developing the e-commerce environment

2004 USC Marshall School of Business ABAC Team

Developing the E-Commerce Environment

Dr. Dennis SchorrDr. Doug JoinesDr. Ravi Kumar

Shanti PriyaMichael LuSteven Holzer

Cory GasawayAaron FuShawn Ellis

Richard ChangYu-Jung ChenAlbert Choi

Marshall MBA Students

Marshall Faculty Advisors

Chandler Sun Yohei Yamamuro

Business Perspective onCurrent State of E-commerceABAC has requested Marshall to evaluate the state ofe-commerce in a select number of APEC economies.

Areas of Focus

• Factors that promote e-commerce development• Barriers to e-commerce development• The role of international investment and trade

ChinaJapan

MexicoUnited States

Developed Nations Developing Nations

Research Methodology

89 interviews withCEOs, managers,

lawyers, academics,consultants, andentrepreneurs

• Technology Start-ups• Intellectual Property• Online Content• Entertainment

• Software• Computer Hardware• Network Backbone• Manufacturing

Fields of Expertise

China: 21

Mexico: 26Japan: 22

USA: 20

Phases of E-CommerceDevelopment

Level ofDevelopment

Government

PrivateSector

Time

Introductory Growth Maturity

Government FindingGovernment plays a critical role in facilitating e-commerce by narrowing the digital divide

and building trust among users, particularly in the introduction and growth phases ofdevelopment.

Culture FindingE-commerce development must be achieved within the context of the country’s cultural

identity to ensure participant willingness to interact online.

Private Sector FindingPrivate sector diffuses technology worldwide and reaches diverse consumers helping to

sustain e-commerce development through growth and maturity phases.

Key Factors for E-Commerce

E-CommerceGrowth and

Development

Engage PrivateSector

Adapt to Culture

Government Involvement

The Role of Government


DevelopmentPrivate Sector

Culture

Government

Narrowing the digital divide• Government funded initiatives• Effective regulation• Cultivating human capital

Building trust among users• Online government services• Comprehensive legal framework

Government plays a critical role in facilitating e-commerce by narrowingthe digital divide and building trust among users, particularly in the

introduction and growth phases of development.

Government Finding

Government funded initiatives increase Internetuse by delivering infrastructure to the masses.

e-MexicoGoal: Bring the Internet to 95%

of the population by2006

Status: Number of Internetusers has doubledsince 2001

Success Factors:

e-JapanGoal: “Become the world’s

most advanced ITnation”

Status: Highest broadband andwireless data usage;leader in m-commerce

Success Factors:

• Government sponsoredrollout of infrastructure

• Partnered with privateindustry

• Subsidized FTTH for lowinvestment zones

• Targeted efforts to reach alldemographics

<Government : Narrowing the Digital Divide>

Effective regulation can increase competition and driveusage by creating an attractive environment for users.

EffectiveRegulation

Increased Usage

More Competition &Investment

Better Service & Lower Prices

• NTT forced toopen its network

• Ownershiprestrictions lifted.

Japan

• Spurs ADSLcompetition

• Global ISPsenter the market

• Prices fall

• Greater bandwidth

• Advanced servicesavailable


• Prices fall

• Greater bandwidth

• Advanced serviceavailable

Effective regulation can increase competition and driveusage by creating an attractive environment for users.

EffectiveRegulation

Increased Usage

More Competition &Investment

Better Service & Lower Prices

Japan• 79%: 2nd highest

reach

• 30%: Highestpenetration rate

• Next generationnetwork build out

• Increased contentdevelopment


Government must provide a sufficient IT workforce tosupport growth through domestic or foreign sources.

“Our companies have a great need for educated ITresources but there aren’t enough qualified workers.”

Business Development Manager, network equipment provider in Japan

Proper education must beprovided.

• Sufficient quantity of schools andprograms

• Schools cover necessary materialand knowledge

• Cultural acceptance of IT careers

Local Labor Sources Foreign Labor Sources

Foreign labor policies must beflexible.

• Visa programs for IT workers

• Streamlined process to bring in oroutsource foreign labor

• Government assistance in helpinglocal companies find foreignexpertise when needed


By offering government services online, countries areable to build trust of the Internet with their citizens.

Online governmentservices attract users

to the Internet

Successfultransactions help

citizens gaincomfort andexperience

Internetbecomes a

trusted mediumfor personal and

businesstransactions

<Government : Building Trust and Awareness>

A comprehensive legal framework protects consumersand businesses which encourages online transactions.

