In early days, most people could only exchange goods and products needed face to face. This face to face commercial act is called traditional commerce. One of the most important characteristics of traditional commerce is its deep reliance on paper-based transaction, including quotations, purchase orders, contracts, invoices, checks, and receipts. In tradition commerce, the success of a deal between a buyer and a seller is based on a schema, a traditional commerce schema. In the schema, a seller provides reliable information on goods, professional and helpful services, clear signs of the title of company or business unit, and descriptions needed for extra explanation for the transaction, the payment, and demanding authentication of the buyer’s payment if not using cash. In this case, every customer may produce different commerce schemas, because they may not have identical need for goods. However, by the schema, every customer learns the price and ways of payment, the details of the transaction. This base of communication of the schemas can be similar to every buyer and seller. People have worked in this schema and exchanging environment to build small businesses and enterprises for many years. Nevertheless, nowadays, with the development of computer and network technologies, it creates more varieties and possibilities for business. An age of the computer-based instead of the paper-based transaction, running via the Internet instead of face-to-face exchange, brings another style of business transaction, called Electronic Commerce (E-commerce). According to the article, “E-Commerce: E-Nevitable, a writer states: “sooner or later there will be electronic commerce and no other kind (PC Week, 1998). Many people believe that E-commerce not only can make a global market which brings more benefits and convenience easier, but also can reduce energy waste and pollution. Therefore, many traditional businesses convert to E-commerce in order to increase their competitive capabilities. Here, I would like to present two case studies—first my father’s company, SinoPac Securities Corp in Taiwan, and second, the Gendai Industrial Company (GIC) in Japan—in order to explicate a comparative study on the E-commerce and Traditional commerce in terms of their principles of prosperity and tracks of conversion
General background of SinoPac Securities in Taiwan
SinoPac Securities Corporation was established on October 11, 1988 and started operations on November 8, 1988. It engages in transactions involving marketable securities such as: (a) underwriting, dealing and brokerage; (b) financing customers’ acquisition and short-sales; (c) trading foreign securities on behalf of customers; and (d) assistance activities in futures trading. Its shares have been listed on the GreTai Securities Market (the over-the-counter Securities Exchange of the Republic of China, or "ROC OTC) since December 1994. The first E-commerce department was established and executed in 1999. Since May 9, in 2002, SinoPac’s shares ceased to be traded over the ROC OTC because SinoPac Securities was incorporated into the SinoPac Holdings through a share swap. By its stockholders’ approval, on November 19, 2001, SinoPac Holdings incorporated Bank SinoPac. SinoPac Holdings became a parent company of securities and bank. On May 9, 2002, under an approval of the Board of Directors who acted on behalf of the stockholders according to Article No. 15 of the ROC Financial Holding Company Act, SinoPac Holdings will merge with SinoPac Securities on July 22, 2002, with SinoPac Holdings as the surviving entity. SinoPac Holdings issued one share for every 1.2672884782 shares of SinoPac Securities to carry out this merger. SinoPac Holdings had 2,018 employees and 47 branches supporting its head office by December 31, 2003 (see figure 1.1).
