The Implications of E-business on Frontier Markets - Research Paper Example

The Implications of E-business on Frontier Markets Student’s name Code & Course Professor’s name University City Date Abstract The purpose of this paper is to investigate the extent to which e-commerce influences and affects economic development in frontier economies. Advancements in technology, the spread if ICT, improved infrastructure investments by the private and public sectors, improvements in public knowledge and awareness levels are all improving the likelihood of the adoption of e-commerce. The developing world has and continues to enjoy the productivity advantages of the adoption of e-commerce. Even though there have been improvements, the potential for growth of e-commerce and the subsequent economic improvement in frontier economies is very high. The researchers will conduct a survey, sending questionnaires to 200 respondents and complementing the information gathered through direct interviews. The sampling will be done purposively, with the researchers choosing respondents from as wide and representative a pool as possible in order to have viewed as varied as possible. The researchers will also use simple relative percentages and descriptive analysis to analyze the data. The research will look into the moderating factors in the relationship between e-commerce adoption and economic growth, the barriers, and facilitators of e-commerce adoption. The Implications of E-business on Frontier Markets Contents 1.0 Introduction 4 1.1 Research Questions 6 1.2 Significance of the study 7 2.0 Literature Review 8 3.0 Methodology 11 4.0 Data Analysis 12 5.0 Results and Discussion 14 6.0 Conclusions, Implications, and Recommendation 18 1.0 Introduction Decades ago, frontier markets were largely unexplored by investors. Frontier markets are those fast-growing countries which are less economically developed than the typical emerging markets. Some of the reasons used to justify these decisions included political instability, high inflation rates, large currency fluctuations, a poor business climate and difficulty in gaining access to markets. The past few years have seen a huge change in tact, though, as investor interest in frontier markets like Paraguay, Kenya, Ecuador, Nigeria, The Dominican Republic and Vietnam has grown (Damani, 2015). At the center of this rise in popularity is the emergence of e-commerce as an important factor in emerging and frontier markets. For instance, developing and emerging countries previously seen as unattractive have had an unprecedented rise in domestic e-shopping habits (Kumar, Sikdar, & Alam, 2016). E-commerce is growing in importance in the emerging economies. It is constantly changing the way enterprises communicate with each other, with consumers and with the government. Due to changes in the ICT sector, e-commerce has grown rapidly in the business sectors of many frontier markets (UNCTAD, 2015). Technologies designed to improve the speed and efficiency of doing business also continue to evolve, and with social media growing in the recent few years, conversations between businesses, among consumers and between consumers and their vendors have been more engaging. If utilized well, e-commerce could be a source of significant advantage to businesses in frontier economies (Khan, 2016). But what exactly is e-commerce? Electronic commerce in full, it is the buying and selling of digital goods. Most people have in the past only used the internet as a means of interaction and communication (Khan, 2016). Other than buying and selling, the internet can also be a source of information on pricing. E-commerce refers to the entirety of the electronic processes through which individuals or organizations make transactions like buying and selling, transfer or exchange of goods and services (Alyoubi, 2015). The current business environment grows more competitive every day. For businesses to stay afloat and competitive, they have to improve themselves and look for ways to serve their customers more efficiently. One of the most significant trends in the last decade has been the use of the internet. As a medium, it creates new opportunities for transactions, giving businesses, especially small and medium enterprises, a huge advantage. The advantages of internet use for businesses include streamlining or processes, cost reductions, an enhanced business reach, new ways of buying and selling, more suppliers and trading contracts and partners as well as a greater competitive advantage (Ahmad, Abu Bakar, Faziharudean, & Zaki, 2014). At the very basic level, e-commerce technology improves communication within the firm, making management and utilization of firm resources much more streamlined. Such capabilities as streamlined transfer of files and information, as well as the networking of computers, increases the efficiency of such business processes as documentation, data processing, and other background functions in the office as the organization of invoices and incoming orders (Ahmad, Abu Bakar, Faziharudean, & Zaki, 2014). E-commerce has been thoroughly utilized in developing countries, but frontier economies still lag behind. There are success stories among the more established emerging economies, with countries like India experiencing tremendous growth in e-commerce adoption in the past few years. The numbers in India are