The Impact of E-Commerce On Small-Size Companies in Sweden: Diyan Ivanov
The Impact of E-Commerce On Small-Size Companies in Sweden: Diyan Ivanov
The Impact of E-Commerce On Small-Size Companies in Sweden: Diyan Ivanov
Business
Administration
Master’s Thesis
15 ECTS
Diyan Ivanov
3
CONTENTS
1. INTRODUCTION...................................................................................................6
1.1. BACKGROUND....................................................................................................6
1.2. RESEARCH PROBLEM........................................................................................7
1.3. AIM AND OBJECTIVES.......................................................................................8
1.4. THESIS OUTLINE.................................................................................................9
2. METHODOLOGY................................................................................................10
2.1. RESEARCH APPROACH....................................................................................10
2.2. RESEARCH METHOD........................................................................................11
2.3. DATA COLLECTION..........................................................................................12
2.3.1. Secondary data............................................................................................12
2.3.2. Primary data.................................................................................................13
2.4. RESEARCH MODEL OUTLINE........................................................................15
3. THEORETICAL BACKGROUND......................................................................16
3.1. INTRODUCTION.................................................................................................16
3.2. DEFINITION OF E-COMMERCE......................................................................16
3.3. DEVELOPMENT OF E-COMMERCE AND PROCESS OF ADOPTION......................................... 17
3.4. E-COMMERCE AND MARKETING STRATEGY............................................20
3.4.1. Product....................................................................................................................21
3.4.2. Place........................................................................................................................21
3.4.3. Price.........................................................................................................................22
3.4.4. Promotion................................................................................................................22
3.5. BENEFITS OF E-COMMERCE ADOPTION IN SMALL COMPANIES........24
3.6. BARRIERS FOR E-COMMERCE ADOPTION IN SMALL COMPANIES......27
3.7. SUMMARY OF LITERATURE REVIEW.......................................................................................... 30
4. FINDINGS............................................................................................................31
4.1. ELECTRONIC DEVELOPMENT IN SWEDEN................................................31
4.2. E-COMMERCE USAGE IN SMALL-SIZE COMPANIES.................................33
4.3. DEVELOPMENT OF E-COMMERCE IN THE INTERVIEWED COMPANIES35
4.4. THE REASON BEYOND E-COMMERCE DEVELOPMENT...........................36
4.5. THE IMPACT OF E-COMMERCE ON MARKETING.....................................37
4.6. BENEFITS FROM E-COMMERCE ADOPTION..............................................39
4.7. BARRIERS FOR E-COMMERCE ADOPTION..................................................39
4.8. BENEFITS AND BARRIERS – BEFORE AND NOW......................................40
5. DISCUSSION.......................................................................................................42
5.1. E-COMMERCE DEVELOPMENT IN SMALL-SIZE COMPANIES IN SWEDEN 42
5.2. DRIVING FORCE FOR E-COMMERCE ADOPTION......................................43
5.3. THE IMPACT OF E-COMMERCE ON MARKETING.....................................44
5.4. BENEFITS FROM E-COMMERCE ADOPTION..............................................45
5.5. BARRIERS FOR E-COMMERCE ADOPTION..................................................46
6. CONCLUSION....................................................................................................48
LIMITATIONS AND FURTHER RESEARCH....................................................49
REFERENCES..........................................................................................................50
APPENDIXES............................................................................................................53
List of figures
List of tables
1.1. Background
Electronic commerce is reshaping many aspects of the business and the social
life. Companies need to adapt their strategies to the new realities if they
want to be competitive in the marketplace. E-commerce is a new way of
conducting business and its influence is increasing every year (Chong 2008).
The term “e- commerce” is described by Chaffey (2009) as all electronically
mediated transactions between the company and third party. At the same time
e- commerce not only provides the companies with a huge amount of
information, increases the speed of the transactions and decreases costs, but
also reshapes their marketing strategies and practices (Dou & Chou 2002).
The reasons for implementing an e-commerce strategy can vary from company
to company. According to Xu and Quaddus (2009), while in the big
companies the leading motives are to improve efficiency in their internal
processes; small companies are more concerned with the competiveness.
Successfully adoption of e-commerce is a slow process and it cannot be
completed at once, but rather in small series of adoption processes in which
the company moves gradually from simple to more complex stages o f e-
commerce (Brand & Huizingh 2008). Obviously, any firm beginning the
process of adoption will face many problems and barriers. Managers in the
small companies need to overcome the barriers and realize the benefits from e-
commerce in order to prevent the risk of competitive disadvantage in their
businesses (Abid et al. 2011; Stockdale & Standing 2004). This study will try
to describe the impact of e-commerce on Swedish small-size companies. The
reasons why the small companies have started the process of e-commerce
adoption will be described. Attention will be put on the benefits and barriers
related to this process. In order to do this, an extensive review of the
literature and secondary data will be performed. Second, three interviews
with small-size companies based in Värmland region of Sweden will be made.
