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Information Technology remains the key agent of change in the business world. IT has not only enhanced the efficiency and effectiveness of businesses but has also led to the creation of new business models and forms. E-business has emerged due to the impacts of IT on the business sector.
The electronic economy has been marked by the emergence of pure virtual organizations and semi-virtual businesses. These organizations are growing at a faster rate compared to the brick and mortar companies in the physical world (Adams, 2003). This study highlights the importance of technology to the business world. The paper also gives attention to the importance of E-business and virtual organizations.
Benefits of Information Technology
Information Technology is the major tool that has transformed the business world. IT has increased the efficiency and effectiveness of E-business. The technology enables business organizations to improve the accuracy of business operations. Operational errors are easily identified and controlled through effective utilization of IT-enabled devices.
Business organizations use technology application tools of business management such as Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), and Supply Chain Management (SCM) to eliminate errors in operations and achieve efficiency. For instance, businesses can use ERP to ensure effective planning and allocation of resources (Collier & Bienstock, 2006).
The tool enables businesses to design effective strategies of resource allocation and control processes. ERP integrates all the operations of an organization through effective utilization of the available data. It can be used in project management to identify sources of deviations and ensure proper scheduling of project operations (Barua & Konana, 2001).
Enhanced communication is the other advantage of IT to the business world and especially in the field of E-business. Unlike brick and mortar companies that rely on paper for communication, virtual organizations utilize their virtual nature to enhance communication. In this case, the organizations can easily send and receive messages through internet-enabled devices.
Elimination of paperwork in E-business also reduces the cost of operation and improves the performance. Information Technology has, therefore, reduced the cost of doing business for many organizations, which exist in the physical and virtual space (Barua & Konana, 2001).
Technology has also reduced the initial capital that is needed to start an online business. For example, starting a business in the virtual space only requires an entrepreneur to establish a reliable and effective website. The cost of establishing the website is a one-off investment that is not incurred on repetitive basis.
The websites used in the E-business also enable investors to reduce the cost of product promotion (Bapna & Gupta, 2005). Time management is another beneficial aspect that is associated with technology in business. The entrepreneurs in E-business can easily sell their goods and services without travelling to the physical market place.
The same case applies to the consumers who are able to access different varieties of goods and services at their own convenience. The customers who use online business services are able to choose different goods from different vendors. They determine the prices of the various goods and services through their purchasing power and the supply patterns in the market (Adams, 2003).
General Environment of E-Commerce
Online transactions are the major components of E-commerce. However, the transactions may take place in different environments. These environments determine the type of organizations in E-commerce (Collier & Bienstock, 2006). Pure virtual environment is the most common type in E-Commerce. In such environments, the organizations assume virtual existence in the online world.
The organizations in the pure virtual environment rely on internet connection to provide goods and services to their customers. Such businesses offer product catalogues at their websites for the customers. Their operation systems are automated by software, which offers direct services and assistance to the clients. Organizations that specialize in data management are some of the businesses that operate in the pure virtual environment.
Other organizations include the Wedding Channel, Amazon, online advertising companies, and Ensemble. Organizations that exist in the virtual environment enjoy a low cost of operation and a reduced initial investment. For example, such organizations do not have to spend a lot of funds in building physical offices, buying machines and equipment, and incur maintenance cost.
Virtual organizations also spend less money in advertising and product promotion. Apart from the pure virtual organizations, click-and-mortar is another form of business environment in E-commerce. An organization that exists in a click-and-mortar form has some aspects of virtual and physical existence. Such businesses may exist in the physical world and also in the online platform.
The businesses can attract customers from both environments. The organizations give their customers the opportunity to choose the most reliable and efficient transaction. The customers can either transact online or go to the physical offices of the company. A good example of a click-and-mortar organization is the online banking method that has been adopted by most banks around the world.
