E-Commerce and Business Models

Subject: E-Commerce
Pages: 60
Words: 17370
Reading time:
64 min
Study level: PhD

Background of the Problem

In the past few decades, the American economy has shifted from a primarily industrial-based economy to one depending largely on technology. The shift has come with new challenges that businesses must deal with. Contemporary American businesses spend much time, energy, and resources keeping up with technological innovation. On the other hand, new entrants in the global market have developed new ideas and business models. E-commerce has grown rapidly in the last decade. It represents one of the most important and profound transformations that technology has brought to global trade, transaction, and production (Zhu, 2008).

It is difficult to pinpoint precisely when e-commerce set on, but since the invention of a graphical user interface for the World Wide Web in 1993, it took only 10 years for this phenomenon to attract a 53% share of U.S. households. In comparison, it took radio 38 years and television 17 years to achieve a mere 30% share (Laudon & Traver, 2007). E-commerce technology breaks boundaries by allowing businesses to make transactions beyond their regions in an efficient and cost-effective manner compared to traditional businesses. As a result of this advantage, the potential market for an e-commerce business is equal to the population of global online users (Laudon & Traver, 2007). According to Internet Usage Statistics (2012), the number of online users is more than one billion and three hundred thousand users as of 2011.

E-commerce technology may impact traditional small and medium-size (SME) businesses. As an additional shopping option channel for many industries, specifically for the jewelry and diamond industry, e-commerce might have long-term positive or negative effects on local land-based retailers and a company’s operations, survival, or reconfiguration (Bruce, 2009). If customers are not able to locate products in a quick and efficient manner, they might seek

other alternative ways of shopping (Bruce, 2009). E-commerce may emerge as the perfect shopping channel with millions of e-stores all over the world. Navigating this jungle of e-commerce businesses, however, is not a challenge to customers.

The introduction of e-commerce has changed the business structure in recent years, causing some small family owned businesses to cease operations. The businesses include drug stores, video and gaming stores, bookstores, and many others (Bruce, 2009). Another type of business that is particularly affected by this change is in the jewelry industry. Of particular interest to this study are jewelry businesses in the city of Los Angeles. Local retail jewelry stores offer services to their customers based on a face-to-face contact format, with walk-in customers who can spend hours with jewelry or diamond specialists examining a variety of jewelry and diamonds with distinct designs. The customers compare prices and collect information to make an informed purchasing decision. However, this is no longer the case with the introduction of information technology.

The Internet has changed the way people purchase jewelry. It has created new cost-effective means for businesses to increase sales, both nationally and internationally, while decreasing operational costs. It enhances customer relations and builds customer loyalty (MacKenzie, 2006). According to the findings of a 2011 census carried out by the Bureau of the Department of Commerce, U.S. retail e-commerce sales for the second quarter of 2011 was $47.5 billion, compared to $10.2 Billion in the second quarter of 2002. E-commerce sales have increased from $45 billion to $200 billion in a period of nine years, an increase of almost 450%.

The internet helps companies in opening up new channels of distribution, creating buyer and seller communities, and in increasing revenues. At the same time, it helps the companies to reduce operational costs and boost the bottom line (Bruce, 2009). Large companies are spending billions to create software and websites, collect information about buyers, such as their interests and needs, and link them to sellers or other third parties through complex and sophisticated networks (Bruce, 2009). All businesses, regardless of their size, must be ready and willing to adapt to the constant and rapid changes in technology and consumer expectations. Failure to do this, the companies will lose their competitive advantage to other innovative and adaptive businesses (Bruce, 2009).

The $51 billion traditional jewelry industry is a byzantine, fragmented collection of 126,000 physical stores in the United States, including 28,000 locations classified as specialty jewelry stores. About 95% of all retail jewelry firms operate only a single store (Laudon & Traver, 2007). To supply this fragmented market are several layers of wholesalers and intermediary manufacturers, jewelry wholesalers, and finally, regional distributors. However, starting in 2003, web diamond sites have garnered over $2 billion of the U.S. jewelry market. Start-ups, such as Blue Nile, Ice.com, Abazias.com, diamond.com, and even Amazon.com, are transforming the high-end jewelry business. Blue Nile, for instance, has put out several supply-side layers of intermediaries. Instead, the company deals directly with wholesale diamond owners and jewelry manufacturers. In doing so, it has minimized its inventory costs and limited its risk of inventory markdowns. On the sell-side, Blue Nile has eliminated the expenses associated with running a physical store with the cost of sales clerks and expensive glass cases. Instead, Blue Nile offers a single web site. The benefit of rationalizing the supply and distribution chain is reduced markups of 15%, compared to between 50% and 100% in a traditional brick and mortar store (Laudon & Traver, 2007).

It is a fact that the internet could assist U.S. based small and medium-sized enterprises (SMEs) to increase sales, decrease operational costs, and improve their relationship with customers. However, it is unfortunate to note that very little empirical evidence exists to suggest that SMEs in the United States are planning or have the ability to use the internet as a business tool (MacKenzie, 2006).

The current study is based on existing research by L.M. MacKenzie (2006), titled On Use of the Internet as a Business Tool by Small and Medium- Size Enterprises (SMEs). The current study will enhance and expand on the research conducted by MacKenzie to include a new sector of the U.S. economy, the jewelry and diamond retail industry. The additional sector may create a complete picture of the current status of e-commerce among U.S based SMEs (MacKenzie, 2006).

Problem Statement

Local land-based retail jewelry and diamond shop owners in Los Angeles have closed down their shops, while others have stayed in business in light of the expanding e-commerce business channel for consumers (Bruce, 2009). According to the data provided by U.S. Census Bureau in 2011, jewelry stores in Los Angeles area reduced from 429 in 2002 to 391 in 2009. The general problem is that the growth of e-commerce companies, such as Blue Nile Inc., Bidz.com, ebay.com, and Amazon.com, has exerted enormous business pressure on traditional jewelry and diamond businesses in the city of Los Angeles. The competitors offer a wide selection of both high and low end products at very low market prices. The large e-commerce companies offer products from their own inventory and from resellers in a wide array of geographies. They have forced brick and mortar businesses to change their business models and adopt e-commerce as an additional sales channel. If they fail to do so, they are likely to go out of business. The specific problem is whether the competitive pressure has affected the willingness and readiness of SMEs in the City of Los Angeles to adopt e-commerce or not.

Purpose Statement

The purpose of this quantitative correlational research study is to examine the effects of e-commerce jewelry businesses on traditional jewelry stores in Los Angeles, United States of America. The study will examine the willingness and readiness of traditional jewelry stores to expand their current traditional business models by adopting e-commerce. A quantitative correlational approach is appropriate for this research due to the presence of three quantitative variables: 1) the increase in competitive pressure on traditional jewelry stores in Los Angeles, 2) willingness, and 3) readiness of traditional jewelry stores to expand their current traditional business model by adding an e-commerce sales channel. Therefore, there is a need to determine if there is a relationship between these three variables.

Significance of the Study

Seven days a week, 24 hours a day, hundreds of millions of people around the world cross national borders without a second thought. They cross the borders from the comfort of their home by scouring internet for ideas, products, and relationships that they may not find easily—if at all—where they live. The borderless community of internet users comprises a virtual eighth continent racing towards a population of a billion inhabitants. It exists wherever a computer, mobile phone, set-top box, or personal organizer touches the internet. Until the Web pulled together this huge electronic society, its citizens were unreachable. They could only be reached with massive investment in local staff and infrastructure in each country where business was desired. The current borderless digital community confounds legislators and cultural purists worldwide. The purists are confused. They do not know what to make of the Web-based globalization phenomenon that threatens to make their geographic, political, economic, and cultural boundaries meaningless. It places new burdens on companies that are suddenly confronted with business inquiries from far-off places (Depalma, 2002).

The findings made in this study will help governments, academic institutions and other organisations in the State of California and the United States, which are interested in the economic progress of SMEs. It will help organisations that are developing programs and services that match the needs in the marketplace (MacKenzie, 2006). In addition, learning about the advantages and disadvantages of e-commence to traditional jewelry stores in Los Angeles will help the City of Los Angeles administration to implement plans to increase business growth in the area. Results of this study will also help small businesses to change their business models to help them remain competitive in their markets. Most small businesses, especially jewelry enterprises in downtown Los Angeles, are based on a brick and mortar format, which could be transformed into multi-channel merchants or brick-and-clicks format. The current study will help these companies to become e-commerce-ready. The companies will not only have a network of physical stores as their primary retail channel, but also introduce their merchandise or services online (Laudon & Traver, 2007).

Nature of the Study

The study examined the correlation between increase of competitive pressure on traditional jewelry stores in Los Angeles, and their willingness and readiness to expand their current traditional business model by adding an e-commerce sales channel. The study examined these factors by collecting data using a survey questionnaire. Owners of 150 jewelry and diamond businesses in the City of Los Angeles were used as respondents. The survey sought to find out whether these businesses are willing or ready to add a new channel to their current business model to stay competitive or not.

Researchers use quantitative research designs to describe and explain hard data. On the other hand, qualitative research designs are used in exploring and understanding unknowns (Turner, 2010). Quantitative studies use preformatted, validated instruments to collect data from many participants. Qualitative studies ask general questions in an exploratory manner, and normally involve a small number of individual participants (Creswell, 2005; Salkind,

2006). A quantitative correlational study was appropriate for this research because of the three quantitative variables identified. The three are: 1) the increase of competitive pressure on traditional jewelry stores in Los Angeles, 2) willingness, and 3) readiness to expand their current traditional business model by adding an e-commerce sales channel. Therefore, by applying correlational statistical techniques on the data gathered, the relationship between these variables is determined.

Research Questions and Hypotheses

The research questions and hypotheses for this study are:

  • R1: Is there a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their readiness to expand their current traditional business models by adding an e-commerce sales channel?
  • R2: Is there a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their willingness to expand their current traditional business models by adding an e-commerce sales channel?
  • H01: There is no significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their readiness to expand their current traditional business models by adding an e-commerce sales channel.
  • H02: There is no significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their willingness to expand their current traditional business models by adding an e-commerce sales channel.
  • H1: There is a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their readiness to expand their current traditional business models by adding an e-commerce sales channel.
  • H2: There is a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their willingness to expand their current traditional business models by adding an e-commerce sales channel.

