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E-business: A new paradigm shift in business

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DQW Bureau
New Update

The Internet is turning business upside down and inside out. It is fundamentally changing the way companies operate, whether in high-tech or metal bashing. Here is the proof for my statement.

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E-commerce purchases may gain as much as 5 percent of retail sales in 2000. The NYSE stock exchange is under pressure to adopt a 24-hour trading network. Ford recently announced its intention to manage its entire supply chain on the Web.

Driven by an increasingly competitive global environment, good management teams have begun to recognize the opportunities in thinking beyond the boundaries of their own internal processes to envision how a `virtual value chain' could improve their sales and lower costs. Fed-Ex was an early mover in implementing this concept when it initiated the service that allowed customers to track their packages on the Web.

The Web now provides a new channel of distribution that allows producers who formerly had to go through retailers to reach the end user directly. This marketing shift also led to the creation of totally new kinds of retailers such as Amazon that avoided traditional barriers to entry by building

cyberstores.

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These new online stores have, in turn, increased demand and the number of users, putting pressure on traditional retailers to create an e-commerce presence as well. Suppliers have had to adapt their delivery systems to this new model as well.

The Web is creating a tougher customer. E-commerce continues to expand consumer choice by providing the tools for them to switch suppliers instantaneously, including the ability to quickly and easily make price comparisons. In many cases, suppliers are dealing with end users for the first time, having previously been shielded by their resellers. Management strategies must take these into consideration.

One overriding attribute of the past five years' experience with Internet initiatives has been the urgency to develop and implement competitive Web strategies. One of the most visible and oft-cited examples is that of Dell overtaking Compaq's leadership in the PC market. While Compaq had built a successful franchise through dealer channels, Dell recognized the customers' willingness to buy directly from the manufacturer and to do so online. This strategy allowed them to build on-demand, minimizing inventories and configuring machines for individual needs. Similarly, Barnes and Noble took a `wait and see attitude' toward Amazon and now finds itself having great difficulty in increasing its market share of Web sales.

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The strategic time compression created by the Internet may be the single largest contributor to the number of small, upstart competitors on the Web. There are two main reasons that this gives them an advantage. First, the cost barrier to entry in the Web market is virtually zero and, second, small new companies do not have a formal infrastructure through which strategic ideas get squandered. By the time a large firm has approved a capital budget to implement a strategic Web idea, some small group of idea people backed by a venture capitalist has already implemented it.

In conclusion I have this to say. Business is still in the early stages of experiencing the full impact of the e-business phenomenon. The Internet not only provides a valuable e-commerce retail venue, it provides a dynamic and economical platform to virtually integrate a firm's value chain. The management task is to leverage these opportunities quickly to sustain or enhance competitive advantage.

Kiruba Shankar


www.ciol.com

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