Benefits of Adopting E-Commerce - Term Paper Example

A Report on the Benefits of Adopting E-Commerce 1.0 Introduction The changing nature of businesses, the advancement in information and communication technologies have compelled many firms to adopt emerging technologies so that they can remain competitive. It is important for K&T to adopt these new technologies so that it can remain competitive and be able to expand to other cities. Electronic commerce refers to all electronic exchange of goods, services, information and payments and it also involves the creation and maintenance of Web-based relations (Frank, Malcolm, (1997); cited in Fruhling and Digman, 2000). Kalakota and Whinston (1997), categorised e-commerce into three main layers: inter-organisational, intra-organisational and customer to the business. Intra-organisational is e-commerce within the business, and it mainly uses intranet and internal email. Inter-organisational e-commerce is concerned with the business conducted with business partners, and it mainly uses extranet. Customer to business is the public network which uses the internet, and it is open to all (cited in Fitzgerald et al. 2005). E-commerce is not only concerned with buying and selling through the internet, but it is concerned with servicing the customers, conducting business internally and in collaborating with business partners. There are various benefits of e-commerce. For example, it helps to reduce external and internal communication expenses, through speeding up business processes as well as reducing administrative tasks. It also increases the firm’s revenue from current business and new initiatives. E-Commerce also helps in cost reduction, and it provides more flexible working practices. In addition, e-commerce has other benefits such as offering an enhanced competitive positioning and improving customer relationships (Maloff, 1996, cited in Beheshti and Salehi-Sangari, 2006). They also cited other scholars who support this, for example, Lederer et al. (1996), identified cost saving, productivity, competitiveness, information, new applications and control to be the main benefits of e-commerce. A business owner plays a pivotal role in determining if a business will implement e-commerce or not. This view is supported by the findings of Beheshti and Salehi-Sangari in 2006. It is important for K&T to adopt an E-Commerce strategy because other than enabling the customers to make electronic payments, it will also enable the firm to coordinate with the business partners in an easier manner, for example, through inventory management. In addition, it will enable customer self-service through tracking order status. K&T will also use the internet to search for solutions to the problems that it faces. 2.0 How Can E-Commerce Help K&T Ltd in its Future Expansion Plans? It is necessary for K&T to invest in technology so that it can exploit e-commerce and look for ways to close the gap between it and other companies in terms of development and innovations. This will, in turn, enable the firm to earn more profits which will enable it to expand to large cities in the UK such as Manchester, Rugby and Nottingham. E-business models are electronic methods and structures that are used by businesses so that they can remain competitive and generate more revenue. Although there are various e-business models, the five most common ones are business-to-customer (B2C), portals, business to business (B2B), websites and mobile business (Beheshti and Salehi-Sangari, 2006). According to Barau et al. (2001), companies should ensure that they chose a suitable model that will help to lower intermediary costs, improve their relationship with the buyers and the suppliers, improve the market share and reduce purchasing costs (cited in Beheshti and Salehi-Sangari, 2006). It is important for K&T to fully understand the benefits that it can accrue from adopting E-commerce. The following are the benefits of E-Commerce that can help K&T’s expansion plans: cost reduction, adding value, improving market development and penetration, increase in sales and improving customer satisfaction. 2.1 Cost Reduction and Increase in Sales E-Commerce helps firms to achieve operational excellence through reduction of operational costs. It decreases distribution costs through the reduction in overheads, for example, personnel, inventory and retail space. The inefficiencies caused by paper processing will also be eliminated (Levy, 2012). This cost reduction will benefit the customers because it will translate to a reduction in the cost of the commodity which will, in turn, lead to an increase in demand, thus increasing the profit margins. If company K&T adopts electronic commerce it will be able to reduce its cost substantially which will, in turn, enable it to expand its business. Research conducted by Beheshti and Salehi- Sangari in 2006, revealed that SMEs benefit from e-commerce in operational as well as in the performance of the organisation. This study further revealed that e-business helps to reduce costs. The online business provides a convenient way to order items thus helping to increase the level of sales. It also enables the company to have online billing and payments, provide customer service, and to inform customers about new sales as well as promotions in an easier and cheaper way. K&T will also use the internet and social media platforms such as Facebook and Twitter to inform the customers once it opens new businesses in other cities. If K&T Ltd adopts e-commerce, it will reduce the number of intermediaries and the store space that is needed thus, reducing the total cost of production which in turn reduces the cost of its products thus increasing the demand. 