Evaluation of e-Commerce Models in Wall-Mart Stores - Case Study Example

Electronic Commerce Abstract This particular paper dwells mainly on electronic commerce. The paper begins by giving an overview of electronic commerce and some potential hurdles that organizations are likely to be faced with when implementing the technology, and later on provides some possible mitigation strategies that enterprises may apply in order to eliminate or reduce the associated risks. The paper the proceeds on and explains on the various electronic commerce concepts and in particular the Business-to-business concept whereby it tries to relate how the concept is related to electronic supply chain and how organizations may fully benefit from it. The paper then concludes by providing an elaborate description of electronic supply chain together with their associated benefits and drawbacks. It finally gives a real life scenario on how electronic supply chain have become successful in Wall-mart stores, and assisted it to achieve the competitive edge. Table of contents Abstract ……………………………………………………………………………………….2 Introduction …………………………………………………………………………………..4 Electronic Commerce Pitfalls …………………………………………………………………4 Mitigating Potential Electronic Commerce Risks ……………………………………………..6 Business-to-Business ………………………………………………………………………….7 Electronic Supply Chain ……………………………………………………………………….9 Wall-Mart Case Study ………………………………………………………………………….10 References ………………………………………………………………………………………12 Introduction This is basically a business that is conducted online over the internet by utilizing applications that rely on the internet such as web services, shopping carts, instant messaging, and email among others. These businesses involve buying and selling of goods and services, serving customers, and collaborating with business partners. A huge percentage of electronic commerce is conducted entirely electronically and in some cases may involve the transportation of goods physically whereby most transactions are usually completed electronically and interactively in real time. This particular electronic commerce concept is new and business people are taking advantage of e-commerce solutions to make their business entities more popular and profitable (Bhasker, 2009, p.2). With increasing business competition, rising operational expenditure, coupled with global financial crisis, modern technology has transpired as a crucial tool that assist organizations to devise new techniques and strategies so that they may have a competitive edge when compared to their rivals. In the current scenario, electronic commerce is this crucial tool whereby it is already guiding enterprises in promoting their products while keeping them linked with their customers 24/7/365 (Schneider, 2010, p.6; Laudon & Traver, 2009, p.8). E-commerce concept has provided enterprises with additional flexibility that enables their clients to acquire products from anywhere and anytime. For instance, it is now possible for people to conduct their shopping at the comfort of their offices or homes due to scarcity of time (Broadway, 2011). Electronic Commerce Pitfalls The adoption of technology within the business environment is a very strategic imperative for most enterprises, however, the technological revolution has brought about new form of risks that neither insurance nor legislative bodies thought about previously, or have any sufficient experience, or law to draw upon (Greenstein & Vasarhelyi, 2002, p.387). These online risks involve: Physical threats These are mainly threats which are posed to the IT infrastructure in general and may involve fire, flood or theft of the hardware itself. Data Threats These are threats which arise as a result of databases, software’s, viruses. When these threats invade an e-commerce infrastructure, they are likely to paralyze some, or all of the operations of the system making e-commerce facilities from the company inaccessible for some period of time. This could seriously dent the reputation of the company and possibly make the enterprise loose out on some of its key clients. Technical Failures These occur as a result of software errors or hardware failures such as the server crashing. When this happen some of the functionality of the system may be affected whereby very crucial functions such as the cataloguing or the billing system can be compromised which will definitely affect the entire operations of the company (Business Link, 2011). Identity theft It is basically a crime where someone’s information is compromised and used illegally in electronic transactions in instances such as fraud, forgery, and theft among others. This form of crime takes many forms such as; financial theft, non-financial theft, account take over, reverse record identity, and criminal record identity. This can happen when hackers gain access to the company’s main database through the website and obtaining clients sensitive personal information such as credit/debit card numbers or social security numbers. This information could then be used to make online purchases or obtaining credit illegally from the financial institutions. When this has been discovered, the company