Electronic Commerce for Enhancing Business value Through ICT Initiatives:

E-commerce for Competitiveness

A Research Paper by:

Shepherd Magombedzes.magombedze@gmail.com

ABSTRACT

The use of electronic commerce (e-commerce) globally in businesses has increasingly

become a necessary component of business. Although e-commerce is not a new concept in

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Zimbabwe, businesses have not fully implemented it. E-commerce strategies that are fully

integrated into the business’ strategy can be utilised to build sustainable competitive

advantage.

Through research surveys employing questionnaires and interviews, a research study was

done using the manufacturing industry to analyse the degree to which manufacturing

companies have embraced e-commerce and how this technology has impacted on business

performance. The main objectives of this research was to investigate e-commerce

awareness in companies, to investigate companies’ utilisation of e-commerce technologies,

to identify major challenges in implementing e-commerce, and to determine if there is a

relationship between e-commerce and profitability.

The research employed ideographic methods by using surveys and structured interviews to

source responses. Judgemental samples coupled with stratification procedures were used

to select sample data. Questionnaires were issued out to different levels of computer system

users. Descriptive and inferential statistical techniques were used for data analysis.

Despite the utilisation of different types of e-commerce, it was established that profitability

was minimally achieved from these implementations. The research found out that there was

lack of commitment by companies’ management to e-commerce. Despite the above finding,

a strong relationship between the level of utilisation of e-commerce and business profitability

was established. Businesses therefore need to provide e-commerce training to management

and staff so as to be able to reap its benefits. Organisations also need to develop e-

commerce strategies which will integrate e-commerce with the business processes

specifically the Value Chain process.

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TABLE OF CONTENTS

ABSTRACT..............................................................................................................................iiTABLE OF CONTENTS.........................................................................................................iiiLIST OF TABLES.....................................................................................................................vLIST OF FIGURES..................................................................................................................vi1.0 INTRODUCTION AND BACKGROUND........................................................................11.1 INTRODUCTION...............................................................................................................1

1.1.1 BACKGROUND..........................................................................................................11..1.2 RESEARCH JUSTIFICATION..................................................................................2

2.0 LITERATURE REVIEW....................................................................................................32.1 INTRODUCTION...............................................................................................................32.2 THE E-COMMERCE CONCEPT.......................................................................................3

2.2.1 THE DEFINITION OF E-COMMERCE.....................................................................32.2.2 B2B AND B2C E-COMMERCE.................................................................................52.2.3 THE BENEFITS OF E-COMMERCE.........................................................................52.2.4 MODELS OF E-COMMERCE....................................................................................7

2.2.4.1 Electronic Areas Model.........................................................................................72.2.4.2 The Hierarchical Framework of E-commerce.......................................................82.2.4.3 The Electronic Commerce Value Grid..................................................................92.2.4.4 Discussion of the various e-commerce models...................................................11

2.2.5 HOW THE INTERNET AFFECTS E-COMMERCE................................................122.2.5.1 Positive Effects to a Business..............................................................................122.2.5.2 Negative Effects to a Business............................................................................142.2.5.3 E-Commerce effects on Markets.........................................................................15E-market Commodities....................................................................................................16

2.2.6 INHIBITORS OF E-COMMERCE............................................................................162.2.7 DRIVING FORCES OF E-COMMERCE..................................................................17

2.3 THE CONCEPT OF SUSTAINABLE COMPETITIVE ADVANTAGE........................182.3.1THE DEFINITION OF SUSTAINABLE COMPETITIVE ADVANTAGE..............182.3.4 E-COMMERCE AND COMPETITIVE ADVANTAGE..........................................20

2.3.4.1 Introduction..........................................................................................................202.3.4.2 E-commerce’s influence on Operational Effectiveness.......................................202.3.4.3 E-commerce’s influence on Strategic Positioning...............................................222.3.4.4 Achieving competitive advantage through e-commerce strategies.....................22

2.4 THE E-COMMERCE VALUE CHAIN FRAMEWORK.................................................242.4.2 EXTERNAL, CUSTOMER-SUPPLIER LIFE CYCLE............................................262.4.3 INTERGRATING INTERNAL AND EXTERNAL PERSPECTIVES.....................262.4.4 APPLYING THE E-COMMERCE VALUE GRID...................................................27

2.5 CONCLUSION..................................................................................................................273.0 RESEARCH METHOD AND PROCEDURE..................................................................294. RESEARCH FINDINGS.....................................................................................................294.3 COMPOSITION OF E-COMMERCE USAGE ACROSS MUNUFACTURING COMPANIES IN ZIMBABWE..............................................................................................304.4 E-COMMERCE UTILISATION.......................................................................................314.5 E-COMMERCE STRATEGY EXISTENCE AND LEVEL OF IMPLEMENTATION..34

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4.6 E-COMMERCE CONTRIBUTION TO BUSINESS PERFOMANCE............................354.6.1 Level of Integration....................................................................................................354.6.2 Contribution to Business Profitability........................................................................36

4.7 BARRIERS THAT HAVE HINDERED THE EFFECTIVE IMPLEMENTATION OF E-COMMERCE..........................................................................................................................374.8 THE RELATIONSHIP BETWEEN E-COMMERCE AND PROFITABILITY..............384.9 CONCLUSION..................................................................................................................405.0 CONCLUSIONS AND RECOMMENDATIONS............................................................415.1 INTRODUCTION.............................................................................................................415.2 CONCLUSIONS...............................................................................................................415.3 RECOMMENDATIONS...................................................................................................435.4 RECOMMENDED FURTHER RESEARCH...................................................................44REFERENCES........................................................................................................................45

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LIST OF TABLES

Table 3.1: A comparison of Nomothetic and Ideographic

Methodologies 55

Table 3.2: Judgemental Sampling Criteria 58

Table 3.3: Departmental Composition of Questionnaires 59

Table 3.4 Qualitative and Quantitative Data Analysis 66

Table 4.1: Questionnaire response rate 69

Table 4.1: The chi-squared test 81

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LIST OF FIGURES

Fig 2.1: Electronic Areas Model 21

Fig 2.2: The E-commerce Framework of Seven Levels 22

Fig 2.3: The Electronic Commerce Value Grid 23

Fig 2.4: Three Generic Strategies 35

Fig 2.5: Two types of fundamental resources underlying

Competitive advantage 40

Fig 2.6: Sustained Competitive Advantage Though the

RBV Model 41

Fig 2.7: The e-commerce value chain 47

Fig 4.1: Composition of users of e-commerce as a tool for

business 70

Fig 4.2: Different functions for which e-commerce is used 71

Fig 4.3: Types of e-commerce utilised 72

Fig 4.4: E-commerce Technologies being used. 73

Fig 4.5: E-commerce strategy Implementation 75

Fig 4.6: Level integration of e-commerce in different

components of the value chain 76

Fig 4.7: Contribution of e-commerce to business profitability 77

Fig 4.8: Barriers to E-commerce 78

Fig 4.9: Summary of Barriers to E-commerce 79

Fig 4.10: Comparison of Utilisation of e-commerce and the

contribution of e-commerce to business profitability 80

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1.0 INTRODUCTION AND BACKGROUND

1.1 INTRODUCTION

In the emerging global economy, electronic commerce (e-commerce) has

increasingly become a necessary component of business strategy and a strong

catalyst for economic development (Andam, 2003). The integration of Information

and Communication Technology (ICT) in business has enhanced business-business

and business-customer relationships. Specifically, the use of ICT in business has

enhanced productivity, encouraged greater customer participation, and enabled

mass customization, besides reducing costs. These benefits from ICT are yet to be

realized from e-commerce hence the need to study and understand the concept of

e-commerce.

Projections of commerce via the internet are remarkable. According to Forrester

Research, online sales were expected to reach $300 billion in 2000 and $488 billion

in 2002. Likewise, business-to-business commerce was projected to reach $327

billion by 2002 (Applegate, Lynda, McFarlan and James, 1996). E-commerce has

evolved from a high-tech marvel to a corporate initiative. According to Jack (1996) e-

commerce can no longer be ignored or thought of only as an ICT project. As such

King and Clift (2000) argue that the ‘‘e’’ – will soon be dropped and that e-business

will be business as it comes to be generally understood. Electronic commerce

projects must now be intertwined with the firm's strategic plans. The next section

reviews the background of The manufacturing sector and the Milling Food Industry in

the light of selected marketing and strategic management tools.

