With the rapidly advancing technologies that are occurring in modern business,
organisations are required to be ready, and able to adapt within their
ever-changing environment. It is true across all diverse industries that in
order to stay competitive, organisations must be able to utilise the various
tools that technology has to offer. Technological factors have been of growing
importance, particularly in recent years. A major factor involved in these
technology issues is the use of the Internet as a major issue to modern
organisations. The Internet has been rapidly growing since it's inception and is
now commonly used in all sectors of societies, in all corners of the globe. The
Internet has quickly become one of the most valuable assets in modern
technology, and as such, is developing as an integral part of modern commerce.
As with past technologies, the Internet will have future technological advances
develop from its own growth. The task the organisations of in the new century?
Realise future opportunities and threats, and base a strategy accordingly.
"Is it cliché to say that 'the Internet changes everything': the challenge
now is to say what, how and how quickly". (When Companies Connect, 1999,
p.19) The Internet has lead to the birth and evolution of electronic commerce or
E-commerce. E-commerce has now become a key component of many organisations in
the daily running of their business. Simply defined, "electronic commerce
is a system of online shopping and information retrieval accessed through
networks of personal computers". (Reedy, J. Schullo, S. Zimmerman, K. 2000,
pg. 29) E-commerce challenges traditional organisational practices, and opens
ups a vast array of issues that the organisations must address. By focusing on
the varying levels of an organisation, it soon become apparent the effects that
E-commerce can have. An understanding of the implication E-commerce has on such
organisational divisions can help businesses gain understanding hence plan for
it's inevitable continuing evolution. In terms of marketing, the modern
organisation must be critically aware of the development of E-commerce, and the
implications that it entails. "Marketers develop their own recipe of
promotional tactics to fit the product lines or industries in which they
compete. Now electronic communications tools are and will continue to be an
important ingredient in the promotional mix" (Reedy, J. Schullo, S.
Zimmerman, K. 2000, pg. 29) In assessing the implications of E-commerce in terms
of marketing, it is important to understand its impact in respect to marketing
strategy formulation. As the Internet, and in turn E-commerce has developed, and
continues to evolve and grow, it is vital that any organisation, in any
particular industry, must base it's strategic planning around such a rapidly
growing medium. The growth of the Internet is an environmental influence that
must be embraced and understood so to successfully plan for future marketing
implementation. In order to successful realise the impact that E-commerce has in
terms of marketing, it is important to break the area of interest into some key
areas. As most of the issues that arise in terms of E-commerce represent
organisations entering the environment, it seems natural to base discussion
around this. Therefore, the bulk of the literature review relates existing
organisations entering into the E-commerce market environment. In successfully
identifying the relationship between E-commerce and strategy, the issues are
categorised as follows: 1. Strategic analysis · Understanding the environment
2. Identifying the strategic options/SWOT analysis · Strategic
Advantages/Disadvantages · Advertising · Electronic cost
cutting/publishing/Process 3. Corporate level, Business level, d Marketing level
4. Retailing in E-commerce · Implementation Issues · Financial · Performance
monitoring 5. Conclusion · Based on current knowledge state To gain a clearer
understanding of the implication of E-Commerce in the formulation of marketing
strategy, it is imperative to gain a clear understanding of the environment and
it's relevant effects. This helps in understanding the rationale in a developing
marketing strategy, particularly the influences of E-Commerce on its make-up.
The next crucial element is to gain an understanding of E-commerce itself, as
well as the current and possible future developments. In understanding
E-commerce's impact on strategic foundations, an organisation's strategies can
be more clearly focused. Once the organisation and E-commerce's respective
environments are clear it is then possible to understand E-commerce's
implications in regards to fundamental marketing strategies. By focusing on
tools such as the competitive strategy framework we can gain a better
understanding of strategy formulation. By now it is easy to link E-commerce
ideals directly into the strategic planning sequence, and hence understand its
impact to the marketer. (Brown, 1997) By reviewing these traditional marketing
theories and practices, it's possible to see where, if at all E-commerce fit
into current frameworks. This will provide relevant conclusions that can be made
based on the strategic implications of E-commerce, and it's attributes in the
marketing process. In doing so, this adds a vital dimension to the marketer in
an ever-growing technology based society, of which must be clearly understood.
Strategic analysis Understanding the Environment In order to gain an
understanding of E-commerce's impact to the modern organisation it is imperative
that the environmental issues are analysed and understood. The understanding of
the environment in which an organisation is involved is a fundamental element of
its strategic plan. In order to be successful in any industry the organisation
must have a sound understanding of influences that effect its product or service
offer. When conducting an environmental analysis in regards to the Internet, it
may seem that many of its attributes are present in traditional consumer
markets. However, E-commerce provides organisations with a unique medium to
analyse, requiring information relating specifically to it's environment.
