Inter-Study Comparisons of Small Business Internet Use in Australia and New Zealand

Stewart Adam, Senior Lecturer, School of Marketing, RMIT University, Level 14, 239 Bourke Street, Melbourne, 3000. Email: stewart.adam@rmit.edu.au

Kenneth R Deans, Senior Lecturer, Department of Marketing, University of Otago, P.O. Box 56, Dunedin, New Zealand. Email: kdeans@commerce.otago.ac.nz

Abstract

Business and government use of the Internet and its graphical face the World Wide Web is increasingly the focus of researchers from a range of disciplines. The Internet is a convergence of a number of technologies but is of course reliant on IT systems. Early studies by Poon and Swatman (1996a; 1996b; 1997a; and 1997b) point to small business use in Australia that is different to the transaction-based e-commerce reported on widely in the business press. The 20-month longitudinal small business study reported by Poon and Swatman (1999) points to disappointment in outcomes from Internet usage by many small businesses. Data from the three-stage WebQUAL Audit is analysed and indicates that small business use of the Net has changed little. More recent information from government is also presented, pointing to the need to replicate such studies as WebQUAL and to ensure that rich data is also captured by way of triangulation using content analysis and published case studies.

Introduction

Mustaffa and Beaumont [HREF 1] state that "in Australia there has been relatively little research into the effect of electronic commerce on small business". One difficulty with this statement is that the limiting term 'electronic commerce' is used based on an outmoded view of Internet (Net) business [HREF 2]. A more recent definition by information industry researchers the Gartner Group (1999) describes e-business (eBusiness) as encompassing the following tasks: e-commerce transactions, customer relationship management, supply chain management, market intelligence, knowledge management, and collaboration technologies.  Thus Gartner Group use a more broadly accepted term, where electronic commerce is simply the transaction aspect of more complex business use of Internet technology.  Today this increasingly involves the World Wide Web (Web). However as Adam, Mulye and Deans (2000) point out, this definition makes no mention of the most popular use of the Net—marketing communication.  In an empirical study of Australian and New Zealand business use of the Web, Adam and Deans [HREF 3] refer to three main Internet roles in their discussion of eMarketing viz marketing communication, marketing channel (transactions and fulfilment), and customer relationship management (CRM).  Australian government is also using the Web, with both Commonwealth and State governments advocating business use of the Internet, although only simplistically using the technology itself (Palmer, Adam and Deans 2000).

We contend that some insight into small business use of the Net has been provided by a number of researchers (Poon and Swatman 1996a; 1996b; 1997a; 1997b; 1999; [HREF3]). Moreover, Australia's National Office for the Information Economy (NOIE) (1999; 2000) has reported on modelling of the impact of Internet technology on the economy and the readiness of business to use such technology.  NOIE (1999) report that economic modelling indicates a number of benefits in the decade ahead resulting from business and government adoption of Internet technology such as increased national output (+2.7%); increased investment (+4%); increased consumption (+3%); increased real wages (+3.5%); increased employment (+0.5%) and exchange rate improvement (+2%).  Both studies point to the patchiness of these benefits across various industry sectors.

Small business defined

The Australian Bureau of Statistics (ABS) have adopted a definition of small business "based on Full Time Equivalent (FTE) employment" with the exception of businesses in the agriculture sector (2000, p.2).  While there are a number of criteria mentioned, small businesses are ostensibly those that employ fewer than 20 people or in the case of agriculture have an estimated Value of Agricultural Operations (EVO) of between A$22,500 and A$400,000. 

In order to compare results where possible with those reported by Poon and Swatman (1996a), we have included manufacturing establishments employing fewer than 100 people, rather than those employing fewer than 20 people.  Moreover we have included both Australian and New Zealand establishments in the WebQUAL respondent data under review.  A comparison of small business numbers by Australian and New Zealand Standard Industrial Classification (ANZSIC) reported by the ABS (2000) is presented for WebQUAL comparison purposes and is commented upon in the next section. We confirm Poon and Swatman's (1999) observations that many micro businesses are participating in Internet business, in that only Manufacturing (14%  micro / 52% small), Wholesaling (50% / 50%), and Transport and Storage (33% / 67%) sectors contain greater numbers of  WebQUAL respondents in the 5 to 20 employee range as opposed to fewer than 5 employees.