1.1.1 BACKGROUND

Although e-commerce is not a new concept in Zimbabwe and the Hospitality sector

for example has implemented e-commerce portals, however such progress has not

been very evident in all business sectors. The food manufacturing sector in

Zimbabwe has embraced Electronic Data Interchange during business to business

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transactions, however little has been implemented for business over the internet.

Also the current e-commerce implementations have not fully exploited all e-

commerce tools or integrated the technology to business processes.

It is also apparent that only a small proportion of the Zimbabwean population has

access to the internet, and a small fraction of those who use it, use it for e-

commerce. There is a big inertia to move towards the new technology and many

only use computers for e-mail, internet and typing. The general public views it as a

luxury to own a computer. However, there is a shift in this view and more are now

having personal internet access in homes thanks to the advent of mobile networks,

3g networks and similar developments. However, the limited access to internet has

led to limited usage of e-commerce by businesses for interacting with clients.

1..1.2 RESEARCH JUSTIFICATION

In Zimbabwe, not much value has been realized by firms implementing e-commerce.

However, an understanding of the impact of fully embracing e-commerce on

business profitability will help companies to realize that it is costly not to utilise the

technology. This research intends to bring out the immediate benefits, in terms of

cost savings, efficiencies and enhanced profitability which are to be realized through

successful implementation of e-commerce technologies. According to Hobart (2001)

adopting e-commerce is no longer a competitive advantage, but a normal business

process, without which an enterprise is unlikely to survive competition.

Implementing an e-commerce strategy is neither straightforward nor cheap. For

example, it comprises a complete rethink of traditional modes of behaviour, the need

and importance to involve internal staff and external suppliers and customers right

from the conceptual stage, need to re-evaluate a company's core competencies, and

requires substantial investment in IT. As such, this study seeks to link e-commerce

concepts together with competitive advantage concepts analysing how these

concepts could be embraced to make the business more profitable.

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Since Zimbabwe is in a challenging economic situation, companies which will

harness e-commerce for achieving competitive advantage will need to be strategic

thinkers focusing on customers, markets, and competitive positioning, as well as on

internal operations. The research seeks to help clarify e-commerce concepts. It also

seeks to aid strategic thinking by providing valuable information on how e-commerce

can be utilised strategically to create competitiveness. Such information brings new

depth to Zimbabwean e-commerce by providing guidelines as to how the potentials

and benefits of e-commerce can be fully harnessed by Zimbabwe’s milling industry.

The research set to provide academia with information on the applicability of e-

commerce in Zimbabwean food industries and provide a source of information for

further research.

2.0 LITERATURE REVIEW

2.1 INTRODUCTION

According to Shah and Dawson (2004), implementing e-commerce technologies

comprises a total rethink of traditional modes of behaviour, and the involvement of

all stakeholders right from the conceptual stage, added to a re-evaluation of the

company’s core competencies. As such, executives of e-commerce companies need

to be strategic thinkers focusing on customers, markets and competitive positioning.

Practically, the section will analyse how e-commerce has influenced business. It will

explore how this new technology can be exploited to achieve sustainable

competitive advantage in conjunction with some traditional strategy tools.

2.2 THE E-COMMERCE CONCEPT

2.2.1 THE DEFINITION OF E-COMMERCE

Many use the terms electronic commerce (e-commerce) and electronic business (e-

business) interchangeably. For the purpose of our study, we seek to differentiate the

two. Allen and Fjermestad (2000) suggest that e-business tends to be used as a

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more general term to describe the use of the internet or any type of electronic

mechanism to conduct an organization’s business processes. This definition implies

that e-business is a term used to describe utilizing Internet technologies to improve

the productivity or profitability of a business. Andam (2003) describes e-commerce

as on-line trading. In other words, e-commerce consists of the buying and selling of

products or services over electronic systems such as the Internet and other

computer networks. Modern electronic commerce typically uses the Internet at least

at some point in the transaction's lifecycle, although it can encompass a wider range

of technologies such as e-mail as well. The wikipedia website considers e-

commerce to be the sales aspect of e-business (www.wikipedia.org).

Kalakota and Robinson (1999) argue that e-business is the function of deploying

technology to maximize customer value while e-commerce is the function of buying

and selling over digital media. Kenneth and Traver (2003) expand this definition

arguing that e-commerce encompasses digitally enabled commercial transactions

between and amongst organisations and individuals while e-business refers

primarily to the digital enablement of transactions and processes within a firm,

involving only the information systems under the control of the firm

In summary, e-business is a super-set of e-commerce. This implies that

incorporating e-commerce into a company's flow would transform the company into

an e-business. E-Business thereby can be broadly defined to encompass all internal

and external electronically based activities and processes. Bakos (1998)

summarises e-commerce as part of e-business which focuses on the electronic

commercial transactions between and amongst organisations and individuals. In this

research we are interested in business-to-business (B2B) and business-to-customer

(B2C) e-commerce.

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2.2.2 B2B AND B2C E-COMMERCE

Fruhling and Digman (2000) argue that B2B e-commerce is a way for business to

create value by alignment with factors which include customers, suppliers, and

employees, among other factors. Andam (2000) defines B2B e-commerce simply as

e-commerce between companies. He further argues that this type of e-commerce

deals with relationships between and among businesses.

Types of business-to-business electronic commerce applications include: electronic

data interchange, electronic funds transfer, electronic forms, integrated messaging,

and shared databases. Business-to-business processes provide sharing of data and

increased information access through corporate extranets. B2C e-commerce

involves customers gathering information; purchasing physical goods or information

goods which are goods of electronic material or digitized content, such as software,

or e-books (Andam, 2000).

2.2.3 THE BENEFITS OF E-COMMERCE

E-commerce presents a number of opportunities for business organisations and

individuals alike. Metzger (2004) suggests that e-commerce companies have a

widened market base. The wide market base gives the companies an opportunity to

grow at very low costs. Hoffman et al (2004) contend that there are distribution,

marketing and operational benefits that can be realised from e-commerce. In other

words e-commerce can bring about a reduction in distribution costs through the

elimination of intermediaries. Since online transactions involve very little costs e-

commerce can also bring about a reduction in transaction costs (Kiggundu, 2002).

Internal and external processes can also be integrated to lower transaction costs. As

worldwide companies are adopting more collaborative relationships with key

suppliers in product development, key business processes now require cross-

functional information sharing on a wide range of issues (McIvor, Humpreys and

McAleer, 2000). This means that firms can utilise e-commerce to expand distribution

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channels at lower costs. According to McIvor et al (2000), these low costs can be

achieved through the reduction of clerical procedures and paper handling. E-

commerce can also accelerate ordering, delivery and payment for goods and

services while reducing operating and inventory costs.

Schaeffer (2003) argues further that e-commerce dramatically reduces the time for

information search and transacting for buyers and sellers. The important point here

is that e-commerce transcends geographic and time boundaries. Since time is

saved, this has cost saving implications. However, geographic and legislative

constraints continue to present significant barriers to the distribution of goods and

services in practice. Even though such constraints exist, personalised product

offerings combined with free market access provide the customer with a wider

availability of hard-to-find products. Added to this wider selection of items, customers

can test products online before a decision is made to purchase (Karavdic, 2002).

Lumpkin, Drogee and Dess (2002) argue that even though the Internet makes

possible new opportunities for strategic success, ignoring business fundamentals

and basic financial requirements results in business losses. According to this line of

argument many e-commerce companies have been unsuccessful at making a profit

due to heavy spending on mass marketing, intensive price competition, lowered

customers' search and switching costs. De Figueiredo (2000) stresses this

argument, contending that increased customer power and lowered entry barriers due

to the Internet can heavily lower a company’s profitability.

Despite the above mentioned negatives of the internet, the author believes that the

main reason for failure on e-commerce is due to lack of clearly defined e-commerce

strategies targeted at building the business’ profitability. The reason for such a belief

is that whilst many companies have failed in e-commerce, others have thrived under

the same conditions. The argument is that certain strategies which the successful

ones have perfected have made the successful companies more successful than the

failing companies. As such, the following section seeks to analyse different e-

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commerce models in the light of their potential impact on e-commerce and

competitive forces.

