Impact of E-Commerce on Businesses - Essay Example

Impact of E-commerce on Businesses Impact of e-commerce on businesses There are numerous ways with which retailers have adoptedthe numerous technological advancement in the internet. This is in relation to the ways that they have adopted, applied and created an impact on these technologies. These enable them to promote and sell their merchandise. During the previous times, there were a lot of predictions and speculations on how internet retailing would be taken up in order to create an impact. In this sense, the initial internet commentators had predicted that online retailing would lead to perfect competition. Perfect competition is a factor that is brought about by the fact that there are many sellers, who in turn make the firms that are available to be price takers. It also includes the sale of homogenous products. Because of this, as is the case that is presented by Thomson, there are chances of both easy entry and exit. However, it is involved with the perfect knowledge about the product, as well as adequate information about their pricing. The speculations were raised because, with the explosive growth of the internet, it was thought that there would be the availability of perfect information on the prices and products at the fingertips of most of those involved. With this, the consumers would be better placed to get the best deals. Thus, it was perceived that it would be a brave world whereby the profit margins of retailers would be competed away and they would be forced to price at a cost. They thought that the internet would reshape the world of commerce by dominating most of the businesses in existence within the established trading environments. As such, it would in the long run attain a position of dominion within the global market. However, the current trends in internet retailing have revealed that this has not happened as the earlier commentators have realized that most of their speculations were rather overblown since the high street market has weathered the storm. This is mainly because the retailers who are taking part in the activities are not making their own custom cannibal; the marketplace is not being fully dominated by the virtual merchants and the fact that the high streets have not been completely put out of business. Thus, most of the predictions that were made at the dawn of the internet era have not come to reality. This is in spite of the fact that some of speculations have come to pass. They include the vital role that is currently being played by the electronic intermediaries, especially on the aspect of making one-on-one marketing become a reality. In addition, the prices have become more and more competitive and the most important factor is that consumers have become more powerful in their decisions and purchase. 2. According to most studies, online retailers are cheaper than conventional rivals and they tend to adjust their prices more often and in a finer way. Nonetheless, they have been shown to find that price dispersion, which refers to the spread between the highest and the lowest price is as wide on the internet in the same way as it is in the shopping mall. At times, it is even wider. In addition, the retailers who have the keenest of prices are shown to rarely have the biggest sales. With this kind of price dispersion, there is a massive indication of inefficiency within the market. In a market that is considered ideally competitive, the products are always identical, with the customers being significantly informed, and there is the availability of a free market entry with a large number of both buyers and sellers. In this sense, there are no costs of search and all sales are made by the retailer who has the lowest price leading to the driving of all prices down to the marginal cost. It is expected that the search cost on the internet be a little bit lower and the online consumers are more informed about the prices. As such, the online price dispersion is expected to be narrower that in the conventional markets. This is however not the case. E-commerce has become an extremely successful component of a large number of retailers since it provides a website for some of them to run in the comfort of their home even though they cannot afford a store. The two case studies reveal the main pricing issues that have arisen as a result of e-commerce. These are the fact that the issue of pricing is not as simple as it may appear from the beginning. They show that in order to make sales to customers who are overseas, it requires a great deal of consideration as well as a lot of prior preparation. There is a need for flexible pricing depending on which part of the continent that the product will be sold. At times, prices are fixed depending on the expected exchange rate. However, it is also crucial to think of how much different the same product is likely to be traded within the UK market and the US market. The competitors in one of the regions may decide to sell it at a cheaper price, hence making it less competitive for an internet retailer. In turn, it affects the perceived value, making it necessary for the retailer to flex their pricing. There is likely to be confusion in relation to the currency for most of the overseas customers. Similarly to the case that is shown on the website of Thomson they have used a broad range of currencies to indicate their pricing in order to avoid confusion. This largely depends on the area of departure and the areas of destination to enable the travelers have a clearer picture of their budgetary requirements. They are thus able to accommodate a wide array of clients who come from all over the world to the international store. 3. Perfect competition is one of the markets that are constantly analyzed by economists. It is in turn affected in a great way by price discrimination. However, it is unrealistic in an incredible way. Some of the principles of perfect competition are that the producers make an insignificant contribution to the market since their individual production levels do not cause any changes to the supply curve. In addition, all the producers are price takers since they do not have any influence on the market. There are also free entry and exit into the market, whereby in the long run, the producers earn zero economic profit since people are engaged in as much as they can in the next best occupation. In addition, producers can alter the quantity of their products and are liberty to enter or leave the market in the effort to create equilibrium at the connection between the supply and demand curves. The principles that are required in price discrimination include the ability to identify different market segments with their differences in price elasticities. There should be a clearly distinct separation between marketers and the lack of seepage between the two groups. In order to attain this, the firm is expected to have some degree of monopoly. The two case studies also bring out the principles of perfect competition and price discrimination. For example, they both charge different prices for the same product depending on the region of sale. This is determined by a number of factors such as consumer ability, quantity of purchase such as bulk buying and type of consumer. While in some areas they exercise the first degree of price discrimination, there are also those where they practice second and third degree. The H& M charges a different fee for goods bought in bulk as opposed to that bought as a single piece as in the case of bikinis and shoes while Thomson charges different for the purchase of holiday tickets by children and adults. This is clearly indicated in the case studies where price discrimination is shown not to have a place within the perfectly competitive markets. 