MASTER'S THESIS. E-Business Adoption in the Banking Industry in Ghana. Emma Anamuah-Mensah Georgia Marfo. Luleå University of Technology

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1 MASTER'S THESIS 2009:038 E-Business Adoption in the Banking Industry in Ghana Emma Anamuah-Mensah Georgia Marfo Luleå University of Technology Master Thesis, Continuation Courses Marketing and e-commerce Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce 2009:038 - ISSN: ISRN: LTU-PB-EX--09/038--SE

2 To God Be The Glory Great Things He Has Done! i

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4 ACKNOWLEDGEMENTS To God Almighty and Our Lord and Saviour Jesus Christ. We express our profound and deepest gratitude to you. Your grace and mercy have enabled us to make this milestone. Our reverence to you Father. To Dr. Anne.Engstrom - our wonderful supervisor We owe you a special debt of gratitude for your excellent guidance, thorough supervision and positive criticism that has engineered the production of this work. We salute you madam! We say God richly bless and increase you abundantly. To the Staff of the four sampled banks Our deepest appreciation for your time, efforts and inputs for being used as the case study in this study. You have our respect Sirs! God bless you all. To Dr. Kwame Adam- our Friend and Proof Reader We say special thanks to you for all your energy, time, efforts and contributions. God bless you. Finally, to all who shared a word or two with us, encouraged, prayed and supported us in diverse ways to assist us complete successfully this thesis, we say our Almighty God bless you with your heart desires for you have helped us to achieve ours. God Bless Everyone. While we share the credit of this thesis with all the above-mentioned people, responsibility for any errors, shortcomings or omissions in this work is solely our own. iii

5 DEDICATION This thesis is dedicated to our husbands; Mr. Ebow Amanuah Mensah & Mr. Emmanuel Coffie For Your Love and Support iv

6 ABSTRACT This thesis is based on a case study of four banks, in Ghana; two private and two state banks. The study only sought to examine the adoption of e-business in the Ghanaian banking industry with respect to the expected benefits derived by adopting e-business, the barriers that prevent firms from taking advantage of e-business adoption and the challenges firms encounter when adopting e-business. The study idea was conceived on the premise that businesses are always looking for ways of improving their products and services deliveries and will thus be useful to understand how the adoption of e- Business can benefit the banking industries in Ghana that is seen to be in the fore-front of national development. The researchers also wanted to understand how electronic commerce as a new way of doing business can be introduced effectively in the Ghanaian banking business especially with the understanding that E-business involves the fundamental reengineering of business model into a internet based networked enterprise. The result of the study indicated that the benefits of e-business are well known to the banks and represent a formidable force to drive the adoption by many banks in Ghana. The benefits of e-business are experienced whether or not the bank is state or private. The various areas where the banks are preparing to use e-business approach includes familiar and relatively mature electronically-based products in developing markets, such as telephone banking, credit cards, ATMs, and direct deposit. This means that most of the banks have recognized the need to change their business process to conform to changing business trends in order to keep up with competition. Despite the perceived and experienced benefits of e-business in Ghanaian banking, they also identified v

7 several barriers and challenges that could be described as: economic; technical and technological; ethical and institutional; and socio-cultural. The results also revealed that the banks consider technology as the most important challenge to the effective adoption of e-service in the banking industry in Ghana. The study provides some recommendations towards improving e-business adoption in Ghanaian banks vi

8 Table of Contents ACKNOWLEDGEMENTS... III DEDICATION...IV ABSTRACT...V TABLE OF CONTENTS...VII TABLE OF TABLES...IX CHAPTER 1: INTRODUCTION BACKGROUND PURPOSE OF STUDY RESEARCH QUESTIONS SIGNIFICANCE OF THE STUDY SCOPE AND LIMITATION OF STUDY... 5 CHAPTER 2: LITERATURE REVIEW THE EVOLUTION OF E BUSINESS DEFINING E BUSINESS E BUSINESS ADOPTION BENEFITS OF E BUSINESS ADOPTION BARRIERS TO E BUSINESS ADOPTION CHALLENGES RELATED TO THE ADOPTION OF E BUSINESS...14 CHAPTER 3: CONCEPTUAL FRAMEWORK INTRODUCTION Benefits of E Business Barriers to E Business Adoption Challenges of E Business adoption SUMMARIZATION OF THEORIES, CONCEPTS AND FRAME OF REFERENCE IN LINE WITH RESEARCH QUESTIONS Research Question One: What are the benefits that may be derived by adopting ebusiness Research Question Two: What are the barriers to the adoption of e business in banks in Ghana Research Question Three: What challenges do banks face in adopting e business CHAPTER 4: METHODOLOGY INTRODUCTION RESEARCH PURPOSE RESEARCH APPROACH Strategies for Research Study Area TYPE OF DATA AND DATA COLLECTION Type of data DATA COLLECTION Sample Selection Empirical Data Secondary data Research Protocols and Case study data base DATA ANALYSIS Method of Analysis vii

