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Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
Tuan mohd azuan bin tuan yusoff a139932-labtask2
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  • 1. TUAN MOHD AZUAN BIN TUAN YUSOFFTable of ContentsABSTRACT ............................................................................................................................... 2INTRODUCTION ..................................................................................................................... 2LITERATURE REVIEW .......................................................................................................... 3 2.1 E-commerce ..................................................................................................................... 3 2.2 Small and Medium-sized Enterprises (SMEs) ................................................................. 4 2.3 E-commerce Adoption by SMEs in Malaysia ................................................................. 4 2.4 Inhibitors to e-commerce adoption ................................................................................. 5METHODOLOGY .................................................................................................................... 5 4.1 Background of the Firms ................................................................................................ 6 4.1.1 Types of Products ................................................................................................ 6 4.1.2 Internet and E-commerce Usage of SMEs Interviewed ............................................ 7 4.2 Impediments to E-commerce Adoption .......................................................................... 8 4.2.1 Barriers to e-commerce ........................................................................................... 9 4.2.1.1 Lack of External Infrastructure .............................................................................. 9 4.2.1.2 Lack of Time ....................................................................................................... 10 4.2.2 Reasons Why SMEs Lack the Inclination to Adopt E-commerce......................... 10 4.2.2.1 Concern about Security of E-commerce ....................................................... 10 4.2.2.2 Trusting E-commerce ..................................................................................... 11 4.2.2.3 High Cost ............................................................................................................ 11 4.2.2.4 Customer-related Constraints ........................................................................ 11 4.2.2.5 Inadequate Support from Government and E-commerce Consultants ................ 12 4.2.2.6 Unclear Benefits of E-commerce .................................................................. 12 4.2.2.7 Not Interested and Not Relevant ......................................................................... 12DISCUSSION .......................................................................................................................... 13Concluding remarks ................................................................................................................. 13REFERENCES ........................................................................................................................ 14 1
  • 2. TUAN MOHD AZUAN BIN TUAN YUSOFFIMPEDIMENTS OF E-COMMERCE ADOPTION: THE CASE OF SMES Noor Azuan Hashim School of Business Management Faculty of Economic and Management National University of Malaysia 43600 Bangi, Selangor Malaysia E-mail: azuan@ukm.my Tel: +60-89215751 ABSTRACTE-commerce has the potential to accelerate existing trends and introduce new ways ofconducting business. It is said that e-commerce has brought undisputed benefits to firmseverywhere such as reshaping the customer and supplier relationships and streamlining thebusiness processes. Practitioners and policymakers are told that e-commerce will give atremendous boost to their firms; businesses that are not involved in e-commerce will be leftbehind in the global marketplace. Contrary to most industry predictions, however, the small-and medium-size enterprise (SME) market has been relatively slow to adopt theseapplications. Not many SMEs are keen to conduct business online and only a few havewebsite. In fact, some studies claim that trading online by SMEs in some countries is stallingand in some cases has declined. Drawing on existing research on ICT diffusion by SMEs, thispaper presents some issues of e-commerce adoption by SMEs in Malaysia. It highlightsfindings from a series of semi-structured interviews with the SME managers in Malaysiaconcerning the impediments of adopting and implementing e-commerce in the organizations.The findings reveal that SMEs do not embrace e-commerce because there are skeptical withsome of the e-commerce components. Among the barriers include lack of knowledge in e-commerce; not interested with fancy stuff; irrelevant to their businesses; and influenced bythe failure rate of their peers. Results are discussed and some implications for