E-Business. Classification, Development And Implications Of E-Business On Modern Organizations - Essay Example

? STRATEGIC MANAGEMENT ………………………….. College ……………………………… ……………….. Words count: 4042 Table of Contents Table of Contents 2 Introduction 3 E-business 4 Development of E-business 5 Classification of E-business 7 Implications of E-commerce on modern organizations 8 Potential Benefits of E-business 8 Impacts of E-business on Value Chain 11 The Economics of the E-business 12 Implication on enterprise value creation 13 Internet Strategy of the Business 14 Implications of E-business on Business-Security 15 E-business labels 17 E-learning 17 M-commerce 17 K-business 18 Conclusion 18 References 20 Introduction It was no wonder that people of commerce quickly realized the growing opportunities when the global networking platform to permit digitized information to be shared and distributed globally has emerged as a revolutionary change in the field of information technology. The global information infrastructure served as the foundation for new methods of personal interaction, communication, transaction and this has tremendously changed the way people did business. From the mid 1990s, global networking platform grew rapidly until 2000 and has started showing major signs of success stories of many multinational companies by 2003 (Schneider, 2011, p. 4). Within just few years after the mid 1990s, the internet-based business has become a larger part of the total economy. Electronic Business, generally termed as E-business, is one of the most important aspects to emerge from the internet. E-business is more than another way to sustain and improve the traditional business practices. Most of the researchers highlighted the revolutionary aspects of e-business adoption and its positive impacts on human life whereas some others suggested that e-business is a kind of disruptive innovation as it radically changes the traditional way of carrying out business. E-marketing, E-banking, E-learning, E-government etc are other major breakthrough developed with the use of internet technology. This paper provides detailed answers to the questions what is E-business and how does it matter to an organization. Based on relevant literatures, this paper examines the theoretical perspectives of e-business and describes its general impacts to a business organization. This paper will focus on the field of e-marketing and examines how e-marketing is influencing today’s business and marketing arenas. E-business The terms E-commerce and E-business are often used interchangeably, but they are distinct concepts. E-commerce is a term used to describe the process of transacting business over the internet, but E-business involves the fundamental reengineering of the business model in to the internet-based networked enterprise. More specifically, ecommerce is narrower in the sense that it refers only to the buying and selling of goods or services by using internet technology, whereas E-business accounts for all business activities, including both internal and external, that are conducted online. E-business describes the information system and application using the internet to support and carry out business processes. As Bartels (2000) noted, to be very specific about the difference, E-business includes E-commerce, but also covers organization’s internal activities such as manufacturing, inventory management, financing, human resource management, knowledge management etc. With E-business, companies can link its internal and external activities very effectively to work more closely with different stakeholders such as suppliers, partners, and customers etc to satisfy customers’ needs. Grefen (2010) strongly argued that primarily three criteria are to be met to call a combination of business activities and information technology e-business. These three criteria are: 1- The business activities must be core activities. The activities must be directly related to the reason of the existence of the business. 2- The use of information technology must be essential for the fundamental ways the activities are performed. If IT is used only for improving the effectiveness and efficiency, it may be called IT-supported activities and hence they do not qualify for e-business. 3- The IT must be used in an integrated way for both processing and communication of information. In this regard, information needs to be transformed and transported digitally. Based on these criteria, Grefen (2010) defined e-business as “conducting core business activities in a way that is enabled by the integrated use of IT for processing and communication of information”. In short, e-business is IT-enabled business. According to the general business and management perspectives, a business comprises of several different activities and set of procedures, workflow steps etc to carry out specific business function. Book keeping, payroll, supplies ordering, inventory control, transporting and warehousing, marketing and financing are some of the examples of business activities. A business activity may comprise of many discrete business transactions of either formal or informal levels. Business activities form a business and determine how the business should be and therefore a business activity is one that contributes a significant segment of values to its customers and a considerable portion of revenues and profits to the business. E-business, as detailed earlier, is the integrated application of internet technology for carrying out business and related activities. Implementation of e-business aims to implement electronic transactions and modifying current business activities to integrate and interface with the electronic transactions (Lientz and Rea, 2012). Development of E-business