The national strategy and competitive advantage of New Zealand

By Torrance Mayberry

February 2, 2011

Table of contents
Context and Scope:................................................................................................... 4 Players and Rules: .................................................................................................... 6 Uncertainties and Scenarios:..................................................................................... 8 Technological and Political Trends: ......................................................................... 15 Demographic Trends:.............................................................................................. 20 Global Economy and Societal Trends:..................................................................... 22 SWOT: .................................................................................................................... 29 Options and Decisions: ........................................................................................... 30 Conclusion and Outcomes: ..................................................................................... 31 References:............................................................................................................. 34

Introduction:

The Asia-Oceania region, which includes New Zealand, is fast becoming the single largest economic region of the world. In 2020 the region is projected to account for 43.2 percent of world gross domestic product (GDP), compared with 37.5 percent in 2005. Regional foreign direct investments (FDI) is projected to increase from 11.4 percent in 2005 to 20 percent in 2020 and 90 percent of the populations in developing economies within the region are expected to move upward into a middle income status. Its also projected that the annual global share of e-Commerce benefits will be $3.8 trillion by 2020. New Zealand is in a position to see, participate in and influence market efficiency in the region as demand from global electronic commerce (eCommerce) increases in the regions developing economies. The capacity for the nation to capitalise on long term growth in e-Commerce will depend on its ability to adopt and integrate the newer technological innovations.

There are many influencers on GDP in New Zealand but this essay will discuss just five key influencers as shown in Figure one. These five have been chosen as they directly affect e-Commerce.

Technological Trends: This factor can have a positive impact on New Zealands GDP. It will influence world economic growth, raise the standard of living in developing economies and strengthen global interconnectedness, expanding e-Commerce.

Political Trends: New ICT RS&T strategic priorities can establish an innovative climate for the nation. It removes barriers of entry so every New Zealand business can participate in e-Commerce growth and set future GDP targets.

Societal Trends: Adoption of mobile devices in developing economies is rapidly causing it be the tool of choice for e-Commerce.

Demographic Trends: Metropolitan areas around the world will continue to account for the lion share of world GDP. The ageing population also has an impact on GDP.

Global Economy: Growing interconnectedness of developing economies adds $3.8 trillion dollars annually to the global economy assisting with the recovery in the aftermath of the global financial crisis (GFC).

Each of the influencers in Figure one will be discussed whilst applying a methodology for assessing a nations competitive advantage in relation to its e-Commerce strategy, in particular New Zealands strategy.

Figure 1: The integration of new technological innovation in New Zealand to improve its GDP.

Source: Torrance Mayberry

Context and Scope:

In this century, economic competition between nations is less like the competition between armies or sports teams. The competition is more like the competition between universities that vie for prestige in a networked search for knowledge. It is less about dominating each other with efficiency and might. It is more about attracting and retaining the best talent and instilling the best value, so if a knowledge worker wants to make the most of their own abilities, they are inspired to do so.

Over the next decade the nations that compete effectively in e-Commerce will be those who recognise geography matters because knowledge workers are most creative when they collaborate face to face. Hence, clustering in metropolitan areas represent the best opportunity to concentrate talent and then attract more talent. The collaboration in these metropolitan areas has greater potential to spill over to other areas and it attracts more talent.

In the aftermath of the GFC, economic growth and national competitiveness are the priority. The GFC has caused a change in trajectory of capital shifting it from West to East for world leading banks (Figure 2). This world event has combined with technological innovations in mobile commerce (m-Commerce) and Web 2.0 technologies (social networking, blogs, etc.) to drive the growing interconnectedness of the global economy. This new economic reality has caused developed economies to rethink their priorities. Many find that they now need to get their fiscal house in order.

Figure 2: The worlds leading banks, before and after the crisis.

The rising national debt and Government spending in New Zealand has created imbalances that are unsustainable (NZIER, 2010). They have the potential to stifle

future e-Commerce and international competitiveness. For instance, the New Zealand Government must tackle the economic imbalances that require it to borrow $300 million a week to meet its domestic obligations. If this continues, in four years time the annual interest payments on the nations debt will cost more than what is spent on the Police, defence and early childhood education. The combined effort by the Government to cut domestic spending and fast track the adoption of newer technologies will ensure the nation can better capitalise on the current global expansion in e-Commerce.

