E-Business & Competitive Forces

What is E-Business?

     Technology has changed the way most companies do business.  Even if a company does not have an online store, they are likely using the internet or other networks to enable various types of business activities and find customers.  Many people have heard of the term “e-business” before, but the actual meaning of the term might be surprising.  The term “e-business” and “e-commerce” are sometimes used interchangeably; however, they are not the same.   The term “e-business” was initially coined by former IBM CEO Lou Gerstner (Marakas & O’Brien, 2011).  E-business is defined as using the internet, networks, and information technology to help promote e-commerce, collaboration and communication, and web-enabled business processes (Marakas & O’Brien, 2011).  E-commerce falls under the e-business category; however, e-business also includes internal processes such as inventory management, finance, production, knowledge management, human resources, and a plethora of other business processes (Bartels, 2000).

(Towson University, 2013)

     In 1997, IBM launched a campaign to convince the world that the internet was great a place to conduct their business and make money (“IBM to Launch Ad Campaign”, 1997).  The advertisements contained logos that were created to resemble the “@” in order remind the viewers that these ads pertained to activities that could be conducted over the internet.  

(“Transforming the World”, n.d.)

(“Transforming the World”, n.d.)

Types of E-Business Systems

     As noted earlier, there is much more to e-business than just e-commerce.  Various other systems use the Internet and other networks to help firms collaborate and communicate.  A few examples of these systems include customer relationship management (CRM), supply chain management (SCM), enterprise resource planning (ERP), transactional processing systems (TPS), human resource management systems (HRM), accounting and finance systems, and manufacturing information systems (Marakas & O’Brien, 2011).  E-business has changed the way companies manage inventory, support and recruit employees, perform daily processes, and interact with their customers.  E-business systems provide companies with new ways of gaining a competitive edge in an increasingly competitive market.

E-Business Systems and Competitive Forces

(Porter, 2008)

     Using an eye test, all varieties of industries appear to be different on the surface, but the behind the scene motivating factors of profitability are the same. Companies must navigate the competitive waters of rivals within their industry, but the term competition is just a blanket overview of the ever changing dynamics involved in business. Established rivalries are a basic competitive factor, but other influences include customers, suppliers, prospective industry entrants, and substitute or generic products; all are industry drivers companies must successfully juggle in order to become profitable. (Porter, 2008)

                                                                                                  

     The emergence of e-business has not been immune to the influences of competitive forces.  An understanding of the effect that these five competitive forces place on a business will benefit a company in developing a strategy for a long-term business plan that anticipates changes and allows for flexibility when market patterns fluctuate or new competition emerges. Although the predominate competitive force varies by industry, the ability to determine which has the greatest impact allows a company to have direct influence on their competition and control their capability for profit. (Porter, 2008) Anytime a competitive advantage is gained, the new market position can easily be copied by a rival. The consistent competitive forces placed on business makes any competitive advantage temporary at best and requires e-businesses to consistently evaluate their venture and strive to achieve better business practices. (Serbanica, 2008)

How are E-Business Systems Being Used?

     When IBM first informed the public about the wonders of e-business in the 1990’s, they described the ways that e-business will change the world.  The company talked about how consumers could make purchases in virtual stores and have money immediately deducted from their bank accounts, and how retail companies would be able to use the internet to manage purchase orders and keep inventories stocked for consumers (“Transforming the World”, n.d.).  IBM’s vision was right on track.  Now e-business is changing the ways that companies operate.  The use of e-commerce is probably one of the easiest examples to show how e-business has changed companies competitive positions.  Smaller companies are looking to the internet to find more opportunities and a larger customer base (Root III, n.d.).  The threat of new entrants is now becoming very real for many companies.  Interacting on an internet platform helps “level the playing field”, and even the smallest companies can compete with the largest and industry leading companies (Root III, n.d.).  E-business has decreased many barriers to entry that once existed and have made it easier for smaller companies to gain a foothold in the market. 

        Customer relationship management systems and other marketing information systems are helping to promote product and service differentiation and improve the company’s competitive position.  CRM systems help companies identify their best customers and can help the company customize services based on the customer’s needs (Marakas & O’Brien, 2011).  Customers can now immediately and conveniently access real-time account information from anywhere, at any time, through the use of e-business systems (Root III, n.d.).  Marketing has also been revamped through the use of e-business.  Many consumers look to the internet to find information about companies, items, and services.  Using e-business to get their information to potential consumers gives companies the opportunity to find a whole new market of customers (Root III, n.d.).  Using e-business tools to offer customers what they need as soon as they need it influences competitive forces by helping to increase brand identification and reputation (Porter, 2008).

       Companies are also now able to save money, reduce sales staff, and spend time finding new customers by allowing legacy clients to place their own orders through real-time inventory software (Root III, n.d.).  Offering convenience to customers helps increase the power of the supplier in the competitive forces.  While there might be an influx of other suppliers in the industry, do they all offer the same convenience and ordering options as those who fully utilize the power of e-business?  Also, developing an inventory system with companies can potentially create switching costs, which can also increase the power of the supplier.  

            It is also obvious that the emergence of e-business has also increased the power of the buyers.  E-business has given consumers more access other undifferentiated products.  Buyers can quickly and easily find alternatives, influencing competitive forces (Porter, 2008).  E-business also makes it easier for consumers to use the internet to research and access substitute products (Porter, 2008).

