E-Commerce and Small and Medium-Sized Enterprises in S.E.Wales

WEI Working Paper Series

Paper 33

“E-Commerce and Small and Medium-sized Enterprises in South East Wales: A Clear

Case for Intervention?”

Professor David BrooksbankDr. Brychan Thomas

Dr. Gary PackhamLeighton Morse

Welsh Enterprise InstituteUniversity of Glamorgan Business School

Pontypridd CF37 1DL

Tel No : 01443 482818Fax : 01443 482380

March 2003

E-Commerce and Small and Medium-sized Enterprises in South East Wales: A Clear Case for Intervention?

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Abstract

One region where e-commerce will have a particular impact for small and medium-sized

enterprises (SMEs) over the next few years will be in South East Wales (SEW). In response to

this a survey was undertaken by the Welsh Enterprise Institute (WEI) in collaboration with the

Open University Business School and Rennes ESC in Brittany to assess the e-commerce activity

of firms within the SEW area. The survey was conducted using a database provided by the

Cardiff Chamber of Commerce, Trade and Industry.

Results from the survey demonstrated that nearly all firms used some form of Information

Communication Technologies (ICT). The results also highlighted that a significant proportion of

the sample (77%) were currently using a Web site to increase trade or improve opportunities for

e-commerce. Furthermore, it was observed that firms in the personal services, distribution and

transport industries were less likely to utilise a Web site than firms in the manufacturing, business

services and hospitality industries. Despite the large proportion of firms that had a Web site, only

11% of businesses reported that their site enabled customers to order and pay for products

online although 42% of respondents considered e-commerce to be important for the future of

their business.

This paper therefore argues that these results clearly underpin the necessity for an e-commerce

policy in SEW for the future competitiveness of the area. It also recommends that the Wales

Assembly Government (WAG) should embrace and develop an e-commerce business culture for

the benefit of areas like SEW. If this policy is not forthcoming it is contended that there are

substantial risks to SEW in falling behind the rest of the United Kingdom (UK) that will only

serve to add to the economic disparities already being endured by the Welsh economy. There are

real potential opportunities to develop and diversify the economy of SEW and to develop a

global approach to the marketing and selling of products and services. In fact, this research

establishes e-commerce not only as a priority for new and existing ventures in Wales but also as a

central issue to improving national competitiveness.

Key words: E-Commerce, SMEs, South East Wales, ICT.


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1 E-COMMERCE AND SMALL AND MEDIUM-SIZED ENTERPRISES

It has already been recognised that e-commerce is revolutionising business transactions. In fact,

e-commerce is changing the way businesses of all sizes operate in terms of their interaction with

customers and suppliers. In addition, it is contended that the rapid adoption of e-commerce by

many firms is also providing the catalyst for societal change. Through e-commerce it is possible

to market products and services to customers around the world. It continues however, to present

a significant challenge to regional and central governments alike in terms of policies and

programmes. In this sense, it is argued that businesses will need to adopt a proactive approach if

they are to benefit from this new medium. Moreover, it is submitted that unless firms develop

their own procedures and systems to keep pace with electronic developments, they are likely to

be left behind and fall by the wayside as the ‘e-economy’ gathers momentum.

Whilst there is no internationally accepted definition of e-commerce, the Department of Trade

and Industry proposed the following working definition to the Organisation for Economic Co-

operation and Development (OECD):

‘Using an electronic network to simplify and speed up all stages of the business process,

from design and making to buying, selling and delivery e-commerce is the exchange of

information across electronic networks, at any stage in the supply chain, whether within an

organisation, between businesses, between businesses and consumers, or between the

public and private sectors, whether paid or unpaid.’ (Inland Revenue, 1998)

Small and medium-sized enterprises (SMEs) are exhibiting considerable evolutionary change.

Indeed, the diffusion of e-commerce amongst these businesses illustrates the need for

entrepreneurs to embrace this technology (Williams and Phillips, 1999). SMEs are accessing the

Internet to carry out business and find new customers. In these terms e-commerce involves e-

tailing (virtual store fronts), electronic data interchange and electronic mail (Williams and Phillips,

1999). Studies undertaken by numerous organisations have considered the barriers and the

increased use of e-commerce by business. Typical characteristics of e-commerce include SMEs

utilising the Internet for higher revenues; the ability to research new markets through a Web site,

and the barriers associated with the adoption of e-commerce such as cost. SMEs will use the

Internet for a variety of activities including advertising, sales and business-to-business (b2b),

transactions. Although this is apparent it appears that there is only a small percentage of Internet

use among SMEs directed towards e-commerce sales.


