PROJECT TOPIC- UTILISATION OF ELECTRONIC COMMERCE IN MARKETING INDUSTRIAL PRODUCTS IN SMALL MEDIUM ENTERPRISES IN LAGOS METROPOLIS, NIGERIA
Background of the study
E-commerce (Electronic Commerce) is an all-embracing concept. It is described by E-commerce Innovation Centre (EIC) (200 1) as any form of business or administrative transaction or information exchange between the company and the outside world; that is executed using any Information and Communication Technology (ICT). E-Commerce has become an important marketing tool provided by the current Information and Communication Technology (ICT), particularly through the services of the Internet. According to Kotler (2004), ICT is an important
determinant of the process of globalisation. Laisser (2002) define ICT as an integrated set of information and communication technologies used to code, process data and for effective management of information and organisational resources. According to Laisser, information technology involves technologies that are used to process and store data, which include the computer and the different software. On the other hand, information technologies deal with information dissemination and include technologies such as the telephone (landline and mobile), Internet, television, radio broadcasting, chatting and video conferencing among others. ICT is therefore the integration of the computing and communication technologies used for information
processing and management. With the current trends in which information in form of words, voice and pictures, etc is transmitted globally with minimum delay, the world is now a global village and globalisation has become the contemporary trend.
Wikipedia (2007) defined globalisation as a process in which improvements in technology such as the communication and transportation, combine with the deregulation of markets and open borders to bring about vastly expanded flows of people, money, goods, services, and information. This process integrates people, business, nongovernmental organisations, and nations into larger networks. The forces of globalisation and the ICT revolution are combining to create the present economy, marked by higher rate of economy and productivity growth. Technology is both driven by and drivers of globalisation, as both forces continually reinforce one another.
The process of globalisation creates new challenges and opportunities for businesses. The opportunities include access to new markets that were previously closed due to cost, regulation, or indirect barriers, the ability to tap resources such as labour, capital, and knowledge on a worldwide basis, the opportunity to participate in global production networks that are becoming prevalent in many industries. The challenges are from foreign competitors entering firms domestic markets, and from domestic competitions reducing their costs through global sourcing, moving production offshore or gaining economies of scale by expanding into new markets. Globalisation challenges firms to become more streamlined and efficient while
,simultaneously extending the geographic reach of their operations.
According to Bradley, Jerry, and Richard (1993), in order to respond to these opportunities and challenges, firms require a fundamental restructuring of the organisational strategy and process. One aspect that is being influenced by globalisation is the way and manner marketing is conducted globally. E-commerce is an innovation in ICT that is changing the way marketing is being conducted globally and is a driving force of the current globalisation by ensuring that marketing takes place globally with minimum barriers in terms of location and time.
According to Herbert (1 998), the Internet, through the e-commerce applications has transformed the global market into a homogenous one, with trading activities taking place 24-hours in all year round. There are no time and geographical barriers in the current global market. The lnternet is a resource provided by ICT which refers to thc global network of computers that connect users of all types all over the world. Internet is a vital facilitator of globalisation and e-commerce.
The impact of globalisation is felt across all organisations – public and private, large and small and in all management disciplines, marketing, strategy, behaviour, and communications; among others. The process of globalisation has led to the reduction in geographical and time barriers across the globe. Consequently, people around the globe are more connected to each other than ever before. Marketing activities now take place globally through the use of e-commerce resources across the world.
There are varied resources in e-commerce, which can be utilised by organisations for administrative and marketing efficiency and effectiveness. Chan and Swatman (2001) stated that e-commerce resources are derived from the facilities and applications available on the net. Chan and Swatman identified e-commerce resource as the e-mail, web and Electronic Data Interface (EDI) Internet solutions as some of the e-commerce resources. Heng (2006) stated that there are three major resources in e-commerce, including physical, human and societal resources.
The physical ecommerce resources include natural resources, technologies and physical infrastructure; human resources include the labour, knowledge and skills, while societal resources include moral an ethical systems, institutions, culture, languages, societal harmony and community spirit. E-commerce resources according to Deital, Deital and Nieto (2000) comprise the proprietary and non-proprietary technologies that can be used to aid e-commerce, stressing that the core technologies are open standard.
