The growth in the use the Internet has been the main driving force in the growth and frequency of E-commerce (Tan and Ouyang, 2004). E-commerce is the short form of the term Electronic Commerce which refers to the practice of buying and selling goods and services electronically with the main media being the Internet and other computer networks (Tan and Ouyang, 2004). This term has been expanded to include a wide range of business related activities which may include but not limited to marketing and brand awareness endeavours, communication and collection of data, and the processing of payments to be remitted to the sellers of the goods and services. The topic of E-commerce has drawn remarkable interest in the since the beginning of the 21st century with an almost unanimous verdict from surveyors that its popularity is on a steady increase. However, there have been major disparities in use of E-commerce between national economies with the developed economies appearing to embrace its use at a larger scale than in the developing countries. Some of the reasons for these disparities have traditionally included the difference in literacy levels, lack of adequate infrastructure in the developing economies, disparities in the purchasing power, and the socio-cultural influences among others (Ernst and Jiachen, 2000). Even though the use of E-commerce in China is growing at a remarkable pace, it must be noted that this use continues to lag behind that of the developed countries (in proportionate terms). This paper explores the matter with the aim to establish reasons for the rapid growth of e-commerce in China, the impact that this growing popularity has on the Small and Medium Enterprises’ Critical Success Factors, the reason for their apparent lag in the practice of e-commerce as compared to their developed counterparts, and an examination of the steps being taken to promote e-commerce at the national level. It also intends to make recommendations on the steps that China can take to encourage e-commerce (based on theory and the experiences of other countries).
The title for this study shall be: Impact of E-commerce on the Critical Success Factors (CSFs) for Small and Medium Enterprises (SMEs) in China
This study aims to establish the how e-commerce in China impacts the performance of SMEs and shall significantly focus on the current trends in China as far the use of e-commerce. In so doing, the study shall establish the reasons for such trends. It shall also make a comparison between China and other economies, especially the developed economies and attempt to explain any disparities in the extent to which e-commerce is embraced in the economies in question. The impact on such disparities on the performance of SMEs in the countries will also be covered. Finally, the study shall focus on the challenges that are facing the adoption of e-commerce in China will be highlighted and recommendations made as appropriate.
The research questions to be attended will therefore be as follows:
· What are the SMEs Critical Success Factors and how can they be impacted by e-commerce in China?
· To what extent is e-commerce practiced in China?
· What are the trends in the practice based on recent statistics and on professional projections for the future? And what does this mean in terms of threats and opportunities for the Chinese SMEs?
· How does the practice of e-commerce in China compare with that of the developed economies?
· What challenges are faced in the adoption of e-commerce in China and how do these challenges inhibit its adoption?
· How can these challenges be overcome and how what additional measures can China take to encourage more e-commerce among SMEs?
· In what additional ways can e-commerce be implemented to add value to the SMEs and the Chinese national economy?
Rationale for the study
Unlike many other facets of trade and economy that tend to have been firmly grounded and supported by business theorists, e-commerce seems to have taken a somewhat different path. The growth in the popularity of the internet has surprised market analysts with many playing catch-up to establish how the medium can contribute to brand equity and by extension- the success of the organisations (Barney, 2000). SMEs are increasingly becoming innovative in terms of business process and marketing and are fast adopting e-commerce to curve out a strategic position in the Chinese market. E-commerce is a highly dynamic field with new inventions being developed on a regular basis. Its analysis therefore requires a practical and dynamic approach which not only highlights the developments and challenges, but also sheds light on its importance to the national economy and in what additional ways its use can be actualised. This study is designed to add an invaluable input into the body of knowledge existing on this intriguing subject by making clear presentations on the aspects described above.
E-commerce is growing remarkably in the Chinese market due to the steady growth in the number of internet users. According to the China Internet Network Information Centre, the total population accessing the internet has topped a figure of 384 million or 28.9% of total population (Olsen, 2010). This pales in comparison to the developed economies such as the UK and the USA where over 95% of the populations have access to the Internet. This figure is however expected to surpass the 60% mark by 2013 hence making China the largest single market (in terms of population) accessing the internet and therefore easy to serve through e-commerce (Olsen, 2010). The development is coupled with the fact that China contains one of the fastest growing middle class with significant a significant growth in their incomes. This growing middle class is the main target for businesses pursuing to exploit the use of e-commerce as part of their generic strategies (Elsingerich and Kretschmer, 2008). Even though the average Chinese citizen tends to be thrifty in their spending habits, the growing middle class has exhibited dissimilar characteristics. Many of them are increasingly being drawn towards lifestyle spending and practices consistent with the Western definition of ‘comfort’ (Nissanof, 2006). This is the market segment mostly taken by e-commerce with many opting to engage in exercises such as online shopping and electronic payments among others.
