ICT3261 Chapter 4 E-business strategy for small and medium-sized enterprises (SMEs) Paula Goulding

ICT3262 Learning objectives  Appreciate the contribution and importance of small and medium- sized enterprises (SMEs) to a healthy national economy  Appreciate the nature and distinguishing characteristics of SMEs, their use and adoption of IT, and the attitude of the owner- manager to IT innovation

ICT3263 Learning objectives  Understand the risks if SMEs do not adopt e-business and some of the reasons why SMEs have been comparatively slow to adopt e-business  Understand some of the problems associated with a lack of planning of e-business requirements and initiatives in SMEs

ICT3264 Learning objectives  Understand the need for SMEs to undertake careful planning and strategising before adopting e-business  Understand a framework presented to support visioning and thinking about e- business strategy for SMEs

ICT3265 Definition of SME  Government definitions typically rely on industry type, number of employees, ownership, annual turnover, and the like  SMEs can be defined by characteristics –Relatively small share of market –Managed in personal & idiosyncratic way, free from external influence or control over decision making

ICT3266 Small Business – The Facts  Typically defined in Australia by number of employees –1-4 Micro –5-19 Small – Medium

ICT3267 Why focus on SMEs?  Australia & many countries in region are heavily dependent on SMEs for wealth creation, growth & prosperity  96% non-agriculture private sector <20 employees –75% of these in service sector  Employ  2.5 m (33% of workforce) –85% are micro businesses (<5 people)  Contribute 1/3 non-farm gross production  Small + Medium = 52% of workforce (ABS 2001)

ICT3268  Significant contribution to social cohesion, employment & production in this region –Health of national economies linked to health of SME sector –Crucial to national competitive development & innovation –Success of SMEs is contingent on remaining efficient and competitive, & responsive to changing customer demands  Concerns expressed about slow uptake of electronic commerce Why focus on SMEs?

ICT3269  SMEs yet to be persuaded of benefits of EC ? –Relatively efficient & effective channel for  Info provision & exchange  Advertising, marketing  Transactions  Facilitating distribution of goods & services globally  Ignoring EC means potentially –Risk becoming uncompetitive in long term –Risk loss of market share to global competitors Why focus on SMEs?

ICT32610  SME owner-managers yet to be persuaded about benefits of e-Commerce ? –Attitude of owner-manager critical to uptake of technology –Sometimes struggle to demonstrate ROI  Clear benefits need to be demonstrated for business before owner-managers likely to adopt e-Commerce Why focus on SMEs?

ICT32611 Small Business – 2004  Sensis SB Index (July 2004)  –94% (91% in 2002) of all small businesses own computers (100% medium; 97% in 2002) –Spending on software has risen over the last 12 months –86% (79% in 2002) of small businesses are connected to the Internet (99% medium)  Majority by modem ( broadband growing amongst medium )

ICT32612 Small Business: The Online Challenge  SMEs see being online as a necessity –45% of small businesses have web sites (80% medium, down from 82%) –13% (15% medium) have intention to get one within year  So, what are they using the internet for???

ICT32613 Small Business: The Online Challenge  94% of those small businesses connected to the Internet see as being the most essential internet application  90% research  88% looking for products and services

ICT32614 Small Business: The Online Challenge  Procurement – 56% –The portion of internet purchases of total purchasing activities has increased (45% 2003) –12% do majority of purchasing online  Payment – 59% (up from 23% two years ago) –96% satisfaction level –Mostly computer software, flights, stock/merchandise

ICT32615 Small Business: The Online Challenge  On-line selling –39% take orders online –Online sales represents >5% of total sales in 47% of businesses  Return on Investment –59% indicated investment had already been recovered –Further 17% expected to recover investment in next twelve months

ICT32616 Lessons learned about e-Business needs of SMEs  Inadequate knowledge of e-Business resulted in poor decision making  No clear business vision with respect to e-Business  Limited strategy with respect to e-Business  Limited integration of e-Business vision with existing organisational vision & strategy

ICT32617 Lessons learned about e-Business needs of SMEs  Limited appreciation of impacts on core business processes of adoption of e-Commerce  Limited understanding of need to change performance measurement systems following adoption of e-Commerce  Limited understanding of potential changes to relationships with suppliers  Limited attention paid to logistics requirements following introduction of e-Commerce

ICT32618  Limited understanding of nature of e- competition & implications of entering a global marketplace  Limited attention paid to effectively managing customer relationships  Limited attention paid to developing required resources & functional strategies  Insufficient attention paid to need for organisational change management Lessons learned about e-Business needs of SMEs

ICT32619 Towards a framework..  Need for device to help structure & integrate thinking about diverse elements involved in e-commerce –planning & implementation issues  support a systematic & holistic approach to e-commerce  develop an e-business mindset

ICT32620  Consideration needs to be given to: –investment in appropriate IS/IT –appropriate re-engineering & redesign of business processes –effective marketing & customer relationship management –efficient & effective acquisition & management of resources & relationships –development & management of efficient & effective logistics or distribution capability Towards a framework..

ICT32621 A framework for e-business strategy formulation Step 1: e-vision

ICT32622 A framework for e-business strategy formulation  Step 2: Strategy development –Having established e-vision, SME can consider a number of themes to ensure successful adoption of e- Business  Investment in suitable IS/IT  Appropriate re-engineering & redesign of core business processes  Effective marketing & CRM  Effective & efficient acquisition & management of resources & relationships  Development & management of effective logistics capability

ICT32623

ICT32624 A framework for e- business strategy formulation  planning IS/IT investment requires strategy formulation  e-business implies even tighter linkages Business Strategy * mission & vision * objectives & directions * change IT Strategy * supply orientated * technology focussed IS Strategy * business based *demand orientated * application focussed Where is the business going & why What is required How it can be delivered IS/IT impact, potential & technological breakthroughs Investment in IS/IT

ICT32625  Investment in IS/IT –identify IS/IT functionality required for e- business initiatives –determine where to source expertise & technology  develop / bring in-house  adopt solutions from ISP / ASP  develop & manage outsourcing arrangements from a “whole-of-business” perspective A framework for e- business strategy formulation

ICT32626  Redesign of Business Processes –advertising, selling, interacting with customers, processing payments & orders online may imply need to modify existing business processes / create new processes –strategy formulation & strategic decisions will effect extent of redesign A framework for e- business strategy formulation

ICT32627  Logistics Capability –examine customer expectations of delivery of non-digital goods/services –review existing capability in terms of requirements of e-commerce –consider requirements for warehousing, packing, order fulfilment & distribution A framework for e- business strategy formulation

ICT32628  Marketing & CRM –need to consider and plan for the capacity of e- commerce to change & extend nature of organisation’s products/services & markets  market research & testing  product & market extensions  market exposure  prospect generation & contact  sales channel support  post-sale customer support A framework for e- business strategy formulation

ICT32629  Sourcing of Resources –requires acquisition & integration of resources (human, physical, financial, etc) –consideration of development of alliances, partnerships, outsourcing relationships A framework for e- business strategy formulation

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ICT32631 E-visioning and e-business strategy development  Issues & Learning –Is this framework restricted to SMEs?  Applicable to large organisations as well?

ICT32632 Summary  use framework to highlight concerns, develop understanding of broad range of issues –Encourages holistic, systematic & integrated thinking –Shape a “strategic conversation”  revisit strategy as learning occurs  ensure strategy suitable for e-commerce is developed –existing strategy may not “transplant” to new environments