2.2 Adding Value E-Commerce creates new ways that enable companies to add value both internally and externally. Companies that adopts it are able to increase access and improve communication through e-mails and other platforms. Information technology also greatly impacts how companies are managed. E-Commerce enables companies to differentiate their products from those of their competitors. K&T can implement mass customization strategies that will enable it to produce large numbers of customised products for its customers. The internet will also provide it with new innovative ways of customising the existing products (Fruhling and Digman, 2000). Selling differentiated products will help K&T to remain competitive thus, enabling it to make profits that will enable it to expand to new cities. K&T Ltd will also be able to connect their internal research and development with their suppliers. This means that the firm will be able to share data with the manufacturers thus enabling them to produce high-quality goods which meet the customer’s requirements thus, giving them an advantage over their competitors (Levy, 2012). Amazon.com, for example, differentiates its products by using intelligent information which it obtains directly from its customers. Amazon develops a profile for each customer which they use to suggest other books that consumers could order and to pass other important information to the customers (Hof and Robert, 1998; cited in Fruhling and Digman, 2000). 2.3 Improving Customer’s Satisfaction Since the customer’s expectations keep on changing over time, it is important for K&T to keep on updating its system in a timely manner so that it can be able to meet the changing demands of the market. To be able to satisfy customer’s needs, the company needs to have an effective marketing strategy that must have a customer relationship database which contains data on consumers purchasing behaviour and preferences. This database will enable the sales staff to direct all the marketing efforts towards achieving the customer’s needs. Having an integrated program also enables the staff to know how the current and prospective customers react to pricing, customer service and the introduction of new commodities. This will enable them to serve the customers better which will, in turn, increase the customer loyalty and improve the quality of the products and services offered by the firm. Some Microsoft Internet applications give customers the troubleshooting ability and other options for self-service (Fruhling and Digman, 2000). Social media platforms will enable the company to have direct communication with the customers. This will enable it to know the customer’s feelings about their products, which will enable it to deal with complaints they get as well as make improvements based on the customer’s specifications. E-commerce will offer K&T Ltd an easier and cheaper way to advertise and market its products (Vargas-Hernández, 2015). This direct communication and relationship with the consumers will be important to its future expansion plans because they will have known and acted on most of the criticism that they will have heard. E-commerce can also enable the firm to know the needs and the preferences of the customers in the cities that it wants to expand to in the future, through direct communication with them through social media platforms as well as through e-mails. E-Commerce will help customers to do the following; to check product availability, to use automated search tools to search for the exact product that they need, to obtain the actual price of the commodity, to review the total order costs which include the taxes as well as the shipping expenses. It will also enable the customers to make an order with the click of a button, to choose from various payment options and to track the status of an order until it is delivered (Ghosh and Shikhar, 1997; cited in Fruhling and Digman, 2000). 2.4 Improving Market Penetration and Development The internet opens up new distribution channels that lead to new market segments being served. These new markets can enable a product that is in the maturity or decline stage of the product cycle to get back into the growth stage thus, leading to more sales. K&T Ltd will, therefore, benefit from using e-commerce to expand to new markets. According to Fruhling and Digman, (2000), IT has become an integral part of how current businesses are carried out. Mr David should, therefore, ensure that his business is not left behind. They further argue that e-commerce enables businesses to quickly and effectively expand and implement geographical expansion growth strategies. 3.0 Key Issues and Challenges in E-Commerce 3.1 Data Security and Privacy One of the critical issues facing e-commerce is the security of supplier’s, buyers and business partner’s data that is transmitted electronically (Vargas-Hernández, 2015). SMEs are at a more risk because they might not have the expertise and finances needed to hinder unauthorised access to confidential information mainly by employees, outsiders and hackers. K&T owner and its manager must take the necessary steps to ensure that the security of its website is assured. 