The Correlation between the Application of E-commerce and Business Performance of Engineering Consultancy Companies

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1 Online Access: Management and Administrative Sciences Review Volume 5, Issue 5 Pages: September, 2016 e-issn: p-issn: X The Correlation between the Application of E-commerce and Business Performance of Engineering Consultancy Companies Yi-Chan Chung* Associate Professor, Department of Business Administration, Yuanpei University of Medical Technology, Taiwan. This study treated engineering consultancy companies as its subject and explored the influence of business strategy and leadership style on the application of e-commerce as well as the correlation between the application of e-commerce and business performance. Its results show that the application of e-commerce has a significant and positive influence on business performance. Cost leadership and differentiation strategies are beneficial for the application of e-commerce. Leadership style has a positive impact on the application of e- commerce. Thus, engineering consultancy companies can raise their business performance via the application of e-commerce, cost and differentiation strategies, and strengthened leadership style. Keywords: E-commerce, business strategy, leadership style INTRODUCTION Engineering consultancy companies are engaged in the industry of engineering consultancy and vital for national economic development. In the context of growingly competitive market, it is essential for engineering consultancy companies to select appropriate business strategy and leadership style, apply e-commerce in customer service to offer better service, and raise business performance. This study treated engineering consultancy companies as its subject and explored the correlation among business strategy, leadership style, application of e- commerce, and business performance. Its purpose include: (1) to probe into the influence of business strategy on the application of e-commerce; (2) to learn the influence of leadership style on the application of e-commerce; (3) to understand the influence of e-commerce on business performance; (4) to study the influence of scale of company on the application of e-commerce. LITERATURE REVIEW Business strategy Porter (1980) suggested that if a company wanted to gain or maintain competitive advantage, it can implement cost leadership strategy, differentiation strategy, and centralization strategy. Based on the response to environmental changes of a company, Miles and Snow (1978) classified business strategy *Corresponding author: Yi-Chan Chung, Associate Professor, Department of Business Administration, Yuanpei University of Medical Technology, Taiwan. kent4321@ms19.hinet.net 286

2 into four categories, that is, prospector strategy, defender strategy, analyzer strategy, reactor strategy. Durand and Coeurderoy (2001) classified business strategy into (1) Cost leadership strategy: to improve efficiency and reduce cost to reduce the price product or service; (2) Marketing differentiation strategy: to provide products and services different from those of competitors and pay attention to the quality of products and services; (3) Innovative differentiation strategy: to offer innovative products and services not easy to be copied by competitors to enhance competitiveness. This study adopted three categories of business strategy of Durand & Coeurderoy (2001), namely, cost leadership strategy, marketing differentiation strategy, and innovative differentiation strategy. Leadership style Robbins (2005) assumed that leadership was an ability to facilitate a group to reach a target. Quinn (1988) classified leadership style into four categories, that is, target-oriented, sound and conservative, considerate and supportive, and innovative and adaptive. Bass and Avolio (1990) classified leadership style into transactional leadership and transformational leadership. Hersey and Blanchard (1988) classified leadership style into four categories, that is, inform, promote, participate, and authorize. This study employed the four categories proposed by Quinn (1988). The application of e-commerce Kalakota and Whinston (1997) pointed out that e- commerce was a trade method used by enterprises via distant communication and process to buy and sell products, services, and information via a computer. Kalakota and Whinston (1997) divided the application of e-commerce into three categories, that is, business-to-business (B-to-B) e-commerce, business-to-customer (B-to-C) e-commerce, and e- commerce within an enterprise. Rayport and Jaworski (2001) divided the application of e- commerce into four categories, that is, B-to-B e- commerce, B-to-C e-commerce, C-to-B e-commerce, and C-to-C e-commerce. According to the classification of Kalakota and Whinston (1997), this study discussed the application of e-commerce according to three aspects, that is, B-to-B e- commerce, B-to-C e-commerce, and e-commerce within an enterprise. Business performance Kirca et al. (2005) adopted four indicators to assess performance, that is, business performance, profitability, sales volume, and market share. Croteau and Bergeron (2001) used profitability and sales growth to assess performance. Farrell (2000) pointed out that business performance was an indicator for a company to compare with its peers in terms of customer retention rate, new product success rate, return on investment (ROI), and overall performance. Through literature review, this study employed six indicators to assess business performance, including compliance rate of operational goals, satisfaction of quality of service, revenue growth rate, transaction percentage of existing customer with a company, ROI, and competitiveness of a company. Types of business strategy and the application of e-commerce Pimsawadi and Digman (2012) deemed that the business strategy selected by a company affected its application of e-commerce. Lin (2002) indicated that the degree of application of e-commerce was related to the strategy adopted by a company. Based on the above, this paper proposes H1: Different business strategies have different degrees of influence on the application of e-commerce. Leadership style and the application of e- commerce Cope and Waddell (2004) pointed out that a company's leadership style would influence its application of e-commerce. Sophonthummapharn (2005) asserted that different business strategies adopted by a director had different degrees of influence on the application of e-commerce. Based on the above, this paper proposes H2: Different leadership styles have different degrees of influence on the application of e-commerce. The application of e-commerce and business performance Girishankar (1998) suggested that -commerce could help improve the quality of customer service and reduce cost. Turban et al. (1999) assumed that the benefits of the application of e-commerce included reducing cycle time and improving quality of service. Wu (2002) indicated that e-commerce can facilitate information storage, offer new services and products to customers, and enhance company reputation. Based on the above, this paper proposes 287

