Rise of E-Commerce

The success of this electronic form of business is dependent on customer trust and the availability of suitable technology. Organizations use e business for a number of reasons. Some of these reasons are discussed below: Transaction management: It is possible to completely integrate customers and suppliers using e business, thus bringing down the transaction costs of purchasing. E business also does away with the problems associated with time and distance.

Business efficiency: E Business appeals to companies because of its ability to achieve efficiencies in production and distribution. Efficiency can be increased in the entire value chain, right from the procurement of goods to customer service.

Reshaping customer relationship: The collection of data through the Internet helps organizations provide better customer service. It also helps in targeting right customers for their products and services.

Reaching new markets and segments: The Internet makes it possible for companies to explore new markets by providing global reach. Foreign markets can be explored without a physical presence in the market. Moreover, time differences do not pose a hinderance to the study of those markets.

According to studies, e business can benefit organizations in several ways: increase revenues by about 10 20%, reduce costs by 20 45% and reduce working capital requirements upto 60%. For example, Dell Computers has been able to increase its revenues by 20% and profits by 85% by doing business online.

PricewaterhouseCoopers has identified four distinct phases of e business. The first phase is marked by the implementation of a website that will enable the concerned organization to buy and sell online. The second phase involves putting supply chain management processes online by linking suppliers with the enterprise, using extranets and intranets. In the third phase, the organization forms alliances (content, marketing and commerce) with other online players indicating the adoption of e business as a commercial too. This alters the way in which the organization operates. In the fourth and final stage, there is a convergence that will lead to innovative products and services. Some of the key characteristics of e business are:

Customer is king: Customers have more choices since they can collect information on a range of competing products. Entry barriers are low: Entry barriers are low since the online model can be easily replicated by competitors at a lower cost. Although, conducting business online is relatively easy, digitizing the entire value chain and reaping the benefits of doing so is a difficult task.

E business leads to disinterinediation: In e business, middlemen are replaced by infornediaries. Infornediaries offer information on products and services on behalf of the manufacturers. They link manufacturers and customers.

Economies of scale: Since the fixed cost incurred on servicing customers comes down with the increase in the number of customers, organizations have to look for ways to attract more customers to their website. When the number of transactions increases, organizations can obtain economies of scale.

In the early stages of e business, an organization must have to gain first mover advantage and adopt a sustainable and flexible e business strategy.

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