9 4.7. QUALITY DATA Validity and Reliability Validity Reliability CHAPTER 5: CASE STUDY ANALYSIS INTRODUCTION GENERAL DESCRIPTION OF BANKING IN GHANA INDIVIDUAL CASE ANALYSIS Case One: Ecobank Ghana Ltd E business Adoption in Ecobank Ghana Ltd Benefits of e business adoption in Ecobank Ghana Barriers to the adoption of e business in Ecobank Ghana Challenges in the adoption of e business in Ecobank Case Two: Stanbic Bank Ghana Limited (SBG) E business Adoption in Standbic Bank Ghana (SBG) Benefits of e business adoption in Stanbic Bank Ghana Barriers to the adoption of e business in Stanbic Bank Ghana (SBG) Challenges in the adoption of e business in Stanbic Bank Ghana (SBG) Case Three: Agricultural Development Bank (ADB) E business Adoption in Agricultural Development Bank Benefits of e business adoption in Agricultural Development Bank Ltd Barriers to the adoption of e business in Agricultural Development Bank Ltd Challenges in the adoption of e business in Agricultural Development Bank (ADB) Case Four: Ghana Commercial Bank E business Adoption in Ghana Commercial Bank Ltd Benefits of e business adoption in Ghana Commercial Bank Ltd Barriers to the adoption of e business in Ghana Commercial Bank Ltd Challenges in the adoption of e business in Ghana Commercial bank Ghana CROSS CASE ANALYSIS Cross case analysis Banking Business Characteristics in Ghana Bank age and Regional coverage Type and location of customers Reasons for applying e business E services and products Cross Analysis of Benefits to the adoption of E business Cross Analysis of Barriers to the adoption of E business CROSS ANALYSIS OF PERCEIVED CHALLENGES IN THE ADOPTION OF E BUSINESS CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS BENEFITS THAT MAY BE DERIVED BY ADOPTING E BUSINESS BARRIERS TO THE ADOPTION OF E BUSINESS IN BANKS IN GHANA CHALLENGES THAT BANKS FACE IN ADOPTING E BUSINESS SUMMARY RECOMMENDATIONS...53 REFERENCES...55 APPENDIX...72 Table of Figures Figure 2-1: Classification of e-business and e-commerce (adapted from EC 2007)...8 Figure 3-1: Emerged frame of reference...21 Figure 5-1: Ghana map inserted with the Regional distribution of banks and Numbers showing human population density per square kilometer...42 viii

10 Table of Tables Table 3-1: A table showing research questions and theories used to answer Table 5-1: Description of the four selected Banks in Ghana...33 Table 5-2: Benefits of e-business adoption, derived from literature review...44 Table 5-3: Benefits of e-business adoption, additional findings...45 Table 5-4: Barriers to e-business adoption, derived from literature review...46 Table 5-5: Challenges of e-business adoption, derived from literature review...48 Table 5-6: Challenges of e-business adoption AdditionalFindings...48 ix

11 Chapter 1: Introduction 1.1. Background Information and Communication Technologies (ICTs) have become an essential part of our lives. In the past decade, the use of ICT throughout society really took off with the introduction of the Internet. The Internet started mainly as a network for researchers that gave the opportunity to share information and ideas. An important step in the commercialization of the Internet was the announcement of the World Wide Web (www) in 1991 by Tim Berners-Lee of CERN (Kalakota and Whinston, 1996). Today, because the Internet can facilitate the quick and efficient movement of information among trading partners at a greatly reduced cost, (Ministry of Commerce Barbados, 2005), business via the internet or electronic commerce (E-Commerce) has become one of the principal means of doing business. In the World Trade Organization (WTO) Work Programme, E-Commerce is understood to mean the production, distribution, marketing, sale or delivery of goods and services by electronic means. Broadly defined, electronic commerce encompasses all kinds of commercial transactions that are concluded over an electronic medium or network, essentially, the Internet. Electronic Commerce is a new way of doing business. According to Payne (2003) it is transacting or enabling the marketing, buying, and selling of goods and/or information through an electronic media, specifically the Internet. Recently authors have begun to delineate more explicitly a difference between e- commerce and e-business. E-commerce is emerging as the term used when discussing the process of transacting business over the Internet. E-Business, on the other hand, involves the fundamental reengineering of the business model into an Internet based networked enterprise. The difference in the two terms according to most authors is the degree to which an organization transforms its business operations and practices Page 1

