Leon Lim, Centre for Computing and Biometrics (past post-graduate student), Lincoln University
The Internet is portrayed by the media and the Information Technology
industry as revolutionising business activities. Trade publications
and popular books promote what companies can or will be able to
achieve on the Internet. Indeed, many companies already use the
net (or plan do so in the near future) and a new industry has
sprung up to advise and support them. Clearly there is a great
deal of interest and enthusiasm in the Internet's potential for
commerce. However, there are currently only a few studies of business
use the Internet and most of these are from private market research
companies (eg Activ Media [HREF 2],
O'Reilly & Associates [HREF 3]).
The first objective of this study was to investigate the current
and future use of the Internet by New Zealand businesses. Secondly,
it looked at the benefits companies perceived from net use, both
for general business activities and specifically for marketing
and advertising. The ultimate goal was to promote a better understanding
of the Internet's potential for commerce.
Many reasons for using the Internet in business have been suggested.
In fact the growth of the Internet (and the World-Wide Web in
particular) has been given as a reason itself for being connected.
Cronin (1995) categorised business use of the net into three main
areas:
| Area of Use | Sample Uses | Potential Benefits |
| customer relations |
sales marketing, advertising market research customer support |
increased market share reach a wider market greater customer satisfaction |
| dealing with suppliers |
product information product support on-line ordering |
lower operational costs greater flexibility of supply |
| internal company operations | communications information gathering resource sharing job recruitment | access to expertise regardless of location more awareness of business environment increased productivity |
Marketing on the Internet has received substantial attention.
Businesses are not only able to reach a wider audience but also
reduce marketing costs (Ellsworth & Ellsworth, 1995). Indeed,
creating a "business presence" is a common reason given
for being on the net. Regardless of size, a business can have
the same on-line profile as much larger companies (Cronin, 1995).
While the Internet offers many potential benefits, there are a number of unresolved issues in conducting business on it. Despite recent advances, security remains the most fundamental concern and the main reason why companies hold back from full use of the net (van Kirk, 1994; Baron, 1995).
Other important issues include:
It appears that a number of New Zealand companies are trialing
use of the Internet, to see where it fits into their business
(Collins, 1995; King, 1995). Electronic mail is the predominant
use and there is growth in the area of product support (Hosking,
1995; King, 1995). Recent articles give little indication as to
the level of business use but two surveys in the last year provide
some data on general usage patterns in New Zealand. The first
was a local market research survey undertaken by Go Global Interactive
and AGB McNair which looked at the profiles of individuals using
the Web only [HREF 4]. The
second was the New Zealand and Australian results from the 4th Georgia
Institute of Technology WWW User Survey which again looked at
user profiles [HREF 5].
However, neither of these surveys addressed business use of the
Internet.
Reports of New Zealand companies suggest that they are facing
the same issues and problems described in overseas literature.
The slow speed of some Internet connections and relatively high
traffic charges are of special concern in New Zealand (Watt &
Stewart, 1995). There have been a number of recent changes (and
controversies) involving New Zealand Internet Service Providers
(ISPs) and their charging, access and service policies. With the
entry of Telecom New Zealand and other large companies into the
ISP market, further shake-ups are likely [HREF 6].
To investigate some of the issues mentioned above, a questionnaire
was developed and sent to New Zealand companies already using
the Internet. The areas covered were:
As the study was aimed at businesses already using the net, the
"New Zealand Internet Connected Organisations" web page
[HREF 7]
was used as the starting point. This page contains the Internet
addresses for New Zealand organisations with registered domain
names. This list is automatically updated each month and includes
all addresses with ".NZ" as part of the name. For this
study, the list as at August 1995 was obtained and manually edited
to remove duplications (eg different branches of the same company)
and non-profit organisations such as universities and schools
(ie those without ".CO" in the address). The edited
list contained 754 companies and was used as the sample for the
study.
An email message requesting participation was sent to each of
the companies on the edited domain name list. The message did
not contain the survey itself, due to the difficulties of designing
a legible email form and of respondents filling it in on-line.
As the addresses on the list did not contain any user identification,
the messages were sent to the "postmaster" alias, on
the assumption that every correctly set up email system would
have a postmaster.