(Strauss, J. Frost, R., 1999). E-commerce ideals place particular emphasis on
environmental factors, due to the high rate of change and development it
constantly undergoes. An understanding of both environmental influence on the
Internet and E-commerce, and that of a particular organisation is imperative
basing any strategic formulation. Strauss, J. Frost, R. (1999) includes these
macro and micro environmental factor as key issues, and they are extremely
useful in constructing a basic for strategic planning. Macro Environment
Technology Obviously technology is a key environmental issues that must be
addressed when analysing and understand E-commerce. Technology is ever-changing,
and as such E-commerce is absolutely influenced by it's evolution. Rapid changes
in recent technological advances have bought about the Internet and in turn
E-commerce, and such dramatic evolution is likely to continue. In terms of
strategic formulation, technology is a huge issue that any organisation must be
aware of when realising E-commerce' s strategic implications. For example, an
organisation thinking of developing a Web site must be strongly aware of
technological issues that pertain to such initiations. The decision to develop a
web-site internally or externally would be a key issue for any organisation.
Internal web-site development would require a vast understanding of technology
and require this environmental factor to be constantly reviewed and analysed. In
any case, awareness of technology is vital in planning marketing and business
strategies, and should be closely followed. World economies Another key
environmental influence is an awareness and understanding of global activity
such as world economies. As the Internet provide a basis for global
communication, the awareness of world economies must be understood in regards to
E-commerce. The linking of the Internet world-wide, in turn effects the way in
which E-commerce behaves, and therefore makes an understanding of world
economies imperative. Legal/Political As with the need to understand world
economies, global integration of E-commerce highlights fundamental environment
issues such as legal and political influences. As independent countries operate
different legal and politic systems, it is obvious that an understanding of such
ideals is also important in addressing E-commerce. For example, a recent
precedent-setting court case in New York recently, a judge ruled that New
Yorkers were breaking the law by gambling on the Internet, even if the gambling
companies were based in other countries. State Supreme Court Justice Charles
Edward Ramos stated, "The act of entering the bet and transmitting the
information from New York via the Internet is adequate to constitute gambling
activity within New York State." (Public Agenda Online, 2000) Such example
highlights issues that organisation must be aware of when developing a marketing
strategy formula. Failing to recognise possible repercussions of E-commerce use,
in a political or legal manner could prove catastrophic for an organisation. It
is imperative it is carefully looked at, particularly in regards to E-commerce.
Micro Environment Market environment The growth of E-commerce has transformed
the way in which consumers purchase products as well as how organisations
operate. The Internet provides the necessary tools; easy operation and exchange
of information; and therefore effects all diverse industries and organisations.
The Internet has become a useful tool for selling, buying and distributing goods
and services globally in a rapidly growing supply chain. The potential market
that the Internet provides has little or no restrictions by either geography or
time, and therefore poses a huge impact on any organisation considering
E-commerce in it's strategic marketing formulation. Opportunities in E-commerce
are enormous, as present growth and development have proved. (Kay, E. 2000) The
Internet provides a virtual marketplace, providing huge opportunities in the
marketing strategies that an organisation my wish to develop. Forecasters have
projected that the world wide E-commerce revenues will be over $350 Billion in
the year 2000. (Jones, I. 1999) User trends The trends of Internet users and in
fact the use of E-commerce in general is extremely valuable information that the
organisation must be aware of. By knowing how the advances of the Internet are
being used, a marketing strategy can be focused keeping these ideals in mind. As
E-commerce provides different uses to varying companies or industries, user
trends and their relative importance differ. For example business to business
electronic communication would represent different characteristic than
communication relating directly to the end-consumer. Ideals such as customer
tracking can be found as an integral advantage in the use of Internet based
marketing. Information regarding "users" use of resources can be
tracked reasonably easily on the Internet, and is a direct result of the
information-based platform the Internet provides. For example Amazon.com provide
e-mail announcements when a new product or service become available to its
customers. (Reedy, J. Schullo, S. Zimmerman, K. 2000). Such understanding and
manipulation of user information is beneficial to both consumer and suppliers.
