15 Nov The growth of “E” Models- From E-Business to Advanced E-Commerce
The rapid rise of internet and its effects on business at large can only be appreciated once we understand the influence, extent and impact of multiple technologies at a business value chain level. A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.
Essentially, as defined by Michael Porter in his understanding of Value Chains, there are five key Primary activities performed by any firm towards reaching its goals of delivering enhanced customer value. They are-
- Inbound Logistics- involve relationships with suppliers and include all the activities required to receive, store, and disseminate inputs
- Operations- All the activities required to transform inputs into outputs (products and services)
- Outbound Logistics- include all the activities required to collect, store, and distribute the output.
- Marketing & Sales- activities inform buyers about products and services, induce buyers to purchase them, and facilitate their purchase
- Service- includes all the activities required to keep the product or service working effectively for the buyer after it is sold and delivered
Diagram: Porter, Michael E., “Competitive Advantage”. 1985, Ch. 1, pp 11-15. The Free Press. New York
To understand and trace the impact of technology on these stages it is imperative to map the processes enhanced by technology across each of them. This would also help us appreciate the differences in the definitions of terms such as e-business, ecommerce, e-marketing, online marketing or the latest coinage termed as digital marketing. In all these cases the “E” stands for “Electronic Networks” and describes the application of electronic network technology- including internet and electronic data interchange (EDI)- to improve and change business processes.
The reason for application of the Porter’s Value Chain model is that it explains in a single consolidated view the coverage of each of the E-models and why they are essentially different even though they are used interchangeably in multiple contexts across business discussions and texts. That said, there are variations in the way these concepts have been explained across various stander marketing primers and one would benefit with taking this explanation as an instance of such attempts.
Diagram- Comparison of E-models mapped to Porter’s Business Value Chain
Understanding E-Models- To understand what each of the E-models encompass, we would need to map the key physical process areas as described in the Porter’s model and understand the extent and coverage of technology on each of them in a holistic manner. To understand, let us take an example of the most ubiquitous internet term “E-business” whose impact covers each of the four process areas in the diagram above to appreciate how it impacted business in general and was the pioneer of future E-models to emerge.
E-business Definition– The term ’E-business’ was coined by IBM’s marketing and Internet teams in 1996 and was looked at by IBM as a key differentiated offering in the market. It involved application of information and communication technologies (ICT) to support all the physical processes and activities of any business which was looking to go virtual.
Here are some examples of the kind of processes impacts across the value chain which would form the basis of the E-business model–
- Impact on Procurement Function- Involves Management of physical Procurement through IT. Eg: Supply Chain System
- Impact on Production Function- Improvements in Internal Production or Resourcing. E.g. Production/Knowledge Portal
- Impact on Delivery function- Technology for internal logistics. E.g. Intermediaries Collaboration Portal
- Impact on Consumption Function– Integration with Internal Customer Management Tools E.g. CRM Platforms
The above examples understand the meaning of E-business, which was set-up to help transition the physical processes of any business to make them more technology enabled and efficient. The key point to note here is that ‘E-commerce’ as a concept has a more internal focus to transform internal processes and tools to enable them better for external collaborations.
Understanding E-commerce business
‘E-commerce business’ is considered to be the sales aspect of e-business and involves wide variety of Internet-based business models. Typically, an e-commerce strategy incorporates various elements of the marketing mix to drive users to a Web site or an online market-place (like Ebay) for the purpose of purchasing a product or service. Baourakis defines it as: “The trading of goods and information through the Internet” (Baourakis, Kourgiantakis, & Migdalas, 2002)
The major difference between E-commerce and E-business is that while e-business is aimed at improvements in efficiency and productivity, E-commerce is a more revenue-oriented concept which focusses on bridging Internal and External systems through improved collaboration across all commerce-oriented functions from Procurement to Delivery.
As in the case of “E-business” above, let us go through some examples of E-commerce Implementation across the value chain which would clarify the differences more clearly-
- Impact on Procurement Function- Cross- Business Integration with Portals/Systems of other suppliers. E.g. Portal based Procurement
- Impact on Production Function- Processed involving Integration of common production facilities. E.g. Value Added Production Chains
- Impact on Delivery function- Collaboration with External Delivery Platforms. E.g. Web Based Marketplaces
- Impact on Consumption Function– Improvement in transaction/sales/payment focused processes. E.g. Customer Payment Platform
As can be seen above, E-commerce has a stronger orientation towards technology investments for commerce and better internal-external tools collaboration to carry out the sales process.
