E-Commerce Role in Developing Countries
Introduction The number of internet users has been growing steadily around the world and it creates an opportunities for regional and global e-commerce to develop. Therefore, by the impact of internet, both socioeconomic and infrastructural have created a major level of differentiation in the growth and acceptance of e-commerce at different regions of the world. This differentiation occurred in the field of socioeconomic and infrastructure. To identify the diffusion of e-commerce in the various locations of the world, they have been conducted different studies and models.
We Will Write a Custom Essay Specifically
For You For Only $13.90/page!
Infrastructure and services are considered as a primary diffusion factor of the model (Efendioglu, Yip, & Murray, University of San Francisco, 2009). However, these factors will create a difference in the acceptance of electronic commerce in the developing countries, which depends on the cultural, infrastructure, and socioeconomic. Depending on different regions in the developing world, they have various models to discover the electronic commerce diffusion (Zwass, 1999).
E-payment systems comes under the services and some of these services are securing messages, use of credit card, and electronic markets. According to Grabner-Kraeuter trust is “the most significant long-term barrier for realizing the potential of E-Commerce to consumers” (Grabner-Kraeuter, 2002). More than eighty percentage of the world’s population are in developing countries, where they have the opportunity to grow the electronic commerce.
Theoretical clams illustrates that electronic commerce can increase the economic growth rate of the developing countries, but they have little empirical on the outcomes of electronic commerce adoption. From the studies it can be indicated that intra and inter organizational communications are the benefits for electronic commerce, depending on these improvements. By implementing electronic commerce it can benefit the customer or supplier linkages and cost savings. This would increase the competitiveness, disintermediation, and global supply chain (Molla & Heeks,2007).
This paper discusses on the model of electronic commerce adoption, diffusion of electronic commerce in infrastructural and socioeconomic factors. E-commerce adoption is clearly explained in the figure1. There are various challenges and benefits in developing countries for electronic commerce adoption, these factors are discussed clearly in figure 2. The major barriers for developing countries would be cultural and technological barriers, which does not allow electronic commerce to grow.
E-Commerce Adoption for Businesses in Developing Countries Depending on the information technology and e-commerce context, the development of business differs in developing countries. There are some environmental constraints that face greater risks substantially, which occur due to the implementation of these constraints in e-commerce for developing countries. A little study has been conducted on the factors that differ in the complexity of e-commerce in developing countries, which are used in these markets.
Molla and Licker have formulated an e-commerce adoption model, known as the Perceived E-Readiness Model, and a measuring instrument. Because of the perceived factors the model has been important. A differentiation between the primary and secondary characteristics of the managerial, environmental, innovation, and organizational adoption have been studied. Primary characteristics are intrinsic in the implementation context and can be measured independently.
Secondary characteristics are perception-based characteristics that could reasonably predict innovation adoption intentions and behaviors. Many characteristics of innovation and organizational characteristics have been secondary. The two organizations have the same level of organizational resources and they operate in the same context, depending on their different perceptions they differ in decisions. Therefore, perception-based models can be logical for predicting of e-commerce adoption in developing countries (Molla, & Licker, 2005) Figure 1.
A Model of E-Commerce Adoption for Businesses in Developing Countries (Source: Adapted from Molla, & Licker, 2005). This model is based on the perceived e-readings, defined as “an organization’s assessment of the e-commerce, managerial, organizational, and external situations in making decisions about adopting e-commerce”. Perceived organizational e-readiness (POER) and perceived external e-readiness (PEER) are the two major constructs of PREM. Four major components of perceived organizational e-readiness are awareness, governance, resource and commitment.
Initial adoption and institutionalization are the two levels of e-commerce adoption. Initial adoption can be defined by the organization’s attainment in interactive e-commerce. Institutionalization can be referred to the organization’s utilization (Molla, & Licker, 2005). B2B E-Commerce in Developing Countries B2B e-commerce can facilitate the access to global markets and reduce the barriers to entry in the international development and burgeoning literature on e-commerce.
By enabling these applications the producer firm can reduce their transaction costs, from which they can get benefit in the international trade. From the research it can be known that the implementation of the public internet and the www will not reduce the overall transaction costs, which can facilitate for the entry of new global markets in the developing countries (Pare, 2003). E-commerce and its related actions over the internet will be the engine to boast up the domestic economic, through the domestic service liberalization and integration of global production.
