E-Commerce Analysis Franke-Sissons Ltd - Essay Example

Module of the Assignment: E-Commerce Analysis (Franke-Sissons Ltd). of the Number: Introduction Contemporary international financial systems have evolved into a borderless global trading arrangement, mainly driven by hi-tech innovations in electronic commerce (E-commerce) resulting from advanced internet technologies. Both small and large enterprises have welcomed the internet as a factual tool in business approaches and a major channel for business growth. This addition of information and communications technology (ICT) in trade has transformed trade between companies and as well as those with other companies and their customers. The use of ICT in industry has improved efficiency, improved better customer involvement, and enabled group adjustments, in addition to reducing costing. At Franke-Sissons Ltd, the company has fully integrated internet technologies as a business strategy by adding the latest ICT architecture to develop a full-fledged website that has an online E-commerce facility enabling online transactions and marketing facilities. The Franke-Sissons Ltd website has also started an online order tracking system that enables clients keep abreast of the movement of their purchases (Franke Sissons, 2009). Background Franke Sissons Ltd is a UK based European stainless steel sanitary and catering equipment manufacturer. It was started in Sheffield, UK in 1784 as the W & G Sissons Ltd dealing exclusively in sanitary equipment [see Appendix Figure:7]; it merged with Swiss Franke WSS family group in 2002 to becoming Franke Sissons Ltd (2007) adding catering ware to its catalogue [see Appendix Figure:8]. The company employs over 100 staff with most of them engaged within the production division the firm specialising in complimentary sanitary and catering products that are retailed internationally (Franke Sissons, 2009). The term E-commerce has been simply defined as ‘doing business electronically’ (Timmers, 1998). Andam (2005) however defines electronic commerce as ‘The transformation of an organization’s processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy’ (Pg. 7). Andam (2005, Pg.5) argues that electronic commerce has levelled the playing field in marketing for goods and services whereby with skilful careful approach, small and medium scale enterprises are able to compete efficiently with the larger more established enterprises. According to a Forrester Research estimate, global e-commerce trade for 2008 stood at $204 billion with a projected growth of up to $335 billion by 2012 [see Appendix Figure: 6]. Within the US the global leader in online transactions, E-commerce accounts for over six percent of all retail sales (Barke et al, 2008, Pg.1). Geographical boundaries are rapidly vanishing as the internet interlinks the international commercial traders enabling businesses market access everywhere globally. In the UK, approximately 80 percent of firms by 2003 were utilising it, even as one-fifth allege they can barely survive without it [see Table: 3] (Chaffey, 2009). Most companies websites generally employ them to market their products and services and moderately for sales, feedbacks, supply and mobile internet services (See Table: 2). An International Benchmarking Study 2003, by DTI revealed that customers spend over £1 billion monthly online (DTI, 2004, Pg. 16). Electronic commerce has been further enhanced by the emergence and popularity of the social networking forums like Facebook, MySpace, Twitter, and YouTube the multimedia sites, that have grown into major media forums challenging other mass media like television and print services in their effective reach among the young consumers. These social networks are now available through mobile phones hence having even an even greater impact. Organisations now have the ability to exploit the many available social networking, web-based multimedia, and portable business forums for marketing purposes. Situational Analysis A situational analysis was conducted applying various models and methods to determine the internal and external factors affecting the company operational environment thus enabling a strategic formulation. To analyse Franke-Sissons Ltd competitive advantages, Porters Five Forces framework was applied to determine the competitive factors inherent in the industry (See Appendix:1). Porters (2001) Five Forces model recommends that for a market entry, fully differentiated products and services should do full market research to identify the consumer’s needs and preferences thus gain a competitive edge. Conversely, to evaluate the E-commerce sector, PESTLE analysis was prepared that reveals that ecommerce as a viable business model (See Appendix: 2). Lastly, Rayport and Jaworski (2001) 7Cs framework was applied to determine the efficacy of Franke-Sissons website. Elements of the 7Cs Framework The 7C framework analyses ecommerce interfaces by studying client requirements based on seven elements: context, content, community, customization, communication, connection, and commerce (Rayport and Jaworski, 2001). An in-depth analysis of Franke-Sissons website using the 7 Cs model reveals the following: Context This depicts how the internet site is conveyed thus demonstrating its utility and ocular appeal. The utility elements consist of two issues: content pages design and routing capacity