Via https://newsapi.org online business online marketing online business opportunities Ranking 42 countries by ease of doing digital business

Via https://newsapi.org  online business  online marketing  online business opportunities Ranking 42 countries by ease of doing digital business
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Via https://newsapi.org online business online marketing online business opportunities

via https://newsapi.org  online business  online marketing  online business opportunities
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The World Bank’s annual Doing Business survey has been described by some as the“World Cup” or “Olympics”for governments competing to make their countries attractive to businesses. The rankingmeasureshow easy it is to do business in a country by examining regulatory environments and is enormously influential: it has inspired more than3,500 reformsacross 190 economies; in 2017-18 alone, 128 economies undertook arecord 314 reforms.

While this attention to policy responsiveness is admirable, a key element is missing from rankings such as Doing Business: they say little about the ease or difficulty of doingdigitalbusiness. We aim to close this gap with the first analysis of the Ease of Doing Digital Business in 42 countries around the world. We picked these countries because they constitute the most significant markets for digital businesses worldwide and offer a consistent set of data across a wide range of indicators. We find that digital business environments require distinctive policy focuses and investments. Our evaluation is intended as a complement to that of the World Bank; it provides decision-makers a basis to compare countries not only in terms of “traditional” business-friendliness but also in terms of factors affecting setting up digital businesses.


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While all businesses have elements of digital technology built into them, we define “digital businesses” as ones that have adigital platformas core to its business model. We analyzed four essential digital platforms: ecommerce platforms (e.g. Amazon, eBay); digital media platforms (e.g. YouTube, Netflix); sharing economy platforms (e.g. Uber, Airbnb); and online freelance platforms (e.g. Upwork, Toptal).

Arguably, digital businesses represent one of the most dynamic growth aspects of most major economies. In the U.S., for example, the digital economy grew 3.7 times faster in the 11 years through 2016, compared to the economy as a whole, according to theCommerce Department’s Bureau of Economic Analysis.

We considered some of the particular challenges digital businesses face:

  • They grow or shrink at different speeds and are governed by several factors that are specific to the digital ecosystems.
  • They face unique marketresistance and competition.
  • Digital businesses present nuanced regulatory challenges. Rules governing the mobility of data, protection of user privacy, or net neutrality can fundamentally affect the ease of doing digital business – and these rules vary across countries.
  • Given their strategic value, digital businesses can be particularly important to governments. The U.S.-China rivalry is an example. Many international digital business thathave tried and failed to enter Chinawhile the U.S. ishome to many powerful tech companiesand the U.S. government has hit companies such as Chinese digital giant, Huawei, with particularlystringent restrictions.

There are numerous other infrastructural factors that are idiosyncratic to digital businesses, such as digital access and adequate bandwidth, institutional enablers for creation of digital content and internet censorship as well as the availability of talent. Despite the power of the digital economy, these factors are not as well understood, benchmarked across countries or systematically evaluated for action by policymakers, business leaders, and investors.


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Creating a Scorecard for the Ease of Doing Digital Business: Methodology

We wanted to know: how easy is it for the most significant digital platforms to enter, operate, thrive, or exit in markets around the world, and what are the primary facilitators and barriers?

We drew upon 236 variables across 42 countries from over 60 data sources comprising public databases such as those from the World Bank and the World Economic Forum, subscription services, such as GSMA and Euromonitor and proprietary sources, such as Akamai, Chartbeat, and Private Capital Research Institute. To create a composite picture of “digital business,” we considered four types of digital platforms representing distinct value propositions and the primary business models -ecommerce platforms, digital media, sharing economy platforms, and online freelance – as the leading indicators of digital business opportunities in a country.

A country’s Ease of Doing Digital Business (EDDB) score was obtained from a combination of platform-specific scores and foundational levers, as shown in the list below:

Digital platforms made up 50% of the score.They were weighted as follows:
Internet retailing/e-commerce: 20%
Digital media, defined as media and entertainment delivered through digital means: 15%
Sharing Economy/ the digital facilitation of sharing of assets between private individuals and groups: 10%
Online high-skilled freelancers using the internet to secure, complete, and deliver projects: 5%

Foundational factors made up the other 50% of the total score.They were weighted as follows:
Data accessibility, defined as the extent to which data easily transfers across and within borders, including the intensity of data flows and data restrictions. These free flows of data as well as government openness to sharing anonymized data publicly, with policies in place to safeguard user privacy: 25%
Digital and analog foundations essential for all digital platforms, across demand, supply, institutions, and innovation: 15%
World Bank Ease of Doing Businessscore for 2019, representing how a country performs compared to the best possible measure: 10%

The graphic below shows the EDDB and how 42 countries compare, both through EDDB performance in the aggregate and across the four digital platforms. 

via https://newsapi.org  online business  online marketing  online business opportunities

There are several implications of note from our findings. We’ll explore three types: key findings for notable countries, patterns by digital platforms, and a comparison of the EDDB with the World Bank’s Doing Business rankings. 