huge, with researcher putting the adoption rate at about a 120 percent growth in the last decade or so (Alyoubi, 2015). Today, research identifies India as the most likely to emerge as a world leader in the global e-commerce market. It has moved from a lowly economy to one of the most promising, part of the BRICS; Brazil, Russia, India, China and South Africa. In Latin America, 59 percent of which is covered by Brazil, there was a revenue increase of about 1.6 billion USD in the last decade associated with e-commerce. There is a clear relationship between the adoption of e-commerce and the emergence of the country’s economy as dominant (Alyoubi, 2015). In developing and frontier economies, the rates at which businesses implement e-commerce is growing, but there is still a long way to go (Alyoubi, 2015). Businesses in frontier economies face greater challenges than their counterparts in the more established countries due to such factors unreliability of internet connections, poor infrastructure leading to poor access, the high cost of access and the low penetration of ICT throughout the country (Kabango & Asa, 2015). For e-commerce to be fully adopted, though, apart from overcoming these problems, there must be further conditions that have to be met. The key factors that impact e-commerce include trust, security and protection from fraud and hacking, the awareness of the perceived usefulness of the program and accessibility and perceived quality (Kabango & Asa, 2015). The government also plays a role in the adoption of e-commerce in the frontier countries by acting as facilitator. 1.1 Research Questions This study will look to answer the following questions as comprehensively as possible in order to meet the objectives of the research project. Answers to these questions will mean the study will have delivered on its mandate. i. What role does the adoption of e-commerce play in the economic growth process of frontier markets? ii. What are the challenges to the adoption of e-commerce in these markets? iii. How important is the role played by governments of frontier economies in the adoption of e-commerce? iv. How do cultural beliefs affect attitudes towards and the adoption of e-commerce in frontier economies? v. What are the most significant facilitating factors in the effective adoption of e-commerce in frontier economies? 1.2 Significance of the study The main aim of the study is to determine the extent of the relationship between economic growth in frontier economies and the adoption of e-commerce. Frontier countries have in the past few years increased in the adoption and integration of e-commerce into their business and governance models as they continue to improve. However, there is still space for improvement and a lot to be done. This aim of this study is to fill the research gap by determining what it will take for countries to realize the true potential in terms of their capacity for the adoption and use of e-commerce technologies. 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. Governments play a regulatory and enabler role in the process of adoption of e-commerce. The results of this study can be useful in guiding policy, funding and investment decisions as governments seek to improve and develop their frontier markets. 2.0 Literature Review The subject of e-commerce and its adoption in emerging economies has been written on by many researchers and scholars, especially in the context of adoption and benefits in an emerging economy. Mirescu (2011) gives the basics of electronic commerce, including definitions, advantages for the buyer, producing companies, sellers, and overall advantages. The article also highlights the historical beginnings and expansion of electronic commerce, from the seventies through the dot-com boom of the eighties and nineties to the current situation[Mis11]. Khan (2016) writes about the benefits and challenges that electronic commerce adoption faces in emerging economies. The researcher uses secondary data collected from published books and journals, and bases their research on Bangladesh, looking into the e-commerce adoption situation in the country as an emerging economy. The study identifies the possible benefits of e-commerce adoption as well as the biggest barriers to its adoption. Ahmad et. al. (2014) also take the same approach, but their focus is on the impact of e-commerce adoption in Malaysia. Unlike the work was done by Khan (2016), theirs is an empirical study that looks to test eight hypotheses through the survey of 307 small and medium business owners in Malaysia. Ahmad et. al. (2014) look into the factors that affect the adoption of e-commerce within Malaysian SMEs, finding that the biggest factors include the perceived relative advantage, the knowledge, and expertise of the manager, perceived compatibility and agents of external change. Alyoubi (2015) approaches the subject in a similar way, but his work is in the context of the introduction of modern systems. The work of Alyoubi (2015) is especially profound as it seems to show the distinct relationship between economic development and the adoption of e-commerce. It shows how India, Brazil, and Latin America have benefited from the adoption of e-commerce and will continue to grow. However, even more, important from this article is the realization that even though there have been strides in leveraging e-commerce