TITLE: “Determinants for Profitability of E- Commerce Operations of Companies in the

Communication Sector in Nairobi County, Kenya”

AUTHOR: Morrisson Muntuku of Kenyata University

PUBLICATION: June 2018
SOURCE: research gate.net accessed on May 11, 2021 at
https://www.researchgate.net/publication/325813360_Determinants_for_Profitability
of_E_Commerce_Operations_of_Companies_in_the_Communication_Sector_in_Nairobi_Count
y_Kenya

Concept 1: E-Commerce- The author define the concept of E-commerce as a way of conducting
business by companies and their customers performing electronic transactions through computer
networks which is he find out that selling and buying through electronic media is one of the
fastest growing methods of trading worldwide. Organizations are engaging in Business to
business (B2B) trading where companies trade and exchange information using the World Wide
Web. Organizations and consumers are transacting through Business to consumer (B2C) or
Consumer to Consumer (C2C) where companies deal directly with customers through electronic
media. E-commerce can help business organizations cut costs, interact directly with customers,
run more smoothly and in a timelier manner, and even better, it can help an organization
outperform its competition. The author also indicated the type of e-commerce which are B2B
(the term encompasses all companies that create products and services geared toward other
businesses) C2C (Customer to customer which is  pertaining to a business model that enables
customers to trade with each other, frequently in an online environment and a type
of business model that emerged with e-commerce technology and the sharing economy.) and
B2C (is the type of commerce transaction in which businesses sell products or services directly
to consumers).
The author used the data of Nielsen, (2000) explaining that the vital part of web sites due
to the first appearance to users. Quality of the content is one of the two most important
determinants of e-commerce web usability. If a business wants to be successful, a good website
is probably a good place to start first, and it seems the opposite is true as well. Across the globe
there are over two billion internet users and this number grows by two hundred million annually
hence the need to evaluate the benefits of using internet and specifically for the ecommerce, the
benefits of using the website in relation to the business performance (Schneider 2003). This
raises important implications for organizations thinking of making an appearance on the internet
as well as presenting them with pertinent issues to keep in mind when designing their websites.
He stated also that a web site can improve communications with other organizations, thus
improving the efficiency of business processes by increasing direct sales and reducing costs
(Zona Research Inc., 2000). Schneider (2003) suggests that the benefit of improved
communication extends also to the businesses customer base, in that the organization can receive
feedback directly from customers.

Author findings attached:

 The findings of the study indicate most of the business owners understand the effect of e-
commerce on business profitability (93%) as shown below. In general, the study gives a
favorable picture concerning the effect of e-commerce on organizations. The study findings
show that e-commerce has led to increase in turnover (33%) and increase in customers (28%) as
shown.
Table 4.1 How e-commerce has helped Organizations
Effect of e-commerce Findings Number of Respondents
Increase in profitability 20% 16
Increase in market share 5% 4
Increase in turnover 33% 26
Increase in customers 28% 22
12% 10

Majority of the Organizations interviewed were experiencing between moderate effect due to
ecommerce (38%) and no change (26%) as shown in table 4.2
Table 4.2 Level of effect on the business as a result of e-commerce
Level of Effect Number Number of Findings
Organizations
High effect 17 21%
Moderate effect 30 38%
No Change 21 26%
Low effect 8 10%
No effect 2 5%

The main purpose of the author is to study the views of the respondents in relation as to
whether online business had proved as an advantage or disadvantage to the businesses across the
border. The findings indicate that most of the businesses in Kenya (58%) view the online
business as an advantage to their businesses while only 8% do not view online business as an
advantage to their business especially in terms of profitability.

Concept 2: Profitability- the term profitability is the ability of a business to earn a profit. The
author stated that those who are using e-commerce they can earn revenues as longs as they can
do the process made by the worldwide web. Most firms profitability is driven by sales, product
diversity and pricing. However more and more firms are increasingly beginning to rely on the
web to generate sales. Now, in their result and discussion the author notice that most of the
respondents acknowledge that ecommerce if adopted and embraced in an organization can lead
to profitability similar to other normal marketing operations.

