MODULE 5: NEW OPPORTUNITIES FOR EXPANSION
Science and Technology have always influenced modes, practices and procedures of business
and trade. The advancement of Science and Technology, more particularly in electronics and
internet, has profoundly influenced the conduct of business in the world. The fast changing
information technology and convergence of various communication technologies have
virtually taken the business practices by storm. The use of Internet has made the world small
and through it, business transactions are conducted globally at a faster pace. The age of
connectivity has reduced distances and brought people closer. This can be directly attributed to
the development of electronics and communication technologies.
Computers and the Internet are now increasingly widely used to function as part of doing
business. Transactions conducted through the Internet have enormous implications on the
international competitiveness of every nation, giving rise to new and exciting opportunities in
national and international industries, the governments and for individuals. In this module we
describe the use of Internet and other electronic technologies as means of achieving New
Opportunities for Business Expansion.
WHAT IS E-BUSINESS?
Electronic Business or e-Business refers broadly to the use of technologies, particularly the
Information and Communication Technologies (ICTs), to conduct business or facilitate
improved business activities and processes, including procurement, operation, manufacturing,
marketing and sales, logistics, human resources management, finance, and research and
development. Originally, the term e-Business refers primarily to the digitally enabled
transactions and processes within an organization, involving information systems under the
control of the organization. E-business does not include commercial transactions involving an
exchange of value across organizational boundaries. These online interactions are aimed at
improving or transforming business processes and efficiency. Over time, e-Business has been
known to cover online transactions, extending to all Internet- based interactions with business
partners, suppliers and customers such as selling direct to consumers, manufacturers and
suppliers; monitoring and exchanging information; auctioning surplus inventory; and
collaborative product design.
E-Business, therefore, relates to any commercial activity that is conducted in an electronic
format including commercial transactions conducted via the Internet, telephone and fax,
electronic banking and payment systems, electronic purchasing and restocking, etc. Like the
telephone, fax, and calculator, e-Business is a tool that can enable increased productivity,
improved customer services, and reduction in costs.
E-Business is not limited to certain type of business or technology, but includes networking,
allowing sales and marketing activities, purchasing and logistics, production, education,
design and engineering to take place. The most effective use of e-Business is when a business
combines several of these activities allowing information to flow from sales, to purchasing and
production. It facilitates creating more effective external interactions with customers, clients,
collaborators and suppliers, as well as helps improve internal business efficiency and even the
emergence of new products and services.
E-Business could be generally described as any ICT enabled system that suppliers,
distributors, or customers use, as the basis for conducting their business operations, such as:
• Communicate with clients or suppliers via email;
• Send email to other organizations to order supplies;
• Sell or promote products or services via a web site and/or email;
• Publish a web site to provide public information about the business;
• Use the Internet for online banking and paying bills;
• Research information about customers and competitors using web sites;
• Provide technical or customer service by email or web site; and
• Manage and distribute internal organization documents via an intranet.
WHAT IS E-COMMERCE?
The advances in Information and Communication Technologies (ICTs) and the emergence of
the Internet have revolutionized business activities enabling new ways of conducting business
referred to as electronic commerce (Zwass 2003; Turban, King, Lee, & Viehland, 2004).
Electronic commerce (e-Commerce) describes the process of buying, selling, transferring, or
exchanging products, services, and/or information through computer networks, principally the
Internet (Turban et al., 2004). Electronic commerce can also be described as the sharing of
business information, maintaining of business relationships, and conducting of business
transactions by means of telecommunications networks (Zwass, 2003).
Due to the invention of internet, web technologies and other electronic devices, a new form of
commerce known as e-Commerce has emerged. Electronic Commerce (e-Commerce) is a set of
technologies, applications, and business processes that link businesses, consumers, and
communities for the purposes of buying, selling, and delivering products and services; as well
as for integrating and optimizing processes within and between participating entities. E-
Commerce builds on traditional commerce by adding the flexibility and speed offered by
electronic medium, thereby facilitating improvement in operations leading to substantial cost
savings, as well as increased efficiency and competitiveness through the redesign of
traditional business methods.
