Challenges and Opportunities of eBusiness in a Global World


1
Challenges and Opportunities of e-Business in a
Global World

• Professor Robin Mansell
• London School of Economics
• President IAMCR
• WSA Content Forum 1 e-business 16.00-17.30
  Room Expo 3 15 November Tunis

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Promises of B2B e-commerce

• Neutral Internet-based intermediaries that focus
  on specific industry verticals or specific
  business processes host electronic marketplaces
  and use various market-making mechanisms to
  mediate any-to-any transactions among businesses
  .
• (Kaplan and Sawhney 1999)
• They were expected to
• Address transaction cost-related problems of
  coordination and of motivation
• Encourage firms to expand the number of
  transactions they conduct across organisational
  and geographical boundaries.

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From Value Chains to Value Networks
Source Ericsson/UNIDO 2002 Industry at the
Edge
4
UNCTAD UNDP OECD Propositions -

• B2B e-commerce works through many-to-many e-
  marketplaces
• Many-to-many e-marketplaces will be supported by
  complementary business functions
• B2B E-commerce offers great returns to firms in
  developing countries
• B2B e-commerce particularly helps smaller firms
  to enter global markets by reducing transaction
  costs

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Views about e-business and e-commerce strongly
influenced by Transaction Cost Theory

• Information asymmetries are the primary barriers
  to trade.
• B2B e-commerce should reduce trade-related
  transaction costs by providing opportunities to
  develop one-to-one trading relationships between
  buyers and sellers.
• B2B e-commerce should help to redefine value
  chains (domestic and international).
• B2B e-commerce promises a radical change in the
  way firms trade with each other.

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Key questions

• Is B2B e-commerce opening new and cheaper access
  to global markets for developing country producer
  firms
• Are developing country producers being
  marginalised by the spread of B2B e-commerce

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An empirical case

• Two sectors garments and horticulture
• Three countries Bangladesh (garments only)
  Kenya and South Africa
• Study of 184 e-marketplaces
• Interviews with mangers of 47 garments and 27
  horticulture firms plus 37 key-informant
  interviews
• Collaboration with IDS Sussex LSE IDS Nairobi
  Bangladesh IDS School of Development Studies
  Univ. of Natal Dept. of Agricultural Economics
  Univ. of Stellenbosch.

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What applications and services were involved

• Electronic catalogues
• Electronic data interchange
• Auctions
• Bulletin boards
• Email requests for quotes
• Logistics and customs clearance

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Very little new business was being generated by
use of B2B e-commerce

• Few e-marketplaces had technical systems in place
  to complete transactions on-line. 7 of the
  e-marketplaces supported payment on-line.
• Only 10 producer firms had used Bulletin Boards
  to post items for sale only 4 had completed a
  sale.
• Producer firms did access information online but
  business deals were conducted offline firms
  preferred and valued their off-line
  relationships.
• Non-contractable commitments and complex
  information were key and involved personalised
  relationships within supply chains.
• Some closed e-commerce sites were developing but
  this did not appear to mean new business partners
  for producer firms.

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Some comments

• Users garment producers and buyers of
  e-marketplaces are on the margins of the industry
  basically the lunatic fringe. The garments
  sector just isnt set up to deal with e-markets
  
• If the volume is not sufficient the hassles of
  B2B e-marketplaces are not worthwhile
• There is a general lack of interest in B2B
  trading portals we are a long way from it. There
  is also the question of how appropriate
  e-commerce is for the clothing industry. At the
  moment its relevance is debatable
• On the vegetable side this would be very
  difficult unless we move into ready-to-eat meals
  or something like that I cant see going to the
  Web and saying I want to buy ten tonnes of beans
  

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Email trumps the Web

• B2B e-commerce dominated by use of email
• In terms of IT there is a lot of progress
  being made on the processing side of things in
  terms of customers and suppliers receiving
  information. Email is faster easier and quicker
  than fax. Email has substantially replaced the
  telephone for us - the result is miraculous in
  terms of cost.
• Little evidence of direct lead-buyer pressure to
  make greater use of B2B e-commerce applications.
  
• We used to put pressure on our clients to go
  online - This company was prepared to make
  greater use of IT-related solutions but their UK
  customers were not They are dumb. We couldnt
  believe it. We had to push them. Because telecom
  is so easy in Europe theyre used to calling
  someone. For us email was a blessing.

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B2B e-commerce increasingly involves supply chain
integration

• The use of e-mail was extensive.
• Supply chain integration was likely using the
  web.
• E-mail and web use were constrained by costly
  telecom infrastructure but this was not the
  central issue.
• Firms trade core products within value chains
  that encourage repeat transactions occasional
  and easily standardised products may be traded
  using open e-commerce sites.

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Global Market Structure Matter

• Limitations on greater access to global markets
  linked to existing structure of supply chains
  NOT domestic IT-related constraints
• You cannot just locate JC Penny on the Web and
  then hope to do business with them - it doesnt
  work that way Virtually no progress is being
  made at the transaction level. Doing deals is
  another story people want personal contact.

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Priorities for policy were not those receiving
the greatest attention

• Understand sector value chains and business
  relationships.
• Improve transport and related infrastructure.
• Train and build capacity but not by broad-brush
  ICT strategies to address digital divides.
• Better access to international markets for
  producer firms is not first and foremost a
  telecom infrastructure issue.
• Legal infrastructure for B2B e-commerce was not
  the highest priority (electronic signatures
  etc).
• A trust infrastructure was not central because
  most e-commerce providers do not assume risks.

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Roles of intermediaries in B2B e-commerce and
developing countries

• In the US trade associations play an important
  role in championing the use of new technologies.
• Until recently no studies of role played by
  trade associations as intermediaries in promoting
  B2B e-commerce.
• New empirical study of US-based trade
  associations reveals key areas where their
  involvement is crucial (Dr. Olugbenga Adesida
  LSE 2005). They can play a much greater role in
• Reducing barriers risk assessment
• Education Networking
• Information exchange Standards setting
• Enabling market access
• Advocacy of local requirements

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Strategies for the future

• Combine top down e-strategies with bottom up
  sector-based initiatives.
• Provide support for training.
• Understand trade and organisational barriers
  not just technology (infrastructure) barriers.
• Acknowledge that even when e-commerce is used to
  successfully facilitate international trade some
  domestic firms may suffer
• E.g. Chilean furniture manufacturing micro-firms
  (Dorothea Kleine PhD candidate LSE