E-Commerce in the 21st Century - Essay Example

E Commerce in the 21st Century Contents Introduction E Commerce: An Introduction Implementation of E Commerce The UK Perspective Issues of E Commerce Introduction The advent of Internet has drastically changed lifestyles. This change has taken its effect on individuals and businesses alike. Corporations are dependant on internet for successful completion of various business activities. E-Commerce is the latest revolution in Internet which companies to exploit the power of the Internet to boost their sales. It allows users to buy goods while sitting at the luxury of their home. It provides innumerable benefits to businesses; broadens the customer base, provides products a healthy brand equity, spreads the roots and reach of a company to name a few; which directly have a positive impact on the returns on investment of a company. However, E Commerce is no panacea. There are some thorny issues in the implementation of E Commerce; particularly, the technical standards and security issues. The report aims at analysing the benefits of E Commerce to business functions. The report looks at the current technological offerings available to businesses to implement E Commerce. Specific benefits brought about by E Commerce in various systems and sub systems of businesses are considered. The paper also analyses the loopholes of E Commerce solutions that may hamper the companies in the implementation. Finally the case study of COMPANY is considered to bolster the premises of the report. E Commerce: An Introduction The availability of commodity priced IT systems, high speed and affordable communications infrastructure and ever increasing research and development in computer languages have swelled E Commerce. But what exactly is E Commerce The ubiquitous definition of E Commerce would be, "Buying and selling of goods on the Internet". However this definition is a little too coarse; too simple. The eCommerce Innovation Centre provides a more pragmatic view by defining E Commerce as every form of business or administrative transaction or exchange of information between a company and its outside world (eCIC, 2001). The first implementations of E Commerce applications can be traced back to the early 1970s, when a few companies began exchanging data among themselves through Electronic Data Interchange (EDI), a prevalent industry standard for inter enterprise communication. Since then there has been no looking back. Companies began deploying huge corporate networks with groups of systems perform certain business tasks. The major springboard to E Commerce was provided by the low cost entry of the Internet. Virtually every major company started transforming their businesses to global level through Internet (Gottardi et al, 2004). However today, just a decade after the revolution, E Commerce is plainly considered to be a synonym for high profits. It is an underlying business philosophy assumption of major companies and not some necessary technological breakthrough. Such a ubiquity of E Commerce was mainly due to its potential to lead to dramatic growth in trade and improved efficiency and effectiveness of business practises. As of today, E Commerce consists of several theoretical models, which provide a company with the tools to support the 5 essential elements of conducting business, namely price, promotion, presence, product and place. The important models are: Merchant Model: This model is typically used by traders, resellers, wholesaler and retailers of goods and services. It includes 24x7 ordering and one to one custom marketing (embellix, 2000). Auction Model: This model emulates the traditional 'bidding' model. It implements the bidding mechanisms by presenting goods and their value online. Manufacturer Model: It is used by the manufacturers directly to communicate to the consumers about their goods and services. Affiliate Model: In this model a company becomes an 'affiliate' of another company to advertise itself or its products and needs to pay certain amount for using it. Advertising Model: In this model, a company uses another website to advertise with the use of banners. Subscription Model: This model is generally used by Online Libraries and Scientific Organizations, where certain amount has to be paid as subscription charges to view or download any content offered (commissionjunction.com, nd). Logistics Model: In this model a company manages the logistical activities of another company. It is useful to organizations that have a strong foothold and already generated sufficient revenue. E Commerce Implementation E Commerce is tailored for an organisation based on its business needs. A successful E Commerce solution is totally based on the business drivers of the company and does not depend totally on the technology. Each business considering the implementation of technology for their main stream marketing must consider a number of factors to ensure that their E Commerce framework is robust. INSEAD, a primer marketing research company suggests that a successful implementation of E Commerce essentially needs two factors in place (Zott & Donlevy, 2000): Enhancing Transaction Efficiency Creating 'stickiness' to motivate repeat transactions Enhancement of transaction efficiency requires a certain level of business process re engineering to match the new trends of the Internet. Companies must make objective forecasts of the supply and demand for their product and how that might be affecting with their online presence. Changes are mandated at the following levels to ensure high transaction efficiency: Supply Chain Integration: Cost Cutting must be the primary goal of a business planning to implement E Commerce solutions; particularly with their supply chain. An efficient way to do that is to integrate the ties that bind the links in the supply chain (Zott & Donlevy, 2000). Increase the size and quality of product offerings: From perspective of the customer a gap is created between the idea of the product in the customer's mind and the actual tangible object. Most people, who have refrained from purchasing online, have done so, on account