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SMEs in South Africa 127 • Contextual characteristics The economic benefits of moving business transactions from fax, telephone and post to the Internet are well documented in many publications (Davies, 2002). Wilde and Swatman (2000) also noted that the forces of economic rationalism and globalism have enhanced the market as the final arbiter of price and service with the balance of power tilting from the manufacturer towards the consumer. Given this erosion of margins, companies need to reduce costs, both in production and transaction, in order to make their products and services more competitive. This again points to the Internet as a vehicle to reduce costs and to assist in obtaining a competitive advantage in the short term. The traditional value chain has become virtualized to a great extent due to the fact that users of the Internet are able to order products and services online, without intervention of the purchasing department, while payment is made electronically using electronic funds or purchase cards. The primary activities in the Porter Value Chain, namely incoming logistics, outgoing logistics, marketing and sales, are being redefined in terms of how they are carried out and interact with each other, as technology provides for more sophisticated methods of business interactions (Walton & Miller, 1995; Porter, 1985). These chains have become virtualized as the Internet was increasingly used as a ‘binding agent’ (Davies, 2002). John Dobbs of Cambridge Technology partners describes ‘value chain integration’ as a process of collaboration that optimizes all internal and external activities involved in delivering greater perceived value to the ultimate consumer (Economist, 1999). In the process, whole portions of the previous chain are being removed, redefined or disintermediated. It is, however, necessary to note that the integration of value chains does not solve all problems. JIT (Just in Time) production is a methodology of reducing inventory stock that has been used for many years and serves as an example to prove this point. Critics of this method have pointed out that it merely forces the lower level manufacturer to hold stock and deliver to the client as needed. This method does however reduce stock holding costs throughout the higher levels of the value chain. It is also interesting to note that the Internet plays an increasingly important role with JIT ordering due to the ease of ordering at short notice. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
128 Cloete Researchers have further identified a number of additional issues that impact the adoption of e-commerce. These are summarized by Courtney and Fintz, 2001: • Low use of e-commerce by Customers and Suppliers. This means that there is little incentive for SME’s to engage e-commerce until their customers and suppliers are also using it. • Concerns about security aspects. • Concerns about legal and liability aspects. • High costs of development and computer and networking technologies commerce. • Limited knowledge of e-commerce models and methodologies. • Unconvinced of benefits to the company. The South African SME business sector in 1996 was estimated to number in the order of 800,000 (Darrol, 1996). Viviers and Sootinis (1999) suggest that this group accounts for approximately 46 percent of the total South African economic activity. Survey Results The study by Davies (2002) concentrated on trade, manufacturing and construction sectors, mainly in the Johannesburg-Pretoria area, while the study by Courtney and Fintz (2001) was aimed at the manufacturing sector in the Western Cape. Both surveys encountered low response rates, mostly due to resistance and to a certain extent unhelpfulness by potential survey companies. While both surveys supported the findings of the other, only the study by Davies will be commented on in this paper. • ICT usage Two hundred and fifty three SMEs were targeted from the Gaffney’s Business Directory, Gaffney (2001), with a response rate of 19.4 percent. The first part of the survey, questions one to four, determined the economic sector and ICT utilization. In the response, 80 percent of the organizations that returned survey forms (39) claimed their PCs were connected to the Internet and 35 servers were utilized, with ten connected to the Internet. Only five mainframes were used, of which one was connected to the Internet. One company used a total of six standalone Point of Sale devices, with no Internet connection. Six notebooks were listed by the 49 organizations, with only two of these connected to the Internet. Two companies claimed to have no Internet access and one possessed no computer facilities. A total of 20 organizations had websites, with a mere five utilizing EDI. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.
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Acquisition Editor: Mehdi Khosrow-P
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The Economic and Social Impacts of
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