Electronic Commerce for Enhancing Business value Through ICT Initiatives:
E-commerce for Competitiveness
A Research Paper by:
Shepherd [email protected]
ABSTRACT
The use of electronic commerce (e-commerce) globally in businesses has increasingly
become a necessary component of business. Although e-commerce is not a new concept in
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Zimbabwe, businesses have not fully implemented it. E-commerce strategies that are fully
integrated into the business’ strategy can be utilised to build sustainable competitive
advantage.
Through research surveys employing questionnaires and interviews, a research study was
done using the manufacturing industry to analyse the degree to which manufacturing
companies have embraced e-commerce and how this technology has impacted on business
performance. The main objectives of this research was to investigate e-commerce
awareness in companies, to investigate companies’ utilisation of e-commerce technologies,
to identify major challenges in implementing e-commerce, and to determine if there is a
relationship between e-commerce and profitability.
The research employed ideographic methods by using surveys and structured interviews to
source responses. Judgemental samples coupled with stratification procedures were used
to select sample data. Questionnaires were issued out to different levels of computer system
users. Descriptive and inferential statistical techniques were used for data analysis.
Despite the utilisation of different types of e-commerce, it was established that profitability
was minimally achieved from these implementations. The research found out that there was
lack of commitment by companies’ management to e-commerce. Despite the above finding,
a strong relationship between the level of utilisation of e-commerce and business profitability
was established. Businesses therefore need to provide e-commerce training to management
and staff so as to be able to reap its benefits. Organisations also need to develop e-
commerce strategies which will integrate e-commerce with the business processes
specifically the Value Chain process.
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TABLE OF CONTENTS
ABSTRACT..............................................................................................................................iiTABLE OF CONTENTS.........................................................................................................iiiLIST OF TABLES.....................................................................................................................vLIST OF FIGURES..................................................................................................................vi1.0 INTRODUCTION AND BACKGROUND........................................................................11.1 INTRODUCTION...............................................................................................................1
1.1.1 BACKGROUND..........................................................................................................11..1.2 RESEARCH JUSTIFICATION..................................................................................2
2.0 LITERATURE REVIEW....................................................................................................32.1 INTRODUCTION...............................................................................................................32.2 THE E-COMMERCE CONCEPT.......................................................................................3
2.2.1 THE DEFINITION OF E-COMMERCE.....................................................................32.2.2 B2B AND B2C E-COMMERCE.................................................................................52.2.3 THE BENEFITS OF E-COMMERCE.........................................................................52.2.4 MODELS OF E-COMMERCE....................................................................................7
2.2.4.1 Electronic Areas Model.........................................................................................72.2.4.2 The Hierarchical Framework of E-commerce.......................................................82.2.4.3 The Electronic Commerce Value Grid..................................................................92.2.4.4 Discussion of the various e-commerce models...................................................11
2.2.5 HOW THE INTERNET AFFECTS E-COMMERCE................................................122.2.5.1 Positive Effects to a Business..............................................................................122.2.5.2 Negative Effects to a Business............................................................................142.2.5.3 E-Commerce effects on Markets.........................................................................15E-market Commodities....................................................................................................16
2.2.6 INHIBITORS OF E-COMMERCE............................................................................162.2.7 DRIVING FORCES OF E-COMMERCE..................................................................17
2.3 THE CONCEPT OF SUSTAINABLE COMPETITIVE ADVANTAGE........................182.3.1THE DEFINITION OF SUSTAINABLE COMPETITIVE ADVANTAGE..............182.3.4 E-COMMERCE AND COMPETITIVE ADVANTAGE..........................................20
2.3.4.1 Introduction..........................................................................................................202.3.4.2 E-commerce’s influence on Operational Effectiveness.......................................202.3.4.3 E-commerce’s influence on Strategic Positioning...............................................222.3.4.4 Achieving competitive advantage through e-commerce strategies.....................22
2.4 THE E-COMMERCE VALUE CHAIN FRAMEWORK.................................................242.4.2 EXTERNAL, CUSTOMER-SUPPLIER LIFE CYCLE............................................262.4.3 INTERGRATING INTERNAL AND EXTERNAL PERSPECTIVES.....................262.4.4 APPLYING THE E-COMMERCE VALUE GRID...................................................27
2.5 CONCLUSION..................................................................................................................273.0 RESEARCH METHOD AND PROCEDURE..................................................................294. RESEARCH FINDINGS.....................................................................................................294.3 COMPOSITION OF E-COMMERCE USAGE ACROSS MUNUFACTURING COMPANIES IN ZIMBABWE..............................................................................................304.4 E-COMMERCE UTILISATION.......................................................................................314.5 E-COMMERCE STRATEGY EXISTENCE AND LEVEL OF IMPLEMENTATION..34
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4.6 E-COMMERCE CONTRIBUTION TO BUSINESS PERFOMANCE............................354.6.1 Level of Integration....................................................................................................354.6.2 Contribution to Business Profitability........................................................................36
4.7 BARRIERS THAT HAVE HINDERED THE EFFECTIVE IMPLEMENTATION OF E-COMMERCE..........................................................................................................................374.8 THE RELATIONSHIP BETWEEN E-COMMERCE AND PROFITABILITY..............384.9 CONCLUSION..................................................................................................................405.0 CONCLUSIONS AND RECOMMENDATIONS............................................................415.1 INTRODUCTION.............................................................................................................415.2 CONCLUSIONS...............................................................................................................415.3 RECOMMENDATIONS...................................................................................................435.4 RECOMMENDED FURTHER RESEARCH...................................................................44REFERENCES........................................................................................................................45
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LIST OF TABLES
Table 3.1: A comparison of Nomothetic and Ideographic
Methodologies 55
Table 3.2: Judgemental Sampling Criteria 58
Table 3.3: Departmental Composition of Questionnaires 59
Table 3.4 Qualitative and Quantitative Data Analysis 66
Table 4.1: Questionnaire response rate 69
Table 4.1: The chi-squared test 81
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LIST OF FIGURES
Fig 2.1: Electronic Areas Model 21
Fig 2.2: The E-commerce Framework of Seven Levels 22
Fig 2.3: The Electronic Commerce Value Grid 23
Fig 2.4: Three Generic Strategies 35
Fig 2.5: Two types of fundamental resources underlying
Competitive advantage 40
Fig 2.6: Sustained Competitive Advantage Though the
RBV Model 41
Fig 2.7: The e-commerce value chain 47
Fig 4.1: Composition of users of e-commerce as a tool for
business 70
Fig 4.2: Different functions for which e-commerce is used 71
Fig 4.3: Types of e-commerce utilised 72
Fig 4.4: E-commerce Technologies being used. 73
Fig 4.5: E-commerce strategy Implementation 75
Fig 4.6: Level integration of e-commerce in different
components of the value chain 76
Fig 4.7: Contribution of e-commerce to business profitability 77
Fig 4.8: Barriers to E-commerce 78
Fig 4.9: Summary of Barriers to E-commerce 79
Fig 4.10: Comparison of Utilisation of e-commerce and the
contribution of e-commerce to business profitability 80
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1.0 INTRODUCTION AND BACKGROUND
1.1 INTRODUCTION
In the emerging global economy, electronic commerce (e-commerce) has
increasingly become a necessary component of business strategy and a strong
catalyst for economic development (Andam, 2003). The integration of Information
and Communication Technology (ICT) in business has enhanced business-business
and business-customer relationships. Specifically, the use of ICT in business has
enhanced productivity, encouraged greater customer participation, and enabled
mass customization, besides reducing costs. These benefits from ICT are yet to be
realized from e-commerce hence the need to study and understand the concept of
e-commerce.
Projections of commerce via the internet are remarkable. According to Forrester
Research, online sales were expected to reach $300 billion in 2000 and $488 billion
in 2002. Likewise, business-to-business commerce was projected to reach $327
billion by 2002 (Applegate, Lynda, McFarlan and James, 1996). E-commerce has
evolved from a high-tech marvel to a corporate initiative. According to Jack (1996) e-
commerce can no longer be ignored or thought of only as an ICT project. As such
King and Clift (2000) argue that the ‘‘e’’ – will soon be dropped and that e-business
will be business as it comes to be generally understood. Electronic commerce
projects must now be intertwined with the firm's strategic plans. The next section
reviews the background of The manufacturing sector and the Milling Food Industry in
the light of selected marketing and strategic management tools.
