Mortar: Essay, Research Paper
FROM BRICK AND MORTAR TO CLICK AND MORTAR:
MAKING THE TRANSITION FROM CONVENTIONAL BUSINESS
TO ELECTRONIC COMMERCE
FROM BRICK AND MORTAR TO CLICK AND MORTAR:
MAKING THE TRANSITION FROM CONVENTIONAL BUSINESS TO E-COMMERCE
TABLE OF CONTENTS
Summary 1
Making the Transition from Conventional Business to E-Commerce 4
Introduction 4
Background 4
Problem Definition 5
Hypothesis 6
Methodology 6
Research Design 6
Sources of Data 7
Research Results 7
The Question is Not Whether or When to Enter E-commerce; It?s How to Enter E-Commerce. 7
E-commerce Benefits 11
Lessons Learned 12
A Proposed Model for Developing an E-Commerce Strategy 14
Introduction. 14
Prerequisites. 16
The key rule of E-commerce. 17
Steps for building an E-commerce strategy. 18
Typical stages of E-commerce development. 25
Steps for establishing a small business website. 26
Selling Power ? Enters E-Commerce 28
A Javier Romero Design Group Web Implementation Plan 33
Analysis 35
Selling Power analysis. 35
JRDG analysis. 35
Research Limitations 36
Conclusions 37
Bibliography 39
Appendix??????????????…??????????.????????. A-1
Summary
The scenario created for this project called for the research team to simulate membership on the staff of a small, ?brick and mortar? firm. A Chief Executive Officer (CEO) heads the firm, and she is the primary decision maker for the firm. The CEO is inclined to pursue a venture into E-commerce, but neither she nor her staff members have experience or knowledge in this area. To help her make some decisions, the CEO asks three staff members to form a team to research E-commerce and make a recommendation on whether she should pursue E-commerce opportunities.
The objective of this research is to provide the CEO with a reasonable recommendation to either pursue some form of E-commerce or to remain with her current brick and mortar model. Because there are constraints with respect to cost/benefit analyses, there are two research questions to be answered: (a) Should the CEO venture into E-commerce, and (b) if she should, what should she do to initiate her E-commerce venture?
The research revealed that E-commerce is expanding quickly, and the potential benefits from participating are enormous. It also indicated that businesses that are reluctant to participate in E-commerce risk falling behind their competitors or becoming non-competitive in their existing market. For those that do wish to enter into E-commerce, the task should not be taken lightly. An organization requires a visionary leader, perseverance, a significant investment, the ability to establish partnerships with successful firms, and full participation from the entire organization. They must also recognize that E-commerce focuses on serving the customer, not pushing their products.
Successful E-commerce entrepreneurs become successful by developing strategic plans. At a minimum, a strategic plan should address methods for accomplishing the following five steps: (a) make it easy for your customers to conduct business, (b) focus on your true end-customer, (c) design customer-facing business processes, (d) use technology to enable your company to be profitable, and (e) promote customer loyalty. If a website is to be incorporated into the organization?s E-commerce plan, it must take five basic steps in order to complete the mechanics of establishing a viable website: (a) find an Internet service provider (ISP), (b) register a domain name, (c) develop the website, (d) manage the website, and (e) measure the website?s effectiveness. Additionally, many businesses progress through several evolutionary stages before reaching their full potential: (a) supplying company and product information, (b) providing customer support and enabling interaction with the customer, (c) supporting electronic transactions, (d) personalizing interaction with customers, and finally (e) fostering community among customers.
The research team reviewed a small, regional company?s experience with E-Commerce and a sample E-commerce proposal from a professional website development firm. The team found that the regional company initially failed when it attempted to enter into E-commerce without a strategic plan or professional expertise. However, the company?s fortunes changed after seeking help from a reputable professional and developing a strategic plan. In comparing the elements of the professional web development firm proposal with the textbook recommended model, the researchers found that they were substantially similar.
After reviewing all the collected data, the researchers made the following conclusions: (a) The CEO should pursue an E-commerce initiative, (b) the CEO?s first step should be to initiate a pre-investment study to estimate and assess the expected costs, benefits, etc. associated with establishing and maintaining an E-commerce presence, (c) the CEO should contract with a reputable E-commerce developer to build a strategic plan and establish the E-commerce vehicle, and (d) the CEO should develop a strategic plan before venturing into E-commerce.
From Brick and Mortar to Click and Mortar:
Making the Transition from Conventional Business to E-Commerce
Introduction
Background
This research project was prompted by the requirement for the researchers to complete a research project as part of the Applications of Business Research course, BSA 515. Per the guidance provided by the course instructor, the researchers chose to research an area of interest. The area of interest chosen for research was electronic commerce (E-commerce). However, none of research team members had any previous knowledge or experience with E-commerce. Accordingly, the team decided to build a research scenario to allow them to conduct their research from ?scratch.?
