The Importance Of E Commerce In Globalization

The Importance Of E Commerce In Globalization In the new era of Globalization, new opportunities for countries economic growth are knocking the doors, the new trends of market open the way for new countries to emerge and enhance their economies, for the common Ultimate goal of better well being. Kazakhstan, as the one of participant of global processes of development of e-commerce, aspires to occupy the appropriate place in this market. The analysis of information‘s application and communication technologies was carried out by the programs-the Real Monitoring of the Kazakhstan Internet and à ¢Ã¢â€š ¬Ã¢â‚¬ ¢Readiness for an Information Society by the Actis Systems Asia in Kazakhstan in 2001. The results of the analysis have shown the following representations about the Kazakhstan users of the Internet. The audience of the Internet in Kazakhstan is submitted in the basic experts in the given sphere, businessmen and students. There are nearly two millions of the men of the adult population living in the large cities. Thus one million, men receives information from the Internet independently or through the intermediaries. Also researches on the users of the Internet on a level of the incomes have shown that the Internet is visited by the persons both with high and low level of income. 2.1 Importance of E-commerce In fact, e-commerce come to be one of the catalysts that can promote the way for better trading and better economy, Mahesh and Vishnu (2005) discuss how E-commerce has a tremendous growth potential and also generates economic growth in the country. Furthermore â€Å"E-commerce promises better business for SMEs and sustainable economic development for developing countries.† (Ruth, 2003) In addition, at the beginning of 2000, Benbasat, Ives and Piccoli conducted a survey of the IS World Community on the â€Å"Electronic Commerce Top Research Questions†. The result of that survey indicates e-commerce success as one of the important electronic commerce research issues. And the measurement of E-commerce success is one of the research questions which are identified in that survey. Alemayehu (2001) Therefore, while implementing e-commerce, we have to measure of E-commerce success to understand where we are now and which factors are more crucial for better implementing. 2.2 Defining and measuring E-commerce â€Å"Electronic commerce or e-commerce refers to a wide range of online business activities for products and services.† (Anita, 2000) â€Å"E-commerce is usually associated with buying and selling over the Internet, or conducting any transaction involving the transfer of ownership or rights to use goods or services through computer- mediated work.† (Thomas, 2000) â€Å"E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, to transform, and to redefine relationships for value creation between or among organizations, and between organizations and individuals†. (Lallana et al, 2000) Moreover definition of e-commerce is adopted describing internet commerce as â€Å"the sharing of business information, maintaining business relationships and conducting business transactions by means of Internet- based technology.† (Zwasse, 1996) â€Å"The E-commerce improves communication channels a nd provides a virtual interactive environment where the suppliers and customers can exchange information and products.† (Gunasekaran and Ngai, 2005) Also Evans and Wurster (1997) â€Å"acknowledge that e-commerce allows both customers and suppliers to reduce the transactions costs significantly and enables information to reach more people without sacrificing the richness of the content.† 2.3 E-commerce perspectives â€Å"Electronic commerce and its related activities over the internet can be the engines that improve domestic economic well-being through liberalization of domestic services, more rapid integration into globalization of production, and leap-fogging of available technology. Electronic commerce integrates the domestic and global markets from its very inception.† (Catherine L. Mann, 2000) E-commerce often through to refer to the buying and selling of goods through the internet only. However, E-commerce involves much more than electronically mediated financial transactions between organization and customer Chaffey (2002). Table.1 presents range of perspectives regarding what is considered as E-commerce. Table.1 Range of perspectives regarding what is considered as â€Å"E-commerce† (Source from: Kalakota and Winston, 1996) Figure.1 The main objectives usage of the internet in Republic Kazakhstan Source from: Agency on Statistics of the Republic of Kazakhstan. Available from www.stat.kz As mentioned before by Chaffey (2002) we can see from the Figure.1 presents range of perspectives regarding what is considered as E-commerce. 