Since the global and domestic markets integrates with the e-commerce from the inception, electronic commerce will negotiate ontrade issues, in the past they have more trade negotiations, which demand for the key domestic policies, mainly in delivery, financial services, distribution, and telecommunications . Since these are the fundamental sectors for a modern economy, and liberalization will rebound to the greater economic narrow sectors (Mann, 2000).
Even though, the increase in internet connectivity in developing countries are not benefiting the involvement of e-business, small and medium business lag from potential improvement in productivity by implementing e-business, which will not benefit without proper managerial, innovation, and technical skills. Both information and communication technologies have a significant potential for the development and economic growth, they can promote innovation and develop productivity, and reduce the transaction costs.
By implementing information communication technologies in developing countries, there would be benefiting the small and medium enterprises, which gain in employment, gender equality and standards of living (Deepak, 2005). E-commerce and trade in developing countriesThe impact of e-commerce in facilitating trade and contributing other income activities to the gross national product through entrepreneurship and exports and employment opportunities at the national and local level. In many developing countries economic growth occur due to the trade of exports, which serves as a critical contribution to it.
The successful experiences of countries such as Thailand, Singapore, Taiwan and China, give evidence to trade being an important motivation to rapid economic growth. The potential advantage of adopting and implementing electronic commerce in developing countries are savings in the transaction costs, and innovating new markets for new products to increase their the global reach. The economic and social development in the developing countries can be obtained by utilizing idle human and capital source, by which creating employment and gaining foreign exchange from exports to invest the imports of capital goods and domestic development.
Depending on the inelasticity of supply and demand within the global markets, the dependence on exports has a handicap for achieving the development in economic growth. Several reasons for slow growth are as follows, transformation of technology from low to high technology and skill intensive products, which reduces raw material demand; the use of raw material efficiency increases; and natural raw materials with substitutes like copper, cotton and rubber.
Challenges that seek economic growth through exports cannot be rectified by electronic commerce alone, which point out in achieving operational efficiency and the market expansion in current export that is critical for the survival of developing country firms. Therefore, they generate more revenue through other countries. As discussed earlier, operational efficiency is a basic trend to get attractive for the developing countries in adopting the electronic commerce, and further benefit the informational and strategic importance.
From the research on electronic commerce and trade in developing countries, it can be reported that quit a number of innovative techniques have been adopted by the entrepreneurs. These techniques have been focused on selling their unique cultural capital; festivals, products, and art, for some developing countries the way electronic commerce in tourism. Some of these methods include Ethiogift. com (Ethiopia) and Munshigi. com (Bangladesh), which market the concept of non-resident Ethiopians or Bangladesh buying gifts online, which can be delivered to their relatives or family friends living at home.
India Shop is an online shop, which is constructed by hundred college graduates for local clothing market, and jeweler products, from which 40 percent of woman graduates are in this team. Cultural capital tend to be potential in some areas where female entrepreneurs dominate as knowledgeable resources in the process of decision making of electronic commerce. (Boateng, Heeks, Molla, & Hinson. 2008) The changing marketplace Electronic trade sources allow new opportunities for export companies, basically for small enterprises.
By implementing electronic trade firms can reduce their transaction costs and increase their export distribution chain. It allows the firm to regain its position in the worldwide. Electronic trade capacity will not conduct the each and every stage of the electronic transaction in the global market. The market does not demand it at the movement. It will not end the work of acquiring electronic stage for transaction in each stage. Here both managers and public sector strategy maker require a concentrated response in the trade support institutions. A staged approach
Companies should concentrate on acquiring electronic competency in stages. This can be done by building up the capacity among the individuals, which creates a basic web presence; expanding the e-network and practicing to the partners, those are clients and suppliers of the firm; and rethink to take electronic competency into the competitive strategies. E-competency should be implemented in short run, for the small and medium enterprises in improving transaction economies. Public sector need to be geared up to the level of sophistication, so that that they can maintain electronic trade competency and development programmers.
Finally, companies should acquire a total competitive response capability. A sign from the foreign marketplace confirms that this is the lower level of electronic competency, which is expected for an export-completive company (Barclay, & Domeisen, 2001). New business opportunities The three main categories for export opportunities have been emerged to: software, services exporting, and hardware. Service exports are on the rise, which exploits the information and communication technology, as the implementation of business change and new intermediaries emerge.
