Barriers to E-Commerce and Competitive Business Models in Developing Countries: A Case Study

1. Barriers to E-Commerce and Competitive Business Models in Developing Countries: A Case Study Written by: NirKshetri Presented by: Marc Gill Travis Cain Janelle Boucher

2. Introduction Marc Gill

3. Barriers to E-Commerce in Developing Countries • Economic Barriers • Sociopolitical Barriers • Cognitive Barriers

4. E-commerce Business Models Travis D. Cain

5. 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.”

6. 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.

7. Approaches to describe types of Business Models • Researchers with marketing orientation use product, price, place, and promotion. • 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.

8. 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

9. Relational Objectives • These are used to classify e-business models based on the Internet‘s connectivity characteristic. • Target Market • Connectivity-related objects

10. 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.

11. 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.

12. Thamel.com’sCompetitive 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.

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

14. 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

15. 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.

16. 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.

17. Thamel.com’s Business Models Janelle Boucher

18. Thamel.com’s Business Models • Combination of the following: • An internet portal • A bundle of services • A manufacturer’s agent • A virtual mall

19. 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.

20. 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

21. 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

22. Thamel.com as a Virtual Mall • Hosts multiple online merchants on its website

23. Thamel.com as a Virtual Mall

24. 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

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

26. What can small developing countries learn from this Nepal case study? • In relatively small markets of developing countries, companies can add value by bundling together various products and services

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

28. Conclusion and Recommendations • The developing world still has much to learn about e-commerce. These countries must realize that: • 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. • Thamel.com’s model “worked” in Nepal, but may not be successful in other scenarios

29. Conclusion and Recommendations • Countries in the developing world must: • Determine the optimum size of the e-commerce market for companies in their country to profitable exploit. • Determine the types of companies that are likely to force their business partners to adopt ICTs (Information and Communications Technology). • Determine the optimal level of involvement for government and private organizations in combating various e-commerce barriers.

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