12 through the use of the Internet (Hackbarth & Kettinger 2000; Mehrtens et.al. 2001; Poon 2000; Poon & Swatman, 1997). In this study, we will use e-business to describe all electronically based exchanges of goods, services and information. According to Basu and Muylle (2007), E-Business has dramatically changed how companies business processes are implemented and has also enhanced industry structure and shifted the balance of power between corporations and their suppliers and customers. According to them, companies in every industry have had to evaluate the opportunities and threats presented by e-business. By thinking strategically about e- Business, managers can select technological solutions that support the company s business strategies and create value for the company and its customers (Cote et al, 2005). The Internet is driving the new economy by creating unprecedented opportunities for countries, companies and individuals around the world. Today CEOs worldwide recognize the strategic role that the Internet plays in their company s ability to survive and compete in the future. (Al-Mudimigh, 2007). Indeed, currently businesses everywhere need to understand the if, when and how to use electronic commerce. In some industries, businesses are learning now that this is no longer an option to consider, but a requirement for survival. The reach of the underlying information and communication technologies (ICT) making electronic commerce possible is also causing unprecedented globalization of business. Businesses in developing countries will soon be affected as significantly as those elsewhere (Payne, 2003). In this respect, Kofi Annan former UN Secretary General opined that, the ability of developing countries to adopt e-business can be another opportunity for accelerate economic growth and development. However, according to research conducted, companies and the private sector in Africa have not been active initiators of e-commerce. For example, a survey in Ghana (part of a Ghana SCAN-ICT study) 1 revealed that about 65% of ICT companies do not have a 1 Workshop%20Programme-Final.pdf Page 2

13 presence on the Internet and 84% reported that they were not involved in e-commerce. (Opoku Mensah et al, 2005) Though there are a growing number of examples of the use of ICT for electronic business (e-business) in developing countries the effects to date are small compared to what is expected to occur (UNCTAD Report, 2002) 2. As the economy of Ghana is picking up the service industry especially the banking industry are extending their national and regional coverage to be able to provide the needed financial service. In this development it is expected that the use of the internet would facilitate the adoption of e-business in the Ghana banking industry as a means of offering fast, flexible, and cost-effective ways of doing business as well as enhance their competitiveness. This state of development will be important especially as volume of trade increases and Ghana and other developed countries require fast transfers of monies, payments across continents, and many other services that promote growth of business (Al-Mudimigh, 2007). As with most developing countries that have pursued economic and structural reforms, Ghana has been undergoing a process of financial sector restructuring and transformation as an integral part of a comprehensive strategy for some time (Acquah, 2006). According to Bawumia (2007) banks in Ghana will need to reinvent themselves in this new conducive but challenging environment. This is important because electronic transactions will continue to grow and only countries that make a move towards embracing e-business will participate in this revenue generation (Akoh, 2001). Banking in Ghana is one of the industries being radically transformed by ICT (Frempong, 2007). For example most banks within the main cities of Ghana now employ cutting edge technologies to roll out their products to their Ghanaian customers. (Bawumia, 2007). Banks today are becoming increasingly aware of both the threat and the opportunity that the Web represents. ICT- mediated services such as automatic teller machines, electronic fund transfer, electronic smart cards, cell phone banking among others, are 2 UNCTAD Report: "Developing world looks to e-business for growth" Page 3

14 transforming the traditional ways of banking and providing competitive edge for banks that provide those services (Frempong, 2007). But, to be competitive in the Internet economy, companies need to harness the power of the Internet successfully (Al- Mudimigh, 2007) hence it is important to understand the benefits, barriers and challenges related to companies adoption of e-business Purpose of study In Ghana banking is one of the service industries crucial to the growth of its emerging economy. Banking is important in the role it plays in capital mobilization and granting of financial facilities that is crucial to business development and growth. As businesses always need to find ways of improving its products and services deliveries it will be useful to understand how the adoption of e-business can benefit the banking industry. The purpose of this study therefore is.to describe the status of adoption of e-business in banks in Ghana as a means of identifying their special needs for enhancing the adoptions processes. The specific objectives to be achieved are to: identify the benefits of e-business to the banking industry in Ghana; explore barriers to the adoption of e-business in banks in Ghana; and describe the challenges encountered in the adoption of e-business Research questions The research questions to be addressed by this study will be: o What are the benefits that may be derived by adopting e-business o What are the barriers to the adoption of e-business in banks in Ghana, o What challenges do banks face in adopting e-business Page 4

15 1.4. Significance of the Study The significance of this study can be seen in the fact that the outcome can be applied in the development of national policy framework as a guide for e-business adoption, which is relevant to the national policy of using the banks to facilitate economic and social growth. In this respect the study will improve our understanding of the following issues as they apply in the Ghanaian situation. o The relevance of e-business in banking for a developing country like Ghana o Expected benefits derived by adopting e-business o The barriers that prevent firms from taking advantage of e-business adoption o The challenges firms encounter when adopting e-business 1.5. Scope and Limitation of Study In this study, it is assumed that e-business concerns the recognition of business opportunities that are based on ICT. The exploitation of these opportunities for e- Business gives a competitive edge. This study focuses on the ability of firms to discover and exploit opportunities based on ICT. Again, the emphasis is not on the process of opportunity recognition itself. Rather, the result (the expected e-business benefits) is related to a firm s ability to recognize opportunities and the benefits it brings. In other words, which firm characteristics explain the recognition of opportunities for e-business leading to its adoption? This study will only examine the adoption of e-business in banking with respect to their; o benefits o barriers o challenges Page 5

