SMEs and E-Commerce

The adoption of e-commerce technologies is important for
the ongoing survival of SMEs. The most significant
business benefits for SMEs from the use of e-commerce
are described below (Arunachalam, 1995; Sengenberger
et al., 1990, Sharma et al., 2003, Afuah & Tucci, 2000):
• Better service quality—E-commerce can improve
the quality of the marketing, sales, support, and
procurement processes of SMEs by delivering more
accurate, timelier, and more complete information to
the point of sale, point of decision, or point of
support. Service can also be delivered over a broader
geographic and temporal base worldwide or any-
time, anywhere.
• Reduced service costs—The self-service Internet-
based e-commerce model is characterized by rela-
tively low variable transaction costs, with increas-
ing cost-effectiveness as the scale of activity in-
creases. At higher volumes of activity, Internet
commerce channels for sales and support services
are likely to be low-cost channels.
• Increased revenue—Extended geographic sales
channels and improved service quality may lead
directly to increased market share, improved compe-
tition among brands, and greater revenue.
• Reduced time to complete a business transaction—
By communicating electronically, the time required
to place and confirm an order can be compressed by
hours or, in some cases, days or weeks. This short-
ens the lead time for product delivery. As a result,
it may be possible to reduce parts or finished goods
inventories or receive critical products more rapidly
to gain a competitive advantage.
• Reduced administrative costs—The cost of pro-
cessing purchase requisitions, purchase orders,
and payments can be dramatically reduced, as can
invoice and bill presentation costs. The accuracy of
business transactions is improved, increasing cus-
tomer satisfaction; reducing transaction, auditing,
and administrative expenses; as well as reducing
the costs of expedited manufacturing and shipping
costs to correct erroneous or late orders.
• Improved return on capital—By shortening the
“product turn” and payment cycles, enterprises can
reduce the amount of material requirements and the
time for which funds must be committed to pay for
the production of inventory, materially lowering
capital requirements.
• Increased return on investment through better plan-
ning—More timely planning and information allows
for more efficient acquisition and scheduling of
capital equipment, reducing unit costs, increasing
the return on investment, and ensuring a better
match between manufacturing capacity, produc-
tion, and market demand.
• Increased time devoted—SMEs now can devote
more time to their products and their customers and
lose less time in unproductive administrative jobs,
such as time savings associated with electronic
purchasing and materials management.
• Enhanced marketing—SMEs can enhance their lo-
cal and international marketing efficiency through
electronic catalogues and advertising through the
Internet.
• Enhanced innovation capacity—SMEs can dramati-
cally enhance their innovation capacity through
technology watch, reverse and concurrent engi-
neering, rapid prototyping, and distance manufac-
turing.
• Increased bidding opportunity—SMEs can bid on
larger and international projects through network-
ing with other partners worldwide and even with
competitors.