Top 8 Key Risk Factors of Developing E-business in Traditional Retail Trade are Analyzed with Interp

International Journal of Advances in Management Science (IJ-AMS) Volume 3 Issue 4, November 2014 DOI: 10.14355/ijams.2014.0304.01

www.ij-ams.org

Top 8 Key Risk Factors of Developing E-business in Traditional Retail Trade are Analyzed with Interpretative Structural Model Jiangping Wan*1, Guangwei Pan2, Yahui Zhu3 School of Business Administration, South China University of Technology Wu shan street,Tianhe district,Guang Zhou,China csjpwan@scut.edu.cn; 2guangwei_pan@foxmail.com; 3451517171@qq.com

*1

Abstract The top 8 risk factors of developing e-business in traditional retail trade are analyzed with interpretative structural model: there are risk of market transparency, marketing service risk, IT facilities construction risks, human resource risk, online and offline coordination risk, organizational strategic risk, operating data risk, logistics distribution risk, and its interpretative structural model is established. The result illustrates that the relationship among the top 8 risk factors of developing e-business in traditional retail trade is interactive, human resource risk and risk of market transparency are at the bottom of the structure, those are the root risks. Marketing service risk, logistics distribution risk and operating data risk are at the top of the structure. The above five risk factors are the most critical risk factors. The purpose of this paper is to find the root risks and the relationship among the top 8 risk factors, so as to guide the enterprise invest the fund and manpower into the root risks according the priority order while doing risk management, in time to avoid the loss of these risks to the enterprise.

Keywords Traditional Retail Trade; E-business; Risk Factors; Interpretative Structural Model(ISM)

Introduction In recent years, e-business has developed rapidly in China, online shopping market has maintained a high growth trend, which have a strong impact on traditional retail enterprises. Many traditional retail enterprises have tried to enter or ready to enter the ebusiness. However, in the process of entering the ebusiniess, traditional retailers face enormous challenges Whether from the page views or the amount of the transaction, the e-business of traditional retail is far less than the pure e-business. Data shows that the total of e-business sales of 62 traditional retailers is 35 billion yuan, less than the sales of the Jingdong Mall. So developing e-business in traditional

retail trade is a general trend, but still faces a lot of risks.

J.P. Wan, Y.Q. Liu, Y.H Zhu (2014) summarize 26 risk elements affecting traditional retail develop e-business literatures and questionnaire survey, statistical software is used to calculate the result obtained by questionnaire survey. Then 8 common factors are extracted from the 26 risk elements with factor analysis, and the influences of each factor are obtained.

Finally, combining with factor score matrix, the calculation function of the risks of traditional retail develop e-business is gotten, which is used to calculate the comprehensive risk of traditional retail develop ebusiness. This paper studies the hierarchy relationship in the top 8 risk factors of developing e-business in traditional retail trade with Interpretative Structural Model (ISM), and tries to find the root risk and the influence relationship among risk factors, so as to provide better risk management.

This paper is organized as follow: introduction and literature review are in the first, and then the hierarchical structure relationship among the top 8 risk factors of developing e-business in traditional retail trade is analyzed with ISM in order to find the root risk factors and their influence relationship, finally it is the conclusion.

Literature Traditional Retail E-business Research Foreign scholars’ research on e-business in traditional retail trade more focuses on the following aspects: The adoption factors of retail e-business, analysis of failure and its causes of online retail how to improve the competitiveness of online retailers and network retail risk management and so on. HsinHsinChang and Su Wen Chen(2008) analyzed how website quality and

105

www.ij-ams.org

International Journal of Advances in Management Science (IJ-AMS) Volume 3 Issue 4, November 2014

website brand impact consumer purchase intentions by use of structural equation model, so as to find online retailers should focus the marketing strategy on website brand instead of the functionality of website.

Richard T. Watson(2008) argued that online retailers need to build own core strategy and capabilities from website, marketing, sales, service and pricing those aspects.

In recent years, domestic scholars’ research on ebusiness in traditional retail trade mainly focus on current status of network retail, the impact of ebusiness on the traditional retail trade on the theoretical level, transformation of e-business in retail trade and so on. Ch.Y.He (2012) argued that at the present stage China's retail trade developing ebusiness is facing five major problems those are lack of awareness of e-business, low level of enterprise information, security problems persist, shortage of professionals and logistics management development lag. G.F.Shao (2008) argued that the problems of domestic retail e-business is reflected in 4 aspects those are backward concept, system aging, information Closed and delivery and payment lag. D.Ji (2010) think retail e-business has the following problems: (1) Enterprise system is aging and information management is not standard. (2) Retailers have no clear awareness of e-business. (3) The information and data is easy to be attacked and leaked.

(4) The development of logistics system in China is not perfect.