themanagement are made.Keywords: ICTs, e-commerce, SMEs, diffusion, impediments.INTRODUCTIONE-commerce has the potential to accelerate existing trends and introduce new ways ofconducting business (Scupola, 2003; Pool et al., 2006; MacGregor and Vrazalic, 2007).Policymakers and practitioners are told that e-commerce has brought undisputed benefits tofirms everywhere such as reshaping the customer and supplier relationships and streamliningthe business processes. (Daniel, 2003, Pool et al., 2006). E-commerce will give a tremendousboost to their companies, that businesses not involved in e-commerce will be left behind inthe global marketplace. In fact, some studies claim that the use of e-commerce is aprecondition for a company‟s success in today‟s business world, (Porter, 2001; Adham andAhmad, 2005).Contrary to most industry predictions, however, the small- and medium-size enterprise(SME) market has been relatively slow to adopt e-commerce (Beveren and Thomson, 2002;Fillis et al., 2004; Grandon and Pearson, 2004; Houghton and Winklhofer, 2004). In the US, 2
  • 3. TUAN MOHD AZUAN BIN TUAN YUSOFFGrandon and Pearson (2004) note that e-commerce adoption by SMEs is limited to e-mailand the company web page. In the UK, trading online in small businesses is stalling and insome cases has declined (Booz, 2002). In European countries and in Australia, few SMEstrade online (Beveren and Thomson, 2002; Scupola, 2003, MacGregor and Vrazalic, 2007),while in Asia, few SMEs in Singapore, Thailand, and Malaysia have adopted e-commerce(Kendall et al., 2001; Lertwongsatien and Wongpinunwatana, 2003, Yeung et al., 2003;Hashim, 2009).This result is surprising given the indications that e-commerce may be valuable to SMEs. It issaid that the Internet provides a platform for SMEs to compete with large firms because theInternet allows equal access for both small and large firms to explore their potential. TheInternet also allows SMEs to conduct their business 24 hours a day and 7 days a week, andalso to trade internationally. SMEs today may be become a large firm or multinationalcorporations (MNCs) in future (Curran and Blackburn, 2001). Thus, why SMEs arereluctance to become e-commerce-capable deserves serious attention (Curran and Blackburn,2001). To date, there has been very few research that investigate the impediments of e-commerce adoption among SMEs, particularly in developing country like Malaysia. Thisstudy seeks to fill this gap to help understand the factors that hinder the adoption of e-commerce by SMEs, particularly in developing countries, such as Malaysia.This article is structured as follows. Section 1 presents the research problem, follows by theliterature review in Section 2. Section 3 describes the methodology of the study. Findings andanalysis are discussed in section 4. Section 5 presents the discussion, and finally theconcluding remarks are presented in section 6.LITERATURE REVIEW2.1 E-commerceE-commerce is a new phenomenon in business and management era. Thus, there is noagreement on the definition of e-commerce (Kendall et al., 2001; Grandon and Pearson,2004). Many researchers have came out with their own e-commerce definition based on whatthey are researching for (Kendall et al., 2001; Grandon and Pearson, 2004; Pool et al, 2006).However, there are two common elements to most definitions. First, e-commerce concernsbusiness activities that occur by electronic means, such as sharing business information, andbuying and selling. The second element is the technological means that enable theseactivities. The difference lies in how some researchers define these two elements. Somedefine e-commerce broadly, including all business activities carried out over any electronicmedia (see, for example, Wigand, 1997; Timmers, 1999). Others define e-commerce morenarrowly by focusing on certain business activities or technological means (see, for example,Zwass, 1996; Kalakota and Whinston, 1997). In this study, Zwass‟s (1996) definition of e-commerce is adapted, focusing on Internet-based technology: “E-commerce is sharing ofbusiness information, maintaining business relationships and conducting businesstransactions by means of Internet-based technology”. This definition has been used by manyother researchers, such as Poon and Swatman (1999), Scupola (2003; 2009) and Pool et al.(2006).The literature in e-commerce adoption by organization revealed that there are three main e-commerce components that are used to indicate the prevalence of e-commerce (see Hashim,2009). These three components are: e-mail, websites and online buying. E-mail is usedamong firms to communicate with customers and suppliers, usually the prerequisites ofonline selling and buying. Website is used to indicate online selling. Firms need to invest onwebsites to sell online, while online buying can be done anywhere and anytime as long as 3
