ELECTRONIC COMMERCE: OPPORTUNITIES AND CHALLENGES OF GENERAL IMPORTERS


ELECTRONIC COMMERCE: OPPORTUNITIES AND CHALLENGES OF GENERAL IMPORTERS   

ABSTRACT

Advances in information technology have created great opportunities as well as threats to organizations in various business sectors. Though adoption of e- commerce is considered to provide substantial benefits to business; many general importers in Ethiopia still have not realized to adopt electronic commerce due to different factors. Identifying the main opportunities and challenges and suggests suitable strategies to promote e-commerce are the basic purpose of this research. To attain the objective, data for the study were obtained from sample of 203 general importers from total of 748 which are found in Addis Ababa and had collect data basically from primary sources. To do so questionnaire was designed and distributed to the top level managers of the selected companies. This study used descriptive survey research designs. The data collected was analyzed with the help of Microsoft Excel software packages. The empirical findings show that, although the country registered two digit economic growths, with stable political climate, the banking, ICT and E- commerce practice in Ethiopia are underdeveloped. Dominant barriers that highly hinder e-commerce adoption are; lack of skilled workers, Fear of risk security and privacy, lack of e-commerce infrastructure. The government of Ethiopia should formulate strategies that enhance the e-commerce infrastructure and enabling policy environment by involving full participation of all stakeholders, develop awareness raising campaigns. Finally, service provider and customer should sign service level agreements.

TABLE OF CONTENT

Contents pages

CERTIFICATION i

DECLARATION iv

TABLE OF CONTENT vii

LIST OF TABLES x

LIST OF FIGURES x

LIST OF ACRONYMS xi

CHAPTER ONE 1

INTRODUCTION 1

Background of the study1

Statement of the problem6

Objectives of the study9

Significance of the study9

Delimitation of the study10

Limitation of the study11

Organization of the paper11

Operational definition12

CHAPTER TWO 13

LITERATURE REVIEW 13

Introduction13

What is electronic commerce?13

Definition of e-commerce14

2.2.2 Conceptual Framework of electronic commerce 16

Classification of e-commerce17

2.4. Comparative analysis of e-commerce application in developed and developing Countries 20

Barriers hindering e-commerce adoption in developing countries21

E-Commerce in Africa24

Selected developing countries e-commerce experiences25

E-commerce in Libya25

E-commerce in Egypt26

E-commerce in China28

Ethiopian experience and nature of Ethiopian e-commerce environment29

Introduction29

The Telecom Sector31

ICT Policies33

Quality of telecom services33

ICT challenges34

Human resource capacity35

Language barrier35

Opportunities35

The Ethiopian financial sector and e-banking practice in Ethiopian commercial banks39

Payment Systems in Ethiopia41

CHAPTER THREE 45

RESEARCH DESIGN AND METHODOLOGY 45

Research design45

Data measurement46

Target population and sampling technique46

Method of data collection, Data gathering instrument and data sources49

Data analysis and presentation51

CHAPTER FOUR 53

PRESENTATION, INTERPRETATION AND ANALYSIS OF DATA 53

4.1. E-commerce in Ethiopia 53

4.2 General Characteristics and profiles of the Respondents 59

Company information61

Introduction to E-commerce practice and application by the companies

...................................................................................................................................................62

Payment modalities, service hour, e-commerce trust and advantages69

Perceived Benefit of e-commerce technologies72

Barriers of using e-commerce technologies74

Opportunities analysis81

CHAPTER FIVE 83

CONCLUSIONS AND RECOMMENDATIONS 83

Conclusion83

Recommendation88

References

Appendices A: Questionnaire

Appendices B: telecommunication statistics about Ethiopia

LIST OF TABLES

Table 2.1: e-commerce classification 18

Table 2.2: Summary of major telecom and ICT infrastructure indicators 31

Table 2.3: summary of mode of payment 43

Table 4.1: respondents’ sex and age 59

Table 4.2: company web page, IT department 62

Table 4.3: e-commerce usage and degree of utilization 64

Table 4.4 Company e-commerce experience 67

Table 4.5 Company IS strategies to use e-commerce 68

Table 4.6: Means of payment 69

Table 4.7: service hour per day 70

Table 4.8: Trust and commerce advantages 70

Table 4.9:   Internal Barriers to using or extending use of e-commerce technologies 75