1.1.1 BACKGROUND
Although e-commerce is not a new concept in Zimbabwe and the Hospitality sector
for example has implemented e-commerce portals, however such progress has not
been very evident in all business sectors. The food manufacturing sector in
Zimbabwe has embraced Electronic Data Interchange during business to business
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transactions, however little has been implemented for business over the internet.
Also the current e-commerce implementations have not fully exploited all e-
commerce tools or integrated the technology to business processes.
It is also apparent that only a small proportion of the Zimbabwean population has
access to the internet, and a small fraction of those who use it, use it for e-
commerce. There is a big inertia to move towards the new technology and many
only use computers for e-mail, internet and typing. The general public views it as a
luxury to own a computer. However, there is a shift in this view and more are now
having personal internet access in homes thanks to the advent of mobile networks,
3g networks and similar developments. However, the limited access to internet has
led to limited usage of e-commerce by businesses for interacting with clients.
1..1.2 RESEARCH JUSTIFICATION
In Zimbabwe, not much value has been realized by firms implementing e-commerce.
However, an understanding of the impact of fully embracing e-commerce on
business profitability will help companies to realize that it is costly not to utilise the
technology. This research intends to bring out the immediate benefits, in terms of
cost savings, efficiencies and enhanced profitability which are to be realized through
successful implementation of e-commerce technologies. According to Hobart (2001)
adopting e-commerce is no longer a competitive advantage, but a normal business
process, without which an enterprise is unlikely to survive competition.
Implementing an e-commerce strategy is neither straightforward nor cheap. For
example, it comprises a complete rethink of traditional modes of behaviour, the need
and importance to involve internal staff and external suppliers and customers right
from the conceptual stage, need to re-evaluate a company's core competencies, and
requires substantial investment in IT. As such, this study seeks to link e-commerce
concepts together with competitive advantage concepts analysing how these
concepts could be embraced to make the business more profitable.
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Since Zimbabwe is in a challenging economic situation, companies which will
harness e-commerce for achieving competitive advantage will need to be strategic
thinkers focusing on customers, markets, and competitive positioning, as well as on
internal operations. The research seeks to help clarify e-commerce concepts. It also
seeks to aid strategic thinking by providing valuable information on how e-commerce
can be utilised strategically to create competitiveness. Such information brings new
depth to Zimbabwean e-commerce by providing guidelines as to how the potentials
and benefits of e-commerce can be fully harnessed by Zimbabwe’s milling industry.
The research set to provide academia with information on the applicability of e-
commerce in Zimbabwean food industries and provide a source of information for
further research.
2.0 LITERATURE REVIEW
2.1 INTRODUCTION
According to Shah and Dawson (2004), implementing e-commerce technologies
comprises a total rethink of traditional modes of behaviour, and the involvement of
all stakeholders right from the conceptual stage, added to a re-evaluation of the
company’s core competencies. As such, executives of e-commerce companies need
to be strategic thinkers focusing on customers, markets and competitive positioning.
Practically, the section will analyse how e-commerce has influenced business. It will
explore how this new technology can be exploited to achieve sustainable
competitive advantage in conjunction with some traditional strategy tools.
2.2 THE E-COMMERCE CONCEPT
2.2.1 THE DEFINITION OF E-COMMERCE
Many use the terms electronic commerce (e-commerce) and electronic business (e-
business) interchangeably. For the purpose of our study, we seek to differentiate the
two. Allen and Fjermestad (2000) suggest that e-business tends to be used as a
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more general term to describe the use of the internet or any type of electronic
mechanism to conduct an organization’s business processes. This definition implies
that e-business is a term used to describe utilizing Internet technologies to improve
the productivity or profitability of a business. Andam (2003) describes e-commerce
as on-line trading. In other words, e-commerce consists of the buying and selling of
products or services over electronic systems such as the Internet and other
computer networks. Modern electronic commerce typically uses the Internet at least
at some point in the transaction's lifecycle, although it can encompass a wider range
of technologies such as e-mail as well. The wikipedia website considers e-
commerce to be the sales aspect of e-business (www.wikipedia.org).
Kalakota and Robinson (1999) argue that e-business is the function of deploying
technology to maximize customer value while e-commerce is the function of buying
and selling over digital media. Kenneth and Traver (2003) expand this definition
arguing that e-commerce encompasses digitally enabled commercial transactions
between and amongst organisations and individuals while e-business refers
primarily to the digital enablement of transactions and processes within a firm,
involving only the information systems under the control of the firm
In summary, e-business is a super-set of e-commerce. This implies that
incorporating e-commerce into a company's flow would transform the company into
an e-business. E-Business thereby can be broadly defined to encompass all internal
and external electronically based activities and processes. Bakos (1998)
summarises e-commerce as part of e-business which focuses on the electronic
commercial transactions between and amongst organisations and individuals. In this
research we are interested in business-to-business (B2B) and business-to-customer
(B2C) e-commerce.
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2.2.2 B2B AND B2C E-COMMERCE
Fruhling and Digman (2000) argue that B2B e-commerce is a way for business to
create value by alignment with factors which include customers, suppliers, and
employees, among other factors. Andam (2000) defines B2B e-commerce simply as
e-commerce between companies. He further argues that this type of e-commerce
deals with relationships between and among businesses.
Types of business-to-business electronic commerce applications include: electronic
data interchange, electronic funds transfer, electronic forms, integrated messaging,
and shared databases. Business-to-business processes provide sharing of data and
increased information access through corporate extranets. B2C e-commerce
involves customers gathering information; purchasing physical goods or information
goods which are goods of electronic material or digitized content, such as software,
or e-books (Andam, 2000).
2.2.3 THE BENEFITS OF E-COMMERCE
E-commerce presents a number of opportunities for business organisations and
individuals alike. Metzger (2004) suggests that e-commerce companies have a
widened market base. The wide market base gives the companies an opportunity to
grow at very low costs. Hoffman et al (2004) contend that there are distribution,
marketing and operational benefits that can be realised from e-commerce. In other
words e-commerce can bring about a reduction in distribution costs through the
elimination of intermediaries. Since online transactions involve very little costs e-
commerce can also bring about a reduction in transaction costs (Kiggundu, 2002).
Internal and external processes can also be integrated to lower transaction costs. As
worldwide companies are adopting more collaborative relationships with key
suppliers in product development, key business processes now require cross-
functional information sharing on a wide range of issues (McIvor, Humpreys and
McAleer, 2000). This means that firms can utilise e-commerce to expand distribution
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channels at lower costs. According to McIvor et al (2000), these low costs can be
achieved through the reduction of clerical procedures and paper handling. E-
commerce can also accelerate ordering, delivery and payment for goods and
services while reducing operating and inventory costs.
Schaeffer (2003) argues further that e-commerce dramatically reduces the time for
information search and transacting for buyers and sellers. The important point here
is that e-commerce transcends geographic and time boundaries. Since time is
saved, this has cost saving implications. However, geographic and legislative
constraints continue to present significant barriers to the distribution of goods and
services in practice. Even though such constraints exist, personalised product
offerings combined with free market access provide the customer with a wider
availability of hard-to-find products. Added to this wider selection of items, customers
can test products online before a decision is made to purchase (Karavdic, 2002).
Lumpkin, Drogee and Dess (2002) argue that even though the Internet makes
possible new opportunities for strategic success, ignoring business fundamentals
and basic financial requirements results in business losses. According to this line of
argument many e-commerce companies have been unsuccessful at making a profit
due to heavy spending on mass marketing, intensive price competition, lowered
customers' search and switching costs. De Figueiredo (2000) stresses this
argument, contending that increased customer power and lowered entry barriers due
to the Internet can heavily lower a company’s profitability.
Despite the above mentioned negatives of the internet, the author believes that the
main reason for failure on e-commerce is due to lack of clearly defined e-commerce
strategies targeted at building the business’ profitability. The reason for such a belief
is that whilst many companies have failed in e-commerce, others have thrived under
the same conditions. The argument is that certain strategies which the successful
ones have perfected have made the successful companies more successful than the
failing companies. As such, the following section seeks to analyse different e-
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commerce models in the light of their potential impact on e-commerce and
competitive forces.
