The Benefit of Electronic Mediation for the Firm - Essay Example

?Explain how electronic mediation would benefit a firm in terms of its ability to work effectively with s and supplier. Adopting technology and integrating it in the organizational strategy as well as in business processes is no longer just an element in a concerted effort to gain competitive advantage. Rather, it has become a necessity that is crucial for an organization to survive in today’s highly globalized market. Technology, through the two engines of computing and communication, has particularly rendered the variables of distance and time obsolete because people can now communicate, interact and access all kinds of information from anywhere and anytime. Many people call this as the knowledge revolution, characterized by an international data highway that works 24 hours a day, seven days a week. It has been far too long since people have acknowledged that the wired or networked world is revolutionizing business. This phenomenon has paved the way for organizations to better communicate with their market and all the stakeholders involved in the production and selling of goods and services. In a nutshell, companies use technology and electronic mediation not just to reach out to its consumers and suppliers but also to automate back-office tasks and industrial operations while pushing ahead with research and development. eCommerce eCommerce or eBusiness is the most prominent consequence of electronic mediation in business. Here, individuals and organizations can sell and/or purchase goods and services through the Internet. The standard definition for eCommerce has been put forward by the US Census Bureau , which defined eCommerce as “any transaction completed over a computer-mediated network that involves the transfer of ownership or rights to use goods or services.” (Storz 2007, p. 126) The Internet, however, is not the only channel by which eCommerce can operate. For instance, transactions can be made through different communication and technological channels such as the phone. Nonetheless, the Internet dominates the electronic commerce today. It was created thanks to the personal computer (PC), telecommunications, business software, as well as the advances in office technology industries. (Shi, p. 25) What ecommerce did for companies is to tear down the traditional bricks and mortar business models and imposing its own brand that features increased performance, speed and cost efficiency. In addition, according to Kellerman (2002), “globalization is quite unique to eCommerce, permitting the creation of global market areas for many products and services,” and that its “attribute is “intelligence, whereby eCommerce is aided by sophisticated information tool, such as databases, search engine and the like.” (p. 128) There are fundamentally two classifications by which eCommerce operates: B2B eCommerce and B2C eCommerce. The transactions that are electronically mediated between enterprises are called business-to-business (B2B) eCommerce, while electronically selling goods and services by a company to its consumers is called as business-to-consumer (B2C) eCommerce. Together they manifest the best possible benefits that a company could reap out of communication and technology. Business to Business With regards to the organization, electronic mediation poses several benefits and opportunities. The most important of these is cost efficiency, productivity and convenience. In the past, for instance, a company would follow the traditional method of procurement, which entails numerous work and human resource in order for products to be bought and sent to the buyer. The consumer would order through a thick and burdensome catalog and would be punished by having to browse each and every page that could rival the number of pages of the telephone directory. After, making the selection, he would then have to phone the selling party, be given several forms to fill, fax his information and proceed with the buy and sell process. This setup can be extremely be aggravated when products and services are negotiable and open to haggling. Needless to say, the traditional system was labor-intensive, requiring a lot of money to complete. With eCommerce, however, the dreaded catalogue can just be uploaded online, while the organization add a search functionality to the site just so the customer can easily look for whatever he wanted. An order form will be made available once purchase will be made and once completed would be sent digitally to the organization’s computer terminals for processing. All these processes are transpiring with the speed of light. This setup is what is now known as emarketplace or B2B eCommerce. Zhou explained that it can be accurately defined as any business process or transaction between two companies that is mediated by Web-based technology, which can include several functions that range from digital invoicing, inventory management, electronic payment, to specialized ones such as the auction of finished product or services. (p. 60) In addition, Bushry (2005), also emphasized that B2B eCommerce can be categorized: 1) on the basis of who controls the marketplace - the supplier, the customer or the intermediary; or, 2) on the basis of the parties involved – virtual companies, interorganizational network and online auctions. (p. 52) B2C Meanwhile, B2C is the commercial transaction between a company selling products and services and the consumer buying the goods online or electronically. Some scholars call this model as eRetail or e-tail, noting how, in this system, consumers shop for products, arrange their finances, arrange the delivery of goods and avail of after sales support and services. According to Joseph, the benefit of B2C for companies can be summarized in the following: inexpensive cost; big opportunities as the web can reach the widest market possible; less operational cost; and improved knowledge management. (p. 45-46) Most importantly, B2C allows companies to offer value to their consumers because it is most convenient. Shoppers can purchase products from anywhere and anytime. Automation Breakthroughs in information technology can make it easier for an organization to record its operations and transactions, store them and access them easily and effectively using various database systems. This is very important because information – data that are fast and accessible anytime – can impact the manner by which an organization develop products and services that give the best value to its clients. These capabilities had been demonstrated in the early 1980s. An account by Ralph Blanchard (2009), who is one of those pioneers that chose to adopt technology, depicted this excellently: I had purchased an Apple Macintosh computer in 1984 and had seen the potential firsthand. We used a Mac to create exploded views of XY’s instruments for our Dealer Service Manual. What would have taken an engineering draftsman days or even weeks was completed in a few hours with a computer. I was noticing more and more new businesses built around computer technology and the capabilities it had to store, manipulate and distribute information. (Blanchard, p. 446) Today, the breakthroughs in computing and technology allowed for far more sophisticated equipment, softwares, applications and systems that made everything speedier and much more convenient compared to several decades ago. For example, Wal-mart has created an application for its point-of-sale transaction wherein data are delivered real-time - as customers make