The questionnaire was targeted at individuals responsible for
decisions regarding Internet usage by their companies (eg IT manager).
The email message contained a request to forward it to the appropriate
individual in the company.
Of the 754 email requests, 139 replies agreeing to participate
were received and questionnaires were mailed, faxed or emailed
according to respondents' wishes. In total, 116 completed questionnaires
were returned (15% of the companies on the list). It should be
noted that about 200 of the email requests were rejected by the
computer systems of the recipient companies. This was primarily
due to incorrect set up of either the email systems or the postmaster
aliases.
As this was an exploratory study, descriptive statistics were
considered appropriate for presenting the survey results.
As is common with many Internet surveys, a self-selected sample was used. This means the results obtained cannot be generalised to all New Zealand companies using the Internet. The problems and validity of Internet surveys are topics of ongoing debate (eg see discussion in Georgia Institute of Technology WWW User Survey reports [HREF 8]). In our case, random sampling was not deemed appropriate because the study was attempting to determine the range of Internet use rather than the absolute number of businesses connected. In addition, little was known about the types of companies involved and the likely response rate.
A summary of the results from the survey in each of the areas
addressed follows. A complete list of results and the original
questionnaire can be found at on the Lincoln University web site
[HREF 1].
This section looked at the range of companies and individuals
answering the survey. Respondents were asked their job title and
how they learned about the Internet as well as their company's
area of business, size (in staff and turnover), and the year net
access was established.
As mentioned previously, 116 completed surveys were returned.
Two-thirds of the respondents were in management positions (including
business owners) while about a quarter were technical staff (eg
system administrator, engineer, programmer). 42% learned about
the Internet through print and other media. This was not surprising
given the extensive publicity and exposure that the net has received.
Other sources included staff or business contacts (28%), general
knowledge or "folklore" (22%) and university contacts
(11%).
Three quarters of the companies gained net access within the previous
two years with only a small number using it for more than four
years. 64% of the companies were in the business/financial services
industry while just over half had an "Information Technology
focus".
72% of the companies employed fewer than 50 employees. As can
be seen in Table 1, the largest proportion of responses were from
small companies with a technology focus. Analysis of the results
show that these companies used the Internet in more ways, gained
more benefits from its use, and were more likely to use it for
advertising or marketing; these points are discussed later. Over
half the companies had an annual turnover in excess of $1,000,000.
These were defined as the methods used to access the Internet
and included email, World-Wide Web, FTP, etc. Respondents were
asked about which resources they were aware of, which were currently
used by their company, and which were expected to be used within
the next 12 months.
There was high awareness (over 70%) of all the resources listed.
Not surprisingly, almost every company used email and 80% used
the web. Newsgroups and FTP were also used by more than 70%. With
such high current usage, the expected increase in use over the
next 12 months was small, with only FTP and WWW showing much increase
(13% and 10% respectively).
The figures for FTP were a little puzzling and it is not clear
if some respondents considered that this covered file transfers
over email, etc. The figures for current and future use of Gopher,
Telnet and Listservers were comparatively low. In the case of
Gopher, this probably indicates that it has been superseded while
the others are only used in special situations.
This section looked at the ways in which the companies used the
Internet. Uses included dealing with customers and suppliers,
internal company use (eg communications, voice/video conferencing)
and "to be seen at the forefront of technology". Respondents
were asked about their awareness of these uses as well as current
and future uses.
Once again, awareness was high with over 70% for each use listed. The top current uses were:
Providing customer information and accepting customer orders were
the major areas for growth over the next year (34% and 27% respectively).
Other uses expected to increase were advertising job vacancies,
voice/video conferencing, market research, and ordering from suppliers
(about 20% for each).
This section asked about the perceived benefits of Internet use,
both current and expected in the next 12 months. Benefits listed
were in the areas of supplier and customer relations, increased
market share and improved productivity. Respondents were asked
for an overall effectiveness rating as well as for any reasons
why their company had not fully benefited from use of the net.
All the benefits listed were selected by at least 20% of the respondents. Those with the highest ratings were:
Growth over the next year was expected in the areas of increased
market share, reaching international markets and increased customer
satisfaction (about 25% each).