2.4 Current situation of E-commerce in Kazakhstan and Korea 2.4.1 Korea â€Å"Korea was an independent kingdom under Chinese suzerainty for most of the past millennium. Following its victory in the Russo-Japanese War in 1905, Japan occupied Korea; five years later it formally annexed the entire peninsula. After World War II, a republic was set up in the southern half of the Korean Peninsula while a communist style government was installed in the north. During the Korean War (1950-1953), US and other UN forces intervened to defend South Korea from North Korean attacks supported by the Chinese. An armistice was signed in 1953, splitting the peninsula along a demilitarized zone at about 38th parallel. Thereafter, South Korea achieved rapid economic growth with per capita income rising to roughly 14 times the level of North Korea.† (Internet World Stats, 2010 Available from: http://www.internetworldstats.com/asia/kr.htm). In Table.3 Internet Usage Statistics is 34,820,000 Internet users as of Sept/08, 70% of the population, according to NIDA. Latest population Estimate: 49,232,844 populations for 2008, according to US Census Bureau. Gross National Income: GNI Per capita is (ppp) US$ 17, 690 (‘06) according to World Bank. Country Area: 99,268 sq.km. Population density is 510 persons per sq.km. 2.4.3 Internet Usage Status According to the 2008 survey by Korean Communications Commission and National Internet Development Agency, Koreas Internet users spend an average of 13, 7 hours per week, in which 69.2% more than half are using the Internet for an average of more than 7 hours per week. 98.5% of the places for using the Internet is surveyed as â€Å"home†, followed by 39,4% at office, 18.7% at no certain places (including wireless access), 13.9% at facility for public access (Internet cafes and game clubs) and 17.1% at â€Å"school† (Figure.1, Table.3) 2.4.4 E-commerce in Korea E-commerce represents online business transactions performed electronically by business subjects utilizing information and communication technology and the Internet. It also represents the related activities of business subjects to fulfill such transactions. Major business subjects can be categorized as individuals, corporations, and governments. The idiom e-commerce is comparable to E-business equally used interchangeably in the field. E-commerce may be regarded as a rather limited term, focusing on the transaction itself as a means of interchanging goods or services. In contrast, e-business includes rather broadly the activity of building IT infrastructure and the application of information technology to business. E-commerce standardization is the process of eliciting related standards from e-commerce industry members. The roadmap for e-commerce standardization is defined as providing guidelines or directions for e-commerce standardization. The intention is to present guidelines for developing e-commerce technologies to e-commerce related parties, such as private corporations, and to convey proper instructions for driving e-commerce standardization systematically and efficiently. To accomplish such objectives, the roadmap should contain the following materials: Outline of e-commerce, e-commerce standards, and standardization; Classification of e-commerce technology; Core elements of e-commerce technology for standardization; Status analysis of core technologies; Selection and timetable of to-be-standardized technology items; Information to project from any previous or future roadmaps The Roadmap project is comprised of three phases, from 2001 to 2003: Phase I: Standards status analysis, overall standards implementation timetable, and 2001 timetable for selected time-sensitive priority standards. Phase II: Status analysis of Phase I results, analysis, and classification of e-commerce technology, selection of individual standard items within each category, and overall 2002 standardization timetables, all taken in strategic approach to e-commerce framework standards. Phase III: Combination of the artifacts of Phase I and Phase II and consideration of changes necessary to produce a final comprehensive version of an e-commerce standards roadmap as a national guideline. The e-business environment changes rapidly and continuously. Although the Forum finished the initial three-phase project and produced a final version, it continues to update the contents of the version on a yearly basis (Jakobs, 2005) à Ã‚ ¢Ãƒ Ã‚ °Ãƒ Ã‚ ±Ãƒ Ã‚ »Ãƒ Ã‚ ¸Ãƒâ€˜Ã¢â‚¬  Ãƒâ€˜Ã†â€™ à Ã‚ ¼Ãƒ Ã‚ ¾Ãƒ Ã‚ ¶Ãƒ Ã‚ ½Ãƒ Ã‚ ¾ à Ã‚ ´Ãƒ Ã‚ ¾Ãƒ Ã‚ ±Ãƒ Ã‚ °Ãƒ Ã‚ ²Ãƒ Ã‚ ¸Ãƒâ€˜Ã¢â‚¬Å¡Ãƒâ€˜Ã…’ à Ã‚ ¿Ãƒâ€˜Ã¢â€š ¬Ãƒ Ã‚ ¾ à Ã‚ ²Ãƒ Ã‚ ¾Ãƒ Ã‚ »Ãƒâ€˜Ã… ½Ãƒ Ã‚ ¼ 2.4.4.1 The volume of E-commerce by type The volume of e-Commerce in Korea reached KRW 516.514 trillion in 2007, which was an increase of KRW 102.930 trillion (24.9%) from 2006. The volume and proportion of each transaction type shows that B2B accounts for 89.9% of the entire businesses with KRW 464.456 trillion, while B2G takes 7.1% with KRW 36.801 trillion. B2C takes 2.0% with KRW 10.226 trillion, and C2C takes 1.0% with KRW 5.032 trillion. Compared to 2006, the transaction volumes have all increased: B2B by 26.8%, B2G by 6.9% and B2C by 12.0% and