A Model for Small Tourism Business Internet Use in Developing Countries Stergios Karanasios1 and Stephen Burgess2 1Centre
for Hospitality and Tourism Research Victoria University PO Box 14428 Melbourne, Australia, 8001 Email:
[email protected] 2Centre
for Hospitality and Tourism Research Victoria University PO Box 14428 Melbourne, Australia, 8001 Email:
[email protected]
Abstract This paper examines the use of information and communications technologies in developing countries. It is observed that some important typical characteristics of small businesses in developing countries are that they tend to be resource poor, have basic technology needs, are informal in nature, rely on family labour and suffer from information scarcity. Some challenges to their growth and indeed survival are poor infrastructure, corrupt institutions, limited markets, and a political and business environment that favours large enterprises. These can all inhibit small businesses in their use of ICTs, and particularly the Internet. A planning and implementation model for the use of the Internet by small tourism businesses in developing countries is proposed. Keywords Small business; Internet; tourism; developing countries; planning; model.
INTRODUCTION Many development professionals and aid organizations agree that Information and Communication Technologies (ICTs) have the potential to lift the sagging fortunes of developing countries, allowing them to achieve economic growth and close the gap between developed and developing countries. However, some observers point out that ICTs can widen the gap between these countries. In India for example, despite the massive growth in IT and ICTs, little has been done to diminish poverty in what has been described as the highest concentration of poverty in the world (Cullen 2001). Ultimately, most observers agree that ICTs are not seen as a panacea for the problems of resource poor nations, nevertheless, they present an invaluable opportunity for developing countries to invigorate and sustain economic growth (Kamel & Hussein 2002; Mujahid 2002; UNCTAD 2003). In other words, developing countries have more to gain than to lose by utilizing technology. ICTs, in particular the Internet, have been highlighted as technology that shows promise for small firms in developing countries. One industry where the Internet and e-commerce is touted to have large impact is on small and medium tourism enterprises (SMTEs). This paper begins by examining ICT use in developing countries and moves on to look at the use of the Internet by SMTEs in developing countries. A planning and implementation model for the use of the Internet by SMTEs is proposed by the authors.
THE DIGITAL DIVIDE The poorer regions of the world continue to face a series of obstacles to the rapid diffusion of ICTs. There are many reasons contributing to the gap in the use of ICTs in developed and developing countries. Before entering into a discussion on some of the larger obstacles faced by developing nations, a brief comparative discussion into the number of Internet users in developed versus developing countries is given.
Table 1 illustrates the number of Internet users and hosts in developed and developing countries. While the measurement of Internet users is not recognised as the most accurate measurement, it is used here to illustrate the difference between the developed and developing countries. One phenomenon to note is that the developing world has shown the largest percentage increase in users over the last three years. If the current trends continue in the next five years, Internet users in developing countries may comprise 50 per cent of the world’s total. This is largely because of their demographic patterns (younger populations, faster overall population growth) (UNCTAD 2003). Table 1: Internet users per 10,000 people by region, 2000 – 2002 (Source: UNCTAD, 2003)
2000
2001
2002
% change 2000-2001
% change 2001-2002
Developing countries
195
280
391
43.59
39.67
Developed countries
2416
2914
3262
20.61
11.94
Reasons for the divide There are many reasons for the digital divide. Four of the most commonly cited challenges faced by developing countries are discussed here. Low wealth of developing countries Often the necessary resources for small businesses in these regions for basic survival are not directly available. Therefore, the Internet is not seen by these businesses as being of high priority (Murelli 2002). In addition to this, the technology cost is comparatively higher in developing countries, often unreachable for the common person. Take the example of Internet costs in rural India, the cost per connection ranges from Rs 40,000 (approx Aus$1,200) to over Rs 130,000 (approx Aus$3,900) in remote villages with rocky terrain (The Financial Express 2000). Lack and availability of ICT’s infrastructure The Internet is totally dependant on the existence of connectivity infrastructure. However, many resource poor countries have typically had limited telecommunications networks (Murelli & Okot-Uma 2002) making internet connectivity difficult. Even where the infrastructure is in place, there has also been the problem of defective and poor quality telephone lines meaning that lines cannot handle data transmission (De Boer & Walbeek 1999). Some authors claim that the lacking of telephone infrastructure can be seen as an advantage in that it allows developing regions to bypass this technology and use alternative technology. A few examples include Wireless Loop Technology (Jeffrey 2002), wireless networks (Tully & Riekstins 1999) and Very Small Aperture Terminals (VSATs) (ITU 2000; Lake 2000; Sarrocco 2002). Level of education, computer illiteracy, socio-cultural factors In many developing countries the level of education and low