The Implications of E-business on Frontier Markets 1.
1.0 Background Study
The advent of internet technology has signified a shift of power from the buyer to the seller. Customers therefore have different expectations as opposed to before the invention internet technology and e-commerce. An enterprise that understands and capitalizes on this new need can greatly benefit from it. These emerging technologies have redefined business and its dynamics. Boundaries like time and geographical area no longer exist between buyers and sellers. Electronic commerce involves the use of electronic media, such as computer network to carry out business. With E-commerce, customers can purchase commodities and access services remotely in the comfort of their homes. Services such as banking can equally be performed remotely by just a click of the mouse.
Business on e-commerce platforms has its advantages. First, doing business over e-commerce platform provides a larger market share and secondly, the concept of portability enhances a company’s bottom line. The negative implications of e-commerce on emerging markets are equally immense. These include factors such as; lack of security, huge cost of setting up user resistance due to trust issues and other factors such as the high cost of internet and telecommunication infrastructure in emerging markets.
A study sanctioned by the United Nations conference on Trade and Development (UNCTAD) illustrates that small and medium sized enterprise though lagging in ICT; stand to gain most in productivity if they adopted e-commerce business platforms. They run a risk of loss in profitability and productivity by not adopting e-business.
2.0 Objectives of this study
The intention of the study will be to spot the relationship between e-commerce and the economy of the developing countries and draw conclusions on the implications of this relationship.
Moreover, the study will include these specific objectives;
To study the role of e-commerce in the economic growth of developing countries.
To identify the factors and challenges limiting adoption of e-business in frontier markets
To study cultural effects on e-business in frontier markets
The role and impact of government and state regulation in e-business
The implications of e-commerce on employment
3.0 Research Questions
This study will seek to answer a number of questions so as to satisfactorily meet the stated research objectives. If this study satisfactorily answers these questions then it will have successfully delivered on its mandate as stated by the preceding research objectives.
What is the relationship between e-business and economic growth in frontier markets?
What are the challenges to e-commerce in these markets?
What roles do the governments of developing countries play in e-commerce?
How do the cultural beliefs and attitudes in these countries influence e-commerce?
Significance of the study
The central aim of this study is to determine the relationship between e-business and economic growth in developing countries. E-commerce is immensely affecting business and it offers numerous benefits to developing countries. Developing countries though lacking adequate technology infrastructure, could leverage on benefits offered by the internet and leapfrog through some of the necessary stages in the development of internet technology and take advantage of the full benefits of using the internet for conducting business (Panagariya, 2000).
Majority of small and medium sized enterprise in frontier markets could benefit from information technology and the internet in their daily business activities. However this is not the case, since most of these enterprises in developing countries have not maximized on the use of ICT to enhance their productivity. Governments in developing countries also need to take advantage of the numerous opportunities that arise with the use of ICT. Determining the relationship between e-commerce and its impact on the economic growth of developing countries is therefore essential to encourage faster adoption of ICT and e-business in these countries.
The study also aims to study the challenges and factors that limit the adoption of e-commerce in frontier markets. E-commerce faces a host of challenges in frontier markets. Developing countries face a number of challenges such as logistical problems, high cost of ICT infrastructure, speed of internet, trust issues by customers using e-commerce platforms etc. This study aims to identify and discuss these challenges so that these findings could be applied as a framework by companies seeking to adopt e-commerce platforms in developing countries or that are already running e-business platforms and are seeking to expand market reach to developing countries. Studying the effects of cultural beliefs and attitudes toward e-commerce is also helpful to such enterprises seeking to expand their market reach into developing countries.
This study can also be used by Government to identify and leverage on new opportunities presented by e-commerce since it covers the role of the state and regulations in the adoption of e-business. The study will also identify barriers in state regulation that either hinder or promote e-commerce. This is also significant because it can be used by companies looking to set up shop in developing countries or those seeking to extend their market reach. This study can also be used by governments to identify barriers to e-commerce and propose appropriate regulation to encourage investment in e-commerce. Since it studies the implications of e-commerce on economic growth it’s prudent that recommendations suggested by this study could be adopted by the state so as to allow these countries to maximize on the benefits of e-business.
Definition of Terms
E-commerce can be stated to be the use of internet technology in conducting business locally or internationally (WTO, 1998). E-commerce transactions occur as; business-to-customer, customer-to-customer, customer-to-business or business-to-business transactions. In plain sense e-business can be said to be the deliberate effort of individuals to create and trade, for profit, goods and services that gratify society’s needs via the resources available on the internet (Brahm Canzer, 2009)
5.1.2 Frontier Markets
A frontier market can be defined as a developing country which is more developed than the least developing countries but much smaller to be categorized as an emerging market. (Wikipedia)
5.2 History of E-commerce
The use of internet in conducting business probably dates back to the 1960s (Zwass, 1996). However, other studies suggest that it’s only in the 1990s that e-business through the internet featured as a centeral feature of several enterprises (Melao, 2008). While others saw e-business as a way of staying ahead in the competitive global economy others hoped it would in turn completely impact the way businesses, clients, partners and suppliers interacted. Businesses are therefore now capable of linking their internal and external data processing systems more successfully and efficiently using electronic business methods. They are more capable of working closely with partners and suppliers to satisfy their client’s needs. E-business therefore means more strategic focus in light of using electronic capabilities.