(Fig 1.) is an example of user information that may be pertinent in designing a
strategy based using research of Internet use. The Graphics, Visualisation, and
Usability (GVU) Centre conducted the research of this information that was found
in on an information-based Web site. Such information may be particularly useful
when implementing strategic formulation, however should not be treated as
sacred. Because of the limited nature in which this research is presented, it is
hard to gauge its validity as a neutral and independent source. Organisation
must be aware of such information's credibility, and clear of its context and
meaning. Without doing so, an organisation risks initiating a strategy that is
based on inaccurate information. In keeping in mind the limitations of various
consumer analysis information, it should be understood that there is still a
place for its use in strategic formulation and planning. Having an awareness of
the varying user trends aids in strategy formulation in a number of ways. By
understanding how the users of information tools such as the Web act, for
example, it is possible to forecast or predict future behaviour and base
strategies accordingly. Therefore user trends are an integral environmental
issues that FIG 1. INTERNET USER PROFILE must be identified, in order to achieve
successful marketing success. Consumer analysis Possibly the major factor in
understanding the effects of E-commerce towards marketing within an organisation
is the awareness of who in fact has access to such resources. By having an
understanding of users of the Internet and E-commerce resources, the marketing
strategy can be further advanced, and tailored in a favourable direction to the
organisation. Various factors make-up the analysis of the consumer when
addressing both E-commerce and the more tradition means of commerce. Ideals such
as demographics and cultural influences must be identified when assessing the
characteristic of any market. It is important that the users of Internet
technology are identified, and the relevant consumer attributes understood. In
terms of E-commerce, this aspect of the environment provides a basis for how an
organisation would structure their marketing strategies based on the attributes
that make up the general Internet consumer. "It is important to get some
idea of the degree to which the marketing approach will be accepted by potential
customers" (Higgins, 1999, p.47) It is also imperative that awareness of
the consumer does not limit organisations to just the end-consumer.
Business-to-business relationships must also be taken into account when planning
strategy based around the E-commerce framework. By being aware of how industries
and organisations utilise tools such as the Internet, a marketing strategy can
be further guided in the right direction. Identifying the Strategic Options/SWOT
analysis Having provided a situation analysis and environmental analysis, an
organisation must use the information, in order to implement its strategic plan.
In implementing a strategic plan is it appropriate to identify the four key
elements in an organisation's environment. They are: the internal strengths and
weaknesses; and the external opportunities and threats. (Or SWOT analysis). By
matching the organisations resources, and any apparent opportunities it may be
possible to conclude an effective match, and hence, a favourable outcome.
(Brown, L. 1997) These four major environmental factors are important for the
organisation, and are vital in assessing its strategy in an E-commerce
situation. For example a farming supplier whom currently possesses an e-mail
ordering system may be thinking about developing a web-site. As they currently
already operate basic E-commerce facilities, they may identify this as a
strength in their business. Hence, in doing so, their strategic formulation has
been based around the fundamental practice of SWOT analysis. These ideals keep
with common literature and practice, however they can be further explored by
looking at some of the external forces that E-commerce poses. As such,
E-commerce provides strategic advantages and disadvantages that have been widely
discussed and challenge. As opportunities and threats can often be rather
blurred, these E-commerce or Internet advantages or disadvantage pose some
interesting question. Strategic Advantages/Disadvantages In having a
comprehensive analysis of the environment in which the organisation is face with
when dealing with E-commerce, the task is now rather simple. The organisation
must identify how to use the Internet towards a useful business advantage. (McEarchern,
T. O'Keefe, B., 1998) There are huge amount of interesting approaches to
achieving such an ideal, and the basic ideals varying across different
industries and organisations. For example, "CD Now and Amazon.com are
building businesses based on immediate availability and ordering of,
respectively, any CD or book". (McEarchern, T. O'Keefe, B., 1998, p.62)
While this may be an ideal medium for companies such as Amazon.com it may prove
rather less successful for different organisations. Unless clearly define
objectives are set when approaching E-commerce, strategic ideals may prove
derogatory to an organisation. (Higgins, J. 1999) While it is obvious that
dynamic organisation possess varying attributes, there are some general
advantages and disadvantages that E-commerce offers across all different
industries. As E-commerce advances at it rapid rate, it is clear that no
industry will be exempt from its impact. Therefore key issues in its possible
uses must be address across all diverse industries. Advertising Advertising on
the Internet presents a significant opportunity for an organisation to enter the
world of E-commerce. As part of strategic planning any organisation must be
ready to develop it's brand image and as such, the Internet offers a wide range
of opportunities. Such as the use of billboards in the real world, the Internet
can provide ideal locations to further developing their offer. Obviously the
information received on site hits and relevant user data acquired, helps to
focus such ideals towards the appropriate target market. There are, however many
views that Internet advertising will not gain distinctive popularity because of
the difficulty in assessing it effectiveness (Ottman, 1996 cited Johns, R.,).
