The History Of Organization Factors

Published Date: 02 Nov 2017

The objectives of this study were to examine the state of electronic commerce adoption among the small and medium enterprises in services industry of Klang Valley region of Malaysia and determine factors that might hinder its adoption. A conceptual model was developed to assess the possible influence of various factors (Organization, Technology, Financial and Environment) on the adoption of e-commerce by the small and medium enterprises. The model was designed based on numerous prior and latest literatures findings. A contingency theory was applied in this model in view that the best practices depend on the contingencies of the situation and it allows the author to analyze a situation and determine what variables influence the decision with which are concerned. The research model method was questionnaire survey where the questionnaires were mailed to all the respondents in the designated sampling frame.

5.2 Conclusion

The data gathered were then analyzed using various statistical tools in order to provide answers to the research questions that were raised earlier. The research questions were (a) what is the extend of e-commerce adoption among the SMEs services industry in Klang Valley region of Malaysia?; (b) What are the potential factors that hindering the adoption of e-commerce among the SMEs services industry in Klang Valley region of Malaysia?

As to the extent of e-commerce adoption, the results showed that most SMEs services industry in Klang Valley region have adopted some form of e-commerce applications, however the adoption level mainly on the basic applications such as website and e-catalogue. Relatively low percentile of SMEs has adopted advanced applications such as online payment or purchasing. The results have indeed adequately answered the first research question. This implied that more efforts are needed to assist and encourage small and medium enterprises in services industry of Klang Valley region to adopt e-commerce system, particularly the more advanced applications.

With respect to the second question, a few statistical analyses were performed. The results were tested and showed that organization, technology, financial and environment factors were found to be significantly influenced the level of e-commerce adoption. Hence, the author can draw the following conclusions:

5.2.1. Organization Factors

The organization factors were found to be highest ranking among the identified factors that significantly influence the adoption of e-commerce, with beta of 0.479. The supportiveness from top management and the positive perception of owners or managers towards new technology will create a favorable environment for a firm to implement electronic commerce smoothly. The Internet opens up certain proprietary relationships, extends relations between sectors, makes the electronic market accessible to smaller business and allows them to address international markets. It is important for the owners or managers to think through and strategies the future direction of the company and determine the sum of investment towards new technology. Furthermore, the firm is unlikely to embrace electronic business without sufficient skilled work force within the company. For electronic commerce, IT expertise needs to couple with strong business applications skills, flexible and multi-skilled work force. undoubtedly, electronic commerce will affect changes in the mixture of jobs skills required, driving demand for information technology (IT) professionals in the labor market and it is particularly important especially for those SMEs where have not been exposed to significant technological change or international competition as greater demand for IT professionals means higher cost in salary payout.

5.2.2 Environment Factor

This study also revealed that environment factor is associated with the adoption of e-commerce. The environment factor covers external pressure from suppliers or customers and government support through initiatives to promote the electronic business. In absence of push factor from suppliers, it is unlikely that the smaller firm will swift into electronic business. For example, if the insistence by large businesses with all of their suppliers to link into their e-commerce system that served as a condition of doing business, the smaller business will more likely to embrace such technology. The changing landscape of consumers buying behavior from physical stores to online will significantly influence the company to determine its business direction. Similarly, the Internet has created lower boundary crossing for new entrants which leads to increased competition among the industry. Furthermore, the efficacy of government policies pertaining to e-commerce and of traditional commercial practices and procedures will formed with a much different image of commerce in mind. Similarly, the changes on consumer protection, tax collection, trade and competition policies will help to elevate electronic commerce in the SMEs services industry.

5.2.3 Technology Factor

The complexity of new technology will determine how quickly the firm can adopt into electronic commerce. Minimal changes in internal processes of a firm will encourage the owners or managers toswift towards electronic business. Otherwise, the decision makers of the firm will have to re-examine the internal or external processes in order to streamlining it and provide training to its employees to adapt the new technology. The business to consumer segment usually faces barriers such as concerns about security of payment, potentially fraudulent merchants, privacy of personal data, email privacy and cost in accessing e-commerce merchants. This will have a large impact on the growth of business to consumer electronic commerce.

5.2.4 Financial Factor

The financial stability of the firm would often determine the decision of investing into electronic commerce technology. Smaller firm would priorities to invest into a more impactful project with immediate return in view of their limited access to financing and funding internally. Hence, the firm would weight against the return on total investment amount against the cost of setting up e-commerce application, renewing hardware or software, purchasing server, regular system maintenance and training provided to its employees. The higher the cost and longer period of return on investment is the main factor for the firm to embrace into new technology.

5.3 Recommendation

E-commerce will revolutionize the way business is performed such as traditional intermediary functions will be replaced and new products and markets will be developed. The closer contact will be formed between business and consumers. With the stiff competition in the local and global market, Malaysian SMEs have to prepare for these changes in term of innovation, human capital and market access in order to grow further and be competitive. It is also important and aligned with the proposed development roadmap for Malaysian SMEs for year 2012-2020 in the National SME Blueprint.

From the insights that gained in the study, the author suggests that the needs of external push and internal business driver to make small firms proactively engage in adopting advanced e-business technologies. As far as the SMEs in services industry is concerned, the smaller firm needs a champion or successful role model to lead and owners or managers need to develop a strategic vision for the company. This could be achieved by inspiring the owners or managers with immediate benefits and competitive advantages of using e-business technologies. The key to success is to provide a cost or time saving as well as flexible learning opportunity for the owners or managers who are busy in managing daily business and seeking for new business opportunities. The IT industry that provide services in developing e-business solutions needs to articulate explicitly the potential and added value of technologies to the owners or managers of small and medium enterprises. The products or services should be tailor made to suit the uniqueness of the services industry and the needs of respectively SMEs. The vendor’s support and training is recommended to be prioritized to clients particularly in SMEs segment in view that they usually lack of expertise and resources within the firm.