2.2.4 MODELS OF E-COMMERCE

Different models can be used to analyse and build e-commerce model strategies for

business. No single model covers all the areas of interest and hence a selection of

models has to be used when planning. The section below outlines some of the most

prominent models and evaluates their strengths and weaknesses.

2.2.4.1 Electronic Areas Model

Fig 2.1. Electronic Areas Model (Choi et al., 1997:18).

The Electronic Areas model shown in Fig. 2.1 presents the difference between e-

commerce and traditional commerce. The representation portrays e-commerce as a

three dimensional space, with traditional commerce in the front bottom left area and

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e-commerce in the back top right area. This model also identifies product, agent and

process as three key dimensions distinguishing e-commerce from traditional

commerce. The representation underlies the fact that e-commerce may be

implemented to compliment an existing venture, or may be used to establish a totally

new electronic venture (Haylock et al, 1999).

Kao and Decou (2005) argue that the electronic areas model can be useful in

determining the organisation’s focus in relationship to technology. However, even

though this model helps focus the relationship of an organization with e-commerce

applications, it does not assist in showing any clearly defined e-commerce strategies

to pursue.

2.2.4.2 The Hierarchical Framework of E-commerce

Meta-Level Level Function

Product and Structures

7 Electronic Marketplaces and Electronic Hierarchies

6 Product and Systems

Services 5 Enabling Services

4 Secure Messaging

Infrastructure 3 Hypermedia/ Multimedia Object Management

2 Public and Private Communication Utilities

1 Wide-Area Telecommunications Infrastructure

Fig 2.2. The E-commerce Framework of Seven Levels (Zwass, 1998)

The hierarchical model outlined in fig. 2.2 above defines three meta-levels of e-

commerce which are Product and Structures, Services and Infrastructure. Each level

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sits on top of the one below it and benefits from the strengths of the lower level

(Zwass, 1998). Each level has sub levels which are shown as one to seven (fig. 2.2).

Feng Li (2006) contends that the strength of the Hierarchical model is that it shows

that in order to build a strong e-commerce strategy, a bottom up approach has to be

taken. In other words, there needs to be a strong Wide Area infrastructure and

strong ICT systems leading to the provision of excellent e-commerce products.

Riggins (1998) argues that one difficulty with the hierarchy is that the sequence of

layers may not be sufficiently flexible to accommodate the changing functions and

activities of e-commerce. However, Zwass (1998) further argues that the hierarchical

model focuses attention on important components to be considered within the e-

commerce strategic planning context.

2.2.4.3 The Electronic Commerce Value Grid

Riggins (1998) developed the Electronic Commerce Value (EC) Grid (fig. 2.3) to aid

managers in determining where Web-based electronic storefronts could improve

profitability.

Fig 2.3. The Electronic Commerce Value Grid (Riggins, 1998)

He argues that firms compete along five dimension of commerce. By using various

modes of interaction, firms compete over both time and distance to provide some

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product or service to their customers through a chain of relationships (Riggins,

1998). He adds that since investments in information technology are typically

justified using three different criteria – generating efficiency, effectiveness, and/or

strategic benefits, the two perspectives mentioned above can be combined to create

the Electronic Commerce Value Grid (fig. 2.3) which identifies fifteen areas where

managers can use Web-based electronic storefronts to add value to their customers.

The strength of the model is that it provides a way for improving efficiency and

effectiveness for the decision makers by making the right information available on

demand (David et. al, 2000). These decision makers could be consumers

considering a purchasing decision or a manager seeking information to formulate a

marketing strategy. The model also offers strategic choices to the implementer and

allows firms to gain an advantage over competitors by developing new customer

loyalty. The result is temporal first mover competitive advantage. However, Riggins

(1998) argues that long term advantage can only be obtained by constantly updating

the content and functionality of the Web site and by redesigning business processes

to take advantage of the new technology.

While the E-commerce Value Grid is useful in identifying opportunities, it is specific

to Web-based sales applications and is difficult to use in other e-commerce strategic

developments (Elliot et al, 2000). It also does not consider financial and legal

business interests.

Applying the EC Value Grid

Riggins (1998: 12) suggests that to use the grid, managers should first determine

which of the five dimensions of commerce to target for impact using the online

storefront. He also poses the following questions:

Should the Web site be used to add value to the user by diminishing the time

it takes to deliver information, products, or services? Are there distance

barriers which need to be overcome in order to better serve customers? Is the

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objective to alter the relationships in the industry, possibly by intermediation

or disintermediation? Can the organization improve the nature of the

interaction between industry parties? Or is the goal to use the technology to

institute entirely new products and services which were not feasible before

the introduction of the Web?

The above are some of the questions detailing the issues the EC Value Grid tries to

identify. Riggins (1998:34) further argues that managers must examine the type of

value to be generated for the user. He also stated that the following questions need

to be investigated (Riggins, 1998:34):

Is there a need to improve the efficiency of performing various tasks, improve

the user's effectiveness in delivering timely information to decision makers, or

use the technology to strengthen a long term relationship with the user?

Riggins (1998:35) contends that answering the above questions provides the EC

Value Grid with information to develop a Web-based application that will provide new

value for the user.

The extent to which the Web site incorporates several cells in the grid

becomes a measure of the strategic sophistication or EC coverage of the site.

The goal of the grid is to move from a simple online storefront, where the

impact is on time and distance generating efficiency and effectiveness

benefits, to vast electronic business sites which change the relationships in

the industry.

Riggins (1998:35) argues that the mode of interaction developed with customers and

trading partners utilising the EC Value Grid produces creative new products and

services to generate strategic value.

2.2.4.4 Discussion of the various e-commerce models

As already noted in sections 2.2.4.1 to 2.2.4.3 no one model covers all the required

areas. The electronic model can be used to focus on the relationship of a company

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with e-commerce applications. The hierarchical model is then used to analyse the

infrastructure, services and product meta-levels of the company and aid in a bottom

up strategic e-commerce strategy. The electronic value grid will then be used to

factor in measures that will improve efficiency and effectiveness for customers. In

the application of these models it is also essential to consider financial and legal

concerns. These models have been designed to create competitive advantage,

however for its sustainability; they have got to be applied in support of the normal

strategic processes. Since they do not conflict, the above mentioned models can be

used concurrently to build competence. As such, we look at e-commerce in the light

of business strategy.

2.2.5 HOW THE INTERNET AFFECTS E-COMMERCE

Zwass (1998) argue that popularity of the Internet for e-commerce is

unquestionable. Schaeffer (1999) contends that this popularity emanated from the

fact that the internet offers a channel where buyers and sellers are able to complete

transactions cheaply, instantaneously and anonymously whilst overcoming

geographic and time barriers. He contends that it provides a channel to remove

multiple layers of middlemen by bringing companies and their customers and

suppliers together directly and cheaply (Shaeffer, 1999). As such, e-commerce is

thereby expected to widen markets and lower transaction costs.

2.2.5.1 Positive Effects to a Business

Shingh (2003) contends that the Internet enables a company to expand its market

reach. Jensen (1999) agrees and contends that a little company is able to utilize the

internet to reach markets far beyond its traditional vicinity while also gaining access

to markets beyond its current customer base. Given this advantage to small

companies, Jensen (1999) further argues that small companies can also have

greater visibility against large companies and hence a chance to level the playing

field to some extent.

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Schaeffer (2003) adds to the debate that on the Internet each company is reduced to

the common size of the customer’s browser window. While creating the original web

presence may not be inexpensive, the cost of subsequent maintenance is minimal

(Shaeffer, 2003). Jensen (1999) argues that the Internet provides cost advantages

for businesses in being able to update information, post features, and simply

maintain a site that is perennially current at a minimal cost and time lag. These

features stated by Jensen (1999) combine to generate a greater presence within the

present target market while gaining a greater component of their mind share.