Internet has created a new world beyond the real world to be described as a ‘virtual network world’. Internet has broken the boundary of time and space and alerted the trade patterns and has improved the circulation of merchandise, capital and information. The development of computer science and communication systems has played vital role in lying foundation for e-business. The first phase of e-business development was based on the EDI- Electronic Data Interchange- that has been originated in the 1960s. EDI has been implemented and adopted by large scale business ventures by 1980s. EDI enjoyed advantages of decreasing the intensity and mistakes in handling documents as well as improving the efficiency. Initially, the e-business and e-commerce practices were based on the EDI, and later, after the internet technology has become popular in the late 1990s, internet based e-commerce came in to existence (Qin, 2009, p. 5). Within just very few years, internet has become very popular and many entrepreneurs not only found the opportunities of internet-integrated business practices, but also seized the opportunities by investing heavily on internet technology. Internet’s popularity growth rate has surpassed the growth rates of any previously discovered electronic information mediums. As depicted in the figure below, Radio, television and personal computer took 38, 13 and 16 years respectively to reach 50 million people, but internet took only 4 years to reach same numbers of people (Greenstein and Vasarhelyi, 2002, p. 6). The potential benefits of using and integrating internet for various purposes have become known to all, and thence business and non-business organizations developed e-marketing, e-retailing, e-banking, e-government etc. Classification of E-business One of the major segments in the E-business processing is buying and selling of goods, supplies, raw materials or services by using internet. This can be classified basically in to four, namely B2C, B2B, C2C and C2B. Researchers like Goel (2007, p. 16) has added B2G as another important segment of E-business. B2C refers to Business-to-Customer form of e-commerce system. It has been the most highly publicized forms of e-business stores or online shops such as Amazon.com and Dell.com. The business that goes to marketing of its goods or services by using internet focuses on consumers rather than businesses. Examples are amazon.com and dell.com. B2B refers to Business-to-Business form of e-commerce. B2B includes e-commerce activities between businesses. With this relationship between businesses, firms are found to improve efficiency of several common business functions such as inventory management, payroll system etc. Intel.com is an example for B2B as it offers online procurement and support to businesses. C2C refers to Consumers-to-Consumers form of e-commerce. This type of E-commerce includes an auction model in which consumers are directly dealing with other consumers for taking auction or to market certain items. Example for this type of E-commerce is ebay.com. C2B refers to Consumers-to-Business model of E-commerce in which customers decide on prices and other requirements and they buy goods or services accordingly. In the C2B form of E-commerce, consumers get choices of wide varieties of commodities and services and they also get opportunities to specify the range of prices they may afford to pay for them. It therefore reduces bargaining time. The B2G, which refers to Business-to-Government, is a newly emerging model of E-commerce in which government departments directly reach to the citizens by setting its own websites. These websites have certain rules and regulations that governments have on its people (Goel, 2007, p. 16). Implications of E-commerce on modern organizations E-business is tremendously changing business ways. Electronic business is not just a technology, but has the potential to largely impact every aspects of the value chain of the firm. It influences every aspect of management, procurement, marketing, financing and so on and therefore implementing e-business in a more innovative scale requires management to view the marketplace beyond the normal physical boundaries. Internet has profoundly influenced the society, and similarly, internet-based business has also profoundly impacted the business landscape and the economy as a whole. E-business has many advantages to the marketer, buyer and the society as a whole. Similarly, e-business has implications on the value chain of the business and internet strategy of the business as well. Internet based business has posed challenges on information security as well as business ethics. These implications are detailed below: Potential Benefits of E-business E-business has emerged as a remarkable reform in the history of business mainly because of that most of the world’s leading multinational companies adopted e-business as an important strategy to dominate the market. E-business provides small and medium sized business with opportunities to go global and generate greater earnings from global marketing. There are many advantages that result from adopting and implementing the e-business and these advantages accrue to the seller, the buyer and the society as a whole. Advantages of E-business to the seller E-business provides the seller with most convenient means for internationalizing the business and to place his good and services in front of the world market. By the global reach, e-business makes it possible for organizations to explore more new ideas and further opportunities for new markets. Many business organizations are found to achieve competitive advantage by adopting build-to-order processes by enabling inexpensive customization of products or services according to specific requirements