The New Ways of Electronic Commerce in Business - Case Study Example

 According to the Organization for Economic Co-operation and Development (OECD), electronic commerce had been one of the newest ways of doing business in the world today, and that it has a great potential of actually altering economic activity worldwide despite being relatively young (Organization for Economic Co-operation and Development 1999). This is because of the fact that electronic commerce, more popularly known as e-commerce, has been able to make many business transactions around the world more flexible speedy and convenient. Through the use of the internet, e-commerce has opened a lot of possibilities for businesses and entrepreneurs alike, opening up newer markets which were before out of reach, and revolutionizing how business in conducted. But what is the definition of electronic commerce? One definition of electronic commerce states that it is the use of computer networks in business, with the aim of increasing profitability and increasing market share and brand reach (Watson et al. 2008). Another definition of electronic commerce states that it is any form of business transaction done in the internet (Department of Trade and Economic Development – Government of South Australia n.d.). There may be a lot of varying definitions, but most of these definitions boil down to one common theme: the use of the internet in conducting business transactions, as opposed to physical contact in doing business. One of the main reasons why electronic commerce has already been one of the most popular choices for many businesses is because of the fact that electronic commerce has been able to improve organizational efficiency and other logistical problems in conducting business. Some of the main advantages if using electronic commerce involves increasing the profitability of the business, improving customer services to its clients, gaining a larger market share, and as well as delivering goods and services to clients in a faster, more convenient, and more efficient way (Watson et al. 2008, p.8). For instance, by using electronic commerce, businesses can actually save on logistical expenses, especially on marketing their respective products, due to the fact that maintaining a website and investing on search engine optimization services to reach out on prospective customers online is more cost-effective, as compared to physically distributing marketing tools to customers or hiring advertising firms to advertise on tri-media. In this case, lessening such costs will surely increase the profitability of any business. In addition, by using electronic commerce, clients can now have much more convenience in giving feedbacks to the goods and services that they receive, especially through online surveys that online businesses actually uses. This mechanism will surely help businesses in evaluating their own performances and giving much better services to clients. In terms of gaining a larger market share, the best thing about electronic commerce is that it has the ability to reach out to millions of customers worldwide in just a matter of seconds. This would be virtually impossible for other businesses who are not engaged in electronic commerce. In addition, it is important to take note that consumers nowadays are more comfortable in looking for goods and services through the internet, given its speed, reliability, and the convenience that it offers to consumers. Also, because electronic commerce relies much on the internet, it would be able to deliver services to clients at a much faster pace than usual. Take note that consumers nowadays can now do their shopping in the comfort of their own homes, and that companies can now provide the specific needs of customers in just a matter of clicks, without bothering them to go physically into the merchandising stores of companies. This will surely make businesses deliver their goods and services much faster than before, and at the most convenient war for their loyal clients. The key to the success of electronic commerce, especially when viewed from a cost-effective standpoint, is that it enables to use the benefits of technology, specifically on information technology, to be able to enhance business transactions and make it more effective and efficient (Watson et al. 2008, p.8). In this case, it is also important to note that having a competitive computer infrastructure is required, given that information technology relies much on such infrastructure. This is why it is also said that electronic commerce involves the buying and selling of goods and services through the use of the internet and computer networks (Centrul European al Consumatorilor Romania n.d.). Another advantage of doing business through electronic commerce is that it makes cross-border business transactions so easy and effective that electronic commerce has been one of the catalysts of economic globalization (Economic Intelligence Unit 2007). Given the increasing liberalization of trade across the entire globe, electronic commerce has provided the opportunity to businesses to take up this challenge and deliver services to a globalized economy. One of the major elements of doing electronic commerce is the internet. It is through the internet that businesses are doing wireless, impersonal business transactions with consumers all around the world. Simple defined, the internet, also known as the World Wide Web, is actually the wide network of computers around the