Chapter 1 INTRODUCTION This study analyses the prospect of implementing e-commerce to Turkeys small and medium industries.

The study investigates the factors that constraint ecommerce application. Further, the readiness of these SMEs, and issues surrounding e-commerce are discussed. To determine the readiness, SMEs which already ventured into e-commerce are examined. This chapter starts with the background of the study, a brief review the nature of problems, aims and objectives, scope of the study, methodology, and the significance of the study. Background of the Study According to Bacchus and Molina (2001), the Internet as a communication medium and market space is growing at an unprecedented rate, following Berners-Lee's development of the "World Wide Web" (WWW) in 1989 which was a key to opening up the Internet as a global and easily accessible information space. By the end of 1997, business-to-consumer (B2C) electronic commerce had become a legitimate retail channel, with 10 million people in the U.S. and Canada purchasing at least one item via the Web (United States Department of Commerce, 1998). A study in 1998 estimated that the commercial domain is the largest domain on the Internet with 28% of all Internet hosts (Network Wizards, 1998). Moreover, the commercial domain is by far the largest and fastest growing on the WWW with an estimated 63% of all sites on the Web, and to meet increasing demands, industries are offering online services to further boost their businesses (Network Wizards, 1998). In 1998, there were an estimated 320 million web pages. According to Bacchus and Molina (2001), other studies suggest that the number of web sites is doubling every six months. In August 1999, some 215 million people have had access to the Internet, a leap from the 133 million estimated to be online one year earlier and a fivefold increase from the 40 million users in 1995 (Bacchus & Molina 2001). It appears that businesses are increasingly taking part in the new marketing

forum available in cyberspace. To meet the unending increase in demands, industries are offering online services to increase their market share.

The diffusion of the Internet has revolutionized the business landscape (Merilees, 2001). The Internet has been instrumental in transforming the value chain from manufacturers to retailers to consumers, creating a new retail distribution channel (Donthu & Garcia, 1999). Research has investigated the components of emarketing, notably banner advertisements and consumer information search processes (Ducoffe, 1996). Marketing on-line services is all about cultivating trust, building relationships and recognizing that the customer defines the rules of engagement[1] (www.opensolutions.com). Since after, the Internet emerged as a tool to advance commercial and leisure activities. New terminology in relation with the internet (i.e. internet commerce, electronic commerce, cyberspace, cybermediaries, market place and the virtual organization) has entered the business ad academic communities at rapid rate, and there are strong behavioral indicators that the Internet is becoming a fixture in consumers daily lives. E-commerce is broadly defined as any electronic transaction which performed the sale or purchase of goods or services, whether between business, households, individual, governments, and other public or private organizations conducted over the internet (Harrington, 1995). The proliferation of the Internet and relatively low barriers to enter electronic commerce transactions paved the way for a new complementary information channel between the business and consumers. At first this channel served the purpose of awareness, advertising information provision and information gathering but soon a set of commercial services such as shopping online were launched to both consumers. Perhaps one of the most fundamental changes brought by the Internet is its impact on marketing (Rostoker, 2003). According to Merrilles (2001), e-marketing basically consists of the same principles found in conventional marketing (the four Ps: product, price, people, and place). Its advantage over the traditional marketing is that it has the ability to greatly enhance the effectiveness of each one of these components (Rostoker, 2003). Rostoker (2003) adds that small businesses and large corporations are jumping on the bandwagon and are investing heavily on research and development on e-marketing, respectively.

For this study, the prospect of e-commerce for Turkey, especially to its small and medium industries is examined. Moreover, this research discusses the benefits of e-commerce to SMEs, the factors to be considered in venturing into e-commerce, the readiness of these SMEs in implementing Internet-based services, and some issues concerning Internet security and customer satisfaction.

Turkey is located in a strategic geographical location, a bridge between two continents, Europe and Asia. Turkey is always involved in negotiation, and mediation processes in economic and political events with the Balkan, Turkic Republics and Middle Eastern countries. (Atakan et al., 2000). As a result of a strong privatization policy that has swept Turkey, the country has been moving toward a more decentralized, deregulated and market-oriented economy; many economic reforms are performed to attract more foreign investment and increase opportunities in general whilst trying pull down inflation (Atakan et al., 2000).

Study shows that there is a need for e-commerce in Turkey to cope with the growing competition; this is apart of the EU integration process[2]. Moreover, ecommerce lessens high physical transaction costs and brokerage and intermediary costs; and it resolves time constraint of physical exchanges and the problem of lack of full access to market participants. Turkey is conducive for the implementation of ecommerce because of its relatively new telecom infrastructure and the increasing demand & usage of information technology. Turkey also has a developing economy & emerging market.

However, there are major barriers for e-commerce: the relatively low Internet penetration rate, the insufficient Information sources and asymmetrical distribution of knowledge, the inefficient business models, and the lack of e-business know-how.

