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Enhancing Asia-Pacific small and medium-sized enterprises productivity through e-business

Enhancing Asia-Pacific small and medium-sized enterprises productivity through e-business

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UNESCAP: Enhancing Asia-Pacific small and medium-sized enterprises productivity through e-business. http://www.unescap.org
UNESCAP: Enhancing Asia-Pacific small and medium-sized enterprises productivity through e-business. http://www.unescap.org

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06/26/2010

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Enhancing Asia-Pacic small and medium-sizedenterprises productivity through e-business
The United Nations Conference on Trade andDevelopment (UNCTAD) has recently published the
Information Economy Report 2006 
, which, among other issues, confirms the positive impact of informationand communication technologies (ICT) on productivitygrowth and highlights the importance of promotingbroadband adoption in developing countries to enhancecompetitiveness and productivity at the level of privatefirms. Since small and medium-sized enterprises(SMEs) account for the majority of the enterprises andemployment in developing countries, their level of ICTadoption deserves special consideration. How do SMEs
in Asia and the Pacic use ICT in their business? Whatare the challenges that they face in adopting ICT? This
policy brief examines the factors that contribute to the
adoption of e-business, dened as the use of ICT in
business, by SMEs in the developing and the least
developed countries of Asia and the Pacic. ESCAP
recommends five areas for policy intervention toenhance e-business adoption among SMEs.
Figure 1
Proportion of enterprises using the Internet for providing customer 
services and banking or nancial services
United Nations Economic and Social Commission for Asia and the Pacic
E-business benets
Source: UNCTAD – Information Economy Report 2006 
United NationsE S C A P
POLICY BRIEF ON ICT APPLICATIONSIN THE KNOWLEDGE ECONOMY
I S S U E N O . 1 N O V E M B E R 2 0 0 6
The engines of growth for the economies of Asia andthe Pacific are the SMEs, which account for morethan 95 per cent of the enterprises in some countriesof the region. The important contributions of SMEs toGDP and employment are well recognized. However,the competitiveness and productivity of SMEs areoften constrained by limited access to information andtechnological know-how to support the developmentand marketing of value-added products. The use of ICT,particularly e-business applications, can address someof these limiting factors in the development of SMEs.E-business refers broadly to the use of ICT to conduct,support or improve business activities and processes,including research and development, procurement,
 
Figure 2.
Expected ICT impact on SMEs
Source: ESCAP survey among SMEs in GMS (2005)
E-business is indisput-ably transforming theway business is con-ducted across the world.More and more enter-prises in developed anddeveloping countries areintegrating ICT in their business processes, including
through providing customer services and using nancialservices via the Internet (see gure 1). Among other benets, ICT increases efciency, promotes innovation,
reduces transaction costs, facilitates networking amongstakeholders and allows SMEs to participate in broader 
markets and compete with larger rms in what can becalled a “leveled playing eld”.An ESCAP survey conducted in 2005 among 109
enterprise support agencies (ESAs) (e.g. governmentagencies, business associations, chambers of commerce) in Cambodia, the Lao People’s DemocraticRepublic, Myanmar, Thailand, Viet Nam and YunnanProvince of China, showed that ICT was considered tohave a positive impact on SMEs in terms of creating or enabling competitive advantage, improving customer 
satisfaction and enabling growth (see gure 2).
Broadband access is neither easily available nor affordable in developing countries.In the developing and least developed countries of 
Asia and the Pacic, the use of ICT in business is still
low, particularly among SMEs. E-business adoption bySMEs is limited to word processing, email and searchesfor information on the Internet.Regarding ICT applications, an ESCAP surveyconducted in 2004 among SMEs in Cambodia,the Philippines and Viet Nam showed that SMEsconsidered the ease of interacting with customers tobe the most important aspect of ICT applications, andtherefore email was their most commonly used Internetapplication. Business-related research through theInternet was the second most prevalent use of ICT. Thedevelopment of websites for business purposes wasfar less prevalent than email use and websites weretypically used to display products rather than to facilitateonline transactions.Consistent with the customer orientation of e-business,the survey found that businesses targeting overseascustomers indicated higher levels of email use andwebsite presence than those oriented towards domesticmarkets. This includes exporters and the tourism andhotel industry, which are reliant on foreign clientele.Except for the use of accounting software, specializedbusiness management software, such as managementinformation systems, were not commonly used bythe SMEs surveyed. This pattern seems to be true indeveloped countries as well and it is mainly related tothe lack of software adapted to SMEs’ needs.Since the Asia-Pacific region consists of a mix of least-, medium- and most-connected economies interms of ICT connectivity, there is a wide division,between countries regarding the level of use of ICTin business. Additionally, there is a divide within thesesame countries. Internet access is available mainly inthe major cities; rural areas lag behind and have littleaccess to the Internet.In terms of connectivity, whenever SMEs access theInternet they usually do it through dial-up connections.
How do SMEs use ICT?
design and develop-ment, operation, manu-facturing, marketing andsales, logistics, humanresources management,
nance, and value chain
integration. A subset of e-business is e-com-merce, which describesthe buying and selling of products, services, andinformation via computer networks, including theInternet.2
 