Shaeffer (2003) further argues that one of the greatest benefits of doing business

online rests in its ability to promote relationship building with customers and

partners. Straub (2001) contends that the Internet is unmatched in its ability to

increase responsiveness. Examples of this responsiveness are clearly visible in

companies such as Dell, UPS, and FedEx that now allow both partners and

consumers to check various facets of their transactions directly by logging onto their

Web sites (Straub, 2001). This interconnectedness comes at a lower cost and on

demand thus, providing a more efficient method to respond to customer

needs/wants.

Straub (2001) agrees with Schaeffer (2003) that the Internet provides the benefits of

shared information that can be enjoyed by organizations of all sizes big or small at a

fraction of the cost. Straub (2001) argues that access to real-time data enhances

efficiency, which improves productivity, and profitability. Schaeffer (2003) further

contends that the nature and content of information that can be shared has

broadened in scope. He states that the multi-media nature and real time capabilities

of the Internet are fostering an environment that is conducive for relationship

building.

The blossoming and adoption of the Internet has seen businesses realize enormous

cost savings by moving a myriad of services online. The range of business areas

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positively impacted are vast, from customer service centres, online tracking of

packages, to online brokerages, the list is endless. Berryman, Harrington, Layton-

Rodin and Vincent Rerolle (1998) contend that the ability to digitize offerings and

provide products/services on demand has lead business to realize two allied goals of

enhanced service at a reduced cost of product, support, and service. The above

information strongly suggests that the Internet can also be used to gain competitive

advantage through linkages with suppliers which will cut costs.

2.2.5.2 Negative Effects to a Business

Given the above potentials of e-commerce, there are a number of challenges as e-

commerce takes root as a business tool. Schaeffer (2003) argues that e-commerce

is limited to the transmission of information that can be interpreted by two of the five

senses alone namely sight and sound. As such the internet is unable to

communicate taste, smell, and feel.

Wigand et al (2004) argue that there are possibilities of reduced profits as

competition intensifies. In agreement, Straub (2001) states that e-commerce tends

to reduce entry barriers as there are very little and sometimes no setup costs

required to setup an internet based business. Straub (2001) further states that

companies involved in e-commerce lose their bargaining power and this tends to

reduce the companies’ ability to push their products, thus driving down profits.

The UNCTAD Report (2002) states that one of the major challenges facing

companies doing business in an e-commerce environment is the issue of security.

The problem is generally about how to address the issue of security while preserving

the benefits and ease of use of the internet and its open nature. According to the

UNCTAD Report (2002), possibilities of fraud abound on the internet for both the

buyers and the sellers. Another challenge that may be faced by internet based

companies is the issue of costs, especially in relation to network access. Network

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access providers may monopolise access and charge premium charges for network

access (UNCTAD Report, 2002).

Gapu (2004) contends that a major challenge to e-commerce is customer loyalty:

one of the manifestations of using the technology of the internet has been the ease

with which consumers can navigate the internet in order to satisfy their needs and

wants. Besides, the internet reduces switching costs to the point where consumers

do not have an inherent investment in the current relationship. In instances where

businesses do not create a personal shopping experience, this problem is further

amplified.

2.2.5.3 E-Commerce effects on Markets

The Internet has seen the emergence of electronic markets. Whitey (2000) defines

an Electronic marketplace as an inter-organisational information system that

provides facilities for buyers and sellers to exchange information about price and

offerings. Berkowitz (2000) argues that this market space is information and

communication-based electronic exchange environment occupied by sophisticated

computer and telecommunication technologies and digitized offerings. The impact of

this digitization is evident in the following changes as stated by Berkowitz (2000:5):

The content of transaction is different – information about a product often

replaces the product itself.

The context of transaction is different – an electronic screen replaces the

face-to-face transaction

The enabling infrastructure of transactions is different – computers and

communications infrastructure may replace typical physical resources

especially if the offering lends itself to a digitized format.

Shingh (2003) states that the Internet provides a platform for e-commerce by

providing a wide market place for business which covers the whole world. Goods

and services can be accessed from anywhere with virtually no costs. Accordingly

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Schaeffer (2003) suggests that delivery of purchased items can be via postal

services or downloads, if downloadable, and payment can be done by credit cards or

mailing payments. As the internet provides for transactions with high speed

information flow there is much hope of lowered costs and an ever expanding

marketplace (Berkowitz, 2000).

E-market Commodities

According to Professors Rajiv Lal and Miklos Sarvay of Stanford University, in

Schaeffer (2003), there are two types of goods that can be bought on the internet.

One type is goods that a person can buy without seeing. Experience goods are the

second type. One needs to see this type of goods before buying. Schaeffer (2003)

gives examples of the first type of goods as computers and compact discs and the

second type as goods like clothes and jewellery. Schaeffer (2003:15) states that:

Purchasers really like to touch and feel experience goods and will only buy

after some experience. Since brand identity and customer loyalty is important,

experience goods are not vulnerable to severe price competition. As such

physical stores can be used to build relationships with customers and then e-

commerce be used for creating repeat orders at low cost.

Therefore in this view, e-commerce can be viewed as a complimentary channel to

integrate along existing distribution channels, particularly for experience goods.

2.2.6 INHIBITORS OF E-COMMERCE

In developing countries like Zimbabwe, a major impediment to take-off of e-

commerce is inadequate ICT and Telecoms infrastructure as well as shortcomings in

physical infrastructure, logistics and trade facilitation (Gapu, 2004). Other limitations

include foreign currency controls, which limit the free exchange of value over the

internet. A research in Vermont, USA (Vermont Report, 1999) revealed that there

are three main areas of barriers to e-commerce:

Ignorance – when people know little about the internet, they tend to hate the

technology and thus use of the facility will be limited. However, this is not the

situation in Zimbabwe because rapid changes in mobile technologies and the

16

quick buy in by people in Zimbabwe have proved that Zimbabweans are quick

to adapt to changes and embrace them.

Cost – costs prevent most businesses from establishing e-commerce

services. Cost comes in the form of cost to buy hardware and software for

use in e-commerce. It also comes in the form of cost of building the system as

experts are expensive to pay. Significant costs also come from the cost of

leasing bandwidth from telecommunication service providers. In Zimbabwe,

cost is one big inhibitor to technological advancement.

Time – companies find it difficult to invest in time to develop systems that can

be used on the internet.

Straub (2001) contend that other inhibitors of e-commerce come from fears about

perceived lack of online privacy, which arise from the internet’s ability to record

every aspect of the user’s behaviour. For example the Government recently

announced its intentions to monitor the Internet and intercept e-mails for

intelligence reasons. Every transaction on the internet involves some disclosure

of one’s personal information (Straub, 2001). This tends to scare away senior

managers from conducting business on the internet.

Van Hooft and Stegwee (2001) contend that there is a general lack of secure

electronic payments system. They base their argument on the fact that current

generations of e-payment systems involve sending information over the internet.

This has the attendant risk that such information may be intercepted by the

wrong people and hence may be misused.

2.2.7 DRIVING FORCES OF E-COMMERCE

Improvements in technology continue to be a major driving force of e-commerce

(Vermont Research, 1999). There have been fast changes in technology and in turn

the associated costs of technology continue to fall. This in turn makes it very

possible for innovative new ways of doing business to emerge. Changes in

17

technology have also been making it possible for mobile technology to allow e-

commerce. An example is the emerging of WAP technology, which now makes it

possible to browse on the phone. As the technology improves, it will soon be

possible to have even larger bandwidth on mobile phones, which can make it even

easier to do commerce while on the move.

Changes in life styles of people have also contributed to growing use of e-

commerce. Falling prices of computers and associated hardware and software have

also facilitated more people to own computers. More people now own and use

computers for their day to day business making it easier for businesses to bring

shop fronts right in the homes of people. Gapu (2004) states that statistics show that

more and more people now own computers. For Zimbabwe the number of people

with computers rose from 33,000 in 1995 to 600,000 in 2000 (Gapu, 2004).

The technical capabilities of telecommunication networks have also been improving

thus making e-commerce more accessible. The bandwidth obtainable on existing

copper wire has been enhanced by such new technologies as DSL and ISDN. Since

these technologies work over existing infrastructure, it is easier to provide internet

access to more people with little investments in new infrastructure.

