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), e-

mail, 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 e-

commerce 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

c. Educational Attainment

d. Employment Status

e. Family’s Monthly Income

2. To what extent the following factors in demographic profile affect the online

purchasing behavior of internet users?

a. Gender

b. Age

c. Educational Attainment

d. Employment Status

e. Family monthly income

3. How the different factors that affects online purchasing behavior be describe

based on the answers of the respondents?

4. To what extent the following factors influence consumer purchasing behavior

through e-commerce?

a. Website Design

b. Firm’s Reputation

c. Information Quality

d. Trust

e. Ease of Payment

f. Benefits of Online Shopping

5. What are the significant factors that encourage or discourage the consumers to

purchase online?
 6. 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 e-

commerce.

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 e-

commerce.

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.

The demographic profile to be investigated such as Age, Employment Status,

Gender, Educational Attainment, and Family Monthly Income were grounded from the

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

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

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

(2014).
 Figure 1.1: Conceptual Framework of the Overall Study

Trust Age

Benefits of
Online
Shopping Gender

Ease of
Payment
Employment
Online
Status
Purchasing
Behavior

Information
Quality

Educational
Attainment

Firm's
Reputation Website
Family Design
Monthly
Income
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 e-

commerce 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 e-

commerce 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 e-

commerce. 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.