E-Business Systems and Competitive Advantage

To have a successful e-business, an organization needs to use efficient and effective e-business systems. E-business is using technology to improve and support business processes (What is eBusiness?). It is a term that refers to information technologies, the internet, and other networks used by organizations to support e-commerce, enterprise communications and collaboration, and Web-enabled business processes, both within a networked enterprise and with customers and business partners (O’Brien & Marakas, 2011). E-business systems are the combination of technologies, equipment, and tools that businesses use to conduct business via the Internet, intranet, or other networks to help them connect with customers, process orders, and manage information (Balle). These systems are numerous and can give a company a competitive advantage.

According to Louise Balle, the base of an e-business system is formed by a website (domain and web hosting account), email account (which commonly comes with the web hosting account), and an Internet connection, which together allow for the integration of all other e-business tools.  These tools enable users to connect to the web and publish information.  If managed effectively, this information can influence the competitive position of a company

The ways companies use e-business systems to influence competitive position.

E-business has changed many of the dynamics of how businesses are run in the United States.  There are numerous uses for e-business within any industry and very often companies are engaging themselves in more than one use.  The widespread use of e-commerce has shifted the competitive position of many companies and it continues to do so based on the ways the company uses e-business systems.  The increase in e-business has been fueled by the growing availability no matter where you are.  E-business is no longer based on appealing to the customer on their one home desktop.  Now e-business has the ability to target people via their mobile devices using digital tools, which means, for many people, one can appeal to customers on multiple streams throughout the day.  According to a study presented by RetailingToday, over 81% of shoppers research online before they make a purchase.  This alone gives businesses another chance to appeal and try to gain the business of an undecided consumer.  The graphic below from GE shows how customers are researching before they buy.

This means that companies can gain a competitive advantage over their competitors by having a superior website with the information that the consumers want.  Also, within this, the companies need to advertise on the internet and with search engines so that the customers can find their website.  This study found that 60% of consumers started off their research on a search engine.  Meaning, if a company’s site was not being promoted on the search engine then it could be further down the list of sites and may never be seen by the consumer (RetailingToday).

Business to consumer (or B2C) is only one of the types of e-business.  The other two are business to business (B2B) and business to government (B2G).  The chart below shows a breakdown of the three. 

                (Source: InnovationPEI)

However, there are other resources that point that there being many more categories in the breakdown of e-business.  In his case study, Dien Phan believes that based on the various types of trading partners, there are more categories like: consumer to business, consumer to consumer, people to people, government to citizen, citizen to government, exchange to exchange, and intra-business.

The influence on competitive advantages by using e-business systems come from three things: efficiency, marketing, and ease of access.  This increase in efficiency is because, by using e-business, the user can save money on sales expenses, marketing, buying from producers, and communication.  Within marketing, e-business systems allow for advertising at very low prices compared to the possible views one can gain from each advertisement they put out.  With ease of access, this allows the customer to find the company and then have a chance to actually look through the items available from said company.  For users that incorporate an online store, they are also allowing the customers to browse their items and buy them without the consumer having to spend money on travel and without the business having to spend as much money on salary expenses.  This ease of access can also increase the sales within a company by not only catering to current customers but by providing the needed services to new customers as well. 

No matter which position one is as a trading partner, the most effective strategy will have the strongest competitive influence from e-business systems (Porter. Harvard Business Review).   InnovationPEI gives their top ten benefits gained by investing in e-business.  They believe it can make the business more efficient, reduce costs, allow for competition with larger competitors, enables quicker distribution of information, enhances availability of customer service, helps the company reach new markets, enables the company to improve marketing strategies, can increase sales, help find better business deals, and the number one benefit being that businesses cannot afford not to.  With the low costs of having simple e-business systems and the majority of customers that rely on e-business as well as saving money on business deals, it makes for a bad outlook for companies without this amenity for themselves and their customers.  On the other side there are costs associated with implementing e-business systems (Shin, Pace University).  The following is a chart from InnovationPEI that outlines the costs of certain e-business systems:

(Source: InnovationPEI)

This simply shows that setting up e-business systems can often times cost $0 down and so it is not worth the missed opportunities by not being represented on the internet.  With introductory prices this low, the company cannot help but jump into the e-business game.  From there, the influence of e-business on their competitive advantages revolves closely around the amount they decide to spend on their e-business systems. 

Amazon.com – A Real Life Example

Amazon.com is perhaps one of the most recognizable examples of an e-business engaging strictly in e-commerce.  This company began in the 1990s as an online bookstore when creator Jeff Bezos recognized the consumer need for such a resource, and converted his garage into a warehouse to begin selling books from his home. As books began to sell, he slowly began incorporating more and more products, allowing his company to evolve with the needs and demands of consumers. Amazon has grown into one of the largest e-businesses available to consumers today.

