Critical Success Factors for EC: Korea vs. U.S.A.

1
Critical Success Factors for ECKorea vs. U.S.A.

• Tae Kyung Sung, Ph.D. CFE
• Kyonggi University
• IC2 Institute, The Univ. of Texas at Austin

2
About the Author

• Ph.D., Department of MSIS, The University of
  Texas at Austin
• Professor, Department of MIS, Kyonggi University
• Research Fellow, IC2 Institute, The University of
  Texas at Austin
• Consultant, ISTC(International Science
  Technology Center), Russia
• President, Korea Chapter, Association of
  Certified Fraud Examiners
• Research Interests
• Information Systems Strategy and Management
• Fraud Prevention and Detection
• Business Innovation
• Technology/Knowledge Transfer
• Global Sustainability and Entrepreneurship

3
Introduction

• The newest innovations, which we label
  information technologies, have begun to alter the
  manner in which we do business and create value,
  often in ways not readily foreseeable even five
  years ago.
•   Alan Greespan
• Chairman, Federal Reserve Board
• May 6, 1999
• What are CSFs for EC companies?
• Are there any differences between Korea and USA?
• Do CSFs actually impact firm performance?

4
Literature Review (1)

• Critical Success Factors
• Not many studies explicitly examining CSFs for
  EC
• Rather suggest a number of factors or issues
• Huff et al. (2000) Nine CSFs
• Tabor (1998) Strategic Fit
• Plant (1999) Seven Issues
• Hahn and Noh (2000) Critical Failure Factors
• Hagel and Rayport (1997a 1997b)
  Customer-orientation
• Barua et al. (2000) Eight key drivers
• EC strategy
• Evaluation and Assessment of EC operations
• Marketing Paradigm

5
Literature Review (2)

• Performance of EC Firms
• How to measure the success of EC firm?
• Amazon.com has never produced a profit, but
  considered to be very successful
• Whats my ROI on EC? Are you crazy? This is
  Columbus in the New World. What was his ROI?
• (Andy Grove, Chairman of Intel)
• Not many studies on organizational level of
  performance
• In this study, two kinds of measures
• Tobins q marketing measure
• ROA accounting measure

6
Performance Measurement

• Tobins q
• Introduced in 1969 by James Tobin as a predictor
  of firms future investments
• Has been recognized as very useful
• Tobins q (MVE PS DEBT) / TA
• Where
• MVE (Closing price share at the end of fiscal
  year) (number of common shares outstanding)
• PS Liquidating value of firms outstanding
  preferred stock
• DEBT (Current liabilities Current asset)
  (Book value of inventories) (Long-term debt)
• TA Book value of total assets
• ROA
• Standard accounting measure

7
Research Methodology

• Stage 1
• From literature review, 125 items compiled
• 10 academicians and EC managers evaluate each
  item on a 7-point Likert Scale
• Items scored lower than 4 were removed
• Eliminate duplicates integrate similar items
  (14 items)
• Categorize 111 items into groups (16 groups)
• Stage 2
• Standard questionnaires were administered
• With help of Chamber of Commerce (USA) and
  newspaper agency (Korea)
• Korea 203 returned from 235 companies (7
  unusable)
• USA 152 returned from 358 companies (15
  unusable)
• N 196 (Korea) and 137 (USA)

8
Research Variables

• VARIABLE DESCRIPTION No of
  ITEMS SAMPLE ITEM
• CUSTOMER Customer Relationship 6
  How much web page is customized for each
  customer?
• PRIVACY Privacy of Information
  7 Do you honor privacy rights?
• LOWCOST Low Cost Operation
  7 What is cost/revenue ratio?
• EASE Ease of Use
  8 How easy to recognize
  menu?
• STRATEGY EC Strategy
  6 Is there EC strategy?
• EXPERTISE Technical EC Expertise
  6 Do you have necessary EC technology?
• STABLE Systems Stability
  8 How often system is disconnected?
• SECURITY Security of Systems
  8 Do you have enough protection from
  hacking?
• PLENTY Plenty of Information
  8 Is there enough information about
  goods/svcs?
• VARIETY Variety of Goods/Svcs
  7 Do you carry top-brand goods/svcs?
• SPEED Speed of Systems
  8 How fast is retrieval time?
• PAYMENT Payment Process
  6 Is customer payment safe?
• SERVICES Services
  8 Do you have technical
  services hot line?
• DELIVERY Delivery of Goods/Svcs
  8 How accurate your delivery to customers?
• LOWPRICE Low Prices of Goods/Svcs 4
  Are you prices of goods/svcs are competitive?
• EVALUATION Evaluation of EC Operation 6
  Do you have metrics for Web sites?