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SMEs are adopting e-commerce for marketing, promoting, buying and selling goods and services

electronically. In particular, this is carried out as a new way of transacting business and

encompasses various aspects of Internet use. This involves virtual store fronts that are sites for

shopping and making purchases and business-to-business (b2b), exchange of data and e-mail.

There is also business-to-business buying and selling and the need for the security of data

handling and transactions (Van Ketel and Nelson, 1998). In these terms Forrester Research

(1998), which is an independent research firm, defines e-commerce as ‘the trading of goods and

services in which the final order is placed over the Internet’. It is evident that a growing number

of SMEs are accessing the Internet for their business and to reach new customers. Although

online sales are growing e-commerce only represents a small amount of SMEs’ use of the

Internet. Consequently, more research is required into the barriers to e-commerce. Nearly all

areas of business are beginning to use e-commerce to reach customers more effectively, plan

production, streamline logistics and inventories, manage multiple relationships and as a means of

cost saving on purchasing (USDoC, 1998). As a consequence, this medium is experiencing

considerable growth. E-commerce is enabling SMEs to compete more effectively in the global

market and more businesses to start-up. It has opened up new areas for businesses to obtain

information and conduct transactions more easily. It is becoming an important tool for business

and a number of issues are evident such as the cost of establishing and maintaining a Web site

and the security of data on-line.

Dun and Bradstreet (1998) have reported the inevitable growth in the use of the Internet by

SMEs, as well as large businesses, and this is now evident. A survey conducted by the Arthur

Anderson Enterprise Group and the National Small Business United (1998) reported that e-mail

and research are the most popular use of the Internet amongst SMEs. In the survey it was found

that SMEs used a Web site in order to reach new and potential customers (78%), sell goods and

services (65%), provide information more efficiently (62%), reach new prospective employees

(13%) and expand globally (17%).

Internet sales for business-to-consumer (b2c), and b2b, e-commerce differ considerably for

source estimates. Analysts have estimated Internet retail sales to be a small fraction of consumer

spending (Roberts, 1999). In fact, the largest part of electronic commerce is b2b trade (Anon,

1998). As already described, there has been a dramatic increase in the percentage of SMEs

gaining access to the Internet. Indeed, it has been reported that there has been greater diffusion

of the Internet to the professional services (such as accountants, insurance companies, estate

agents and law firms) (IDC, 1998). It was also found that manufacturing companies frequently


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access the Internet for many applications. Alternatively, the health and retail sectors lag behind

on Internet usage (IDC, 1998).

The three phases of Internet use which SMEs go through as their Internet involvement develops

are described as connectivity, customer relations and commerce (YG, 1998; Ng et al, 1998).

‘More than two-thirds of the companies…. surveyed have yet to even move into the customer

phase.’ (YG, 1998) The three phases are seen as the ‘building blocks of e-commerce’ (Williams

and Phillips, 1999) as shown in Figure 1 (based on van Goeler, 1998).

Phases Information exchange Web site development

Connectivity Product/Service andEnterprise InformationCustomer FeedbackForms

Brochure-ware sites

Customer Connections Online catalogue Pre E-Commerce sites

E-Commerce Online ordering

Online payment

Simple E-Commercesites

Figure 1: Phases in the Development of E-Commerce for SME Web sites

(Adapted from van Goeler, 1998)

The three phases towards e-commerce can be described as follows:

� Brochure-ware sites. Enterprises use their Web sites for product/service advertisement and

gather information and improve services through customer feedback forms. Such enterprises

need to install electronic technology to sell goods over the World Wide Web.

� Pre-commerce sites. Enterprises are able to provide information on price for immediate

orders from their Web sites. But they do not carry out online point-of-sale transactions

although they keep their site current.

� Simple e-commerce sites. Enterprises accept orders and payments over the Web.

