Specifically, the project will examine managerial attitudes and opinions towards B2B commerce and the challenges faced by such companies in the evolving Internet economy. The following research questions are of significance to the study: Is there an understanding of e-commerce, the Internet and B2B amongst SME managers? Are they familiar with the ways of fully utilizing B2B? What are the opportunities for involvement in B2B? What are the benefits of involvement in B2B? Are there effects if not? What investments are necessary for training and development? What way will it affect existing business relationships? Chapter 2 The Evolving E-commerce Economy 2.1 Introduction This dissertation will examine B2B transactions in an SME context and will seek to determine the nature and extent of B2B among small businesses in the Southeast region.
The change the Internet offers is the improved efficiency in exchanging information. The transaction costs have declined and it is easier and cheaper for a company to exchange information with other companies. Enormous information technology investments are no longer needed to interact with supply chain partners electronically. The solutions should be within reach for all companies independent of size. 2.2 Definitions of E-commerce ‘E-commerce is the ability to perform transactions involving the exchange or use of goods or services between two or more parties using electronic tools and techniques’. Treese and Stewart (1998) Some main technologies have made e-commerce viable ‘ www, Electronic Data Interchange (EDI), Electronic Funds Transfer (EFT) and E-mail. ‘EDI is the inter-organizational, computer-to-computer exchange of business documentation in a standard, machine-processable format. EFT was designed to optimize electronic payments with electronically provided remittance information.’
Kalakota and Whinston (1997) E-commerce provides the capability of buying and selling products and information via telephone lines, computer networks, and other electronic means. The Internet, the largest network of computer networks, is the medium usually favored for electronic commerce because it allows an organization to cut service costs while increasing the speed of service delivery. E-commerce is considered a primary means by which organizations may expand rapidly into the high growth emerging markets of the world. This is possible because, firstly as transnational companies become skilled in their use of the Internet, they will be able to pursue global electronic commerce more efficiently, saving important advertising, communication, and administrative costs.
Secondly, the Internet can increase responsiveness by notifying individual customers when new products in their areas of interest become available and by creating customized products and services. Thirdly and finally, transnational companies using the Internet can increase their knowledge about consumer habits, be able to define trends, and turn consumer statistics into long-term customer relationships. Boudreau et al (1998) 2.3 B2B E-Commerce Forrester Research defines business-to-business e-commerce as ‘inter-company trade in which the final order is placed over the Internet’. The definition is constructed since the order is only one of the transactions needed between trading partners. It is ‘Information and telecommunication enabled collaboration across horizontal and vertical value chains’. (Eloranta 2000) E-business creates a platform for coordinating demand/supply chains and wider business networks. Another aspect at micro-level is that e-business makes it possible to capture a vast number of one-to-one relationships.
E-business models are ‘all the business models using the Internet as a means of information delivery’ (Huttunen 2000). This definition is encompassing since it includes all kinds of relationships. B2B e-commerce was born out of an attempt to solve an administrative problem. It developed a new computer standard to handle these needs, which became known as EDI, Electronic Data Interchange. Today its descendant, XML, a lighter, simpler data interchange standard is used by B2B sites. Simple e-commerce sites first appeared in 1992. The early e-commerce sites were virtual catalogs, simply listing products for sale. Ordering was off-line, through e-mail, phone or fax. By 1996 the technology had advanced greatly to produce virtual stores with shopping carts, client accounts and, with the development of protocols such as Secure Socket Layer, enabled customers to order and pay for their purchase on-line directly by credit card. (www. Shelron.com “E-commerce: A Brief History”. 2000)
B2B e-commerce quickly became popular with consumers and suppliers. For customers, it was fast, easy and efficient, allowing them to compare products, prices, and services before a purchase. For suppliers, it allowed them to reach an unlimited international audience, 24 hours a day, 7 days a week at reduced costs. Today e-commerce is widely used and growing fast. B2B is the largest, fastest-growing and most profitable market. According to the Internet Development Company (IDC), this year, it is expected to account for two-thirds of worldwide e-commerce. B2C is also expected to grow, boosted by Broadband (high-speed) Internet access to more on-line households. Future advances include digital money and e-wallets, and ‘personal agents’ that help users find what they are looking for and of course WAP phones. Sites can work with fulfillment centers providing customers with excellent service and suppliers with information and can support the newest trend for human interaction in e-commerce customer service.
2.4 The Importance of the Internet in B2B trade In an AT Kearney Report (AT Kearney, 1999) possible channel strategies that the Internet offers are outlined as follows: a) Selling b) Electronic marketing, advertising and promotion c) Digital distribution of goods and services d) After-market products and customer support In the area of operations, the following uses of the Internet have been listed (AT Kearney, 1999): a) Online publications and communications b) Procurement and sourcing c) Digital co-operatives d) Transportation and logistics e) Digital supply chain f) Digital configuration g) Global communication and production h) Integrated enterprise resource planning systems i) Variable pricing 2.5 Some Impacts of the Internet on Business-to-Business (B2B) E-commerce It has already been suggested that the Internet will revolutionise the traditional ways of doing business; and it will also bring changes for the B2B sector.
These may be detailed as follows: – a) Access to more partners, customers or suppliers If within consumer businesses there exists an opportunity to reach a wide group of consumers, in the B2B area there also exists an opportunity to reach more suppliers, even globally. It is not a problem to share sales and inventory information with more suppliers with company benefits through lower purchasing prices. b) Outsourcing and specialization Manufacturers and distributors are in a more difficult situation. While requirements have grown, speed, accuracy, service level and customization requirements are high.
While specialization is needed, outsourcing has become more attractive as it is more cost-effective than before thanks to more efficient communication. Henriott (1999) However, not all companies outsource their production. They fear losing control over intellectual property and quality or leaking innovations to competitors. They also want to keep in touch with customers and industry trends. Engardio (1998) c) The changing role of customer Relationships may change in B2B e-commerce. Customer know-how is employed in many e-commerce cases, as the customer has the facility to configure the product required and in some cases, the control of the supply chain is also customer controlled.
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