literacy rate, especially among women and girls (Payne 2002; UNCTAD 2003) and low computer literacy rate (De Boer & Walbeek 1999) contribute to the slow diffusion of Internet services. De Boer and Walbeek (1999) also point out the language of a country can also be an issue as most content on the Internet is in English. There is also social-cultural factors that limit the diffusion of the technologies in developing countries (Pradhan 2002). For instance there is often the misconception that IT and the Internet may replace manpower (Aljifri, Pons & Collins 2003). Government forces and regulatory factors Government involvement, enthusiasm, and support are essential for introducing and exploiting the potential of international network links (Sadowsky 1993). However, in the developing world the view and behaviour towards the Internet is completely different from the developed world, making government support difficult. Some governments have strict control of the Internet. For instance, in China, Laos and Vietnam, censorship is more evident than in other countries (Murelli 2002). In Egypt it only became legal in 1998 for a person to own a second telephone line (Tanburn & Singh 2001). Regulations have an impact on the level of international Internet connectivity within a country and potentially its reach, resulting in passing on the cost of these services to end-users (Sarrocco, 2002). Other political factors also
effect the diffusion of ICTs for instance in countries like Nepal, Sri Lanka and Zambia the conflicts and unstable political environments impact the development of successful ICT initiatives (oneworld.net 2003).
SMALL BUSINESS IN DEVELOPING COUNTRIES Small businesses in any country generally tend to be resource poor (Oyelaran-Oyeyinka & Lal 2004), have basic technology needs, are informal in nature, rely on family labour (Mead & Liedholm 1998; Turner 2003) and suffer from information scarcity (Duncombe & Heeks 2001; Moyi 2003) – when compared with their larger counterparts. In developing countries small businesses typically avoid bank loans due to such problems as issues with the bureaucracy through to internal problems such as lack of knowledge in applying for a loan (Turner 2003). This means that small businesses tend to have more difficulty finding the capital needed to invest in ICTs (Payne 2002). In addition to this, small businesses in developing countries face numerous challenges to growth, some of which are: poor infrastructure, limited markets (Matambalya & Wolf 2001), corrupt institutions (Turner 2003) and a political environment that favors larger businesses (Al-Shaikh 1998; Montealegre 1998). Technology and small business in developing countries Payne (2002) suggests that small businesses are in a good position to adopt new technology because they are not slowed down by bureaucracy and hierarchies. Despite this, small enterprises still face a range of technical and non-technical issues that complicates technology adoption and impact the ability of small business to exploit technology. The Internet and e-commerce literature suggests that despite the much publicized benefits there is a general lack of knowledge of the full potential of the Internet (López-Bassols & Vickery 2001; Moodley & Morris 2004) and often the benefits are not seen to be applicable (Cloete, Courtney & Fintz 2002). In an investigation of technology adoption by small tourism business in Nicaragua and Costa Rica (Croes & Tesone 2004), business owners were asked about the impact of technology on their business. Nine out of 10 firms in Costa Rica reported that technology had an impact on their business strategy in significant ways while three out of four firms in Nicaragua reported the same. Pricing strategy for those businesses was the area where the greatest impact was felt, and this impact is evenly distributed among the firms in both countries. Despite this, the results of this study suggested that there is limited technology adoption by small businesses in developing countries. Likewise, a study of Chinese tourism operators found that other than the use of a computer as a typing machine, little ICT adoption was taking place (Ma, Buhalis & Song 2003). Small businesses in developing countries face many challenges to adopting e-commerce – many of which are similar to those faced when using ICTs. For instance, at the macro level some of these obstacles are the cost of technology (Best & Maclay 2002; James 2003), access to telecommunications infrastructure (Murelli & OkotUma 2002; Salman 2004), lack of timely and reliable systems for the delivery of physical goods (Costa 2001; Hawk 2004), low bank account and credit card penetration (Hawk 2004; Murelli & Okot-Uma 2002), lack of uniform payment system (Aljifri, Pons & Collins 2003), governmental and regulatory systems (Murelli & OkotUma 2002; Ranganathan & Kannabiran 2004), lack of knowledge and skills (De Boer & Walbeek 1999; Salman 2004), and problems with security and trust (Aljifri, Pons & Collins 2003). At the micro level, challenges include a lack of financial resources and knowledgeable staff (Aljifri, Pons & Collins 2003; Costa 2001), security and legal issues (Cloete, Courtney & Fintz 2002) and general lack of knowledge of the full potential of the Internet (López-Bassols & Vickery 2001; Moodley & Morris 2004). Tourism and small enterprises The vast majority of tourism enterprises around the globe can be classified as small and medium-sized tourism enterprises (Buhalis 1998; Liu 2000). For instance, within Victoria, Australia some 70–80 per cent of the tourism businesses are classed as small (less than 20 employees), with many located in regional areas (Morrison & King 2003). In rural areas, tourism is dominated by family businesses (Getz & Carlsen 2005).
