructure to support the system and lack of clear ICT Policy to govern the system are also barriers to adoption. Lack of top management support, management approval and ownership by management were not barriers to e-commerce adoption.

The study has established that there’s a strong relationship between the adoption of E- Commerce and the performance of the SMEs in Imo state, Nigeria. It was established that the adoption of E-Commerce to facilitate payments, to list and display available inventory to customers, to track inventory from purchase to sale, to make enquiries, to receive orders, to fulfil orders, to engage customers, accounted for 85.8% of the performance.

5.2 Conclusion

The study concludes that the adoption of E-commerce by SMEs, leads to an improvement in performance. It is evident that there’s a strong relationship between performance and adoption of E-Commerce to; facilitate payments, track inventory from purchase to sale, list and display available inventory to customers, to engage customers, make enquiries as well as receive and fulfil orders. This relationship accounted for 85.8% of the performance of the SMEs in Imo state, Nigeria.

The decision to adopt E-commerce is driven by; the perceived advantages it brings to the operations of the firm, the compatibility of the system with the existing ones in the organization and institutional pressures whereby competing firms have adopted the same. Reduction of costs also motivates the firms to adopt E-commerce. The size of the organization moderately leads to the adoption of E-commerce. Further the availability of technical staff to rollout E-commerce and the level of external infrastructure development such as internet and smartphone penetration drives the adoption of the E-Commerce in most SMEs. The need to enhance security of customer transactions and the high level of readiness by customers to use Ecommerce platforms, are other key driving factors.

Lastly the study concludes that the main barriers are; resistance by employees to adopt to E- commerce, inadequate financial allocation and staff to support the system and Lack of technical know-how to deploy the system. Lack of proper infrastructure to support the system and lack of clear ICT Policy to govern the system is also a barrier to some firms. Lack of top management support, management approval and ownership by management were not barriers to adoption of E-commerce.

5.3 Recommendations

The researcher recommends that SMEs need to incorporate all the aspects of E- commerce into their overall adoption strategy. The SMEs need to find out ways of encouraging employees to make use of E-commerce. If employees are encouraged and motivated by the top management to use E-commerce, the adoption becomes much easier. It is therefore recommended that the management of SMEs need to incorporate motivation and incentive into the overall E-commerce strategy. It is also incumbent on the employees of these firms to enhance their skills by taking lessons on E-commerce and to keep abreast with emerging technologies to remain relevant in the ever-changing modern workplace.

Since E-commerce is increasingly becoming an important and indispensable tool for conducting business, the government should come up with relevant policies that support its adoption by eliminating the known barriers to adoption that are related to policy and regulation. In addition, owners and employees of SMEs should be encouraged to regularly attend workshops and courses to constantly improve on their technical skills and knowledge of E-commerce.

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Frequently Asked Questions

What is the impact of e-commerce on SME’s?

There is a positive impact by operational effect applicable to the SMEs from using e-commerce. One of the founding was that operations such as order processing, order fulfillment and supplier development, brought a positive impact on the use of E-commerce, improving the overall efficiency.

Can e-commerce improve the performance of SMEs in the Greater Jakarta?

This research has provided an overview of the development in the use of E-commerce on operational level in which provides a significant influence in improving the performance of SMEs, particularly the performance of business in the Greater Jakarta. Whereby the result of hypothesis testing was derived by multiple linear regression method used.

Can the e-commerce experience moderate the impact of e-commerce performance?

However, the E-commerce experience cannot provide a moderating influence that is bracing or even weaken the relationship between the impact of the use of E-commerce performance.

What is the average SME turnover per annum that use e-commerce?

It shows the average SMEs turnover per annum that use E-commerce is less than 50 million.

What are the benefits of SME e-commerce?

One of the founding was that operations such as order processing, order fulfillment and supplier development, brought a positive impact on the use of E-commerce, improving the overall efficiency. The less developed impactful effect on the benefits can be gained from the use of SME E-commerce particularly in the short time ahead.

Do SMEs care about e-commerce customer satisfaction?

When SMEs are taking their initial satisfaction. But by understanding the customer p erception towards e-commerce, SMEs c an customer satisfaction. Therefore, the contribution of this research is two -fold. The findings from SMEs will provide the expected outcome of e-commerce. types of e-commerce, e-commerce drivers, and theoretical foundations.

What factors affect the adoption of e-commerce by SMEs?

This paper aims to investigate the factors that affect the adoption of e-commerce by SMEs. Variables such as perceived ease of use, security, willingness, perceived usefulness, company readiness, relative advantage, and customers’ need are expected to affect the adoption of e-commerce.

How are SMEs in India getting involved in e-commerce?

But with the growing rate of internet penetration, SMEs in India are also gradually modifying their activities to grab opportunities to trade globally through e-commerce. It is very fascinating to note that around 43% SMEs are now involved in online transactions.

Does e-commerce promote SME’s performance in Indonesia?

Hypothesis 1: The use of E-commerce in the operation aspects has a positive influence towards the SMEs’ performance in Indonesia Hypothesis 2: The use of E-commerce in the marketing aspects has a positive influence towards the SMEs’ performance in Indonesia

Do SMEs care about e-commerce customer satisfaction?

Is size a disadvantage for SMEs in global platform e-commerce?

The findings of the study shows that although their size is a disadvantage for SMEs to compete in global platform e-commerce can help them make up however there are several barriers that limit or prevent them from getting into e-commerce which can be handled with public and private support.

How can SMEs gain by implementing e-commerce in Jordan?

There are also studies that focus on the impact of e-commerce on customers. Again such studies are lacking in Jordan SMEs. The research also aims to close this literature gap by satisfaction towards SMEs in Jordan. This is the outcome that the SMEs aim to gain b y implementing e-commerce.

Does e‐commerce usage moderate the relationship between business performance and performance?

E‐commerce experience (in years) is found to moderate the relationship between e‐commerce usage and business performance. The paper focuses on the tourism sector in Malaysia and concentrates only on the management perspective of e‐commerce adoption.

What is the economic impact of e-commerce on business?

Ecommerce has contradicted the classic economic theory of decreasing returns to scale which holds that a business cannot grow its profits infinitely. E-commerce based enterprises have been shown to sustain fast growth while increasing returns as well.

How e-commerce can help businesses overcome current obstacles?

Now there is an opportunity for businesses to overcome current obstacles by adopting e-commerce. The adoption of e-commerce can lead to positive results such increasing the sales, profits, and efficiency of performance.

What is eCommerce and how does it work?

The main aspect of ecommerce involves doing business on the web and includes: Business to business (B2B) trading which involves a business such as a company trading with another business on the world wide web. Business to consumer (B2C) trading which involves a business such as a company directly dealing with consumers over the world wide web.

How much does employee turnover cost a business?

A business with 100 people that are providing an average salary of $50,000 could have turnover costs of between $660,000 to $2.6 million every year. According to Gallup, that equates to a trillion dollars per year in the United States that is being lost to employee turnover.

Which industry has the highest rate of employee turnover?

The industry with the highest rate of employee turnover is accommodation and food service at 130.7% as of 2020. Other fields that had extremely high rates of staff turnover in 2020 include the arts and entertainment industry with 129.3%, retail trade with 69.7%, and construction with 69.6%.

How big is the e-commerce market?

The e-commerce segment is currently merely 1.6 per cent of the total retail sales, according to a 2019 World Bank Group report.

Can India’s e-commerce market reach $99 billion by 2024?

The battle emphasizes the potential of India’s e-commerce market reaching $99 billion in size by 2024, according to Goldman Sachs. There is probably no other major economy in the world offering that level of scale.