e7 - impact of ebusiness

8/13/2019 E7 - Impact of EBusiness

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(EDI) - to improve and change business processes (Bartels, 2000)E-commerce or electronic commerce is carrying out businesscommunications and transactions through computers and overnetworks. It involves buying and selling of goods and services throughdigital communication. E-commerce also includes transactions on theWorld Wide Web and the Internet and means such as electronic fundstransfer, smart cards and digital cash. E-commerce covers outwardfacing processes that interact with customers, suppliers and externalpartners such as sales, marketing, delivery, customer service,purchasing of raw materials and supplies for production. It involves newbusiness models and the capability to gain new revenue. So E-commerce is a subset of e-business.

E-business or electronic business evolved from e-commerce. It isconducting business on the internet by not just selling and buying ofgoods but also servicing customers and join forces with businesspartners. Most companies have realised that the internet is a long termthing and will is here to stay. Corporate leaders have become consciousof the fact that in order to maintain the competitive edge they mustbecome e-business as well (Altekar, 2005, Supply chain management,Prentice hall of India, New Delhi,Pg. 373)

E-business includes e-commerce and is a much broader concept thane-commerce. It also covers internal processes such as production, new

product development, stock management, risk management, financeand HR. E-business is more complex and more focused on internalprocesses. It is aimed at improving efficiency, productivity and costsavings as well (Bartels, 2000)

CURRENT STATE OF E-BUSINESS MARKET:A research by Forrester research and cowls/samba information showedthat in 1994, 240 million dollars worth of business was done on theinternet.

Source: Forrester research and cowls/samba information

In the year 1996, that figure quadrupled and rose to 993.4 million USdollars and in the year 2000 it touched 6.9 billion US dollars. Businessthrough internet is growing day by day. Most of the companies haverealised that internet is a big electronic market and companies likeGoogle, Amazon and E-bay are prime examples of it. Most of thecompanies now days have their own website and business on theinternet have been adopted by large and small organizations (Kosiur,1997)

GENERAL IMPACTS OF ADOPTING E-BUSINESS:


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E-business now is not a new concept. The current state of e-businessstarted taking its shape at the beginning of this century. The growth andits impact have been dramatic and will continue to be so. It is promotinga new, borderless global economy which is not only a technologicalissue but also a new approach of doing business. In brief, organisationsare externalizing their business applications via internet in order to gaincompetitive advantage. The three key areas of focus are: 1) Businessemployee (such as intranet e-business sites) 2) Business to business(E-supply chain, e-marketing, e-support) and business to customer (viae-lobby or enterprise portal) (Hurwitz S J, 1999)http://www.informationweek.com/743/43uwjh.htm (29/12/06)

The impact of E-business/IT on business relationship has been intheoretical level two folded. First, it has had a huge impact on internalprocess like book-keeping and salary payments, which happen inside acompany engaged in a business relationship. Computerization fromlarge mainframes to inexpensive PCs with modems is an apparentimprovement of internal processes. Secondly, it has had an impact onthe number of connections, I-EDI and new viable connections ERP2 toother organisations. Both the levels of impacts are interlinked. Before acompany fully engages itself in activities in a business that requiredigital tools e.g. software or extranet, the internal information systemsand e-business possibilities have to be in place. The internet and many

other new technologies form possibilities for people and organisationsto build, maintain, and end business relationships with organisations(Salo, J, 2004)http://www.taloustieteet.oulu.fi/henkilokunnan_sivut/karjaluoto/publications/j8.pdf (31/12/06)

ADVANTAGES OF ADOPTING E-BUSINESS ORIENTATION:

An e-business solution will not only add value, but offer many otherbusiness advantages as well. Some of them are:

Removes location and availability restrictions - An online business hasa global marketplace. Information about the product can be accessedfrom anywhere in the world with the help of internet facility. Similarlyorders can also be booked online. Therefore users need not necessarilybe present in the same location where the company is.

Reduction in time and money spentMany of the traditional businessprocedures can be replicated with electronic means. Less paperwork isone of the major cost cutting factors in an e-business application.

