The Impact of E-commerce Technology Resources and Management Skills On Organization Capabilities In Malaysia

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1 The Impact of E-commerce Technology Resources and Management Skills On Organization Capabilities In Malaysia Mutia Sobihah Abd Halim (Corresponding Author) Politeknik Hulu Terengganu, Kuala Berang, Terengganu, Malaysia. Nuru Mazlia Musa Politeknik Hulu Terengganu, Kuala Berang, Terengganu, Malaysia. Ahmad Munir B. Mohd Salleh Embat Faculty of Management and Economy, Universiti Malaysia Terengganu, Malaysia. Wan Abd Aziz B. Wan Mohd Amin Faculty of Social Development, Universiti Malaysia Terengganu, Malaysia. Mohamad Saladin Muda Faculty of Management and Economy, Universiti Malaysia Terengganu, Malaysia. Noor Maizura Mohamad Noor Faculty of Technology and Sciences, Universiti Malaysia Terengganu, Terengganu, Malaysia. Abstract This study aims to determine the relationship of E-commerce technology resources and management skills on organizational capabilities in the hotel industry in Malaysia and the factors associated with it. Measurement tools for E-commerce technology resources and management skills adapt from Duncan and Bogucki (1995), and Mata, Fuerst & Barney (1995). The findings show the E-commerce capabilities is higher with a mean of 3.23 compared with E-commerce benefit of The study also found that E- commerce management skills with a mean of 3.23 and E-commerce technological resources with a mean of The study also shows that there is a correlation between the ability of the organization (the E- commerce benefit and E-commerce capabilities) with variable E-commerce technology resources and management skills. While regression analysis 'stepwise' E-commerce technology resources as the most dominant factor in predicting organizational capabilities and E-commerce benefits. While E-commerce management skills is the most important factor in influencing the E-commerce capabilities. Keywords: E-commerce, E-commerce technology resources, E-commerce management skills and organization capabilities. 1- Introduction Organization is constantly changing in line with global environmental changes. These changes cannot be expected and is formed out of control. This situation demands that each organization is also a change to reduce the gap in environmental changes that occur. Organizations that fail to follow the tide of change that will be left behind in many things. This indirectly affects the individual employee and organizational performance. Since 1950, the organization invests money into information technology to improve profitability and to increase the capacity of the organization. In 1980 and 2004 private sector organizations invest in information technology from 34% to 50% of total investment (Laudon, 2007). E-commerce becomes more important at the end of the 20 th century (Laudon, 2007). E-commerce is the buying and selling products or services over electronic systems such as the internet. E-commerce used the internet and other information technology to support business capabilities. In 13 years, since 1995, E-commerce grew by $258 billion and retail for about U.S. $3.6 trillion in the United States (McKay and Marshall, 2004). In 2005, E-Commerce transaction in Malaysia reached RM3.7 billion (U.S. $ 1.0 billion) increased by approximately 81.8% per year ( 181

