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Introduction
Electronic commerce, or e-commerce as it is more commonly
known, has exploded in the last couple of years, mostly out
of convenience to shoppers. The reach of e-commerce can be
shown by the fact that some e-commerce only companies, such
as Amazon.com are listed on the Nasdaq 500, the list of the
500 biggest companies in the United States. Moving to an e-commerce
solution can offer a company benefits but it can also be a
disastrous move for a company if they do not have the relevant
expertise. The whole company needs to 'buy in' to the change
from managing director to office junior as moving operations
to an ICT approach requires a change in company culture. The
culture change will require a company to move from paper based
transactions to a culture that embraces IT and its benefits.
There is a definite connection between failed strategic business
plans and misaligned corporate culture, so getting the right
mix of culture and technology will be an important balance.
Worldwide sales using e-commerce have risen year-on-year and
the total spending in e-commerce is expected to reach anywhere
from $1.4 trillion to $7.3 trillion.
Motives
Why would a company want to become an e-business? This is
an important question that needs to be answered and the reasons
given will be just as important as the implementation of an
e-business strategy. Companies should never adopt a new way
of doing business just because it is being touted as the latest
business trend by management consultants or the media.
The decision to become an e-business should be influenced
by the future growth potential of the company and how customer
value can be improved by such a move.
Choosing to become an e-business requires more than just an
appreciation of how general business trends are likely to
affect your firm. It also requires an in-depth understanding
of the possible benefits that such a move is likely to bring
to your business.
By taking an e-business awareness test
an IT manager will be able to judge their knowledge on the
subject and the suitability of their business to the transaction
to an e-business.
E-commerce will allow organisations to:
" Reduce costs
" Reach a larger market
" Eliminate the use of middlemen and intermediaries
" Reduce search costs by facilitating comparison of price,
products and services
" Reduce lead times
" Improve production and supply capability
" Improve personalisation and customisation of product
offerings
While also offering:
" Giving your business the leading edge. A web presence
gives your company maximum marketing exposure and an advantage
over competitors
" Maximum exposure, Permanent advertising on a global
scale at an extremely tiny cost
" Customer service and feedback.
" Customer or employee access to company information
and databases during both business and non-business hours
increases customer satisfaction.
Approaches
An e-business model is simply the approach a company takes
to become a profitable business on the Internet.
There are many different approaches that could seemingly be
adopted when contemplating an e-business, all depend on the
situation of the business and current market that the company
operates in. Although some people, such as Kenneth P. Morse,
believe that electronic models are no different from traditional
business models, electronic business markets have produced
differing models.
The basic idea of e-commerce, or doing business on the Internet,
is that at least two parties - a seller and a buyer- exchange
valuable products or services. The exchange transactions can
occur between individuals, businesses and organizations (sic).
This leads to an approach based on whether the organisation
is:
" B2C (Business to Consumer)
" B2B (Business to Business)
" A2M (Association to Member)
These categorisations can be broken down in what seems an
endless list, but in this report we will only investigate
into the different types of model that describe the 3 categories
listed and then the specific model most suitable for P&N.
P&N is most likely to be dealing with other business but
it is possible that they may also deal with individuals.
Business to Consumer
Allows any end consumer to purchase goods and services via
a secure connection using a credit card or echeck with real
time verification or at a later tie with batch processing.
Used for e-retailer, retail only or both.
Figure 1 - B2C retail model
Figure 2 - B2C eretail model
Business to Business
Allows wholesales or distributor customers to purchase goods
and services via a secure connection and pay via purchase
order, credit card or echeck. Customer credit lines are optionally
integrated into the submission of purchase orders. Used for
manufacturer, wholesaler or distributor.
Figure 3 - B2B Manufacturer model
Figure 4 - B2B Wholesale model
It is safe to say that P&N would be providing
a majority of its business to other businesses and would be
operating in a B2B marketplace and could run its system on
the wholesale model figure
4.
Professor Michael Rappa describes a different set of models
but he points out that 'Internet business models continue
to evolve. New and interesting variables can be expected in
the future,'
P&N would be most likely to use a manufacturer (Direct)
model; this is described as:
'The manufacturer or "direct model", it is predicated
on the power of the web to allow a manufacturer (i.e. a company
that creates a product or service) to reach buyers directly
and thereby compress the distribution channel. The manufacturer
model can be based on efficiency, improved customer service,
and a better understanding of customer preferences.'
To see the full list of models as described by Michael Rappa
look at
< http://digitalenterprise.org/models/models.html >
Although it is fair to say that lessons must be learnt from
failed electronic commerce ventures, which there are plenty
of examples, many of the failing companies were operating
on a first-to-market strategy. Their hope was that by getting
their ideas out ahead of the market, consumers would develop
brand loyalty before competitors arrived.
Strategic Aims
The strategic aim of any existing company is one in which
the next couple of years will produce a time where the organisation
takes more money than they spend. In most cases this is the
primary aim but depending on the current situation of the
organisation and the current economic climate. Some organisations
are happy to be seen as market leader at all costs.
When an organisation is drawing up a strategic business plan,
they will have to conduct an audit of their organisation to
see the current state of play, with this audit in mind they
can then identify areas where their organisation can grow.
The strategic plan will, out of the many factors, depend on
the type of organisation and these questions need to be answered;
is the organisation trying to become an e-commerce organisation
without the backing of an established business, such as Amazon,
or is the e-commerce side of operations an addition to an
established business like Barnes and Noble. These are referred
to as 'clicks' and 'bricks n mortar' companies respectively.
Bricks n mortar
A traditional business will set up an electronic business,
traditionally, as a response to a move by another company,
such as Barnes and Noble responding to Amazon creating a new
marketplace. Another reason is a new medium of sales that
will attract a different sort of customer, which would lead
to an increase in profits. Although now a variety of companies
are realising the benefits offered to them by the Internet
and moving some of their business online. The start-up costs
for this sort of organisation are lower as they already have
the stock, offices, website without e-commerce capabilities,
customer support and warehouses. Traditional companies also
have the advantage that they can rely on profits from their
main operations to support their electronic venture until
it can support itself. This is an important fact as traditionally
dot.com businesses have rarely turned a profit and the biggest
dot.com company Amazon only started to make a profit last
year, this has led to debts of $3 billion. No other business
and very few companies could justify continual operation with
losses of that extent.
The strategic aims of a 'bricks n mortar' company when setting
up an electronic venture will be to increase sales and profits,
increase customer base, increase customer satisfaction and
to become the number 1 operator as an electronic vendor.
'Clicks'
This type of organisation is a new organisation that would
have no traditional business and would have been set up as
an attempt to create or exploit a niche market. The set up
costs for a dot.com are bigger than the traditional businesses
as they have to start from scratch. Cost awareness is an important
factor and will be discussed at a later point. These costs
would include; e-commerce compatible website, warehouses,
offices, stock, customer support and logistics. This new organisation
will also be without any contacts within organisations in
vertical or horizontal industries to the industry that the
dot.com is setting up n so these will need to be made and
quickly. Another factor is that there is a need for customers,
a new organisation will need to market itself thoroughly and
build a network of contacts that includes; loyal customers,
suppliers, retailers, brokers, co-producers, employees and
shareholders.
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