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Factors Affecting the Growth of E -Business in

India & its Impact on SMEs

Presented by,Ayaz Ahmed Shariff K

Asst. Professor, Dept. Of CSEBirla Institute of Technology International Centre

Ras Al Khaimah@

INTERNATIONAL CONFERENCE OF TECHONOLOGY & BUSINESS MANAGEMENT 2011

Venue: SZABIST, ACADEMIC CITY, DUBAI

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Objectives of the presentation

• Overview of terms E Business & E Commerce.

• Difference between E business & E commerce

• Factors affecting the growth of E Business in developing countries like India.

• Impact of E Business on SMEs in India• Proposed Model for E Business in rural

agricultural markets for farmers, traders

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Introduction to E Business

• Both e-business and e-commerce rely on the Internet to accomplish their goals

• “E Business includes buying and selling of products and services, servicing customers, collaborating with business partners, and conducting other intra-business tasks”

• Successful E Business depends on a critical threshold of online users, the precursor to a critical threshold of sellers & buyers

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E Business & E Commerce

E Business• E business is a broader aspect

with e commerce, Internet marketing, e procurement etc.

• E-business applications strive to give a good idea of their company, promoting the values they use to market their business

• Transactions involving money are "e Commerce" activities including the interactions with business partners, customers, vendors

E Commerce• E commerce refers to

online transactions - buying and selling of goods and services over the Internet involving transaction of monetary nature

• E commerce is a subset of E Business.

• E-commerce focuses on appearance much more than e-business.

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E Business in India

• E Business has tasted much success in India in recent past and has provided Indian business a new heights, global reach, competitive advantage, acquiring new customers (global & local), foreign product knowledge etc

• E Business has become integral part of everyday life from online banking to brokerage transactions, e contracts to global marketing

• E Business has seen significance impact on airline sector, banking sector, educational, matrimonial services, placement sites and many B2B transactions

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Growing sectors of E Business in India

• Automobiles: Buying and selling of new & used four wheelers and two-wheelers, its marketing, etc.

• Real estate and e-commerce: They provide information on new properties as well as properties for resale.

• Travel & tourism: Online reservations, tour packages, hotel bookings

• Stocks & shares: Online trading, Online banking• Gifts through E commerce: Chocolates, Luxury items,

flowers• Matrimonial Services, Employment sites• Indian railway (IRTC)

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Need of study• The tremendous rise of growth in E business has also

increased the growth of risks, security threats, hackers, fear among internet shoppers.

• Apart from ebay.com have had on Indian users, there are few traditional sectors which has touched the expectations of ecommerce. There is much scope open left for e business in global marketing, online shopping, delivery of products, advertising.

• Currently, there are less than 1,000 merchants in the country who are doing business online. Large chunk of these merchants are SMEs

• Successful E Businesses based on viable E Business models and sound business principles will grow, change and mature; on other hand, E Business models based on flawed E Business models find it difficult (Albert Napier )

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Barriers affecting the growth of E Business

• The factors affecting the growth of E Business as follows:

– IT and Security factors

– Customer perception & Attitudes

– Technological factors

– General factors

– Internet factors

– Infrastructural & Internal resisting factors

– Regulatory & Political factors

– User interface factors

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Information Technology & Security factors

• Major hurdle for growth of e business all over world is the security of online data

• Ensuring security of payments and privacy of online transactions is key to widespread acceptance of e commerce

• Virus, spyware, worms, Phishing increases fear• Denial of Service attacks & spoofing• Lack of transparency in electronic transactions • Internet provides greater access to data not only to

legitimate users, but also hackers, disgruntled employees, corporate spies.