In the contemporary society, customers have the opportunity to bank online or visit the physical location of their banks (Adjei & Noble, 2012). Another business environment in E-commerce is brick and mortar. The organizations in this type of environment rely on physical existence to conduct their transactions. The businesses conduct most of their transactions offline.
However, they rely on online transactions to attract more customers to their website and increase their sales. The businesses may also conduct online transactions when they purchase their raw materials from suppliers located in other countries. Unlike completely virtual organizations that mainly focus on digital products, brick-and-mortar organizations offer both physical and digital products.
The organization may outsource the services of a virtual organization when selling their products in the online world. A good example of businesses that operate in the brick-and-mortar environment includes hotels and restaurants in the physical world. Most hotels and restaurants rely on online marketing to attract to their products.
The online booking services offered by air flight companies are also a good example of a brick-and-mortar environment. In such cases, the customers buy the tickets online while the actual services are offered in the physical environment. Brick-and-mortar companies depend on their physical existence to offer customers services and increase customer satisfaction (OMB, 2008).
E-Commerce Classification
Based on the aforementioned E-commerce environments, it is, therefore, essential to classify the different categories involved. E-commerce is classified according to the nature of the parties involved. For example, in B2B classification the business transactions, in this case, involve businesses. Businesses are able to trade in the online world to get the right goods and services from different sources.
One organization may act as a supplier of particular goods and services while the other receives the goods. For example, a private company in the online world may supply data management services to a government entity such as the ministry of registration. B2B classification involves the transaction of high volumes and value that take place mainly between two organizations (Barua & Konana, 2001).
In B2C classification, the business sells the goods to the consumers. This is the most common classification in E-commerce since most business organizations involve businesses and consumers. For example, when Amazon sells its books to the individual consumers such as students, the nature of the business involved in this case is B2C. The business targets its products to the direct consumers of the product (Anthony & Grabski, 2006).
C2B classification takes place when an individual consumer sells goods or services to a business. In this case, the business acts as the consumer of the products. For example, when a customer sells used books to Amazon, the nature of the business is C2B. The transaction mainly takes place when the company involved is interested in recycling the old products (Adams, 2003).
C2C approach is another classification that is used in E-commerce. The transactions involve two different customers. Individual customers may exchange goods or services for reducing the cost of buying the goods from the organizations. C2C classification mainly takes place where consumers would like to exchange different goods or services. For example, students in different locations may exchange books or electronic materials (Adjei & Noble, 2012).
Financial Infrastructure for Development
E-business development requires a well organized and comprehensive financial infrastructure. The development of the infrastructure must be based on the various activities involved in the operation of E-business. The most important aspect in the development of E-business is the establishment of a reliable website. The supplier building the E-business website should provide accurate invoicing for the various equipment involved.
The other important element is the payment system which enables the customers to pay for their services immediately after buying the purchase. A good payment system should facilitate sharing of information between the various departments of the organization. For instance, the production department should be able to share the information with sales section.
The two departments determine product pricing and the profits of an organization (Anthony & Grabski, 2006). Service architecture also determines the financial infrastructure in E-business development. Ability to access the services offered by an organization with regards to the location and the people involved determines the financial implications involved when selling the products.
Another element that determines the service architecture is the range of services offered. In this case, elements such as interaction, integration, product features, and functionality greatly determine the financial requirements when developing the products. Reliable service architecture in E-business should enable the customers to perform multiple transactions at low cost.
Integration of various systems in an organization also determines the financial infrastructure in E-business development. Integration of the service architecture with information system may require an organization to spend a lot of funds in developing the reliable programs and software for automated transactions.
A good example is the integration of the ordering system with the distribution mechanisms, which employ the requirements of the information system and the service architecture. The requirements may also be extended to include vital operations such as security issues and cost control measures (OMB, 2008).
In other situations, operations such as hardware installation, training services, marketing initiatives, and customer relationship management may be not included when determining the initial investment in E-business. These operations tend to change with the existing business conditions and customer requirements. However, wages to be paid to the employees should be determined during the initial stages.