E-Commerce involves the application of ICTs to conduct commercial transactions between and
among organizations and individuals. It could be said to comprise of all commercial
transactions mediated by digital technology (landline telephone, fax, mobile phones,
electronic mail and Internet), between private individuals or commercial entities, which take
place in, or over, electronic networks. The object of the transactions could be tangible or
intangible. The only important factor is that the communication and transactions take place over
an electronic medium.
DIFFERENCE BETWEEN E-BUSINESS AND E-COMMERCE
The terms ‘e-Business’ and ‘e-Commerce’ are often used interchangeably, but what do these
words really mean? While the meaning of the words Commerce and Business are essentially the
same in English as nouns describing organized profit-seeking activity, there is a
difference between e-Commerce and e-Business. The difference is quite artificial, but
different terms do carry different meanings.
As was mentioned earlier, e-Commerce refers to online transactions - buying and selling of
goods and/or services over the electronic medium especially the Internet. Electronic business
transactions involving money are "e-Commerce" activities.
However, there is much more to e-Business than selling products and services. What
aboutresearch, development, marketing, procurement and customer relations? To sell
online
successfully, much more is required than merely having a website that accepts credit cards.
Selling online successfully requires a web site that people want to visit, accurate catalog
information, good logistics, and much more. The term "e-Business" highlights the fact that
definition of e-Commerce was too narrow. To be successful, we need to think more broadly.
E-business goes far beyond e-Commerce or buying and selling over the Internet, and deep into
the processes and cultures of an enterprise. E-business is the powerful business
environment that is created when critical business systems are connected directly to
customers, employees, vendors, and business partners, using Intranets, Extranets, e-
Commerce technologies, collaborative applications, and the Web.
TYPES OF E-COMMERCE
Business-to-Consumer
Virtually all goods and services can be sold to customers online. Transactions of
commercial organizations selling their products and/or services directly to the consumers are
known as business-to-Consumer. In other words, it is an exchange and transaction of
information, products or services between a business and a consumer(s). It is the interaction to
the purchase/sale of goods and services between a business and consumer(s) (i.e., retail
transactions), including tangible goods such as books, music, collectibles, clothing,
consumer electronics, real estate and airline tickets, as well as intangible services such as
financial information, health information, and digital goods. The “novelty” is that retail
transaction is done on the Internet/Web, rather than in a “brick and mortar” store location.
Business-to-Business
Business-to-Business e-Commerce refers to electronic business transactions directly
between two or more companies, relating to the purchase and sale of goods and services. In
other words, it involves electronic business transactions with other business(s), which
typically takes the form of automated processes between trading partners and is
performed in higher volumes. This is perhaps the largest form of e- Commerce based on
the value and/or volume of transactions. This is by far the most common type of e-Commerce
generally managed by larger companies that are supplying merchandise to smaller businesses
who then sell to their customers. Manufacturers, who are selling in large quantities, are a good
example of this. B2B can also encompass marketing activities between businesses, and not just
the final transactions that result from marketing, and also are used to identify sales transactions
between businesses. B2B e-Commerce focuses more on creating highly efficient and
transparent markets that would transform the structure of industry value chains.
Consumer-to-Consumer (C2C)
This model provides a way for consumers to sell to each other, with the help of an online
market maker. It is an Internet-enabled form of historical commerce in the form of barter, flea
markets, swap meets, garage/yard sales and the like.1 In other words, consumers sell directly to
other consumers. It includes any website where people are brought together to buy, sell, or
trade. Online auction such as eBay.com is a perfect example of this business model. Another
good example will be Craig-List.com in the USA.
Business-to-Government (B2G)
As the name implies, there is a form of electronic businesses transactions between
businesses and the government. In other words, government buys or provides goods,
services, or information to/from businesses or individual citizens. It may also involve
transactions regarding various business licensing, legislative issues or reporting
requirements.
