In today's globalized competition, all successful organizations realize the necessity of e-business activities for remaining competitive in the marketplace. E-business has become a significant initiative for organizations that influences the performance of any company. The current paper examines the influence of e-business implementation on productivity and growth of leading organizations. The Internet has revolutionized the industries by evolving new business models, thereby changing the methodology of conducting business between sellers and buyers.
E-business implies to any process, which the company conducts over the Internet with the help of computer network. It involves selling and buying, as well as a wide range of production, customer, and management focused processes adopted by profit or non-profit organizations. E-business technology is based upon processing and transmitting digitized information, including visual and text images from one computer system to another or some other e-device.
E-business focuses on enhancing the performance of business through connectivity by employing latest technologies in the organizations value chain to obtain visibility and transparency. It also connects the value chains between business stakeholders and between and across external businesses to achieve competitive advantage, reduce costs, generate growth, and open new channels.
Thus, the definition of e-business deals with much more issues than just the seller-buyer relationship as it transforms different ways to conduct business activities. If organizations implement e-business processes effectively, it can help them enhance a relationship with customers, reduce costs, and increase profits. E-business impact on organizations business efficiency is observable through its business models, which a company implements in its supply chain activities.
The current paper addresses the strategic issues concerning the impact of e-business on the organizations success and examines how different e-business models can help increase productivity and growth, which will lead them to competitive advantage. The paper also studies the most effective ways for managing and developing e-business systems and researches its framework by evaluating characteristics of e-business, how they evolve, and in which direction they are moving.
Information Technology Improves Business Processes
The e-business processes of a company define its potential and ability to provide employees and customers with quality services and effective solutions. Such processes impact organizations performance, delivery of services, as well as the level of administrative support accessible for service offerings. Every city municipality wants to strengthen its infrastructure by increasing the quality of its services and the performance of its daily activities. Business processes consist of operational activities, which produce, provide, and deliver services, with or without electronic technology.
Every company has a team of professionals who conduct business operations by utilizing available resources and with the support of information technology. E-services are one of the significant areas of e-business systems and the set of administrative processes, which enable businesses to offer services for their customers through the Internet (Koufteros et al., 2014).
E-services permit citizens to interact with city municipalities through the Internet. Customers can send queries, receive replies and updates on municipality regulations, download official documents, send applications, pay bills and taxes, and receive payments. These are some of the e-services that are usually delivered by municipalities and healthcare agencies. European countries put an emphasis on e-services as it is an optimum method to improve service delivery but the business processes development demands a much broader perspective, which is not limited by the website.
It is necessary to consider the skills of IT professionals involved in business processes and their efforts in improving the performance of services as they affect the quality of services and improve daily life of customers. According to survey conducted by Business Week, more than 75% of 300 IT professionals surveyed agreed that e-business has helped their organizations in improving a decision-making process, while almost 55% said that e-business processes have significantly enlarged the role of IT. Finally, 60% appreciated that e-business has encouraged their IT department to reengineer business processes (Chuang, Peng and Heim, 2014).
The city municipality of Lillesand Town in Norway has been encouraging citizens to use electronic application forms that make it easier to access services and increase interaction with the municipality, while reducing the paperwork burden on its employees. The Lillesand municipality has identified and described 20 business processes in its network system. Lillesand now provides many services at its website where people can view their pending cases and send online payment for their dues, as well as access the status of their applications or queries.
Such tracking services have been achieved by reengineering the business processes associated with electronic forms, including specific databases, data storage, and data provided in multiple channels. The residents mostly communicate with the municipality via digital formats and avail better services through e-business technology (Lim, 2014).
Advantages and Disadvantages Associated with E-Business
E-business is a monolithic term incorporating several business processes, which integrate the traders or vendors with the suppliers and consumers by using the computer mediated network. The entire process of creating a website, assisting customers in browsing the website, listing the available products and services, offering vouchers and discounts to attract the prospective buyers and transforming them into customers, is the prime strategy of e-business.
Global presence is the prime advantage of performing online business. A company engaged in e-business activities can demonstrate a nationwide or a global presence. IBM was the first company that used the term e-business for referring to servicing customers and communicating with business stakeholders at a global level. Dell Inc. achieved flourishing business results by selling computers throughout the United States and the Europe only via Internet until the year 2006.
