ECommerce in Developing Countries Research Paper

eCommerce in Developing Countries

What are the most important ideas in the two articles?

Both articles and their extensive empirical and theoretical research have a wealth of insights and intelligence that brings e-commerce into a more realistic and pragmatic perspective. Starting with Exploring E-commerce benefits for businesses in a developing country (Molla, Heeks, 2007) that authors explain how they have interviewed 92 businesses in South Africa who have moved beyond the basic stage of ecommerce as defined by the 6-point e-commerce capability indicator cited in their article (Molla, Heeks, 2007). In citing this scale the authors contend that the much-hyped benefits of e-commerce surrounding operating efficiency gains including lower transaction costs and greater fluidity and flexibility of e-commerce are in fact not occurring in the emerging economy of South Africa. Instead, the authors state that the greatest gains are being made in the area of intra- and interorganizational communication and collaboration, clustered primarily in services industry as evidenced by their cited research (Molla, Heeks, 2007). This is certainly the case in Brazil where the continued growth of e-commerce has succeed while other nations have failed mainly due to the exceptional stability of the nations’ banking system, strong laws and regulations to protect e-commerce and online commerce, and an infrastructure that makes automating supply chains more achievable than many other regions and nations of the world (Paulo, Dedrick, 2004). Brazil is also unique in that is government subsidizes new ventures and seeks out global technology partners, including Intel, for its e-commerce and infrastructure-dependent industries (Callaway, 2008).

Juxtaposing the growth of Brazil is the stagnation of South Africa as is shown in the analysis, which implies e-commerce is better at breaking down the walls of organizations and getting them to work together more effectively than it is in driving top-line revenue from transactions., This consistent with the more pragmatic and practical studies of e-commerce adoption in emerging nations that show e-commerce system development and implementation will teach a business more about itself than it had never considered prior to the implementation (Alemayehu, Heeks, 2007). The process of creating an e-commerce strategy including the process and system integration, coordination of product and services catalogues, redefining and clarification of pricing, and the ability to define expediting processes for service and service recovery of negative customer events all force a business to grow faster than it had anticipated (Standing, Benson, 2000). Small businesses enter e-commerce thinking the big pay-off will be increased top-line revenue growth and greater transaction efficiencies (Molla, Heeks, 2007). Small businesses in commodity driven industries will also do this to specifically drive down the cost per transaction and pool purchasing power to gain an advantage in negotiating with suppliers (Salcedo, Henry, Rubio, 2003). All of these actual benefits are completely different than the much-hyped and promoted benefits of e-commerce being frictionless commerce throughout a supply chain, greater revenue growth at lower transaction costs, and ease and speed of generating customer loyalty, all contributing to skyrocketing profitability of an enterprise (Romano, 2009). All of these benefits accrue, in actuality, to oligopolistic firms who have the infrastructure, from a corporate it staff to a well-known brand and the ability to selectively disintermediate their own supply chain to gain the much-hyped transaction cost efficiencies (Molla, Heeks, 2007). The greater the global market power of a company and its commanding position in an oligopoly, the more it can enforce its market-maker statue and drive change (Alemayehu, Heeks, 2007). Molla and Heeks (2007) deflate the hype of Transaction Cost Theory and its corollary of disintermediation by showing through their research that perfect competition doesn’t exist in e-commerce globally and is especially problematic in emerging countries due to the lack of value chain integration and transparency. The authors also make an excellent point that the main catalysts or fuel of e-commerce growth in many nations is market research and mass customization (Molla, Heeks, 2007). There are myriad of examples of how e-commerce combined with mass customization has led to explosive, profitable growth on the part of companies with Dell not only reaching over $1B in revenues from online sales but also achieving double-digit inventory turns and extensive operational efficiencies at the same time (Luo, John, Du, 2005). The authors contend that for many emerging nations this however is not possible given the lack of trust and adoption of e-commerce, and the lack of alacrity and accuracy in complex supply chain relationships including a lack of clarity in communications and procurement performance (Molla, Heeks, 2007). Contrasting this however are the effects of a stabilized and trusted banking system in Brazil for example (Brazilian e-Commerce, 2005). The greater the trust levels in a given nation’s financial system the higher the level of e-commerce adoption, even in highly collectivist cultures (Joia, Sanz, 2005). The authors continue with a triangulation of market performance, communications and transaction cost reduction, showing how e-commerce is more of a catalyst of organizational synchronization than a platform for selling more online (Molla, Heeks, 2007).

