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Lesson 3 The impact of e-commerce on business models
Objective Describe how e-commerce influences and changes the dynamics of business.

Impact of e-commerce on Business Models

Describe how ecommerce influences and changes the dynamics of business. Why has Web-based ecommerce already revolutionized business in so many industries? Although there are many different factors, the overriding reason has to do with geographic market reach. Quite simply, companies that previously were limited in terms of geography, marketing, and distribution, can instantly become global players by selling goods and services over the Web. On the Web, all businesses automatically possess a worldwide reach.
On the surface, the Web's global reach can make for appealing stories. The Web offers the opportunity for businesses to dramatically alter the flow of products and services, and to change the playing field in many industries.
As a result, start-up Web specialty businesses (the notorious "dot-coms") tried to take early mover advantage of the opportunities afforded by the Web's reach. Brick-and-mortar companies (companies which pre-existed Web-based e-commerce) reacted to the changes set in motion by the dot-coms, and fought back with their own Web-based e-commerce. In many cases, the brick-and-mortars, renamed "click-and-mortars" once they earned their Web stripes, creatively went beyond even the dot-coms in terms of their application of e-commerce.

How the Web affects industry change

The Web affects industry change in several areas, including competition, marketing, service, and sales. The risks are real, and businesses cannot enter into e-commerce lightly. The following Slide Show describes some of the specific business model changes and risks associated with the Web:

E-Commerce Management
  1. Web based ecommerce lowers the barriers of entry for virtually any industry. Because the cost of using the web as a retail outlet typically is far less than the costs of a physical store, a rash of new competitors should be expected.
  2. Brick and mortar companies will take advantage of the web to move into new industry arenas.
  3. An influx of competition into an industry usually translates into changes in product, mix, pricing, branding and supply chain partnerships.
  4. The ability to market often differentiates companies. With the web, however, the marketing differences between companies become far easier for buyers to compare. With only a few keystrokes and clicks, a buyer can compare the web sites, and thus the products, prices and associated services of competitors.
  5. The web generates new prospects and customers for companies, and new methods of marketing to those prospects/customers and existing customers.
  6. A new science of marketing known as e-marketing has evolved to deal directly with the marketing challenges of doing business on the web. One of the disciplines of e-marketing. known as personalization, enables organizations to simulate one-to-one marketing to prospects and customers.
  7. The notion of brand remains every bit as important on the web as it did before the web gained popularity.
  8. Many companies have always taken pride in differentiating themselves from their competition through superior customer service. ecommerce offers new opportunities for organizations to distinguish themselves by offering customer self-service on the web.
  9. Companies that provide extensive product information, or related product/service information, and even access to customer support specialists through email or chat, not only keep their web-centric customers happy, but cna reduce the overall operational costs of customer service.
  10. Of course, the most obvious business model change resulting from e-commerce falls in the area of sales. E-commerce web sites may significantly reduce the cost of sales and savvy dot-comes and click-and-mortars have figured out ways of empowering web prospects and customers.
  11. Allow web prospects and customers to perform their own product/service comparisons, configure their own pricing, choose their own shipping, make the payments, and track the fulfillment, all without the aid on an actual salesperson.

Impact of ecommerce

Impact of global reach, virtual sales, and online payment

With the incredible global reach offered by e-commerce comes an array of risks that many businesses and organizations never even considered. Global reach, virtual sales, and online payment all carry dangerous risks that can potentially put a company out of business.

Risks of Web-based e-commerce

  1. Payment fraud and other security issues,
  2. new forms of tax and customs considerations, and
  3. misrepresentation of products and services
all mean that these risks are real, and that businesses cannot enter into e-commerce lightly.
In summary, Web-based e-commerce empowers all kinds of businesses, start-ups and established players alike, to test new markets, form creative partnerships, and chase previously untouchable business opportunities on a worldwide basis by means of a few simple keystrokes and clicks.
In the next lesson you will learn more about B2B, B2C, and e-marketplaces.

Web Business Model Changes

Click the exercise link below to complete an exercise on specific business model changes associated with the Web.
Web Business Model Changes