Todays new economic reality is dominated by 24 hour access to goods and services enabled by webification. Webification is much more than e-Commerce transactions or buying and selling over the internet. According to Kalakota, Robinson and Tapscott (1999), the overall strategy and vision of e-Commerce ought to help redefine old business models with the aid of leading edge information, communication and digitized technologies (ICT). Hence, ICT research, science and technology (RS&T) plays a vital role in accelerating the webification of buying, selling or exchanging goods, services, and information through electronic networks (Kalakota et al., 1999; NZ Digital Strategy, 2005 and GIF Taskforce, 2005).

Players and Rules:

There are four basic forms of e-Commerce that ICT RS&T can influence. They include: business-to-business transactions (B2B), business-to-consumer transactions (B2C), consumer-to-consumer transactions (C2C) and mobile commerce (mCommerce) transactions (OECD, 2009; Kalakota et al., 1999).

The rapid adoption of newer technologies and the growing interconnectedness around the world have combined in the aftermath of the GFC to help accelerate e-Commerce, bringing developing economies forward quicker into the market. The long term outlook for New Zealand is promising as they move forward on the successful integration of their revised ICT RS&T policy. This change in trajectory positions the nation to compete for a share of the global GDP on the backdrop of growth that is occurring in developing economies.

New Zealand, a member of the OECD, is part of a much wider community of global players who have greater purchasing power. This new economic reality has been recognised by OECD nations in competition with New Zealand. The global economic potential increases for e-Commerce as more players or consumers get access to world markets. The Government of New Zealand along with the other OECD players, are chasing after a share of the projected short term $1.5 trillion in e-Commerce revenue (ITIF, 2010) to assist with recovery from the GFC.

New Zealands sustained economic growth is dependent on their ICT RS&T policies that contribute to spillovers. According to Porter (2000), spillovers from metropolitan areas have more potential to increase national GDP. Spillovers are accentuated where high value economic activities are more broadly dispersed within metropolitan areas. These activities are described as knowledge intensive business services such as research, science and development, engineering, software development and content production (Porter, 2000). They are the type of activities that form into clusters in metropolitan areas to ensure a nations information industries can differentiate themselves on the world stage. Porter (2000) suggests the greatest concentration of knowledge intensive business services are found in metropolitan areas.

For instance, a comparison to Australia suggests that before, during and after the global financial crisis three metropolitan areas, Melbourne, Brisbane, and Sydney, experienced no decline in either employment or income from 2007 to 2010 (Brookings, 2010). Brookings goes on to say in 2007, the world metro areas accounted for fewer than 12 percent of global population but generated an astonishing 46 percent of world GDP.

A 2010 Brookings study supports Porters findings above, suggesting that metropolitan areas form clusters to become locations for high-value economic activity (Brookings, 2010). The study examined data on economic output and employment in 150 of the worlds largest metropolitan economies, located in 53 countries, from 1993 to 2010. The study purports that because metropolitan areas form the base for national and international economies, understanding their relative positioning provides important evidence on shifts in the location or demographics of global economic resilience and future growth. 7

According to the OECD over the decade to 2005 global commerce has been dominated by technology intensive ICT RS&T exports. This trend in exports continues to increase gaining ground over all OECD manufacturing exports combined except for Japan (OECD, 2005). By 2020 the Information Technology and Innovation Foundation (ITIF) project that e-Commerce will account for $3.8 trillion in global GDP (ITIF, 2010).

In the short term Forrester Research (2011) suggests IT spending will increase 7.1 percent globally to $1.7 trillion in 2011. The demands for knowledge intensive jobs are on the rise and Forrester sees gains coming in the future years. The increased demand in knowledge intensive work is a leading indictor of things to come. For instance, the Bureau of Labour Statistics (2010) in the US suggests the number of network systems and data communications analysts is expected to increase by 53 percent by 2018, while the number of computer software engineers expands by 34 percent in the same period. The Bureau goes onto to say knowledge intensive activities will realise the fastest growth over the next decade. This uptake is being influenced by technological and political trends and it will affect New Zealands international e-Commerce competitiveness.

Uncertainties and Scenarios:

New Zealands indebtedness to the rest of the world has led to Standard and Poors, known as an independent provider of credit ratings, placing the nation on a negative outlook. A negative rating means New Zealand will have trouble generating enough cash flow to account for its internal obligations. In comparison the only other developed economies with a foreign debt size as New Zealands is Ireland, Portugal, Greece, Spain and Portugal (nzhearld.co.nz, 2011). This is unsustainable and is a major negative uncertainty that can hold back inflows of foreign direct investments (FDI) which would enable innovations in ICT RS&T. In order to make New Zealand competitive with the OECD economies it must address its indebtedness problem. This political factor and the rapid technological innovations occurring around the world have placed more pressure on developed economies, such as New Zealand, to get their e-Commerce strategy right. 8

