BENEFITS and LIMITATIONS OF E-BUSINESS
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for students of Prof. W.T.G. Richardson
updated 2010 Sept 02
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Introductory video made for this unit 
Sept 2010
- posted on YouTube
 youtube.com/watch?v=rDX1qm4Dqac 

- simply WTGR's audio comments scrolling through the unit - helpful to view before you start reading this material

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http://www.witiger.com/ecommerce/bookCurrentIsssues2ndEd.htm this unit is in the text
"Current Issues in Marketing in the Information Age, 2nd. Edition"
on page
13 - 18
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. This Unit used in the courses
MRK 410
MRK 610
MRK 619
BCS 555
MGS 523
IEC   702
FSM 620
MGT D06
CCT 322
TCS 301
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This web page has audio clips - just click on the icon (like the one to the left) and you can hear Prof. Richardson's voice adding additional information to topics on the page. turn on your speakers to hear audio clips
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LEARNING
OBJECTIVES
.. Students graduating with an e-commerce and internet marketing background will be increasingly called upon to explain to people, (clients, employers, colleagues) more detail about what is good, and not-so-good, about e-business, ... in order that these people hire you, or work with you effectively. 

So,,,,, you may expect a bit of your time taken up in explaining to people these things so that they may then say "OK, do it for me" 
 
http://people.senecac.on.ca/tim.richardson/audio/audiobenefits1.wav The purpose of this unit, on Benefits and Limitations of e-business / e-commerce, is to give you the tools to answer to people who question the value, or purpose, of having an online component of their marketing program.
Most people appreciate the basic benefit that e-business may help them sell more, but beyond that they are not too clear - your job is to point out more benefits so it will become obvious that e-business is a great thing and that they need you to help them do it.

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INTRODUCTION .. Benefits of eBusiness eCommerce
  • Benefits to organizations that use this with their business partners
  • Benefits to consumers 
  • Benefits to society
Limitations
  • Technical Limitations
  • Non-Technical Limitations
...
 
Basic
Benefits
of
eBusiness
eCommerce

 

Basic Benefits of eBusiness eCommerce
    o increase sales - this is the first thing that people consider 
          when dealing w e-commerce
    o decreasing costs
    o provide price quotes
    o increase profits
               o understanding that profits is not the same as sales
    o Expands the size of the market from regional to national or national to international
    o Contract the market
    o reach a narrow market
               o target market segmentation allows you to focus on a more 
                    select group of customers
               o and therefore have a competitive advantages in satisfying them
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Basic
Benefits
of
eBusiness
eCommerce

 

Decreasing costs
    o costs of creating the product
    o marketing
                 o of promotional material
    o costs of distribution
    • eg. Netscape allowing you to download instead of waiting to get the CD by mail
     o costs of processing (orders from the customers)
    • repeat activities and information processing
    • of handling customer phone calls
    • of handling sales inquiries
    • determine product availability (inventory management)
     o costs of storing information
     o lowers telecommunication costs
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Basic
Benefits
of
eBusiness
eCommerce
Provide price quotes
 
-  with a web site, you can have the prices listed, and change them 
             - you simply edit the web page 
- in a printed catalogue you are stuck with the expense of printing a new version if you need to change many of the prices
 
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Basic
Benefits
of
eBusiness
eCommerce
Provide price quotes
 
student Andrea L. in MGTD06 at UTSC in Sept 2007 sent a useful email suggesting several considerations re: price quotes online.

After the class on "Benefits & Limitations", in which Price Quotes was discussed Andrea said 
"I just had some comments/questions about something you said that stuck to me (that maybe I should have shared in class) and I was hoping to share it with you.

The key part that stuck to me was: providing prices online mean potential customers can do the research/comparisons online and only the ones who are really interested in buying will come to the store in person. That way the salespeople will be investing time on those who will most likely purchase, rather than wasting time and getting frustrated with those who are just browsing (for the first time perhaps).

Richardson says
Yes Andrea, sometimes we can save money by just focusing on customers who are genuinely interested in the product and know right up front the price, so if they inquire, we know they can pay the price "no prob"

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Basic
Benefits
of
eBusiness
eCommerce
Provide price quotes ....

