E-Commerce Case Study

Chapter 1

INTRODUCTION

This study analyses the prospect of implementing e-commerce to Turkey's small and medium industries. The study investigates the factors that constraint e-commerce application. Further, the readiness of these SMEs, and issues surrounding e-commerce are discussed. To determine the readiness, SMEs which already ventured into e-commerce are examined. This chapter starts with the background of the study, a brief review the nature of problems, aims and objectives, scope of the study, methodology, and the significance of the study.

Background of the Study

According to Bacchus and Molina (2001), the Internet as a communication medium and market space is growing at an unprecedented rate, following Berners-Lee's development of the "World Wide Web" (WWW) in 1989 which was a key to opening up the Internet as a global and easily accessible information space. By the end of 1997, business-to-consumer (B2C) electronic commerce had become a legitimate retail channel, with 10 million people in the U.S. and Canada purchasing at least one item via the Web (United States Department of Commerce, 1998).

A study in 1998 estimated that the commercial domain is the largest domain on the Internet with 28% of all Internet hosts (Network Wizards, 1998). Moreover, the commercial domain is by far the largest and fastest growing on the WWW with an estimated 63% of all sites on the Web, and to meet increasing demands, industries are offering online services to further boost their businesses (Network Wizards, 1998).

In 1998, there were an estimated 320 million web pages. According to Bacchus and Molina (2001), other studies suggest that the number of web sites is doubling every six months. In August 1999, some 215 million people have had access to the Internet, a leap from the 133 million estimated to be online one year earlier and a fivefold increase from the 40 million users in 1995 (Bacchus & Molina 2001). It appears that businesses are increasingly taking part in the new marketing forum available in cyberspace. To meet the unending increase in demands, industries are offering online services to increase their market share.

The diffusion of the Internet has revolutionized the business landscape (Merilees, 2001). The Internet has been instrumental in transforming the value chain from manufacturers to retailers to consumers, creating a new retail distribution channel (Donthu & Garcia, 1999). Research has investigated the components of e-marketing, notably banner advertisements and consumer information search processes (Ducoffe, 1996). Marketing on-line services is all about cultivating trust, building relationships and recognizing that the customer defines the rules of engagement[1] (www.opensolutions.com).

Since after, the Internet emerged as a tool to advance commercial and leisure activities. New terminology in relation with the internet (i.e. internet commerce, electronic commerce, cyberspace, cybermediaries, market place and the virtual organization) has entered the business ad academic communities at rapid rate, and there are strong behavioral indicators that the Internet is becoming a fixture in consumers' daily lives.

E-commerce is broadly defined as any electronic transaction which performed the sale or purchase of goods or services, whether between business, households, individual, governments, and other public or private organizations conducted over the internet (Harrington, 1995). The proliferation of the Internet and relatively low barriers to enter electronic commerce transactions paved the way for a new complementary information channel between the business and consumers. At first this channel served the purpose of awareness, advertising information provision and information gathering but soon a set of commercial services such as shopping online were launched to both consumers.

Perhaps one of the most fundamental changes brought by the Internet is its impact on marketing (Rostoker, 2003). According to Merrilles (2001), e-marketing basically consists of the same principles found in conventional marketing (the four Ps: product, price, people, and place). Its advantage over the traditional marketing is that it has the ability to greatly enhance the effectiveness of each one of these components (Rostoker, 2003). Rostoker (2003) adds that small businesses and large corporations are jumping on the bandwagon and are investing heavily on research and development on e-marketing, respectively.

For this study, the prospect of e-commerce for Turkey, especially to its small and medium industries is examined. Moreover, this research discusses the benefits of e-commerce to SMEs, the factors to be considered in venturing into e-commerce, the readiness of these SMEs in implementing Internet-based services, and some issues concerning Internet security and customer satisfaction.

Turkey is located in a strategic geographical location, a bridge between two continents, Europe and Asia. Turkey is always involved in negotiation, and mediation processes in economic and political events with the Balkan, Turkic Republics and Middle Eastern countries. (Atakan et al., 2000). As a result of a strong privatization policy that has swept Turkey, the country has been moving toward a more decentralized, deregulated and market-oriented economy; many economic reforms are performed to attract more foreign investment and increase opportunities in general whilst trying pull down inflation (Atakan et al., 2000).

Study shows that there is a need for e-commerce in Turkey to cope with the growing competition; this is apart of the EU integration process[2]. Moreover, e-commerce lessens high physical transaction costs and brokerage and intermediary costs; and it resolves time constraint of physical exchanges and the problem of lack of full access to market participants. Turkey is conducive for the implementation of e-commerce because of its relatively new telecom infrastructure and the increasing demand & usage of information technology. Turkey also has a developing economy & emerging market.

However, there are major barriers for e-commerce: the relatively low Internet penetration rate, the insufficient Information sources and asymmetrical distribution of knowledge, the inefficient business models, and the lack of e-business know-how.

According to Cabbar (2001), in order to accelerate the e-commerce applications, national policies should concern the promotion of B2B applications; setting up of e-marketplace and helping the SMEs to participate in these markets; promotion of SME support networks especially aiming at e-commerce