E-Business Is Better If Localized - Essay Example

Running Head: E-BUSINESS E-Business is Better if Localized SCHOOL Table of Contents Introduction 2 The New Business Ecosystem3 Alternative Approaches to Virtual Business Protocol 6 Think Global Act Local Paradigm Implications 7 E-Business Should be Localized 9 An E-business Model for SME's 10 Requisites to Fulfill E-commerce Model 12 Web Design 12 Infrastructure 12 Database 12 Security 12 Payment Handling 13 Distribution 13 Conclusion 14 References 15 Introduction The profile of business has changed dramatically throughout the years. Technological advancements dominate the shift in business strategies of many firms and made traditional business models obsolete. Upheavals wrought by these developments have forced many corporations to restructure and seek new directions. Previously, the firm who has the most resources and the lengthiest experience dominated the market. During the smokestack era, money assumed the dominant feature that will ensure a company gains the upper hand at maintaining market dominance and power. Alvin Toffler (1990), in his book Powershift, wrote that [t]his "smokestack power", moreover was further protected by a financial industry that made it difficult for competitors to challenge Blue Chip dominance" (p.46). Technological advancement and the introduction of computer-driven technologies in the business landscape have influenced how business is managed today. Computer-driven technologies are making it possible to turn out small runs of increasingly customized goods aimed at niche markets. Smart companies are moving from the production of long runs of commodity products to short runs of "higher value added" products (Toffler,1990,p.52). Financial markets are not spared from the upheaval. World capital markets throughout the globe are now interlinked via satellite, networks and technology. Globalization has linked formerly independent economies. When a cataclysm occurs within a globally linked financial system, the entire global market feels the ripples of the event. Businesses are no longer isolated entities that operate autonomously. The New Business Ecosystem Business environments are changing rapidly because of several factors. These changes make it difficult for companies to meet the challenge while using traditional business models. Barabba (1998,pp.34-59) attributes these three phenomena as factors of change: 1. Customer needs are changing rapidly and are difficult to predict; 2. Communications technologies improve and enable businesses to acquire deep and broad external knowledge of markets, allowing them "to better sense changes in customer requirements." These technologies will also allow companies "to Innovatively serve those markets."; and 3. "Technology is redefining the nature of competition." Murphy (1998) describes "a new business model or paradigm that he calls alternatively" an "internetworked (virtual) enterprise" or "extended enterprise." These new enterprises "encompass channel partners, remote workers, suppliers, distributors, and consumers through a secure Web-based global network." (ij and Saarinen,2001). Infrastructure to support this new development is provided by the Internet. The Internet allows companies to become decentralized and operate within the digital environment. To make this model work, this type of business organization must link all business functions (supply, purchasing, manufacturing, operations, transportation, financing, accounting, personnel, sales, and customer service), "all stakeholders (business partners, suppliers, service and technology providers, distributors, retailers, outsourcing partners, remote workers, and customers, competitors, financiers, and regulators), and all organizational capabilities (information system, self-regulating and self-organizing organizational structure, and reinvented virtual supply chain)" (ij and Saarinen, 2001). This is to create a holistic business approach in the digital milieu. The new business paradigm created by three new classes of business model - extranets, enterprise portals and digital marketplaces. (ij and Saarinen, 2001 ). Tapscott et al (2000) proposes an alternative terminology for concept of e-business model and call the primary structures that determine the future of digital business as b-webs. B-webs is defined as: "a distinct system of suppliers, distributors, commerce service providers, infrastructure providers, and customers that use the Internet for their primary business communications and transactions. . . Internetworked enterprises, teams, and individuals are the fundamental components of b-web collaboration and competition." (Tapscott et al,2000, p.17) Timmers classifies the business models for electronic markets in the following manner: (Timmers,1998, pp.5-7 and 2000, pp.35-40): 1. E-shop (Web marketing of a company or a shop) 2. E-procurement (electronic tendering and procurement of goods and