Assignment # 3
All the students of IT430 are directed to download the 3rd assignment. Due date for submission is Tuesday 18 January, 2011.
Question: (10 Marks)
Read the attached research paper thoroughly and write in your own words that why we still are lacking in E-Commerce despite the availability of reliable IT infrastructure and courier companies providing fast and reliable physical delivery in Pakistan.
Your answer should not exceed more than a page and strictly to the point. Avoid irrelevant stories and lengthy answers otherwise your marks will be deducted.
Following are the idea lines mentioned in the research paper, make your own words:
IT infrastructure in Pakistan is up to mark providing consumers and businesses a reliable and efficient mode to conduct transactions. This fact is true for the urban areas in particular, however, in the rural areas IT infrastructure is present but in lags in terms of speed and connectivity. Consumers have access to good quality internet at cheap costs and they are satisfied with it. The physical delivery system is also reliable and offers quick deliveries nationwide. Besides the local governmental postal services, there are foreign companies such as FedEx and UPS operating in Pakistan providing physical delivery services. The banks and financial institutions have the capacity to offer e-commerce services but have been reluctant due to the lack of its demand in the market. The Central bank of Pakistan is providing the basic setup that is required for online transactions. The penetration of personal computers and IT infrastructure in the rural areas needs improvement but from our analysis we conclude that its supply will quickly follow its demand in rural areas whenever it increases.
Personal computers are common and are found in all educational institutions, offices, and households. The present state of electrical supply in the country has been very poor.
Households and businesses have been facing electrical shortages of several hours in a day. Under these circumstances the IT infrastructure becomes secondary as without electrical supply all of these are useless. In the rural areas, traditional economy prevails and compared to the developed countries, people engaged in agriculture are not nearly as educated. The agriculture sector in developing countries is still following centuries old market practices hence e-commerce is not a suitable tool for them.
The government has taken initiatives to encourage e-commerce but considering the political instability and national issues of higher priority, the governments over the last decade have been unable to succeed in its efforts. The people of Pakistan have the tendency to trust online interactions however it is limited to the educated class in the urban areas. People have less faith in financial institution’s capacity to provide security for online transactions but this phenomenon is linked with the government’s inability to improve law and order situation in the country and provide cyber protection to the people.
This trust can improve dramatically if the government is able to take productive steps to ensure people rights and security. Unlike in some Asian countries, people don’t have high preference for face to face interactions. Especially in urban areas people are familiar with online chat rooms and have faith in it; however this trend is unpopular in rural areas. In Pakistan people prefer shopping in groups and seek peer approval before purchasing something.
The high difference between urban and rural areas in terms of IT adoption is a reflection of the contrasting education levels which is very low in rural areas. This low literacy level means there is a small percentage of the population that can speak and write English, understands e-commerce and its benefits, can operate a computer. Therefore, only a small percentage of the national population has the mental capacity to operate a computer, use the internet and appreciate the benefits of e-commerce.
These factors are inter-related and improving just one factor won’t be sufficient to encourage e-commerce. The literacy level is low which results in a low productive workforce which in general results in low national productivity. The governments over the last ten years have been unstable and have not shown significant contribution to improve the literacy rate. In order to improve the state of e-commerce in the country the government needs to start at the grass root level and educate the masses and only through education will the people have the capacity to accept and embrace new technologies, innovations and way of life. Besides this significant reforms needs to be taken by the government to improve its own performance in terms of electrical supply. The cultural barriers would take time to overcome and through a paradigm shift in the mindsets of the masses can it be resolved.
SOLUTION:
In Pakistan we still are lacking in E Commerce despite the availability of reliable IT infrastructure and courier companies providing fast and reliable physical delivery because of several reasons which cannot be neglect. Following are the reasons:
1. Time for delivery of physical products. It is possible to visit a local music store and walk out with a compact disc or a bookstore and leave with a book. E-commerce is often used to buy goods that are not available locally from businesses all over the world, meaning that physical goods need to be delivered, which takes time and costs money. In some cases there are ways around this, for example, with electronic files of the music or books being accessed across the Internet, but then these are not physical goods.
