Critically Analyse And Discuss The Impact Of E-Commerce On Business Strategy

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Organizational Strategy

Critically Analyse And Discuss The Impact Of E-Commerce On Business Strategy

Supply Chains, Logistical Operations, And Business Models.”

Introduction:

The world of business has witnessed drastic transformations within the recent decade largely due to the introduction of ecommerce. As per Andam (2014), despite formidable concerns related to the security of transactions and relevant business information on e-commerce platforms, many business organizations are transitioning to the online business environment for developing sustainable competitive advantage (Andam, 2014). However, these scenarios demand organizations to have a better understanding of the scope of business within the online environment to derive strategic revenue and business models that can facilitate coherent benefits for the business organizations.

Furthermore, business organizations have to reflect on the significance of e-commerce technology in framing strategic approaches for recognizing specific and diverse opportunities in e-commerce. Another characteristic highlight that should be identified as a priority by business organizations engaging in e-commerce is the evaluation of the impact of e-commerce on supply chain management. The following essay intends to reflect critically on each of these aspects to obtain productive learning outcomes in the context of e-commerce, the nature of the business environment, the necessity of infrastructure, and the impact of the internet on existing as well as conventional approaches for business activities.

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Nature of online business:

The illustration of the nature of the online business can be realized effectively with a clear demarcation between the definitions of e-commerce and internet commerce. Internet commerce is associated with the use of the Internet for purchasing or selling services and goods alongside the provisions for support and service after sales (Barnes & Hunt, 2013). On the other hand, the definition of e-commerce has been subject to several ambiguities based on its similarity to internet commerce. However, e-commerce practices and applications are diversified thereby creating the need for different presale and post-sale activities.

As per Chaffey (2015), E-commerce can be defined as the process of developing and maintaining business relationships, sharing business information, and executing business transactions through telecommunication networks. Therefore e-commerce applications exist in the form of business-to-customer (B2C), Business to Business (B2B), and intra-organizational. A clarification of the difference between e-business and e-commerce can be highlighted in the use of ICT for different purposes in each case (Chaffey, 2015). While in the case of e-commerce ICT is used in transactions between firms, individuals, and organizations, e-business implies the use of ICT for improving any business process that can facilitate value to the customers. Therefore, it is imperative to observe that the domain of online business indicates a profound emphasis on the development and maintenance of relationships in the transactions in the online environment (Delfmann, Albers & Gehring, 2002).

According to Laudon & Traver (2013), an understanding of the nature of business in the online environment has to be sufficient with an explanation of the factors that drive e-commerce (Laudon & Traver, 2013). The three major forces of technology, economic forces, and customer interaction forces are considered to be notable influences on the development identified in the domain of online business (Veit et al., 2014). The economic forces responsible for the promotion of e-commerce are identified in its outcomes that facilitate economic efficiency especially due to the improved flexibility and speed of transactions with suppliers, cost-effective customer service alternatives, lower costs for global advertisement and information sharing, and the reduction in costs of technological infrastructure and communication (Gunasekaran et al., 2002). The market forces are responsible for driving e-commerce can be identified in the opportunities for organizations to reach international markets irrespective of the size through the internet. The Internet has emerged as a prolific channel for improving efficiency in customer service and support which enables organizations to facilitate comprehensive information related to products and services to target customers (Choshin & Ghaffari, 2017).

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As per Ma (2008), the customer interaction forces are also responsible for tailoring the marketing approaches of organizations thereby increasing the prospects for the implementation of e-commerce. Business in the online environment is also dependent on competencies for adapting to technological changes (Ma, 2008). The primary concern associated with technological forces in the existing business environment is multimedia governance in the context of business activities, especially marketing, and advertisements. The productive outcomes of ICT systems have been explicitly noted in the digitization of content as well as the increasing preferences for open systems technology thereby leading to the integration of various communication services in a single platform (Weingarten et al., 2013). Therefore communication through the use of such platforms could be reflective of efficiency, ease, speed, and cost-effectiveness since the requirements for establishing separate networks and layers for access to internet services, television broadcasts, and telephone services have been eliminated by the introduction of ICT technologies (Golicic et al., 2002). The process of business transactions is simplified through the implementation of the Internet which implies a faster and more open process that would facilitate improved opportunities for customers to exercise higher control in terms of product selection, access, and purchase. As per Rayport & Jaworski (2002), the purchasing decisions in the case of an organization are also subject to the benefits of price transparency that is obtained in the online business environment (Rayport & Jaworski, 2002).