2.2.4 MODELS OF E-COMMERCE
Different models can be used to analyse and build e-commerce model strategies for
business. No single model covers all the areas of interest and hence a selection of
models has to be used when planning. The section below outlines some of the most
prominent models and evaluates their strengths and weaknesses.
2.2.4.1 Electronic Areas Model
Fig 2.1. Electronic Areas Model (Choi et al., 1997:18).
The Electronic Areas model shown in Fig. 2.1 presents the difference between e-
commerce and traditional commerce. The representation portrays e-commerce as a
three dimensional space, with traditional commerce in the front bottom left area and
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e-commerce in the back top right area. This model also identifies product, agent and
process as three key dimensions distinguishing e-commerce from traditional
commerce. The representation underlies the fact that e-commerce may be
implemented to compliment an existing venture, or may be used to establish a totally
new electronic venture (Haylock et al, 1999).
Kao and Decou (2005) argue that the electronic areas model can be useful in
determining the organisation’s focus in relationship to technology. However, even
though this model helps focus the relationship of an organization with e-commerce
applications, it does not assist in showing any clearly defined e-commerce strategies
to pursue.
2.2.4.2 The Hierarchical Framework of E-commerce
Meta-Level Level Function
Product and Structures
7 Electronic Marketplaces and Electronic Hierarchies
6 Product and Systems
Services 5 Enabling Services
4 Secure Messaging
Infrastructure 3 Hypermedia/ Multimedia Object Management
2 Public and Private Communication Utilities
1 Wide-Area Telecommunications Infrastructure
Fig 2.2. The E-commerce Framework of Seven Levels (Zwass, 1998)
The hierarchical model outlined in fig. 2.2 above defines three meta-levels of e-
commerce which are Product and Structures, Services and Infrastructure. Each level
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sits on top of the one below it and benefits from the strengths of the lower level
(Zwass, 1998). Each level has sub levels which are shown as one to seven (fig. 2.2).
Feng Li (2006) contends that the strength of the Hierarchical model is that it shows
that in order to build a strong e-commerce strategy, a bottom up approach has to be
taken. In other words, there needs to be a strong Wide Area infrastructure and
strong ICT systems leading to the provision of excellent e-commerce products.
Riggins (1998) argues that one difficulty with the hierarchy is that the sequence of
layers may not be sufficiently flexible to accommodate the changing functions and
activities of e-commerce. However, Zwass (1998) further argues that the hierarchical
model focuses attention on important components to be considered within the e-
commerce strategic planning context.
2.2.4.3 The Electronic Commerce Value Grid
Riggins (1998) developed the Electronic Commerce Value (EC) Grid (fig. 2.3) to aid
managers in determining where Web-based electronic storefronts could improve
profitability.
Fig 2.3. The Electronic Commerce Value Grid (Riggins, 1998)
He argues that firms compete along five dimension of commerce. By using various
modes of interaction, firms compete over both time and distance to provide some
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product or service to their customers through a chain of relationships (Riggins,
1998). He adds that since investments in information technology are typically
justified using three different criteria – generating efficiency, effectiveness, and/or
strategic benefits, the two perspectives mentioned above can be combined to create
the Electronic Commerce Value Grid (fig. 2.3) which identifies fifteen areas where
managers can use Web-based electronic storefronts to add value to their customers.
The strength of the model is that it provides a way for improving efficiency and
effectiveness for the decision makers by making the right information available on
demand (David et. al, 2000). These decision makers could be consumers
considering a purchasing decision or a manager seeking information to formulate a
marketing strategy. The model also offers strategic choices to the implementer and
allows firms to gain an advantage over competitors by developing new customer
loyalty. The result is temporal first mover competitive advantage. However, Riggins
(1998) argues that long term advantage can only be obtained by constantly updating
the content and functionality of the Web site and by redesigning business processes
to take advantage of the new technology.
While the E-commerce Value Grid is useful in identifying opportunities, it is specific
to Web-based sales applications and is difficult to use in other e-commerce strategic
developments (Elliot et al, 2000). It also does not consider financial and legal
business interests.
Applying the EC Value Grid
Riggins (1998: 12) suggests that to use the grid, managers should first determine
which of the five dimensions of commerce to target for impact using the online
storefront. He also poses the following questions:
Should the Web site be used to add value to the user by diminishing the time
it takes to deliver information, products, or services? Are there distance
barriers which need to be overcome in order to better serve customers? Is the
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objective to alter the relationships in the industry, possibly by intermediation
or disintermediation? Can the organization improve the nature of the
interaction between industry parties? Or is the goal to use the technology to
institute entirely new products and services which were not feasible before
the introduction of the Web?
The above are some of the questions detailing the issues the EC Value Grid tries to
identify. Riggins (1998:34) further argues that managers must examine the type of
value to be generated for the user. He also stated that the following questions need
to be investigated (Riggins, 1998:34):
Is there a need to improve the efficiency of performing various tasks, improve
the user's effectiveness in delivering timely information to decision makers, or
use the technology to strengthen a long term relationship with the user?
Riggins (1998:35) contends that answering the above questions provides the EC
Value Grid with information to develop a Web-based application that will provide new
value for the user.
The extent to which the Web site incorporates several cells in the grid
becomes a measure of the strategic sophistication or EC coverage of the site.
The goal of the grid is to move from a simple online storefront, where the
impact is on time and distance generating efficiency and effectiveness
benefits, to vast electronic business sites which change the relationships in
the industry.
Riggins (1998:35) argues that the mode of interaction developed with customers and
trading partners utilising the EC Value Grid produces creative new products and
services to generate strategic value.
2.2.4.4 Discussion of the various e-commerce models
As already noted in sections 2.2.4.1 to 2.2.4.3 no one model covers all the required
areas. The electronic model can be used to focus on the relationship of a company
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with e-commerce applications. The hierarchical model is then used to analyse the
infrastructure, services and product meta-levels of the company and aid in a bottom
up strategic e-commerce strategy. The electronic value grid will then be used to
factor in measures that will improve efficiency and effectiveness for customers. In
the application of these models it is also essential to consider financial and legal
concerns. These models have been designed to create competitive advantage,
however for its sustainability; they have got to be applied in support of the normal
strategic processes. Since they do not conflict, the above mentioned models can be
used concurrently to build competence. As such, we look at e-commerce in the light
of business strategy.
2.2.5 HOW THE INTERNET AFFECTS E-COMMERCE
Zwass (1998) argue that popularity of the Internet for e-commerce is
unquestionable. Schaeffer (1999) contends that this popularity emanated from the
fact that the internet offers a channel where buyers and sellers are able to complete
transactions cheaply, instantaneously and anonymously whilst overcoming
geographic and time barriers. He contends that it provides a channel to remove
multiple layers of middlemen by bringing companies and their customers and
suppliers together directly and cheaply (Shaeffer, 1999). As such, e-commerce is
thereby expected to widen markets and lower transaction costs.
2.2.5.1 Positive Effects to a Business
Shingh (2003) contends that the Internet enables a company to expand its market
reach. Jensen (1999) agrees and contends that a little company is able to utilize the
internet to reach markets far beyond its traditional vicinity while also gaining access
to markets beyond its current customer base. Given this advantage to small
companies, Jensen (1999) further argues that small companies can also have
greater visibility against large companies and hence a chance to level the playing
field to some extent.
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Schaeffer (2003) adds to the debate that on the Internet each company is reduced to
the common size of the customer’s browser window. While creating the original web
presence may not be inexpensive, the cost of subsequent maintenance is minimal
(Shaeffer, 2003). Jensen (1999) argues that the Internet provides cost advantages
for businesses in being able to update information, post features, and simply
maintain a site that is perennially current at a minimal cost and time lag. These
features stated by Jensen (1999) combine to generate a greater presence within the
present target market while gaining a greater component of their mind share.