It is important to note some salient features of business use of computers and the Net put forward by NOIE whereby "at February 2000, all medium businesses in Australia owned at least one computer. That percentage for small business was lower but equally impressive at 84%" and that "from February 1999 to February 2000, the percentage of small businesses online increased from 48% to 60% [HREF 4].  Thus small business is embracing the use of information technology.  One might speculate that the introduction of a goods and services tax (GST) and a new tax regime involving the submission of business activity statements (BAS) will be a further stimulus to small business entering the information age in Australia.

Table 1. Small Business by ANZSIC divisions: A comparison of ABS data and WEBQUAL Australian and New Zealand respondents
Source: ABS  (2000), Small Business in Australia, Australian Bureau of Statistics, Cat. No. 1321.0. (Canberra):28.
^a Communication services are not shown separately; ^b Education counted as government in the WebQUAL Audit; ^c Health & Community Services counted as government and excluded here.

The significance of small business to the economies of Australia and New Zealand hardly needs mentioning. Suffice it to say that small business, as indicated numerically in Table 1, represents over 95% of all private sector businesses in Australia and accounts for 48% of all private sector employment (ABS 2000).  The situation is similar in New Zealand, where 96% of enterprises employ 19 or fewer FTEs and account for 42% of all employees and 33% of economic activity (NZ Ministry of Commerce 1999).  The significant influence of small business on the economies of both Australia and New Zealand is not further elaborated upon in this paper.

WebQUAL Audit revisited

The WebQUAL Audit study is a multi-stage, longitudinal, probabilistic study of business and government use of the Web initially carried out in Australia and New Zealand.  The first stage of the study involved an email invitation to a sampling frame of  2,976 Websites drawn from the early 1999 population of 81,563 Australian and 17,888 New Zealand domain names (com/co; asn; edu; org; and gov).  The study achieved a response rate of over 17%, with an overall useable response of  399 (13.4%) [HREF 3]. There were three phases to the study: 1) an online email and Web form survey [HREF 5] of a random sample of Australian and New Zealand organisations with registered domain names, 2) content analysis of respondent Websites [HREF 6], and 3) personal interviews with selected respondents. The analysis of results, as they relate to small business and reported herein, concerns all three phases of the study in Australia and New Zealand.  

Using SPSS, cases were selected from the main WebQUAL data set that met the earlier definition of small business and where respondents had reported employee numbers (n=249).  It is of note that respondents had difficulty determining which ANZSIC classification they should nominate.  As a consequence a single researcher revisited each respondent Website in late 2000 to reconfirm respondents' selections.  It can be seen from Table 1 that sectors such as mining, construction, wholesaling and transport/storage are under-represented, whereas cultural / recreational services and personal / other services are over-represented.  This outcome is not surprising given that many new forms of service business have developed on the Web—a point also noted by Poon and Swatman (1999).  Moreover, uptake by the construction sector has been more to do with revamping business processes (post becomes email), and there are reports of considerable barriers to a wider use of eBusiness / eCommerce by this industry sector [HREF 7]. 

Analysis and discussion

Poon and Swatman (1996a) found from their exploratory study of small business that the five most important criteria for adopting the Net were wider corporate exposure, direct and indirect marketing (which we take to mean direct response and advertising respectively), low cost communication medium (which we take to mean email); access to potential customers, and company image enhancement.  We suggest that there is much overlap between these small business nominated criteria.

Uses of the Internet by small business in Australia are shown in Table 2.  However, the terms marketing and selling are broad terms and provide relatively little assistance in our understanding of Internet use by small business.  