Interpretative Structural Model Interpretative Structural Model (Warfield 2003) is proposed by Professor Warfield in America to analyze the problem of complex social economic system. It is mainly applied to qualitative analysis, translates the vague idea into an intuitive hierarchical relationship structural model with participants' practical experience and computer technology, so as to solve the complex problem. ISM work program can be divided into the following steps: (1) implement the ISM group, including technical experts, coordinators and participants; (2) set the key issues; (3) select the factors have influence on the key issues of the system; (4) list the correlation of the factors; (5) establish the adjacency matrix and accessible matrix, according to the correlation; (6) breakdown the accessible matrix and build the structure model; (7) establish the interpretative structure model based on the structure model.

106

Building the Top 8 Risk Factors Interpretative Structure Model of Developing E-business in Traditional Retail Trade Establishing the ISM Group 7 experts with rich experiences in e-business project implementation and management, including two managers of e-business projects in Guangzhou Tianhe City, the Grandbuy Group information department manager, the Shenzhen Broadengate Electronic Business Company manager, the Li Kou Fu Company e-business department manager and two senior consultants in IResearch Consulting firms and Der Spiegel are invited to join the ISM group.

ISM group discuss and communicate through e-mail.

Setting the general problem of modeling is whether factor A affect factor B, we distribute the problems to each members of ISM group in the form of the questionnaire, after collecting and collating the questionnaire, we feedback to each member, let them modify the conclusion. This is repeated until all the ISM group members on the formation of a unified opinion. J.P.Wan and J.J.Hou(2012) focus on the key risks of SAP Business One implementation, the interpretative structural modeling approach is used to study the relationship between these factors and establish a seven-level hierarchical structure. The study illustrates that the structure is olive-like, in which the risk of data import is on the top, and the risk of senior managers is on the bottom.

Discussion about the Relationship among the Top 8 Risk Factors of Developing E-business in Traditional Retail Trade Through further discussion by experts about the causality between every two risk factors, the ISM group has unified views on the result of the discussion and formed the causal relationship between risk factors after analysis of multiple iterations. In order to express conveniently and uniformly, "X" in the cell is used to illustrate the row factor and the column factor influence each other, "V" means the row factor has influence to the column factor, while "A" has the opposite meaning, and the cell in space means there is no relationship between row factor and column factor (Table 1).

According to the results above, an adjacent matrix can be built. For the top 8 risk factors of developing ebusiness in traditional retail trade Ki (i = 1, 2,.. 8), "1"

International Journal of Advances in Management Science (IJ-AMS) Volume 3 Issue 4, November 2014

means Ki is influential to Kj, otherwise, "0" is used. So the relationship in Table 1 can be expressed as the adjacency matrix (1) as follows: TABLE 1: THE RELATIONSHIP AMONG THE TOP 8 RISK FACTORS OF DEVELOPING E-BUSINESS IN TRADITIONAL RETAIL TRADE

K1 K1 Risk of Market Transparency K2 Organizational Strategic Risk K3 IT Facilities Construction Risks K4 Marketing Service Risk K5 Logistics Distribution Risk K6 Human Resource Risk K7 Online and Offline Coordination Risk K8 Operating Data Risk

K2 V K3 V K4 V V V K5 V V K6 A A A A K7 V A K8 V V V

K1 K 2 K3 K 4 K5 K6 K7 K8 K1 K2 A＝K 3 K4 K5 K6 K7 K8

0  1 1  1 1  0  1 1 

advanced set (Table 2).

TABLE 2: THE REACHABLE SET, ADVANCED SET AND UNIVERSAL SET

Ki K1 K2 K3 K4 K5 K6 K7 K8

P(Ki) 1,2,3,4,5,7,8 2,4 3,4,5,8 4 5 2,3,4,5,6,8 4,7 8

(1)

Ki

P(Ki)

k +1

P(Ki) = { Kj mij=1 } Q(Ri) = { Kj mji=1 }

Q(Ri)

T(Ri)

K2

2,4

4

4

K3

3,4,5,8

4,5,8

4,5,8

K4

4 4

4

K5

5

K7

4,7

K8

8

The set for each factor Ki is obtained with the reachable matrix R:

K4

4

K5

5

K8

8

4,5,8

4

Building the Hierarchical Interpretative Structural Model of Risk Factors of Developing E-business in Traditional Retail Trade According to the hierarchy of the top 8 risk factors of developing e-business in traditional retail trade, the ISM model of the top 8 risk factors of developing ebusiness in traditional retail trade is set up (Fig.1).