2.3 THE CONCEPT OF SUSTAINABLE COMPETITIVE ADVANTAGE

2.3.1THE DEFINITION OF SUSTAINABLE COMPETITIVE

ADVANTAGE

Grant (1995) argues that competitive advantage is the ability of a firm to outperform

rivals on the primary goal of profitability. Barney (1991:102) takes the definition

further suggesting that a firm is said to have sustainable competitive advantage

when it is implementing a value creating strategy not simultaneously being

implemented by any current or potential competitors and when these other firms are

unable to duplicate the benefits of this strategy.

18

Barney (1991) contends that resources that create this advantage have value,

rareness, inimitability and non substitutability. Mata et al (1995) agree with Barney

(1991) stating that for a resource to give sustainable competitive advantage, it must

be valuable, it must not be possessed by many competitors in the industry and it

must not be easily available for competitors to acquire. In addition Bharadwaj (1993:

84) in Maisiri (2006) also emphasizes that competitive advantage is only sustainable

if the advantage resists erosion by competitor behaviour.

Byrd and Turner (2001) in Basutu (2005), argue that IT is a highly transferable

resource, a necessary but not a sufficient condition for sustainable competitive

advantage. Powel and Dent (1997) differ and maintain the position that IT is not a

highly transferable resource, and therefore, it is both a necessary and sufficient

source of competitive advantage. Given Zimbabwe’s harsh economic environment

and the fact that e-commerce is a resource easy to imitate, this paper agrees with

Byrd and Turner. In other words the position is that e-commerce competitive

advantage are quickly copied and firms have got to innovate quickly in order to keep

on having these advantages. Mata et al (1995) reinforce this view stating that the

use of proprietary technology as a source of sustainable competitive advantage has

proved to be difficult because IT applications are difficult to patent. Workforce

mobility has been found to reduce the extent to which the proprietary technology is

kept secret from competitors. Competitors can easily get access to technical

knowledge by hiring the workforce involved in the development of the proprietary

technology.

19

2.3.4 E-COMMERCE AND COMPETITIVE ADVANTAGE

2.3.4.1 Introduction

Porter (1985) argues that achieving a sustainable competitive advantage can be

achieved by operating at a lower cost, by commanding a premium price, or by doing

both. Accordingly, cost and price advantages can be achieved in two ways, which

are operational effectiveness and strategic positioning.

Operational effectiveness is doing the same things your competitors do but doing

them better (Porter, 2001). Operational effectiveness advantages can take myriad

forms, including better technologies, superior inputs, better-trained people, or a more

effective management structure. Strategic positioning is doing things differently from

competitors, in a way that delivers a unique type of value to customers (Porter,

2001). This can mean offering a different set of features, a different array of

services, or different logistical arrangements.

E-commerce affects operational effectiveness and strategic positioning in very

different ways. It makes it harder for companies to sustain operational advantages,

but it opens up new opportunities for achieving or strengthening a distinctive

strategic positioning.

2.3.4.2 E-commerce’s influence on Operational Effectiveness

Porter (2001) argues that Internet e-commerce is arguably the most powerful tool

available today for enhancing operational effectiveness. Grant (1995) agrees that by

easing and speeding the exchange of real-time information, it enables improvements

throughout the entire value chain, across almost every company and industry. Porter

(2001) further contends that because the internet is an open platform with common

standards, companies can often tap into its benefits with much less investment than

was required to capitalize on past generations of information technology.

20

Hobart (2001) argues that companies only gain advantages if they are able to

achieve and sustain higher levels of operational effectiveness than competitors.

Hoffman (2000) disputes this argument, stating that it is exceedingly difficult to

sustain an advantage even in the best of circumstances. The point is that once a

company establishes a new best practice, its rivals tend to copy it quickly. Horbart

(2001) observes that the best practice competition eventually leads to competitive

convergence, with many companies doing the same things in the same ways. Along

the same line of reasoning, customers end up making decisions based on price,

undermining industry profitability.

Jack (1996) states that the nature of Internet e-commerce applications makes it

more difficult to sustain operational advantages than ever. Jack (1996:45) further

reasons as follows:

In previous generations of information technology, application development

was often complex, arduous, time consuming, and hugely expensive. These

traits made it harder to gain an IT advantage, but they also made it difficult for

competitors to imitate information systems. The openness of the Internet

combined with the advances in software architecture, development tools, and

modularity, makes it much easier for companies to design and implement

applications. As the fixed costs of developing systems decline, the barriers to

imitation fall as well.

Hoffman (2000) contends that today, nearly every company is developing similar

types of e-commerce applications, often drawings on generic packages offered by

third-party developers. The resulting improvements in operational effectiveness will

be broadly shared, as companies converge on the same applications with the same

benefits (Sinha, 2000). Very rarely will individual companies be able to gain durable

advantages from the deployment of "best-of-breed" applications (Jack, 1996).

21

2.3.4.3 E-commerce’s influence on Strategic Positioning

Due to the advent of internet e-commerce, the above sections have shown that it

has become harder to sustain operational advantages and strategic positioning

becomes all the more important. Porter (1985) argues that if a company cannot be

more operationally effective than its rivals, the only way to generate higher levels of

economic value is to gain a cost advantage or price premium by competing in a

distinctive way. Thompson and Strickland (1990) agree that without a distinctive

strategic direction, speed and flexibility lead nowhere. Either no unique competitive

advantage is created, or improvements are generic and cannot be sustained.

Having a successful e-commerce strategy now requires more discipline. Porter

(2001) argues that e-commerce strategy requires a strong focus on profitability

rather than just growth, an ability to define a unique value proposition, and a

willingness to make tough trade-offs in choosing what not to do. A company must

stay the course, even during times of upheaval, while constantly improving and

extending its distinctive positioning (Porter and Millar, 1985). E-commerce strategy

now goes far beyond the pursuit of best practices of strategizing. Shingh (2003)

proposes that e-commerce strategies have to involve the configuration of a tailored

value chain to be defensible. In other words, when a company's activities fit together

as a self-reinforcing system, any competitor wishing to imitate a strategy must

replicate the whole system rather than copy just one or two discrete product features

or ways of performing particular activities.

2.3.4.4 Achieving competitive advantage through e-commerce strategies

How Overall Cost Leadership can be achieved by E-commerce

Lumpkin et al (2002) contend that business fundamentals need to be adhered to for

businesses to successfully implement e-commerce and achieve advantages.

According to Lumpkin et al (2002:6):

The service and capability offered by businesses have to be made

uninimitable. For cost leadership advantages companies have to continue

22

focusing on all cost centres, decrease expenses and maintain cost

advantages as well as reduce inventories using e-commerce real-time

communications to make production schedules and delivery systems more

efficient.

How differentiation advantages can be achieved by E-commerce

Firms can create capabilities so specialised for a given customer that the chance of

customers turning to other solution providers is greatly lessened (Tapscott, 2000).

There is still a great need to position products as unique and valuable to customers.

Overpricing of products has to be avoided.

How Focus advantages can be achieved by E-commerce

Porter (2001) agrees with Lumpkin et al (2002) that focusers can capitalise on e-

commerce to capture specialised market niches. This can be done using

technological capabilities to satisfy the needs of particular markets and reduce the

threat of new entrants by firmly establishing itself as the customer’s most valued

provider. Focusers need to read the scope and interests of their target markets

(Lumpkin et al, 2002). As such uniqueness and focus on markets need to be

maintained. A focus firm’s niche should be big enough to be profitable, but small

enough to lessen the attractiveness to potential new entrants.

Summary

According to Porter (2001), the creation of true economic value once is the final

arbiter of business success. Economic value for a company is nothing more than the

gap between price and cost, and it is reliably measured, only by sustained

profitability (Porter, 2001). As such, sustainable competitive advantage creation

involves making choices throughout the value chain that are interdependent (Porter,

2001). In other words, all company activities must be mutually reinforcing. This

process actually makes a strategy harder to imitate since the whole system of

competing is difficult to imitate.

23

2.4 THE E-COMMERCE VALUE CHAIN FRAMEWORK

2.4.1 THE E-COMMERCE VALUE CHAIN

Shingh (2003) argues that for electronic commerce, the value chain can be a

convenient means of being able to organize the examination of the business

processes within a business. Porter (2001) argues that the basic tool for

understanding the influence of information technology on companies is the value

chain. He defines the value chain as the set of activities through which a product or

a service created and delivered to customers.