Consumer

Business

• Internet Privacy Protection• Sales Fraud Protection

• Intellectual Property• Sales Fraud Protection

Privacy major concerns• 70% of users won’t

register demographicinformation online

• 42% enter falseinformation instead

Source: GVU's Tenth WWW User Survey

Piracy major concerns

• Insufficient protection ofintellectual property willdiscourage investment andtechnology transfer.

• Enforcement is an issue

<Government : Building Trust and Awareness>

The Role of the Private Sector



Culture

Government

Diffusing technology worldwide• Multi-National Corporations (MNC)

Reaching diverse consumers• Small-Medium size Businesses (SME)

Private sector diffuses technology worldwide and reaches diverseconsumers helping to sustain e-commerce development through growth

and maturity phases.

Private Sector Finding

“The push for new technology comes from big companies.”former CEO of high-tech start-up in Mexico

Domestic Technology

Adoption and Diffusion

By sharing technology though global expansion,MNCs increase online participation.

Best Practices

InfrastructureDemands

Value ChainEffects

<Private Sector : Diffusing Technology Worldwide>

Wal-Mart: Diffusing Technology Globally

Electronic Data Interchanges – Online Store

Integrated Supply Chain – Satellite System – Suppliers Use Similar IT Platforms

Competitive advantage through efficient use of IT worldwide

<Private Sector : Diffusing Technology Worldwide>

SMEs extend e-commerce by expanding into newmarkets currently untapped by MNCs.

MNC 1

MNC 2

SME

Government

SME

SME SME

SME

SME

SME

SME

SMESME

•SMEs grow throughthe desire to gaincompetitive advantage

•As SMEs grow thenumber of nichemarkets that werepreviously un-serveddecreases

E-commerce market potential

<Private Sector : Reaching Diverse Consumers>

Netflix: Unique On-Line BusinessModels Reach Niche Markets

• Founded in 1998; IPO in 2002

• New business model:

“Unlimited DVD rentalsfor a flat monthly fee.”

• Over 2.2M subscribers: +72%

• Revenues of over $500M: +96%

• All customer interaction takesplace online

• Broadband video-on-demandservice in 2005

<Private Sector : Reaching Diverse Consumers>

The Role of Culture



Culture

Government Incorporating Culture

• Adapting processes

• Adopting technology

E-commerce development must be achieved within the context of acountry’s cultural identity to ensure participant willingness to interact

online.

Culture Finding

A country’s e-commerce activities must be aligned withexisting consumer behaviors and infrastructure.

Adapting processesConsumers have existingpurchase behaviors

• Credit cards vs. cash• Preference for in-

person transactions

Adopting technologiesExisting infrastructureinfluences technologymigration

• Fixed line vs. wireless• Costs of existing

infrastructure

supported by existing culture

<Culture : Incorporating Culture>

Settlement in Japan:Adapting Process to Existing Behaviors

<Culture : Adapting Processes>

Consumer Behavior:• Low credit card usage duringintroductory stages of e-commerce• History of paying bills at conveniencestores such as 7-11

Resulting action:Even as credit card usage increases, e-commerce companies ships individual’sorder to local 7-11 where the fulfillmentof the order takes place

Technology Adoption in China:Taking Advantage of Existing Infrastructure

<Culture : Adopting Technologies>

Existing Infrastructure• Low credit card penetration• Low fixed line penetration

Resulting action:Mobile phone subscriber growthsurpasses PC growth. E-commerceswitches to M-commerce, whereorders and fulfillment are handled viaSMS services

Key Factors For E-commerce


Development

Engage PrivateSector

Adapt to Culture

Active Government Involvement

Roles for Growing E-Commerce

Introductory Growth Maturity

Government Funded Initiatives

Effective Regulation

Cultivate Human Capital

Establish an effective legal framework

Online Government Services

Multi-National Corporations

Small/Medium Enterprises

There is no one right solution for any country. Leaders must take the developmental phases and

cultural environments into account.

Conclusion

To grow e-commerce, business leaders must analyze thephases of development within their countries and industrysectors.

Business leaders must adapt their strategy to involve theright mix of private and public sectors relevant to theircountry's needs.

Culture is the environment that defines the boundaries.

Thank You!

Questions?

developing the e-commerce environment

Documents