Andrea added "I know the salesperson side of it firsthand as I've been in retail for like 5 years now. I think it's a very good point you made and retail managers/owners need to realize that benefit! I noticed a lot of retail companies' websites do not provide prices. Many clothing stores/boutiques don't put prices online (i.e. Jacob, RW & Co, etc) and none of the cosmetics/make up companies do either (i.e. Dior, Clinique, MAC,etc). Why is that? From a consumer's standpoint, that's very frustrating when you are trying to research and compare products. It would save me a trip to the mall and the effort from going into all those stores to research that little bit of info. As a saleslady, it would be nice if we didn't have to spend all that time with price-conscious consumers who like the product(s) but once they find out the price, they leave the store! Online price quotes can set the expectation. The company that I still work at, they don't share prices because they don't want competitors to find out so easily and because they think if they provide that, then less customers will visit the store. Which means many retailers may be thinking the same thing--that they focus on increasing store traffic and they think withholding pricing info means more traffic in store. However to your point, by providing prices, the resulting visitors (which may be more or less store traffic?) will be informed consumers, who are more likely to purchase."

Richardson says
You are correct Andrea, and some stores do this in different ways, sort of like the "velvet rope" they have at fancy clubs to make sure only big spenders get in.
see  witiger.com/marketing/CLVandVelvetRopeCustomers.htm

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Basic
Benefits
of
eBusiness
eCommerce
Facilitating Distribution
- digital distrubtion, digital rights management, multiplayer and communications applications
student Jason F. in MGTD06 at UTSC in Nov 2009 sent a useful email discussing several aspects of "Benefits & Limitations", in the context of the gaming industry.

Jason said 
"I was reviewing the "Benefits and limitations of e-commerce" section on your website and I would like to share with you an example that came to my mind. Low margin on computer games has plagued the PC gaming industry for more than 10 years now."

Jason continues "The high development costs and long payback period has slowed the growth of the industry to almost a standstill.  Moreover, sales were declining year after year due to the ease of piracy.  One game developer, Valve, came out with a digital distribution platform called "Steam" in 2002 and it has revolutionized the PC gaming industry ever since."
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Basic
Benefits
of
eBusiness
eCommerce
Facilitating Distribution
- digital distrubtion, digital rights management, multiplayer and communications applications

Jason explains "Steam is a digital distrubtion, digital rights management, multiplayer and
communications application. It is used to distribute a wide range of games directly over the internet, offering over 837 games by 39 different companies.  As of February 18, 2009, there are over 20 million user accounts.  There are several benefits to ordering a copy of a game through Steam. First, the price of the game is lower than you would find on the shelves of retail stores and is non-taxable.  Additionally, once you purchase a game, it is forever stored on Steam's servers for you to re-download which eliminates the hassle of losing your installation discs. I personally use Steam and I find it much more convenient than going to the store and buying the game, especially on release dates for popular games that will sell out."

Jason's analysis "As it relates to the course content, I feel that Valve has done a wonderful  job in cutting costs through e-commerce.  The costs of bandwidth for a game to be delivered online is much less than that of producing a disc(s), labeling the CD, making and designing a CD Case, producing and designing a box, and shipping it around the world.  Their method of delivery offers true "Just in Time" benefits as a shortage or excess of inventory will no longer exist.  Not only are they cutting costs, they are driving sales by offering an identical product that is cheaper, and more easily purchasable online than in store."
Richardson says
"Thanks for the explanation, this serves as a good example of the variety of reasons why situations are turning to web-based business"

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Basic
Benefits
of
eBusiness
eCommerce
 

 

Other Benefits ....
    o Pull-type processing
                      o enables customization of products
    o allows for innovative business models
    o allows for a high degree of specialization
    o reduces the time exposure
    o supports BPR - Business Process Reengineering 
    o increases productivity
    o improves customer service (in some cases)
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Thinking about the advantages of having a website, beyond "just selling"
itbusiness.ca is a portal featuring several aspects of IT and e-commerce business news. 
CDN is the Computer Dealer News
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In Sept 29th, 2004 they interviewed Prof. Richardson about some of the things a SME (Small / Medium sized Enterprise) company can do to be more effective in the e-Business world.
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Richardson simply emphasized the some of the points listed herein, namely
 
The article began with the introduction about a report from the Canadian e-Business Initiative (CeBI). The CeBI is calling for governments, the private sector and universities to come up with a strategy encouraging e-business adoption by these companies.
"University of Toronto e-commerce marketing professor Tim Richardson agrees the problem is serious, and argues resellers should be doing more. Most SMEs think having a Web site is only for selling products, he said in an interview, failing to see the advantages of using it as an information tool to draw customers into stores, save money on marketing material and attract suppliers."