The accessed companies can be described as small, with numbers of
employees from 10 to 49 and annual
turnover below 5 million euro. Company A is a producer of gardening tools
and equipment and operates mainly in the local Swedish market. The products
are distributed within the country by well-developed network of industrial
distributors and retailers. Company B produces ergonomically chairs and high
quality ergonomic seating solutions. High volume of company’s sales is
generated in the international market. Company C produces equipment and
products for industrial labelling, coding and identification. The company
sales its products mainly in Sweden and have few clients in the other Nordic
countries.
The aim of the research is to investigate the influence, barriers and benefits of
e-commerce adoption in small size companies in Sweden. In order to do this,
the following tasks will be performed:
2. Review the literature about the perceived benefits and barriers from
small size companies.
Therefore, in my thesis, first I will examine the literature, and then conduct
my own observation and present the results. Afterwards, the facts will be
correlated and explained in wider context, referring again to the previously
examined literature in order to answer the research questions set earlier.
2.2. Research method
Many researchers use a mixed method, which combines the qualitative and
quantitative techniques in order to improve the reliability of the research
outcome. In this study qualitative method was applied and primary and
secondary data were used. The reasons to use a qualitative method are
numerous. First, the human factor in small companies is very important for
the strategic decisions. Therefore, by approaching the persons who have the
power to make decisions and by conducting interviews, I can obtain more
accurate information in order to answer to the research questions. Second,
because the purpose of the thesis is to describe the phenomena of e-
commerce rather than to confirm or reject hypothesis, the qualitative
method is more suitable. Third, the method supposes more flexibility and
adjustments, and it is more appropriate for an inexperience author. Fourth,
qualitative researches have already been made. For example, Statistics Sweden
publishes every year an extensive data about e-commerce usage from the
enterprises. Therefore, I decided to conduct interviews rather than a
questionnaire survey. At the same time, the results from the secondary data
sources will be taking into the account. Finally, a qualitative research can be
performed in relatively short time period. On the other hand the time frame to
write the thesis makes hard to complete an extensive quantitative research. At
the same time, some limitations of this research can be depicted. The
limitations of the thesis are described in the last chapter.
Data collection can be divided into two types – secondary and primary. While
secondary data is available before, the primary data is new data collected
from the researcher (Bryman & Bell 2007). For the purpose of this work a
combination of the both techniques will be used in order to increase the
validity. According to Yin (2004), the results from the research are more
accurate when they are based on several data sources.
At the same time, well–developed procedures for data collection and the
highly experienced researchers lead to far more accurate data than any student
can obtain. For example “Statistic Sweden” presents every year an extensive
amount of research comprising samples which is not possible to achieve for a
single researcher. As Bryman and Bell (2007) stated, governmental or trading
organizations have well-developed procedures for control of the quality of the
data, hence the outcome is far more accurate than any single researcher can
achieve.
Drawback from using secondary sources is that the data could not be
appropriate for cross-national comparisons, when different criteria and
definitions are used. Since in this thesis, the purpose in not to compare
different countries but to explore only one, using secondary data is considered
favourable.
In this paper multiple secondary data sources were used – official statistic and
public documents, journals, articles, international statistic from “Eurostat” as
well as information from companies’ web sites. Reviewing the secondary
data in this thesis was performed before the collection of primary data,
consistent with Crawford (1997) who stated that this is the right approach -
first to examine secondary data and then to collect and analyse primary
sources.
Primary data in this thesis was obtained from face-to-face and telephone
interviews conducted with preliminary selected companies. Interview, as a
source of primary data has many advantages and disadvantages. In this paper,
the main benefits are the possibilities to collect valuable data critical for
answering the research questions. On the other hand, the interviews are time
consuming and needs greater preparation. That’s why semi-structured
interview technique was used in this thesis. Positives from this approach are
that they were performed in a short time period and are more appropriate for
an inexperienced researcher. Semi-structured interview is suitable when the
author has already sufficient knowledge about the topic and it supposes little
variation of the questions and their sequence, or altering of the wording
(Crawford 1997). While the interviews in quantitative research must be highly
structured to maximized the reliability and validity of the data, in qualitative
research the emphasis is on the generality of the primary research ideas and
interviewees’ own perspective (Bryman & Bell 2007).
Table 1 below shows the interviewed companies and their main activities, the
respondent’s role, the length of the interviews and their type:
3.1. Introduction
In the last two decades due to the increased development of the technology
and the emergence of the Internet and World Wide Web (www) the new
term– e-commerce was born. From the mid-1990s e-commerce began to grow
rapidly and to reshape many industries. The marketplace and the way the
business is conducted will never be the same (Chong 2008).
The importance of the topic has been increasing every year since the very
beginning, and nowadays e-commerce is considered as a promising tool for
reaching companies’ goals – increased sales and revenue. At the same time
there are still some prejudices and negatives for adoption of this new strategy.
This is especially highly visible in the small companies which are the target
of this study. Before beginning to explore the influence of e-commerce, a
clarification of the meaning of this term according to different authors is
given.
The increasing number of the publications past few years leads to greater
variation of the definitions of e-commerce. The first definitions were simple –
e-commerce has been defined as a process of buying and selling of goods over
the Internet. The term was developed later and it was added “exchange of
information” in addition to “buying and selling of goods” (Chong 2008,
pp.470).