Grant (1995) argues that when a company competes in any industry, it performs a

number of discrete but interconnected value-creating activities, such as operating a

sales force, fabricating a component, or delivering products, and these activities of

suppliers, channels, and customers. Porter (2001) then in agreement states that the

value chain is a framework for identifying all these activities and analyzing how they

affect both a company's costs and the value delivered to buyers.

24

Primary Activities

Inbo

und

logi

stic

s

Ope

rati

ons

Out

boun

d lo

gist

ics

Mar

keti

ng a

nd S

ales

Procurement

Technology Development

Human Resources Management

Firm Infrastructure

Ser

vice

Customer Relations

Margin

Sup

port

Act

ivit

ies

E-learning

Collaborative Engineering

E 1E 2 E 3 E 4 E 5

Figure 2.7. The e-commerce value chain (Van Hooft and Stegwee, 2001)

Key:

E1 – E-Procurement

E2 – Fatory Floor Automation

E3 – E-Fulfilment

E4 - Web Site and Web Marketplace

E5 – CRM and E-Service

Because every activity in the value chain involves the creation, processing, and

communication of information, information technology has a pervasive influence on

the value chain. The special advantage of Internet e-commerce is the ability to link

one activity with others and make real-time data created in one activity widely

available, both within the company and with outside suppliers, channels, and

customers. Taking the value chain (Porter and Millar, 2001) and placing e-commerce

into the framework gives an insight into the reach of e-commerce into the value

activities.

Figure 2.7 above shows how e-commerce reaches all activities of the organization.

Linkages already exist between activities; some of these linkages have been

integrated by using e-business technologies, ultimately providing a fully integrated e-

commerce process. It is important to realise that these new applications have to be

integrated with supporting and, if applicable, primary processes to prevent creating

islands of automation.

The physical processes might have to be rearranged to better align the original value

chain to the new e-commerce oriented value chain. Integration of the physical

processes and e-business applications is essential to achieve maximum results.

Analysing the e-commerce value chain can help in lowering the costs and increasing

the value of activities.

25

Taking the Web marketplace as an example, one can see that, if a marketplace

requires sound estimates for the delivery time of a product, e-fulfilment systems

have to be in place and the factory floor automation has to be capable of providing

this information. Supporting processes are not only the technical infrastructure, but

also the databases holding all information and people capable of working with the

systems.

2.4.2 EXTERNAL, CUSTOMER-SUPPLIER LIFE CYCLE

For the purpose of further analysing relationships between suppliers and customers,

Kettinger and Hackbarth (1997) in Shingh (2003) introduced the Customer/Supplier

Life Cycle (C-SLC) Theory. The purpose was to provide a way of isolating a

company’s buying and selling activities to better understand the interrelationships

between customers and suppliers’ business processes and their interactions in the

company. The C-SLC framework is a particularly useful planning tool to help

structure a review of existing business processes to determine the potential for

turning these into e-processes (Kettinger and Hackbarth, 1997). Because every

company is both a customer and supplier, the C-SLC can be used from both the

supplier and customer perspectives:

From a supplier’s perspective, it is important to effectively target the market and

advertise for customers, evaluate their product and service requirements and

respond to their requests, deliver in a timely manner, and support customers after a

sale. Concurrently, customers are searching for product and service information with

the intent of more clearly specifying their own requirements, evaluating and selecting

a supplier, and ultimately ordering and receiving a product or service (Kettinger and

Hackbarth, 1997). Evaluating the current customer life cycle with selected customers

might give new insights of where initiatives can best be made to increase the value

offered to the customer.

26

2.4.3 INTERGRATING INTERNAL AND EXTERNAL PERSPECTIVES

Kettinger and Hackbarth (1997:67) outline that:

It can occur that both internal and external processes become interconnected.

For example, the automation of procurement (e-procurement) involves

investigating the buying activities but also involves integration with internal

processes and systems. So not only do the processes themselves but also

the integration and automation through e-business become a topic of

investigation. After the focus on parts of the C-SLC has been decided, the

impact on current systems and processes has to be assessed.

The e-commerce value chain (introduced in Figure 2.7) can help in this assessment.

Taking the example of e-procurement, it can be seen that this system affects both

the supporting (procurement) and primary (inbound logistics) processes; for the

example of the Web site, most linkages exist with the marketing and sales activity. In

both cases it is important that the appropriate supporting processes are in place.

Kettinger and Hackbarth (1997) argue that if an organisation’s processes consist of

multiple value chains, the steps described above can be repeated for each chain.

2.4.4 APPLYING THE E-COMMERCE VALUE GRID

After having identified areas where e-commerce could be used to support the

business strategy, specific e-business applications have to be specified. A

framework to identify opportunities from Web-based electronic commerce (EC)

applications has been developed by Riggins (1991) see section 2.3.5.3. Value is

generated in three different ways, by using EC applications to generate efficiency,

effectiveness and/or strategic benefits. It can be seen from the above mentioned

section that the dimensions of commerce and the dimensions of value creation apply

to all areas of the e-commerce value chain.

27

2.5 CONCLUSION

It has been shown that while it is easy to create competitive advantage utilizing e-

commerce, it is a more daring task to build sustainable competitive advantage using

the same technology. Although e-commerce is now a requirement for engaging in

competitive business, it has been proven not to be enough in itself for sustainable

competence. It has also been shown that e-commerce implementations are easy to

imitate and lower entry barriers as a result lowering a company’s profitability.

It has been explained how no single strategy is enough to guarantee sustainable

competitive advantage in e-commerce. What comes out is that it is essential to

combine e-commerce strategies with traditional strategies so as to maintain

competitive advantage. Given Zimbabwe’s economic environment of a

Manufacturing Industry that has a limited infrastructure, the recommended approach

is to utilize the Hierarchical Framework of e-commerce to develop an enabling

infrastructure, maintain the services being provided by the company whilst

developing electronic marketplaces. This approach will enable a company to target a

global market whilst maintaining its current clientele.

The organisation can further employ the Electronic Value Grid to find means of

better serving customers. The model will assist in developing improved efficiency

and effectiveness of processes. The company needs to use the above mentioned

tools together with other strategy planning tools. Porter’s five forces model and the

three generic strategies can be used to understand competition better and employ

the best chosen generic strategy to create competitive advantage.

Finally, the RBV helps to analyse resources and protect against imitation, although

this study has shown that this is a difficult task with e-commerce. As such, the

modified Value Chain Model, which is the EC- Value chain, is used hand in hand

with the C-SLC in applying e-commerce to the Value chain in the creation of value

and a close alignment of the e-commerce strategy with the relationship between

suppliers and customers. This analysis gives insight of where initiatives can be best

28

made to increase value offered to customers. In conclusion, since competitors can

imperfectly imitate the above mentioned value creation process, sustainable

competitive advantage can be created.

3.0 RESEARCH METHOD AND PROCEDURE

The research methods employed were structured surveys, interviews and

documental review. The chosen methods set to collect information from different

employee levels in the manufacturing sector. The structured interview was targeted

at senior management who are the main implementers of strategies, while surveys

were conducted on middle level and line managers. As such, questionnaires were

distributed at selected manufacturing sites. The questionnaires were designed to

obtain information to answer various research questions designed to unravel

ecommerce strategies for Zimbabwean industries.

4. RESEARCH FINDINGS

This section lays out research findings and discusses the results after the

conduction of the research was done in the manufacturing sector. A total of 50

questionnaires were distributed to Directors, Management, Supervisors and non

management staff in the manufacturing sector. The research response rate is as

depicted below:

Table 4.1. Questionnaire response rate

Target Groups No. of

Questionnaires

No. of Return

Questionnaires

Response

Rate (%)

Directors & Senior

Management

6 4 83.3%

Line Managers 25 21 88%

Non Managers 19 17 89.5%

Total 50 42 84%

29

The response rate was an average of 42 out of 50, which is 84%. More details on

the response rates can be analysed from table 4.1. The six senior managers were

also interviewed and company strategy documents were also used to verify interview

details.