of customers. Dell is a good example for effective customization and build-to-order strategy. Customization and build to order strategies are found to help firms eliminate inventory handling expenses and thus achieve competitive edge. E-business allows firms to use online advertising and enables them to reach the exact targeted audience in more cost effective manner than traditional print or broadcast advertising. Business organizations can extend their hours of operation to increase profitability and performance by establishing a website by facilitating online-access for customers. Online promotion activities can be targeted to drive increased online-sales. E-business applications can be used as means for gathering useful information about customers, their feedback and others view about products or services. Business firms can directly interact with customers and thus to establish customer loyalty. Potential customers can search for information and do research as well so that salespeople can better deal with more informed customers (Reynold, 2010, p. 106). Apart from these, the seller can reduce procurement processing costs, cost of purchase of goods and sales and marketing costs. Similarly, he can reduce inventories and cycle time. With E-business facilities, the seller can also provide better service to customers. Advantages of E-business to the buyers With E-business facility, buyers can buy goods or services from providers around the globe and thus get access to a much wider choices in supplies, quality, price, features, configuration, style, utilities etc. Buyers can make comparisons of goods, quality and price more conveniently between shoppers. Instant quoting about pricing of shipping can be obtained from the website. Online-shopping facility is available 7 days a week and 24 hours a day. Delivery time and costs are significantly less for certain items such as Videos, Software, games, music etc. Buyers can view their order history and order’ delivery status (Reynold, 2010, p. 207). . Advantages of E-business to the society As people can do online shopping, they don’t have to go out for shopping and this reduces risks associated with travelling outside and traffic congest etc. Customers in developing as well as underdeveloped countries are gaining access to services that they were previously deprived of. Consumers are getting more aware about ethics, social responsibility and fair trade etc. making business firms also more concerned about the same (Reynold, 2010, p. 207). Impacts of E-business on Value Chain Internet allows businesses to reshape their interactions with customers in way that they can make 24/7 interactions, making it possible to increase the level of information throughout the value chain and reducing the cost of stages in the value chain. Traditionally, value chain described the information system data as flowing through the processes of inputs or outputs to the supplier at the back and to the customer at the front stage. But, in the contemporary e-business circumstances, businesses that engage in e-commerce may share information with their customers and suppliers at various stages of the value chain. As depicted above, the traditional value chain shows a flow from supplier to customer through procurement, production and outbound logistics. But with the implementation of e-commerce, customer and supplier are always linked to a firm’s information system. Customers are able to access a firm’s inventory data such as quantity available, price quoted etc and therefore customer gets sufficient time and information before taking decision regarding purchases. Customers can also design and customize products or services according to his specific requirement and preferences. As shown in the diagram above, the E-commerce system depicts customer-oriented value chain system. According to the value chain concept developed by Michael porter in 1980s, a typical business organization designs, manufacturers, markets, delivers and supports products or services and each activity in the chain such as inbound logistic, outbound logistic, procurement etc delivers significant part of values to customers and a certain portion of profits to the firm. Customers spend money for goods or services for that they get certain values or utilities from buying or using them. E-commerce may enhance value chain by identifying better opportunities for cost reduction, because internet can increase speed and accuracy of communication between customers, suppliers and distributors (Bidgoli, 2002, p. 43). The Economics of the E-business Internet-based business has shattered many of the economic principles that have long guided the industrial age. The economics of the new information age is based on certain new set of principles that are entirely different from the traditional economic concepts. Major impacts of e-business on the economic concepts are listed as under: 1- The economy experienced a paradigm shift from an environment of scarcity to one of the abundance: In the traditional economic doctrine, tangible resources were considered as the basic foundation for creation of economic assets, but not, it is information. For E-business system, information and its share among potential customers can profoundly affect the business and therefore the economics of the system as well. 2- Transaction and coordination costs are eliminated: Another major change can be noticed from the fact that internet has created a strategic shift of affiliate marketing program in which transaction and coordination costs are quite insignificant. 4- Demand can be calculated with precision. In the traditional economic perspectives, demand calculation is a foggy prediction about the future, but the emergence of internet and E-business made it possible to forecast and calculate real demand for goods or services that are yet to be developed and marketed. 