The Government of New Zealand has come a long way since it first introduced their ICT RS&T policy enabling its e-Commerce strategy and vision in 2000. At that time a key uncertainty the nation attempted to address through its e-Commerce strategy was to prevent it from lagging behind other OECD trading partners (Barton, Fallow, Gifford, Oliver, and Stevenson, 2000; NZ e-Commerce Strategy, 2000; MOED, 2001; Evans, Mellsop, Burgess, Png and Low, 2003; NZ Digital Strategy, 2005). Although the Governments e-Commerce strategy had the best of intentions, by itself it was unable to positively change the perspective of the OECD members and international investment community. Many investors did not view the nations small to mediumenterprises (SMEs) as viable regional clusters where spillovers could effectively happen from their ICT RS&T investments.

The Ministry of Economic Development (MOED, 2001) suggests the strategy did achieve on increased adoption of technologies that enabled e-Commerce. However, they also suggested it did not increase the penetration needed to support full integration of business information systems. In a nutshell, they found there was a low level of understanding of the opportunities that could be gained from e-Commerce and ICT RS&T (MOED, 2003).

Another uncertainty the Government of New Zealand has to tackle in this new economic reality is enticing high levels of FDI back into the nation. Although inflows of FDI and banking capital are flowing into the region overall, they are disproportionately increasing into the developing economies. This has given OECD developing economies more of an opportunity to accelerate their adoption and integration of newer e-Commerce technologies that can booster productivity. In response, OECD players such as New Zealand have to refocus their nations eCommerce strategy on high-value economic activities and decrease their total indebtedness to the rest of the world as already mentioned.

The future of New Zealands e-Commerce competitiveness depends on stable ICT RS&T policies and greater FDI with net foreign debt below 50 per cent of GDP (Porter, 2000). If higher FDI inflows come into New Zealand, the Government and businesses can put that capital to work on upgrading its IT infrastructure and 9

integrating newer technologies to improve economic performance. This will promote demand for skilled knowledge workers and will produce higher incomes and a better quality of life for New Zealanders. This inflow of capital is a positive long term economic outlook for Governments enabling them to diffuse the worlds newer technology and knowledge (Evans et al, 2003).

In the case of New Zealand it has been losing a vital source of investment capital that would be used to increase national employment and incomes. According to the Economic Intelligence Unit (EIU, 2010), FDI inflows to New Zealand were $US471millon in 2009, far below the total of $US5.5billion in 2008. According to Evans et al (2003) this has the effect of reducing technology spillover benefits to metropolitan areas.

As shown in Figure three between 2008 and 2009 OECD player Singapore (a developing economy) experienced a sharp post financial crisis recovery in FDI compared with New Zealands (a developed economy) decrease and lack of recovery to pre crisis levels (World Bank, 2010).

Figure 3: FDI comparison between New Zealand and Singapore.

Figure four shows inflows of FDI into developing economies remain on the rise. Because FDI is an enabler of business activity, the impact of FDI on a nations economy can be measured from the capital generated through initial public offerings (IP0s). According to the World Bank (2010) corporations in developing economies raised the most capital through IPOs and had two record breaking deals in 2010.

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This included a world record $22.1 billion IPO (both domestic and international) by First Agricultural Bank of China, and another world record equity sale of $70 billion by the Brazilian oil company Petrobras. According to the World Bank (2010) nine OECD developing economies received the vast majority of capital inflows in 2010. China, India, Brazil, Indonesia, Malaysia, Thailand, Turkey, South Africa and Russia expanded their GDP in 2010 by an average of 8.4 percent when compared to a modest 2.4 percent for New Zealand. They go onto suggest increased equity inflows have boosted market valuations in these OECD developing economies, as such their share of global market capitalisation has risen from about 14 percent in 2005 to roughly 30 percent in 2010. The World Bank makes note that international banking capital activity, as shown above in Figure two, supports this long term trend. They too have been shifting their capital outflows into developing economies for the purpose of getting higher returns on investments (ROI).

Figure 4: Shifts in global capital favouring developing economies.