Customers have developed a behavioural sequence to online shopping. Indeed, Forrester

Research (1998) has divided the online retail market into the three categories of convenience

items, replenishment goods and research purchases. Convenience items are low cost

discretionary items such as books, clothes and music. Replenishment goods are medium cost

https://www.researchgate.net/publication/26387550_Business_Use_of_The_World_Wide_Web_A_Report_on_Further_Investigations?el=1_x_8&enrichId=rgreq-de5b49d074680e820ec305f95dfda39b-XXX&enrichSource=Y292ZXJQYWdlOzIzNzQ0ODM5NDtBUzoxMDMxMTgzMjY5OTI5MDJAMTQwMTU5NjczMzIwNg==


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high frequency purchases like groceries. Research purchases are information driven and cost

more than the other two categories and include planned purchases such as cars, computers and

airline tickets. The Forrester Research study (1998) found that first time buyers usually bought

convenience items and that it took around one year for online shoppers to move to a further

category.

Unfortunately, Internet sales are still less than 1% of total retail sales with a fast growth in books,

cars, computers and software (USDoC, 1998). Important players in this growth are online

entrepreneurs (Simons, 1998).

Whereas some SMEs have been early adopters of e-commerce others have lagged behind in

establishing the ability to sell their products and services over the Internet (Williams and Phillips,

1999). In fact, SMEs have been slower than large businesses in embracing e-commerce (Mehling,

1998). Even though the number of SMEs using the Internet is rising there are a number of

obstacles to their use of e-commerce. These include cost features, customer service

requirements, security problems and technical expertise (van Goeler, 1998). Indeed, it has been

found that businesses using the Internet to sell computer-related products identified cost,

customer service, security and implementation problems as obstacles to e-commerce (Williams

and Phillips, 1999).

The most common impediment to e-commerce is cost (Williams and Phillips, 1999).

Fundamental cost concerns are lack of funds for implementation, limited money for maintenance

of sites and the likelihood of no return on investment. Security concerns include ‘hackers’

obtaining restricted information, customer fraud, fallible Internet Service Providers (ISPs) and

Web hosts, and the vulnerability of internal systems to ‘hackers’. Further difficulties SMEs have

are those of integration and implementation of e-commerce sites and the resources to maintain

sites. Also, customer services are considered an e-commerce challenge (Williams and Phillips,

1999).

SMEs rely on knowing customer needs and build business processes and quality control around

communications. A major concern is that the loss of customer contact may lead to a lower

quality of service and there may be customer resistance to product price at the point of

transaction. Low technology enterprises will have concerns about online sales and e-commerce

(van Goeler, 1998). Most SMEs recognise the importance of selling on the Internet as being

important in the future (Williams and Phillips, 1999). It is the proposition of this paper that due

to the future importance for indigenous SMEs to sell their products and services over the


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Internet it is necessary for an e-commerce policy in regions like South East Wales (SEW) for the

future competitiveness of the area.

The cost of building and maintaining an e-commerce site is seen as the largest restriction to

online selling with the lack of technical expertise, site security and the cost of building

transactions based sites as other barriers (Mehling, 1998). Pricewaterhouse Coopers (1998) in

their study highlighted the lack of qualified workers as a barrier, and other studies have found

that age and gender, business age and industry also have an impact on how SMEs adopt e-

commerce. In fact, Quayle (2001), who explores the awareness and level of implementation of e-

commerce, has eloquently described the e-commerce challenge for Welsh SMEs. Results of a

survey of 298 small firms were used to identify barriers faced by these enterprises and he

suggests paths which might be followed in seeking to achieve best in class performance for e-

commerce.

2 RESEARCH METHODOLOGY

The research concerning e-commerce and SMEs in SEW, reported in this paper, was carried out

in two stages involving an initial study followed by the first part of a main study. The Welsh

Enterprise Institute (WEI) on behalf of the Cardiff Chamber of Commerce, Trade and Industry

carried out the initial work concerning e-commerce and SMEs. This was part of the Learning

Chamber questionnaire survey with five sections (the business, training, graduate employment

policies, business support organisations and general Information Technology). The two main

methods involved in conducting the study were a survey of the training needs of the Chamber

members, followed by a series of in-depth focus groups differentiated by sector and size of firm,

to address some of the key issues arising from the survey. Questionnaire forms were sent to the

1,137 Chamber members between Thursday 2 March and Thursday 9 March 2000, and 150

questionnaire forms were returned between Tuesday 7 March and Friday 24 March 2000. The

number of forms returned equated to a sample size of 13.19%. The qualitative data was input

onto an SPSS data file and the results were analysed.