Definition of Terms

E-commerce: As already indicated, the proposed study revolves around the issue of e-commerce. As a result, it is important to define this term. It is conceptualized as financial transaction conducted online (Tassabehji, 2003). E-tailing, virtual-stores or cyber stores are other terms used for online retail selling (Tassabehji, 2003).

E-business: According to Beach (2004), an e-business is a firm, which, in contrast to an electronic commerce firm, conducts its day-to-day business functions over the internet, and/or other electronic networks, such as electronic data interchange (EDI).

Traditional business: A traditional business in the context of this research paper is a brick and mortar venture. Such a company possesses a store or a building, and usually offers face to face or telephone based services to the customers.

The global market: The activity of buying or selling goods and services in all the countries in the world, or the value of the goods and services sold.

The World Wide Web: According to Beach (2004) the World Wide Web (www) is the complete set of documents residing on all internet servers that use the HTTP protocol. The documents are accessible to users via a simple point-and-click system.

Security Exchange Committee (SEC): According to InvestorWords (2011), Securities and Exchange Commission is the primary federal regulatory agency for the securities industry, whose responsibility is to promote the rights of the investors, as well as protect them against fraudulent and manipulative practices in the securities markets.

Scope of the study

The scope of a study defines the extent to which the findings of the study are regarded as representative. The researcher sets boundaries within which the study is conducted because the methodology used in a particular study cannot be adopted in a universal manner to explain all aspects and phenomena of the study. The scope of this study is limited to the City of Los Angeles, where owners of 150 jewelry and diamond businesses were selected. In addition, the study used data from the U.S. Census Bureau, the Department of Commerce, the Security Exchange Committee (SEC), the Federal Reserve Bank, and the City of Los Angeles.

Assumptions made in the Study

At the time of formulating and proposing the current study, the researcher came up with a number of assumptions that were made in this study. The various assumptions that were made are as follows:

  1. The participants will provide honest and accurate information concerning their willingness and readiness to adopt e-commerce in light of competitive pressure.
  2. E-commerce has increased competitive pressure in the jewelry and diamond industry in Los Angeles.
  3. It is possible to extrapolate the findings of this study to explain the willingness and readiness of the jewelry and diamond businesses to use e-commerce in other regions beyond Los Angeles.
  4. Business owners largely determine whether or not an enterprise will adopt online business to increase sales.
  5. Competitive pressure has significantly led to the increase in the number of online businesses in the jewelry and diamond industry in the City of Los Angeles.

Limitations of the Study

  1. The study was limited to the effects of competitive pressure on the willingness and readiness of jewelry and diamond businesses regardless of the fact that other factors, such as capital and information systems, determine the adoption of ICT in businesses.
  2. The study was limited to jewelry and diamond businesses despite the fact that other businesses in other industries are also reeling from the effects of competitive pressure as a result of adoption of e-commerce.
  3. The study was limited to jewelry and diamond businesses in the City of Los Angeles, although study dynamics differ with the population in focus.
  4. The study focused on SMEs, although there are other businesses that do not necessarily fall under this category, but are equally affected by the competitive pressure brought by e-commerce.
  5. The study used a quantitative method, which is limited.

The methodological limitations are outlined in Chapter three.

Chapter Summary

The literature review in chapter 2 develops the theoretical framework for the quantitative correlational study. In chapter 1, the background of the problem and the purpose of the current study were examined. The problem statement addressed the growth of e-commerce based jewelry and diamond businesses in the United States and the increase of uneven competition pressure on traditional jewelry and diamond stores in Los Angeles. Chapter 2 is a critical review of literature available in this field.

Literature Review


E-commerce has a tremendous impact on every industry in the world. E-commerce, which is synonymous with the internet, has removed the global barriers that hindered business. It has significantly reduced the cost of doing business, improving the quality of the products and services in the process. In addition, it has helped organizations in getting new customers, improving supplier penetration, and generating new ways or channels to distribute products and services (Chaudhury & Kuiboer, 2002). Fortunately, such benefits are realized not only by large enterprises, but also by small and medium enterprises [SMEs] (Huff et al., 2000, Pham et al., 2011). Ironically, little research has been carried out to explore the adoption and utilization of e-commerce among SMEs (Grandon & Pearson, 2004). On the contrary, recent studies have focused on the implementation of information technology (IT) in large corporate settings, which may not be applicable to small firms (Pham et al., 2011). Small firms differ from large firms in a variety of ways, with the former having minimal bureaucracy, centralized decision-making in one or two persons, and limited long term planning (Premkumar, 2003; MacKenzie, 2006).

If SMEs in the United States, which make up over 90% of manufacturers, are to successfully compete in an increasingly competitive national and global marketplace, it is imperative that they embrace the full benefits available through optimized use of the Internet (MacKenzie, 2006). Surprisingly, adoption of e-commerce among SMEs is limited to their willingness and readiness to expand their current traditional business models by adding an e-commerce sales channel.

In this chapter, literature relevant to the current study is critically reviewed. Even though there has been increased attention and interest in e-commerce during the last two decades, very few studies and researchers have focused on the SMEs, particularly SMEs operating in the U.S.

This study presents new knowledge and information to help business owners understand the impacts of e-commerce technology-based companies, such as Blue Nile Inc., Bidz.com, bay.com, and Amazon.com. It will help business owners understand the growth of such companies, in addition to the enormous business pressure they impose on traditional jewelry and diamond businesses in the city of Los Angeles. The growing business competition forces them to either close shop or change their business models. Leaders of small and big business organizations may benefit from this study by understanding what e-commerce is all about. In addition, they will understand the advantag­­es and disadvantages of e-commerce, and how business owners can exploit this channel to increase their competitiveness. Information on the possible effects of e-commence on traditional jewelry stores in downtown Los Angeles, as well as the possible outcomes of such a development, will help the local authorities in Los Angeles to come up with strategies and implement them to increase business growth in the area.

Results of this research study will help the government, as well as academic and business entities, particularly in the State of California, that are interested in the economic progress of SMEs (MacKenzie, 2006). The study used data from the U.S. Census Bureau, the Department of Commerce, the Security Exchange Committee, the Federal Reserve Bank, and the City of Los Angeles. The data was used to compare business profitability and competitiveness. To accomplish this goal, it is necessary to analyze past and present research related to SMEs’ willingness and readiness to adopt e-commerce as an additional business channel. A critical review of literature will help researchers to identify the limitations and competitive advantages and disadvantages of having such a channel. To this end, a review of primary and secondary sources will support the findings of the research. Data gathered within a period of 20 years, and which is drawn from various sources, is critically reviewed, compared, and used to analyze the information in the study. In Chapter 1, an overview of the background of this study and the challenges that traditional businesses, specifically traditional jewelry and diamond stores, are facing on the competitive world of innovation was discovered.

The environmental uncertainties of the last two decades have stimulated the interest of corporations in innovation of all kinds. The corporations are viewing the innovation as a means of sustaining competitiveness (Francisa & Bessant, 2005; Zheng, 2009). Business leaders, regardless of the size of their business and their area of operations, are concerned about innovation. They have prioritized it in their strategic plans (Scantlegury & Lawton, 2007). But the major question is whether these businesses are capable and ready to innovate or not (Klein & Sorra, 1996; Zheng, 2009).

The increasing costs, as well as associated risks, have turned any innovation endeavor into a complex undertaking (McElroy, 2003). For these businesses, innovation is synonymous to uncertainty, risk, and opportunity to survive (Klasen, 2004; Zheng, 2009). Chapter 2 presents a review of existing empirical, theoretical, and practical literature addressing a number of themes touching on SME’s and their use of the internet (MacKenzie, 2006). It will cover an overview of e-commerce, current trends in the use of e-commerce, and growth of e-commerce businesses in the United States. As aforementioned, the chapter will also address the willingness and readiness of SMEs to expand their business model and propose theories in this area.

A Short History

The modern economy experienced a fundamental shift in focus and growth as a result of the internet. The new technology revolutionized the way individuals work, play, live, learn, consume, and purchase (Rayport & Jaworski, 2002). The advent of e-commerce and related technology substantially changed the way many industries carried out business, including the diamond and jewelry industry. E-commerce is a common term in the contemporary business world. The term is receiving considerable attention from publishers of various journals and publications. Given the attention given to e-commerce, there is need to carry out more studies to critically examine the impacts of this development in the society.

Electronic commerce, although seemingly a new phenomenon, has existed for the past forty years. The observation is made by the editor-in-chief of International Journal of Electronicommerce, Vladimir Zwass. According to this scholar, the first form of e-commerce is traced back to the electronic transmission of messages during the Berlin airlift in 1948. Following this rudimentary stage, electronic data interchange (EDI), emerged as the next step in the development of e-commerce. In the 1960s, common electronic data format was developed through the concerted effort of an industrial group. Initially, the focus of e-commerce was not quite as expansive as it is now. The main reason for this is that it was largely used for intra-industry transactions touching on the business aspects of purchasing, finance, and transportation (Tassabehji, 2003). E-commerce has been part of the business world for some time now, although not in the internet-based iteration that is now impacting on the world of commerce.

From the 1970s through to the 1990s, the business world witnessed the final stages of e-commerce’s history that prefaced the internet. Throughout this period, electronic data interchange (EDI) standards were developed and tailored to the needs of a variety of American industries. According to Vladimir Zwass, the retail, automotive, heavy manufacturing, and defense industries adopted EDI to assist in the flow of information within the organizations (Tassabehji, 2003). As a result of this, information was made more accessible, which helped the various elements of the organization to share data and information both internally with concerned parties and externally with partners and shareholders (Zwass, 2003). However, at the time, the use of EDI systems entailed a significant cost to the organization. As a result, it limited the use of this technology to predominantly multinational corporations with strong financial base (Tassabehji, 2003). However, the initial cost enhanced the development of easily accessible iterations of the predecessor to modern e-commerce.