  • 4. TUAN MOHD AZUAN BIN TUAN YUSOFFfirms are connected to the Internet. These three main e-commerce components are used toinvestigate the impediments of e-commerce adoption in this study.2.2 Small and Medium-sized Enterprises (SMEs)SMEs play an important part in the economic activities of most nations (Curran andBlackburn, 2001; Beaver, 2002; Simpson and Docherty, 2004). There are numerousexamples in the literature that illustrate the weight that SMEs carry in their own nationaleconomies. In most European countries, SMEs constitute more than 90% of businesses(OECD, 1998; 2000; Scupola, 2003). In the UK, for example, there are an estimated 3.7million businesses of which 99.8% are SMEs (DTI, 2001). In Malaysia, SMEs (commonlycalled Small and Medium-size Industries, SMIs) account for more than 90% of totalbusinesses (Malaysia, 2004).Each country has its own definition of SMEs and there is no formal categorisation of whatconstitutes an SME (Ghobadian and Gallear, 1996; Mohd Asri, 1999; Curran and Blackburn,2001). However, there are two common ways of defining SMEs: definitions based onfinancial turnover and definitions based on numbers employed (Curran and Blackburn, 2001).Definitions based on financial turnover have been found to be problematic (Curran andBlackburn, 2001) as this is difficult to measure, and varies by sector (Storey, 1994).Definitions based on numbers employed are more popular, and most commonly used bypolicy makers (Curran and Blackburn, 2001) and researchers (for example, Raymond, 1987;DeLone, 1988; Raymond, 1992; Cragg and King, 1993; Mohd Osman, 2001).For the purpose of this study, SMEs is defined by numbers of employees employed by thefirm: SME as a firm employing 10 to 250 employees. More specifically, the definition usedby other researchers conducting similar SME studies in Malaysia will be adopted (MohdOsman, 2001; Ismail, 2004). This is in line with the definitions of SMEs used in othercountries (European Commission, 2002). Very small firms (fewer than 10 employees) willbe excluded since these are likely to approach IT issues very differently (Hussin et al., 2002)and because their numbers would swamp those of larger SMEs.2.3 E-commerce Adoption by SMEs in MalaysiaStudies showed that SMEs everywhere were not adopting e-commerce readily (Beveren andThomson, 2002; Lertwongsatien and Wongpinunwatana, 2003; Fillis et al., 2004; Grandonand Pearson, 2004; Houghton and Winklhofer, 2004). In Malaysia too, studies of e-commerce adoption by businesses, particularly SMEs, are mostly limited to awareness andreadiness of Malaysian companies. Sulaiman (2000), for example, found that although manyMalaysian firms have Internet access, most usage is limited to e-mail (Sulaiman, 2000). Otherstudies, such as Paynter and Lim (2001); Albert et al. (2002) and Ang et. a.l (2003), alsofound e-commerce usage by SMEs in Malaysia is still in its infancy. Indeed, manycompanies, especially SMEs, are reluctant to go online (Karkoviata, 2001).Adham and Ahmad (2005) investigated the adoption rates of website and e-commercetechnology by all 562 Malaysian public companies (reputable SMEs and large companies,listed on the main board of Kuala Lumpur Stock Exchange (KLSE1)). Their study examinescompany websites for operability and whether these websites incorporate e-commercesystems for online transactions. Only 62% of websites are operable with 96% providing onlycompany and product information and only 4% equipped for e-commerce transactions(Adham and Ahmad, 2005). Surprisingly, even well-known companies in Malaysia withexcellent profit track records are yet to use online transactions.1 As of June 2004, KLSE has officially changed its name to Bursa Malaysia. 4
  • 5. TUAN MOHD AZUAN BIN TUAN YUSOFFHashim (2009) recently investigated the adoption of e-commerce among SMEs in Malaysia.Her survey includes SMEs that have received government grant to adopt e-commerce. Thereis a varied exploitation of e-commerce among SMEs in this study. Of 522 SMEs, more than95% have an Internet connection and have used e-mail. Although e-mail was widely usedamong SMEs, the usage is limited by the SMEs‟ recognition of the importance of face-to-face interaction with their customers and suppliers. Although more than 60% of SMEs havewebsites, many of these websites were mainly to promote the company‟s goods and services,and the company itself. Websites with online payment facilities and online buying are rareamong SMEs in this study. Online buying is almost unpopular among SMEs in the study.This indicates that SMEs in Malaysia are still not adopting e-commerce as readily as mostindustry predictions, and as readily as the Malaysian government expected.2.4 Inhibitors to e-commerce adoptionThere is not much research that investigates inhibitors to e-commerce adoption, particularlyamong SMEs. As such, a review of inhibitors to ICT adoption affecting firms was used as aguideline. Among the inhibitors faced by firms include high investment costs andunfavourable financial conditions, shortage of highly-skilled workers, lack of ICT specialists,and insufficient ICT oriented training (Yap et al., 1992 and Chapman et al., 2000). Otherinhibitors also include information barriers (reflecting technological uncertainty) and alsomanagerial barriers, such as insufficient awareness of managers (Chang et al., 2003). Table 1shows some studies on inhibitors of ICT adoption among SMEs.Table 1: Inhibitors of ICT