For the purpose of this project, the team assumed the role of staff members in a hypothetical firm. This firm is a small regional company headed by a CEO who is also the company?s founder and owner. The company has a staff of approximately 150 people, and it produces and markets several consumer products. Currently, the firm conducts business in a conventional ?brick and mortar? model. That is, the firm uses a tradition store, housed in building, where customers drive to the store?s premises to purchase goods. The firm employs traditional marketing methods (newspaper, television, and radio), and its only electronic transaction capability is a limited telephone ordering capability.
The CEO, who is the primary decision maker for the firm, is forward thinking, and she would like to expand her market. She perceives that E-commerce would be a good way to accomplish this goal, but she knows next to nothing about E-commerce. The firm?s staff members do not have any experience or working knowledge of E-commerce, so the CEO has no internal resources to provide immediate advice or recommendations on how she should proceed. She is inclined to believe that she should migrate to a ?click and mortar? model (a traditional business model expanded to take advantage of electronic business technologies; ?click? refers to the click of a computer mouse) to expand her business, but she is unsure. The CEO decides that she wants to investigate E-commerce, and she wants to determine whether E-commerce is a wise choice for her firm. Accordingly, she assigns three members of her staff to research E-commerce and provide recommendations.
Problem Definition
The research team used the following steps to define the problem: (a) ascertain the decision maker?s objectives, (b) understand the problem?s background, (c) identify and isolate the problem(s), (d) identify relevant variables, if any, and (e) state the research questions.
The decision maker has three objectives: (a) to expand her knowledge of E-commerce, (b) to find out how to implement an E-commerce model for her firm, and (c) to decide whether to migrate to a ?click and mortar? model. The following background factors are pertinent to the problem: (a) There is a perceived need to enter into E-commerce, (b) the CEO has minimal E-commerce knowledge or understanding, and (c) no experience or knowledge base on E-commerce exists within the firm.
The actual problem to be solved is two-fold. The CEO doesn?t know whether E-commerce is a good vehicle for her organization, and she does not know how to commence an E-commerce initiative. With respect to the relevant variables, the following variables would have an impact on the problem: (a) the estimated cost of establishing the E-commerce vehicle, (b) the estimated cost of maintaining the vehicle, and (c) the estimated return on investment (ROI). Unfortunately, the hypothetical nature of the firm in question prohibited the research team from performing a realistic cost/benefit analysis to use in making recommendations. This will impact on the research questions.
The objective of this research is to provide the CEO with a reasonable recommendation to either pursue some form of E-commerce or to remain with her current brick and mortar model. Considering the constraints with respect to cost/benefit analyses, there are two research questions to be answered: (a) Should the CEO venture into E-commerce, and (b) if she should, what should she do to initiate her E-commerce venture?
Hypothesis
The hypothesis for this research project supports the following proposition: E-commerce is not a fad, E-commerce is not only the wave of the future, but it is here to stay, and businesses will have to invest in E-commerce to remain competitive. Accordingly, barring pre-investment study results contrary to global trends, the hypothetical business owner in this project should pursue an E-commerce initiative because its benefits will far outweigh its costs.
Methodology
Research Design
Due to the constraining factors affecting this project, particularly time constraints, the research design is very basic. The researchers decided to conduct the research by following these steps: (a) collect secondary data on E-commerce to develop a knowledge of its evolution, trends, expected benefits, and textbook recommended designs, (b) collect data from at least one company that has ventured into E-commerce and document its experience, (c) obtain and study a typical E-commerce development recommendation from a professional E-commerce developer, (d) compare the company?s experience and the developer?s proposal to the ?textbook solution? to determine whether they are significantly different or substantially the same, and (e) make a recommendation based on the research findings.
Sources of Data
The research project depended primarily on secondary data sources. The researchers studied textbooks, on-line journal articles, traditional journal articles, case studies, and abstracts. The researchers also studied a web implementation plan acquired from a professional website developer who specializes in E-commerce development. The only primary data obtained by the researchers consisted of interviews conducted with a web development specialist and with a local company that has recently ventured into the world of E-commerce.
Research Results
The Question is Not Whether or When to Enter E-commerce; It?s How to Enter E-Commerce.