of this gap. Thus the company must ensure that the product branding is as close as possible to the actual product. The company must eliminate any barriers that might exist in transitioning the product to the customer. Particularly, the size of the companies' warehouses and production capacity must not hamper the delivery of goods. Convenient transactions: Customers have been identified to be mostly impatient on the Internet. Unlike direct marketing, the customer can not get the "touch-and-feel" of a product and make an instant decision to buy. The company must ensure that, their online shop does not cause any stress or irritation among the customers. Requiring too many clicks to complete a transaction would put off the customer. Being able to attract a customer and making business with the customer is only one half of the work. It is much more important and at the same time difficult to keep a customer. This factor is known as 'stickiness'; improving the loyalty of the customer to the company. This area is of high importance as companies participate in very price competitive markets. Retention of customers can be achieved in several ways: Personalisation: Companies can build closer relationship with their customers if they can customize the transaction interface to suit the customer's needs. Enhancements in Web Programming Languages allow the company to keep track of the interests and trends of the customer and then display information based on collected information. Loyalties: This is a sure way of building stickiness. Reward the customer for their loyalty. Schemes like, reward points that may be redeemed later, discounts based on loyalty, free gifts and other such measures prompt the customer to make more transactions with the same company. Trust: Finally, nothing is as important as retaining the brand of the company and the product high by ensuring quality. Delay is product delivery, gap in the online description and the tangible and unfair prices lead to distrust in the mind of the customer and he is sure of not returning again regardless of the company's efforts to reconsolidate. The UK Perspective The UK government long realised the impact of E Commerce on its economy. In this regard, the UK Government set itself the target of becoming 'the best environment in the world to do e-commerce' (ONS, 2002). The Office for National Statistics, UK conducts many surveys and research to identify the E Commerce trend. According to them, the value of Internet sales rose by 56 % between 2004 and 2005, from 66.2bn to 103.3bn. In the same period, Internet purchases rose by 50 % from 48.4bn to 72.8bn. They also reported that nearly 70% of the businesses had websites. These numbers clearly show that UK businesses are deploying E Commerce solutions by the truckload. E Commerce will have a huge impact in the years to come over all the domains operating in UK. Education, transport, government, retail, IT, manufacturing, automobile, research and development and virtually every business sector will be a part of one big family. This forecast is bolstered by several current trends. For example, E Commerce minister during 2001, Douglas Alexander announced his intention to make online voting a reality within the UK. However it is not a completely green field in reality. There are some loopholes of E Commerce that need immediate attention. The following section illustrates the issues concerning E Commerce. E Commerce Issues Despite the tremendous upsurge in E Commerce, there are a few weaknesses this area of business suffers from. The issues mainly arise out of the following (Hall, nd). Security Issues: This is a prime factor that is currently hampering customers from making payments online. There is a great fear of sensitive information leakage. Although a number of security measures have been implemented over the years, the Internet as we know it today is not 100% hacker safe. Companies therefore must make use of as much Internet security mechanisms (Encryption, Firewalls, VPN, Secure Protocols) as possible and make it obviously clear to the customers that their transaction interfaces are safe. Servqual Gap: The main reason for former online shoppers to reduce their online activity is the gap in the online product and the actual product. The customers can not touch and feel the products before deciding to buy it. This leads to apprehensions in the minds of the customer. Service and Business Culture: From the perspective of the businesses, the major hindrance they face in transitioning to E Commerce is the need to re engineer their current business practices (Supply chain, CRM, HR, Manufacturing) to suit the online trends. They incur heavy costs in acquiring the technology needed and training of the staff to the new practices. Despite the above mentioned issues, E Commerce is booming. Workarounds are available to all issues that may hamper successful E Commerce implementations. These issues certainly do not outweigh the advantages brought about by E Commerce. E Commerce is here to stay. Businesses only need to carefully understand what the existing technology can do for their businesses today and mix and match the right set of technological products to transition to E Commerce. References eCommerce Innovation Centre (2001), "An E Commerce Primer for Small Businesses", Cardiff University Press. Gottardi G, Bolisani E & M. Di Biagi (2004), "Electronic commerce and open communities: An assessment of Internet EDI", International Journal of Services Technology and Management, Volume 5, pp. 151-169. Embellix (2000), "E Marketing Planning: Accountability and eMetrics", Sponsored by Embellix Software, Pg 4 Commission Junction (nd), "What is Affiliate Marketing", found at: http://www.cj.com/frame_hom.asp Christoph Zott & Jon Donlevy (2000), "Strategies for Value Creation in E Commerce", Venturelab Publications. Office for National Statistics (2002), "E Commerce and Internet", found at: http://www.statistics.gov.uk/CCI/nugget.aspID=177 Robert Hall (nd), "Reducing the impact of E Commerce", Submitted to BCSC, found at: http://www.bcsc.org.uk/scm/scm2007/presentations/WS_RobertHall.pdf Read More