Notable Country Findings: The Strong Performers

The U.S. and UK are top performers across the board, driven by several strengths: market sophistication, supply and institutional boosters for the digital economy, accessibility of data, along with strong performance in terms of translating the “ease” across all four platforms. The UK is, of course, expected to go through some significant changes post-Brexit. We have modeled several possible scenarios – of hard and soft Brexit – and found that while the UK’s overall score drops, it retains its second-place ranking.

Here are a few other findings that stood out:

  • In Singapore,6% of the population are freelancers, yielding a high Online Freelance score. Correspondingly, its growth in ecommerce and as a sharing economy can beattributed to its digital foundations, and word of mouth popularity of sharing economy offerings. However, Singapore’s restrictions on open data sharing and regulatory constraints on digital media businesses contribute to its weaker performance on that platform. Singapore also is not a signatory to theOpen Government Partnershipwhich lowers its Data Accessibility score.
  • South Korea does best in market sophistication measures, such as mobile broadband coverage,speeds, and consumer sophistication; however, its digital media scores are adversely affected by instances ofinternet censorship. It scores relatively low on Data Accessibility because of its data localization laws which restrict spatial and location information owing tonational security concerns. Also,strong labor unions and rigid regulationshave ensured that ridesharing and home sharing services remain either partially or fully banned in Korea.
  • Estonia does particularly well in the sharing economy for several reasons. Its innovative institutions provide strong foundations. While some European countries have responded to the sharing economy with bans, Estonia has worked with companies, such as Airbnb and Uber, to come up with anew tax arrangement, allowing hosts and drivers to pay tax authorities seamlessly. Bolt, one of Uber’s most formidable competitors in Africa and Europe,was born in Estonia. Estonia’s greatest opportunity for improvement is in easing the environment for ecommerce businesses that must operate at the intersection of the digital and the physical world. It has a low per capita usage of ecommerce and is negatively affected by cross-border shipping costs in the EU.

Among the EU nations, the Nordic countries, as a group, were among the early movers in their embrace of digital technology and are consistently highly evolved digitally, as measured by our Digital Evolution Index. Their performance on the EDDB is also strong for several reasons: Nordic consumers have embraced subscription-based models fordigital newsand media access much faster than other countries;their appetite for subscription video on demand remains at an all-time high; the region is home to some of the most savvy online shoppers– a third of all Nordic consumers engage in cross border ecommerce on a monthly basis, primarily from websites in theUK, Germany, and China.  Finland, in particular, is a leader in the sharing economy; its success has been shaped by a combination ofan open government, and high levels of trust.

However, the Nordics have considerable variation among themselves in their EDDB performance primarily driven by differences in the levels of data accessibility.  Several Nordic countries have strong data localization laws, which affect their Data Accessibility scores. For example, in Denmark, the Danish Bookkeeping Act requires firms to store financial data of Danish citizens in either Denmark or another Nordic country for five years.

Notable Country Findings: Those With Significant Gaps to Close

China stands out as an anomaly and a contradiction: while it was the fastest-moving digital economy as measured by themomentum score of our Digital Evolution Index, its EDDB performance is weak. The reason is that even though it has established a highly favorable environment for the dominant domestic digital players, China is a challenging market for new and international business builders because of multiple government restrictions. The “ease” evaluated here takes the perspective of a potential digital business builder located anywhere. In addition to government barriers to entry, China’s overall environment is a difficult one for a business that plans to establish itself in the market because of a host of restrictive digital economy lawsand policies – including data localization laws and lack of data openness.  As a result, despite the rapidly advancing and highly innovative digital ecosystem within China, its EDDB performance is markedly weaker.

We have also modeled the impact of scenarios where there are no penalties for restricting data mobility to identify the impact on countries, such as China, that pay a heavy EDDB score penalty for such restrictions. In this scenario, China improves significantly and moves 13 spots up to the 26thposition in the EDDB.

