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World Of E-Commerce Essay, Research Paper

The World of E-Commerce

E-Commerce today is a shape-shifter whose mission is various and evolving, one moment as small and personal as finding a local restaurant, the next as big and corporate as locating a pasta wholesaler for your chain of noodle shops. Thanks to new technologies and rapidly increasing Web access, e-commerce is beginning to pick up speed.

Last year, very few European retailers were taking orders on the Web, but this year has seen phenomenal growth. One reason is simply that more potential consumers are connected to the Web. On-line access almost doubled in Europe this year. Within five years the Euro e-penetration rate will be more than 50 percent.

Almost a fifth (18 percent) of companies have launched a product that is only available on the Internet. In addition, nearly three quarters of respondents have, in the last three years, launched a new product or an existing one, using e-commerce technologies.

Senior directors with responsibilities for e-commerce in 357 European companies were questioned about their use of e-commerce. The research revealed that the gap between the electronically sophisticated companies and the rest , identified in last year s report, is now narrowing. In the last 12 months, European business has grasped the monumental scale of e-business and e-commerce opportunities. All business leaders now know that they must respond quickly or they will die. Barriers to entry are increasing as the first movers mature. The action is moving from pure e-commerce to the re-engineering of the whole enterprise to e-business.

Last year s report makes a distinction between sales attributable to the Internet , where companies use the Internet for marketing purposes but use conventional channels to complete the purchase, and Internet transactions where all aspects of the sale, including payment, are concluded over the Internet. Major findings of the year s report include:

+ Sixty-three per cent of companies now say that they have sales attributable to the Internet, up from 45 percent last year, representing a 40 per cent increase.

+ Currently, 23 per cent of respondents make Internet transactions. By 2002, 83 per cent of respondents expected they would be making Internet transactions.

+ The UK, Germany, Italy and Scandinavia emerged as the most sophisticated e-commerce countries. On a sector level, manufacturing and retail wholesale distribution are the most advanced. Overall, 12 percent of respondents now claim to be fully automated with on-line customer purchases linked to back-up office systems such as stock control. However the majority of companies, 51 per cent, are only at the stage where they have established two-way communication, but are still unable to carry out transactions on-line.

+ The ability to reach new markets or customers is seen as the most important benefit of e-commerce by 36 percent of respondents. However, speed and cost savings of e-commerce are now regarded as less important factors than a year ago. This may be because businesses have discovered that implementing e-commerce strategies is more expensive than they had originally calculated.

+ The traditional barriers to electronic trading still remain but, as expected, are shrinking. Security continues to be the greatest cause for concern, cited by 78 percent of respondents. Most significantly, in 1998, 67 percent of respondents saw lack of understanding of the benefits of being on-line as a barrier, whereas this year, only 47 percent saw this as a barrier.

+ Marketing budgets for e-commerce are increasing but are still disappointingly low as a percentage of all marketing spending.

Research demonstrates that companies are now fully aware of the transformation that e﷓commerce will bring to their dealings with both customers and suppliers. All the companies surveyed are taking steps to embrace e-commerce technologies and they can be certain that all their competitors are doing the same.

The Internet and global business

In reality the Internet is a territory which should be viewed from two perspectives: technology and business, as both an end point and a starting point for business managers. This is the beginning of the early stages of an entirely new style of business and competition. Although the Internet, and its business applications, is still in its infancy, business managers should strive to integrate the Internet into their organization s infrastructure.

The fast paced and unrelenting revolution in information and communication technologies has made this new competitive resource known. Information is the new raw material and that material is applied to products, services, companies and entire businesses.

The Internet provides a number of opportunities which may be exploited by those willing to focus, in a systematic way, on what the Internet can allow their particular organization to do. In broad terms there are three distinct opportunities available:

+ Establishing a direct link to customers to complete transactions or trade information more easily, allowing companies to bypass others in the value chain and in the supply chain.

+ Creating Internet technology to deliver new products and services for and to new customers.