For business opportunities it can consider both software and hardware technology exports (Barclay, & Domeisen, 2001). Electronic commerce to expand to developing countries The Business Exchange Service has been implemented to the developing countries, so that they can be motivated to start electronic commerce. By this service, it can result in the partnership between the World Trade Center, World Internet Secure Key, and International Telecommunication Union. The project of International Telecommunication Union in the developing countries will lead to the use of existing infrastructure and services.
Security for establishing trust through the transaction, authentication, and authorization can be obtained by BeX service. The World Trade Centre combines both business and government agencies to involve in the international trade, which provides necessary trade services connected with global commerce, and improves the economy in the area they serve. World Internet Security Key provide a higher level of certified services with global identification and trust (Electronic commerce to expand to developing countries, 2000). Figure 2: Influences on Diffusion of E-Commerce (Source: Adapted from Travica, 2002)
Political/Legal: Governmental policies and Support and Legal Environment & Practices Countrywide Acceptance And Diffusion of E-commerce Infrastructure: Access to technology & connectivity Telecommunication Infrastructure & Supporting E-service Socio-Economic: Business Environment, Consumer & Business, Practices & social & cultural characteristics Socio-economic influences of e-commerce adoption Socio-economic influences assessment is difficult in the adoption of e-commerce because of its methods, which are required to reveal the complex and unpredictable community values.
The factors which influence in the social and economic framework are not proposed for the comprehensiveness. But the selection is based on the agreement of empirical evidence and socio-economic literature. Social impact of e-commerce implementation Tremendous growth of ecommerce and internet has major effects on the organization and functioning of the social order at an individual and total level. Internet has made various changes on the way we shop, communicate and the pattern we live in the society. This portion describes various social force of ecommerce implementation. Escalating digital divide
The increase of e-commerce has formed enormous influences on market structure, services, competition and, reorganize of market and industry. These areas of changes are influencing in many sectors of society, business, work and government. The use of communication and information technology in ecommerce intensifies and deepens among the socio groups; business, people, and nations. There is a complex patchwork of changeable levels of information and communication technology (ICT) entree, ICT usage, and applications of ICT among socio groups; much more disparities are receiving even larger.
The quality of infrastructure of the internet and the dispersed location, even the phone line quality has created a huge gap in accessing. Use of digital technology certainly creates gap among diverse socio groups and within firms depending upon education, income levels, gender and in the same way for firm depending upon size (small or large firms), on industry structure and of course location. The technology in India shows the existing scene of poverty level, discrimination, and dissection on to the novel canvas of technology.
Disparities in ICT are evident that is based upon the location (like urban rural), economic groups, and gender. People living in the cities or urban area do not have sufficient skill to play with the internet stuff and most of the time many interesting sites are blocked by the politicians or top level people for own purpose. Hence, the digital technology of India states the current position of technology infrastructure and the way of wealth distribution in India. The division of rural urban is caused by intrinsic difficulty in providing access to the network, let only electricity, in particularly rural areas.
Poverty has been the main barrier to the growth of internet and also the main problem in implementing e-government in our country India. The monthly expenditure on internet is more than the monthly income of main part of population in India. Bad telecommunication infrastructure and the poverty of the country has always been the main reason for widening gaps between haves and haves not, that is why haves not has to suffer from enormous in equality in wealth distribution. The major disparities in accessing ICT are based on some economic factors e. g. Geographical location, gender, age, income and so on.
Although government tried a lot and came up with new strategy, it could not succeed to help prevent in the diffusion of information technology across genders, regions disparities of social economic groups. T his failure definitely has retarded in the process of implementing e-government and e-commerce in India. MarginalizationIt involves in the prohibition of set of people from mainstream action, intentionally or otherwise. In order to conduct business with the internet use only few people are required and this has made the job more automated. Thus marginalization may be considered likely a consequent of e-commerce implementation.