The long term risks for developed economies such as New Zealand require them to enact successful policies that will promote increases in higher incomes and employment for knowledge workers. The Government of New Zealand expects its new ICT RS&T policy will increase GDP from 4.3 percent to 10 percent by 2012 (Growth and Innovation Framework, 2003; GIF Taskforce, 2005; ASOCIO, 2009; Size of Domestic NZ IT Market, 2010). The Government stated that New Zealands economy has not grown at a rate that compares well with other OECD countries (NZ RS&T Priorities, 2009; NZ Innovation Policy Brief, 2007; NZahead, 2010). For

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instance, the total government ICT RS&T investments in New Zealand are 1.2% of GDP, compared with the average of 2.2% for other OECD countries (NZ Innovation Policy Brief, 2007; NZ RS&T Priorities, 2009; OECD, 2010). The Governments new ICT RS&T strategic priorities seek to reverse this trend and help the nation improve on its ICT trade (NZ RS&T Priorities 2009).

According to the National Intelligence Council (NIC), a centre of strategic thinking within the US Government the nations with the most diverse creative clusters will dominate the next decade (NIC, 2010). The international e-Commerce players that will benefit the most from globalisation will be the ones that can accrue, adopt, apply and integrate the newer global available technologies. It will be those nations that successfully achieve these activities that will have more of a global influence and gain share. The poor execution of policies, as well as the other influencers shown above in Figure one, creates uncertainties for the market.

As shown in Figure five, in recent decades there has been an acceleration of international asset trade and linkages of the financial system for developed and developing economies. According to the International Monetary Fund (IMF) the diffusion of ICT has driven the growing global financial integration. The tighter integration of the global market has helped to drive the significant expansion in financial assets and rising share of cross border ownership of financial institutions (IMF, 2010). For instance, the commonwealth bank of Australia (CBA) has operations that span across borders in China, Hong Kong, Indonesia, India, Japan, Vietnam and Singapore. The long term effect of this cross border activity has been moving the developing economies toward traditional and simpler banking services.

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Figure 5: Acceleration of global financial integration enabled by ICT.

The long term wealth effect seems more likely to maintain its upward trajectory for developing economies. According to PWC the E7 (China, India, Brazil, Russia, Indonesia, Singapore and Turkey) developing economies will overtake the G7 (Canada, Mexico, United States, Japan, United Kingdom, Italy, and Australia) developed economies on a regular basis over the next 40 years. Their analysis also suggests that by 2020 China is likely to have overtaken the US in GDP and India will move ahead of the US by 2050 (Figure 6)

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Figure 6: Emerging & developing economies growth overtaking G7.

Source: PWC 2010

According to Price Waterhouse Coopers (PWC, 2010) the three key findings within the graph above are:
There has been rapid convergence between the E7 and the G7 in recent years,

accelerated by the global financial crisis. In 2007, total G7 GDP at purchasing power parity (PPP) was still around 60% larger than total E7 GDP. By 2010, we estimate the gap had shrunk to only around 35%. (Price Waterhouse Coopers, [PWC],2010, p.8)
The catch-up process is set to continue over the next decade: by 2020 total E7

GDP at PPP could already be higher than total G7 GDP, although any difference would still be within the margin of error of such projections.(Price Waterhouse Coopers, [PWC],2010, p.8)
In the following decade from 2020 to 2030, however, the process of overtaking is

likely to be reinforced, with total E7 GDP projected to be around 44% higher by 2030 than total G7 GDP in PPP terms. The gap would widen further beyond that, with the E7 almost twice as large as the G7 by 2050 in PPP terms.(Price Waterhouse Coopers, [PWC],2010, p.8)

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The New Zealand information industries should see this as an opportunity to trade more ICT RS&T with developing economies. The Governments new ICT RS&T priorities should enable the nations information industries to rely less on domestic markets and see more of their economic growth coming from developing economies.

Technological and Political Trends:

In order to capitalise in the aftermath of GFC developed economies, such as New Zealand, need to enact stable policies that enable them to change trajectory and make up for lost ground. According to NIC, in the aftermath of the financial crisis China and India have gone back to positions they held two centuries ago (NIC, 2010). At that time China produced 30 percent and India 15 percent of the worlds wealth. Hence, New Zealands ICT RS&T policy pursuits must help it to diversify its economy and influence an expansion in its information industries. Driven by the right demographic trends in metropolitan areas the nation could evolve into a hot spot to find knowledge intensive talent for the growing IT service sectors.

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Table 1: Technological trends driving global change.

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NIC suggests the technology trends as shown in Table 1 are the future (NIC, 2010). These trends symbolise what has been influencing the growing interconnectedness and expanded flows of information, technology, capital, goods, services and people throughout the world. According to NIC the greatest benefactors of these trends will be those nations who can access and adopt new technologies, irrespective of whether the technologies are acquired through the nations own ICT RS&T investments or not (NIC, 2010).

