Academic journal article Entrepreneurial Executive

Impact of E-Commerce on Entrepreneurs and Small Businesses: Opportunities, Challenges, and Strategies

Academic journal article Entrepreneurial Executive

Impact of E-Commerce on Entrepreneurs and Small Businesses: Opportunities, Challenges, and Strategies

Article excerpt

ABSTRACT

Small businesses and entrepreneurs are rushing to the Internet to do business and reach new markets. While e-commerce is used for advertising, business-to-consumer and business-to-business transactions, small businesses and entrepreneurs encounter several challenges. This paper examines both the opportunities and challenges that are posed by the use of e-commerce and makes recommendations to small businesses and entrepreneurs so they can overcome the challenges and exploit the opportunities presented by e-commerce.

INTRODUCTION

The Internet and the World Wide Web (WWW) are revolutionizing the way organizations are functioning around the world. The Web is used by organizations in a myriad of ways, some of which include collaborating, communicating information, obtaining information, providing information, and sharing information. One application of the Web that is grabbing headlines in virtually every media is Internet commerce or Electronic Commerce (e-commerce). E-commerce--the marketing, promotion, buying and selling of goods and services over the Internet is experiencing unprecedented growth (Williams, 1999). In the past 2 or 3 years, e-commerce growth has been astonishing and is expected to continue at a similar rate over the next four years.

Small business use of the Internet (e-commerce and other applications) has increased from 10 percent in 1996 to about 75 percent today; this use is expected to increase to 85 percent by 2002 (Song, 2000). However, currently, only 28 percent of small companies sell goods and services online (Maxwell, 2000). If one looks at businesses with fewer than 10 employees, one sees a slightly different picture. In 1999, about 15 percent of these 7.5 million small businesses in the U.S. conducted e-commerce (Business Week e.biz, 1999). This number is expected to increase to 20 percent by the year 2001. Although these statistics provide evidence that smaller organizations are now conducting e-commerce activities, large companies still account for the majority of e-commerce activity in the U.S. These statistics also fail to tell us whether or not selling online is a better method for small business.

Over the past few years, a decrease in the prices for software and hosting services has reduced the barriers to entry in the online environment. Even the smallest of businesses can now have a presence on the web and conduct commerce. Selling online, however, is not without its perils. Blindly diving headfirst into the Internet without a complete understanding of technical, managerial, and competitive challenges may result in stressed operations or bankruptcy.

A question, then, arises: should small businesses and potential entrepreneurs embrace the Internet? The answer to this question lies in how well a business understands e-commerce opportunities in its environment and implements strategies to take advantage of these opportunities. This paper will examine the opportunities that are available for small businesses and entrepreneurs on the Internet, identify the challenges they are likely to encounter, and suggest strategies they can develop and implement to take advantage of e-commerce opportunities.

OPPORTUNITIES

E-commerce takes a number of forms: business-to-consumer (B2C), business-to-business (B2B), e-procurement, and e-marketplace. According to Forrester Research (2000), the U.S. share of global B2B e-commerce sales will grow to approximately $3 trillion by 2004, while B2C e-commerce sales will account for $184.5 billion (see Table 1). E-commerce is growing much faster in the B2B sector compared to B2C and is largely dominated by larger companies. By the year 2002, 85 percent of small businesses are expected to conduct business via the WWW.

Retailing or "e-tailing" is the most typical B2C activity. New ventures or small businesses can use the Internet to either start a new retailing or service business, enhance an ongoing business or provide hardware, software, or services that allow other businesses to integrate the Internet into their business model. …

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