2 All companies today no matter big or small, local and international use of information systems and has spent a significant investment in information technology to achieve key business objectives such as improving the ability of the company (Laudon, 2007). Internet, related technologies and applications should be changed in line with changes in business operations and how the employees work and how information systems to support business processes, decision making, competitive advantages and capabilities (O Brien, 2007). Today, many aspects of the world market are affected directly or indirectly by the development of information technology. In the 21 st century, the world market has been supported by a market system that uses electronic infrastructure. Common knowledge of information technology has no boundaries and can be reached anywhere by anyone accessing the Internet. Trade through the internet has opened a new era in trade relations have also been structuring the entire system in electronic markets that provide opportunities for firms from the third world countries. According to Ng (2000), generally a lot of organizations, regardless of size, are unable to identify the overall potential of the existing values in the E- commerce. In developing countries like Malaysia for example, the enterprise has been identified as the main group does not participate in the use of E-commerce. The organizations are identified in Malaysia but it was not a pioneer in the use of E-commerce. The tourism sector will be fast growing and constantly changing with the development of new networks and services. Tourism is one of the pioneer industries successfully adopt the system in a larger scale. According to Berhanu Beyene & Kibruyisfa Archamyeleh (1997), a computerized ordering system via the internet is the best example to describe the electronic market. It has a complete restructuring, and overall industry distribution channels. Not only the airlines that use it as well as the tourism industry supply instruments that allow the flow of processes and offers to services to potential customers around the world. E-commerce is the best medium of instruction is more efficient and flexible. The tourism industry will generate revenues for many countries and attract foreign currency into a country. Tourism market is rapidly growing. 'World Tourism Organization' estimated that by 2020 more than 1.5 billion tourists will travel overseas. Europe will become the most popular tourist destinations. The second is the Asia-Pacific Europe which will be visited up to 397 million tourists. Growth rate percentage stood at 6.5% per annum. The tourism industry showed encouraging growth rates. However, competition is a great situation. As is generally known, the tourism sector can bring in foreign exchange into the economy of a country in rapid time. Thus most developing countries have focused attention on the tourism sector by measuring the development of the tourism sector as the basic issues in the Social Planning and National Development. Developing countries also have developed their tourism sector. (Patthanid Cheangtawee, 2005). Tourism is a global movement, in which the global information, global communication, service and product line is needed. Therefore, using E-commerce, information that is shared more easily, cost effectively and more importantly can be accessed on-line for the bodies which come under the tourism organizations such as hospitality. This is the reason why the information can be accessed on-line that can promote and ensure the success of E-commerce in the hotel sector. Now the hotel has introduced E-commerce in the various forms of work such as online, self-exploration, information about hotels, locations, types of rooms, prices rooms and facilities available, , purchase of raw materials from suppliers through the Internet and online payment. All these facilities will enhance the operation of hotels (Pattahnid Cheantgawee, 2005). In the year 2005, E-commerce transactions in Malaysia reached RM3.7 billion (U.S. $ 1.0 billion) and it moved up 81.8% from year to year. B2B transactions grew from RM7.7 billion in 2004 to RM29.3 billion. While B2C transactions grew from RM3.4 billion to RM7.4 billion. In a period of 5 years from 2006 to 2010 the value of E-commerce transactions are expected to increase by an average of 27% per year (www. Technopreneurdevelopment.net.my). E-commerce has the power, especially in the tourism industry in general that particular hotel. This can supply information easily together with payment via online. This research is to identify the effect of implemented E-commerce capabilities and organizational culture has an impact on performance of organizations in the tourism industry in Malaysia and focuses on the hotel industry. 182

3 2- Problem Statement Many organizations regardless of industry type or size, is still not clear about the advantages brought by the E-commerce in Malaysia. Lack of success stories by the "click and mortar' company has been identified as a reasons why the traditional business refuses to start investing in E-commerce. In the study of stimulus E- Commerce and practices among Small and Medium Industries (SMIs) in Malaysia, and Noor Ainin Ismawati (2003) provide empirical support in which 79 percent of respondents said "not many success stories of E-Commerce" as a barrier key to apply the E-Commerce, followed by "do not have knowledge in E-Commerce" (72.6 percent), "Internet Access lowest among buyers" (72.2 percent), and "lack of knowledge about the potential of E-Commerce" (69.6 percent). Chow (2000) found that only 20.5% of organizations involved in the travel get involved in E-Commerce because of the lack of success stories and information on the effect of E-commerce in the ability of organizations in Malaysia. While many articles discuss the applications and benefits using the E-commerce, but academic studies with a systematic explanation of the effect of technological resources and management skills E-commerce on the ability of organizations in Malaysia in tourism and hospitality sector in particular is limited. The extent of using E- commerce in the ability and give affect the hotel industry in Malaysia yet to be identified. 3- Research Questions This study aims to determine the impact of E-commerce technology resources and management skills in ability of the hotel sector in Malaysia. Thus the issues and questions are as follows: 1. What are the stages of organizational capabilities (E-commerce benefits and E-commerce capabilities), E-commerce technology resources and E-commerce management skills? 2. Do any relationship between E-commerce technology resources and E-commerce management skills and organizational capabilities (E-commerce benefits and E-commerce capabilities)? 3. The most dominant variables which may influence the organization's capabilities (E-commerce benefits and E-commerce)? 4 - Research Objective The study is to identify the impact of E-commerce in the hospitality sector in influencing the ability of their organizations. Thus the objective of the study is as follows: 1. To identify the levels of organizational capabilities (E-commerce benefits and E-commerce capabilities), E-commerce technology resources and E-commerce management skills; 2. To determine the relationship between organizational capabilities ( E-commerce benefits and E- commerce capabilities) and independent variables, and 3. To determine the most dominant variables that affects the organization's capabilities (E-commerce benefits and E-commerce capabilities) 183