16 Due mainly to time and budgetary constraints this research will cover only four banks. Two of which are state-owned banks located in Kumasi, the second largest city and the other two which are private-owned banks located in Accra, the capital of Ghana. Page 6

17 Chapter 2: Literature Review In chapter One we set out the outline of our study, stating the pursopse, specific objectives, scope of study and research questions. In this chapter we present from a literature survey existing views, knowledge and other information relevant to the theme of this study but more importantly to the objectives and research questions set for this study. This literature review was also conducted to help put the research methodology in a better conceptual framework. In this regard the review focused on: the evolution and definition of e-business; processes of e-business adoption; benefits, barriers and challenges to e-business adoption The Evolution of e Business E-Business probably began with electronic data interchange in the 1960s (Zwass, 1996). However, (Melão, 2008) suggests that it was only in the 1990s, primarily via the Internet, that e-business has emerged as a core feature of many organizations. In his opinion, the hope was that e-business would revolutionize the ways in which organizations interact with customers, employees, suppliers and partners. Some saw e- Business as part of a recipe to stay competitive in the global economy Defining e Business The term e-business has a very broad application and means different things to different people. Furthermore, its relation with e-commerce is at the source of many disagreements. (Melão, 2008) Some authors view e-business as the evolution of e- commerce from the buying and selling over the Internet, and argue that the former is a subset of the latter.( Turban et al., 2006). Others defend that, although related, they are distinct concepts (Laudon and Traver, 2008). Others use both terms interchangeably to mean the same thing (Schneider, 2002). (Kalakota and Robinson, 2000) proposed a definition of e-business that clearly stresses the difference between e-commerce and e- Page 7

18 business. More precisely they assume that e-business is not just about e-commerce transactions or about buying and selling over the Web; it is the overall strategy of redefining old business models, with the aid of technology, to maximize customer value and profits. Kalakota and Robinson s definition is of great importance because it describes e-business as an essential business-reengineering factor that can promote company s growth. (European Commission, 2007) Recently authors have begun to delineate more explicitly a difference between e- commerce and e-business. E-commerce is emerging as the term used when discussing the process of transacting business over the Internet. E-Business, on the other hand, involves the fundamental reengineering of the business model into an Internet based networked enterprise. While e-business refers to more strategic focus with an emphasis on the functions that occur using electronic capabilities, e-commerce is a subset of an overall e- business strategy. E-commerce aims at adding revenue streams using the World Wide Web or the Internet to build and enhance relationships with clients and partners. Often, e-commerce involves the application of knowledge management systems. On the other hand, e-business involves business processes that span through the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service and cooperating with business partners. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these (European Commission, 2007). Figure 2-1: Classification of e-business and e-commerce (adapted from EC 2007) Page 8

19 The difference in the two terms according to most authors is the degree to which an organization transforms its business operations and practices through the use of the Internet (Hackbarth & Kettinger, 2000; Mehrtens et.al., 2001; Poon, 2000; Poon & Swatman, 1997) Some commonly used definitions of e-business are presented by; o Earl (2000) e-business is about re-engineering or redesigning business processes to match customers expectations in the new economy o El Sawy (2001) e-business involves rethinking and redesigning business processes at both the enterprise and supply chain level to take advantage of Internet connectivity and new ways of creating value o Kalakota and Robinson (2001) e-business is the complex fusion of business processes, enterprise applications, and organisational structure necessary to create a high performance business model o Laudon and Traver (2008) e-business refers primarily to the digital enablement of transactions and processes within a firm, involving only the information systems under the control of the firm o Papazoglou and Ribbers (2006) e-business can be defined as the conduct of automated business transactions by means of electronic communications networks (e.g., via the Internet and/or possibly private networks) end-to-end o Schneider (2002) business activities conducted using electronic data transmission technologies such as those used in the Internet and the World Wide Web o Turban et al. (2006) e-business refers to a broader definition of e- commerce], not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization o Windrum and Berranger (2002) E-business is the integration of the internet and related ICTs into the business organization Page 9

20 According to (Melão, 2008) the clear commonalities among these definitions, include the improvement of business processes and the use of ICT in intranets, extranets and the Internet to conduct business. He defines e-business as the use of ICT as an enabler to (re)design, manage, execute, improve and control business processes both within and between organizations. Thus, front- and back-office integration and multi-channel integration become crucial in e-business, which requires a challenging process improvement approach to support the necessary organizational, technological and social changes. E-Business can describe companies operating in the ICT producing sectors as well as new emerging sectors and industries such as in the area of digital content. However, at a more fundamental level, the term e-business also describes the application of information and communication technologies to business processes in all sectors of the economy to reduce costs, to improve customer value and to find new markets for products and services (Department of Enterprise, Trade and Employment, 2004). Electronic business methods enable companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers. E- Business refers to more strategic focus with an emphasis on the functions that occur using electronic capabilities. (Yen-Yi, 2006) In this study we will, as previously stated, use e-business to describe all electronically based exchanges of goods, services and information E Business Adoption The organizational adoption of an innovation has been defined as the adoption of an internally generated or purchased device, system, policy, program, process, product, or service that is new to the adopting organization (Daft, 1982) E-business commonly involves integration of the internet and related ICTs into the business organization and has two facets. One is the integration of the supply chain so that production and delivery become a seamless process. The other is the creation of new business models based on open systems of communication between customers, Page 10

