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How the Rural-Urban Divide Plays Out on Digital Platforms

It is one thing for entrepreneurs, whether urban or rural, to create and operate an online store, as some digital platforms have made it relatively easy to manage an e-store – even by using just a smartphone.

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In the West, villages are emptying out due to the lack of economic opportunities. Consider Italy where, in a bid to attract newcomers, a handful of municipalities have turned to selling houses for €1.

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Meanwhile, in some developing countries, the digital revolution has created a path for villagers to earn a living through online selling. To wit: About 40 percent of online entrepreneurs in China live in a rural area.

It is one thing for entrepreneurs, whether urban or rural, to create and operate an online store, as some platforms have made it relatively easy to manage an e-store – even by using just a smartphone.

Perhaps the most troublesome aspect of online selling is that platforms frequently tweak their algorithms. This requires entrepreneurs to keep up with these changes and constantly adjust their strategy. If not, their products may never surface in customer searches.

The next problem is that platforms do not always communicate the changes in the most straightforward manner, leading to confusion among entrepreneurs. As I show in my paper, Platform governance and the rural-urban divide: Sellers’ responses to design change, co-authored with Charles Eesley, compared to rural entrepreneurs, urban entrepreneurs have access to offline sources of information that helps them see through the veil quickly. This advantage can lead to lasting gaps in performance.

The Offline Interface: In-person communications still rule

For online business and digital platforms, my research highlights the importance to understand the offline interface – a term I use to describe the local, offline factors (be it economic, social, cultural or political) that affect users’ ability to navigate a digital environment.

In most countries, online entrepreneurs on digital platforms usually start out as scavengers, either making their own products or pulling excess supplies from their environment (e.g. factories). You see this phenomenon on a number of e-commerce platforms, such as Lazada and Shopee in Southeast Asia.

Entrepreneurs sourcing from nearby factories might sell socks, car radios and baby products, whatever assortment of products they manage to line up – or figure out what might sell based on a recent fad.

In May 2013, a prominent e-commerce platform in China was trying to increase the professionalism of its sellers (entrepreneurs) by encouraging them to specialise in a single product category.

The goal was simple: over time, entrepreneurs would become category experts able to provide top-level customer service. To achieve this, the platform modified its algorithm to prioritise entrepreneurs who sold many products within one or two product categories (a characteristic termed “category focus”).

However, the platform had difficulty conveying this change to entrepreneurs. A somewhat cryptic announcement said that Big Data would be used to construct buyer profiles and that a new algorithm would “help entrepreneurs lock onto potential buyers and implement targeted marketing”.

Poor communication such as this is common. While hiring better communicators might…

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INSEAD Knowledge is the expert opinion and management insights portal of INSEAD, The Business School for the World. Knowledge showcases the latest business thinking and views from award-winning faculty and global contributors

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Ecommerce

How will oil prices shape the Covid-19 recovery in emerging markets?

Oxford Business Group

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How will oil prices shape the Covid-19 recovery in emerging markets?
– After falling significantly in 2020, oil prices have returned to pre-pandemic levels
– The rise has been driven by OPEC+ production cuts and an improving economic climate
– Higher prices are likely to support a rebound in oil-producing emerging markets
– Further virus outbreaks or increased production would pose challenges to price stability

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A combination of continued production cuts and an increase in economic activity has prompted oil prices to return to pre-pandemic levels – a factor that will be crucial to the recovery of major oil-producing countries in the Middle East and Africa.

Brent crude prices rose above $60 a barrel in early February, the first time they had exceeded pre-Covid-19 values. They have since continued to rise, going above $66 a barrel on February 24.

The ongoing increase in oil prices, which have soared by 75% since November and around 26% since the beginning of the year, marks a dramatic change from last year.

Following the closure of many national borders and the implementation of travel-related restrictions to stop the spread of the virus, demand for oil slumped globally.

In the wake of the Saudi-Russia price war in early 2020, Brent crude prices fell from around $60 a barrel in February that year to two-decade lows of $20 a barrel in late April, as supply increased and demand plummeted. The value of WTI crude – the main benchmark for oil in the US – fell to record lows of around $40 a barrel last year on the back of a lack of storage space.

While global demand for oil remains low, one factor credited with reversing the trend is the decision to make significant cuts to oil production, which subsequently tightened global supplies.

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Will South-east Asia’s tech giants turn to SPACs to boost post-pandemic growth?

Oxford Business Group

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Will South-east Asia’s tech giants turn to SPACs to boost post-pandemic growth?
– SPACs have become a hot-button topic in global finance
– The vehicle is widely used to help tech start-ups go public
– Both Singapore’s and Indonesia’s exchanges are set to allow SPACs
– Several South-east Asian tech unicorns may use SPACs to list publicly

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South-east Asia is seeing a wave of interest in special purpose acquisition companies, or SPACs, with various major tech players considering them as a means to fast-track public listings. In parallel to this, several exchanges in the region are moving to allow SPAC listings, with a view to boosting post-coronavirus growth.

SPACs are shell companies set up by investors and then listed on a given stock exchange. Their sole function is to acquire a private company, enabling it to go public without having to go through a traditional initial public offering (IPO).

A SPAC does nothing beyond its essential function – it neither produces nor sells anything, and a SPAC’s only assets are the funds raised from its own IPO.

Crucially, people who buy into a SPAC do not know what its eventual acquisition target or targets will be. This is why SPACs are often referred to as “blank cheque companies”: they give the founders a free rein to back their choice of private company. A key feature of SPACs is that they are often headed by big-name business executives or fund managers, who trade on past successes to inspire trust in investors.

While they are far from a novel phenomenon, SPACs have become a hot button topic in recent times: SPAC initial offerings quadrupled last year, with the vehicles raising a record $80bn.

Merging with a SPAC enables a company to go public and raise capital more quickly and painlessly than with a traditional IPO, circumventing some of the volatility that Covid-19 unleashed on global markets. At the same time, they function rather like venture capital, helping investors to buy into high-growth start-ups on the ground floor.

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Tech

Viu leads Southeast Asia’s video-streaming market with 30m users

According to research platform Media Partners Asia (MPA), Viu pulled in 30.5 million monthly active users from markets including Indonesia, the Philippines, Singapore, and Thailand in the fourth quarter of 2020.

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Viu pulled in 30.5 million monthly active users from markets including Indonesia, the Philippines, Singapore, and Thailand in the fourth quarter of 2020.

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