Thesis Chapter 1

CHAPTER 1

THE PROBLEM: RATIONALE AND BACKGROUND

Introduction

It was a common question just when we are all starting schooling, or even when we are being tortured by the complex equations of higher Mathematics, where, when and how are we going to use Mathematics in our lives. But as we grow, as we continue venturing this world, little by little we find answers to these questions. Nevertheless, the uses of Mathematics do not end at its usual known usage such as the time, the number of objects, your height, your weight and many more but rather it extends to almost every known field of study.

In the height of societal and technological advancements, the need for quantitative data erupted. Quantitative data are being favored. Numbers are being relied to rather than mere words and qualitative observations. Decision-makers began looking for data that could provide numbers, for that reason many statistical tools and mathematical models were continuously being developed and modified in response to different demands of data analysis in various fields of research and development. But, some data are not quantitative in nature, for that reason Statisticians have devised a number of ways to analyze and explain categorical data (Elliot, 2006), one of which is the logistic regression.

Logistic regression is used to predict the presence or absence of a

characteristic or outcome based on values of a set of predictor variables (SPSS Inc., 2009). Binary logistic regression is used when the dependent variable has two categories (i.e. yes or no, dead or alive, etc.). If the dependent variable can be divided in more than two categories, multinomial logistic regression is used (Schippers, 2009).

Businesses specifically in the field of Marketing are interested of data that are mostly categorical. Who patronize these products and what age is the market, are just two of the questions that Marketing people ask, which requires categorical data analysis. Thus, these needs are being addressed by Mathematics and Statistics by a number of known models, but one of the most acknowledge is the Logistic Model.

But as the field of Mathematics grows, so is the field of Business. Advances in technology were being adopted by almost every business in existence, since more and more of the world’s population are becoming members of the online society. Connected devices, such as computers, mobile phones and tablet became a way of life for many. Around 40.4% of the world population has an internet connection today. Compared in the year 1995 wherein there is only 1% of the population who uses the internet, the number of internet users had increased tenfold from 1999 to 2013. The first billion was reached in 2005, the second billion in 2010 and the third billion was reached last 2014 (Internet Live Stats, 2015).

As the internet usage had grown extensively all over the world, it is no longer used solely for the purpose of entertainment and research. It is now used as a tool in business.

Internet nowadays is used for marketing, advertising and as a transaction medium. By using Internet, people have the opportunity to sell goods or services worldwide, and thus building the concept of e-commerce (Napitupulu,& Kartavianus, 2014).

But, what do we mean when we say e-commerce? E-commerce is the pre-eminent buzzword of the online business revolution. It captures the excitement and focus of this fast emerging market. At its core it embodies a concept for doing business online. It is the paperless exchange of business information using electronic data interchange (EDI), email, electronic bulletin boards, fax transmissions, and electronic funds transfer. It refers to Internet shopping, online stock and bond transactions, the downloading and selling of “soft merchandise” (software, documents, graphics, music, etc.), and business-to-business transactions. Its concept is all about using the Internet to do business better and faster (BusinessTown.com, LLC, 2001-2003).

The use of internet for e-commerce had developed drastically around the world, especially in the west. Advancements in technology had further developed it. Shopping online had become even more convenient. Many banks had started offering e-banking that supports easier payment process for the online market. As a result, many consumers especially the young and busy professionals had changed shopping habits and turned to ecommerce in purchasing their need since it is more comfortable than the conventional shopping style which usually attributed with anxious, crowded, traffic jam, limited time, no parking space and out of stock problems.

Philippines, with its more than 39.4 million of internet users ranked 16th in the world and penetrating an estimate of 39.43% internet users against its total population (Internet Live Stats, 2015). Moreover, when it comes to learning more about what they need to buy, Filipinos are among the most active in the Asia-Pacific region in using the Internet for product research and sharing online deals (Lucas, 2012).

However, despite the

acceptance of e-commerce in western countries, the rise of online stores, product research and technological advancements, shopping habits of Filipinos remain traditional. The number of Filipino consumer that purchases online remains relatively low. For that reason, this study is designed and patterned to the study of Leelayouthayotin (2004) and Napitupulu & Kartavianus (2014) and from the other related studies to investigate factors that encourages and discourages consumers to purchase online and find out the relative importance of each factor with respect to the other factors. So as to developed a model that would encouraged customers to engage more into online shopping for e-commerce to be successful in the Philippines market.

Statement of the Problem

Generally, the main problem of the study is: How to develop a model of factors that would help in persuading internet users to be online consumers?