New Zealand s ICT RS&T policies need to closely align to these technological trends to ensure they can stay competitive. How the Government structures its ICT RS&T polices will enable spillovers for these trends for it to capitalise on long term growth in the Asia-Oceanic Region. How successful the Government is in the implementation of its policies will be measured by the uptake in future employment, incomes and share in global GDP.

According to Gartners emerging trend radar screen (ETRS) shown in Figure seven, the NIC trends will have sweeping impacts on global e-Commerce. The key technological trends that are most influential on long term growth in e-Commerce include:
Behaviour Analytics: Advancements in collaborative, social software and in web

oriented architecture enabling analytics to improve e-Commerce business models. For instance, combining consumer decision making processes as inputs into product and service designs.
Green IT: Advancements in business processes and products to change

environmental impacts. For instance, smart grid/meters embed ICT into the framework of power systems. This expands into homes enabling consumers to monitor energy usage of their appliances.
Personal Manufacturing: Advancements in inkjet and scanning technology makes

3D printers more affordable. Products can be showcased using a range of materials (resin, glass, silver, etc) and then shipped and received shortly thereafter.

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 Mobile Robots: Advancements in sensor technology enables autonomous

interactions via remote control to influence the environment. This will reduce operational risk and improve quality of life. For instance, mobile robots can be used on the battle field to retrieve wounded soldiers, to lift patients in home healthcare, in customer facing roles such as receptionists or to deliver on demand mobile videoconferencing for physicians.
Human Augmentation: Advancements in human sciences to restore normal levels

of performance and health. For instance, restoring to normal tactile movements through visual images connected to wearable devices.
Mobile as the hub: Advancements in mobile application development will enable

anywhere, anytime connections. Apps that run on mobile devices will expand the products and services of many industries providing fast links to games, entertainment, news, professions and commerce in areas such as:

o Heathcare Apps will help improve interactions between patients and their physicians, provide access to patients medical history, and patient monitoring of their own blood pressure or glucose levels.

o Content Production Apps will enable more frequent updates of content on the go via call in, text, voice activation or blogs.

o Entertainment Apps will evolve into the primary platform for media consumption (T.V ,movies, video conferencing, music, and games)

o Mobile Money Apps enabling digital wallets to exchange data for trade within four inches by using near field communications (NFC) chips.

o Automotive Apps will enable transportation of people to their destinations, allow drivers to check tire pressure, download music, schedule service, monitor electric car charge, automate check-ins to retail outlets or keep up with their Twitter feeds. 18

o Interactive Shopping Apps will enable barcodes or QR codes to scan everything from in-store communications and loyalty offers. Products of interest can be scanned when customers are out and about, it can automatically be dropped into a consumers online cart.

o Micro-Businesses Apps enabling anyone in possession of a resource or skill to share or trade it within a community. For instance, sites like Airbnb, Ziolk, NeighborGoods and Skyara are bringing buyers and sellers together that have passion for similar interests.

o Social Commerce Apps enabling retailers to leverage customers social media profile data ( e.g. facebook, twitter, etc) to deliver personalised shopping experiences.

Figure 7: Gartner's emerging trends.

Source: Granter Group 2010

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The global expansion of e-Commerce will be driven by three key factors. The first is the continued adoption and growing interconnectedness of newer technologies by developing economies. The second is market efficiencies and increased demand coming from a more sophisticated buying customer. The third is a growing computerliterate society in developing economies driven by their demographic trends. New Zealands ability to gain share of the future economic growth in e-Commerce will depend on the successful implementation of its ICT RS&T policies.

Demographic Trends:

The long-term risk in New Zealands demographic trends will directly affect its long term competitive position in the Asia-Oceanic Region. The social and economic change associated with a growing ageing population is another trend that requires the right level of political attention. As a result of low fertility rates combined with extended longevity rates, e.g. baby boomers (65+ older), New Zealand is going to have more of its population reaching retirement age and moving out of the workforce (Statistics New Zealand, 2009). Since world metropolitan areas will still dominate economic growth engines for global e-Commerce, it is imperative that New Zealand generate a consistent supply of knowledge workers to replenish those who are reaching retirement (Porter, 2000; Brookings, 2010).