The use of EDI by the mid-1990s was quite high, with nearly 50,000 companies in Europe and approximately 44,000 in the United States of America having adopted this tool. While this number may seem high, it represents a small fraction of 1% of the companies in operation within the US and Europe. The massive shift towards e-commerce was catalyzed by the advent of the internet. Zwass states that e-commerce has evolved substantially as a result of the Internet, with a majority of the already existing e-commerce shifting into the online realm (Tassabehji, 2003). Subsequently, the internet has emerged as the engine behind e-commerce’s march into the mainstream.

In spite of the fact that this form of commerce is referred to by some as “i-commerce” or “web-commerce”, the names have not stuck. On the contrary, this form of commerce has taken over the delineation of “e-commerce”. Likewise, a new labeling system was devised in reaction to the online revolution. It led to the emergence of such labels as “e-tailing”, “virtual-store”, “cyber-mall”, and many other “i-“ or “e-“ iterations (Tassabehji, 2003). Given the significance of electronic commerce to the modern world of business, the inherent trends were considered through the windows of business and technology. In doing so, the stakeholders were illustrating the intricacies of e-commerce and its substantial impact on the modern enterprise.


Business Trends

Given the online nature of e-commerce and the global interconnectivity brought about by the internet, the market for an e-commerce business may expand and attain the size of the number of users able to access the internet. Given the ease of access, the number of online shoppers has risen at a very high rate (Laudon & Traver, 2007). Likewise, the growth in e-commerce sales volume across the world is indicative of the substantial importance and focus on e-commerce among businesses all over the world. Developing nations are expected to join in on this, with Indonesian e-commerce sales expected to grow from $120 million USD in 2010 to $650 million USD by 2015. In India, the 2010 market of $600 USD million is anticipated to increase to $70 USD billion in 2020, with China having some $124 USD billion in 2011, an increase of 66% from 2010. Brazil is expected to experience a 21.9% growth in 2012, rising to $18.7 USD billion. In the developed world, it is anticipated that e-commerce sales volumes in Europe will increase by 78% by 2016 to reach $230 USD billion. In the United States, e-commerce sales are expected to increase by 62% by 2016 to settle at $327 USD billion (Laudon & Traver, 2007). The anticipated growth in the e-commerce sector in nations across the world is massive, underlining the expansive nature of the use of e-commerce in the modern and future world.

Many business sectors will be affected by e-commerce, with the effects taking place largely in stages. The first of these will witness the inclusion of e-commerce in the sales of books, music, and in travel. The second wave will expand into such sectors as telephones, television, real estate, as well as the jewelry and diamond business. The expansion of e-commerce across the business spectrum, from the small- to medium-sized enterprise and the multinational corporations, is illustrative of the ease of use of e-commerce. The ease of use is manly provided for by the e-commerce infrastructure built by such industry staples as Ebay.com and Amazon.com (Laudon & Traver, 2007). Businesses, small and large, may thus capitalize on e-commerce, and need only seek out existing companies to find services to enable them to do so, with minimal overhead and investment. Many studies undertaken in this field, with regard to e-commerce, have largely revolved around large enterprises. However, according to analysts Merle Sandler and Raymond Boggs (2004), small- and medium-sized enterprises have begun to recognize the value of e-commerce. As a result of this realization, the small businesses are adopting it within their varied business environments. The adoption of e-commerce is further augmented by the ease of use as mentioned above (Sandler & Boggs, 2004).

Technology Trends

The expansion of e-commerce was largely fueled by advances in technology that have made the technology to be more accessible to the consumer. The advancements include the use of handy devices, such as smart phones and tablet computers. Internet Logistics.com (2012) explored this phenomenon in one of their recent studies. In the study, it was observed that following the introduction of the iPhone, and a few years later in 2009 the introduction of the iPad, the use of online shopping has significantly increased. The onward momentum of e-commerce was augmented in 2012 when additional iterations of these devices were released by Google. Likewise, the technology offered by the Amazon Kindle spread throughout the US, and will do so in the UK over the course of 2012, given its recent release in the new market. As the prevalence of the technology that provides access to the internet increases, the use of e-commerce will spread in the business world. While these devices are largely divergent in brand name and operating system, they all have the ease-of-use attributes. To this end, they are portable and touch-operated. Given the prevalence and simplicity of use of such technology, the expansion of e-commerce is a natural development.

Business Models

The internet has gained ground, creating such opportunities as e-trading. Likewise, business models have continued to evolve, leading to a reduction in the number of such barriers as costs, which have hampered the sale of goods and services (Zilber & Araujo, 2012).

Brokerage Model

Brokerage business model connects buyers to sellers. In this case, the broker is a person who operates a business. He or she facilitates transactions, and is paid on a commission basis, depending on the sales made (Lin, Ke & Whinston, 2012). In this model, there are various kinds of markets. The first is B2C, which is also referred to as a buy/sell fulfillment. The intermediaries in B2C manage and maintain information, thus reducing the prices charged on customers. The second market is B2B, which is also referred to as market exchange. In this case, intermediation is conducted between companies. Under the brokerage model, the business community is made up of websites dedicated to the collection of data. In addition, the websites maintain contact between agents from diverse business sectors.

Buyer aggregators or purchasing groups bring together buyers interested in a certain product. The coming together of these buyers concentrates demand, which serves the purpose of improving the conditions of sales adhere to by the suppliers. Distributors are the individuals responsible for publishing online product catalogues. Virtual malls or virtual centers refer to online stores, which are managed and maintained by a distributor. They are characterized by guaranteed and common means of payment. When virtual malls specialize in a particular sector, they become a part of the industry’s market. Such sites include discussion forums and user groups on social sites. Metamediaries are online commercial centers that guarantee payments, manage transactions, protect consumers, and report on the level of customer satisfaction. Auction brokers work in collaboration with sellers to supply different kinds of products. Sellers are either companies or particulars. Reverse auction, or inverted auction sites, have an intermediary, whose work is to act as a buyer and negotiate prices of goods and services. In addition, the intermediary makes adjustments to predefined conditions (Business Models for Strategy and Innovation, 2012).

The software used to drive these websites has algorithms to account for variations in product description in different databases. The services are customized in order of group buyers, depending on their interests based on previous purchases. The customer can easily access the information he or she is interested in at the click of a button, while the seller can maintain communication with the buyers by sending them updates on products or services they are interested in. Linking customers with similar interests helps them to compare their shopping experiences (Koussouris, Gionis, Lampathaki, Charalabidis, & Askounis, 2010).

Publicity Online Model

The model involves sites that do not disclose payment details. An example of such a site is Generalized Portal. The site receives users as soon as they go online. Most of the sites under this category are supported through advertisement and sponsorships. Specialized Portal is related to General Portal, but has a limited audience as suggested by the name. It is used to achieve publicity segmentation. There are different models under this category. The attention marketing model targets consumers and announcers, while the free model is made up of a site that provides clients with free services (Business Models for Strategy and Innovation, 2012).

Informediary Model

The model consists of a company that provides customers with free services over the internet, with the aim of obtaining information about the consumers. The information gathered may include, among others, the items that people buy and the pages they frequent. The company collects such information and uses it to inform its business strategy, or give it to other companies. Recommender systems are sites that provide users with information regarding the quality of products and services, advising them on how to make purchases. The customer is only allowed to access content after providing some information. The database compiled by the company using the information gathered from clients is used for commercial purposes (Business Models for Strategy and Innovation, 2012).

Merchant Model

The model complements traditional business. It refers to a project where the business earns from cybertrading only. The model has various subsets. Virtual merchants make online transactions only. Catalog merchants sell from one person to the other, using cataloged services and products. Surf and Turf (vendor on-off) merchants largely use traditional business models, while at the same time selling over the internet (Lin et al., 2012).

Product/Manufacturer Model

The aim of this model is to cut off intermediaries so that the client can receive the product or service at the lowest price possible. It also aims at creating and maintaining contact between the consumer and the producer (Business Models for Strategy and Innovation, 2012).

Affiliation Model

It is a model involving the creation of a network of members among business organizations. If a client uses another site in the network to get to the vendor site and proceeds to make a purchase, an agreement between the various sites demands that they share the income generated (Helgueros, 2012).

Community Model

In this model, the focus is the loyalty of users. They are either knowledge networks or voluntary contributors. In the first model, experts provide professional assistance to members of the community without charging them. In the second case, the site is sponsored by the community through donations (Business Models for Strategy and Innovation, 2012).

Subscription Model

In this model, users pay for accessing the site and the content they receive from the site. In some cases, access is usually free, and as such, most sites only charge for the content that a client accesses. The converse is also true, where clients pay for accessing a site. They can use the contents in the site without further charges (Zilber & Araujo, 2012).

Utility Model

The utility model is founded on immediate payment and measured use. The major difference between utility and subscription is that real rates are the basis of measured use. In the traditional utility business model, measurement is used for basic services, such as water and electricity (Helgueros, 2012).

Maximizing the E-Commerce Opportunity

For SMEs to remain competitive, they have to be aware of the changes taking place in the e-commerce world. Keeping track of the changes enables a business to decide where to list their products on the internet. In addition, it increases the traffic on the company’s webpage. The company is aware of what will make the customer purchase their product, and not that of the competitor (Dizgah, Godarzvand & Mashayekhi, 2011). The internet has changed the way people buy products, whether from an online store or from a traditional brick and mortar shop. Many people are turning to the internet to acquire information on products and services, regardless of where they will make a purchase. However, the amount of money that consumers spend per e-commerce order has increased drastically over the last decade. The increase implies that consumers have become quite comfortable making online payments (Adaileh, 2012).

