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E-Business: Why It Matters for Modern Organizations

Introduction

Many companies in the world are using internet-based systems that are cheap and simplify the information management process by removing the complexity, which makes the organisation more responsive and as result organisation generates more profit through revenue and saving. In addition, companies are trading together in electronic marketplaces and provide cost effective goods and services which are of benefit to customer and act as means to fast economic recovery and development (Smith, Chiozza, & Edin 2002).

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According to Feng Li (2006) E-business is : ”The use of Internet and related technologies to integrate and redesign an organisation’s internal activities, processes and external relations and create new way of working that are significantly different from, and very often far superior to, what was possible in the past”.

According to Gottschalk (2005) “ E-business embodies the most pervasive, disruptive, and disconcerted form of change: it leaves no aspect of managing organisation untouched, it changes long accepted and organisation leader who have little to draw on from their experience”. Organisations depend much on information resource for value-adding, efficiency and competitiveness this makes them to be information intensive. The dependencies are as result of change in business environment in two ways; first, ‘the nature of economy has changed as measured by the informational elements of our products, services and production processes’ and change in proportion of workforce where workers duties are informational instead of physical also known as informational or knowledge workers. These changes cut across all industries from services to technologies industries, agricultural to manufacturing industries and in both public and private sectors Feng Li (2006). The information required by the organisations is facilitated by the use of Information Communication Technologies (ICTs) which provide convenient, versatile, affordable and powerful tools which assists user in information capturing, storage, retrieval, manipulation, transmission and presentation. Availability of advanced tool enables organisations to be able to deal with the information in different ways which enable them to survive and flourish in new economy Feng Li (2006). In this light, the following paragraphs explain why e-business matters for modern organisations.

Importance of E-Business

Change in business environment requires organisation to constantly review their strategy or develop new strategies and business models. Exploitation of new strategies and business model that are distinct from the existing has been as a result of fast internet development and associated technologies and a change in economy nature. The change in strategy orientation started in 1990 when focus of many companies increasingly shifted to offering customer integrated solution instead of excellent products and services and later the focus changed from offering customer integrated solution to customer experience in beginning of new millennium, which was as a result of advancement of e-business technologies that enabled effective integration of different stages of value-chain and inter-organisational relation and costumer communities. The shifting trend enabled many organisations to rapidly expand from the product to service offering organisation, a move that fueled rapid industrialization of services and facilitated easy outsourcing and off shoring.

E-business technologies enable automation of front-office and back room tasks like counter operation, billing, security and order taking which enable an organisation to do without clerical or accounting and facilitates a self service for organisation’s customers (Feng Li 2006). The strategy orientation to customer experience uses supportive component of experience environment that are customer communities and set of connected companies which enables unique value for each customer. Organisations in an experience environment are required to be informative and well connected to their customers, to avoid questioning and challenges from customer who are connected, informed (through internet which give access to all kind of information) and active. For organisation to survive the changes, it needs to realign the strategy and redesign all processes by building around a reorganized and modernized information and value chain and by having a wider customer community that enable each customer to core create unique experience for themselves (Feng Li 2006).Actually, these changes have resulted to new study, which has challenged the assumptions previously widely used strategic frameworks and made them invalid in today’s new business environment (Lee et al. 2001).

E-business has enabled organisations to change the way they work and implement new organisational design. The changes occur either incrementally or radical and they affected different parts of organisation which include; structure, organisation of work, processes and inter-organisational relation (Feng Li 2006). E-business has enabled organisation to flatten the hierarchal management structure by increasing steadily the number of people reporting directly to the Chief Executive Officer (CEO) and by reducing the number of managerial levels between the CEO and the low-level managers. Consequently, the change in hierarchical structure is as a result of easy availability and accessibility of information to everyone, which enables organisations during acquisition, merger or diversification to have insignificant addition of CEO direct report and thus lower managers only take on additional responsibilities. Organisations are required to adopt new organisational design in order to achieve new alignment between organisation and the ever changing new business environment. Despite this change the hierarchy characteristic and fundamental nature have not changed (Feng Li 2006).

E-business technologies affect the organisations business model by redefining the processes, structure, strategies and goals that are conceive to create value to consumer and to enable organisation to compete effectively (Barnes 2006). In essence, a business model acts as a link between information systems, business organisations and the strategy by providing an understanding and a clear communication of concepts between strategic people information system and process designer. Organisation e-business model enable smoother execution of strategies which makes it easier for manager to effectively adopt to external forces such as customer demand change, social and technological change, competition and legal Value creation from e-business models (Wendy 2004). E-business model enable organisations to take advantage of the new internet capabilities and the associated technologies, which introduces new products and services by inclusion of new and strong information component or by digitization which adds value to the product or service. An organisation with e-business system uses a different pricing model and marketing channel, by saving cost through optimized infrastructure management and direct sell over the internet which lowers price of commodity (Smith, Chiozza, & Edin 2002).