The implications of e-commerce in the context of business relationships are observed in the transformation of conventional economy relationships noted in vertical or linear relationships to contemporary economy relationships that are associated explicitly with end-to-end relationship management solutions involving extended or integrated relationships. Therefore these inferences can be drawn from the analysis and understanding of business in the online environment (King & King, 2004).

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Online business and revenue models:

As per Andam (2014), the Internet has introduced substantial reforms that are considered productive in terms of commercial and strategic possibilities in terms of media. Therefore, organizations have found a novel medium for communicating, distributing, and selling their products and services to target customers in the form of the Internet which requires them to reform their existing business and revenue models (Andam, 2014).

As per Barnes & Hunt (2013), the primary requirement identified for the transformation of online business models is to understand the novelty of the medium as well as the natural law associated with business transactions. Therefore, the majority of business organizations are subject to ambiguities in the context of developing online business models that can facilitate the integrity of conventional economy systems alongside addressing the demands for transaction-based relationship management in the modern domain of online business (Barnes & Hunt, 2013).

The majority of research literature has been directed toward the definition of online business models, their evolution, and the critical success factors associated with the efficiency of online business models. The business model in e-commerce has been associated with networks as the central element in the majority of research studies (Ivanova, 2017). However, the central emphasis of a business model is vested in the production of content and the role of content providers as intermediaries in the business model. The business model for an organization has to address the scenarios in four distinct aspects such as product innovation, infrastructure management, customer relationship, and financial aspects. From a critical perspective, these four aspects are identified as primary elements of different online business strategies since product innovation and customer relationship are accountable for validating the primary motivation for e-commerce noted in transactions (Sharma, 2016). The customer relationship outcomes derived in online businesses can be considered as a crucial factor for defining the precedents of product innovation (Rutner, Gibson & Williams, 2003).

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Chaffey (2015) said that the definition of the product innovation schema could help organizations to develop strategies for infrastructure management that would have to be directed toward the creation of value in customer relationships and maintaining their integrity (Chaffey, 2015). The infrastructure management aspect also emphasizes the competencies of an organization for improving the value proposition for customers thereby implying an impact on customer relationships. The financial aspects of an online business model are also considered critical since they are responsible for addressing the conventional norms of business transactions and providing revenue opportunities from the business model (Azeem et al., 2015). The financial aspects such as costs of R&D, general and administrative costs, costs of sold goods as well as sales and marketing are subject to the influence of the above-mentioned factors thereby invoking formidable changes in the cost structure and revenue model of an organization (Laudon & Traver, 2013). Virtual communities, e-malls, third-party marketplaces, e-auctions, collaboration platforms, e-shops, value chain service providers, information brokerage, trust and other services, information brokerage, and value chain integrations.

Various perspectives could be implemented for understanding the online business models and the reflection on the aspects of the ‘revenue model’ could be considered as a viable source for critical reflection on an understanding of the online business models and revenue models. The revenue model suggests prominent references to the examples of direct product or service sales, advertisement, service rental or subscription, commission-based sales, and sales of syndicated services and content (Sila, 2013). The revenue models can be considered as outcomes of the concerns of business organizations to acquire revenue from the online business environment. Direct sales comprise selling products and services of an organization directly to customers on the Internet (Ma, 2008). Commission-based sales are obtained in the domain of online business by assisting other organizations and people with certain products and services thereby obtaining money in the course of the process. Subscription or rental services as well as the sale of syndicated content and services could also be observed as vital aspects of the online revenue models.

As per Qin (2010), advertisement revenue should also be considered a crucial aspect of the online revenue model of an organization which could earn money based on the advertisements posted on the website that is determined through different approaches such as fixed price model, CPC, CPS, CPM or hybrid model. However, a critical understanding of online revenue models suggests that the efficiency of revenue models is subject to various factors (Qin, 2010). The significant influences on online revenue models could be identified from the factors such as customer relationship, payment process, delivery of goods and services, and the payment process. The majority of research study literature about revenue models in online business has been characterized by crucial gaps in the form of a lack of research on the effect of system security and stability, E-commerce strategy, excess of information, and evaluation of e-commerce operations on the success of specific online revenue models (Sila, 2013).