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Customer perception and attitude

• Lack of trust among customers for online business• Not sure of product quality• No touch & feel of product• Many Indians prefer to physically go out for shopping• Indian customers has attitude to bargain products• Impatience to wait for receiving the purchased product • “it’s one thing to submit a credit card number to buy a

product. It’s quite another thing to put your entire personnel dossier online and hope that no one intercepts it, Allan & William [5]”

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Technological factors

• E business partners find it hard to invest & update with new technologies

• Bandwidth: Transmission capacity of a communication channel is a major barrier for products that require more graphical & video data.

• Rapidly changing technologies & emerging of new technologies

• Financial costs: Storing information, data mining, processing orders has impact

• High costs of developing, purchasing new software, licensing of software, Integration into existing systems, costly e business solutions for optimization

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General factors

• Lack of awareness & understanding the value of e business & security involved in it

• Lack of understanding on how E business operation works • Lack of trust: Safety, security, delivery• Need for insurance of high cost products• Shipping & courier costs• Lack of IT knowledge to purchase online • Different local languages & cultural factors• Leaders of many SMEs have less literacy in computers &

IT area

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Internet factors

• According to internetworldstats.com, India with a population of over 1.1 billion has estimated 6.9% (81 million) Internet users by 2008 [5]

• E business depends on speed, bandwidth of communication.

• Internet connections yet to reach many rural areas.• Broadband connections are limited to urban & sub-

urban areas.• Low internet penetration as well as low credit card

population.

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Infrastructural & Internal resisting Factors

• Logistics: Deliver the product, safe and secure, in the hands of the right guy in right time frame

• Need to share your revenue here (~4% or more) even when you get paid by net banking

• Underdeveloped transportation infrastructure resulting in slow and uncertain delivery of goods and services

• Bureaucratic wrangles: Fear among elderly staff is significant barrier to e-transformation of organization

• Survey by the GIIC found out that only 20% of organization covered under CIO segment are trying to use E Business to an extent.

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Political & Legal factors

• Taxations: Octroi, entry tax, VAT and lots of state specific forms which accompany are confusing at times

• Lack of regional legal framework, and legal framework on e-signatures

• Need of harmonized taxation laws

• Misuse of E commerce (child pornography, cyber squatting)

• Rights to e-consumers still a major issue

• Domain name registration policy, domain name disputes, privacy & data protection issues

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User Interface factors

• Some products require more graphics than textual data

• Some website’s GUI confusing at times• Limited menus, poorly designed navigations, difficulty

in comparing multiple products on same screen• Lack of online support with product selection• Room for improvements in sound and picture quality• Virtual immaturity: This area in which much progress

has not taken place• Web page design can change customer preferences

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E Business Impact on SMEs• E Business has much impact on SMEs with reduced

information costs & transaction costs• E Business facilitates SMEs to world markets• Indian SMEs in the service sector have expanded their

market with overseas customers• Investment pressures & marketing pressures to attract

customers • Difficulty integrating the existing systems with E Business

transactions• However, there is still a doubt for SMEs whether there is

enough information on the Web that is relevant and valuable for them to try, that would make investment in internet access feasible.

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Proposed E Business model for agricultural trading

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References

1. Laudon &Traver, text book on E-Commerce (2002)

2. P T jospeh, text book on E Commerce Indian Persepctive, PHI

3. Zorayada Ruth Andam (2003) “E commerce & E business”in e-ASEAN task force

4. Lord, P., Mary, A. And Kristy, B., 2002, Managing e-business security & challenges, an Oracle white paper, USA.

5. Allan D. S.and William 2002, “E-lending: Foundations of financial and consumer marketing in an Information intensive society” – Journal of e-business and IT vol. 3 No. 1

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References

6. www.internetworldstats.com

7. "Creating a Winning E-Business"By H. Albert Napier

8. Jing Ni Xinli Zhai Lijun Zhu “A semantic web service oriented model for E-Commerce”Servics systems & management, 2007, International conference, IEEE

9. Kaparubandara, M. Aruntileka, S. Gnige “Application of E Business strategies for SMEs in developing countries”2004 International conference on e-commerce and e-service, IEEE

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Thank You All