+ Enabling companies to become dominant players in the electronic channel of a specific industry or segment, controlling access to customers and setting new business rules.

By exploiting these opportunities, an organization may capture the critical mass within an industry, through Internet technology, and in this way be able to deliver three forms of services to customers, namely:

+ To provide the same level of direct selling service as a salesman through live and on-line interfacing with customers, with details of products and previous purchases, both in transit and delivered;

+ To establish customer retention and customer loyalty programmes which are personalized/customized interactions to build customer loyalty; and

+ To provide a new product service and to launch a platform which may be used to introduce valuable new services inexpensively.

The business opportunities offered by Internet in a three-tier pyramid structure are:

1. Information infrastructure: Internet is provided within the organization as an extra service, simply to provide another source of information.

2. Business report: Internet is used to support marketing, supplier and customer communications and transactions that increase the commitment of the organization.

3. Revenue generation: the access to and the use of Internet become a key part of the business s strategy and represents revenue-generating activities.

However, since Internet is a vehicle whereby product knowledge is available in a very short time, customers have perfect information on pricing policies of competing products. The effect of this manifests itself in a downward pressure on margins. However, while Internet effectively opens and widens markets, business managers also need to build switching costs so as to keep customers and at the same time minimize the costs to the company associated with retaining such customers.

The companies which have been most successful in Internet commerce are those that have used this technology to create a combination of three types of relationships:

+ Transaction: electronic ordering of goods and services, together with electronic payments.

+ Information: information ranging from static displays of text to the full range of dynamic multimedia.

+ Interaction: electronic links between company and customer.

Benefits of the web to business

Customers are changing and success in the future depends on who can provide the greatest value to the customers, when and where they want it.

The web enables businesses to attract a wider audience on a permanent basis, reduce costs and satisfy the needs of existing and new customers.

Cost reduction

In some instances there will be a lot of benefits. It will be easy to quantify the return on investments with the web because you can see when your site is being hit, you can invite users to open up a dialogue with you, and you can change your pages to suit their needs. It is a place where you can provide all the information about your company, product offerings, featured articles, sale items, changes in strategy etc. And it only needs to be done once and then maintained.

92 million people world-wide are now on line and by the year 2000 almost 25 million households in Europe will be on line. Through the web any company can reach this audience.

Home shopping

The consumer has only to switch on the television and he is offered a choice of things to buy. Home shopping is now bursting into the internet as more and more goodies go on line. Now you can buy a book or a CD, you can book a holiday and view your chosen hotel, buy a pizza from the shop six streets away, purchase a bike, view a new flat in New York, London or Paris, watch clips of the latest movies, tour a historic house … the list is endless. So, think what benefits it can bring to business.

Cable TV will soon provide access to the internet through television. There are 50 million people in the UK. How many televisions? How much buying power?

Create interest in your company

It is important to use the net to relay the story of your company and its vision, to tell web users what you sell and what makes you the best in your field. You have the opportunity to develop a strong on-line market position and perception of your business across geographic boundaries, to many audiences.

Response to customer demands

The future of business, and the key to success for all businesses will depend on Who gives the biggest value to consumers . If businesses offer customers value they will get the repeat business and loyalty they need. This means convenience. Consumers want new ways of managing their lives. They are busy people. Many customers now want to do their business on line.

Have you ever wanted to go into a shop, but have been deterred because you only wanted to browse, to compare prices or even to kill time but you knew the shop assistant was waiting, ready to pounce on you with the hard sell. The internet enables customers to browse without being submitted to pressure.

Increase speed and breadth of communication

Customers can e-mail over the internet and in many cases create a strong dialogue with the producer of the goods or service. There is the opportunity to learn from these customers, and develop both the site and what is sold in the business. Opening up this dialogue is quick and easy. There are 92 million potential new customers out there. The most capable companies will have the ability to reach them, opening up more lead generating activities.