The term e-commerce and e-business are interchangeable (Rainer & Cegielski
(2011, pp.201). Many people use e-business or even e-marketing, talking
about e-commerce in a broader sphere (Schneider 2011, pp.4). Good
illustration of the closeness between the two terms can be found in the IBM
definition of e-business: “the transformation of key business process through
the use of internet technologies” (Schneider 2011, pp.4; Chaffey 2007, pp.14).
Before digging into the main problem of the thesis (the influence, the barriers
and benefits from e-commerce), I feel that it is necessary to describe how e-
commerce has evolved during the years and what prompt the managers to
adopt more technology in their business es.
Schneider (2011) divides the development of e-commerce into two stages: first
wave and second wave. “First wave” of e-commerce was adopted by large
enterprises in USA with easy access to capitals, primarily from external
sources. Evans and Wurster (1999) refer to e-commerce in this early stage as a
“landgrab”. At once, the whole new marketplace was created and companies
who had sufficient resources and willingness could “grab from the land”.
These large companies firstly understood the possibilities that e -commerce
can offer and started exploring and developing them. Since most companies
were
dependant on external investors, achieving the profit was relatively rare. The
pressure to the smaller companies was far more intensive, and many of them
suffered losses. In the beginning, the technology was simple, inexpensive and
internet connection slow, the websites were mainly English based, e -mails
were used unstructured and the integration of e-commerce with other
processes were not efficient (Evans & Wurster 1999).
The driving force for improvements and innovations of any company is the
aim to increase the revenue. Theoretically, e-commerce can improve the
performance by two ways: first, by increasing the customer base and number
of purchases, and seco nd, with cost reduction by implementing e-commerce.
Cost reduction like material savings, decrease of transport, storing cost, or by
reduction of personal expenses (Chaffey 2009).
Figure 2: E-commerce adoption ladder in s mall companies (Xu & Quaddus 2009, pp.304)
The adoption ladder in figure 2 shows the logical process companies follow
when implementing e-commerce. At the beginning, companies have few or
non e-commerce capabilities. Level 2 supposes more intensive use of online
communication, mainly e-mails for internal and external communication. In
the next stage, level 3, companies start to use e-commerce as a marketing tool,
mainly to communicate their products through online brochures and
catalogues, but they still do not conduct business transactions. The most
sophisticated level of development can be characterized with intensive
information exchange and interaction with customers and partners with
increased speed. Companies also make and receive orders, and make payments
online. While advanced e-commerce adoption is far more costly and
complicated, the initial stages can be completed relatively i nexpensive and
easy. Furthermore, the adoption decisions are described as less controversial
(Xu & Quaddus 2009).
At the same time different reasons for e-commerce adoption are mentioned in
the literature. On the other hand, commonly reported motives for small
companies are the necessity to compete more effectively, while the large
companies adopt e-commerce because of their more complex internal
processes and operations (Xu & Quaddus 2009).
As I mentioned in the previous section, one of the most common reasons for
small companies to adopt e-commerce strategies in their businesses
according to the literature is to enhance competiveness (Xu & Quaddus 2009).
At the same time e-commerce presupposes new possibilities and difficulties
as well as certain changes in the marketing strategy. But according to
Stockdale and Standing (2004), electronic technologies and e-commerce are
not the reason for the market to exist. The basic principles of the marketing
are the same and the technology only facilitates the businesses (Stockdale &
Standing 2004).
Allen and Fjermestad (2001) suggest that the impact of e-commerce can be
better understood in the contexts of the traditional marketing mix of the four
Ps - Product, Price, Place and Promotion. Therefore they will be described in
details in order to obtain a clearer picture of the impact of e-commerce.
3.4.1. Product
Traditional marketing considers “product” as anything which can be offer in
the market for satisfying customer needs. In e-commerce, information can be
regarded as equal to the product itself (Evans & Wurster 1999). Enterprises
providing clear relevant information can increase the attractiveness of their
products. Technology improvements give possibilities for decreasing the
cost of searching, collecting, and disseminating of information from the
company and from the customers. Buyers can access information instantly,
and even virtually test the product, which in traditional marketing concept
would be time consuming. E-commerce changes even the way of delivering
the product (Alrawi, 2007). For example a software company can offer the
purchased product to be downloaded directly from their website after the
payment. Or the physical distribution can be replaced with online
distribution. This can decrease the overall costs. The possibilities for
innovation are also increasing. E-commerce provides better access and
communication with customers, which can be used for a better
understanding of customer needs and finally offering a product which fully
satisfy those (Allen & Fjermestad 2001). Moreover, e-commerce gives
possibilities for shortening the product’s life cycle, as well as the process of
testing and development. At the same time, companies can expand their
product line, offering additional interactive or physical services around the
core product (Chaffey et al. 2000). As value-added product characteristics
influence the customer’s perceptions, and brand is dependent on these
perceptions, e-commerce can be used to create strong brand identity and
enhance brand awareness (Chaffey 2002).
3.4.2. Place
Marketing channels or “the place” has changed due to e-commerce. The effect
of e-commerce is higher on the “place” than on the other three elements.
Why? Because e-commerce changed rapidly the marketplace and offered
tremendous opportunities for expanding the customer base and increasing the
market share (Allen & Fjermestad 2001). According to Chaffey (2002) digital
channels gives opportunities to selling more existing products on the same
markets (market penetration).