Adoption Among SMEsINSERT TABLE 1 HERETable 1 summarises 6 studies of ICT adoption by SMEs. Among the inhibitors are lack ofknowledge (Chau, 2001; Drew, 2003; Scupola, 2003; Simpson and Docherty, 2004), lack ofresources (Auger and Gallaugher, 1997; Drew, 2003) and feat of the Internet (Scupola,2003). The sample sizes of SMEs that have been used in these studies range from 2 to 462.Data gathering methods are mainly postal questionnaires, and semi-structured interviews.Studies using large sample sizes and combining semi-structured interviews with postalquestionnaires are rare in the literature.METHODOLOGYSemi-structured interviews were carried out with SME managers in Malaysia who did notadopt any of the e-commerce components. Interviews are important to provide a thoroughunderstanding of the most relevant concepts and detailed insights into the issues beingstudied (Greene et al., 1989; Silverman, 1993; Creswell, 1994). They help the researcher toanswer the „why‟ questions. Interviews allow researchers to adapt questions when necessary,clarify doubts, and ensure that responses are properly understood (Scupola, 2003). It allowsinterviewees to talk freely about the subject, thus adding useful information from which it ispossible to create new themes (Creswell, 1994). The questions addressed the following: WhySMEs did adopt or use, or stop using e-commerce in their businesses. The interviews wereconducted personally face-to-face lasted approximately one to one and half hour. Wheneverpossible, the company‟s website was visited to gain better understanding of its use of e-commerce. 5
  • 6. TUAN MOHD AZUAN BIN TUAN YUSOFFTwenty-nine SME were chosen from the list of SMEs which did not use or adopt any of thee-commerce components. Twenty-nine pre-interview calls were made with the SMEmanagers to make appointments for full telephone interviews. Pre-interview calls made suremanagers spare time to be interviewed so that the conversation would not be interrupted.Only eighteen agreed to be interviewed. The interviews provided an opportunity to explorethe non-adopter issues in-depth and gather information on constraints or incentivesencountered.findings AND aNALYSIS4.1 Background of the FirmsIn-depth interviews were conducted with SME managers who did not have an Internetconnection, did not use e-mail, no longer had firm websites, and also those who did not buyor had stopped buying online. A condition for each firm agreeing to participate in theresearch was that the information provided would be treated in confidence. Thus, names ofthe firms and individuals involved in the interviews are disguised.4.1.1 Types of ProductsTable 2: Firms‟ main products and services Firm Type of firm Products and services A M Food and crackers B M Coconut and palm industries C M Bakery products, shortening and star fruit D M Beverages E M Plastic motor components F M Automobile manufacturing Elastic bands, knit tape, narrow fabric G M accessories Electronic alarm system and engineering H M services S M Wooden rubber wood furniture Motorcycle spare parts and accessories, J M motorcycles K M Building manufacturing L M Agricultural products and chemicals M S Imaging technology IT infrastructure and system integration N S maintenance O MS Gold and jewellery services P MS IS and IT consultancy, and executive desktop Q MS Health and food supplements R O Building and constructionsNote:M: ManufacturingS: ServicesMS: Manufacturing and Services 6
  • 7. TUAN MOHD AZUAN BIN TUAN YUSOFFO: OthersAs illustrated in Table 2, the firms are involved in a variety of products and services, and it isdifficult to classify their activities into discrete categories. Three firms (A, C and D) wereinvolved in food and beverage production. Three firms (M, N and P) were principallyinvolved in IT services. Two firms (B and L) produced agricultural products. One firm (Q)produced health and food supplements. The remaining firms manufactured finished productsand some (firms G and S) were subsidiaries of large organisations.4.1.2 Internet and E-commerce Usage of SMEs InterviewedOf the eighteen respondents, two interviewees (A and B) did not have an Internet connection.Two SMEs (C and D) used to have an Internet connection and e-mail in their businesses.Fourteen of the eighteen interviewees had e-mail. Eleven SMEs abandoned their websites,and the other seven still had simple websites. (A simple website displays only informationabout a firm and its products and services without any price quotations.) Five SMEs hadonce bought online, but had decided to stop. The remaining firms had an Internet connectionand e-mail, but did not have websites and did not buy online (see Table 3).Table 3: Internet and e-commerce usage of firms Firm Have Internet Use e-mail Have website Buy online connection before before before before now? now? now? now? ? ? ? ? A No No No No No No No No B No No No No No No No No C Yes No Yes No No No No No D Yes No Yes No No No No No E Yes Yes Yes Yes Yes No Yes No F Yes Yes Yes Yes No No No No G Yes Yes Yes Yes Yes Yes* No No H Yes Yes Yes Yes Yes Yes* No No S Yes Yes Yes Yes Yes Yes* No No J Yes Yes Yes Yes Yes Yes* No No K Yes Yes Yes Yes No No No No L Yes Yes Yes Yes Yes Yes* Yes No M Yes Yes Yes Yes Yes Yes* No No N Yes Yes Yes Yes Yes Yes* Yes No O Yes Yes Yes Yes Yes No No No P Yes Yes Yes Yes No No Yes No Q Yes Yes Yes Yes No No Yes No R Yes Yes Yes Yes No No No NoNote:Yes*: SMEs with simple websites with simple information about the firm and its products 7