Table 2. Major uses of the Internet by small business
^a Includes businesses with a website/homepage.
Adapted from ABS (2000), Small Business in Australia. Australian Bureau of Statistics, Cat. No. 1321.0, (Canberra): 95.

Perhaps surprisingly given the reported adoption of the Net and Web, the WebQUAL Audit conducted nearly three years later shows results that tend to agree with Poon and Swatman (1996a).  Table 3 summarises these in order of frequency of agreement with business use of the Net nominated by the researchers.  Responses to open textbox questions are not shown.  In the main the business uses nominated by respondents tend to fall into the researcher-nominated categories apart from Intranet and Extranet uses such as 'informing employees'.

We undertook factor analysis of WebQUAL data to identify underlying dimensions in the data, and thus ascertain if respondents could be grouped according to their orientation in use of the Web in business.  The business use variables loaded on three factors which we have labeled marketing communication; Business processes and Customer Relationship Management (CRM).  The business orientation factors and factor loadings (correlations between the three factors and the variables) are also shown in Table 3.  

Table 3: Small business use of the Web and orientation—WebQUAL Audit data
Orientation is derived from Factor Analysis where the variables loaded into 3 factors. (Principal Component Analysis. Rotation method: Varimax with Kaiser Normalization. Rotation converged in 5 iterations.)

The results in Table 3 illustrate the deficiency in the previously referred to Gartner Group (1999) definition of eBusiness, in that the resulting factors are mostly concerned with marketing communication and CRM.   While there are many types of relationships, CRM in the behavioural context typically involves communication in most of the stages through which people pass viz contact, involvement, intimacy, deterioration, repair and dissolution (DeVito 1993).  In the commercial context, we tend to think of such communication in the context of creating, maintaining and enhancing two-way, interactive and mutually beneficial relationships (Selnes 1995).  There has been much commentary by academia and business writers as to the beneficial outcomes for companies like Cisco Systems, Dell and Intel (Iggulden 2001).  These are but a few of the many companies that are reported to have experienced positive profit outcomes due to the impact of the Internet on business processes.  The present study does not support these contentions, but rather finds that small business typically sees the technology not so much as a 'disruptive technology' (Downes and Mui 1998; Evans and Wurster 2000) but rather as a supplement to their existing communication channels.

Poon and Swatman (1996a) commented three years earlier, use of the Net for 'online sales and transactions' ranked poorly against use of the Net for marketing communication.  Clearly, supporting offline sales and customer relationship management (CRM) were more important than transacting online.  In an analysis of respondent nominated reasons for Net use (open textboxes), we found no evidence of Net use for the formation of alliances as commented upon by Poon and Swatman (1996b).  In personal interviews when triangulating the study, it became clear that in at least two industry sectors (real estate sales and tourism) that the Web is in fact used as part of the business process where there are links between small business and larger businesses. The benefits of such case studies are highlighted by the richness of results obtained by Poon and Swatman (1997a; 1997b).

Managerial implications

Is our view of business use of the Net outmoded?  This is a question flowing from the preceding commentary and one that future research must answer.  The findings of the studies mentioned in the preceding section support  Kenny and Marshall's (2000, p.119) point that "the Internet has been a letdown for most companies".  Kenny and Marshall (2000) are two of a growing number of researchers and commentators who question the relevance of the Internet and Web to all business types.  If new peer-to-peer (P2P) online business models like Napster (whose activities are now somewhat curtailed due to legal action by the Recording Industry Association of America), Gnutella, and Scour can garner 50 to 60 million mainly Generation Y (GenY:  Born 1975-1984. Aged 16-25) users, and the claimed numbers of people reached by many of the 'pass-it-on' or 'viral' marketing techniques (or IdeaVirus if preferred) are anything to go by, business use of this interactive medium for one-way marketing communication is indeed outmoded [HREF 8].  