Examples of E-Business Systems Success

In today’s competitive market, some type of e-business has almost become a requirement for a company to remain successful. If properly implemented, some of these new innovative forms of e-business can help separate a company from the competition resulting in increased business success. Walmart serves as one of the best examples of the possible benefits of e-business systems and how it can vastly improve a company’s competitive position in the market. Walmart was one of the earliest adopters of e-business systems and it was one of the main reasons they were able to increase their sales numbers from $8.4 billion to $118 billion in just a 12 year span and establish themselves as one of the top companies in the North American retail market (Cecil Buffington Enterprises, n.d.). Walmart chose to implement e-business in an attempt to revamp their procurement process and find a better way to coordinate with their suppliers. The supply chain management (SCM) system they implemented gave them a huge competitive advantage in the market and completely transformed the way today's companies manage their supply chains. This SCM system allowed them to accurately monitor all of their inventory real-time and use this sales data to analyze trends and produce accurate purchasing forecasts. They used these tools to develop a “pull” supply chain approach where inventory levels are driven by customer demand (iTeam Technical Solutions, n.d.). This system allowed Walmart to free up capital by reducing inventory and at the same time, made them more capable of handling fluctuations in customer demand. By reliably providing the customer with any items desired, Walmart was able to quickly grow to the dominant retail company it is today.

(Amazon.com, Inc, n.d.)

Although e-business is one of the main contributors to Walmart’s early success, in recent years it has introduced competition new entrants using new forms of e-business. The company currently posing the biggest threat to Walmart is Amazon.com, another great e-business success story (Manjoo, 2012). In only 20 years since its launch in 1994, Amazon.com has grown to one of the largest retailers in the world with almost $89 billion dollars in sales for 2014 (Amazon.com, Inc., n.d.). Amazon did this through the use e-commerce applications and is widely considered the pioneer of online retailing (History of Amazon.com, Inc., n.d.). Amazon’s customer relationship management (CRM) system provides the customer with a personalized shopping experience where they can purchase almost any item they could want. Amazon's focus on customer service has brought them increased popularity among consumers, allowing the company to grow at an unprecedented rate (Amazon.com, Inc., 2013). Over the last ten years, Amazon’s sales have increased from $6.92 billion to $88.99 billion and today they are the leading online retail company in the United States (Amazon.com, Inc., n.d.). Their innovations in e-business have transformed the online shopping industry and have brought success to many companies who have modeled their e-commerce platforms off of Amazon’s. Some of the most notable of these companies include Gap, Dell, eBay, and BustBuy; all of which provide additional real world examples of the success a company can experience with the right e-business system.

Works Cited:

Amazon.com, Inc. (2013, June). Overview. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-mediaKit

Amazon.com, Inc. (n.d.). Quarterly Results. Retrieved from http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsother

Amazon.com, Inc. (n.d.). Amazon Home Page. Retrieved from Amazon.com Web Site: http://www.amazon.com/

Bartels, A. (2000, October 30). Computerworld. The difference between e-business and e-commerce. Retrieved February 26, 2015, from http://www.computerworld.com/article/2588708/e-commerce/the-difference--between-e-business-and-e-commerce.html

Bhushan, A. (n.d.). Top Most Popular E-Commerce, E-Business or online retailer Websites Reviews. Retrieved from CEO World: http://ceoworld.biz/ceo/2010/03/25/top-most-popular-e-commerce-e-business-or-online-retailer-websites-reviews

Cecil Buffington Enterprises. (n.d.). The History of Wal-Mart. Retrieved from Cecil Buffington Web Site: http://cecilbuffington.com/photo3_38.html

Hamel, G. (n.d.). Examples of E-Business. Retrieved from Small Business: http://smallbusiness.chron.com/examples-ebusinesses-15758.html

History of Amazon.com, Inc. (n.d.). Retrieved from Reference For Business Web Site: http://www.referenceforbusiness.com/history2/35/Amazon-com-Inc.html

IBM to Launch Ad Campaign For E-Business. (1997, September 7). Telecompaper . Retrieved February 26, 2015, from http://www.telecompaper.com/news/ibm-to-launch-ad-campaign-for-ebusiness--119248

iTeam Technical Solutions. (n.d.). Wal-Mart: An E-Business Success Story. Retrieved from http://www.childcareworldwide.ca/articles/ecommerce/Walmart_an_eBusiness_Success_Story.php

Manjoo, F. (2012, December). Walmart's Evolution From Bix Box Giant To E-Commerce Innovator. Retrieved from Fast Company: http://www.fastcompany.com/3002948/walmarts-evolution-big-box-giant-e-commerce-innovator

McNeil, K. (n.d.). Push vs Pull Supply Chain Models. Retrieved from Advantage Internation Web Site: http://www.advantageinternational.com/www/content/default.aspx?cid=921&

Porter, M. E. (2008, January). The Five Competitive Forces That Shape Strategy. Retrieved from Harvard Business Review: https://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1

Root III, G. (n.d.). Chron.com. What Are the Benefits of E-Business Technology? . Retrieved February 26, 2015, from http://smallbusiness.chron.com/benefits-e-business-technology-4048.html

Serbanica, D. (2008). Competitive Advantage By Integrated Business In Supply Chains: A Strategic Approach. Retrieved from Academia: http://www.academia.edu/2417663/COMPETITIVE_ADVANTAGE_BY_INTEGRATED_E-BUSINESS_IN_SUPPLY_CHAINS_A_STRATEGIC_APPROACH

Towson University. (2013, October 26).  What is E-Business?  Retrieved February 26, 2015, from https://www.youtube.com/watch?v=1VQMpr5fI8Q

Transforming the World. (n.d.). IBM - Canada. Retrieved February 26, 2015, from http://www-03.ibm.com/ibm/history/ibm100/us/en/icons/ebusiness/transform/