Business to Employee (B2E)
This is a model where information and services are made available to employees online. For
example, as in B2E portal, a company or organization Intranet or Extranet can be customized
for each employee. It includes specific information and personalized data such as personal
hyperlinks, stock quotes, sports scores and news clips. It could even include a video feed to
their children's day care center.
Mobile commerce (M-commerce)
In mobile commerce, wireless digital devices such as cell phones and handheld devices are used
to enable transactions on the Web. It takes traditional e-Commerce business models and
leverages emerging new wireless technologies. Key technologies are telephone network
based 3G; Wi-Fi; and Bluetooth. However, technology platform continues to evolve
E-COMMERCE AND SMALL BUSINESSES
The need for micro- and small enterprises to consider adopting e-Commerce is driven by
global, regional and national business trends. This relates to markets, costs, new technologies
and political factors including:
• Adaptation to rapid market changes that are impacting on export and domestic markets.
• Cost competition and the need to compete more effectively in both local and
international sectors.
• Globalization of the production and supply of goods and services – and the need to
integrate small enterprises more effectively into the supply chains of larger businesses.
• Increased customer expectations and consumer power – buyers expecting to be able to
access web-based information about products and services.
• Adaptation to new technologies – an overall need for technological upgrading.
• Greater role for information in business and the need to access process and
communicate it efficiently and effectively.
• Government deregulation and liberalization – lowering costs of access.
• Bilateral and multilateral trade agreements – opening up markets to developing country
producers.
• Adaptation to higher quality standards such as ISO9000 – ICTs are acting as an enabler
in this area.
ADVANTAGES AND DISADVANTAGES OF E-COMMERCE
Modern e-Commerce/e-Business has been around since the mid 1990s, ever since the advent of
the World Wide Web. Now anyone can become a global seller of goods, services, and
information online. No longer do you need huge distribution networks and management teams
to run a successful business. We summarize below some of the well known e- Commerce
advantages and disadvantages.
A. Advantages
i. Cost Reduction Benefits:
One of the greatest benefits of e-Commerce is cost reduction benefits. It is simply the most cost
effective way to open and run a business. E-Commerce business has far fewer overheads than
traditional brick and mortar business. The cost benefits include:
• Reduced cost of establishment: There is little cost associated with establishment of e-
Commerce. Little rental expenses, employee costs, insurance, power, phone or any of the
hundred other bills that conventional store owners have to deal with on a regular basis.
• Reduced Running Cost: Low running costs and time effective management are also
benefits of e- Commerce. In Figure 4, the grey area in the chart depicts the running costs for a
typical e-Commerce business, compared to the blue area for traditional brick and mortar store.
These low running costs mean a far bigger profit margin, while staying competitive. A
medium sized E-Commerce business can be run for $25 - $200 a month, while small to
average sized brick and mortar business will cost over $200 per square foot, per year in rent
in major business districts. When you start adding the other essential running costs
involved with the brick and mortar stores, the price of owning a business just keep increasing.
• Reduced travel costs: By using a mobile phone, email and other ICTs enabled devices to
substitute for journeys, travel cost will be greatly reduced.
• Reduced cost of materials: More information means better choice of suppliers and more
competitive prices.
• Reduced marketing and distribution costs: It is easier to market and distribute products
and services using e-Commerce. For example, publishing a brochure online can reach an
unlimited number of potential customers and allow for regular update.
• Reduced sales costs: E-Commerce provides unprecedented opportunities for businesses
to reduce the costs of trade locally and across borders.
ii. Market Benefits:
• Greater reach: A vital benefit of e-Commerce is access to global markets which
enables businesses to expand their reach. The Internet allows for unconstrained
awareness, visibility and opportunity for a business to promote its products and services
(Senn, 2000). A web presence can allow businesses to reach out to customers far beyond their
immediate location, and is open often 24 hours a day, every day. Time and distance are no
longer a problem, since customers can access product and services from anywhere in the world,
whatever time zone they live in. An e-Business doesn't need to close at the end of day;
• Improved customer service and brand awareness: With e-Commerce businesses can provide
more responsive order taking and after-sales service to customers, and therefore lead to
increased customer loyalty. E-Commerce also offers new avenues of promotion for products
and services.