purchases – to the decision makers. This is extremely important because finance executives can carry out analytics and make value-added decisions using profitability analysis and pricing models. (Clements et al., p. 289) Wal-mart even required its suppliers to hook-up to this point-of-sale system, electronically and automatically transacting new orders according to the inventory as reflected by the digitized sale activities. If this was done in the old system, the paperwork of the daily sales would be humongous, making the documentation, storage and analysis of the data labor intensive, requiring an army of employees while the process would take days if not weeks or months to complete. Automation, combined with electronic mediation has also allowed for faster response time to the needs and requirements of customers and suppliers Customer service is an excellent example. Digital technology has allowed for the 24/7 customer support that benefit consumers immensely. Case Study: The RFID Technology An important example of electronic mediation that many has already been trumpeted as revolutionary and will provide quantifiable benefits is the Radio Frequency Identification or the RFID technology. It is a “fairly simple wireless technology, composed of a small antenna and microchip, and able to streamline the mobile supply chain.” (Unhelkar and Gale 2006, p. 868) The study undertaken by Baskerville (2005) illustrated how RFID can address the tremendous difficulties faced by manufacturing supply chains, such as how to manage inventories characterized by several distinct and often divergent supply chain tiers. (p. 154) In business, this is further complicated by the volatility of the market as well as the market and competition pressures. The promise of RFID, wrote Baskerville, “is to enable a supply chain to act as a cohesive unit – to readily provide information throughout the supply chain, from inventory creation to its final sale to the consumer.” (p. 154) With RFID, it has become possible for timely, organized and comprehensive acquisition of information that allows businesses to be more agile, flexible and intuitive in responding to the various requirements of their consumers, suppliers and other stakeholders in the supply chain. Electronic Mediation and Outsourcing The Internet has also resulted in the emergence of the outsourcing business model, which, if done right, could save a huge amount of expenditures for an organization. Simply put, outsourcing is when an organization removes a portion of its in-house work and awards it to a third party. Digital technology makes this possible and cost effective because a firm based in the United States, with its costly labor market, can simply outsource the services of an Indian or a Philippine-based company or individual, whose workforce are significantly paid much less. Most of the outsourced projects are in the area of computing and IBM, Accenture, Hewlett-Packard and Perot Systems, lead the global organizations in outsource their computing projects. (Plunkett) Electronic mediation makes it easier for organizations to transact with suppliers of services as almost all aspects of the interaction can be done online. Challenges Security is still the top issue in eCommerce and in any electronically mediated business process. Transactions made through the Internet can be compromised and accessed by third parties. This is particularly dangerous since the information being transmitted can be extremely valuable such as the financial and personal information of people involved in the process. This leads to the issue of reliability, which often discourages individuals, consumers and organizations from transacting electronically. This problem, however, is not without any solution. There is an increasing sophistication in manufactured programs and systems that ensure the security and reliability of networks. For instance, organizations could utilize the so-called virtual private network (VPN) technologies – private data networks that make use of public telecommunication infrastructure and maintain privacy by its use of a tunneling protocol and stringent security procedures. (Zhou, p. 60) Then, there is also the cost of investing in both hardwares and softwares in digitizing and automating business operations. They would take a lot of capital in addition to the cost and resources to be spent in training or hiring new employees to operate these new technologies. There are some analysts who argue that adopting IT or electronic mediation in business operation would not necessarily translate into profitability or increased performance. As Keen (1997) recounted, billions of dollars have been invested on the basis of promises of multibillion-dollar returns resulting in over a billion dollars of losses. (p. 11) The reason for this supposedly lies in the management strategy and capability, the willingness of the organization to embrace change and whether the IT strategy is aligned with the overall organizational objectives. Conclusion The advantages of digitizing or using electronic mediation in business processes have several benefits. First, it can be used as a platform for trade that can outperform the traditional bricks and mortar enterprise and offer cost efficiency and swift transaction times. Here, it can have a wider customer reach and could acquire and maintain more with the added functionalities offered by electronic transactions that, in turn feature convenience and cost efficiency. Secondly, it can gather, store and manipulate information at the retail and consumer levels that make it possible for suppliers as well as manufacturers to make effective business decisions. They can, for instance, make more informed and accurate predictions of the demand and the control of inventories. These variables, combined together, create value for organizations. They drive lowers costs, create competitive advantage, increase performance and productivity, and, eventually, achieve profitability. There might be problems in using electronic mediation in business processes, but these challenges are not entirely insurmountable. With all the advantages presented by this paper, it is easy to say that the benefits far outweigh the perceived problems. Again, it must be underscored that adopting electronic mediation or adopting technology, in general, in the overall organizational strategy is crucial in an organization’s very survival today. References Baskerville, R. (2005). Business agility and information technology diffusion. Berlin: Springer. Blanchard, Ralph. (2009). Creating Wealth with a Small Business. Bushry, M. (2005). E-Commerce. Firewall Media. Clements, S., Donnellan, M., and Read, Cedric. (2004). CFO insights: achieving high performance through finance business process. Wiley and Sons. Joseph, P.T. (not dated). E-Commerce: An Indian Perspective 3Rd Ed. Bombay: PHI Learning Pvt. Ltd. Keen, P. (1997). Business multimedia explained: a manager's guide to key terms & concepts. Harvard Business Press. Kellerman, A. (2002). The Internet on earth: a geography of information. Wiley and Sons. Plunkett, J. (2008). The Almanac of American Employers 2009. Plunkett Research, Ltd. Shi, N. (2004). Wireless communications and mobile commerce . Idea Group, Inc. (IGI). Storz, C. (2007). Competitiveness of new industries. London: Routledge. Unhelkar, B. and Gale, T. (2006). Handbook of research in mobile business. Sydney: Idea Group, Inc. (IGI) Zhou, Z. (2004). E-commerce and information technology in hospitality and tourism . New York: Cengage Brain. Read More