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									SME Electronic Commerce Study

Singapore, 7 December 1999
Presentation by Joshua Shapiro
                  Study Methodology


    • A multilingual survey in nine
      languages was conducted over
      the Internet and on paper in each
      economy
    • Focus groups (at least two)
      were conducted with SMEs in
      each economy
    • Key informant interviews (three
      or more) were conducted with
      key electronic commerce experts
      in each economy
    • Desk research and related
      studies provided background and
      contextual material for this study
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    Priorities for SMEs



    • Customers and Markets
    • Supply Chain Integration
    • Confidence and Trust
    • E-Business Models and Technology




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                   Customers and Markets


    • Improving customer service and
                                           100
      information exchange was              90
      identified as an important benefit    80
      of e-commerce by over 90% of          70
      participating SMEs                    60
                                            50
    • High customer expectations and        40
      competition are driving the           30
      development of e-commerce             20
      among SMEs                            10
                                             0
    • SMEs value the ability to offer




                                                   Customer




                                                                            Customer
                                                              Information
                                                               Customer




                                                                             Loyalty
                                                    Service
      24-hour/day information, respond
      more quickly to inquiries, and
      gather better market intelligence
      on customers and competitors          Very Important    Somewhat Important

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                Customers and Markets


    “E-Commerce provides SMEs with global reach – allowing them to
       reach 100 million people globally rather than just 100,000 Thai
                          people.” - SME, Thailand

        “E-commerce will bring SMEs great opportunities, such as
       shortening cycle periods, reducing labour and inventory costs,
             developing potential new markets, and competing
                   internationally.” - Key Informant, China

     “Our customers must be constantly informed about new product
            lines, discounts and other promotions.” - SME, Peru




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                 Focus on International Markets


                                       • Due to domestic market
         Importance of Accessing
                                         limitations, SMEs in lower GNP
           International Markets
                                         economies place more
    80                                   importance on using e-
    70                                   commerce to access export
    60                                   markets
    50
    40                                 • Higher capability firms in all
    30                                   economies see that e-commerce
    20                                   can enable them to develop a
    10                                   presence and compete in
     0
                                         markets that were previously
          Lower GNP      Higher GNP
                                         untapped by SMEs
          Economies       Economies

             Lower Capability Firms
             Higher Capability Firms

6
                Supply Chain Integration


    50                               • SMEs, particularly those with lower
    45                                 capabilities, did not place as much
    40                                 importance on supply side issues
    35                                 (supplier information exchange,
    30                                 reducing purchasing costs)
    25
    20                               • Experts believe that supply chain
    15                                 integration offers significant
    10                                 opportunities
     5
     0
                                     • SMEs, particularly where purchased
           Supplier      Reduce
                                       materials are an important cost
         Information   Procurement     factor, could benefit from exploring
          Exchange        Costs        supply side e-commerce
           Lower Capability Firms      opportunities before their
           Higher Capability Firms     competitors

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                Low Customer Use is a Barrier


                                      • Low customer e-commerce use was
         Concerns About Low             the mostly widely cited limiting factor,
            Customer Use                particularly in lower GNP economies
    60                                • To increase customer use, SMEs
    50                                  want action on:
    40                                  • cost, accessibility and dependability
    30                                    of telecommunications, including
                                          internet service
    20
    10
                                        • payment systems

     0                                  • confidence and trust in e-commerce
         Lower GNP      Higher GNP        transactions
         Economies       Economies      • language and cultural barriers
            Lower Capability Firms
            Higher Capability Firms

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                   Confidence and Trust


    • Lack of confidence and trust -
                                           80
      including security concerns and
                                           70
      legal issues - was identified as a
                                           60
      top inhibitor to growth
                                           50
    • Concerns were stronger in lower      40
      GNP economies                        30
                                           20
    • Firms with more advanced
                                           10
      capabilities were less concerned
                                            0
      about security due to greater
      awareness of appropriate                    Concerns       Legal and
      technologies                              About Security   Liability
                                                                 Concerns
    • SMEs value measures to
      develop an appropriate legal                   Somewhat Important
      framework                                      Very Important