3.2 Weak Consumer Confidence in Online Shopping Most customers across the globe are not ready for electronic transactions. Lack of trust in electronic means of payments deters e-commerce worldwide (Vargas-Hernández, 2015). The company might also face issues due to the generation gap between the target consumers. The youths may prefer online shopping while the elderly may prefer the traditional methods. K&T should, therefore, ensure that they have different shopping options. 3.3 Lack of IT Experts The company will need to employ IT experts who will be in charge of online commerce thus leading to additional costs. If e-commerce is implemented in the right way, it will lead to increase benefits which will surpass the cost of its implementation (Fruhling and Digman, 2000). 3.4 High Costs Related to Web Design and Technical Support Creating Web Designs requires huge amounts of money. K&T Ltd should have the required capital needed to create these designs and for technical support. Since K&T is a small-scale enterprise, it lacks the technical, human and financial resources required to adopt e-commerce (El-Gawady, 2005). However, as some scholars argue these challenges should not hinder SMEs from adopting e-commerce, they suggest that the companies should take advantage of their flexibility especially in decision making so that they can exploit the opportunities of e-business (Awa et al., 2011; Chuang et al., 2009; cited in White, Afolayan and Plant, 2014). 3.5 Abrupt Technological Changes and Lack of Financial Support Technology keeps on changing, and this makes it difficult for SMEs such as K&T to stay up-to-date with the changes. The company will require a lot of capital so that it can update its technology regularly. Various studies have shown that most company’s managers and workers are not able to select the right IT solution for some organisational problem (Apulu and Latham, 2009 cited in White, Afolayan and Plant, 2014). Another common problem faced is power interruptions which hinder online transactions. Poor infrastructural development can also hinder e-commerce. 4.0 Recommendations It is important for the company to ensure that the e-business aligns with its goals so that is can create positive impacts. The business owner should realise that IT alone cannot produce competitive advantage, it can only provide value if it is combined and coordinated with organisational and environmental resources (Mata, Fuerst and Barney, (1995) cited in Vargas-Hernández (2015). K&T must ensure that the integrity and the privacy of the information that is exchanged are always protected. Hu et al. (2003) argue that many organisations display security seals on their websites so that they gain consumers trust and assure them that it is safe to use their site (cited in Beheshti and Salehi-Sangari, 2006). K&T should also do this be it will help to increase customer confidence in e-commerce. The manager and employees of the company should undergo training so that they can be aware of the vast changing nature of e-commerce which will enable them to come up with the appropriate solutions for the problems that the firm might face (Golding et al. 2008; cited in White, Afolayan and Plant, 2014). The company should also ensure that it has a backup power supply system so that it does not inconvenience customers during power interruptions. 5.0 Conclusion From the above, it is clear that K&T should adopt e-commerce so that it can remain competitive and be able to expand to other markets. E-commerce will offer many benefits to the firm: it will help to reduce the costs; it will lead to increase in sales volume, it will enable the firm to venture into new markets and to improve customer satisfaction among others. There are various issues and challenges that K&T might face if it decides to venture into electronic commerce, for example, consumer’s data might be hacked, and it might not have the required IT staff and capital required. These problems, however, should not hinder the firm from adopting e-commerce because, with proper planning and managerial expertise, the benefits of the adoption will surpass the costs and other challenges that it might face. 6.0 References Beheshti, H.M. and Salehi-Sangari, E., 2007. The benefits of e-business adoption: an empirical study of Swedish SMEs. Service business. El Gawady, Z.M., 2005, November. The impact of e-commerce on developed and developing countries case study: Egypt and united states. In International conference of Globalization. Technology and Sustainable Development. Fitzgerald, G., Papazafeiropoulou, A., Piris, L. and Serrano, A., 2005. Organizational Perceptions of e‐Commerce: Re‐assessing the Benefits. Electronic Markets. Fruhling, A.L. and Digman, L.A., 2000. The Impact of Electronic Commerce on Business-level Strategies. Journal of Electronic Commerce Research. Levy, P., 2012. Simple Strategies for Enhancing Ecommerce Profitability. A First Data White Paper. Vargas-Hernández, J.G., 2015. Strategies for the Adoption of E-commerce. Journal of Global Economics. White, G.R., Afolayan, A. and Plant, E., 2014. Challenges to the adoption of e-commerce technology for supply chain management in a developing economy: a focus on Nigerian SMEs. In E-commerce Platform Acceptance. Springer International Publishing. Read More