Shaeffer (2003) further argues that one of the greatest benefits of doing business
online rests in its ability to promote relationship building with customers and
partners. Straub (2001) contends that the Internet is unmatched in its ability to
increase responsiveness. Examples of this responsiveness are clearly visible in
companies such as Dell, UPS, and FedEx that now allow both partners and
consumers to check various facets of their transactions directly by logging onto their
Web sites (Straub, 2001). This interconnectedness comes at a lower cost and on
demand thus, providing a more efficient method to respond to customer
needs/wants.
Straub (2001) agrees with Schaeffer (2003) that the Internet provides the benefits of
shared information that can be enjoyed by organizations of all sizes big or small at a
fraction of the cost. Straub (2001) argues that access to real-time data enhances
efficiency, which improves productivity, and profitability. Schaeffer (2003) further
contends that the nature and content of information that can be shared has
broadened in scope. He states that the multi-media nature and real time capabilities
of the Internet are fostering an environment that is conducive for relationship
building.
The blossoming and adoption of the Internet has seen businesses realize enormous
cost savings by moving a myriad of services online. The range of business areas
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positively impacted are vast, from customer service centres, online tracking of
packages, to online brokerages, the list is endless. Berryman, Harrington, Layton-
Rodin and Vincent Rerolle (1998) contend that the ability to digitize offerings and
provide products/services on demand has lead business to realize two allied goals of
enhanced service at a reduced cost of product, support, and service. The above
information strongly suggests that the Internet can also be used to gain competitive
advantage through linkages with suppliers which will cut costs.
2.2.5.2 Negative Effects to a Business
Given the above potentials of e-commerce, there are a number of challenges as e-
commerce takes root as a business tool. Schaeffer (2003) argues that e-commerce
is limited to the transmission of information that can be interpreted by two of the five
senses alone namely sight and sound. As such the internet is unable to
communicate taste, smell, and feel.
Wigand et al (2004) argue that there are possibilities of reduced profits as
competition intensifies. In agreement, Straub (2001) states that e-commerce tends
to reduce entry barriers as there are very little and sometimes no setup costs
required to setup an internet based business. Straub (2001) further states that
companies involved in e-commerce lose their bargaining power and this tends to
reduce the companies’ ability to push their products, thus driving down profits.
The UNCTAD Report (2002) states that one of the major challenges facing
companies doing business in an e-commerce environment is the issue of security.
The problem is generally about how to address the issue of security while preserving
the benefits and ease of use of the internet and its open nature. According to the
UNCTAD Report (2002), possibilities of fraud abound on the internet for both the
buyers and the sellers. Another challenge that may be faced by internet based
companies is the issue of costs, especially in relation to network access. Network
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access providers may monopolise access and charge premium charges for network
access (UNCTAD Report, 2002).
Gapu (2004) contends that a major challenge to e-commerce is customer loyalty:
one of the manifestations of using the technology of the internet has been the ease
with which consumers can navigate the internet in order to satisfy their needs and
wants. Besides, the internet reduces switching costs to the point where consumers
do not have an inherent investment in the current relationship. In instances where
businesses do not create a personal shopping experience, this problem is further
amplified.
2.2.5.3 E-Commerce effects on Markets
The Internet has seen the emergence of electronic markets. Whitey (2000) defines
an Electronic marketplace as an inter-organisational information system that
provides facilities for buyers and sellers to exchange information about price and
offerings. Berkowitz (2000) argues that this market space is information and
communication-based electronic exchange environment occupied by sophisticated
computer and telecommunication technologies and digitized offerings. The impact of
this digitization is evident in the following changes as stated by Berkowitz (2000:5):
The content of transaction is different – information about a product often
replaces the product itself.
The context of transaction is different – an electronic screen replaces the
face-to-face transaction
The enabling infrastructure of transactions is different – computers and
communications infrastructure may replace typical physical resources
especially if the offering lends itself to a digitized format.
Shingh (2003) states that the Internet provides a platform for e-commerce by
providing a wide market place for business which covers the whole world. Goods
and services can be accessed from anywhere with virtually no costs. Accordingly
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Schaeffer (2003) suggests that delivery of purchased items can be via postal
services or downloads, if downloadable, and payment can be done by credit cards or
mailing payments. As the internet provides for transactions with high speed
information flow there is much hope of lowered costs and an ever expanding
marketplace (Berkowitz, 2000).
E-market Commodities
According to Professors Rajiv Lal and Miklos Sarvay of Stanford University, in
Schaeffer (2003), there are two types of goods that can be bought on the internet.
One type is goods that a person can buy without seeing. Experience goods are the
second type. One needs to see this type of goods before buying. Schaeffer (2003)
gives examples of the first type of goods as computers and compact discs and the
second type as goods like clothes and jewellery. Schaeffer (2003:15) states that:
Purchasers really like to touch and feel experience goods and will only buy
after some experience. Since brand identity and customer loyalty is important,
experience goods are not vulnerable to severe price competition. As such
physical stores can be used to build relationships with customers and then e-
commerce be used for creating repeat orders at low cost.
Therefore in this view, e-commerce can be viewed as a complimentary channel to
integrate along existing distribution channels, particularly for experience goods.
2.2.6 INHIBITORS OF E-COMMERCE
In developing countries like Zimbabwe, a major impediment to take-off of e-
commerce is inadequate ICT and Telecoms infrastructure as well as shortcomings in
physical infrastructure, logistics and trade facilitation (Gapu, 2004). Other limitations
include foreign currency controls, which limit the free exchange of value over the
internet. A research in Vermont, USA (Vermont Report, 1999) revealed that there
are three main areas of barriers to e-commerce:
Ignorance – when people know little about the internet, they tend to hate the
technology and thus use of the facility will be limited. However, this is not the
situation in Zimbabwe because rapid changes in mobile technologies and the
16
quick buy in by people in Zimbabwe have proved that Zimbabweans are quick
to adapt to changes and embrace them.
Cost – costs prevent most businesses from establishing e-commerce
services. Cost comes in the form of cost to buy hardware and software for
use in e-commerce. It also comes in the form of cost of building the system as
experts are expensive to pay. Significant costs also come from the cost of
leasing bandwidth from telecommunication service providers. In Zimbabwe,
cost is one big inhibitor to technological advancement.
Time – companies find it difficult to invest in time to develop systems that can
be used on the internet.
Straub (2001) contend that other inhibitors of e-commerce come from fears about
perceived lack of online privacy, which arise from the internet’s ability to record
every aspect of the user’s behaviour. For example the Government recently
announced its intentions to monitor the Internet and intercept e-mails for
intelligence reasons. Every transaction on the internet involves some disclosure
of one’s personal information (Straub, 2001). This tends to scare away senior
managers from conducting business on the internet.
Van Hooft and Stegwee (2001) contend that there is a general lack of secure
electronic payments system. They base their argument on the fact that current
generations of e-payment systems involve sending information over the internet.
This has the attendant risk that such information may be intercepted by the
wrong people and hence may be misused.
2.2.7 DRIVING FORCES OF E-COMMERCE
Improvements in technology continue to be a major driving force of e-commerce
(Vermont Research, 1999). There have been fast changes in technology and in turn
the associated costs of technology continue to fall. This in turn makes it very
possible for innovative new ways of doing business to emerge. Changes in
17
technology have also been making it possible for mobile technology to allow e-
commerce. An example is the emerging of WAP technology, which now makes it
possible to browse on the phone. As the technology improves, it will soon be
possible to have even larger bandwidth on mobile phones, which can make it even
easier to do commerce while on the move.
Changes in life styles of people have also contributed to growing use of e-
commerce. Falling prices of computers and associated hardware and software have
also facilitated more people to own computers. More people now own and use
computers for their day to day business making it easier for businesses to bring
shop fronts right in the homes of people. Gapu (2004) states that statistics show that
more and more people now own computers. For Zimbabwe the number of people
with computers rose from 33,000 in 1995 to 600,000 in 2000 (Gapu, 2004).
The technical capabilities of telecommunication networks have also been improving
thus making e-commerce more accessible. The bandwidth obtainable on existing
copper wire has been enhanced by such new technologies as DSL and ISDN. Since
these technologies work over existing infrastructure, it is easier to provide internet
access to more people with little investments in new infrastructure.
