During late 2000 and early 2001, the Chinese Manufacturers Association (CMA) and SmarTone Broadband Services Limited jointly conduct a research on e-commerce development of CMA's members. It aims to identify the current e-business and technology applications used by SMEs within the selected industry segments; to identify their short, medium, and long term goals in the adoption of new technology and e-business tools; and to understand if companies move through identifiable stages in the adoption of new technologies. The survey, by providing both first-hand information and industry benchmarks, will help local SMEs to get prepared for the opportunities and challenges arising from e-commerce.

The Study covers four industrial sectors of CMA's membership, namely Textile & Garment (T&G thereafter), Electrical & Electronics (E&E), Toys & Plastics (T&P), and Trading. Following a qualitative analysis on the basis of focus group discussion, questionnaires were drawn up and distributed. Of the 1,367 questionnaires sent out in December 2000 and January 2001, a total of 242 successful submissions was received by 15 January, 2001, with 50 from E&E, 52 from T&P, 81 from T&G and 59 from Trading. The overall response rate of 17.7% is considered fairly positive for a self-completion approach.

Respondents are mostly Small and Medium Enterprises, with an average employment size of less than 14. Respondents in general have operating history of over 10 years, and an annual turnover falling in the range of HK$ 10 million to 50 million. About 70% of them are engaged in the manufacturing of finished goods, and two-thirds focus on B2B (Business to Business). Hong Kong and Chinese Mainland are major areas where the responding companies conduct business, followed by other countries in the Asia Pacific Region, North America and Europe. Moreover, 64% of the respondents are partnerships, with another 30% as sole proprietorships.

Most of the respondents are still at the preliminary stages of e-business, lacking on-line transaction (only 5% have such facilities in E&E sector, 3% in both T&G and T&P, and 0% in Trading) and e-integration facilities (nil in all sectors). Nearly 90% of them are using e-mails and have Internet access. The technology adoption level evidently varies across industries, with Electronics & Electrical taking the lead. For instance, 100% E&E companies are using e-mail and Internet, in comparison to 88% for T&G, and 90% for both T&P and Trading companies, while the current web penetration rates for the four sectors are 82%, 35%, 71%, 43% respectively. Such divergences are governed not only by industry-specific factors, but also by the resources of different companies. In the survey, the Electronics & Electrical companies are relatively bigger in size and longer in history.

It is worth noting that the overall attitude of Hong Kong companies towards adopting new IT technology is encouragingly positive. First, in the coming 12 months, Internet penetration will come close to universality in all segments - 100% E&E, 96% T&G, 93% T&G and 95% Trading companies will move on-line.

Second, a migration from 56K-modem access to Broadband connectivity will gain momentum. The percentage of companies using Broadband will, one year from now, grow from 28% to 44% in E&E industry, from 29% to 50% in T&P, from 27% to 44% in T&G, and from 24% to 37% in Trading. On the contrary, 56K Dial up access will decrease by 16% (E&E), 11% (T&P), 16% (T&G) and 8% (Trading) in the respective sectors.

Third, the web presentation rate will also pick up fast. It is expected to escalate to 90% in E&E, 81% in T&P and 69% in Trading, with T&G stagnating at 38%. At the same time, industry portals and self-hosting are likely to enjoy increased popularity. The former is going to be adopted by 24% E&E, 21% T&P, 16% T&G and 10% Trading companies, as compared to the current 14%, 13%, 4% and 7% respectively. The latter will become the choice of 29% T&P, 30% T&G and 20% Trading companies, up from the current ratio of 23%, 19% and 12% respectively. Self-hosting will remain at 48% in the Electronic & Electrical industry, as they have already achieved such a relative high level.

Due mainly to their aspiration for tapping the overseas market, Hong Kong SMEs are much likely to direct their IT investments to areas related to exporting or marketing, such as communications with customers (as acknowledged by 20% E&E, 42% T&P, 37% T&G, 25% Trading companies), EDI & trade documentation (24%, 37%, 44%, 27%) search of information (20%, 25%, 35%, 32%), and sourcing of materials ((32%, 23%, 31%, 17%).

Among the other factors, the desire to improve productivity (recognised by 73.5% of all the respondents), and the pressure from both competitors (69.5%) and overseas buyers (57.5%), are major driving forces to propel SMEs to embrace e-commerce. On the other hand, high entry costs associated with both equipment (85.1%) and training (81%), lack of immediate benefits from IT investments (77.8%), as well as security concerns (71.1%) remain the biggest barriers that hinder respondents from making IT investments.

Based on such findings, the Study points out that the development of e-commerce is predicated on the concerted efforts of IT practitioners, the Government and SMEs themselves. While appealing for affordable, safe and appropriate technology-especially, Broadband access, Enterprise Resource Planning (ERP) and Customer Relations Management (CRM) solutions, SMEs should take a proactive attitude towards e-commerce and make commitments to longer-term investment. Moreover, there is still ample room for the SAR Government to enhance its role as a facilitator or even a propeller. Besides providing financial support for e-commerce initiatives, the Governments should, either by itself or in collaboration with industrial associations, step up efforts in keeping SMEs abreast of the fast changing IT environment, through staging educational campaigns, organising seminars, exhibitions, and other similar measures.

(For a detailed Report, please contact Mr. Hilson Yan, Manager for Industrial Development and Research of the CMA by Telephone: 2542 8631, Fax: 2541 4541)