Focus group events were held at the Cardiff Marriott Hotel, with an initial meeting on 8 May,

and three consecutive meetings on 15, 16 and 17 May, for the following sectors, to address some

of the key issues arising from the survey:

� Manufacturing, Engineering and Scientific, Monday 8 May 2000.

� Catering and Hotels, Monday 15 May 2000.


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� Education, Business Services and Leisure, Tuesday 16 May 2000.

� Insurance, Banking and Financial Services/Property, Architecture and Building Services,

Wednesday 17 May 2000.

The meetings commenced at 9.30 a.m. and continued for approximately two hours with

attendance by more than four members of each sector. Nine discussion points were considered

and the main items of discussion were noted after each point. A diagram illustrating the factors

involved for businesses and discussion sheets were provided for each of the members so that

they could take away a record of the proceedings.

The initial work carried out in the Learning Chamber survey regarding e-commerce and SMEs

has been followed in the interim by the first part of the ‘Effects of E-Commerce on Small and

Medium Enterprises in Britain and France’ (E-CoSME) survey (Brooksbank et al, 2001). The

sample for SEW was again composed of firms who were members of Cardiff Chamber of

Commerce, Trade and Industry. The survey form, agreed by E-CoSME partners, was sent to the

sample as a postal questionnaire at the same time as the Chamber Quarterly Economic Survey to

be returned by freepost or fax. The Chamber of Commerce conducted the survey using their

database of members.

The Chamber database included 3,000 current members in the SEW area and questionnaire

forms were sent during November 2001 to be returned before Christmas. 157 replies were

received giving a response rate of 5%, similar to the E-CoSME Devon and Cornwall study.

Although this is a low response it appears sufficient to recruit firms for the part two personal

interviews. Since the response included ten large companies as well as SMEs the findings are

analysed according to the whole return and also for SMEs specifically for the analysis.

3 SURVEY RESULTS: INITIAL FINDINGS

The general levels of Information Technology usage reported by the businesses in the Learning

Chamber survey are shown in Table 1.


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Table 1: The general levels of Information Technology for the businesses in the survey

Manufacture/Engineering &Scientific %

Communic-ations &Computing%

Insurance/Banking/Finance %

Property/

Architect/Building%

Catering&Hotels%

OtherServices%

Total %

Businesseswith e-mail 86 92 100 92 100 94 91

Businesseswith Websites

71 69 55 46 79 69 71

The data showed that 91% of the businesses had e-mail and 71% had developed their own Web

sites identifying their commitment to undertaking commercial operations. The data also indicated

that approximately 60% of small businesses had their own Web sites, and this rose significantly

in the larger business category where 85% had developed their own sites. The doubling of the 'e'

commerce market during the 12 months prior to the survey reflected the importance of 'e'

commerce capability, especially 'business to business' and 'business to consumer’. In addition on-

line sales are almost doubling year on year (Andersen Consulting, in Hill, S., Changing Wales

Report, April (2000)). Table 2 shows the barriers to using e-commerce reported by businesses in

the survey.

Table 2: Barriers to using ‘E’ Commerce reported by the businesses in the survey

Manufacture/Engineering &Scientific %

Communic-ations &Computing%

Insurance/Banking/Finance %

Property/

Architect/Building%

Catering&Hotels%

Other Services%

Total%

Existing workpressures onstaff

39 46 50 23 36 50 43

Lack oftechnicalsupport in-house

32 49 44 23 21 19 30

Level of skillsin business

14 31 32 8 14 19 19

Lack ofunderstanding

25 39 26 23 14 19 24

Shortage offinancialresources

25 31 29 15 21 25 25

The main restrictions and barriers to undertaking ‘e’ commerce activity were seen to be:


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� The existing work pressure on staff (43% of respondents) mainly identified by the small and

medium-sized businesses.

� The lack of technical support in-house (30% of respondents), mainly in the medium–sized

businesses.

� The shortage of financial resources (25% of respondents) identified mainly by small and

medium-sized businesses.