21 suppliers and partners. Where the integration of the supply chain provides increased efficiency and significant cost advantages through waste minimization, the development of new products and services are facilitated by new ways of conducting business based on internet working between organizations and individuals. (Windrum, and De Berranger, 2002 It is possible to trace a number of stages through which firms are passing as they progress towards e-business. Each stage is associated with a higher degree of internetworking and sophistication in communication modes, progression from traditional commerce to e-commerce business models which require more radical restructuring of the internal structures. (Windrum and De Berranger, 2002). In order to acquire a holistic view of the electronic business adoption phenomenon the academic and research community has focused its research attention on the analysis of the electronic business adoption process. Within this framework, a great amount of effort has been placed on the examination of the electronic business adoption process as well as on the investigation of the significant factors that affect the specific process. The results of the specific research attempts and developments have led to the formulation of certain electronic business adoption models (European Commission, 2007). The Stages theory has been widely used as a way of examining the adoption and progression of various aspects of electronic business in organizations. The main assumption of the Stages theory is that organizations progress towards electronic business through a number of clearly defined and successive stages or phases. Each adoption stage or phase is characterized by the existence of distinctive applications, benefits and problems while it reflects a particular level of maturity in terms of the use and management of Information Systems and Information Technologies (Taylor and Murphy, 2004). It is also assumed that the electronic business adoption process is linear, while the outcomes and the developments of the progressive process are cumulative. (European Commission, 2007). Page 11

22 Within the Staged adoption models, early stages of electronic business adoption are typically characterized by gaining access to the Internet followed by the use of relatively simple applications, such as electronic mail ( ), in order to dispense and gather information. Later, the business starts to publish a wider range of information in order to market its products or services and perhaps provide after-sales support. The deployment of electronic commerce practices comes next, allowing the users of the corporate site to order and/or pay for goods and services. In the most mature stages, the corporate website is fully integrated with the various back office systems such as enterprise resource planning (ERP), customer relationship management (CRM), and integrated supply chain management (SCM) applications (Mendo and Fitzgerald, 2005) Electronic business can be approached in many different ways, depending on the specific business process that might be carried out through the Internet. Thus, several Internet usage profiles or approaches are possible. A company must determine which profile or combination of profiles best suits its particular business context and strategy. (Mendo and Fitzgerald, 2005) 2.4. Benefits of E Business Adoption According to Basu and Muylle (2007), companies can gain two fundamental types of benefits from e-business. These are generally described as: Value Creation or Value Enhancement for one or more of a company s stakeholder groups; and Lower Cost of providing goods and services to the market place. Examples under Value Creation include Improvement in internal and external communication through effective e-marketing, Increment of sales through an e- commerce website integrated with a back office systems and Improvement in supplier relations and productivity through collaborative workspaces (Basu and Muylle, 2007). And examples under Lower Cost are: reduction in communication and travel costs using online meeting tools; shared workspaces and; benefit from license free open source alternatives to proprietary software ( Business). Page 12

23 Businesses also see tremendous opportunities for cost saving, revenue generation, increased market share, marketing and market access, and improving customer service through direct links that facilitate speedy enquiry and feedback. Similarly, consumers can inter alia, access the world market through the virtual economy on the Internet, choose from a wider variety of products, and shop in the comfort of their homes. Globalization and specifically liberalization of communication networks have all facilitated this break-through that further presents a massive boost for international trade. (Mark Bynoe, 2002) Akoh (2001) answers the question why firms should go the e-business way and outlines the tremendous benefits derived by firms who have already integrated e- Business in their business processes. According to him it is shown that the cost of a full-service trading transaction is about $150. It will cost $69 doing the same using a discount broker and $10 using an online broker! That s about $140 saving on doing business on the web. Ako (2001) states that it will cost all parties (the bank, consumer, service provider, etc.) $1.27 for a banking transaction (could be as little as making a cash withdrawal) at a bank branch, $0.27 using an ATM machine and $0.01 banking using the Internet! And in addition Ako iterates that doing business electronically does not only reduce cost but tremendously affects the speed and efficiency of businesses. Windrum and Berranger (2002) suggest that the commercial benefits of e-business lie in five areas. Firstly, firms are able to expand their geographical reach. Secondly, important cost benefits lie in improved efficiency in procurement, production and logistics processes. Thirdly, there is enormous scope for gaining through improved customer communications and management. Fourthly, the Internet reduces barriers to entry for new market entrants and provides an opportunity for small firms to reorient their supply chain relationships to forge new strategic partnerships Finally, e-business technology facilitates the development of new types of products and new business models for generating revenues in different ways. Page 13