Specifically, it aims to answer the following questions: 1

How do the demographic profiles of the respondents be described? a. Gender b. Age

2

c. d. e. To

Educational Attainment Employment Status Family’s Monthly Income what extent the following factors in demographic profile affect the online

3

purchasing behavior of internet users? a Gender b Age c Educational Attainment d Employment Status e Family monthly income How the different factors that affects online purchasing behavior be describe

4

based on the answers of the respondents? To what extent the following factors influence consumer purchasing behavior

5

through e-commerce? a Website Design b Firm’s Reputation c Information Quality d Trust e Ease of Payment f Benefits of Online Shopping What are the significant factors that encourage or discourage the consumers to

6

purchase online? What is the relative importance of each factor that affects the consumers from purchasing online?

Statement of the Hypotheses

Hypothesis 1: Gender does not affect online purchasing behavior through e-commerce. Hypothesis 2: Age does not affect online purchasing behavior through e-commerce. Hypothesis 3: Educational attainment does not affect online purchasing behavior through e-commerce.

Hypothesis 4: Employment Status does not affect online purchasing behavior through ecommerce. Hypothesis 5: Family’s monthly income does not affect online purchasing behavior through e-commerce. Hypothesis 6: Website’s design does not influence online purchasing behavior through ecommerce. Hypothesis 7: Firm’s reputation does not influence online purchasing behavior through e -commerce. Hypothesis 8: The quality of information does not influence online purchasing behavior through e-commerce. Hypothesis 9: Trust does not influence online purchasing behavior through e-commerce. Hypothesis 10: Ease of payment does not influence online purchasing behavior through e-commerce. Hypothesis 11: The benefits of online shopping do not influence online purchasing behavior through e-commerce.

Conceptual Framework

The model shows that there is a causal relationship between the dependent and independent variable. Various factors that could possibly affect the dependent variable, consumer purchasing behavior through e-commerce, were identified as the independent variables in this research study. Factors identified to act as the independent variables to

be investigated are website design, information quality, firm’s reputation, trust, ease of payment, and benefits of online shopping. These factors were adapted from a number of different research studies from other countries addressing the same matter.

Trust

Age

The demographic profile to be investigated such as Age, Employment Status, Gender, Educational Attainment, and Family Monthly Income were grounded from the

Benefits of

study of Leelayouthayotin (2004). While Website Design was based from the study of Online

Shopping

Javadi et al. (2012) and Jung-Hwan et al (2009), Firm’s Reputation was adapted from the

Gender

study of Lee et al (2011). On the other hand, Information Quality was taken from the study of Aghdaie et al. (2011) and Upadhyay et al (2011), whereas Trust was grounded from the study of Chih-Chien Wang et al. (2009). Conversely, Ease of payment and Benefits of online shopping were adapted from the study of Napitupulu & Kartavianus

Ease (2014). of Payment

Online Purchasi Figure 1.1: Conceptual Framework of the Overall Study ng Behavior

Employment Status

Information Quality Educational Attainment

Firm's Reputation

Family Monthly Income

Website Design

Significance of the Study

The significance of the study lies on the benefits of determining, analyzing and developing factors that affect online consumer’s purchasing behavior in order to make ecommerce effective and acceptable in the Philippines’ market.

E-commerce site owner, It aims to help e-commerce sites owners have an idea on how to strategize their business, on how to build the customer loyalty and how to promote their product to make it attractive to the consumer and make internet users be online consumers. By helping the e-commerce site owners learn on which factor affect the consumer most, they would know on which of the factors they need to give focus and emphasis in building their e-commerce business so as to attain their goal of earning profit.

Traditional market, As for the traditional retailers they can be engaged in ecommerce activities to continue their profit rotation. And by using e-commerce, organization can expand their market to national and international with minimum capital investment.

An organization can easily locate more customers, best suppliers and

suitable business partners across the globe. It also helps organization to reduce the cost, to create process, distribute, retrieve and manage the paper based information by digitizing the information.

Government, In this fast moving economy where technology slowly becoming threat to man’s labor, where fast and efficient computers were being favored over manpower, it will be of great help if one will consider investing in e-commerce since it does not need a space or a physical store, a business that is definitely easy to put up that can be put up by anyone of any age as long as there is internet connection, and considering that internet cafes and free Wi-Fi connection had been widespread all over the country, it is not necessary that you have a connection at home. E-commerce being an entrepreneurship might be the answer to unemployment. Furthermore, consumers being engaged to buying through e-commerce might also be the answer to too much pollution and traffic. Having not to drive to go to the malls and market to buy what you need would minimize the use of gas consumption and of air pollution.