They adopt e-business to enhance communicationwith both customers (B2C: business-to-customer)and partners in the supply chain (B2B: business-to-business). Usually, the adoption of e-businessthroughout the supply chain imposes e-businessadoption on all businesses that want to keep operatingin that industry. In developed countries, the adoptionof e-business per se may not necessarily bring anycompetitive advantage for the enterprises operating in
the specic sectors of economy mentioned above. It
is only part of the cost of their business. On the other hand, in developing countries, enterprises in these
sectors are in a position to benet from e-business and
gain a competitive advantage.Other sectors of the economy are not yet obligated toadopt e-business systems but may see them as anopportunity to reach a broader market (e.g. handicrafts/artisans, agribusiness). SMEs that adopt e-business inthese sectors usually are export-oriented and use B2Bweb portals to sell their products.E-business portals and e-marketplaces are thepreferable online locations for SMEs to conduct e-
commerce, dened as selling and buying goods and
services through the Internet. The use of such portalshas many advantages for SMEs compared withdeveloping and hosting their own website, particularlythe affordability of the solution and the visibility of well-known e-business portals.Results from the ESCAP project on the development of e-business services for SMEs in the Greater MekongSubregion
1
countries show that SMEs and enterprisesupport agencies consider e-business portals asadequate e-business development services for SMEs.Portals and e-marketplaces considered as simpleand affordable ways to start e-business and an initialstep prior to more advanced ICT use, such as thedevelopment of dedicated websites.E-commerce conducted by SMEs, including businessutilizing e-business portals, is usually limited topromoting products through the website followed by anexchange of e-mails to set the terms of the purchase(e.g. price, quantity, return policy etc.). Since onlinepayment systems are absent in most countries of the region, the payment is usually conducted off-linethrough traditional means (e.g. bank transfer, courier etc.).
To nd SMEs on the Internetjust visit an e-business portal
While poor ICT infrastructure and a lack of ICT technical
and managerial capacity are limiting factors for e-business adoption among SMEs, the lack of awarenessand understanding of e-business is considered as oneof the key obstacles preventing SMEs from employingICT to enhance their business.Stakeholder consultations conducted by ESCAP in2005 among SMEs and enterprise support agencies
in six GMS countries identied ve top barriers to the
development of e-business services for SMEs:
1. Lack of awareness and understanding of e-
business2. Poor infrastructure3. Lack of human resources4. The lack of a comprehensive legal framework5. Language barriersA lack of awareness regarding the benefits of e-business is usually the case of SMEs in non-export-oriented economic sectors. Since their clients andpartners in the supply chain are also deprived of affordable and adequate ICT access, they do not seeany benefit in adopting ICT in their business. Theylack the managerial and technical capacity to use ICTto improve internal processes and to visualize hiddenopportunities.
Different needs meansdifferent strategies
Companies that see profitability in conducting e-business are clearly willing to invest in the hardwareand obtain connectivity that allows them adequateaccess to the Internet. This suggests that businesses
that are in a position to benet from e-business will plan
for ICT investment as they would for any other businessexpansion plan.Some sectors of the economy are practically required toadopt e-business to remain competitive, and ultimately,in business. The software, manufacturing, tourism andhospitality industries are such examples.
What you don’t know youdon’t miss
1
Information regarding the ESCAP project entitled “The Developmentof e-Business Development Services for SMEs in Selected ASEAN
Countries and Southern China” is available at: www.unescap.org/
icstd/applications/projects/e-business-GMS/index.asp
3

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