SinoPac Securities in 1988 to 1998 (Trading by Telephone and papers)
According to the article, “Will Amazon (.com) Save the Amazon, Christine Y Chen and Greg Lindsay point out that in 1997, business in the Internet related: $2.0 billion, 458 deals and NOT Internet related: $9.5 billion, 2,211 deals (Fortune, 2000). In 1997, the Internet business is fewer than non-Internet business. From the above data, we learn that from 1988 (the established year of SinoPac) to 1998, network technology was not popular and not ready to be applied to business yet. SinoPac Securities Corporation was fully running on paper-based model using huge numbers of operators, papers, and office consuming resources. It provided tradings mainly by phone, assisting clients in placing orders via telephone, which needs many operators and papers for purchase-orders running in real-time in order to satisfy clients’ needs. These processes had been run for ten years, which not only generated many customer resources, but also made SinoPac Securities Corporation grow stronger. In 1994, SinoPac Securities became the first Securities Dealers tolist on the GreTai Securities Exchange, also known as Over-The-Counter (OTC) exchange, and has been rated by the Central Bank of China, as the number one government bounds dealer in Taiwan. Furthermore, SinoPac Securities released the first issue of warrants in 1998 leading the corporation to higher level of business. According to above descriptions, we can discover that SinoPac Securities had been growing and developing bigger and wilder year by year by running a traditional commerce model. At that time, there was no Internet and computer network to help business; traditional commerce was the only way for business. However, after 1998, the Internet and network technology is getting ready to access business area. According to the reported data, in 1999 business in the Internet related: $19.9 billion, 1,798 deals and NOT Internet related: $15.7 billion, 2,204 deals (Fortune, 2000). The data shows that the Internet is popular and widely used enough to run business. Moreover, according to the book, Principles of Information Systems, Ralph M Stair and George W Reynolds state that “business processes that are strong candidates for conversion to E-commerce are those that are paper based and time consuming and those that can make business more convenient for customers (P.320, 2003). SinoPac Securities is a suitable candidate for using E-commerce. Hence, the Chairman of SinoPac Securities believed that the corporation needed to set up a new department and positions of E-commerce to develop and hold another level of client resource; and, in doing so, the corporation could strongly increase its competitive capability in the future in the business world. Therefore, the E-commerce department and E-commerce division were established and executed in SinoPac Securities in the beginning of 1999 (see figure 1.2). It offered a new trading way, trading by the Internet, which could attract the E-generation for developing more customer resources for the corporation. As for the old way, trading by phone, it became an extra option for clients to choose. It seems that providing a new technology to fit in the future high-tech business plan can efficiently hold the loyalty of customers. However, the story did not run as smooth as what we think.
SinoPac Securities from 1999 to now (To add Trading via the Internet)
In this new business age of the Internet, SinoPac Securities spent huge amount of money to set up E-commerce department in order to offer the variety of services for the needs of clients. The costs and expenses was 3,162,874NT$ (around $95,845) in 1998, but the expenses became 4,100,180 NT$ (about 134,432$) in 1999, increasing 40% of the costs and expenses compared to the former year (see table 2.1). Everything was on the right track and SinoPac Securities should grow up faster and gain more profits throughout the strategy of adding the new service, E-trading. However, in the end of 1999, the annual report was not so good because the E-commerce department did not have enough trading amount and revenues to balance the expenses. In 1999, the total revenues was 5,897,444 NT$ ($193,359) and in 1998 the total revenues was 5,712,894NT$ ($173,118), increasing 11% of the total revenues (Table 2.1). Although the corporation had grown, the biggest surprise was that it was not growing faster enough to cover the expenses; even in the following three years that situation of deficiency continued and the vision of improvement was still bad. In 1999, the subtotal amount of trading by the Internet was only 5% of the total trading; which is to say, trading by telephone was 95%. The traditional way of trading ran well like before and somehow kept growing, but the E-trading was just stocked there. In 2000 and 2001, the situation became even worse; the total revenues decreased 13% (see table 2.1). SinoPac Securities Corp had very hard time during the period of 1999 to 2001. It seems that trading through the Internet was not popularly accepted by people in Taiwan from 1999 to 2001. The issue shows that customers still didn’t trust the Internet at that time. “People would much prefer to hand over their personal credit card information to a minimum-wage gas station attendant rather than send it over the Internet (PC Week, 1998). The antitrust effect makes the clients for E-commerce increased very slowly, somehow even decreased to the bottom, and it would just cause serious financial problems for SinoPac Securities Corp. Thus, in 2000, the Chairman of SinoPac Securities determined to merge Wan Sheng Securities Cooperate, which completed 75% of trading amount by the Internet and 25% of trading by telephone. The purpose of merging is to get the customer resource of E-commerce from Wan Sheng Securities to stimulate the growth of SinoPac’s E-commerce department. Moreover, the Internet and network technology is getting popular year by year; thus, in 2002 the Net income from 1,337,701NT$ (43,151$) was increased to 1,629,284NT$ ($52,557), increasing 22% of the total net income; in the following year, 2003, it was increased 32.7% of the total net income. Finally, the e-trading of SinoPac became number two in Taiwan with the market share of 14.76% in 2003. The total e-trading was around 40% of the total amount of trading of the corporation; it increased a lot from 5% in 1999 to 40% in 2003, eight times than before.