4 5 - Literature Review Laudon & Traver (2009) defines E-commerce as the use of the Internet and websites to perform business transactions. In detail, the commercial transactions between and among organizations and individuals via online. Meanwhile, according turban (2008), E-commerce is a process of buying, selling or exchanging products, services or information through computer networks. From a business perspective, E-commerce is doing business electronically with the handling of business processes on an electronic network which replaced the physical business process (Weill & Vitale, 2001). The concept of E-commerce is to support trade with the computing system with high dynamic and open information technology. E-commerce, also known as doing business without paper, which includes a messaging system, check, pay and product delivery. In this system, electronic data exchange, process communication (computer to computer applications) in the information business is a branch of this system. Trading partners (sellers, buyers or middlemen) global electronic market system meets the Internet. Electronic market is a system that connects computers to each other. All commercial activities from finding customers or suppliers, negotiations, contracts, agreements and settle payments electronically place safely and efficiently (Turbans, 2008). 5-1 E-commerce Technology Resources Researchers have found that the technology for information technology has been listed as a major concern in the information technology resources (Koeller, 1994; Niederman, Brancheau & Wetherbe, 1991). Technology for information technology can be defined to as the one set of resources that can be seen and to services that are not visible (McKay, 1989; Weill, 1993; Dunco & Bogucki, 1995) as: i. Technology platform; ii. Telecommunications and networking technology; iii. Key data; iv. Applications the main data processing; v. Plans a balanced strategy with business objectives; vi. Information technology design plan and vii. Information technology skills in the management of information technology resources The first four components of hardware and software technology are basic requirement infrastructure information needed for an organization operates. The last three components are connected with the planning information system which allows the firm can respond quickly and effectively to the needs and opportunities that exist (Henderson & Venkatraman, 1993). While the planning system helps to support the implementation of information technology. What is needed is a plan that combines high-level business direction, technology, human resource processes into a single plan so it can be used as a design framework for the analysis of information technology, design and execution (Maglitta, 1994). Finally, any organization needs the skills and experience of information technology to integrate information systems planning and design plans of information technology effectively by an organization that can respond efficiently in the business requirements. Some researchers question the source of technology for information technology is a set of complex technology resource development and difficult to modify. It is neatly explained in written form because it involves the planning, processes and interactions between and within the entire value chain of an organization (Cash, McFarlan, Mc Kenney & Applegate, 1992). Infrastructure an organization can implement to achieve competitive advantage and our competitors cannot imitate because the technology and skills, information technology infrastructure seen as a strategic resource and as a potential source of sustained competitive advantage (Keen, 1991; Niederman, Brancheau & Wetherbe, 1991; Weill, 1993). While there are some researchers argue that information technology has value but it is not a source of competitive advantage because infrastructure technology and technical skills are easily copied and obtained (Hayes & Wheelwright, 1984; Barney, 1986; Points et al., 1995). Bharadwaj (2000) argued that infrastructure information technology alone cannot be viewed as independent components. Developing integration infrastructure will take time, effort, learning experience and financial risk (Weil & Broadbent, 1998). Competitors will not receive the same results as a result of the investment in information technology 184