Today, most online shoppers rely heavily on collaborative knowledge and social networking for information on products and services, as well as on new technologies. Most online shoppers visit review sites like consumerresearch.com, pricegrabber.com, epinions.com, and consumerreports.com, before deciding whether or not to buy a product. Despite the impressive trends, e-commerce sites manage to convert only between 1 and 5% of leads into sales. Some of the more established sites convert up to 15% of those who visit their sites. The question is how they achieve their success and what SMEs can learn from them to increase the adoption of e-commerce (Pantaleo & Pal, 2008). There are many ways through which such successful online companies keep in touch with their customers. However, the main difference is that they have user friendly sites that make it efficient and fun to make purchases. When creating an e-commerce site, it is important to take into consideration three factors that determine the success of online purchases. First, a shopper has to find what they are looking for. Second, it is the company’s responsibility to properly showcase its products. Third, the checkout process has to be seamless (Adaileh, 2012).

Finding a Product

The main reason why a potential buyer will not make a purchase from a certain site is not because of the price, customer service, or the lack of intent to buy. The main reason for not making a purchase is that customers cannot find the product they want (Sau-ling, 2011). The first step in helping customers find the services or products they want is to understand them. All customers are divided into two; those who know how to quickly find the products they are looking for, and those who do not have a lot of online shopping experience. The webpage should be designed to make it easy for experienced users to access products in as few steps as possible, and assist the other group through simple well-defined steps. Different online customers have different challenges and present unique opportunities.

Power Shoppers

These are experienced online shoppers who know how to purchase from most online companies. They do not like wasting time perusing a website. Their most essential need is an efficient search bar that will lead them to what they are looking for (Jackso, 2009). Regarding design, the bar should be large enough and should have adequate contrast for easy visibility. Conventionally, it is placed at the right top corner of the home page. With respect to functionality, it should suggest products to customers as they key in. It saves time for the shoppers if they can type few letters to find the specific product they are looking for (Jackso, 2009).

Recreational Shoppers

There are many shoppers who fall under this category. They are people who regard shopping as an experience and they have time to search for different products. They rarely purchase from the first or second site. They are impulsive and adventurous. As a result, they can present the company with an opportunity to improve sales. Such shoppers have to be lured using dynamite photography, unbeatable deals, and unique surprises (Dizgah et al., 2011). An attractive homepage does not necessarily have to be one that blows up the marketing budget. Some of the most successful e-commerce sites use creative and simple techniques to come up with entertaining and eye-catching storefronts. A good example is Free People, which is a website that sells women’s clothing. The model spread used in the site is rather traditional, but it displays a simple, creative twist when one moves the cursor over the images (Pantaleo & Pal, 2008).

Reluctant Shoppers

They do not have a lot of experience or confidence about shopping over the internet. The major concerns for such customers are security and privacy. They require notes that promise them good customer service and trust. Online shoppers touch the products only after making purchases. Therefore, it is important to promise refund in case they do not receive what they ordered for (Adaileh, 2012). Refund and return policies increase the probability of business with such customers. In order to assist them get to the products they are looking for, the seller should provide them with shopping wizards or gift guides. The customer answers several questions and receives suggestions on what they need.

Showcasing Products

After a customer has chosen the product they would like to buy, the conversion journey begins.


The quality of photography will determine whether the buyer proceeds or loses interest. If only one photo is provided per product, the background should be distraction-free and neutral colored. If design does not allow for full-size view of products, there should be a modal view capability (Sau-ling, 2011).


The price of an item is the main reason why a shopper will close one site and begin looking for the product elsewhere. The price should be displayed clearly and boldly before the customer adds items to the cart. In case there are discounts involved, they should be displayed (Dizgah et al., 2011).


The site should provide opportunity for shoppers to give feedback. Positive reviews lead to more sales while negative ones help to highlight problems and respond to them. Feedback increases the credibility of the site and translates to repeat sales and customer loyalty (Pantaleo & Pal, 2008).

Add to cart

The words “Add to Cart” are not only conventional, but they also imply that the customer is free to change their mind and can purchase as many items as they wish. The button should be visible and uniquely fit into the design of the site to set it apart from all other sections. If the button is visible, the shoppers are motivated because the transaction appears fast and efficient. After the customer has added the item to their cart, it is important for them to receive the confirmation that the product was added. The customer should be able to add other items. As such, the product’s page should stay open as they add items to the cart. If at the time they can only access the shopping cart, they are most probably going to stop shopping (Adaileh, 2012).

Related Products

As the customer goes about their shopping, they may be looking for other related items. Suggesting such items to them saves time because they do not have to finish buying one product then begin the process all over again. In addition, some buyers may not have search skills. As a result, they will appreciate such help (Dizgah et al., 2011).


Shoppers are always excited about promotions and deals, the main one being free shipping. Free shipping is pointed out as the mainstay of the success of Amazon.com. To remain profitable, an SME can set a minimum amount that shoppers have to spend to get free shipping. The amount should not be very high. Most shoppers will be willing to spend a little more than they had planned to have their goods shipped for free (Pantaleo & Pal, 2008).

Sealing the Deal

For the shopper to finalize the purchase, the checkout process should be as simple as possible. Shopping is fun, but spending cash is not. The job of the online company is to make sure that the process is simplified and painless. The checkout should be confined to one webpage. Shoppers are most likely to lose patience if they have to load multiple pages to enter information. One study found that the number of online sales increased by 23% when the checkout was limited to one page (Dizgah et al., 2011). The company should provide instant access to customer service. Seventy six percent of shoppers want to instantly chat with a representative during checkout (Sau-ling, 2011). Instant chat helps the customer in case of any technical challenges they may be having. It encourages them to finish the purchase. The representative should be keen to capture information about the client, such as their email address, to follow them up in case they decide not to buy at this point. Customers should not be required to register in order to check out. Registration should remain optional and, in most cases, after the customer has checked out. Cookies help to identify customers the next time they revisit the site. They can be used to easily assist customers during their repeat visits (Dizgah et al., 2011).

Factors Promoting the Adoption of E-Commerce among SMEs

Xiaolin et al. (2011) point out that business is the main force propelling the adoption of technology as described in the British Library’s Staircase Model (herein referred to as BLSM). According to the BLSM, there are non- technology factors, such as increase in information and communication technology skills, and external pressure, which drive the success of SMEs. However, there are also influential factors, such as system changeover and lack of skills and resources, which may send SMEs downstairs. According to the BLSM, a firm successfully integrates e-commerce depending on how efficient its managers are with regard to linking the evolution of technology to their learning and management capacity with regard to ICT.

Chiliya, Chikandiwa & Afolabi (2011) are of the view that some SMEs, which were driven by short term objectives and operational efficiencies, had adopted e-commerce. However, they later failed in strategy and, as a result, failed to realize long term goals. Some of the short term operational benefits of adopting e-business include, among others, improved communication and marketing, sharing information, and cost reduction. In addition, e-commerce has brought with it improved efficiencies in purchasing practices (Uwalomwa & Ranti, 2009). For instance, there is reduced paper work, and as a result, operation costs are drastically reduced. In addition, the order cycle time is reduced and, consequently, the inventory is also reduced because information related to purchase order is transmitted faster. Moreover, it creates a partnership between buyers and suppliers by establishing business to business communication.

Moreover, e-commerce leads to faster communication with regard to the needs of the customers. According to Ramsey, Ibbotson & Mccole (2008), there are two main reasons why SMEs have adopted e-business in their operations. The two are need for improved customer feedback and competition. Responding to the needs of the customers in real-time has become one of the main strategies adopted by companies to remain profitable in the midst of stiff competition. Sarkar (2009) is of the view that organizations adopt e-commerce depending on how long they have been on business. The highest level of adoption is associated with SMEs that have been in operation for a long period of time. According to Elmazi, Vukaj, Gega & Elmazi (2011), the older organizations are associated with a higher level of accountability and reliability, as well as a lower rate of failure compared to the younger organizations. The scholars also point out that larger firms easily and rapidly adopt internet technology than smaller firms. According to Gilaninia (2011), the adoption of information and communication technology depends on the nature of business that a firm is involved in. Hafeez (2010) asserts that most SMEs only innovate when they are under pressure from their clients or suppliers, or when they clearly associate such adoption with a direct business opportunity. In addition, industry standards have largely contributed to the adoption of e- commerce technology.

Factors Inhibiting the Adoption of E-Commerce among SMEs

Several studies have concluded that SMEs lag behind with regard to the adoption of e- commerce in comparison to larger firms (Wilson, Daniel & Davies, 2008; Chiliya, Chikandiwa, & Afolabi, 2011). There are various factors contributing to this slow adoption of technology in these firms. The factors are grouped into various categories. The various categories are analyzed below:

Manager/Owner Characteristics

The decision to embrace ICT is in most cases made by the owner of the business in collaboration with the management (Wilson et al., 2008). The companies that have succeeded as far as their profitability is concerned, as a result of adopting IT technologies, are those that have owners who champion technological innovation. Owners of many SMEs do not want to be in the forefront of using technologies that have not been used by other companies. In addition, others feel comfortable with the traditional way of doing business, and as such, they do not see the need to change even when there are technologies that would apparently be beneficial to the firm. According to Ifinedo (2011), regardless of whether ICT innovation is taking place as a result of a technological push or pressure from the market, the decision to innovate is the responsibility of the owner.

Organizational Characteristics

As aforementioned, there are various factors specific to the various firms, which determine the adoption of e-commerce. A classical example is the age of the organization, which is linked with increased adoption of innovative technology. The kind and size of industry, and the traditional practices adopted, significantly determine the kind of technologies used (Olatokun & Bankole, 2011). Pressure from competition and the supply chain are also important factors that determine the technology used by organizations. The amount of information and data that an organization generates also determines whether it adopts e-commerce or not. Organizations that handle large volumes of products and supply chain data find it easier to adopt online business because a user friendly interface enables all stakeholders to access information in real-time (Ramsey et al., 2008).

Return on Investment and Cost

Luqman & Abdullah (2011) point out that limited personnel, training, management, time, and financial resources are some of the factors that limit the adoption of e- business among SMEs. According to Gilaninia (2011), SMEs spend very little on technology because of the pressure of other urgent recurrent needs, such as paying salaries. Even when they choose to invest in technology, most SMEs opt for less than optimal solutions because of cost limitations. Most SMEs start without a strategy for long term survival, and as such, they only invest in technologies that have a return on investment in the short term.