Attracting new people world-wide

Many people, world-wide, use the web to look for employment and to develop interests. The internet wipes out geographic barriers. For example, it would be possible for a cycle shop in Scotland to use the expertise of a wheel maker in the Netherlands by sharing information and stories. Similarly, it would be possible for property agents in different countries to arrange accommodation for people visiting or re-locating to their respective local areas.

Advantages of e-commerce

The web is a tool which, more than anything else, allows companies to proceed by both constant testing and checking. It is an ideal field for flexible strategies, for exploring and searching while acting. The absence of rigidity and limitations can be used as to advantage rather than being a problem. Dialogue, interaction and service are the keys to building an island within the web. Experience already shows that this is a winning card. Every phenomenon on the web has had a non-continuous trend, i.e..economic progress increases neither steadily nor exponentially but has a Gauss s bell shape. If we analyze the market for any single product, we would see a gradual start, a sharp boom and at the end a slowdown when the market has reached maturity. The web is the sum of a multitude of different phenomenons and behaviour. So we can expect a positive trend which will increase with both accelerations and decelerations.

Access to the web allows both big and small companies:

+ To enrich company comunication through the market for marketing ends

+ To ensure more efficient delivery

+ To become more efficient- by cutting costs

+ To use the web as a dealing channel.

In particular using e-commerce could give both many opportunities to companies and many benefits to consumers as shown below:

OPPORTUNITIES FOR COMPANIES OPPORTUNITIES FOR CONSUMERS

GLOBALIZATION MORE CHOICE

MORE COMPETITIVE BETTER QUALITY OF SERVICE AND GOODS

MASS PRODUCTION CUSTOMIZED GOODS AND SERVICE

NOSEDOWNING OF COSTS DECREASING OF PRICES

NEW BUSINESS OPPORTUNITIES NEW GOODS AND SERVICES

The economic fields where e-commerce works are continually on the increase, not only traditional businesses such as industry, publishing and broadcasting, but also e-commerce related to banking, financing, insurance and tourism.

There are three kinds of e-commerce:

1. Business to business which means only trade among companies.

2. Business to consumers which means a supply of final goods and services to customers.

3. Interbusiness which takes place when there is an exchange either within a company or between two offices.

The biggest percentage of trading on line stems from the first one: business to business. Nowadays this kind of trading is worth around Lit. 43 billion (while business to consumers is estimated at Lit. 8 billion).

Research has made a forecast about European markets: over the first few years of 2000, e-commerce growth should occur in all sectors; however the main increase will be in four fields: health, with a growth of 546%, consumer goods with a growth of 517%, financial services with a 449% increase, and manufacturing with 371%.

According to researchers, in 2003 the number of European users will reach 100 million. In 1998 the number of users was 28 million, double the 1997 number.

According to an economic and financial programming document approved by the Italian Government in June 1999, only 1.5% of GNP is assigned both to information technologies and to services on line. In the USA there is 3.6% of GDP versus 2.9% in Japan, 2.9% in UK, and 2.3% in France. The low growth of Internet in Italy is due to the following reasons:

+ A limited number of companies on the web

+ A low number of regular users

+ A high number of occasional users

+ Slow telephone lines which lead to slow surfing

+ A low number of PCs per 1000 inhabitants (11 per thousand)

+ Expensive Internet lines (200-300% higher than other countries in the EU)

+ The lack of Internet culture

+ Limited use of the English language

+ Little faith in purchases by correspondence

+ Little faith in long-distance purchases

Consumers are rational

A fundamental axiom in economics is that people are rational. They act with purpose, regardless of the nature or morality of that purpose.

When choosing between two goods or services, the consumer is really choosing between the values of the two goods. Economists call this opportunity cost. For instance, customers have to evaluate the inconvenience (cost) of going to one shop rather than to another.

It must be made clear that the consumer is weighing up the relative values of two possible purchases. In this way, the consumer sets a scale of preferences in which goods are ranked by order.