for the consumers. Frank Sissons has constructed a well-designed aesthetic website that captures its products but is lacking in advanced contemporary interfaces like real-time feedbacks, personalised web pages etc. Content According to Lee and Benbasat (2004), content encompasses ‘offering mix, appeal mix, multimedia mix, and content type’ (Pg.81). Thus, content include the website actual offerings including all the merchandise displayed in the website. Frank Sissons content is relevant but less detailed hence not fully capturing the company’s pertinent product features. Community This involves the interface between users that induces the sense of devotion by consumers. This function is subdivided into interactive contact and non-interactive contact whereby the interactive communication tools comprise ‘instant messaging, message boards and mailing lists’ (Lee and Benbasat, 2004, Pg.82). Frank Sissons interface is not well formulated to induce acute customer devotion due to the limited customer interfaces within the site. Customization This is the website’s personalisation aspect by clients or users including when consumers setup their own personal WebPages. At Frank Sissons website, there is minimal customer personalisation features hence need to be more developed to incorporate these aspects that assist in getting the client engaged and building brand loyalty. Communication This is the website interactive ability between the user and the site including mail notifications, podcast among others. Frank Sissons has not yet developed a fully interactive site but still has some elements of communication as customers transact business online and track their purchases delivery. Connection The actual linkage from differing websites including borrowing content from other sites forms the connection for sites. Frank Sissons has not fully developed a linkage with other active websites including the influential social media like Facebook and Twitter or the search engine powerhouses Google and Yahoo! Commerce This aspect involves the commercial interaction as consumers transact through the website and the site takes in orders and requests. Frank Sissons has managed to set up an interactive website that allows online transactions, marketing of its products and communication through email alerts. Internet Marketing or E-Marketing E-commerce also involves companies marketing their merchandise online using various media including, company websites, emails, mobile telephony or social network media forums. Internet marketing has become one of the fastest growing sectors in the current competitive business world. This is especially true in advertising and ecommerce, whereby even new business units are able to use the internet to market their products at lower costs as compared to the old methods. Firms are able to market their products globally through two business models: business-to-customer (B2C) and business-to-business (B2B) (Slidell, 2009). This medium has brought great success to many sectors from banking, to auction marts and the music industry. Franke-Sissons has effectively utilised this segment to market itself successfully internationally (See Appendix 4 & 5). The firm is able to not only market its merchandise through the website but also engage in online transactions as customers purchase the desired items as itemised in the site. Through an interactive forum in its website, the company gathers data from its clients that assist in improving its services while similarly sending out updates and promotions to its customers (Franke Sissons, 2009). Webtransitions.com (2004) has subdivided E-Commerce marketing into two main segments: enticing visitors or unconverted clients to the website; and secondly, converting visitors (non-customers) into customers and enhancing the site effectiveness. According to Slidell (2009), an effective ecommerce marketing strategy should involve ‘article writing, revamping a website, link building, an email campaign’ among other attributes. Advantages of E-marketing Internet marketing has several advantages over the other types of media. This include: improved expense efficiency and flexibility as compared to offline media; 24 hour-round the clock presence; cheaper research methods for your products and cheaper market research; value added clients approval; standardised trade schedules; enhanced reliability; interactive consumer marketing; higher possibility for market expansions; international recognition; and provides diversified revenue streams to the firm. Another major advantage is the ease of computation of statistical data regarding usage and its affect, which is done rather cheaply (DTI, 2004). This means that most aspects of the internet marketing campaigns can be drafted, evaluated, and verified through available techniques like pay per impression, pay per click, pay per play, or pay per action. This analysis uses web analytics to account for marketing and advertising exposure, reaction, and general effectiveness unlike other conventional marketing methods (European-Commission, 2008); (Ramos and Cota, 2009, Pg.25). The main attraction among the various benefits or advantages associated with internet marketing is the relatively low costs and the wider reach in its distribution and the sales of products and services. The channel is able to operate not only through the conventional