Introduction to e-Business

Colin Combe

• Editorial: Routledge
• Año: 2012
• ISBN:
  9781136392894
• Edición: 1
• Categoría: Business
• Categoría: Business General

An Introduction to e-Business provides the contemporary knowledge of the key issues affecting the modern e-business environment and links theory and practice of management strategies relating to e-business. This book brings together the most cogent themes for an introduction to e-business and constitutes a valuable contribution to formalising common themes for teaching the subject in higher education. It brings together theoretical perspectives based on academic research and the application of e-business strategies. These concepts are further explored in the six case studies that follow the set chapters. This new textbook integrates the main themes to provide a complete picture of the key elements relevant to an introductory text in e-business. To fully appreciate the e-business environment it is necessary to understand the links between the different disciplines that come together to form

Introduction

DOI: 10.4324/9780080492780-1

Key issues:

• Defining e-business;
• The development of the new economy;
• Types of e-business and related industries;
• The growth of e-business;
• Use of the internet;
• Key people;
• Scope of the book;
• Structure of the book.

Defining e-business

Electronic business (e-business) can be defined as the use of the internet to network and empower business processes, electronic commerce, organizational communication and collaboration within a company and with its customers, suppliers, and other stakeholders. E-businesses utilise the internet, intranets, extranets and other networks to support their commercial processes. Electronic commerce (e-commerce) is the buying and selling, marketing and servicing of products and services via computer networks. Since e-business includes the process of transacting with suppliers and customers there is an overlap in activities with e-commerce.

Although the terms ‘e-business’ and ‘e-commerce’ are often used synonymously, the distinction between them lies in the broader range of processes in e-business that incorporates internal transactions within an organisation. These include transactions relating to procurement, logistics, supply chain management, payments, stock control and order tracking. As Chaffey (2004) notes, e-commerce can best be conceived as a subset of e-business. Where the two concepts overlap is in the buying and selling of products and services. Buy-side e-commerce refers to electronic transactions between a purchasing organisation and its suppliers and sell-side e-commerce refers to electronic transactions between a supplier organisation and its customers. Figure 1.1 illustrates the relationship between e-business and e-commerce.

Figure 1.1 The relationship between e-business and e-commerce

The development of the new economy

Throughout the book references will be made to ‘the internet economy’, ‘the information economy’ or ‘the digital economy’. These terms are used to define the distinct contributions to the economy through use of the internet, digital technology, or information and communications technology (ICT). Together these types of technologies have created the so-called ‘new economy’, one that is based on entrepreneurship in knowledge creation and sharing, innovation and creativity, and utilising information technology for developing and selling new products and services. The new economy defined the industrial landscape of the late twentieth century and will be the dominant driver of economies well into the new millennium.

The new economy has been boosted by the development of the infrastructure that supports the internet, ICT and digital technology. The rollout of high-speed broadband internet access means more people can connect to the internet at higher speed and with greater flexibility and scope of activities. Digital exchanges and fibre-optic networks mean that the convergence of technologies further boosts the new economy. Where once the internet, television broadcasting and telecommunications were separate and distinct industries, convergence means that these sectors have increasingly merged, thereby offering consumers greater scope for accessing services via one technology. For example, the new economy is boosted by the development of internet access on mobile phones because it means knowledge workers can access information and communicate with others from almost any location. The convergence of the internet and television means that interactive television provides an additional media for facilitating online sales of products and services.

At the business level, organisations are no longer viewed as individual entities but as part of an integrated network of organisations where information and communications technologies play a key role in smoothing transactions and collaborative ventures between partners. The internet has opened up the possibility of exchanging information, products and services around the globe without any restraints of time or distance. This has given rise to the concept of the ‘boundaryless’ organisation. Indeed, the new economy is characterised by changes to the boundaries of whole economies as well as industries and firms. In the last few decades these changes have led to a marked acceleration in globalisation.

The diffusion of information technologies has played a key role in knowledge sharing, encouraging innovation and creativity, integrating global supply chains, facilitating global trade and creating wealth. There is also a local characteristic to the new economy as organisations utilise information technologies to serve local or regional demand. The scope of the new economy encompasses the spectrum from localisation through to globalisation and lends meaning to the concept of the ‘boundaryless’ organisation, industry or economy.

Information technology has also enabled new forms of management and control, both within organisations and between organisations. Information technology makes it possible to simultaneously co-ordinate economic activity in many different locations and beyond traditional organisational boundaries. This has enabled organisations to create new structures, such as the network organisation or the virtual organisation, that are more flexible and efficient, harness the best skills and experience of workers and eliminate many of the costs associated with running traditional hierarchical and rigid organisations.

The new economy is also characterised by changes in the competitive structure of industries. The traditional model, based on mass production where competitive advantage was gained through decreasing production costs or increasing productivity, has given way to a need for organisations to adapt to changes in market conditions, seek new opportunities, enhance learning, embrace change and innovation, and create and share knowledge. Managers in organisations have to co-ordinate and control the use of information technologies such as the internet, intranet, extranet and applications software to help meet these challenges and take advantage of the opportunities associated with operating within the new economy. Figure 1.2 summarises the key differences between the old and new economy from the perspectives of the overall economy, businesses and consumers.