3 H3: The application of e-commerce has a significant and positive influence on business performance. Scale of company and the application of e- commerce Bertschek and Fryges (2002) pointed out that larger companies could reduce the risk and cost to adopt new technology. The scale of manufacturer had a significant and positive influence on e-commerce. Zhu et al. (2003) aruged that larger manufacturer had higher degree of application of e-commerce. Based on the above, this paper proposes H4: Companies of different scales have different degrees of application of e-commerce. RESEARCH METHOD According to literature review, this paper proposes the following hypotheses: H1: Different business strategies have different degrees of influence on the application of e- commerce. H2: Different leadership styles have different degrees of influence on the application of e- commerce. H3: The application of e-commerce has a significant and positive influence on business performance. H4: Companies of different scales have different degrees of application of e-commerce. Questionnaire collection and data analysis The questionnaire of this study covered four parts which were all measured by 5-point Likert scale. Part 1: Business strategy, which includes (1) cost leadership strategy, (2) marketing differentiation strategy, and (3) innovative differentiation strategy; Part 2: Leadership style, which includes (1) targetoriented leadership, (2) sound and conservative leadership, (3) considerate and supportive leadership, and (4) innovative and adaptive leadership; Part 3: The degree of application of e- commerce, which includes (1) business-to-business e-commerce, (2) business-to-customer e-commerce, and (3) e-commerce within a company; Part 4: Business performance, which includes six indicators, that is, compliance rate of operational goals, satisfaction of quality of service, revenue growth rate, percentage of re-cooperation between existing customer and a company, ROI, and competitiveness of a company; Part 5: According to the quantity of employees, enterprise sale was classified into medium- and large-scale company and small company. This study considered the 390 member companies registered at The Chinese Association of Engineering Consultants as its subjects, sent the questionnaire via , and collected relevant data. It sent the questionnaire from April to May 2016, and collected 41 valid copies. The respondents were directors. The reliability of variables is shown in Table 1. TABLE 1 HERE Nunnally (1978) in exploratory research, 0.7 was an acceptable value of reliability. The values of reliability of all the variables in this study were above 0.7, so this study was reliable. The main statistical analysis technique adopted by this study was analysis of variance (ANOVA). The ways to measure variables Variables include business strategy, leadership style, application of e-commerce, business performance, and scale of company. The ways to measure variables are described as follows: The way to measure business strategy This study used the three categories of business strategies proposed by Durand & Coeurderoy (2001), referred to relevant empirical research questionnaires of scholars, and classified business strategy into: Cost leadership strategy It contains (a) to invest in technology or equipment which can save cost; (b) to control the cost of service within a low level; (c) to reduce cost by improving work efficiency; and (d) to reduce cost to provide lower tourist services than one's competitors. Marketing differentiation strategy It contains (a) to provide more valuable service than competitors; (b) to provide services to customers according to their needs; and (c) to provide services better in quality and features than competitors. Innovative differentiation strategy It contains (a) to provide services which are difficult to be copied by competitors; (b) to re-design service so as to provide services better than competitors; and (c) to provide better services than competitors via new technology or technique. 288

