Boon or Bane? Impact of the Digital Age on Small Business Exporting

By Elango, B.; Donald Jones, J. | Entrepreneurial Executive, Annual 2002 | Go to article overview

Boon or Bane? Impact of the Digital Age on Small Business Exporting


Elango, B., Donald Jones, J., Entrepreneurial Executive


ABSTRACT

The Internet can be used by small firms to enhance their operations internationally. This paper reviews the opportunities presented by the Internet in cross-border trade by small business and the challenge of using the Internet properly. While it is evident that ample opportunities exist for small business firms in the international arena, small firms can benefit from pitfalls experienced by earlier users of the Web. Suggestions are given for entrepreneurs to help them in their development of international e-Commerce strategies.

INTRODUCTION

Much has been said and written about the phenomenal growth of the Internet and the spread of e-Commerce. Both the Internet and e-Commerce have become an important part of society and an integral part of the international business world. Forrester Research predicts that e-Commerce transactions worth $6.8 trillion are likely to take place worldwide in 2004. According to IDC, e-Commerce activity outside the U.S., currently 26% of the worldwide total, will increase to 46% by 2004 ("Cross-border regulations," 2000).

It is important to recognize that currently a greater part of Internet-registered households and of international e-Commerce is located in a few areas of the world. The main areas of Internet commerce are North America, the European Community, and Japan. Hence, large segments of the international trade world do not use the Internet. This is certain to change. For example, the emerging markets (e.g., India, China, and Brazil) though relatively small today, are expected to grow substantially over the next decade. According to Access Media International estimates, there will be 200 million Internet users in Asia by 2004 ("The tiger," 2000). This will be as large as the total number of users in the U.S. in 2004. Even using a conservative estimate that 15% of total market in e-Commerce will be cross-border, there will be a $1 trillion opportunity for businesses involved in international trade. Small businesses have much to gain by using the Internet, including the possibility of participating internationally even with meager resources.

The significance of the trend is illustrated by two facts: the volume of international trade currently conducted through the Internet (US$80 billion); and the amount of time senior managers are devoting to needs of their firms to compete successfully in international e-Commerce. For instance, Amazon.comTM gains 25% of its revenue overseas and Mr. Jeffrey Bezos, Amazon's CEO, hopes to gain more than half its sales from overseas markets in the near future ("Amazon.com sets," 2000). A top executive of YahooTM (whose site is ranked No.1 in terms of visitors traffic in Europe) reports that managers devote 50% of their time to planning for the future needs of the international aspects of their business (Auerbach, Wysocki, and Boudette, 2000).

Unfortunately, little has been written about the impact of Internet on international trade and how the Internet can benefit small businesses. According to a survey by Forrester Research, 85% of the online business firms (including large firms) are incapable of shipping overseas ("Cross-border regulations," 2000). This paper looks at the benefits and barriers facing a small business conducting international trade through the Internet. We believe this paper will be useful for small firms, which make products that can be sold globally and are planning to enter overseas markets. The paper addresses the benefits and pitfalls a business may face in international operations. In particular, we will examine the effect of consumer-directed (Business-to-Consumer) and business-directed (Business-to-Business) Internet enterprises on international trade and offer suggestions for small businesses to benefit from these trends. These Internet business segments will be addressed separately in the following sections, as will the benefits of e-Commerce and the impediments to e-Commerce inherent to the segment of e-Commerce being discussed. …

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