Amazon.com is another example of successful implementation of e-business, which helps customers buy products from third parties internationally. Thus, worldwide presence is possible, if organizations want to expand their business with the help of the Internet (Afterman, 2015).
Cost-Effective Marketing and Promotions
The Internet enables to sell merchandise across the global reach at a minimal price. Advertising techniques, such as, for example, pay per click advertising, guarantee that the advertiser would only pay for the advertisements, which were actually accessed.
The users are taken to e-business portal due to the affiliates efforts, who successively receive a financial benefit for their endeavor on account of e-business activities. Affiliate marketing helps both the affiliates and businesses. Organizations largely use cost-effective Internet advertising strategies to derive advantages and benefits.
Developing a Competitive Strategy
E-business companies need to design a competitive strategy for achieving a competitive advantage. In absence of effective strategy, they have to struggle to maintain the competitiveness in the marketplace and earn profits. The strategies that the companies can adopt can be a differentiation strategy or a cost strategy.
For example, till the year 2006, Dell Inc. was marketing PCs only through the Internet. It implemented a differentiation strategy by marketing its PCs online and manufacturing its laptops to meet the requirements of customers. Hence, e-business enabled Dell Inc. capturing a large segment of the computer market using the differentiation strategy (McElheran, 2015).
Better Customer Service
E-business provides better customer service and increases the satisfaction of customers. Very often, during visiting a website, the user is welcomed by a pop-up chat window. Such instantly available customer service encourages the customer to know more information about products and services. Furthermore, customers can pay online, and the buyer receives the goods without leaving the house.
Curtailing of Transaction Cost
The characteristic of e-business signifies that the cost incurred for every transaction is smooth and transparent as there is no middleman. Websites offer sufficient directions to expedite stress-free transactions. Succinct and simple instructional tabs usually save the prospective customer from unpleasant experience. The companies predetermine the mode of payment and promise security to the buyer. Thus, online payments are considered to be safe, if the customer follows payment security procedures of the company.
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Overhead Costs Are Reduced
E-business is independent from overhead costs that a company usually incurs in case of having a physical entity, such as physical stores. Utility bills and other expenses are also minimal. Moreover, e-business can be managed with minimum skilled employees, which helps the company save expenses on salary and wages. Operating an e-business is extremely convenient as it does not require large area as in case of physical stores (Afterman, 2015).
E-business faces insufficient growth in many sectors due to product or sector limitations. The furniture and food sector has not received enough benefits from online sales and revenue growth due to numerous reasons with one of them being that the food products are perishable items. Consumers prefer visiting supermarkets to buy food products instead of buying from online shops. Similarly, consumers want to feel physical aspects of the products when they decide to buy furniture, such as comfort, color, and appearance.
Costly E-business Solutions for Optimization
E-business organization needs substantial resources for redefining its product range to sell online. Training personnel, updating websites, and upgrading computer technology require considerable resources. Moreover, Enterprise Resource Planning and Electronic Data Management necessary for maintaining optimal internal business processes demand substantial investment and may be considered, by some companies, as a costly business solution.
Question of Security
There are some peculiar characteristic of the Internet, which should be taken into consideration. For example, the information provided in the Web can be stolen or lost easily, especially the one regarding the shoppers monetary details and personal information. In e-business context, some companies offer security protection and third-party privacy, such as encryption and protection of password.
Even many e-business companies offer secured certification from professional organizations, but still customers continue losing their money through the Internet annually. Such financial losses occur due to the customers negligence, and some other factors, such as publically exposing credit card details to unknown people or websites, online shopping on the computer infected with a virus, and improper handling of the credit card (Haucap and Heimeshoff, 2014).
In addition, many customers tend to experience other risks, including a psychological one. It is connected with such factors as disappointment and frustration caused by online shopping, which occurs due to the fear of information loss. On the Internet, the private information could be tracked and gathered, and then misused by sharing with third parties. The Federal Trade Commission possesses statutory authority to prohibit such websites, which acquire information by unfair trade practices. Nevertheless, it lacks the ability to control every activity on the Internet thoroughly.
