E-Commerce in East Africa

Table of Contents Definition and background2 Reasons for growth of e-commerce in East Africa. 4 Influence of e-commerce on trading practices in East Africa. 5 Types of e-commerce8 Challenges facing the growth of e-commerce in East Africa. 9 1. Poor infrastructure9 Computer illiteracy9 Lack of proper regulation9 Inadequate capital10 Inadequate personnel10 Conclusion10 References11 Definition and backgroundE-commerce refers to business conducted through the use of computers, telephones, fax machines, barcode readers, credit cards, automated teller machines (ATM) or other electronic appliances (whether or not using the internet) without the exchange of paper-based documents. It includes activities such as procurement, order entry, transaction processing, payment, authentication and non-repudiation, inventory control, order fulfillment, and customer support. When a buyer pays with a bank card swiped through a magnetic-stripe-reader, he or she is participating in e-commerce. |It mainly in volves the buying and selling of products or services over electronic systems such as the Internet and other computer networks. Electronic commerce draws on such technologies as electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transaction's life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices and telephones as well.Originally, electronic commerce was identified as the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically. The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of electronic commerce. Another form of e-commerce was the airline reservation system typified by Sabre in the USA and Travicom in the UK.Electronic commerce or ecommerce is a term for any type of business, or commercial transaction that involves the transfer of information across the Internet. It covers a range of different types of businesses, from consumer based retail sites, through auction or music sites, to business exchanges trading goods and services between corporations. It is currently one of the most important aspects of the Internet to emerge. Ecommerce allows consumers to electronically exchange goods and services with no barriers of time or distance.Electronic commerce has expanded rapidly over the past five years and is predicted to continue at this rate, or even accelerate. In the near future the boundaries between â€Å"conventional† and â€Å"electronic† commerce will become increasingly blurred as more and more businesses move sections of their operations onto the Internet. Business to Business or B2B refers to electronic commerce between businesses rather than between a business and a consumer. B2B businesses often deal with hundreds or even thousands of other businesses, either as customers or suppliers.Carrying out these transactions electronically provides vast competitive advantages over traditional methods. When implemented properly, ecommerce is often faster, cheaper and more convenient than the traditional methods of bartering goods and services. Electronic transactions have been around for quite some time in the form of Electronic Data Interchange or EDI. EDI requires each supplier and customer to set up a dedicated data link (between them), where ecommerce provides a cost-effective method for companies to set up multiple, and ad-hoc links.Electronic commerce has also led to the development of electronic marketplaces where supplie rs and potential customers are brought together to conduct mutually beneficial trade. Just like the rest of the world, East Africa hasn’t been left behind in adopting e-commerce as a way of doing business. Many individuals, corporations and even governments have resolved to using e-commerce in consummating their business transactions, albeit on a smaller margin as compared to western countries or the more developed world economies.Countries in east Africa, that is Kenya, Uganda and Tanzania have all been taking steps in the recent past to ensure that trade among them grows as a way of boosting the economic growth of these countries. One of the steps has clearly been adopting the use of e-commerce. Relevant infrastructure has been or is being established to back up this adoption. Since e-commerce ideally is all about the internet, most of the infrastructure I am referring to involves it in way or another.Most notably has been the laying of the fiber optic cable from the coast of Kenya towards the inland that allows for high speed internet access. Reasons for growth of e-commerce in East Africa. The rapid growth of e-commerce since 1995 is due to the unique features of the Internet and the Web as a commercial medium: * Ubiquity: Internet/Web technology is everywhere, at work, home, and elsewhere, and anytime, providing a ubiquitous market space, a marketplace removed from a temporal and geographical location. * Global reach: The technology reaches across national boundaries. Universal standards: There is one set of Internet technology standards, which greatly lower market entry costs (the costs to bring goods to market) and reduce search costs (the effort to find products) for the consumer. * Richness: Information richness refers to the complexity and content of a message. Internet technology allows for rich video, audio, and text messages to be delivered to large numbers of people. * Interactivity: The technology works through interaction with the user. * Information density: Information density is the total amount and quality of information available to all market participants.Internet technology reduces information costs and raises quality of information, enabling price transparency (the ease for consumers of finding a variety of prices) and cost transparency (the ability of consumers to determine the actual costs of products). Information density allows merchants to engage in price discrimination (selling goods to targeted groups at different prices). * Personalization/customization: E-commerce technologies permit personalization (targeting personal messages to consumers) and customization (changing a product or service based on consumer preference or history.Influence of e-commerce on trading practices in East Africa. As it has already been established, e-commerce is being used, even though not so widely in East Africa. The firms or organizations that have decided to employ e-commerce are benefiting from it in the following way s: 1. Exploitation of New Business Broadly speaking, electronic commerce emphasizes the generation and exploitation of new . business opportunities and to use popular phrases: â€Å"generate business value† or â€Å"do more with less† Safaricom, mobile service provider has the m-pesa service that captured so many customers and helped many people establish new businesses.There is also the m-kesho service which is a joint venture between Safaricom and Equity Bank that has enabled many small business owners and individuals to access banking services. 2. Enabling the Customers Electronic Commerce is enabling the customer to have an increasing say in what products are made, how products are made and how services are delivered (movement from a slow order fulfillment process with little understanding of what is taking place inside the firm, to a faster and rt1ore open process with customers having greater control. . Improvement of Business Transaction Electronic Commerce ende avors to improve the execution of business transaction over various networks. 