Table 4.10: External Barriers to using or extending use of e-commerce technologies 77

Table 4.11: consider shopping online and effort of government 79

Table 4.12: Public monopoly of ETC 80

LIST OF FIGURES

Figure 2.1: conceptual frame work of e-commerce 17

Figure2.2: Barriers hindering e-commerce adoption in developing countries 23

Figure 4.1: Academic background of the respondent 60

Figure 4.2: Years of Experience of in the organization 61

Figure 4.3: e-commerce level of awareness 63

Figure 4.4: E-commerce technologies application 66

Figure 4.5: operational efficiency benefits 72

Figure 4.6 service benefits 73

LIST OF ACRONYMS

ATM Automated Teller Machine

B2B Business-to-Business

B2C Business-to-Customer

B2G Business-to-Government

C2B Consumer-to-business

C2C Consumer-to-consumer

CAD Cash against Documents

CBE Commercial bank of Ethiopia

E-banking Electronic banking

E-business Electronic business

E-commerce Electronic commerce

EDI Electronic Data Interchange

EFT Electronic Fund Transfer

E-mail Electronic mail

E- Payments Electronic Payments

ETA Ethiopian Telecommunication Authority

ETB Ethiopian Birr

ETC Ethiopian Telecommunication Corporation

EU European Union

G2B Government-to-Business

GDP Gross Domestic Product

HTML Hyper Text markup language

HTTP Hypertext Transfer Protocol

ICT4D ICT for Development

ICT Information and Communications Technology

IDI Information Development Index

IP Internet Protocol

ISDN Internet subscriber digital network

ISP International Service Provider

IT Information Technology

ITU International Telecommunications Union

LC Letter of Credit

LDC Least developing countries

M-commerce mobile commerce

MOTI Ministry of Trade and Industry

NBE National Bank of Ethiopia

NRI Network readiness index

NSF National since foundation

OECD Organization for Economic Co-operation and Development

PASDEP Plan for Accelerated and Sustainable Development To End Poverty

SSL Secure Socket Layer

SWIFT Society for Worldwide Interbank Financial Telecommunication

TCP/IP Text Control Protocol/Internet Protocol

Telecom Telecommunications

UNCITRAL United Nations Commission on International Trade Law

UNCTAD United Nations Conference on Trade and Development

UK United Kingdom

UN United nation

US United States of America

USD United state dollar

WAN Wide Area Network

WB World Bank

WTO World Trade Organization

WWW World Wide We

CHAPTER ONE INTRODUCTION

Background of the study

Commerce (trading of products) has been a major impetus for human survival since the beginning of recorded history, which is based on specialisation of skills. Historically, there has been commerce for centuries but, developments in information and communication technologies have carried commerce to a new dimension in 1990s, which enable the transformation of traditional commerce to e-commerce (Turban et. al., 2000). This most strategic event specifically goes as far back as in 1991 when NSF lifted the restriction of commercial use of the Internet and that marked the beginning of the age of electronic commerce. Research so far show that the technologies designed to improve commercial transactions using the Internet have evolved as quickly. Since 1995, the economic consequences of the Internet and related technologies have increased dramatically (Guilherme et al., 2007). As of 1991, the Internet had less than 3 million users around the world, and its application to e-commerce was non- existent. By 1999, an estimated 250 million users accessed the Internet and approximately one quarter of them made purchases online from e-commerce sites, worth approximately $ 110 billion (Copell, 2000). It is also evident that as of September 2006, over 1 billion people (or 16.7% of the world population) had access to the Internet. Meanwhile, World usage has increased by over 200% between 2000 and 2006. Yet, in developing countries, usage rates are significantly lower than in developed countries (Guilherme et al., 2007).

The rapid change in technology, products, processes, severe competition, and trends towards globalization, force organizations to do business in new ways in order to survive and be successful. One of these new trends is e-commerce, a form of entrepreneurial activity, which transforms the manner in which firms operate using the Internet. The new technology has been used mostly as a tool to deliver value to the customer as a way to increase the core competencies (Starr, 2003).