This means that the core technologies in e-commerce are available for use freely for commercial and non-commercial purposes. Open standard technology software is (I) available at no cost, (2) available with source code and (3) freely redistributable, with or without modifications. The Internet is an example of the ecommerce resource which is relatively free for use by everyone globally. This implies that the Internet is not an exclusive patent right of anybody or organisation. In this present study, e-commerce resources are the technologies and applications in computer networks, including the Internet used for carrying out marketing and other business transactions of a firm.
The term utilisation refers to the employment of any tool or resources to facilitate performance. In the context of this study, utilisation of e-commerce resources refers to the use of e-commerce resources (e-mail, web, search engine, etc) to support marketing activities of the Small and Medium Enterprises (SMEs) in marketing industrial products in Lagos. Marketing activities according to Osuala (1998) include, managing, forecasting; conducting research, pricing, transporting, storing, advertising and selling. These marketing activities are usually summed up as a marketing mix which comprises the 4ps – product, price, promotion and place. The marketing mix, constitute the core of an organisation’s marketing system geared towards achievement of the organisational goal.
Furthermore, utilisation is related to the concepts of diffusion and adoption used in the Rogers Innovation Diffusion Theory (Rogers, 1983 and 1995). According to Rogers, diffusion is the process by which an innovation is communicated through certain channels over time among the members of a social system. Adoption is a component of the diffusion process that refers to the evaluation of the results of a trial use of the innovation and a decision to continue using the innovation.
According to Shen, Mawley and Dickerson (2004) the rate of adoption and adoption level are other related concepts. Rate of adoption refers to the relative speed with which an innovation is adopted by members of a social system. It is generally measured as the number of individual who adopt a new idea in a specific period. Adoption level is defined as the average level of utilisation of an innovation by the members of the social system. The concept of adoption level is similar to the utilisation used in this study. Utilisation of e-commerce in this study therefore means the level of the applications of e-commerce resources in marketing industrial products by SMEs.
Utilisation of e-commerce is not concerned with how many firms adopt e-commerce innovation, but is concerned with how many different e-commerce resources a company is using, and to what extent each of the e-commerce resources is used.
Rogers postulated that for any innovation to be adopted by an individual, there are five stages involved – awareness, interest, evaluation, trial and adoption. There are also certain characteristics of innovations that could affect the diffusion or utilization of technological innovations by any group in the society. These include relative advantage, compatibility, complexity, divisibility and communicability. Rogers Innovation Diffusion Theory has been acclaimed to offer explanations on certain factors and problems that influence utilisation of any technological innovation,including e-commerce (Al-Qirim, 2005). Therefore, Rogers Innovation Theory is a useful theoretical framework in determining the extent of the utilisation of ecommerce in marketing products.
PROJECT TOPIC-PUTILISATION OF ELECTRONIC COMMERCE IN MARKETING INDUSTRIAL PRODUCTS IN SMALL MEDIUM ENTERPRISES IN LAGOS METROPOLIS, NIGERIA
According to Stanton, Etzel and Walker (1991), marketing is a total system of business activities designed to plan, price, promote and distribute want-satisfying products to target market to achieve organisational objectives. They stressed that marketing concept is customer oriented. To achieve this philosophy of the modem marketing, all necessary tools should be employed and this includes the utilisation of e-comrnercc which would cnsure effcctive marketing of a firm’s products.
Stanton, Etzel and Walker (1991) wrote that in a narrow sense, a product is a set of tangible physical attributes assembled in an identifiable form which carries a commonly understood (or generic) name, such as apples, steel or baseball bats.
Stanton, et al stressed that this definition is far too limited to convey the brcadtli of the product concept. Stanton et al stated further that in marketing, product is seen as an umbrella term that includes tangible goods, services, places, persons and ideas.