services) 3. E-auction (offer an electronic implementation of bidding mechanisms also known from traditional auctions) 4. E-mall (consists of a collection of e-shops, usually enhanced by a common umbrella, for example of a well-known brand) 5. Third party market place (an emerging model that is suitable if companies wish to leave Web marketing to a third party) 6. Virtual communities (focus on added value of communication between members) 7. Value chain service provider (specializes on a specific function for the value chain, such as electronic payments or logistics, with the intention to make that into their distinct competitive advantage) 8. Value chain integrators (focus on integrating multiple steps of the value chain, with the potential to exploit the information flow between those steps as further added value) 9. Collaboration platforms (provides a set of tools and an information environment for collaboration between enterprises). 10. Information brokers/ trust providers (business information and consultancy, trusted third-party services) companies. Companies wishing to gain significant advantage over competitors should consider re-evaluating their business modeling. Companies aiming to reach a wider customer base may consider any of the e-business models and incorporate it in the strategic planning of the firm. Firms that experience reduced financial gains and losing hold over most of their customers can attribute the weaknesses to changing business environment. Most firms that are veterans in their respective fields find unprecedented competition from young upstarts. Most of these young firms have included some pertinent e-business models into their strategies to wrestle the market away from the pioneering firms. Alternative Approaches to Virtual Business Protocol Companies can position themselves in the Web in various forms. The purpose of each varies. At a corporate level, alternatives for the Web can be categorized in order of increasing commitment as follows: information only; interactive communications tool; channel to market (e-Commerce); separate online business; integration with traditional business strategy; transformation of traditional business to the Web (Dennis and Harris,2002, p.98). Structurally, a website can be classified as: 'bricks and mortar' - traditional business model; the Web site is brochureware only; 'clicks and mortar' - the company pursues online and offline marketing and transactions; 'clicks only' - the entire business model is online, with little or no physical presence (such companies are also known as 'dotcoms' or 'pureplays' (pp.98-99) Think Global Act Local Paradigm Implications After the mad dash of going global, the entire business community is confronted with issues that affect a company's e-business strategy. Among the issues are privacy, cultural context, intellectual property rights and laws and jurisdictions. There are no clear ethical guidelines that would regulate e-businesses on the web. Furthermore, the question of culture has also migrated into cyberspace as many companies using the Internet as a marketing strategy encountered barriers attributed to the cultural context of the foreign countries they are serving. The adage "Think Global, Act Local" was not truly manifested thus the need to re-evaluate e-business strategies. The new paradigm of knowledge, violence and wealth implies that business, governments and individuals are collecting and storing more sheer data than any previous generation in history (Toffler,1990,p.82). Knowledge and information are the currency of power today. But it is not a guarantee that all information collected is true and accurate. The entry and dominance of information technology in all aspects of life in this century has generated various issues that affect the entire social, political and economic structure of world economies. The influx of information technology affects people as "every new technology creates hidden effects in its environment, rearranging the social order it penetrates. Many of these effects are inextricably linked to ethical issues" (Cooper,1998, p.71+). Various ethical issues have developed as new technologies are introduced. These untested encroachments into "traditional business models have led to a lot of misinterpretation, misappropriation, frustration, social dilemmas and lawsuits"(Cooper,1998, p. 71+). The introduction of regulations is an attempt of humanity to restore order in the ubiquitous platform of the web. On the aspect of legal issues, privacy legislation was not a priority in the United States. In Europe however, the notion of data-protection panel is not strange or novel. Great Britain, Germany and France had privacy legislation in place. In the United States, the Privacy Act of 1974 was passed by Congress to "provide certain safeguards for an individual against invasion of privacy"(Eder, 1994, p.38+). Despite the presence of laws regulating the use of