2.3 THE CONCEPT OF SUSTAINABLE COMPETITIVE ADVANTAGE
2.3.1THE DEFINITION OF SUSTAINABLE COMPETITIVE
ADVANTAGE
Grant (1995) argues that competitive advantage is the ability of a firm to outperform
rivals on the primary goal of profitability. Barney (1991:102) takes the definition
further suggesting that a firm is said to have sustainable competitive advantage
when it is implementing a value creating strategy not simultaneously being
implemented by any current or potential competitors and when these other firms are
unable to duplicate the benefits of this strategy.
18
Barney (1991) contends that resources that create this advantage have value,
rareness, inimitability and non substitutability. Mata et al (1995) agree with Barney
(1991) stating that for a resource to give sustainable competitive advantage, it must
be valuable, it must not be possessed by many competitors in the industry and it
must not be easily available for competitors to acquire. In addition Bharadwaj (1993:
84) in Maisiri (2006) also emphasizes that competitive advantage is only sustainable
if the advantage resists erosion by competitor behaviour.
Byrd and Turner (2001) in Basutu (2005), argue that IT is a highly transferable
resource, a necessary but not a sufficient condition for sustainable competitive
advantage. Powel and Dent (1997) differ and maintain the position that IT is not a
highly transferable resource, and therefore, it is both a necessary and sufficient
source of competitive advantage. Given Zimbabwe’s harsh economic environment
and the fact that e-commerce is a resource easy to imitate, this paper agrees with
Byrd and Turner. In other words the position is that e-commerce competitive
advantage are quickly copied and firms have got to innovate quickly in order to keep
on having these advantages. Mata et al (1995) reinforce this view stating that the
use of proprietary technology as a source of sustainable competitive advantage has
proved to be difficult because IT applications are difficult to patent. Workforce
mobility has been found to reduce the extent to which the proprietary technology is
kept secret from competitors. Competitors can easily get access to technical
knowledge by hiring the workforce involved in the development of the proprietary
technology.
19
2.3.4 E-COMMERCE AND COMPETITIVE ADVANTAGE
2.3.4.1 Introduction
Porter (1985) argues that achieving a sustainable competitive advantage can be
achieved by operating at a lower cost, by commanding a premium price, or by doing
both. Accordingly, cost and price advantages can be achieved in two ways, which
are operational effectiveness and strategic positioning.
Operational effectiveness is doing the same things your competitors do but doing
them better (Porter, 2001). Operational effectiveness advantages can take myriad
forms, including better technologies, superior inputs, better-trained people, or a more
effective management structure. Strategic positioning is doing things differently from
competitors, in a way that delivers a unique type of value to customers (Porter,
2001). This can mean offering a different set of features, a different array of
services, or different logistical arrangements.
E-commerce affects operational effectiveness and strategic positioning in very
different ways. It makes it harder for companies to sustain operational advantages,
but it opens up new opportunities for achieving or strengthening a distinctive
strategic positioning.
2.3.4.2 E-commerce’s influence on Operational Effectiveness
Porter (2001) argues that Internet e-commerce is arguably the most powerful tool
available today for enhancing operational effectiveness. Grant (1995) agrees that by
easing and speeding the exchange of real-time information, it enables improvements
throughout the entire value chain, across almost every company and industry. Porter
(2001) further contends that because the internet is an open platform with common
standards, companies can often tap into its benefits with much less investment than
was required to capitalize on past generations of information technology.
20
Hobart (2001) argues that companies only gain advantages if they are able to
achieve and sustain higher levels of operational effectiveness than competitors.
Hoffman (2000) disputes this argument, stating that it is exceedingly difficult to
sustain an advantage even in the best of circumstances. The point is that once a
company establishes a new best practice, its rivals tend to copy it quickly. Horbart
(2001) observes that the best practice competition eventually leads to competitive
convergence, with many companies doing the same things in the same ways. Along
the same line of reasoning, customers end up making decisions based on price,
undermining industry profitability.
Jack (1996) states that the nature of Internet e-commerce applications makes it
more difficult to sustain operational advantages than ever. Jack (1996:45) further
reasons as follows:
In previous generations of information technology, application development
was often complex, arduous, time consuming, and hugely expensive. These
traits made it harder to gain an IT advantage, but they also made it difficult for
competitors to imitate information systems. The openness of the Internet
combined with the advances in software architecture, development tools, and
modularity, makes it much easier for companies to design and implement
applications. As the fixed costs of developing systems decline, the barriers to
imitation fall as well.
Hoffman (2000) contends that today, nearly every company is developing similar
types of e-commerce applications, often drawings on generic packages offered by
third-party developers. The resulting improvements in operational effectiveness will
be broadly shared, as companies converge on the same applications with the same
benefits (Sinha, 2000). Very rarely will individual companies be able to gain durable
advantages from the deployment of "best-of-breed" applications (Jack, 1996).
21
2.3.4.3 E-commerce’s influence on Strategic Positioning
Due to the advent of internet e-commerce, the above sections have shown that it
has become harder to sustain operational advantages and strategic positioning
becomes all the more important. Porter (1985) argues that if a company cannot be
more operationally effective than its rivals, the only way to generate higher levels of
economic value is to gain a cost advantage or price premium by competing in a
distinctive way. Thompson and Strickland (1990) agree that without a distinctive
strategic direction, speed and flexibility lead nowhere. Either no unique competitive
advantage is created, or improvements are generic and cannot be sustained.
Having a successful e-commerce strategy now requires more discipline. Porter
(2001) argues that e-commerce strategy requires a strong focus on profitability
rather than just growth, an ability to define a unique value proposition, and a
willingness to make tough trade-offs in choosing what not to do. A company must
stay the course, even during times of upheaval, while constantly improving and
extending its distinctive positioning (Porter and Millar, 1985). E-commerce strategy
now goes far beyond the pursuit of best practices of strategizing. Shingh (2003)
proposes that e-commerce strategies have to involve the configuration of a tailored
value chain to be defensible. In other words, when a company's activities fit together
as a self-reinforcing system, any competitor wishing to imitate a strategy must
replicate the whole system rather than copy just one or two discrete product features
or ways of performing particular activities.
2.3.4.4 Achieving competitive advantage through e-commerce strategies
How Overall Cost Leadership can be achieved by E-commerce
Lumpkin et al (2002) contend that business fundamentals need to be adhered to for
businesses to successfully implement e-commerce and achieve advantages.
According to Lumpkin et al (2002:6):
The service and capability offered by businesses have to be made
uninimitable. For cost leadership advantages companies have to continue
22
focusing on all cost centres, decrease expenses and maintain cost
advantages as well as reduce inventories using e-commerce real-time
communications to make production schedules and delivery systems more
efficient.
How differentiation advantages can be achieved by E-commerce
Firms can create capabilities so specialised for a given customer that the chance of
customers turning to other solution providers is greatly lessened (Tapscott, 2000).
There is still a great need to position products as unique and valuable to customers.
Overpricing of products has to be avoided.
How Focus advantages can be achieved by E-commerce
Porter (2001) agrees with Lumpkin et al (2002) that focusers can capitalise on e-
commerce to capture specialised market niches. This can be done using
technological capabilities to satisfy the needs of particular markets and reduce the
threat of new entrants by firmly establishing itself as the customer’s most valued
provider. Focusers need to read the scope and interests of their target markets
(Lumpkin et al, 2002). As such uniqueness and focus on markets need to be
maintained. A focus firm’s niche should be big enough to be profitable, but small
enough to lessen the attractiveness to potential new entrants.
Summary
According to Porter (2001), the creation of true economic value once is the final
arbiter of business success. Economic value for a company is nothing more than the
gap between price and cost, and it is reliably measured, only by sustained
profitability (Porter, 2001). As such, sustainable competitive advantage creation
involves making choices throughout the value chain that are interdependent (Porter,
2001). In other words, all company activities must be mutually reinforcing. This
process actually makes a strategy harder to imitate since the whole system of
competing is difficult to imitate.
23
2.4 THE E-COMMERCE VALUE CHAIN FRAMEWORK
2.4.1 THE E-COMMERCE VALUE CHAIN
Shingh (2003) argues that for electronic commerce, the value chain can be a
convenient means of being able to organize the examination of the business
processes within a business. Porter (2001) argues that the basic tool for
understanding the influence of information technology on companies is the value
chain. He defines the value chain as the set of activities through which a product or
a service created and delivered to customers.
