Business-to-business e-commerce in the South African feed industry.
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Date
2002
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Abstract
S.A. Bioproducts, a biotechnology company that started in the 1993 manufactures and markets a product called Lysine, which is an animal feed additive. It operates in both the international and local animal feed markets, which are volatile and highly competitive. S.A Bioproducts envisages using e-commerce to streamline business processes and to improve customer service. This study was designed to assist S.A Bioproducts with the decision making process about the introduction of e-commerce to its customers. It examined the readiness and willingness of Bioproducts customers to purchase Lysine online. The study also explored the behaviour of the industrial buyer with a view to understanding the factors that affect the adoption of e-commerce. Another objective of the research was to understand customers perceived barriers and the benefits of e-commerce. The study took the form of a research project conducted amongst the current local customers of Bioproducts. Structured questionnaires were used to obtain information about customers' attitudes and perceptions about ecommerce. Due to the small number of customers a census sample was used with one representative from each company filling out a questionnaire. The data was analysed with statistical software called SPSS and mostly descriptive statistics has been used to interpret the results. Decisions about e-commerce has been gaining importance in organisations and generally forms part of the strategic decision making process either at the functional or the business level. By the end of 2002 it is expected the B2B e-commerce will account for 83% of the total online sales in the world and this is expected to grow to 88% by 2006. Africa's implementation of e-commerce has been lagging behind Europe and U.S due mainly to the lack of infrastructure. By the end of 2002 South Africa is expected to spend R35 billion online, the bulk of which will be B2B e-commerce. This study shows that the information technology infrastructure amongst Bioproducts customers is very well developed. Although all respondents have access to the Internet only 23.3% of them actually purchased goods online. Currently, the Internet is most commonly used for obtaining quotes and for final electronic payment. The results show that there is high level of interest in e-commerce with only 3.3% respondents not being interested in e-commerce. Approximately sixty percent of respondents have at least an "average" level of awareness for e-commerce indicating that most customers have a reasonable grasp of e-commerce. The results tend to indicate that larger companies are more likely to adopt innovations sooner than smaller companies, which is in keeping with the finding of Fredrick & Webster (1969). Due to the highly competitive nature of the animal feed industry, the "bandwagon effect" identified by Mansfield (1968) will have significant effect in increasing the rate of diffusion of e-commerce within the animal feed industry in S.A. The main reason why most local customers are currently not using e-commerce is that suppliers are not ready. In Europe, procurement managers stated that the main reason why managers did not purchase on-line was that their suppliers were not on-line or not ready to implement e-commerce. In Singapore a study found that security, initial set-up costs, and on going operational costs as the main barriers to the adoption of B2B e-commerce. Customers rated the ability to reach a wider network suppliers and the ability to track orders as the major benefits of e-commerce. This result is similar to the results of the Singaporean survey where 49.1 % of the firms rated global reach of suppliers as being important. Generally the financial benefits of using e-commerce was not rated as highly as the logistical benefits. This study is only the first step in Bioproducts e-commerce decision making process. Having established there is an interest in e-commerce amongst customers and that customers have the resources to purchase online, Bioproducts can now invest resources in answering the other aspects of the decision making process. The study indicates that most local customers are keen to purchase Lysine online within one year which means that Bioproducts should commence with further investigations as soon as possible. The scope for further research can be increased by including international customers in the survey. Bioproducts needs to perform further research to establish the cost of implementing an e-commerce strategy. The study also needs to evaluate the financial benefits that will accrue to Bioproducts if it embarks on an e-commerce strategy. Bioproducts also need to establish if its suppliers are in a position to embark on business-to-business e-commerce. If Bioproducts is able to employ e-commerce for procurement and for sale of its products it would increase the financial justification for e-commerce. It is imperative that Bioproducts has a sound business model before implementing e-commerce. This study shows that people are very concerned about the "lack of human contact" that is normally associated with e-commerce. Bioproducts should ensure that even if e-commerce is introduced it should not be a substitute for human contact. Bioproducts needs to ensure that it employs adequately qualified IT personnel early in the conceptual phases if it wants to successfully implement e-commerce. While customers welcome e-commerce the traditional methods of marketing still need to be maintained. In essence, e-commerce should complement traditional marketing channels and not substitute them.
Description
Thesis (MBA)-University of Natal, Durban, 2002.
Keywords
Feeds--Marketing., Theses--Business administration., Electronic commerce--South Africa.