The number of employees should be determined during E-business development stage. In addition, tax requirements or other funds that have legal obligations should also be determined during the initial stages (Bapna & Gupta, 2005).
Technology
Based on the infrastructural requirements in E-business development, different technological tools are important for the existence of E-business. Technology determines the various frameworks used in E-business environments. For example, the network computing system has enabled organizations and consumers to conduct their transactions in various ways (Bapna & Gupta, 2005).
E-business framework may involve individuals within a common network in an organization. For instance, intranet connection may be used in an organization to facilitate the transactions between individuals in the entity. Individuals may also use peer-peer network connection to conduct business transactions. E-business framework may also exist in the form of extranet network system.
Extranet networks enable individuals in the intranet system to conduct transactions with others in the external network. The ultimate framework used in E-business transactions is the internet. This form of network connects various individuals and organizations in various networks from peer-peer network, intranet, and extranet (OMB, 2008).
Information technology is the key building block of E-business. IT integrates the technical requirements of technology with the goals and information needs of E-business. The technology facilitates interaction between the restructuring and design requirements with data architecture, organizational structure, and information architecture.
The concept of utility computing is another technology that is important in the development of E-business. The technology is important to facilitate sharing of resources in a computer network. Utility computing has various tools that are important for the operations of E-business transactions (Adjei & Noble, 2012). Such tools include virtualization tools and policy-based resource management devices.
The virtual tools facilitate storage and retrieval of data. The tools also facilitate uninterrupted flow of information within the computer network. On the other hand, policy-based resource management devices enable the customers to post queries on different products and services that are offered by an organization.
Such tools are also used to ensure that product catalogues and product carts are used in the online business. Service provider applications are also important kinds of technology used in E-business. The applications facilitate the interaction between the customers and the organization (Bapna & Gupta, 2005).
Major Issues in E-Business and Virtual Organizations
E-business and virtual organizations are affected by myriad range of issues. Security factors top the list of issues that affect E-business. Security issues that are associated with theft of customer’s information and use of unreliable payment systems greatly affect the efficiency of E-business. Customers and organizations have lost a lot of funds and confidential information due to theft and fraud (Bahmanziari, Odom & Ugrin, 2009).
Apart from security issues, legal factors also affect the efficiency and effectiveness of E-business and virtual organizations. Legal requirements have been set governments and trade entities to regulate online transactions. Despite the fact that such regulations implemented to improve efficiency in the E-business sector, they have serious financial implications that are very expensive for a small business in the online world.
The regulations tend to reduce the rate of growth in the sector (Adjei & Noble, 2012). Issues of trust also dominate the list of factors that affect E-business. Most customers rely on E-business to achieve convenience. However, the level of trust is very low. Customers tend to believe that online organizations are fraudsters or scams that are formed to steal from innocent people.
The level of trust in E-business has reduced due to rampant cases of computer crime and internet theft (Anthony & Grabski, 2006). System implementation and integration are the technical issues that affect the performance of virtual organizations and efficiency of E-business.
Issues such as system architecture, information flow, and other technical requirements affect the effectiveness of E-commerce. In some cases, a virtual organization may use incompatible software and computer programs, which may result in the opportunity for the customer to access the goods and services offered by the organization (Bahmanziari, Odom & Ugrin, 2009).
Evaluations
Performance matrices should be used to evaluate the effectiveness of E-business. The business should be evaluated against important elements of cost, security, convenience, efficiency, trust, the range of goods and services, and technical requirements. With regards to convenience, E-business should be evaluated in terms of promptness and ability to supply various goods and services to meet the needs of the customers.
E-business should also be evaluated against the security to ensure that businesses are operated in secure environments (OMB, 2008). Evaluation of E-business in terms of efficiency should focus on the performance of various elements such as network connectivity, the speed of browsers used by the website, and organization of business processes.