While Strauss, J. Frost, R. (1999) believes that advertising on the Internet
helps reach its revenue objectives, Johns, R. (1996) suggests that Internet
advertising is full of clutter, and therefore proves difficult to gain the
attention of the target market. Virtual stores are another significant ideal in
which strategic planning can base significant interest in, when addressing
E-commerce. Virtual store can provide an inexpensive form of direct sales or
help to supplement existing sales channels. (Strauss, J. Frost, R., 1997) By
using the Internet, manufacturers are possible to reach the end-consumer without
going through intermediaries. (Turban, E. et al, 2000). Successful exponents of
such strategies are organisations such as Amazon.com, and their success in the
distribution of books. When aligning a strategic plan based around the
development of a virtual store, there are some key issues that must be
addressed. As with any strategic development, there are usually threats, and
virtual stores pose considerable threats due to intense competition. In a
marketplace such as the Internet, other company can apply huge pressure, perhaps
due to a sustainable competitive advantage. (Strauss, J. Frost, R., 1997)
Electronic Cost-cutting By replacing existing print and publishing cost,
organisation can use E-commerce for their electronic publishing. Distribution on
the Web, as opposed to mail, for example can have a huge impact on cost, and may
be a strategic driver. The initial strategy might be for lowered cost of the
product offer, and hence lowering cost in documentation distribution may help in
the financial control of such a strategy. FIG 2. THE STRATEGY HIERARCHY (Brown,
L. 1997, p.10) The Strategy Hierarchy As a vital aspect of understanding the
implications of E-commerce to marketing strategy, it's vital to look at all
levels of the strategic hierarchy. The strategy hierarchy (Fig 2.) identifies
the: · corporate strategy · business strategy · And at a functional level,
the marketing strategy. It is imperative that when addressing the strategic
implication of E-commerce, that all three areas of the organisation must be
addressed. In doing so, the marketing role within the organisation is not
isolated, and is in keeping with the overall organisations core objectives. The
first step is to address the corporate strategy and define the its link to the
strategic development of E-commerce. The basis for the corporate strategy
identifies where the business wants to focus its attention in regards to the
scope of the organisation. In doing so bases it's mission and vision to align
with key objectives. (Brown, L. 1997) Paxton, B. Baker, T. (1997) suggests that
"it is essential that the Internet planning process is not divorced from
the corporate strategic management process but is integrated into each stage of
your company's existing process". The focus of the corporate strategy is to
develop synergy between the various Strategic Business Units (SBUs). This is a
vital element to any organisation that is evolving its strategies into new
domains, particularly as a result of environment shifts. Therefore when
formulated a strategy based around the use of E-commerce, it is imperative that
the SBU planning is in synergy with the core corporate objectives. In doing so,
the other relevant SBUs will follow the corporate strategies lead. As the
varying SBUs are aligned within the corporate strategy, they too have influence
over their relative functional levels. The business strategy possesses more
defined objectives as well as a clearly defined competitive strategy. Because
the SBUs operate in their relevant markets, such clearer focused goals are
possible. "At this level the focus is on building, defending and
maintaining competitive positions through the development and implementation of
competitive marketing strategies". (Brown, L. 1997, p.11) The role of the
SBU strategy is clear, and is also highly relevant to E-commerce issues. This
drive to maintain competitiveness in a SBU's market may be the foundation for a
move into E-commerce development. As the core goals are to sustain a competitive
position, an organisation may decide that E-commerce provide this and inherits
it's use in their strategic planning. However, some organisations may find that
E-commerce provide them with no significant competitive offering, and hence
chooses to ignore it as part of their strategic formulation. The decisions must
"follow a well prepared business plan and require a thorough understanding
of the impact of the bottom line". (Higgins, J. 1999, p.48) The marketing
strategy level of strategic planning identifies some key functional issues that
the organisation must implement. This identifies the relevant marketing
objectives that the organisation wishes to implement as well as the product
market strategies. This level gains a clearer focus on the consumer in each
particular target market. This integrates many key marketing ideals, and is used
to co-ordinate marketing resource and the marketing mix to reach the desired
markets in which are targeted. The Marketing strategy is by far the most
relevant in measuring the impact of E-commerce on the marketing strategy
formula. While the upper levels in the hierarchy shapes the direction in which
various marketing strategies are planned; it is this level that develops the
functional elements of this strategy. Retailing in E-commerce A major shift in
the evolution of E-commerce is it's impact on the traditional retailing system,
in particular the shift of intermediaries from the distribution channel. In
theory, the Internet allows manufacturers to sell directly to the consumer,
cutting out the traditional ideals of a middleman or intermediary. (Turban, E.
et al. 2000). Turban (et al. 2000) describes this phenomenon as
disintermediation. Turban, E. et al. (2000) also identifies an emerging
"electronic middlemen" such as e-mail and product selection agents.