4 A 5-point Likert scale was used, rangning from 5 (strongly agree) to 1 (strongly disagree). The way to measure leadership style This study used the classification of leadership style proposed by Quinn (1988), referred to relevant empirical research questionnaires of scholars, and classified leadership style into four categories, that is: Target-oriented leadership It contained (a) A director should clearly tell his/her subordinates the target of the company; (b) A director should clarify the responsibilities of each subordinate; (c) A director should guide a subordinate based on standard procedures and correct him/her timely; And (d) A director should clearly understand priority and direction; (e) A director should be performance-oriented. Sound and conservative leadership It contained (a) A director should pay attention to the details of all written documents; (b) A director should check the progress of each plan regularly; (c) A director should establish measures to inspect each performance; (d) A director should keep a company in normal and stable operation; and (e) A director should coordinate plans according to budget. Considerate and supportive leadership It contained (a) A director should put himself/herself in the shoes of his/her subordinates; (b) A director should help employees to plan their career; (c) A director should communicate with employees on the issues they raised in a supportive manner; (d) A director should allow employees to fully express their opinions so as to reach a consensus; And (e) A director should encourage employees to participate in decision making. Innovative and adaptive leadership It contained (a) A director should solve issues in an innovative manner; (b) A director should clearly state, reiterate, and strengthen the vision of a company; (c) A director should try with new concept and procedure; (d) A director should encourage employees to improve the ways they handle things; And (e) A director should shall endeavor to maintain a good relationship with his/her superior. The way to measure the degree of application of e- commerce The indicators to measure the degree of application of e-commerce were concluded based on those proposed by Pan (2000) and Wu (2001), including: The measurement of application of business-tobusiness e-commerce It contained (a) to provide company consultancy to partners electronically; (b) to allow partners to review electronic record; (c) to trade product or service with partners electronically; (d) to exchange information with partners electronically; (e) to integrate workflow with those pf partners electronically; (f) to provide the functions of services electronically. The measurement of application of business-tocustomer e-commerce It contained (a) to introduce the information of a company to customers electronically; (b) to trade with customers electronically; (c) to allow customers check relevant product and service electronically; (d) to provide services to customers and answer their questions electronically; (e) to carry out ads marketing to customers electronically. The measurement of application of e-commerce within a company It contained (a) to convey relevant messages via ; (b) to publish relevant information via BBS; (c) to manage electronic documents of a company; (d) to allow employees to share the resources of a company electronically; (e) to provide channels of communication to employees electronically. The way to measure business performance In consideration of literature review and work features, this study adopted six indicators to measure performance, that is, compliance rate of operational goals, satisfaction of quality of service, revenue growth rate, transaction percentage of existing customer with a company, ROI, and competitiveness of a company. Scale of company This study classified companies into two categories according to the quantity of employees. Mediumand large-scale: Over 20 employees. Small company: Less than 20 employees. 289

5 RESEARCH RESULTS The correlation between business strategy and the degree of application of e-commerce This study classified business strategy (cost leadership, marketing differentiation, and innovative differentiation) into two levels (high and low). The averages of degree of application of e- commerce of the two levels were used to see if they had significant difference. Table 2 shows the analysis of variables as of the influence of business strategy on the degree of application of e-commerce. Hence, H1 is rejected. Both cost leadership and differentiation strategies (marketing differentiation and innovative differentiation) are beneficial to the application of e- commerce. TABLE 2 HERE The correlation between leadership style and the degree of application of e-commerce This study classified leadership style (targetoriented, sound and conservative, considerate and supportive, and innovative and adaptive) into two levels (high and low). The averages of degree of application of e-commerce of the two levels were used to see if they had significant difference. Table 3 shows the analysis of variables as of the influence of leadership style on the degree of application of e-commerce. Hence, H2 is rejected. All the four leadership styles are beneficial to the application of e-commerce. TABLE 3 HERE The correlation between business performance and the degree of application of e-commerce This study classified e-commerce into two levels (high and low). The averages of business performance of the two levels were used to see if they had significant difference. Table 4 shows the analysis of variables as of the influence of the degree of application of e- commerce on business performance. The result supports H3. TABLE 4 HERE The influence of degree of application of e- commerce on different scales This section explored the influence of degree of application of e-commerce on different scales. The results in Table 5 show that scale has a significant influence on the executive degree of e- commerce. The results support H4. Medium- and large-scale companies have higher degree of application of e-commerce than small ones. TABLE 5 HERE CONCLUSION AND SUGGESTIONS Few empirical studies probed into the application of e-commerce from the perspectives of business strategy and leadership style so as to learn their influence on business performance. Therefore, this study considered engineering consultancy companies as its subject and explored the correlation among business strategy, leadership style, the application of e-commerce, and business performance. The results show that cost leadership strategy, differentiation strategies, and the four types of leadership style are constructive for the application of e-commerce. Higher degree of application of e-commerce has a more significant and positive influence on business performance. Hence, this study suggests that, in order to enhance performance, a company shall adopt cost leadership and differentiation strategies and strength the four types of leadership style. As this study focused on engineering consultancy companies, future empirical analysis can be done on other industries. REFERENCES Bass, B.M. and Avolio, B.J., Transformational leadership development: Manual for the Multifactor Leadership Questionnaire. Palo Alto, CA: Consuldng Psychologist Press. Bertschek, I. and Fryges, H., The Adoption of Business-to-Business E- Commerce: Empirical Evidence for German Companies. ZEW Discussion Paper, No , Cope, O and Waddell, D Leadership in E- Business, in E-Business Innovation and 290

