What is e-business?
Terms such as e-business and e-commerce are are all too often used without anyone actually knowing what they stand for, why is e-business different to e-commerce, let alone all the other e- words which are now in circulation. If one is to start using the Internet for business, a good start is an understanding of how the commercial use of the Internet is divided into different areas.
The four divisions of business on the Internet – There are two main players involved in business on the Internet, business and consumers. With two players we can draw up a matrix consisting of four quadrants each with a different relationship between the two players. The four quadrants are:
- Business to business, or B2B.
- Business to consumer, or B2C, also commonly refered to as e-commerce.
- Consumer to business, or C2B.
- Consumer to consumer, or C2C.
The B2B quadrant is the one that we will be looking at in this article. The B2C quadrant is reserved for companies selling goods over the Internet, companies such as bookseller Amazon and personal computer company Dell, and online stockbroker Charles Schwab. The C2B quadrant is interesting because it is a purely Internet creation, it uses the technology to drive transactions the other way round, a site such as Priceline.com allows customers to bid for airline tickets and then leaves it up to the airlines whether to accept these offers. The C2C quadrant is occupied by sites offerng consumer auctions, these are a sort of giant global flea market, where consumers can buy items which are being sold by other consumers.
In all four quadrants the Internet offers the main players some unique advantages over existing methods and processes, for a start the potential marketplace is now global rather than local, there is therfore greater choice, and with greater choice comes a wider range of prices and greater competition. But perhaps most importantly, as far as business is concerned, it allows the easy comparison of prices, a mechanism which will drive down costs and drive up market efficiency.
The business to business quadrant.
E-business is probably best described as the transformation of all business processes, including customer relationship management, sales, supply chain management, and human resources management to take full advantage of the developing Internet based technologies. This is a move that will not only considerably increase corporate efficiency, enhance productivity and thus increase profitability and competitive strength, but which will also profoundly change many of the ways in which we conduct business.
This move has become essential because of the increasing need for speed and flexibility in modern business, today competitiveness comes from being the first to spot a trend or market opening and for being the quickest to take the appropriate action. E-business offers companies that speed of information input and the speed and flexibility of response, in particular flexibility, and the potential to restructure whole industries.
Although e-business will initially have the biggest impact on large multinational companies such as Ford and General Motors, it will eventually have a major impact on all enterprises large and small. Indeed according to Forrester Research online business to business trading will account for 92% of all e-commerce, and could top $900billion per annum in Europe by 2004 according to investment bank Goldman Sachs.
In the words of one commentator, within four years there will be no Internet businesses, since all businesses will be Internet businesses, companies must adapt to the new technology or die. Managers must face the task of managing by information derived from automated systems.
It is important to realise that e-business is a process and not a product, it is the use of a wide collection of different techniques ranging from knowledge management, online procurement, dynamic pricing, and electronic supply chains. The task facing management is one of using this new technological infrastructure and turning it into a means of generating timely business information.
So far e-business has largely been concerned with reducing costs and increasing profitability. We have seen the development of e-markets in a wide range of specialist product areas from carrots to cobalt, markets that have greatly improved the efficiency of business to business trading in commodities. However, e-markets are now starting to develop in other areas, such as surplus equipment, spare production capacity, and logistics services.
Companies such as Ford and General Motors are developing e-business systems linking them with their suppliers which will not only enable them to further improve on the just in time manufacturing process but which will substantially decrease the bureaucratic cost of such transactions. The recent development of Internet systems that allow suppliers to bid for contracts is reducing purchase department overheads still further.