The formal sectors of economy in many country is now have become less labor intensive and have provided jobs to the more specialized workers. Greater knowledge and skill is required to be a part of ecommerce technology. On one side it has created many different job opportunity to the people who were unemployed and on the other side it has segmented the market on the basis of people’s purchasing power. It discriminates between rich and poor, skilled and unskilled. Those who do not get chance to get such training are left out of mainstream activities. Due to the unsuitable skill and training, poor are pushed to utside edge. They are more marginalized because the gap between those who joined the e-commerce bandwagon and the knowledge they gained themselves grows. A similar kind of sentiments was echoed by the World Employment Report of 2002. This report shows that the use of such technology as ecommerce is absolutely interrelated to economic growth both on organizational level and national level. E-commerce implementation results in the inclusion of several segments of the society, results in the increased participation and an enlarged marginalization, seclusion and exclusion in other parts of the society from communication.
Since ICTs are very expensive in India compared to other parts of the world, people are not involved in electronic marketplace and even electronic players do not consider them in the business. Societal disparities and distribution of incomeThere is a complex relationship between e-commerce and income distribution and people see it in both negative as well as in positive ways. Income distribution system is not properly organized among different groups of people like old workers, women, and poor in India. The items such as gasoline, foods and other necessary things are costlier in India compared to U.
S dollar terms, due to this fact poor are unable to live even a very simple life. Partiality is being done for these groups of society. Many factors are responsible for these disparities, sometimes it is caused because of the ignorance of politicians or some casual chains. We can see in some parts of Indian cities a very few quantity of tele-commuting started. E-work that is based on home and several other combination of place and time flexibility has found several effects on family, partnership. This has an influence on income distribution and social contacts.
Historically, Indian women were fully responsible for taking care of children, family and manage a whole family. But today since most of the work can be carried out by simply sitting at home, some women are also actively participating in doing some jobs or business. Thus a change in responsibility, household roles, and division of labor at least to some extent is influenced by this modern information technology. Social isolationEcommerce have become an important catalyst for new stretchy option for work in the form of telecommuting. Tele-work has a diverse form. It consists, among others, company employees work away from ork place it may be a,maybe based upon home freelancer, work as a temporary worker as secondary activity. Recently, mobile computing has also gain popularity in doing business. It has made the process of communicating and sharing of information easy. The research that was made shows that the centers of tele-work may boost up productivity, in social context, e-commerce has a far success implication. On one side, people are provided with the facility of buying goods or services sitting anywhere and on the flip side; it has removed social needs of human interaction.
People are spending long time in the internet rather than with people or friends. It is obvious that the more people use the internet, the less time they spent with others. Now days, since employees can report or do all the stuff at home, they do most of the work out of their office. In India, not many people use social networking sites like face book, my space, which is very popular among U. S people, which also in some way helps in social interactions. Due to such trend people these days play passive role in their neighborhoods, now it is hard to see the as it used to be 1960s or 1980s.
The use of internet therefore, can lead to stress, withdrawal and social isolation. This may hamper the old tradition of the country i. e. India. There is a mixed kind of impact of ecommerce and internet among people in India. Approximately 33% of population in India said that internet has set the new form of vibrant communities where as 67% of the respondents stated that internet has led to social isolation. Although, the addiction rate of people in India for internet use is only few percent approximately 10% but they believe that this things have made a great impact on society and also blames for social isolation.
The data however, indicates that only percent of the population have access at home to the internet and remaining is still the component of digital divide. Loss of privacy and individuality concernIn today’s economy ,maintaining a good customer base has become an essential element for taking competitive advantage for the organization . Therefore ,every company or organization try their best to reach customer and get all the necessary information or personnel data from which they can be benefitted.
They do obtain information in many ways just like sending regular mail and stating that they are always there to help and support them, provide some unique goods/information. Although, the intention may be to get some secret information from customer. Different hand held instrument are being used whether that is for surfing internet ,sending email, purchasing goods things like that but we never notice about privacy concern ,which in today’s world is really a serious matter. They use many sophisticated tools to collect data in to their database. Today this personnel information is gathered, stored, disseminated in high ratio than ever.
As a consequence of this privacy has become a main issue in national as well as in international level. However, this privacy concern is not taken seriously by India so far. Until this stage, Indian public either ignore the privacy matter or unconcern about it. The society is still not worried about this serious issue. Influence on local, social, and political valuesCommerce, mainly, local commerce is a societal activity that identity the value of the community, reinforces community value, establishes community distinctiveness and also supports in the development of the community.