Trust and Trustworthiness
The tendency of buyers to purchase various goods depends on their level of trust towards the sellers in the superstores, as well as in the Internet shops. Online trust is the prime and essential feature for building a relationship with customers. The current studies performed by the experts show that level of online trust is much lower compared to face-to-face interactions in the physical stores.
Moreover, some researches indicate that the trustworthiness of any e-business company in regard to its security control, and perceived integrity (third-party recognition and legal aspect), including the external environment, has considerable influence on establishing consumer trust in the online shopping (Mishler, 2015).
E-Business Models Reduce Costs and Increase Efficiency
There are many advantages of running business on the Internet. An e-business offers high-quality customer services, improved supply chain management, and superior personalized services. Such companies as eBay, Yahoo, and Amazon.com have played a key role in defining business models and industry categories of the Web and achieved a competitive edge in the marketplace. Some of the most effective business models practiced by these companies are the storefront model, the auction model, the portal model, and the direct sales model.
The storefront model immediately occurs in the minds of people when they confront the word e-business. This model involves processing of transactions, online payment, security, information storage and database, which enable companies to sell their merchandise on the Web. The model includes significant characteristics of e-commerce where the seller and the buyer interact directly. E-businesses need to design an online catalogue of merchandise and services to implement storefront model, accept orders and payments in a secure environment, offer trust and privacy, and send goods to buyers and manage their databases.
Usually, many companies and banks use Electronic Funds Transfer for receiving and making payments in this model. EDI is another business tool, in which business forms, such as quality specifications, invoices and purchase orders, have standardized formats so that the merchants can send information to vendors, business stakeholders, and customers electronically. This tool saves time, as well as offers effective services, fast transactions, and reduces cost.
Storefront model is extremely popular among B2C merchants. For instance, More.com sells health and beauty products through its e-commerce site and uses a shopping cart enabling people to buy its wide range of beauty products.Ticketmaster.com uses the e-commerce website to sell tickets and offer attractive vacation packages, improving customer experience. Potential buyers can access seating plans, availability of tickets, waiting lists, and price discounts at the website. The current storefront model helps Ticketmaster expand its advanced database system and strengthen its infrastructure (Haucap and Heimeshoff, 2014).
The websites offers an extensive range of auction sites. The companies design the sites in such a way that it is possible to find lowest prices on an available product in the shortest time. In addition, other web-portals also help direct buyers use auction sites for buying desired items with ease.
Usually, auction sites operate in a form of forums, through which the customer can enter and participate as either a seller or a buyer. As a seller, an individual can upload an item for sale, set the minimum price of an item, and a closing date of the auction. Some websites permit users to increase features of their products by adding a photograph and description of the product.
As a bidder, an individual can search the availability of the product, browse the ongoing bidding activities, and place a bid. Some best-selling sites permit bidders to submit maximum price and bid till seller receives a desired price. As an example, eBay online auctions are extremely popular among the Internet users, and the company introduces 500,000 new items daily for online auctions. On eBay, individuals can buy and sell anything and the company collects a submission fee in addition to a percentage of sales (Guo et al., 2013).
Web-portals offer people the opportunity to search almost everything they require at a single platform. These sites often include news, weather, sports, and blogs, as well as help in searching the Web to obtain desired products. Portals link customers to online sellers, online shopping stores, and auction sites providing several advantages. For example, Hotbot.com, Yahoo.com, About.com, and Altavista.com direct users to a shopping page that connects them to e-business sites offering a wide range of products. Portal models help users collect information about the product and permit users to browse independently.
The prime feature of Dell Inc. efficient SCM is its successful direct business model, which has encouraged many companies to follow Dell's supply chain practices. Dell's direct model focuses on build-to-order strategy and direct sales to actual users. The direct model shows that the company does not market through retail channels, but sells its products directly to buyers through its official website. Figure 1 shows the direct model channel of Dell Company.
Such model excludes participation of intermediaries, which usually increases costs and delivery time. Consequently, this model connects Dell to its customers directly. Besides, minimum inventory leads to low inventory costs permitting the company to pass cost benefits to the buyers (Rechtman and Rashbaum, 2015).