  • 8. TUAN MOHD AZUAN BIN TUAN YUSOFF4.2 Impediments to E-commerce AdoptionThe interviews revealed some evidence why some SMEs did not adopt or use or stop using e-commerce. The analysis provides a detailed evaluation of problems encountered and isdivided into a few thematic. The findings from the interviews show that there are twoprincipal reasons why SME managers did not adopt or use or stop using e-commerce. First,some interviewees suffer from constraints to adopt e-commerce. Second, some of them arenot inclined to adopt e-commerce due to several reasons. Table 4 displays the summary of thefindings.Table 4: Non-adopters of e-commerce and reasons found in the study by rankDimension Barrier Non- % Rank Non- % Rank Non- % RankOf Adopters Adopters adoptersinhibitors of Of of e-mail online website (n=4) buying (n=11) (n=18)Barriers to Lack of time 3 100% 1 2 22% 3 7 50% 2adopt e- Lack of 2 67% 2 10 44% 2 10 3commerce externalamong infrastructureSMEs Technology infrastructure Basic infrastructure such as transportation and delivery service Lack of IT N/A 5 56% 1 8 57% 1 expertise and financial resourcesReasons Concern N/A 8 89% 1 11 71% 1why aboutSMEs securityhave lackinclination Lack of trust N/A 7 78% 2 11 79% 1to adopt e- of e-commerce commerce High cost N/A 5 56% 3 10 86% 3 Customer- N/A N/A 9 64% 4 related 8
  • 9. TUAN MOHD AZUAN BIN TUAN YUSOFF constraints Inadequate N/A N/A 8 64% 4 support from government and e- commerce consultants Lack benefits N/A N/A 8 57% 6 of e- commerce Not relevant 2 67% 1 N/A 6 43% 7Table 4 displays ten inhibitors of why SMEs in this study did not adopt e-commerce. Threeof them are the constraints the SME faced to adopt e-commerce while the other seven aresome sorts of reasons that SME managers gave why they are not adopting it. Most of theinhibitors are common among the three e-commerce components. But, most inhibitors wereacquired from SMEs that were not using websites. Table 4 also displays these inhibitorsaccording to ranking, i.e. which are the inhibitors that found in most SMEs. Each of theseinhibitors is describe below.4.2.1 Barriers to e-commerce4.2.1.1 Lack of External InfrastructureSince e-commerce relies on telecommunication networks, a poor telecommunicationsinfrastructure presents a significant barrier to the application of e-commerce technologies(Slyke and Belanger, 2003). In Malaysia, while a reliable telephone service and dial-up tothe Internet are commonly available, access to a broadband infrastructure still remainsbeyond the reach of potential users in many locations. Because of their location in remoteareas, many SMEs suffered from poor telecommunications infrastructure.The government said that we are ready to get connected anytime and the Internet isubiquitous. I don‟t think we are up to that standard yet. Not everybody can have abroadband facility.”SME manager from firm OIn addition to the technology services, SMEs managers also claimed the transportation anddelivery system for e-commerce in Malaysia was not efficient. Many SME managers saidthey could not provide prompt delivery to their customers. They still had to use traditionalcarriers, such as Pos Malaysia Berhad (the Malaysian post office). Although they hadalternative ways to send items, such as DHL, they were quite costly. SME managers alsosaid that the traditional carriers did not deliver at the weekend. Most of the time, sellers andbuyers needed to go to the post office to send and collect the item.“In order for e-commerce to succeed, everything needs to be efficient – the order andpayment systems, the online tracking system as well as the delivery system. If all thesethings can be fixed, then we may be ready for online transactions.”SME manager from firm L 9
  • 10. TUAN MOHD AZUAN BIN TUAN YUSOFF 4.2.1.2 Lack of TimeLack of time to set-up and maintain e-commerce is the major constraint for almost allinterviewees. Most SME managers interviewed claimed that they were very busy with theirroutine business operations. They stated that they were required to do so many things at thesame time. They rarely had a normal day, as there was always something urgent to do, animportant problem to be sorted out and an order that needed to be dispatched (Hunt, 2003).Most of the interviewees saw e-commerce in their business as yet another task to be done.They already had a great many things to do, and they were not convinced that adding morewould be useful. They argued that acquiring websites was not as simple as it was made outto be. Managers needed time, money and effort to maintain and update their websites,especially websites with online transaction facilities. “Time is very precious for SMEs like us. We have so many other things to do rather thansitting in front of the computer.”SME manager from firm LLack of IT Expertise and Financial ResourcesThe other constraint in adopting e-commerce, according to the interviewees, was the limitedresources available to SMEs. SME managers said they needed a technical expert who couldset-up and maintain the websites for them because they were not able to do that on their own.However, they were not willing to hire dedicated IT expertise or an IT consultant since thatwould cost too much. SME managers claimed that setting-up a website with onlinetransaction was not easy. They said that e-commerce is not a simple and straightforwardprocess requiring only the installation of hardware and software.