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E-Commerce: Technology-Based Business

Introduction

According to Wigand (1997), electronic Commerce is an integrative concept, designed to draw together a wide range of business support services. This includes inter-organizational e-mail, directories, trading support systems for commodities, products, customized products, and custom-built goods and services, ordering and logistic support systems, settlement support systems, and management information and statistical reporting systems. Hence e-commerce is about the buying and selling of goods through the Internet, especially the World Wide Web.

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Fast Moving Consumer Goods (FMCG) Companies

Fast-moving consumer goods are products that have a quick shelf turnover and are relatively low in cost. Additionally, these types of products do not require a customer to expend a lot of thought, time, or financial investment. For companies that deal in FMCGs, the margin of profit on every individual FMCG is less. However, if the company can sell a huge number of goods then the company can earn a good profit. Thus, profit in FMCG goods always translates to the number of goods sold (Cohen, DeLong, and Zysman, 2000).

B2B benefits and competitive advantage

According to Molla and Heeks (2007), developing countries have over 80% of the world’s population and hence are the site for the growing use of e-commerce. While research has suggested that e-commerce could bring benefits to producer firms in developing countries, there has been little empirical evidence on the actual outcomes of e-commerce implementation. Therefore, there is a gap in the literature about the benefits of e-commerce in developing countries like Saudi Arabia. Molla and Heeks (2007) reported that e-commerce benefits are mostly limited to intra- and inter-organizational communications. So far the research has not supported that there are benefits like market access, customer/supplier linkages, or cost savings for these firms in developing countries (Molla and Heeks, 2007). Molla and Heeks recommended, however, that the manufacturer firms in emergent countries may be able to profit from B2B e-commerce if they expand a multi-prong policy aimed at the construction of the resources and capabilities of their products and if they can expand electronic-mediated commerce routines with associates and clientele, and if they can concentrate on countrywide e-readiness and global trade convention.

Reduced Costs

Inventory

E-commerce helps to reduce inventory costs by allowing the company to access and utilize its supplier’s database. This allows for just-in-time inventory control, as the supplier and buyer are directly linked to one another for automatic restocking. The buyer can see availability and at what price. The supplier can see when the buyer is running low and act to re-supply immediately. The customer saves on warehousing costs (Wigand and Benjamin, 1995).

Productivity

By improving upon the processes, ensuring that adequate materials (inventory) are available as necessary and increasing collaboration to take advantage of concurrent work processes, e-commerce allows a company to reduce the time it takes to get its product to market. (Wirtz and Wong, 2001). However, controls can be put in place to eliminate the need for the approval of each and every activity, giving employees the ability to make some decisions by choosing from a list of pre-approved items (Wong, 2001).

Procurement and Payment

When using electronic ordering, there is no longer any need to fill out requisition forms and purchase orders (Richie, Brindley, & Peet, 1999). Orders can be accepted, confirmed, processed, and monitored via the e-Commerce link between the buyer and supplier. Suppliers can place their entire inventory in an online catalog. Prices and products are those up to date and easily changed. It can also be tailored to provide different prices to different customers or transactions by volume. The catalog can be customized by the customer so that the customer is initially presented with a list of supplies that they regularly purchase instead of the entire catalog. Billing and paying electronically are also possible through e-Commerce (Wigand and Benjamin, 1995).

Increased Reliability

Because the system is online and people are making choices rather than completing forms freehand, there is greater accuracy. Because the system is tracking all data, there is greater reliability in the data that is pulled from the system, which does not miss items (Wigand and Benjamin, 1995).

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Telecommunications

Communicating electronically results in significant reductions in costs when compared with telephone, fax, and paper-based transactions. Costs of paper supplies and telecommunications charges are also reduced (Wigand and Benjamin, 1995).

Reduced Shipping Costs

In most cases where the product being purchased is a digital product, distributing the product via electronic means, could significantly reduce the shipping costs network rather than using other distribution methods. For example, the software is now easily downloaded through the Internet rather than copied onto diskette or CD-ROM and mailed out (Wigand and Benjamin, 1995).

Human Resources

Human resource costs are reduced as the need for training is reduced, since e-Commerce allows the use of a common interface (i.e. the Internet browser) to access all information and perform all tasks. This can also serve to reduce user frustration and improve accuracy as there is no need for printed records.

Reduced Systems Maintenance

Because e-commerce uses standard software to interface with the system and it is shared amongst various companies, it can eliminate the need to support older network protocols and legacy software. It can also reduce the costs that are associated with developing and maintaining special client software (Wigand and Benjamin, 1995).