The new economic reality favours nations that can supply knowledge workers of working age to service the increasing demand in e-Commerce from developing economies. The developed economies that are effective in clustering this knowledge intensive talent in metropolitan areas, will sustain their long term economic growth beyond the competition. In the case of New Zealand their numbers of people of working age is decreasing, while the number of older people is on the rise (Statistics New Zealand, 2009). This demographic trend poses a risk to New Zealands long term ability to sustain a share of e-Commerce GDP. According to Statistics New Zealand (2009) the older age group 50 years and over is projected to increase to 63 percent between 2006 and 2031. An examination of the effect of this trend at a subnational level (combining fertility, mortality, migration, and living arrangements) provides more uncertainty surrounding its metropolitan areas ability to sustain a supply of talent. According to Statistics New Zealand (2009), Auckland City is the 20

only New Zealand metropolitan area that has seen positive population growth. They suggest that Auckland will account for 49 percent of the national growth between 2006 and 2031. Although Auckland Citys growth of 1.4 million (as at 2009) is a positive sign, it presents the nation with a potential shortfall of knowledge intensive talent to supply the demand in the Asia-Oceania Region. New Zealand needs for its other metropolitan areas such as Wellington and Christchurch to increase their poll of knowledge intensive talent. This will give the nation more economic diversity enabling it to absorb future economic shocks.

The long term outlook for knowledge intensive talent to sustain e-Commerce integration into the global market is underpinned by high economic activities. These are described as knowledge intensive business services such as research, science and development, engineering, software development and content production (Porter, 2000). The availability of these skills is a key ingredient for long term e-Commerce economic growth over the next decade.

The Government of New Zealand needs to enact policies that will promote more immigration and retention of knowledge intensive talent that flows through its universities. If this trend of diminishing talent continues unabated it may make it more difficult for the nation to attract high levels of FDI to support ICT RS&T and eCommerce developments because talent attracts investment.

The challenge to attract FDI may increase as other OECD players from developing economies attract knowledge intensive talent and adopt newer ICT technologies. The landscape is getting more crowded as more players enter the game in search of higher levels of FDI, knowledge intensive talent and ICT RS&T returns on investments. As shown in Figure six above, OECD developing economies, such as China, India, Indonesia, and Malaysia, FDI funding is on the rise. This gives them levels of capital to attract and retain knowledge workers to grow their domestic markets and then launch outward to compete for a greater share of e-Commerce GDP. This gives the investor community more choice of where to put their capital to work. Developed or developing economies that have multiple metropolitan areas with diversified knowledge intensive working populations are more resilient (Brookings, 2010).

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Although the immigration policies of New Zealand can help it to turn the demographic trends around, in the short term it appears there have been small changes in permanent and long-term migration. According to Statistics New Zealand the migration group described as people with New Zealand residency as well as students and holders of work permits has changed very little over the years (Statistics New Zealand, 2009). The increased inflows and retention of this group is what is required to help offset the uncertainty and risk surrounding New Zealands growing ageing population. Moreover, increased retention and inflows of knowledge workers supported by an immigration policy, can ensure sustained clustering in metropolitan areas. This clustering will lead to greater spillovers in information industries to other areas within the nation.

Global Economy and Societal Trends:

The small to medium size enterprises (SMEs) in New Zealands metropolitan areas that get access to and adopt the newer technologies can help the Government achieve its GDP target. The IT services and products New Zealands information industries innovate have the potential to service developing economies growing demand in mCommerce and social commerce. The World Bank (2010) suggests that mobile devices are the tool of choice in developing countries and there remains untapped mCommerce potential in these countries. They go on to say in developing economies mobile devices are the largest delivery platform for interacting with customers. Morgan Stanley, a global investment banking organisation, supports their claim. According to Morgan Stanley in 2009 the top internet markets of the 1.8 billion internet users came from five countries of China, US, Brazil, India and Russia (Morgan Stanley, 2010). As shown in Figure 8A, eight of the Asia-Oceanic regions players comprise the top mobile internet markets of 670MM 3G subscribers (Morgan Stanley, 2010). J.P. Morgan suggests e-Commerce revenue will grow by 19 percent in 2011 worldwide to $680 Billon and will hit as high as $963 billion by 2013 (Figure 8).

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Figure 8: Projected e-Commerce revenue growth.

Figure 8A: Top Mobile Internet Markets.

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The developing economies growing adoption of smart phone and social networking technologies continues to help expand global e-Commerce. The long term outlook suggests that more e-Commerce will be delivered through mobile devices. The increased adoption of these tools as a platform to conduct commerce has been driven by features that enable customers to check purchase options, prices and locations of goods or services. The convergence of m-Commerce and social networking has helped to expand commerce to create new channels in addition to traditional online searching. As shown in Figure nine comScore suggests social media has overtaken traditional online search engines, such as Google. The graph shows how Facebook online penetration has surpassed Google.

Figure 9: Facebook overtakes Google.

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As shown in Figure 10, eMarketer suggests Facebook has become the biggest website in terms of market share in the US.