for economic growth, there are still gaps left to be filled. In India, for instance, even though the country has been named most likely to emerge as an e-commerce investment hub, there are still logistical barriers to its growth. Kabango and Asa (2015) also investigate the factors influencing e-commerce development and the implications for developing countries. They identify many of the barriers identified by other researchers; infrastructure, cost, accessibility, and ICT penetration. Additionally, though, this study adds to the debate the issue of facilitating factors. For the barriers to be broken, Kabango and Asa (2015) suggest that there has to be trust in the e-commerce initiatives, the perception of security of information and transactions, the awareness of the perceived usefulness of e-commerce, accessibility, perceived quality and facilitation from the government. The International Finance Corporation explores the broader issue of technology and the role it has to play in global development, both in the emerging and developed economies. According to Molders (2016), there is a global productivity slowdown that is affecting both mature and emerging markets. Even then, the productivity levels in the mature economies are almost five times those of the emerging and frontier economies. This gap provides a lot of catch up the opportunity, even as globalization continues to lose momentum after the global recession and global development slows down. This article identifies technological factors, among the electronic commerce, as some of the biggest factors in the catch-up race for the emerging economies (Molders, 2016). The takeaways here are that global growth has slowed down ever since the global recession, but there is still a gap between the established and the emerging markets. Spurring growth to close this gap is the key to the developing world returning to growth levels and reaching the desired high standards of living (Molders, 2016). So far the relationship between technology and justifiable economic contribution, especially in emerging and frontier markets has just been a theoretical issue. Dicle and Levendis (2013) change this trend in a case study that further justifies the push for e-commerce in frontier economies and the need for this study. Dicle and Levendis (2013) take the Johannesburg stock exchange (JSE) as a case study and investigate its adoption of the SETS system from the London Stock Exchange. The researchers tested whether the adoption of the SETS system, a proven technological system, actually adds value to the JSE. The results were that after SETS adoption, the JSE became more efficient and independent, and now offers better diversification opportunities for international investors. Being one of the most attractive emerging markets in the past few years, the use of a South African example here is significant (Dicle & Levendis, 2013). The UNCTAD (2015) goes deeper and more specific, looking into the development potential of e-commerce. It is an exhaustive report, one that looks into the global e-commerce market, details of new productivity evidence in Europe and evolution in the global market. It also looks at regional trends, focusing on Africa, Asia, and Latin America; the regions where most of the emerging markets and frontier economies are. According to UNCTAD, the global e-commerce landscape is changing, and with the accompanying ICT changes, the business world has changed dramatically. Still, the utilization of e-commerce and ICT technologies varies greatly among various types of businesses across different regions. This means there is still a lot to be done to bridge the gaps in things like the availability and access of e-commerce platforms and internet access (UNCTAD, 2015). 3.0 Methodology The research will aim at collecting data through a survey. The survey will be conducted through administering questionnaires through emails to the respondents. This will require top-level managers within SMEs in order to attain responses from an administrative point of view since the decisions for adoption, and implementation of the technological innovations are made from the managerial level (Kurnia et al. 2015). In order to get the sample required, random sampling will be utilized so as to come up with 880 participants that will be used in the survey (Allen et al 2014). Choosing such a large sample will be important so that the responses are varied to get composite conclusions. Due to the unique nature of the research, choosing of the questions for the questionnaire preparation will be done carefully to design suitable questions for the managers at the SMEs and e-commerce platforms. This response will be categorized according to age, education, position and industry (Kurnia et al. 2015). Moreover, the usage of Facebook by SMEs will be examined (Sila 2015). This will be supplemented by interviews in order to collect more specific responses regarding the perception of the e-commerce and social media impact on the current state of business. The data collected will then be analyzed through descriptive analysis and simple relative percentages so as to represent the whole population through the selected sample (Allen et al. 2014). 