The world of business has witnessed drastic transformations within the recent decade largely due to the introduction of E-commerce. The internet has turned out to be a suitable marketplace for small and medium scale business organizations to reach out to a diverse a wider customer base. As per Andam (2003), despite formidable concerns related to security of transactions and relevant business information on ecommerce platforms, many business organizations are transitioning to the online business environment for developing sustainable competitive advantage (Andam, 2003). However, these scenarios demand organizations to have a better understanding of the scope of business within the online environment in order 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 ecommerce technology in framing strategic approaches for recognizing specific and diverse opportunities in ecommerce. Another characteristic highlight that should be identified as a priority by business organizations engaging in ecommerce is the evaluation of the impact of ecommerce on supply chain management. The following essay intends to reflect critically on each of these aspects in order to obtain productive learning outcomes in context of ecommerce, the nature of business environment, necessity of infrastructure and the impact of internet on existing as well as conventional approaches for business activities.
The illustration of the nature of online business can be realized effectively with a clear demarcation between the definitions of ecommerce 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 ecommerce has been subject to several ambiguities based on its similarity to internet commerce. However, ecommerce practices and applications are diversified thereby creating the need for different presale and post-sale activities.
As per Chaffey (2015), Ecommerce can be defined as the process of developing and maintaining business relationships, sharing business information and execution of business transactions through telecommunication networks. Therefore ecommerce applications exist in the form of business to customer, Business to Business and organizational. A clarification for the difference between e-business and ecommerce can be highlighted in the use of ICT for different purposes in each case (Chaffey, 2015). While in the case of ecommerce 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 profound emphasis on 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 sufficed with an explanation of the factors that drive ecommerce (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 promotion of ecommerce 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 responsible for driving ecommerce 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).
As per Ma (2008), the customer interaction forces are also responsible for tailoring marketing approaches of organizations thereby increasing the prospects for implementation of ecommerce. Business in the online environment is also dependent on the competences for adapting to technological changes (Ma, 2008). The primary concern associated with technological forces in the existing business environment is multimedia governance in 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 integration of various communication services in a single platform (Wiengarten 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 broadcast and telephone services have been eliminated by the introduction of ICT technologies (Golicic et al., 2002). Furthermore, the impact of ecommerce on the consumer as well as business relationships could be considered as a viable highlight in the nature of online business (Falk & Hagsten, 2015). Customer and business relationships are major emphasis of organizations in order to obtain the productive business outcomes (Qin, 2010). The process of business transactions is simplified through the implementation of the internet that implies a faster and open process that would facilitate improved opportunities for customers to exercise higher control in terms of product selection, access and purchase. The purchasing decisions in the case of an organization are also subject to the benefits of price transparency that is obtained in online business environment (Rayport & Jaworski, 2002).
The implications of ecommerce in 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).
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 internet which requires them to reform their existing business and revenue models (Andam, 2014).
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, majority of business organizations are subject to ambiguities in 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).
Majority of research literature has been directed towards definition of online business models, their evolution and the critical success factors associated with the efficiency of online business models. The business model in ecommerce has been associated with network as the central element in majority of research studies (Ivanova, 2017). However, the central emphasis of a business model has been found out to be vested in 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 ecommerce 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).
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 towards creation of value in customer relationships and maintaining their integrity (Chaffey, 2015). The infrastructure management aspect also emphasizes on the competences of an organization for improving the value proposition for customers thereby implying impact on the 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 transaction 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). Some of the revenue models that are identified in the existing business environment include references to e-procurement, virtual communities, e-malls, third party marketplaces, e-auction, collaboration platform, e-shop, value chain service providers, information brokerage, trust and other services, information brokerage and value chain integrations.
Long tail business model
The evolution that has been taking place recently in the business model thinking is required to examine closely for the creation of an effective business model. In comparison to the decade ago currently the business activities are occurring in a highly different context. A shift in the business strategy and behavior of consumers has been noticed with the rise in the internet and related technologies. This has eventually resulted in the achievability of the long tail business models.
The perspectives that are encompassed in the long tail business reasoning are as follows: to some extent, the true size of demand is not known as suppliers have held them back into serving the small size audiences. If infinite choices and distribution are available for customers, then it can be organized in a cost-effective form. Then eventually the size of true demand becomes very clear and reveals highly less focus on the products that are on mainstreams than are assumed previously.
It has been described by Anderson that there are three forces behind the long tail in which:
- Reduction of the costs of production like the tools related to production and software are available for free frequently.
- Reduction of the costs of distribution, like the costs related to search, for physical products dramatically decreases
- Through filters, the demand and supply are brought together more effectively
Different academic researchers have pointed towards the significance of emerging ecommerce technologies on the proliferation of additional opportunities in terms of strategic opportunities in ecommerce. The noticeable challenges and setbacks encountered by ecommerce platforms are responsible for drawing new opportunities in terms of technological advancements.
According to Rayport & Jaworski (2002), the low conversion rates due to lack of customer conversion rate and increasing concerns of security in the domain of ecommerce have created substantial pitfalls for the online business sector (Rayport & Jaworski, 2002). The operating costs for ecommerce as well as the environmental concerns pertaining to 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 ecommerce 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 as 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.
Grid computing is considered as the resolution for all issues identified in 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 which 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 the emerging technologies for obtaining strategic opportunities in ecommerce can be validated on the grounds of a common principle associated with the technology. As per Barnes & Hunt(2013), the emerging technologies are directed towards 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).
The development of an ecommerce initiative is subject to the involvement of a diverse supply chain comprising of seller, transaction partners, business organizations, government, consumers and the internet. These factors could be considered as inherent entities of supply chain of an ecommerce organization and ecommerce facilitates opportunities for classification of networks which comprise of 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 ecommerce on supply chain could be identified explicitly from this perspective. The generic definition of supply chain management is directed towards the monitoring and review of materials, finances and information as well as their flow from supplier to the consumer through manufacturers, wholesaler and retailer (Chaffey, 2015).
The primary scope of supply chain management in an ecommerce initiative is to ensure external as well as internal integration of the flows. The impact of ecommerce on 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 ecommerce introduced a cyclical relation between the producer, retailer and consumer thereby ensuring interlinking between the producer and consumer also. The primary flows identified in the extended or integratedsupply chain management for ecommerce 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 involvement of payment schedules, ownership and consignment arrangements and credit terms. The supply chain management in ecommerce 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. The impact of ecommerce has therefore induced facilities for effective management of existing resources, cost effectiveness, reduction in time-to-market and sustainable planning for future needs.
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.
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