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Factors Affecting the Growth of E -Business in India & its

Impact on SMEs

Presented by,

Ayaz Ahmed Shariff KAsst. Professor, Dept. Of CSE

Birla 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 & ECommerce.

• Difference between E business & E commerce

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

• Impact of E Business on SMEs in India

• Proposed Model for E Business in ruralagricultural 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