9
Measures (1)

• Mean Std.
  Dev Cronbachs ?
• CSFs KOR USA KOR USA KOR USA
• CUSTOMER 3.5459 3.6326 1.0874 0.7934 0.8543 0.8081
  
• PRIVACY 3.1046 3.6423 0.7346 0.9605 0.7872 0.8123
  
• LOWCOST 3.1565 3.1004 0.5256 0.7015 0.8320 0.8456
• ease 3.5595 3.2044 0.8299 0.8237 0.8122 0.7754
• STRATEGY 2.8699 2.9343 0.7677 0.7446 0.7145 0.7453
  
• EXPERTISE 3.1837 2.9871 0.8394 0.7851 0.7630 0.787
  8
• STABLE 2.9311 2.5000 0.9096 0.7351 0.8088 0.7322
  
• SECURITY 2.7577 3.4988 0.7783 0.8344 0.7753 0.7255
  
• PLENTY 2.9473 4.0620 0.7867 0.7304 0.8289 0.8188
  
• VARIETY 3.2449 3.2409 0.8667 0.7304 0.8091 0.7760
  
• SPEED 3.6173 2.8358 0.8132 0.7744 0.8345 0.8005
  
• PAYMENT 3.1888 3.1655 0.7746 0.5334 0.7360 0.7872
• SERVICES 2.4362 2.9854 0.7389 0.9234 0.7874 0.7431
  
• DELIVERY 4.0663 3.3577 0.7076 0.6309 0.7582 0.7289
  
• LOWPRICE 3.3810 3.1727 0.6572 0.8246 0.8481 0.7984
  
• EVALUATION 2.8087 2.7536 0.7564 0.8067 0.7230 0.76
  63

10
Measures (2)

• CSFs KOREA USA
• Correlation with Tobins q ROA
  Tobins q ROA
• CUSTOMER 0.1741 0.2511
  0.3802 0.3592
• PRIVACY 0.3261 0.3034
  0.1554 0.2344
• LOWCOST 0.2861 0.3372
  0.3019 0.2863
• EASE 0.3142 0.3265
  0.4992 0.5014
• STRATEGY 0.3218 0.3986
  0.3049 0.3626
• EXPERTISE 0.4785 0.4569
  0.4997 0.5255
• STABLE 0.4719 0.4889
  0.1756 0.1517
• SECURITY 0.3826 0.4340
  0.3420 0.3236
• PLENTY 0.5010 0.5231
  0.0923 0.0661
• VARIETY 0.3998 0.3979
  0.3988 0.3620
• SPEED 0.4192 0.4156
  0.4113 0.3499
• PAYMENT 0.4223 0.3922
  0.2740 0.3192
• SERVICES 0.1800 0.2009
  0.5138 0.5134
• DELIVERY 0.1549 0.1361
  0.1566 0.0958
• LOWPRICE 0.2182 0.1842
  0.4296 0.3604
• EVALUATION 0.4035 0.3640
  0.3507 0.3859

11
Measures (3)

• Factor1 Factor2
  Factor3 Factor4
• PLENTY 0.6857 0.3798 0.1872 0.0646
• PAYMENT 0.7058 0.2626 0.0467 0.1747
• VARIETY 0.7005 0.2498 0.1982 0.3077
• LOWPRICE 0.5543 0.1791 0.2529 0.3154
• SERVICES 0.6178 0.1779 0.3045 0.0273
• DELIVERY 0.5066 0.0687 0.3061 0.1837
• SECURITY 0.0211 0.5545 0.0170 0.2278
• STABLE 0.3710 0.6911 0.1271 0.0056
• EVALUATION 0.3799 0.5281 0.3873 0.0195
• EXPERTISE 0.1595 0.6491 0.1617 0.0301
• SPEED 0.1029 0.6628 0.0978 0.1614
• CUSTOMER 0.1756 0.0364 0.7062 0.1190
• STRATEGY 0.3679 0.2450 0.6336 0.0802
• PRIVACY 0.0162 0.1733 0.1345 0.8091

12
Results CSFs (1)

• Top 5 Bottom 5
• KOREA USA
  KOREA USA
• 1 DELIVERY PLENTY 16 SERVICES STABLE
• 2 SPEED PRIVACY 15 SECURITY
  EVALUATION
• 3 EASE CUSTOMER 14 EVALUATION SPEED
• 4 CUSTOMER SECURITY 13
  STRATEGY STRATEGY
• 5 LOWPRICE DELIVER 12 STABLE EXPERTISE