“We are delighted if government or e-commerce consultants can provide us with training toset-up and maintain the website. We don‟t need anything fancy; we just want simple andmanageable websites. The training package for creating a website is too expensive and toocomplicated. We don‟t have resources for that now.”SME manager from firm R4.2.2 Reasons Why SMEs Lack the Inclination to Adopt E-commerceAs illustrated in Table 3, most interviewees use e-mail in their businesses, but rarely havewebsites and buy online. All but three interviewees stated they needed e-mail tocommunicate with their customers and suppliers. Seven SMEs wanted firm websites, butsimple websites with simple information about the firm and its products. Those that boughtonline before declined to continue the activity. This gives an indication that mostinterviewees have a good idea what e-commerce all is about. However, many remaindisinclined to implement e-commerce, particularly online transactions.4.2.2.1 Concern about Security of E-commerceConcern about security is also one of the main reasons why SME managers in this study werereluctant to adopt e-commerce. Most of the interviewees were uncertain how secure e-commerce was for online transactions. Some SME managers worried about the possibility ofInternet errors in online trading. One SME manager (firm K) had picked up computer virusesthat were delivered through the Internet. He had to reformat most of his computers‟ harddisks and this was costly and inconvenient.The interviewed SME managers also argued that it was not secure to disclose credit cardinformation on a website, particularly to those that are not well-known and have no trackrecord. According to the managers, Internet hackers may hack information about their creditcards and use it somewhere else. 10
  • 11. TUAN MOHD AZUAN BIN TUAN YUSOFF“If I were to buy online in future, I would only buy from large and reputable organisationsthat promise secure protection on online transactions and also those who would pay me backevery single cent of what I have spent if something goes wrong with the delivery or if I wereto return their products.”SME manager from firm J4.2.2.2 Trusting E-commerceLack of trust in e-commerce is another prominent reason why SME managers were reluctantto adopt e-commerce. SME managers said that e-commerce is not reliable. They claimedthat they did not trust e-commerce because they did not trust the Internet. According to themanagers, in the Internet world anybody can be a seller and a buyer because nobody knowswho is behind the Internet. They were unable to determine genuine sellers or buyers on theInternet.SME managers were also doubtful about having a website with online transaction facilities.If customers were to order and pay online, product and service information, including priceshad to be available on the Internet. According to them, this could lead to loss ofcompetitiveness in the marketplace because other firms could imitate them.“Trust is still an issue and there is a lot of spin and self-interest out there”.SME manager from firm G“Online payments need control. Control needs trust, ownership and protection. I don‟t thinkthis technology will last long. And I don‟t think people will be able to put their trust in theInternet.”SME manager from firm H4.2.2.3 High Cost Another main reason SME managers were reluctant to have e-commerce in theirbusinesses was the high start-up and maintenance costs, particularly in adopting a website.SME managers said if they were to have a website with online transactions they had to investmore money to buy more advanced machines, hire more people with ICT skills, and sendmore staff for training.“We are SMEs. We are not as rich as large organisations. Our works are on a day-to-daybasis. We have got to make sure that our businesses run smoothly in order to survive. Howcan we compete with large organisations which have a lot of money? With the Internet, thelarge organisations are the ones who benefit most. Previously, they may have looked forSMEs to sell their products to the local people. However, with the Internet, they can selldirectly to the people at a cheaper price without us.”SME manager from firm JSome managers claimed that online buying also involved high costs. They needed to doresearch before buying on the Internet, which was time consuming. Since there is a widerange of websites on the Internet, buying online sometimes takes longer than traditionalshopping.4.2.2.4 Customer-related ConstraintsAnother prominent reason why SME managers were reluctant to have e-commerce in theirbusinesses was that the demand for e-commerce from customers was very limited. SME 11
