E-Commerce and its Impact on the Global Marketplace - Essay Example

E-Commerce and its impact on the Global Marketplace Introduction E-commerce is the practice of buying and selling products and services over the Internet, utilizing technologies such as the Web, electronic data interchange, email, electronic fund transfers, and smart cards. (Source: http://www.ilr.cornell.edu/library/subjectGuides/E-Commerce.htmlrefresh=true&cat_id=779) Electronic commerce has exploded in the recent years. Fuelled by the advances in the evolution of information technology, e-commerce has changed the way business is done. The utilization of e-commerce has become inevitable as a competitive tool as more and more companies are joining the fray. One of the major reasons for the explosion of ecommerce was the growth of Internet users from big businesses to individual consumers. (Source from website: http://www.unctad.org/en/docs/ecdr2003_en.pdf) The main impact of E-Commerce is the fact that the global marketplace never sleeps and working 24/7, 365 days a year. It functions across different time zones as well as geographic boundaries. The integration of synergies leads to an extraordinary improvement in efficiencies. The presence of better and improved software enables the companies to conduct business online in an automated fashion leading to better productivity. It opens up a better competitive arena even to smaller companies with lesser resources at their disposal. It symbolizes the usage of the complete potential of the Internet and using it to gain profitability. In short, the benefits of e-commerce are undeniable and would include improved access to information, effective communication, and opening of new markets, improved client service and lower costs. The principal methods of E-Commerce Inter-business transactions or business-to-business (B2B) or e-commerce between businesses usually between manufacturers and suppliers. The other is the transaction between businesses and consumers (B2C) or electronic retailing. B2B type of E-Commerce is more common because of the usage of computer technology to a large extent by businesses, B2C in the form of online retailing has picked up exponentially. Sourcehttp://www.networkworld.com/news/2005/020705specialfocus.htmlpage=2 E-Commerce in the Retail sector: Wal-Mart About Wal-Mart The success story of Wal-Mart has been extensively discussed and analysed. Sam Walton's guiding principles of "everyday low prices " have made Wal-Mart the world's largest retailer. The availability of the product when the customer looks for it on the shelf has to be accomplished, at the lowest possible cost without high overheads Using E-Commerce Supply Chain to Support Low Prices and Increased Customer Satisfaction "At Wal-Mart, we don't implement technology for its own sake," says David Flanagin, Director of Network Engineering. "It has to have a payback that helps the customer."(Quoted from http://www.cisco.com/warp/public/779/ibs/vertical/retail/Wal-Mart.PDF) So when the Wal-Mart network that unifies more than 100,0000 employees in more than 2400 stores and 100 distribution centres was undertaken, the Cisco network was chosen after great deliberation. Unifying and coordinating retailers and suppliers were of paramount importance. The number is staggering considering there are thousands of products and hundreds of suppliers and these are shipped to myriad destinations in the actual seasonal periods when they are sold. Wal-Mart ventured into EDI (Electronic Data Interchange) in 1980 and used it to transmit data to its suppliers. By 1990 Wal-Mart had its own application called "Retail Linka" and suppliers used modems to dial into the network for sales and inventory data. This enabled better forecasting and planning, producing and shipping. With the growing E-Commerce scenario, Wal-Mart utilized the power of the Internet and using the Cisco network, Wal-Mart updated and reorganized the "Retail Linka" to a greater level of competence and usability. Logins are password protected and each supplier has a level to which he is able to access the information. "We transformed it from a traditional dial-in network to an Internet application," says Flanagin. "Now it's easier for our vendors to use, because they just need a Web browser. More of our international suppliers can get access, because it's on the Internet. And it's easier and less expensive for us to maintain." (Quoted from http://www.cisco.com/warp/public/779/ibs/vertical/retail/Wal-Mart.PDF) Benefits Data Availability: The main advantage was that due to the immense data availability, the replenishment was more rapid, the product mix aligned to customer demands, and much lower inventory costs for Wal-Mart. Data transfer was much faster than modem linkups previously allowed. This translates into profitability for both the suppliers and Wal-Mart. Its suppliers deliver as and when required and Wal-Mart thereby reduces warehousing and inventory costs to a minimum and passes the benefit to the customer and this keeps its consumer numbers growing. "Having a network that is designed to meet our business requirements-growth, future functions, cost savings, and reliability-gives us a competitive advantage," says Flanagin. "We're utilizing technology to provide customer satisfaction, everyday low pricing, and an enhanced shopping experience," (Quoted from http://www.cisco.com/warp/public/779/ibs/vertical/retail/Wal-Mart.PDF). The Wal-Mart example illustrates that creating an e-business architecture is a continuous process of integration, encompassing the enterprise's entire operating base including applications, information and communication and infrastructure to support the business. (Kalakota, Robinson 1999) Monitoring Customer Preferences: Wal-Mart needs to have its finger on its customer's pulse