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Furthermore, E-business has an important role in the communication not just within an organisation but also in the inter-organisation communication. The inter-organisation information exchange (Business-to-Business E-Business) has been transformed by the introduction of e-business technologies that have brought about various communication processes. This transformation started in the first age of e-business in the mid 1970’s with the automation of order entry systems and since then e-business has greatly facilitated transaction between different organisations at large. Inter-organisation exchange of information using the internet communication systems attracts distinctive attention due to their potential for growth and their impact on different organisation structures all over the world. Inter-organisation exchange earnings through the internet amounted to $43 billion in 1998 (Gottschalk 2005). Inter-organisational relation for the organisations with the same supply chain and has fostered the existing relationship between relating organisations. Inter-organisational relation can take the form of strategic alliance, joint ventures, long term buyer-supplier partnership and other ties (Fletcher, Bell, & McNaughton 2004).

E-business enables sharing of information which is required in inter-organisational relation for fostering closer partnership and cooperation between involved firms. Organisation can concentrate on to core-competence and depend on network partner or outsourcings for other activities and non-competence, which lower cost of operation, shorten lead time, lower stock levels and increase cash flow. Inter-organisational relations improve the responsiveness of the supply chain to the market transformation by improvement in productivity, rise in sales, and secure lengthy period contract. Consequently, inter-organisational relation fosters the existing relations between the seller and buyer and raises the future competitors’ entry barrier. Inter-organisational relation has enabled the production of just-in-time products. For example, the manufacture granted suppliers rights to the production planning and the forecasting information. This sharing of information reduces the lead time and better planning to the supplier. Inter-relating organisations can develop new products by using a strategy of joint development. In joint development strategy suppliers are provided with the detailed Computer Aided Design (CAD) data on space occupied and technical specification of the component and suppliers starts to design the component and passes feedback and modification to the manufacturer (Barnes, 2007).

Change in the business environment requires organisation to integrate internal system with the external environment and partners. The integration in an organisation is achieved by collaboration with other partner in the external environment which enables the organisation to reduce cost, improve cycle time, and enhance buyer satisfaction by connecting inter-channel processes (Feng Li 2006). This integration is called supply chain and includes business channels, distribution channels and payment channels interconnection and transformation to provide real-time and accurate information that guide decision maker. Supply chain at business channel operations, involves understanding customer and satisfying their needs during the production of goods and service. Supply chain at distribution channel operations, involves determining the best means to move goods to the buyer by understanding the chain from raw material to the end buyer through the use of most efficient and effective logistic and inventory systems. Lastly, Supply chain at payment channel operations, involves determining the best way to move money in exchange of goods and services that is smooth, on time and accurate (Lee & Whang 2001). Supply chain processes are saturated by need for gathering and analyzing information arise during finding suppliers, enforcing contracts, maintaining inventory levels and in product transportation to the next process of production. Supply chain information assists the organisation in management of tasks through information sharing that reduces volatility of production and sales (Lee, 1997).

E-business replaces inventory in the supply chain with information which reduces cost arising as a result of production-line storage and warehousing, insurance and spoilage by using just-in-time means of production. Inter-organisation communication in the supply chain has enabled the organisation to reduce paper work and human contact through the use of e-business technologies which has made it possible repetitive task like order placement, payment and billing to be triggered and performed automatically by systems without any human intervention which has reduced procurement cost (Koenig et al 2002). The automation in the supply chain eliminate the need of labor by automation of inventory management, order processing and production process streamlining which enables quick action in reduction of production and labor resource (Smith, Chiozza, & Edin 2002).Organisations in the same supply chain can maintain one customer management system through sharing of the customer database, improvement of internal order fulfillment, management of fixed product line and pursuing average service for customer which enable cataloging of customers needs and provides a way for supply chain to treat each customer product or service need as unique.

Supply chain enable co-development of new customer winning values, product design, channel customer management, redundancy removal, and demand forecasting, through the use of advanced technologies that provides capabilities for real-time collaboration applications integration and utilization of common distributed database of channel knowledge to integrate individual competence and resources for synchronization of competitive. As competition intensifies, collaborating organisations in supply chain, move toward a common strategic vision that is characterized by same marketplace development, sharing of resources and trust between partners, strategy that provide common infrastructure and communication access to unified information (Ross 2003).

Moreover, the introduction of E-business technologies has brought about a significant change in the way organisations handle customer relationship. The use of technologies ranges from the production process with user specification to after sale services to satisfying consumers which makes many organisations to modify production process to focus much on the customer instead of operational efficiency. Through the use of internet, customer provides specification of commodity to buy; this information is captured, outlined, and used in customer relationship through personalization and profiling, customer satisfaction and in discovery of new products and profitable business opportunity. Customer profiling allows personalization filtering that contributes to personalized relationship between customer and organisation which gives customer a feeling of been understood. In addition, managers can gain insight on customers buying behavior and preference and use this insight in creating a positive feedback effect (Gottschalk 2005). For example, an organisation can be able to improve products and services as per customers need and preference faster than the competitors.