Therefore, the implication of ecommerce has a great blow on social life. We can notice lots of changes being made in India regarding policies, rules, institutions with the implantations of this telecommuting or virtual mobility of labor . This has also brought changes in the way of living life, eating habits, housing, and transportation system and so on. Now, one can attend kid’s activities, different social activities or function frequently and at same time they can coordinate to their senior regarding work issue (Sharma, & Gupta, 2003).
Challenges facing global E-CommerceE-Commerce development in developing countries have been achieved greatly. The actual stage has been implemented in the place of concept stage in some of the developing countries. Although, there is lack of creativity, the expansion of the website is expanding. For developing countries it is good to start the e-commerce and the perspective, but the requirements are not matured for e-commerce development. There are different reasons for the unmature requirements, they are lack of telecommunications infrastructure, lack of skilled and competent staff who can develop and maintain electronic commerce sites.
Some other reasons would be lack of internet knowledge for the consumers, lack of logistics, low bank account, and credit card penetrationEducation is very important for the consumers. Lack of education is the main reason for the low growth rate of electronic commerce. Since, people in the under developed countries have little knowledge in e-commerce. More than half of the populations in some countries are uneducated, which has a great negative impact on the consumer, since they are unable to use the internet and its application. Internet is limited for business purpose, and it is not used by every house hold.
Table 1 clearly shows the internet users around the world by geographic regions. The population size in Asia or Africa is greater than North America, but the internet users are more in North America. Benefits of E-Commerce for Business From the identified different infrastructure and cultural characteristics as impediments to consumer participation in electronic commerce in China. Transfer of funds for payment systems and distribution systems have limitations in their technology access, and the primary impediments were attitudes to the offsite transaction systems (Efendioglu, Yip, & Murray, University of San Francisco, 2009).
The adoption of business to business electronic commerce platforms on the World Wide Web will tend to offer new exchange methods that allows businesses to complete in world markets. E-Commerce and The Reduction of Transaction Costs E-Commerce implementation requires both reduction in the technological divides and improved institutional support to the emerged international trade. This implementation can benefit the diffusion of communication and information technologies. Transaction cost theory involves two types of costs for commercial exchange; they are coordination and actor motivation problems.
Coordination costs generally are perceived from the need to determine prices and other transaction details, to make the existence and location of potential buyers and sellers to know one another, so that they can interact. This kind of costs can be divided into four categories, they are searching for products, buyers, sellers and services; ensuring the contract terms are met; negotiating and fulfilling a contract; and adapting the tenure of the contract to change. Actor motivation costs can be categorized into two types; they are information asymmetries and incompleteness (Pare, 2003).
Table 1: World Internet Usage and Population for June 30, 2009 (Source:www. internetworldstats. com,on Nov 3, 2009) WORLD INTERNET USAGE AND POPULATION STATISTICS| World Regions| Population (2009 Est. )| Internet Users Dec. 31, 2000| Internet Users Latest Data| Penetration (% Population)| Growth 2000-2009| Users % of Table| Africa| 991,002,342| 4,514,400| 65,903,900| 6. 7 %| 1,359. 9 %| 3. 9 %| Asia| 3,808,070,503| 114,304,000| 704,213,930| 18. 5 %| 516. 1 %| 42. 2 %| Europe| 803,850,858| 105,096,093| 402,380,474| 50. 1 %| 282. 9 %| 24. %| Middle East| 202,687,005| 3,284,800| 47,964,146| 23. 7 %| 1,360. 2 %| 2. 9 %| North America| 340,831,831| 108,096,800| 251,735,500| 73. 9 %| 132. 9 %| 15. 1 %| Latin America/Caribbean| 586,662,468| 18,068,919| 175,834,439| 30. 0 %| 873. 1 %| 10. 5 %| Oceania / Australia| 34,700,201| 7,620,480| 20,838,019| 60. 1 %| 173. 4 %| 1. 2 %| WORLD TOTAL| 6,767,805,208| 360,985,492 | 1,668,870,408| 24. 7 %| 362. 3 %| 100. 0 %| | Conclusions In the developing country, electronic commerce plays a major role for the development of electronic market.
It will boast up the competition and increase better transparency in transaction. Therefore, benefit in economy can occur if they have higher growth rate in electronic commerce. Small and Medium Enterprises plays a major role in the development of economic growth rate in any country. Since, small and medium enterprises start up with electronic commerce, which is mean for the further development of the country. This is the reason why electronic commerce required in taking an immediate action, in the developing countries for the development of the economic growth (Panagariya, 2000).