� The level of IT skills in the business (19%).

The following points arising from the Learning Chamber focus group discussions were noted.

Manufacturing, Engineering and Scientific – It was reported that Wales.com had now been

launched which would help Welsh businesses. Whereas larger businesses were more likely to

have a Web site, Objective 1 funding could be used to enable other businesses to have sites. This

was especially the case with manufacturing companies, which needed to have Web sites. It was

noted that the costs to set up a site were between £4k and £8k. When a Web site was set up

there was a cost involved in maintaining the site and there was the need to re-register regularly

with search engines.

Education, Businesses Services and Leisure – It was reported that the Internet was used as a

marketing tool and this would be helped by Wales.com. This would give businesses a wider

audience and in some cases it would revolutionise their activities. Web pages were the first stage

pegs in the ground. To be effective there was a need to upgrade these. Web sites were being used

instead of libraries as the first point, from which to obtain information. In the Financial Services

sector they were being used as brochures to provide information on financial services. It was

possible for businesses that did not even understand e-mail to buy a domain name and have a

Web site up and running within a day. Many colleges were looking for Web placements. There

was also the activity of on-line bidding by businesses for contracts. It was essential to change a

site continuously to stay high on Web lists and to have a large number of hits on sites. There was

also a need to employ Web managers to update and manage sites all the time and if this was done

there was considerable potential. It was felt that the ‘e’ commerce resource of universities and

colleges was not being used since most businesses were not aware of this.

Insurance, Banking and Financial Services/Property, Architecture and Building Services – It was

felt that Wales.com presented considerable opportunities for businesses. An example was that

the Wales Tourist Board had set up a Web site the previous year and had 30,000 hits, which they

claimed had helped with marketing. There was a need to update sites to stay high on lists. SMEs


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were disadvantaged when they had Internet or computing problems due to their lack of finance

and resources.

One of the findings of the Learning Chamber Report was for the exploitation of 'e' business

capabilities. The Chamber has developed its own Web site (www.cardiffchamber.co.uk) which is

presently externally managed and upgraded on a monthly basis. Arising from this a number of

recommendations were made. These were that the site could be developed to include bulletin

boards and chat lines allowing members the facility to register their training problems in a simple

to use form. The additional provision of an on-line training specification would facilitate

members and identify specific training needs. The present members’ database could be further

developed to allow different sectors to be quickly identified. This would also provide the

Chamber with the capability to better target specific events, initiatives and information. The

capability to provide on-line interactive training information and manuals, along with other

traditional library support, is currently restricted by the capacity of the system. This would need

to be addressed if the demand for these services is to be met. Hyper-links to existing training

providers and to organisations and bodies providing support for training initiatives is a further

possible development area for the existing Web site. Within Wales, chambers with relatively small

registers of members are disadvantaged in seeking to create the type of electronic

communications infrastructure proposed by the Chamber in Cardiff. To maximise the potential

benefits of the Cardiff Chamber, it could become the focal point for electronic communications,

with the smaller chambers operating as affiliated organisations. On a national basis, there is no

common standard operating system currently used within the UK Chambers. This situation

could in the medium term restrict the sharing of electronic information and restrict the

Chamber’s ability to react effectively to members’ needs. The recommendations from the survey

were reported to the Wales Assembly Government (WAG) and these will be implemented in the

Learning Chamber Network project to be initiated shortly. This will involve support for SMEs to

network to enhance their e-commerce capabilities through the provision of affordable training.

4 E-CoSME SURVEY OF SOUTH EAST WALES

The questionnaire returns received for the E-CoSME survey of SEW demonstrate that nearly all

firms use computers (only one respondent company did not use a computer although they are

anticipating obtaining one within a year). Three quarters of the firms are networked and this

finding is similar for the whole return in SEW and SMEs specifically. In accordance with the

specifications for the E-CoSME study the aim of part 2 is to recruit matched pairs of firms, split

according to whether they are low or high/more advanced users of Information and

http://www.cardiffchamber.co.uk/


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Communications Technology (ICT). Table 3 illustrates the differences between industries for

SMEs and large companies (LCs) and the split between networked and non-networked

computers will be used as a criterion for recruitment to part 2.