Significance of E-Business Tools
The infrastructure of e-business technology relates to communication infrastructure, software tools, and its applications. The extensive use of e-business has developed new methods and business tools that are resulting in the growth in e-business concepts. Such business tools integrate with various business models, thereby helping in achieving efficiency, and are largely dependent on the Internet for supporting the external and internal processes of the firms.
Some of the tools are more technological because they play a significant role in business processes, while others are management approaches for increasing the efficiency of processes. The key e-business tools include EDI and XML applications, Sell-side and Buy-side e-commerce applications, trading exchanges, item identification, content management, and collaboration.
Electronic Data Interchangeis the oldest technology among them, and the application of EDI continues growing since the 1980s. It includes an element dictionary and a set of standard message formats to exchange data through any e-messaging service. Most large businesses with high transaction volumes with customers or vendors use EDI in their supply chain systems and business models.
In addition, many SMEs have also begun using an EDI system due to the fact that retailers, manufacturers, and distributors mandate that all their business partners communicate electronically. Thus, even though Electronic Data Interchange has numerous limitations, such as inflexible message formats and high costs, this technology is widely implemented. In addition to it, EDI vendors are continuously improving this technology and offering new business solutions that are much purposeful for organizations (Kumar, Verma, and Lata 2015).
XML is a simple, self-describing method of encoding both data and text that enables processing of content with little human involvement and exchange information across operating systems, diverse hardware, and processes. The design and features of XML enables to use structured documents on the Internet. Structured information incorporates words and pictures and indicates what role the content can play. A markup and identification language is a technique for distinguishing structures in the XML and a document. XML specifications define a standard format of including markup to documents.
Hence, XML provides a standard technique of representing data and text in a format without human interaction. The exchange of information processed in XML moves across various platforms, applications, and languages. Moreover, it can be utilized with several available tools. The number of applications that use XML is large and e-commerce transactions are one of its applications.
However, XML has become cost-effective mechanism of exchanging information from one system to another and between organizations. IT professionals maintained that XML solutions offer an alternative to EDI, and minimize the entry barrier to e-commerce due to the lower costs in comparison to EDI (Lin, Bai and Jiang, 2015).
Broadly defined, collaborationenables two-way information exchange between business partners. The application of collaboration is extensive in IT industry. Businesses use collaboration in many ways, for instance, demand information, fax, phone calls, including EDI. However, the Internet offers new opportunities for collaboration as it provides a customized network, which interconnects various partners in supply chain system. Collaboration further divides into two categories, such as information-sharing and connectivity.
Information-sharing techniques aim at extracting accurate information from the customer and transferring it through the entire supply chain. It is necessary to know that collaboration is possible at the stage where two firms can have two-way communication and a real-time about a single plan. Connectivity methods offer the possibility to receive information from ERP systems in an appropriate format and transmit it over the Internet (Li and Jhang, 2013).
Content managementoffers the platform to exchange and manage vast amounts of documentation, contracts, images, product specifications, and Web pages for supporting e-business. The item identification applications provide visibility to the flow of materials. Bar coding is an appropriate solution but RFID is the latest promising technique. On the other hand, it creates obstacles to large-scale usage, represented by lack of standardization (Cusumano, 2014).
The basic concept of digital marketplaces or trading exchanges is a website where sellers and buyers conduct business dealings efficiently, quickly, and without involvement of paperwork. After the Dot.com failure, three powerful B2B models have evolved in the industry, such as coordinated, private, and public exchanges. While industry-coordinated B2Bs are invaded with public exchanges and slow decision-making with low margins and extreme competition, many IT professionals believe that private or one-coordinated seller or buyer exchanges will gain significance in the future.
However, such exchanges have become more successful in B2C sector than in B2B segment. Covisint offers a B2B platform to automotive industry for sharing business processes with customers and vendors but encounters problems in establishing its role in the business segment. WWRE is another example of thriving B2B platform, which is attracting a large number of suppliers and retailers to benefit from its services (Lycett, 2013).
Internet Technology Creates Competitive Advantage in E-Business
Supply chain management is an inter-enterprise and cross-functional system, which uses IT to manage and support the links between key business processes of a company, as well as between its customers, vendors, and trading partners. The objective of SCM is to establish a fast and effective low-cost network of business relationship, to help transfer a firms merchandise from conception to market.
