E-Commerce Operation of Companies - Essay Example

10 September 2007 E-Commerce The Internet has opened up avenues for commerce that were unimaginable just a few short years ago. In essence, the Internet has created opportunities for seamless business collaboration between buyers and sellers as well as the collection of service companies that have constituted traditional supply chains. New business models inspired by the new technology break down traditional boundaries between business partners, in essence making all participants in a business transaction part of an expansive extranet. For many companies, a web site becomes one of the main tools which help to connect the organization with potential customers and suppliers. The changes brought about by the Internet have even broader implications. With the advent of Internet technology, every company becomes a global company, with the means and opportunity to buy and sell from, or strike an alliance with, any company, anywhere, anytime. This golden opportunity brings with it a level of complexity that surpasses anything that all but the most far-flung global enterprises have experienced to date. The recent explosion of information and information technology (IT) has induced corporate management to utilize its ingenuity in creating the best available means to manage the flow of information, control flow channels, and integrate the different assets (both hardware and software) of IT utilized by the different departments and divisions of the corporation. As companies invest heavily in information-based systems, they are vesting more (Cunningham 23-24). Like many processes, the design of a web site can be broken down into simple steps, and each step can then be further broken down in to tasks and actions. Most researches are based on the principle that most large projects can be reduced to 'bite-sized chunks', thus reducing the fear factor and avoiding the sense of being overwhelmed by the gargantuan nature of the task ahead (Coltman 57). Creating an action plan, setting achievable targets within sensible deadlines, and distributing responsibility appropriately, will ensure that the project moves forwards as smoothly as possible. There are four basic stages through which the planner has to move to create an effective project plan: awareness, familiarity, understanding and readiness (Eisenberg et al 38). The web is a publishing and communication medium, and as such it needs to be focused on the audience. As with any strategic development, the company should conduct some basic market research prior to the web site development. This will help keep the company planning process focused on the customer and demonstrate that the company is aware of the wider environment in which web site exists. There are many research tools and services on the web that can assist the company with this process (Eisenberg et al 49). When setting up a web site or e-business, the company should do as much research as it can to find out who is offering similar services on-line (and off-line). It is crucial to use search engines, company lists, newsgroups and word of mouth to get as much information on competitors as the company possibly can. Most importantly, the company should not stop researching once the e-company/dotcom is off the ground. It is important to carry on researching and refining (Nielsen 30). For organizations creating a new brand, or launching themselves on to the web for the first time, the selection of an effective domain name can be a difficult process. All the 'good' names seem to have gone, and the organization's preferred domain name might have been taken by someone with no apparent claim to that name (Lucas 98). Trademark and copyright issues aside, choosing a domain name is often simpler than many organizations think: the most important aspects are that it should be memorable, and easy to spell and type. Issues relating to brand reinforcement and literal, descriptive names are secondary, and can be dealt with by effective marketing and explanatory text on the web site or promotional literature (Nielsen 38). Brand management is a strategic element that is not unique to e-commerce. The use of brand management to build customer trust and loyalty is similar in both traditional commerce and e-commerce. In both, the brand name is used to attract customers to visit new physical or online locations, try new products, or use new services. The naming, e-commerce awareness and association, and bricks and clicks are important factors to manage. Successful e-commerce brand management requires taking advantage of the innovation and flexibility made possible by e-commerce, while at the same time meeting the expectations traditionally associated with a brand name (Lucas 39). Limiting the offerings and policies to those traditionally associated with brands greatly limits the success of the e-commerce venture; but moving too far beyond traditional methods of business in an e-commerce venture can create risk to the brick-and-mortar operation. Following Hoffman and Novak (2000) companies must permit the brand to adjust adequately to develop creativity in an e-commerce venture, while at the same time maintaining the traditional credibility of the existing business. The company should identify its target for the web site. It may differ from traditional segmentation and targeting used y the company (Cunningham 28). Whether the aim is to develop a new web site or improve an existing service, it is increasingly clear that many sites do not always meet their targets. These targets may be revenue based or they may be more abstract, seeking to present the organization as effectively and efficiently as possible to its audience. There are many potential site outcomes, but essentially they are divided between internal and external results. Internal outcomes might include satisfying organization's core mission, justifying a departmental budget or staffing level, or reducing costs in delivery of information and services. "External outcomes might include providing new outlets for products, information or services through customer acquisition and increased sales value, or raising awareness of the organization in the wider marketing environment" (Cunningham 48). The range of content expected and available from a web site includes corporate and service information as well as customer support. If a site is supporting an existing service the company will have a reasonably clear idea of what its users expect from the company, and therefore-in theory at least-what they expect from the web site. When companies decide to sell directly online, a major strategic element is to decide which specific goods and services to offer. For most companies, setting up an e-commerce web site that "mimics the offerings at physical locations is not a logical or profitable choice" (Hamel 38). In