Table 3: Computer usage by type of industry (SMEs and LCs)

No No, but willwithin ayear

Yes, Non-networked/Standalonecomputer(s)

Yes,Networkedcomputers

Total %

Manufacturer – finishedgoods

0 0 3 22 25 16

Manufacturer – components 0 0 3 14 17 11Business services 0 0 5 40 45 29Personal services 0 0 3 5 8 5Building/construction 0 0 7 8 15 9Distribution/transport 0 0 6 14 20 13Hospitality 0 1 5 3 9 6Other 0 0 6 12 18 11Total 0 1 38 118 157% 0 1 24 75

Table 4 provides the differences between industries for SMEs specifically. The results show only

slight adjustments to the data from Table 3 for the 10 large companies (LCs) that are excluded.

Table 4: Computer usage by type of industry (SMEs)

No No, but willwithin a year

Yes, Non-networked/Standalonecomputer(s)

Yes,Networkedcomputers

Total %

Manufacturer – finishedgoods

0 0 3 17 20 14

Manufacturer – components 0 0 3 13 16 11Business services 0 0 5 37 42 29Personal services 0 0 3 5 8 5Building/construction 0 0 7 8 15 10Distribution/transport 0 0 6 14 20 14Hospitality 0 1 5 3 9 6Other 0 0 5 12 17 11Total 0 1 37 109 147% 0 1 25 74

About three-quarters of respondents had networked computers. The areas of manufacturing had

more than 80% of companies with networked computers, business services 88%, personal

services 62.5%, building/construction 53%, distribution and transport 70% and 70.5% for

others. Only hospitality had more companies with non-networked/standalone computers (55%),

33% networked and 1 company without a computer at the moment.


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Based upon these results there are potential matched pairs in building/construction, distribution

and transport, and hospitality. Matched pairs are also offered by personal services and ‘other’

dependent on whether the businesses are comparable. There should be enough respondents so

that size differences can be taken into account. A significant determinant of e-commerce is the

use of a company Web site. Similar to Devon and Cornwall the SEW study exhibits an

unbalanced split between the use of Web sites (77%) and companies without Web sites 23%, as

illustrated in Table 5.

Table 5: Website usage by type of industry (SMEs and LCs)

No No, but intend to within ayear

Yes Total %

Manufacturer – finished goods 2 1 22 25 16Manufacturer – components 1 5 11 17 11Business services 4 1 40 45 29Personal services 3 0 5 8 5Building/construction 4 1 10 15 9Distribution/transport 5 4 11 20 13Hospitality 0 2 7 9 6Other 2 1 15 18 11Total 21 15 121 157% 13 10 77

Table 6 shows the split between companies with Web sites and those without for SMEs

specifically. Again, the results show only slight adjustments to the data from Table 5 for the 10

large companies (LCs) that are excluded.

Table 6: Website usage by type of industry (SMEs)

No No, but intend to within ayear

Yes Total %

Manufacturer – finished goods 2 1 17 20 14Manufacturer – components 0 5 11 16 11Business services 4 1 37 42 28Personal services 3 0 5 8 5Building/construction 4 1 10 15 10Distribution/transport 5 4 11 20 14Hospitality 0 2 7 9 6Other 2 1 14 17 12Total 20 15 112 147% 14 10 76

Some 76% of SMEs who responded had a Web site and 24% did not. Those industries where

around 40% of the respondents did not have a Web site were personal services and distribution

and transport. Alternatively, the manufacturing, business services, hospitality and ‘other’ had high


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Web site usage. These results will be useful when deciding which firms to take to part 2. Only

11% of businesses reported that their Web site allowed customers to order and pay for products

online. For those respondents with Web sites 18% updated them frequently (daily or weekly –

the same percentage as for Devon and Cornwall), 15% once a month and 45% did not update

their Web site more frequently than three months and often longer.

Most respondents were connected to the Internet with only 5% not connected. The most

common connection was ISDN (42%) and there were 33% with fixed-line, 20% cable modem,

10% for ASDL and leased line and 4% using a WAP connection. 43% of businesses with a

business plan had an ‘ICT plan’ and 42% of respondents considered e-commerce to be very

necessary for their business. Only 5% did not feel that e-commerce was important. With regard

to ICT skills 50% of respondents reported that they acquired these in-house, 36% on a formal

course, 43% said that staff learn these on the job as they go along, 8% recruit skills and 3%

through other means.