Furthermore, Internet gives premise for more a global reach and creating of
larger marketplace or market development. E-commerce gives new
possibilities for distribution of the product and international expansion with
relatively lower costs (Allen and Fjermestad 2001). Before, companies
needed
to invest huge amount of money to establish local supporting structures. Now,
they create virtual market space, which can complement their traditional
marketing channels. Chaffey (2002) stated that this is a big opportunity
especially for small and medium size companies. Moreover, the large variety
of choices is available 24h per day and buyers can at the same time consider
different offers from a variety of sellers (Alrawi 2007). Additionally,
companies can shorten their supply chains and bypass some of the parts of
the value chain (Allen & Fjermestad 2001).
3.4.3. Price
Price is the most flexible of the four elements of the marketing mix. At the
same time it is the only element which generates revenues, that’s why
companies should be aware of possibilities and threads exposed on (Allen &
Fjermestad 2001). With the increased exchange of information, customers can
easily compare different prices on a global scale and quickly make their
choice. The price competition is increasing, companies are pressured to
decrease the prices, and turn to other sources of competitive advantage. This
can lead to price standardization across borders (Allen & Fjermestad, 2001).
At the same time, there are possibilities for decreasing the overall costs for
storing, and also administrative costs. By better coordination of production,
distribution and sales, companies can decrease the overall costs of their
products (Alrawi 2007). Moreover, companies selling online can offer special
discounts in order to meet its objectives. The lower overhead of electronic
transactions than telephone or personal sales gives possibilities for these price
reductions (Chaffey 2002).
3.4.4. Promotion
E-commerce provides a new way to communicate company’s messages to the
customers. Enterprises can connect the traditional method for obtaining
information, like product testing and focus groups with the information from
their e-commerce website to build a unique profile for every customer. By
doing this, they can develop more precisely advertising messages to targeted
groups or individuals using such tools like e-mails, web media, blogs, social
media adds and others (Allen & Fjermestad 2001). Performed well, the low-
cost promotion over the Internet leads to competitive advantage for the
companies over these competitors who did not succeed it. Companies can
either create web site with the idea of communicating messages to the
customers, or use external internet advertisement to attract visitors to their
home page. Sales promotions can be established quickly, and customers can
be better informed. Direct marketing, which in traditional strategy is too
costly and time-consuming, now can be performed faster using direct e-mails.
Of course, this cannot fully replace the “old way” but supplement the overall
marketing strategy. For example, direct e-marketing can be used to identify
and establish the relationships with customers, and then face-to-face approach
can be performed (Allen & Fjermestad 2001). However, there are some
negatives of relying entirely on online promotion. For example, customers are
still unwilling to share information fully, feared for their privacy because the
information can be used with unclear intentions. Evans and Wurster (1999)
suggest that if marketers used the information to create additional value,
customers will be more willing to share the information. Therefore e-
commerce and internet promotion suppose more efforts for satisfying
customer needs and predispose the customers to share information.
Digging into the problem and examining other publications gives a more
detailed picture about the problem. For example Abid et al. (2011) stated that
the most important benefits are connected with the competitive environment
rather than just cost savings. The following major benefits have been reported:
increased sales and increased ability to compete. Next to them, companies
highlight increased customers service and reaching large number of customers
(Abid et al. 2011).
Xu & Quaddus (2009) state that the increased ability to obtain information
about customers and suppliers is one of the major benefits for small
companies. Moreover, they can benefit from expanding their covering beyond
the regional or even national borders. With the global nature of the
technologies, companies can increase their market presence by penetrate in
the global market (Xu & Quaddus 2009; Turban et al. 2008). The authors
suggest that in the near future e-commerce will become a necessity for
survival in ever increasing market competition.
At the same time, most small companies nowadays are primarily concerned
with short term and tangible benefits like cost savings than the long term
indirect benefits, like better corporate image (Duan 2011). The explanation of
the author is that even if e-commerce leads to some intangible benefits for the
small business, these perceived benefits are far below the initial expectations
(Duan 2011).
However, the barriers for adoption of e-commerce are numerous but they are
different in small than the large companies. Arendt (2008) states the opinion
that even with the similar level of connectivity to Internet the gap between
small and large companies still exists. According to Arendt (2008) the barriers
can be split into two major categories: macroeconomic and microeconomic.
One of the major macroeconomic barriers is the lack of innovation culture.
Due to the insufficient reward from the market companies are not stimulated
enough to introduce innovation (Arendt 2008).
In addition, Stockdale & Standing (2004) stated that many small companies
operate in an environment that does not encourage the process of innovation
and development of the strategy. At the same time e-commerce can be
irrelevant to the business and managers feel that it is not appropriate to
participate in the e-marketplace (Chaffey 2002).
This factor, together with the low access and increasing cost of capitals is a
major obstacle. According to Arendt (2008) the very first microeconomic
barrier is insufficient awareness and skills in the company and the level of
implementation of e-commerce is dependant in higher degree of that factor
than the financial/costs factors. However, even if the financial barriers still
exist in some degree, we are observing a major shift from resource driven
toward management driven factors (Arendt 2008). In other words, the process
of decreasing the influence of the costs factors and increasing the influence of
the internal factors is irreversible. Most researches select lack of knowledge
and skill as a major obstacle.