Tangible goods can be seen and touched; services cannot be seen and touched. An example of place as a product is location, such as holiday resort, person, is a footballer and idea is a political party with an idea to sell to the electorate. Also, Palmer (2000) wrote that product is any tangible and intangible item that satisfies a need. In other words, a product can be (1) a material, (2) an intangible service, (3) a combination of ( I ) and (2), (4) a location, (5) a person and (6) idea. Palmer classified product into two broad categories – consumer and industrial products. Consumer products are destined for the ultimate consumers, while industrial products are destined for further production of goods and services. The present study is on industrial products. Palmer classified industrial products into six – raw materials, major equipment, accessory equipment, component parts, consumable supplies and business service.
Osuala (1998) categorised industrial products into two broad divisions – (I) products that are used in the production of other goods and become a physical part of another product and (2) product that are necessary to conduct business and do not become part of another product. Industrial products that are used in the production of other goods are subdivided into four – (1) raw materials, such as agricultural products, livestock, poultry and dairy products, and the products of fisheries, (2) semimanufactured goods, including, sheet, casting, plate, glass and plastics; (3) components, including, car batteries, tyres, headlights and radios, and (4) subcontracted production services such as exists in subcontracting.
Also, industrial products that are used to conduct business are subdivided into five – (1) capital investment goods, such as manufacturing plants and installations, tools, machines, display counters, computers and cash registers, (2) operating supplies, including, paper clips, tapes, and lubricating oil; (3) contracted industrial services, including machine servicing and repairs, cleaning, remodelling, waste disposal and operation of employee cafeterias, (4) contracted professional services, including advertising, datdword processing jobs, legal services and professional accounting, and (5) utilities, including energy, telephone communication and water. Palmer (2000) summed up the service aspects of the industrial products as industrial service.
Monash University (2006) summed the classification of industrial goods into three – equipment, aw materials and services.
E-commerce is considered as a marketing tool that has created new industry structures, changing intensity of rivalry, threats of new entrants, bargaining power of suppliers and buyers and threats of substitutes (Hoft and Stegwee, 200 I). This implies that every organisation, including large and small, can be a major player in the new global market. Studies from other parts of the world (Limthongchai and Speece, 2003 and Pease and Rowe 2003) revealed that small and medium enterprises have successfully adopted e-commerce but only by late 1990’s. It is relatively a new
development with the Small and Medium Enterprises (SMEs) in parts of the world.
The adoption and utilisation of e-commerce were mostly by the large organizations with the financial strength and expertise, (Metz, 2003).
There are currently indications all over the world, including Nigeria, that ecommerce is being utiliscd by the small and medium enterprises. In India, for example, (Payne, 2003) wrote that anecdotes abound about craft people selling their wares on websites, Indian women providing transcription services on the Internet, and even rural farmers checking products prices via the web. The range of products and services involved, span from consumer goods to industrial products (Rowe, 2004).
Furthermore, Kotler (2003) and Osuala (2004) gave indications that ecommerce is being used to market both consumer and industrial products. Kotler and Armstrong (2004) wrote that marketing industrial products via the e-commerce is growing rapidly. They stated that it was estimated that industrial products purchased monline in the United States of America (USA) in 2000 was $75 billion and over $3 trillion in 2003. Industrial marketing deals with products and services intended for the production of further goods and services (Osuala, 1998).
According to Monash University (2006), industrial goods are goods and services purchased by industrial buyers for use in the production of their own goods and services or in the conduct of their business. The industrial buyers are well informed and geographically spread. Ecommerce provides varied information on industrial products, thereby enhancing industrial marketing efficiency. Kotler and Armstrong (2004) wrote that I0 percent of annual purchase bill was saved as a result of e-commerce resources utilised.
The quest to exploit the e-commerce benefits, has become strong motivation for the utilisation of e-commerce by SMEs, all over the world, Nigeria is not an exception. Organisations in Nigeria commenced adoption of e-commerce by the late 1990’s when Nigeria linked to the Internet, (Adekeye, 1997). According to Ibene andObi (2001), by late 1990s, organisations in Nigeria have started to adopt some form of e-commerce such as the use of e-mail and e-payment. However, the use of ecommerce then was mostly by the large organisations and in particular, the financial institutions and the publishing houses (Ibene and Obi, 2001). Among the early adopters of e-commerce by the use of websites were the Nigeria Stock Exchange, Banks and Newspapers, mostly in Lagos, (Oyebisi, Ilori, Adagunodu and Ugwu, 2000). However, by the turn of this millennium, a lot of SMEs joined theircounterparts in e-commerce utilisation, offering varied range of products and services.