The rapid and unpredictable advances in information and communication technologies (ICT) and the dissemination of networked data processing have led to widespread access to information resources and globalization of communications, businesses, and services. Among leading digital technologies, internet has brought the huge impact and greatly changing the way how business is conducted, access information, acquire products and services. These day’s firms should rethink, redesign, and rework how businesses and public services operate and, typically, have been aimed at the improvement of productivity, effectiveness, and efficiency, both internally and in the external relationships with clients, customers, suppliers, and business partners to accommodate the demand of this changing environment.

Internet itself has grown at a remarkable pace since the emergence of the World Wide Web in the early 1990s. Murthy (2004) pointed out that due to a pervasive and steadily growth of information and communication technology, the world industry is entering into new phenomena of unprecedented form of competition supported by modern information and communication infrastructure. The rapid

growth and sophistication of information and communication technology is changing societies' ways of life in various parts of the world and in various economic sectors. This opened new frontiers in communication, commerce, medicine, politics, and almost every other aspect of private and public life. One of the leading areas where this is highly manifested is the way how the business is conducted. In the import sector, this trend is expressed by the growing use of e- commerce, an area distinguished by the combined utilization of electronic communication and information technology to transmit, store, and retrieve digital data.

The essence of e-commerce is reliable transaction delivery in a fast changing environment involving people, processes, and a service or business infrastructure. E-commerce in its simplest sense is trading electronically. Different scholars forward different ideas about growth of electronic commerce and its role on different aspect of business. Zwass (2003) pointed out that, over the past decade, electronic commerce on the technological foundation of the Web-Internet compound has entered extensive areas of organizational and social activity. Advances in information and communication technologies and the emergence of the internet have revolutionized business activities enabling new ways of conducting business referred to as electronic commerce (Zwass , 2003; Turban, 2000).

Electronic commerce looms large on the horizons of tomorrow, and it promises to transform trade and industry in ways not yet imagined or comprehended. For several countries it continues to be perceived as a double-faced blessing one

promising and the other threatening (Singh, 1999). Organizations are embracing e-commerce as a means of access or expanding to global markets, improving customer service, reducing costs, and enhancing productivity and efficiency (Wenninger, 1999). However, the range of benefits offered by e-commerce to transactional businesses has also given rise to key issues, especially on privacy of users and security of information shared online. These issues emerged because of the wide accessibility, openness and interconnectivity as innate features of the Internet (Smith et al., 1996).

Despite the global reach of e-commerce, not all countries have taken advantage of or benefited from e-commerce. With Internet, different characteristics of infrastructural, socioeconomic and socio-cultural have created a significant level of variation in the adoption and growth of ecommerce among countries. There is a big gap in Internet and ecommerce adoption between the developed and developing countries (Licker & Motts, 2000); thus creating a digital divides. According to Mbarika et al. (2005) digital divide is abundantly clear when comparing Sub-Saharan Africa with countries of the west like US or UK. In these countries, consumers, businesses and government have recognized the potential and benefits of adopting computer-enabled networks (Kole, 2000; Hoffman, 2000). The main obstacles that prevent developing countries from leveraging the internet and e-commerce solutions are lack of adequate , secure, efficient communication and banking infrastructure, technical knowhow, and information processing about the economy and environment (Khalfan & Akbar, 2006;Wondwossen &Tsegai, 2005). Guilherme et al. (2007) pointed out that developing countries have fallen behind in the early stages of technology

acquisition because of inefficient use of related knowledge, lack of investment within firms to acquire technology, lack of promotion policies that develop these technological areas and high costs of importing technology. Moreover, recent technological developments such as the introduction of digital signatures may widen the gap in the use of e-commerce technologies. Developing countries have poor telecommunication, poor transport systems, poor electronic payment systems, no security, and no skilled workforce (Odedra , 2003).

It is known that the success and growth of e-commerce, depends on efficient telecommunication facility and ICT infrastructure, secure electronic payment system, efficient regulatory framework, and widespread awareness among the public. This success factors do not characterize current Ethiopian information economy. The report forwarded by the international telecommunications union (ITU World Telecommunication Indicators, 1995) show that developing countries like Ethiopia were represented to be among the least developed in terms of the state of their telecommunication networks and limited range of services offered. Low level of internet penetration and poorly developed telecommunication infrastructure impede smooth development and improvements of e-commerce in Ethiopia. This statement supported by Lishan, 2009/10, who pointed out that Ethiopia’s ICT sector remains far behind the rest of the world. It sits at the bottom of the Information Development Index (IDI), scoring 0.97 and placing 154th out of 159 countries in 2010 ( Lishan, 2009/10) .