Figure 1.2 Key differences between the old and new economy

Types of e-business and related industries

E-business varies in scope and type of activities undertaken. The entire supply chain of many industries has been radically transformed by the development of the internet and related technologies. Some organisations specialise in business-to-business (B2B) activities by providing e-business services across the supply chain or in parts of the supply chain such as e-procurement, logistics, stock control, ordering, payments and distribution. E-business also includes the organisation of collaboration platforms that allows different organisations to share information and knowledge for mutual benefit, i.e. the organisation of e-marketplaces that bring organisations together for buying and selling products and services or providing an online business support service.

The most high profile types of e-business involve those that sell products or services to customers. The business-to-consumer (B2C) sector has attracted the highest number of entrants as well as some of the most successful e-business ventures such as Amazon.com, e-Bay and FriendsReunited. The latter two also incorporate a consumer-to-consumer (C2C) element to their service by bringing consumers together for specific purposes. Most organisations now have a website that is used for promoting the activities of the business or marketing their products and services. More and more traditional firms are creating their own e-business and e-commerce websites to offer an additional sales channel for their customers (Tesco.com, marksandspencer.com).

There is a large industry sector that supports e-business, including Internet Service Providers (ISPs) such as Yahoo!, Google and AOL. These organisations run a number of services including internet access and search engines and have built up enormous databases of websites that form the basis of their search engine. Organisations who want to have their websites on the search engine pay an amount relative to the prominence on the list. Other organisations specialise in providing applications software for facilitating e-business or sell hardware such as computers and modems (Dell, Compaq, IBM). There are many thousands of businesses that specialise in maintaining and supporting e-businesses, including computer analysts, IT specialists, software consultants, applications consultants, computer trainers, security consultants and so on. The development and maintenance of the network infrastructure is a vital industry for ensuring high quality access to internet services and includes some of the world’s biggest and most complex organisations such as BT and Cisco.

The growth of e-business

The most significant factor that transformed the internet into a global communications phenomenon was the development of the World Wide Web (WWW) in the early 1990s. This extended the functionality of the internet by introducing hypertext that linked documents held on the internet servers. This facilitated access to particular parts of documents or even to other relevant documents held on other servers. This was called the hypertext transfer protocol (HTTP) and derived from a mark-up language called hypertext markup language (HTML). Within the servers, each document, or pages within documents, are given a unique address. The addresses are termed universal resource locators (URL’s). The ability to access pages, documents and servers from many different websites created a network of interconnectivity and gave rise to the term the World Wide Web.

The Web was the catalyst for huge changes in the business environment as more and more firms sought to integrate their traditional business models with those online. By the mid 1990s firms ‘born on the net’ emerged, whose function was to exploit the opportunities in the marketplace by using the internet. However, the key driver of the phenomenal rise of the internet was the rapid increase in the use of computers with access to the internet and the Web by the public. From 1993 to 1996 the number of computer users with access to the internet and the Web rose from zero to 10 million. In 2004 the figure stood at around half a billion. Also, the number of websites appearing on the Web has increased exponentially from 1993 onwards. In the months following the release of HTTP and HTML there were less than 50 websites in existence. By the end of the decade there were countless millions available.

Since the commercialisation of the internet in the mid 1990s demand for its use has increased hugely each year. In fact, the growth of the internet has been such that there are fears that the existing infrastructure may be unable to sustain demand into the future. The internet has had a profound effect at so many different levels including individuals, society, business, governments, education, health, security services, entertainment, news services, financial markets and many others. To comprehend the staggering growth of the internet many analysts turn to the prediction of the founder of Intel and inventor of the chip, Gordon Moore. In the mid 1960s Moore predicted that the number of components that could be located on a single chip would double every twenty-four months. In the twenty years between 1974 and 1994 the Intel 8080 chip increased the number of transistors from 5000 to over 5 million. This exponential growth phenomenon became known as Moore’s law and can easily be related to the growth witnessed in demand for access to information technology in general, and the internet in particular.

The internet has created a new communications channel and provides an ideal medium for bringing people together cheaply, efficiently and for a wide range of different reasons. It has also presented opportunities and challenges for the business community. As consumers become more knowledgeable about using the internet to service their needs and wants so the business community has been boosted by the potential the internet presents for extending markets, developing new products and services and achieving a competitive advantage and profitability. New markets quickly emerged based on applications of the internet, most prominently the business-to-consumer (B2C) and business-to-business (B2B) sectors.

One of the key characteristics of e-commerce is the ease of entry for firms. The cost of entry and exit is low relative to traditional industries, as firms do not require large sales teams, costly investment in infrastructure or high sunk costs in order to compete effectively. Rising connectivity rates among potential customers ensures increasing competition among e-commerce firms as more are attracted to the source of potential revenue. Importantly, the internet does away with geographical boundaries thereby increasing yet further the extent of competitive rivalry. Intense competition is a characteristic of the internet economy and has spread across all e-business and e-commerce sectors. Figure 1.3 outlines the main benefits that firms and consumers gain from using the internet.

Figure 1.3 Advantages of using the internet for firms and consumers

Use of the internet

Demand for internet services has been growing year on year since it became generally available to the public in the mid 1990s. The internet has had an impact on the economic and social fabric of many societies and has been the catalyst for changes in the way people interact, do business, gain information and seek entertainment. The internet has provided a whole new economy with its own rules and terms of engagement. Businesses and customers have been through a period of learning about how they can best leverage advantage from using the internet and many users are now adept at utilising the technology in a versatile and effective way to enhance their lifestyle.

In the UK around 60% o...