eBusiness Changes to Traditional Business
The following are changes wrought by the Internet to business/marketing:
A power shift from sellers to buyers
Both individual and business buyers can be more demanding than ever because they are just one click away from a plethora of alternative global suppliers, all vying for their business. In this environment, buyer attention is the scarce commodity and customer relationship capital a valued asset.
The mass market has been slowly disappearing since about 1992, as evidenced by the decline in prime time television ratings (Bianco, 2004). Marketers discussed the fragmentation of markets into smaller segments ever since the growth of cable television and increasing number of special interest magazines. The Internet put finality to this trend by extending to its ultimate – a market size of one customer – and prompted marketers to create products and communication to small target groups.
Death of distance
Geographic location is no longer a factor when collaborating with business partners, supply chain firms, or customers, or just chatting with friends. The Internet made place less important and allows many buyers and sellers to bypass traditional intermediaries.
Time is not a factor with Internet communication between firms and their stakeholders. Online stores can be open 24/7; people can communicate as their schedules permit; times zones disappear for managers collaborating with partners on other continents.
Critical knowledge management
In the digital world, customer information is easy and inexpensive to gather, store and analyse. Managers can track marketing results as plans are implemented, receiving play-by-play reports. However, turning huge databases into meaningful knowledge to guide strategic decisions is a major challenge.
Marketers must understand technology to harness its power. They do not have to personally develop the technologies, but they need to know enough to select appropriate suppliers and direct technology professionals.
Intellectual capital rules
Imagination, creativity and entrepreneurship are more important resources than financial capital.
Traditional Organisation v eBusiness Organisation Models
Purely physical organisations (firms, companies, institutions) are referred to as bricks and mortar (or old-commerce)
Clicks and mortar or bricks-and-clicks is a business model by which a firm integrates both offline (bricks) and online (clicks) presences.
Organisations that are engaged only in eBusiness are considered purely as clicks or perhaps clicks and flips, flips referring to catalogues.
The digital versus brick-and-mortar firms
- Selling in physical stores
- Selling tangible goods
- Internal inventory/production planning
- Paper catalogue/s
- Physical marketplace
- Use of Value Adding Networks and traditional Electronic Data Interchange (EDI)
- Value adding services
- Physical auctions
- Broker-based transactions
- Paper-based bidding
- Paper-based tendering
- Push production, starting with demand forecast
- Mass production (standard products)
- Word-of-mouth, slow and limited advertisement
- Linear supply chains
- Selling online
- Selling digital products
- Online collaborative inventory forecasting
- Smart electronic catalogue
- Marketspace (electronic)
- Use of the Internet and extranets
- Online auctions, everywhere, any time
- Electronic infomediaries,
- More value-added services
- Electronic billing
- Electronic tendering (reverse auctions)
- Pull production, starting with an order
- Mass customisation, build-to-order
- Affiliated, virtual marketing
- Viral marketing
- Hub-based supply chains
Competitive Factors Supporting eBusiness
eBusiness competition is very intense because online transactions enable the following:
Lower Search Costs for Buyers.
eBusiness reduces the cost of searching for product information. This can significantly impact competition, enabling customers to find cheaper (or better) products and forcing sellers, in turn, to reduce prices and/or improve customer service. Sellers that provide information to buyers can exploit the Internet to gain a considerably larger market share
Not only can customers find inexpensive products online, but they also can find them quickly. For example, a customer does not have to go to several bookstores to find the best price for a particular book. Using shopping search engines for consumer products, customers can find what they want and compare prices. Organisations that sell online and provide information to search engines will gain a competitive advantage.
Differentiation and Personalisation
Differentiation involves providing a product or service that is not available elsewhere. For example, Amazon.com differentiates itself from other book retailers by providing customers with information that is not available in a physical bookstore, such as communication with authors, almost real-time book reviews and book recommendations.
In addition, eBusiness provides for personalisation or customisation of products. Personalisation refers to the ability to tailor a product, service, or eBusiness content to specific user preferences. For example, Amazon.com notifies customers by e-mail when new books on their favourite subjects or by their favourite authors are published. Several sites will track news or stock prices based on the consumer’s preferences.
Consumers tend to like differentiation and personalisation and are frequently willing to pay more for them. Differentiation reduces the substitutability between products, thus benefiting sellers who use this strategy. Also, price cutting in differentiated markets does not impact market share very much: Many customers are willing to pay a bit more for the personalised value offers.
Lower Costs = Cost Leadership.
Buy.com, Half.com, Blue Nile and other organisations can offer low prices due to their low costs of operation (no physical facilities, minimum inventories, etc.). If volume is large enough, prices can be reduced by 40 percent or more.
Less expensive Customer Service
Amazon.com and Dell, for example, provide superior customer service. Such service is an extremely important competitive factor.
Barriers to Entry Are Low.
Setting up an eBusiness site is relatively easy and inexpensive and doing so reduces the need for a sales force and brick-and-mortar stores. Organisations have to view this as both a threat (e.g., Where will our next competitor come from?) and as an opportunity (e.g., Can we use our core competencies in new areas of business?).
Virtual Partnerships Multiply.
With access to a World Wide eBusiness of expertise and the ability to share production and sales information easily, the ability of a firm to create a virtual team to exploit an eBusiness opportunity increases dramatically. The Internet is especially good at reducing interaction costs, the time and money expended when people and organisations exchange goods, services and ideas (e.g., meetings, sales presentations, telephone calls).
More Market Niches
The market-niche strategy is as old as the study of competitive advantage. What has changed is that without the limits imposed by physical storefronts, the number of business opportunities is as large as the eBusiness.