|A timeline for the development of e-commerce globally: 1979: Michael Aldrich demonstrates the first online shopping system.1981: Thomson Holidays UK is first business-to-business online shopping system to be installed.1982: Minitel was introduced nationwide in France by France Télécom and used for online ordering.1984: Gateshead SIS/Tesco is first B2C online shopping system  and Mrs Snowball, 72, is the first online home shopper1984: In April 1984, CompuServe launches the Electronic Mall in the USA and Canada. It is the first comprehensive electronic commerce service.1992: Book Stacks Unlimited in Cleveland opens a commercial sales website (www.books.com) selling books online with credit card processing.1994: Netscape releases the Navigator browser in October under the code name Mozilla. Netscape 1.0 is introduced in late 1994 with SSL encryption that made transactions secure.1994: Ipswitch IMail Server becomes the first software available online for sale and immediate download via a partnership between Ipswitch, Inc. and OpenMarket.1994: “Ten Summoner’s Tales” by Sting becomes the first secure online purchase. 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24-hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use Internet for commercial transactions. eBay is founded by computer programmer Pierre Omidyar as AuctionWeb.1996: IndiaMART B2B marketplace established in India.1996: ECPlaza B2B marketplace established in Korea.1998: Electronic postal stamps can be purchased and downloaded for printing from the Web.1999: Alibaba Group is established in China. Business.com sold for US $7.5 million to eCompanies, which was purchased in 1997 for US $149,000. The peer-to-peer filesharing software Napster launches2000: The dot-com bust.2001: Alibaba.com achieved profitability in December 2001.2002: eBay acquires PayPal for $1.5 billion. Niche retail companies Wayfair and NetShops are founded with the concept of selling products through several targeted domains, rather than a central portal.2003: Amazon.com posts first yearly profit.2004: DHgate.com, China’s first online b2b transaction platform, is established, forcing other b2b sites to move away from the “yellow pages” model.2007: Business.com acquired by R.H. Donnelley for $345 million.2009: Zappos.com acquired by Amazon.com for $928 million. Retail Convergence, operator of private sale website RueLaLa.com, acquired by GSI Commerce for $180 million, plus up to $170 million in earn-out payments based on performance through 2012.2010: Groupon reportedly rejects a $6 billion offer from Google. Instead, the group buying websites went ahead with an IPO on 4 November 2011. It was the largest IPO since Google.2011: Quidsi.com, parent company of Diapers.com, acquired by Amazon.com for $500 million in cash plus $45 million in debt and other obligations. GSI Commerce, a company specializing in creating, developing and running online shopping sites for brick and mortar businesses, acquired by eBay for $2.4 billion.2012: US eCommerce and Online Retail sales projected to reach $226 billion, an increase of 12 percent over 2011.2014: Overstock.com processes over $1 million in Bitcoin sales. India’s e-commerce industry is estimated to have grown more than 30% from a year earlier to $12.6 billion in 2013.|
As can be seen in the Table above, E-commerce in India started with the launch of IndiaMART in 1996, almost the same timeframe as the rise of the Dotcom Era. The recent growth in E-commerce though started with the rise of Flipkart in 2007 by two ex- Amazon employees which gave Indian customers the first taste of how orders placed through a website can be fulfilled efficiently, in time and at the expected quality.
While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals).
In e-business, on the other hand, ICT is used to enhance one’s business. It includes any process that a business organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network. Apart from the above-mention processes from procurement to sales, E-business can also include enhancement of internal management processes like employee services, training, internal information-sharing, video-conferencing, and recruiting which help improve internal productivity.
Moving ahead from business and commerce, the most commonly used marketing term to denote any form of internet operations is E-marketing. By definition e-marketing involves utilization of electronic medium to perform marketing activities and achieve desired marketing objectives for an organization. This term is typically misused for E-business and E-commerce and as per proper definition, should also be used to denote and represent marketing related activities.
The focus of E-marketing is to transition physical marketing and sales based activities to be performed in a more automated manner and to have technology support and drive the product discovery process. Two examples which make the concepts clearer include-
- “E-marketing” helping with delivery of products/services through collaborations with external partners. E.g. Logistics Platform Implementation
- Improving internal sales and marketing systems for stronger customer connect. E.g. Loyalty Automation Platforms
Before we move on to explaining ‘Online Marketing’, we should understand how it differs from E-marketing. Typically E-marketing has a broader coverage which includes not only Online/Internet marketing aspects but also more enterprise specific marketing areas like e-CRM, digital customer data, which gives it a broader scope than the both of them.
Online marketing started with reference to the Internet and e-mail-based aspects of a physical marketing campaign and went to grow and represent activities aimed at transitioning all marketing activities to web and online platforms- most primary of them being web-portals, e-mails and blogs.
Along-with the transition to web, the other most crucial characteristic of online marketing was the collaborations which started to be developed with other top platforms/websites holding inventory for commerce including Amazon/ E-bay. These collaborations formed the basis of the growth of online marketing to its present avatar called digital marketing whose mainstay is deep technology and multi-platform marketing engagement.