E-Commerce and Export Markets: Small Furniture Producers in South Africa *. (Global Perspective)
Moodley, Sagren, Journal of Small Business Management
Excluding government transactions, approximately 90 percent of global e-commerce is conducted among businesses (Mansell 2001). Increasingly, international wood furniture buyers are using the internet to transform the way they do business and by which they collaborate with trading partners. In particular, many of them are using the internet to trade online and to develop close knowledge-based links with suppliers. E-commerce technologies are, in turn, becoming increasingly important for South African small wood furniture producers (SWFPs) as they are integrated into global value chains and are exposed to more sophisticated markets.
SWFPs are likely to benefit from low cost access to the global marketplace, which previously was only open to major companies with a global marketing and distribution infrastructure. The development of effective e-commerce strategies thus is of critical importance for increasing SWFPs' competitiveness in global markets. This is in keeping with Keesing and Lall's (1992) argument that third-world producers often are expected to meet requirements that frequently do not apply as yet to their domestic markets. Opportunities exist for SWFPs to participate in the reorganization of supply chains to capture efficiency gains and to participate in more geographically diverse supply systems. Failure to adopt e-commerce technologies could lead to SWFPs increasingly becoming marginalized from international markets. By not making the transition to e-commerce, SWFPs run the risk of becoming less competitive, affecting both their present market positions and their long-term viability. As larger companies in the wood furniture value chain integrate e-commerce into their business, small firms without e-commerce capabilities run the risk of being "frozen out" of the value chain.
Unlike large enterprises, many of which already operate in global markets through well-established networks of affiliates, the export potential of SWFPs has been constrained because of their small size, lack of resources, and limited ability to identify and work with new international customers and suppliers. The internet eliminates these disadvantages by opening up global markets to SWFPs with an effective strategy for conducting business online. Reduced transaction costs, lower barriers to market entry, and improved access to information likely are to reduce the economically optimal size of firms, thereby encouraging smaller firms to work together to develop global markets. Despite these opportunities, South African SWFPs are lagging behind their counterparts in the European Union, North America, and even developing economies like Brazil, China, and India, in the exploitation of e-commerce.
For SWFPs the e-commerce shift is likely to be profound, but for large firms they are primarily extensions of the proprietary networks that many big firms already are using. Smaller producers would, thus, be able to leap-frog the expensive and relatively inflexible electronic data-interchange (EDI) stage of networking and would be able to go straight to building networks based on an open internet architecture. From a development perspective, small furniture firms are important because of their potential for economic growth, job creation, and black economic empowerment.
The objective of this paper is to provide a preliminary analytical foundation to help focus the policy debate. The discussion that follows is based on insights gleaned from an exploratory, qualitative survey, undertaken between January and March 2001, of SWFPs that currently are exporting. One hundred five exporting SWFPs listed in the South African Wooden Furniture Trade Directory (2000) were identified and a short questionnaire and cover letter were sent to each firm. Completed questionnaires were received from 64 firms (a response rate of 61 percent). In addition, face-to-face interviews were conducted with 19 furniture industry experts drawn from academia; government; trade unions; employers' associations; the South African Furniture Export Council; and business, marketing, and information technology (IT) consultancies. …