We are in a critical state of change in the context of business activities and strategies. Today, huge percentages of multinational companies are shifting their sales toward internet sales, like has been done by RyanAir, Easyjet, etc. These companies experienced the cost-saving benefit of making their sales online and they plan to increase their online sales percentage further in the future. What has been done by companies like Easyjet and RyanAir are categorized as B2C E-commerce activities, and the popularity of these activities has been increasing extra-rapidly since we enter the 21th century.
Experts and observers of the industry however, believed that we are still in the beginning stage of the B2C E-commerce development. In the B2B category moreover, we are stated to be at the first ‘minute of a hockey match’ and are still heading for much bigger things to take place. The fact that we are still in the early stages of e-commerce explorations revealed the vast possibilities of how e-commerce can change the face of business activities in our world. E-commerce itself carries with it several important traits that need to be adopted by multinationals if they are to receive the full benefit of e-commerce activities.
One of the traits discussed is global reach. In definition, Global Reach is and initiative to increase the amount and the quality of connection between a company and its customers using the internet. Technically, internet can provide customers with information and services that were previously only available by meeting directly with corporate officers. By taking advantage of the internet, customers can place their order electronically and thus reducing cots of communication (like telephone calls or postage services) and transportation.
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Importance of commerce in moderm world
This easiness of communication and transaction methods will attract more companies to do business with our company, including companies from afar. In this paper, I am discussing how E-commerce adoption could rapidly enhance corporate international expansion, compare to traditional commerce and I will also discuss E-commerce strategies to achieve the state of global reach.
Development of E-Commerce Strategy for Global Reach
How the Concept of Global Reach Becomes Important?
The rapid development of E-commerce is not seen in the business world until the beginning of the 21st century.
It is only then that people embrace the possibilities of making significant transactions through the internet. The concept of connecting with customers via internet however, has been around for much longer than that. We have been using Electronic Data Interchange and Electronic Data Transfer between companies for more than a decade. B2B Electronic data interchange represented early designs of information exchange and online transactions for businesses. Since then, entrepreneurs have been developing possibilities of making the internet transaction available for B2C activities.
Benefits of E-commerce
Developing an e-commerce strategy is not easy and it is certainly requires quite an investment. The question we might ask ourselves is perhaps regarding the actual benefits that can be obtained from developing an e-commerce strategy. Observers and writers however, have been researching the phenomenon for a quite long time that they are now able to define the actual benefits of performing an e-commerce strategy for a business. The identified benefits of implementing e-commerce strategies are:
Observers of the phenomenon have discovered significant development in efficiency measures once a company managed to get their e-commerce strategies are up and running.
In most companies practicing e-commerce strategies, their services improved in the form of 24 hour services, from practically any location that has an internet connection. This is a huge convenience for customers.
Speed In this world of efficiency and effectiveness, e-commerce strategies could also help vendors and customers save their time by completing transactions through the internet rather than meeting traditionally. Read about open access good example
Due to the practical and the almost instant connection that can be provided by e-commerce strategies, errors could be remedied before it could cause economic losses.
The internet has gone global as we speak and thus, being able to expand the offerings of our business to the people of the world would be another advantage of applying e-commerce strategies.
Updating and printing catalogues are sexpensive work and using the internet, the cost structure to make sale offerings will be significantly lower.
In this paper however, I am focusing on how e-commerce could deliver the benefit of ‘global reach’ for companies adopting it (Bakos, 2001).
E-commerce has been developing rapidly because people believed that it would increase competitive advantages of a business compare to its competitors. In reality, the basics of E-commerce have been benefiting companies for years by creating concepts like EDI and JIT. E-commerce only expands the application of the concept outside the walls of the companies.
For example, Wal-Mart has been reducing its cost structure by working together with its suppliers by means of Electronic Data Interchange and Just In Time systems. In short, e-commerce could enhance the competitiveness of a company within its environment. Researches and observations regarding the effects of e-commerce strategies toward the competition level revealed an expected conclusion. It is stated that the practice of e-commerce significantly enhance the level of competition between companies inside a particular industry.
This is possible because in addition to reducing the operational cost structure, the practice of e-commerce generally created a new culture of internet literate and fast information exchange. This means managers could quickly find out about their competitors’ actions, and perhaps strategies. In the internet realm, competitors could also dig-up information regarding our companies. The fast exchanges of information generated increased level of activities responding to competitors’ actions.