C2C by 31.5%. B2B: The total B2B e-Commerce transaction volume in 2007 reached KRW 464.456 trillion, which increased 26.8% (KRW 98.264 trillion) from KRW 366.191 trillion in 2006. Of the B2B transactions, buyer-led transactions increased by 21.9% to KRW 321.058 trillion and seller-led transactions increased by 38.3% to KRW 119.246 trillion. Broker-led transactions also increased by 45.2% to KRW 24.152 trillion. The proportions of seller-led and broker-led transactions both increased by 2.2%p and 0.7%p to 25.7% and 5.2% respectively. However, buyer-led transaction showed a decrease by 2.8%p to 69.1% from 71.9% of the previous year. B2G: The 2007 B2G e-Commerce volume of government bodies such as central administrative organizations, local governments, and offices of education accounted for KRW 36.801 trillion, which increased 6.9% from KRW 34.435 trillion in the previous year. Of this amount, the construction contract volume has increased 14.4% (KRW 2.166 trillion), and the purchase volume of goods and services has increased 1.0% (KRW 200 billion) from 2006. B2C/C2C: The B2C e-Commerce transaction in 2007 reached KRW 10.226 trillion after increasing 12.0% from 2006, and the C2C transaction increased 31.5% to KRW 5.318 trillion. The transaction volume through online shopping malls in 2007 has increased by 17.1% (KRW 2.306 trillion) from KRW 13.460 trillion in 2006 to KRW 15.766 trillion. Of this amount, B2C transaction takes the largest portion with 64.9% (KRW 10.226 trillion), 68 followed by C2C 31.9% (KRW 5.032 trillion) and B2B 3.2% (KRW 508 billion) (Informatization White Paper, 2008: 33-35) Informatization White Paper (2008). 2.5 Kazakhstan â€Å"The current independent state of Kazakhstan declared in 1991.It has population of 15. 4 million people with a land mass of 2.7 million square kilometers. The GNI per capita was 1860 Euro in 2005, according to the World Bank. Kazakhstan is the constitutional republic with a President and bicameral legislature. The country consists of 14 provinces and 3 municipal districts.† (McNamee, 2006) According to independent research company ICT-Marketing (2010) held its annual study of internet audience in Kazakhstan. The results shown that for 2009 number of internet users were 3.16 million people, or 19.8 % of population. Furthermore 80% of internet users are using ADSL connection. As it stated by ESCAP: â€Å"In 2000, there were first Kazakhstan online shops. The online shops conduct the retail trade in consumer goods. Their quantity is increased with each month. Priority task is the connection of Kazakhstan to the international system of e-trade. Through this system, it is possible to unit interests of the clients (consumers of the goods and services) and trade organizations of the various countries. Now there are following systems of information interaction between the subjects of economic activity: Inter firm business-to-business, intercompany, consumer business-to-consumer, governmental government-to-citizens, tender business-to-government, and auction consumer-to-consumer.† (Economic and Social Commission for Asia and the pacific, 2002) 2.5.1 ICT Infrastructure The low Internet penetration rate is mainly due to the lack of competition and of modern equipment in the telecommunications sector. In order to continue the promising growth in terms of Internet access, the government has run a program for the development of the telecommunications sector in 2005. The program includes a phased liberalization of telecommunications market to achieve a competitive environment by allowing new operators to enter the market. In addition the telecommunications infrastructure is being modernized by using state-of-the-art technologies such as fiber-optic cables. In implementing the program for development of the telecommunications sector, accessibility to the Internet will be improved especially in remote areas. At the same time, increased bandwidth and affordable rates for Internet access will contribute to improve the quality and increasing the use of the Internet in the business sector as well as in private households. 2.6 E-commerce in Kazakhstan 2.6.1 Current situation â€Å"Kazakhstan, as the participant of global processes of development of e-commerce, aspires to occupy the appropriate place in this market. The country has favorable geographical location for transit of flows of materials, power, human and information between Europe and Asia. It is the basis for successful development of e-commerce in Kazakhstan. Another basis for development of e-commerce is desire to improve the informational telecommunication network.† (Economic and social commission for Asia and the Pacific, 2002) â€Å"Today in Kazakhstan, there is a sufficient quantity of the companies applying for a rank à ¢Ã¢â€š ¬Ã¢â‚¬ ¢the supplier of the decisions of e-business. These companies offer various packages of the decisions for development of own business in online.