How E-Commerce Provides Startup Companies to Enter the Market - Research Paper Example

 How is e-commerce providing an alternative for startup companies to enter the market given the current economic crisis? INTRODUCTION The current financial storm has wreaked havoc in the world of business and economics. The fiscal crisis, that traces its origins in the US, has had affected the entire world. Stock exchanges all over the world had suffered huge losses, with many countries facing collapsing stock exchanges. Non-capitalist economies were not spared from the effects of the recession either. The recession wave in Russia alone amounted to a colossal loss of more than half of its stock market. The global recession has closed down thousands if businesses all over the world, accruing to the already high rates of unemployment in developing countries. Moreover, the crisis has slowed the growth in both the developed and the developing countries, although the effect has been more marked in the latter. The economic meltdown has increased the inflation rates and lowered the export revenues. The countries whose products are subject to high income elasticities have suffered greatly as well as countries that are dependent on foreign aid and remittances, since both of these have been adversely affected by the global economic crisis. Countries in Africa have particularly been impacted by the crisis by reductions in both external and internal finance (United Nations, 2009). As a result, countries have taken steps to mitigate, if not completely reverse given the enormity of the impact, the effects of the economic crisis they are facing. Countries are focusing on providing a broader support to businesses (Staff Team from the Fiscal Affairs Department, 2009); however, the waters businesses find themselves in necessitate the urgent reformation of policies. Businesses are desperately looking for alternate ways to survive the financial storm. Where survival is tough for already established businesses, the question arises if startup businesses have a scope in the bleak circumstances the economy, especially in poor countries, is plunged in. one of the strategies that startup businesses can employ is by trading online. This paper will explore the scope of e-commerce in the world today and its potential role in helping startup businesses in entering the market. DISCUSSION Electronic commerce, or e-commerce, is a method of doing business over the electronic sources. Products and goods are bought or sold via electronic sources which include the Internet and connection of computers meant to communicate. With the rapid pace at which technology has imbued in the lives of the people, as well as the surge in the popularity and usage of the Internet, e-commerce has boomed. In the US alone, the online retail produced a lump sum of more than $175 billion in revenues in 2007 (Dugal, Jiang & Luddy, 2010). For startup companies, e-commerce is an alternative way to break into the market and help establish themselves. As portrayed above, the survival of businesses in light of the economic crisis has become increasingly difficult. Therefore it would not be possible for startup businesses to break into the market through traditional methods. For startup companies, the conventional factors that govern the success or failure of the business fall short of the demands made by the economy. These companies are expected to have an exceptionally unique performance in order to establish themselves in the rising and falling tides of instability. E-commerce is a break from the traditional modes of business transactions and can be an effective alternative option for such startup companies to adopt. E-commerce allows businesses to conduct business activities through Electronic Data Interchange, EDI, which allows gives more transparency to transactions and permit businesses to operate more competently (Goel, 2007). The factors that make e-commerce favorable for starters are discussed below. E-commerce includes e-taling. E-taling provides service users to access the business 24/7 (Sarknas, 2006). Moreover, by setting up online, the business has an international reach. Customers from all over the world can access and contact the business despite geographical distances (Botha, Bothma & Geldenhuys, 2008). E-commerce equips business with a virtual storefront, where customers can demand specific information and benefit from a more interactive experience. The ease with which they can order and negotiate business deals surpasses the experience of interacting traditionally. For startup companies, e-commerce can be beneficial since the prime thing that startup companies are looking for is a sound customer base. In order to increase the number of customers, startup companies need to provide them with services that not only satisfy the consumers but also encourage them to seek for their particular product or service over other competitors. Doing business online can remove the barriers of communication that consumers have to deal with traditionally, and can increase the customer experience by giving them custom information. For a business to survive in the current circumstances, it needs to not only cover its costs but also make enough profit to keep it running. Thus by attracting the maximum number of customers, it can ensure a higher income than it could have had by operating traditionally. Moreover, in order to increase the appeal of their products and services, and to make it easier for the customer to search for particular information, the business can design its site with interactive multimedia and graphics. The implementation of e-commerce provides advantages that outweigh the backdraws associated with online trading (MacGregor & Vrazalic, 2007). The e-commerce is also a better option for small and medium enterprises intending to break into the market because of its lower operating costs. If the website of the business is maintained and run efficiently, with the operators responding promptly to customer inquiries, the costs of maintaining the business can be appreciably reduced. By efficiently coordinating the orders, and by making the processes automated, the transactions can be carried out more quickly and smoothly. This would be beneficial for the business both in terms of customer satisfaction and the operating costs. Furthermore, e-commerce can enable companies to advertise their products without making the customers feel that the advertisements are intrusive. Many companies, including the