24 2.5. Barriers to E Business Adoption According to Windrum and Berranger (2002 ) it is hypothesized that many of the factors affecting the successful adoption of new technologies such as e-business are generic in nature and that the successful adoption of internet technologies in part depends on how these are used in conjunction with the other technologies and management practices that form a technology cluster. However the most critical barrier can be ascribed to the very limited information and communication infrastructure available in most countries in Africa (Ben Akoh 2001). Reasons vary widely among sectors and countries and are most commonly related to lack of applicability to the business, preferences for established business models, (OECD, 2004). Common barriers include: unsuitability for the type of business; enabling factors (availability of ICT skills, qualified personnel, network infrastructure); cost factors (ICT equipment and networks, software and re-organisation); security and trust factors (security and reliability of e-commerce systems, uncertainty of payment methods, legal frameworks and Intellectual Property Right); and challenges in areas of management skills, technological capabilities, productivity and competitiveness (OECD, 2004). Lack of reliable trust and redress systems and cross-country legal and regulatory differences also impede e-business adoption (OECD, 2004). It is however important to note that barriers to e-business adoption work differently according to organizational type and culture. Areas of training and people development need to be addressed. (Aranda-Mena and Stewart, 2005) Challenges Related to the Adoption of E Business Many writers of e-business and e-commerce extol the enormous potential and opportunities provided for consumers and businesses globally. However there are some drawbacks and the benefits to be derived tend to be overstated. (Mark Bynoe, 2002) Page 14

25 While many commentators hold the view that e-commerce has many advantages for developing countries, the African continent has a number of major challenges to overcome before it can more fully exploit the benefits of e-commerce. A number of constraints, specific to doing e-business in Africa, are apparent (Akoh, 2001). These include but not limited to the following: Low level of economic development and small per-capita incomes; limited skills base with which to build e-commerce services; the number of Internet users needed to build a critical mass of online consumers and; lack of familiarity with even traditional forms of electronic commerce such as telephone sales and credit card use (ibid). Perhaps one of the greatest constraints to the adoption of e-business as a means to generate efficiencies is a cultural reluctance to interface with buyers and suppliers electronically. Such challenges remain major obstacles, limiting the potential benefits of e-business (Akoh, 2001). Other challenges are the cost of implementation, security concerns, perceived customer readiness, lack of knowledge of IT and e-business, the relatively high costs associated with investments in ICTs, the lack of technical and managerial skills and reluctance on the part of companies to network with other enterprises and lack of executive support and concerns regarding the reliability of technology (Department of Enterprise, Trade and Employment, 2004). Page 15

26 Chapter 3: Conceptual Framework 3.1. Introduction The previous chapter provided a review of literature relevant to our research questions. This chapter will provide the conceptualization, which constitutes the frame of reference for this study. The main aim of this chapter is to select relevant theories and concepts that will be used in this study. The frame of reference provides guidance in the collection of data and also helps to fulfill the purpose of describing the adoption of e- business in banks in Ghana Benefits of E Business Benefits expected to be gained from e-business as an option is a big deciding factor for a firm s decision to go the e-business way. Some of these benefits include value creation and value enhancement, improvement in internal and external communication (Basu and Muylle, 2007), cost saving, increased market share, speed and efficiency of doing business and improvement in customer service (Akoh, 2001). These elements of benefits are the expected answers to our first research question, What are the benefits that may be derived by adopting e-business? Barriers to E Business Adoption Windrum and De Berranger (2002) states that factors affecting the successful adoption of new technologies such as e-business are generic in nature. However reasons vary widely among sectors and countries. Common barriers include security and trust factors, unsuitability for the type of business, enabling environment and cost factors. Other barriers (OECD, 2004) have already been discussed in chapter two. From the literature cited it is abundantly clear that there are certain issues or factors that constitute barriers to the smooth adoption of e-business. Page 16

27 This addresses our second research question What are the barriers to the adoption of e- business in banks in Ghana Challenges of E Business adoption Though the expected benefits in the adoption of e-business are enormous, firms adopting this new way of doing business can also expect some challenges as well. According to (Akoh, 2001) some of these challenges are specific to doing business in Africa. They include low level of economic development, limited information and technological infrastructure, culture and high cost of investment. This reference is formulated in view of our third research question, What challenges do banks face in adopting e-business? 3.2. Summarization of theories, concepts and frame of reference in line with research questions Research Question One: What are the benefits that may be derived by adopting e business To be able to describe the benefits to the adoption of e-business, the following theory has been utilised. o Value creation or value enhancement. (Basu and Muylle, 2007) o lower cost. (Ben Akoh ( 2001); Windrum &, De Berranger, (2002); Basu and Muylle (2007), ) o Improvement in internal and external communication. (Windrum & De Berranger (2002) ; Basu and Muylle (2007) ) o Increment of sales. (Basu and Muylle, 2007) o Integrated with a back office systems. (Basu and Muylle, 2007) o Improvement in supplier relations. (Basu and Muylle, 2007) Page 17