• Increased market awareness: Businesses can become more aware of competition within
their market and more aware of market changes, which can lead to
product/service innovation or quality improvement.
iii. Increased Efficiency
E-Commerce can provide substantial benefits to small enterprises via improved
efficiencies and raised revenues. E-Commerce not only reduces costs but it can also increase
the speed of buying and selling transactions. It enables a new way of working to emerge as
businesses face the future and embrace the new economy. E-Commerce enables businesses to
gain access to better quality information, and thus empowers them to take informed decisions in
their businesses. More efficient supply chain management: E-Commerce can eliminate the
need for middlemen leading to lower transaction costs (including marketing, sales, transaction
processing), reduced overhead, and reduced inventory and labor costs.
Improved internal functions: Cutting down on meetings, improving the exchange of critical
knowledge, eliminating red tape, and streamlining communications. Reduction in routine
administrative tasks frees staff to focus on more strategic activities.
Improved processes of activity – Both efficiency and effectiveness can be improved across a
wide range of activities using e-Commerce – particularly internal and external
communications (including advocacy with donors, government, etc) and procurement.
iv. Better Service Delivery
• With e-Commerce, a business will achieve improved accuracy, quality and time
required for updating and delivering information on products and/or services. E-
Commerce necessitates improved ease, speed and immediacy of customer ordering. With e-
Commerce it is not necessary to have vast quantities of stock. The store or business carries only
what is needed or better yet, carry none at all. Many suppliers will ship direct to the customers,
meaning stocking the merchandise is unnecessary.
v. Competitive Advantage:
E-Commerce can give a competitive advantage if properly implemented. It can help strengthen
market position and open up new business opportunities with the potential of increased profits.
It can enhance market, industry or competitor intelligence acquired through information
gathering and research activities.
vi. Continuous Trading
This can be classified under market benefits. Online business gives you access to the largest
market available, with over 3 billion people currently connected and growing on a daily basis.
Access for customers to catalogues and services is on a 24 hours, 7 days a week basis. By
breaking the restraints of geographical boundaries, e- Commerce can be used to access the
global marketplace on a continuous basis. Huge difference is evident in the bar graph in Figure
5. With such a huge customer base, the potential reach of vast number of people, is one of the
greatest e-Commerce advantages
vii. Human Capital Development
E-Commerce can be used to improve business and organizational skills as well as technical
skills of the employee. The motivation and confidence of staff can be enhanced through e-
Commerce activities. With e-Commerce, information and knowledge capacity can be improved
to support marketing, communication and branding of products and services.
B. Disadvantages
As noted above, e-Commerce is generally presented in very positive terms but, along with the
potential benefits, come potential problems especially for developing countries. The few
pitfalls of going into e-Commerce are discussed below. They are the financial costs, the
business 'opportunity costs' and the dangers of failure. These disadvantages are far less than the
advantages and most can be overcome.
i. Extra Cost
Developing e-Commerce for a business will most certainly require extra costs. Initial start-up
costs (investment in a computer, network connection, bandwidth, etc) can be significant, and
there are additional running costs too. Even after start-up, e- Commerce activity will need
to run in parallel with existing business methods (if applicable). For example, enterprises will
need to continue to produce paper-based marketing material (brochures, stationery, leaflets, etc)
as well as building up web presence. This will duplicate some activities adding to overall costs.