Author findings attached:

Responses to various statements under each e-commerce indicator were collapsed and a
composite index (mean score) computed for each function. Tabulated results showed that
establishing online presence was rated highest on average with a mean of 4.18 with responses
deviating from this mean by a standard margin of 0.80. This was followed closely by online lead
generation with the mean of 4.00, with standard deviation (STD DEV) of 0.96, online sales
generation (mean = 3.59, STD DEV = 0.78) and web marketing (mean = 3.46, STD DEV = 0.56)
in that order. This ordering could be interpreted to mean that establishing online presence was
considered the best factor that improved business profitability as on average respondents agreed
to them. Conversely, online sales generation was lowest on the scale of effect on business
profitability although it was still well above the average (mid-point), implying it was also used to
a great extent. Developments in information and communications technology have
fundamentally changed the way businesses sell and distribute their goods and services. New
technology such as the internet and broadband has opened up a whole new world of
opportunities for business. The study combined both inferential and descriptive design since the
researcher intended to look at the problem at hand thoroughly to define it, clarify it, and obtain
pertinent information that could be of use to policy makers in basic education. By using those
methodology they come with the result below.

Table 4.3 Ranking of e-commerce Indicators impact on Business Profitability as represented

using
Mean and Standard Deviation
Variable (E- Mean Std Deviation Rating of impact of
Commerce indicator on
Indicator) Business
Profitability
Establishing online 4.18 0.80 1 (Highest impact)
presence
Online lead 4.00 0.96 2
generation
Online sales 3.59 0.78 3
generation
Web Marketing 3.46 0.56 4
 The study aimed to find out also which combination of e-commerce indicators had
greatest impact on business profitability as viewed by the respondents. This was tested using a
multiple regression analysis. As evident in Table 4.4, the values of beta coefficient and R 2 for
online lead generation and online sales generation were 0.3 and 0.1, respectively. This implied
that for every unit increase in online lead generation, there was a corresponding increase in
business profitability by 0.3. Beta coefficient is significant at α < 0.01. Therefore, the best
combination was online lead generation and online sales.

Table 4.4 Results of the Regression Analysis of the combination of e-commerce indicators on
Business Profitability
Variable Beta t value a value
EAC Combination
of
Indicators
Online lead 0.3 4.0 <0.01
generation
and online sales
generation
Online visibility and 0.2 2.3 <0.01
web marketing
R2 = 0.2
Web marketing and 0.3 3.3 <0.01
online lead
generation
R2 = 0.1
However the author findings was saying that the relationship between the e-commerce indicators
and business profitability did not hold across all the variables considered to be indicators of
successful e-commerce adoption. Surprisingly the findings of this study indicated that not all
these indicators, specifically web marketing, affect business profitability. While online lead
generation and online sales showed a significant correlation with firm performance (r = 0.4, α <
0.01) and (r = 0.3, α < 0.01) respectively, online visibility (r = 0.2, α < 0.01), and web marketing
(r = 0.3, α < 0.05) showed positive but weak correlations with business profitability. Most
commonly (in 48% of responses), firms generated less than 20% of total leads online, although
almost a quarter generated no online leads at all. A significant number of firms, however,
produce a high percentage of leads through online marketing. Approximately 15% of firms
generate 40% or more of their new business leads online. Clearly, online lead generation can be
an effective strategy in the modern professional services firm.
Concept 3: Business to Consumer or Consumer to Consumer. He defined that in an organizations
they are engaging in Business to business (B2B) trading where companies trade and exchange
information using the World Wide Web. Organizations and consumers are transacting through
Business to consumer (B2C) or Consumer to Consumer (C2C) where companies deal directly
with customers through electronic media. If we are going to see their relationship they are both
pertaining about an online type of selling and buying.

Concept 3: E-commerce and profitability- The findings of the study indicate that e-
commerce leads to an increase in turnover and customers which ultimately leads to an increase
in profitability. Further the studies pointed out that focus on having an online presence, online
lead generation and online sales led to increased business profitability. Yet as we can see above
about their findings ecommerce is one leading that can lead to profitability. Their relationship
were connected to each other which ecommerce is one way to create profit in our business and
in economic sector.
Conclusion: The findings depict a positive relationship between e-commerce indicators and
business profitability with online visibility and online leads generation leading in terms of level
of impact on profitability. The only aim of these research was to find out the effect of e-
commerce on business profitability. According to the author there was a moderate positive
relationship between e-commerce indicators and business profitability; online visibility had the
greatest impact on business profitability; and a combination of online lead generation and online
sales generation led to the highest impact on increased business profitability compared to
combination of the other indicators. The research findings also indicated that e-commerce lead to
increase in turnover and increase in customers which ultimately leads to increase in profitability.