Electronic Commerce systems, with is efficiency and operational effectiveness have revolutionalised the way commerce is conducted. Businesses are now faced with increasing complex operation and rules on which to operate. The Internet and Electronic Commerce have created a number of new rules which a company must aware of in order to remain competitive.
Rule No 1 : Space
Due to the networked nature of the Internet, distance has vanished. Businesses have the opportunity for globalisation of their products but at the same time is also exposed to worldwide competition. Companies must now addresses these issues when moving into the electronic commerce environment.
Companies which previously have market share in their local domain now faces new competition from electronic commerce businesses established not only within their local domain but also from other domains/countries as well. An example of this is Amazon.com (www.amazon.com) which have over the last 4 years established themselves as the largest bookstore in the world providing competition to not only traditional brick and mortar stores in the US e.g. Barnes and Noble which have also enjoyed a big market share in the US but also bookstores around the world.
Rule No 2 : Time
The World Wide Web and electronic commerce systems are instantaneous in nature thereby requiring companies to provide instant interactivity in provision of service or information. These factors have accelerated change be it in operation or service to ensure fast response.
It is important for companies to learn from and adapt to the marketplace in real time to cater for this increase in interactivity. A perfect example would be Dell Computers (www.dell.com) which have revolutionalised PC sales by offering machines built directly from buyer's request.
Rule No 3 : Matter
The convergence of technology and information within the World Wide Web and electronic commerce systems have ensure that processing of information is much more powerful and cost-effective than moving physical products. Electronic commerce systems have created a new economy in sales and services of information based products.
As an example, Yahoo's (an information based web site) market value went from US$400 million to US$5 billion in 2 years due to intangibles.
Rule No 4 : Growth
The Internet grows as a rate of 10% per month and growth for electronic companies is accelerated by the growth of the Internet. The concept of virtual marketing to these potential customers can greatly increase the adoption of a product or service.
In this networked economy, 'first-mover' advantages are greater than ever. As an example, Hotmail (www.hotmail.com) which is predominant the first website offering free e-mail signed 2 million subscribers in 2 years and continues to signup 100000 new accounts every day. Hotmail was eventually purchase by Microsoft for US$400 million.
Rule No 5 : Markets
In this new networked economy, the buyers are gaining new power and the seller new opportunities. Businesses that offer unique services or lower costs will prosper.
As an example, Auto-by-tel (www.autobytel.com) provides on-line shopping for cars. The website provides the ability to personalise a consumers shopping experience. Another attractive feature is it's personalise car service which provide value added information on when to service cars based on the car models and service reminders.
New Business Models
Due to its unique mechanism, electronic commerce systems allow for new business models, based on the wide availability of information and its direct distribution to end-customers.
An example of this would be so-called infomediaries or information brokers which repackages information e.g. Dealernet (www.dealernet.com), a site which offers comparison between types of cars, with pictures, product specification and third-party reviews.
Rule No 6 : Value
In the new network economy, the value of a company rises with the market share. Many companies give away their products to establish market share and then sell linked services later on.
As an example, Realnetworks (www.realnetworks.com) gave away streaming media players on the Web to create a "standard". The value of the company is now very high and the market is beginning to use the software as a standard for streaming video and music.
Rule No 7 : Efficiency
One of the most widespread beliefs about the new Network Economy is that "friction-free" contact between buyers and sellers will eliminate the need for middleman. However, this is far from the truth as an extraordinary new type of business "infomediary" has replaced intermediaries.
Infomediaries are entities that turn data into usable information via a community-based buying environment or powerful technology-based buying aids. Due to the enormous amount of information existing in the World Wide Web and the increasing value of these informations, infomediaries play an important part in the efficiency of electronic commerce systems by providing repackaged information in accordance to the needs of the consumer.
An example of this would be AOL (www.aol.com) which packages information into reusable portions for its community of AOL users.
Rule No 8 : Transactions
In electronic commerce, one-to-one marketing will take precedence as customers demand customisation of products and suppliers ensure new product capabilities to cater for the increasing sophisticated demand of its customers. Customer services will become increasingly efficient and sophisticated through the integration of video conferencing in web sales and web support.
An example of this would be Staples (www.staples.com), an office supplier website which sells paper clips on a one-on-one basis.
Rule No 9 : Impulse
The buying experience in an electronic commerce economy is different from the real world. The consumers of an electronic commerce environment are so-called 'impulse' buyers who may discover a product they desire and just hit the "buy" button. The downsides of these consumers are also that they are just a click away from the competitors. Electronic commerce websites need to ensure the "stickiness" of their sites to attract the potential consumers.
Rule No 10 : People
The new economy will be dependent on brainpower which is the prime factor driving the new economy. Large value in an electronic commerce economy would come from an idea combining with the necessary technology as well as an effective model. New forms of expertise will be required in the new economy to ensure its success and existing personnel need to be re-skilled in the ways of the new economy to ensure its sustainability.
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