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Module 2: Legislative and Policy options to Promote e-Commerce and Expand Internet Use
Box 6. What is Electronic Commerce, or e-Commerce?
For purposes of this module, e-commerce is broadly defined as
Any use of information and communication technology by a business that helps it to improve its interactions with customers or suppliers.
Under this broad definition, it is possible for businesses in developing countries to reap significant benefits from e-commerce, even when legal, regulatory or infrastructure constraints make it difficult or impossible for them to actually transact business electronically. For example, a business in a developing country could use the Internet to figure out market prices for its products and use the information to compete better or win new customers. Many SMEs also gain a competitive edge by using the Internet to do market research, find information on competitors and track down leads for new customers.
The definition also covers transactions or exchange of business-related information between:
Business-to-business (B2B)
Business-to-consumer (B2C)
Business-to-government (B2G).
“Electronic commerce” is also not limited to the use of the Internet and/or web sites powered by computers. It also covers the use of mobile phones (m-commerce), VoIP, CD-ROMs and other computer applications with no telecommunications component. All of these can be and are being used in innovative ways by businesses in developing countries.
The definition encompasses both domestic and international business. It is very important to realize that SMEs may find benefits to e-commerce to enhance their relationships with domestic customers and suppliers, and not necessarily internationally.
I. Why should SMEs engage in e-commerce?
SMEs can benefit from a variety of e-commerce processes and techniques, as shown in the table below.
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Business Process |
Sample Sub-processes |
Examples of e-Commerce Techniques |
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Marketing and Sales |
Market research – learn more about potential customers and competitors |
Web searches; examination of competitors’ sites for information on pricing, problems, hiring, press releases, news articles; information-gathering on website by visitors and customers |
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Marketing techniques to reach more customers and partners |
Website; email follow-ups; prospect database; links with other sites; electronic marketplaces; web-events; one-to-one marketing techniques; electronic newsletters |
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Generating sales |
Email; advertisements product catalogues; descriptions of services, credentials, current customers |
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Order placement |
Electronic Transaction Processing |
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Payment |
Invoicing |
Electronic Transaction Processing |
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Settlement |
Electronic settlement technique; third-party service |
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Product/Service Delivery |
Set-up |
Electronic mail, electronic transactions, shipment notification, directly or via third-party service |
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Actual delivery |
For electronic goods and services, electronic transmission |
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Customer Service |
Post-sales support, including add-on sales |
Web-based FAQs and databases; web-forms; email; call centres |
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Production |
Creating the product or service to be sold Enhancement of an existing product or service |
For documents or electronic goods – web-based collaboration, document sharing, email. Computer-aided design or remote production services |
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Buying materials / procurement |
e-Procurement techniques including catalogue orders, auctions, requests for information |
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Back Office |
Financial management |
Web-based computer applications, either in-house or via third-party provider |
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Payroll/personnel |
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| Source: Payne, Judith, 2005. E-Commerce Readiness for SMEs in Developing Countries: A Guide for Development Professionals. Learn Link – Academy for Educational Development, Washington, DC. | ||
From a public policy perspective, the immense impact of SME fortunes or failures on the economy makes it critical for SMEs to be prepared for and take full advantage of any benefits offered by electronic commerce. Note that according to the United Nations Conference on Trade and Development, SMEs account for 60 to 70 per cent of all employment in developing countries.
e-Commerce can give SMEs a better chance to find new customers and suppliers and to compete, especially in markets that they have not easily been able to reach before – either internationally or regionally.
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