Figure 10: Face book increases market share.

Figure 11 shows how social networking site Groupon, has expanded commerce for customers looking to use their collective purchasing power as a community to get the best deals for products and services.

Figure 11: Collective buying of social networking communities.

In Figure 12, a Rice University Jones Graduate School of Business study summarises how profitable this type of social commerce is from a sellers perspective. With profitability above 50 percent, 82 percent of businesses plan to run more social commerce through Groupon.

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Figure 12: Profitable Promotions, propensity of businesses to run another Ad.

The figure above suggests social commerce is on the rise. The social elements about what matters to the public including prospects, customers, suppliers, distributors, the press and other groups have been digitally monetized. As shown in Figure thirteen, eMarketer.com worldwide suggests businesses are chasing after commerce through channels to reach where the customers are. In 2011, social networking advertising spend worldwide is expect to top $4.26 Billion.

Figure 13: Rise of social networking Ad spending.

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The expansion of social commerce is increasingly driving commerce through more spending on advertising. Global brands have found they can influence revenue growth through m-Commerce and social commerce by expanding their reach to interact with customers through these channels. As shown in Figure fourteen, eMarketer.com suggests mobile payments are on the increase worldwide, reaching $633.4 Billion in 2014. Figure 14: Worldwide mobile payments

The behaviour of customers around the world suggests they are increasingly adopting m-Commerce. This became evident in the aftermath of the 2010 holiday season. In spite of the challenging financial outlook around the world, consumers were willing to spend money at the holiday season. Their increased adoption of m-Commerce is showing the consumers were willing to use and trust the mobile device as a payment method.

The Government of New Zealand can take the learnings from these seasonal holiday figures to help it push the importance of m-Commerce to its information industries.

A recent report by IBM Coremetrics unit suggests the uptake in mobile shopping is a real trend to watch when compared to previous years (IBM Coremetrics, 2011). They too examined e-Commerce activity on Black Friday (beginning of the Christmas shopping season in the U.S) and saw that 5.6% of people logged onto a retailers website using a mobile device. This was a jump of 26% when compared to the prior 27

years Black Friday holiday shopping season. Along the same lines, Scanbuy, a provider of mobile barcode solutions, found that during the same period a 30% yearover-year increase happened in barcode scans. This increase was 20 times the daily scanning average. PayPal, an e-Commerce business that allows payments and money transfers to be made through the internet, stated it handled $700 million mobile transactions in 2010. This was a 310% year-over-year increase in m-Commerce for their business. Their parent company, Ebay, an online auction and shopping business for buyers and sellers, has projected that it sold $1.5 billion in goods via m-Commerce that same period. This was more than double the gross merchandise value it saw in 2009.

The data as shown in Figure fifteen shows a global perspective of social consumer behaviour. As they follow brands on social networking sites such as Facebook, Twitter and use mobile device features (geo-location and scanning of barcodes) they are becoming more literate. According to a survey conducted for NCR by BuzzBack, 43% of consumers in nine major markets said they view barcode scanning to do price comparison as a way for them to gain more control over the shopping experience ( Figure 15)

Figure 15: Global mobile commerce behaviour.

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The features of mobile devices such as geo-location and scanning of barcodes are making it possible for the social customer to interact with brands and their promotions, participate in store events to compare prices, locate product reviews and create wish lists. This has helped to make commerce much easier around the world. The social behaviours have moved beyond the boundaries of developed economies and have expanded to OECD developing economies that are projected to lead world economic growth. According to the World Bank (2010) developing economies are expected to expand by 6% or more in 2011. This is more than twice the 2.4 2.7 percent growth rates for developed economies. The new economic reality for e-Commerce is sitting in high growth markets of developing economies.

It is imperative that New Zealands e-Commerce strategy and vision recognises the long term growth outlook in developing economies as they adopt m-Commerce and social networking as their preferred means of commerce.

SWOT:

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Options and Decisions:

New Zealands short to medium term outlook to capitalise on the e-Commerce expansion is promising. The nation has one of the highest per capita users of the internet. In the past New Zealanders have been fast adopters of new technology and services. This has been demonstrated in the nations high usage of electronic point-ofsale transactions and electronic and internet online banking (ASOCIO, 2009).

The electronic literacy of the nation and its workforce is high and it can be capitalised on by information industries because they already have many of the required skills. The Government, through policy, can generate more awareness of the e-Commerce opportunity in the business community by targeting SMEs in information industries to make them aware of the growth that is happening in the region. Since SMEs employ 90 percent of the worlds workforce and account for more than 50 percent of GDP worldwide, it stands to reason that targeting the SMEs information industry can help the nation increase employment and incomes the fastest (ASOCIO, 2009; AMI, 2010).