6 Change Management. Idea Group Publishing, Hershey, PA. Croteau, A.M. and Bergeron, F., An information technology trilogy: business strategy, technological deployment and organizational performance. Journal of Strategic Information Systems, 10(2), Durand, R. and Coeurderoy, R., Age, order of entry, strategic orientation, and organizational performance. Journal of Business Venturing, 16 (5), Farrell, M.A., Developing A Market- Oriented Learning Organization. Australian Journal of Management, 25(2), Girishankar, S., Virtual Markets Create New Roles for Distributors, InternetWeek [CWE], Hersey, P. and Blanchard, K., Management of organizational behavior: Utilizing human resources (5th ed.). Englewood Cliffs, NJ: Prentice-Hall. Kalakota, R. and. Whinston, A.B., Electronic Commerce: A Manager Guide. New Jersey, U.S.A, Addison-Wesley. Kirca, A.H., Jayachandran, S. and Bearden, W.O., Market orientation: A metaanalytic review and assessment of its antecedents and impact on performance. Journal of Marketing, 69 (2), Lin, S. M Business Strategy Analysis in Company-The Textile Industry. Master s thesis. Graduate School of Business Administration, National Cheng Kung University. Miles, R.E. and Snow, C.C., Organizational Strategy, Structure and Process. New York: McGraw-Hill. Nunnally, J.,1978. Psychometric Theory (2d ed). New York: McGraw-Hill. Pan, P. S A Study of Relationship between Knowledge Management and Electronic Commerce. Master s thesis. Graduate school of Information Management, Da- Yeh University. Porter M.E, 1980, Competitive Strategy, New York: The Free Press. Pimsawadi, L. and Digman, L, The impact of porters strategies utilized on the level of E-commerce adopted by large service enterprises in Thailand, International journal, 15(2), Quinn, R.E., Beyond Rational Management: Mastering paradoxes and competing demands of high performance. Jossey-Bass, San Francisco. Rayport, J.F. and Jaworski, B.J., 2001, e- Commerce, McGraw-Hill. Robbins, S.P., 2005, Organizational behavior, 11th ed, New Jersey: Prentice Hall International, Inc. Sophonthummapharn, K Leadership Styles and E-Commerce Adoption: An Analysis of Thai Food Exporters Masters Theses, Blekinge Institute of Technology. Turban, E., Lee, J., Lee, J.K., King, D. and Chung, H.M., Electronic Commerce: A Managerial Perspective. New Jersey, U.S.A, Prentice Hall. Wu, C. H Study on E-commerce Business Perofmrance and Competitive Advantage. Takming Journal, 19, Wu, C. J The Relation between Applications of Electronic Commerce and Performance of Supply Chain Management: An Empirical Study of Taiwan's Information Industry. Master s thesis. Department of Management Information Systems, National Chengchi University. Zhu, K., Kraemer1, K. and Xu, S., Electronic Business Adoption by European Firms: a Cross-country Assessment of the Facilitators and Inhibitors. European Journal of Information Systems, 12(4),

7 APPENDIX Table 1: Cronbach s α coefficients for all variables Questionnaire Dimension Cronbach s α Cost leadership Business strategy Marketing differentiation Innovative differentiation Target-oriented Leadership style Sound and conservative Considerate and supportive Innovative and adaptive B-to-B e-commerce Application of e-commerce B-to-C e-commerce Internal e-commerce of the firms Business performance

8 Table 2: ANOVA of business strategy on e-commerce application degree B-to-B e- commerce B-to-C e- commerce Internal e-commerce Low # Cost leadership High # F-value P-value 0.008* 0.013* 0.034* Low # Marketing differentiation High # F-value P-value 0.011* 0.021* 0.014* Low # Innovative differentiation High # F-value Note: Low # : the average score lower than or equal to 3.5; High # : the average score higher than 3.5; * p < P-value 0.001* 0.017* 0.000* 293

9 Table 3: ANOVA of leadership style on e-commerce application degree B-to-B e-commerce B-to-C e-commerce Internal e-commerce of the firms Low# Target-oriented High# F-value P-value 0.006* 0.008* 0.015* Low# Sound and conservative High# F-value P-value 0.012* 0.022* 0.001* Low# Considerate and supportive High# F-value P-value 0.002* 0.019* 0.000* Low# Innovative and adaptive High# F-value Note: Low # : the average score lower than or equal to 3.5; High # : the average score higher than 3.5; * p < P-value 0.005* 0.039* 0.001* 294

10 Table 4: ANOVA of e-commerce application degree on business performance Business performance Low # High # F-value P-value B-to-B e-commerce * B-to-C e-commerce * Internal e-commerce * Note: Low # : the average score lower than or equal to 3.5; High # : the average score higher than 3.5; * p < Table 5: ANOVA of scale on e-commerce application degree Scale F-value P-value LSD B-to-B e-commerce * A>B B-to-C e-commerce * A>B Internal e-commerce of the firms * A>B A:Over 20 employees; B: Less than 20 employees; * p <