to cater regional demands. The continuous flow of sales information is carefully categorized and customer preferences are logged and understood. These databases allow Wal-Mart to quickly and effectively predict the needs of customers in different areas and from different backgrounds. And by ensuring that each store receives required products Wal-Mart keeps inventory costs down. The suppliers are fed information about buyer patterns and future forecasts that allow them to modify or upgrade their goods as required. Problems encountered: On the downside of this integration, Wal-Mart is known to have pushed its suppliers into purchasing software and technology needed to integrate with its site. This has however created some misgivings among its suppliers, especially the smaller suppliers. High investment is required for the upgrades that are not affordable and paybacks are not viable in the short-term. Hence these suppliers end up losing their biggest customer or having their margins greatly squeezed and create operational issues. Also when the customers do not upgrade to the level of technology required the integration loses some of the efficiencies. Online site launch In 2000, Wal-Mart launched the online site, striking fear in the hearts of many online retailers as well. "In addition to the wide variety of goods for sale, the site launched a new feature called My Wal-Mart, designed to offer personalized service online, such as buying histories and faster checkout. Other features were built in to help customers find items faster and easier." This site is also cleverly used to cross market its products as well which means that if a book is sold it will try to sell a bookcase too. (Source from website http://transcripts.cnn.com/2000/TECH/computing/01/04/walmart.relaunch.idg/index.html Wal-Mart has embraced the bricks and clicks integration methodology that relates the Web site into its real world stores. This means a product ordered online and can be picked up in the stores. This would apply to a prescription loaded online can be picked up at the store or tires bought online can be mounted at its automotive department. Similarly it offers universal returns where an item bought at one store may be returned at any Wal-Mart. Problems: However, Wal-Mart needs to remember that its success lies in a customer visiting its site and concluding business. To drive traffic to its site it needs to continually update its site to the changing dynamics and differentiate its site so that customers are lured to it. Also, the cost of Internet transactions and maintenance issues need to be taken into account as well and monitored from affecting its business model. In spite of the enormity of its physical presence, Wal-Mart in the initial period struggled with its online store. However after integration it's on and off premises stores, it has garnered good growth and has collectively clocked in revenues of $295 billion in 2005. While Amazon.com is its closest competitor, other sites like Google that has introduced Froogle shopping may create threats to Wal-Mart for its low prices by allowing people to find bargains elsewhere. Constant evolution and innovation are a must for Wal-Mart. E-Commerce in the Manufacturing sector: Dell About Dell Michael Dell, the founder of Dell computers revolutionized the PC industry when he pursued his unique idea of marketing the computer directly to customers without a middleman. This approach has spelled success for him and his company sales have reached an astounding $50billion! There is no retailer, time and costs are consequently reduced, so Dell is able to price competitively. Since the customer is directly in contact, catering to customer needs closely becomes straightforward. E-Commerce and Dell's supply chain The efficiency of its supply chain serves to reduce costs by adopting just-in-time production where every computer system is made after an order is placed and built as per individual specification. The parts are supplied as and when needed several times a day to the factory and the order is shipped immediately on completion. In this way there is no warehouse for either the raw materials or the finished product and these reduce costs dramatically. This real time production has ensures no costs are incurred from rising inventory stocks. Since the needs are dictated by customer demand, this caters unerringly to what is required. Source: http://www.businessintelligence.com/assets/pubimage/id4_fig11.gif Dell embraced Internet technology with zeal when it arrived and its website was geared towards well-organized processes that would allow customers to directly purchase the machine online by logging into its site. Selling online is more practical and the customer is taken step by step through an automated process. The full product range is listed on the website and detailed information is included with user-friendly navigation that guides him to decision-making and purchase. He simply follows the easy, automatic instructions that come up on screen. The presence of options allows the customer to buy a system that exactly meets his needs. Payment is made through credit cards online or for those worried about security through an operator over the telephone. Dell allows leasing too in special cases. This order now moves to the production department and the computer is manufactured, tested and shipped. All of the processes linking to the sale are done through e-commerce: order placement, order tracking, payment processing, inspection, testing and delivery. Internally, Dell has a website www.valuechain.dell.com, suppliers are fed complete information that in useful to deliver components and parts and these have specifications from inventory required to acceptable product quality. Dell's strength is its ability to have implemented