Modeling Factors Affecting the Expansion of E-Commerce Supply in Iran by an Integrated Approach

اقتصاد و توسعه منطقه ای

Article 9, Volume 30, Issue 26, February 2024, Pages 268-298   

Document Type: Original Article

DOI: 10.22067/erd.2024.82509.1183

Authors

Ali Alivar¹; Mohammad Reza Armanmehr^{* 2}; Mohammad Mirbagherijam²

¹M.S of Economic Systems Planning, Department of Industrial Engineering and Management, Shahrood University of Technology, Shahrood, Iran

²Assistant Professor, Department of Industrial Engineering and Management, Shahrood University of Technology, Shahrood, Iran

Abstract

 
1- INTRODUCTION
E-Commerce plays a fundamental role in the global economy and has a significant impact on the growth of countries. This area has far-reaching impacts on social activities such as retail, healthcare services, financial services, manufacturing and etc. E-Commerce is observed as a driver of future economic growth and is attributed to its new communication channels and constant accessibility. In Iran, this sector is growing, but the country's share of E-Commerce sales in the region is relatively small. According to the 2019 UNCTAD report, Iran's share of E-Commerce sales was only 7%, and the country ranked 42nd out of 152 countries in the E-Commerce sector. Therefore, in order to promote E-Commerce in the country, this research models the behavior of the E-Commerce system in Iran by integrating econometric and dynamic systems approaches. The aim is to simulate and evaluate the influencing variables on E-Commerce development, quantify the effects of the factors and clarify the obstacles to E-Commerce development in the country.
 
2- THEORETICAL FRAMEWORK
Several factors influence the adoption and development of E-Commerce, and categorizing them helps to understand and expand the mental model of E-Commerce development. Examples of influencing factors in E-Commerce development are trust in the E-Commerce system, security of the information exchange space, service quality, and information quality and system infrastructure quality, customer satisfaction, advertising, public awarenes, technology usage level and education and learning in E-Commerce. In this study, the factors affecting E-Commerce development in the country are divided into four groups: 1 – infrastructure, 2 – security and privacy, 3 – quality and benefits of E-Commerce, and 4 – trust and customer satisfaction. These factors are identified and classified in the study's conceptual model, with these four categories representing the most critical components of the dynamic E-Commerce system.
Based on previous studies, positive and crucial factors in E-Commerce include information availability and quality, awareness and information dissemination, infrastructure improvement, and culture promotion for the use of technology, improved education, electronic trust, perceived security, information quality and product variety, use of specialized information platforms, secure payment systems, advertising, government infrastructure support for E-Commerce, computer literacy and internet literacy. On the other hand, the barriers to lower acceptance of E-Commerce in society include legal problems and tax evasion, lack of technology infrastructure and the inconsistency of economic policies with the development of the e-economy.
 
3- METHODOLOGY
System dynamics aims at an internal interpretation of the causes of phenomena and system dynamics is one of the best scientific methods for modeling complex, dynamic and nonlinear systems. For this reason, the research methodology for identifying and modeling the factors affecting the development of electronic commerce in the country is a combination of systems approach and econometrics. The modeling uses time series data collected by the Statistical Center of Iran and other reliable statistical sources from 2006 to 2021, and the research model's predictions extend to the year 2031. The estimate of per capita income from electronic commerce in the dynamic model was performed with a multivariate regression model. The limit of the dynamic model for the development of electronic commerce is determined by the selection of endogenous and exogenous variables. To illustrate the system feedback, causal loop diagrams and state flow diagrams of the dynamic model are created by using Vensim software. The dynamic hypotheses of the research are validated by three tests: the reference behavior test, the extreme condition test and the sensitivity analysis test. After validating the model, policymaking will be carried out in two scenarios: increasing advertising and increasing government support for infrastructure development until 2031.
 
4- RESULTS & DISCUSSION
The results of the reference behavior, extreme conditions and sensitivity analysis confirm the validity and accuracy of the dynamic model in research. The evaluation of the research hypotheses suggests that an increase in public awareness leads to a growth in the number of E-Commerce providers. In addition, as system quality increases, the number of E-Commerce providers increases exponentially. The increase in E-Commerce revenue also leads to a logarithmic growth in the number of providers.
The scenario analysis under the dynamic system model of E-Commerce development shows that doubling advertising leads to a 2.2% increase in vendors, while tripling advertising leads to a 6.2% increase. It is observed that advertising promotes the development of E-Commerce as an increase in advertising leads to increased public awareness, which ultimately leads to an increase in the number of consumers and therefore an increase in the number of E-Commerce provider’s leads. In the second scenario, a doubling of government support for infrastructure development leads to an increase in suppliers by 3.2%, and with a tripling of government support, suppliers increase by 4.2%, which contributes to the development of E-Commerce. This is due to the fact that increased government support for infrastructure leads to improved infrastructure quality, increased efficiency, security of information sharing and public trust. Increased trust leads to an increase in the number of buyers and an increase in E-Commerce providers.
 
5- CONCLUSIONS & SUGGESTIONS
Increasing awareness among government, entrepreneurs and society will lead to further growth in E-Commerce offerings over time. Consequently, cultural, educational and support efforts are needed to develop and promote the use of E-Commerce in the country. The Iranian economoy and trade structure as well as the knowledge gap in technology have hindered the private sector from synchronizing with the developments and sustainably establishing E-Commerce in the country. Therefore, government policymaking and support are crucial to improve the quality of the E-Commerce system in Iran. The increase in sales through E-Commerce leads to an increase in E-Commerce providers. Efforts to support the market and expand electronic infrastructure are therefore also recommended.