4.3 COMPOSITION OF E-COMMERCE USAGE ACROSS

MUNUFACTURING COMPANIES IN ZIMBABWE

Of the respondents who responded, 92% understand e-commerce and 87%

acknowledge that in one way or the other, companies is utilising e-commerce. Of all

the respondents, 78.6% understand e-commerce with an understanding above

average.

Fig 4.1 Composition of users of e-commerce as a tool for business

Fig 4.1 shows that e-commerce is used by selected users. The figure shows that

69% of questionnaire respondents responded that e-commerce tools are only used

by a few selected users and 19% responded that it is a key tool for management. It

is also evident from the interview findings that there is no convincing evidence that

the management are utilising e-commerce as a tool. This also explains why

manufacturing companies are finding it difficult to develop its relationships with

customers.

30

Key:-E-commerce utilised by IS only

-Everyone uses IS

-Used by only a selected users

-It is a key tool for management

-Other Reasons

Along these lines Gapu (2004) argues that relationships can be enhanced via e-

commerce. Schaeffer (2003) also argues that e-commerce via the internet enables a

company to expand its market reach. Expanding regionally is one of the key

objectives in the next 10 years (The manufacturing sector Strategy Document, 2007

– 2010). The findings show that in contrast to Gapu (2004) and Schaeffer (2004), the

manufacturing sector has failed to provide the infrastructure that would allow it to

expand its market base through the internet and e-commerce.

4.4 E-COMMERCE UTILISATION

Fig 4.2 Different functions for which e-commerce is used

The figure 4.2 above illustrates the degree to which different functions of e-

commerce have been exploited at the manufacturing sector. It shows that e-

commerce is mainly used by the companies for communication. However, the

interview has shown that this communication is not mainly business communication

but communication with friends and relatives. According to the findings, 80% of

communication is non-business communication. Berkowitz (2000) argues that

communication used for non-business functions is not part of e-commerce. In other

31

words, companies is lowly utilising e-commerce in all areas, otherwise its customer

relationships should have improved.

Whitey (2000) agrees with Berkowitz (2000) that e-commerce can be used to define

electronic market places thereby, building a large marketplace for organisations.

This is contrary to fig 4.2 which shows that companies has not been able to expand

its market reach via e-commerce. Companies have also not been able to reduce any

cost of sales or improve transaction costs by e-commerce.

Fig 4.3 Types of e-commerce utilised

However, fig 4.3 shows that companies has been able to utilise all types of e-

commerce, Business to Business (B2B), Business to Supplier (B2S), Business to

Customer (B2C) and internal e-commerce. B2C e-commerce has been shown to be

the main type of e-commerce being utilised by the manufacturing sector. This level

of utilisation is followed by Business to Business e-commerce and all the other types

which are at the same level of utilisation. The high level of B2C e-commerce shows

the high degree of potential that the manufacturing sector has to reach markets via

e-commerce.

32

Interview findings have shown that management believes companies can expand by

utilising B2C e-commerce. Company strategy documents show the management’s

intentions to enhance the ICT function in companies. However, no solid strategy and

plan has been put in place to develop B2C e-commerce as an expansion move.

Hoffman et al (2004) argue that B2C e-commerce can be used to build operational

advantages in distribution marketing. In contrast, the above findings show that the

manufacturing sector has not benefited from these potential advantages.

Fig 4.4 E-commerce Technologies being used.

Fig 4.4 further shows that companies have used the different e-commerce

technologies which include intranets, extranets, e-mail and electronic fund transfers

in different levels. The prominence of e-mail usage is evident in fig 4.4, in agreement

with the finding in fig 4.2, which shows that e-commerce has been mainly used as a

communication tool. Interview findings also reinforce this finding showing that

companies have got a robust intranet and efficient e-mail. However, interviews have

shown that there is little integration between the manufacturing sector and external

companies that is the extranet is not established. Another interview finding is that

Electronic Data Interchange (EDI) is only utilised together with electronic fund

transfers (EFT) by the finance department’s finance director and manager.

33

The above 50% questionnaire response could be explained by the fact that all

employees are allowed access to one of the internet PC computer which is a pool

computer located in the board room.

However, Riggins (1998) contends that the internet should provide the interaction

dimension of the electronic commerce value grid for efficient customer feedback and

online interaction with the customer community. This is not so from the findings,

since there is limited internet within companies. Since not all technologies are fully in

use, the above findings contradict Riggins (1998) who argues that firms should

compete along five dimensions of e-commerce which are time, distance,

relationships, interaction and product (see section 2.2.4.3). In The manufacturing

sector’ case, the relationship and interaction dimensions are severely compromised

due to limited access to the internet by employees. The limited extranet network also

lowers communication and linkage with business partners.

4.5 E-COMMERCE STRATEGY EXISTENCE AND LEVEL OF

IMPLEMENTATION

The research study findings show that 73.8% of the respondents view E-commerce

strategies as none existent or were implemented to a small extent.

Fig 4.5 E-commerce strategy Implementation

34

Its findings shows that respondents had a bias towards the “I don’t know”, “No” and,

“to a small extent” options of e-commerce strategy implementation. In a summary

the questionnaire finding indicates that e-commerce strategies have been

implemented to a limited extent. Interviews with Senior Management show that no e-

commerce strategies have been developed or are in place. Shingh (2003) agrees

with Porter (2001) that an e-commerce strategy is needed to establish a competitive

edge (see section 2.4). As evident in the above findings, the manufacturing sector

has not established any competitive edge through the implementation of e-

commerce strategies.

4.6 E-COMMERCE CONTRIBUTION TO BUSINESS PERFOMANCE

4.6.1 Level of Integration

The electronic value chain framework developed by Van Hooft and Stegwee (2001)

shows how e-commerce strategies can integrate e-commerce to reach all

organisational activities (see section 2.4.1).

Fig 4.6 Level intergration of e-commerce in different componets of the value

chain

35

Research study findings illustrated by fig. 4.6 show that in all the value chain

processes the majority of the respondents responded that e-commerce has been

utilised minimally in all the value chain processes with the majority of respondents

saying e-commerce has been utilised between 0-20 %. Interviews further elaborated

the fact that different processes and departments in the value chain are not

integrated. As a result, the interviews further show that departments are disjointed

and individualistic. This is contrary to Kettinger and Hackbarth (1997) who

introduced the C-SLC (See section 2.4.2). They argue that by analysing

relationships between suppliers and customers, businesses can be structured to

increase value offered to the customer by integrating all processes internally and

with the external. As such companies are product oriented instead of being market

driven, to quote one of the senior managers.

4.6.2 Contribution to Business Profitability

Fig 4.7 Contribution of e-commerce to business profitability

A detailed analysis of fig 4.7, using a scale of 0–100% contribution to business

performance, shows that 60 percent of the respondents responded that e-commerce

contributed 60% towards business profitability, whilst 71.4% responded that e-

36

commerce contributed about 60 – 80% profitability as a combined range. Further,

research study interview findings show that all management representatives

interviewed responded that e-commerce has contributed to the profitability of the

companies.

Survey Findings show that e-commerce is not fully integrated to the value chain.

Although interview findings are in agreement with the survey findings, they show that

e-commerce has a great potential for yielding business profitability if integrated with

the value chain. Riggins (1991) supports these findings in his arguments that e-

commerce can be used to generate efficiency, effectiveness and strategic benefit

(see section 2.2.4).

4.7 BARRIERS THAT HAVE HINDERED THE EFFECTIVE IMPLEMENTATION OF E-COMMERCE

L ac k of C onfidenc e in E -c ommerc e

11%

No c us tomer c onnec tivity

10%

Diffic ulty of implementation

9%

R es is tanc e to c hange9%

L ac k of Management C ommitment

14%

High c os t of E -c ommerc e

Implementation12%

No Unders tanding to e-c ommerc e B enefits

14%

S ec urity Is s ues11%

L ac k of F inanc ial R es ourc es

10%

Fig 4.8 Barriers to E-commerce

The ratio of 60.3%:39.7% can be approximated to a ratio of 60:40. In this case

management ignorance and attitude contributing to more that 60% of the barriers to

37

e-commerce progress. This ratio can be interpreted to mean that human factors

which constitute about 40% of the factors considered are responsible for 60% of the

barriers to e-commerce. This analysis closely follows the Pareto 80:20 rule, which

states that 80 percent of the results are due to 20% of the factors.