traditional retailing, holding physical inventory and dedicating shelf and floor space in a store are both impediments to offering extremely high product variety. Scarce shelf space is dedicated to items with high sales volumes. In e-commerce, neither of these issues is as critical. Companies can often offer a much greater variety online without high incremental costs. While product variety is clearly a differentiator between traditional commerce and e-commerce, it is unlikely to be a source of long-term competitive advantage between e-commerce competitors (Nielsen 101-102). The web site may have a clear mission, relevant and sufficient content, be focused on customer service and reflect internal organizational needs, but there is one more element to consider-the competition. The transparent nature of the web provides the company with the opportunity to monitor those sites that are competing for visitors' attention. Identify elements that enhance these sites, and consider developing alternatives for a site (Lucas 26). This does not mean simply copying, but it does mean ensuring that the company does not lose competitive advantage due to simple ignorance of the competitive environment. Even unique sites have to compete for users' time and attention. Business partners will be able to easily and securely communicate and complete end-to-end transactions from within their respective companies (Nielsen 104). Web site implementation requires secure payment methods and strict control of banking information obtained for the customers. Alternative methods of payment-these can maximize revenue but add to the administrative burden. The company will need to assess the costs and benefits of offering a range of payment methods. Refund policy-make it clear how this operates. As with privacy, site visitors will have a natural concern with the security of on-line payment system. It can seem risky to give credit card details to a stranger, especially one whose web site may be in a different country (Nielsen 47). It is crucial to take into account continuity policy and copyright policy. Updates policy-if the content on the site is perishable, then there should be an easy method for the visitor to notify the site manager that an error has occurred, that facts have changed, that something is simply wrong Contact details for web site manager-it is good relationship marketing to positively encourage feedback and contributions from the audience (Cunningham 76). They feel that the company listens to their needs and suggestions; the company gets the benefit of thousands of proof-readers. All web design staff needs to be trained in and kept up-to-date with copyright issues. Protecting the company's own copyright is one thing-infringement of others' copyright may result in expensive, embarrassing and damaging publicity. While kiosks ought to have the full capabilities of the company's site, content specifically tailored to in-store customers, such as in-store inventories, is also helpful. Many companies have found ways for e-commerce and traditional business to complement one another (Cunningham 72). Charles Schwab found that opening local offices has the effect of greatly increasing online sales, because it gives customers a physical branch with a human touch to fall back on when problems occur with the online channel (Nielsen 87). For most visitors the content of the site demonstrates the company's expertise, and spelling and grammatical errors do little to maximize that impression. It is important get several people to proof-read articles and features on the site-it is one of the quirks of publishing that it is almost impossible to check the company's own copy, whereas a 'stranger' can take one look and spot errors that have eluded the developer over several readings (Nielsen 84). Also, in the same way that proof-reading, the company needs to get an external view of how the web site actually operates. The importance of customer service practices in e-commerce strategy cannot be overstated. For some companies, this might require a departure from their traditional business, in which they have built a brand that emphasizes low prices or the uniqueness of their offerings. In e-commerce, every company must seek to be an industry leader in customer service practices, even if that area is not a part of their explicitly stated appeal to customers or the value proposition. Further, the impact of e-commerce operations and the web site on the traditional brand can be significant. Poor customer service practices online will not only dissuade customers from shopping at a particular web site, but they may also cause declines at physical locations (Nielsen 87). The long-term advantages afforded by unique uses of e-commerce are less dependent on finding uses of technology that could potentially benefit any similar company in the market. Rather, long-term advantages are derived from finding unique applications of e-commerce to the company's specific business strategies. The e-commerce strategies of companies such as Dell, Cisco, and Wal-Mart are known to the business community. However, their long-term success has not relied solely upon e-commerce. Rather, their previous business strategies were already uniquely suited to the advantages they were able to derive from e-commerce (Lucas 82). The implementation of the website will influence organization stricture and design. Once a company has established an e-commerce strategy, organizational structure becomes a primary concern in the process of implementing that strategy. In many cases, e-commerce will not initially fit neatly into the existing organizational structure of a traditional company. E-commerce, even to the most technologically savvy company, represents a new channel for procurement, distribution, and sales. E-commerce ventures also put new demands on individuals and business units at every level of the company. The implementation can be accomplished through a number of different methods, such as the creation of a temporary separate business unit with the sole purpose of developing a company-wide e-commerce solution as efficiently as possible before being folded back into the larger business structure (Hamel 81). Of course, some companies do not desire, or require, that e-commerce permeate all aspects of their business structure. Limiting e-commerce to certain company functions such as HR, payroll, marketing, or customer service may be optimal, but only when these limitations are dictated by the needs of the company rather than by the fears of a company's leadership. In these implementations the process can permit e-commerce to take hold in particular units or functions that require it while not interfering with others. Such an approach allows for the creativity of a separate unit model to find the best ways to incorporate e-commerce in its limited