Keywords

E-Commerce; Digital Economy; System Dynamics; Integrated Approach

References

AbreDari, Y.; Falah, T., & NoshadiJalal, M. (2021). Identification and ranking of factors affecting the implementation of e-commerce using the TOPSIS method,The fourth international conference on knowledge and technology of the third millennium of Iran's economy, management and accounting, Tehran. (in Persian)

Almeida, D. B.; Magalhães, C.; Sousa, Z.; Borges, M. T.; Silva, E.; Blanquet, I., & Mucha, A. P. (2021).  Microbial community dynamics in a hatchery recirculating aquaculture system (RAS) of sole (Solea senegalensis). Aquaculture. 539, 736592.

Annual report of electronic commerce. (2021). Iran Center for e-Commerce Development. (in Persian)

Annual report of electronic commerce. (2022). Iran Center for e-Commerce Development. (in Persian)

Babaianpour, M., & Karamati, V. (2020). The model of acceptance of e-commerce in government organizations by customers with the systems dynamics approach (case study: a government organization), the first international conference on new challenges and solutions in industrial engineering, management and accounting, Sari. (in Persian)

Bala, B. K.; Arshad, F. M., & Noh, K. M. (2017). System dynamics. Modelling and Simulation, 274.‏

Bastan, M.; Abbasi, E., & Tavakoli, H. (2015). Challenges of electronic government in Iran: a model based on system dynamics approach, the first international conference on industrial engineering, management and accounting, Tehran. (in Persian)

DelAfrooz, N.; Taghavi, A. A.; Ghasemi, A., & Jafari, S. (2019). Identifying factors influencing the development of e-commerce with emphasis on the role of social networks. Business Management, 11(43), 70-87. The Journal of Business Management of the Islamic Azad University. (in Persian)

Farokhizadeh, F.; Toloie Eshlaghy, A.; Radfar, R., & Shoja, N. (2019). A Dynamic Model of E-Readiness for SMEs to Enter the E-Commerce Domain, Modern Researches in Decision Making, 4(2), 97-122. (in Persian)

Fernández-Bonilla, F.; Gijón, C., & De la Vega, B. (2022). E-commerce in Spain: Determining factors and the importance of the e-trust. Telecommunications Policy, 46(1), 102280.‏

Gupta, A. (2014). E-Commerce: Role of E-Commerce in today’s business. International Journal of Computing and Corporate Research, 4(1), 1-8.‏

Haji Gholam Serizdi, A.; Zandi Dareh Gharibi, D.; Azizi, H., & Azadian, R. (2019). Analyzing the expansion of e-commerce in Iran using the systems dynamics approach, the second national conference of the Iranian Society of Systems Dynamics, Tehran. (in Persian)

Kim, D. H. (1999). Introduction to systems thinking, 16, Waltham, MA: Pegasus Communications.‏  

Kabango, C. M., & Asa, A. R. (2015). Factors influencing e-commerce development: Implications for the developing countries. International Journal of Innovation and Economic Development, 1(1), 64-72.‏

Mousavizadeh, S., & Vahabzadeh, S. (2019). Investigating the impact of national culture on customer trust in the development of e-commerce (the study of all branches of Tejarat Bank in Tehran), the third national conference on modern management and accounting studies in Iran, Karaj. (in Persian)

Oliva, R.; Sterman, J. D., & Giese, M. (2003). Limits to growth in the new economy: exploring the ‘get big fast’strategy in e‐commerce. System Dynamics Review: The Journal of the System Dynamics Society, 19(2), 83-117.‏  

Panasenko, S. V.; Karashchuk, O. S.; Mayorova, E. A.; Nikishin, A. F., & Boykova, A. V. (2019). Regional aspects of e-commerce development. International Journal of Civil Engineering and Technology, 10(2), 1821-1829.‏

Raghebi, M., & Salimi, F. (2022). The strategic role of e-commerce on supply chain management, the first international conference on the leap of management, economics and accounting sciences, Sari. (in Persian)

Shahabadi, A., & Ganji, M. (2015). Challenges and opportunities of the state of maturity and electronic readiness of the Islamic Republic of Iran compared to selected Islamic and developed countries in line with the development of electronic commerce and economy. Development Strategy, 41: 149- 184. (in Persian)

Startseva, E.; Xia, Z. H., & Rathnayake, D. N. (2021). E-Commerce Developments and Strategies for Value Creation: The Case of Russia and China. Journal of Contemporary Issues in Business and Government, 27(3), 1232.‏

Sterman JD. (2000) Business dynamics: systems thinking and modeling for a complex world. McGraw-Hill Higher Education, Boston

Sweeney, L. B., & Sterman, J. D. (2000). Bathtub dynamics: initial results of a systems thinking inventory. System Dynamics Review: The Journal of the System Dynamics Society, 16(4), 249-286.‏

Zarei, M., & Hasanpour, H. A. (2013). Analysis of the dynamics of factors affecting e-commerce with the approach of system dynamics, the second international conference on management, entrepreneurship and economic development, Qom. (in Persian)