  • 12. TUAN MOHD AZUAN BIN TUAN YUSOFFmanagers stated that e-commerce needs not only active sellers, but active buyers too. Tocapture the attention of customers to buy online, SMEs needed an attractive website, whichwould take time, effort and money. Even then, this did not guarantee that the SMEs would beable to sell online.“I have had online ordering and online payment on the website for nearly two years. I think Idid a lot of advertising to promote the website. Not a single buyer has purchased through mywebsite. I would rather use my energy to promote my business and keep my customers withme.”SME manager from firm R4.2.2.5 Inadequate Support from Government and E-commerce ConsultantsGovernments and e-commerce consultants usually act as catalysts to increase the diffusion ofe-commerce (Hadjimanolis, 1999; Gladwin et al., 2002; Scupola, 2003). They usually playan important role in influencing SME managers to adopt technologies and ideas. In theprocess of getting SME managers to adopt e-commerce, both the government and e-commerce consultants made many promises to SMEs. However, most of the SMEs wereignored once they adopted the technology. SME managers suffered with the technology anddrifted in their own world without proper direction.“The consultants gave us a lot of promises before we used their services to have a website.They came and visited us almost weekly during the trial period to see our progress dealingwith the website. After we had signed an agreement with them, we could hardly get in touchwith them. We needed to call them several times before they agreed to meet us. They saidthere were no dedicated consultants for each SME, but one consultant for many SMEs. So,the SMEs in trouble were required to make appointments. It sometimes took weeks andmonths.”SME manager from firm JMost interviewees that received the government grant also regarded the government grant asrelatively short-term. They said that the government only gave assistance once to SMEs;however it did not ask any feedback after the grant has been given.“The government should follow up with the companies who received their grants. Then theywould realize what problems arise after the e-commerce grant has been spent.”SME manager from firm L4.2.2.6 Unclear Benefits of E-commerceAnother reason why SMEs did not adopt e-commerce was a failure to gain any advantagesfrom using the technology. SME managers said the benefits of having e-commerce were notclear. Many SME managers in this study who used to have more complex firm websites havescaled down. They hardly sold online and never gained any profit from complex websites.Instead, they needed to invest even more to maintain their websites.“All this while, we heard many good things about e-commerce, such as how SMEs canincrease their sales and how to save costs using e-commerce. So, we invested in a complexwebsite for online transactions. But,… we are only able to look at it, edit it and maybe feelproud of it. That is it. How to make customers buy from it is the biggest problem in e-commerce.”SME manager from firm E4.2.2.7 Not Interested and Not RelevantSome SME managers in this study stated that they were just not interested in Internetactivities. One particular interviewee (firm B) opposed the Internet because of the failure rate 12
  • 13. TUAN MOHD AZUAN BIN TUAN YUSOFFof his peers who had adopted the Internet. Two SMEs (firms C and D) used to have Internetconnection, but decided to discontinue the Internet connection to cut their operation costs.“I only use computers to keep information about my customers and the firm inventory. Ihave the Internet at home for personal access. But I am not fond of having an Internetconnection in my firm because I don‟t like to spy on my staff.”SME managers from firm BSome SME managers also said e-commerce was not relevant in their businesses because theyserved only local people. They said the nature of their business and the product mix offeredneeded face-to-face interactions. This, according to the managers, did not come with e-commerce.“I have been selling medicine for more than a decade. My firm website is only to display thekinds of medicine we have. We are reluctant to sell online because not all medicine issuitable for everybody. We need to talk to our customers first and give proper advice tothem.”SME manager from firm Q.DISCUSSIONThe findings from the interviews give some ideas the barriers and why SMEs are not inclinedto adopt e-commerce. Some of the inhibitors that found in this study are similar in otherstudies. For example, Chappell and Feindt (1999) and Sadowski et al. (2002) found that lackof time is the factor hinder SMEs to adopt ICT, Craag and King (1993) and Purao andCampbell (1998) found that lack of IT expertise is one the major concern for SMEs to useICT in their businesses, and lack of external IT infrastructure is the one the barrier found inHadjimanolis‟s (1999) study. Concern about security (OKeeffe et al., 1998; Hadjimanolis,1999; Walczuch et al., 2000; Lawson et al., 