In the second article Internationalization of e-commerce: a comparison of online shopping preferences among Korean, Turkish and U.S. populations (Hwang, Jung, Salvendy, 2006) the authors compare the performance of the U.S., Korea and Turkey from an e-commerce standpoint. Of the many excellent lessons learned in this analysis and cited research, the authors provide the greatest value when they compare e-commerce performance across these nations on the dimensions of trust. The authors provide statistically significant findings based on their studies showing how critical information and content are to Koreans relative to Americans, citing the collectivist vs. individualist natures of these cultures based on the Hofstede Model of Cultural Dimensions (Hwang, Jung, Salvendy, 2006). Differentiating cultural adoption of e-commerce based on the level of collectivism makes sense as many cultures seek to mitigate and eliminate risk as much as possible through consensus-based decision making, and this extends into their online purchasing (Joia, 2002) and online retailing strategies (Joia, Sanz, 2005). The greater the level of individualist culture, as the U.S. is, the higher the level of trust in e-commerce and less the need for a continual stream of information and content to assuage doubts of credibility (Hwang, Jung, Salvendy, 2006). Information accuracy and product and price comparisons most differentiate Korean and U.S. online consumers, which further supports how Asians have a collectivist view of e-commerce that is predicated primarily on distrust. This aspect of collectivism is uniform across all demographic and economic segments of the Korean population which shows a remarkable solidarity of values in this nation (Hwang, Jung, Salvendy, 2006). There has been more pluralism and balkanization of values in more individualist nations when it comes to behavior and trust of e-commerce, with the U.S. being one of the more illustrative of this approach to e-commerce behavior (Luo, John, Du, 2005).

The Brazilian e-commerce market is flourishing today despite its mid-range score in Individualism (38) relative to South Korea (18) and the U.S. which has one of the highest scores of all at 91. Figure 1, Hofstede Cultural Dimensions Analysis Comparing Brazil and the U.S. illustrate these differences. Despite Brazil having a lower level of IDV score than the U.S., the trust levels in the infrastructure of the country are acting as a very powerful catalyst of economic growth (Campos, 1999) (Brazilian e-Commerce, 2005). The conclusion based on an analysis of the cited research is that the greater the level of trust in banking, systems of financial record, and a stable judicial system, the greater trust consumers have in e-commerce despite a relatively low IDV score on the Hofstede Model of Cultural Dimensions (Hwang, Jung, Salvendy, 2006). This also indicates that for e-commerce to flourish in a given economy, it must also respect and provide flexibility and freedom around the cultural constraints of its society at the same time. This is inferred from the studies completed by Hwang, Jung, and Salvendy (2006) in that despite Korea very collectivist and risk-averse (and data-centric) buying cycles online, there still exists the opportunity to have e-commerce be a disruptive innovation by respecting these cultural differences and navigating around them.

Figure 1:

Hofstede Cultural Dimensions Analysis comparing Brazil and the United States Source: http://geert-hofstede.com/brazil.html

What are the main benefits, opportunities and barriers of e-commerce for a developing country?

The greatest benefits of e-commerce are the discipline it forces companies to have greater levels of collaboration and communication within and between their business units and departments. Contrary to the much-hyped benefits of streamlining transactions while driving top-line revenue growth, e-commerce initially serves to create a more unified organization capable of collaborating more effectively (Molla, Heeks, 2007). It also acts more as a catalyst to drive change management throughput an organization, resisting fear of change by increasing the timeliness and quality of information shared across department and divisional boundaries (Kabasakal, Asugman, Develioglu, 2006). These are not intuitive benefits of e-commerce yet are far more effective over the long-term for making businesses more competitive over the long-term.