personal computers and email but also through wireless media like mobile phones and other gadgets. Internet marketing requires efficient use of both the technical and creative web designs when developing the sites, advertising, and the sales aspects. It involves the setting up of the media content along several stages in the customer engagement cycle including search engine marketing (SEM), search engine optimization (SEO), banner advertisement on particular websites, the use of E-newsletters, and Web 2.0 tactics (Story, 2008). It has been argued that the efficient deployment of the ecommerce can boost the competence of business productions by more than 60 percent (Kėdaitiene, 2008). Malaviya (2001, Pg.13) concur asserting that ecommerce main advantages include reduced expenditure, time, enhanced returns and better interaction. Wehling (1996, Pg. 173) emphasises that ecommerce moreover gives the customers further benefit of expansive selection of goods and services as well as price range within the comfort of their homes with less effort in terms of traversing through many stores and merchandise. Advantages Attributed to B2B E-Commerce There have been numerous advantages attributed to B2B e-commerce. These include reduced transaction costs by firms due to reduced costs in getting clients, time and money costs minimised as well as improved efficiency in completing transactions. Competence has therefore been greatly boosted due to reduced supply chain management and bureaucracy. At Frank Sissons, the use of e-commerce means that the firm is able to transact several purchases efficiently and effectively for many clients, without the need to open additional stores and branches in diverse locations. Another advantage attributed to B2B e-commerce is direct trading whereby traders are now able to deal directly with others hence reducing or eliminating the disputes involving wholesalers and retailers. This in effect contributes to expenditure reduction when e-commerce serves both the customer and producer at minimal costs to either of them. Other benefits in e-commerce are availability of choice in pricing procedures, as the single online marketing forums constitute a large market for dealers that offer customers a choice of available prices. Likewise, the supply-side of producers are able to pool resources in effective economies of scale as they are able to source for cheaper raw materials (Andam, 2005, p. 11). Disadvantages Lee (2003, Pg. 303) however asserts that one of the major problems confronting ecommerce marketing and sales is overcoming intangibility. This is because customers are unable to actually touch or feel the merchandise. Nevertheless Kurtz and Clow (1998, Pg. 251) argues that a firm that creates a positive brand image can surmount this shortcoming as well as stressing the accrued advantages of online purchase and the product highlights. Ecommerce is mostly hampered by residential deliveries and satisfying customers’ expectations as depicted in the websites (Lee, 2003). Jedd (2000, Pg.51) however asserts that ecommerce has the advantage of reduced inventory costs due to less need for warehousing. Ecommerce also enables smaller firms or start-ups to market merchandise against larger companies. Ecommerce marketing reach is international reach due to the unlimited internet spread hence reducing the dependence on local markets (Wilder, 1998, Pg.53). The segment also can operate in a 24-hour basis hence giving it an advantage over formal physical structured establishments limited with hourly operations (Pallab, 1996, Pg.28) Web design Analysis Internet technology eliminates tedious chores and can eradicate repetitive procedures in the supply chain management hence reducing time wastage and creating an inexpensive system. This is mainly done by designing web-based forms that instigate another task or generates a report, automatic computation, tracking procedures, and general workflow management competence (State of Victoria, 2004). A firm needs to engage professional web designers to develop a secure website as a poorly constructed site is always prey to hackers and hoaxers who exploit the simple algorithms to generate viral false reports on the company. According to Craig Silverman, editor of Regret the Error, ‘Once something is online and people start finding it, its just a matter of time before it starts spreading through links, blogs, Twitter, e-mail, or IM’ (Tynan, 2009, Pg. 1). Alternatively, a website must be overly attractive to draw potential clients and internet surfers. Franke-Sissons must therefore redesign their site to have conventional features that are more appealing to users. E-Business Model Ontology Osterwalder & Pigneur (2002) have proposed a generic e-business model comprising four main quadrants: product innovation, infrastructure management, customer relationship and financial aspects that they have named e-Business Model Ontology. The basis of this model is the conventional business framework (Figure: 1) that illustrate the logic behind a commercial structure, ‘the conceptual and architectural implementation of a business strategy and as the foundation for the implementation of business processes’ (pg. 2). Figure 1: Business Logic Triangle Source: Osterwalder & Pigneur (2002) Timmers (1998) has defined a business model as ‘architecture for the product, service and information flows’ (pg. 2). This includes a description of the different people engaged in the business and the role they play, prospective advantage they may gain, and the sources of capital. Dubosson-Torbay et al (2001) asserts that a business model should include ‘the architecture of a firm and its network of partners for creating, marketing and delivering value and relationship capital to one or several segments of customers in order to generate profitable and sustainable revenue streams.’ (pg. 3) The Osterwalder & Pigneur (2002) framework/ontology extension (Figure: 2) seeks to construct a systematic ‘building-block-like methodology that defines the essential concepts in e-business models’ (Pg. 3). The products and services offered by the corporation depict the value attached by the customer to the product/service that they are ready to spend on; (2) the infrastructure and the system of associates are essential to generate goodwill and equitable client relationship; (3) the relationship investment with the client is important to please your customers whose expenditure generates your revenues; and (4) the financial aspects, critical to support all the other three factors including cost and revenue arrangement. Figure 2: e-business model framework Source: Osterwalder & Pigneur (2002) E-Commerce Shopping Cart For the company to discern the efficiency of its online activity there is need to establish an e-commerce system (shopping cart) that provides data on usage on most aspects of the website including the entry and abandonment rate. Some of the effective tools include ShoppingQ e-commerce systems that utilises the Urchin e-commerce reporting module, Google Analytics, Clicktracks (Internetmarketingengine.com, 2009). The effectiveness of email advertising has plummeted in recent years with most surveys indicating that most individuals routinely delete such viral emails. This has led to firms switching to search sites and blogs as majority of online shoppers start with search to detect the preferred products (Chaffey, 2002). The EU recommends a continuous improvement of a firm’s ICT infrastructure and IT skills to take advantage of the rapidly improved software and systems in the market. Firms should embrace the ERP (Enterprise Resource Planning) systems, which form the core platforms for data exchange and launching of e-business and ecommerce (European-Commission, 2008). The most effective online marketing technique has been found to be search engine optimisation, as most users rely on websites like Google and Yahoo!, to hunt for bargains and other online shopping. To achieve this, a professional redesign of the website’s basic code, architecture, and visible content is improved to ensure the site features in the natural search results of spider-based search engines. This includes keyword research, directory submissions, search engine enhancements, link popularity enhancement, website conversion audit, website competitive intelligence, and website content enhancement. Sarwar et al, (2000, Pg. 9) have advocated for firms targeting recommender systems which are increasingly being used by clients to sift through millions of online purchases that suit their preferences. Firms marketing their products must therefore design the merchandise that matches these popular needs to remain relevant in ecommerce. Franke-Sissons must engage the services of such systems that can direct appropriate web traffic to their site. Business-to-Business (B2B) Analysis In e-commerce, the main categories of business models are ‘business-to-business (B2B); business to-consumer (B2C); business-to-government (B2G); consumer-to-consumer (C2C); and mobile commerce (m-commerce)’ (Andam, 2005, Pg. 9). Business-to-business (B2B) which constitutes over 80 percent of all e-commerce transactions refers to the business between two companies. Its main modules are e-frastructure and e-markets whereby the former refers to the architecture composing the B2B that includes logistics; applications software including centrally controlled systems e.g. Oracle, Cisco); and outsourcing facilities e.g. webhosting among others. Franke-Sissons relies heavily on B2C in its online operations has minimal C2C and m-commerce but occasionally secures B2G contracts. However, most of the B2B transactions are in supply management including purchasing, inventory administration, distribution organization, and payment organization among others (Goldman Sachs Investment Research, 1999, Pg. 71). Meyer (2008) asserts that a company website is also hampered by the need to maintain customer loyalty due to the lack of personified or physical interactions with the firm. The company is therefore obligated to design an interactive website that has consumer interfaces. Meyer (Pg. 8) has also categorised ecommerce into comparable communication interfaces, which generates diverse relationships. These include: Business-to-business (B2B) identifying transactions between two institutions Business-to-consumer (B2C), signifying transactions between the firm and customers Peer-to-peer (P2P) – transactions between the consumers Consumer-to-business (C2B) – transactions initiated by consumers towards the firm. Social Media and Ecommerce Apart from enhancing the company’s website, Frank Sissons can exploit the now accredited integration of social media and ecommerce. This involves marketing the company’s products in