E-Commerce Marketing
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.