Critically analyze and discuss the impact of e-commerce on

organizational strategy, supply chains and logistical operations

With the application of e-commerce in international trade, the procedures of
various transactions can be simplified, and transactions can transcend the limitations of
time, space and region, and can be conducted directly on the virtual network in an
electronic way. In this way, a great deal of cost of traditional actual transaction is saved.
Under the stimulation of such intelligence, trade opportunities between various
countries are also gradually increased. The use of e-commerce has improved the
operation efficiency of international trade and brought unprecedented development
opportunities to the international community. Mastering the most important technology
of developing e-commerce is the key factor for all countries to win in the new
competition.

Name : Anne Yu
Student ID : 1876811
Course No. : E-Commerce BHO0171
- Assignment One
Submission Date : 19 April 2019
 Contents

1 Introduction ................................................................................................................. 1
2 Understanding of business within the online environment ......................................... 1
3 Online business and revenue models within the context of e-commerce ................... 3
3.1 To promote reform of trading entities and trading modes ................................ 3
3.2 To increase the international division of labor and coordination ...................... 3
3.3 To change competition in international trade .................................................... 4
4 The impact of e-commerce on organization strategies, supply chains and logistical
operation ........................................................................................................................ 4
4.1 The impact of e-commerce on organization strategies of markets and retailers
................................................................................................................................. 4
4.2 The impact of e-commerce on supply chains.................................................... 5
4.3 The impact of e-commerce on logistical operation........................................... 6
4.4 The impact of e-commerce on consumer .......................................................... 6
Conclusions .................................................................................................................... 7
References ...................................................................................................................... 8
1 Introduction
As we all know, e-commerce is a rising and dynamic business mode in the current
era. In the 1990s, the potential of e-commerce in economy and trade was gradually
revealed. In many countries, such as Singapore and the United States, there are more
and more attention to e-commerce, the biggest goal is to make the world’s e-commerce
begin to development, so the practice of e-commerce will be promoted. The Chinese
government mentioned that Chinese enterprises need to cater to the trend of national
development, so they should actively develop e-commerce and gain a firm foothold in
international competition. We need to believe that under the new historical background,
the most popular and convenient form of international trade is e-commerce. The
booming development of e-commerce can promote international economy and trade
and make it a sunrise industry.

2 Understanding of business within the online environment

E-business is any kind of business or commercial transaction that includes sharing
of information across the internet. Commerce constitutes the exchange of products and
services between businesses, groups and individuals and can be seen as one of the
essential activities of any business. Electronic commerce focuses on the use of
Information and Communication Technology (ICT) to enable the external activities and
relationships of the business with individuals, groups and other businesses, while e-
business refers to business with help of the internet. The term “e-business” was coined
by IBM’s marketing and Internet team in 1996 (Li, Zhaolin, 2015).
E-commerce is reflected in international trade in the following aspects: at the very
beginning, e-commerce can use international trade to gather the trading partners of
different countries. Different international trade cannot be carried out without suitable
trading partners. The difference between e-commerce and traditional trading methods
lies in the ability to find suitable trading partners through convenient and fast
international Internet (Dimkota, Angelika, 2012). Because in China, enterprises use e-
commerce, no matter they are big or small, whether they have been established for a
long time or a short time, they can search the trade information they need on the equal,
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open and free Internet, and approach for their business partners. At the same time, many
enterprises can also develop their own websites, publicize the information of products
and services, search potential customers around the world, and then obtain valuable
information related to enterprises, and take the initiative to connect with businesses to
increase more business opportunities. In this process, we found that e-commerce is not
necessarily constrained by the traditional sense, and the cost of enterprises can be
reduced which is a great advantage for the business.
Secondly, e-commerce in international trade can help to carry out series of
communication of e-commerce through consultations and negotiations between the
buyers and sellers. With the implementation of e-commerce, buyers and sellers can
negotiate through E-mail, offer, counter-offer and other means, and they can also
publish the opinions and information expressed by both sides with the help of the power
of the Internet. Although these traditional ways of trade can be done through fax,
telephone and other channels, the cost of communication is quite expensive, and most
of them use face-to-face communication. Due to the factors of region and time, the cost
of communication is relatively large, so the negotiation may not be successful (Evans,
Richard, 2002).
Thirdly, e-commerce in international trade can help people with electronic
contracts, online ordering, or online payment. The use of e-commerce enables
companies to establish websites, communicate with different buyers via email, and
release different transaction information. The successful payment methods include
Paypal and Worldpay enables online Banks and credit card companies to provide certain
services to both of the sellers and buyers. In this way, buyers and sellers can sign
electronic contracts or carry out a series of trading procedures on the Internet (Delone,
2004). Professional electronic encryption technology is used to ensure the privacy of
buyers and sellers as well as trade secrets. This process is convenient and quick and
provides safeguards, and in many cases reduces staff costs.
Finally, e-commerce can help manage international trade activities in an
information-based and networked way. There are trade activities between different
countries and these businesses will be involved in the functions of different segments,
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as well as insurance, finance, transportation and other service sectors. In addition, it
also includes a series of links such as customs declaration, market regulation and tax
collection. Affected by the trade operation before the emergence of e-commerce,
trading enterprises need to spend more money and time to negotiate with different
departments (Bakos, 2001). With the emergence of e-commerce, these businesses
procedures can be completed on the network.