This study, therefore, is initiated in view of the fact that undertaking a research in the area can provide a useful insight regarding the opportunities, challenges e- commerce in Ethiopia, particularly for general importers.

Statement of the problem

The growth, integration, convergence and sophistication of information communication technology are changing our world. The world continues to witness a revolution in the way business is conducted, and the uncharted area of e-commerce presents many opportunities and challenges to a newly emerging world economy. E-commerce is an inevitable reality as the prime promoter of commerce & trade, and become one of the most essential components for current international trade; it greatly changed the ordinary manner of international trade (UNCTAD, 2003).

Apparently, the importance of e-commerce technologies in the development of international trade is immense and has a tendency to grow: under modern globalization circumstances, the application of information and telecommunication technologies has become a crucial factor of development in both international trade and economy in general (Aurelija, 2011). E-commerce benefits internationalization in two ways. First, as noted in PricewaterhouseCoopers (1999) there is a direct substitution of e-business technology and processes for physical locations, manual processes, or other expediting function. Second, e-commerce reduces coordination costs. Use of the Internet lowers communication costs, reduces the length of time-to-market for goods and services, makes possible the delivery of information in a digital

format, reduces transport and distribution costs and allows for more fully integrated and broader business alliances (International trade centre, 2009).

Regardless of the above benefit it offers not all countries are equally beneficial from this new technology. Research shows that the associated benefits of information technology have been under-realized in most developing countries. In most developing countries, business face severe limitations in terms of connectivity, ability to pay, deliveries, willingness to make purchases online, infrastructure accessibility (Straub, 2003). However, since e-Commerce is important tool for development, Poor countries can exploit rapidly expanding opportunities for profitable commercial ventures on the Internet.

It is known that, although the cost of using information and communication technologies for economic development is high, the cost of not doing so is likely to be much higher. Thus all sectors of a given economy should aware themselves to application of ICT. Import sector as part of trade subsector of Ethiopian economy should be competitive not only at home but also internationally. To this end this sector should aware about ICT and e-commerce to efficiently and effectively carry out the business operation. E-commerce managers should understand that e-commerce offers sustained growth and profitability. Although research( Wondwossen and Tsegai, 2005; Lishan, 2009/10) indicates e- commerce offers viable and practical solutions for organizations to meet challenges of predominantly changing environment, which enable businesses to cut costs, increase efficiency and reduce constraints of time and distance, enhancing their productivity, business in Ethiopia delay in adopting ICT and e-

commerce technologies. ICT is growing, but is still in its infancy. Very few private sector companies have established business-to-business websites and internationally accepted credit cards is none existent. It is evident that no significant attention has been made on electronic commerce to conduct and simplify commerce activities with the application of information communication technology (Wondwossen and Tsegai, 2005; Lishan, 2009/10).

The researcher believes that the aforementioned country wide problems are also exist on import sector, specifically on general imports. General importers in Ethiopia are not fully utilizing their capacities to introduce this new paradigm, to be competitive internationally and to exploit the benefit it offers. Additionally, the author argues that this technology is not yet applied in optimal way. At present there is low adoption of e-commerce, As well as the fully-fledged e- commerce has not yet been achieved by Ethiopia B2B commerce. In other words, 7 days a week, 24 hours a day have not yet implemented. These situations call for better understanding by the researcher. Thus the aim is that, by understanding opportunities and problems associated with e-commerce, will contribute to filling the gap identified, and thereby lay the foundation for a coherent body of knowledge, in the field.

In attempting to investigate the opportunities and practical challenge of electronic commerce activity of general importers in Addis Ababa the researcher coined the following leading questions.

1. What is the current situation of Ethiopia’s e-commerce market?

2. What are perceived benefits and risks of e-commerce adoption?

3. What are the main opportunities to adopt and implement e-commerce?

4. What are the main challenges that hinder the development of e-commerce?

Objectives of the study

The main objective of this research is to assess the current Practices, opportunities, and challenges of E-commerce in Addis Ababa city particularly on general imports.