This Government activity to generate more awareness of the e-Commerce opportunity needs to involve its universities. They can help the nation attract, retain and supply their information industries with much sought after knowledge workers. According to New Zealand Institute for Economic Research (NZIER) universities in New Zealand play a vital part in attracting and up-skilling knowledge intensive talent (NZIER, 2010). As shown in Figure sixteen educational activities produced from the university system help to increase productivity and incomes. The NZIER report suggests a Government injection of $200 million over five periods will permanently increase GDP 12 percent by 2025.

Figure 16: Educational activities contribute to a positive change in GDP

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The high value economic activities produced from university educational activities promote behaviour changes and social innovations that are crucial to enable better solutions and technological innovations for businesses.

The Government policies that privatise state-owned assets are a long term positive outlook for the nation. This will enable funds to be released to invest back in more valuable national assets such as its knowledge workers and information industries. Moreover, a focus on increasing national savings, debt reduction, consumption and government spending will help it to attract FDI. This capital is important for New Zealand to increase IT exports from its metropolitan areas, such as Auckland, Wellington and Christchurch. If these fundamentals are corrected the nation will create a stronger economy to help it retain the knowledge workers its businesses need to operate and grow.

Conclusion and Outcomes:

The GFC has created a new global economic reality. It has caused a shift in capital from West to East for world leading banks. This global event, along with technological innovations in mobile commerce (m-Commerce) and Web 2.0 technologies, has driven a greater interconnectedness between national economies. This new economic reality has caused developed economies, such as New Zealand, to rethink their priorities.

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The Asia-Oceanic region, within which New Zealand resides, has many emerging economies. The region is expected to contribute 43.2 percent of global GDP by 2020. This poses a great opportunity for New Zealand to participate in and influence the regions GDP, growing its own economy. But it is in a competitive struggle with the other OECD players to win a share of the $3.8 trillion dollar market that is looming from e-Commerce.

In order for New Zealand to participate fully, Government must review its eCommerce strategy in light of some of the global trends that are occurring. Government has a vital role to play in establishing the overall climate for eCommerce to develop and grow national GDP. The new economic reality requires the Government to adopt policies that increase national savings, reduce debt, consumption and government spending.

The adoption of newer technologies has the potential to foster dramatic improvements in the nations GDP. The application of newer technologies represents the key fundamentals for global e-Commerce, reducing barriers of entry, and provide for a lower cost structure that can lower prices for customers (NIC, 2010).

New Zealands sustained economic growth and participation in the regions overall growth, is dependent on their ICT RS&T policies that contribute to spillovers. Where clusters of knowledge intensive business services are established in metropolitan areas, spillovers of the benefits they attract occur in other areas therefore, creating a spread of growth and increasing national GDP.

The Governments indebtedness and subsequent negative S & Ps rating, means New Zealand will have trouble generating enough cashflow to account for its internal obligations making it increasingly difficult to implement their ICT RS&T policies for growth. Enticing higher levels of FDI into the nation must therefore, be a Governmental priority. Although inflows of FDI and banking capital are occurring in the region, overall they are disproportionately increasing in the developing economies giving them more of an opportunity to accelerate their adoption of newer e-Commerce technologies and sustained competitiveness.

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The Governments understanding, decisions and reaction to technology trends have a major impact on their international competitiveness. New Zealands ICT RS&T policies need to closely align to the technological trends that are happening around the world to ensure New Zealand can be competitive. In particular, the policies need to encourage the information industry to capitalise on the growth that is happening in mCommerce. It is clear from global trends that mobile devices are the tools of choice for e-Commerce. This trend, along with increased social networking, has helped to expand commerce to create new channels in addition to traditional online searching. The economics of this is that there is greater interconnectedness and global trading due to increased accessibility to global markets.

New Zealands e-Commerce policies must contend with the problem of an ageing population. Low fertility and extended longevity rates are seeing much of its population reaching retirement age and moving out of the workforce with fewer younger replacements. New Zealands policies must seek to generate a consistent supply of knowledge workers to replenish those who are reaching retirement (Porter, 2000; Brookings, 2010). One way to attract knowledge workers is through partnering with universities. The university system can help to increase productivity and incomes. They also have a means of attracting new talent into the country through their international student programmes.

In this new economic reality it will be New Zealands Government, universities and businesses combined participation that will ultimately determine if the nation can capitalise on its future e-Commerce economic growth.

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