4. The initial commentators envisioned e-commerce in a way that it would be related to frictionless e-commerce since they implied that it would bring about the death of distance. These have the impacts that are related to the strength of the competition within the markets and the different constraints that are facing them. They refer to the scal and the monetary policy issues that are related to the economic level and the national geography in cases where the cost of transport and distance play a critical role. However, the initial commentator ideas with regard to frictionless e-commerce have come into fruition in the sense that the prices that are offered within internet retail areas are still high, hence leading to a much higher rate of competition with the high streets. In these cases, there is a difference, however between the travelling site and the clothing site. There is less competition in the former since most of them offer online services as opposed to the latter, which have numerous high street stores offering the same. b. There are ways through which both studies have shown how the discrimination of prices can be achieved in an online environment. These are the use of first degree price discrimination to extract a greater kind of surplus from the consumers. Thus, the most common type of price discrimination used in the online environment is the first degree through the offering of different prices to different consumers. As such, most online retailers such as the ones provided in this case study use it to increase their profits. However, they can also apply the second and third degree price discrimination by offering different prices depending on the amount of products purchased as well as the person purchasing it in relation to either sex or age. This case is shown in Thomson when adults and children pay different prices for the tickets. Question 2 1. In the existent world, there are a number of e-commerce activities in which most of the people engaged in businesses are getting involved in. These tend to create a great impact on the activities related to marketing mix, thus it has made a massive improvement in the way that a company makes use of varied strategies to promote its product or brand within the market. For instance, with e-commerce, most of the businesses have been enhanced and have been converted into cost effective and practically run enterprises. Through e-commerce, there are certain factors that have increasingly become easier to perform within the business field. They are the ability to conduct market research in a better way, the increase in ability to reach new markets, provision of better services to customers, the faster distribution of products and services to customers, easier solving of problems, and the improved communication with partners in terms of efficiency. In particular, these include the ability of the businesses to reach a much wider audience, which helps them to cut the costs that are related to creating a presence on the high street stores. For instance, at the H&M, it has enabled the retailers to avoid spending a lot of money on the traditional retailing methods that include having to open a store and stocking the goods. This is also the case with the Thomson Company, which can reach a lot of customers who are intending to travel to different destinations across the world in an easier manner. In addition, an individual who is working from home is also able to advertise effectively and sell their products and services across the world. Thus, with the use of e-commerce a lot of benefits have been experienced in relation to various aspects of the marketing mix, which include enhanced flow of information, the creation of new products and services for consumers and the improved availability and transparency within the market. 2. The similar ways with which internet or mobile communication has impacted on the traditional marketing mix include the availability of more information such as different destinations and various varieties, quality and pricing of different clothing in Thomson and H&M respectively, consumers are provided with a broader platform to gain more information. They are both used to bring about a successful presence in the market as well as serve the company in a better manner and reflect the different strategies that are employed by the company. 3. On the contrary, there are also a number of differences that are brought about by this relation. This is mainly shown by the different way with which each of them operates. The modern applications are much advanced that the traditional ones, hence their greater impacts on the marketing mix. As such, the use of the internet and mobile in communication requires the application of different approaches. With this, the consumers can now access a number of sources with similar information and hence collect a broad range of information on particular products on their own. The two have also created a great change in the traditional marketing mix tools in the sense that organizations can use them to coordinate their messages and build their brands. This helps them to build customer relationships that are very strong. In turn, it also helps them to satisfy the needs of the customer. This can be the case for most websites to construct the relationship with their customers and meet their needs in a better way. Thus, both mobile and internet communication has helped the businesses grow and prosper through the creation of relationships and strengthening of the effectiveness of the different organizations. Thus, besides the effect on the way that companies can communicate with their prospective customers these technologically advanced modes of contact allow people to learn more about each other since that have a elevated level of e-mail and connection with other individuals and businesses through their computers and mobile phones. This is the case in both sites which have promotions via mobile marketing and are also linked to social sites such as Facebook and Linked In as opposed to the common traditional forms such as newspapers and magazines. These include the fact that more power to find out about different products is placed on the customers when they make use of the internet and mobile as opposed to the traditional marketing mix techniques where the seller makes a lot of efforts to reach the consumer. With this, they possess more information prompting the consumer to approach them often for information. 4. Digital technologies such as the internet and mobile have had a major impact on the marketing mix. As is revealed in the two studies, these are majorly through the coming up with different kinds of innovation that enable them to remain relevant. Customers are able to observe and compare the prices of most products from one region to the other or that offered for various individuals. Thus, they are able to know the right place to buy a particular product and where not to for specific people. Most business people have come up with unique ways through which they can have a more effective competition on a local, regional and global respect. Owing to this, most companies such as H&M and Thomson have increased their use of the internet to obtain more customers, to increase the level of awareness that their companies have on the public and to sell more of their products. It is because when used in a proper way, the internet and competitive marketing can be powerful sources of the competitive advantage within global markets. In the same sense, the interactive technologies have become the mainstream component that is used for shopping by most consumers. For this reason, managers and most companies should embrace the new technology in order to create more value for their customers. They will be able to identify the right sites to place their products with the provision of the right prices. With this, the relevant people will use them as the most appropriate places to find information and conduct their purchases. Read More