E-commerce Initiative by Competing Firms - Term Paper Example

?E-commerce Initiative By Competing Firms Commerce is often a basic economic activity that mostly involves trading or the buying and selling of goodsand services. During the early days, businesses were mostly conducted face to face for example a customer would enter a bookshop, examines the books, and pays for them. In order to fulfill the customer requirements, the bookshop needs to carry out other transactions and business functions such as to process the payment. However, with the advancement in technology whose aim is to cover a larger market segment, the question is whether the commercial transactions and business functions can be carried out electronically in a more successful manner. E-commerce is therefore an important activity a firm can venture into if it wants to be successful. Thus in E-commerce there is no paperwork or personal contact (Ritesh 89). In order for a firm to be successful, it must look back to what used to be done to the traditional business, how management used to operate in those times and the information technology that was applied. Moreover, the company needs to evaluate its business environment and other factors such as corporate strategies, her business structure, and the resources available for the business. This paper will address in depth the initiatives taken by four competing firms in a business industry in mobile phone delivery of services. The four firms are mostly involved in online transactions of their business and business functions. It will also assess the the products the four firms are dealing with, the strategies they employ in order to realize their goal, cost and revenue drivers and the business models. Finally, the conclusion will be drawn with all the four companies put into the comparison bearing in mind on the strategies they all employ in a successful ecommerce transaction. For easier referencing the four companies are Safaricom, Zain, Orange and Yu mobile phone services. 1. Business Strategy Ecommerce has lately changed the economy and affecting most companies on how they transact their business. Today, it is clear that no company can ignore ecommerce as it has been a more effective method of doing business and more convenient to even customers. Business strategy is a long term plan on how a given company will get enough profit to keep it in operation. However, this can be possible if the given company if the given ecommerce strategy would be able to implement the given activity in the most efficient way. Ritesh believes that for a successful ecommerce strategy, the company must consider their relationship with the consumer. Most often, the business owners neglect their relationship with the buyer and in so doing, they would be losing customers. Therefore, good customer service online goes hand in hand to retaining customers as the sole aim of a business is to make a profit that depends on retaining and acquiring new customers. Moreover, supply chain management is also essential in a successful online business as it ensures good communication between the business and the consumer (98). The four companies use ecommerce which has made them take advantage of tools and techniques being provided in the ecommerce websites such as the shopping cart, use of video that are more cost effective and easier to implement by the organization. However, they have adopted in the use of business strategies due to the much competition amongst themselves. Safaricom, Zain, Orange, and Yu mobile service providers have come up with different strategies in order to gain a competitive edge over the other. 1.1 Costs The four firms located in the same environment have mostly been successful in Kenya where they have looked for ways to gain a competitive advantage over them. This strategy aims at a firm becoming the lowest production company in a given industry. However, it is never an easy way so it calls for nice planning on how to do it. In the past companies often had to deal with the issue of competition with either increasing their sales or by decreasing cost in order to attract customers. However, in recent time reduction of costs calls for a focus on acquiring high quality raw materials at the lowest price. Safaricom has however been dormant in the reduction of her prices in terms of call rates but the move by the other companies namely Zain, Orange and Yu forced her into adoption of the method as it would have lost a number of customers. Cost leadership is essential in trying to remain noticed by consumers in any competitive environment like the one experienced by the four firms which often leads to the delivery of high quality services that are being accepted by the customers. 1.2 Differentiation Differentiation is a business strategy that enables a company to produce a unique product unlike its competitors. Differentiation can be either actual or perceived. In actual differentiation, a company produces goods and services that are not currently available in the market so that it can attract new customers. It is true that new products often attract customers who would want to have a taste of the product ahead of others. In perceived differentiation, a company uses a form of advertisement similar to the ones available in the market for a similar product. In this form of differentiation, customers use the knowledge they have of a similar product to fully understand how the new product works. For example, after Safaricom launched its Mpesa services they attracted a lot of customers and this made Zain to launch almost the same application but in Zain’s application one can send money to any network may it be Safaricom, Orange, or Yu service providers. 1.3 Price strategy In price strategy, companies often fight one another in the form of price wars (Ritesh 90). This is more so seen between the two most successful service providers; Zain and Safaricom. Due to much competition from Safaricom, Zain almost got out of the market but once it reduced her prices in terms of the call rates, it got more customers. Furthermore, later on Safaricom too reduced her call rates. This has been the case for quite some time now between the two most successful service providers in Kenya. Businesses often reduce their prices in order to gain a competitive edge against their competitor. The different forms of price strategies include: Penetration, economy, skimming, bundle and promotional strategies. In penetration pricing, a company gets into the market and introduces low prices with a sole aim of getting the market share. However, it slowly increases her prices as it gets more common amongst her clients up to a given level. This strategy is common amongst the owners of the Yu network who often give low prices for their products and their services are low. With time however, this network would increase her charges as at the moment it charges low rates on calling to the different networks. In bundle pricing the company includes several different products where all of them cost the same price. Safaricom service provider often advertises the sale of phones and at the same time a customer is given a free item for a given amount free of charge due to the purchase of the phone that is part of promotional pricing. 1. Business Models Business models are concerned with the activity that a given firm is involved in doing or the service it lenders to its customers. The four firms make profits by selling their products and services to their clients. Safaricom, Zain, Orange, and Yu service providers fall under the seller-oriented form of business models. Moreover, it is rare for such firms to buy any product from her clients. 