role, while still keeping the project close enough to the core of the company to ensure that the e-commerce initiative maintains a certain company focus. Larger web sites in particular will involve a number of people with different areas of expertise, each contributing to the team. The requirements can be divided in to several key areas, with strong similarities to a print magazine production team: site production-the practical and technical construction of the pages and features within the site -using e.g. HTML, Perl, JavaScript, dynamic HTML; Graphic and visual design-developing the visual style and providing the illustrations-using e.g. Photoshop, Flash, Dreamweaver Content management-commissioning, editing and updating the textual elements that make up the site. Project management-managing the project, the staff and the resource acquisition and allocation (Cunningham 93). Eventually e-commerce need not be separated from traditional business strategic considerations. However, during early stages of e-commerce implementation and for strategies that do not fully integrate e-commerce immediately, such separations may be necessary. Further, the terms e-commerce and e-business are used interchangeably here to denote broad considerations and aspects, including all uses that lead to either increases in revenue or "decreases in cost-thus including sales, supply chain, functional integration, logistics, cost control, and so forth" (Cunningham 129). When managing an e-commerce integration strategy, careful planning is necessary to overcome the obstacles that occur from cannibalization and cross-channel conflict. Full integration is certainly desirable when the trends are clear and when the benefit cost analysis yields a significant payoff from the e-commerce investment. It is also certainly a challenge to achieve, and there are many legitimate reasons for companies to choose another strategy (Coltman 37). The e-commerce unit, however, may also take on some characteristics of a traditional functional unit. Depending on their breadth, these units are sometimes treated instead as cost centers to serve the business units rather than external customers. In addition to integrating the Web channel with other channels and business units, "the unit (whether functional or business unit) may also provide e-commerce solutions to other parts of the company and integrate the company's back-end systems" (Coltman 55). Keeping e-commerce management internal is vital to implementing e-commerce strategy, but the successful implementation of e-commerce must also allow for flexibility in the management structure. The IT backbone that implements back-end systems for e-commerce should also provide the basis for a highly networked organizational structure. As such, the company can reap the benefits of decentralization without incurring the high costs or loss of the advantages of a more centralized and integrated structure (Hamel 63). Discussions of strategy also must focus on an identification and articulation of the company's value proposition. What unique products and services does the company provide In this context, companies can determine how much e-commerce is core to company success and position e-commerce and IT strategies within overall company strategy. They then can determine how to proceed toward converting their traditional brick and mortar company to one with a significant e-commerce component. "The e-commerce strategy must fit within the overall company strategy and is an integral part of the entire e-commerce integration process, including e-commerce structure and systems" (Hamel 63). Though one e-commerce strategy does not fit all companies, examining recent successes and failures provides substantial guidance to companies as they formulate or revise e-commerce strategies. The full integration strategy focuses on folding e-commerce into the traditional business structure. Here e-commerce activities are encouraged to cannibalize existing business operations, and multi-channel coordination is pursued (Nielsen 83). E-commerce opportunities, while numerous, need to be tailored to the strengths and weaknesses of particular company characteristics. Many choices are possible in the formulation and implementation of an e-commerce strategy, including choices of integration strategy and the key success factors. From formulation to implementation, companies should strive to make e-commerce a core part of company strategy not only to create a new realm of business opportunity but also to augment the company's traditional business operations. "The alternatives presented here can serve as a guide to finding a proper role" (Nielsen 62). Once a company has established an e-commerce strategy, organizational structure becomes a primary concern in the process of implementing that strategy. In many cases, e-commerce will not initially fit neatly into the existing organizational structure of a traditional company. E-commerce, even to the most technologically savvy company, represents a new channel for procurement, distribution, and sales (Lucas 92). In sum, an integrated company should not spin off its e-commerce operation, because this new aspect of a company's business is essential to the future of the organization and creates significant future corporate value. Web site development requires careful attention to organizational strategies and goals, personal and target audience. The web site proposes many opportunities and hides many threats for every company. E-commerce ventures also put new demands on individuals and business units at every level of the company. Systems and strategy must be aligned to both the corporate and the e-commerce structures for success. The approach should articulate e-commerce strategy within the context of traditional business strategy and links it to implementation through structures and systems. Certainly appropriate strategy must reflect a company's customer type, product type, geographic scope, procurement and distribution channels, and so forth. Timing and speed of entry into the e-commerce environment must also be considered. Works Cited 1. Coltman, Tim, et al. "E-Business: Revolution, Evolution, or Hype" California Management Review 44 (Fall 2001): 57-86. 2. Cunningham, Michael J. B2B: How to Build a Profitable E-Commerce Strategy. Cambridge: Perseus Publishing, 2001 3. Eisenberg, B., Eisenberg, J., Davis, L. Call to Action: Secret Formulas to Improve Online Results. Thomas Nelson, 2006. 4. Hamel, Gary. Leading the Revolution. Boston: Harvard Business School Press, 2000. 5. Hoffman, D., Novak, Th. "How to Acquire Customers on the Web." Harvard Business Review 78, (2000): 179-188. 6. Lucas, Henry. Strategies for Electronic Commerce and the Internet. Cambridge: MIT Press, 2002. 7. Nielsen, J. E-Commerce User Experience. Nielsen Norman Group; 1st edition edition, 2001. Read More