By 2002 (Aflon, 2002), there was a list of SMEs with websites signifying utilization of a form of e-commerce resources. Small and medium enterprises are seen to be a critical factor to the economic development of any nation. Therefore, the adoption of e-commerce by this category of business in Nigeria is a welcomed development. According to Osuala (2004), the definition of what constitute a small business defies precision. This is because it is variously defined in different economies of the world. However, in Nigeria, the Industry Policy of Nigeria gave the benchmark for the definition of Small and Medium Enterprises (SMEs).
Jegede (1990) wrote that the policy describes SMEs in terms of micro, small, and medium enterprises. Micro enterprises are the enterprises whose total investment cost does not exceed Wl00,000.00, including working capital but exclusive of land. The small enterprises are those with a total investment of between P1100,000.00 and $42 million, exclusive of land, but including working capital, Medium enterprises are those with total investment between $42 million and $45 million exclusive of land but including working capital. This was however, modified in the successive years and most currently, the Federal Government of Nigeria (FGN)(2007) categorised SMEs into three – micro, small and medium enterprises (MSMEs). Micro enterprises are business concerns with less than 10 employees and capital base of less than W 5m.
The small enterprises are the businesses with employees ranging from 10 – 49 and capital base of W 5m – W49m. Medium enterprises have employees ranging from 50 – 199 and capital base of W 50m – N499m. Therefore, SMEs are the business entities whose capital base does not exceed W 499m and a maximum of 199 employees. Form the purpose of this study, SMEs are in three categories of micro, small and medium enterprises in line with the current Federal Government categorisation.
The utilisation of e-commerce resources is important to the SMEs in the developing countries, including, Nigeria, as this would enhance the needed impact of the SMEs in the economic development of the country. According to Grandon and Pearson (2004), SMEs are attributed to the development of healthy and dynamic economies and to the introduction of inventions and innovations within most countries of the world. Ballentine, Levy and Powell (1998) stated that SMEs constitute more than 95 per cent of the enterprises and account for more than 60 per cent of the employment levels in different countries of the world.
This implies that the SMEs should brace up with the modern global marketing imperatives brought by the development of e-commerce in order to maintain or progress in the vital role of national economic development. This would also contribute to the fulfilment of the Information Technology (IT) policy goal of the nation. Nworgu (n.d.) wrote that the major thrust of the IT policy in Nigeria is the vision of making Nigeria an IT-capable country in Africa and a key player in the information society, using IT as the engine for sustainable development and global competitiveness.
The present age is variously described as the new digital age, information age and information economy, among others. The race for survival in business is defined by the utilisation of e-commerce resources. Osuala, (2004) asserted that the reality isthat nearly every organisation in every industry is affected by e-commerce. Any organisation that does not at least have some kind of plan for an e-commerce initiative is going to find itself significantly behind its competitors. In this present global market, no business can survive without the use of some form of e-commerce in their operations
. Many SMEs in Nigeria, and in particular, Lagos, are already adopting and utilising e-commerce resources, (Achumba, 2005). For instance, out of an estimate of 1,842 lnternet cafes in Nigeria, close to 1000 were in Lagos by 2002 (Nigeria Business Infor.com (2003). Also a conservative estimate of 1.6 million Nigerians used the Internet by then. This figure may have been more than doubled by now.
With lnternet usage by organizations currently in Nigeria, e-commerce has become a reality and despite some perennial problems such as power supply and other essential facilities, the benefits of e-commerce is too much to be ignored. Although ecommerce resources are available for use by the SMEs in Lagos, the extent of the utilisation of these resources by the SMEs is not determined. Therefore, there was the need to explore the extent of the utilisation of e-commerce resources by SMEs in marketing industr
PROJECT TOPIC-PUTILISATION OF ELECTRONIC COMMERCE IN MARKETING INDUSTRIAL PRODUCTS IN SMALL MEDIUM ENTERPRISES IN LAGOS METROPOLIS, NIGERIA