Benefits of Electronic Commerce to Seasons Outfitters - Case Study Example

Electronic Commerce Seasons outfitters is a leading clothing retailer that has been operating in four different continents, with over 200 shopping outlets, and operations in across 35 countries. The company is headquartered in Prague, Czech Republic, and this is also where the company’s strategies are initiated. The company sells various items through its branches and some of their products include; tops, shorts, trousers, caps, and shoes among others. These products are sold directly to the customers through traditional brick and mortar stores whereby clients may pay directly either by cheque, cash or credit/debit cards. However, with the increasing business competition coupled with global financial crisis, the company needs to expand to other continents so that they may increase on their sales and profit margin while reducing unnecessary expenses. The entire process of obtaining business permits, acquiring store leases, recruiting staff and other expenses associated with opening new offices is very expensive for the organization and the company itself has been forced to devise ways that could enable it to compete globally. Some of the ways that an organization such as seasons outfitters may venture into a foreign country include; direct venturing, strategic partnership and franchising. Direct venturing even though risky and expensive is preferred due to its higher profit margins and because establishing brick and mortar stores are very expensive, the company has decided to go the electronic commerce way. Electronic commerce is basically any form of business transaction whereby parties interact electronically over the internet rather than the physical exchange (DTED, 2010). With ecommerce, the company will only need to establish regional offices that will deal with issues such as logistic supervision from the company’s warehouses. This is so because the products will be ordered online and delivered to the customers addresses. This does not require any brick and mortar store to be set up but rather require ecommerce applications which are deployed and controlled from the headquarters, which will enable client to make orders. We also require a huge warehouse to stock merchandise, and a world class logistical system that will assist to deliver items to client’s location. This logistical system may be deployed in collaboration with one of the leading logistics company. Benefits of Electronic Commerce to Seasons outfitters When the company decides to venture into electronic commerce this means that some of the company’s operational activities will be conducted online through computer technologies and the internet. There are numerous benefits that come along with such an initiative (Wilcocks & Plants, 2000). To begin with, the internet is vast with huge audience that consists of approximately two billion of the global population out of a possible seven billion hence representing a penetration rate of 28% (Internet world Stats, 2011). Asia has the largest number of internet users, even though the highest number of penetration rate comes from; North America (77.4%), followed by Australia (61.3%), Europe (58.4%), and Asia (21.5%). This clearly shows that there is the market because the audience is already there regardless of the region whereby according to the Nielsen group (2011), over 84% of the global internet users have already shopped online. Fig 1.0 depicting internet users by regions. Internet world stats- http://www.internetworldstats.com/stats.htm Basis: 1,966,514,816 internet users on June 30, 2010 Copyright ©2010, Miniwatts Marketing Group With electronic commerce it will be easier to market the company’s products across the globe. This is so because we can employ cost effective marketing concepts such as pay per click, affiliates, referral links, and e-mail campaigns. This will enable us to deliver digital catalogues of our products at a fraction rate that it would have normally cost us through hard copy printing technology (Fergusson, 1999). Other benefits are improved customer relation and service, enhanced inventory control, minimal marketing and distribution costs, reduced cycle time, increased market reach and minimized costs of operations (Salnoske, 1997). There are technological benefits as well whereby these involve automated processes that are embedded into electronic commerce related applications which in the end will directly impact on time and costs. With technology, the manual processes will be automated hence improving on administrative costs while reducing errors. There are operational benefits which are mainly concerned with the quality of information flow, this is basically the timeliness, accuracy, and correctness. These benefits will directly contribute towards increased efficiency. Some of the notable impacts with operational benefits are improved cycle time, timely marketing, minimized operation costs, and enhanced inventory control management. There are also relationship related benefits which include improved customer service, reputation and enhanced trust between trading partners. Methods In this particular research we are going to examine three key elements in e-commerce from a business perspective by focusing on the benefits, challenges and factors that would drive up success in each area. This particular research also involved survey from top 1000 Australia companies whereby the companies were chosen at random and they ranged from various service industries. The benefits of e-commerce are either tangible or intangible. Tangible Benefits Acquiring Niche market Minimizing costs of operations Retaining and expanding the customer base Transforming the existing market chain Enhanced automation of processes Business efficiency Intangible Benefits Convenient Shopping Maintaining competitive advantage Customer Loyalty Challenges In order to enjoy the benefits from electronic