Many entrepreneurs, particularly sole proprietors and families are drawn to tourism for lifestyle reasons and to an industry that is relatively easy to break into and does not require specific previous experience and a high level of education (Getz & Carlsen 2005; Lerner & Haber 2001; Morrison & King 2003). In truth the perceived lifestyle of the tourism industry rarely becomes reality with many businesses suffering from financial and resource poverty (Morrison & King 2003) as observed this is common amongst small businesses. Small tourism enterprises in developing countries In discussing small tourism businesses and developing countries, it is useful to highlight the importance of tourism in these parts of the world. Many studies have focused on the importance of tourism and its roles in development. (Ashley, Roe & Goodwin 2001; Briedenhann & Wickens 2004; Ghimire 2001) Tourism is labour intensive (Ashley, Roe & Goodwin 2001; Egziabher 2001), and creates linkages to other areas such as accommodation, food and beverages, recreational activities, transport and souvenir sales etc which generates employment (Ghimire 2001; Kirsten & Rogerson 2002). Some statistics on the importance of tourism in developing countries (WTO 2002):
In 83% of developing countries tourism is a major export, and the primary export for one third. 80% of the worlds poor live in 12 countries and tourism is a major trade in 11 of these. Developing countries continue to draw increasing numbers of visitors – an increase from 20% in 1973 to 42% in 2000.
Summary This section of the paper discussed small business both in general terms and in relation to developing countries. It was observed that small businesses are resource poor, nevertheless when adopting technology their small size can be a blessing, allowing them to restructure faster and with less complexity than a larger organization. Some important characteristics of small businesses in developing countries are: are resource poor, have basic technology needs, are informal in nature, rely on family labour, enterprise start up/capital is also strongly related to family, and suffer from information scarcity. Some challenges to growth and indeed survival are: poor infrastructure, corrupt institutions, limited markets, and political and business environment that favours large enterprises.
MEETING THE CHALLENGE – DEVELOPING A MODEL FOR SMALL TOURISM BUSINESS INTERNET USE IN DEVELOPING COUNTRIES The Internet may provide a means by which small tourism businesses are able to enhance their existing activities, but how are they to do this? As part of a PhD project, the authors propose the following model that may be implemented by small businesses to assist in forming an e-commerce strategy. When designing the model, the authors considered that planning models for Internet use were important, as this was an area lacking in small businesses generally. From a planning point of view, Decou and Kao (2003) proposed a planning model of e-commerce. They posit that the planning stage, prior to any major commitment of resources, is the core focus of strategy and the dimensions of finance, legality, logistics, marketing, operations, security, and technology need to be examined. If there are serious concerns about the deployment of any of the above dimensions, they should be addressed, with more consideration given to the specific deficient dimension. In regards to small business, one of the authors (Burgess 2002) developed a web site planning and adoption model. It is a model designed to assist small businesses to develop web site strategies and add value to their goods and services through their web site. The stages of the model are: perform a business analysis (typically a SWOT analysis - examine internal and external factors affecting the business), develop website strategy,
determine website implementation technology, determine promotion strategy, determine website evaluation techniques, and implement and review website.
The Burgess model is used as the basis for a conceptual framework for the proposed SMTE model because it focuses on small businesses and adoption of the Internet. It is also one of the few models that steps a business through the planning stage, right through to implementation and review of their strategy. While the Burgess (2002) model focuses on web site strategies, it will be used as a basis to accommodate a more flexible ecommerce approach, one that does not focus solely on web sites. Additionally, as the model was developed in the context of developed countries and in general for all industries, it will be modified to reflect the challenges faced by small tourism business in developing countries. It does provide a useful starting point, one that allows for analysis of the businesses resources and formation of e-commerce strategy. However, some additions are required for SMTEs in developing countries. Additions for the SMTE Model The Enabling Environment Despite the many benefits of e-commerce, businesses still need to consider the supporting infrastructure – that is, the enabling environment – especially in developing countries. Two areas are identified as being of importance, they are: supporting industry e-readiness and government e-readiness. The concept of e-readiness has gained increasing attention in the domain of e-commerce and developing countries (Choucri et al. 2003; Molla & Licker 2005). When considered together with developing e-commerce strategy, an assessment of these two elements provides a thorough analysis of a businesses readiness to take part in e-commerce.
Supporting industry e-readiness: Refers to the assessment of e-commerce enablers, this includes financial institutions, the IT industry, and most importantly the telecommunications industry (Molla & Licker 2005). As an example, is there a ready access to telecommunications, can local banks handle on-line credit card transactions? Are local website developers available? Are their support services to deal with telecommunications faults?
Government e-readiness: Often a impediment to e-commerce is the lack of information and official guidance from government on what is permitted (ITU 2002). Government readiness refers to a favorable ecommerce environment including legal and regulatory procedures and official guidance. For instance, in Morocco, Mann (2004) found the countries financial sector was only recently embracing secure electronic transactions and technologies because the country’s capital account remained partially closed (this was seen by policy makers as necessary to protect domestic savings and international reserves).
Categorising E-Commerce Strategies What if a business wants to get online because they want to grow? What is the next step? The next step is to take this strategic thrust and develop a strategy. Angehrn (1997) developed a model that categorizes the opportunities brought about by the Internet into four different virtual spaces. They are the Virtual Information Space, Virtual Communication Space, Virtual Transaction Space and Virtual Distribution Space. It is a model that can be used to detect opportunities for use of the Internet in an industry. It also serves to structure and detect opportunities in individual companies. The ICDT Model is generic and applies to various industries. The four spaces are treated separately because they correspond to different strategic objectives and require different types of investment, and organizational adjustments.
The Information Space: refers to the different ways a business can provide information about themselves and their products online. Exploiting this space means providing the basic information that customers need, such as product and contact information. Literature suggests that businesses in developing countries are exploiting this space in three simple ways, they are: basic business web sites, sites within portals and the use of small ads (Lallana, Pascual & Andam 2002; Zeitlyn & Barone 2004). Two reasons why this space is important are: first, tourism is an information-based and information-intensive industry (Inkpen 1994; Poon 1993; Sheldon 1997), and has become one of the most popular mediums for researching and planning trips (Collins, Buhalis & Peters 2003). The second reason is that trust is a barrier to e-commerce in developing countries (UNCTAD 2004). A business with an effective information strategy can overcome this barrier by providing information about themselves online and promoting an image of trust.
The Communication Space refers to the exchange of information with the various stakeholders: suppliers, customers, and strategic allies. Unlike the Information Space, information in the Communication Space may flow both ways. E-mail is the most widely adopted Communication Space tool adopted by small businesses in
developing countries (Duncombe 1999; Tanburn & Singh 2001). It is also the most cost effective and easily adopted e-commerce activity (Payne 2002). Adopting email for communication with customers may simply mean accessing the Internet from a central access point. Nevertheless, despite the ease of implementing this tool, consideration must be given to promoting the email address and instilling a good level of customer service, re-engineering of the reservation process may also be required.
The Distribution Space allows for businesses to reduce costs, differentiate or improve the quality or innovation of products and services by distributing products via the Internet. As there are no products to distribute in tourism this space will not be included in the model.
The Transaction Space The main use of this space is to carry out payments online. Small business in developing countries face many obstacles to offering online payments. Portals have been adopted as a way of overcoming these barriers (Kuwayama 2001).
Each dimension of these spaces can further be classified in terms of its technical sophistication. For instance a simple generic Information Space presence may involve a simply creating a basic web site with the business details published, while an advanced Information Space presence might include a multimedia presentation of a hotel room or tourist attraction. Figure 1 illustrates the ICDT Model and the different strategies and different levels of sophistication and customisation.
The Internet spaces
Levels of sophistication/customisation Level of sophistication
Info
Comm Space
Space Traditional Market Space
Advanced, customised presence
Simple, generic
Simple, customised presence
high
presence
Transaction space
Advanced, generic presence
low
low
high
Level of customisation
* The distribution space is omitted as there are no physical products/services to distribute in tourism
Figure 1: The ICDT Model (Source: adapted from Anghern 1997) Implementation Issues The Burgess (2002) model suggests three areas that need consideration after strategy has been formed; these are technical considerations, strategy evaluation, and positioning. Technical Issues This area needs special consideration because many e-commerce activities are not appropriate for businesses in developing countries. In fact, many authors agree that it is not necessary for small enterprises in developing countries to concentrate on the most sophisticated technological approaches, or that on-line payments need not be included (Humphrey 2002; Payne 2002). Small businesses in developing countries will need to consider if they need an Internet connection (if their only use will be email, they could access the Internet via a nearby access
point) and, if so, what type of connection? More technical issues will need to be considered such as software and hardware options, hosting and ISPs selection and maintenance. Strategy Evaluation Adopting e-commerce will not involve a starting and finishing point. For instance, the Burgess (2002) model suggests that after implementation, a business should evaluate its strategy. This is particularly important in the case of small businesses in developing countries as they cannot afford to waste resources on an e-commerce endeavor that does not produce benefits (Payne 2002). A number of authors have created methods of measuring e-commerce performance (Bickerton, Bickerton & Simpson-Holley 1999; Larsen & Bloniarz 2000). The selection of suitable measures of success depends upon what the business is trying to achieve with the e-commerce strategy (Burgess 2002). Payne (2002) suggests that following simple measures that a business may use to measure expected results: increased revenue per employee, increased customer satisfaction, reduced inventory, increased sales per salesperson, increased market share, and increased profitability. Positioning Beyond the development of an online presence, a combination of offline and online promotion is needed. The WTO (2001) calls this web advertising the competitive advantage. They also say that promotion is one of the most forgotten tasks in e-commerce. Birch et al (2000) suggest four levels of Internet promotion that have proven to be successful. These levels are: promotion on the organisation's own Web site, promotion on other commercial Web sites, promotion in Internet communities, and promotion outside the Internet.
THE MODEL Figure 2 shows the model proposed by the authors. The model begins with an investigation of e-commerce readiness of the business. It is here that the business assesses its preparedness to participate in e-commerce. It is also here that a business will begin to acknowledge the type of e-commerce activities it can perform. After an analysis of the e-commerce readiness of the business, the business then can begin to form its strategy. The model suggests three areas that can be exploited. Once the strategy is formed the business will be faced with technical considerations, it is here also that a strategy is formed to promote its e-commerce readiness, as this is particularly important to tourism businesses. Lastly, the model posits that a business must evaluate the e-commerce strategy to measure its performance, where an area does not meet expectations the business can alter its approach.
CONCLUSION Small businesses in developing countries are resource poor, have basic technology needs and typically suffer from information scarcity. In addition to this they face the challenges of poor infrastructure, limited markets, and a business environment that favours large enterprises. The vast majority of tourism enterprises around the globe can be classified as small and medium-sized tourism enterprises Many entrepreneurs, particularly sole proprietors and families are drawn to tourism for lifestyle reasons and to an industry that is relatively easy to break into and does not require specific previous experience and a high level of education. In truth the perceived lifestyle of the tourism industry rarely becomes reality with many businesses suffering from financial and resource poverty as observed this is common amongst small businesses. In this paper the authors proposed a planning and implementation model for the use of the Internet by SMTEs in developing countries as they consider the problems associated with having an Internet presence that can enhance their business. Developed from other models (primarily Burgess, (2000) and Angehrn, (1997)), it aims to provide a set of guidelines for small tourism businesses in developing countries to follow when implementing an Internet strategy. These steps would typically not be performed by these businesses. Further stages of the research involve the testing and refinement of the model be it exposure to a panel of experts in the various fields of small business, developing countries and Internet strategies and exposure to SMTEs in developing countries.
E-COMMERCE READINESS The Enabling Environment
Supporting industry e-readiness
Govt e-readiness
External Forces
Internal Resources
Customers Competitors Suppliers Alliances Other Market Forces
Overall strategy Capital Infrastructure Employees
STRATEGY FORMATION
Information Space
Communication Space Internet Transaction Space
Technical Issues
Positioning
Evaluation
E-commerce Adoption Figure 2: Proposed Internet Model for SMTEs in Developing Countries
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