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Application of e-commerce technology for strategy development:

Different academic researchers have pointed toward the significance of emerging e-commerce technologies on the proliferation of additional opportunities in terms of strategic opportunities in e-commerce. The noticeable challenges and setbacks encountered by e-commerce platforms are responsible for drawing new opportunities in terms of technological advancements.

According to Rayport & Jaworski (2002), the low conversion rates due to a lack of customer conversion rates and increasing concerns about security in the domain of e-commerce have created substantial pitfalls for the online business sector (Rayport & Jaworski, 2002). The operating costs for e-commerce, as well as the environmental concerns about online business, have also increased thereby leading to profound challenges and pitfalls.

Automation of business procedures such as information collecting and sharing has also been identified as a profound strategic limitation for online businesses. However, the practical case examples which have highlighted the significance of business process restructuring, information sharing, and system integration through the use of emerging technologies contribute an impression that technological advancements could provide suitable platforms for the resolution of problems encountered in the e-commerce environment.

The necessity for addressing the emerging technology trends and factors in the technological infrastructure of an organization engaged in online business could therefore be anticipated clearly. Application services, web services, service-oriented architecture, grid computing, and grid service can be considered notable technological advancements that contribute to the development of new strategic approaches for realizing effectiveness in the online business environment. service-oriented architecture is liable for facilitating advantages such as reduction of costs, limitations of risks, design of architecture according to the process, mitigation of risks, and opportunities for leveraging the existing assets.

Market Segmentation and Targeting

Grid computing is considered the resolution for all issues identified in the context of information sharing and collection. The advantage of grid computing could be recognized in the form of opportunities to induce flexibility in the management of systems that cannot be handled efficiently by single systems (Ma, 2008). Web services could also be accounted as promising technological interventions that have been accepted on the grounds of their characteristics to provide components for utilization to customers. The advantage of web services can be identified in the form of flexible representation of business functions and services alongside opportunities for remote access through other programs.

The application of emerging technologies for obtaining strategic opportunities in e-commerce can be validated on the grounds of a common principle associated with the technology. As per Barnes & Hunt(2013), emerging technologies are directed towards the management of complexity, automation, and virtualization of IT-based services and enabling common languages supported by open industry standards. Business organizations engaged in e-commerce should also observe the critical inference that the technologies should not be considered as exclusive entities (Barnes & Hunt, 2013).

On the contrary, the technologies support each other in application thereby implying the requirement of advanced programming skills for integrating the applications of the technologies. Apart from the emergence of new technologies, it is also essential to reflect critically on the role of other non-technical factors such as privacy and security, budget allocation, and the involvement of stakeholders in the effective adoption of emerging technologies in e-commerce.

CASE STUDY REPORT

Impact of e-commerce on the supply chain:

The development of an e-commerce initiative is subject to the involvement of a diverse supply chain comprising sellers, transaction partners, business organizations, government, consumers, and the Internet. These factors could be considered as inherent entities of the supply chain of an e-commerce organization and e-commerce facilitates opportunities for the classification of networks which comprise the involvement of product distribution for addressing customer demands and partner firms for resolving the requirements of supplies.

As per Chaffey (2015), the management of various networks associated with workers, distributors, competitors, suppliers, and customers and the interlinking between them could be addressed only through the introduction of an extended supply chain management. Therefore the impact of e-commerce on the supply chain could be identified explicitly from this perspective. The generic definition of supply chain management is directed toward the monitoring and review of materials, finances, and information as well as their flow from supplier to the consumer through manufacturers, wholesalers, and retailers (Chaffey, 2015).

The primary scope of supply chain management in an e-commerce initiative is to ensure external as well as internal integration of the flows.  The impact of e-commerce on the supply chain has been noted in the flow that was linear in conventional relationships. The producer was interlinked with the retailer who in turn was related to the consumer with no links between the producer and consumer. The introduction of e-commerce introduced a cyclical relationship between the producer, retailer, and consumer thereby ensuring interlinking between the producer and consumer also. The primary flows identified in the extended or integrated supply chain management for e-commerce initiatives include references to the product flow, finances flow, and information flow.