4. Effective Performance It leads to more effective performance i. e. better quality, greater customer satisfaction and better corporate decision making. 5. Greater Economic Efficiency We may achieve greater economic efficiency (lower cost) and more rapid exchange (high speed, accelerated, or real-time interaction) with the help of electronic commerce. 6. Execution of InformationIt enables the execution of information-laden transactions between two ore more parties using inter connected networks. These networks can be a combination of ‘plain old telephone system’ (POTS), Cable TV, leased lines and wireless. Information based transactions are creating new ways of doing business and even new types of business. 7. Incorporating Transaction Electronic Commerce also inco11'orates transaction management, which organizes, routes, processes and tracks transactions. It also includes consumers making el ectronic payments and funds transfers. 8.Increasing of Revenue Firm use technology to either lower operating costs or increase revenue. Electronic Commerce has the Potential to increase revenue by creating new markets for old products, creating new information-based products, and establishing new service delivery channels to better serve and interact with customers. The transaction management aspect of electronic commerce can also enable firms to reduce operating costs by enabling better coordination in the sales, production and distribution processes and to consolidate operations arid reduce overhead. . Reduction of Friction Electronic Commerce research and its associated implementations is to reduce the â€Å"friction† in on line transactions frictions is often described in economics as transaction cost. It can arise from inefficient market structures and inefficient combinations of the technological activities required to make a transaction. Ultimately, the reduction of fr iction in online commerce will enable smoother transaction between buyers, intermediaries and sellers. 10. Facilitating of Network Form Electronic Commerce is also impacting business . o business interactions. It facilitates the network form of organization where small flexible firms rely on other partner, companies for component supplies and product distribution to meet changing customer demand more effectively. Hence, an end to end relationship management solution is a desirable goal that is needed to manage the chain of networks linking customers, workers, suppliers, distributors and even competitors. The management of â€Å"online transactions† in the supply chain assumes a central roll. 11. Facilitating for Organizational ModelIt is facilitating an organizational model that is fundamentally different from the past. It is a control organization to the information based organization. The emerging forms of techno-organizational structure involve changes in managerial respon sibilities, communication and information flows and work group structure. Types of e-commerce Business-to-business (B2B) Business that sells products or provides services to other businesses. Business-to-consumer (B2C) Business that sells products or provides services to end-user consumers.Consumer-to-consumer (C2C) Consumers sell directly to other consumers. Business-to-government (B2G) Government buys or provides goods, services or information to/from businesses or individual citizens. Business-to-employee (B2E) Information and services made available to employees online. Mobile commerce (m-commerce) E-commerce transactions and activities conducted in a wireless environment. Collaborative commerce (c-commerce) Individuals or groups communicate or collaborate online. Challenges facing the growth of e-commerce in East Africa. . Poor infrastructure. Many consumers and businesses in the east African region are not able to access internet services due to poor access of the internet and online services in general. This makes it difficult for them to transact through the internet and hence e-commerce has not been able to grow at a reasonable rate. This poor internet access can be attributed to the poor infrastructure currently being used in the region. Modern high performance network equipment has to be installed for e-commerce to grow as expected. Computer illiteracyMany individuals in the east African region do not have access to computers and those who might have access do not know how to use them. This has largely affected the growth of e-commerce since computers are an integral part of the online business. This is why many online transactions in the region are usually done by way of mobile phones which again aren’t that accessible to the common citizenry. Lack of proper regulation The internet is largely unregulated. Many businesses and individuals lose their money to unscrupulous and fraudulent business people who take advantage of the lack of proper r ules and regulations to play foul.The situation is even worse in east Africa and many businesses are losing money hindering their expansion and the industry in general. Inadequate capital Investment in the equipment and manpower required to run online business is very expensive and most firms cannot afford it. Computers, database managers, hard drives, software and software managers are all needed to keep on online system running. Administration of such systems is also very expensive and it needs regular updating and upgrading. Inadequate personnel Many firms in east Africa do not have the expertise needed to run these e-commerce systems.The curriculum in schools and higher learning institutions do not offer adequate skills. Expertise has to be imported from the rest of the world to complement the little that we have. This makes it so expensive to run online businesses. Conclusion Even though it has taken so long for e-commerce to be integrated into the business world in east Africa , it is finally here and it is being appreciated by those who are willing to adopt it. The governments of the countries in the region are doing a lot of investment in the required infrastructure to see to it that internet is accessed widely and cheaply.Investors from other countries have also realized that this east African region holds a lot of potential and are willing to invest their money to boost online trading establishments. There are still many challenges that need to be surmounted and e-commerce has gotten to its feet fully, but with the measures being taken by the governments, the private sector and many other stakeholders in the information technology sector, it is only a matter of time before e-commerce becomes fully operative in the region.This will present a lot of opportunities that will help improve the standards of living in the region. References * www. ecommerce-land. com * www. ihub. co. ke * The Economics of M-Pesa, William Jack and Tavneet Suri, 2nd Edition, Au gust 2010 * www. kcbbankgroup. com * www. imbank. com * The Smart Company, The Daily Nation, 17th July 2012 page 8-9