Competition could become harsh and involve illegal or unethical means of extracting information or other competitive actions. Governments and trade organizations realized this development and they have been working to create better formulas to regulate e-competition between companies.
E-commerce and SWOT Analysis SWOT analysis is a tool in assessing corporate internal business capabilities. The analysis tool is usually used when people are trying to understand the current position of a company within its industry.
Good and solid results from SWOT analysis means that the company has internal capabilities that could lead itself toward a leadership position in the future. Analysis and investors usually pay attention to SWOT analysis because it provides a picture of how a company aligns its internal structure with effective strategies in its particular industry. In terms of corporate internal capabilities, observers revealed that e-commerce information systems can increase corporate strengths and reduce its weaknesses since the 1980’s.
This is true especially for companies having differentiated products and large business chains. In these settings, the vital presence of Strategic Information Systems can no longer be denied because its directly influences the effectiveness of a company’s business structure. Using e-commerce designs, companies can reduce their rate of mistakes due to the presence of sufficient and accurate information. Companies can also monitor activities so that mistakes can be remedied faster than usual.
In terms of strengths, companies can increase the timeliness of their services which is currently a huge plus for most customers. Some other benefits that can be gained through the adoption of e-commerce strategy are: expanding sales up to the entire world, obtaining additional sales channel, having the capacity of managing more target markets, reducing cost of sales, reducing purchasing cycles, opening possibilities for new pricing alternatives and building internet communities which provide the ease of communication between companies and their customers (Bradley, 1993).
SWOT analysis of E-commerce Effects If an analysis is performed on the effects of e-commerce toward SWOT capabilities itself, the results would be as following:
brought by e-commerce practices e-commerce activities enhances the company’s internal capabilities by: extending corporate operations up to 24 hours a day, expanding business scope into the global level, deliver cheaper prices to customers due to the absence of middlemen within transactions, faster transactions processes, increase the popularity of our products, reducing operational costs, especially staff costs.
of E-commerce practices Despite the benefits, e-commerce also has challenges. Some of them are: lack of interaction between seller and customers, which might reduce corporate capacity to convince customers, increasing transportation costs when customers is in different regions than sellers, there are still not enough people buying from the internet to generate economies of scale.
Opportunities generated by e-commerce
Researches indicated that the number of people using the internet increased rapidly, thus enhancing expectations of a better economies of scale in the future.
Online shopping has been the new culture in a modern society and observers believed that people of the future will be much more accustomed to the idea of home shopping through the internet. This is highly anticipated, especially with the rate of advertising and promotions of how much the internet can help make your lives easier.
brought by e-commerce Significant threats coming from the practice of e-commerce is generated by people’s capability of being dishonest and performs scams through the internet.
Such irresponsible activities could destroy the positive image of e-commerce and lead people to believe that they cannot feel secure when buying things online. Until today, internet marketers, sellers and also governments are still looking for ways to deal with potential scams performed though the internet (Damme, 2001).
Porter Five Forces Analysis
E-commerce and External Environment Assessment Porter Five Forces Analysis is also an important tool of assessing the conditions of a corporation.
If SWOT analysis depicts corporate conditions by describing its internal structures and how it has been aligned to corporate strategies, Porter Five Forces Analysis helps us understand corporate positions in relation to its connections to external environments. This is as important and sometimes even considered more important then assessments of internal capabilities itself because in reality, companies are demanded to shifts their structures and change their strategies in reactions to external influences.
Therefore, assessing the effects of e-commerce in porter five forces analysis is important in order to understand the wholesome effects of e-commerce practices. Externally, performing e-commerce transactions means that the company has turned into an e-business. This means it has to deal with various factors of e-environment which might be a little different compare to its previous business environment. Nevertheless, the presence of e-commerce within out company can strengthen pour position in our current business environment.
For example, companies are currently accustomed to use Porter’s five forces analysis to determine the nature of a business environment and then decide how the company can manage its position in the market and develop its competitive advantages. Researchers argue that the use of Information Technology (e-commerce) can alter the five forces affecting the company into its favor. Airlines for example, can use the frequent flier program and internet booking system to increase barriers of entry and win on competitions with equals (Brynjolfsson, 2000).
Porter’s Five Forces of E-Commerce Practices
Porter’s Five Forces analysis features five dimensions of how to define the position of a company within its industries. The five dimensions are: rivalry, buyer power, supplier power, threat of substitutes, barriers of entry. In terms of rivalry or competition, as previously stated, practices of e-commerce strategies will enhance the level of competition within an industry. This is true because the internet has made it possible to focus on both the top and bottom lines of the market share.
