What is E-Business?
E-business, short for electronic business, is the conduct of business processes through the use of digital technologies, primarily on the Internet. It involves using the internet to perform various business functions, such as marketing, buying and selling products or services, managing supply chain operations, providing customer service and support, and conducting financial transactions.
The term ‘e-business’ is made up of two distinct terms:
- Electronic: This term is related to the technical concept of information technology (IT). An object that is electronic operates through certain electronic mediums and electronic devices, such as a computer, the Internet or television.
- Business: This term mainly refers to the activities of buying and selling of products and services at various individual, organisational and national levels. These activities are related to the transaction of money or other commodities.
Table of Content
- 1 What is E-Business?
- 2 Features of E-Business
- 3 E-business Vs E-commerce
- 4 Characteristics of E-business
- 5 Elements of an E-business Solution
- 6 Role of E-business
- 7 E-business Requirements
- 8 Impact of E-business on Organisations
- 8.1 Improved operational efficiency and productivity
- 8.2 Reduction in operating costs
- 8.3 Improved competitive position
- 8.4 Penetration into new markets through new channels
- 8.5 Harmonisation and standardisation of processes
- 8.6 Improved internal information access
- 8.7 Improved relationships with suppliers and customers
- 9 Force Driving Transformation of Business into E-business
Thus, e-business deals with commercial activities that are performed through an electronic medium for the exchange of data. In other words, e-business can be defined as online business transactions of products and services through electronic media or any other computer-mediated network. These transactions often result in the transfer of funds or the rights to use a product or avail a service. Here, the user can be an individual, a business or the government of a country.
E-business websites interact with the user of the e-business system. These sites are developed and administered by the site manager and administrators. The database of information regarding the products and services are ready to be made available to the user at any time. If the user is happy purchasing the product or service, he/she can select the option to pay electronically. Shipment support gets the product delivered to the customer. There can be another trend where the shipment takes place first and payment is done afterwards. In that case, it may or may not be an electronic payment.
User has to access the e-business site and enquire about the product he/she wishes to buy. After enquiring, the user has to understand the features and terms and conditions of the product or service. Finally, he/she can buy the product.
Features of E-Business
E-business consists of various distinguishing features that are not possessed by other modes of trading. E-business offers a flexible mode of transactions. This implies that the customers have the opportunity to choose from a variety of products from different manufacturers before actually placing an order for a particular product. Let us briefly discuss some of the distinctive features of e-business:
- Minimum investment
- Easy to use
- Customer interaction
- Mass media
- Option to search
- Optimised product list
Since e-business operates exclusively through the Internet, the organisations do not need to invest in shops, warehouses, showrooms or any other property. The maintenance cost of implementing e-business is negligible as compared to the establishment of physical shops or stores.
Easy to use
It allows customers to easily access a wide variety of products. A customer only needs to click a few links for accessing the desired product. The traditional mode of retailing was quite complex and required lots of searches to find the required items. Moreover, traditional trading was a time-consuming process; whereas, e-business is quite simple and time-saving.
E-business helps in maintaining healthy relationship between the organisation and its customers. The feedback provided by the customers helps the organisations to understand customer requirements. It also provides better customer satisfaction by improving their products and services accordingly.
While doing e-business, the information can be accessed from any part of the world, as it is a web-based service.
Option to search
Through e-business, an organisation can offer a wide range of search options to its customers. This helps the customer to get information of the desired product. Therefore, depending on the requirement, the customer can purchase the appropriate product.
Optimised product list
It provides the product list in an optimised and customised manner. In other words, the list of products can be generated for a customer on the basis of earlier purchases made by him/her.
E-business Vs E-commerce
Many people consider e-business and e-commerce a similar activity. However, there exists certain differences in between the two. E-commerce covers the outward-facing processes that involve customers, suppliers and external partners, such as sales, marketing, delivery, customer service, etc.
E-business, on the other hand, apart from performing the e-commerce activities, also covers internal processes. This includes production, inventory management, product development, risk management, finance, human resource management, etc. Therefore, an e-business strategy is more complex and comprehensive than e-commerce strategies.