various social media sites like Facebook, Twitter, MySpace, LinkedIn or YouTube sites where the abundant prospective clients abide who may be interested in the firm’s merchandise. According to Bowles (2010), this medium called Social Media Marketing (SMM) campaign is very effective cost effective forum as they do not involve any subscription fees but have more active users than almost all formal company websites. The firm can therefore apply the Continuous Process Improvements (CPI) to enhance its social marketing postings and interaction with users that be enticed by the merchandise promoted. The firm must first determine which social network their customers prefer e.g. majority of Facebook users are mature or middle aged or older with a median age of 37 and almost equal gender distribution. This is the appropriate target groups apt to transact with Franke-Sissons. Bowles (2010) has identified five effective SMM tools that a firm like Frank Sissons can use to interact with customers in this medium. These include: Establishing contact in the specific media used by the company targeted customers. These can be determined through surveys, scrutinizing social websites, and checking the data on popular usage. Observing rival firms application of the module including social sites used and methods applied in their transactions. The company can promote special offers through the social media, which will encourage users to consider the company’s products especially if they are well presented and have benefit. Avoid inundating or overloading the forum with too many products that may irritate the social media users whose foremost endeavour is interaction with other users rather than shopping online. Actually, sell the merchandise through the social media rather than merely using as a marketing tool. The company can establish a Facebook store that will retail its merchandise online. Shopping Cart Abandonment Rate The company must always examine and focus critically on the shopping cart abandonment rate, which will normally give an indication of where the firm is erring in its ecommerce marketing and trading (Nicholls, 2008). The abandonment rate is mostly attributed to bargain seeking behaviour by customers but is sometimes due to the company promoting unavailable items, which makes clients to seek them elsewhere thus leading to low conversion rates. Nicholls (2008) argues that the company must ensure the correct items are marketed and seeking out again the shopping cart abandoners. This can be done through emails for the ones who had placed orders that were abandoned. Other tactics employed include extending free shipping promotions are the most popular incentive for customers. Highly targeted promotions that are behaviour based that can be discerned from the user merchandise interest can revive their interest ensuring the product has a benefit. As stressed by Nicholls, social media promotions that are well packaged can have the right impact on potential clients hence Franke-Sissons can gainfully apply the same methods. Dalyleish (2000) has ascribed ‘eleven best-practice fundamentals’ to engender an effective website for ecommerce (Pg. 93-101). The benefits that can likewise be utilised by Franke-Sissons include the following: Innovation or having the latest technology incorporated in the company’s website‘e-citizen’, active involvement in online societies across diverse industries hence able to keep updated on recent events. Generating value early on is critical as it points clients to their website rather than other mundane sites as well as being customer oriented Allowing clients to discern the actual value of the website as these will capture their interest immediately. This includes creating value in terms of convenience, cost and accessibility. Integration of the ecommerce to marketing thus ensuring the merchandise depicted in the website matches the marketed physical items. Allowing clients choose different forms of payment whether through online or physical transactions. This enables both the firm and customer to be flexible thus not restricted to one singular method. Studying client specific preferences and consequently merging this in their ecommerce methods. Creating an interesting interactive ecommerce website that is relevant to the client. Creating a website that has a real-time aspect on a 24hr basis that has international global reach. Guaranteeing virtual capacity corresponds to the physical aptitude. Actively apply technological innovations in ecommerce, for the convenience of both the company and her consumers. Mobile Commerce Analysis The explosive expansion of mobile telephony has led to the interfacing of internet marketing within the phones as a viable means of ecommerce expression. Already in most countries, the number of mobile phone internet users are surpassing those using the stationary users hence m-commerce is gaining greater advantage. Lee and Benbasat (2004. Pg. 98) have applied the 7Cs design framework to develop an interface for mobile phones by incorporating two new elements (2M’s). These are mobile setting and mobile device constraints thus signifying the efficacy of the devices in both online transactions and marketing of merchandise. A study by Cisco Internet Business Solutions Group (IBSG) in 2008 similarly outlined how cell phones have now emerged as a major marketing channel for both digital and online transactions. This include either through the short messaging service (SMS) or the now popular condensed internet viewing through the mobile phones (See Figure: 3) (Barke, 2008). Figure 3: Source: Cisco.com According to the Cisco IBSG survey, there are ‘three times as many mobile-phone subscribers (3.3 billion) as Internet users (1.3 billion) worldwide.’ (pg. 2) Mobile phone technology has enabled the use of SMS, internet interface and other facilities to advance e-market to the next level. Frank Sissons must now incorporate these features in its website to take advantage of the increasingly higher internet usage in mobile phones (Appendix: 3). Conclusion The significance of e-business has been aptly demonstrated by the successes of various small business start-ups online portals that has efficiently utilised a practical e-commerce strategies to attract numerous potential and active clients to sample their products and services. The emergence of social networking as the next major media platform provides an opportunity for further growth that can be exploited more effectively by Franke-Sissons. Similarly, the mobile telephony technology has wide-ranging potential for growth in e-commerce that can be exploited by the firm in future. A situational analysis including the Porters Five Forces model study of the market revealed that Frank Sissons has a strong competitive advantage with minimal threats from either substitute products or market entrants. A PESTLE matrix analysis to assess the impact of e-business illustrated the effectiveness of online technology to enhance a firm’s and industry growth using the e-business channel. E-business is now the most important strategy for most business and it has now become indispensible for a majority of modern firms both small and large. Nonetheless, the 7Cs framework analyses on Frank Sissons ecommerce interfaces indicates the company has not fully exploited the online platform to cultivate an efficient site and interactive media. Recommendations To enhance the website potential, Frank-Sissons can employ the Return on Opportunity (ROO) Assessment Model that will assist in discerning the effectiveness of its online strategies among its customers. This can be used to assess the efficiency of enterprise application integration (EAI) solutions that enable the integration of diverse applications into one forum that is accessible to a singular user. Similarly, the firm can enhance its capacity by conducting periodic performance management analysis for its overall strategic objectives [see Figure: 4]. Frank-Sissons should also exploit the social networking forums like Facebook and Twitter that currently rely on customer groups as a viable e-marketing strategy. This will assist the firm tap into the largest active online users thereby marketing the firm globally by either linking its website to this sites or advertising there. It can also be voluntarily set up by Frank-Sissons Ltd customers and admirers. Frank-Sissons should also improve its advertising in the large search-engine websites like Google, Yahoo! and MSN that use web-analytics to enhance the full use of search engine marketing. It has been estimated that 90 percent of internet users rely on search engines to research on desired merchandise, services and for other information. This factor is highlighted by the fact that most users utilize the first 10 to 30 search results or the first three pages hence making others ineffective. Internet marketers therefore focus on natural search engine optimization or the strategy that ensures their website appears on this visible pages or listings (Direct-Traffic, 2008). Frank-Sissons must also instigate aggressive e-marketing techniques including paid placement or pay-per-clip (PPC), demographic, contextual advertising, and paid inclusion. Similarly, using behavioural-targeting that consequently develops from the recorded behaviour of the user; the firm can enhance its marketing targets. According to surveys done by Marketing Sharpa and IMedia Connection, a majority of companies spend more on behavioural targeting, as they were largely impressed by the impact. A Forrester Research study also confirmed that 52 percent of the respondents in the survey were already utilizing the sector. They identified the main advantages of behavioural targeting of further click-through at over 35 percent more, extra conversions at 26 percent extra, and enhanced ROI of over 21 percent (DTI, 2004). Lastly, Frank-Sissons Ltd can enhance its management system through training to curb instances of poor customer services to enhance its online potential whereby prompt and comprehensive feedbacks are sent to customers and vice-versa. Intensive re-training of staff on customer service and redevelopment of internal systems in addition, as this is usually a periodic event for many organisations [See Figure: 5]. References Andam, Z. R. (2005). E-Commerce and e-Business. Kuala Lumpur, Malaysia: The e-ASEAN Task Force & UNDP Asia Pacific Development Information Programme (UNDP-APDIP). Barke, C. M. (2008). Cisco E-commerce Study Reveals Mobile Phone to Be New Fourth Channel for Revenue. 