SCM tracks information and inventory across companies and among business processes. Therefore, SCM is an IT system, which supports supply chain activities by automating the tracking of information and inventory among various business processes. For instance, Figure 2 shows the structure of supply chain system.
The goal of SCM system is to automate the systematic flow of information and inventory across the entire supply chain. The company uses electronic data interchange system, which enables computer-to-computer transfer of information enclosed in standard business documents, such as purchase orders and invoices, in a standard format. It helps procure required inventory from different manufacturers.
Such e-orders would activate other systems within the manufacturing company, including the placing of raw materials and parts from their vendors and instructions to drop shipments at the companys warehouse. The company can achieve competitive advantage in the marketplace, if all of its supply chain processes that help information handling in an automated manner by EDI are integrated effectively and timely (Wright and Wright, 2015).
A well-designed SCM helps the business by optimizing the following processes:
- ensuring the availability of right quantity of raw materials for manufacturing or merchandising available goods at the right time;
- adopting the cost reduction methods for transporting materials with reliable and safe delivery;
- ensuring smooth functioning of production lines by making quality parts available at a right time;
- ensuring that sales volume does not decline due to empty shelves;
- maintaining the cost of purchases and prices of merchandise as low as possible.
The value chain of an organization and how basic business processes use IT (McElheran, 2015).
Technology Strengthens E-Business Continuity
If a firm provides its tracking system in a manner that enables the customers to view shipment details not only through computer systems but through a mobile technology as well, such action could strengthen e-business infrastructure of the company. The increasing competition demands innovation and differentiation strategies of IT for maintaining competitive edge and business continuity.
A company can use information technology to lower the cost of business processes and reduce the costs of products and services that benefit the company in the long perspective. The given process includes latest IT systems to differentiate its merchandise, as well as minimize the differentiation advantages of rivals. The inclusion of such technologies helps a company focus on products and services at selected niche markets.
Innovation strategies develop new products with the help of e-business models that further lead the company to developing new markets. Such strategies enable the company to make rigorous changes to business processes with IT practices. As a result, it helps dramatically reduce costs, enhance quality, efficiency, and quality of customer service.
A firm can use IT tools to manage global and national expansion through diversification and integration into other products and services. It can use information technology to exchange information, procurement of raw materials, and marketing of products with global business partners. Further, developing inter-enterprise information exchange systems linked by the extranets and the Internet supports strategic business relationships with suppliers, customers, and other partners.
Investments in IT can permit an organization to lock in vendors and clients by building new relationships with them. For instance, Mc Donalds, a fast food company, realizes the advantage of using IT by investing substantially in satellite network that links the point-of-sale outlets in all of its facilities (Middleton, Scheepers and Tuunainen, 2014).
Information Communication Technology Enhances E-Business Operations
Organizations have increasingly realized the positive effect of ICTs, for example, e-mail, computer terminals, as the applications of the Internet have significantly improved their business performance. In developing economies, even small businesses, including micro-firms with ten employees, have computer terminals, usually with Internet access. The new technology of business software improves knowledge and information management within the company.
Consequently, it leads to better performance and increased efficiency of business processes. In B2C and B2B contexts, the communication by the means of e-mails improves the external communication greatly by increasing reliability and transaction speed, decreasing transaction costs, and obtaining optimal value from a number of transactions in the value chain.
The use of ICT in e-business is increasingly growing according to survey of European countries. Eurostat survey on e-business in 2005 shows that eight out of ten smaller companies are equipped with advanced computer technologies and conduct e-business operations through their computer-mediated networks. Internet communication has become a permanent feature in smaller companies.
While use of Internet is higher in larger organizations, the gap between smaller and larger firms is narrowing. In most European nations, Internet penetration rate for medium-sized firms is nearly 75% and 60% in micro-firms. Such data shows that the Internet has become a vehicle for enhancing two-way communication among various stakeholders and trading partners of the company (Hu, Li, and Huaqing, 2015).