Similarly, cost of paying rent at a physical location can also be saved ascompared to cost of maintaining an online site.


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Gives competitive advantage Easy access to real time information isan important benefit of the internet, enabling a company to give efficientand valid information. An organisation can gain competitive advantageover those companies that are not there on the internet(onlinebusiness.com, 2006)http://onlinebusiness.volusion.com/articles/e-business-advantages/(31/12)

Reduced cost of doing business It helps reduce inventory,employees, purchasing cost, transaction costs, order processing costsrelated with fax, phone calls, etc.

LIMITATIONS / DRAWBACKS OF E-BUSINESS:There are lots of problems and issues with e-business. Some of themare discussed below:

Trust: People are quite reluctant to buy high value goods or servicesusing electronic medium. The main reasons for such mistrust aresecurity and hesitation to release personal information on the internet.

Security: One of the biggest disadvantages of e-business is security.Other people can easily get personal and financial information of thecustomers. Most of the companies dont have authentic and secured

transaction systems. Many developments have been made to maketransactions over the internet safe and secure, like pay pal, secureserver, etc.

Technological standards: Technological standards develop quickly inelectronic markets. Some of these standards are not secure or haveproblem of integrating with standards in other areas.

Re-intermediation: One of the problems is difficulty in finding the exactsuppliers of goods and services.

Higher number of errors: The amount of mistakes made withcustomers and suppliers is much more visible in electronic markets(Davies, 2004)

DIFFERENT FORMS OF E-BUSINESS:

Business to Business (B2B)It involves companies buying from andselling to each other, on the internet. In other words it is commercialactivity between businesses. Online B2B is growing fast in both

horizontal and vertical markets. In a horizontal market, companies inone industry sell to companies in other industries, whereas in a vertical


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market business takes place among companies operating in the sameindustry in a sequential supply chain (Oz, 2002)

Business to Consumer (B2C)It applies to any business ororganisation that sells its products or services to consumers on theinternet for its own use. About one fifth of e-commerce takes placebetween businesses and consumers. B2C is of greater interest to thepublic, because most of the online buyers are people (in millions) andnot organisations (Patton, 2006) http://www.cio.com/ec/edit/b2cabc.html(1/1/07)

Consumer to Consumer (C2C)It supports the community chainsurrounding the organisation. In other words C2C e-commerce is acommercial extension of community activities. It usually takes placebetween individuals and involves forms of cash dealings generally forlow cost goods or services (Davies, 2004)

PORTERS FIVE FORCES ANALYSIS AND ITS USE IN E-BUSINESS:To understand the influence of an organisations environment on acompany, Porters five forces model is used. By recognizing thepossible impact of e-business on each of these forces, the influence onthe organisations environment is estimated. The fiveforces and its usein e-business are as follows:

1. Entry of new competitorsE-business can help companies enter intonew markets. Through the internet small and medium organisations canthink of gaining new customers by reaching people in other parts of theworld. By using standard and open systems, switching costs will reducefor customers and suppliers. Capital requirements will also decrease toenter a new market.

2. Bargaining power of buyersTo strengthen the relation betweenbuyers and suppliers using high software investments were things in thepast. Modern technologies allow forward and backward incorporation in

the value chain. The intermediaries are under pressure e-businessenables to have direct links across various levels in the supply chain.Due to this there is increased transparency in the market.

3. Bargaining power of suppliersEffects mentioned above for thepower of buyers can be replicated to describe the power of suppliers.In order to find, expand and retain relationships with customers,suppliers will have to raise their efforts.

4. Threat of substitutesDue to the increased transparency of markets

it is easier for organisations to develop substitutes for other markets.Huge amount of market data can be collected and analysed by applying


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new internet technologies. Also because of decreased switching costsnew substitutes are more likely to enter the markets.

5. Rivalry among existing competitorsAs mentioned above, e-business permits companies from other industries or various countriesto enter into new industries. This gives rise to more players in the samemarket and eventually increases competition (Hooft et al, 2001)

e7 - impact of ebusiness

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