its innovative idea flawlessly. It ensured that its BTO, built-to-order model functioned efficiently. It has translated the value of Dell computers to mean purchasing a high quality product at a low cost. (Kolakata, Robinson 1999) Benefits Lowest possible Inventories: Its efficient and trend-setting supply chain allows Dell to assemble its products within hours of receiving customer orders, while keeping only seven hours of inventory. It has no warehouses for finished products. Dell has immense turnovers and procured over 26 billion USD of materials via ValueChain.Dell.com. (Source: http://www.firstmonday.dk/issues/issue7_11/standifird/index.html). With immense volumes, (Dell's global website receives more than 1 billion page requests per quarter at 80 country sites in 28 languages and 26 currencies. (Source from website http://www.business2000.ie/cases/cases_7th/case8.htm) Cost Savings: Dell Computer is a good example of a company that has realized tremendous cost savings by using B2B e-commerce for both its sales and procurement. The world's largest computer maker, Dell Computers sells over 50 million USD per day via its e-commerce site, primarily to business and institutional customers. Dell's approach to e-commerce serves to link the buyer and the seller. E-Commerce and customer satisfaction: Dell has successfully eliminated the middlemen, but customers need to be kept informed for them to feel secure through out the process. In order for the customer to know at what stage of the process, his order is in, customers are provided with an order tracking number that allows knowing where his order is at that point in time. This offers an estimate of the delivery time schedule as well, which is advantageous. Service support is provided by creating and viewing service records online like shipment and delivery dates. A maintained log of servicing done allows Dell's customer service to respond quickly. The quick turnaround times achieved in service translate into customer satisfaction. Managing an efficient website allows the customer to gain confidence in the company to execute their orders. Customer profiling and changing trends: If there are any changes in customer preferences and trends, Dell is the first to know due to the direct interaction. The customer and the company complete the transaction without ever meeting face to face and this would not possible without E-Commerce. Problems: However, with the changing technologies, Dell has to be alert to changing synergies in the industry. Since it is involved in B2B ecommerce with suppliers, it needs to be aware of increased competition as more companies opt for ecommerce and suppliers who may be able to leverage that increase in demand and increase prices. Also e-procurement may be restrictive and require a high degree of compliance that may restrict the suppliers who are willing to participate. If an industry's B2B e-commerce systems are restricted to a handful of dominant players, the cost advantages conferred to those participating in B2B e-commerce serves as a huge competitive advantage over those excluded. It would depend on the openness of the B2B system for the path it would take in future. Rapidly changing technology and customers getting more Internet savvy tend to increase expectations in the service quality required and catering to changing demands needs upgraded website navigability at all times. Security concerns of giving the credit card numbers can be addressed by ensuring adequate security and privacy characteristics. Also, innovations may bring another more dynamic marketing methods that may render the current initiative take a back seat. E-Commerce in the Logistics sector: UPS About UPS UPS is leader in the logistics industry. They move goods, documents and funds through their stores or shipping centres and provide delivery by land or air depending on the how fast or how much time is required by the customer. They operate in more than 200 countries worldwide, do business in 15 different languages and dialects, and as a result handle an enormous amount of data. Even in 1985, UPS had a well-organized data networking system to track and handle data of every shipment and were able to communicate with improved capabilities. In 1994, UPS understood that E-Commerce had great potential and decided to take advantage of the numerous opportunities that would open up. The greatest asset of a logistics company would be its connectivity and the ability to track a shipment and its whereabouts as well as on time delivery. "UPS decided that their own definition of e-commerce was not about technology, but was about the integration of "bits and bytes with bricks and mortar." (Quoted from website http://www.informit.com/articles/article.aspp=20881&rl=1) The ability to access a wider customer base was necessary due to the emerging B2B E-Commerce, and necessitated an investment in technology to achieve a state of the art infrastructure to cater to those companies that jump onto the E-Commerce bandwagon. It set up a link to the UPS website and adding tracking numbers to find and locate the travel of the shipment. "UPS also offers a set of transportation APIs called the UPS OnLine Tools that allow businesses to integrate tracking, rating, address validation, and a number of other valuable functions into their Web site. Now, through their eLogistics service, small B2C companies (as well as large companies) can have their own virtual logistics department hosted at UPS." (Source from website http://www.informit.com/articles/article.aspp=20881&rl=1) Benefits Reduced wait time: With electronic signatures made possible, UPS has now moved all the COD payments, credit risk assessment, billing systems, and cash flow online and it has presented surplus capacity to deal with and has resulted in cutting the wait