may be made liable for all the incidences which could lead them to unnecessary litigation hence possible bankruptcy. Denial of Service Attacks Here the attacker floods the network with a lot of request until the bandwidth collapses. This may be performed with business competitors who have some intention of discrediting the company’s services. Perpetrators of such kinds of attacks will mainly target sensitive institutions like banks and e-commerce stores. Client machines can also be subject to these attacks whereby they can be saturated with external communication requests in such a way that it becomes extremely difficult for the machines to respond accordingly to the legitimate traffic hence unable to provide the intended service. Cross site scripting This mainly happens through web applications when malicious attackers inject client side scripts into web pages which are viewed by other users. When this happens attackers can use such vulnerability to bypass access controls which could results into significant security risks because attackers can have control of crucial personal accounts. Mitigating Potential E-Commerce risks Physical threats These threats can be mitigated by housing the hardware equipments in fireproof cabinets that can be purchased from various vendors. When it comes to the security of the equipments, they can be housed in secure rooms that contain latest security mechanisms such as alarms, and intrusion detection systems. The rooms where the equipment is housed can also be installed with a smoke detector which can alert personnel incase some fire has been detected within. Data threats This can be mitigated upon by installing automated security solutions such as antivirus and antispyware software’s. The company can also install intrusion detection systems and firewalls that will alert the company’s system administrator of any technical abnormality within their systems. Technical Failures These can be resolved by purchasing top of the range systems from reputable vendors that have a solid service history. The company can also implement parallel systems such as having two servers running whereby the extra server hardware will serve as a backup incase the server crashes. Personnel should also be well trained and properly versed with the system in such a way that they take minimal time to diagnose systems malfunctions. Before any software solution or hardware is deployed for the company’s operations, it should be thoroughly tested against all potential risks and the company should ensure that there is a disaster recovery plan in place just incase the system crashes down and affects crucial components such as the databases. Identity Theft The company should make efforts to educate their clients on various measures. This include unnecessary disclosure of sensitive personal information through the phone unless they have initiated the contact because identity thieves can usually pose as representatives of the company whereby the company’s customers may be requested for their Social Security numbers or credit account details (Hammond,2003,p.75). Denial of Service Attacks This can be mitigated upon by installing firewalls because these devices have simple rules such as denying protocols, ports of IP addresses. The company can also use modern switches which comes bundled with rate limiting and ACL capability. The switches will provide automatic rate limiting, Bogon filtering which filters bogus IP, deep packet inspections and delayed binding which detect and remediate denial of service attacks through automatic rate filtering. The company can also use Application front hardware which is usually placed on the network before it reaches servers. This device can be used in conjunction with routers and switches whereby it analyzes data packets as they come through the system and classify them as either dangerous, regular or priority. Other risk mitigation measures include deploying intrusion prevention systems, prevention via proactive testing. There is also blackholing and sinkholing whereby traffic to the attacked DNS or IP address is sent to some “blackhole” so that they do not affect network connection. The traffic may also be passed through a cleaning center whereby good and bad traffic are going to be separated and the good traffic send to the server. Cross site scripting The client will have to be thoroughly informed on this whereby some of the mitigation strategies would include content filtering, disabling the scripts in web browsers, offering periodic scanning which simulate attacks from the company’s server to clients machines and checking if the attack is successful whereby incase the attack succeeds, the client is provided with detailed information on how it occurred and timely advised on how they can prevent such attacks from occurring in future. Business-to-Business Business to business (B2B) basically describes commercial transactions that were conducted between businesses. This may be between manufacturers and wholesalers or between wholesalers and retailers. This concept is very important to organizations and has driven significant number of organizations to adapt the