E-Commerce: Achieving Competitive Advantage

Introduction

Without any doubts, in the 21^st century, global process has significantly changed the way people conduct their business. Moreover, the overall map of economy has been transformed. Scientists claim that thanks to e-commerce, companies can find potential customers, deliver their products and services rapidly, and expand their market. Therefore, it is clear that e-commerce has significantly changed the way of global business collaboration and work. According to a definition, e-commerce is a new mean of information technology that gives businesspeople a priority to advertize, buy, distribute, and sale their products and services. Vladimir Zwass (1998), a Columbian Ph.D., thinks that e-commerce is a unique tool that efficiently conducts business transactions and relationships by using different types of telecommunications networks. It is known that e-commerce is built on the transmission of data (text, sound, and video) and electronic transmission. Historically, it is known that electronic commerce was first used in Germany in 1948. The next stage of e-commerce was implementation of electronic data interchange. A great change in the development of electronic commerce was made in 1960s when industry organizations made the first attempt to finance and purchase data for inner-organizational transactions. It is known that in 1990s the first national electronic data interchange standards were developed and applied. Undoubtedly, e-commerce has altered economy in a positive way; however, some companies do not know how to achieve competitive advantage of using e-commerce. Therefore, they are still on a phase developing their competitive strategies. The problem is that many industries have mainly focused on advertizing and visual attractiveness. However, it is not enough to exist in the globalized market. Consequently, it is highly recommended to evaluate how to obtain competitive advantages employing informational technologies. IT revolution has rapidly changed all global economy. There is no company in the world that can escape the influence of e-commerce. Most managers agree that the global revolution in IT sphere can bring many advantages, and only few business people can disagree with importance of IT. Information technologies have almost totally absorbed investment capital. Bright managers highly support the idea that a modern business person has to be aware and involved in the development and utilization of IT technologies in their businesses. This can help them use a competitive advantage of their business against rivals. This study seeks to explain the information revolution and its impact on modern business. How will changes in the IT sphere influence global economic competition and the ways of competitive advantage? How one could be successful on the global market and obtain a competitive advantage using IT? What companies have successfully applied competitive advantages in their business? In order to answer the above-mentioned questions, business people have to comprehend that IT is much more then computers. In the 21^st century, e-commerce means encompassing of the information in order to increase business profitability and stability. De Figueiredo (2000) states that the information revolution has influenced market competition in three ways:

1. E-commerce has totally changed the rules of market competition.
2. E-commerce encompasses industry with competitive advantages in order to outperform company’s opponents.
3. E-commerce creates new businesses.

Competitive Advantages: IT as a Competitive Strategy

According to a definition, competitive strategy is a list of actions that are made in order to successfully create a high position amid rivals and face different types of challenges. Competitive strategy helps the owner explore main actions in order to compete in the global business market. In this case, the businessperson tries to investigate the strategies of his/her rivals and develop a new one in order to gain competitive advantages and profitability. The term of competitive advantage includes utilization of different means in order to get profit and bring values to the customers. Moreover, applying competitive advantages, a businessperson seeks to differentiate his/her own business from that of the opponents and be the first figure in the market. McNamara et al (2003) thinks that in order to implement competitive advantage, the owner has to pay attention to three strategies. The first one is the strategy of differentiation that means utilization of unique means in order to be a superior competitor in the market. Secondly, the price strategy is defined as application of low prices in order to find potential customers. Finally, there is a focus strategy that helps create a target audience. By using these strategies, a business owner clearly understands the scope of his/her aims, services, and products.

The Role of “Value Chain”

It is needless to say that information technology is reshaping the ways companies conduct their business and communicate with their rivals and customers. Also, it significantly influences the entire process of creating and delivering companies’ products and services. What is more, IT is changing the product itself by altering the total package of services that industries use in order to bring value to their potential customers. In this case, it is clear that the role of “value chain” in utilizing IT in competition is significant. By definition, the concept of “value chain” means division of company’s prime activities into two ways, such as technological and economical activities that help the company operate in the market. These activities may be defined as “value activities”. Generally speaking, a value of any product can be measured by the quantity of purchasers who show keen interest in buying products or getting services. A business is profitable and compatible if the value is higher than the cost of activation of company’s value activities. Therefore, if the company wants to get competitive advantage, it has to conduct value activities at lower prices or apply premium cost.