5- Switching costs are lessened: ‘Switching’ itself has been considered as a ‘cost’ in the economics of industrial age, but this has become very easy with just a mouse click and internet has facilitated zero or lower switching costs from between products or brands (Roberts, 2003, p. 63- 67). Implication on enterprise value creation Traditionally, value is what the customer received in consideration of the money he is willing to pay. Customer’s specific requirements and preferences determine the ‘value’ of the product or service. In order to ensure value of the offerings, marketers traditionally attempted to improve every aspects of quality, features, outlook etc, but now, there are many other factors that too determine the value that a firm can create. Internet revenue models are thus far significant in determining the value and profits to the customer and firms. These factors are listed below: 1-Access to the Internet: Few firms can generate incomes by providing access to the internet. 2- Membership and subscription revenues: For some websites, especially content sites, may not be able to charge for their contents such as article, music, videos etc, but membership or subscription seem to be a better way of getting easier sell of making reasonable profits. 3- Advertising Revenues: Some e-business sites are possible acquiring and retaining customers by ‘monetizing’ the customer base by selling advertising on the site. Pay-per click advertsing as well as banner advertising on the sites are found to be revenue-generating ways. 4- Service revenues: Firms like Dell are providing customer service through their websites to the customers as a value-added element of their offerings. Online support and service have profoundly impacted customer’s’ reputation and thus the value customers perceive form the company as well (Roberts, 2003, p. 73). Internet Strategy of the Business Strategy is an important buzzword in the management literature. Almost all the firms that face fierce competition from counterparts in the market are always seeking better and effective ‘strategy’ to achieve competitive edge. In recent years, internet has become a integral part of most business strategies to achieve certain goals such as customer loyalty, customer focus, integrated communication and promotion, customized as well as direct marketing and so on. Albert Angehrn developed a strategic business model called ‘information, communication, transaction and distribution (ICDT), that is used as a basis for discussing the internet strategy of businesses. This business model has been developed on the basis of four virtual spaces; virtual information space, virtual distribution space, virtual transaction space and virtual communication space (Tsai, 2003, p. 154). This model basically serves as a basis for identifying how the existing lines of products or services can be extended or restructured or reengineered in order to take benefits of internet-based business (Zeng, 2012, p. 690). A business that intends to take internet strategy is initially required to determine its overall strategy and then to determine how the internet can be leveraged. The ICDT business model comprises of four virtual spaces, namely distribution space, communication space, information and transaction spaces. Virtual information space is the easiest space for a business to enter the virtual market place. Information needs to be accurately displayed and the information displayed need to be viewed by authorized users. Virtual distribution space is used to deliver the products or services requested by the customer. For virtual distribution to be taken place, the products to be offered should be digital and services to be performed digitally. The major two concerns related to virtual distribution are; 1) whether the goods or services will be delivered only to the legitimate customers, and 2) whether the distribution will be reliable (Greenstein and Vasarhelyi, 2002, p. 15). Virtual transaction space is used to carry out business transactions like purchase, sales and so on. For entering to virtual transaction space, firms need to have effective data entry. The concerns in entering this space are security of the data, accuracy and integrity of processing the data, vendor’s reliability, reputability of trading partner and customers’ privacy concerns. Finally, the virtual communication space used to enhance relationship building, negotiation and processing of ideas such as forums, chat rooms and virtual communities. Implications of E-business on Business-Security E-business involves transferring and storing of bulk information that are vital to the company. E-business has posed greater challenges of information security and privacy issues since unauthorized users can often access the website and retrieve data or information that are critically important to the firm. Greenstein and Vasarhelyi (2002, p. 18) quoted an important statistics about information security issues faced by business organizations. According to a survey conducted by Federal Bureau of Investigation together with Computer Security Institute, more than 70 percent of the business organizations out of those studied and researched had detected unauthorized access to their systems and retrieve information vital to them. The survey revealed that companies reported a 75% of infection of company equipments via virus and malicious codes and 64 percent of abuse of computer access controls. Similarly, 50 percent of the companies experienced physical theft and intentional destruction of computing equipments. 