barriers to e-commerce and competitive business models in developing countries: a case study

Barriers to E-Commerce and Competitive Business Models in

Developing Countries: A Case Study

Written by: Nir Kshetri

Presented by:Marc Gill

Travis CainJanelle Boucher

Introduction

Marc Gill

Barriers to E-Commerce in Developing Countries

Economic Barriers

Sociopolitical Barriers

Cognitive Barriers

E-commerce Business Models

Travis D. Cain

What is a Business Model?

“A description of a company‘s intention to create and capture value by linking new technological environments to business strategies.”

Types of Business Models

Lam and Harrison-Walker estimated about 50 revenue-generating e-business models.

There are different approaches to describe the models. The following are a list of these approaches.

Approaches to describe types of Business Models

1. Researchers with marketing orientation use product, price, place, and promotion.

2. Others, in terms of structural characteristics around the value chain of suppliers and buyers, IT systems and architectures, technical platforms, and security and traffic scale.

Dimensional Models

Lam and Harrison-Walker analysed business models employed by Internet companies and reduced them through the use of two-dimensional models.

1. Relational objectives

2. Value-based objectives

Relational Objectives

These are used to classify e-business models based on the Internet‘s connectivity characteristic.

Target Market

Connectivity-related objects

Value-based Objectives

These are related to a value formula such as generation of revenues and others benefits.

Examples include non-financial contributions such as increased marketing effectiveness or improvement in consumer attitudes.

Issues in Developing Countries?

Very few firms sell products online and so this model is not widely employed in developing countries.

Many service providers in developing countries have invented viable business models. Some argue that e-commerce can be a key competitive advantage if it is used effectively in these ”imperfect” markets.�

Thamel.com’s Competitive Business Model: A Case Study

Thamel.com was established in 1999 as a web portal.

Its physical office is located in Thamel, a street in Kathmandu

Thamel.com originally targeted tourists. Then the company shifted its focus on Nepalese expatriates. Acted as a gift provider to expatriates and their families.

In 2001, 900,000 Nepalese lived outside the country. Higher Internet adoption rates, Higher disposable incomes Higher rate of credit cards ownership. This market is e-commerce ready with a greater

value-creation opportunity. The company also targeted foreign Expatriates living

in Nepalese. In 2004, 80% Thamel.com customers were Nepalese

expatriates and 20% were foreigners

Thamel.com’s competitive business model: A Case Study

E-commerce Barriers In Nepal

Economic factors

1994, Internet introduced in Nepal 1999, 0.15 % users of total population 2004, 0.9% users of total population Developing countries e-commerce

market lacks economies of scale. ICT access charges expensive

Monthly Internet access (20hrs/wk) was more than per capita annual income

Still was a cash-based society over credit cards

E-commerce Barriers In Nepal

Socio-Political factors

Classifying Asian countries by level of adoption of digital and electronic signatures has put Nepal at level 0.

As of mid-2004, Nepal hadn’t enacted DES laws.

E-commerce Barriers In Nepal

Cognitive factors

Knowledge, skill and confidence related to e-commerce usage are even stronger

2% estimate of population are English literate in Nepal ½ of adult population is illiterate Highly undeveloped and unreliable postal systems Problems of postal system in Nepal include inefficient

security, unreliability and theft.

Thamel.com’s Business Models

Janelle Boucher

Thamel.com’s Business Models

Combination of the following:

An internet portal

A bundle of services

A manufacturer’s agent

A virtual mall

Thamel.com as an Internet Portal

Two most popular models for a portal:

Free model Offers some free goods and services to create high traffic Advertising opportunity

Content sponsorship model Uses content, links and services to attract visitors to

generate advertising revenue

Thamel.com used the content sponsorship model.

Thamel.com as a Bundle of Services

Provides multiple services as a package deal for customer

Facilitates online ordering and payment of goods

Delivers gifts to the customer

Confirms delivery by taking a digital photo of the gift being delivered to the customer

Thamel.com as a Manufacturers’ Agent

According to Lam and Harrison-Walker, a manufacturers’ agent represents “more than one seller, and sometimes an entire industry, to sell specific types of products”

In 2004, Thamel.com featured over 7,000 products representing diverse industries such as chocolates, ceremonial goats, birthday cakes, silk saris and cheese

Facilitates vendors such as the goat herders who do not have their own websites by providing information on their products on the Thamel.com website

Revenue comes from user fees, advertising, sponsor commissions

Thamel.com as a Virtual Mall

Hosts multiple online merchants on its website

Thamel.com as a Virtual Mall

Thamel.com’s Strategies to Overcome E-commerce Barriers in Nepal

Targeted the population that experienced relatively fewer economic barriers – the expatriates

Outsourced payment/transaction processing functions to the US Thamel.com as an alternative to Nepal’s poor technological and financial structure, and also to avoid the legal barriers

Provided delivery service and delivery confirmation photos Initially Kathmandu had no street addresses making it difficult to find

recipients’ homes Through a partnership with the Municipality of Kathmandu and their

mapping system, they created delivery zones around well-known landmarks Took digital pictures of the delivery of the gift to the recipient which would

be sent to the buyer as delivery confirmation, and a thank you note for using the service

What can small developing countries learn from this Nepal case study?

1. In a developing country, a company’s success depends on its ability to simultaneously deploy and manage multiple e-business models

Thamel.com’s customers would never have bought products listed on the company’s website if it had just acted as a web portal

What can small developing countries learn from this Nepal case study?

2. In relatively small markets of developing countries, companies can add value by bundling together various products and services

What can small developing countries learn from this Nepal case study?

3. To deliver full potential, developing country-focused Internet business models are required to outsource some functions to the industrialized world

Impossible to break all e-commerce barriers

Outsourcing can enhance value delivery

Conclusion and Recommendations

The developing world still has much to learn about e-commerce. These countries must realize that:

I. Not all business models targeting the developing world are equally successful. Developing countries still need to deeply research the factors that differentiate successful/unsuccessful e-commerce business models.

II. Thamel.com’s model “worked” in Nepal, but may not be successful in other scenarios

Conclusion and Recommendations

Countries in the developing world must:

III. Determine the optimum size of the e-commerce market for companies in their country to profitable exploit.

IV. Determine the types of companies that are likely to force their business partners to adopt ICTs (Information and Communications Technology).

V. Determine the optimal level of involvement for government and private organizations in combating various e-commerce barriers.

THANK YOU

QUESTIONS???