Impact of ecommerce on global economy in developing countries

Introduction

E-commerce is the process of managing online financial transactions by individuals

and companies. This includes business-to-business (B2B), business-to-consumer
(B2C) and business-to-government (B2G) transactions. The focus of e-commerce is
on the systems and procedures whereby financial documents and information of all
types are exchanged. This includes online credit card transactions, e-cash, e-billing,
e-cheques, electronic invoices, purchase order and financial statements.

An internationally agreed working definition of e-commerce accepts three

dimensions as part the process. These dimensions relate to the: Networks over
which the relevant activities are carried out; Processes that ought to be included
within the general domain of electronic commerce; and Actors involved in the
transactions.

Networks are specified through broad and narrow definitions.The broad definition
considers goods and services are ordered over electronic transactions, whether
between business, house holds, individuals, Governments, and other public or
private organizations, but the payment and the ultimate delivery of the good or
service may be conducted on- or offline.

The narrow definition considers goods and services are ordered over the internet
whether between business, house holds, individuals, Governments, and other public
or private organizations, but the payment and the ultimate delivery of the good or
service may be conducted on- or offline.
.
E-commerce is often described as being one of three varieties business-to-
business (B2B), business-to-consumer (B2C) or business-to-government (B2G).
Most of statistics has focused on this two. About 80 per cent of the total value of
electronic commerce in the world today are accounted for by B2B e-commerce.
B2C e-commerce has the potential to substantially affect the way in which people
live and interact with each other and is therefore a key aspect for statistical
measurement.

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http://www.statistics.gov.uk/IAOSlondon2002/contributed_papers/downloads/
CP_Petrova.doc

E-Commerce Eludes Developing Countries

By Ron Berry
The business world and society have changed very much due to the information
technology and impact of internet is high. Internet is becoming essential for every
business activity .Moreover, at the beginning; No one thought that the internet will
be a source for conducting business. It is estimated that 288 million people are
using online for conducting business (www.glreach.com).

The internet is quickly becoming the major choice for electronic commerce
transactions. The internet will definitely changes the global economy as all
organizations and companies are looking towards the e-commerce. The increase in
e-commerce via the Internet is definitely moving society a little closer to the
"global village" concept that has been touted as a future way of life. More
importantly, it is changing the face of business.

The internet also plays very important role in the field of small businesses and
entrepreneurs competing global economy. Because of the internet the small and
virtual organizations are gaining more profits because there is no need for
maintaining large staffs, huge capitals, multi-lingual, transitional infrastructures.
People began using internet for business purposes by publishing static web pages
fro advertising and dynamic pages soon emerged and allowed organizations to
support online sales, customer service and other value added services.

According to some statistics, it is estimated that over $10 billion in business to

consumer sales have occurred within the last year via the Internet. Sales in the area
of Internet commerce expected to see the largest growth, business to business
commerce, are expected to reach $153 billion this year.

Many challenges and obstacles must be overcome before developing countries can
benefit from the Internet and Internet commerce. The necessary technological
infrastructure is either inadequate or non existent. Developing this infra structure is
very difficult for the developing countries for this they require government support.
Until governments become Internet and business friendly and set Internet access

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and use as a priority, developing countries may never reap the benefits their world
counterparts share.

For information on the Journal of Internet Commerce,

Visit: www.hawortpressinc.com

http://www1.worldbank.org/devoutreach/spring00/article.asp?id=79
E-commerce and the Reduction of Transaction
Costs

Now days it is belief that by implementing B2B e-commerce they can reduce the
transaction costs associated with trade across organizational and geographical
boundaries. By utilizing ICTs facilities to maximum they can reduce the transaction
costs to maximum. This reduction will encourage the firms to extend the number of
transactions they conduct across both organizational and geographical boundaries.
It also is expected to provide opportunities for producer firms in developing
countries to enhance their international profile and to develop direct one-to-one
trading relationships with international buyers and sellers.

http://www.gapresearch.orgproductionDraftAoIR3.pdf

B2B E-commerce: Issues for Developing Countries

E-commerce works through many-to-many e-marketplaces. It involves large

number of buyers and sellers. In this many buyers and sellers can come together in
one trading community and gets idea of whether to bur y or sell. Many-to-many e-
markets will be supported by complementary business functions. If the buyers and
sellers decided to do business through online then they require producing complete
information for making the transaction and systems must be in place to arrange
binding contracts and payment.