In other words, e-commerce is a part of e-business that majorly deals with the buying and selling of goods and services, and transfer of funds through digital communications. This can be conducted from a Business-to-Business (B2B) or Business-to-Consumer (B2C) perspective. E-commerce includes the following processes:
- Online display and cataloging of goods and services
- Customer service
- Handling of payments and transactions
On the other hand, e-business is a more generic and broader term. This because it is not only limited to buying and selling of goods, but also to servicing customers and collaborating with business partners, distributors and suppliers. It covers the following processes, which are ignored by e-commerce:
- Customer Relationship Management (CRM)
- Supply Chain Management (SCM)
- Enterprise Resource Planning (ERP) integration
According to Davydov, “E-business encompasses sophisticated business-to-business interactions and collaboration activities at a level of enterprise applications and business processes, enabling business partners to share in-depth business intelligence, which leads, in turn, to the management and optimization of inter-enterprise processes such as supply chain management.”
E-business is, therefore, more than just buying and selling of goods. It integrates key processes, such as CRM, SCM and ERP on the web. E-business provides the following additional benefits to customers:
- Tracking the status of an order from placement to delivery
- Prompt support to the customer once an order has arrived
- Easy follow-up of related orders
E-business enables companies to:
- Link their internal and external processes more efficiently and flexibly. Internal processes include manufacturing, distribution and accounting, whereas external processes include front-office processes that connect an organisation to its customers and suppliers.
- Work more closely with suppliers.
- Satisfy the needs and expectations of their customers better.
Characteristics of E-business
E-business helps organisations to reach more and more consumers; thereby providing a wider market to enhance their business domains. In other words, e-business provides new business opportunities for the organisations. It also facilitates customers to choose the desired product from a variety of products offered by different manufacturers. E-business saves time and effort of both the parties (buyers and sellers) while making a transaction.
The following are the main characteristics of e-business:
- Provides support to manage different business transactions over different networks.
- Provides better quality and maximum customer satisfaction with optimal corporate decision-making.
- Enables business organisations to achieve high economic gain (lower cost) and rapid (high-speed, accelerated) transactions with the consumers.
- Allows customers to access the products and services of an organisation anytime and anywhere using the Internet.
- Provides better trading opportunities to small merchants as well as consumers, as they can have their own Web stores on the Internet to trade online.
- Opens new opportunities of earnings and revenue generation where consumers can also sell products to other consumers without maintaining an inventory of their own.
- Helps business organisations to improve the quality of their products and services on the basis of the feedback received from their online customers and consumers.
Elements of an E-business Solution
E-business intends to create an environment for business where trading partners interact and collaborate with each other for business transactions. In an e-business life cycle, businesses become more agile and flexible to maximise their SCM efficiency, improve customer service and increase profits.
To become an e-business solution, a company must ensure that its mission—critical business information systems, such as inventory, accounting, manufacturing and customer support interact with each other, and with partners and customers via web. For operational efficiency, businesses should also develop new distributed applications that extract data and launch business processes across systems. Therefore, an e-business solution should integrate the following systems:
This system is an important element of e-business. As we know, the success of an organisation directly depends on the level of customer satisfaction. Therefore, it is important for an organisation to build rapport with the customers, identify their needs and expectations and fulfil them. Maintaining a successful relationship with the customers helps the organisations to attract new prospects and gain market share.
CRM is a tool that helps in determining mutually satisfying goals between the organisation and its customers. A CRM system provides information related to the existing and potential customers of an organisation. It also provides information related to customers’ preferences and their feedback and facilitates customer interaction.
Unlike CRM systems, the ERP systems are ‘back-office’ systems that do not involve customers and the general public. ERP system is one of the most important cross-functional information systems. These integrate all the core business processes, such as purchase management, inventory management, production and distribution management, human resource, finance and sales. It produces a common database for all these business processes. The following are the major benefits of an ERP system:
- Supports the organisation with an integrated view of business processes
- Provides quality information to support all business processes
- Provides enterprise-wide information to managers for effective decision-making
- Supports organisational change and provides flexibility of business processes.
Many renowned organisations, such as Microsoft, Cisco and Coca-Cola have adopted the ERP system to increase operational effectiveness. However, installing an ERP system incurs heavy costs for an organisation.
It deals with the planning and implementation issues involved in managing a supply chain. It is a cross-functional information system that is able to adjoin business processes from an organisation to suppliers on the one hand and to customers on the other hand. It helps in planning, organising, directing and controlling all the activities related to procurement of required materials in an organisation.