Fig 4.9 Summary of Barriers to E-commerce

Fig 4.9 above summarises Research interview findings with middle and low level

management. These findings attribute most barriers as due to lack of senior

management commitment and lack of understanding to benefits of e-commerce. The

Vermont Report (1999) also echoes these findings, stating that e-commerce is

inhibited by fears of online privacy by management.

38

4.8 THE RELATIONSHIP BETWEEN E-COMMERCE AND PROFITABILITY

Fig 4.10: Comparison of Utilisation of e-commerce and the contribution of e-

commerce to business profitability

Survey results show that the majority of responses were on the middle response. On

a scale of 100%, 21 out of 35 respondents responded that the percentage of

contribution of e-commerce to business profitability was 60%. 29 out of 42

responded that the percentage utilisation of e-commerce at The manufacturing

sector was 60%. These findings are summarised by fig 4.10 above.

Fig 4.10 shows a comparison between research study responses on the contribution

of e-commerce to business to business profitability and the utilisation of e-

commerce. The findings show similar trends for different response options. As such,

the researcher investigated the relationship between the two variables. Ghauri and

Gronhaug (2002) argue that the chi-squared test can be used to test the relationship

between two variables.

39

Hypothesis Test for the Relationship between e-commerce utilisations and its

contribution to profitability

The researcher assumed that the null hypothesis was that the proportions of the

research responses on the contribution of e-commerce to business profitability were

the same as that of the utilisation of e-commerce. The researcher tested the

relationship on a 95% significance level. The critical value was 0.05.

Ho: 5.7%:22.9%:60%:11.4% for the responses of 20%, 40%, 60% and

80%

respectively.

H1: The ratio of responses for 20%, 40%, 60% and 80% levels are not

5.7%:22.9%:60%:11.4%

The degree of freedom (d.f.) = 3.

For 3 d.f. and p = 0.05, the critical chi-square value is 7.815.

Table 4.1: The chi-squared test

Actual utilisation responses

Expected Proportion out of 100

Expected responses

Actual – Expected (A-E)

Sqr (A-E)sqr(A-E)/

E

2 5.7 2.4 -0.4 0.16 0.1

3 22.9 9.6 -6.6 43.56 4.5

29 60.0 25.2 3.8 14.44 0.6

8 11.4 4.8 3.2 10.24 2.1

42 100.0 42 Chi-squared value = 7.3

From table 4.1, Chi-squared = 7.3, which is less than the critical value of 7.815. The

null hypothesis was therefore accepted, and the conclusion was that at 95% level of

significance, e-commerce utilisation is related to its contribution to profitability.

40

4.9 CONCLUSION

The findings have shown that 60.9% of the respondents responded that e-commerce

is only used by selected users. In all the business processes, research findings

show that e-commerce has been utilised below 40%. However, e-commerce has

been equally used for B2B, B2C and Internal e-commerce. E-commerce has not

been able to utilise extranets or the internet since these infrastructures have been

implemented minimally. The research findings have also revealed that e-commerce

has not been utilised to interlink and integrate business processes in the value

chain. The main barrier to e-commerce has been shown to be human factors which

included lack of management commitment to the implementation of e-commerce.

The following section presents the research conclusions and recommendations to

management.

5.0 CONCLUSIONS AND RECOMMENDATIONS

5.1 INTRODUCTION

This research set out to investigate the degree to which the manufacturing sector

has embraced e-commerce. In identifying this utilisation of e-commerce, the

research was carried out through interviews and questionnaire surveys to find out

the following:

1. The degree of awareness in businesses of the existence of e-commerce.

2. The degree to which businesses have utilised e-commerce technologies.

3. The major challenges in implementing e-commerce to ensure competitive

advantage.

4. The different e-commerce strategies that can be implemented by businesses

for competitive advantage.

From the research findings and their analysis, conclusions can be made as to the

level of implementation of e-commerce by businesses in Zimbabwe. This section

41

purposes to carry out that particular function and present recommendations for

possible action by Zimbabwean businesses.

5.2 CONCLUSIONS

1. Even though all managers and most employees understand e-commerce with

an understanding above average, the research has established that e-

commerce tools are only being utilised by a few selected users. The research

also established that e-commerce is not considered as a key business tool by

management.

2. Internet, which is supposed to be a key tool to enhance e-marketing, has

been shown to be minimally utilised. As a result, businesses have not been

able to establish e-marketplaces. In return, no sales have been improved via

e-commerce implementations.

3. Despite the fact that Zimbabwean companies has been able to utilise

Business to Business, Business to Customer and Business to Supplier e-

commerce, they have failed to be more profitable from utilising e-commerce.

This could be explained by the fact that Zimbabwean companies have no e-

commerce strategies in existence to effectively drive the e-commerce thrust.

4. The research has established that e-mail is the main e-commerce technology

under use. However it has also been established that companies have not

been able to harness the potential of e-mail to enhance business

communications and develop customer relationships. This is the case, since

Zimbabwean companies have not been able to utilise other e-commerce tools

which should contribute hand in hand with e-mail to quicken and make

business processes more efficient.

5. The research has also established a strong relationship between the level of

utilisation of e-commerce at manufacturing firms and its contribution to

business profitability. Although it has been established that e-commerce has

42

contributed to the profitability of companies, it can be concluded that the

absence of an e-commerce strategy has strongly contributed to the failure by

companies to establish competitive advantage via e-commerce.

6. The research has established that e-commerce has been mainly hindered by

the lack of commitment to e-commerce and low appreciation of the benefits of

e-commerce by management. Other big hindering factors have been shown

to be high costs of implementing e-commerce and security fears by

management.

In considering all the above conclusions it can be concluded that the e-commerce

technologies among e-mail, the internet, extranets, intranets, EDI and EFT that have

been fully utilised by Zimbabwean businesses are less than those that have not. In

other words, Zimbabwean businesses have not fully embraced e-commerce.

5.3 RECOMMENDATIONS

The following recommendations are documented for Zimbabwean organisations in

the light of the findings and conclusions of the research study:

5.3.1 The training of management on e-commerce

The Information Systems (IS) department in conjunction with the HR department

should develop a training program to educate senior management about e-

commerce and its benefits. This training should cover how e-commerce strategies

are developed and how they can be integrated to all business processes and the

value chain. By offering this training, the lack of understanding and low appreciation

will be minimised and the knowledge will be used to effectively implement e-

commerce.

43

5.3.2 The development of an e-commerce strategy

Management with the aid of the IS department should develop an e-commerce

strategy. This strategy should build on general corporate and IS strategies. It should

direct how companies intend to build competitive advantage through the

implementation of e-commerce strategies. The buy in of the board and top

management should be sourced in order to make sure that the implementation of the

e-commerce strategy will not be hindered due to lack of funding. Developing a

robust e-commerce strategy will set Zimbabwean companies ahead of the regional

competition. Since regional competitors are still reluctant to utilise this technology

fully, Zimbabwean firms can reap from first mover advantages.

5.3.3 Development of the different types of e-commerce

Organisations should fully develop Business to business and Business to customer

e-commerce by the implementation of internet for linking with key suppliers and

customers. To develop business to customer e-commerce, the marketing

department will need to be fully computerised from the ordering process to customer

servicing. The setting up of a fully functional website can also enhance customer

services. The business will need to analyse supplier-customer processes so as to

enhance customer services. Organisations will need to develop external links with

key suppliers so as to enhance and secure the procurement process.

5.3.5 Integration of e-commerce with the Value Chain

Organisations will need to fully computerise and expand access to computers by

every key information requiring and processing department. The Value Chain needs

to be fully integrated by the full implementation of e-commerce to every process in

the value chain. This will enable companies to become market driven as the

production department will be able to produce as per orders from marketing. All

departments will be able to make informed decisions based on current up to date

information due to online systems.

44

5.4 RECOMMENDED FURTHER RESEARCH

This research could also be further carried out on the whole food milling industry to

establish the potential benefits of e-commerce in the industry. In that research an

investigation of how e-commerce strategies can be used to establish competitive

advantage can be carried out. The research could also set to find out how e-

commerce can actually be utilised by the Foods Industry in Zimbabwe to expand

globally and through the SADC region.

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