Barriers to E-Commerce and

Competitive Business Models

in Developing Countries:
A Case Study
Written by: Nir Kshetri
Presented by:
Marc Gill
Travis Cain
Janelle Boucher

Introduction

Marc Gill

Barriers to E-Commerce in
Developing Countries

Economic Barriers

Sociopolitical Barriers

Cognitive Barriers

E-commerce Business
Models

Travis D. Cain

What is a Business Model?

A description of a companys intention to

create and capture value by linking new
technological environments to business
strategies.

Types of Business Models

Lam and Harrison-Walker estimated

about 50 revenue-generating ebusiness models.

There are different approaches to

describe the models. The following
are a list of these approaches.

Approaches to describe types of

Business Models
1.

2.

Researchers
with
marketing
orientation use product, price,
place,
and
promotion.
Others, in terms of structural
characteristics around the value
chain of suppliers and buyers, IT
systems
and
architectures,
technical platforms, and security
and traffic scale.

Dimensional Models

Lam and Harrison-Walker analysed

business
models
employed
by
Internet companies and reduced
them through the use of twodimensional models.
1. Relational objectives
2. Value-based objectives

Relational Objectives

These are used to classify e-business

models based on the Internets
connectivity characteristic.

Target Market

Connectivity-related objects

Value-based Objectives

These are related to a value formula

such as generation of revenues and
others benefits.

Examples include non-financial

contributions such as increased
marketing effectiveness or
improvement in consumer attitudes.

Issues in Developing
Countries?

Very few firms sell products online

and so this model is not widely
employed in developing countries.

Many service providers in developing

countries have invented viable
business models. Some argue that ecommerce can be a key competitive
advantage if it is used effectively in
these imperfect markets.

Thamel.coms Competitive Business

Model: A Case Study

Thamel.com was established in 1999 as a

web portal.

Its physical office is located in Thamel, a

street in Kathmandu

Thamel.com originally targeted tourists.

Then the company shifted its focus on
Nepalese expatriates. Acted as a gift
provider to expatriates and their families.

Thamel.coms competitive business

model: A Case Study

In 2001, 900,000 Nepalese lived outside the

country.
Higher Internet adoption rates,
Higher disposable incomes
Higher rate of credit cards ownership.
This market is e-commerce ready with a greater
value-creation opportunity.
The company also targeted foreign Expatriates
living in Nepalese.
In 2004, 80% Thamel.com customers were
Nepalese expatriates and 20% were foreigners

E-commerce Barriers In
Nepal

Economic factors
1994, Internet introduced in Nepal
1999, 0.15 % users of total population
2004, 0.9% users of total population
Developing countries e-commerce
market lacks economies of scale.
ICT access charges expensive

Monthly Internet access (20hrs/wk) was more than

per capita annual income
Still was a cash-based society over credit cards

E-commerce Barriers In
Nepal

Socio-Political factors

Classifying Asian countries by level of

adoption of digital and electronic
signatures has put Nepal at level 0.

As of mid-2004, Nepal hadnt enacted

DES laws.

E-commerce Barriers In
Nepal

Cognitive factors

Knowledge, skill and confidence related to

e-commerce usage are even stronger
2% estimate of population are English literate
in Nepal
of adult population is illiterate
Highly undeveloped and unreliable postal
systems
Problems of postal system in Nepal include
inefficient security, unreliability and theft.

Thamel.coms Business
Models

Janelle Boucher

Thamel.coms Business
Models

Combination of the following:

An internet portal

A bundle of services

A manufacturers agent

A virtual mall

Thamel.com as an Internet Portal

Two most popular models for a portal:

Free model
Offers some free goods and services to create high traffic
Advertising opportunity

Content sponsorship model

Uses content, links and services to attract visitors to

generate advertising revenue

Thamel.com used the content sponsorship

model.

Thamel.com as a Bundle of Services

Provides multiple services as a

package deal for customer

Facilitates online ordering and payment of

goods

Delivers gifts to the customer

Confirms delivery by taking a digital photo

of the gift being delivered to the customer

Thamel.com as a Manufacturers
Agent

According to Lam and Harrison-Walker, a manufacturers

agent represents more than one seller, and sometimes an
entire industry, to sell specific types of products

In 2004, Thamel.com featured over 7,000 products

representing diverse industries such as chocolates,
ceremonial goats, birthday cakes, silk saris and cheese

Facilitates vendors such as the goat herders who do not

have their own websites by providing information on their
products on the Thamel.com website

Revenue comes from user fees, advertising, sponsor

commissions

Thamel.com as a Virtual
Mall

Hosts multiple online merchants on

its website

Thamel.com as a Virtual Mall

Thamel.coms Strategies to
Overcome E-commerce Barriers in
Nepal

Targeted the population that experienced relatively fewer

economic barriers the expatriates

Outsourced payment/transaction processing functions to the US

Thamel.com as an alternative to Nepals poor technological and
financial structure, and also to avoid the legal barriers

Provided delivery service and delivery confirmation photos

Initially Kathmandu had no street addresses making it difficult to find
recipients homes
Through a partnership with the Municipality of Kathmandu and their
mapping system, they created delivery zones around well-known
landmarks
Took digital pictures of the delivery of the gift to the recipient which
would be sent to the buyer as delivery confirmation, and a thank you
note for using the service

What can small developing countries

learn from this Nepal case study?
1.

In a developing country, a companys

success depends on its ability to
simultaneously deploy and manage
multiple e-business models

Thamel.coms customers would never have

bought products listed on the companys
website if it had just acted as a web portal

What can small developing countries

learn from this Nepal case study?
2.

In relatively small markets of

developing countries, companies
can add value by bundling together
various products and services

What can small developing countries

learn from this Nepal case study?
3.

To deliver full potential, developing

country-focused Internet business
models are required to outsource some
functions to the industrialized world

Impossible to break all e-commerce barriers

Outsourcing can enhance value delivery

Conclusion and Recommendations

The developing world still has much to learn

about e-commerce. These countries must
realize that:
I.

II.

Not all business models targeting the developing

world are equally successful. Developing
countries still need to deeply research the
factors that differentiate successful/unsuccessful
e-commerce business models.
Thamel.coms model worked in Nepal, but may
not be successful in other scenarios

Conclusion and Recommendations

Countries in the developing world must:

III.

IV.

V.

Determine the optimum size of the e-commerce

market for companies in their country to profitable
exploit.
Determine the types of companies that are likely to
force their business partners to adopt ICTs
(Information and Communications Technology).
Determine the optimal level of involvement for
government and private organizations in combating
various e-commerce barriers.

THANK YOU
QUESTIONS???