28 o Improvement in Productivity (Basu and Muylle, 2007) o Cost saving. (Ben Akoh, 2001), Mark Bynoe, 2002, ) o Revenue generation. (Mark Bynoe, 2002), (Windrum, P. &, De Berranger, P., 2002 ) o Increased market share. (Mark Bynoe, 2002) o Marketing and market access. (Mark Bynoe, 2002) o Improving customer service. (Mark Bynoe, 2002) o Speed and efficiency. (Ben Akoh ( 2001); Windrum. &, De Berranger ( 2002 ) o Expand geographical reach. (Windrum & De Berranger, 2002 ) o Reduces barriers to entry for new market. (Windrum, P. &, De Berranger, P ) o Facilitates development of new products and new business models. (Windrum, P. &, De Berranger, P ) Research Question Two: What are the barriers to the adoption of e business in banks in Ghana To be able to describe the barriers to the adoption of e-business, the following theory has been utilised. o Lack of applicability to the business. (Windrum and De Berranger,. 2002) o Preferences for established business models. (Windrum and De Berranger. 2002) o Unsuitability for the type of business. (OECD,2004) o Enabling factors. (OECD,2004) o Cost factors. (OECD,2004) Page 18

29 o Security and trust factors (OECD,2004) o ICT competencies within the firm. (OECD,2004) o Availability and cost of appropriate interoperable systems. (OECD,2004) o Network infrastructure and Internet-related support services.. (OECD,2004) o Cross-country legal and regulatory differences. (OECD,2004) Research Question Three: What challenges do banks face in adopting e business To be able to describe the benefits to the adoption of e-business, the following theory has been utilised. o Low level of economic development. (Akoh, 2001) o small per-capita incomes (Akoh, 2001) o Limited skills base. (Akoh, 2001) o Lack of familiarity (Akoh, 2001) o Cultural reluctance. (Akoh, 2001) o Availability of information and communication infrastructure (Akoh, 2001) o Cost of implementation. (DETE, 2004) o Security concerns. (DETE, 2004) o Perceived customer readiness. (DETE, 2004) o Knowledge of IT and e-business. (Department of Enterprise, Trade and Employment, 2004) o High costs associated with investments in ICTs. (Department of Enterprise, Trade and Employment, 2004) Page 19

30 o Lack of technical and managerial skills. (Department of Enterprise, Trade and Employment, 2004) o Reluctance on the part of companies to network with other enterprise. (Department of Enterprise, Trade and Employment, 2004) o lack of executive support (Department of Enterprise, Trade and Employment, 2004) o Organizational type and culture. (Aranda-Mena and Stewart, 2005) The table below summarizes our research questions and theories used to answer them. Table 3-1: A table showing research questions and theories used to answer. Research question What are the benefits that may be derived by adopting e-business What are the barriers to the adoption of e-business in banks in Ghana What challenges do banks face in adopting e-business Theories used to answer Basu and Muylle (2007) Ben Akoh ( 2001) Windrum &De Berranger (2002) Mark Bynoe (2002) Windrum De Berranger (2002) OECD,(2004) Akoh, (2001) DETE (2004) Content Value creation or value enhancement, lower cost, Improvement in internal and external, communication, Increment of sales, Integrated with a back office systems, Improvement in supplier relations, Improvement in Productivity, revenue generation, Increased market share, marketing and market access, improving customer service, speed and efficiency, expand geographical reach, reduces barriers to entry for new market, facilitates development of new products and new business models Lack of applicability to the business, Preferences for established business models, Unsuitability for the type of business, Enabling factors, Cost factors, Security and Trust factors, ICT competencies within the firm, Availability and cost of appropriate interoperable systems, Network infrastructure and internet-related support services, Cross-country legal and regulatory differences. Low level of economic development, small percapita incomes, Limited skills base, Lack of familiarity, Cultural reluctance, availability of information and communication infrastructure, Cost of implementation, security concerns, Perceived customer readiness Page 20

31 In this study the benefits of e-business are conceptualized as issues or factors perceived by respondents as beneficial for e-business adoption. Similarly, barriers are those factors perceived to be impediments to the adoption of e-business. Finally challenges are conceptualized to be the perceived factors that make it difficult to adopt e-business. Figure 3-1: Emerged frame of reference Page 21