Other Factors

According to Sarkar (2009), SMEs are inhibited from e- commerce by inadequacies in delivery and transportation, online payment limitations, and uncertain rules of taxation. On the other hand, Uwalomwa & Ranti (2009) pointed out that lack of computers and necessary know-how, as well as limited knowledge of e-commerce methodologies and models, is one of the main factors that have inhibited SMEs from adopting e- business. In addition, security concerns are cited as reasons for the lack of willingness to adopt online businesses among various SMEs. According to Olatokun & Bankole (2011), lack of vision and strategic planning has made SME owners to consider e- commerce as a distraction as opposed to a business tool. They add that most SMEs find it costly to hire ICT professionals because of financial pressures in an uncertain economy. Elmazi et al. (2011) contend that the absence of pressure from the supply chain has contributed to the laxity in adopting e- business models.

The Progress of E-Commerce in America

Given the rapid growth of the e- commerce industry, the collection and evaluation of data is difficult. The high speed of change makes it hard to collect data to analyze this sector of the economy. According to Sejuti Banerjea, a business analyst with Zacks Investment Research, the e-commerce industry is one of the fastest growing sectors in the American economy. According to Laudon & Traver (2007), approximately 175 million people accessed the internet in 2005. 67% of all Americans over the age of 14 have access to the internet (Grau, 2005). The observation is significant compared to alternative means of commerce and advertising in America. For instance, 98% of all American households have a television while 94% have telephones (Laudon & Traver, 2007). The exposure to these media is shifting upwards with regard to e- commerce and the internet, with 60% of adult users logging in at least once every day. The observation is underlined by the reality that as time on the internet increases, the likelihood of exploring its various services also increases (Laudon & Traver, 2007). The expansion of the use of the internet laid the foundation for a proportionate increase in the use of e- commerce.

While e- commerce may appear to be present in all industries, in reality, it is present within a few industries. According to the US Bureau of Census, the two largest industries within which e- commerce is found involve the business-to-business sector of the economy. The first of these is the manufacturing sector, which attributes 42% of its overall sales to e- commerce. Next in line are the merchant wholesalers. For the latter, e- commerce comprises 23.4% of their total sales. Lagging substantially behind are retailers, for whom 4% of sales are attributed to e- commerce, and service providers, for whom e- commerce accounts for just 2.3% of sales. In spite of this, each of these business-to-consumer sectors increased their percentage sales through e-commerce over the last few years. Within the e- commerce sales category, the business-to-business segment comprises 91% of total e- commerce sales. To this end, the fastest growing segments are those of manufacturing and services (Benerjea, 2012). As a result, it is concluded that the e- commerce industry is expanding in both the business-to-business and consumer sectors. The expansion underlines the fact that with time, the sector will become more and more prevalent within the larger economy.

Overview of Competitive Pressure

‘Pressures’ are forces that lead to forward movement. When it comes to the realm of business, the pressures that go along with competition can cause particular organizations to change. The organizations are likely to change their business models, company objectives, and such aspects. At the end of the day, the businesses change their way of doing things. There are many different forces that can create pressure in the business world. The different forces or pressures may include, among others, changes in technology, the rise of new competitors (or changes in existing competition), significant shifts in either supply or demand in the marketplace, or something as overarching as globalization. Due to the fact that these pressures are all related to the world of business, they are referred to as business pressures. Each of these factors is called a “pressure element” (Benerjea, 2012). The types of pressure elements are classified into many categories. The various categories include, among others, political pressure elements, social pressure elements, and technological pressure elements. In this research, the focus will largely revolve around technological pressure elements.

According to Olatokun & Bankole (2011), e- commerce is of particular interest when taken as a business pressure element due to the fact that it has experienced exponential and fast growth in the U.S. marketplace. Although there is a noticeable shrink in the growth of the high- tech industry as a whole (mainly caused by the recession), there is still a significant growth in the frequency of online purchases made by consumers. The development has allowed many high-tech firms to remain present in the marketplace when it comes to e- commerce. The growth of e-commerce can only affect the overall advancement of the economy as a whole. Nevertheless, e-commerce remains a problematic issue for some, and the inundation of this technology into the marketplace will continue to challenge small businesses around the country (Luqman & Abdullah, 2011).

Most of the benefits associated with e- commerce are from the perspective of the consumer. When buying online, consumers can easily locate and purchase the goods and services they desire. What this means is that consumers spend less time and effort than they would in a brick and mortar store, as a result making online purchasing more attractive to them compared to conventional shopping. In addition, online shopping leads to a reduction in costs associated with the purchasing exercise. With such a reduction in costs (both to the consumer and to the business), levels of productivity increase. Interestingly, this increase in productivity for individual businesses translates to an increase in productivity in the wider economy in the country and in the world as a whole.

In addition, businesses that are not currently taking advantage of e- commerce opportunities have begun to make changes in their own infrastructure in order to begin using e-commerce. The businesses have realized that e- commerce is a significant source of competition than originally thought. According to Willis’ 2004 study titled “What Impact will E-commerce Have on the U.S. Economy?” e- firms have an advantage over brick and mortar businesses because. The advantages are associated with the ability to use unconventional sales methods, including lowering the cost of transaction, distributing information and products more efficiently, and allowing the consumer greater access to increased portions of the market. In addition, Willis argues that e- firms have another advantage over traditional firms. To this end, they do not have the same overhead as the traditional firms. The need for a highly paid workforce or the necessity of a large space is also greatly reduced. In other words, e- firms have fewer operating costs compared to the traditional firms, which translates to more money that is put back into the business.

However, in spite of the various benefits associated with this technology, there are disadvantages as well. E-firms lose the face-to- face customer relationship that often translates to return customers in brick and mortar stores. But losing this advantage may be a small price to pay when the return is access to a greater number of customers instead of a few, valued customers.

Lim (n.d) uses the example of transactional costs as a cost- reducing measure. According to Lim (n.d), Lehman Brothers, for example, had reported that it cost the company approximately $1.27 each time a teller made a transfer between bank accounts. It is noted that if this same process was completed via the ATM or over the internet, it would have cost the company only $0.27 or $0.01, respectively. Such kind of savings is difficult to argue with. In “The Diffusion of E-commerce Among SME’s: Theoretical Implications and Empirical Evidence”, Ching & Ellis (2004) shows that companies that adopt e-commerce in their operations experience not only the benefit of reducing their distributive and market entry costs, but also end up with a higher number of customers. The development allows the business to remain competitive, in spite of the pressure element. SME’s, which normally face some of most difficult challenges and high costs of setting up a proprietary distributive channel, benefit from dealing more directly with consumers. However, the businesses are tending towards the adoption of e-commerce because of the benefits of incurring little or no costs during transactions. Such benefits are far too tempting. Many SME’s, having realized the advantages of e- commerce, will continue to move in this direction. The SMEs may soon carry out all their transactions over the internet.

The changes in technological pressure elements may also lead to an increase in competition. On its part, the growth of e-commerce may lead to faster and increased innovation compared to other forms of technology. Increased innovation at a fast pace may be necessary for businesses in the future, as they vie to make their products and services stand out from the competition. Consequently, the aggressive spirit, spurred by actual market competition, may lead to further innovations in the field. The innovations arise as businesses attempt to make their mark in the e- commerce world. Over the next few years, it is possible that the business world will experience significant changes in the way e- commerce is conducted. The individuals who will fail to take advantage of e- commerce in the present may find new and innovative ways to use the technology. The adoption will push the industry forward at an even greater pace.

Other scholars aver that companies and businesses that choose not to engage in e-commerce will be at a huge disadvantage as the technology progresses. Lowering prices and improving productivity will become increasingly difficult without the use of e- commerce technologies. Unless these businesses find a more innovative and creative way to deal with market and competition pressures, they will most certainly be left behind. In other words, the likelihood of e- commerce to become one of the most important tools used by businesses is quite high (Santarelli & D’Altri, 2003).

In “Building and Sustaining the Source of Competitive Advantage in E-Commerce Capabilities”, Lawrence (2004) points out that there is an obvious separation between competition in traditional markets and competition in e- markets. According to Oeztel (2002), this separation is due to three important factors. The factors include the low costs of internet searches and transactions compared to traditional transaction and ‘search’ costs. Oeztel (2002) terms this observation as ‘information asymmetries.’ The asymmetries in information, according to Oeztel (2002), are due to the hypothesis that as information becomes more ‘transparent’ and easily accessible online, brick and mortar (read traditional businesses) will lose their current ‘face-to-face’ abilities. The abilities lost include the knowledge of products and services, as well as the pricing (see also Lawrence, 2004). In sum, the business pressures placed upon traditional business models by the advent and continued growth of e- commerce will gradually erode the profits, pricing, and quality that these businesses currently afford their consumers. Although e-commerce seems to be a welcome technological advance, it remains to be seen whether it will cause too large of a shift in the way that businesses both do business and respond to competitive pressure (Bakos, 2001; Oeztel, 2002; Lawrence, 2004).

Overview of the Concept of Willingness to Expand Business Models

The internet has created a new world that exists beyond our real world. It is a “virtual network world,” or “the sixth continent”, as Lu Yongxiang, an academic at Chinese Academy of Science, described it. E-commerce, which was facilitated by the internet, is one of the most significant scientific accomplishments. Traditional businesses can achieve greater, faster, better and more economical results through e-commerce compared to the adoption of traditional business models. The influence of e- commerce extends far beyond the realm of conventional business activity (Qin, 2009). According to Karakaya & Shea (2008), the growth in e- commerce is expanding and is likely to continue in the near future. The number of internet users exceeded one billion in 2005 (Karakaya & Shea, 2008) and, according to internet world statistics, this number surpassed 2.2 billion by the end of 2011.

