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eBusiness and the value chain

Term Paper 2001 26 Pages

Computer Science - Commercial Information Technology

Excerpt

Table of Content

1 Introduction

2 Internet and eBusiness
2.1 Internet and WWW
2.2 eBusiness definition
2.3 Types of eBusiness Business-to-business Business-to-consumer Business-to-employee eGovernment
2.4 Demographics
Basic demographics
Business-to-consumer eCommerce transactions
Business-to-business eCommerce transactions

3 Value Chain Integration and defined Business Processes
3.1 Theory - Definition of Value Chain and importance within an organization
Value Chain Model of Michael e. Porter
Business Processes - Definition
Transformation of the value chain (Virtual Value Chain)
Interfaces from Internet to business processes and the value chain
3.2 Solutions and strategies for eBusiness Consulting
Business concepts and not Technology
3.3 Examples: Integrated Solutions, Marketplaces, Portals
Integrated solutions
Virtual market places
Portals
3.4 Opportunities and Benefits resulting from eBusiness
3.5 Challenges and limitations
Limitations - technical
Limitations - nontechnical

4 Critical Analysis and Conclusion

5 References

1 Introduction

"There is nothing more powerful in the world than an idea whose time has come." 1

(Victor Hugo)

There are few things in the world, which had a mayor influence on the economy. The introduction of electricity was one - eBusiness and the Internet might be the next. The new economy, as it is called, is constantly changing and challenging organizations. Globalization, cost reduction, customer relationship management and the faster changing markets have a strong impact on companies. Enterprises need to adapt to change faster than ever to stay competitive and face the transition to the e-economy.

Many people only see in eBusiness the selling and marketing of products and services via the Internet. But reality shows that this opinion does not hold any ground. The purpose of this paper is to give an overview about eBusiness including definitions, perceptions and models. The main part of this work addresses the importance of the whole value chain and defined business processes within an organization. Michael E. Porter' value chain model will be used to provide a general idea about value chains within an organization. The second part brings the "basic" value chain in relation to eBusiness and illustrates the importance of it for companies and organizations.

The paper will only give a basic overview of the issue mainly because a detailed analysis would be to complex and to long for this essay, and additionally I find it very essential to reach a basic command on value chains and business processes within organizations and to achieve the understanding that eBusiness will concern the whole value chain. It is important to change perception about eBusiness and understand the complexity of the topic. The reason for that is my practical experience on this topic originating from my internship at the Siemens AG and my study specialization International Logistics. To round up the whole picture this paper includes some practical examples and also a short critical analysis.

It is important for this work to notice that there is much literature available concerning eBusiness or eCommerce. Because of eBusiness being such a new issue many authors use different terminologies and adding to this - many only address technical issues but leave the business side totally out of perspective. Speaking from my own experience I realized that the business concept behind every new invention is one of the most important things. Technology is in most cases a tool and changing virtually every day. This does not apply to business rules and concepts. They do evolve over time but have to be of a consistent and stabled nature. Business should initiate technology and not vice versa and companies should put their focus on the business concept to make eBusiness work.

2 Internet and eBusiness

In the 1970s started an innovation, which will influence economies and business in the future. Large corporations started electronic trading with technologies like the electronic transfer of funds. After that EDI (Electronic Data Interchange, standardized format for data transfers) became the system which included for example financial transactions and connected not only financial institutions but also manufacturers, retailers, service providers and so on. But only with the introduction of the Internet electronic commerce has expanded so rapidly.2 Business has changed drastically and will continue even more in the future. Almost every large company and even small and medium sized businesses have online presentations on the World Wide Web. But many still underestimate the chances of eBusiness. This first part will give a short overview of the Internet, the World Wide Web and eBusiness including some figures on the use of the Internet and the size of eBusiness.

2.1 Internet and WWW

"The Internet is a global network of computer networks...it links the computing resources of business, government, and educational institutions using a common computer communication protocol." (Turban/MacLean/Wetherbe)

The U.S. department of defense established the first form of the Internet with a project called Advanced Research Project (Advanced Research Project Agency - ARPA). The ARPA-Net from 1969 had the task to provide a Wide Area Network (WAN) over which researchers, educational institutes, military personnel and government agencies could exchange data, messages and files. Nowadays the Internet is not only used by these four initial fields but by people from all backgrounds and all around the world.

The Internet is a decentralized network, which is not managed by a single agency and works on many platforms. Costs are shared by all users (through fees, telephone bills, provider fees etc.). The common protocol is called TCP/IP - Transmission Control Protocol/Internet Protocol.3 There are several definitions available for the term Internet and they depend on the different points of view - either technical, business-wise, service oriented and so on.

The World Wide Web - or WWW - is a way to organize information. In 1989/90 the physicist Tim Berners-Lee developed a system at the European nuclear research center (CERN) in Switzerland, which had the purpose to organize internet-based information, and resources via cross-references. The process is called Hypertext and is the foundation for the World Wide Web.