P(Ki)∩Q(Ki) = T(Ki)

K1 K 2 K3 K 4 K5 K6 K7 K8 1 1 1 1 0 1 1  1 0 1 0 0 0 0 0 1 1 1 0 0 1  0 0 1 0 0 0 0 0 0 0 1 0 0 0  1 1 1 1 1 0 1  0 0 1 0 0 1 0 0 0 0 0 0 0 1 

2,3 4

Stage 1 = { K1, K6 }

Stage 3 ={ K4, K5,K8}

1  0 0  0 0  0  0 0 

2,3 4

DEVELOPING E-BUSINESS IN TRADITIONAL RETAIL TRADE

According to the formula ( A + I ) ≠ ( A + I ) = ( A + I ) = R (I refers to the unit matrix), the reachable matrix (2) is acquired as follows with the ISM WIN 1.1 software:

K1 K2 R＝K 3 K4 K5 K6 K7 K8

T(Ri) 2,3,7 4 4,5,8

The relationship description of the top 8 risk factors above are not intuitive enough. To express the relationship more clearly, the hierarchy is further analyzed (Table 3).

Stage 2 = { K2, K3，K7}

k

Q(Ri) 2,3,7 4 4,5,8

TABLE 3: THE HIERARCHY PROCESS OF THE TOP 8 RISK FACTORS OF

0 0 0 0 0 0 0  0 0 0 0 1 0 0 0 0 0 0 1 0 0  1 1 0 0 1 1 0 0 1 0 0 1 0 0  0 0 0 0 0 0 0  0 0 0 0 0 0 0 0 1 0 0 1 0 0  k −1

www.ij-ams.org

(2)

P(Ki) is called to reachable set, namely the set of all the reachable factors from factor Ki. Q(Ki), called advanced set, refers to the set of all the factors can reach Ki. T(Ri) means the universal set, which is the set of all the factors both belong to the reachable set and the

We can illustreated in Fig.1: (1) the interpretative structural model of risk factors of developing ebusiness in traditional retail trade has three levels. The two risks on the first level are affected by tree risks on the second level directly and risks on the third level indirectly. The three risks on the second level are affected by risks on the first and third levels directly.

(2) Human resource risk and risk of market transparency are on the first level, which are the root risks of developing e-business in traditional retail trade. Human resource risk affects IT facilities construction risks and organizational strategic risk on the second level. Risk of market transparency affects all risks on the second level. (3) IT facilities 107

www.ij-ams.org

International Journal of Advances in Management Science (IJ-AMS) Volume 3 Issue 4, November 2014

construction risks, organizational strategic risk and online and offline coordination risk are on the second level, which are the indirect effect factors on developing e-business traditional retail trade. IT facilities construction risks affect all risks on the third level. Organizational strategic risk and online and offline coordination risk affect marketing service risk on the third level. (4) Marketing service risk, logistics distribution risk and operating data risk are on the third level, which are the direct effect factors on developing e-business traditional retail trade.

Marketing service risk

Logistics distribution i k

Operating data

IT facilities construction i k

Organizationa l

Online and offline di ti

Human resource risk

REFERENCES

Ch.Y.He. “The problems and countermeasures of retail developing e-commerce at the present stage in China.”

Journal of ABC Wuhan Training College, 2012(6):72-74.

D.Ji.

“The

problems

developing

and

countermeasures

e-commerce.”

NORTHERN

of

retail

ECONOMY

AND TRADE, 2010:55-56.

G.F.Shao. “Study of retail e-commerce system” MSc

Risk of market transparency

FIG.1: THE HIERARCHICAL STRUCTURE MODEL OF THE TOP 8 RISK FACTORS OF DEVELOPING E-BUSINESS IN TRADITIONAL RETAIL TRADE

Conclusion This paper has built the key risk factor interpretative structural model to analyze the top 8 risk factors of developing e-business in traditional retail trade. The result illustrates that the relationship among the top 8 risk factors of developing e-business in traditional retail trade is interactive. Human resource risk and risk of market transparency are on the first level, which are the root risks of developing e-business in traditional retail trade. Marketing service risk, logistics distribution risk and operating data risk are on the third level, which are the direct effect factors on developing e-business traditional retail trade. The above five risk factors are the most critical risk factors.

108

We hope that the research will be enlightenment for developing e-business in traditional retail trade.

Management diss., Central China Normal University thesis, 2008.

Hsin Hsin Chang, Su Wen Chen. “The impact of online store environment cues on purchase Intention.” Online Information Review, 2008, 32(6):818-841.

J.N.Warfield. ”The Mathematics of Structure.” USA, Palm Harbor, FL, AJAR, Publishing Company. 2003.

J.P Wan, J.J. Hou. ”Research on SAP Business One Implementation Risk Factors with Interpretive Structural Model,

Journal

of

Software

Engineering

and

Applications” 2012, 5 (3):147-155.

J.P.Wan,

Y.Q.Liu,

Y.H.Zhu.

“The

Risk

Research

of

Traditional Retail Develop e-business with Factor Analysis”, Open Journal of Social Sciences, 2014, 2(7): 5663.

Watson Richard T, Pierre Berthon, Pitt Leyland F. “Electronic

Commerce:

The

Strategic

Perspective.”

Journal

of

Marketing,

2008,

6(2):50-68.