world that provides information from anywhere to everywhere on the globe(Department of Trade and Economic Development – Government of South Australia n.d.). One major factor that has contributed to the success of electronic commerce is the number of potential costumers that are presently using it (Watson et al. 2008, p.8). The internet has developed to be one of the largest and most convenient sources of information for consumers worldwide. In this case, a lot of people actually prefer searching the internet for any information that they need, as well as for the products and services that they would want to offer. Adding to that is the millions of people that actually have access to the internet. In fact, in developed industrial countries like the Australia, the US, and the countries within the European Union, having a computer and an internet connection has become so common, even to the younger sections of the population. In this case, almost all of the different niches of consumers are already using the internet; and when businesses are not able to adapt to this situation, they are actually losing streams and streams of potential customers to competitor firms who are actively conducting business through electronic commerce (Watson et al. 2008, p.9). Given the digital revolution, a lot of products and services offered in the market right now are classified as digital products, which often have an audio-visual characterization. This includes music, movies, computer hardware and software of different purposes, and even digital books popularly known as “e-books.” And the fact is that these products are all information intensive, and are mainly marketed through the internet (Watson et al. 2008, p.9). In this case, businesses which offer digital merchandise also rely heavily upon electronic commerce, given that this is the most effective way to market their products. Aside from businesses selling digital merchandise, there are also other businesses that actually ell products and services that are information intensive (Watson et al. 2008, p.9). This includes products that requires a certain amount of information before they be described (Watson et al. 2008, p.9). This includes both common household goods and goods with cutting edge technologies (Watson et al. 2008, p.9). In this case, electronic commerce has also been one of the most efficient ways to deliver these kinds of products, given that consumers can conveniently access information on these products just with the tips of their fingers. Considering the amount of information that is stored in the internet, as well as the number of people that is currently using it, some of the main advantages of using the internet in conducting business, especially through electronic commerce, include: Promoting cost-effective promotional products and tools electronically Advertising products to millions of consumers and costumers in an instant Having the ability to research market information in order to have crucial knowledge in maintaining competitive advantage over other competitor businesses Easier communication with all business stakeholders around the world (Department of Trade and Economic Development – Government of South Australia n.d.). Aside from having these advantages, electronic commerce also has the means to be able to reduce significant business risks. Summarized into three main business risks, this includes demand risk, innovation risk, and inefficiency risk (Watson et al. 2008, p. 9). Briefly defined, demand risk includes both the sharp change in demand for a product, as well as the complete collapse of market for a product (Watson et al. 2008, p. 9). One popular example of demand risk includes the demand for typewriters (Watson et al. 2008, p. 9). Before the advent of computers, which have word processors in it, much of the papers and even legal documents were made through the use of typewriters. However, in the advent of the digital revolution, computers with word processors in it have become so abundant and common that the demand for typewriters simply collapsed (Watson et al. 2008, p. 9). Of course, typewriter firms that were not able to adapt to this new situation quickly had no other choice but to declare bankruptcy. The key in minimizing such demand risks includes flexibility, adaptability, and innovation in the part of businesses (Watson et al. 2008, p. 9). The good thing about electronic commerce is that it is able to minimize such risk by giving enough information to the business on what is happening on the market, on how it changes, as well as on information on the changing tastes and preferences of consumers worldwide. In this case, through electronic commerce, businesses can now be able to use the Web to assist them in analyzing the changing market preferences of their clients in the most efficient way, as well as enabling them to adapt to such situations quickly. Through the extensive use of the internet, electronic commerce can now reach out to a global market, analyze consumer trends on a global scale, have access on to one of the most up-to-date market information, and assist in strategy formulation to counter threats of demand risks (Watson et al. 2008, p. 9). Another significant business risk that can be avoided through electronic commerce includes innovation risk. Simply stated, innovation risk is actually the inability of a firm to constantly innovate, given that products and services offered to consumers has the tendency to saturate the market