Factors Affecting the Growth of

E -Business in India & its

Impact on SMEs
,
Presented by

Ayaz Ahmed Shariff K

Asst. Professor, Dept. Of CSE
Birla Institute of Technology International Centre
Ras Al Khaimah
@
INTERNATIONAL CONFERENCE OF TECHONOLOGY &
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BUSINESS MANAGEMENT 2011
Objectives of the presentation
• Overview of terms E Business & E
Commerce.
• Difference between E business & E commerce
• Factors affecting the growth of E Business in
developing countries like India.
• Impact of E Business on SMEs in India
• Proposed Model for E Business in rural
agricultural markets for farmers, traders

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 Introduction to E Business
• Both e-business and e-commerce rely on the Internet
to accomplish their goals
• “E Business includes buying and selling of products
and services, servicing customers, collaborating with
business partners, and conducting other intra-
business tasks”
• Successful E Business depends on a critical
threshold of online users, the precursor to a critical
threshold of sellers & buyers

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 E Business & E Commerce
E Business
• E business is a broader aspect
with e commerce, Internet
marketing, e procurement etc.
• E-business applications strive
to give a good idea of their
company, promoting the
values they use to market their
business
• Transactions involving money
are "e Commerce" activities
including the interactions with
business partners, customers,
vendors
E Commerce
• E commerce refers to online
transactions - buying and
selling of goods and services
over the Internet involving
transaction of monetary nature
• E commerce is a subset of E
Business.
• E-commerce focuses on
appearance much more than e-
business.
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 E Business in India
• E Business has tasted much success in India in
recent past and has provided Indian business a new
heights, global reach, competitive advantage,
acquiring new customers (global & local), foreign
product knowledge etc
• E Business has become integral part of everyday life
from online banking to brokerage transactions, e
contracts to global marketing
• E Business has seen significance impact on airline
sector, banking sector, educational, matrimonial
services, placement sites and many B2B transactions
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 Growing sectors of
E Business in India
• Automobiles: Buying and selling of new & used four
wheelers and two-wheelers, its marketing, etc.
• Real estate and e-commerce: They provide
information on new properties as well as properties
for resale.
• Travel & tourism: Online reservations, tour packages,
hotel bookings
• Stocks & shares: Online trading, Online banking
• Gifts through E commerce: Chocolates, Luxury items,
flowers
• Matrimonial Services, Employment sites
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• Indian railway (IRTC)
 Need of study
• The tremendous rise of growth in E business has also
increased the growth of risks, security threats, hackers, fear
among internet shoppers.
• Apart from ebay.com have had on Indian users, there are few
traditional sectors which has touched the expectations of
ecommerce. There is much scope open left for e business in
global marketing, online shopping, delivery of products,
advertising.
• Currently, there are less than 1,000 merchants in the country
who are doing business online. Large chunk of these
merchants are SMEs
• Successful E Businesses based on viable E Business models and sound
business principles will grow, change and mature; on other hand,
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Business models based on flawed E Business models find it difficult
 Barriers affecting the growth
of E Business
• The factors affecting the growth of E Business as
follows:
– IT and Security factors
– Customer perception & Attitudes
– Technological factors
– General factors
– Internet factors
– Infrastructural & Internal resisting factors
– Regulatory & Political factors
– User interface factors
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 Information Technology &
Security factors
• Major hurdle for growth of e business all over world is the
security of online data
• Ensuring security of payments and privacy of online
transactions is key to widespread acceptance of e
commerce
• Virus, spyware, worms, Phishing increases fear
• Denial of Service attacks & spoofing
• Lack of transparency in electronic transactions
• Internet provides greater access to data not only to
legitimate users, but also hackers, disgruntled
employees, corporate spies.
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 Customer perception and
attitude
• Lack of trust among customers for online business
• Not sure of product quality
• No touch & feel of product
• Many Indians prefer to physically go out for shopping
• Indian customers has attitude to bargain products