5 and the same because not enough time, ambiguity and social complexity (Deirickx & Cool, 1989). For example, Dell and Nike have a complex arrangement of information technology and expand gradually in several years. Both have infrastructure information technology that has links with business activities that support coordination between business partners and customers worldwide. Routine and complex business relationships are difficult to be copied and copied, and the unique characteristics of information technology or E-commerce are also fixed. In all these situations where technological resources for information technology and E-commerce value, if it is not easily imitated, if it is distributed throughout the various organizations, and if it is complex, it may be a source of competitive advantage. In conclusion, E-commerce technology has the potential because it is able to integrate, develop and combine with other resources such as management skills, business networking, synergy information and customer networks. Research is seen together with the ability to rapidly changing environment (especially when technologies and markets still grow) may help to explain why e-commerce capabilities with excellent performance in the influence of an organization. According to Zhang and Lado's (2001), the involvement of information technology into a competitive advantage depends on the "How do and how it is used". In other words, whether e-commerce technology can be a source of organizational capability depends on how it is used to produce results. E-Commerce Technology does not have such features are rarely found, not moving and cannot be copied, but it is a source of complement to enhance the strength of other resources and capabilities and at the same time can reduce the weaknesses of other sources (Fay, 2000; Teng & Cummings, 2002). Without combination with other resources, use of information technology cannot achieve gains beyond normal levels. Thus the use of E-commerce can be considered as able to merge and integrate with other resources to create competitive advantage (Amit & Schoemaker, 1993; Bharadwaj, 2000). 5-2 E-commerce Management Skills According to literature review, the properties of E-commerce management skills are as follows: (i) function of an effective management information system, (ii) the interaction and coordination with the user community, (iii) the ability to integrate information technology applications to planning processes and business strategies (iv) capable of using information technology to achieve more effective operations, and (v) the ability to anticipate customer needs and create valuable suggestions which others cannot copy it (Mata et al. 1995; Bharadwaj, 2000). The management is able to coordinate activities such as organizing a complex with the successful applications of E-commerce is a key factor in achieving competitive advantage. For example, Dell uses web technology services to share inventory information with suppliers of components. Thus, Dell can successfully manage the inventory from 36 hours to 5 hours (Hagel III, 2002). Dell successfully in the management of the value chain is not due solely web technology, but more than the ability of management skills better. Researchers say that management skills are not the main factor of performance expectations for an organization, but it is also a major source for E-commerce performance (Reed & DeFillippi, 1990; Dvenport, 1994; Pfeffer, 1995 & Brown and durguid, 2002). Researchers (Mata et al., 1995, Robert, 2000) states that the managerial skills may be valuable and could be a variety to be distributed throughout the organization. They also state that management skills are difficult to be imitated, because they usually develop within a period of time through trial right or wrong (Katz, 1974). For example, Nike has spent millions of dollars before the software was successfully implemented id2 value chain (Davenport, 1994; Hagel III, 2002). Management skills will also be a tactical, more centralized or specific (Chatfield & Bjorn-Andersen, 1997; Sambamurthy & Zmud, 1997). Because of the ambiguity of roles in the management skills of E-commerce for his involvement in many processes and the various interactions cause it cannot be replicated exactly (Castanias & Helfat, 1991). Finally, management skills tend to be complex because other things will also be involved in a relationship with users and business processes; it also will provide links to external networks such as customers and suppliers to develop a strategic organization (Jackson, 1985; Mata et al., 1995). For example, no specific management skills and networks "technical-social", Benetton is unable to manage the network of 7,000 franchises around the world. 185