due to oversupply (Watson et al. 2008, p. 11). In this case, in order to avert oversupply or market saturation, businesses must be able to make new products, or fit their products to the specific tastes on consumers around the world (Watson et al. 2008, p. 11). In addition, it is also important for many businesses around the world to be able to have a steady source of new ideas and concepts that will surely generate interest among their prospective clients (Watson et al. 2008, p. 11). In innovation, it is crucial for firms to have enhanced communication capabilities with clients, especially on their feedbacks to products and services offered; in able for them to contribute on how new products and services will be packaged to consumers. In this context, electronic commerce actually delivers the best enhanced communication capabilities with consumers, especially through the use of technological advancements in information technology (Watson et al. 2008, p. 11). Through electronic commerce, information that is gathered on the market is more reflective of the conditions of the market for a certain product in relation with consumer trends, making it easier for firms to innovate. Some of the more popular communication tools that are used by businesses engaged in electronic commerce include online forums, bulletin boards, chat rooms, blogs, and even simple electronic mails (Watson et al. 2008, p. 11). Meanwhile, inefficiency risk refers to the failure of a firm to match the cost-effectiveness of competitor firms (Watson et al. 2008, p. 12). Of course, it is inevitable for any business firm to have fixed costs in their operations, especially in logistics, marketing, advertising and promotion, among others. The good thing about electronic commerce is that it significantly reduces a firm’s operating costs, especially on logistics-related expenses. Physically going out into the field taking information about a specific target market, as well as conducting personal, face to face surveys regarding consumer preferences and feedbacks, or even simply advertising products through print, radio and television is just too costly, especially when reaching markets on a global scale. However, through the use of the network infrastructure provided by electronic commerce, such kinds of expenses are significantly reduced to the costs related with maintaining a website and being able to innovate web pages to allure consumers surfing in the World Wide Web (Watson et al. 2008, p. 12). One popular method used by businesses engaged in electronic commerce is providing space for a Frequently Asked Questions (FAQs) webpage (Watson et al. 2008, p. 12). Through this tool, businesses are able to disseminate as much information about the product as possible in the most cost-effective way. Through this tool, consumers are being able to browser through the qualities of a product in the most convenient way, raising chances of generating sales, or even mere brand exposure. Of course, the success of electronic commerce relies heavily upon the technological infrastructure that actually supports it. One of the main drivers of electronic commerce in this case is internet technology (Watson et al. 2008, p. 21).The technology behind the internet is actually composed of the following key components: the use of a common language (the TCT/IP – Transmission Control Protocol/Internet Protocol), the presence of addressability of different sites through the Internet Network Information Centre (InterNIC), and the overall internet infrastructure (Watson et al. 2008, p. 21). Briefly defined, the TCT/IP is actually the technology responsible for the transmission of data through the internet (Watson et al. 2008, p. 21). The functions of the TCP also includes splitting messages sent through different computer packets, determining the path of a specific message to a certain computer (popularly known as the router), and determining the best route of messages through the network. Meanwhile, the InterNIC is responsible for the provision of unique IP addresses of each computer throughout the globe, enabling communication between computers from one location to another location in any part of the world (Watson et al. 2008, p. 21). IP addresses usually consist of 32 bit number, which consists of any four groups of numbers ranging from 0 to 255 (Watson et al. 2008, p. 21). In addition to this, the internet is also supported by a certain infrastructure, consisting of different layers including the national information infrastructure, message distribution infrastructure, electronic publishing infrastructure, business service infrastructure, up to electronic commerce applications (Watson et al. 2008, p. 22). Reference List Business Insights n.d., B2B eCommerce: from EDI to eMarketplaces, viewed January 9, 2010, . Centrul European al Consumatorilor Romania n.d., E-commerce, viewed January 9, 2010, . Economic Intelligence Unit 2007, Digital Identity Authentication in E-commerce, Identrust, viewed January 9, 2010, . Government of South Australia Department of Trade and Economic Development n.d., Biz Facts, viewed January 9, 2010, . Organization of Economic Co-Operation and Development 1999, The Economic and Social Impact of Electronic Commerce: Preliminary Findings and Research Agenda, OECD Publications, Paris, viewed January 9, 2010, . Watson, R, Berthon, P, Pitt L & Zinkhan, G 2008, Electronic Commerce: The Strategic Perspective, Global Text Project, Zurich, viewed January 9, 2010, . Read More