The information flow aspect is associated with updating the status of delivery and the transmission of orders while the finances flow refers to the involvement of payment schedules, ownership and consignment arrangements, and credit terms. The supply chain management in e-commerce is reflective of the use of open data models that facilitate information sharing in internal as well as external contexts of organizations. The extended enterprise supply chain management applications are reflective of the involvement of crucial suppliers, manufacturers, and end users of a particular company (Barnes & Hunt, 2013). The shared data is vested in data warehouses that are considered as diverse database systems which can be transmitted in upstream flow with the suppliers of the company and the downstream flow with clients.

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Conclusion:

The essay presented a coherent impression of the nature of online businesses, emerging pitfalls, and effectiveness of technological infrastructure and the effect on supply chain management with the help of critical reflection on research study literature.

References

Andam, Z. R. (2014). e-Commerce and e-Business.

Azeem, M. M., Ozari, A., Marsap, P., Arhab, P., & Jilani, A. H. (2015). Impact of E-Commerce on Organization Performance; Evidence from Banking Sector of Pakistan. International Research Journal of York University, 2(3), 260-275.

Barnes, S., & Hunt, B. (Eds.). (2013). E-commerce and v-business. Routledge.

Choshin, M., & Ghaffari, A. (2017). An investigation of the impact of effective factors on the success of e-commerce in small and medium-sized companies. Computers in Human Behavior, 66, 67-74.

Chaffey, D. (2015). Digital business and E-commerce management. Pearson Education Limited.

Delfmann, W., Albers, S., & Gehring, M. (2002). The impact of electronic commerce on logistics service providers. International Journal of Physical Distribution & Logistics Management, 32(3), 203-222.

Falk, M., & Hagsten, E. (2015). E-commerce trends and impacts across Europe. International Journal of Production Economics, 170, 357-369.

Gunasekaran, A., Marri, H. B., McGaughey, R. E., & Nebhwani, M. D. (2002). E-commerce and its impact on operations management. International journal of production economics, 75(1), 185-197.

Golicic, S. L., Davis, D. F., McCarthy, T. M., & Mentzer, J. T. (2002). The impact of e-commerce on supply chain relationships. International Journal of Physical Distribution & Logistics Management, 32(10), 851-871.

Ivanova, I. (2017). The impact of digital competencies on the emotional capital of E-commerce Enterprises. In SCIENTIFIC CONFERENCE ON ECONOMICS AND ENTREPRENEURSHIP SCEE’2017 (p. 90).

King, D. N., & King, D. N. (2004). Introduction to e-commerce. Prentice Hall.

Laudon, K. C., & Traver, C. G. (2013). E-commerce. Pearson.

Ma, Q. (2008). A Review of Emerging Technology Trends in E-Commerce. International Technology Management Review, 1(2).

Qin, Z. (Ed.). (2010). Introduction to E-commerce. Springer Science & business media.

Rayport, J. F., & Jaworski, B. J. (2002). Introduction to e-commerce. McGraw-Hill/Irwin marketspace.

Rutner, S. M., Gibson, B. J., & Williams, S. R. (2003). The impacts of the integrated logistics systems on electronic commerce and enterprise resource planning systems. Transportation Research Part E: Logistics and Transportation Review, 39(2), 83-93.

Sharma, R. (2016). E-Commerce: An Analytical Study on Its Spread and Impact on Indian Economy. Productivity, 56(4), 338.

Sila, I. (2013). Factors affecting the adoption of B2B e-commerce technologies. Electronic commerce research, 13(2), 199-236.

Veit, D., Clemons, E., Benlian, A., Buxmann, P., Hess, T., Kundisch, D., … & Spann, M. (2014). Business models. Business & Information Systems Engineering, 6(1), 45-53.

Weingarten, F., Humphreys, P., McKittrick, A., & Fynes, B. (2013). Investigating the impact of e-business applications on supply chain collaboration in the German automotive industry. International Journal of Operations & Production Management, 33(1), 25-48.

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