For example, the payment and the ordering systems should be efficient to enable the customers to access the products and pay for them in time. The product catalogues should provide for accurate description of the products. Moreover, the shopping carts should enable the customers to access the various options offered by an organization (Adjei & Noble, 2012).
Cost is another vital aspect that should be considered during the evaluation process. The main goal of E-business is ensure cost reduction. Cost elements in E-business such as cost of website maintenance, cost of product promotion, wages paid to the employees, and taxes should be controlled to ensure effective performance of the system. Cost evaluation should be based on the ability of the E-business organization to control these elements.
For example, the organization can operate in using cost-efficient website applications (Bahmanziari, Odom & Ugrin, 2009). Performance evaluation on the basis of security should be based on the ability of the organization to the network system used by a company.
The ability of the network to prevent entry of intruders is very cardinal to ensure the performance of the website. The effectiveness of security control measures such as data encryption, security certificates, and firewalls forms the basis of the assessment (Collier & Bienstock, 2006).
Solution
To achieve the aforementioned performance matrices, effective strategies should be established to improve the performance of E-business (Bahmanziari, Odom & Ugrin, 2009). The stakeholders in the sector should consider the following recommendations.
- Adoption of reliable payment systems
- Conducting businesses in a secure environment by protecting computer networks
- Adoption of compatible software and computer programs for system integration
- Adherence to the legal regulations in the business environment
- Establishment of cost control measures
Conclusions
Information technology has played an immense role in transforming the business environment. Information technology has enabled many countries around the world to establish the online economic system where online trade activities contribute to the economic development of states. This study has brought into perspective the benefits of E-businesses.
E-business enhances the efficiency and effectiveness of business activities. The method also reduces the cost of doing business. Moreover, it enables customers to access different varieties of goods. E-business is conducted in various environments such as pure virtual space, click and mortar, and brick and mortar environments. The classification of E-business is based on the category of participants.
For instance, the transactions involve consumers and businesses that interact in different levels. E-business development and financial management is also another aspect that has been highlighted in the study. Financial infrastructure should be in tandem with the technical requirements of E-business development.
The funds used in the development should enable the business to attain service requirements, system architecture, and information systems. To understand these requirements, it is also important to highlight the technology involved in E-business. Computer networks and utility computing systems are very important in the performance of E-businesss.
However, E-business is affected by various issues such as legal requirements, security issues, trust issues, performance, and cost factors. Therefore, to ensure efficiency and effectiveness of E-business, there is need to adopt effective strategies that can be used to manage the problems affecting the business.
Such recommendations include the adoption of effective and secure computer networks, establishment of cost control strategies, and regular assessment of website performance. These recommendations will have an important role in transforming E-business and enhancing the development of electronic economy.
References
Adams, F. (2003). The E-business revolution & the new economy: E-economics after the dot-com crash. New York: South-Western Educational Publishing.
Adjei, M. &Noble, S. (2012). Enhancing relationships with customers through online brand communities. MIT Sloan Management Review, 34(2), 22-24.
Anthony, J. & Grabski, S. (2006). Market reaction to e-commerce impairments evidenced by website outages authors’ response. International Journal of Accounting Information Systems, 7(2), 87-90.
Bahmanziari, T., Odom, M. & Ugrin, J. (2009). An experimental evaluation of the effects of internal and external e-Assurance on initial trust formation in B2C e- commerce. International Journal of Accounting Information Systems, 10(3),152- 170.
Bapna, R. & Gupta, A. (2005). Pricing and allocation for quality-differentiated online services. Management Science, 46(7), 1141-1150.
Barua, A., & Konana, A. (2001). Driving e-business excellence. MIT Sloan Management Review, 45(3), 36-44.
Collier, J. E. & Bienstock, C. (2006). How do customers judge quality in an e-tailor? MIT Sloan Management Review, 38(4), 35-40.
OMB, A. (2008). U.S.2009 budget goes paperless. Information Management Journal, 42(3), 11-14
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