Electronic Commerce

With the help of electronic commerce, small and medium-sized enterprises can improve their relations with suppliers and buyers, build up their customers' loyalty, lower their costs, and create a more dynamic and flexible business structure. Very little appropriate software is being offered by consulting firms, however.

In 1999 the consulting firm Price Waterhouse Coopers polled small and medium-sized enterprises in the APEC (Asian Pacific Economic Cooperation) countries on the advantages to their businesses of electronic commerce. Arranged in order of priority, their answers were that it:

Improves customer service
Strengthens the enterprise's image
Serves as a customer information centre
Gives the enterprise a better competitive position
Builds customer loyalty
Offers better access to international markets
Increases sales
Reduces the cost of information
Serves as an information centre for suppliers
Attracts new investors in the enterprises
Reduces the cost of administrative procedures

There are two forms of electronic commerce:

Business-to-Consumer (B2C) or direct sale to the final customer; and
Business-to-Business (B2B) or transactions within the value chain, such as between the manufacturer and the supplier, the manufacturer and the distributor, and the exporter and importer, for example

Statistics have shown that B2B commerce is undoubtedly far more important than B2C. Furthermore, industrial enterprises almost never sell directly to the final consumer. The aim of B2B is to lower the transaction costs, offer customers better service, and improve the enterprise's organisation -or, stated more generally: to improve continually the relations with customers and suppliers. Electronic Commerce in this sense can be considered a management tool for ensuring quality, product innovation, and making the supply chain as effective as possible. Consulting firms in the developing countries normally try to sell B2C solutions to SMEs. They spread the illusion that an enterprise can increase its sales heavily by "marketing" its website: by entering its name and products in search vehicles like Yahoo and Altavista. Exporters are recommended to add a "shopping cart" and an option to pay with a credit card. Nothing could be further from the truth. At times, B2B is seen as a "marketplace" or "exchange" that operates like a commodity exchange or auction. I do not believe that B2B constitutes a viable alternative; furthermore, it is more suited to products that are highly standardised.

B2B solutions for small and medium-sized businesses are almost non-existent in the developing countries. Consulting firms normally work exclusively with large local firms, for which they prepare B2C systems or highly complex websites. The quality of these is not outstanding. There is an enormous gap that must be bridged: SMEs are sadly lacking in information about the Internet and electronic commerce, and consulting firms do not understand the needs of this market segment. Communication between the two is almost non-existent.

The task here is to create and promote a market for entrepreneurial services that are customised to meet the needs of SMEs. This is a task that should be performed by a government institution, a non-profit organisation, or a specialised private firm. International co-operation can also play a highly important role in this context. Partial subsidy of small and medium-sized enterprises and subsidised pilot projects can be justified until such a time as a market has been established that offers solutions that are geared to the existing needs. The enterprises should assume between 30% and 50% of the costs involved. It is not recommended that national institutions offer these services: they have neither the necessary expertise, nor the capacity to react with flexibility to the needs and demands of the customers.

In Peru, I have implemented an Electronic commerce programme for small and medium-sized enterprises; the methodology received ISO 9000 certification in 2001. See the brochure on E-Commerce and extracts from the project's Quality Manual. Two enterprise solutions prototypes were developed to show SMEs the advantages of working with the Internet and B2B (while at the same time showing the service providers the proper course to be followed).