It could be argued that peer-to-peer models are based on access to free music and other items.  Based on commentary by Fader (2000), this is too simplistic a view in that "since using Napster, a greater share of consumers have increased their purchasing of CDs than have decreased their purchases" [HREF 9].   Kenny and Marshall (2000) argue that with the advent of newer devices such as WAP phones, DoCoMo's version of Mobile Commerce telephones, the 'always on' cable-connected home and wireless-connected car (Microsoft 2000) users will soon experience the ubiquitous Internet.  They may be correct in stating that the ubiquitous Internet (Net) will penetrate our lives differently.  This will only happen if the online model business and government currently use to ambush passers-by changes in favour of online models that involve users who increasingly seek experiential outcomes.

Summary remarks

The analysis of WebQUAL Audit data supports the findings of Poon and Swatman's (1996a) small business case studies in that some three years after their initial study in 1995, small business use of the Internet and Web favours marketing communication over online transactions and unlike other forms of information technology, business processes are less affected than they might be.  It is important however that quantitative studies such as WebQUAL are replicated over time so as to add to longitudinal studies of selected small businesses such as the Poon and Swatman (1999) study carried out between 1995 and 1997.  Such studies are in effect diffusion research and should meet certain criteria.  For example, they should be "reliable, replicable, and permit some degree of statistical power" and predictive (Tornatzky and Klein 1982, p.29). Moreover, such studies should ideally be longitudinal and avoid the pro-innovation bias still so evident among research publications (Rogers 1995).   

The reported increasing usage of the Net by small business to 60% of Australian small businesses by February 2000 [HREF 4] needs to be examined in terms of the benefits, perceived and real, that are accruing to small business and therefore to the overall economies in Australia and New Zealand.  The already mentioned studies into the outcomes small businesses are experiencing need to be followed by probabilistic studies that examine business orientation when using the Net and further case studies.  The alternative is mere exhortation by government to use this technology because it is there, when government itself is actually saying 'do as I say not as I do' (Palmer, Adam and Deans 2000).

References

ABS (2000), Small Business in Australia. Australian Bureau of Statistics, Cat. No. 1321.0, (Canberra). 

Adam, S. Mulye, R. and Deans, K.R. (2000), "The Evolution of Relationships in e-Marketing", in Sheth, G. Parvatiyar, A.  and Shainesh, G. (Eds.) (2000), Customer Relationship Management: Emerging Concepts, Tools and Applications.   Tata McGraw-Hill, New Delhi. (republished from International Conference on Customer Relationship Management: Emerging Concepts, Tools and Applications, MDI Gurgaon, India and the Institute for Customer Relationship Management, Atlanta USA, Gurgaon, India (24 - 25 November): 135-142. 

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Downes, L. and Mui, C. (1998), Unleashing the Killer App.. Harvard Business School Press, Boston.

Evans, P. and Wurster, T.S. (2000), Blown to Bits. Harvard Business School Press, Boston.

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Myths that can destroy a Business. US. 

Iggulden, T. (2001), "You can't see them coming", Financial Review Boss, 3 (March): 48-51.

Kenny, D.F. and Marshall, J.F. (2000), "Contextual Marketing:  The Real Business of the Internet", Harvard Business Review, (November-December): pp.119-125.

Microsoft Corporation (2000/2001), "Your Car.NET", Communiqué, (December-January): p.33.  (Also see www.microsoft.com/net.)

Ministry of Commerce (1999),  SMEs in New Zealand: Structure and Dynamics, Firm Capability team, (May).

NOIE (2000), E-Commerce Across Australia.  Department of Communications Information Technology and the Arts, Canberra.

NOIE (1999), E-Commerce Beyond 2000. Department of Communications Information Technology and the Arts, Canberra.

Palmer, D. Adam, S. and Deans, K.R. (2000), "Victorian.Government@Online: eMarketing Strategy in Review", Full refereed paper, ANZMAC Conference Proceedings, Griffith University, Gold Coast, (28 November - 2 December):CD-ROM.