The system also helps in coordinating and integrating the links involved in this process. These links include suppliers, transporters, wholesalers, retailers and customers. An SCM system coordinates the activities involved in the procurement of raw materials utilised in the production of finished goods. Supply chain management is a tactical task for every organisation since it has a direct effect on the efficiency of the business. Therefore, an organisation should have an effective SCM system. An SCM system helps an organisation to:
- Provide effective and timely feedback and control
- Avoid unnecessary delays in product delivery
- Prepare effective production planning
- Establish effective delivery pattern
- Maintain good relations with retailers, wholesalers and suppliers
Role of E-business
E-business involves business activities and transactions that are carried out between different entities, such as organisations, customers, as well as government authorities. Depending on the parties among which these transactions are carried out, various roles of e-business have been defined. These roles help in identifying the type of transactions that can be carried out between the participating entities. Let us discuss the different roles of e-business in different markets:
Role of e-business in B2C market
The B2C e-business involves business-to-consumer transactions in which a business or organisation sells its products or services directly to the consumers or end-users. For example, a transaction in which a customer visits the company’s website to purchase a new handset represents a B2C transaction. In other words, the transactions involving online buying and selling of products between the customers and manufacturers or service providers are referred to as B2C transactions.
To conduct B2C e-business with its customers, an organisation needs to undertake the following tasks:
- Identifying the type of consumers who are interested to purchase products online.
- Highlighting the advantages of products on the website.
- Determining the targeted consumers by studying their demographic information, such as age, sex and income.
- Identifying the features of a product that motivated the consumers to purchase it in the past.
- Identifying the key factors that motivated the consumers to purchase products more frequently.
Role of e-business in B2B market
This involves business to business transactions, where both the participating entities are organisations. In other words, B2B type of market involves e-business transactions, in which an organisation sells its products and services to other organisations.
An example of the B2B e-business is a transaction where wholesalers or retailers first buy products in bulk from organisations or manufacturers and then sell these products to customers. The major roles that e-business performs in B2B market are:
- Logistics: Deals with warehousing, transportation and distribution processes of a product.
- Application service provider: Handles the deployment, Web hosting and packaging of software from a central facility.
- Outsourcing: Refers to the delegation of services, such as Web hosting, security and customer-care solutions provided by an organisation to the third party.
- Auction solution software: Handles the operation and maintenance of real-time auctions over the Internet.
- Content management software: Facilitates the development and management of the website content.
Role of e-business in C2C market
In the C2C market, e-business involves business transactions that are carried out between two or more consumers. It has evolved as a new dimension of e-business where consumers can directly sell products and services to one another using electronic media. Various online organisations and business websites have been established to encourage the role of e-business in C2C market. The websites that offer classifieds, auctions and forums where people can sell and purchase products are some implementations of C2C e-business.
For example, eBay is a website that allows consumers to sell their products and services to other consumers. The C2C e-business is carried out between unknown parties. Therefore, various technologies and means are used to avoid any fraud.
For example, eBay provides the facility to the sellers and buyers to rate each other. This rating helps the prospective buyers to select the seller for their future business transactions. Apart from this, services of various payment intermediaries are also used to support payment through a third party. PayPal is an example of such a payment intermediary. The buyers can pay the amount of payment to PayPal instead of directly paying the amount to the sellers. PayPal then transfers the amount to the sellers once the purchased product reaches the buyers.
Role of E-business in C2B market
The transactions in which an individual offers services and products to organisations come under the purview of the C2B market. The C2B is the reverse of the traditional business model in which an organisation offers products and services to consumers.
The best example of C2B e-business can be cited from the relationship between a freelancer and a prospective employer. Organisations that want to avail the services of freelancers post their projects along with their requirements on the websites that support C2B transactions. The freelancers fill their bids for the projects. The organisations review the bids from various freelancers and select a freelancer who has posted an optimal bid.
E-business is a virtual marketplace where the buyers and sellers can interact with each other, communicate information about the services and products to be offered and negotiate about various business transactions. Carrying out business transactions using e-business provides new marketing domains to the sellers where they can reach more number of buyers.
An organisation decides to use e-business to carry out business transactions only if it foresees the underlying benefits that can be availed by providing its services online. Decision for using e-business, depends on the need of the organisation. Prior to starting e-business, an organisation needs to go through the following requirements:
- Problem Definition
- Research Process
- Identifying Factors to Support E-business
- Specifying Guidelines to Start E-business
Prior to adopting e-business, an organisation first needs to identify the problem with the existing system. E-business helps the organisation to find new customers, search new vendors and suppliers for products and services, and conduct efficient advertising at low cost. However, to become a member of e-business, the organisation sometimes has to pay some fees. This can be in the form of registration fees, percentage of business volume, service fees and fees for advertising.