Analysis
In the first ten years (1988-1998) of running by traditional commerce model, SinoPac Securities had very stable growing of its business. It kept stable increasing of 5 to 10% every year from 1988 to 1998. However, in the beginning of adding E-commerce service in 1999, the balance of revenues and expense was not good as they expected although the traditional part could still support the whole corporation. Eventually, the growing population of E-commerce users had made SinoPac Securities earn their profits, good reputation, and honored position among peer corporations in 2003. SinoPac Securities still keeps its traditional commerce because the majority of revenues are made by traditional department. The e-trading is good now in SinoPac Securities, but it doesn’t influence the traditional part. Both of them are the majors leading SinoPac Securities to be the top securities corporation in Taiwan. E-trading is not only another option for customers to choose among ways of trading, but also it develops different conversion of trading for clients from different age levels. Nowadays, technology and environment have being changed quickly, SinoPac Securities follows the flow of technology to change its fully traditional commerce to be half traditional and half E-commerce in order to increase its competitive potential and satisfy customers’ needs. It is a good example of prosperous conversion from traditional commerce to E-commerce. The story of SinoPac was happened in the changing age of traditional commerce to E-commerce in Taiwan; it tells us that it must take some risks to invest the new technology to fit the future business plans. Fortunately, SinoPac developed its trading conversion in 1999. It was a perfect time for developing E-commerce. If converting to E-commerce before 1999, SinoPac had to face longer hard time in order to gain back its business loss; yet if converting to E-commerce after 1999, the corporation might not hold enough customer resource because it loses by missing the timing.
Gendai Industrial Company (GIC) in Japan
Another example is Gendai Industrial Company, which is for designing and making logotype and name-signboard for other businesses. It was established in 1991 in Osaka, Japan. GIC is a small business company running up business-to-business in traditional model until now. It has stable growing since 1999 (see table 2.2). In 2000, the total revenues had been increased 30.5% from $940,429 (in 1999) to $1,227,492. In 2001 and 2002, GIC had been growing firmly: 21.5% and 16.7% of its total revenues in each year. Moreover, in 2003, the growth jumped to 44.1% of the total revenues (see table 2.2). Although nowadays the Internet and network technology are very successful and popular all over the world, some businesses can still firmly run their businesses well by sticking to traditional commerce model. The author, Ralph M Stair and George W Reynolds, of the book, Principles of Information Systems, claims that “the strong candidates for conversion to E-commerce are those that are paper based, time and convenience consuming for customers (P320, 2003). However, GIC’s business is focused on the idea of design, which is usually based on clear and careful negotiation in meeting with customers in person, unlike the business characteristic of SinoPac Securities Corp relying a lot on paper based works, timely transaction, and the convenience of accessing and placing orders. Some people might think that nowadays the videoconference is ready in the Internet; hence, even when some business focuses are on the design and personal negotiation, E-commerce can still provide competitive and efficient service to fit into the business needs. This idea may be correct, but executing net-meeting or videoconference demands compatible software and computer equipment for both sides of the business, the buyer and seller. It will increase the prime cost for both sides of business for sure. Perhaps, for some businesses, spending more time and energy on the product design instead of on updating the software and hardware equipment is a more practical issue.
However, E-commerce may still offer some help to the business like GIC. In E-commerce, the idea of web site of the company not only can help a company to access the global market, but also can develop more customer resources, if used properly. A webpage could introduce the company services to potential customers and could develop interactive communication between the customers and designers. At this point, it is useful for a company like GIC to develop its E-commerce.