Over 90% of respondents felt that the Internet had been "effective"
or "very effective" in meeting their company's needs.
The most common reason given for not getting full benefit
from the net was that suppliers and customers were not yet on-line
(70%). Locating information on the net was listed as a problem
by 32%. This is important as it contrasts with the high value
placed on information gathering. Technical limitations of the
hardware or software was selected by 30% and network charges by
16%. Of special note was that, when asked for written comments,
10% of the respondents said they had experienced problems with
ISPs.
This section asked about the importance of a number of current issues surrounding Internet use. All the issues listed were selected as "important" or "very important" by more than half of the companies. Combining the important and very important responses, the issues in rank order were:
Interestingly, only 19% of respondents said that frivolous use
of the net was a very important issue.
Respondents were asked if their companies used the Internet for
marketing or advertising. Those that did were asked which methods
were used (eg bulletin boards, mailing lists, WWW), whether they
collected statistics, and how effective the marketing effort had
been. Those that did not market on the net were asked for reasons
why.
Only a quarter of the companies engaged in marketing on the net
and 83% of those did so via a web home page. Also used were mailing
lists (37%), newgroups (33%), electronic publications (23%) and
virtual shopping malls (20%). About half of those marketing said
that statistics were collected on customers perusing their Internet
information. In most cases, this was simply a count of web page
accesses. Half of those using the net for marketing felt that
it had been "effective" or "very effective"
while a third felt it was "neutral" and 13% indicated
it was "too early to tell".
The main reasons for not using the Internet for marketing were:
14% of respondents also indicated that a marketing use was contemplated
or under development.
This was an exploratory study and no specific hypothesis or theory
was being tested. It is important to remember that since a self-selected
sample was used, the results are not necessarily representative
of all New Zealand businesses using the Internet. Nonetheless,
some of results are very interesting and provide ideas for further
research.
As mentioned previously, a large proportion of responses came from companies with less than 50 employees. In one way, this result is not surprising as almost all New Zealand businesses fall into this category. But it contrasts sharply with a recent survey of Internet use by North American businesses [HREF 3]. In that study, the proportion of large businesses (more than 100 employees) connected to the net was several times greater than that of small companies. The difference may be partially explained by the purported enthusiasm of New Zealanders for adopting new technology. In addition, New Zealand companies may believe that the Internet helps reduce the effects of New Zealand's geographical isolation.
It is also interesting our results show that both small and IT-focussed
companies used the Internet for more business activities and reported
more benefits. While this result might be expected for the IT
companies (owing to the nature of their business and their existing
expertise), the difference between smaller and larger companies
is again surprising.
For example, Table 2 shows a breakdown of uses for the Internet
by company size. Small companies had higher levels for almost
all the activities listed, especially for accepting customer orders
and being seen at the forefront of technology. Possible explanations
for this are that small companies may be more flexible and willing
to experiment with new technology and that handling customer orders
over the net may be a cost-effective way of reaching a wider market.
| To get information from suppliers | ||
| Provide information to customers | ||
| Send orders to suppliers | ||
| Receive orders from customers | ||
| Market and product research | ||
| Communication with other branches, companies | ||
| R&D/Sharing of software, data or information | ||
| Advertising job vacancies or recruiting | ||
| To be seen as being in the forefront of technology | ||
| Voice or video conferencing via the Internet | ||
Similarly, Table 3 shows that small companies claimed more benefits
from their use of the net than larger ones. This is probably due
in part to the greater use of the net by small companies as mentioned
above. However, there is a substantially higher number of small
companies using the net to both increase market share and lower
costs. The market share issue is reinforced by the higher level
of net use for marketing by small companies (33% versus 7%). Again,
it may be speculated that small companies in New Zealand find
the Internet a cost-effective way to increase their profile and
put them on a more even footing with their larger competitors.
| Lower cost of obtaining supplies | ||
| Faster, more flexible delivery from supplier | ||
| Better service and support from suppliers | ||
| Increase in market share of products/services | ||
| Lower cost margins for products/services | ||
| Greater customer satisfaction | ||
| Ability to reach out to international markets | ||
| Effectiveness in information gathering | ||
| Increased productivity | ||
| Availability of expertise regardless of locality | ||
| Better awareness of the business environment | ||
It should be noted that there is a substantial overlap between
companies in the small and IT focused categories (refer table
1). But even when the results are broken down by both categories,
the differences between small and large companies is still apparent,
with the most uses and benefits claimed by companies that are
both small and IT focused.