Establishment of good infrastructure and internet facility in the developing countries can make higher progress for electronic commerce. Higher increment in digital divide can occur by the development of electronic commerce. Developing countries should concentrate on the electronic commerce technologies, since it is the major factor where the world is headed. By this they can embrace their challenges in the global market with other countries. Necessary decisions should be taken by the third world countries from first world countries, since these countries have certain experience in this field.
Therefore, if any changes occur in the implementation than there should be certain good will from the government. Due to the poverty line in the developing countries, the adoption of electronic commerce is slow compare to the other third world countries. Therefore, electronic commerce may become a dream in certain developing countries due to their high poverty line (Panagariya, 2000) References 1. Alev M. Efendioglu, Vincent F. Yip,& William L. Murray, “E-Commerce in Developing Countries: Issues and Influences” University of San Francisco, Retrieved Oct 26, 2009 from http://userwww. sfsu. du/~ibec/papers/25. pdf. 2. Brian Barclay, & Natalie Domeisen. (2001). E-trade opportunities: Are developing countries ready? International Trade Forum, (1), 16-19. Retrieved November 2, 2009, from ABI/INFORM Global. (Document ID: 74105857). 3. Catherine L. Mann March 2000, Electronic Commerce in Developing Countries, Issues for Domestic Policy and WTO Negotiations, Retrieved Oct 28,2009 fromhttp://iiea. iie. com/publications/wp/00-3. pdf 4. Cloete, E. , & Doens, M. (2008). B2B e-marketplace adoption in South African agriculture. Information Technology for Development, 14(3), 184-196. ttp://search. ebscohost. com, doi:10. 1002/itdj. 20105 5. Deepak Bansal. (2005). E-commerce and Development Report 2004. Review of medium_being_reviewed title_of_work_reviewed_in_italics. Finance India, 19(1), 237-239. Retrieved November 2, 2009, from ABI/INFORM Global. (Document ID: 848972321). 6. Electronic commerce to expand to developing countries. (2000, February). Signal, 54(6), VG2. Retrieved November 2, 2009, from Research Library. (Document ID: 49640685). 7. Grabner-Kraeuter, S. (2002). The role of consumers’ trust in online shopping. Journal of Business Ethics 39: 43-50. . Geneva. (2003), Use of E-commerce grows in developing countries, retrieved from: Xinhua News Agency, Nov 20, 2003 pNA, Business Index ASAP. (Document RN: A110366607). 9. Molla, A. , & Licker, P. (2005). Perceived E-Readiness Factors in E-Commerce Adoption: An Empirical Investigation in a Developing Country. International Journal of Electronic Commerce, 10(1), 83-110. http://search. ebscohost. com. 10. Molla, A. , & Heeks, R. (2007). Exploring E-Commerce Benefits for Businesses in a Developing Country. Information Society, 23(2), 95-108. http://search. ebscohost. com, doi:10. 080/01972240701224028. 11. Pare, D. (2003). Does This Site Deliver? B2B E-Commerce Services for Developing Countries. Information Society, 19(2), 123. http://search. ebscohost. com. 12. Panagariya, A. (2000). “E-commerce, WTO and Developing Countries”. 18-26. 13. Richard Boateng, Richard Heeks, Alemayehu Molla, & Robert Hinson. (2008). E-commerce and socio-economic development: conceptualizing the link. Internet Research, 18(5), 562-594. Retrieved November 2, 2009, from ABI/INFORM Global. (Document ID: 1587923811). 14. Sushil K Sharma, & Jatinder N D Gupta. (2003).
Socio-economic influences of e-commerce adoption. Journal of Global Information Technology Management, 6(3), 3-21. Retrieved November 2, 2009, from ABI/INFORM Global. (Document ID: 454272861). 15. Travica, B. , (2002). “Diffusion of electronic commerce in developing countries: The case of Costa Rica. ” Journal of Global Information Technology Management, 5(1), 4-24. 16. “Internet Users around the world and Population”, www. internetworldstats. com, Retrieved Nov 03, 2009 17. Zwass, V. , (1996). “Electronic commerce: Structure and issues. ” International Journal of Electronic Commerce, 1(1), 3-23.