Despite the above mentioned that e-commerce will be led by business, however it is important that governments have continue to play a critical role in developing technology for these activities and they have an obligation to pursue broad societal goals. The government should work closely with business to maximize the potential of this activity. Electronic commerce raises many issues regarding the application of existing regulations and issues such as tax law, commercial codes and consumer protection which have received a lot of attention. Policies should be crafted cautiously with due recognition of the evolving nature of electronic commerce. As e-commerce will increase international trade, particularly in electronically delivered products, many of which are services which have not yet been exposed to significant international trade but other sectors would have do so since the early stage. Hence, policy makers should ensure the standardization in regulatory compliances globally so that undesired dispute in later stage.

Although the government has taken several key steps presently in supporting and promoting the growth of e-commerce in the country, however they can still continue to play their role in accelerating the development of retail market. The government needs to establish standardized commercial regulations that govern commercial transaction between businesses and consumers through the Internet. These practices will serve as a benchmark for online retailers in covering various aspects of online shopping practices including consumer privacy, security and resolution of disputes. Through the supervisory of government, it helps to raise trust and confidence in consumers to shop online. The government should remove the sales tax on Internet transactions for new local entrants into electronic business. Although the government has difficulty in tracking the transaction, however formalized the tax exemption for transaction that performed electronically will encourage more retailers and merchants to market their product and services via Internet. Hence, the move of tax exemption will definitely accelerate the adoption of e-commerce as an effective medium of doing business.

In any business environment, cost reductions are not automatically translated into price reductions as they are contingent on sufficient competition. Electronic commerce will certainly change the structure, if not the level, if pricing as more products are subject to the differential pricing associated with customized products, fine market segmentation and auctions, and as the ease of changing prices increases. Hence, the government should conduct studies periodically on a variety of consumer and business products to measure the impact and identify factors that encourage and inhibit price competition. The electronic marketplace needs to be continuously monitored and ongoing assessment of potential new barriers to market entry is also needed so that it will help policy makers to address issues of commercial governance which are critical to the development of electronic commerce. Asymmetries in firm’s ability to control access to the electronic marketplace should be investigated so that policy makers can address competition issues as well as formulate proper policies to target SMEs development.

It is also important for government to identify specific skills needs for e-commerce and opportunities for worker requalification. Policies to cope with skill mismatches will have to be reinforced when the volume of electronic transactions increases. Better methodologies and data are needed for tracking rapidly changing skill requirements and monitoring labor market responses and adjustment mechanism given the swiftly changing demand for different categories of ICT workers.

Assurance of protection of privacy and personal information play an important role in building confidence. Both the public and private sectors need a fuller understanding of the requirements for fostering confidence in electronic markets, particularly among consumers. Hence, it is necessary to better understand the use and protection of private information, and the means to evaluate the costs and benefits of various proposals to protect or reveal private information.

There is also evidence suggests that supporting institutions are not doing enough and many SMEs in Malaysia does not aware its presence and role that tasked to promoting R&D and innovation within this entity. The supporting institutions are namely (i) the Multimedia Development Corporation; (ii) Technology Park Malaysia (iii) the Malaysian Technology Development Corporation (iv) the SME Corporation Malaysia. It is recommended for the government to:

Bring up awareness of e-commerce's benefits by hosting seminars and conferences at open public places which will be accessible by public easily and better coverage of crowds

Arrange mentor-mentee programs to assist SMEs in adopting e-commerce. The supporting institution can play the role of a mediator or advisor to this program.

5.4 Contributions of the Study

This study would aid the party concerned such as government bodies, supporting institution of SMEs or other relevant parties in Malaysia that currently investigating the issues. This study also contributes to and extends the understanding of the e-commerce as a medium of commercial use in the service area, identifying the rationales for adopting or rejecting the technology by the SMEs. From a managerial viewpoint, the findings provide some direction for investment decisions. The decision that relating to the development of e-commerce services would be addressed and the concerns and needs of companies would be taken into consideration.

5.5 Limitation of the Study

Like other empirical studies, this study is not free from limitations. Firstly, the sample size is relatively small and only represents small portion of the entire SMEs services industry population. The respondents were mainly within the region of Klang Valley Malaysia which comprising Kuala Lumpur and its suburbs and towns in the state of Selangor. In view of that, we can’t conclude that the influencing factors in this study are truly reflects the exact situation as SMEs services industry in other states may experiencing different factors that remains undiscovered and hindering them from e-commerce adoption. Furthermore, the study is mainly focusing on SMEs in services industry and the feedback from SMEs in other industries would reflect different outcome.

Secondly, the questionnaire was designed in the close ended manner to obtain precise feedback from the respondents. It may provide some kind of restriction for respondents to further elaborate their view and opinions on the subject manner. Thirdly, the targeted respondents are supposed to be owners or higher managers within the firm so that it can reflect the actual situation of the company. However, portion of the survey forms collected were returned by middle level managers. It could be due to the decision makers are being bonded with their busy schedule. As such, it may not reflect the accurate outcome as wished in view that some of the factors are more relevant for the decision makers to response accordingly.

5.6 Suggestion for Further Research

Although the study has provided some meaningful responses to the research questions, however the author is in his opinion that a combination of both quantitative and qualitative approach on the subject manner would further enhance its outcome within this study. Qualitative research can be performed via interview session so that the researcher can collect more information from the respondents and discover other possible factors that hindering the SMEs to adopt e-commerce. Furthermore, there is a clear need to collect a larger size of sample from the population and a mixture of industries are suggested in this study so that it can reflect more accurate results and generalize the research findings for the SMEs population in Malaysia.