electronic environment as their main business channel. Even though electronic business concepts require that organizations have to make changes to their existing business models so as to exactly depict the changing environment in which a number of business models pertaining to electronic commerce have emerged (Loshin & Vacca, 3002, p.187). There are also various types of B2B transactions and activities and these include; sell side, buy side, Exchanges and Supply chain improvements and collaborative commerce (Haig, 2001, p.15). Sell side: Here one company sells to a number of products and services through electronic catalogues or auctions over the internet and businesses can also use forward auctions when selling their products. This happens when manufacturers invite partners to participate in market places. Here companies may attempt to sell their products to other organizations electronically using their own private electronic marketplace, website or third party website. In this instance the buyer is usually an organization and they are expected to come to the market place, view catalogs and place an order. The seller will use electronic catalogues to increase on their sales volume, reduce selling and advertising costs, minimize on administrative costs and increase speed of delivery. Buy side: Here the company mainly uses reverse auction, negotiations and group purchasing or various electronic procurement methods. Some of the available e-procurement methods include; e-sourcing, e-tendering, e-reverse auctioning, e-informing, web based ERP, e-marketsites and E-MRO. Here the company’s purchases products form other organizations electronically with a goal of reducing the costs of items purchased while minimizing on their administrative expenses. Electronic exchanges: This is a type of electronic market with one buyer and many sellers. They are open to a number of businesses and in most cases owned by third parties. They are used as the initial contact point and once partners make their business contacts they may then proceed on to a private exchange to conduct their business (Rainer & Cegielski, 2009, p. 215). Electronic exchanges can be used both for direct and indirect materials. Direct materials are the inputs used during manufacturing e.g. safety glass in automobile windshields while indirect materials are items required for maintenance, operations and repairs which may include office supplies. Some of the types of public exchanges include: Vertical exchange: this connects buyers and sellers from a specific industry Horizontal exchange: This connects buyers and sellers from various industries. Functional exchange: This assist in needed functions such as extra office space which can be traded on a needed basis. Merchant Models: This type of model will enable manufacturers to sell some of their goods and services through the internet based on list prices or auctions. Such model evolves mainly from the traditional brick and mortar store that is seeking to establish new marketing channel for their products. The online store model is the most relevant when it comes to B2B electronic transactions whereby products information can be updated while still having the freedom of initiating immediate business transactions. Manufacturer model: This particular model enables manufacturers to connect with buyers directly through the internet. This has been found to eliminate the middlemen hence shortening the distribution channel which results into enhanced efficiency, improved customer service and also an opportunity to reach a huge clientele base. Buy side model: This is where a major purchaser seeks to acquire products or services from potential suppliers in huge quantities by using the internet. This model encourages suppliers to establish business relationships with the buyer by just approaching them and hoping that they will acquire the required products. This enables buyers to minimize on their acquisition costs and also provides the advantage of viewing some of the products and services that they are being offered. It also enhances on customer relationships due to the prompt replies received from suppliers. Brokerage model: This is whereby both buyers and sellers are brought together to meet and conduct there transactions whereby each party is usually charged some fee for every transaction that has been completed. Electronic Supply Chain This is basically a group of independent organizations which are located in different countries and have a strategic alliance with a single goal of designing, manufacturing, and delivering products within short time frames through the internet or rather electronic means which develop, collaborate and synchronize the entire business process. Fig 1.0 Diagram depicting an electronic supply chain. Benefits of Electronic Supply Chains Electronic supply chains expedite on business processes, they assist to improve on supplier relationships, they save on time hence money because when goods are required they can be delivered immediately which means they do not hold down a business operations and incase of lets say a retail store, such e-chains will ensure that stocks do not get