13
Results CSFs (2)

• T Test N 196 (Korea) N 137 (USA)
• CSFs KOR USA t stat KOREA USA
• CUSTOMER 3.5459 3.6326 -0.84
• PRIVACY 3.1046 3.6423 -5.52 PRIVACY
• LOWCOST 3.1565 3.1004 0.79
• EASE 3.5595 3.2044 3.85 EASE
• STRATEGY 2.8699 2.9343 -0.76
• EXPERTISE 3.1837 2.9871 2.26 EXPERTISE
• STABLE 2.9311 2.5000 4.60 STABLE
• SECURITY 2.7577 3.4988 -8.30 SECURITY
• PLENTY 2.9473 4.0620 -13.86 PLENTY
• VARIETY 3.2449 3.2409 0.05
• SPEED 3.6173 2.8358 8.88 SPEED
• PAYMENT 3.1888 3.1655 0.33
• SERVICES 2.4362 2.9854 -5.79 SERVICES
• DELIVERY 4.0663 3.3577 9.40 DELIVERY
• LOWPRICE 3.3810 3.1727 2.56 LOWPRICE
• EVALUATION 2.8087 2.7536 0.64

14
Results Regression Analysis

• KOREA (N 196) USA (N 137)
• Tobins q ROA Tobins q ROA
• PLENTY 0.0574 1.0640 0.0237 0.1638
• PAYMENT 0.0249 0.1750 0.0047 0.2096
• VARIETY 0.0427 0.6769 0.0035 0.0816
• LOWPRICE 0.0044 0.2123 0.0382 0.1117
• SERVICES 0.0016 0.1164 0.0317 0.6533
• DELIVERY 0.0083 0.0864 0.0114 0.1198
• SECURITY 0.0725 1.4129 0.0228 0.2029
• STABLE 0.0240 0.5448 0.0179 0.2259
• EVALUATION 0.0389 0.1486 0.0827
  1.5205
• EXPERTISE 0.0712 0.9979 0.0989
  2.1312
• SPEED 0.0285 0.4279 0.0423 0.2298
• PRIVACY 0.0522 0.7042 0.0055 0.3950
• LOWCOST 0.0161 0.6594 0.0430 0.5867
• EASE 0.0355 0.5141 0.1096 1.8081
• CUSTOMER 0.0061 0.3495 0.0001 0.0263
• STRATEGY 0.0258 0.0062 0.0643 0.6711

15
Findings (1)

• Respondents rate the following five factors the
  most critical
• KOREA USA
• DELIVERY (of goods/services) PLENTY (of
  information)
• SPEED (of systems) PRIVACY (of information)
• EASE (of use) CUSTOMER (orientation)
• CUSTOMER (orientation) SECURITY (of systems)
• LOWCOST (operation) DELIVERY (of
  goods/services)
• Korean respondents consider SPEED as critical
  while US respondents consider otherwise while US
  respondents consider SECURITY as critical while
  Korean respondents consider otherwise
• Korean respondents evaluate EASE, EXPERTISE,
  STABLE, SPEED, DELIVERY, and LOWPRICE higher than
  US respondents while US respondents evaluate
  PRIVACY, SECURITY, PLENTY, and SERVICES higher
  than Korean respondents

16
Findings (2)

• CSFs have very significant explanatory power for
  firm performance
• 51 and 53 for Tobins q and ROA for Korean
  Sample
• 55 and 56 for Tobins q and ROA for US Sample
• In case of Tobins q,
• SECURITY, PRIVACY, EXTERTISE, PLENTY, VARIETY,
  and EVALUATION are most contributable for Korean
  Sample
• EXTERTISE, EVALUATION, EASE, and STRATEGY are
  most contributable for US Sample
• In terms of ROA,
• PLENTY, SECURITY, VARIETY, PRIVACY, EXPERTISE,
  and STABLE are most contributable for Korean
  Sample
• EXTERTISE, EVALUATION, and EASE are most
  contributable for US Sample
• Whether Tobins q or ROA is used,
• PLENTY, SECURITY, VARIETY, PRIVACY, and EXPERTISE
  are the most explanatory for Korean Sample
• EXTERTISE, EVALUATION, and EASE are the most
  explanatory for US Sample

17
Future Research Directions

• Replicate the research with a larger population
  both locally and internationally
• Unit of analysis
• Validate CSFs
• Level of Analysis
• B2C vs B2B
• Detailed investigation of CSFs on firm
  performance
• More valid organizational level performance
  measures
• Longitudinal Study