4.0 Data Analysis Out of the 880 questionnaires distributed among the respondents, only 350 were completed and deemed usable since they were the only ones responded to by the participants. Of the respondents, 182 were male representing 52% while 168 were female representing 48% of the population. This data indicates that virtually the respondents were equal basing on gender representation (Allen et al. 2014). Gender Male Female 182 168 52.0 48.0 Age 20-29 30-39 40-49 50-59 60 and above 208 123 12 6 1 59.4 35.1 3.4 1.7 0.3 Education Higher secondary Bachelor Masters 140 198 12 40.0 56.6 3.4 Position Mid-level Top-level CEO Owner 101 97 43 109 28.9 27.7 12.3 31.1 Industry Food Garment and clothing Processing Agriculture/agribusiness Telecommunications Miscellaneous 73 167 18 5 7 80 20.9 47.7 5.1 1.4 2.0 22.9 TOTAL 350 100% Table 1.0 Data representing responses from participants Source: Allen et al. 2014 The respondents when categorized basing on their age, it was realized that 208 of them were aged between 20 and 29 years of age representing 59.4% of the population. Basing on the analysis, it can be deduced that most of the participants were younger people representing 59.4% while the elderly were the least representing only 0.3% of the population, therefore, making it possible for the firms to adopt technological innovations due to the presence of the younger generation (Herzallah & Mukhtar 2015). Furthermore, 123 were between the age of 30 and 39 years which made up 35.1% of the population, 12 were between 40 and 49 years representing 3.4% of the population, 6 were between the age of 50 and 59 which represents 1.7% of the population and only 1 of the respondents above 60 years of age represented 0.3% of the population. Basing on the education levels, 140 of the participants had graduated from high school representing 40.0% of the population which translates to the conclusion that most of the employees under the SMEs have basic qualification that can be utilized to adopt technology like social media marketing (Dahnil et al. 2014). Furthermore, the responses indicated that 198 respondents representing 56.6% of the population had attained a bachelor’s degree and only 12 respondents had a master’s degree representing 3.4% of the population. The number of respondents having bachelor's degree is over half of the participants and therefore paves the way for conclusion that the adoption of the innovation in SMEs has been made possible due to the presence of skills and innovative minded employees (Herzallah & Mukhtar 2015) In terms of positions held at the workplaces, it was established that 101 participants were at the mid-level position representing 28.9% of the population and 97 respondents making up 27.7% of the population were at the top level positions at their respective workplaces. Of interest, 12.3% represented by 43 respondents held CEO positions while 109 participants representing 31.1% of the population were owners of the various businesses. 73 of the respondents representing 20.9% of the population were in the food industry while 167 participants representing 47.7% of the population were in the garment and clothing industry (Allen et al. 2014). Moreover, agribusiness and agriculture were had 5 respondents representing 1.4% of the population while 5.1% represented by 18 participants were in the processing industry. The respondents in the telecommunications industry were 7 representing 2.0% of the population and the remaining 80 participants representing 22.9% were in other industries (Allen et al. 2014). This indicates the SMEs within the garment and clothing industry are willing and have adopted the innovations compared to other industries. 5.0 Results and Discussion Innovation within the business sector has been aided by the improvement in technological studies that are taken up by most of the people worldwide. For instance, with the increased campaigns on equality, it can be seen that the training in the innovative and technological field has been taken up by both male and female almost at equal levels (Sila 2015). Basing on the findings in the study, it can be seen that 52.0% were male and 48.0% were female. This can be attributed to the fact that the recent developments in the training has influenced the peoples’ interest in e-commerce for both genders (Rahayu & Day 2015). Most importantly, it can be noted that more than half of the participants were younger people aged between 20 and 29 years. This indicates that the e-commerce field is being run by younger generation which is a positive indication since the young population are perceived to enhance innovativeness in the business sector (Herzallah & Mukhtar 2015). Moreover, with little incentive, the young population will be motivated to participate in training in such areas as web design and online marketing. The innovativeness in such fields will ensure that the businesses penetrate the e-markets through creating advertisements and creating purchase and shipment tracking systems. Furthermore, it can be noted that only 0.3% of the respondents were above 60 years of age. This is an indication that the firms are investing more in employing younger generation while the elderly are being phased out (Sila 2015). This can be perceived as a move to transforming the e-commerce sector to bring in new expertise who are able to accept change and transform the trade through the use of modern technology and means of marketing. As a matter of fact, Sila 2015, notes that international trade is growing at a fast rate and therefore