3 Online business and revenue models within the context of e-

commerce

3.1 To promote reform of trading entities and trading modes

In other words, the use of international trade in e-commerce has led to great
changes in the international market. As a result, many products and services appear in
the international market, and many virtual enterprises exist in the same period. The use
of e-commerce itself is through a company or enterprise which has a strong strength in
their own professional field. Nowadays, there is a global unified website to provide
people with better services and products (Eisingerich, 2008).
The best allocation of resources can be achieved by making use of e-commerce to
make the network interactive and to allow certain flow of production resources and
transnational factors, such as commerce, material, information and capital (Teriz, 2011).
The information network becomes the most powerful broker, making those agents who
lack information and cannot import or export finally eliminated, so that buyers and
sellers can timely and effectively transfer information, and goods can flow freely
without barriers.

3.2 To increase the international division of labor and coordination

With the adoption of e-commerce, many transaction details of buyers and sellers
can be implemented through the network, and manufacturers and customers can
communicate with each other from zero distance. Henceforth, the international division
of labor needs to be refined, so that e-commerce can be widely used. Each of the
countries have their own characteristics and advantages of the product, so as to improve

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the competitiveness of the product (Burgess, 2009).
Businesses using e-commerce can sell products on the market according to
customers' needs, and enterprises can re-design and process products according to the
the personnel assigned to them, in order to let the electronic products adapt to the
international level of development (Tayler, 2016).

3.3 To change competition in international trade

In traditional international trade, competition is mainly focused on products or
services. With the same price, the business with better products or services, and are
cheaper than those of the same quality, will have a greater advantage towards their
competitors. However, in the e-commerce model, who has a better business model,
which can make the best products and services for customers in the shortest time can
take the initiative. At the same time, with the innovation and development of Internet
information technology, the businesses with rapid progress of work, international trade
workflow and competition between supply chains will rapidly expands. The business
who has better supply chain quality, which can get better products at lower cost, so has
better efficiency in the market. Therefore, supply chain management has become an
essential knowledge to the businesses, with the goal to simplify the process of decision-
making and management information sharing, and to achieve faster production, prompt
delivery and minimum inventory level, so as to reduce the cost of businesses and to
maximize their performance.

4 The impact of e-commerce on organization strategies, supply

chains and logistical operation

4.1 The impact of e-commerce on organization strategies of markets

and retailers
E-commerce markets are growing at noticeable rates. The online market is
expected to grow by 56% in 2015–2020. In 2017, retail e-commerce sales worldwide
amounted to 2.3 trillion US dollars and e-retail revenues are projected to grow to 4.88
trillion US dollars in 2021. Traditional markets are only expected 2% growth during the
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same time. Brick and mortar retailers are struggling because of online retailer’s ability
to offer lower prices and higher efficiency. Many larger retailers are able to maintain a
presence offline and online by linking physical and online offerings (Wienclaw, 2013).
E-commerce allows customers to overcome geographical barriers and allows them
to purchase products anytime and from anywhere. Online and traditional markets have
different strategies for conducting business. Traditional retailers offer fewer assortment
of products because of shelf space where, online retailers often hold no inventory but
send customer orders directly to the manufacturers. The pricing strategies are also
different for traditional and online retailers. Traditional retailers base their prices on
store traffic and the cost to keep inventory. Online retailers base prices on the speed of
delivery.
There are two ways for marketers to conduct business through e-commerce: fully
online or online along with a brick and mortar store. Online marketers can offer lower
prices, greater product selection, and high efficiency rates. Many customers prefer
online markets if the products can be delivered quickly at relatively low price. However,
online retailers cannot offer the physical experience that traditional retailers can. It can
be difficult to judge the quality of a product without the physical experience, which
may cause seller uncertainty. Another issue regarding the online market is concerns
about the security of online transactions.
Security is a primary problem for e-commerce in developed and developing
countries. E-commerce security is protecting business' websites and customers from
unauthorized access, use, alteration, or destruction. The type of threats include:
malicious codes, unwanted programs (ad ware, spyware), phishing, hacking, and cyber
vandalism. E-commerce websites use different tools to avert security threats. These
tools include firewalls, encryption software, digital certificates, and passwords.