"The World Wide Web is a vast collection of interconnected pages of information that are stored on computers around the world that are connected to the Internet. (...) It allows quick access to information that is stored as text, pictures, video, and so on. (...) And is based on a set of standards for storing, retrieving, and manipulating information, using a special tool called a Web browser."4 Examples for browsers are Netscape or the Microsoft Explorer. The most common standard is HTML (Hyper Text Markup Language).5

2.2 eBusiness definition

"Electronic commerce is a concept to utilize specific information and communication technologies for the electronic integration and interlocking of value chains and processes between enterprises."6

Philip Kotler/Friedhelm Bliemel

The above definition of electronic commerce or in short eCommerce covers a wide range of concepts and is not limited to the Internet or even the World Wide Web. Many definitions only target a smaller range or use the terms electronic shopping or Internet shopping as synonyms. This is true so far that the Internet is the central eBusiness or eCommerce medium today and the business-to-consumer transactions are in the center of public awareness due to companies like Dell or Amazon. But electronic transactions in the sense of the above definition are neither new nor limited to the Internet as outlined before.7 Electronic commerce or eBusiness uses several technologies, ranging from electronic data interchange (EDI) to email. 8 At present business-to-business transactions play the major role in eBusiness.7 The term eBusiness is also used as a synonym for eCommerce. I found a more detailed distinction between eCommerce and eBusiness in the literature of KPMG, a known international consultancy (see picture 1). For this paper I will mainly use the term eBusiness

despite of eCommerce.

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Picture 1: Systematic eBusiness (KPMG9 )

2.3 Types of eBusiness

There are several types of eBusiness defined. The first two are used already widely in the literature but the term business-to-employee is fairly new. The fourth type eGovernment is a phrase I have chosen to describe the growing sector of governmental transactions.

Business-to-business

B2B, as the short naming, is defined as electronic transactions done between businesses or organizations. Business-to-business does not only relate to the sales side within an organization. EDI for example is one of the oldest forms of business-to-business trading and as said before business-to-business is at present the biggest part of eBusiness.10 Business-to-consumer

This concept describes the eCommerce or electronic trading between business and individual customers. Examples for business-to-consumer transactions are home banking, buying stocks, finding jobs, organizing travel, buying items at retail stores and electronic malls like Amazon. 11

Business-to-employee

With more and more companies focusing on the Intranet the employee will be included in the eBusiness concept. Examples are internal communication via email but especially electronic conferences, transfer of internal data or management information systems.12 For the future B2E will play an important role in the personal administration of employees, like time reporting, travel expenses management and so on via Internet or Intranet.

eGovernment

One side of governmental eBusiness is electronic communication of companies with tax, finance or social agencies to reduce costs and process time. In the United States this is done via Extranet.13 Governments are also known for being some of the most important customers for industries. One example for the relationship between government and business is RFP (Request for Proposal) online, where government agencies issue their request for proposals online to collect offers. Even more significant for the public will be the provision of services from public administration to citizens via Internet.

2.4 Demographics

The Internet is changing and growing rapidly and therefore it is hard to present accurate figures about the number of users or the kind of uses. Though all figures presented below were outdated days after they have been published it is important for this paper to have at least a quick look at them. Though the Internet is not limited to Germany and German sites are visited from all over the world as well as German surfers visit sites around the world, the figures presented cover Germany only.

Basic demographics

Figures published in June 2000 talk about 16,1 million users of the Web in Germany in April 2000 (13,8 million in February). This equals a quarter (25,3 %) of the German population having access and having used the Internet. Female users are still in the minority with a share of 36,2 %. The dominating age groups are the 20 to 29 year old (23,7 %) and the 30 to 39 year old (28,6 %). Almost 60 % of the German Web users have or will get a high school degree or a university degree. Another interesting figure is the gap between the users in the eastern part and the western part of Germany: only 15,7 % of all Internet users are in the eastern part of the country.

The Internet is mainly used from home (72,3 %), at work (37,5 %) and in schools or universities (13,9 %). Internet cafes only play a minor role (2,9 %) - multiple answers included.14

These figures are - due to the size of the sample - only estimations, but give a good overview of the German web community. But the development can be characterized by the following: Young intelligent well-situated professionals - a primary target for many marketing activities.

Business-to-consumer eCommerce transactions

In general the acceptance of online shopping is growing. This can be concluded from the fact that the number of Web-users shopping online is increasing at a higher rate than the number of Web-users itself. Also 63% of those who have shopped already online are willing to do it again. These figures support the promising opportunities for eBusiness.15

Books, CD's and videos are the goods mostly bought online at the moment. Computer hardware and software follow, and then train tickets, flights and holidays. Other goods like clothing play only a minor role. What these often sold goods have in common is that they can be "tested" online or the purchase decision does not depend on seeing and feeling the real product (furniture, fabrics) or trying it (shoes, clothing). Users see the biggest disadvantage of shopping online in not having the possibility to try out the product. This disadvantage is seen as a bigger problem than the security of personal data and the missing service.16

Business-to-business eCommerce transactions

The Boston Consulting group conducted a study concerning business-to-business eCommerce in Germany and asked about 330 companies. Today the sales volume of B2B transactions is estimated by about 236 Billion DM. According to the study the branches retail, automotive and consumer goods dominate the eBusiness market in Germany. At present companies see only a small benefit in the online trade but estimate a larger significance for the future.17 Another study conducted by VDI/ADL (Verein Deutscher Inginieure/Arthur D. Little Consultancy) showed that only 50% of 334 asked companies have a clearly defined eCommerce strategy. But in general it is to notice that all companies recognize this new phenomenon as something important for their business.18 But the Boston Consulting group mentioned that many companies aim to low when it comes to eBusiness. They see only the benefit for their company in online trading and marketing (through a web presence). But it is important to realize that the Internet will offer the opportunity to link all business processes and the value to the Internet and electronic processes. EBusiness is an opportunity to connect all actors in the marketplace - suppliers, costumers, strategic partners, intermediates, contractors, employees and potential employees etc.