As may be expected, beyond China, emerging markets, in general, exhibit significant opportunities for improvement; each represents a different challenge that must be overcome, despite their“Break Out” status on our earlier research on digital economies, the Digital Evolution Index.Consider the examples of three key emerging market nations, India, Indonesia and Turkey, each with different opportunities for improvement on the EDDB:

Comparing EDDB and Doing Business Performance

There is a modest correlation between the Doing Business and the EDDB scores (coefficient of 0.42). Being highly competitive in Doing Business is neither necessary nor sufficient for competitiveness in EDDB. There are two ways in which the scores in one diverge from the scores on the other.

First, reforms in the digital domain have not been matched by reforms in other domains, like regulation. In the EDDB, several advanced economies, such as Netherlands, Japan or Switzerland, have also made advancements in digital ease, while their traditional regulatory systems have lagged those of several emerging market nations, such as Thailand, Russia, or Malaysia, which have moved aggressively to institute reforms overall and have yet to address their digital deficiencies.

To take a closer look, consider the cases of Switzerland and Malaysia. While Switzerland does better, relatively speaking, on EDDB than on the Doing Business scores, the opposite is true for Malaysia.  On one hand, Switzerland has beenslipping in the Doing Business rankings,particularly because of its weaker performance in the “starting a business” category. It has not done enough to keep up with the reforms made by other countries that have been more aggressive in promoting entrepreneurship. Switzerland has, however, consistently maintained a strong score in the digital foundational factors and is particularly outstanding in enabling digital media, which has given it a boost on the EDDB score.

Meanwhile,Malaysia recently carried out six business reforms, and as a result it jumped nine spots on the World Bank’s Doing Business ranking to the 15thspot. Yet, Malaysia has not dealt with several barriers that affect digital businesses. These include: cross border inefficiencies and ease of market entry; a relatively lower percentage of its population covered by a 3G-or-better network; and factors that affect efficient fulfillment (timeliness, quality of trade and transport infrastructure, quality of logistics services, tracking and tracing). Malaysia also has a lower score on data accessibility because of the high frequency of government removal requests directed at companies such as Google, and government requests to Facebook for user data as well as lower scores on the Freedom of the Press and Freedom of the Net indices.  In contrast, Switzerland performed very well across all these metrics.

Second, some digital platforms get a boost from reforms that boost Doing Business: Ecommerce, given its high reliance on analog foundations for fulfillment and logistics demonstrates the strongest relationship with the Doing Business scores (co-efficient of 0.49). Digital Media stands out as the platform with the lowest correlation with the Doing Business scores. In other words, countries that are strong on Doing Business get a boost in their Ecommerce platform scores, which in turn boosts their EDDB performance.

What this means for businesses

First, unsurprisingly, digital regulations and public policy choices are key determinants of EDDB. These can range from user privacy or accessibility of data rules to those governing sharing economy companies or those protecting the rights of freelance workers. Accessibility of data is key to the sustained growth of digital businesses as they integrate the analyses of data into the products and services they continue to offer.Several countrieshave restrictions on data flows or data localization laws in place due to user privacy or other concerns. Policymakers keen on fostering robust digital economies would do well by measuring and monitoring what we call their Gross Data Product orthe new “GDP”and carefully evaluate barriers to accessibility of data.

Second, infrastructural elements that are at the intersection of the digital with the physical world, from internet and mobile access to payments and fulfilment, are all key to performance on EDDB, just as they are key to traditional businesses.

Third, since digital businesses are built on platforms that match users on either side of a transaction, the factors governing all users’ capabilities are key to EDDB. Skills, user sophistication, and the willingness to engage with digital platforms are all factors.

Fourth, greater ease for one kind of a digital platform in a country does not automatically translate into ease for every other kind of digital platform. Each digital platform relies on different levers. Ecommerce relies on analog foundations for fulfillment and logistics. Ecommerce-friendly regulations and enforcement of antitrust help with cross-border e-shopping. As for Digital Media, online freedoms are a boon; countries in the bottom quartile are beset by media restrictions and censorship. Countries in the top quartile on the Sharing Economy have high availability of idle assets, infrastructure and have mitigated the resistance and protests from incumbents negatively affected by sharing economy businesses. Online Freelancers benefit from English language proficiency, high-skilled talent pools and easier invoicing and tax filing regimes.

Finally, digital platforms are global. Not only do national regulations matter, but cross-border restrictions on the movement of data and regulations governing the flows of payments, can govern the growth of digital platforms.

All of these are possible levers that policymakers, businesses and investors must keep an eye on and activate if they wish to boost digital business in any country.

Editor’s note: Every ranking or index is just one way to analyze and compare companies or places, based on a specific methodology and data set. At HBR, we believe that a well-designed index can provide useful insights, even though by definition it is a snapshot of a bigger picture. We always urge you to read the methodology carefully.

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