Prudens Information Resources for the Internet


E-BUSINESS BASICS

A Prudens Basic Report

by James E. Burke, Ph.D.

This is a brief summary of introductory e-Business concepts usually addressed in books and training courses. All of the terms in bold are explained in the text.


E-Business Online Activities

E-Business includes many types of online activities, such as communications, manufacturing, processing, and the online buying and selling of goods and services, which is known as e-Commerce. E-Business applications cover not only online business but also education, government, non-profit organizations, and goal-oriented communities. Although there are many differences between these types of organizations, their transactions and Internet applications are surprisingly similar.



E-Commerce is that part of e-Business concerned with retail and wholesale purchases and sales. E-Commerce also includes servicing customers and collaborating with business partners. Direct retail selling over the Internet is also known as e-retail or e-tail. During the "Dot-Com" boom, traditional companies were disparaged as "bricks and mortar" companies that would inevitably go out of business. Today, they are among the most successful e-Commerce companies. Many are preparing for M-Commerce, which refers to mobile wireless transactions, often commercial sales related to travel.

Online sales are also designated by the parties participating in the transaction:

An early strategy of e-Commerce was to bypass the middle man, such as a distributor, in a process known as disintermediation. Although the approach had success in some areas (e.g. bookselling), it foundered when a manufacturer began to compete with its own sales channels. B2C also opened new opportunities for intermediaries, such as price comparison sites, and their activities continue to grow.

A Comparison of E-Business and Traditional Business

This sections conveys the message that e-Business is, fundamentally just like any business, but in some ways may be different. These similarities and differences are considered in the context of direction, markets, planning, and business model.

Business Direction

Every business should have a direction both in general and in specific terms. The goals of an organization describe its overall direction in very general terms and are often encapsulated in a mission statement. Goals shouldn't change unless the company is undergoing a major change. Goals provide a basis for decision making, especially when alternative actions are similar. A manager should take his or her company in the direction indicated in the goals.

The intended future of the organization may also be described in a vision statement, or simply "vision". In this case the future of the organization is described in more detail than a set of goals. The steps to be taken to get from the present to the envisioned future may be laid out in a roadmap. It shows a sequence of events and may indicate the timing of major events, or milestones. The process of mapping out the transition of the current state of a business, or any organization, to its desired future will also indicate the deficiencies or needs that must be met before the future can be attained.

Finally, on a short-term basis (e.g. quarterly or annually), or on a project basis, specific and measurable objectives, or performance criteria, can be set to give short-term direction to the company. The successful attainmnent of the objectives should demonstrate that the organization is making progress towards it goals or whether a specific project has accomplished what it was supposed to do.

Markets

The success of any company, whether an e-Business or a traditional business, lies in understanding the market and making sales. If there aren't sufficient sales the business won't survive.

E-Business is more customer driven than traditional business because its offerings are on the web site for everyone to evaluate, and to compare with other online and traditional businesses. This puts pressure on an e-Commerce site to have low prices and to provide free shipping. Some customers use a hybrid approach - finding out about the product online and then buying it offline.

The key for an e-Business is to understand its market and to let it impact the offering. As the market changes offerings should change too. But it may be difficult for an e-Business to maintain its link to the market. If it was easy to do then every e-Business would be successful.

In theory the market for an e-Business spans the globe, but because of localization issues (language, currency, import-export regulations, local pricing, etc.) it is likely to be regional, and possibly national. This may seem like an advantage but there are also many more competitors - some with significant competitive advantages.

Business Planning

Business planning is done for a startup business, whether it is online of offline. The various facets of a business plan such as the business concept, market analysis, and technical and financial analyses are used to describe a business that doesn't exist. A business plan may be written to attract investors, or for other reasons such as attracting top managers. Management skill is important since the plan won't be entirely accurate and changes will have to be made in order for the business to survive and become successful. E-Business planning and startup is discussed in a separate e-Report.

Implementation planning considers the startup of an activity within an existing organization. Even though the organization has resources to assist in planning and startup, it is surprisingly difficult to implement change within some corporate cultures. These types of organizations may be severely impacted by disruptive technologies.

Business Model

The e-Business model, like any business model, describes how a company functions, how it provides a product or service, how it generates revenue, and how it will create and adapt to new markets and technologies. It has four components:

Excellence in some capabilities, or competencies, may give the company a competitive advantage. The business model is described, in detail, in a separate e-Report.

Many of these concepts were ignored during the Dot-Com era but are, hopefully, back in favor.


Dr. James E. Burke is a Principal in Burke Technology Services (BTS). BTS provides business assistance to startup technology companies, or organizations planning or integrating new technologies; develops and manages technology projects; performs technology evaluation and commercialization, and assists in technology-based economic development.

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