VARs "should be providing software and hardware that allows SMEs to integrate more of the supply-side of their business with the retail."... "They have to be able to explain things in terms which the customer can understand, and that requires a more intimate knowledge of what those businesses are doing," he said."

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......
http://people.senecac.on.ca/tim.richardson/audio/audiobenefits4.wav A large component of business these days is dealing with other businesses (B2B) that supply parts and components since rarely do companies manufacture things from beginning to end - most things are made from component parts which are created by different companies.
This component approach to manufacturing is true for many services also. Companies supplying services often have that service broken down into sub-contracting services eg. - a building maintenance contract can be subdivided into the following services
    o security service
              o access control
              o alarm response
    o landscaping service
              o summer - grass cutting
              o winter - snow removal
    o janitorial service
    o heating, ventilation and air conditioning service
    o electrician service
    o plumbing service
    o window washing service
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......
http://people.senecac.on.ca/tim.richardson/audio/audiobenefits5.wav Appreciating the component approach applied to manufacturing, and services, it is therefore interesting to see the application, and benefits that may accrue to enterprises that use e-Commerce with their business partners

Benefits to organizations that use e-Commerce with their business partners
- manufacturers and service companies
    o minimizes Supply Chain inefficiencies

    • reduces inventories
    • reduces delivery delays
    • enables efficient e-procurement
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...... Benefits to organizations that use e-Commerce with their business partners
- manufacturers and service companies
     o build more collaborative and stronger relationships with suppliers. This includes streamlining and automating the underlying business processes, enabling areas such as
    • direct marketing, 
    • selling, 
    • customer services, (call centres)
    • fulfillment, 
    • procurement,
    • replenishment and 
    • information management. 
some info came from  www.e-commscore.com/optimising/optimising_benefits.htm
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http://people.senecac.on.ca/tim.richardson/audio/audiobenefits5.wav Benefits to consumers that use e-Commerce (e-Business) 
     o can buy when you want, from more locations (internet connected terminals) more choices
                                o when you have more choices you can decide on a product with 
                                     better features at a more competitive price
    o sometimes products are less expensive online
    o can receive more information about the product, make a more informed decision
    • greater information leads to more confidence to make a purchase decision
    • more info also leads to enhanced customer satisfaction because the customers has a better idea how to use the product
     o quicker delivery (for online products)
      quick delivery is important for people who want to use the product immediately, as opposed to waiting longer - if they have to wait long, they may pick a competitor's product
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......
http://people.senecac.on.ca/tim.richardson/audio/audiobenefits5.wav Benefits to society 
(when consumers and business use e-Commerce) 

    o cocooning - more individuals can work offsite

    • this decreases HR costs for companies because they can have smaller office buildings, less parking spaces, fewer IT services, etc.
    o less affluent people can buy more and increase standard of living (questionable says WTGR)
    o facilitates delivery of public services (Toronto water bills online now)
      sending out bill payment info is a significant cost for companies
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KEY
POINTS
Just as a "famous philosopher" once said
http://www.youtube.com/watch?v=cZNlraF0xec "A Man's got to know his limitations"
www.youtube.com/watch?v=t2JnCXvm_Qc
Inspector Harry Callahan, Magnum Force  (Clint Eastwood)

also, 5 or 6 shots

 

and, it is also true that e-commerce and e-business has limitations

Ignoring those limitations can cause problems because a company may have expectations that cannot be met, and therefore think the website is "not working"
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WTGR

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Limitations of e-Commerce (e-Business) 
- you should understand some of the limitations and be able to explain these to a potential client because not everyone is convinced the internet will be a major way to conduct business
- example TV has been around for a long time - but only a small percentage of all companies advertize on TV !!
- radio - some very successful companies, like Sleep Country Canada advertise on radio
 