Organisational responsiveness to customers needs through faster and immediate transfer of information is essential for organisational growth. The organisation responsive capability that is quickly and accurate to meet the customer need determines whether customer will hold on or will go to competitors. Organisation with customer communities can foster a dialogue with customers about what they want in the future products and service or request for feedback on new product design this effectively serves the customer needs and improve the loyalty to the organisation. (Barnes 2007).

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Internet technologies have in the past decade, rapidly and widespread changed the economy, environment, society and culture setup which have enable knowledge worker to work for global business. According to Gottschalk (2005), ‘e-business practices are changing the tools of office workers use, where they work, who they are employed by, and their relationship with the clients, customers, suppliers, managers and workers’. This new way of working have been facilitated by the introduction of global e-business through internet, increased traveling and has made societies not to be isolated but to be at the centre of problem solving and provide potential solutions. For organisation to have a good employment terms, growth dynamics and to become a global e-business there must be good management of new knowledge creation, knowledge intensity, technology, and human resource maintenance. Work have become knowledge intensive not only in technology sectors but also in manufacturing and primary sector which have made work to move away from centralized factories; a move that have made it possible for workers to work remotely ( tele-working or e-working). Workers of same global company can come together to form a creative cluster that speed up production, accumulation and deprecation of knowledge reflect and faster technological progress (Smith, Chiozza, & Edin 2002). E-working and creative cluster contributes to a substantial sustainable development of the economy, increased productivity of staff, and better utilization of office space.

Sustainable development as social objective is also attained by balancing of work and social life, reduction in stress associated with traveling and provision of opportunity to minor on the society such as people looking after young ones and people with disability. E-working enables the organisation to reduce the cost associated with employing work to a centralized factory and other cost such as traveling to work, office rent, and meeting location and it also reduces the ecological impact (Smith, Chiozza, & Edin 2002).

Conclusions

Therefore, E-business technologies has offered an opportunity for organisations to overcome the geographical barriers and it has enable them the operate in a foreign market and also small firms can benefit from effortlessness information gathering, self promotion and better services to customer in new markets at moderately lower expense. E-business marketing has resulted to number of effect that has changed in the way marketing is done by creating opportunities and challenges for organisations, industries and their market. According to Feng Li (2006), the impact of internet to business includes; ‘reduction of importance of economy of scale, lowing of market communication cost, provided a great prices standardization, reduction in the information float time, temporary synchronicity, increase contact between seller and buyer, and change in intermediary relationship”. Consequently, E-business impact has enable small organisation to compete internationally through access to cheaper communication that facilitates direct interaction with international customer, provide a low-priced promotional medium, facilitate business ties involving information sharing, outsourcing, and risk sharing.

Internationalization of large and small organisation has changed the boundary between the organisation and the environment which require firms to be much flexible and much responsive in order to compete in a dynamic market. For an organisation to be flexible and responsive different tactics are used same of which are discussed below: organisation can divide the customer, organize them to customer communities and create a competitive advantage through brokerage between one buyer to many seller, one seller to many buyers and many seller to many buyers. Organisation can also use the scalability of the e-business technologies to create a barrier to new competitor entry by means of increase the value to new customer through personal gain. For example a company request customer to provide personal and relatives contact and provide a communication system which reduces chances of customers switching to the competitors.

References

  1. Barnes, Stauart 2007, E-commerce and v-business: digital enterprise in the twenty-first century, Butterworth-Heinemann, Oxford.
  2. Feng Li 2006, What is e-business?: how the internet transforms organisations, Wiley-Blackwell, New Jersey.
  3. Fletcher, R, Bell, J & McNaughton, R.B 2004, International e-business marketing, Cengage Learning EMEA, London.
  4. Gottschalk, P 2005, E-business strategy, sourcing, and governance, Idea Group Inc (IGI), New York.
  5. Koenig et al. 2002, “New Economy, New Recession?” Southwest Economy, Federal Reserve Bank of Dallas: 11-16.
  6. Lee et al. 2001, “E-Business and Supply Chain Integration,” Stanford Global Supply Chain Management Forum, SGSCMF-W2-2001.
  7. Lee, H.L 1997, (1997), “Information Distortions in a Supply Chain: The Bullwhip Effect,” Management Science, Vol. 43, No. 4.
  8. Ross, D.F 2003, Introduction to e-supply chain management: engaging technology to build market-winning business partnerships, CRC Press, New York.
  9. Smith, B.K, Chiozza, E, & Edin, M 2002, Challenges and achievements in e-business and e-work, IOS Press, Amsterdam.
  10. Wendy, C 2004, Value creation from e-business models, Butterworth-Heinemann, Oxford.

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