Emerging Market Countries and Digital Transformation

Digital transformation has been spreading extensively and rapidly since the Covid-19 pandemic. From the time when there have been prevalent stay-at-home preparations, illness, and lockdowns, firms had to make use of the technologies surrounding them in order to maintain their customer relationships. These tools include the use of video conferencing platforms like Zoom and e-learning for students to learn and several other activities that virtually took place. Technology has played a vital role in the evolution and economic growth of the Western World. However, our main focus in this article is to highlight the fact that Third World countries are still suffering to amalgamate advanced and up-to-date technologies through their system today.

Digital businesses introduce technology in order to generate new value in business models and the internal capabilities that aid with its core operations. ‘Digital’ focuses mainly on the use of technology to enhance its business performance, this allocates which direction the firm is willing to undertake to establish new competitive advantages with technology. In the present day, with the Covid-19 pandemic, people have started spending m0re m0ney online. This has created a huge shift in the digital economy that has led to more people being familiar with digital services and products which have motivated companies to capture new opportunities in the digital field. 

There have been several perspectives on the ‘right’ definition of digital business industry experts. “Digital should be seen less as a thing and more as a way of doing things” This was quoted by Karel Dorner, a principal in McKinsey’s Munich office, introduced in his article on What ‘digital’ really means. Another expert, Gartner, defined the digital business as the creation of new business designs by blurring the digital and physical worlds. There is not a single definition that is preferred over the other, businesses tend to either fit one or both of the points mentioned above by the two perspectives. 

There are common elements of digital business that companies find helpful and afterward they match it up against their own business models. The first element is the use of new technologies which help with the collection of data and provide an overall improved customer experience and indulging new value to their customers. Furthermore, this is followed by the second element which is embracing the concept of digital transformation and the requirement of cultural shifts. This introduces new roles leading the IT department with greater opportunities like input into their strategic decisions. Finally, the last element is to explore new business models that enable the customer experience to be present at the center of the digital strategy. Customers get the urge to spend more for an extraordinary cultural experience.

The vastly growing digital transformation brings a lot of benefits for many countries, with third countries, better known as emerging market countries, included. It has made businesses in these countries able to grow at such a rapid rate, by enabling producers and buyers to get more connected than ever. With technology, business becomes more inclusive to not only big corporations, but also small-medium enterprises, and even family-based businesses. Optimization of production also increases productivity, meaning more things can be done, and more goods can be produced at a lower price. Developing countries can benefit from this phenomenon since it opens the way for new businesses to grow. It is also easier for the ‘digitized’ countries to connect with other countries despite the distance.

For companies, digital transformation offers opportunities to not only boost sales and increase the production process. They are also given the chance to empower their employees through higher-skills training,  engage better with their consumers through optimized websites reachable 24/7 and digital marketing, and enhance the overall operational system by making it convenient to connect with other countries, outsource, import-export. As consumers, we can also now buy everything we need through our fingertips, and we can have the items delivered to us while we stay inside in the comfort of our own homes. This also potentially increases our customer lifetime value, since connections with brands are more up close and personal, and can last longer. According to Motista, with more intimate and emotional connections, consumers can have up to 306% higher lifetime value (PRNewswire.com, 2018).

However, we need to be aware of the potential harm digital transformation has for developing countries. The worldwide advancement of the digitization process comes with a price too. On one hand, there are many benefits the countries can reap as mentioned above. It also ultimately helps to improve the economy and reduce poverty. On the other hand, each country also inevitably has a different starting point. While some countries’ infrastructures are ready to welcome this new way of doing business, many developing countries are behind or still in the process of building theirs. This leads to a digital imbalance, which hinders the emerging countries from being able to compete against developed countries. Digital transformations demand not only the software and applications being used but also the inclusivity of the infrastructure development. People have to be trained, as their daily lives will be digitized. Electricity and good signals are required everywhere, let alone an adequate internet speed. This means that a country needs to be prepared fundamentally. Governments and stakeholders have to make sure that the people are empowered by technology, and not manipulated from the lack of information they have on how to navigate it. When we succeed in these necessities, then we can carry on to connecting everyone digitally and by governing through technology advancement. 

On top of that, emerging market countries also lose a decisive competitive advantage: cheap labor. High-income countries generally have preferences for lower-income countries to be able to gain more profit from relatively cheaper production costs. If technologies are far more preferred in the long run for the production of goods, emerging countries have to be able to compensate for the loss of jobs by competing in not only the advancement of the technologies, but also in pushing the people of their country to venture into entrepreneurship, making startups, and thus empowering the local communities to not rely on working for other people, but also to start their own businesses. 

Ultimately, the growth of the digital business has to be accompanied by the support of all parties, including the laws and regulations in order to maintain healthy competition between the countries. Emerging countries also need to be aware of the double-eyed sword of this phenomenon. It is never too late to grow and build the digital ecosystems for businesses, companies, and governments, as the digital transformation still has so much more to explore. Nevertheless, emerging countries also need to smoothly navigate themselves and catch up with the others, to make sure the countries, along with their vast potential, are ready to stand on the same level in the international business scene.

Digital transformation offers unimaginable possibilities for the human race, and greatly impacts all aspects of life, including business. With all the convenience offered, business actors can now easily connect, transact, and reach out to their consumers. However, every convenience comes with the consequence, and we as the main actors of the change have to be aware and adapt quickly. Especially for emerging market countries, digital transformation can be a golden ticket to boost their growth and to compete better with other developed countries, but without a clear strategy and strong forecast about the possible issues, it can also be a dangerous double-edged sword. In the end, there is still so much room for improvements and changes in the tactics the government and stakeholders used to reap the most benefits from digital transformation and to avoid as much as possible the negative side effects.



 

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