9
                 Confidence and Trust


     “The main risk is that people don’t trust electronic commerce or the
          technical infrastructure to support it.” - Key Informant, Peru

         “I find that the question of security is not so important. The
       problem of credibility, on the other hand, is extremely relevant.” -
                                   SME, Chile

        “Security is frequently cited as a problem, but it is not a real
        problem in Singapore. It’s more of a psychological barrier.” -
                            Key Informant, Singapore




10
                   E-Business Models & Technology


     • Limited knowledge of e-
                                          70
       commerce business models and
                                          60
       technology were cited as
       important inhibitors by 60% of     50
       SMEs                               40
                                          30
     • Lower awareness levels and lack
       of comfort with technology are     20
       more prevalent in lower GNP        10
       economies                           0
     • SMEs value government                   Knowledge of Knowledge of
       measures to highlight successful          Business    Technology
                                                 Models
       models and to lead by example
       (e.g. electronic services,                  Somewhat Important
       electronic procurement)                     Very Important

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                E-Business Models & Technology



         “E-commerce will only be successful if there is a successful
       electronic business model. The whole business model may need
                        to change.” - Key Informant, USA

     “A real effort needs to be made to highlight successful e-commerce
                     experiences by SMEs.” - SME, Philippines

       “SMEs who want to develop e-commerce have difficulty finding
           information on success stories.” - Key Informant, Japan




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                       Measures to Increase E-Commerce Use


                                                        Very Important Measures for SMEs
 • SMEs, especially in lower GNP
   economies, believe governments                                      Higher GNP   Lower GNP

   have a key role
 • Key measures cited by SMEs:
     • Improve telecommunications                    Telecom Infrastructure

                                                 E-Commerce Legal Barriers
       infrastructure and internet access
                                                   Business Internet Access

     • Create legal framework and                Fair E-Commerce Tax Policy

       institute fair tax policies for e-      National E-Commerce Strategy

                                            Business E-Commerce Awareness
       commerce
                                            Government Services on Internet

     • Raise business awareness of e-          Government E-Commerce Use

       commerce opportunities and                      E-Commerce Training

                                                  Promote E-Commerce Use
       benefits
                                                                              0     20          40   60   80
     • Enhance government services on
       the Web and government use of e-
       commerce
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                Factors attracting e-commerce adoption in Singapore


     • There are several benefits that local SMEs would like to derive from
       using e-commerce

         • access to wider customer base locally and internationally
         • increase revenue from sales
         • access to timely information
         • increase speed to market




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                Constraints affecting e-commerce adoption in Singapore


     • Many local SMEs would like to realise the benefits of harnessing the
       power of e-commerce but highlighted various concerns


          • start-up and maintenance costs
          • security concerns especially credit card fraud
          • lack of customer sophistication
          • lack of supplier sophistication
          • lack of clarity on legal issues regarding cyber transactions




15
                  Suggestions for Individual and Collective Action


     • Improve telecommunications infrastructure and Internet access
      • improve access, affordability and dependability of Internet and other
        telecommunications services through liberalization and regulatory
        reform to increase effective competition
      • through APII (Asia Pacific Information Infrastructure programs) and
        other programs develop regional and global infrastructure
      • develop and maintain common standards for e-commerce - facilitate
        an international, voluntary and consensus-based environment for
        standards setting




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                  Suggestions for Individual and Collective Action


     • Create legal framework and fair tax policies for e-commerce
      • strengthen the domestic legal framework such as validity and
        enforcement of contracts
      • address security issues, including the authenticity of electronic
        documents and the privacy and confidentiality of personal and
        corporate records
      • address confidence and trust issues in international transactions -
        legal and security issues that are international in nature
      • ensure transactions receive neutral tax treatment relative to non-
        electronic transactions
      • support the development of appropriate electronic payment systems




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               Suggestions for Individual and Collective Action


     • Support the development of e-commerce capabilities among
       SMEs
      • raise business awareness of e-commerce opportunities and benefits
        through seminars, workshops or other activities
      • provide training around SME concerns
      • attract and retain venture capital and investment in SMEs with
        potential for rapid growth
     • Make government a model user of e-commerce in government
       procurement and provision of government services




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