An article by Windrum, and De Berranger in 2002, discussed the need for intergration of various technologies and the internet into the business organization. It had two elements. Firstly, Supply chain integration so as to achieve seamless production and delivery processes. Secondly, creation of innovative commerce models resulting in open systems of communication between partners, manufactures and customers. This results in higher efficiency and reduced costs of production due to the intergration of the supply chain while the new business models and products introduced new ways of doing business on the internet platform.
Two fundamental benefits arise from adoption of e-business; value enhancement and reduction in cost of goods and services (Basu and Muylle, 2007). A typical example of value creation is the improvement in communication between suppliers and clients through effective marketing while a typical example of reduction in cost using e-commerce is the reduction experienced in reduced communication and travel costs as a result of using online meeting tools. For services such as banking, the online systems enable clients to do transactions any time of day or night (Whitley 2001). The globalization of communication networks enabled this break through which presents opportunities for huge growth in international trade (Sohani, 2009). Developing economies can leverage on the massive opportunities this presents for purposes of economic growth.
5.3 An overview of unique aspects of developing nations.
There is no universal definition for the term ‘developing nation’. Various terms are used interchangeably depending on the context to describe them such as; third world countries, emerging markets, less developed countries and non-industrialized nations. There are a few factors which unique to these nations and that form the basis of them being described as developing countries. There are further subgroups within this group such as; oil producing, middle or low income and newly industrialized sub group that these developing nations could be classified under. It’s important to note that the bulk of nations classified as developing nations are found in Latin America, Asia, Africa and the Middle East. Different world organizations such as World Bank, WTO and the IMF have different but unique parameters they use to classify nations. In some instances the groupings aren’t similar therefore a nation could be classified as a developed nation by one organization and as a developing nation by another. The overall fact remains that in developing nations, the economic indicators remain the same. Developing nations are considered to share certain economic parameters such as; investments are considered to have a higher risk, high costs of conducting business and that capital for investment is not easily available. All the factors are considered to hinder the nation’s economy from effectively competing with nations from the developed world and thus creating a more limiting environment for business in general.
6.0 Literature Review
E-commerce has a great potential. E-commerce promises to promises to transform trade and business in unimaginable ways and its impacts are expected to have a far reach beyond workers, producers and consumers (Singh, 2000). Contrary to E-commerce, the internet goes beyond the transaction itself since the internet is open to everyone. It brings with it additional benefits from marketing, product display, purchase, shipment tracking and delivery (Singh, 2000). In order to have an in-depth understanding of this topic, this chapter will provide a review on related topics by other authors in relation to the implications of e-commerce on developing countries.
Several issues relating to the subject of this study were discussed in a paper by Alwyn Didar Singh (2000) on implications of e-commerce on firms and workers in developing countries. Alwyn Didar singh argues that the biggest limitation to adoption of e-commerce in developing nations is failure to understand its potentials and its immense benefit on the economy. The aim of Alwyns paper is to attempt to tackle the issues that limit the adoption of e-commerce in these nations.
The first section explores the present state of e-commerce in comparison with its status in developing nations. Section two raises the question of infrastructure requirements, financial and legal framework as well as the issue of human capital essential for the adoption and promotion of e-commerce. The third section explores the impacts e-commerce has on businesses and firms in developing nations. It discusses the challenges as well as the potential benefits that governments and firms seeking to operate within these nations should keep in mind. Section four discusses issues on policy affecting workers and employment in these nations while section five discusses possible future research and the general policy agenda for international organizations in this area.
Alwyn Didar Singh mentioned a variety of electronic trading technologies that have each impacted their markets in radical ways. He however argues that the real game changer came in the form of internet technology which eliminated barrier posed by the previous forms of e-commerce platforms that only permitted subscriber and selected suppliers to access their services. Internet on the other hand is a resource open to everyone which permits everyone to access services offered online. Conducting business over the internet even goes beyond the transaction. Alwyn Didar singh also lists several areas where in his opinion the impact of e-commerce will be felt greatest. He however, leaves out the role mobile technology has played in developing e-commerce in developing nations. Mobile penetration as opposed to PC penetration in developing nations has grown astronomically and this has consequently aided e-commerce in these nations. Many languages are also now available on the internet as a direct influence of dominance of emerging economies.
Given the concepts stated in the discussion it is eminent that e-commerce will play a major role in the growth of economies in the developing nations. This study is therefore important and relevant for developing a e-commerce strategy while considering issues that are unique to developing nations.
7.1 Sources and Collection of data
This study aims to conduct a survey employing 200 questionnaires administered to 200 respondents. The reason for choosing a sample size of 200 respondents is so as to get as much varied views and response as possible. To supplement the questionnaires, the study also intends to administer direct interviews to some respondents.
Considering the uniqueness of this study, the questions will be carefully chosen and designed in a way that suits people who actually interact with e-commerce platforms in developing countries. To ensure thoroughness the questionnaires will be designed to classify data by; Age, Gender and e-commerce platforms.
Data from this study will be analyzed by means of Statistical package for social sciences (SPSS). Simple relative percentages in addition to Descriptive analysis will also be used. The sample size will be chosen such that it equally represents the whole population so as to achieve as much diverse responses as possible.
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