Putting aside the question of response bias, these results could
imply that companies which are small or IT focused stand to gain
the most (or the most initially) from using the Internet. As most
New Zealand companies are small by international standards, this
could be a significant factor in planning for Internet development
in New Zealand. Further research is needed to test if this is
a general trend and to investigate the factors leading to successful
use of the Internet in business.
As could be expected, security of both messages and internal networks
were the main concerns of the companies surveyed. However, it
would appear there are more fundamental issues of concern. A majority
of the businesses felt that they had not received full benefit
from the Internet because either their suppliers or their customers
were not yet on-line. This seems to imply that the level of Internet
usage in New Zealand at the time of the survey was not sufficient
to sustain effective commercial activities. However the continued
growth in sites and users (both in New Zealand and overseas) suggests
that this concern will diminish over time.
Some of the companies indicated that they were dissatisfied with
their Internet access. Unreliable connections, poor service and
high charges were the main reasons given. That about a quarter
of the original email requests for participation in this study
failed to reach their destinations is further evidence of problems.
It would appear that the relatively young Internet service industry
is facing a number of teething problems. The situation is likely
to improve with time, especially given the increasing competition
in the industry.
It is unclear if the above problems are unique to New Zealand, although some of the access and charging issues seem to be. It may be that, in New Zealand, the Internet has yet to reach a point of maturity or to fulfil its potential for electronic commerce. Further research is needed to determine what types and levels of services are required by companies. Initially, it would be useful to document the problems occurring and to formulate objective measures for rating ISPs. This would not only aid companies in selecting a supplier but also help the budding ISP industry identify problem areas.
Use of the Internet for marketing purposes by the responding companies was fairly low. Many of those using the net for marketing were unsure of its effectiveness and the only evaluation method used was keeping track of costs. This is not surprising as methods for measuring the effectiveness of the Internet are only starting to appear (Metcalfe, 1996).
Further research is needed to develop effective cost-benefit techniques to apply to Internet use. For example, a checklist of criteria for success would help companies evaluate if their needs warrant the use of the net. Such techniques are essential for companies making decisions about Internet use and trying to monitor its effectiveness.
This study looked at the ways that some New Zealand businesses are using and benefiting from the Internet. The response from small companies is especially interesting and important. This, coupled with New Zealand's relative geographical isolation, makes the net an extremely attractive method for New Zealand companies to expand their markets and perhaps even gain a competitive advantage. However, fruitful use is being hampered by concerns over security, whether target markets can be reached, and problems with ISPs. Further research in this area is crucial if New Zealand is to capitalise on the full potential of the Internet for commerce.
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CommunicationsWeek, No. 563, pp. 5(2).
M Collins (1995) "NZ companies dip a tentative toe into Internet
waters..." The National Business Review, Jul 21, pp. 24-25.
M J Cronin (1995) "Doing More Business on the Internet"
New York: Van Nostrand Reinhold.
J H Ellsworth and M V Ellsworth (1994) "The Internet Business
Book" New York: John Wiley & Sons, Inc..
R Hosking (1995) "Businesses take first steps online"
ComputerWorld (NZ), No. 396, pp. 1(2).
D King (1995) "Net Profit: A big boost for business"
InfoTech Weekly, No. 185, Mar, p. 6.
R M Metcalfe (1996) "Do the numbers add up to an intoxicated
Internet facing a hangover?" InfoWorld, Vol. 18, No. 11,
p. 55.
L Watt and P Stewart (1995) "Cashing in on the information
superhighway" Management, Vol. 42, No. 1, pp. 58-65.
D van Kirk (1994) "Unraveling the Internet hype" InfoWorld,
Vol. 16, No. 52, pp. 52(2).
Walt Abell, Leon Lim ©, 1996. The authors assigns 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. Any other usage is prohibited without the express permission of the author.
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