To illustrate the differences of the major barriers then and now, I examined
some past research about the problem. Studies made among small and
medium size companies show that the leading barrier is the initial set-up costs
and followed by the running costs. Because the small companies did not have
easy access for capitals, this was a major obstacle. But with the development
of the technology, the initial investments are decreasing and other factors
emerged as most important –lack of skills and knowledge (Fillis et al. 2003;
Arendt 2008).
The results obtained from Arendt (2008) and Duan (2012) are constant with
the research from Abid et al. (2011) among Australian small-size companies.
The authors stated that the internal barriers are more important, and the
external takes the lowest position in the ranking. Lack of knowledge and
skills is the most important barrier for the Australian companies, and after
that is the cost factor (Abid et al. 2011)
Major barrier is also the lack of compatibility between the company’s technical
infrastructure and e-commerce technology. Moreover, Abid et al. (2011)
additionally examined the expected barriers and compare them with the
perceived after starting to implement e-commerce strategies. The result
showed that small firms are bad prepared for the introduction of e-commerce.
They make insufficient planning process and underestimate the technological
sophistication and complexity of the process.
The lack of long term business strategy is also indicated by Arendt (2008).
Companies also need to adapt their strategy with the transition to more
relationship oriented strategy, which is inevitable with e-commerce (Arendt
2008). But according to O’Toole (2003) this requires people and substantially
changes in the way of doing business. People and knowledge are becoming
more important and companies need to invest more on training programs to
overcome this barrier and to be successfully implementers of e-commerce
strategy (O’Toole 2003).
The security risk is increasing with the openness of the company to the world
and with that, the fears that the company could be more vulnerable to attack s.
This in turn can affect negatively the internal environment and the company
can terminated the process of e-commerce adoption on very early stage (Oh
Ka-Young et al. 2012).
Moreover, Oh K-Young et al. (2012) showed that the perceived business risk
has double effect on the company. The perceived business risk is defined from
Oh Ka-Young et al. (2012) as apprehension about an organization’s business
security when using e-commerce systems. First, the business risk has an
overall negative effect towards implementation to e-commerce strategy, and
second, positive effect towards improved innovation capabilities. The
results show that the greater the risk is, the more likely the firms are to
strengthen their innovation capabilities. But overall, security risk is a major
obstacle. The fear of possible negatives of information exchange between
partners remains (Oh Ka-Young et al. 2012). According to O’Toole (2003),
security of information exchanged between the partners and the fear that
strategic data can be accessed by competitors is a major obstacle for the
small companies. Moreover, customers are also concerned about the data
collection about them and the security of electronic financial exchange
(O’Toole 2003).
A good classification of the barriers is given from Arendt (2008), where they
are classified into six main categories. Summary of the barriers from my
literature research based on the Arendt’s model is presented in the table 5.
Table 5: Barriers for e-commerce adoption (Adapted from Arendt, 2008)
Category Barriers Source
Managemen Lack of awareness Arendt (2008), Abid
t and Lack of long term business et.al (2011), Duan
strategy strategy (2012)
Lack of innovation culture
Resistance of top
management
Cost and Lack of finance resources Arendt (2008), Abid et.al
financin Long process of return on (2011), Fillis et al.(2003)
g investments
Skills and Lack of experience and knowledge Arendt (2008), Abid et.al
training (2011), Oh Ka-Young et
al. (2012)
The Unsuitability for the type Arendt (2008), Chaffey
Supply of business (2002)
chain Lack of consumer demand
Technolog High level of Abid et.al (2011), Fillis
y Choices complexity Lack of et al.(2003)
time
Security Business risk Arendt (2008), Oh K-
and Security Young et al. (2012), Abid
reliability factors et.al (2011), O’Toole,
2003,
Oh Ka-Young et al. (2012)
The statistical office of Eurostat (2012) presents data about the spreading of e-
commerce and electronic technologies among the enterprises in EU. The
broadband internet connectivity among the enterprises in Sweden is well
developed. In 2011, 95% of companies with 10 or more employees are
connected to Internet. Comparing to the previous year there is an increase of
4%. Overall, Sweden is on sixth place of all EU members’ countries, while the
average broadband connectivity in EU is 89%. Online selling in 2010 is highly
spreaded in Norway (34% from enterprises), Belgium – 26%, Denmark – 25%
and Sweden – 24%, while at the same time the average percent for all EU
members countries is 13 %, as can be seen in table 6 below.
The average turnover from e-commerce in Sweden in 2010 accounts for 18%
from the total turnover, while the average level for European Union is 14%.
All companies are connected to Internet and have websites. At the moment
only company B has a different than Swedish version of the website. The
company has four language versions additionally to Swedish. Company A is
now building an English version of their web page, while company C has
only a Swedish version. Company B has allowed their customers to
participate actively in the information exchange by integration with the social
media like Facebook and Twitter. The other two companies have not adopted
these applications. E-mails are used actively from all firms to communicate
inside and outside the companies. All companies use web pages to publish
information such as products, catalogues and brochures. Additionally, e-
commerce is used as a tool to promote the companies’ products. Internet is
used also for searching for new suppliers and to interact with the government.