Rothaermel & Hess (2007) define competitive advantage as differentiation or cost of company’s general operation and its value chain. It is known that company’s value activities have cost drivers that show the scope of a cost advantage. Any company will be profitable and competitive in the market if it fulfills customer needs. This characteristic differentiates one industry from another thus constituting a competitive advantage.

While defining the role of e-commerce as a means of obtaining competitive advantage, it is necessary to mention the role of a competitive scope. Considering a definition, it is clear that a competitive scope helps identify the target audience of customers. In this case, IT plays a pivotal role since it significantly saves manager’s time and increases profitability. For example, by applying e-commerce, a manager can easily reach any customer from different part of the globe. Therefore, IT contributes to global partnership and interrelationships.

IT Business Strategies for Competitive Advantage

Undoubtedly, the Internet helps the business owners collect much information about products, services, and customers. The latter can easily use the Internet in order to find needed products and services without traveling to the shops. Therefore, it is clear that the Internet is a modern competitive advantage of e-commerce that significantly saves managers’ and consumers’ time and money. Statistically, 80% of buyers prefer Internet shopping rather than conventional stores. They explain their choice reasoning that the Internet helps them make a full research about needed products and services within a short period of time. Moreover, the buyers can easily compare prices in different online stores. Consequently, the Internet is a real competitive advantage for consumers. Talking about businesses, it is also clear that those companies who use the Internet have more chances to find potential customers and exceed their profitability. It can be explained by the fact that the business owners can provide more advertizing campaigns in the Internet in order to popularize their products and services. What is more, in the Internet, industries can make a list of unique features of their products that help them differentiate their businesses from those of their rivals. In order to be a competitive company in the market, every business owner has to pay attention to the following strategies:

1. Product bundling. This strategy helps the managers increase their profitability and keep potential customers. While searching the Internet, the customer can find information about different products and services without comparing the prices if a manager provides the advantages of the whole package of their products. For example, a famous company, Gateway, gained many competitive advantages over their rivals since they successfully utilized product bundling of its Internet activities and services. Gateway bundled their computers in response to the price increase for computers. Another good example of product bundling is adding of different interactive activities on computer, television, and mobile phones by AOL. Looking at the above mentioned examples, it is clear that product bundling is cost efficient. Customers understand that they pay more money for the additional services. Utilizing product bundling, a company can plunge higher prices for extra services. What is more, product bundling helps sell some extra services to potential customers rather than attract new ones. Therefore, product bundling is financially attractive.
2. Introduction or innovation of the productivity. This strategy helps compete in the existing market by providing new product substitutes or new services. Doubtless, e-commerce is a key to the success. By using the Internet, any company can find characteristics of the potential target customers, and thus will try to do its best in order to attract them and sell the products. Moreover, the Internet helps introduce company’s products and services in a better way. Consequently, it is clear that IT can not only increase the number of target customers, but also save company’s time and efforts.
3. Customer-centric strategy. This strategy helps find the prime desires and needs of the consumers. Comparing to a product-centric strategy which introduces products to customers, customer-centric strategy helps discover all information about customers’ needs, and only then the company offers its products and services. This strategy assists in monitoring the needs of target audience and then promoting the company (Tedeschi, 2000).

Michael E. Porter identified five primary forces that help the company be competitive in the market. These include the increasing power of purchasers, plunging power of suppliers, competition between other companies, the treat of substitution, and new entrants. Consequently, every company has to take into consideration the above mentioned forces and define its weak points in order to avoid bankruptcy. Undoubtedly, the Internet and e-commerce in general help the company be stable in the market. Any manager can avoid business issues if he/she knows how to utilize the Internet in order to bring advantages. For instance, if there are many new entrants who want to substitute the existing company, the manager can easily make a survey, find information about new companies, and differentiate company’s products and services. Through e-commerce, the company can easily provide customers with the information why it is unique and stable. Therefore, it is clear that IT helps the industries avoid being duplicated. Finally, it is worth mentioning that five competitive forces are strategic opportunities for modern businesses. They determine company’s direction.