time for COD receivables wait from two weeks to two days. Surplus Call Centre Volumes: Earlier, their call centres struggled with the volume of calls generated by their staggering shipment numbers. Now due to the Internet, more of their tracking requests are online and automated (about 2.5 million requests per day), and this has freed up their call centre capacity that has helped to diversify their services and offer a call centre service to their customers as well. Consolidated Services: UPS has banked on E-Commerce to diversify on its core competencies. It now offers a consolidation of call centre, logistics with information tracking and shipment deliveries as a packaged back-end service to key customers like Nike. Problems: UPS competitors like FedEx and global player like DHL are all equally e-commerce savvy and therefore UPS, needs to watch not only its business consumers, but also its individual consumers as well. Competing companies end up slashing prices to gain customers who susceptible to pricing on the shipping tariffs. These may put a tight rein on the margins causing operational difficulties. Similarly constant ability to bring customers to its site by promotions and return customer discounts will help keep its website users. Having more competition and being dependent on logistics makes it vulnerable to changing needs Conclusion The business situation is continually changing and complacency on the part of the company with its current position spells disaster for it. Failing to invest in new technology and utilise the enormous potential of E-Commerce will cause the company to lag behind its more savvy competitors who react dynamically to the changing structures and upgrade, adapt and integrate E-Commerce into their business environment. With the globalisation of the marketplace and widening of the target consumer base, growing Internet users, heightened competition and more sophisticated and aware customers, being able to provide real-time information becomes paramount. It is not without challenges either. It starts with the need and the vision to execute, the ability to find the monetary resources and knowledgeable personnel. It needs diligent planning and cannot be embarked upon haphazardly. Above all, it is still needs to be clearly defined with respect to legislations and legal ramifications and its consequences. E-commerce is not just new technology. Its impact on the global market is phenomenal. It's a newer way of doing business that makes use of the full potential of the Internet. The main impact of the E-Commerce is the integration of the various functionalities that allow information sharing more easily. Business strategies now need to address more dispersed workplaces and therefore rethink and reinvent their way of functioning. Wal-Mart, Dell and UPS are examples of companies that were aware of the emerging markets and external environments and looked at them as opportunities too precious to be missed. Sources Kalakota, Robinson 1999 E-Business Roadmap for Success Addison-Wesley Longman Inc ISBN 0-201-60480-9 United Nations Conference on Trade and Development Ecommerce and Development Report 2003 Internet Edition prepared by the UNCTAD secretariat Accessed on 20 Feb 2006 from website http://www.unctad.org/en/docs/ecdr2003_en.pdf InfoGuide E-Business Canada Economic Development for Quebec Regions Accessed on 20 Feb 2006 from website http://www.infoentrepreneurs.org/servlet/ContentServercid=1099569601561&pagename=CBSC_QC%2Fdisplay&c=GuideInfoGuide Guide to E-Commerce Martin P. Catherwood Library Cornell University Accessed on 20 Feb 2006 from website http://www.ilr.cornell.edu/library/subjectGuides/E-Commerce.htmlrefresh=true&cat_id=779 The Wal-Mart Story Cisco-Retail Customer Success Story Accessed on 20 Feb 2006 from website http://www.cisco.com/warp/public/779/ibs/vertical/retail/Wal-Mart.PDF Songini, Marc L Nov 20, 2000 Just-In-Time Manufacturing omputerworld.com Accessed on 20 Feb 2006 from website http://www.computerworld.com/industrytopics/manufacturing/story/0,10801,54131,00.html E-Commerce within Dell and how this new way of doing business is managed Business 2000 case study- Dell Business 200.com Accessed on 20 Feb 2006 from Website http://www.business2000.ie/cases/cases_7th/case8.htm Levy, Mitchell 2 Mar 2001Case study United Parcel Service, Inc. Informit.com Accessed on 20 Feb 2006 from website http://www.informit.com/articles/article.aspp=20881&rl=1 Bednarz, Ann July 7, 2005 The Art of balancing E-Commerce processes Networkworld.com Accessed on 20 Feb 2006 from website http://www.networkworld.com/news/2005/020705specialfocus.htmlpage=2 "THE ROLE OF STANDARDS IN THE GROWTH OF GLOBAL ELECTRONIC COMMERCE" Wal-Mart prepared statement Accessed on 20 Feb 2006 from website http://commerce.senate.gov/hearings/1028hab.pdf Briody, Dan Jan 4, 2000 Wal-Mart ups e-commerce bid with Web site relaunch Accessed on 20 Feb 2006 from website http://transcripts.cnn.com/2000/TECH/computing/01/04/walmart.relaunch.idg/index.html Basic notebooks Dell.com Accessed on 20 Feb 2006 from website http://www1.us.dell.com/content/products/features.aspx/featured_basnbc=us&cs=19&l=en&s=dhs&pbar=true Welcome to UPS UPS.com Accessed on 20 Feb 2006 from website http://ups.com/content/gb/en/index.jsx Supply Chain Accounting software Research ASAresearch.com Accessed on 20 Feb 2006 from website http://www.asaresearch.com/E-Commerce/supplychain.htm Make yourself at home Walmart.com Accessed on 20 Feb 2006 from website http://www.walmart.com/ Standifird, Stephen S, Sandvig Christopher J Control of B2B E-Commerce and Impact on Industry Structure FirstMonday Peer reviewed journal Accessed on 20 Feb 2006 from website http://www.firstmonday.dk/issues/issue7_11/standifird/index.html) Read More

 

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