4.2 The impact of e-commerce on supply chains

For a long time, companies had been struggled between the benefits of the supply
chain technology and the solutions to deliver those benefits. However, the emergence
of e-commerce has provided a more practical and effective way of delivering the

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benefits of the new supply chain technologies.
E-commerce has the capability to integrate all inter-company and intra-company
functions, meaning that the three flows (physical flow, financial flow and information
flow) of the supply chain could be also affected by e-commerce. The affections on
physical flows improved the way of product and inventory movement level for
companies. For the information flows, e-commerce optimized the capacity of
information processing than companies used to have, and for the financial flows, e-
commerce allows companies to have more efficient payment and settlement solutions.
In addition, e-commerce has a more sophisticated level of impact on supply chains:
Firstly, the performance gap will be eliminated since companies can identify gaps
between different levels of supply chains by electronic means of solutions; Secondly,
as a result of e-commerce emergence, new capabilities such as implementing Enterprise
Resourcs Planning (ERP) system, System Applications, Products (SAP) system, Xero
and Megaventory, have helped companies to manage operations with customers and
suppliers more efficeintly. Thirdly, technology companies would keep investing on new
e-commerce software solutions as they are expecting investment return. Fourthly, e-
commerce would help to solve many aspects of issues that companies may feel difficult
to cope with, such as political barriers or cross-country changes. Finally, e-commerce
provides companies a more efficient and effective way to collaborate with each other
within the supply chain.

4.3 The impact of e-commerce on logistical operation

Logistics in e-commerce mainly concerns fulfillment. Online markets and retailers
have to find the best possible way to fill orders and deliver products. Small companies
usually control their own logistic operation because they do not have the ability to hire
an outside company. Most large companies hire a third party to provide fulfillment
service for the company’s logistic needs.

4.4 The impact of e-commerce on consumer

E-commerce brings convenience for customers as they do not have to leave home
and only need to browse website online, especially for buying the products which are
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not sold in nearby shops. It could help customers buy wider range of products and save
customers’ time. Consumers also gain power through online shopping. They are able to
research products and compare prices among retailers. Also, online shopping often
provides sales promotion or discounts code, thus it is more price effective for customers.
Moreover, e-commerce provides products’ detailed information; even the in-store staff
cannot offer such detailed explanation. Customers can also review and track the order
history online.
However, e-commerce lacks human interaction for customers, especially those
prefer to have face-to-face connection. Customers are also concerned with the security
of online transactions and tend to remain loyal to well-known retailers. In recent years,
clothing retailers such as Tommy Hilfiger have started adding Virtual Fit platforms to
their e-commerce sites to reduce the risk of customers buying the wrong sized clothes.
However when the customer regrets after the purchase of a product, it involves the
return of goods and refund procedures, these procedures are inconvenient somehow, as
customers need to pack and post the goods which cost them a lot of extra time. If the
products are expensive, large or fragile, the safety issues will need to be concern.

Conclusions
Modern electronic commerce typically uses the World Wide Web for at least one
part of the transaction’s life cycle although it may also use other technologies such as
e-mail and other social media. Typical e-commerce transactions such as purchase of
online books in Amazon and purchase of online music (downloading the music in the
form of digital distribution such as iTunes Store), and to a less extent,
customized/personalized online liquor store inventory services. There are three areas of
e-commerce: online retailing, electric markets and online auctions. E-commerce is
supported by electronic business.
E-commerce technologies cut transaction costs by allowing both manufactures and
consumers to skip through the intermediaries - Disintermediation. This is achieved by
extending the search area of best price deals and by group purchase on the Internet. The
success of e-commerce in urban and regional levels are well depends on how the local

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firms and consumers have adopted to e-commerce in their own territory.

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