† (Economic and social commission for Asia and the Pacific, 2002) According to independent research company ICT-Marketing (2010) held its annual study of internet audience in Kazakhstan. The results shown that for 2009 number of internet users were 3, 16 million people, or 19, 8 % of population. Furthermore 80% of internet users are using ADSL connection. 2.6.2 Existing issues in Kazakhstan â€Å"The basic reasons of the slowed down rate of development of e-commerce in Kazakhstan are: insufficient quantity of the participants of e-trade, absence of the laws, which adjust the relation to the participants of e-commerce, safety problem for the information, which is transferred through the Internet, insufficient protection of the rights of the consumers in the purchase of the goods and services in the Internet.† (Electronic and Social Commission for Asia and the Pacific, 2002) In addition from 2003 year E-commerce Center has been worked on Kazakhstan market. The reason for creating the company was the government regulation of Republic of Kazakhstan of December 13, 2003 à ¢Ã¢â‚¬Å¾- 1262 About some issues of Public Procurement Agency of Republic of Kazakhstan, as a result Republican State Public Enterprise E-commerce Center of Financial Control and Public Procurement of Ministry of Finance of Republic of Kazakhstan was created. In 2007 E-commerce center joined the National Scientific and Technological Holding Samgau as a subsidiary company and was reorganized into Ltd E-commerce Center. Nowadays, successful business is looking for new ways of development, and to attract customers and partners worldwide. Internet and commerce have become an integral part of each other, creating the concept of e-commerce. The main activities Ltd. E-Commerce Center are: Development, implementation and support of software and information systems in public procurement; Maintenan ce of the information system of electronic public procurement; Training of staff of organizations participants in the process of public procurement, including training in the system of electronic public procurement; Organizing seminars, conferences in the field of public procurement; Participate in the development of legal and regulatory framework for electronic public procurement; Technical and system services for computer and communications equipment in the field of electronic public procurement; Research in the field of electronic commerce. (E-commerce center, 2010) Source: (http://www.ecc.kz/). 2.6.3 How the market of Kazakhstan is ready to move to e-commerce? The market of Kazakhstan is ready to move to electronic commerce. The state, creating electronic trading platforms and commodity exchanges, in particular, stimulates the development of trade, creating a meeting place for the subjects of trading activity without having to special requirements. The main objective the conclusion of an increasing number of sales transactions. In doing so, the legal regulation on trading floors and commodity exchanges, carried out the internal rules and regulations outside the state financial control and oversight. The establishment in the past year, a portal of electronic public procurement www.goszakup.kz, helped make the first step the transition of Kazakhstan to the electronic trading and commerce at the state level. To provide opportunities for all wishing to make commercial transactions in electronic form, must first establish an adequate world class development and effective in our countrys laws. First steps in this direction have already been taken. However, to date there are still problems associated with not resolving the legislation in the field of electronic digital signature, the problem of the introduction of electronic money and the lack of literacy in information technology. Should be established and effective infrastructure for transactions and contracts in electronic form. And from a practical point of view, a crucial component of the infrastructure of e-procurement systems or electronic trading today is a public procurement portal. We must also remember that the development of electronic commerce to further exacerbating the problem of privacy, as well as the use info comm. technology has greatly facilitated the free collection of personal data and their synthesis of a variety of sources available in electronic networks. E-commerce, including public procurement, operating information, which is commonly called  «private nature of information ». And this is a very fine place in a legal provision where the availability of standards to ensure the fundamental rights and freedoms of citizens, is the general atmosphere of mutual trust and respect, and, ultimately, the success or failure of development of the entire e-commerce. It should be noted that the concept of public procurement is not smooth and fast. Nevertheless, a number of recently issued regulations on electronic commerce and government procurement systems show a high degree of interest on the part of the state and society to the problem. Conduct of electronic procurement is considered one of