Electronic Commerce (e-

commerce)

Impact of e-commerce on
organizations and the business
environment
E-commerce is changing the way traditional
business is conducted. How?
Technology can help throughout the process
including promotion, searching, selecting,
negotiating, delivery and support.
The value chain is being reconfigured.
Specifically e-commerce impacts can be seen
in each of the following:
Structure/Connections
Work routine
Communications
Marketing
Information Technology
Impact on Structure

Supply Chain Integration (This is the integration of three or more
organizations, so that for example, a retailer can signal a reorder to
its wholesaler and its wholesalers supplier at the same time.)
Supply chain integration builds strong partnerships through collaborative
technology.
E Commerce helps in reducing problems in the flows of material, money,
and information
facilitating the restructuring of business activities and supply chains
Direct Sales
Elimination of the Middleman
Decentralization( devolution, delegation)
Virtual Organizations (A Virtual Corporation is an electronically
supported temporary joint venture for a specific time-limited mission)
Business Model (EC introduces new business models and
automates business processes)
Impact on Work Routine

International Business
24 Hour / 365 Days
Faster Turnaround (Circle, rotate)
There is cycle time reduction which refers to
shortening the time it takes for a business to
complete a productive activity from its beginning to
end. It is extremely important for increasing
productivity and competitiveness
Increased Automation (Computerization)
Impact on Communication

International
Immediate Response
Indirect

Impact on Marketing

Customer Characteristics
International
Direct Sales
Demographics (Refers to Tracking and analyzing data of a
selected population and getting characteristics that are used
used in government, marketing or opinion research). They can
be used to develop a marketing plan or strategy)
Frequent Updates
More Public Information
Search Engines and Directory
Impact on IT

More mission Critical (refers to any factor (equipment, process,
procedure, software etc) which is crucial to the successful
completion of an entire project), thus E commerce is a factor that
leads to the crucial successful use of IT in organizations.
More integration projects
Business chain integration
Off the shelf product integration (Buying off the shelf products to
perform common tasks).
eg you can integrate your website with another like google check out through
the off the shelf shopping cart.) Google checkout lets your customers buy
items from you quickly and securely using a google username and
password. Google check out lets you charge customers credit, track orders
through your fulfillment process and receive order payments in your bank
account. you can integrate your website with google checkout by including
basic order information inside HTML forms on your web pages
Database integration
Network and security
Define the term business strategy
(2 Marks)
Discuss the four generic strategies for
achieving a profitable business and show
the impact of E- Commerce on these
strategies. (8 Marks)


IMPACTS OF E-COMMERCE ON
THE BUSINESS ENVIROMENT

The term business environment refers to
the social, economic, legal, technological,
and political actions that affect business
activities.
-Some of the areas of the business
environment in which Internet and Web
technologies have impacted include:
Industry structure
Industry Value chains
Firm value chains
Business strategies
Industry Structure

- This refers to the nature of the players in an industry and their
relative bargaining power.
-Industry structure is characterized by five forces:
Rivalry among existing competitors. (They compete in none price
dimensions like innovation, marketing etc) hence entry of new
competitors.
The threat of substitute products (Customers switch to alternatives)
Barriers to entry into the industry (eg patents (A set of exclusive rights
granted by a state to an inventor for a fixed period of time in exchange for
a disclosure of an intervention.), rights etc
Bargaining power of suppliers (the suppliers of raw materials, components
and services to the firm can be a source of power over the firm. ) e.g
charge excessively high prices for unique resources
Bargaining power of buyers (the ability of customers to put the firm under
pressure) eg Buyer price sensitivity, buyer information availability
- E-commerce can affect the structure of industry based on the
above 5 forces.
Industry Value Chains.

- Concerned with business operations at the industry level.
Definition: A Value Chain is the set of activities performed in an
industry or in a firm that transforms raw inputs into final products
and services.
- Each activity adds economic value to the final product hence the
term value chain (an interconnected chain of value adding
activities).
- E- commerce technologies reduce the cost of information thus
each of the key players ( suppliers, manufacturers, distributors,
retailers, customers and transporters) have new opportunities to
maximize the position by lowering costs and /or raising prices.
- E.g. distributors can use highly efficient inventory management
systems to monitor, the quality, location and status of inventory as
well as the related shipping, receiving, picking and put away
processes. , retailers may have CRM system, customers can
easily search for products etc.
-E-commerce technology also increase operational efficiency of
the entire industry thus:
Lowering prices and adding value to consumers
Giving industry competitive edge over alternatives.
Firm value chain

- Set of support activities a firm engages in to create final products from
raw inputs.
- Support activities are also developed to coordinate the production
process and contribute to overall operational efficiency
- Support activities include: Inbound logistics (The receiving and
warehousing of raw materials, and their distribution to manufacturing as
they are required), Operations (the process of transforming inputs into
finished products and services), outbound logistics (The warehousing
and distribution of finished goods), sales and marketing (The
identification of customer needs and the generation of sales) and after
sales service (the support of customers after the products and services
are sold to them).
- Internet allows firms to Increase their operational efficiency and
differentiate their products. E.g. through outsourcing (subcontracting a
process, such as product design or manufacturing to a third party )of non-
core activities, etc.
- Firms can use Internet to more precisely coordinate the steps in the
value chains and reduce their costs.
- Firms can also use Internet to provide users with more differentiated
and high value products.
Business Strategy

Definition: A set of plans for achieving superior
long-term returns on the capital invested in a
business firm.
-Helps in making profits in a competitive
environment over the long term.
-Four generic strategies for achieving a
profitable business include:
Differentiation
Costs
Scope
Focus
i) Differentiation

- How to make your products appear unique and distinguishable from those
of competitor
-Opposite is commoditization- no differences among products apart from
price.
- Differentiation may be achieved on the following ways:
Create expectations among users about the experience of consuming the product
Adding features/enhancements to a generic product
Using Marketing to create a brand that stands for these features.
- Differentiation features give the customer value proposition (or the sum
total of benefits which a vendor promises that a customer will receive in
return for the customers associated payment or any other value transfer).
-Internet and Web, through personalization and customization, are a
powerful differentiation tool.
- By Leveraging ubiquitous nature of Internet, (Internet / Web technology is
available everywhere at home, workplace and elsewhere via mobile
devices, anytime.- It liberates the market from being restricted to a physical
space and makes it possible to shop from desktop, at a home, at work, even
from your boda boda using mobile commerce) businesses can help
differentiate products by allowing users to purchase anywhere,
anytime.
-Through Interactivity and richness- allows chatting, videos etc.

Costs

-New and more efficient sets of
business processes (sets of steps or
procedures required to perform the
various elements of the value chain)
help reduce costs. Lower costs allow
a business to charge customers a
lower price.
Scope
Which markets should a business compete in
and what kind of activities is involved in such
markets? This looks at the size and the
composition of the market you intend to
target.
When targeting a broad market scope,
differentiation strategy and low cost
competency should be the main focus. E
commerce can enable differentiation as
discussed above.
Focus /Market
segmentation./Niche strategy

In this strategy, the firm concentrates on a
select few target markets. Its hoped that by
focusing your marketing efforts on one or two
narrow market segments and tailoring
your marketing mix to these specialized
markets, you can better meet the needs of
that target market. Firms with a low market
share are successful because they use
market segmentation to focus on a small but
profitable market niche