These costs are definite whereas the new revenue streams from e-Commerce are not,
particularly
given the relatively lower numbers of people online and with credit cards in developing
countries. Hence, many small businesses may be sceptical about e- Commerce benefits,
and should be encouraged to approach it in the step-by-step manner.
ii. Risk of Failure
Research has shown that any new business venture is likely to fail, unless careful steps were
taken to guide against it. As the dot.com boom and subsequent bust demonstrated, e-
Commerce ventures may be more likely to fail than conventional businesses. This emphasizes
the importance for small businesses to be careful and not throw all their eggs into the e-
Commerce basket. Failure can be avoided by first deciding not to adopt e-Commerce at all
or by taking a step-by-step approach that minimizes risk.
iii. Risk of Losing Focus
For conventional businesses running brick & mortar store, it is important that online and offline
efforts are not in competition with each other within a business. In fact, for most large and
medium sized enterprises, offline activities (such as face-to-face meetings) will remain far
more important than online communication. In the long term, risks can be minimised
through effective integration of online and offline activities – using e-Commerce to
complement existing business processes. In the short and medium terms, there is a risk that a
business could lose focus of its true business needs if e-Commerce is oversold. This has
happened before during the dot.com boom in the late 1990s.
Opportunity Cost
With e-Commerce, there will be risks for businesses if e-Commerce does not take off as
anticipated. Also, there are other costs involved in building capacity in the business as it relates
to e-Commerce in various ways:
i. Knowledge: improving management and staff's knowledge about e- Commerce.
ii. Skills: gaining specific skills in using, advising and training on e-Commerce.
iii. Attitudes: developing positive but realistic attitudes towards e-Commerce among staff.
iv. Finance: affording the direct and ongoing costs of any investment in e- Commerce.
v. Risks of Ignoring e-Commerce
Technology and innovation are often described as the catalyst for change. Ignoring new
technology may have significant impact on the ways business is done in the future. For
example, having no website, or a badly designed or marketed website, may put a business at a
disadvantage compared with competitors. Over the medium and long term, unsuitable or
inadequate technology can mean that customers remain uninformed and therefore business
cannot compete effectively. The real risk to small business is NOT getting involved. Not
putting e-Business solutions into place will force small businesses to face the real threat of
declining business. Not having e-Business in place will squeeze a business out of the supply
chain by those who do business online. Some large industry firms require their suppliers to be
connected to their network. Most importantly a business may not be able to keep up with
competitors without the innovation that comes with e-Business affecting costs, sales and
eventually, revenue and profit. E-Commerce offers great benefits to any economy. As it
continues to gain acceptance in Nigeria, the initial divide between Nigerian consumers and
the rest of the global market will be bridged. Nigerian consumers will have direct contact
with merchants of their choice, in any region of the world. Nigerian businesses will also be able
to take advantage of the global reach, to open new and profitable markets for local goods and
services, in the not-too-distant future.
There is no denying the fact that by facilitating the integration of Nigeria economy and society
with rest of the world, e-Commerce will flourish in Nigeria. Today all countries are working
to achieve structural reforms in society under the key paradigms of liberalization and
globalization. The nation’s competitive power will determine the trade and the nation’s strength
in science and technology will play an important role to dominate the trade. All organizations
are making the best use of digitalization and use of the Internet to achieve the desired goal.
Computers and the Internet are now increasingly widely used to function as part of the
business. Transactions conducted through the Internet will have enormous implications on the
international competitiveness of every nation, giving rise to new and exciting
opportunities in both the domestic and international arena.
vi. Sustainability
A business may be able to overcome initial investment, but it is sustainability in terms of
recurrent costs, required staffing and skills, maintenance and upkeep, that could become a
pitfall.
Technology Phobia:
The technology can be alien to owners or employees, especially those new to E- commerce.
Therefore all the normal fears and self doubts of engaging in something new and unknown is a
disadvantage. Without the e-Commerce technology, businesses remain without the tools that
they need to compete effectively. Technology should be an enabler and not a driver for the
realization of benefits, and risks need to be assessed in terms of actual costs, opportunity costs,
and the dangers of failure.