32 Chapter 4: Methodology The previous chapter which represents our conceptual framework provided the theoretical bases for the planning and implementation of our research. In this chapter we present the detail methodology showing the logical framework that discusses the research purpose, research approach, data collection and data analysis 4.1. Introduction Many writers have written extensively on research methodology. The underlying factor in most studies on research methodology is that the selection of methodology is based on the research problem and stated research questions. Methodologies cannot be true or false, only more or less useful (Silverman, 2003). Nachamias et al (1996) for instance states that methodologies are considered to be systems of explicit rules and produced, upon which research is based, and against which claims for knowledge are evaluated. Conducting any type of research should be governed by a well-defined research methodology based on scientific principles. Eldabi and others (2002) have suggested a series of steps as a research paradigm to be followed in a methodology in a research. However, certain quality criteria such as reliability and validity should be used as demonstrated in Figure 4.1 (CF, Foster, 1998). Figure 4-1: Research Paradigm presentation for methodology. Source: Foster (1998) Page 22

33 For the purpose of this research the schematic approach shown in Figure 4.1 will be adopted Research Purpose The purpose of this thesis is to conduct an exploratory and descriptive research in order to gather as much information as possible concerning the adoption of e-business as an option in a competitive business environment in Ghana. Specifically this will be in respect of the banking business. According to Yin (1994) exploratory research is designed to allow a researcher to just look around with respect to some phenomenon, with the aim to develop suggestive ideas. Exploratory research is often used when a problem is not well known, or the available knowledge is not absolute. The technique that is best suited for information gathering when performing an exploratory research is interview (Yin, 1994). We are employing exploratory study because it gives valuable insight of the problem and result drawn from this study will be in firm grasp of essential characters. It has also been demonstrated that exploratory research provides suggestive ideas through reviewing information from problem area. (Chisnall, 1997) 4.3. Research Approach The research approach in this study is chosen based on the purpose and the research questions set out to be addressed. In an exploratory research such as this a qualitative approach will be adopted. Qualitative data are characterized by the richness and fullness based on the opportunity to explore a subject. The nature of qualitative study is primarily to understand, not to explain. Qualitative research implies an emphasis on processes and meanings that are not measured in terms of quantity amount, intensity or frequency. The main features of quantitative research approaches have been described by Miles and Huberman (1994) as shown below. o The aim of qualitative analysis is a complete, detailed description o Recommended during earlier phases of research projects Page 23

34 o Researcher may only know roughly in advance what he/ she is looking for o The design emerges as the study unfolds o Researcher is the data gathering instrument o Data is in the form of words, pictures or objects. o Qualitative data is more rich, time consuming, and less able to be generalized o Researcher tends to become subjectively immersed in the subject matter We are using the qualitative approach for our study because we want to have a deeper understanding of e-business adoption and its ability to give competitive edge. By using the qualitative approach we will get the opportunity to explore our subject matter. We are seeking to understand more about e-business adoption and its competitive nature and not to explain it Strategies for Research Yin (2003) has described five primary strategies for research in social sciences to collect empirical data. According to him, depending on the character of the research questions, to which extent the researcher has control over behavioral events and to what degree the focus is on contemporary event, the research can choose from the following: o Experiments; o Survey; o Analysis of archival records; o History; o Case Study. In our study we have used a case study approach since our research deals with how barriers, benefits and challenges related to e-business adoption in Ghanaian banks can be described.. This is because the form of our research question is how e-business Page 24

35 adoption has or can help firms to stay ahead of competition in their respective environments. In this thesis we are using the four banks in Ghana as a case study Study Area This section describes the banking environment in Ghana with respect to the policy and legal framework under which the banking industry in Ghana operates. The banking industry in Ghana is controlled by the Bank of Ghana acting as the central bank. The total number of registered commercial banks under the bank of Ghana numbers up to 23 as at January These comprises 5 state owned banks and 18 other private or multinational banks. In addition to the 23 banks, the sector also comprises a range of non-bank financial institutions, including several community banks established to mobilize rural savings. The past few years have seen a phenomenal growth in the Ghanaian banking sector. Ghana s financial sector according to the Bank of Ghana is well-capitalized, very liquid, profitable and recording strong asset growth. The banking sector has seen major capital injection partly because of the political stability, attainment of micro and macroeconomic stability and the government s desire to make Ghana the financial hub of the Sub-region. For instance net interest income for the industry increased by 19% from 2.7tn in 2004 to 3.2tn in 2005 (George M and Bob-Milliar, 2007). Over the five-year review period, net profit had increased by about 56%. Industry net profit after tax margin dipped from 29.64% (2001) to 23.99% (2005). Industry return on equity (ROE) has decreased steadily from a high of 43.9% in 2001 to 26.9% in 2005, while return on assets dropped from 5.7% to 3.5 percent giving an indication of the increasing competitive nature of the banking industry (Pricewater House Coopers, 2006). The Ghanaian banking sector is now very vibrant and modern. According to Dr.Mahamadu Bawumia, (the second Deputy Governor of BoG), bank branches in Ghana increased by 11.3 per cent from 309 to 344 between 2002 and 2004 with 81 new branches springing up from 2004 and 2006 indicating an increase of 23.5 per cent. Most banks now employ cutting edge technologies to roll out their products to their Ghanaian customers. Banking halls are housed in ultra modern buildings, staffed with well trained ladies and gentlemen. Ghanaians living in the big commercial towns are Page 25