E-Commerce Readiness and Diffusion: The Case of Brazil

Abstract

In Brazil, a poor telecommunication infrastructure was considered an important barrier for e-business diffusion. However, from 1998, when the telecom system was privatized, to 2000, telecom investments boosted to an average of 1.36% of GNP a year, a percentage well above both Brazilian and Latin American historical levels. There is now idle capacity and telecommunication infrastructure is no longer considered a major barrier for e-commerce. Brazil's financial sector is the clear leader in adopting information technologies, and is widely considered the leading user of the Internet for marketing, online sales, and service and support. The sum of the survey results suggests that the financial sector has capitalized on its experience with IT in order to adopt e-commerce technologies and to integrate them with existing information systems. E-commerce in Brazil is strongly anchored in information intensive sectors little affected by foreign transactions. Local forces seem to play a more influential role due to Brazil's unique economic history and government policies. For e-commerce diffusion, a factor more important than the sector itself is the scale of information flow among various agents within the economy. Information-intensity is, in part, related to the size of the business. The larger the firm, the easier it obtains scale benefits of digital services. However, some activities demand more information exchange than others. Distribution and finance face similar driving forces for e-commerce diffusion, but are different from manufacturing. The manufacturing industry is driven to achieve, by cost reduction, through inventory reduction and improved logistics. But while productivity growth is the most important driving force for manufacturing, the finance and distribution sectors focus on opportunities to expand and improve their relationships with clients. The Internet is increasing the intensity of competition rather than the number of competitors. Whereas in the recent past e-commerce was dominated by new companies, nowadays-existing market leaders seem to be rapidly gaining business through the new channel. Strong links between users and producers of IT solutions facilitate technological leadership. The case study on the banking industry showed that internal technological capabilities were key for e-commerce leadership, since they enhanced the user-producer links providing capabilities that are flexible and tailored to specific needs. Legal protection is a more important barrier than expected. This includes lack of business laws for e-commerce and inadequate legal protection for Internet purchases, barriers affecting more than 40% of the surveyed Brazilian firms.

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