Company A sends electronic invoices but does not receive. They do not use
electronic technologies to share information about sales in terms of inventory
control, accounting or distribution. Online ordering and payment are not
possible. At the same time, there is a possibility for receiving orders from
customers by other methods – emails, EDI or others. Company A does not
order electronically from suppliers. Electronic technologies for administrative
procedures are not used.
“We believed that we can cut expenses, because we have many partners and
by using Internet we can save money and time”.
According to the first respondent (Company A), the e-commerce has not
changed their marketing strategy much. The most visible result they see in the
possibilities to inform customers for the products via company’s website.
Importantly, they use Internet to advertise the products and to inform the
customers where they can find the products in Sweden. The prices are not
published and customers have to send additional requests if they want more
information. They cannot pay online. The respondent summarizes that via e-
commerce his company managed to increase the advertisement and reach
more customers. However, they are not so relied on finding customers by
Internet, and are more dependent on their distributaries around the country.
Asked if they have changed company’s long time business strategy because of
e-commerce, CEO replies negatively. He adds that e-commerce helps them a
lot but they have not made any significantly changes in the strategy.
Similarly, CEO of Company B states that the company did not change the
business strategy influenced by e-commerce. Additionally, direct sales are
generated only in Sweden due to the high credit risk. Due to the specificity
and complexity of their products and their high price the necessity for online
ordering from their website is low. The markets out of Sweden are covered by
the distributors with which Company B has established close connections. The
company can offer extensive information to their foreign customers by the
web page; information is published in four additional languages beside
Swedish.
On the other hand, in Company C the changes is the long term strategy are
more visible. The CEO explains that they have realised the possibilities which
e-commerce offers, and changed dramatically their vision and strategy for the
future. As a part of their new image the CEO highlights different graphical
profile of the company, a new logo, a redesigned web site and a changed
marketing strategy. Now they manage to operate with a far broader product
line than before and manage to optimise it internally. The CEO explains:
”Before we had also a huge product line, but it was hard to handle with.
Now, when everything is in the web shop it is much easier to have this range
because of the structure to sell it. So, we also helped ourselves internally by
optimising our product line”.
The sharing of information and the possibilities it gives is also among the
most valuable benefits, according to Company B. The respondent states that
sharing of information with distributors is very important for their company
since many of them are outside Sweden. At the same time, the company
uses actively Internet to promote its products. Besides, they have created five
language versions of the company’s web page to cover the need of
information from non-Swedish clients.
The respondent from Company C explains the main positive effect from e-
commerce in terms of cutting costs for advertisement. Before, his company
generated huge costs to reach and inform customers – for printed catalogues,
exhibitions and other forms of advertising. The respondent explains:
Now, they have reduced dramatically the advertisement budget and attend
only few exhibitions. Through the web site they have a virtual exhibition open
24h per day, 7 days a week, 365 days per year, as CEO adds.
The CEO of Company A summarizes that the cost factor is very important to
his company. He explains that at the moment they would not invest more
money in software or technologies since they are still not sure of the positive
results from their initial investments. Being asked how important the cost
factor is from 1 to 5, the CEO responses with 4.
On the other hand, the CEO of Company B describes that among the main
barriers for their company is the risk of card payments together with the
higher cost. He states:
”We have a lot of international payments but accepting them in the form of
foreign credit cards is too expensive and risky. We only accept international
bank transfers.”
According to the respondent, the cost factor is also very important to adopt
more e-technologies – he gives it the highest grade.
The CEO of Company A answers that they were less aware of the potential
benefits. He explains that due to the little experience in this area the company
had not big expectations, except to improve efficiency and reduce costs. And
these expected benefits were visible as results. Concerning the marketing side
and competiveness the respondent states that they were not aware of the
possible outcome. The CEO states:
”We had some positive expectations for the potential benefits in terms of cost
efficiency, but for example the positives for the competiveness and
marketing were not clear for us”.
However, during the time they have realised the benefits of e-commerce in
terms of competiveness. On the other hand, they were more aware of the
potential barriers which may occur. From all the barriers, the company was
most aware of the need to educate people and higher costs. Little experience
causes the need for some education and company was aware of the cost
connected with software and hardware upgrading.
The respondent of Company B says that the initial expectations regarding the
possible outcomes have been met. The company has started to use social
media (Facebook and Twitter) and this effect has been greater than expected,
according to the CEO of the company. Regarding the awareness of the
potential benefits, the respondent adds that his company was aware of the
benefits mostly in terms of sharing of information. On the other hand, the
company faced unexpected difficulties in setting up a web shop. They have
still not set up their online store due to the payment and credit risk.
“We knew we had to do this to be competitive but we did not expect to be so good”.
For his company, the benefits are far more than their initial expectations. As
an example of the impact, the CEO mentions that almost all new customers
have found them through Internet and most of their clients have already been
informed about the products before making a request. Regarding the barriers,
the CEO explains that they were aware of the need for continuous work.