For a new established company, the web site is a very good idea and strategy to make its business known or promoted, especially among the Internet users’ circle. However, GIC have been worked for its business for 14 years since 1991 up until now. Its reputation and name are already well-known in its business field; therefore, the benefit of advertising from web site can be very limited. To spend a lot of time and money on building, updating, and maintaining the web site for limited benefit may not be worthwhile. Therefore, GIC still keeps its traditional style and not considers for conversion to E-commerce yet.
According to the article, “Lessons From Japan, the authors, Yutaka Mizukoshi, Kimihide Okino and Olivier Tardy state that “the reality of circumstances will vary from country to country. Culture, demographics, the maturity of the [E-commerce] market and the availability of alternative technologies will cause markets to differ from one another (p96, 2001). In this point of view, we can clearly understand that even though the idea of E-commerce can be run very well in Taiwan or other countries; nonetheless, it may not fit for every type of business in Japan. In my case study, the example of GIC running traditional commerce successfully competed and survived in local market in Japan illustrates that counties and cultures are another significant considerations in business. Somehow, before considering about what services and capabilities will target customers want and needs, we can step back to think more about cultures and countries, which are two main factors to drive people having different behaviors. To know the E-commerce is not the only way to run business efficiently and successfully; the traditional commerce or the combination of both can be other good ways for business.
Conclusion
Network technology and E-commerce are invented and improved quickly in these few years. The idea of E-commerce is to save office utilities and time, to reduce the costs and pollution, to increase profits, and to get the chance to access a global market right from the start. Therefore, if the business is paper based and time demanded and convenience claimed for customers, the E-commerce can be a good way for the customers to pursue. On the contrary, if the business is based on personal negotiation and idea communication, the issues of cost, limitation, revenues, and speed may be considered for further deciding whether E-commerce or traditional commerce is better.
Summary
Traditional commerce is a kind of paper-based transaction including quotations, purchase orders, contracts, invoices, checks, and receipts. Nowadays, the changes of the computer and network technologies create more varieties and possibilities for business. A computer-based instead of the paper-based running via the Internet instead of face-to-face brings another style of business transaction, called Electronic Commerce (E-commerce). E-commerce not only makes a global market easier and brings more benefits and conveniences, but also reduces energy costs and pollution. SinoPac Securities Corporation is a strong candidate that has successful conversion to E-commerce, although it was once fully running on paper-based model with huge numbers of operators, papers, and office unities resources. SinoPac Securities decided to use the new computer technology to fit the future business plan. However, the antitrust effect makes the clients for E-commerce increased very slowly, somehow even decreased to the bottom, and it would cause serious financial problems for SinoPac Securities Corp. Fortunately, the Internet and network technology is getting more and more popular year by year; thus, in 2002 the net income of SinoPac increased from 1,337,701NT$ (43,151$) in 2001 to 1,629,284NT$ ($52,557), increasing 22% of the total net income; in the following year, 2003, it was increased 32.7% of the total net income. Therefore, e-trading of SinoPac becomes number two in Taiwan with market share of 14.76% in 2003.
Another example is Gendai Industrial Company, which is for designing and making logotype and name-signboard for other businesses. It was established in 1991 in Osaka, Japan. GIC’s business is focused on the idea of design and negotiation between customers and designers; unlike SinoPac Securities Corp. Spending more time and energy on the product design instead of on updating the software and hardware equipment can be more direct and practical for a thirteen workers’ company like GIC. GIC have been worked for its business for 14 years since 1991 until now. Its reputation and name are well-known in its business field already; therefore, the effect of advertising from web site can be very limited. To spend a lot of time and money on building, updating, and maintaining the web site for the limited effect is not worth for GIC to risk the conversion to the E-commerce.
Somehow, before considering about what services and capabilities will target customers want and needs, we can step back to think more about cultures and countries, which are two main factors to drive people having different behaviors. To know the E-commerce is not the only way to run business efficiently and successfully; the traditional commerce or the combination of both can be other good ways for business.