Summary of Research in the Field

According to Xiaolin et al. (2011), an increasing number of small and medium- sized enterprises (SMEs) use the internet for business purposes. However, it is noted that only a few of them have adopted the internet as an online direct sales channel (herein referred to as ODSC). Among those that do use the ODSC, some end up abandoning it shortly afterwards. In their study, researchers explored a few critical factors underlying the initial adoption and continued use of online direct sales channels among SMEs (Xiaolin et al., 2011). The findings suggest that the initial implementation and continued use of ODSCs involve different sets of decision factors. According to Xiaolin et al. (2011), many aspects of the innovation remain unclear to the organization before SMEs’ initial adoption of an ODSC. There are various uncertainties and the risks are high. Therefore, the SMEs’ risk propensity serves as a direct impetus for the initial adoption of the innovation. At the post- adoption stage, however, the SMEs have had experience with the ODSC. As a result of this experience, decisions regarding whether or not to continue using the ODSC are driven more by the observed benefits than by the SMEs’ risk propensity (Xiaolin et al., 2011).

In addition, Karakaya & Shea (2008) examined the reasons why companies begin to use e- commerce to determine whether these e- commerce initiatives are successful or not. According to Karakaya & Shea (2008), enhancements in technology, such as the internet, have helped lower barriers to market entry in a variety of industries (Porter, 2001). The lowering of the barrier has made the marketplace easier to access for businesses (Bandyopadhyay, 2001). Furthermore, and according to Petrtyl (2012), electronic markets have few or no barriers for new entrants. As a result, new businesses (regardless of whether they are SMEs or large businesses) can start business operations very fast. In their research, Karakaya & Shea (2008) focused on nine motivations that would impel a company to enter the e- commerce arena. According to these scholars, eight of the nine reasons for initiating e- commerce were regarded as very important factors. Two of the most important reasons that they found for establishing e- commerce were: 1) keeping up with technological trends in business and, 2) expanding sales to a wider geographical area. One of the other factors— cost savings through decreases in personnel— appeared to have the least impact, although the respondents still remained neutral in their ratings of this variable (Karakaya & Shea, 2008).

Ching and Ellis (2004) also examined the factors that affect the adoption of e-commerce among small and medium- sized enterprises (SMEs). The findings of their study reveal that the adoption of e-commerce among SMEs is significantly affected by various factors. The factors include, among others, 1) various decision- making considerations, including age, education, and cosmopolitanism; 2) innovation, including relative advantage, compatibility, and cost; and, 3) environmental characteristics, which included factors like customer pressure. Moreover, Petrtyl (2012) regards compatibility as an impetus to adopt e- commerce and “an advantage over competitors gained by offering greater customer value, either through lower prices or by providing more benefits that justify higher prices” (Kotler & Armstrong, 2010). E-commerce provides SMEs with new exchange mechanisms that enable them to compete on an equal basis in the global markets, a factor that motivates nearly every SME to adopt e-commerce as part of their business model (Zhu, 2008).

Much is written about e- commerce. A number of scholars argue that e- commerce leads to undisputed benefits. To this end, it is a fact that various benefits are associated with the use of e-commerce. The benefits notwithstanding, the use of the technology by many companies is very limited. The disinclination of SMEs to adopt and use e-commerce deserves serious attention, given the substantial role that SMEs play in all economies (Hashim, 2009). Business organizations use it on their daily activities because they receive a number of benefits. However, in spite of the positive impacts of e-commerce, SMEs still face a number of limitations and barriers that make it difficult to add e-commerce as a new business channel. In the next section, the author will address the specific issues faced by SMEs, which makes pursuing e-commerce very challenging.

Overview of Readiness

A considerable amount of literature has been established and research conducted on the subject of small- to medium-enterprises alongside e-business and the various elements of e-commerce. A large amount of this literature is based on SMEs that are not American. According to these results, the internet and its related technology had significant implications with regards to competition. The internet has enabled SMEs from across the world to compete on the global playing field, made possible entirely through the utilization of internet technology. As stated by Beach (2004), the advances in the use of internet technology may eventually lead to its universal adoption, as those business models that have made the move to include the use of internet technology have generally realized significant benefits. Conversely, and according to Becherer, Haynes & Helms (1998), smaller companies may not be able to capitalize on the internet and its related opportunities as effectively as larger ones. However, to not compete on the internet amongst such giants as Yahoo or e-Bay is to miss out on an opportunity.

Existing Literature: An Overview

The Gartner group has advanced that 75% of all e-business and e-commerce issues that develop and opportunities that are missed are as a result of, according to Greco & Ragins (2003), a lack of technological understanding, or poor business planning. However, even within technology-based companies, the requisite organizational learning, adoption, diffusion, and infusion of innovations must be effectively adopted. To this end, the encouragement of a positive culture that supports creativity, and the necessary structural supports, are elements that make this possible (Zwass, 2003).

Technological risks that are associated with the development of technology and the adoption of computer systems are largely related to the failure of hardware and software. Such operational speed-bumps would serve as the primary limitations to the speedy adoption of e-commerce (Sukumar & Edgar, 2009). In addition, and according to Sukumar & Edgar (2009), the speed at which technology develops may at times be difficult to keep up with. To this end, legacy systems largely contribute to the inherent difficulty experienced by the e-business, with small- and medium-sized entrepreneurial endeavors mostly disadvantaged. They lack support to enable them address issues as they arise within the system.

E-commerce will face a number of additional issues, with privacy emerging as one aspect that had to be dealt with (Beritz & Gyun, 2001). When conducting an online transaction through e-commerce, certain information is required for processing. Some of the information is personal, while others are of financial nature. Such personal information must be protected and secured to prevent adverse developments underlining the importance of privacy. According to Beritz & Gyun (2011), SMEs and large corporations alike must collect personal information on behalf of the customer to process their transactions. The information is in turn applied to benefit the business, whether through simple assessment and consideration, or through direct marketing and other such advertising initiatives. The trust a consumer places on e-commerce is largely informed by their sense of safety and security with regard to their personal information. Lack of this sense of safety presents one of the few impediments to the growth of the e-commerce industry (Hoffman et. al., 1999; Milne & Boza, 1999; Shankar et. al., 2002)

The violation of intellectual property (herein referred to as IP) rights, whether undertaken consciously or mistakenly, is an issue of considerable concern (Halpern & Mehrotra, 2000). Due to the global nature of interactions taking place on the internet, the potential to violate IP rights is high. The potential is high given the prevalence of information and scope of its publication. According to Halpern & Mehrotra (2000), the use of e-commerce is associated with both risks and gray areas. One such area is that of metatag manipulation. Metatags are hidden within the HTML code of a website. They affect the location of the search engine of a particular subject. Metatags impacts on the search substantially, with the manipulation thereof affecting what the customers see. Lack of regulations and appropriate legislations has provided inadequate legal grounding for e-commerce woes. The lack of such a foundation has in turn served as both a limitation and barrier with regard to the ability of the SMEs to fully incorporate the elements of e-commerce into their business model (Zhu, 2008). Nonetheless, and according to Shih et al. (2005), the legal environment in the United States is particularly conducive to e-commerce. The environment is better compared to that in other nations, which in turn brings about the increased participation in e-commerce among American firms in general, whether SMEs or otherwise.

Through an exploration of research regarding the SME inclusion of e-commerce, additional risks are identified that impact the prevalence and hesitance to use e-commerce among businesses within the SME sector. Such issues as credit card fraud, identity theft, the hacking of other personal information, the misuse of emails, manufactured transactional difficulties, and malignant computer viruses, such as worms, are all realities faced by the large and small business alike. With regard to access to the internet, there is room for issue, with network access playing a substantial role in security as well (Sukumar & Edgar, 2009). As stated by Sukumar & Edgar (2009), those SMEs that adopt e- commerce are careful to maintain security, as the loss of reputation related to insecurities may not be something an SME may recover from.

The fears by SMEs to adopt e-commerce are brought about by lack of knowledge about the benefits of such technology. Berranger et al. (2001) conducted interviews to collect qualitative data in this regard, with the subjects largely indicating a desire for a larger body of experimental literature on e-commerce prior to their feeling comfortable to include it in their business models. Such lack of knowledge, especially within the leadership of an organization, as well as among SME entrepreneurs, leads to the potential risks that are faced by the organization when adopting e-commerce, particularly with regard to strategy. Lacking such knowledge may be due to unavailability of models and standards to refer to when determining the financial viability of investing in e-commerce. According to Sukumar & Edgar (2009), an understanding of the potential profits in relation to the investment is not as clear is it should be for the SME. As a result, this limits the complete adoption of e-commerce within this sector. Nonetheless, the SMEs have the characteristics of innovation and creativity. Moreover, the SMEs are reactive, given that they may respond to issues faster than larger companies, given their size (MacKenzie, 2006).


A recent study by Elder, Litan, Shutter & Varian (2002) advanced that the use of internet business solutions is adopted by organizations, both large and small, in pursuit of decreasing operational costs. The adoption is also aimed at increasing the profits. The conclusion was based on a study conducted on 2,065 organizations within the United States, as well as 634 companies from the United Kingdom, France and Germany. Cisco Systems was the sponsor of the study, as such information would be of value to this organization. Within the American sample, 61% of those surveyed were found to have already adopted e-commerce and business solutions within their organization. The larger organizations were assessed and classified as such if their number of employees exceeded 5,000. Out of this sample, 83% had already adopted technology in their business operations (Elder et al., 2002).

For organizations to succeed with respect to e-commerce, the adoption of such technology must be effectively carried out. Innovation is central to the leadership required for this adoption. Risk- taking is an element of business that is relevant when attempting new processes, procedures, or technologies. The inclusion of e-commerce into the SME or any other business may seem relatively risky. However, given the clear benefits, the inclusion of this technology can emerge as an important and effective strategic initiative (Sanchez, 2002; Goldberg & Sifonis, 1998). As stated by Bell et al. (2004), the SMEs that hope to successfully adopt e-commerce may find it to be an effective means of entering into the global market. To this end, the SMEs will enhance international distribution through the effective employment of e-commerce and e-business strategies.