2. Revenue Models Revenue models are concerned with the long term plan a company puts in place to gain its long terms returns on invested capital. Revenue models are often the company plans on how to make money which is their main aim of being in the market. The four firms have almost the same means of making money that makes them more rivals in the marketing scenario. For sale of different makes of phones, sale of talk time, providing of internet, sale of different makes of laptops are part of the activities that have enabled the four firms to be in the market (Ritesh 91). 3. Revenue strategy He continues to assert that a revenue strategy is a long term plan on how the given company will raise money that would enable them make a profit. It includes the examination of the potential of a firm’s products, assets and how they are distributed. In order to realize the goal of any company, it should have a clear mission, objectives and assess how it offers her services both the current and from the past and therefore plan in the right manner. Safaricom Company started its offering her services later after Zain Company had started and the other firms Orange and Yu came late. However, Safaricom has become more successful than her main competitor, since then because of her revenue plans that were done in the right way and were planned well. 4. SWOT Analysis SWOT analysis is a strategic planning method that enables a firm to assess her strengths, weakness, opportunities for expansion and the threats both internal and external (Ritesh 93). A successful analysis of this in any firm is essential to the given firm realizing her goals. Among the four firms however, Safaricom is more successful than the others. The question however is what does the firm has that has made it more competitive than the other firms. The launch of Mpesa service has given Safaricom an upper hand in the market than the other firms. This service covers mobile banking, loan services, paying bills, one can withdraw through ATM, buy goods through the service or buy airtime. This is the most outstanding feature that has enabled the Safaricom company to have an added advantage over the other firms. However, a closer look at Safaricom firm makes one realize that her call rates are still high as compared to the other firms. This has been her weakness that has seen customers move to other networks that have lower call rates like her main competitor Zain. Even though the prices are still high the company has still maintained that it would not engage in price wars with her competitors citing that her services are of high quality. Safaricom has enjoyed the Mpesa service and future expansion of the application to cover large areas in business would put her in a position that the other companies would not match her profits. All the firms however face an international issue as they are not available in all the countries of the world. 5. Web Marketing Strategy Most companies have realized the need to use the Internet to reach more customers. This has been done by most of the four firms but not been fully utilized. Using of websites to reach their clients is an effective way due to the advancement in technology. Thus a website would be developed by a business to serve a number of purposes namely: To convey information to its intended audience, or maybe carry a marketing message, a website also allows interactivity between the customer and the company and the website can be used to exchange information and opinions as in a chat room between the concerned parties in a business transaction. 6. Communicating with Different Market segments Communication is essential for the success of any business venture. Communication from customers whether online or face to face communication has paid off in the companies that use them in the most efficient manner. Safaricom’s customer care centers are quite a number in Kenya when compared to her competitors. Moreover, in Kenya where Safaricom has mostly been successful in the delivery of her services the number of Zain’s care centers are hard to find as they are unfamiliar. When Zain introduced the Sagem phones in Kenya which no one had heard about some years back Safaricom introduced Motorola and Siemens as their basic phone models they really sold well a clear indication that there was no communication or market survey done by Kencell as it was called at that time before introducing their Sagem phones. 7. Legal, Ethical and Tax Issues Research shows that the issues that surround the business practices affect the company in some way, but in most cases the ethical responsibility is placed on the poor management of the company. The company management needs to take into much consideration business ethics when making business related decisions (Ritesh 89). Even though most decisions that are made by companies are aimed at making the given business venture realize her goal it should take into consideration the social and ethical responsibility as this results in a more profitable business venture. Issues of business ethics highlights either the competitiveness of a manager of a given firm or their incompetencies in delivering their services. However, some managers in companies feel that there would be no need to take into consideration the ethical issues in the company like hiring of new employees on an equal basis, insider trading as they are not given the mandate to solve them by the organization. Most companies that desire to be more successful often have certain regulations governing the issue of salaries in their organizations. These companies are more often forced to compete with lower prices, taxation in order for them to minimize their expenditures. This is the same scenario experienced by the four firms that often have to pay less in order to make their net income to increase. This is thus a difficult for the managers of these companies to deliver their services in the most efficient way that would benefit both the shareholders and the customers. Therefore it is important to discuss the ethical issues facing these firms regarding their moral adequacy and it is their sole responsibility to address the issue through open communication. 8. Security Issues The Internet is often based on an open architecture with information moving from one side of a system to the other, thus there is a need for security as these information is not secure. Thus people transferring secure information over the internet like the information on a credit card sometimes have to fear from someone who is not the intended party may have access to it mostly hackers (Ritesh 69). Moreover, customers fear since at times the amount they might have agreed with the supplier to pay for a good online would at times be tampered and changed or would the company that is claiming to be the seller of given products be the one or liers? 9. Online Payment With the advancement of technology payments too can be made online. They include credit card payment systems. The firms must realize the importance of online advertising as opposed to the traditional methods of marketing. Thus concentrating on using the internet in their marketing will enable the companies to realize their goal. Works Cited Mariadas, Ritesh. Assessing ecommerce Technology-Enabled Business Value: An Exploratory Research. The University of Texas at El Paso, 2011 United States – Accessed: 28 Feb. 2012. Read More