Improved Customer Satisfaction

Convenience

The customer can find information whenever they need it, regardless of the time or location. It is a round-the-clock service, available every day of the year. Customers can find product information, pricing information, and even technical support (Wigand and Benjamin, 1995).

Information Available

Links can be made to another business system working in real-time. For example, a customer can get details of what is in stock and at what price. With supplier catalogs online, it is easy to find and order products because the customer does not have to know the exact name or product number, as they can search the supplier’s database for them (Wigand and Benjamin, 1995).

Customization

Interfaces between regular suppliers and buyers can be personalized so that the buyer is only getting the information they need and want. Services can be tailored for valued customers, such as recommending new products based on purchase history, and can allow for the placement and tracking of orders, as well as payments online (Richie, Brindley, and Peet, 100).

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Management

Improved Reporting/Decision Making

E-commerce allows the capture of an enormous variety of data and is capable of analyzing it. Thus, data can be mined to provide managers with the necessary information to make more informed decisions with regard to customers, suppliers, and internal operations. It can identify trends and patterns, allow for continuous improvement and allow instant comparisons between targets and achievement (Moodley and Morris, 2004).

Maintenance of Control

Although e-commerce enables a company to empower its employees, it also enables management to maintain control. Management can establish the limits within which an employee can work without requiring approval. This eliminates the need for managers to be constantly approving routine and/or regular activities. It also, eliminates maverick buying, as the employee is confined within specified parameters (Moodley and Morris, 2004).

Creating competitive advantage

Organizations have a competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price (Wong, 2001). A firm creates a competitive advantage when it creates superior value for its customer because customers are always looking for the best value for their money. Hence, a company can either give the customer more for their money (differentiate) or can reduce the cost to the customer (reduce costs). Thus, it is important to understand the customer’s business and to know how it perceives value (Porter, 1990; see Figure 1).

Porter proposed that firms face threats to their business through five forces (Fig.1):

  1. New entrants to the market
  2. Pressure from substitute products or services
  3. The bargaining power of buyers
  4. The bargaining power of suppliers
  5. Rivalry with existing competitors (Porter, 1990)
A customer desides

Block diagram of the software and human components

E-business provides a means to achieve sustainable competitive advantage over competitors who are still using less technologically sophisticated techniques or who have not fully appreciated the potential. The following illustrates how this can be achieved:

  1. Create barriers to prevent another company from entering the market, such as raising the costs of entry into the market through differentiation and the use of technology.
  2. Reduce the threat of substitute products and services by implementing industry-wide standards.
  3. Build in costs or services that make it difficult for a company to switch to another supplier, such as customized electronic ordering and tracking.
  4. Create mutually beneficial alliances with other firms that can work to change the balance of power between the two parties (Moodley and Morris, 2004).

Bibliography

Cohen, S.J., DeLong, B and Zysman, J. 2000. Tools for Thought: What is New and Important about the ‘E-Conomy’, BRIE Working Paper No. 138, University of California, Berkeley. Working Paper No. 138, University of California, Berkeley.

Garicano, L. & Kaplan, S.N. (2000) The Effects of Business-to-business E-commerce on Transaction Costs, NBER Working Paper No. 8017, National Bureau of Economic Research, Cambridge, Massachusetts.

Malone, T.W., Yates, J. & Benjamin, R. (1987) Electronic markets and electronic hierarchies, Communications of the ACM, 30: 484–497. Web.

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Molla, Alernayehu and Heeks, Richard. (2007) Exploring E-Commerce Benefits for Businesses in a Developing Country. Information Society, 23(2): 95-108.

Moodley, S. and Morris, Michael. 2004. Does e-commerce fulfil its promise for developing country (South African) garment export producers? Oxford Development Studies, 32(2):155-178.

Porter, Michael. 1990. The Competitive Advantage of Nations. New York: The Free Press.

Wigand, R. 1997. Electronic commerce: definition, theory, and context, The Information Society, 13: 1–16.

Wigand R. and Benjamin, R. 1995. Electronic Commerce: Effects on electronic markets. Journal of Computer Mediated Communication3(3); 1-10

Wirtz, J., and Wong, P. K. 2001. An empirical study on Internet-based business-to-business e-commerce in Singapore. Singapore Management Review 23(1):87–112.

Wong, P. K. 2001. Leveraging multinational corporations, fostering technopreneurship: The changing role of S&T policy in Singapore. International Journal of Technology Management 22(5/6):539–567.

Global competitiveness report 2000. New York: Oxford University Press.

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StudyCorgi. "E-Commerce: Technology-Based Business." November 7, 2021. https://studycorgi.com/e-commerce-technology-based-business/.

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StudyCorgi. (2021) 'E-Commerce: Technology-Based Business'. 7 November.

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