Economic factors

The economic prosperity and competitive environment in different countries will determine the e-commerce potential of each. Managers developing e-commerce strategies will target the countries that are most developed in the use of the technology. Knowledge of different economic conditions is also part of budgeting for revenue from different countries. For example, Fisher (2000) noted that the Asian market for e-commerce is predicted to triple within three years. However, within this marketplace there are large variations. Relative to income, the cost of a PC is still high in many parts of Asia for people on low incomes. In China there is regulation on foreign ownership of Internet portals and ISPs which could hamper development. User access to certain content is also restricted. Despite this, access in China is doubling every 6 months and at this rate China could have the largest user base within 10 years!

The trend to globalisation can arguably insulate a company to some extent from fluctuations in regional markets, but is of course no protection from a global recession. Managers can also study e-commerce in leading countries to help predict future e-commerce trends in their own country.

In Chapter 2 we saw that there is wide variation in the level of use of the Internet in different continents and countries, particularly for consumer use. According to Roussel (2000), economic, regulatory and cultural issues are among the factors affecting use of the Internet for commercial transactions. The relative importance of these means e-commerce will develop differently in every country. Roussel (2000) rated different countries according to their readiness to use the Internet for business (Figure 3.12). This was based on two factors - propensity for e-commerce and Internet penetration. To calculate the propensity of a country for e-commerce transactions, the business environment was evaluated using the Economic Intelligence Unit (www.eiu.com) rating of countries according to 70 different indicators, such as the strength of the economy, political stability, the regulatory climate, taxation policies and openness to trade and investment. Cultural factors were also considered, including language and the attitude to online purchasing as opposed to browsing. The two graphed factors do not correspond in all countries, for example, Scandinavian users frequently use the Internet to gain information, helped by widespread English usage, but they are less keen to purchase online due to concerns about security. Internet penetration varies widely and is surprisingly low in some countries, for example in France, which was earlier a leader in e-commerce through its Minitel system, and in Japan.

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