6 6 - Methodology Conceptual framework This conceptual framework Based on the work of Powell & Dent Micallef (1997) in the retail industry and has been customized by Chu Jan Tow (2008) will be used and modified to follow conformity assessment. Based on the issues and income rather than loose talk of studies in the review found that the work does not rely variable reserved for this study is that the sources of E-commerce technology resources and management skills to the maintenance of E-commerce on organization capabilities (Duncan & Bogucki, 1995; Fuerst & Barney, 1995). Decisions are expected to take effect is to raise the excess E-commerce, and increase of E-commerce capabilities. E-commerce Technology Resources Organization Capabilities 1) E-commerce benefits 2) E-commerce capabilities E-commerce Management Skills Figure 1: Conceptual Framework The hypothesis Thus the hypothesis of the study are as follows: H1: There is no significant relationship between E-commerce technology resources and organization capabilities (H1a:E-commerce benefits, H1b: E-commerce capabilities) H2: There is no significant relationship between E-commerce management skills and organizational capabilities (H2a: E-commerce benefits, H2b: E-commerce capabilities) H3: There is no significant relationship between E-commerce technology resources, E-commerce management skills and organizational capabilities (H3a E-commerce benefits, H2b: E-commerce capabilities) Research Instrument A set of questionnaires for this study consists of five main sections, consisting of 1) demographic variables 2) E-commerce technology resources 3) E-commerce management skills, and 4) organization capabilities. Except for demographic variables, five-point Likert Scale is used for all sources of E-commerce technology resources, E-commerce management skills and organization capabilities. 186

7 Part A: Demographic Variables This Part in respect of personal information from respondents. This section also contains background of respondent gender status, age and highest educational level. Total the questions below demographic variables are 13 items. Part B: E-commerce technology resources The next section B on the E-commerce technology resources. Consists of eight questions, the variable is adapted from Duncan and Bogucki (1995). Part C: E-commerce Management Skills The next section C on E-commerce management skills. Consists of seven questions, this variable was adapted from the eyes, Fuerst and Barney (1995). Part D: Organizational Capabilities Sampling Method This research attempts to examine from the perspective of hotels and resorts in Malaysia because not many studies on E-commerce is done in the sector in Malaysia. The population in this study is 563 hotels and resorts under the Ministry of Tourism Malaysia and accommodation is divided into three (3) category 1) islands and beaches, 2) travel and nature, and 3) stay in the city. For this study, 217 hotels and resorts have been chosen as a sample using simple random sampling technique from three types of accommodation with the status of three (3) stars below, and four (4) stars and above. Hotels and resorts are selected for their involvement in E-commerce initiatives. Total population of this study is 563 hotels and resorts. Referring to Krecjie and Morgan (1970), to measure the population of 563, the minimum required sample size for this study is approximately 217 respondents. The informant for data collection, depend on one (1) person to provide information about the collective procedure. The provider information is considered highly qualified for their position, experience and specialized knowledge (Ventkatraman, 1989). Because this study will investigate the E-commerce, and organizational capabilities, E-commerce Executive or Information Technology Executive is a provider of appropriate information. All data will be analyzed using the SPSS / PC version From the 217 questionnaires distributed to respondents, all were completed and returned. 7 Research Finding Reliability Analysis Reliability is the degree to which any reliable or consistent measure (Trochim, 2001). Alpha reliability is usually used to determine the consistency. Table 1 below shows a list of Alpha reliability values for potential sources of E-commerce technology resources, E-commerce management skills and organizational capabilities. Given these results, all variables were reviewed to have adequate levels of internal consistency since they meet the recommended standard of 0.60 (Sekaran, 2003). Table 1 Reliability Analysis (N=217) Variables Number of Item Alpha Cronbach E-commerce Technology Resources E-commerce Management Skills Organizational Capabilities