Amazon has also helped itself to expand by offering incentives to its customers. For example, consumers are able to sign up for Amazon Prime, which charges a yearly fee for membership. With this membership, customers are eligible for free two day shipping on all orders for the entire year, along with Amazon’s digital media library, which is similar to Netflix or Hulu. Amazon is also a leader in the eBook revolution, with the Kindle being a top selection among consumers. By offering such a wide array of products, along with incentives for shopping, Amazon has secured its position as a leader in the e-commerce world.

An example of Amazon’s Business Model can be viewed below:

Amazon offers the value of price and convenience in all of its product categories, allowing it to extend itself into new markets and continuously extend its customer relationships. The company has dominated online retail with a fairly standard traditional retail business model over the internet, dominating the market with its buying power and financial resources. This supremacy will likely continue well into the future as Amazon continues to explore new product and service categories constantly. The company has developed clear expertise in e-commerce innovation. One of the most interesting things about the Amazon business model is that it is able to thrive in this new digital era by its expert execution of a more traditional business model, rather than trying to invent a totally new one from scratch.

Amazon employs all kinds of e-business systems.  One of the best e-business systems Amazon uses is its customer tracking system.  Amazon makes good use of its homepage, where it features special offers and products, as well as recommendations that are all catered to the user. This is an embedded marketing technique that uses cookies on the consumer’s hard drive to keep track of the user’s interests (Layton).  Another system Amazon uses Amazon Light, which is a “mini-Amazons,” or a satellite sites that does new things with Amazon data and sends people to the main site when they are ready to make a purchase (Layton).  Additionally, Amazon has a new project called the Mechanical Turk project, which seeks to combine community, technology, and compensation, allowing software and Web developers to post tasks they need help with.  Whoever completes this task successfully gets s small amount of money and Amazon gets a commission on each completed transaction (Layton).

There are many e-business systems used by successful businesses.  Each one can help the business gain a competitive advantage over other businesses in the industry.  Amazon.com is a great example of an e-business that is constantly revolutionizing its e-business systems to stay competitive.

 

 

References

Balle, L. (n.d.). What Are E-Business Systems?. Small Business. Retrieved June 30, 2014, from http://smallbusiness.chron.com/e-business-systems-5270.html

Cosper, A. (2014). Description of How Amazon Uses EBusiness and e Commerce for B2B and B2C. Retrieved on June 29, 2014 from http://smallbusiness.chron.com/description-amazon-uses-ebusiness-ecommerce-b2b-b2c-36453.html

Ecommerce-Digest.com (2012). Amazon, Inc. Retrieved on June 29, 2014 from http://www.ecommerce-digest.com/amazon-case-study.html

InnovationPEI.  “How You Can Profit from E-Business.”  Accessed on June 30, 2014 http://www.gov.pe.ca/photos/original/IPEI_ebiz_book.pdf.

Layton, J. (n.d.). How Amazon Works. . Retrieved January 30, 2014, from http://money.howstuffworks.com/amazon3.htm

Noren, E. (July 8, 2013). Analysis of the Amazon Business Model. Retrieved on June 29, 2014 from http://www.digitalbusinessmodelguru.com/2013/07/analysis-of-amazon-business-model.html

O'Brien, J., & Marakas, G. (2011). e-Business Systems. Management Informtion Systems (272). New York: McGraw-Hill/Irwin.

Phan, Dien D.  “E-Business Development for Competitive Advantages: a Case Study”.  Elsevier: Information and Management.  Accessed on June 30, 2014 http://staffweb.hkbu.edu.hk/vwschow/Case-study.pdf.

Porter, Michael E.  “Strategy and the Internet.”   Harvard Business Review.  Accessed on June 30, 2014 http://hbr.org/2001/03/strategy-and-the-internet/ar/1. 

Retailing Today.  “Study: 81% Research Online Before Making Big Purchases.”  Accessed on June 30, 2014 http://www.retailingtoday.com/article/study-81-research-online-making-big-purchases. 

Shin, Namchul. “Strategies for Competitive Advantage in Electronic Commerce.”  Pace University.  Accessed on June 30, 2014 http://www.csulb.edu/web/journals/jecr/issues/20014/paper4.pdf.

What is eBusiness? (n.d.). Northern Territory Government Department of Business. Retrieved June 30, 2014, from http://www.dob.nt.gov.au/business/starting-business/ebusiness/pages/ebusiness.aspx