B2B e-commerce offers greater returns to firms in developing countries than

Other trading channels. It offers two advantages for developing country firms.
First, e-commerce related transaction costs are less sensitive to distance than
Traditional marketing channels, so access to global markets is made easier. Second,
by simplifying and making market channels more efficient, B2B e-commerce
should enable developing country firms to retain a larger share of the final
consumer price of products. It particularly helps smaller firms to enter global
markets. Reduction in the costs of accessing global markets is very important for

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the small firms because they cant afford more money for the global market.
Electronic trading has created opportunities for developing country producer firms
to enter new markets and to strengthen their position international trade. It opens
new commercial opportunities for small firms to participate in the international
markets .It improves the source production with less input and improves the
economy as it eliminate intermediaries or middlemen and its own supply and
export distribution reduces the business transaction costs. Government should give
its support for the development of ecommerce in developing countries and it should
give priority to ensuring that the conditions for participating of their businesses are
met. As B2B transactions are complex and information-intensive government
should take care of the telecommunication services and ensure that they are modern
and efficient. Government should reduce tariffs to support trade in ICT hardware
and software and it also maintain taxation, security and privacy protection at
compatible level so that the small firms can improve their trading much more
flexibly in to the global market.

http://www.gapresearch.org/production/ecommerce.html

Trust services in e-marketplaces

A crucial issue for the use of e-marketplaces is how to establish trust. Firms
purchasing products on-line need assurances about the companies they are dealing
with and about the products they are buying. Firms selling products on-line need to
be confident that payment will be made. Trust is very important in the development
of e-market other wise every one will loose trust and it will become more complex
rather than utilizing its benefits. It was the responsibility of user to know complete
details of the product and the company before making the transaction and in the
similar it is responsibility of company whether they are selling to right person or
not. If the transaction is taking between strangers, for the relationship with each
other there should be registration requirements and screening procedures and get
complete details of other so that strangers can trust each other.

Using e-market places to find buyers for fruits and vegetables:

In Nairobi a small trading company selling fruits and vegetables through open
E-marketplace and gaining more profits .Now the company had registered with
many open e-marketplaces which sites did not charge a registration fee. The
companys overall turn over was not less than US$20,000 per annum.Before they
registered through e-marketplaces their income is less and much of the money was

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paid to the intermediaries but after registering with e-marketplaces they are gaining
more profits and they are able to develop their business through internet and
supplying the fruits and vegetables according to the customer choice, because of
this direct contact with the customer they are getting more interaction with the
customer and also saving costs by not paying to the intermediaries.
http://www.gapresearch.org/production/Report.pdf
On-line showroom

A firm had registered with an on-line trading service providing an on-line

showroom. In the 12 months following registration, the firm received about 20
product inquiries via e-mail. Negotiations were entered into with three potential
clients. After personally visiting all three companies, a successful transaction was
negotiated with one of them. This buyer became a regular client and accounted for
six per cent of the exporters sales. The respondent was satisfied with the business
that had been generated, but he was not prepared to renew the subscription for the
on-line showroom service because of the additional costs incurred in assessing the
Credibility of potential buyers.

Use of the Web for information purposes

One company in the Nairobi had directly benefited from using the web as a
resource for obtaining information. The company is a small flower exporting firm
exports flower through a flower exporter through different places. The proprietor of
this company had frequently visited the flora Holland website to check average
prices for specific periods of sale and for the types of flowers that his company
exported to the auction. By checking regularly he compared the prices listed at the
auction site with those received from the broker for his product. He described
How Web-based information had enabled him to challenge his broker about
differences between what the broker was paying him and the prices paid for his
products at the auction. The discussions with his broker often proceeded along the
lines of, the average this day was 10 Ksh, so why are they giving only 3 Ksh!
Now he is planning to work with a new export because he noted prices at auction
and the local broker paying to him had large discrepancies.

Promoting tourism through internet

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Tourism also plays very important role in the development of economy. Before the
advent of internet the tourism organizations gained very less amount as they have
to pay to the intermediaries but after the advent of internet they are gaining more
profits by directly contacting the customers.

In the Caribbean tourism is one of the main source for economy because tourism
accounts for about 25percent of its GDP.In 2004, it attracted over 42million
tourists, of whom 20 millions where cruise passengers, and generated $21 billion.
As they are known to the internet they launched a website in late
2000(www.doitcaribbean.com) with complete details of their destination places.
They developed website in a complete user friendly manner. It contains six major
languages and listed all the availabilities in an attractive manner. After launching
the website their business was increased rapidly, now they are receiving 200
million visitors yearly.
http://www.unctad.org/en/docs/sdteecb20051ch4_en.pdf

Conclusion

E-commerce had a great effect on the development of global economy in

developing countries. Small firms are gaining more profits by using e-commerce
for making transactions with the clients. . By utilizing ICTs facilities to maximum
they can reduce the transaction costs to maximum. This reduction will encourage
the firms to extend the number of transactions they conduct across both
organizational and geographical boundaries. Many developing countries are not
able to utilize the efficiencies and potentialities of internet marketing. By using the
internet in the developing countries only very little business had been takes place
with new customers/suppliers .Many industries in the developing countries are
not able to utilize the B2B e-commerce effectively. Trust is very important in the
development of e-market other wise every one will loose trust and it will become
more complex rather than utilizing its benefits.Banks and financial services
companies in the developing countries will need to adopt online payment systems
and practices that will meet their clients new needs arising from a shift to e-
commerce. In the development of the e-commerce the government should also play
a key role by becoming Internet and business friendly and set Internet access and
use as a priority.

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 Appendix

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 Business toBusiness E-Commerce, The Fresh Produce Exporter, July-September

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My article was mainly based on this pdf.

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