• Impatience to wait for receiving the purchased product
• “it’s one thing to submit a credit card number to buy a
product. It’s quite another thing to put your entire
personnel dossier online and hope that no one intercepts
it, Allan & William [5]”
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 Technological factors
• E business partners find it hard to invest & update
with new technologies
• Bandwidth: Transmission capacity of a
communication channel is a major barrier for
products that require more graphical & video data.
• Rapidly changing technologies & emerging of new
technologies
• Financial costs: Storing information, data mining,
processing orders has impact
• High costs of developing, purchasing new software,
licensing of software, Integration into existing
systems, costly e business solutions for optimization#
 General factors
• Lack of awareness & understanding the value of e
business & security involved in it
• Lack of understanding on how E business operation
works
• Lack of trust: Safety, security, delivery
• Need for insurance of high cost products
• Shipping & courier costs
• Lack of IT knowledge to purchase online
• Different local languages & cultural factors
• Leaders of many SMEs have less literacy in
computers & IT area #
 Internet factors
• According to internetworldstats.com, India with a
population of over 1.1 billion has estimated 6.9% (81
million) Internet users by 2008 [5]
• E business depends on speed, bandwidth of
communication.
• Internet connections yet to reach many rural areas.
• Broadband connections are limited to urban & sub-
urban areas.
• Low internet penetration as well as low credit card
population.
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 Infrastructural & Internal
resisting Factors
• Logistics: Deliver the product, safe and secure, in the
hands of the right guy in right time frame
• Need to share your revenue here (~4% or more)
even when you get paid by net banking
• Underdeveloped transportation infrastructure
resulting in slow and uncertain delivery of goods and
services
• Bureaucratic wrangles: Fear among elderly staff is
significant barrier to e-transformation of organization
• Survey by the GIIC found out that only 20% of
organization covered under CIO segment are trying
to use E Business to an extent. #
 Political & Legal factors
• Taxations: Octroi, entry tax, VAT and lots of state
specific forms which accompany are confusing at
times
• Lack of regional legal framework, and legal
framework on e-signatures
• Need of harmonized taxation laws
• Misuse of E commerce (child pornography, cyber
squatting)
• Rights to e-consumers still a major issue
• Domain name registration policy, domain name
disputes, privacy & data protection issues
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 User Interface factors
• Some products require more graphics than textual
data
• Some website’s GUI confusing at times
• Limited menus, poorly designed navigations, difficulty
in comparing multiple products on same screen
• Lack of online support with product selection
• Room for improvements in sound and picture quality
• Virtual immaturity: This area in which much progress
has not taken place
• Web page design can change customer preferences
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 E Business Impact on SMEs
• E Business has much impact on SMEs with reduced
information costs & transaction costs
• E Business facilitates SMEs to world markets
• Indian SMEs in the service sector have expanded their
market with overseas customers
• Investment pressures & marketing pressures to attract
customers
• Difficulty integrating the existing systems with E Business
transactions
• However, there is still a doubt for SMEs whether there is
enough information on the Web that is relevant and
valuable for them to try, that would make investment # in
internet access feasible.
Proposed E Business model
for agricultural trading

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 References
1. Laudon &Traver, text book on E-Commerce (2002)
2. P T jospeh, text book on E Commerce Indian
Persepctive, PHI
3. Zorayada Ruth Andam (2003) “E commerce & E
business”in e-ASEAN task force
4. Lord, P., Mary, A. And Kristy, B., 2002, Managing e-
business security & challenges, an Oracle white
paper, USA.
5. Allan D. S.and William 2002, “E-lending: Foundations
of financial and consumer marketing in an
Information intensive society” – Journal of e-business
and IT vol. 3 No. 1 #
 References
6. www.internetworldstats.com
7. "Creating a Winning E-Business"By H. Albert Napier
8. Jing Ni Xinli Zhai Lijun Zhu “A semantic web service
oriented model for E-Commerce”Servics systems &
management, 2007, International conference, IEEE
9. Kaparubandara, M. Aruntileka, S. Gnige “Application
of E Business strategies for SMEs in developing
countries”2004 International conference on e-
commerce and e-service, IEEE

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Thank You All 