commerce, the business has to find ways of overcoming the drawbacks. Some of the drawbacks identified were, technological, managerial and business related. Technological Challenges Technological related issues like acquisition costs, and systems malfunctioning Websites Security Managerial issues Personnel and organizations winning support from management Business Challenges Legal issues Clients old habits customer service E-Commerce Success Factors Some of the E-commerce success factors that were identified were divided into three major categories and these were summarized as: Technological, managerial, and business related. Technological Success Factors Advanced Electronic commerce infrastructure Integrating the website with the organizations business processes Integrating electronic payments secure transactions integrating website with features such as cataloging Managerial Success factors Solid organization structure Establishing alliances with clients, It providers, and suppliers Balanced project leadership Business Success Factors Market responsiveness Enhanced customer service Rapid delivery on and offline advertising RESEARCH We managed to develop a theoretical framework on the above three major topics which dwelled on the successes, challenges, and benefits in relation to electronic commerce. We managed to conduct some series of interviews with some 72 Australian organizations even though we haven’t included this on the paper whereby the data obtained assisted to refine the list of success factors, challenges, and benefits that organizations perceived were instrumental on their decision to venture into electronic commerce. We developed a survey based on the refined list whereby this list was sent to the company’s senior executives such as the Chief Executive Office (CEO), Chief information officers (CIO) and IT managers. Survey Methodology In this particular survey we dwelled on Benefits of electronic commerce Challenges of electronic commerce Success factors The information gathered were ordinal and presented on a Likert scale which is common with most business research. This was chosen because it enables participants to respond by giving some degrees of either agreeing or disagreeing. The questions directed towards participants were to rate the success factors, challenges, and anticipated benefits arising from deploying electronic commerce in their organizations. The purpose of this was to explore on the awareness and expectations of ecommerce by organizations before they deploy the technology. We had a rating of 1-5 with 1 being the lowest and 5 the highest. Response rate Out of the 72 companies, 24 responded which gave a response rate of 33.3%. Results In order to rank the benefits, challenges and success factors, we calculated the median Rank Success Factors Median 1 Secure Transactions 5.00 2 Executive Support 4.00 Properly designed website 4.00 Strong partnership with technological vendors 4.00 5 Proper Project Leadership 4.00 Adequate resources 4.00 Website Updating 4.00 Rapid delivery 4.00 9 Responsiveness and market flexibility 4.00 Vision 4.00 12 Enhanced client service 4.00 13 Integrating website with business processes 3.500 14 Proper communication with customers 3.500 15 Integrating modern technology 3.000 Proper Organization Structure 3.000 Table 1.0 Success factors in electronic commerce The above table (Table 1.0) clearly indicates the common identified success factors which included; secure transactions, executive support, and user friendly website. Table 2.0 challenges of electronic commerce From the above table (Table 2.0) it can therefore be conclude that some of the challenges encountered when implementing electronic commerce includes infrastructure costs, manpower, and customer service. Rank Benefits Median 1 Increase in sales 3.500 2 Organization efficiency 3.000 Competitive advantage 3.000 Enhanced processes automation 3.000 Expanded clientele base 3.000 Minimized operation expenses 3.000 Extension of new technology application 3.000 Client loyalty 3.000 Safe e-commerce environment 3.000 10 Enhanced organizations image 3.000 11 Improved employee skills 3.000 12 Minimal inventories 2.000 13 Improved knowledge management 2.000 14 Niche market acquisition 1.000 Table 3.0 benefits of electronic commerce The above table (table 3.0) indicates that the most achieved benefits were increased sales, operational efficiency, increased automation and competitive advantage. Training A vendor will have to be consulted on training of the organizations employees. This training will have to be done in stages whereby key employees such as those found in the IT department will be given priority. Recommendations In order to fully tap on the potential of electronic commerce, organizations have to be fully aware of the success factors, challenges, and benefits that come from electronic trading. In our research we have managed to identify and confirm these key factors that are critical towards electronic commerce implementation. These factors also indicate that electronic commerce is a very viable venture and when effectively adopted there is likely to be increased business. References Department of Trade and Economic Development (DTED). Electronic Commerce, retrieved 2nd April, from http://www.southaustralia.biz/library/Electronic_Commerce.pdf Fergusson, M (1999). Revenue collection via the internet: Transaction cost components, collectors 1999 proceedings. Internet World Statistics, 2011, World internet penetration rates, retrieved 2nd April 2011 from http://www.internetworldstats.com/stats.htm Nielsen (2010). Nielsen online measurements, retrieved 2nd April 2011 from http://www.nielsen.com/us/en/measurement/online-measurement.html Salnoske, K. (1997). Building trust in electronic commerce, credit world, Vol. 85 no 6. Pp.9-11 Wilcocks, L & R Plant (2000). Business Internet Strategy: Moving to the Net: Moving to E-Business, London, Random House. pp19-46. Read More