businesses have to utilize the modern strategies and approaches to create platforms that allow for free exchange of information. This can be through emailing and other means like social media which the old generation find it hard to keep up with. Therefore, in order to create effective marketing channels, it is crucial that globalization through communication networks be handled by younger generations who are willing to accept and drive the change (Irma et al 2015). The results further indicated that managerial support had a positive impact on the acceptance of technological innovativeness. For instance, basing on hypothesis 2 it can be noted that managers are charged with the responsibility of making decisions in such matters as innovation at workplaces (Putra & Hasibuan 2015). Therefore, in order for the workers to accept and adopt technological innovativeness, the management has to propose by giving the possible benefits that are to be expected from the e-commerce. Putra & Hasibuan 2015 posits that, government support of the technological innovations determine the attitude the employees have towards the innovations. For instance, through the support and financing of research in the field of technology, the firms will provide employment opportunities to the graduates which will motivate more students to take up such courses in the future (Rahayu & Day 2015). That is to say, basing on the data from the respondents where 56.6% were holders of bachelor’s degree, it can be deduced that the government intervention in university education impact positively on the technological innovativeness in business. Moreover, the government policies on SMEs also facilitate the adoption of the innovations. Putra & Hasibuan 2015 points out that the government plays an important role in providing consultancy services through seminars about technology which influences the perception of the innovation by the business firms. As discussed by Rahayu & Day 2015, the adoption of the technological innovations in business facilitates the growth of the business. This can be seen through the manner in which the innovations have been utilized in the garment and clothing industry which has seen to considerable positive growth in the size of the business. Consequently, the growth in business translates to increased market share for the specific business (Rahayu & Day 2015). For example, the garment and clothing industry is represented by 47.7% of the total market which is almost half of the market. Therefore, when the individuals and organizations perceive the innovation as useful, it is possible that they will have positive attitude towards the innovativeness. Rahayu & Day 2015 indicate that the performance of SMEs in terms of profits determine the acceptance and adoption of the technological innovativeness. As a matter of fact, innovations like online advertisement and marketing are perceived to have a positive impact on the sales for firms which translates to profits for the business. Therefore, such innovation will be perceived to be of value to the business and can, therefore, be recommended and even adopted by more businesses (Kurnia et al. 2015). Furthermore, the experience one has had with the innovation can be a factor in determining the adoption behavior of the technological innovation (Kurnia et al. 2015). That is to say, companies that have utilized virtual networking like teleconferencing, Skype video calling and bulk data transfer will have an easy time accepting the innovation compared to those who have not yet experienced such. It can, therefore, be concluded that the innovativeness of the technology will motivate the firms adopting the innovation which will be based on the experience such firms have had before. Motivation through incentives provided to the employees along with the innovation will determine to what extend the innovations will be adopted (Dahnil et al. 2014). For example, such innovations as web hosting will be adopted by a business if the operational costs will be lower than physical storage of the documents on the hard drive and filing. This can also be determined by how useful the innovation is to the business. For example, if the firms perceive the potential for boosting the business benefits is high if the innovation is adopted, then the businesses will adopt the innovation. Besides, the developing countries are likely to adopt the innovations more because they are trying to get to the international business chart which is determined by the success in integrating technology into the business strategies that exist within the business sphere (Herzallah & Mukhtar 2015) 6.0 Conclusions, Implications, and Recommendation In summary, it has been noted that the improvement in infrastructure in terms of technological advancement affects the extent to which e-commerce has developed besides the economic developments in the developing countries (Putra & Hasibuan 2015). Through the information collected from various respondents, it can be noted that the adoption of the technological innovations has contributed positively to the improvements and growth of the frontier economies. The usefulness of the innovations determines the extent to which a firm is willing to adopt it. Therefore, firms perceiving the innovation as crucial to the success and survival of the businesses like experienced with the SMEs will determine whether