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Retrieved March 22, 2010, from Web Transitions, Inc. : Wehling, B (1996) The Future of Marketing: What Every Marketer Should Know About Being Online. Pg. 170-173: Vital Speeches of the Day. Wilder, C (1998) E-commerce Myths & Realities. Pg. 52-53: InformationWeek. Appendices Figure: 4 Performance Management Collaborative Framework Source: DHEC (2004) Pg.1 Figure 5 Sources: Own model Table 3: Selected World Internet Usage - 2003 89% in Sweden 67% in Germany 84% Australia 63% in France 81% in the US 62% in Spain 80% in the UK 60% in Italy 79% in the Netherlands 52% in Brazil 74% in Hong Kong Source: Australian Federal Department of Communications, Industry, Technology and the Arts. Appendix: 1 Competitive Environment Analysis (Porter’s Five Forces) Bargaining power of suppliers: Franke Sissons Ltd is an international sanitary and catering equipment manufacturer. It needs to source its supply of raw materials including steel products, power, and fuel both domestically and overseas. Similarly, the company needs to lease warehouses, manufacturing plants and offices in all its consumer market in the UK and Europe. The company is therefore heavily dependent on its suppliers for its major trade products and services. It must expend considerable time and resources to develop its regular suppliers to its customer requirements. However, the lack of elevated demand for these products lessens the impact. As such, the switching cost of suppliers is relatively high but the bargaining power of its suppliers is perceived to be medium. Bargaining power of customers: Franke Sissons Ltd as an equipment production provider draws its client base from domestic (UK) and European customers. Though the company has built a strong niche for itself, its customers have a range of choices available due to the onset of globalisation. Nevertheless, its customers are not organized and they do not have a collective bargaining forum. Switching cost for its customers is low. Overall, the bargaining power of her customers is perceived to be high. Threat of new entrants: This business requires creating a unique brand presence and maintaining it, which acts as the primary entry barrier in an otherwise competitive market. Without a clear differentiator, the entry barrier into this industry is low. However, Franke Sissons Ltd seems to have created a strong brand presence, which will help in mitigating the risk of low entry barrier into the industry. Threat of substitute products: The threat from substitute products seems to low in the near future owing to the very nature of the specialised highly developed merchandise. Nonetheless, the globalisation effect and online purchase makes international purchases and range of products available high. As such, there is a possibility of cheaper substitute products being made accessible hence constituting a threat to the industry, although the portability of the items can make availability complex. The overall the threat of substitute product nevertheless is low. Competitive Rivalry within the Industry: The industry is highly competitive especially with the onset of global market access, which makes international products accessible. There are therefore several international competitors in this field. The competitive rivalry within the industry can be deemed as medium. Appendix 2: PESTLE Matrix Analysis Political Economic Political interference in this industry is relatively low in the target market and those that use e-commerce. Risk of adverse legislations is not very high. However, adverse legislation could arise owing to sourcing from other countries and sourcing from suppliers who use unethical means of production like poor employee relations application, discrimination. Similarly, legislation on spamming, blocking and hacking can hinder online trade. Inter-country relationships in this sector are good. However, relationship with some sourcing countries may not be very good e.g. China, Russia etc. No price regulation or control is envisaged in this industry. E-commerce performance is directly proportional to the level of consumer spending, which is dependent on the economy. Electronic commerce is not geographically confined. No geographical constrain existing. Seasonality/ weather issues are not a factors in internet usage The e-business requires minimal cash outlay hence not restrictive to market entrants Constant innovations however require firms to update their software and hardware periodically. Social Technological Consumer attitudes/ opinions and media views are generally positive. Great potential of the market due to the popularity of social networking forums like Facebook, Twitter, YouTube and MySpace.com. The emergence of mobile phone as a major catalyst for social interaction has also offered opportunities for further growth. Increasingly, online sales in becoming a mode of choice for consumers. E-business is a technologically dependent system. Implementation of advanced architecture with rapid development of new software needed Innovative concepts always required developing a competitive strategy. Legal Environmental Litigation from disillusioned customers is a risk. Copyright violations prevalent due to the ambiguous nature of the internet. Hacking and misinformation constitute a threat. Electronic commerce is environmental friendly since it employs a paperless environment. Business environment is very conducive for further growth. Figure 6: E-Commerce Trends Source: Gartner Group/Malaviya, P (2001) Pg.11 Figure 7 Figure 8 Figure 9 Figure 10 Read More