finished on the shelves. Drawbacks of electronic Supply chains They are very expensive to install and require a lot of skilled manpower. If a system fails it might end up affecting the entire chain hence entire business operations. Some suppliers may not be very willing to adopt the concept immediately which might affect the overall plan of the organization because some suppliers have contracts which go as much as fifteen years (Warkentin, 2003, p.132). Wal-Mart’s case study The company is boasting of one of the most reputable technology driven supply chains. The company invited some of its key suppliers to assist in establishing a profitable supply chain partnership which are intended to enhance the product flow efficiency within the company. For instance, Wal-Mart has a partnership with Procter & Gamble which enables the interoperation between the enterprise systems at transactional, operational and strategic levels (Turban & Lee, 2010, p.331). The organizations inventory management is performed at both the corporate and store level whereby technological systems facilitate in re-ordering of goods automatically whenever they are reduced to certain level. The small independent stores can also manage their own inventory and even order merchandise, a scenario that has been made possible with Wall-Marts satellite communication solution that has assisted the company to network its suppliers so that the company’s merchandise can be expediently delivered to the nearest distribution center or store. Wall-mart has also deployed state of the art Electronic commerce technology that comes bundled with a disaster recovery feature hence the company can track its goods and inventory incase a disaster strike, with such plans in place the company is assured of uninterrupted service. The company has also deployed a computerized warehouse management system that assists in tracking and managing the flow of goods through its available distribution center. The deployed technological system also manages the company’s trucks and forklifts. This warehouse solution optimizes the enterprise stock levels based on real time information on the available parts and materials. The company’s warehouse management systems has embedded modern technologies such a RFID, Wi-Fi, mobile computers, and bar code scanners. Immediately information data pertaining to products flowing in/out of the warehouse is collected, the information is transmitted to a central data base. The company’s trucks ferry goods from their distribution centers to stores whereby these trucks are managed by several technological tools such as Decision supporting systems that enables optimal scheduling, dispatching, and matching the drivers with vehicles required. The company has also deployed wireless GIS system to locate the truck at any given time. The company has an RFID initiative which is very instrumental towards improving its supply chain since this particular technology assist the company to collaborate more with suppliers while reducing the inventory levels. Therefore with n electronic supply chain the company will improve on its competitiveness because there will be improvements in checking prices which in the past has been attributed to poor labeling. With the company’s 30 million shoppers per day and 800 million transactions, Wall-mart has a very huge database to maintain which requires business intelligence for reporting and analysis purposes. The company has also introduced the smart networks that will enhance the money flow and customer service (Turban & Lee, 2010, p.332). References Bhasker, 2009, Electronic Commerce, 3rd Edition, Tata McGraw-Hill Education. Broadway, 2011, E-commerce: A new way of conducting business, retrieved 6 April 2011 http://www.broadwayinfotech.com.au/article/new-way-of-conducting-online-business.html Business Link, 2011, Managing Risks in Electronic Commerce, viewed 7 April 2011 http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1075386132&type=RESOURCES Efraim Turban, Jae K. Lee, 2009, Electronic Commerce 2010: A Managerial Perspective, Pearson education Fig 1.0 Diagram Depicting an electronic supply chain, viewed 8 April 2011 http://www.ap210.org/tiki/tiki-index.php?page=Supply+chain Gary P. Schneider, 2020, Electronic Commerce, 9th Edition, Cengage Learning. Kenneth C. Laudon & Carol Guercio Traver, 2009, E-Commerce: Business, Technology, Society, 6th Edition, Prentice Hall. Marilyn Greenstein & Miklos A. Vasarhelyi, 2002, Electronic Commerce: Security, risk management, and control, 2nd Edition, Mc Graw-Hill/Irwin. Matt Haig, 2001, The B2B E-Commerce Handbook: How to transform your business-to-business global marketing strategy, Kogan Page Publishers. Merrill Warkentin, 2003, Business to Business Electronic Commerce: Challenges and Solution, Idea Group Inc. Peter Loshin & John R. Vacca, 2003, Electronic Commerce: Theory and practice, 4th edition, Charles River Media. R. Kelly Rainer & Casey G. Cegielski, 2009, Introduction to information systems: Enabling and transforming business, John Wiley and Sons, New Jersey. Robert J. Hammond, 2003, Identity theft: How to protect your most valuable asset, Career press. Read More