KEY
POINTS
Schneider uses the term "Disadvantages" but we can interpret this to mean the same thing as "limitations"
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WTGR
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    o Technical Limitations                         o Non-Technical Limitations

    o Technical Limitations
 
    • costs of a technological solution
    • some protocols are not standardized around the world
    • reliability for certain processes
    • insufficient telecommunications bandwidth
    • software tools are not fixed but constantly evolving (ie. Netscape 3,4,4.7,4.75 etc.)
    • integrating digital and non-digital sales and production information
    • access limitations of dial-up, cable, ISDN, wireless
    • some vendors require certain software to show features on their pages, which is not common in the standard browser used by the majority
    • Difficulty in integrating e-Commerce infrastructure with current organizational IT  systems 
see also  www2.ellinogermaniki.gr/ep/agroweb/htmls/lessons/commerce1/112.htm
Some of the points in the above list are adapted from Schneider et al Electronic Commerce 5th Ed. and Turban et al Electronic Commerce: A Managerial Perspective 2004

    o Non-Technical Limitations
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    •  customer fear of personal information being used wrongly
      • privacy issues
    • customer expectations unmet
    • rules and regulations (ie. Jan 2004 Bill C6 - new privacy law)
    • security and privacy
      • vulnerability to fraud and other crimes
    • lack of trust and user resistance
      • fear of payment information being unsecure
    • tactile limitations
    • Schnieder, 3rd ed. added "many businesses face cultural and legal obstacles"
      • legal issues outstanding such as jurisdiction
      • legal environment has many new and conflicting laws
      • cultural obstacles
      • linguistic challenges
    • limitations of support services
      • financial cost
      • sourcing tech support in foreign languages
    • lack of critical mass in certain market areas for sellers and buyers
    • accessibility outside of urban/suburban and areas effects universality 
    • higher employee training required to be click and mortar 
    • people's resistance to change 
    • people not used to  faceless / paperless / non-physical transactions 
see also  www2.ellinogermaniki.gr/ep/agroweb/htmls/lessons/commerce1/113.htm
Some of the points in the above list are adapted from Schneider et al Electronic Commerce 5th Ed. and Turban et al Electronic Commerce: A Managerial Perspective 2004
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Limitations of e-Commerce (e-Business) http://people.senecac.on.ca/tim.richardson/audio/audiobenefits8.wav One of the big differences between technical and non-technical limitations is that technical limitations can be solved (most of the time) by spending enough money - whereas non-technical limitations are things that are more difficult to change since they involve things that cannot be changed easily - like people's attitude, lack or trust, resistance to change, faceless transactions, etc.
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In looking at the possible benefits/advantages and limitations/disadvantages of e-commerce we have to remember that it only means something when you can put it into the context of an  industry. The auto industry is one of the biggest industries on the planet and is historically one which seeks to cut costs to be competitive so it can be expected that the auto industry will be very serious about looking at the possible benefits/advantages and limitations/disadvantages of e-commerce.
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E-commerce and the Automotive Industry:
Some Preliminary Cautions

Office for the Study of Automotive Transportation
University of Michigan Transportation Research Institute 
Aug 2000  www.osat.umich.edu/e-auto/cautions.html

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"Three particular pitfalls or mistakes that will undercut or delay the benefits of e-commerce.  They are: 
1. Broad expectations. 
We must avoid over-expecting—or over-promising—e-commerce lest we create a backlash when  its promises are not fulfilled.  E-commerce will not, in and of itself, correct all the industry's problems
2. Rote applications.
Little or no improvements will come from the rote imposition of e-commerce techniques on bad practices.  Ensuring the appropriate application of e-commerce requires us to ask more than whether we can apply e-commerce to a practice and to consider whether we should... For example, it does little good, and may even do harm, if suppliers simply receive inaccurate information more quickly via the Internet.
3. Incomplete implementation
The benefits of e-commerce will be restricted if we do not recognize its full system implications, and  instead implement it in limited ways that only partially meet its requirements.  For example, some  e-commerce benefits depend on replacing people with bytes.  To the extent that we do not reduce headcount, or even worse, run parallel people/byte systems, e-commerce’s benefits will be limited.

the above three points come from University of Michigan Transportation Research Institute 

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Benefits and Limitation of e-business / e-commerce is discussed in a number of leading textbooks used in this course, and others. It is an important topic and the main texts have all handled it in different ways
WTGR
 
The Turban book, 1st and 2nd edition refers to it as "Benefits to organizations that use e-Commerce"
The Schneider book, now in its 5th edition refers to it as the  "Advantages of Electronic Commerce"
The Deitel book,
"e-Business and e-Commerce for Managers"
Chapter 2, says "There are many benefits of bringing a business to the internet"
c
BTW - I (WTGR) am aware that a lot of the material on this page of  "benefits and limitations" has been plagarized and offered on an "unethical" site that sells essays. But, such is the nature of the web ... students could save themselves the trouble of buying the essay if they just knew how to google stuff effectively.. they'd then find the original source which is free.
c
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witiger.com
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