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LATIN AMERICA.COM By Raul Gouvea FIT Department Anderson Schools of Management University of New Mexico Albuquerque, New Mexico (87131) I - INTRODUCTION The Internet is drastically transforming the nature, geographic boundaries, timing, and scope of global competition.
Anderson Schools of Management
University of New Mexico
Albuquerque, New Mexico (87131)
The demographics of the Web are changing fast: English is still the lingua franca of the Internet, where 96% of all E-commerce transactions are conducted in English.
The New Economy, or the digital economy, is creating an explosion of economic growth and productivity never seen before.
The Internet has also boosted trade across boundaries by making more and better information available. This has leveled the playing field for companies of different sizes. Small and medium size companies don’t face the same capital constraints they did in order to reach a global market.
On the investment side, the Internet facilitates the integration of companies’ activities at the global level, fostering the integration of the supply chain, cutting costs, and fostering innovations.
Table 1. Outposts on the Net-Projected Number of Regular Internet Users by Year-End 2000.
Economic Region Millions of People Per 1,000 People
North America 148.7 479.1
Western Europe 86.6 217.5
Asia-Pacific 57.6 16.6
South/Central America 10.8 21.1
Eastern Europe 9.5 32.7
Middle East/Africa 7.5 7.2
Source: Mandel, 1999, p.77.
(millions of users)
Region 1998 2003
North America 90.4 171.0
Western Europe 38.9 112.0
Asia Pacific 31.7 138.8
Middle East 0.8 8.5
Latin America 5.4 37.6
Eastern Europe 3.1 24.1
Africa 0.9 6.1
Source: Weyer, 2000, p.69.
Country Cell Phones Internet Access Online Sales (US$ billions)
France 28% 10% 9.20
Germany 21% 15% 16.3
Italy 50% 8% 5.40
Sweden 55% 48% 86.00
Britain 32% 23% 26.00
USA 25% 43% 1 12.00
Source: Baker and Echikson, 2000; p.eb44.
Across Europe however, one finds different levels of Internet penetration.
1) The increasing unification of European markets, making Europe more European, may have a negative impact on the goal of building a global village.
2) In many countries phone calls are charged by the minute, discouraging the use of the Internet.
3) Despite the creation of the Euro, companies are still dealing with fragmented markets, several languages, and a different set of laws.
4) The extensive use of English in the past has discouraged Europeans from using the Web.
5) In order for Europe to act as an electronic shopping center, import regulations have to be standardized.
6) Europeans are more willing to impose governmental control over the Web than Americans. Issues such as consumer protection and privacy are becoming the focus of many lawmakers in Europe.
According to some estimates, by 2003 Asian E-commerce could amount to US$ 32 billion.
Country USA Singapore Hong Kong Taiwan
GDP per capita 30.5 28.4 23.2 14.4
(spending per capita) 1.2 0.6 0.3 0.1
(spending/% of GDP) 4.2% 2.2% 1.3% 1.0%
Internet Users as a
% of PCs 55% 55% 42% 42%
Internet Users as a
% of population 23% 17% 11% 5%
Source: International Data Corporation
Like the Europeans, Asians are looking for alternative Web designs. In Japan the advent of the smart-phones, or Internet-ready cellular phones, is dramatically changing the status of the Internet. Japan is emerging as the technological leader in wireless Net communications.
Country Citizens PC Penetration
Japan 20.0 million 30.0% of households
South Korea 7.8 million 23.0% of households
Taiwan 4.2 million 35.0% of households
India 2.1 million 2.5% of households
China 10.0 million 1.7% of households
Source: Bremmer and Ihlwan, (2000); p.91.
1) Credit cards are not widely used in Asia.
2) The vastness of Asia and the heterogeneous nature of its infrastructure imposes limitations on the distribution side.
3) The lack of vast and liquid capital markets hampers the emergence of venture capitalists.
4) Asia is not a homogeneous business environment, regulation intensity varies from country to country.
5) Foreign direct investment restrictions in some countries, like China, will hinder the Web’s progress in Asia.
6) A lack of research-leader universities.
7) The lack of a risk-loving corporate culture makes the Internet less attractive to traditional Asian industries.
8) The anarchic nature of the Internet affects the foundations of many authoritarian regimes in Asia.
Latin American countries such as Brazil, Mexico, and Argentina are the most aggressive countries in the Latin American E-race. Brazil accounts for 85% of Latin American E-commerce, followed by Mexico with 10%, and all the other markets accounting for 5%.
Source: Latin Trade (1999), p.54.
Table 8. Internet Subscribers, Users (millions), and Number of Sites (units), 1998 - 1999
Country Users(1999) Subscribers (1998) No. of Sites
Brazil 3.42 1.20 215
Mexico 0.79 0.33 113
Argentina 0.50 0.22 30
Source: Brazil em Exame 1999, p 62.
Multinationals like Spain’s Telefonica and U.S.’s Microsoft are racing to connect Latin American customers.
Latin American and E-multinational companies are also rushing to consolidate their position in the industry.
1) Low credit card ownership hampers E-commerce. In addition, Latin Americans fear of credit card fraud keeps possible E-customers from shopping on the Web.
2) Shipping costs are high and crossing customs can be cumbersome and lengthy.
3) Phone calls are charged by the minute.
4) The integration of shipping services, inventory management, and customer service are still in its infancy.
5) Low computer penetration limits the impact of the Internet.
Year Number Growth Rate
1995 158,959 192%
1996 463,508 157%
1997 1,191,84 130%
1998 2,737.24 40%
1999 3,825,386 31%
2000 4,993,992 31%
2001 6,520,549 20%
2002 7,793,202 16%
2003 9,031,771 16%
Source: Vargas et al, 2000.
By 2003, Brazilian E-commerce should total US$ 2.7 billion, compared to US$ 1.47 trillion for the U.S.
Table 10. Electronic Commerce in the US and Brazil (Billions of Dollars)
1998 1999 2003 1998 1999 2003
Business 43 109 1,331 0.06 0.13 2
Business 8 20 144 0.03 0.07 0.7
Total 51 129 1,475 0.09 0.2 2.7
Source: Paduan, 1999, p 75.
A consolidation process coupled with increasing foreign direct investment is changing the profile of the Brazilian industry.
The arrival of foreign E-commerce companies is being reciprocated by the internationalization of Brazilian E-commerce companies.
1) 86% of Brazilians living in Brazil’s largest metropolis’ are still alienated from the Web as a result of lack of access to computers, phones, low income levels, low educational levels, or all of these factors together (Porto, 2000).
2) The low access to personal computers and phone line ratios are creating a bottleneck for further growth of the Internet industry.
3)In the first trimester of 2000, Brazil had 8.2 million computers, or one computer per 19 people. In the USA, the ratio is one computer per two people.
4) Brazil only has 28 million phone lines, or six times fewer phones per capita than a country like Canada.
5)The future of the Brazilian Internet is closely related to its penetration in Brazilian schools.
6) Only 10% of computers in public schools are connected to the Web.
7) Of the 188,700 schools, 116,000 do not have access to a phone line.
The E-commerce environment is going through a period of intense competition.