People are changing

People like to shop around , and they want to shop when and where they want. The pressure on their spare time has increased, with many people working much longer hours than in the past, and therefore they value time much more.

The funny thing is that this has caused customers to look for other channels to make their purchases. Rather than jumping in the car and popping along to the local high street, many of them now spend an hour or two a week (when all the shops are closed) surfing the web, looking for things to buy.

They want to buy all types of goods: mountain bikes, books, CDs, software, holidays, tickets, etc. They want to conduct their buying process on line and they want to evaluate their alternatives without pressure of time and place, or even people.

In addition to the younger generation, a vibrant new and older internet community has emerged. A study sponsored by The Excite Network and Third Age Media reveals that internet users aged 50 years and older are just as active on-line as younger users. The web is offering new opportunities for what the survey terms Third Agers no family and no responsibility for raising a family. These people have lots of time and lots of money. They are using the web to develop their interests, stay in touch with family and friends, and find new jobs after retirement.

They now expect businesses to accommodate their needs.

This is not something for business to be alarmed about in actual fact this opens up a vast opportunity for many small businesses to reach new customers with a lot of buying power. Not only can small businesses reach out to new customers, but they can do it easily, competing on a level field with larger corporations.

Customers come first

To offer advantages which each and every consumer can recognize as such and to be considered as a partner capable of supplying always and in every way the best possible solution are the two conditions which have to be respected in order to attain the ultimate end of complete customer satisfaction. Every company has to be guided by the client himself. These basic rules are also valid in e-business. Even a company which already operates using web technologies for its business must try to offer tangible advantages in order to prove that it can offer them in the future to all its customers. In e-business, the company is guided by the e-customer, who is not just any customer but a special client with his own individual characteristics, needs, expectations and evaluation criteria, often different from those of a customer in the real world . An e-customer is, first of all, a web surfer with his own peculiarities. Presumably he is technologically competent and more curious than the average person. He is not easily satisfied but continues to search for what he wants. He trusts other web surfers more than he trusts the companies. He chats with people he happens to meet through the web. He communicates on subjects which he knows and, above all, carries out conversations with those who have the same interests he has. Presumably he is a pioneer.

As the web cancels out the geographical component of transactions, if he knows English, the e-customer knows no frontiers and is a true citizen of the world. He is, above all, a virtual individual. The community of web surfers have no home, they do not need a physical seat, nor do they need to physically meet each other. E-customers look on the web for solutions to their problems, they learn from the experience of other surfers and, in the end, they make their actual purchases.

The most important thing is not how much time the e-customer spends on line but rather how he spends that time. In fact what differentiates e-customers is their interests and their level of experience on the web. Analyzing e-customers thus means defining a business model tailored to their needs, in other words to get to know each electronic client better.

As on-line relations assume major importance, it is essential for the company s web site not to be a mere catalogue (through the window the shopkeeper cannot learn anything about potential clients) but to serve as a means to listen to the customer because only in this way can the company get to know him better.

Let us remember that the person on line is naturally suspicious. The e-customer is not faithful to any one site or to any one make but may be faithful to his virtual community. So the web site must become the meeting place where e-customers can meet among themselves and with the representatives of the company.

Interaction with e-customers means giving immediate feedback to his inputs, for example replying immediately to his e-mail. Obviously the web cancels out distances and saves time: the virtual world knows no night, no time zone. On internet space is potentially unlimited. In reality e-customers, at least in Italy, are still limited in number and only buy software, telephone contracts, books and little else on line. It could easily be imagined that e-business in Italy will never be profitable and that it will be difficult to recuperate the costs of modifying the company to carry out business in this way.

The growth rate of Italian users stayed close to zero for almost 15 years and only now is it beginning to show signs of life. The first web-surfers are young people who are inclined to use the web rather than the telephone and who constitute an interesting market only for a few firms. This does not however reduce the priority of e-business.

The moral of the story?

THE CLIENT IS ALWAYS WORTH IT.


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