technology, many consumers feel that they are still inadequate. In a study conducted by Equifax, more than three fourths of the public (76%) felt that consumers have lost control over how personal information about them is circulated and used by companies. A majority of Americans polled (55%) felt that protection of information about consumers will worsen by the year 2000 (Eder,1994, p.38+). Just as establishing businesses offshore carry cultural implications, so does expanding business activities globally. Going global for many businesses meant doing business in a multicultural environment. It requires more sensitivity to prevalent cultural practices of the host country. There are differences between countries that espouse individualism and collectivism. Hofstede's individualism versus collectivism differentiates cultures that are highly individualist from the collectivists. Individualist cultures "are expected to be self-reliant and to focus primarily on caring for themselves and their immediate families while in collectivist cultures, people are expected to serve the group where they belong" (Appreciating Cultural Diversity, n.d.). These affect the way they would access and utilize the web. E-Business Should be Localized In the United Kingdom, about 3.7 million businesses are classified as small and medium scale enterprises (SME's). They are important to the UK economy because they contribute to 40% of the GDP (Dixon, Thompson and McAllister, 2002,p.6). However, only about 63% of the SME's are using e-business strategies. Dixon, Thompson, McAllister (2002) attributed this gap to "lack of awareness of the potential of ICT; lack of IT skills base; high initial set-up costs; security/privacy issues; and lack of staff to implement ICT" (p.21). The globalization effort overlooked essential characteristics that would have been addressed by a local e-business entity. Parr and McManus (2000) wrote that global e-businesses should consider localizing their strategies. The companies must be aware of relevant information "such as clear and standard usage of date, time, and measurements; adherence to local regulations; and localized payments or currency conversion links" (p.8). A local e-business would not have that problem because they are definitely familiar with those considerations. In addition, cultural sensitivity is becoming an issue. Allowing the e-business to be localized gives local SME's some leverage over international competitors. Given that the SME's is a major contributor to any country's economy, localizing e-business activities will improve their performance, widening their customer base while maintaining their market dominance in the domestic front. In most developing countries, SME's primarily serve the local market. The cost of connectivity will be cheaper because it only serves the local market. This would somehow resolve the problem of SME's attributing their hesitance to create e-business entities because of costs. An E-business Model for SME's The main objective of this e-business model is to take advantage of the emerging markets in cyberspace. In getting a virtual face, the company also envisions a broader market base to include younger, tech-savvy customers. In addition to the physical premises of these SME's, the Internet provides additional market potentials. In gaining a wider customer base aside from their existing walk-in and called in delivery customers, SME's are likely to increase their revenues as well as marketing advantage over their competitors. The proposed e-business model would serve as incubators and start-up for the SME's. This gives them a collective advantage over their larger competitors. The SME's may begin transforming their businesses by initially joining alliances of companies having a similar nature of business. The Star alliance models are coordinated networks of businesses reflecting a core surrounded by satellite organizations (Burn and Barnett,n.d.). Their members are from similar business or industries. Communication channels are regulated and expenses of maintaining the website, call center facilities and other amenities are initially shared. The diagram in Figure 1 may give a clearer picture. Figure 1 Star Alliance E-commerce Model Requisites to Fulfill E-commerce Model Web Design The SME's would have to purchase webdesign software Dreamweaver by Macromedia. The images to be included should be under 12kb to allow users to load them easily. Photographs must be in .jpeg format while graphics are in .gif format. The website should include product frontliners that the company wishes to market, some advertisements sponsored by their respective manufacturer and special offers and discount that will attract potential customers. The services offered must also be highlighted. Infrastructure The least expensive option if to lease a web server space from a hosting company. It costs around $20 to $50 per month. Database The company may use