WEEK 2 READING MATERIAL for e-commerce study
- 1. WEEK 2 READING MATERIAL E-BUSINESS/E-COMMERCE RISKS, BARRIERS, BENEFITS AND MANAGEMENT ROLE Study table 1.3 below to understand the tangible and intangible benefits from e-business and e-commerce. E-Business Risks 1. Strategic Risks Making the wrong decision about e-business investments. In every business sector, some companies have taken advantage of e-business and gained a competitive advantage. But others have invested in e-business without achieving the hoped-for returns, either because the execution of the plan was flawed, or simply because the planned approaches used for their market were inappropriate. The impact of the Internet and technology varies by industry. 2. Practical Risks Bad customer experiences and bad news stories which lead to damage to the reputation of the company. if the customer experience of a service is very bad, they will stop using it, and switch to other online options.
- 2. Examples of poor online customer experience which you will certainly be familiar with include: 1. Web sites that fail because of a spike in visitor traffic after a peak-hour TV advertising campaign. 2. Hackers penetrating the security of the system and stealing credit card details. 3. A company e-mails customers without receiving their permission, so annoying customers and potentially breaking privacy and data protection laws. 4. Problems with fulfilment of goods ordered online, meaning customer orders go missing or are delayed and the customer never returns. 5. E-mail customer-service enquiries from the web site don’t reach the right person and are ignored. The perception of these risks may have limited adoption of e-business in many organizations which is suggested by the ICT use data in Figure 1.10 below. It is important for managers assessing e-business to develop a cost–benefit analysis that considers both the initial investment costs and the ongoing costs that form the total cost of ownership (TCO) against the value created from the tangible and intangible benefits.
- 3. Total cost of ownership (TCO) TCO refers to the total cost for a company operating a computer system or other investment. This includes not only the purchase or leasing cost, but also the cost of all the services needed to maintain the system and support the end-user. E-Business Barriers Study figure1-12 and identify the most important factors contributing to B2B e- commerce barriers Barriers to consumer Internet adoption Consumer barriers to adoption of the Internet may include: No perceived benefit Lack of trust Security problems Lack of skills Cost. This lack of demand for Internet services from this group needs to be taken into account when forecasting future demand.
- 4. Benefits of Online Services These are summarized by the ‘Six Cs’: 1 Content –This means more detailed, in-depth information to support the buying process for transactional or relationship-building sites or branded experiences to encourage product usage 2 Customization – In this case mass customization of content, whether received as web site pages such as ‘Amazon recommends’ or e-mail alerts, and commonly known as ‘personalization’. 3 Community – The Internet liberates consumers to discuss anything they wish through forums, chat-rooms and blog comments. 4 Convenience – This is the ability to select, purchase and in some cases use products from your desktop at any time: the classic 24 × 7 × 365 availability of a service. Online usage of products is, of course, restricted to digital products such as music or other data services. 5 Choice – The web gives a wider choice of products and suppliers than via conventional distribution channels. The success of online intermediaries such as Kelkoo (www.kelkoo.com) and Screentrade (www.screentrade.com) is evidence of this. Similarly, Tesco.com provides Tesco with a platform to give consumers a wider choice of products (financial, travel, white goods) with more detailed information than are physically available in-store. 6 Cost reduction – The Internet is widely perceived as a relatively low-cost place of purchase. Often customers expect to get a good deal online as they realize that online traders have a lower cost-base as they have lower staff and distribution costs than a retailer that runs a network of high-street stores. A simple price differential is a key approach to encouraging usage of online services. In the late 1990s, low-cost airline easyJet encouraged the limited change behaviour required from phone booking to online booking by offering a £2.50 discount on online flight bookings. Study the range of different ways in which consumers use the Internet to research or transact is shown in Figure 1.14, below.
- 6. Development of e-commerce and e-business strategy with an emphasis on the buy-side and the sell-side. Some of the strategy issues to be managed when developing an e-business strategy using the classic McKinsey 7S strategy instrument (Waterman et al., 1980) are summarized in diagrammatic form in Figure 1.15 and in table form in Table 1.5.
- 7. Management is also key in implementation where they are expected to, among others, provide e-business solutions based on the following: Change management. How to manage the organizational, human and technology change required in the move to e-business.
- 8. Analysis and design. Managers and solutions providers need to discuss main issues of analysis and design raised by e-commerce systems Implementation and maintenance. How should e-commerce systems be managed and monitored once they are live? Compiled by: Sandy Kachale [email protected]