8 7-2 - Descriptive Statistic Mean Score Mean score is to answer the first research objective 1: To identify the levels of organizational capabilities (E-commerce benefits and E-commerce capabilities), E-commerce technology resources and E-commerce management skills. As can be seen in Table 2 below, the organization's capabilities, the E-commerce capabilities is seen as having high levels (mean = 3.23), compared to the E-commerce benefits (mean = 3.22). Meanwhile, management skills (mean = 3.23, SD = ), and E-commerce technology resources (mean = 3.22, SD = ). Table 2 Mean Score Analysis Variables Mean Standard Deviation Organization Capabilities E-commerce Capabilities E-commerce Benefits E-commerce Management Skills E-commerce Technology Resources Correlation analysis Pearson's correlation was performed to answer the second research objective: To measure the relationship between organizational capabilities (the E-commerce benefits and E-commerce capabilities) and independent variables. Referring to Table 3, the results of correlation analysis showed a significant positive relationship between organizational capabilities (E-commerce benefits, and E-commerce capabilities) with variable E-commerce management skills and E-commerce technology resources (p <0.01). The results of this study support the hypothesis H1, H1a, H1b, H2, H2a, H2b, H3, H3a, and H3b. Table 3 Summary of Relationships between Independent Variables and Dependent Variables Dependent Variables Independent Variables Organization Capabilities EC Benefit EC Capabilities E-commerce Technology Resources 0.946** 0.983** 0.801** E-commerce Management Skills 0.938** 0.978** 0.820** Note. ** p < 0.01 level (2-tailed), * p< 0.05 level (2-tailed). 188

9 Multiple Regression Analysis with the procedures 'Stepwise' Analysis of various studies done to answer objective 3: To determine the most dominant variables that affect the organization's capabilities (E-commerce benefits and E-commerce capabilities). The Most Dominant Variables Influencing Organizational Capabilities Organizational Capabilities of E-commerce technology resources, and management skills. Referring to Table 4, only the resources of E-commerce technology resources have significantly influenced the organizational capabilities. E-commerce technology resources is the most dominant in influencing the organizational capability (β =. 946,<0.01). Table 4 Regression Organizational Capabilities (N=217) Model R2 Adjusted R2 Unstand. Stand. T Sig. Value Beta Beta Model Constant E-commerce Technology Resources ** Note. ** p < 0.01 level (2-tailed), * p< 0.05 level (2-tailed). The Most Dominant Variables Affecting E-commerce benefits E-commerce benefits of E-commerce technology resources, and management skills. Referring to Table 5 below, the E-commerce technology resources and management skills have a significant influence on the E-commerce benefits. E-commerce technology resources is the most dominant in influencing the E-commerce benefits (β=. 699, <0.01) and E-commerce management skills( β=. 287, <0.01). Together, these two variables reflect 0,967 R 2 value suggests 96% variance in E-commerce benefits. 189

10 Table 5 E-commerce benefits of regression (N = 217) Model R2 Adjusted R2 Unstand. Stand. T Sig. Value Beta Beta Model Constant E-commerce technology resources Model Constant E-commerce technology resources E-commerce management skills Note. ** p < 0.01 level (2-tailed), * p< 0.05 level (2-tailed). The Most Dominant Variables Influencing E-commerce Capabilities E-commerce capabilities of technology resources, and management skills. Referring to Table 6 below, only the E-commerce management skills have significant influence on the E- commerce capabilities. E-commerce management skills are the most dominant influence on the E- commerce capabilities (β =. 820, <0.01). The variables state that R 2 value suggests 67% in E-commerce capabilities. Table 6 E-commerce capabilities regression (N = 217) Model R2 Adjusted R2 Unstand. Stand. T Sig. Value Beta Beta Model Constant E-commerce management skills ** Note. ** p < 0.01 level (2-tailed), * p< 0.05 level (2-tailed). 8 - CONCLUSION In conclusion, this study reports the effect of the relationship between E-commerce technology resources and E-commerce management skills with the organization capabilities. The findings obtained showed that in line with the previous research by Tow (2004) and Bharadwaj (2000), the findings show the relationship of E-commerce technology resources and E-commerce management skills, organizational capabilities (Ecommerce benefits and E-commerce capabilities). Among all the variables, E-commerce technology resources are the most dominant variable affecting the organizational capabilities. The findings can be used by management to review future plans so that they can increase the capacity of the organization. For the organizations that do business globally allows the organizations to use the E-commerce (Council and Kraemer, 2000). Referring to the results of the study, it is recommended to the management consistently in their willingness to invest in the E-commerce technology resources and E-commerce management skills such as employee training This provides a useful guide to the 'Click and Mortar "to evaluate the use of E-commerce when they use the E-commerce in enhancing organizational capabilities. 190

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