According to Cabbar (2001), in order to accelerate the e-commerce applications, national policies should concern the promotion of B2B applications; setting up of e-marketplace and helping the SMEs to participate in these markets; promotion of SME support networks especially aiming at e-commerce application; raising the awareness for SMEs concerning the benefits of Information and Communication Technology (ICT) and Internet usage. Moreover, national policies should address the need to organize training activities in order to eliminate the ICT skill shortage and develop digital literacy (Cabbar, 2001). Several studies have been undertaken to investigate consumers perceptions of the variables hindering development of online shopping in the last few years (Rhee and Riggins, 1999). However, the picture is very unclear when it comes to understanding the factors affecting customers behaviour regarding intention to purchase over the Internet (Cobanoglu, Ekinsi & Park, 2001).

Bloch (1982) suggests that consumers level of involvement in information technology affects the purchasing behavior as it mediates the relationship between the marketing channel and perceived quality. The degree of personal involvement is the most important factor that shapes the type of decision-process and the following purchasing behavior (Engel et al., 1995). According to Cobanoglu, Ekinci, and Park (2003), purchasing a product over the Internet is a relatively new activity and therefore customers need to determine whether the product category is personally relevant to them and they have to evaluate whether their involvement in purchasing behaviour is stimulated or hindered by various motivational factors. Moreover, Jeong and Lambert (2001) show that customers attitudes towards using a website together with the perceived usefulness of the website information are the best indicators for predicting customers purchasing behaviour. Attitudes towards purchase behaviour are believed to be shaped by many factors such as direct experience with the product, information acquired from others, exposure to mass media etc (Cobanoglu, Ekinci & Park, 2001).

This study presents the results of a survey that investigates the prospect of implementing Internet-based services to SMEs in Turkey. The researcher believes that this study will be very helpful in resolving the problems faced in developing countries in the area of e-commerce.

Objectives of the Study

The primary objective of this study is to examine how is e-commerce applicable to Turkeys SMEs setting. To address this objective, the researcher explores the nature of e-commerce: its benefits and advantages to SMEs, the requirements for its implementation, the factors to be considered in developing Internet-based services, and its maintenance. Afterwards, characteristics of Turkey that affect the success of e-commerce are discussed.

The effectiveness of e-commerce to SMEs is determined through the evaluation of SMEs which already implemented e-commerce. The changes in their market share, the quality of their products and services are examined. Moreover, this study shows how SMEs deal with important issues in e-commerce such as concerns in security. A survey is conducted to SME managers to determine what affects the success of implementing e-commerce to their business. An interview takes place to know what are their problems and concerns regarding the application. As customers largely determine the survival of a business, the researcher interviews customers to assess their perception on e-commerce. Finally, this research comes up with pertinent findings, and provides insightful recommendations on e-commerce application to Turkey SMEs. Statement of the Problem E-commerce has proven to be effective in some businesses as there is increase in market share. Customers are benefited as well, with the improved quality of products and customer services. However, literature shows that implementing e-commerce is not an assurance that the business will be successful. With this, the study attempts to answer the following questions: 1. How applicable is e-commerce to Turkey SMEs?

2. What are the factors that affect the success of e-commerce to Turkey SMEs?

3. What measures should be done in developing e-commerce to Turkey SMEs?

Scope and Limitation

This research study only covers the application of e-commerce to Turkey SMEs as there are numerous studies on large industries. The outcome of this study is limited only to the data gathered from books and journals about e-commerce and from the primary data gathered from the result of the questionnaire survey and interview that will be conducted by the researcher.

Overview of the Research Methodology

For this study, primary research and secondary research are be used. Primary research is conducted using questionnaire surveys that are sent to SME managers who are in the process of implementing e-commerce. The researcher also conducts interview with these managers. Moreover, the researcher interviews managers from SME that already implemented e-commerce; and customers. Here, the

questionnaires will be used to collect quantitative data and the interviews will be used to provide qualitative insights into the data collected.

As stated above, this research will partially base its findings through quantitative research methods because this permits a flexible and iterative approach. During data gathering the choice and design of methods are constantly modified, based on ongoing analysis. This study will also employ qualitative research method

because it will try to find and build theories that will explain the relationship of one variable with another variable through qualitative elements in research. Through this method, qualitative elements that do not have standard measures such as behavior, attitudes, opinions, and beliefs within the e-commerce domain will be analyzed.

For this research design, the researcher will gather data, collate published studies from different local and foreign universities, and articles from business books and journals; and make a content analysis of the collected documentary and verbal material. Afterwards, the researcher will summarize all the information, make a conclusion based on the null hypotheses posited and provide insightful recommendations on the application of e-commerce to Turkey SMEs.