Business people who are pondering whether to venture into E-commerce should focus on the more important question, ?How can I start a effective E-commerce business?? The phenomenal growth in business conducted over the Internet and by other electronic means indicates E-commerce?s great potential. Analyses conducted by numerous researchers verify the growth already experienced, and they also point to a continued explosion of E-business that is not likely to subside. Although they do not provide identical estimates, the following examples all indicate continued E-commerce expansion:
1. ?Between 1995 and 1997, according to a Price Waterhouse study, annual venture capital funding for on-line business went from $134 million to $1.88 billion.? (Siebel and House, 1999, p. 4)
2. A recent (pre-1998) U.S. Department of Commerce study entitled The Emerging Digital Economy estimated 100 million Web users worldwide, and it projects 1 billion web users worldwide for the year 2005. (Siebel and House, 1999, p. 3)
3. A 1999 estimate of web site growth stated, ?New commercial sites are being added to the World Wide Web at the rate of 5,000 a month. That?s one new place of business every nine minutes.? (Siebel and House, 1999, p. 4)
4. Find/SVP, Inc. estimates that the number of regular Web users in the United States jumped from 8.4 million in 1996 to 28 million in 1998. Their projection for Web users in the year 2000 exceeded 200 million. (Siebel and House, 1999, p. 3)
5. The market opportunity for business to business (B2B) e-commerce is immense and already exceeds the business to consumer (B2C) e-market by a considerable margin. Figure 1 illustrates this point. As Figure 2 displays, the Gartner Group, Inc. projects the worldwide market for B2B e-commerce to grow from $403 Billion in 2000 to more than $7 trillion by 2004.? (see Appendix).
6. The E-commerce implementation plan (Appendix) made available by The Javier Romero Design Group (JRDG) provided the estimated E-commerce growth projection information JRDG supplied to one of its clients. Figure 3 below shows estimates for the portion of the worldwide business to business (B2B) E-commerce that will be conducted via e-marketplaces. E*Offering, a subsidiary of E*Trade ?, estimates that e-markets generated about $22 billion in year 2000 revenue on a worldwide basis. According to Forrester Research, the United States B2B E-commerce market should reach $2.7 trillion by 2004, or almost one-quarter of the United States projected Gross Domestic product (GDP) for 2004. For businesses that enter into E-commerce wisely, this signals potential wealth that should be tapped into. (see Appendix).
If the examples above are true indicators, one must conclude that E-commerce is here to stay, and it will continue to grow as more and more consumers and businesses take advantage of E-commerce opportunities. With the increasing number of people who have access to the web, it will become almost a necessity to present your company on the web, and in other E-commerce vehicles, to stay competitive. (Wilson, 1997) We should assume an increasing percentage of our customers and clients would expect us to employ E-commerce as a routine method of doing business. This expectation is fueled by the advances in computer, network and Internet technology combining to enable ?virtuality,? or the ability to conduct business transactions on a global level, in a real time format, without being constrained by physical location. As these advances continue, physical distance becomes irrelevant and completing a transaction is so compressed that, for practical purposes, ?waiting time? is eliminated. (Siebel and House, 1999, p. 8)
E-commerce Benefits
Despite imperatives, there are distinct benefits associated with E-commerce. The following points and examples provide insight into some of the benefits:
1. At a minimum, a website can provide the public with basic business information about our company, such as the hours of operation, contact information and other important details that the consumer needs to know. (net101.com)
2. The Internet provides a way of advertising our products and services, as well as a way of receiving information about what other people can offer our company. (Wilson, 1997)
3. The web provides a vehicle that allows the business to communicate with the customer. Furthermore, it is a way for the customer to provide opinions on possible new products, and for the company to view these opinions without the large expense of surveying through traditional methods. Businesses can also determine the types of products that will be successful by analyzing the type of people who use their website and the products they order.
4. Many companies find that their e-commerce sites actually drive traffic to their stores. At Sears.com, customers can make side-by-side product comparisons before clicking to buy tools or appliances. Many visitors use the site to gather information before heading to the Sears, Roebuck & Co. at their local mall. Because customers walk into the stores knowing what they want, salespeople can sell the drills, refrigerators and washing machines faster. (Stuart, 2000)
5. In other cases, stores drive traffic to websites. That is the idea behind nearly 200 Gateway Country brick-and-mortar stores, which let customers test-drive Gateway computers in the store before ordering them on-line from the San Diego-based company. (Stuart, 2000)
6. Reduced Asset Intensity. Asset intensity refers to the amount of assets you hold, including inventory. Consequently, it directly relates to how many dollars you have to have in place to run a business. If you can reduce both on-hand inventory and plant property by using a website as your storefront, you can reduce the amount of money required to run your business. (Siebel and House, 1999, p. 128)
7. In general, if a company is successfully selling products before venturing into E-commerce, the Internet will only increase sales. The site would merely be an additional channel for selling products. (Stuart, 2000)
The indicators are clear. Those who do not venture into E-commerce will risk being left behind, and they may loose their ability to compete in their established markets. Therefore, it?s not a question of whether or when to enter into E-commerce. Participating in E-commerce appears to be an imperative. The most important question facing those who are not yet participating is how to get started in E-commerce.