Grant (1995) argues that when a company competes in any industry, it performs a
number of discrete but interconnected value-creating activities, such as operating a
sales force, fabricating a component, or delivering products, and these activities of
suppliers, channels, and customers. Porter (2001) then in agreement states that the
value chain is a framework for identifying all these activities and analyzing how they
affect both a company's costs and the value delivered to buyers.
24
Primary Activities
Inbo
und
logi
stic
s
Ope
rati
ons
Out
boun
d lo
gist
ics
Mar
keti
ng a
nd S
ales
Procurement
Technology Development
Human Resources Management
Firm Infrastructure
Ser
vice
Customer Relations
Margin
Sup
port
Act
ivit
ies
E-learning
Collaborative Engineering
E 1E 2 E 3 E 4 E 5
Figure 2.7. The e-commerce value chain (Van Hooft and Stegwee, 2001)
Key:
E1 – E-Procurement
E2 – Fatory Floor Automation
E3 – E-Fulfilment
E4 - Web Site and Web Marketplace
E5 – CRM and E-Service
Because every activity in the value chain involves the creation, processing, and
communication of information, information technology has a pervasive influence on
the value chain. The special advantage of Internet e-commerce is the ability to link
one activity with others and make real-time data created in one activity widely
available, both within the company and with outside suppliers, channels, and
customers. Taking the value chain (Porter and Millar, 2001) and placing e-commerce
into the framework gives an insight into the reach of e-commerce into the value
activities.
Figure 2.7 above shows how e-commerce reaches all activities of the organization.
Linkages already exist between activities; some of these linkages have been
integrated by using e-business technologies, ultimately providing a fully integrated e-
commerce process. It is important to realise that these new applications have to be
integrated with supporting and, if applicable, primary processes to prevent creating
islands of automation.
The physical processes might have to be rearranged to better align the original value
chain to the new e-commerce oriented value chain. Integration of the physical
processes and e-business applications is essential to achieve maximum results.
Analysing the e-commerce value chain can help in lowering the costs and increasing
the value of activities.
25
Taking the Web marketplace as an example, one can see that, if a marketplace
requires sound estimates for the delivery time of a product, e-fulfilment systems
have to be in place and the factory floor automation has to be capable of providing
this information. Supporting processes are not only the technical infrastructure, but
also the databases holding all information and people capable of working with the
systems.
2.4.2 EXTERNAL, CUSTOMER-SUPPLIER LIFE CYCLE
For the purpose of further analysing relationships between suppliers and customers,
Kettinger and Hackbarth (1997) in Shingh (2003) introduced the Customer/Supplier
Life Cycle (C-SLC) Theory. The purpose was to provide a way of isolating a
company’s buying and selling activities to better understand the interrelationships
between customers and suppliers’ business processes and their interactions in the
company. The C-SLC framework is a particularly useful planning tool to help
structure a review of existing business processes to determine the potential for
turning these into e-processes (Kettinger and Hackbarth, 1997). Because every
company is both a customer and supplier, the C-SLC can be used from both the
supplier and customer perspectives:
From a supplier’s perspective, it is important to effectively target the market and
advertise for customers, evaluate their product and service requirements and
respond to their requests, deliver in a timely manner, and support customers after a
sale. Concurrently, customers are searching for product and service information with
the intent of more clearly specifying their own requirements, evaluating and selecting
a supplier, and ultimately ordering and receiving a product or service (Kettinger and
Hackbarth, 1997). Evaluating the current customer life cycle with selected customers
might give new insights of where initiatives can best be made to increase the value
offered to the customer.
26
2.4.3 INTERGRATING INTERNAL AND EXTERNAL PERSPECTIVES
Kettinger and Hackbarth (1997:67) outline that:
It can occur that both internal and external processes become interconnected.
For example, the automation of procurement (e-procurement) involves
investigating the buying activities but also involves integration with internal
processes and systems. So not only do the processes themselves but also
the integration and automation through e-business become a topic of
investigation. After the focus on parts of the C-SLC has been decided, the
impact on current systems and processes has to be assessed.
The e-commerce value chain (introduced in Figure 2.7) can help in this assessment.
Taking the example of e-procurement, it can be seen that this system affects both
the supporting (procurement) and primary (inbound logistics) processes; for the
example of the Web site, most linkages exist with the marketing and sales activity. In
both cases it is important that the appropriate supporting processes are in place.
Kettinger and Hackbarth (1997) argue that if an organisation’s processes consist of
multiple value chains, the steps described above can be repeated for each chain.
2.4.4 APPLYING THE E-COMMERCE VALUE GRID
After having identified areas where e-commerce could be used to support the
business strategy, specific e-business applications have to be specified. A
framework to identify opportunities from Web-based electronic commerce (EC)
applications has been developed by Riggins (1991) see section 2.3.5.3. Value is
generated in three different ways, by using EC applications to generate efficiency,
effectiveness and/or strategic benefits. It can be seen from the above mentioned
section that the dimensions of commerce and the dimensions of value creation apply
to all areas of the e-commerce value chain.
27
2.5 CONCLUSION
It has been shown that while it is easy to create competitive advantage utilizing e-
commerce, it is a more daring task to build sustainable competitive advantage using
the same technology. Although e-commerce is now a requirement for engaging in
competitive business, it has been proven not to be enough in itself for sustainable
competence. It has also been shown that e-commerce implementations are easy to
imitate and lower entry barriers as a result lowering a company’s profitability.
It has been explained how no single strategy is enough to guarantee sustainable
competitive advantage in e-commerce. What comes out is that it is essential to
combine e-commerce strategies with traditional strategies so as to maintain
competitive advantage. Given Zimbabwe’s economic environment of a
Manufacturing Industry that has a limited infrastructure, the recommended approach
is to utilize the Hierarchical Framework of e-commerce to develop an enabling
infrastructure, maintain the services being provided by the company whilst
developing electronic marketplaces. This approach will enable a company to target a
global market whilst maintaining its current clientele.
The organisation can further employ the Electronic Value Grid to find means of
better serving customers. The model will assist in developing improved efficiency
and effectiveness of processes. The company needs to use the above mentioned
tools together with other strategy planning tools. Porter’s five forces model and the
three generic strategies can be used to understand competition better and employ
the best chosen generic strategy to create competitive advantage.
Finally, the RBV helps to analyse resources and protect against imitation, although
this study has shown that this is a difficult task with e-commerce. As such, the
modified Value Chain Model, which is the EC- Value chain, is used hand in hand
with the C-SLC in applying e-commerce to the Value chain in the creation of value
and a close alignment of the e-commerce strategy with the relationship between
suppliers and customers. This analysis gives insight of where initiatives can be best
28
made to increase value offered to customers. In conclusion, since competitors can
imperfectly imitate the above mentioned value creation process, sustainable
competitive advantage can be created.
3.0 RESEARCH METHOD AND PROCEDURE
The research methods employed were structured surveys, interviews and
documental review. The chosen methods set to collect information from different
employee levels in the manufacturing sector. The structured interview was targeted
at senior management who are the main implementers of strategies, while surveys
were conducted on middle level and line managers. As such, questionnaires were
distributed at selected manufacturing sites. The questionnaires were designed to
obtain information to answer various research questions designed to unravel
ecommerce strategies for Zimbabwean industries.
4. RESEARCH FINDINGS
This section lays out research findings and discusses the results after the
conduction of the research was done in the manufacturing sector. A total of 50
questionnaires were distributed to Directors, Management, Supervisors and non
management staff in the manufacturing sector. The research response rate is as
depicted below:
Table 4.1. Questionnaire response rate
Target Groups No. of
Questionnaires
No. of Return
Questionnaires
Response
Rate (%)
Directors & Senior
Management
6 4 83.3%
Line Managers 25 21 88%
Non Managers 19 17 89.5%
Total 50 42 84%
29
The response rate was an average of 42 out of 50, which is 84%. More details on
the response rates can be analysed from table 4.1. The six senior managers were
also interviewed and company strategy documents were also used to verify interview
details.