the basic public services and is one indicator of progress towards the electronic state. To date, Kazakhstan set up e-government portal. Continues to develop electronic public procurement portal, are becoming more and more use of electronic shops. In any future purchases from government procurement, and ending with the usual purchase of goods and services to citizens, it will be possible to implement in electronic form (www.profit.kz). In Table.6 shown about ICT infrastructure in Republic of Korea and Kazakhstan, which was reviewed before. ICT Infrastructure Korea Kazakhstan Internet Usage: 37,475,800 Internet Users, 77.3% of the population Internet: 12.2million subscribers, 77% of total Households. Access is spreading quickly Doubled their exports of telecommunication equipment between 2000- 2003 A penetration rate of 65.7% In 2003 the Republic of Korea had 26.7 million Pcs High percentages of Internet access by enterprises (94%) Largest proportions of online purchases, of businesses with Internet (45.5%) Enterprises use an intranet (35.2%) Mobile phones: 36.58 million, 76% of population Innovativeness in products and services in South Korea (18th) Internet Usage: 3,160,000 Internet Users, 19.8% of the population Internet penetration rate 8.5% E-Readiness (3.2- 2007 out of 10) 80% of Internet access using ADSL with connection speed starting from 128 to 1024 Kbps High mobile phone penetration growth between 2003 and 2004 Internet access prizes starts from Megaline Start- 1930 Tenge (13$ USD per month, speed 256-1024 Kbps) Megaline Turbo Plus- 5 845 Tenge (40 $ USD per month, speed 1GB-8GB Kbps) Table.6ICT infrastructure in Republic of Korea and Kazakhstan 2.7 Different model of assessing e-commerce 2.7.1 DeLone and McLean Model DeLone and McLean Model of Information System Success (1992), IS Success (2003), Measuring e-commerce Success (2004) In order to provide a general and comprehensive definition of IS success that covers different perspectives of evaluating information systems, DeLone and McLean reviewed the existing definitions of IS success and their corresponding measures, and classified them into six major categories. Therefore, they created a multidimensional measuring model with interdependencies between the different success categories DeLone and McLean (1992). Motivated by DeLone and McLeans call for further development and validation of their model, many researchers have attempted to extend or re-specify the original model. Ten years after the publication of their first model and based on the evaluation of the many contributions to it, DeLone and McLean (2004) proposed an updated IS Success model. â€Å"The updated model consists of six interrelated dimensions of IS Success: information, system and service quality, (intention to) use, user satisfaction, and net benefits. The arrows demonstrate proposed associations between the success dimensions.† (Jang, 2010) â€Å"The IS Success Model of DeLone and McLean (1992) provided a common framework to evaluate IS effectiveness/success in information system research. Between 1993 and mid 1999, the IS Success Model of DeLone and McLean was cited by 144 refereed journal articles and 15 papers from the International Conference on Information Systems (ICIS).† (Saha, 2008). DeLone and McLean (1992), prompted to develop a more integrated view of the concepts of success. This resulted in the IS Success Model (Figure.2), which is described as a â€Å"taxonomy of IS success measures† with a number of inter-relationships that are drawn together in a model of six major â€Å"dimensions or categories of IS Success† DeLone and McLeans IS Success Model (1992) have 6 domains, system quality, information quality, use, user satisfaction, individual impact, organization impact, so in Table.3 summary of measured items for the DeLone and McLean Model. An interpretation of the model is as follows: â€Å"System Quality and Information Quality singularly and jointly affect both Use and User Satisfaction†. Additionally, the amount of Use can affect the degree of User Satisfaction. Use and User Satisfaction are direct ante decent of Individual Impact, and this Impact on individual performance should eventually have some organization impact.† (DeLone and McLean, 1992) â€Å"The Updated DeLone and McLean information system success model(Figure.3) can be adapted to the measurement challenges of the new e-commerce world.