33 percent of the companies experienced attacks on bugs in web servers and 18 percent experienced internet fraud. Lack of security is a major barrier to e-commerce and therefore business firms are to take strategic steps to ensure security such as privacy policy, effective control measures on data and information security etc. it is therefore essential to have technological means of authentication, identification, accountability and liability in electronic transactions. E-commerce entails two parties and transactional relationship between them. Since there are security issues, parties to a transaction need to have a confident reliance on user identities (Basu, 2007, p. 25). In order to ensure information security, firms are widely implementing Enterprise resource Planning (ERP). Firms that install ERP are found to have reported fewer issues related to information security than those that didn’t. Firms that failed to effectively implement ERP are found to have fallen to issues such as revenue, information and data integrity loss, theft of trade secrets or data and infection with computer viruses (Greenstein and Vasarhelyi (2002, p. 20). E-business labels E-learning, K-business, M-commerce are some of the newly emerging labels of E-business. These labels are detailed below: E-learning Traditionally, learning was possible only with the physical presence of the teacher or instructor. However, learning possibilities in the contemporary internet-world have been changed to E-learning wherein a learner can use internet as a medium for learning from a tutor from faraway places through video-conferencing and other facilities. E-learning is the examination of the most advanced features of information and communication technology that can support, create and provide educational experiences to the learner as well as tutors. Holmes and Gardner (2006, p. 10) stressed that e-learning offers newer opportunities for both the instructor and the learner to enrich their teaching and learning experiences through virtual environment that support delivery of information. Universities and colleges started facilitating online-portals wherein students can access their class rooms, worksheets and assignments that make them continually work with studies and get evaluated by their instructors on time. M-commerce M-commerce is a newly emerging trend in the field of E-business. M-commerce is Mobile Commerce, in which goods or services can be purchased or sold by using the mobile-enabled internet. Large scale retailers and online-shoppers provide mini applications to customers for using in their internet-enabled mobile phones for selling of goods or services to them. K-business K-business represents Knowledge based business in which knowledge plays significant role in the business processing. Knowledge is always an asset for business organization and that should be managed well so as to get best out of it. Knowledge is either tacit or explicit and knowledge management talks about careful coordination and effective transfer from one type of knowledge to another to ensure greater effectiveness in managing the knowledge. Knowledge management involves creating knowledge, sharing it with others and utilizing the same for organizational purposes. Internet is a potential platform for wider access to data, information and knowledge. K-business proposes commercializing of knowledge provided by internet. Virtually, every organization is rich in knowledge due to access to internet and that is the reason why they have wider business opportunities. K-business integrates the business potential linked among the people, technology and organizational processes. Conclusion This paper has presented a detailed study and literature review about E-business and its implications on modern business organizations. E-business, a wider concept than E-commerce, is the fundamental restructuring of the business model in to the internet-based networker enterprise. E-commerce, E-learning, E-government, M-commerce and K-business are some of the very relevant labels that are newly emerging in the field of E-business. Major implications of the E-business to the modern business organizations include general benefits of E-commerce to various parties, changes in the value chain concepts of the organization, rising challenges of information security and needs to implement ERP as well as other practices and ICDT business models. This paper concluded that E-business has significant implications on modern business organizations, that are its benefits, issues and general impacts on the business structure and perspectives. References Bartels, A., 2000, The difference between e-business and e-commerce, Computer World, Retrieved from http://www.computerworld.com/s/article/53015/The_difference_between_e_business_and_e_commerce Basu, S., 2007, Global Perspectives on E-commerce Taxation Law, Ashgate Publishing, Ltd Bidgoli, H., 2002, Electronic Commerce: Principles and Practices, Academic Press Greenstein, M and Vasarhelyi, M., 2002, Electronic Commerce; Security, Risk management and Control, Second edition, McGraw Hill Companies Goel, R., 2007, E-Commerce, New Age International Grefen, P., 2010, Mastering e-Business, Routledge Holmes, B and Gardner, P.J.R., 2006, E-Learning: Concepts and Practice, Pine Forge Press Lientz, B and Rea, K., 2012, Start Right in E-Business, Routledge Qin, Z., 2009, Introduction to e-commerce, Springer Reynolds, G., 2009, Information Technology for Managers, Cengage Learning Roberts, M.L, 2003, Internet Marketing: Integrating online and offline strategies, McGraw Hill Companies Schneider, G., 2011, Electronic Commerce, Ninth edition, Cengage Learning Tsai, H., 2003, Information technology and business process reengineering: new perspectives and strategies, Greenwood Publishing Group Zeng, D., 2012, Advances in Control and Communication, Springer Read More