The specific objectives of this research are:

i. Identify the main opportunities available to adopt and implement e- commerce.

ii. Identify the main challenges that hinder the development of e-commerce

iii. Review the existing e-commerce practice of the sector.

iv. To identify importers’ attitudes, awareness and expectations in term of security in an e-commerce environment.

v. To suggest suitable/appropriate action to be taken to promote e- commerce in Ethiopia, particularly general import category.

Significance of the study

The researchers aim is to investigate the current situations as well as the prevailing problems and to come up with possible, attainable and relevant solutions. In general the study will have the following significance.

Identification of opportunities and challenges can impact positively on the performance of companies that wish to adopt and/or have adopted e- commerce applications.

The finding provides a framework for the companies for the design of their future directions and to adjust their goals and objectives as per real opportunities and challenges. Additionally, it enables government organizations and trade associations to develop companies e-commerce assistance programmes that are designed to address the factors identified by this research.

Provide an opportunity for decision-makers and managers of the organizations to consider and evaluate the opportunities and problems observed in the existing practices, in order to take appropriate corrective measures in the area or to scale-up the positive factors (if any) for the promotion of e-commerce practices.

The study serve as additional source for reference and it will also serve as a spring board for other researchers who want to conduct detailed research on the issue. So apart from providing a useful insight, is strongly expected to instigate other researchers to undertake a meaningful investigation by enlarging the scope of the issue.

Delimitation of the study

In order to ensure that the research project is manageable, it is necessary to demarcate the research. Although this research was limited to the general imports category in Addis Ababa city, it does not imply that research on the same topic is not needed in other cities and business sectors. With given the limited time allocated and budget constraints, the study did not cover all importers. Thus the scope of this study is confined to assess the current, opportunities and challenges of e-commerce in Addis Ababa city particularly on general imports. It

does not consider other import category, regional importer and export sector. Business-to-business (B2B) e-commerce is by far the largest category of e- commerce, and accounts for the lion's share of web transactions today (Corritore,et. al., 2004). Thus the study focused on business to business aspect of e-commerce.

Limitation of the study

While undertaking this study, researcher had encountered some limitations to mention some absence of well organized and documented information with regard to e-commerce in Ethiopia. Shortage of reference materials about e- commerce practice in Ethiopia enforced the investigator to depend largely on foreign countries experiences. Moreover, inconsistency of some historical data kept by different institution is another limitation that affects the research.

Organization of the paper

The research is organized in to five chapters. The first chapter deals with the introductory part of the research in which back ground of the research, statement of the problem, objectives of the study, significance, scope and limitation of the study , organization of the paper and Operational definition are incorporated. The second chapter deals with the literature review; general information about e-commerce is given; definition of e-commerce, conceptual framework of electronic commerce, classification of e-commerce, comparative analysis of e-commerce application in developed and developing countries, barriers hindering e-commerce adoption , e-commerce in Africa , selected developing countries e-commerce experiences and finally, Ethiopian experience

and nature of Ethiopian e- commerce environment are examined. Chapter three incorporate research design and methodology, which describes the methodology undertaken in relation to justification of the research design, questionnaire design, sampling process and data collection, administration and the intended analysis strategy. Chapter four discusses survey results presentation, analysis and interpretation. Finally, conclusion and recommendation are presented in the chapter five.

Operational definition

General Imports: is the trading activity that the company import different types of product rather than sticking in to only one types of product.

Importer: means any person who imports goods from abroad via land or sea or air into Ethiopia (federal negarit gazeta, 2010).

E-commerce: refers to the application of ICT to undertake trading activity which include from simple information searching using web, e-mail to electronic payment and full digitization.

Perceived Benefits of E-Commerce: refers to the gains or improvements derived from existing ways of operating business transactions using e-commerce applications.

Perceived Barriers of E-Commerce- refers to perceived obstacles in adopting, using or extending use of e-commerce technologies.

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ELECTRONIC COMMERCE: OPPORTUNITIES AND CHALLENGES OF GENERAL IMPORTERS



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