5 CONCLUSIONS AND POLICY IMPLICATIONS

In the future more entrepreneurs will gain access to the Internet at lower cost, but if concerns

such as security are not addressed e-commerce may be slow to grow. If more secure ways of

business are developed on the Internet, consumers and businesses will not consider themselves

vulnerable with personal information. The number of SMEs using computers in their operations

will increase considerably in the future. In particular, the Internet is a quick and simple means of

communication between SMEs and customers. Consequently, more companies in the future will

be likely to use e-commerce. SMEs will be able to buy, sell, distribute, maintain products and

provide services over the Internet. By doing this they will be able to achieve cost savings and

have more customers with increased sales. Here, e-commerce will not replace traditional forms

of shopping and business, but will provide a further option to the SME and the consumer.

Business-to-consumer (b2c), development has been slower than business-to-business (b2b), e-

commerce. For there to be greater growth in online consumer sales there is a need for secure and

cost effective mechanisms. Future consumers are likely to embrace e-commerce and this will

help the development of e-commerce for SMEs. In areas like SEW there is a clear case for

intervention through policy development in order to increase the take-up of e-commerce by

SMEs.

The E-CoSME study shows that about 75% of respondents have networked computers in South

East Wales. The areas of manufacturing have more than 80% of companies with networked


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computers, business services 88%, personal services 62.5%, building/construction 53%,

distribution and transport 70% and 70.5% for others. Only hospitality has more companies with

non-networked/standalone computers (55%), 33% networked and 1 company without a

computer at the moment. For the next part of the study there are potential matched pairs in

manufacturing, building/construction, distribution and transport, and hospitality. Matched pairs

are also offered by personal services and ‘other’ dependent on whether the businesses are

comparable. There are enough respondents to take size differences into account. A significant

determinant of e-commerce is the use of a company Web site. Similar to Devon and Cornwall

the South East Wales study exhibits an unbalanced split between the use of Web sites (77%) and

companies without Web sites (23%).

It is apparent that 76% of SMEs who responded have a Web site and 24% do not. Industries

where around 40% of the respondents do not have a Web site are personal services and

distribution and transport. Manufacturing, business services, hospitality and ‘other’ have high

Web site usage. These results will be useful when deciding which firms to take to stage 2. 11% of

businesses report that their Web site allows customers to order and pay for products online. For

those with Web sites 18% update them frequently (daily or weekly – the same percentage as

Devon and Cornwall), 15% once a month and 45% do not update their Web site more

frequently than three months and often longer.

Generally, respondents are connected to the Internet with only 5% not connected. ISDN (42%)

is the most common connection and there are 33% with fixed-line, 20% cable modem, 10% for

ASDL and leased line and 4% using a WAP connection. Some 43% of businesses with a business

plan have an ‘ICT plan’ and 42% of respondents consider e-commerce to be necessary for their

business. Only 5% do not feel that e-commerce is important. With regard to ICT skills 50% of

respondents report that they acquire these in-house, 36% on a formal course, 43% say that staff

learn these on the job as they go along, 8% recruit skills and 3% through other means.

Based upon these findings the aim for the Wales Assembly Government should be to improve

affordable access to a high bandwidth communications infrastructure for SMEs and to provide

practical, accessible support for these firms, to encourage and enable them to make successful

use of e-commerce opportunities. By implementing this policy it is envisaged that the proportion

of businesses in SEW using e-commerce will increase and eventually converge on the UK

average. Sufficient attention to date has not been given to bringing together all the various

programmes in Wales involving e-commerce into a high profile and coherent strategy as

exemplified by other governments (IoMG, 2000).


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ACKNOWLEDGEMENTS

The authors would like to acknowledge the support and participation of Cardiff Chamber of

Commerce for the Learning Chamber project and the E-CoSME survey. Also, Dr Colin Gray,

Head of the SME Research Unit, Open University Business School, for inviting the WEI to

participate in the ECoSME study, and to Professor Michael Quayle, Director of the Business

School, University of Glamorgan, for his support for the project in South East Wales.

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Documents

E-Commerce and Small and Medium-Sized Enterprises in S.E.Wales