Role of Ecommerce in the Present Business World

To keep a competitive benefit and appear as an industry leader tomorrow, established old-school companies must be ready to take on the dispute of some hard and painful changes.

FREMONT, CA: Virtual companies and the internet vary customarily approved economic practices, making competition even fiercer. As the internet uncovers larger markets to take gain of, more flexible competitors are entering your market, presenting better-priced value propositions to take market share.

Being an industry leader is no longer a security blanket to certify tomorrow's success. To keep a competitive benefit and appear as an industry leader tomorrow, established old-school companies must be ready to take on the dispute of some hard and painful changes.

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Here are some great changes to primary conventional economic thinking and business plan that should be considered carefully to adapt successfully to the future and experience growth.

Increment or Decrement Returns to scale?

A classic economic theory is Declining Returns to Scale, which says that no enterprise can remain to grow productively forever. Still, this principle is not used directly by eBusiness, which can support incredible gain fast while growing returns. The grounds are that eCommerce is based heavily on information and communication and travels light.

As most E-businesses have minimal infrastructure and inventory, it is possible to lower the effect of this classically accepted economic theory. The investment can be assigned to R&D, IT Infrastructure (made frank), and client relations/help. After this, the cost per unit lowers drastically compared to conventional models.

Growing returns to scale are also certainly evident for companies in the information-based product industries, where allocation and sale via eCommerce can bring the cost per unit to around zero.

The result is that in any provided industry, the choices are made before on by customers. First on the scene will always gain a stronghold on the market, giving it enough momentum to carry on successfully into the future. This trend can only be upset by either the vendor making serious strategic mistakes or a competitor offering a revolutionary new solution with added value at a lower cost making the transition between vendors worthwhile.

Return on Intangibles

The centrality of physical assets is becoming less important in today's commercial reality. In the past, intangible assets helped businesses be competitive in their industry. Still, a strong emphasis was also put on their physical assets, such as plants and equipment, along with good management(HR), customer relations & support, and IT infrastructure to achieve a competitive advantage. Still, these intangibles have had little or no value when separated from a business's physical core. Intellectual property added value and was considered part of the business's cost but not a source of revenue to the business. Developers could not effectively collaborate with manufacturers to produce the goods, causing returns to be small, and the manufacturers would eat into the developer's profits during the negotiations; the cost of collaborating between developers and manufacturers was too high.

The internet has allowed companies to give more emphasis to the intangibles and bring them to the front line and turn their value into revenue. Communication and collaboration between companies are easy and inexpensive, and eCommerce allows intangible assets to be leveraged across a much larger buyer base. As eCommerce offers a model with no more time and space constraints, companies no longer have to co-locate with the tangible means of production.

The assumption of "Perfect" Information

One of the basic traditional assumptions in Economics is the assumption that actors in an economy have access to 'perfect' information. This means that vendors know what buyers want, and the buyers know exactly what all the vendors are offering. This assumption has never been truer than in the internet era.

Information has never been perfect and accurate, as it is difficult and expensive to acquire quality information, with some players having more than others. Not all vendors are equal and have access to the same quality of information.

The introduction on the internet allows sellers to get insight into their customer's habits and hopes, not only at a segment level but an individual level, translating into quality targeted products and services being offered to clients. The web greatly impacts how customer-driven businesses conduct R&D, service, and market their products to existing and potential clients. Having such information allows vendors to offer clients exactly what they want, developing a loyal client base that is fully satisfied.

The term 'Perfect' is still not applicable, but we are closest today than we have ever been in the past. Marketers and strategists must now learn to make sense of the vast volume of information they face daily and learn to read trends and filter garbage quickly enough to act faster than ever.

No Time To Spare

The last revolutionary effect of eCommerce on strategy stems directly from its virtuality. In the past, businesses wanting to enter the marketplace had to depend upon the design, means of production, marketing, planning, and sales coordinated by a central vertical enterprise converging finally at a physical location; the storefront.

The classical restrictions do not apply in the eCommerce business model as coordination can be achieved easily, virtually, and at a very low cost. Entire supply chains can be created quickly by linking desktops together. The physical locations of the seller, the warehouse, and the payment processor and whether it is three independent companies are immaterial to the buyer of eCommerce storefronts. All the buyer expects is that the quality, price, and service are met according to their wants.

If you want to survive, you must adapt and evolve. Forward-thinking CEOs will always maintain their competitive advantage and survive in a fiercer marketplace.

Senior executives are notorious for not being proactive. Always reactive and unwilling to embrace the marketplace changes, especially regarding the real threat online sellers pose. Always thinking in brick-and-mortar terms and unable to process the virtual world of eCommerce. Meeting the new challengers in the marketplace and emerging victorious can only be achieved by beating the newcomers at their own game. It's time to think creatively and restructure your business to adapt to the new market.

Keep in mind the golden rule: 'Stick to your core activities. If you are not the best in the industry for performing a function that can be bought from another provider, DO NOT DO IT YOURSELF."

List of points that you should review carefully:

- What are the expectations of the market?

- What are the products customers want to buy?

- Am I competitive within my industry?

- What is the most effective value proposition I can offer customers in the short, medium, and long run?

- What roles should I play-make, sell, or service? Who are my customers?

- Who are my competitors, and how do I need to be positioned?

- What is my operating model?

- With whom should I partner/network?

Your answers, if they are assisted by a good understanding of your market and industry, as well as the economic implications and the opportunities of the economy, will result in a very clear and different vision of your business and its model for the future. With this in mind, you must implement an enterprise-wide vision for your future which has to be identified and defined thoroughly, one that will help you get your staff on board and successfully bring you to your final destination.

For most businesses, accomplishing such a vision will require a greater understanding and expertise in the strategic and operational applications of Information Technology, which is the driving force of the quick evolution of eCommerce. You will be required to incorporate cross-industry, cross-functional viewpoints and expertise as the future businesses will be developed by customer requirements and relations and not by core expertise.