the business will adopt the innovation. Furthermore, the involvement of the government in the training motivates the implementation of technological innovation by SMES. Besides, the policies formulated that are favorable enhance the research into drivers of technology in the e-commerce sector (Herzallah & Mukhtar 2015). This implies that the adoption behavior is hinged on such factors as the support from the government and other incentives. The implementation of technological innovations plays a vital role in the expansion of the SMEs and other businesses to international standards. This is experienced through improvement in communication and efficiency in production which translates to market growth, increased profits and larger market share. Having conducted the research in Indonesian SMEs, it is necessary to point out that the Indonesian SMEs will benefit in a manner that it can be possible to develop improved guidelines which can be utilized to increase financial makeup of firms within the country (Sila 2015). This is because the implementation of the technological innovation is instrumental in contributing to national economic growth through the improvement of economic performance of the SMEs and business firms at large. Basing on the findings, it can be recommended that the government and other stakeholders invest more in training of more people in the technological innovation which will improve the experience in consultation services and marketing abilities. Through the improved skills and flexibility in financial support, the SMEs can be in a position to conduct seminars that are focused on technology. This will enable such firms to adopt technological innovations after understanding the essence of the implementation. Further recommendation would be for the business firms to create virtual networking which will propagate the globalization and develop more international connections for the growth of the business from operating locally to international market (Rahayu & Day 2015). This can be achieved through hiring individuals with relevant skills besides having innovative minds. Moreover, the employees should be motivated through provision of incentives and training which will generate positive perception from the employees towards innovation. Conducting more research within the SMEs will reveal the drivers of technology and its application in the business sector. In so doing, the business firms will be in a better position to impact positively on the perception of the technological innovation and consequently facilitate its adoption (Putra & Hasibuan 2015). This will have positive impact on the individual employees within the SME sectors to improve their perception of the usage of technology in the field. Besides, this will translate to organizational benefits whereby the adoption behavior will determine the success in terms of economic growth, increase in profits and widening the market share. 6.1 Limitations and Future Research One of the limitations experienced during the study was the limited data that was available for analysis. For instance, besides having chosen a large sample of 880 respondents and distributing the questionnaires, only 350 were eligible for analysis. This indicated that over half of the respondents did not provide feedback as expected which reduced the sample for research considerably. Due to this, the validity and reliability of the total responses cannot be presumed to be 100% considering the responses were less than half of what was expected. Moreover, the research was conducted in only one Island of Indonesia and therefore the data was collected only from that island (Irma et al 2015). Since Indonesia is only one of the emerging economies, it would have been necessary for the data to be collected from other emerging economies that would be used for comparison purposes. In addition, future studies on the topic should focus on including other Indonesian islands so as to have composite representation of the adoption of technological innovations in the Indonesian SMEs (Dahnil et al 2014). This will not only generate more reliable and valid analysis but will also provide a clear picture of the adoption and perception of technological innovations in Indonesia. Furthermore, since there are more emerging economies worldwide, especially in the Asia-Pacific region, it would be necessary to conduct similar studies in such regions (Allen et al 2014). This is because having a comparison of the differences in adoption and perception of the innovations within the SMEs in different economies will facilitate drawing relevant conclusions in terms of the impact of the innovations on various economies. For example, conducting studies on Malaysia, Philippines and China will create a better understanding of the adoption of the innovations and how it is impacting on the organizational performance of the SMEs in such economies (Irma et al 2015). Reference list Ahmad, S. Z., Abu bakar, A. R., Faziharudean, T. M., & Zaki, K. A. (2014). An Empirical Study of Factors Affecting e-Commerce Adoption among Small- and Medium-Sized Enterprises in a Developing Country Evidence from Malaysia. Information Technology for Development , 555– 572. Allen, P, Bennett, K & Heritage, B 2014, ‘SPSS Statistics: A Practical Guide’, Cengage Learning. Alyoubi, A. A. (2015). 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