2. Physical product, supplier & delivery uncertainty. When you walk out of a shop with an item, it’s yours. You have it; you know what it is, where it is and how it looks. In some respects e-commerce purchases are made on trust. This is because, firstly, not having had physical access to the product, a purchase is made on an expectation of what that product is and its condition. Secondly, because supplying businesses can be conducted across the world, it can be uncertain whether or not they are legitimate businesses and are not just going to take your money. It’s pretty hard to knock on their door to complain or seek legal recourse! Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever arrive
3. Perishable goods . Forget about ordering a single gelato ice cream from a shop in Rome! Though specialized or refrigerated transport can be used, goods bought and sold via the Internet tend to be durable and non-perishable: they need to survive the trip from the supplier to the purchasing business or consumer. This shifts the bias for perishable and/or non-durable goods back towards traditional supply chain arrangements, or towards relatively more local e-commerce-based purchases, sales and distribution. In contrast, durable goods can be traded from almost anyone to almost anyone else, sparking competition for lower prices. In some cases this leads to disintermediation in which intermediary people and businesses are bypassed by consumers and by other businesses that are seeking to purchase more directly from manufacturers.
4. Limited and selected sensory information. The Internet is an effective conduit for visual and auditory information: seeing pictures, hearing sounds and reading text. However it does not allow full scope for our senses: we can see pictures of the flowers, but not smell their fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when we pick up and inspect something, we choose what we look at and how we look at it. This is not the case on the Internet. If we were looking at buying a car on the Internet, we would see the pictures the seller had chosen for us to see but not the things we might look for if we were able to see it in person. And, taking into account our other senses, we can’t test the car to hear the sound of the engine as it changes gears or sense the smell and feel of the leather seats. There are many ways in which the Internet does not convey the richness of experiences of the world. This lack of sensory information means that people are often much more comfortable buying via the Internet generic goods – things that they have seen or experienced before and about which there is little ambiguity, rather than unique or complex things.
5. Returning goods. Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods get back to their source? Who pays for the return postage? Will the refund be paid? Will I be left with nothing? How long will it take? Contrast this with the offline experience of returning goods to a shop.
6. Privacy, security, payment, identity, contract. Many issues arise – privacy of information, security of that information and payment details, whether or not payment details (e.g. credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply.
7. Defined services & the unexpected. E-commerce is an effective means for managing the transaction of known and established services, that is, things that are everyday. It is not suitable for dealing with the new or unexpected. For example, a transport company used to dealing with simple packages being asked if it can transport a hippopotamus, or a customer asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such requests need human intervention to investigate and resolve.
8. Personal service. Although some human interaction can be facilitated via the web, e-commerce cannot provide the richness of interaction provided by personal service. For most businesses, e-commerce methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This also means that feedback about how people react to product and service offerings also tends to be more granular or perhaps lost using e-commerce approaches. If your only feedback is that people are (or are not) buying your products or services online, this is inadequate for evaluating how to change or improve your e-commerce strategies and/or product and service offerings. Successful business use of e-commerce typically involves strategies for gaining and applying customer feedback. This helps businesses to understand, anticipate and meet changing online customer needs and preferences, which is critical because of the comparatively rapid rate of ongoing Internet-based change.
9. Size and number of transactions. E-commerce is most often conducted using credit card facilities for payments, and as a result very small and very large transactions tend not to be conducted online. The size of transactions is also impacted by the economics of transporting physical goods. For example, any benefits or conveniences of buying a box of pens online from a US-based business tend to be eclipsed by the cost of having to pay for them to be delivered to you in Australia. The delivery costs also mean that buying individual items from a range of different overseas businesses is significantly more expensive than buying all of the goods from one overseas business because the goods can be packaged and shipped together.