Every day the company have had discussions about some issues around e-
commerce. The CEO adds that knowledge and the continuously improvement
are very important. Regarding the possibilities for online payments by cards,
CEO explains that they have already tried it, but at the moment the need for
that is low, since most of their clients prefer to receive an invoice and pay by
bank transfer.
5. Discussion
This chapter presents the author’s analysis based on the theoretical chapter
and the results obtained from the interviews with companies. The author
compares the finding from the literature with his empirical study and in the
form of a discussion tries to answer the research questions.
First, based on the theoretical model presented by Xu and Quaddus (2009) for
the different stages of e-commerce adoption and according to the data
obtained from the interviews it is visible that the three companies are on
different level of e-commerce development:
Summarizing, most of the small size companies are still developing its e-
commerce and are using it primary for communication and as a marketing tool
– level 3. Many companies are still in the level 2, they are present online, but
not use e-commerce intensively. The usage is mainly through e-mails usage
and searching of information.
From my research I found first, that the driving force for e-commerce
adoption is the CEO / owner of the company. This is in accordance with the
results from the literature review - the decisions for adoption of e-commerce
strategy are concentrated in the owners/managers. Their visions and ideas can
be realized in a relatively short period of time, because they can benefit from
more flexibility than the bigger companies. All of the interviewed companies
have made some improvements leaded by a single decision from the manager.
On the other hand, the lack of knowledge from the managers can lead to
ignoring some good ideas within the company.
Having understood that the leading force for e-commerce development comes
from the manager of the company, I will describe what prompts him/ her to
start this process. Speaking about the different motives for implementation,
Evans and Wurster (1999) explained, the main driver for small companies
is the need to “defend the land”, or in other words to be more competitive. On
the other hand, two of the interviewed companies claimed that the reason
beyond e-commerce adoption is to improve efficiency and decrease costs. In
the literature there are not consensuses about which factors are more
important. For example, while Chaffey (2002) says that the cost/efficiency and
competiveness factors are equally important for the small companies, Xu and
Quaddus (2009) state that the big companies start e-commerce primary to
improve efficiency while small size companies adopt e-commerce primary to
improve competiveness. Results from my research do not support the ideas of
Xu and Quaddus (2009) and Evans and Wuster (1999), since two of the
companies put much importance on efficiency factors.
Stockdale and Standing (2004) state that e-commerce facilities the business
and the basic principles of marketing are the same. According to my empirical
study, this is true for companies using not so sophisticated forms of e-
commerce – in the early stage of the adoption ladder. Two of the examined
companies have not made any significant changes to their strategy and this is
constant with Stock and Standing (2004). But I think that for companies using
more advanced e-commerce, there is a need to adapt the long-time strategy so
that they can benefit in higher degree from e-commerce.
Evans and Wurster (1999) put much importance on the information, regarded
as equally important to the product itself. From the empirical study, I have
found out that small companies excessively use the electronic technologies to
exchange information and to inform customers about their products.
Companies who are in stages 1, 2 and 3 in the adoption ladder, the impact on
the marketing is primarily seen in increased advertisement, attracting more
customers and sharing of information. Eriksson et al. (2008) state that over
90% of the Swedish small-size companies use e-commerce in terms of
information exchange and as marketing tool. The importance of the
information is largely described in the literature (Chaffey 2002; Chaffey et al.
2000; Evans & Wurster 1999). According to Allen and Fjermestad (2001) e-
commerce offers a new way to interact with customers and by connecting with
the traditional advertising techniques the effect can be doubled. I found that
nowadays it is possible for the companies to rely almost entirely on e-
commerce, and to reduce to minimum the old forms of advertising. Of course,
this cannot be done without a new way of thinking and a vision for the
future.
On the other hand, the possibilities for expanding the product line are not
much covered from the literature. Chaffey et al. (2000) mention that
companies can add additional products and services around their core
products. Results from the interviews highlight one important possibility for
the small companies - to expand the product line by cooperating externally
with partners. This is possible through e-commerce and a virtual store, where
the products can be placed, even if they are not yet manufactured.
Regarding the price as an element of the marketing mix, I found that prices are
less influenced from e-commerce than the others elements. All of the
interviewed companies have not changed their price level because of e-
commerce. Allen & Fjermestad (2001) state that e-commerce can lead to price
standardization, but due to the specificity of the examined companies this is
not applicable. The impact of e-commerce on prices would be visible when
the competition is higher and the product is not complex. On the other hand,
any company can expect some costs savings because of the decreased
administrative, storing and selling expenses.
From my empirical study I have found that the possibilities for finding and
attracting customers are one of the main benefits for the co mpanies. At the
same time, companies value higher the increased information exchange and
improved internal efficiency. Both the theory and the empirical study show
that this is far more important than just cost savings. According to the
literature, the increased ability to exchange information and cover larger
customer area is among the main benefits (Xu & Quaddus 2009; Turban et al.
2008). From the empirical study I have found that companies are dependent in
higher degree than before on electronic technologies as a way to find
customers. Moreover, by e-commerce, companies can replace the traditional
way of advertising to more modern and advanced way, leading to
decreasing of the advertising expenses. Regarding the costs, the literature
describes only
decreasing of day-to-day expenses and operational costs as a result of e-
commerce, but do not describe the huge impact on the advertisement costs.