Oracle Systems DBMS to integrate the customer database with that of their physical operation database. Security Digital authentication will be used for the website. Each customer will be provided with a password and digital certificates to ascertain their identities. There are three ways to authenticate the user: what the user knows; what the user has; and what identifies the user physically. A firewall will also be used to regulate access between the company's computer system and the Internet to avoid intrusion. A separate virus program will also be installed to secure the system from virus attacks. For additional security, Secure Socket Layer (SSL) will be utilized. It creates a secure "tunnel" between a user and server by encrypting data, allowing for server or client authentication and ensuring the integrity of the message. (Quick, 2003) But SSL provides security during transmission between browser and server. Payment Handling The Electronic Bill Presentment and Payment will be used to generate billing statements to the customers. It allows the company to bill the client and secure payments through the Internet. The invoices are transmitted through an e-mail sent to the client with a link provided for the on-line payment. PayPal or Authorize.net handles the payment processing. The company may also maintain their COD policy. When the goods are delivered to the client, the company may collect upon presentation of billing. Distribution The company can handle the distribution aspect if the orders are within the 50-mile radius. However, should there be orders from areas not within their jurisdiction, the company may outsource the service to e-fulfillment.com or similar entities that assist companies in their delivery of goods. The star alliance business model serves as a testing ground for the SME company. They may have to put in a minimum amount to account for the membership/web hosting of the alliance. This is a more prudent approach than putting the earmarked money all at once without testing the waters. However, joining the alliance does entail some problems. First, the website is shared with other potential competitors thus the market is divided over the number of members in the alliance. The web space is not solely dedicated to the specific SME so there is limited option to placing of advertisement. Conclusion There are several arguments why e-business should be localized. Today's global business community is beginning to notice inherent flows in the global e-business milieu. Among the problems include the issues are privacy, cultural context, intellectual property rights and laws and jurisdictions. Localizing e-business should also give importance to the SME's because they are important drivers of a country's economy. Localizing the e-business ecosystem will give the SME's leverage over their more powerful and larger competitors. References ij, T and Saarinen,K, (2001) Business Models: Conceptual Analysis. Telecom Business Research Center Lappeenranta University of Technology, Finland Retrieved 06 January 2007 from: http://www.tbrc.fi/pubfilet/TBRC_10042.pdf Appreciating Cultural Diversity. (n.d.) retrieved 06 January 2007 from: http://www.wright.edu/scott.williams/LeaderLetter/culture.htm Barabba, V.P. (1998), Revisiting Plato's Cave - Business Design in an Age of Uncertainty, in Tapscott, Don; Alex Lowy, and David Ticoll (eds.), Blueprint To The Digital Economy - Creating Wealth in the Era of E-Business, New York. McGraw-Hill:34-59. Burn, J. and Barnett, M. (n.d.) When Supermarkets Become E-markets: E-Business Models for Retailing Retrieved 06 January 2007 from: http://www.business.ecu.edu.au/schools/mis/media/pdf/0005.pdf Cooper, T. W. (1998). New Technology Effects Inventory: Forty Leading Ethical Issues. Journal of Mass Media Ethics, 13(2):71+ Dennis, C. and Harris, L. 2002 Marketing the E-Business London. Routledge Dixon, T., Thompson, P. and McAllister, P. (2002).The Value of ICT for SMEs in the UK: A Critical Literature Review. Retrieved 06 January, 2007 from: http://www.sbs.gov.uk/SBS_Gov_files/researchandstats/value_of_ICT_for_SMEs_UK.pdf Eder, P. F. (1994 July-August). Privacy on Parade: Your Secrets for Sale! The Futurist. 28 (4): 38+. Parr, B. and McManus, M. (2000). Website globalization: The next imperative for the Internet 2.0 era. Retrieved 06 January 2007 from: http://www.etranslate.com/en/downloads/IDC_Globalization_report.pdf Quick, A. (2003) Gale E-Commerce Sourcebook Volume 1. Detroit. Gale Group. Toffler, A. (1990). Powershift: Knowledge, Wealth and Violence at the Edge of the 21st Century. New York. Bantam Books. Tapscott, D., Ticoll, D., and Lowy, A. (2000). Digital Capital - Harnessing the power of Business Webs, Boston, Massachusetts.Harvard Business School Press. Timmers, P. (1998). Business Models for Electronic Markets. in Gadient, Y.,Schmid, B., Selz, D. EM-Electronic Commerce in Europe. 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