Prior to the development of e- commerce, the process of marketing and selling goods by retailers was limited to local and few non-local customers. E-commerce has changed and challenged much of this traditional way of doing and thinking business. E-commerce technology permits commercial transactions to cross cultural and national boundaries and creates potential market size equal to the size of the world’s online population for every business, small or large. On the other hand, it permits businesses to reduce their operational and production costs and provides them with an opportunity to compete globally with large corporations. All these factors, and many more, which have been addressed in chapter 2, create a potential willingness and interest for SMEs to adopt e-commerce as a new business channel to their current business model. Chapter 2 provided a critical review of available literature for the study. Built on the two chapters, chapter 3 will address the research methodology, which includes a description of the research population, sampling, and data collection instruments. Finally, the chapter will address the data collection procedure. Any limitations associated with the proposed methodology will be highlighted. The measures that need to be put in place to address these limitations will also be analyzed.

Research Methodology


In chapter 2, the researcher provided the reader with a critical review of the literature surrounding the research problem addressed in this study. The findings of several studies conducted in this field were analyzed in an effort to determine the status of the knowledge base in the field. Agreements and disagreements between various scholars in the field were also analyzed from the literature. In addition, the researcher used the literature existing in the field to come up with the theoretical framework underpinning the proposed study.

In this chapter, the methodology that will be used in the proposed study is analyzed. The aim is to provide the reader with an idea on how data will be collected and analyzed for the study. As already indicated earlier in this paper, the proposed study is going to adopt a quantitative correlational design. In this chapter, the researcher will restate the research questions and hypotheses in an effort to tie them down to the research design that will be adopted. The methodology of the proposed study is provided. At this point, the methodology (correlation research) is identified and described. Rationale for the same is provided. Instrumentation and measures used in the study are discussed in this chapter. It is at this point that the researcher will discuss the structure of the questionnaire that will be used to collect data. The reliability and validity of the measure is also provided.

A discussion of the study participants is provided in this chapter. The discussion includes a description of the recruitment of the participants used in the study, the sample size, as well as the rationale for the same. The proposed data analysis plan will also be provided. The researcher will also address ethical considerations touching on the proposed study in this chapter. Issues touching on confidentiality of the participants and informed consent are addressed here. Finally, the researcher will highlight limitations of the proposed methodology. In addition to this, the researcher will highlight the measures that will be taken to address the limitations or mitigate their negative impacts on the study.

Research Questions and Hypotheses

As indicated in chapter 1, the proposed study will revolve around 2 research questions. Two hypotheses (null [H0] and alternative [H1] hypotheses) are formulated and proposed. The hypotheses will be statistically tested for each of the research questions. Following is a restatement of the research questions and the corresponding H0 and H1:

Research Question 1

Is there a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their readiness to expand their current traditional business models by adding an e-commerce sales channel?

  • H0: There is no significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their readiness to expand their current traditional business models by adding an e-commerce sales channel.
  • H1: There is a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their readiness to expand their current traditional business models by adding an e-commerce sales channel.

Research Question 2

Is there a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their willingness to expand their current traditional business models by adding an e-commerce sales channel?

  • H0: There is no significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their willingness to expand their current traditional business models by adding an e-commerce sales channel.
  • H1: There is a significant relationship between the increase of competitive pressure on City of Los Angeles jewelry businesses and their willingness to expand their current traditional business models by adding an e-commerce sales channel.

Proposed Methodology


A quantitative correlational research method will be used in the proposed study. The aim is to identify the correlation (or lack of it thereof) between three quantitative variables. The three variables include 1 independent variable and 2 dependent variables. The independent and dependent variables are restated below:

Independent Variable

The increase of competitive pressure on traditional jewelry stores in Los Angeles.

Dependent Variables

  1. Willingness of City of Los Angeles’ jewelry businesses to expand their current traditional business model by adding an e-commerce sales channel
  2. Readiness of City of Los Angeles’ jewelry businesses to expand their current traditional business model by adding an e-commerce sales channel

Quantitative Correlational Research Design


According to Sinks (2010), correlational research involves finding out whether the data collected has a discernible relationship with each other. The relationship so identified is interpreted further to identify its magnitude and its increase or decrease. Asgari (2011) goes a step further to define a quantitative correlational research as the statistical assessment of the extent to which variation in a given factor is related to variation on one or more factors identified in the study. The relationship between the two is assessed on the basis of a coefficient index (Emlen, 2006). An example of such a study design involves identifying the relationship (or lack of it thereof) between sitting arrangements in class and score among students. In such a case, the researcher is interested in finding out whether the sitting arrangement has any significant statistical relationship with the performance of the students in the class.

According to Lim (n.d), the major aim of a correlational research is to find out whether or not a relationship exists between two or more variables. In the case given above, the researcher may be interested in finding out whether indeed a relationship exists between academic performance and sitting arrangement in class. When such a relationship is established, its strength, based on a coefficient value, is then analyzed (Cohen & Morrison, 2004). Alternatively, the researcher can use the relationship between the two or more variables to make predictions. For example, if a relationship is established between academic performances and sitting arrangement in class, the researcher may use this to make predictions to the effect that students seated at the front will score higher than those seated at the back.

Waters (2012) notes that the two or more variables used in a correlational research should be derived from the same group of subjects. The relationship or covariation between the two or more variables, according to Waters (2012), translates to a similarity between them. The relationship is not interpreted in terms of the differences between the mean of the variables under examination. In theory, a correlation may be established between a set of two or more quantitative variables. An example of such a scenario is the increased competitive pressure on City of Los Angeles’ jewelry businesses and their readiness and willingness to expand their current traditional business model by adding an e-commerce sales channel. The example applies in the case of the proposed study. To establish a theoretical correlation between the two variables, the researcher must have scores on them. The scores must be drawn from the same participants, in this case jewelry businesses in Los Angeles. According to Al-Mahmood, Rashid & Islam (2010), it beats logic for a researcher to collect and analyze data when they have little or no reason to believe that the 2 or more variables are related.

Types of Correlational Research

There are various types of correlational research that a researcher will select from. Each of these designs has its merits and demerits. The selection of one over the other depends on, among other things, the nature of the proposed study, the data needed, the kind of sample available, and the size of the sample. In this section, the researcher will discuss different types of correlational study designs.

Naturalistic (Observation)

In carrying out a study of this nature, the researcher is involved in the observation and recording of the variables in their natural environment (Cohen & Morrison, 2004). The researcher neither manipulates nor interferes with the variables. For example, the researcher observes the sitting arrangement in a class and the grades scored by the students. A major advantage of this form of correlational study is that it gives the researcher the chance to analyze the variables in a natural setting (Lim, n.d). In addition, it can provide the researcher with the ideas for further studies in the field. According to Rippy (2011), it may be the only option for the researcher if experimentation in a laboratory setting is not viable.

However, naturalistic observation may also be a time consuming and expensive venture (Emlen, 2006). Moreover, it denies the researcher the chance to scientifically control the variables. For example, one cannot control or manipulate the grades scored by the students and their class attendance. The researcher is unable to scientifically control for extraneous variables. The effects of external (read extraneous) variables, such as home environment, on student’s performance cannot be controlled when studying the relationship between class attendance and performance. In addition, the participants may be wary of the presence of the observer, making them alter their behavior and, in extension, alter the results.

The Survey Method

It is one of the study designs used in this field. It is the design that will be used in the proposed study. It is also one of the most common methods in correlational research. Here, the researcher randomly selects a sample of subjects from a population. The subjects are then requested to complete a survey questionnaire or test, which is related to the various variables identified (Asgari, 2011). According to Lim (n.d), random sampling is the most critical aspect of this method. Random sampling is critical for this study given that the results are usually generalized to the larger population. As a result, random sampling increases the reliability and validity of such generalizability.

A major advantage of this method is that it is fast and cheap. The advantage makes it easy for the researcher to collect large volumes of data in a short time and at reduced expense as compared to the observation model (Sinks, 2010). It is also a relatively flexible method as compared to the other models. However, survey method is negatively affected by a poor research design (Rippy, 2011). For example, the study design is negatively affected when the researcher comes up with an unrepresentative sample and poorly designed survey questions. Moreover, it is noted that the subjects in such a study can affect the findings. The subjects can affect the findings if they happen to lie to the researcher in efforts to create a favorable image. The subjects may negatively affect the findings if their memory becomes unreliable.

Archival Correlational Research Method

Archival correlational research method is the third research design under this category. According to Waters (2012), it involves the critical analysis of the findings of studies conducted by other scholars in a given field. For example, the researcher may opt to go through the historical medical records of patients suffering from a particular condition. A major strength of this method is the fact that it safeguards against the introduction of changes or manipulation of variables or subject’s behavior by the researcher (Sinks, 2010). It uses large volumes of data, which allows for an improved view of patterns, links, and outcomes among variables. Furthermore, it is a relatively cheap research methodology. To this end, the researcher can access data from free archives and databases.

However, the research design has various weaknesses, which impacts negatively on the quality of the study. For example, the scholar has no control over data collection given that the data is already collected by other scholars before them. In addition to this, significant dates and other chronological records may be missing from the records accessed (Rippy, 2011). It is noted that the previous studies, whose findings the researcher is using, may be unreliable. The previous studies may be unreliable given that the researcher could not control for their validity and reliability.

Advantages and Disadvantages of Correlational Research

Advantages of Correlational Research

According to Al-Mahmood et al. (2010), this form of research design makes it possible for scholars to collect large volumes of data as opposed to controlled experiments. For example, using a questionnaire, the researcher will be able to collect more data than the one they would have collected if they were carrying out a controlled laboratory experiment. In the case of the current study, the researcher will be able to collect more information on the experiences of SMEs in Los Angeles as far as the adoption of e-commerce is concerned.

In addition, researchers can use the findings of past correlational studies to further their own. In other words, correlational research provides an opportunity for further research in the future (Lim, n.d). In the case of the current study, the researcher will use the findings made in a study conducted in this field as a starting point for their study. Correlational research is a good starting point for scholars who are addressing an area of study for the first time. For example, when a possible relationship is established or suspected to exist between two or more variables that can be quantified, researchers can use correlational research to map out the direction and strength of such a relationship (Sinks, 2010). Future scholars can then use the findings of the initial correlational research to narrow down and identify the causation between the variables in an experimental set- up.