Interestingly, I have found that companies were not fully aware of the
potential benefits from e-commerce adoption. For example, while the positive
effect of e-commerce in terms of improved efficiency, information exchange
and decreasing costs was expected, companies were not aware of the huge
impact on the competiveness and the effect of the social media. One of the
respondent companies cannot even imagine their business now without e-
commerce. From my study it is clear that most of the small companies start e-
commerce with limited expectations but during the time they start to realize
the bigger impact and possibilities from e-commerce. According to Brand and
Huizingh (2008) if the benefits are realized, the managers are more likely to
continue to innovate. Of course here the knowledge is important both for
implementing of the strategy and for realising the benefits.
According to the responses from the interviews, the cost factor is still very
important for two of the companies. They see costs as a main obstacle for
future developments. The reason for that is that managers are not sure of the
positive outcome as a result of the e-commerce improvements. According to
Arendt (2008), the main difference between the small and large companies
is in their innovation culture, and if companies do not have sufficient
rewards from the market, the stimuli for future development are low. That is
the explanation, why many companies consider cost factor as very important.
Moreover, from the literature review I have found that the companies should
changed their long term strategies in order to overcome the barriers
(Stockdale & Standing 2004). From my study it was examined that companies
who have not changed their strategy, experience greater difficulties and the
cost factor is a main issue. Therefore, innovation culture and knowledge are
crucial. To illustrate, one of the examined companies highlights the
knowledge as a most important barrier before and now. This company for
example do not give much importance of the cost factor. The results from
the experimental part lead to one important conclusion: small companies
consider the cost factor very important if they do not have sufficient
knowledge and cannot see the positive results from the new strategy. On the
other hand, Arendt (2008) explains that the influence of the cost factor is
decreasing because of the
developing of the technologies and decreasing the initial investment needed.
Therefore, even if the companies consider the cost factor as most important, I
think that the lack of knowledge is with utmost importance. Importantly, the
CEO of one company states that this knowledge should be inside the
company and the company should put much attention not to lose it. Overall,
the main barriers nowadays can be found inside the companies – first, in
categories management and strategy, and second, in skills and training.
Speaking about the awareness for the potential barriers, managers explained
that they were aware for the costs and the need for education and increasing
the knowledge. On the other hand, one company did not succeed in setting up
a web shop since the implementation was more difficult than the initial
expectation. One company faced unexpected difficulties in setting up card
payments, and another see it as a too costly and not efficient.
From the literature I have found that the awareness of the companies for the
necessity of increasing the knowledge is closely connected with their
intention for innovation and improvements (Brand & Huizingh 2008).
Therefore, the more aware the companies are, the more sophisticated levels of
e-commerce adoption can be expected. This was observed in the interviewed
companies. The company which had a clear vision of the barriers and
especially of the need of knowledge managed to improve their e-commerce
capabilities in a short period of time and to benefit from it.
6. Conclusion
This chapter concludes the thesis. Based on the theoretical, empirical and
analytical findings previously presented, the author answers the research
questions. The chapter further points out the limitations and gives
recommendation for further studies.
This study shows that Swedish companies can be characterized with relatively
well developed e-commerce strategies comparing to other countries. At the
same time, differences between small and big companies in Sweden are being
observed. As expected, the biggest company have reached more sophisticated
levels of adoption. The decisions for e-commerce adoption in small-size firms
are dependent on the knowledge of the owner/manager. Today, most of the
small companies use e-commerce as a marketing tool and putting much
importance on the information exchange and informing customers for the
products and services.
This study shows that the improved internal efficiency and increased
information exchanges are the main benefits from e-commerce for the small
companies. By increased information exchange companies are able to cover
much larger customer area and attract new customers. Being more informed
for the characteristics of the products, customers are more satisfied and more
willing to make orders. This study highlights that companies are shifting to a
new way of finding customers which allows decreasing of their expenses for
advertisement. At the same time companies experience cost saving by
improved day-to-day operations.
The most important barriers for the small companies are the lack of
innovation culture and knowledge. Even if some companies still consider the
cost factor as most important this is because of insufficient understanding for
e-commerce and the positive effect of it. This in turn leads to non-consistency
or stopping the process of innovation. Other important barrier is the lack of
customers demand. Further, the study shows that many of the small
companies will not gain substantial benefits from these improvements
because of the character of their businesses or market which does not
encourage the process of innovation.
Limitations and further research
This thesis has its limitations. The major drawback in this thesis is the limited
number of interviewed companies, therefore the findings cannot be taken as
representative for all small-size companies in Sweden. At the same time, the
results in this thesis are highly dependent on the research interpretation;
therefore the ability to reproduce these results is questionable. This thesis does
not draw conclusions about differences between industries or regions in
Sweden. The examined companies have already started the process of e-
commerce adoption. Therefore, this thesis does not explore in details the
barriers experience from non-adopters.
Further studies can be carried out in many areas. A more detailed research
focused on a specific industry would provide valuable information and show
the differences between industries. It would be interesting to conduct a
quantitative research and explore if there are any differences between
companies in different stages of e-commerce development. It is also
interesting to analyse the influence of e-commerce on the process of
internationalization in the small companies.
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