† (Saha, 2008) This model is based on the updated DeLone and Mclean (2003) original success model. Important modifications to the initial model included: The quality construct of IS Success was extended to include Service Quality. The construct Systems Use was found to be multi-dimensional, e.g., mandatory versus voluntary use. As a result, Intention to Use was added to the model, to differentiate between Systems Use as a behavior as opposed to Intention to Use as an attitude. The constructs of Individual Impact and Organizational Impact were collapsed into a single dimension named Net Benefits. DeLone and McLean (2003). In addition to the improvements described above, the authors also suggest that the updated model provides â€Å"a parsimonious framework to organize the various success metrics identified in the IS and e-commerce literature† DeLone and McLean (2003) Source: Measuring E-commerce success: Applying the DeLone and McLean Information Systems Success Model, 2004 DeLone and Mclean Information Systems Success Model can be used to the measurement challenges of the new e-commerce world. The updated model (Figure.5) consists of six interrelated dimensions of information systems success: System quality, Information quality, Service quality, Use, User satisfaction, Net Benefits. â€Å"The six dimensions of the DeLone and McLean IS Success Model can be applied to the e-commerce environment as follows: 1. System Quality, in the Internet environment, measures the desired characteristics of an e-commerce system. Usability, availability, reliability, adaptability, and response time (e.g., download time) are examples of qualities that are valued by users of an e-commerce system. 2. Information Quality captures the e-commerce content issue. Web content should be personalized, complete, relevant, easy to understand, and secure if prospective buyers or suppliers are to initiate transactions via the Internet and return to a site on a regular basis. 3. Service Quality, the overall support delivered by the service provider, applies regardless of whether the support is delivered by the IS Department or a new organizational unit or is outsourced to an Internet service provider. This dimension is more important in an e-commerce environment than ever before, because the users are now customers rather than employees, and therefore, poor user support will translate into lost customers and lost sales. 4. Usage, measures everything from a visit to Web site and navigation within the site to information retrieval and execution of a transaction 5. User Satisfaction is an important means of measuring customers opinions of an e-commerce system and should cover the entire customer experience cycle from information retrieval through purchase, payment, receipt, and service. 6. Net Benefits, are the most important measures, because they capture the balance of the positive and negative impacts of e-commerce on customers, suppliers, employees, organizations, markets, industries, economies, and even society as a whole.† (DeLone and McLean, 2004) â€Å"Finally, e-commerce studies should include net benefits measures and not be content to collect only surrogate measures, such as Web Site hits (i.e., use). Such benefits can be measured on at least four levels: individual, group, organizational, and industry. These measures become most useful, however, when fitted into an overall structure or framework a framework like the one provided by the DeLone and McLean Information Systems Success Models.† (DeLone and McLean,2004) Source: Measuring E-commerce success: Applying the DeLone and McLean Information Systems Success Model, 2004 2.7.2 Rational behind using DeLone and McLean Success E-commerce Model One of the objectives of this research paper is to identify the success factors of e-commerce. â€Å"A review of articles on e-commerce and electronic data interchange (EDI) in recent academic and trade journals (1992-2002) yielded many suggested measures of e-commerce success. IS and marketing journals were included in the search for e-commerce success metrics. Most of the articles were conceptual in nature, but some were empirical and, therefore, attempted to operationalize e-commerce success metrics.† (DeLone and McLean, 2004) 2.7.3 Current research of other researchers As one of the objectives of this research is to assess and investigate the enhancement factors of Kazakhstan e-commerce, this combination make the study unique, as previous research in this field just provide a quick look with no depth focus on the Kazakhstan E-commerce. There were some studies exploring the weakness and strength of the Kazakhstan E-commerce, and other studies independently investigate the critical factors in E-commerce best practices, however no one tried to measure using E-commerce Success model. Moreover some of the research paper using statistical analysis, according to Griffith (2007) â€Å"statistical analysis is like a sewer. What you get out of it largely depends on what you put into it. There are a few researches about the measurement of e-commerce success.† 2.7.3.1 Chang Liu, Kirk P. Arnett Model of E-commerce Web site success, 2000 â€Å"Websites are being widely deployed commercially. As the widespread use and dependency on Web technology increases, so does the need to access factors associated with the Website success. The objective is to explore these factors in the context of electronic commerce (EC).† (Liu, 2000) â€Å"Webmasters from Fortune 1000 companies were used as the target group for a survey. Four factors that are critical to Website success in EC were identified: