ONLINE MARKETING TOOLS HAVE MADE IT POSSIBLE FOR THIRD-WORLD ENTREPRENEURS TO SEEK AND SATISFY CUSTOMERS ON A GLOBAL SCALE - WITH PARTICULAR FOCUS ON THE GARMENT INDUSTRY IN BANGLADESH
The strong and growing evidence of the impact of the Internet on first world countries is clearly observed almost all over the globe and have clearly documented by marketing researchers and academics. The advancement in information and communication technology has impacted global and marketing strategies. It has brought companies closer to their stakeholders such that interactions with these parties are 'just a click away'. Globalization has brought about increased competition as companies have a wider scope of customers due to access to other international markets, cost reduction and ease of operations via information and communication technology. It is apparent that companies in first world countries have experienced tremendous changes in their internet marketing strategies in order to seek, satisfy and add more value for their global customers. (Porter, 2001; Kotabe & Helsen, 2004; Strauss, El-Ansary & Frost, 2006)
The advent of the World Wide Web changed customers' perception of convenience, speed, price, product information and service changed immensely. It has also changed the way the 4P's that is the marketing mix is being applied in businesses now. In the pursuit of creating more value and enhancing customer relationship management, most companies in the western world turned from bricks-and-mortal manufacturers and retailers to clicks-and-mortal competitors, setting up their own online sales and having other click-only companies market and sell their products as well. The factors that have contributed to the success of these companies have been their ability to move from the traditional marketing strategies to e-marketing strategies which not only encompass the traditional models of marketing but has also broadened the horizon of marketers from local to international orientations i.e. 'thinking global and acting local' (Kotler et al, 2008 pp 839; Strauss, El-Ansary & Frost, 2006) However, can we say the same for third world countries? If yes, to what extent can this impact be felt?
The purpose of this essay to critically evaluate the level of the usage of e-marketing tools in the international marketing activities of third world entrepreneurs i.e. the challenges faced and the opportunities open and available to them in a bid to seek and satisfy customers on a global scale. I will discuss the internet and its application to marketing mix, value chain and marketing strategies in general. In addition, I will be employing Hofstede's cultural orientation to my explanations and cited examples. The term' third world' termed old fashioned and irrelevant in its today's context will be replaced with 'Least Developed Countries' (LDCs). I will be focusing particularly on Bangladesh but will cite a few examples from other LDCs like Cambodia, Nepal and West Africa.
Identification and Definition of Terms
Online marketing or e-marketing was described by El-Gohary (2007) as the new modern business practice in relation to buying and selling products, information and ideas via the Internet and other electronic means.
Strauss, El-Ansary & Frost (2006) defined E-Marketing as 'the use of information technology in the process of creating, communicating, and delivering value to customers, and for managing customer relationships in ways that benefit the organisation and its stakeholders. In other words, it is applying information technology to traditional marketing. They also explained that e-marketing affects traditional marketing in two ways; firstly it increases efficiency and effectiveness in traditional marketing functions and secondly the technology of e-marketing transforms many marketing strategies. As we know, every business has the objective to seek a solution to a problem and sell it to their target market.
Entrepreneurship is a process used to describe when a person sees an opportunity and seeks ways to satisfy the needs of the people. It is by nature a free enterprise associated with the self-employed, thus is the seed of new economic growth in every nation. (Cateora & Graham 2007 pp 248)
E-marketing tools are basically all the tools available via the Internet and mobile phone communication through which messages can be transmitted via words, pictures and music. These include SMS, web sites, ad banners, search engines, web advertising, web blogging, amongst others.
Least Developed Countries (LDCs) has been reviewed and identified by the Committee for Development Policy (United Nations) in 2009 as countries that exhibit the following characteristics:
(a) Low socioeconomic development i.e. GNIper capita of less than US $750
(b) A human capital status: (a) undernourished population; (b) high mortality rate for children under five; (c) gross secondary school enrolment ratio; and (d) high adult literacy rate
(c) An economic vulnerability criterion comprising: high population; remoteness; merchandise export concentration; high share of agriculture, forestry and fisheries in GDP (Gross Domestic Product); instability of agricultural production; instability of exports of goods and services.
(Sourced from: http://www.unohrlls.org/en/ldc/related/59/ on 21, January 2010)
These countries have Industrial structures with subsistence, raw-material-exporting or industrializing economies (Kotler and Armstrong, 2010). They are emerging economies with low Gross Domestic Product (GDP) per capita but are experiencing rapid growth. They have over the last few years have been able to increase the rate of internet access in their countries as will be discussed below.
Hofstede 's Cultural Dimension in relation to Bangladesh
Bangladesh is a South Asian country where female entrepreneurship has thrived in the male-dominated society. Using the Hofstede's system of measuring national cultural values, Wulff (2009) described that Bangladesh has high power distance, low individualism and has a middle ranking in masculinity. The high power distance indicates how money and power is distributed in the country and the fact that employees naturally accept their position in the tall hierarchy. It is a collectivist thinking society where extended families and in-groups are formed. In terms of income, it is divided within the family and bonus is shared among groups not individuals. Ranking between 12-14, Bangladesh scored 80 in the Power Distance Index, this indicates that there might be a small selection of people in the middle class who constitutes a certain percentage of the entrepreneurs. There is also less dialogue and more violence in domestic politics. Just like income, power is based on tradition or family, charisma or the ability to use force. (REF Wulff 2009; Itim International (2009; Hofstede and Hofstede, 2005 pp 67) The belief that a woman can do the same job as a man is a strong reason behind the low masculinity in Bangladesh although women are discriminated by lower wages at times. Their economy has experienced growth and attracted foreign investors in the garment industry since 1980. This is as a result of the country benefitting from WTO's Agreement on Textiles and Clothing. The agreement allowed access without quota to European markets and for American markets, they received attractive quotas. Internally, they also succeeded due to the cheap human capital and low conversion rate. (WTO, ud) This narrative is in line with de Mooij's (2005) assertion that poverty leads to collectivism and general low level of education results to high power distance. (Hofstede and Hofstede, 2005 pg 225)
E-marketing Models and tools utilized in Bangledesh
E-marketing has provided marketing domains and tools for Bangladeshi entrepreneurs:
A commonly used model is the B2B that is Business-to-Business model. For this model, marketers use B2B websites, e-mail, online catalogue and resources to reach new business customers and serve existing customers more efficiently. It essentially helps them in obtaining efficiencies and better prices. A lot of major B2B marketers now offer sources of supply and negotiations, to carrying out transactions and payments and supply-chain management functions such as production line planning and collaborative product design and development. It also offers product information, customer purchasing and support services online. It is in record that textile exports from Bangladesh to the United States increased by 10% in 2009. The fact more entrepreneurs are using this model may have contributed to this increase. (Kotler and Armstrong, 2010; Business day, 2009) An example of a BSB website is No 1 business portal for Bangladesh (http://www.bizbangladesh.com/b2b-trade/index.php) which provides information on leading B2B leads from Bangladesh.
Another model used increasingly by Bangladeshi business owners is the Business to consumer model (B2C) which is selling goods and services to final customers directly online. The percentage of online shoppers in 2009 nicreased by 13% (BBC 2009) , this means the internet is fast becoming mainstream. As a result of globalization and the universal availability of online payment made available now online, transactions can be made without any time or geographical constraints. An example is http://www.millennia-bd.com/au.html, Millennium Garments Ltd which even provides information of current customers and pictures of their readymade garments.
Customer to customer (C2C) is a model though not popular yet as the internet availability in developing countries are still limited. C2c involves exchange of information and discussions on common interests are discussed through weblogs or blogs, online journals. Individuals and specific-interest groups post their thoughts on narrowly defined topics. Common blogs are Twitter, Beno, Myspace and other communities. A popular blogger is Asif Anwar a consultant who writes on the business landscape of the garment sector and entrepreneurial development. (http://www.blogger.com/profile/05524677871677354862; http://bangladeshgarments.blogspot.com)
These social networks receive more patronage because they cost 30-50 percent lower than internet portals such as Yahoo and MSN, even experts have predicted a global rise to over $3.5bn by 2011, nearly 580 percent of 2006 levels. (Carlos 2007 pp 3)
Briefly, the C2B model enables consumers to find companies on the internet. This may not be too popular amongst developing countries as they have to pay more money to feature on the top search results on search engines. However, it still provides a means for customers to communicate with companies rather than waiting for an invitation. Here consumers drive the business and not the usual way round.
Tools available and being used by Bangladesh include web advertising. Most popular websites include Google, MSN and Yahoo! A growing media are social networking sites particularly facebook.com. Types of ads include Pay Per Click (PPC), Pay Per 1000 Impressions (PPI), Cost Per Action (CPA),Bangla ad support, Key-word based ads, banner ads, Text ads, Image, flash and video ads. Facebook gives added value services as it not only does geographic target marketing but also language-based targeting, relationship based, provides statistics of customers. Entrepreneurs are able to engage in cost-saving advertisements as Facebook enables flexibility on ad payment by enabling bidding. Moreover, they have control on time of adverts, daily budget, monitor real-time traffic, and it is campaign-based control. (Grameen Solutions 2010). The Internet has allowed mass communication and advertising with negligible variable cost per customer (Deighton, 1997 as cited by Melewar and Smith,)
Challenges encountered by Entrepreneurs in Bangladesh in relation to the Pestel Model
There is nothing more rewarding than business owners being able to not only satisfy their customers but also maintain and grow their customer base. However, some challenges and barriers serve as deterrents in the application of e-marketing tools in their international marketing activities in achieving their objectives.
According to Cateora and Graham (2002 as cited by Strauss, El-Ansary & Frost, 2006), "the internet accelerates the process of economic growth by speeding up the diffusion of new technologies to emerging economies''. Bangladesh is still being plagued by the 'digital divide' owing to the low economic development and poverty. Bangladesh is said to have computer ownership of just 2%. (Strauss and Frost, 2000) According to World Bank (2009), the GDP of Bangladesh as at 2007 was $ 67.7bn, GDP Growth, 6.5% and GDP per capita Growth was 4.8%. These poor economic indicators reflect in the internet penetration which is estimated as 0.4% and the estimated number of internet users is daunting figure of 56,000 as at September and June 2009 respectively. This is a technical challenge for e-marketers as they have limited capability in closing this gap.
The statistical evidence produced by Nath and Murthy (2004) suggests that cultures with lower income levels and that have high uncertainty avoidance and risks (risk-averse) are resistant to the use of the Internet. This explains the low internet diffusion rate.
Infrastructural impediments are a major challenge posed to Entrepreneurs in Bangladesh and other developing countries. Poor Infrastructures and utilities inhibit the proper functioning of operations for entrepreneurs. The industry is known for gross industrial disasters. This may reduce the competitive advantage they tend to gain from other factors. (Patuakhali Science and Technology University, 2008)
The political instability atmosphere in Bangladesh, both within and outside the organization poses problems for entrepreneurs. Strikes due to poor salaries may disrupt the production and supply process thus leading to dissatisfaction when supply requirements are not meant on time. (Patuakhali Science and Technology University, 2008) In consideration of Hofstede 's cultural dimension, some customers on the B2B or B2C models, due to different orientations may choose not to deal with entrepreneurs from developing countries but may choose to purchase elsewhere at a higher price but with guaranteed time delivery. A local example is the dispute over an unsettled Telephone Bill of $50 leading to a gunfight that claimed five lives.
As Hofstede's cultural dimension indicates for countries with high power distance and uncertainty avoidance like Bangladesh and other LDCs are faced with corruption and fraud issues. (Husted, 1999) The cyber crimes and fraud has led to distrust in transacting business online. Credit card fraud, identify theft, financial scams are a source of global problem to which security measures are constantly innovated to combat this menace. A common one is phinishing which has potential to damage brand identities and images of legitimate marketers who are working hard to build confidence in web and email transactions. For security reasons only, Visa and Mastercard debit/credit cards are accepted online. For some customers, the fear of fraud may hinder them from making purchases online. Although, the latest Consumer Reports National Research Center reports that 20 percent of online shoppers are cybercrime victims, in developed countries, the government are doing next to nothing to deal with these issues. (Hofstede,2001, Strauss, El-Ansary & Frost, 2006 pp 860; consumer affairs .com 2009)
High Internet and maintenance costs also pose as challenges to entrepreneurs. An example is Cordelia Salter-Nour, founder of eshopAfrica although originally from UK has successfully run her biz in Accra. They face similar problems like other businesses internationally; they have to pay a lot to use VSAT and have 56k connection speed. Also when it comes to getting onto search engines although they have doubts customers would use search engines for their kind of craft products. Another problem is the local artisans tend to compete with them with price as they see the dollar value of the products online and in return increase the value of their products locally with little understanding of the cost incurred in running the web site. However, they offer discounts who do not mind paying by ordinary bank transfer in the old-fashioned method. (BBC, 2010; Strauss, El-Ansary & Frost, 2006 pp 129)
The challenges experienced at the Chittagong Port being the most important entry and exit point for trade and commerce of the country handles 90 per cent and 75 per cent of the imports of Bangladesh is also a barrier. (Huq 2000 as cited by Robbani ud). The port is inundated with corruption and inefficiency. . with a World Bank (1999 as cited by Robbani ud) study showing that there numerous demands for "under-the-table" payments that are made at every step of export processing, from opening of letters of credit to the clearance of goods from Customs. CPD (Centre for Policy Dialogue) 's study (1997 as cited by Robbani, ud) shows that the hidden costs paid by importers per consignment ranged from Tk.4,700 to Tk.36,800 (about US$100 to $735). These inefficiencies and corruption huge impacts negatively on the competitiveness of Bangladeshi garment in the world market.
Quality Standard do not meet up with international standard, the thickness of the clothes may not be suitable for customers in some other parts of the world. The problem of 'see but not feel' is a major problem as well. (O'Shaughnessy, 1996)
The design of a website should be able to attract and hold the attention of International users from different culture. Besides the universal English language used, it is a standardized criterion for web sites to have zip codes, currency formats, unit of measurement and international telephones. (De Mooij, 2005, pp 158) I observed some of the websites for example the website for Alam Fiber Impex ltd ( www.alamfiber.com) (lacked proper marketing appeal because a potential buyer cannot view and compare prices from a number of the websites. (Walsh, 1993)
One of the biggest issues concerning global communication is that if language. Building web sites should be based on multi-language options, but at the moment that is not the case. This may pose as a limitation to reaching and interpreting words in the context of their potential online audience. (Hofstede, 2001) Cornwell (1998 as cited by Melewar and Smith) explained that cultural and religious differences associated with country-of-origin may also pose as a barrier. However, online forums and blogs may lower this cultural barrier. According to Nicovich and Cornwell (1998 as cited by Melewar and Smith) the Internet can be used as "a bridge mechanism for the transfer between cultures" Intellectual capital is also a challenge due to low level of literacy in Bangladesh. However, with proper knowledge management, this issue can be dealt with.
Benefits of E-Marketing to Bangladeshi Entrepreneurs
A very vital point to discuss in exploring the benefits that E-marketers have is the competitive advantage they have in terms of low penetration cost in producing these labour intensive goods. Two important resources, labour and energy costs are found to be cheap and in abundance in Bangladesh which gives them a competitive edge over its competitors in India, Pakistan and China. Labour cost is only 23 cents/hr as against 43, 41 and 89 in India, Pakistan and China respectively. They are able to meet the demand of their buyers in the USA and European markets especially. Basically, they have been opened up to global competition which has long since spelt the end of domestic territoriality (Ahsan, 2010, Porter 1986 pp2; Levitt, 1983) The entry barrier of entrepreneur into the international market has been brought low by technology as Technology, no size, is touted to be a primary source for competitive advantage. The internet has provided a level playing ground for any global player with its offering to the market. (Kotabe & Helsen, 2004)
Another critical success factor for the Bangladeshi textile entrepreneurs is that policy decision. They have the huge opportunity to gain access, expand and secure their markets in Europe and USA via the MFA and GSM agreements for its Ready Made Garments. This Trade liberalization has thus far encouraged private sector investments and buoyed the industry. Another major boost and advantage to these entrepreneurs is the quota-free textile regime (since 2005) of which might be abolished and would be detrimental to these entrepreneurs. () in order to counter this likely effect, the government has encourage the backward linkage industry which will mean cotton will be sourced locally, leading to lower cost of production and increase the entry barriers for competitors. (Ahsan, 2010,IMF 2004, UNRISD, 1999)
Also they have been able to improve on their value and supply chain by sourcing for cotton from Uzbek because it offers excellent spinability and better values thus they are able to produce better products thus offer better value to their customers. In addition, the acquisition cost is relatively low compared to Pastikan, Indian and West Africa of which they have quality issues with. Also the weakness against the dollar has also help in enhancing their financial capabilities. (Ahsan, 2010)
Websites have provided DIY - Do-it-Yourself opportunity for musicians in developing countries for example, www.tradeinsounds.org, itunes.com and myspace.com which enable them to export their music without leaving even their rooms. (ITC -WIPO, 2009)
New legal frameworks are built to protect customers and marketers, for example, the consumer privacy rules, Data Protection Act and the Distance selling Directive have come into effect.
E-marketing is increasingly improving the economy of countries and is gradually closing the digital divide gap. An example is a village in Robib, Cambodia, where a group of six small villages where only 128 families live use the website villageleap.com in marketing their silk weavings to overseas buyers. They make an income of $40 per day, this is used to maintain their livelihood there and increasing the awareness of the remote village. (Strauss and Frost, 2000) Another is Delora Begum who operates a home office in a straw hut with mud floor, no toilet and no running water In Bangladesh. Popularly known as the 'phone lady', she provides 'mobile services' to the villagers who uses the phone as a major means of sourcing information regarding current market of commodities and also to conclude business transactions. She earned $600 a year which as at the time of the report was twice the annual per capita income in Bangladesh. (Jordan, 1999)
Limitations and Criticisms
This essay involved in-depth research into a lot of third world countries as per their marketing activities online and I could only draw my conclusions based on the findings of other researchers or personal deductions based on my assessment of these entrepreneurial activities. However, a lot of uncertainty lies around the actual profitability of these companies. The proper measures of profitability for example, Rate on Investment (ROI) could not be ascertained as at the writing of this essay. Also due to time, geographical and financial constraints, I could not delve much into seeking for more empirical evidences to support these facts discussed in this essay. Therefore, there is no conclusive analysis as per the progress these entrepreneur endeavors has made thus far. It is hoped that researchers or students from these regions of the world would pick interest in this very interest aspect of international marketing in the near future.
Hofstede's fifth national culture dimension , Long term orientation (Confucian dynamism) has been criticized for labeling values , that is long term orientation as positive and short term orientation as negative. It may not necessarily be so as other environmental factors may influence the level of national growth. Also only Confucianism was considered, other religious values were not applied. In addition, inaccurate English translations leading to misinterpretations in the cross cultural surveys may have led to meaningless findings. Finally the validity of the results is also questionable as the methodology applied is fundamentally flawed. (McSweeney, 2002; Fang 2003)
This essay has attempted to discuss the important terms and critically evaluated the challenges encountered by LDCs entrepreneurs in seeking and satisfying global customers online. Special focus was made on Bangladesh and a few examples from other countries were also discussed. The structural and complex barriers discussed are structural in nature and might take some time to overcome. The present and potential opportunities offered to these entrepreneurs were also explored. From the foregoing, global marketers need to understand that e-marketing goes beyond building a web site but also developing differentiation strategies to lure customers to the website and ensure proper customerization of content and constant updating of the website.
It is also imperative that entrepreneurs form LDCs have a mature and sophisticated consumer demand in their home country before they venture into new markets. Essentially, the product life cycle of the products should be at the growth or maturity level. According to Porter, it is a pre-requisite of international competitive success. (O'Shaughnessy, 1996)
More importantly, proper market segmentation and appropriate communication channel be investigated and applied in the achieving the objectives of the company which is to seek and satisfy stakeholders globally with the aim of making profit.