Sharing of information at different levels among organisations helps them to adopt new selling methodologies and new ways to improve their products and attract consumers. Various researches have been performed to identify the key factors that help an organisation to perform e-business efficiently.
The identified key factors are then sorted on the basis of priority by interviewing different people. These include the top managers, sales managers, IT managers and purchasing managers from various organisations. At times, the feedback is also taken from the existing as well as potential customers about their demands and expectations. All this helps the organisations to devise better strategies and methods to increase competence in the global market and raise their overall production.
Identifying Factors to Support E-business
During the research process, the organisations also identify various factors that may help in conducting e-business practices. Following factors help an organisation to work on different areas to establish their business in the online world:
- Support for e-business activities by top management: E-business decisions need to be supported by the top management to ensure future success.
- Size of organisation: The organisation’s size can be an important factor in e-business when a large number of companies of different sizes are registered in the same e-marketplace.
- Appropriate e-marketplace selection: Prior to starting e-business activities, the organisations should analyse their needs and define their strategies. If an organisation selects e-business without considering its needs, it may lead to uninterested employees, additional costs, and the organisation may not achieve the desired result.
- Language for organisation’s website: A website is used as marketing and customer support tool. Therefore, the language used in the website should be user-friendly and region-specific. The organisations, which cater to the needs of foreign customers, need to provide websites in English along with the regional languages.
- Trained employees: The organisations need to train their employees about e-business and e-marketplace.
Specifying Guidelines to Start E-business
The objectives of an organisation should be properly defined before going for e-business to conduct its business. The objectives can vary from short-term goals to long-term plans. These may include achieving a rise in sale by 20% in foreign markets, introducing at least two new trading channels, or getting at least ten new buyers or suppliers.
After starting the e-business operation, the organisation needs to implement daily updates of their products on its website, educate as well as train employees and search for new e-business partners.
Impact of E-business on Organisations
E-business not only has the capacity to transform the traditional business models, but also improves the organisational efficiency across the value chain. Let us discuss the major impact of e-business on organisations:
- Improved operational efficiency and productivity
- Reduction in operating costs
- Improved competitive position
- Penetration into new markets through new channels
- Harmonisation and standardisation of processes
- Improved internal information access
- Improved relationships with suppliers and customers
Improved operational efficiency and productivity
This is the most significant impact of e-business. Organisations can use e-business technologies to interact with their trading partners. This helps them to streamline their operations and increase effectiveness at the same time. E-business also helps in improving productivity by removing operational waste and automating inefficient business practices.
Reduction in operating costs
E-business initiatives increase the efficiency of a business function by enabling easy collaboration with external partners. When organisations connect directly with suppliers and distributors, they are able to make their process more efficient and reduce per unit cost for producing products/services.
Improved competitive position
E-business may help an organisation in achieving a superior competitive position through:
- Global reach
- Rapid growth
- Low time to market products
- Optimisation of product distribution channels
Penetration into new markets through new channels
With e-business, location is no more a constraint for business expansion. E-business technologies help organisations to enter into new markets, which they had previously assumed to be too distant to be practical.
Harmonisation and standardisation of processes
E-business ensures cross-domain harmonisation of business processes, thereby ensuring smooth transactions across company barriers.
Improved internal information access
E-business initiatives result in quantitative and qualitative improvement of internal information access.
Improved relationships with suppliers and customers
E-business helps an organisation to share information and business processes with its customers and suppliers in a transparent manner. It thus builds stronger and more profitable relationships.
Force Driving Transformation of Business into E-business
The evolution of e-business has created a paradigm shift in the way businesses are carried out. Companies are changing their traditional ways of doing business into e-business models. The major driving forces behind this shift to e-business:
- Strong competition: Organisations are using e-business as a tool to attain competitive advantage. They are using new e-business technologies to perform more effectively than their competitors.
- Global economy: With advancment in global trade, companies are expanding their businesses and operating in various countries. In other words, today’s economy is characterised by the consolidation of international markets for goods, services, technology, investment and labour. It has made countries dependent on each other up to a great extent for doing business practices. This necessitates the usage of e-business practices to make a grip over different national and international market.
- New technologies: Technology helps organisations to lower their overall cost of production. New technologies are developing everyday and providing an easy, cheap and secure platform for e-business.
- Global collaborations: Organisations can now easily access, share and organise their knowledge and expertise using IT technologies. This has led to the integration of processes, thus increasing the use of e-business initiatives.