Use of E-Commerce in a Brick-and-Click Organization - Essay Example

?EVALUATING USE OF E-COMMERCE IN A "BRICK AND CLICK" ORGANIZATION THAT BALANCES ECOMMERCE WITH A CONTINUED HIGH STREET PRESENCE title Instructor’s name Name of Institution Date of Submission Introduction Organizations may be categorized into three main groups based on whether they rely on electronic commerce to conduct business. Brick-and-mortar organizations refer to businesses that carry out their operations off-line especially selling their products through use of agents. Virtual organizations conduct all their business operations on the internet. On the other hand, brick and click organizations rely on e-commerce to carry out some business activities although this is only adopted as an additional marketing channel. As more and more businesses target at increasing their potential buyers and sales bases, they are making migration from brick-to-click technology. According to Hensman et al., (2001, p. 237), the most important development that has occurred recently in the business world is the adoption of e-commerce. E-commerce refers to a process of selling, buying, exchanging or transferring products and services through computer networks. E-commerce has revolutionized the way organizations conduct business and opened up new opportunities. E-commerce is used by businesses for electronically processing orders, dealing with customer service and enhancing the relationship with distributors and suppliers. Businesses that are not seeking to adopt e-commerce risk of being overtaken by competitors that utilize such technology (Hensman et al., 2001, p. 237). E-commerce is conducted using intranets, internet or extranets and other support technologies. Nevertheless, e-commerce comes with security risks which organizations should understand and manage them. The paper will evaluate the use of e-commerce by Tesco Company which is an example of a brick and click organization to improve business operations. The critical issues to be addressed in the paper include forms of e-commerce, technologies used in e-commerce, benefits of adopting e-commerce and the security risks that a business must manage when using e-commerce. However, the paper will begin by providing an overview of Tesco and its reliance on e-commerce. Tesco Company The company was established in 1919 has grown steadily to become the largest food retailer in UK offering various food and nonfood products. Some of the nonfood products sold by the Tesco Company include clothing and electronics (De Toni and Tonchia, 2003, p. 947). The retail also offers various services such as entertainment and insurance. Tesco also has branches in other different countries such as China, Hungary, US and Thailand and employs more than 440,000 people globally. The company has been able to remain ahead of its competitors by employing different strategies such as mergers, acquisitions, expansion and reliance on technology. The success of the company may also be attributable to strong leadership and innovation (De Toni and Tonchia, 2003, p. 950). One of the most notable developments by Tesco happened in 2000 when Tesco.com was launched. In 2001, the Chief Executive of the Tesco acknowledged that e-commerce is a major development to the company which helped change the relationship between the company and its customers. Tesco.com is among the best online shopping systems globally as the website is able to take more than 70, 000 orders weekly. The websites helped change the purchasing behaviors of customers as they do not have to physically get to the stores to buy their groceries. The website essentially offers customers the benefit of shopping from the convenience of their homes and to have their products delivered there (Palmer, 2004, p. 1075). When ordering online, customers can have their products delivered the next day or they can even order 28 days prior to the delivery. Tesco has further developed an online system to allow customers to make purchase from their Smart-phones. This is a form of e-commerce known referred as the mobile commerce (m-commerce) and was necessitated by the fact that more customers can access internet from their mobile phones in contrast to using computers which are less portable (Palmer, 2004, p. 1080). Additionally, the company has a system to maintain customer loyalty and therefore it introduced Tesco Loyalty Club. This strategy was introduced to ensure that the company is able to lock in customers to prevent them from being taken by its competitors as they earn points for every purchase which they can later redeem for some products from the store (Drejer, 2000, p. 207). Tesco does not only rely on technology to sell its products but it also relies on computer based technologies to manage it supply chain system. The company initiated an ambitious program that saw the company computerize the supply chain (Drejer, 2000, p. 206). The company set up centralized warehouses where supplies could be held for dispatcher to the stores rather than relying on the manufacturers to deliver product to the stores directly as this can cause inconveniences. In spite of Tesco being a leader in use of e-commerce, it has maintained high street presence where a significant number of its customers are able to buy directly from its store therefore becoming a good example of a brick and click organization that has maintained a balance between use of e-commerce and street presence (Drejer, 2000, p. 207). Figure one showing an electronic supply chain system Models of E-commerce There are different models that are adopted when developing an e-commerce strategy. One of the business models is the business-to-business (B2B) where all the participants are organizations or businesses (Kenneth and Traver, 2002, p. 27). Tesco Company adopted this model where it developed a Supplier Relationship Management System to enhance the relations between the company and its suppliers. Since suppliers are mostly businesses or organizations, the system fits into the B2B model. The other e-commerce model is the business to consumer model where an organization sells products to individuals. Online purchases by Tesco customers via Tesco.com fall under the B2B as this is trade between a business and individual. Tesco also relies on mobile-commerce where transactions are mediated via wireless environment and this is growing with increased access of internet from mobile devices. Intra-business electronic commerce is another form of electronic commerce where internal activities of the organization are mediated using the internet. These activities may include exchange of goods and services or information among different individuals in the organization. Tesco Company also utilizes this form of e-commerce where information is shared between different departments over the internet. For instance, the