4.3 COMPOSITION OF E-COMMERCE USAGE ACROSS
MUNUFACTURING COMPANIES IN ZIMBABWE
Of the respondents who responded, 92% understand e-commerce and 87%
acknowledge that in one way or the other, companies is utilising e-commerce. Of all
the respondents, 78.6% understand e-commerce with an understanding above
average.
Fig 4.1 Composition of users of e-commerce as a tool for business
Fig 4.1 shows that e-commerce is used by selected users. The figure shows that
69% of questionnaire respondents responded that e-commerce tools are only used
by a few selected users and 19% responded that it is a key tool for management. It
is also evident from the interview findings that there is no convincing evidence that
the management are utilising e-commerce as a tool. This also explains why
manufacturing companies are finding it difficult to develop its relationships with
customers.
30
Key:-E-commerce utilised by IS only
-Everyone uses IS
-Used by only a selected users
-It is a key tool for management
-Other Reasons
Along these lines Gapu (2004) argues that relationships can be enhanced via e-
commerce. Schaeffer (2003) also argues that e-commerce via the internet enables a
company to expand its market reach. Expanding regionally is one of the key
objectives in the next 10 years (The manufacturing sector Strategy Document, 2007
– 2010). The findings show that in contrast to Gapu (2004) and Schaeffer (2004), the
manufacturing sector has failed to provide the infrastructure that would allow it to
expand its market base through the internet and e-commerce.
4.4 E-COMMERCE UTILISATION
Fig 4.2 Different functions for which e-commerce is used
The figure 4.2 above illustrates the degree to which different functions of e-
commerce have been exploited at the manufacturing sector. It shows that e-
commerce is mainly used by the companies for communication. However, the
interview has shown that this communication is not mainly business communication
but communication with friends and relatives. According to the findings, 80% of
communication is non-business communication. Berkowitz (2000) argues that
communication used for non-business functions is not part of e-commerce. In other
31
words, companies is lowly utilising e-commerce in all areas, otherwise its customer
relationships should have improved.
Whitey (2000) agrees with Berkowitz (2000) that e-commerce can be used to define
electronic market places thereby, building a large marketplace for organisations.
This is contrary to fig 4.2 which shows that companies has not been able to expand
its market reach via e-commerce. Companies have also not been able to reduce any
cost of sales or improve transaction costs by e-commerce.
Fig 4.3 Types of e-commerce utilised
However, fig 4.3 shows that companies has been able to utilise all types of e-
commerce, Business to Business (B2B), Business to Supplier (B2S), Business to
Customer (B2C) and internal e-commerce. B2C e-commerce has been shown to be
the main type of e-commerce being utilised by the manufacturing sector. This level
of utilisation is followed by Business to Business e-commerce and all the other types
which are at the same level of utilisation. The high level of B2C e-commerce shows
the high degree of potential that the manufacturing sector has to reach markets via
e-commerce.
32
Interview findings have shown that management believes companies can expand by
utilising B2C e-commerce. Company strategy documents show the management’s
intentions to enhance the ICT function in companies. However, no solid strategy and
plan has been put in place to develop B2C e-commerce as an expansion move.
Hoffman et al (2004) argue that B2C e-commerce can be used to build operational
advantages in distribution marketing. In contrast, the above findings show that the
manufacturing sector has not benefited from these potential advantages.
Fig 4.4 E-commerce Technologies being used.
Fig 4.4 further shows that companies have used the different e-commerce
technologies which include intranets, extranets, e-mail and electronic fund transfers
in different levels. The prominence of e-mail usage is evident in fig 4.4, in agreement
with the finding in fig 4.2, which shows that e-commerce has been mainly used as a
communication tool. Interview findings also reinforce this finding showing that
companies have got a robust intranet and efficient e-mail. However, interviews have
shown that there is little integration between the manufacturing sector and external
companies that is the extranet is not established. Another interview finding is that
Electronic Data Interchange (EDI) is only utilised together with electronic fund
transfers (EFT) by the finance department’s finance director and manager.
33
The above 50% questionnaire response could be explained by the fact that all
employees are allowed access to one of the internet PC computer which is a pool
computer located in the board room.
However, Riggins (1998) contends that the internet should provide the interaction
dimension of the electronic commerce value grid for efficient customer feedback and
online interaction with the customer community. This is not so from the findings,
since there is limited internet within companies. Since not all technologies are fully in
use, the above findings contradict Riggins (1998) who argues that firms should
compete along five dimensions of e-commerce which are time, distance,
relationships, interaction and product (see section 2.2.4.3). In The manufacturing
sector’ case, the relationship and interaction dimensions are severely compromised
due to limited access to the internet by employees. The limited extranet network also
lowers communication and linkage with business partners.
4.5 E-COMMERCE STRATEGY EXISTENCE AND LEVEL OF
IMPLEMENTATION
The research study findings show that 73.8% of the respondents view E-commerce
strategies as none existent or were implemented to a small extent.
Fig 4.5 E-commerce strategy Implementation
34
Its findings shows that respondents had a bias towards the “I don’t know”, “No” and,
“to a small extent” options of e-commerce strategy implementation. In a summary
the questionnaire finding indicates that e-commerce strategies have been
implemented to a limited extent. Interviews with Senior Management show that no e-
commerce strategies have been developed or are in place. Shingh (2003) agrees
with Porter (2001) that an e-commerce strategy is needed to establish a competitive
edge (see section 2.4). As evident in the above findings, the manufacturing sector
has not established any competitive edge through the implementation of e-
commerce strategies.
4.6 E-COMMERCE CONTRIBUTION TO BUSINESS PERFOMANCE
4.6.1 Level of Integration
The electronic value chain framework developed by Van Hooft and Stegwee (2001)
shows how e-commerce strategies can integrate e-commerce to reach all
organisational activities (see section 2.4.1).
Fig 4.6 Level intergration of e-commerce in different componets of the value
chain
35
Research study findings illustrated by fig. 4.6 show that in all the value chain
processes the majority of the respondents responded that e-commerce has been
utilised minimally in all the value chain processes with the majority of respondents
saying e-commerce has been utilised between 0-20 %. Interviews further elaborated
the fact that different processes and departments in the value chain are not
integrated. As a result, the interviews further show that departments are disjointed
and individualistic. This is contrary to Kettinger and Hackbarth (1997) who
introduced the C-SLC (See section 2.4.2). They argue that by analysing
relationships between suppliers and customers, businesses can be structured to
increase value offered to the customer by integrating all processes internally and
with the external. As such companies are product oriented instead of being market
driven, to quote one of the senior managers.
4.6.2 Contribution to Business Profitability
Fig 4.7 Contribution of e-commerce to business profitability
A detailed analysis of fig 4.7, using a scale of 0–100% contribution to business
performance, shows that 60 percent of the respondents responded that e-commerce
contributed 60% towards business profitability, whilst 71.4% responded that e-
36
commerce contributed about 60 – 80% profitability as a combined range. Further,
research study interview findings show that all management representatives
interviewed responded that e-commerce has contributed to the profitability of the
companies.
Survey Findings show that e-commerce is not fully integrated to the value chain.
Although interview findings are in agreement with the survey findings, they show that
e-commerce has a great potential for yielding business profitability if integrated with
the value chain. Riggins (1991) supports these findings in his arguments that e-
commerce can be used to generate efficiency, effectiveness and strategic benefit
(see section 2.2.4).
4.7 BARRIERS THAT HAVE HINDERED THE EFFECTIVE IMPLEMENTATION OF E-COMMERCE
L ac k of C onfidenc e in E -c ommerc e
11%
No c us tomer c onnec tivity
10%
Diffic ulty of implementation
9%
R es is tanc e to c hange9%
L ac k of Management C ommitment
14%
High c os t of E -c ommerc e
Implementation12%
No Unders tanding to e-c ommerc e B enefits
14%
S ec urity Is s ues11%
L ac k of F inanc ial R es ourc es
10%
Fig 4.8 Barriers to E-commerce
The ratio of 60.3%:39.7% can be approximated to a ratio of 60:40. In this case
management ignorance and attitude contributing to more that 60% of the barriers to
37
e-commerce progress. This ratio can be interpreted to mean that human factors
which constitute about 40% of the factors considered are responsible for 60% of the
barriers to e-commerce. This analysis closely follows the Pareto 80:20 rule, which
states that 80 percent of the results are due to 20% of the factors.