ICT in e-business activities offers a large number of benefits. At a business level, applications of ICT enable faster communication within the company and make the companys resources more efficient. A smooth flow of information via shared electronic files enhances the efficiency of processes, for example, data processing and documentation. Besides, sophisticated communication applications, such as ERP and KMS permit businesses to share, store, and use acquired know-how and knowledge. For instance, databases and a history of customer correspondence assist managers to communicate more quickly to their clients (Middleton, 2014).
B2B interaction via the Internet and real-time communication reduces information gaps between suppliers and buyers, thereby building a closer relationship between business partners. In the B2C context, the e-commerce and the Internet are effective tools for fast communication. A companys website, which communicates information on services, technologies, or products, can improve the quality of services providing to potential customers. By communicating with customers, it can collect information on customers requirements due to the fact that such information is useful for innovation or product development (Olejarz, 2015).
Challenges in E-Business
There are several challenges for e-business, which differ from one company to another due to the different infrastructure. However, the current paper categorizes such challenges into four major dimensions, such as economic, social, technical, and legal, which largely impacts the efficiency of the company.
The Economic Dimension
The prime economic challenges in e-business are the cost justification of websites, the number of buyers and sellers, and their use of the Internet, the upgrade of infrastructure, and the shortage of skilled professionals. Justifying the cost of e-business projects poses a huge challenge because investment in developing e-business platform is comparatively high. in addition; lack of experience appreciates these costs.
Moreover, traditional methods to determine the returns are insufficient as it is extremely difficult to depend upon tangible gains to justify an e-business project. Very often, firms have to embark on e-business projects based on intangible benefits, such as the value of the advertisement, enhanced customer service, and increased competitive advantage. Nevertheless, the quantification of intangibles is extremely challenging. In addition, overdependence on intangibles can jeopardize e-business operations (Gavet, 2014).
The Technical Dimension
Technical challenges in e-business are reliability, security, bandwidth availability, communication protocols, as well as issues of their integration with current applications. With the global diversification of the Internet, the security issue has become a prime concern. Users are distrustful regarding the safety and privacy of information they transfer on the Web. Some incidents reveal that even unsophisticated hackers can steal the information.
A recent incident that occurred at CD Universe negatively influenced the confidence of consumers. Some hacker cracker credit card information of customers and sold it to third parties after failing to extract a ransom from the company. Unfortunately, many corporations still do not implement security issues effectively as they store credit card details and confidential information of the customer in a form of plain text without any encryption (Mohan et al., 2014).
The Social Dimension
E-business encounters several social/cultural challenges that need a critical examination when considering the development of e-business platform. Some of them relate to cultural diversity, security and privacy on the Internet, inadequate trust, and non-availability of tangible medium for Internet sales. Privacy and trustworthiness issues retard the growth of e-business. Potential buyers are unwilling to disclose their confidential information, such as credit card number, home address, and social security number. A large percentage of consumers believe that shopping products and services on the Internet are not safe (Chiu et al., 2014).
The Legal Dimension
Many legal challenges evolve every day due to the continuous development of new technologies, and they have to be resolved in the current cyber millennium. New technologies with extreme ramifications, such as WWW and the Internet influence the culture and prevailing norms in society. The legal system is burdened with new challenges, which question the legitimacy of the current laws.
Faster implementation of new laws is necessary to resolve new problems that occur with the introduction of technology. Besides, the issues related to legal validity of e-transactions, intellectual property rights, and taxation continue challenging e-business organizations (Karjaluoto and Leppaniemi, 2013).
Introducing e-business in a company renders a significant influence on various aspects and operations of the business, causing dramatic changes in areas, such as supply chain management, strategy planning, customer service, and technological infrastructure.
For successful implementation of e-business, it is important that the organization should understand their potential impact, the nature of such changes, and incorporate the change process in such a manner that all the stakeholders receive its benefits. The decision to implement B2B or B2C initiative should be considered from technical perspective and the optimum ways to derive advantages from such platform must be examined thoroughly before launching e-business activities.
Furthermore, e-business plans must be formulated as part of the companys strategy and managers must consider the impact that e-business will render on governance, processes, and trading partners. Therefore, it is important that organizations should design a single coherent plan, communicate e-business initiatives and decision-making procedures, and integrate the e-business project with corporate goals.