Furthermore, through the internet, competition has been brought into the deepest edges of cyberspace. In the context of buyer power, e-commerce actually increases the power of customers. This is true because using the internet they have access to more options. On the other hand, businesses are forced to increase their competitive advantages in order to appear more attractive in the market compare to other players. Today, customer loyalty programs include satisfactory internet services. Customers demand that companies respond to their inquiries and protests online instead of using the telephone.
Recently, customers even get more solutions communicating through the internet compare to using the telephone. Supplier powers are decreasing along with the implementation of e-commerce strategies. This is true because due to the more elaborate e-commerce strategies, most companies today already have their own distribution system, which make the distribution activities easier for suppliers. The decreasing level of demands toward suppliers increases the amount of suppliers available to serve the market. Threat of substitutes will also rise higher as companies apply e-commerce strategies within their business structures.
Due to customers’ emerging capabilities of connecting with thousands of competitive companies through the internet, they can easily choose cheaper substitute products if they think that we are charging them too much. In terms of new entrants however, it is still not that easy to establish an online presence within any industry. The investment costs are relatively high. Nevertheless, if the party intended to build a new company is equipped with sufficient funding, starting an online business is significantly cheaper than making a full-fledged traditionally operational business (Cavusgil, 2002).
In this sub-chapter I am discussing the effects of e-commerce strategies toward the marketing mix concept. Marketing mix is a basic concept describing corporate marketing strategies in real terms. It consists of four aspects, which are: price, product, place/distribution and promotion. E-commerce strategies however, influences each of these aspects differently, some are more influenced that others. The two most influenced aspects of the marketing mix are price and place (distribution).
In terms of pricing, researches indicated that e-commerce strategies brought made: price comparisons easier because the level of information available to customers is increased; regional price differentiation becomes more difficult because the internet knows no geographical boundaries; interaction to discuss price possibilities are made easier; price changes can happen faster, real-time pricing is possible. In reality, the wide availability of internet connections has made internet auctions far more popular.
Internet auctions become more popular because it is an ideal concept for efficiently distributing limited resources, and use prices that reflect the scarcity of the product itself. Internet auctions become more popular both in the B2B and the B2C sector, as it turn into a form of trading for the masses. Costs are significantly reduced for both customers and suppliers. In terms of distributions, e-commerce strategies have actually generated more challenges for businesses. With e-commerce strategies, businesses can perform transactions with customers in minutes, but when can they deliver?
This becomes an important question for customers in relation to internet purchasing. Most companies fail to satisfy customers because they are focusing too much on closing the deal that they forget to furnish their delivery. In reality, inefficient logistic distribution system will make a nightmare out of e-commerce business. Experiences of internet business generated the following suggestions for online companies:
- Do not start a web-shop without a prepared logistics system ?
- Maintain an efficient logistic information system ?
- Maintain a Front-End and Back-End System?
- Ensure that customer orders are delivered in 48 hours at the latest ?
This paper has developed an elaboration of how e-commerce affects businesses, especially in terms of global reach. It is true that implementation of e-commerce strategies will bring companies into a new internationalized level of operations. It must be paid attention however, that engaging in e-commerce businesses has its own threats and challenges which might be more than predicted by most people.
E-commerce activities brought different complexities into businesses and might change the looks of companies within analysis tools like SWOT analysis, Porter Five Forces Analysis, and the Marketing Mix.
- Bakos, Y. (2001 ). The Emerging Landscape for Retail E-Commerce. Journal of Economic Perspectives, 15(1), pp. 69-80.
- Brynjolfsson, E. and L. Hitt (2000). Beyond Computation: Information Technology, Organisational Transformation and Business Performance. Journal of Economic Perspectives, 14(4), pp. 23 - 48.
- Bradley, Stephen P., Jerry A. Hausman, & Richard L. Nolan, editors. 1993. Globalization, Technology, and Competition. Boston: Harvard Business School Press.
- Cavusgil, S. Tamer. 2002. Extending the Reach of E-Business. Marketing Management, 11(2):24-29. Damme, E. van, and B. Dellaert, 2001, E-conomy: ICT and the functioning of markets (In Dutch: E-conomie: ICT en marktwerking), CentER, Tilburg, March 2001
- Globerman, Steven, Thomas W. Roehl, & Stephen Standifird. 2001. Globalization and Electronic Commerce: Inferences from Retail Brokering. Journal of International Business Studies, 32(4): 749-768.
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