In addition e-commerce systems actually transform the information systems and workflows throughout a business unit to make them more of a knowledge-sharing system instead of a transaction system (Joia, 2002). The ability to create a more effective knowledge management and learning system is more important than just creating an online store and populating it with products, which is a key lessons learned through much of the analysis for this report (Molla, Heeks, 2007). The internationalization of e-commerce then is the antithesis of one-size-fits all; it is rather the ability to tailor e-commerce strategies with accuracy and precision to the specific needs, preferences and perceptions of specific markets (Callaway, 2008). This is especially evident in how the Hofstede Cultural Dimensions Model shows immediate insights into hwo highly collectivist-based societies including Korea rely on an abundance of data and information to assuage or increase trust in e-commerce, which is low in this nation (Hwang, Jung, Salvendy, 2006). Conversely the finding that countries with a high level of Individualist (IDV) scores including the United States, the level of trust in e-commerce is significantly higher. Intermediating across these two articles and the surrounding analysis is the finding how effective stable, trustworthy infrastructure is in enabling faster growth of e-commerce as is the case with Brazil (Brazilian e-Commerce, 2005). The key finding of this analysis is that national leaders have much more influence on the success or failure of their country’s e-commerce initiatives than they realize. The more stable and trusted the infrastructure of a nation, the faster e-commerce flourishes, even in nations that are not strong in traditional cultural values including IDV that would drive e-commerce adoption from an organic or systemic standpoint (Hwang, Jung, Salvendy, 2006).

References

Alemayehu, M. And Heeks, R. (2007). Exploring e-commerce benefits for businesses in a developing country, Information Society, 23(2), 95-108

Callaway, S.K. (2008). Global corporate ventures: A new trend of international corporate entrepreneurship. Multinational Business Review, 16(3), 1-22.

Campos, G. (1999). Latin america. International Tax Review,, 71-73.

Brazilian E-commerce. (2005). Country Commerce. DataMonitor Report. Brazil, 79-82.

Hwang, W., Jung, H.-S., Salvendy, G. (2006) Internationalization of e-commerce: a comparison of online shopping preferences among Korean, Turkish and U.S. populations, Behaviour & Information Technology, 25(1), 3-18. 2

Case study in brazil. Internet Research, 12(4), 305-317.

Joia, L.A., & Sanz, P. (2005). The hidden value of sporadic customers in e-retailing: An empirical investigation. Internet Research, 15(1), 7-20.

Kabasakal, H., Asugman, G., & Develioglu, K. (2006). The role of employee preferences and organizational culture in explaining e-commerce orientations. The International Journal of Human Resource Management, 17(3), 464-483.

Luo, Y., John, H.Z., & Du, J. (2005). The internationalization speed of e-commerce companies: An empirical analysis. International Marketing Review, 22(6), 693-709.

Molla, a., & Heeks, R. (2007). Exploring E-commerce benefits for businesses in a developing country. Information Society, 23(2), 95.

Paulo, B.T., & Dedrick, J. (2004). E-commerce in brazil: Local adaptation of a global technology. Electronic Markets, 14(1), 36-47.

Polatoglu, V.N. (2007). Strategies that work – the case of an e-retailer in an emerging market. International Journal of Emerging Markets, 2(4), 395-405.

Romano, F. (2009). The digital revolution: The world at the click of a button. International Trade Forum, (3), 22-25.

(Rosener, McAveney, 2006)

Rosener, J.D., & McAveney, S.P. (2006). Controlling chaos: Frameworks for governing virtual relationships: Part 1. Intellectual Property & Technology Law Journal, 18(6), 13-23.

Salcedo, D., Henry, J., & Rubio, a. (2003). What small businesses need from an E-marketplace. International Trade Forum, (3), 24-25.

Standing, C., & Benson, S. (2000). An effective framework for evaluating policy and infrastructure issues for e-commerce. Information Polity, 6(4), 227-236.

Wood, C.M. (2004). Marketing and e-commerce as tools of development in the Asia-pacific region: A dual path. International Marketing Review, 21(3), 301-320.

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