As analysts would observe, e-commerce in China lags far behind other countries- especially those with more developed economies (Sin and Purnamasari, 2010). The main reason for this disparity has of course been a lower access to internet services. According to business strategists, the choice of the medium through which to disseminate products into the market must be determined by the number of prospective consumers who can be reached through such a medium (Ng, 2004). This thinking perhaps explains why the use of e-commerce hasn’t been as prevalent in China in the past. However, this trend is constantly changing. As businesses begin to realise how much the reach of the internet is growing and the growth in the income levels of such internet users, they begin to appreciate the strategic importance of e-commerce towards the attainment of their organisational goals (UNCTD, 2003). This is especially more applicable to small and medium enterprises which have to swiftly curve out a niche for themselves through targeted production and marketing in order to survive the competition posed by the multinationals. E-commerce is increasingly growing in popularity due to the fact that it provides consumers with the luxury of shopping from the comfort of their homes or offices (Efendioglu, Yip and Murray, 2010). The payment system is also quite secure with electronic payments being proved to be more reliable than the habit of carrying cash around where the risks of loss are considerably higher.
A survey on the popularity of e-commerce however reveals that a significant portion of the population remains sceptical about its reliability as a tool of trade (Olsen, 2010). There have been concerns that the Chinese government is yet to prove its competence and political goodwill as far as apprehension and punishment of cybercrime culprits is concerned. This characteristic is significantly different in the developed countries where law enforcement infrastructure is firmly in place with a serious vigilance that heightens the risk of apprehension among the offenders (Miller, 2002). The public confidence in e-commerce is therefore much higher in the developed economies than in China. E-commerce also requires that appropriate infrastructure be developed to the optimum. Service providers facilitating online and electronic transactions must be in place for e-commerce to take root (Chaudhury, 2002). Such services are prevalent in countries such as the UK and the USA with an ever-falling transaction fee which makes e-commerce less costly to both the consumers and the businesses. These costs are comparatively higher in China and as observers would recommend, there needs to be more investment in such services in order to bring down transaction costs through the competition in the industries (Sin and Purnamasari, 2008). The importance of e-commerce in business and the economy cannot be overemphasised and China must take initiatives to promote it in order to realise the full potential for their small and medium sized enterprises as well as the whole economy.
This research shall take a combined approach making use of both primary and secondary research. This combined approach will be useful in not only capturing contemporary sentiments on the subject matter but also in relating the knowledge gathered to relevant theories as well occurrences in other parts of the market.
Given the practical nature of the study, the research shall be dominated by the personal sentiments of the population. This is due to the fact that it is their understanding on the role of e-commerce in SMEs that will inform their answers. However, care shall be taken to assure the objectivity of the findings by ensuring a strong and reliable theoretical basis as well as studies on the goings on in China and other countries around the world. The dominant research philosophy to be used in this case shall therefore be the realist philosophy.
This research shall make use of written questionnaires in gathering the primary data. This choice has been informed by the fact that the content of surveys will be such that the respondents may need ample time to reflect on their responses before providing them. This is different from oral interviews interviewees are often required to provide immediate responses without necessarily engaging in much contemplation. The questionnaires shall also be administered and collected through email due to the distance between the researcher and the population. Email is the fastest mode of communication between long distances. Moreover, it will be highly relevant to the subject of ‘e-commerce’ which also involves the relaying of electronic messages.
The SMEs operating in China shall be targeted. The main focus shall be on the SMEs operating in the urban areas where experience with e-commerce is expected to be a little higher.
In order to facilitate ease of reporting, the sample size shall be limited to a manageable number of 300 respondents. This number will be large enough to capture the sentiments- and small enough to facilitate easy analysis.
The questionnaires shall be analysed both qualitatively and quantitatively. The responses shall also be taken through a reliability test in order to establish the consistency of the responses. Presentation shall be done with the help of visual aids such as diagrams in order to provide better clarity.
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