point-of-sale system is used to check products into and out of the store and sends such information to the central warehouse to determine the reorder level (Kenneth and Traver, 2002, p. 27). The other models of e-commerce include business-to-employees model where organizations rely on computer based technologies to deliver specific information to specific employees. Collaborative commerce allows different users to share information online while peer-to-peer technology facilitates sharing of information between networked computers and processing such information simultaneously. Peer-to-peer technology may be used in business to consumer e-commerce or business-to-business models (Kenneth and Traver, 2002, p. 30). The discussion on the various models of e-commerce demonstrates that brick and click organizations can rely on technology for increasing their sales to their online participating customers but to also enhance their purchasing experience of its customers. In addition to ensuring convenience of the customers as they make purchases, the adoption of internet by Tesco allows the company to manage its overall supply chain and processing of sales for those customers who come to buy from the stores. Internet has eased management of supplies for the company as it is able to monitor the stock levels and initiate supply request as appropriate. Furthermore, internet allows the company to gather information about suppliers from various sources and compare the prices and quality of products offered to ensure it offers the best deal to the customers. Given that e-commerce reduces the number of customers requiring direct service from the employees and therefore the company is able to concentrate on providing quality services to those getting to its stores therefore allowing it maintain high street presence. Technologies Used In Developing an e-Commerce Platform To develop an e-commerce system, an organization relies on networked worked technologies to allow for different units to communicate in processing orders. One of networked systems relied upon by organizations is the intranet and extranet (Rajput, 2000, p. 277). Intranet refers to internal organizational network that relies upon web browsers and internet protocols to connect different units within an organization. Intranet does not go beyond the boundaries of the organization and therefore people outside the organization cannot the network. Development of an e-commerce system relies upon extranet which is a network that allows the intranet of a particular organization to link up with multiple other intranets. Extranets also relies on web browsers and internet protocols and operate on a global scale thereby exposing the system to security risks (Rajput, 2000, p. 277). E-commerce also relies upon two information systems; intra-organizational and inter-organizational information system. Intra-organizational information system is communication systems that allow e-commerce to be carried out within a particular organization. Intra-organizational information system links up different units within an organization and allows them to communicate with each other when processing orders made electronically. On the other hand, an inter-organizational information system facilitates communication between different organizations. Communication between different organizations is critical as enables a company to accomplish different transactions electronically such as ordering goods when the company gets to the reorder level. In addition to the interconnected networks described above, development of an e-commerce platform requires various other software and hardware components. According to Rajput (2000, p. 280), groupware technology is the basis for development of a virtual communities and e-commerce platform. Groupware technology supports various activities required in e-commerce such as communication, sharing of information and collaboration. The features of groupware include e-mails and sharing of information across the internet and intranet (Kenneth and Traver, 2002, p. 87). An e-commerce system also requires middleware which refers to different products and technologies which enhance availability of backend resources such as databases for the fronted applications (Rajput, 2000, p. 280). This is because before a transaction is processed, various activities are first carried out but are not seen by the customer or the employee processing the transactions. The middleware technologies also entail software which initiates backend applications to get and end-to-end automation of business operations; that is, it helps to chain the order request to the inventory and distribution system. Additionally, middleware technologies allow for integration of process with backend enterprise activities such as information repository and enterprise resource planning (ERP) applications. Consequently, the middleware technologies in e-commerce integrate the inventory system to the shipping and distribution systems and gathers information to be used in decision making. Middleware technologies exist between server and client and include access gateways, specialized servers, communication protocols and transaction processing monitors (TP) (Rajput, 2000, p. 287). Given that e-commerce call for different customers to access the same database simultaneously, it is critical to manage such access and this is accomplished through the transaction processing middleware (Kenneth and Traver, 2002, p. 87). Moreover, transaction monitors are required to authentic a transaction before it is authorized. For instance, transaction monitoring may entail ensuring that money is transferred from the account of the client to the account of the company before the transaction can be authorized. Basically, transaction processing monitors enforces the integrity of a transaction although it also balances workload, manages services, and plays a critical role in queuing; recovery and fallback as this are required in a multiservice operation. TP is developed based on the principle that all transactions must have four characteristics represented as ACID. ACID refers to atomicity, consistency, isolation and durability (Rajput, 2000, p. 286). Atomicity describes the fact that each transaction forms a unit of the work while consistency seeks to ensure that the system remains stable even after the transaction. Isolation demands that each transaction is independent and unaffected by other transactions as durability refer to a requirement that all operations carried out during any transaction remain unchanged to avoid fraud (Rajput, 2000, p. 289). An e-commerce platform must also have communication middleware to allow applications communicate when processing transactions. Message-oriented middleware (MOM) for instance allows the client and servers applications to communicate and operate through