Poon S.P.H. and Swatman P.M.C. (1999) "A Longitudinal Study of Small Business Internet Commerce Experiences", International Journal of Electronic Commerce, Vol. 3, No. 3, pp.21-34.

Poon S.P.H. and Swatman P.M.C. (1997a), "Small Business Use of the Internet: Findings from Australian Case Studies", International Marketing Review, Vol. 14, No. 5, pp.385-402.

Poon S.P.H. and Swatman P.M.C. (1997b), "Internet-based Small Business Communication: Seven Australian Cases", International Journal of Electronic Markets special issue on Electronic Commerce in Asia, Vol. 7, No. 2, pp.15-21.

Poon S.P.H. and Swatman P.M.C. (1996a), "Determinants of Small Business Internet Usage: A Multi-method Investigation of Perceived Benefits", Bled'96 Conference - 9th International Conference on Electronic Commerce, Bled, Slovenia, (June 9-11): pp. 465-483.

Poon S. and Swatman P.M.C. (1996b), "Small Business Alliances: Internet-Enabled Strategic Advantage", HICSS-29 Conference - Proceedings of the 29th Hawaii International Conference on Systems and Software, Hawaii, (January): pp.359-367.

Rogers, E.M. (1995), Diffusion of Innovations. The Free Press, New York. 

Selnes, F. (1995), "Antecedents and consequences of trust and satisfaction in buyer-seller relationships", European Journal of Marketing, Vol.32, No. 3/4, pp.305-322.

Tornatzky, L.G. and Klein, K.J. (1982), "Innovation Characteristics and Innovation Adoption-Implementation: A Meta-Analysis of Findings", Journal of Transactions on Engineering Management, Vol. EM-29, No.1, (February):pp.28-45.

Hypermedia references

HREF 1.  Mustaffa, S. and Beaumont, N.(2000), "Electronic Commerce and Small Australian Businesses", ANZAM 2000 Conference Proceedings, (3 – 6 December): http://www.gsm.mq.edu.au/conferences/2000/anzam 

HREF 2.  Electronic Commerce Australia. http://www-cec.buseco.monash.edu.au/links/ec_def.htm 

HREF 3.  Adam, S. and Deans, K.R. (2000a), "Online Business in Australia and New Zealand: Crossing a Chasm", Refereed paper, AUSWEB2K Conference Proceedings, Southern Cross University, Cairns, (12-17 June):pp.19-34. http://ausweb.scu.edu.au/aw2k/papers/adam/index.html  

HREF 4. National Office for the Information Economy. http://www.noie.gov.au 

HREF 5. Adam, S. and Deans, K.R. (2000b), WebQUAL online questionnaire, http://www.bf.rmit.edu.au/~stewarta/ausweb2k/adam_deans/webqual/webqual.htm 

HREF 6. Adam, S. and Deans, K.R. (2000c), WebQUAL Content Analysis rating model, http://www.bf.rmit.edu.au/~stewarta/ausweb2k/adam_deans/webqual/WebQualConceptualModel.htm 

HREF 7. Love, P.E.D. Irani, Z. Warren, M. Coldwell, J. and Warren, S. (2000), "Barriers to implementing e-commerce in construction SME's", ANZAM 2000 Conference Proceedings, (3 – 6 December): http://www.gsm.mq.edu.au/conferences/2000/anzam 

HREF 8. Slaton, J. (2000), "Pass It On", TheStandard.com, (September 18): http://www.thestandard.com

HREF 9. Fader, P.S. (2000), "Expert Report of Peter S. Fader, PhD", http://dl.napster.com/fader_070300.pdf 

Copyright

Stewart Adam and Kenneth R. Deans © 2001. The authors assign to Southern Cross University and other educational and non-profit institutions a non-exclusive licence to use this document for personal use and in courses of instruction provided that the article is used in full and this copyright statement is reproduced. The authors also grant a non-exclusive licence to Southern Cross University to publish this document in full on the World Wide Web and on CD-ROM and in printed form with the conference papers and for the document to be published on mirrors on the World Wide Web.

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