Significance of the Study

This study will be helpful to SME business practitioners for this will be a guide for them when they employ e-commerce systems to their businesses. By examining the risks and other factors involved in e-commerce, small and medium businesses will be able to design measures to minimize the risks. Further, through the understanding of the needs of their customers in terms of security and satisfaction, this study will help SMEs in the process of implementing e-commerce. Moreover, this study will be a significant endeavor in promoting e-commerce awareness among consumers who are still hesitating to shop online.

This study is deemed useful for future researchers on e-commerce and its application to small and medium industries.

Chapter Outline

This studyis composed of five chapters. The Chapter has presented the background of the study, the objectives, research problems, methodology, the studys scope and

limitation and its significance. In Chapter 2, literatures pertaining to e-commerce and Turkey SMEs are reviewed. In Chapter 3, the methodology used for this study is discussed. In Chapter 4, the results of the conducted survey and interview are presented. And in Chapter 5, the study summarizes the findings and provides conclusion and recommendations.

Chapter 3
METHODS AND PROCEDURE
This chapter shall discuss the research methods available for the study and what is applicable for it to use. Likewise, the chapter shall present how the research will be implemented and how to come up with pertinent findings.

Method of Research Used

For this study, the descriptive research method was utilized. In this method, it is possible that the study would be cheap and quick. It could also suggest unanticipated hypotheses. Nonetheless, it would be very hard to rule out alternative explanations and especially infer causations. Thus, this study used use the descriptive approach. This descriptive type of research utilizes observations in the study. To illustrate the descriptive type of research, Creswell (1994) guided the researcher when he stated: Descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. To come up with pertinent findings and to provide credible recommendations, this study utilized two sources of research: primary and secondary. Primary research data were obtained through this new research study. Questionnaire survey and in-

depth interview were conducted. On the other hand, the secondary research data were obtained from previous studies on the same topic.

The primary sources of data came from the survey-questionnaire and interviews conducted by the researcher. The secondary sources of data were based on published articles from business and IT journals, books and related studies on the Internet, e-commerce and its application to SMEs.

Respondents of the Study

The general population for this study is composed 10 managers from small and medium companies which are already implementing ecommerce. These managers were also interviewed. Moreover, 20 consumers who regularly shop online were interviewed regarding customer satisfaction.
Instruments to be Used To determine the effects of knowledge management in the financial sector, the researcher prepared a survey-questionnaire. The respondents graded each statement in the survey-questionnaire using a Likert scale with a five-response scale wherein respondents were given five response choices. The equivalent weights for the answers were: Range Interpretation 4.50 5.00 Strongly Agree 3.50 4.00 Agree 2.50 3.49 Uncertain 1.50 2.49 Disagree 0.00 1.49 Strongly Disagree The decision was made to use a questionnaire for the data collection for this project due to the sensitivity of the information being obtained. It is important for the respondents to be open and honest in their responses. The use of the questionnaire provides the project owner with the ability to test the views and attitudes of the managers. The questionnaire was designed to allow the collection of specific information about the participants to conduct statistical analysis, e.g. age, sex, length of time with the company and position in the company.

In the interview, open-ended questions were used to obtain as much information as possible about how the interviewee feels about the research topic. Interviews took between one and two hours. The questions being used during the interview have been based on the research questions for this project, they have been reviewed, refined and approved by the project supervisor. The researcher designed a semistructured interview. Here, the researcher encouraged the interviewee to clarify vague statements and to further elaborate on brief comments. The interviewer did not share his/her own beliefs and opinions. Validation and Administration of the Instrument For validation purposes, the researcher initially submitted a sample of the set of survey questionnaires and after approval; the initial survey were conducted to five respondents. After the questions were answered, the researcher asked the respondents for any suggestions or any necessary corrections to ensure further improvement and validity of the instrument. Afterwards, the researcher again examined the content of the interview questions to find out the reliability of the instrument. The researchers then excluded irrelevant questions and changed words that would be deemed difficult by the respondents, to much simpler terms. The researcher excluded the five respondents who were initially used for the validation of the instrument. The researcher also tallied, scored and tabulated all the responses in the provided interview questions.

Statistical Treatment of the Data

When the entire survey questionnaire have been collected, the researcher used statistics to analyse all the data; and was assisted by the SPSS in coming up with the statistical analysis for this study. For the interview, a content analysis was drawn in order to identify factors pertaining to the effective/ineffective application of ecommerce. Because of this research design, the results of the data gathered were limited to the determination of factors that affect the implementation of e-commerce to small and medium companies. Thus other possible findings in the field of ecommerce were not be pursued. Summary As stated in the methodology, the research underwent stages. In the research design, the researcher collected secondary data and formulated and developed the questionnaire and interview. In this stage, these instruments were subjected to approval and validation. During the data collection, the researcher collated and summarized the data obtained from the questionnaire and survey. The researcher then analyzed these data and from these, the researcher came up with findings and recommendations that shall be presented in the next chapters.

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