queues. Examples of MOM are MQSeries developed by IBM and MessageQ from BEA. Database Middleware are used to hide the databases from other applications to prevent making unauthorized changes to the database. An example database middleware is the Java Database Connectivity (JDBC) and Database Connectivity (ODBC) (Rajput, 2000, p. 289). An e-ecommerce platform also requires application middleware that are used when triggering other operations. Directory services are the glue in an e-commerce system and they are used in storing up information about the resources and users who access the network resources. E-mail directory enable users to identify users who emails are to be sent to while a LAN directory is used in storing information about persons on the intranet and facilitates connection to internet, and sharing of resources such as printers. An e-commerce also relies on Internet Domain Name Service (DNS) which is an internet directory service and it allows an organization to be identified on the internet for the example the www.tesco.com is the DNS for Tesco. To effectively implement an e-commerce system, online payment systems are required and this may be effected through the online and e-cheque technology. The internet wallet enables users to manage payment instruments. Electronic cheque is based on the concept of electronic documents where public encryption keys as signatures. Advantages of e-Commerce A firm that uses e-commerce in its operations is able to gain competitive advantage over its competitors. E-commerce enables a business to increase sales since it is able to reach out to a global market through creation of a virtual community. In addition, to the offering sellers a wide market, e-commerce also enhances the purchasing opportunities for customers. Businesses can cost costs in their operations since they are able to identify suppliers offering goods at competitive price (Sengupta, Mazumdar and Barik, 2005, p. 120). In addition, negotiating the terms for sale such as price and deliver is easier in e-commerce as the internet provides a better platform to offer competitive bids. Furthermore, e-commerce increase the speed with which transactions are processed and their accuracy thereby leading to reduced costs. Accuracy is enforced through transaction processing monitors. Electronic payments that are made in e-commerce can be easily monitored and audited compared to payments made through traditional means thereby avoiding fraud (Hensmann et al., 2001, p 117). Given that e-commerce systems gather data from customers and store it from in a database, it can enhance planning and decision making within an organization. Data store about the purchasing trends of customers for instance may be extrapolated to identify the products which customers demand in high numbers. E-commerce also helps to create strong relations with customers and suppliers thereby locking them in the system. Security risks in using an e-commerce system Despite the numerous advantages that come with implementation of e-commerce system; such systems are prone to risks which ought to be addressed as it is being developed. Security threats are categorized into threats emanating from client threats such as malicious codes which include computer viruses, Trojan horses and worms which can clog the system making it unavailable to the clients (Sengupta, Mazumdar and Barik, 2005, p. 123). There are also server side masquerading threats where victims are made to believe that they are accessing the right computers. The threat can either be passive attack where the victim merely accesses another site in the name of the authentic one or it can be active when the user actually responds to the bad server (Sengupta, Mazumdar and Barik, 2005, p. 125). There are also communication security threats which include lack of confidentiality about the user data such as when such financial data is recorded and stored without the knowledge of the customer (Sengupta, Mazumdar and Barik, 2005, p. 126). The other form of communication security threat is threat to the integrity of the user for instance alteration of data stored in the databases. Availability threats are other forms of security threats affecting businesses where users may be denied or delayed when accessing various sites. This can negatively affect conducting of e-commerce activities. Another security threat in e-commerce is hacking of passwords or eavesdropping to read data that is being transferred over the internet (Sengupta, Mazumdar and Barik, 2005, p. 127). To deal with these risks, organizations can use antivirus software to check malicious software. Moreover, data encryption as it being transferred on the internet is important to reduce risks of eavesdropping. In addition, organizations should enforce security measures to protect the IT infrastructure since this can bring the system down and must encourage passwords to be changed regularly (Sengupta, Mazumdar and Barik, 2005, p. 128). Regular maintenance of the server is also critical to ensure that it does not get down or affect the internet speed and even employ an administrator to manage the network resources. Conclusion E-commerce is an important tool for organizations that target to gain competitive advantage over their competitors. When implementing an e-commerce system, an organization is able to develop various business models and manage them for the overall advantage of the organization. Brick and click organizations such as Tesco are able to maintain a balance between e-commerce and a high street presence since e-commerce systems support its other traditional operations better and efficiently. For instance, e-commerce helps organizations to manage their supply chain and procure goods from the best supplier. It also helps foster better relationship between organizations and their suppliers and customers. To implement an e-commerce system, an organization relies on various technologies and resources such as intranet and extranet. The organization also requires technologies to manage payment and processing of transactions to ensure that they are authentic. However, an organization must be able to manage various security threats that come with e-commerce such as malicious software, delayed or denied access to the system and hacking of passwords. Bibliography De Toni, A and Tonchia S 2003, ‘Strategic planning and firms' competencies: Traditional approaches and new perspectives’. International Journal of Operations & Production Management, Vol. 23 Issue 9, pp.947-976. Drejer, A 2000, “Organisational learning and competence development,” The Learning Organization: An International Journal, Vol. 7 Issue 4, pp.206-220. Hensman, M., et al. 2001, ‘Clicks vs. Bricks in the Emerging Online Financial Service Industry”, Long Range Planning Journal 34: 231-247. 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