BSM BA Course, The findings in this research should be beneficial to the BSM BA course since this research ventures the continuous development of business and technology and used statistical and mathematical tools and model. Thus, this research touch both of the two worlds that this course aspires, the Business and the Mathematics.

Future Researchers, Future researcher will benefit from this study due to the fact that this research will be using first hand gathered data and was developed through reading and analyzing a good number of written literature and studies with the guidance of experts.

Through this research, the researchers look forward into studying what influences consumer’s buying behavior online so as to help the e-commerce entrepreneurs to formulate the right mix in building their online business. And by helping the e-commerce owners, consumer will have the confidence to buy online, and this boom of online consumer would encourage more entrepreneurs to consider investing through ecommerce. This shift in business style and buying process would be a great help into the cutting down of unemployment, cost, time and pollution that is now a problem of the economy.

Scope and Delimitations

Various studies have used some known theories to explain the online shopping behavior.

Prior research has shown that there are many factors that affect online

consumer behavior, but a complete coverage of all potential factors in one research model is almost impossible (Javadi, & Dolatabadi, et al., 2012) This research was based from the study of Leelayouthayotin (2004) and Napitupulu & Kartavianus (2014) and from the other related studies. The following factors were identified as the independent variable: websites design, firm’s reputation, information quality, trust, ease of payment, benefits of online shopping, and demographic profile such as age, occupation, gender, educational attainment, and family monthly income . Along with that is the online buying behavior as the dependent variable.

This study covers all the e-commerce purchases from consumer goods, gadgets, clothes, appliances, movie tickets and many more including airline, cruise ships and other travel related purchases that were availed online. However, this research does not cover websites or store that sells software merchandise such as e-books, music, movies, and any products that has no physical objects or representations. Also, it does not cover e-banking transactions that concerns paying bills through the internet or any other issues that concerns the security of payment.

The locale of the study is Bulacan State University- Main Campus community. Respondents may be student and faculty of any of the college of the university regardless if they are regular or part-time instructors, personnel including janitors and guards of Bulacan State University Main Campus, as long as they are internet users. However, this does not cover the store or canteen owners and employees found inside the university, also the construction workers and any other personnel that are not permanent member of the community were not included. This inclusion of the faculty and personnel of the university is due to the fact that technically, one of the factors considered by the researchers is the demographic profile so diversification of the demographic profile of the respondents is a must. However, the number of students respondents was still relatively high as against to the number of employed individuals, this is because most of the faculty, staffs and personnel are busy and could not accommodate to answer the questionnaire.

The study will use convenience sampling method and questionnaires. Data are to be collected by way of questionnaires given directly to the respondents, this showcase a

study asking a group of internet users from 16 years old above whether they have purchased through online or not. The main objective of the questionnaire is to determine what made one buy through online and what hinders them from purchasing online. Data collected would later be analyzed through Logistic Regression Analysis.

In the end, this paper should be beneficial for those who are engaged and would like to be engrossed with e-commerce. Any generalization of results from this study should be made with caution, especially when wanting to generalize across the entire population of Bulacan State University and the used of convenience sampling method.

Definition of Terms

Benefits of online Shopping,

saving time, money and effort in purchasing items

compare to the traditional shopping.

Bulacan State University, locale of the study which is located along the McArthur Highway adjacent the Bulacan Capitol Compound at the City of Malolos, Bulacan.

Ease of payment, mode of payment when buying online, it can be in the form of cash, credit card, remittance services, and mobile payments, and other.

E-commerce,

online exchange of value between companies and their partners,

employees, or customers without geographical or time restrictions. In this study, this term denotes to the activity of selling products online.

Family’s Monthly Income, describe the family’s budget of the respondents in a month.

Firm’s reputation, customers’ perceptions of how well a firm takes care of customers and how it is genuinely concerned about their welfare.

Internet, describe computer networks capable of providing instant access, organizing, communicating information and supporting transactions. The Internet is an efficient medium helping companies to interact and deliver messages and marketing activities on actual consumer responses regardless of location and time difference.

Internet users, describe current Internet users who have logged on to the Internet within the past 12 months.

Online purchase, describe a transaction carried out by consumers in order to search, select, and purchase products via the Internet.

Quality of information, describes the quality, arrangement, usefulness or relevance of information of the product or services offered in an online store.

Trust, consumers perception of security and privacy about the online store and its owner. This pertains to the confidence of the consumer to give some of his personal or financial information in order to buy, purchase or do a transaction with the online store and its owner.

Websites design, environment of the sites, it’s all about the order of products in the site. How accessible the information, how colorful and attractive the design and layout, are some of the concerns in this independent variable.