2003; MacGregor and Vrazalic, 2007), lack oftrust of e-commerce (Paul, 2003; Pease and Rowe, 2003; Scupola, 2003) , high cost (Lawsonet al., 2003; Pool et al., 2006), unclear benefits (MacGregor and Vrazalic, 2007), andirrelevant to the business (Beveren and Thomson, 2002; Hughes et al., 2003; Brown andLockett, 2004) are also among reasons that other studies reported of why SMEs are notadopting e-commerce.In general, this article highlights a few important findings. One important finding in thisstudy was lack of external infrastructure that cause not only by technology but the poor basicinfrastructure such as transportation and delivery service systems. A clear message from thisstudy is that the government is yet to provide an appropriate infrastructure. Other reasons thatwere found in this study of why SMEs were not inclined to adopt e-commerce are customer-related constraints and inadequate support from government and e-commerce consultants.Many SMEs said that the demand for e-commerce from customers to buy online was verylimited, and thus this did not permit them to sell online. The analysis of the interviews alsoraises questions about the effectiveness of government support. The interviews revealed theevidence that government grants are inappropriate because they are generally too small, andbecause they are one shot of assistance. The government shows little interest in whether itssupport brings additionality to SMEs.Concluding remarksThis article presents the findings of the impediments of e-commerce adoption among SMEsin Malaysia. In order to encourage SMEs to adopt e-commerce, all the factors that impedeSMEs to adopt e-commerce should be solved. One way is to make SMEs understand what e- 13
  • 14. TUAN MOHD AZUAN BIN TUAN YUSOFFcommerce is all about. For example, practitioners as well as academicians need not onlyhighlight the important of e-commerce to SMEs; however, they should make SMEsunderstand what e-commerce is. E-commerce demands a radical change in the company‟sstrategy and logistics. It requires time and resources, which are precious and scarce in SMEs.SMEs need to be aware that they need to take e-commerce seriously if they really want toinvest in it. They need to have a clear assessment of the value that e-commerce might bring totheir company. SME managers need to be educated about the potential of e-commerce andlearn from the experience of others, which may not necessarily be Malaysian-based. Theyalso need to identify which e-commerce activities are appropriate for them. Withoutadequate information, the anticipated benefits of e-commerce and its development cannot beachieved. For policymakers, they should provide not only the technology infrastructure andservices, but an appropriate delivery service and transportation systems coupled with reliableand reasonable technology infrastructure and security systems would enable SMEs to see theease in e-commerce.REFERENCESAdham, K. A. and Ahmad, M. (2005). Adoption of Website and E-commerce Technologyamong Malaysian Public Companies, Industrial Management and Data Systems, 105(9),pp.1172-1187.Albert, L. K. P., Chai, A. H. S., Khiang, A. L. B. and Chye, G. N. K. (2002). InformationTechnology and E-commerce for Successful SMEs, Malaysian Management Review, 37(2),pp.30-38.Ang, C. L., Tahar, R. M. and Murat, R. (2003). An Empirical Study on Electronic CommerceDiffusion in the Malaysian Industry Shipping Industry, The Electronic Journal onInformation Systems in Developing Countries, 14(1), pp.1-9.Auger, P. and Gallaugher, J. M., 1997. Factors Affecting the Adoption of an Internet-BasedSales Presence for Small Businesses. The Information Society, 13, pp.55-74.Beaver, G. (2002). Small Business, Entrepreneurship and Enterprise Development, PearsonEducation Limited, Harlow.Beveren, J. V. and Thomson, H. (2002). The Use of Electronic Commerce by SMEs inVictoria, Australia, Journal of Small Business Management, 40(3), pp.250-254.Booz, A. H. (2002). International e-Economy Benchmarking: The Worlds Most EffectivePolicies for the e-Economy, Information Age Partnership (IAP), London, UK.Brown, D. H. and Lockett, D. (2004). Potential of Critical E-Applications for EngagingSMEs in E-Business: A Provider Perspective, European Journal of Information Systems,13(1), pp.21-34.Chapman, P., James-Moore, M., Szczygiel, M., and Thompson, D. (2000). Building InternetCapabilities in SMEs, Logistics Information Journal, 13(6), pp. 353-361.Chau, P. Y. K. (2001). Inhibitors to EDI Adoption in Small Business: EmpiricalInvestigations, Journal of Electronic Commerce Research, 2(2), pp.78-88.Chappell, C. and Feindt, S. (1999). Analysis of E-commerce Practices in SMEs, Knowledgeand Information Transfer on Electronic Commerce (KITE),http://rock.cs.unitn.it/narduzzo/b2b/b2b_Papers/kite.pdf, pp.1-27. Last accessed on 1 June2009.Colecchia, A. (1999). Defining and Measuring Electronic Commerce: Towards theDevelopment of an Organisation for Economic Co-operation and Development (OECD)Methodology, International Conference on the Measurement of Electronic Commerce,Singapore, 6-8 December, pp.1-15. 14
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