Disadvantages of Correlational Research

There are several disadvantages associated with this form of research, and which may negatively affect its positive attributes. According to Cohen & Morrison (2004), this study can only map out the existence (or lack of it thereof) of a relationship. It fails to provide further information explaining the reason why such a relationship exists in the first place. In the case of the current study, the researcher will only map out the relationship between the increase in competitive pressure on the one hand and willingness and readiness of SMEs to adopt e-commerce on the other hand. The reason why competitive pressure affects willingness and readiness to adopt e-commerce is beyond the scope of the current study.

It is also important to note that findings of correlational studies fail to provide information regarding which of the two or more quantitative variables has influential power over the other(s). For example, the researcher may find that there is a positive correlation between performance and sitting arrangements in class. However, the study fails to identify which variable between the two (performance and sitting arrangement) has influence over the other. Does sitting arrangement in class influence performance, or do teachers use the performance of the students in arranging them in class? The researcher can make assumptions regarding the two variables and their influence over each other. However, unless further research is conducted to determine the true nature of the relationship, causation cannot be established (Rippy, 2011).

Proposed Correlational Methodology

The proposed study will use a correlational research design that examines the relationship between two or more variables that are not manipulated by the researcher. The proposed study will not adopt the predictive correlational methodology. In addition, the researcher will use survey method as opposed to naturalistic (observation) and archival methods. The justification for these decisions is provided in subsequent sections of this chapter.

Why Correlational Research for the Proposed Study?


There are several reasons why the researcher of the proposed study opted for a correlational study as opposed to other methodologies, such as experimentation. One of them is the fact that there is an existence of three variables that are quantifiable. The variables, as already explained elsewhere in this paper, include the competitive pressure piled on City of Los Angeles’ jewelry businesses, and the readiness and willingness of the businesses to expand their business operations by including an e- commerce sales channel.

There is also reason enough for the researcher to believe that there is a possible relationship between the three variables. Correlational research, according to the researcher, was the best method to map out the relationship between the three variables. The possibility of a relationship between the three variables was established from a critical literature review that was carried out by the researcher prior to the formulation of the proposed study. Other methodologies, such as experiments, may not exhaustively establish the relationship between the three variables.

Moreover, it is noted that it is possible to quantify and measure the three variables identified in the study. To this end, the researcher will be able to use a questionnaire to measure the three variables. The ability to quantify and measure these variables is the reason why the researcher proposes for a survey correlational research method as opposed to other methodologies, such as archival correlational research.

Other methodologies, especially those based on experimentation, call for the manipulation of the variables under examination. However, there are other variables that are not effectively and scientifically manipulated. Such variables are better studied in their natural settings as they occur. When carrying out the literature review prior to the formulation of the research design, the researcher found that it is not possible to manipulate the three variables identified. As such, correlational research was preferred to study the variables in their natural setting. Natural setting in this case is the day-to-day operation of jewelry businesses in Los Angeles.

The researcher also noted that the variables identified could only be effectively studied using data collected from a large sample. In other words, a large sample was needed. According to Lim (n.d), an effective correlational research requires a large sample of more than 30 subjects. The researcher realized that it is possible to obtain such a sample from Los Angeles’ jewelry business community. As a result of this, the researcher found it viable to settle for a correlational research. An experiment could not be effectively carried out using such a large sample given that it is not possible to manipulate such a large number of participants.

Instrumentation and Measures

The instrument that will be used to collect data for this study is a survey questionnaire. In this section, the researcher will discuss the structure and content of the questionnaire. The reliability and validity of the questionnaire will also be discussed. In addition, the researcher will provide justifications for the use of a questionnaire as opposed to other instruments, such as interviews and online survey. A copy of the questionnaire used is provided in Appendix 1.


Study Population

For the purpose of the proposed study, the population will be traditional jewelry and diamond businesses in the city of Los Angeles. The researcher settled for the City of Los Angeles given that he comes from the same region and as such, it will be easier to concentrate on the businesses within the city. Concentrating on businesses from the same region makes the population homogenous, an important aspect of correlational studies. The experiences of the business owners from the same city are likely to be more or less similar when it comes to competitive pressure and their willingness and readiness to expand their traditional businesses.

Study Sample

The study sample for the proposed study includes the owners of traditional jewelry and diamond businesses in the City of Los Angeles. The size of the sample is 150 business owners operating within the city (N=150). The researcher settled for this number of respondents because it is small enough and easy to manage when conducting the study. In addition, the size is large enough for a correlational quantitative study. As already noted in this proposal, researchers are advised to have a sample of at least 30 subjects for a correlational study to be viable. A sample of 150 is above the 30 mark and at the same time, manageable to the researcher.

Sample Characteristics

The researcher will be careful when it comes to the characteristics of the sample given the fact that homogeneity is called for. One of the characteristics of the sample is the fact that the potential participants must have a jewelry and diamond business operating in the City of Los Angeles. Businesses operating outside the borders of the city will not be part of the sample. The participants will also be the real owners of the businesses. What this means is that employees, customers, suppliers, and such other extraneous parties will not be part of the sample.

The business must also have operated within the City of Los Angeles for at least one year. The duration is important given that the researcher believes a business that has been in operation for less than one year may not have fully experienced the competitive pressures as far as e-commerce is concerned. However, it is important to note at this juncture that the size of the business will not be taken into consideration. What this means is that large businesses with several employees and small ventures operated solely by the owner (maybe with the help of their family members) will all be included in the study. The researcher feels that the experience of the businesses may not vary significantly depending on their size.

Sampling Techniques

Random sampling will be used in the proposed study. Correlational quantitative studies call for random selection of subjects, and that is why the researcher settled for this research design. A list of all the businesses operating within the City of Los Angeles will be compiled from the records of the city agency responsible. Caution will be taken to list only those businesses that have been in operation for at least one year. Each of the business will be allocated a random number, starting from 1. Small, rounded plastic cards corresponding to the number of the listed companies will then be marked, starting from 1. The plastic cards will then be put in a large jar and mixed thoroughly. The researcher will then draw cards randomly from the jar. A total of 150 cards will be drawn. The businesses corresponding to the drawn cards will be the ones included in the study.

Data Analysis Plan

Data analysis will be the same for each of the two research questions. When the data is collected, simple correlation will be used to statistically analyze it. Pearson’s r Correlation Coefficient will be employed in correlation analysis for the scores recorded. According to Lim (n.d), Pearson’s Product Moment Correlation Coefficient, or the aforementioned Pearson’s r Correlation Coefficient, is preferred by most researchers conducting a correlational quantitative study. The reason for the preference is that the analysis makes it possible to identify the relationship between the various variables and the direction of this relationship.

According to Lim (n.d), Pearson’s r is used to determine the degree to which paired scores “…..occupy (the) same (or) opposite positions” (p. 24) within their own distribution. For the purpose of the proposed study, the paired scores are as listed below:

  1. Competition pressure and willingness of the traditional businesses to expand by incorporating an e-commerce sales channel
  2. Competition pressure and the readiness of the traditional businesses to expand by incorporating an e-commerce sales channel

r scores for the 2 pairs above will tell the degree and strength of the relationship (or lack of it thereof). The degree and strength of the relationship will range from -1.0 to 1.0. In addition, the scores will tell the direction of the relationship, whether positive or negative. The scale below (as cited in Lim, n.d), will be used for the proposed study:

Correlation Coefficient                                       Relationship

.00 -.20                                                                          Negligible

.20 -.40                                                                               Low

.40 -.60                                                                          Moderate

.60 -.80                                                                         Substantial

.80 – 1.00                                                               High to Very High

When the score of r lies between 0 and -1.0, it will be an indication of a negative relationship between the variables. A score ranging between 0 and +1.0 will be an indication of a positive relationship. A scatter gram will then be used to represent the correlation between the two variables that are measured (Sinks, 2010). In the proposed study, two scatter grams will be used; one for competitiveness and willingness and the other for competitiveness and readiness. Scores for competitiveness will be plotted on the x axis, while the y axis will be for the readiness and willingness scores in the respective graphs. The relationship depicted by the plots made will then be interpreted.

Ethical Considerations

Studies using human beings as subjects should have ethical considerations at their very core. In the proposed study, the researcher will uphold the confidentiality of information provided by the participants, as well as informed consent. As far as confidentiality is concerned, the researcher will make sure that information provided by the participants is not disclosed to unauthorized third parties. What this means is that the completed questionnaires will be kept under lock and key. The names of the businesses and their owners will not appear on the face of the questionnaire. On the contrary, the researcher will use a randomly allocated number for each of the businesses to keep track of the questionnaires. The allocated number will be known only to the researcher. The information will be used only for the purpose of this study. All of these assurances will be made known in the consent form that the respondents are required to sign before taking part in the study. The researcher will inform the respondents the nature of the study, the risks associated with the study, and the sensitivity of the information provided before proceeding with the study. The information will be put down in a consent form that the respondents will be expected to sign before completing the questionnaire (refer to Appendix 2 for a copy of the consent form).

Limitations of the Methodology

One of the major limitations is the possible lack of cooperation on the part of the respondents. The reluctant to cooperate is attributed to the sensitive nature of information required in the questionnaire. The respondents may find it hard to disclose sensitive information, such as financial statements, to the researcher, fearing business espionage. The fears will be addressed when the researcher assures the respondents of the confidentiality of the information. Another challenge is the large number of respondents (150). The researcher may find it hard to distribute questionnaires to all of them single-handedly. To address this, the researcher will recruit 2 qualified research assistants. The research assistants are the ones who will distribute the questionnaires.

The proposed research design has some internal limitations given that it is unable to explain the nature of the relationship identified. For example, the findings made may not provide enough information on the causal relationship between competitive pressures on the one hand and readiness and willingness to expand on the other hand. As a result of this, the researcher will not make efforts to explain the causal relationship as there will be no data for such an explanation. On the contrary, the researcher may make recommendations for future studies in this field, depending on the findings made.

Chapter Summary

In this chapter, the researcher provided the reader with information touching on the methodology that will be adopted for the proposed study. The methodology proposed was analyzed. In addition, the researcher analyzed the instruments and measures to be used, as well as the selection of participants for the study. Data analysis plan, ethical considerations, and limitations of the proposed study were also identified.


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