E-commerce is the entrepreneurial activity implying the sale of goods and the provision of services, carried out using electronic messages.
It is a business whose effectiveness and competitiveness is based on the use of information and telecommunication technologies. Here are the characteristic features of electronic business:
- automation of the company's main business processes (resource accounting, document management, support for managerial decision-making) based on the creation of workstations designed to automate individual operations and integrate them into the firm’s informational network;
- reorganization of the structure and main business processes, based on information and technology;
- reorganization of external relations of the company - the development of connections with existing and potential business partners, as well as with customers;
- the emergence of new products and services aimed at the development and support of the e-business.
E-commerce is usually defined as the business activity which implies the interaction of the business parties via technology - electronically, without direct physical contact.
The desire to use the possibilities of the Internet encourages companies to seek innovative business models and new competitive strategies:
#1. The suppliers of communication equipment, mainly manufacturing equipment for Internet communications, adhere to the traditional business model of selling their equipment at prices that provide a sufficient level of profit and return on investment.
#2. Communication service providers build business models on the sale of services at fixed rates or on a per-hour basis. Since the task of Internet service providers is to provide connectivity to the Internet, they invest significant amounts in the development of communications networks and equipment. The desired level of profitability is not achieved immediately, but with an increase in load, which ensures excess revenue. The main task of such companies is to attract customers faster than their competitors. Brand recognition and advertising are important elements of the strategy of Internet access providers that contributes to increasing market share.
#3. Manufacturers of computer equipment. Like manufacturers of equipment for the Internet infrastructure, manufacturers of computer equipment use mostly traditional business models, selling products at prices that cover costs and provide reasonable profits.
#4. E-commerce software developers create software packages for all types of commercial transactions on the Internet. Their business model consists in investing resources (mainly the work of programmers) in the development and improvement of specialized programs with their further promotion and sale to corporate clients (electronic merchants, Internet service providers, content providers, etc.) at a price that covers costs and provides a sufficient level of profit. Since the main costs of software development companies are linked to the period preceding the creation of programs, and most of them are associated with fixed assets, the profitability of this activity directly depends on the volume.
#5. Electronic retailers. There are two main groups of electronic merchants: the first sells goods mainly to corporate customers (this group is also called B2B), and the second group - to final consumers (B2C). The simplest and most revolutionary strategy is to make profit by advertising other traders who are interested in attracting visitors to electronic merchants' sites.
What E-commerce model would you choose? Not sure? Let the Bizonaire team help you with that!