Picture 2. Five Primary Forces

Creating Competitive Advantages

It is widely known that IT highly influences competitive advantage. The power of influence may be measured in cost efficiency or differentiation. Information technologies have a deep impact on value activities and competitive scope. It means that e-commerce gives many possibilities to companies to gain competitive advantages by identifying changes in the market.

One of the competitive advantages of any company is the process of lowering costs or cost efficiency. The influence of IT in lowering costs is predominant since it can change company’s costs and spending in different parts of the value chain. IT plays a crucial role in lowering costs since it reduced and saves people’s power. For example, optimization of computer can significantly alter the flow of work. Considering the garment industry, innovations in equipment and application of different computer programs to the working procedure has significantly reduced the labor time by 50%. Another good example of using IT as a tool of obtaining competitive advantage is seen in the casino industry. Statistically, it is known that casinos spend approximately 20% of the budget on keeping an eye on potential big spenders. Now, thanks to information technologies, casinos can save their money, since they have developed a player identification system.

Another competitive advantage is differentiation. The impact of information technology is very important in the alteration of the value chain. For instance, IT can easily adapt products and services for the customers. It is known as customization of company’s activities. Therefore, application of computer can reduce employees’ time to fill the orders or find feedbacks from the customers. The process of differentiation is widely used in the travel industry (Tedeschi, 2000). For example, American Express has made differentiated travel services for their customers by using IT. The new services consist of arrangements of traveling, hotel bookings, flights, etc. Moreover, by using IT, an employee can help the customer to find desired holidays within few minutes.

What is more, information technologies have a pivotal effect on the alteration of competitive scope. IT can change the connection between competitive advantage and scope. With the help of it, any company can control its work on regional, national, and global level. Furthermore, the business can be successfully conducted on different continents. With information technologies, any manager can control his/her business in different parts of the world. Consequently, IT can facilitate global cooperation and international relationships. For example, the Wall Street Journal was first published in the USA. Nowadays, one can easily see that there are many types of this publication, including the Asian Wall Street Journal and the Wall Street Journal European Edition (De Figueiredo, 2000).

In the 21^st century, IT has totally changed the way business is conducted. It means that now information technologies allow industries to have interrelationships. Also, the merging of companies is an ongoing process in which IT plays not the least role. Moreover, IT has helped link computer and telecommunication into one industry. Such companies as AT&T and IMB successfully use this new merging in their businesses. Additionally, it is worth mentioning that IT has a positive impact on financial services. For example, with the help of IT, banking and insurance spheres can merge and work much faster. What is more, application of photocopying, typing, and voice communication can dramatically decrease labor time and increase time management. A good example of using IT for financial purposes is the operation of Intermodal Transportation Services. This company has introduced microcomputers in order to centralize all offices in one group. It has helped calculate the spending and revenue of the company. Therefore, it is clear that information technologies have influenced the companies letting them obtain competitive advantages by achieving linkages of different parts of the company on regional, national, and global levels.

Nowadays, many famous business leaders actively use IT in obtaining competitive advantage for their companies. For instance, Toyota, Amazon, Google, Microsoft, Hospital Corporation of America, Nestle and other companies successfully employ information technologies in order to be the market leaders.

Priorities of IT in the Age of Information

There exist five steps that have to be taken into consideration while using IT as a competitive advantage:

1. Access to information. The first task of any company is to analyze the information of products and services that exist in the market. In this case, IT plays a strategic role in the process of information availability analysis.
2. Determination of the IT role. The second step demands that the managers predict the influence of IT on their businesses.
3. Identification of the role of using IT as a competitive advantage. In this case, managers have to clearly understand that IT can alter the value chain. Therefore, managers can identify the opportunities that IT gives in order to gain costs lowering and differentiation.
4. Investigation of the relationships between IT and new businesses. The fourth step helps identify the possibility of IT utilization in establishment of new business chains on regional, national, and global levels.
5. Development of a plan for obtaining competitive advantage with the help of IT. This plan will help analyze real possibilities of the company, its uniqueness, and differentiation from other companies (Rothaermel & Hess, 2007).

Conclusion

All in all, it is worth mentioning that information technologies positively influence the development of any business. They not only help optimize the company but also reduce costs and labor work. Nowadays, every manager should understand that clever IT application will bring many competitive advantages to the company. However, the process of IT integration into business sphere has to be thoroughly analyzed and calculated.

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