Amazon, show details of related products that consumers are buying. This can arouse the curiosity of the customers, and encourage them to take a look at related products as well. The chances of buying these products are increased than as compared to their sales without any promotion. E-commerce also favors startup businesses to build a customer base by providing them more information about the product. If customers have ordered a product, online tracking of the product can provide them information on where the product is and how long it will take for it to be delivered (Reynolds, 2009). This online facility provides an edge for businesses over traditional means of operating. Customers would be attracted more to a service that provides them better quality and more features. Thus, e-commerce can enable startup companies to build a consumer base more quickly than through traditional methods. The influx of technology in the lives of the people has reformed social interactions as well. The surge of social networking sites attests to the preference and the popularity of such sites for communication and interaction. Advertising on such websites opens up more doors for publicity for businesses. E-commerce can help startup businesses advertise better. It can be conducted through email and by social networking websites. Social networking websites, like Facebook, MySpace and Twitter, are used by millions of people all around the world. Since the social networks are accessed by people all over the country, the display of ads on these web pages can advertise information to a large target audience. If sufficient people vote or bookmark a product, then the company’s ratings climb higher. These websites are a regular forum for people to meet and socially interact with. The popularity of social networking sites for marketing purposes can be illustrated by the fact that when Facebook announced that it is going to introduce new plugins that would allow users to share and like pictures and other materials without having to sign in, more than 100,000 sites registered with Facebook to advertise. The Internet provides a rapid supply of products and services and service users can ship or order products directly from the website, without having to rely on supply chains. Moreover, the site is open 24 hours and provides a better retailer interface as compared to stores that operate within office hours. Therefore, startup companies can advertise on social networking websites and attract large numbers of customers, contributing to the progress of the business. E-commerce is interactive for customers; online shopping is very easy for customers as they can shop from their homes without having to go out. E-commerce has made the shift from ‘Point-of-sale’ to ‘point-of-conveniece’ (Morley & Parker, 2009). Moreover, startup businesses can make the shopping experience better for customers by offering them facilities to sift through large catalogs, cutting down their search by defining the keywords that they are looking for. Customers can also compare the features and the prices of the products offered. Doing this by traditional methods can be a tiresome and time-consuming process; there are chances of skipping some details about the products to boot. Customers can benefit from placing large orders in a systematic and organized way online, and tailor them according to their needs. The benefits of e-commerce also lie in the fact that companies can generate and organize large catalogs of the products and services offered. Printing and disseminating such large catalogs for people can not only be expensive but also discourage the customer from going through them. By online catalogs, customers can access the different types of products offered and view their details on preference, without having to sift through bulky catalogs. The benefits of online catalogs also extend to the fact that the business does not have to spend resources on the distribution of catalogs. There is an excessive supply of catalogs in the post, and chances are that any catalog that the customer does not need will be thrown away. Therefore, online catalogs can reduce the costs of the business, which is of great benefit for startup businesses. E-commerce also provides more services for consumers. Consumers can be informed through automated emails when their order is received, or any inquiry that they make, ensuring them that it will be replied to promptly. Increased services in a market which is saturated by competitors, and affected negatively by the economic crisis, can allow the business to have better chances for survival. CONCLUSION AND RECOMMENDATIONS Thus in conclusion, e-commerce can be a feasible alternative for startup companies to break into the market place. E-commerce already has boomed tremendously with the advances in technology. With more than 70% of the Americans using the Internet for business purposes, the chances of survival of startup businesses doing e-commerce are more as compared to traditional methods. Only in third quarter of 2005, the US retail e-commerce sales accounted for total revenue of $22.3 billion, showing an increase of 5.7% from the second quarter of 2005 (How Stuff Works, 2010). Startup businesses need to maintain their website and online retailing in order to effectively establish in the market. REFERENCE LIST Botha, J., Bothma, C. & Geldenhuys, P., (2008). Managing E-Commerce in Business. 2nd ed. Cape Town: Juta and Company Ltd. Dugal, I. S., Jiang, J. & Luddy, M., (2010). E-commerce. Retrieved from http://www.wikinvest.com/concept/E-Commerce#_note-0 Goel, R., (2007). E-commerce. New Age International. How Stuff Works, (2010). How E-commerce Works. Retrieved from http://communication.howstuffworks.com/ecommerce3.htm MacGregor, R. C. & Vrazalic, L., (2007). E-Commerce in Regional Small to Medium Enterprises. Pennsylvania (PA): Idea Group Inc (IGI). Morley, D. & Parker, C. S., (2009). Understanding Computers: Today and Tomorrow, Comprehensive. 12th ed. Cengage Learning. Reynolds, G., (2009). Information Technology for Managers. Massachusetts (MA): Cengage Learning. Sarknas, P. (2006). Pro ASP.NET 2.0 e-commerce in C# 2005. New York (NY): Apress. Staff Team from the Fiscal Affairs Department, (2009). Fiscal Implications of the Global Economic and Financial Crisis. Washington D. C.: International Monetary Fund. United Nations, (2009). The global economic and financial crisis: regional impacts, responses and solutions. New York (NY): United Nations Publications. Read More