Fig 4.9 Summary of Barriers to E-commerce
Fig 4.9 above summarises Research interview findings with middle and low level
management. These findings attribute most barriers as due to lack of senior
management commitment and lack of understanding to benefits of e-commerce. The
Vermont Report (1999) also echoes these findings, stating that e-commerce is
inhibited by fears of online privacy by management.
38
4.8 THE RELATIONSHIP BETWEEN E-COMMERCE AND PROFITABILITY
Fig 4.10: Comparison of Utilisation of e-commerce and the contribution of e-
commerce to business profitability
Survey results show that the majority of responses were on the middle response. On
a scale of 100%, 21 out of 35 respondents responded that the percentage of
contribution of e-commerce to business profitability was 60%. 29 out of 42
responded that the percentage utilisation of e-commerce at The manufacturing
sector was 60%. These findings are summarised by fig 4.10 above.
Fig 4.10 shows a comparison between research study responses on the contribution
of e-commerce to business to business profitability and the utilisation of e-
commerce. The findings show similar trends for different response options. As such,
the researcher investigated the relationship between the two variables. Ghauri and
Gronhaug (2002) argue that the chi-squared test can be used to test the relationship
between two variables.
39
Hypothesis Test for the Relationship between e-commerce utilisations and its
contribution to profitability
The researcher assumed that the null hypothesis was that the proportions of the
research responses on the contribution of e-commerce to business profitability were
the same as that of the utilisation of e-commerce. The researcher tested the
relationship on a 95% significance level. The critical value was 0.05.
Ho: 5.7%:22.9%:60%:11.4% for the responses of 20%, 40%, 60% and
80%
respectively.
H1: The ratio of responses for 20%, 40%, 60% and 80% levels are not
5.7%:22.9%:60%:11.4%
The degree of freedom (d.f.) = 3.
For 3 d.f. and p = 0.05, the critical chi-square value is 7.815.
Table 4.1: The chi-squared test
Actual utilisation responses
Expected Proportion out of 100
Expected responses
Actual – Expected (A-E)
Sqr (A-E)sqr(A-E)/
E
2 5.7 2.4 -0.4 0.16 0.1
3 22.9 9.6 -6.6 43.56 4.5
29 60.0 25.2 3.8 14.44 0.6
8 11.4 4.8 3.2 10.24 2.1
42 100.0 42 Chi-squared value = 7.3
From table 4.1, Chi-squared = 7.3, which is less than the critical value of 7.815. The
null hypothesis was therefore accepted, and the conclusion was that at 95% level of
significance, e-commerce utilisation is related to its contribution to profitability.
40
4.9 CONCLUSION
The findings have shown that 60.9% of the respondents responded that e-commerce
is only used by selected users. In all the business processes, research findings
show that e-commerce has been utilised below 40%. However, e-commerce has
been equally used for B2B, B2C and Internal e-commerce. E-commerce has not
been able to utilise extranets or the internet since these infrastructures have been
implemented minimally. The research findings have also revealed that e-commerce
has not been utilised to interlink and integrate business processes in the value
chain. The main barrier to e-commerce has been shown to be human factors which
included lack of management commitment to the implementation of e-commerce.
The following section presents the research conclusions and recommendations to
management.
5.0 CONCLUSIONS AND RECOMMENDATIONS
5.1 INTRODUCTION
This research set out to investigate the degree to which the manufacturing sector
has embraced e-commerce. In identifying this utilisation of e-commerce, the
research was carried out through interviews and questionnaire surveys to find out
the following:
1. The degree of awareness in businesses of the existence of e-commerce.
2. The degree to which businesses have utilised e-commerce technologies.
3. The major challenges in implementing e-commerce to ensure competitive
advantage.
4. The different e-commerce strategies that can be implemented by businesses
for competitive advantage.
From the research findings and their analysis, conclusions can be made as to the
level of implementation of e-commerce by businesses in Zimbabwe. This section
41
purposes to carry out that particular function and present recommendations for
possible action by Zimbabwean businesses.
5.2 CONCLUSIONS
1. Even though all managers and most employees understand e-commerce with
an understanding above average, the research has established that e-
commerce tools are only being utilised by a few selected users. The research
also established that e-commerce is not considered as a key business tool by
management.
2. Internet, which is supposed to be a key tool to enhance e-marketing, has
been shown to be minimally utilised. As a result, businesses have not been
able to establish e-marketplaces. In return, no sales have been improved via
e-commerce implementations.
3. Despite the fact that Zimbabwean companies has been able to utilise
Business to Business, Business to Customer and Business to Supplier e-
commerce, they have failed to be more profitable from utilising e-commerce.
This could be explained by the fact that Zimbabwean companies have no e-
commerce strategies in existence to effectively drive the e-commerce thrust.
4. The research has established that e-mail is the main e-commerce technology
under use. However it has also been established that companies have not
been able to harness the potential of e-mail to enhance business
communications and develop customer relationships. This is the case, since
Zimbabwean companies have not been able to utilise other e-commerce tools
which should contribute hand in hand with e-mail to quicken and make
business processes more efficient.
5. The research has also established a strong relationship between the level of
utilisation of e-commerce at manufacturing firms and its contribution to
business profitability. Although it has been established that e-commerce has
42
contributed to the profitability of companies, it can be concluded that the
absence of an e-commerce strategy has strongly contributed to the failure by
companies to establish competitive advantage via e-commerce.
6. The research has established that e-commerce has been mainly hindered by
the lack of commitment to e-commerce and low appreciation of the benefits of
e-commerce by management. Other big hindering factors have been shown
to be high costs of implementing e-commerce and security fears by
management.
In considering all the above conclusions it can be concluded that the e-commerce
technologies among e-mail, the internet, extranets, intranets, EDI and EFT that have
been fully utilised by Zimbabwean businesses are less than those that have not. In
other words, Zimbabwean businesses have not fully embraced e-commerce.
5.3 RECOMMENDATIONS
The following recommendations are documented for Zimbabwean organisations in
the light of the findings and conclusions of the research study:
5.3.1 The training of management on e-commerce
The Information Systems (IS) department in conjunction with the HR department
should develop a training program to educate senior management about e-
commerce and its benefits. This training should cover how e-commerce strategies
are developed and how they can be integrated to all business processes and the
value chain. By offering this training, the lack of understanding and low appreciation
will be minimised and the knowledge will be used to effectively implement e-
commerce.
43
5.3.2 The development of an e-commerce strategy
Management with the aid of the IS department should develop an e-commerce
strategy. This strategy should build on general corporate and IS strategies. It should
direct how companies intend to build competitive advantage through the
implementation of e-commerce strategies. The buy in of the board and top
management should be sourced in order to make sure that the implementation of the
e-commerce strategy will not be hindered due to lack of funding. Developing a
robust e-commerce strategy will set Zimbabwean companies ahead of the regional
competition. Since regional competitors are still reluctant to utilise this technology
fully, Zimbabwean firms can reap from first mover advantages.
5.3.3 Development of the different types of e-commerce
Organisations should fully develop Business to business and Business to customer
e-commerce by the implementation of internet for linking with key suppliers and
customers. To develop business to customer e-commerce, the marketing
department will need to be fully computerised from the ordering process to customer
servicing. The setting up of a fully functional website can also enhance customer
services. The business will need to analyse supplier-customer processes so as to
enhance customer services. Organisations will need to develop external links with
key suppliers so as to enhance and secure the procurement process.
5.3.5 Integration of e-commerce with the Value Chain
Organisations will need to fully computerise and expand access to computers by
every key information requiring and processing department. The Value Chain needs
to be fully integrated by the full implementation of e-commerce to every process in
the value chain. This will enable companies to become market driven as the
production department will be able to produce as per orders from marketing. All
departments will be able to make informed decisions based on current up to date
information due to online systems.
44
5.4 RECOMMENDED FURTHER RESEARCH
This research could also be further carried out on the whole food milling industry to
establish the potential benefits of e-commerce in the industry. In that research an
investigation of how e-commerce strategies can be used to establish competitive
advantage can be carried out. The research could also set to find out how e-
commerce can actually be utilised by the Foods Industry in Zimbabwe to expand
globally and through the SADC region.
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