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IN CANADA, SIZE MATTERS

Source: Globe & Mail

Posted on June 14, 2002

      A study of e-business in Canada shows that smaller companies are less nimble in doing business to the Internet, lagging behind medium-sized and large business operations.

      But if the heavyweights are quick to create their own Web sites, the study, titled "Embracing e-Business: Does Size Matter?", also found that all Canadian businesses are slow to implement more sophisticated e-commerce applications, such as buying and selling on-line.

      The study, taken from data gathered for the annual Survey of Electronic Commerce and Technology, also found that certain kinds of industries jump more quickly into the Internet. Information, cultural and educational industries -- regardless of size -- lead in both Internet use and Web-site ownership.

      Small firms were defined by the study as those with a maximum of 19 employees, medium firms with 20 to 99 employees, and large firms with 100 or more. Among manufacturing enterprises, medium companies were defined as those employing between 20 and 499 employees, and large firms as those with 500 or more.

      The study sampled about 21,000 enterprises in all industries except agriculture. It excluded businesses with low revenues -- those earning less than $150,000 to $250,000, depending on the industry.

      study showed that in 2001, 91 per cent of medium-sized companies and 94 per cent of large companies had Internet access, but only 68 per cent of small companies did.

      About 29 per cent of all businesses had their own Web site in 2001, up slightly from 26 per cent the year before. These companies accounted for 81 per cent of Canada's gross business income, meaning that large firms continue to dominate the Internet market.

      Among large companies only, about 74 per cent had a Web site in 2001, compared with 57 per cent of medium-sized firms. Only 24 per cent of small firms had their own Web sites.

      But businesses of all sizes have been slower to adopt these more sophisticated e-business applications, compared with Internet connectivity and Web site ownership. The proportion of firms selling on-line actually dropped from 10 per cent in 1999 to 7 per cent in 2001.

      Despite the drop, however, on-line sales have been increasing steadily, from $4.2-billion in 1999 to $10.4-billion in 2001. StatsCan says that this suggests that while e-commerce is growing, consolidation is also occurring in the electronic marketplace.

      Among small companies, 6 per cent of small businesses were selling on-line in 2001, compared with 12 per cent of medium-sized companies and 15 per cent of large ones. Smaller businesses also accounted for more business-to-consumer transactions than large firms did.

      In 2001, sales by small and medium-sized enterprises accounted for 25 per cent of their total Internet sales, compared with 18 per cent for large firms.

      StatsCan concluded that the flexibility of small firms allows them to move more quickly to take advantage of market opportunities, and to customize their operations to satisfy market demand.

      The study also found that with e-purchasing, the proportion of businesses that bought material on-line was higher than the proportion of businesses selling over the Internet. Moreover, this proportion increased from 18 per cent in 2000 to 22 per cent in 2001. About 20 per cent of small firms, 33 per cent of medium-sized firms and 52 per cent of large firms purchased on-line, again emphasizing the gap between large and small.

      Information and cultural industries as well as educational services led in both selling and purchasing on-line. However, while both sectors recorded a relatively high proportion of small companies engaging in on-line sales and purchases, the gap between small and large companies was significant for on-line purchasing, but negligible for on-line selling.

      The most common reason cited by Canadian companies for their slowness to move their business to the Web was that the firm's goods or services do not lend themselves to Internet transactions, a reason cited by 52 per cent of respondents to the study.

      The next reason to move their business more to on-line services was that companies showed resistance to alter the current structure and preferred to maintain the current business model =97 a reason cited by 36 per cent of respondents.




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