This is quite naturally classified as reintermediation. (Fig 3.) Shows the
prevalence of the two as a result of E-commerce developments. The evolution of
the second phenomenon is commonly believe to the basis for future E-commerce
practices. Hutchinson, A. (1997) suggests that this middleman effect with
combine with global integration and widespread network connections. Once again
Amazon.com provides are useful example of a strong electronic intermediary. When
devising a marketing strategy an organisation must be aware of this shift in
E-commerce structures. The awareness of how intermediaries in the distribution
channel is absolutely vital to marketing strategy, and the implications of how
this is changing could have a profound effect on marketing strategy formulation.
FIG 3. DISINTERMEDIATION AND REINTERMEDIATION BY EC (Turban, E. et al. 2000,
p.64) Implementation Issues Financial The development of Web site is
fundamentally used to result in some level of revenue or a decrease in the cost.
Revenue is typically based around increase sales, and decrease cost could arise
due to elimination of intermediary forces. (Strauss, J. Frost, R. 1999)
Therefore the basis for integration into E-commerce has an effect on financial
issues, and may perhaps be the basis for the strategic formulation. As with
almost any strategic plan, there are associated costs that derive, and this is
reflected also in E-commerce. Such cost could be identified as follows: ·
Connecting to the Internet (The Internet Service Provider) · Hardware and
software · Web site and advertising designers · Staff to maintain the Web
sites and manage e-mail with stakeholders. Performance monitoring As with any
strategic formulation, E-commerce requires appropriate performance monitoring to
ensure that is place in the organisation continues to be in sync with the
functional goal and objectives put in place. This includes ensuring that any
adaptation to E-commerce is monitored, including staff training and awareness.
The use of E-commerce in an organisation must be carefully monitored to ensure
that it remains productive, and that they generate some sort of gain. As well as
these functional aspects, it is imperative that the actual strategies that are
formulated as constantly review, and future developments are adapted into such
strategies. Conclusion E-commerce is revolutionising the way in which an
organisation thinks, and in particular how an organisation bases it's future
goals and objective. An understanding of the critical make up of organisations,
and how they develop their strategies, helps to close the gap between E-commerce
and strategic marketing. An organisations strategic planning process helps to
cover the vital issues that any new paradigm may invoke. This structure helps
provide a basis for assessing the impact of E-commerce and it's relationship
with marketing strategy. By understanding the organisation as a whole, it
becomes clear what initiates strategic development, and hence provides clear
reasons why E-commerce may become prevalent in strategy formulation. Such an
understand allows the organisation to develop E-commerce strategy that is in
sync with the organisations corporate strategies. Such fundamental comparisons
help to gauge the effect E-commerce has and will have on modern organisations.
If Organisations gain an understanding of E-commerce and its relationship to
marketing and operational strategies, they will be better ready for future
development and technological change. (Baty, E. 2000) In order to be competitive
in modern business it is imperative that the organisation's corporate strategies
are constantly review, and environmental influences addressed. One of the major
shifts in recent years is the technological shift towards the Internet, and as a
result E-commerce. E-commerce has developed into an enormous aspect of the
Internet and as such, organisations have been required to address this in their
strategic planning. For example, the University of Otago's strategic plans would
be to look forward to technological changes, and be ready to adapt to these. As
such, perhaps the introduction of an E-commerce Degree may be a resultant of
their strategic plans. Organisations that are looking towards E-commerce as a
strategic option are met with numerous issues that must be addressed. Analysing
theories and thoughts on E-Commerce helps to gain a better understanding of how
an organisation would approach such a strategy. As with any strategy, many
attributes must be considered, and carefully evaluated. As a fundamental
component of strategic planning is to envision future development, perhaps these
ideals could be advanced further. While E-commerce does and will have a profound
effect on marketing strategy formulation, what will the future of E-commerce
hold? As organisations implement their strategic plans in respect to E-Commerce,
it must be realised how this will effect other part of the organisations. It is
also important to understand how society is impacted as a result of their
strategic plan. Is promoting a greater number of Internet users irresponsible?
Perhaps promoting regular use of computers is affecting the general health of
the consumer. While such suggestion seen rather extreme, it is feasible to
assume that such ideals warrant further investigation. In keeping with these
future ideals, research may be sought on developments in technology and the
potential for total media packages and what they would mean to the advertiser.
Perhaps the next step in the Internet, is total home entertainment, and
identification of this early, could lead to a sustainable competitive advantage
in E-commerce.