3 Value Chain Integration and defined Business Processes

"The early bird may catch the worm, but it's always the second mouse that gets the cheese" 19

Paul Saffo (California Institute for the Future)

An article from the Economist describes the situation of Information Technology (IT) and eBusiness around the world. Europe and Japan's economies are clearly lacking behind the United States. IT production accounts for 7% of America's GDP, but only 4% of Europe's. Europe has not been able to create cutting edge technologies like companies from the US. It is also much harder to start up a business in Europe, because for example of the low development of venture capital markets. Labor and product markets are inflexible and employment is strictly protected in Europe.

The Internet itself is a catalyst for change by making markets more transparent and trade restrictions virtually impossible. Shop-opening hours and the strict ruling on pricing and promotion do not hold any ground on the World Wide Web.20

But there are two sectors where Europe and Japan lead the market. Many more Europeans and Japanese use mobile phones which might become the main gateway to the Internet. The equalized standards and new inventions like UMTS (Unified Messaging Transfer Standard) and WAP (Wireless Application Protocol) used throughout Europe support this advantage. And even though the US has some of the best universities in the world, Europe for example provides a much better education for the whole population. To sum it up the US is certainly the driving force behind eBusiness and the World Wide Web at present but Europe for having a more sustainable business culture and learning from mistakes might be faster to catch up and gain more from it in the long run as my citation quotes.21

With this perspective it becomes clear how important it is for organizations especially in Europe to have a clear business concept for eBusiness to be prepared for the rapidly changing markets.

As I already outlined in my introduction the main focus of this paper lies on the role of value chains and business processes for eBusiness. The following part will give a short introduction on Michael E. Porter's value chain model. I also outline some of the models for integrating the value chain into eBusiness. Built-in here is a short overview of solutions and strategies, as well as some examples from the business world, including cutting-edge technologies and concepts like Portals. As a conclusion this chapter contains some benefits and problems emerging from eBusiness.

3.1 Theory - Definition of Value Chain and importance within an organization

Value Chain Model of Michael e. Porter

In 1985 Michael E. Porter wrote a book called the "Competitive Advantage". There he spoke about the importance of value chains for organizations. Porter defines the value chain as a collection of activities that are performed to design, produce, market, deliver and support its product. It also reflects the company's history, strategy and the underlying economics.22 The value activities are split up into primary and support activities. Primary activities are involved in the creation, sale and transfer of the product as well as after sales assistance. Support activities support the primary activities and each other (as shown in picture 2).23

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Picture 2: the generic value chain (Michael E. Porter24 )

The generic value chain from Porter is a model used widely by organizations and companies. The value chain may look different for each industry or even company. But in principle the value chain shows the activities within an organization and the performance of each activity. Hence they become measurable. All these activities can be divided into sub-activities and business processes.

Business Processes - Definition

A business process is a collection of activities that takes one or more kinds of input and creates an output of value to the customer.25

Business process reengineering (BPR) (per Hammer and Champy[1993] ) is the fundamental rethinking of business processes to achieve dramatic improvements in measures of performance such as quality, cost, speed, and services.26

Supply chain. The supply chain describes all activities that occur once the company receives an order.27

Defining business processes did not start with the "Internet Age". Porter's model goes back to 1985. This model and the need for defined business processes brought up other "business trends" like Business Process Reengineering for being a radical rethinking and improvement processes like Kaizen, Total Quality Management, Just-in-time and so on. It was the overall goal to identify business processes within an organization, to describe them, and based on this it was possible to achieve optimized business processes to gain maximum profit.

The need for this organizational and economical change is even more obvious today - globalization, the integration of companies, mergers, a higher need for standardization force enterprises as well non-commercial organizations to change and adapt to the so-called new economy.

With the Internet as the new medium for doing electronic business companies are challenged and the concept of value chains and business processes needs to be revised and improved even more. Sometimes it is even necessary to totally rethink concepts within the organization. The Internet is an inexpensive, fast, global and low regulated medium. Many companies use it already as a new sales channel, but this will not be enough. The challenge is to utilize the Internet to further optimize and integrate the already interwoven activities of the value chain. The next parts will show some of the approaches to integrate the value chain and connect it to the eBusiness concept. These are just a few examples to give a basic impression about eBusiness and value chains. The first model from Bliemel sees information as the key essential for the new virtual value chain and eCommerce. The other two models point out interfaces and links between electronic businesses, the value chain and internal and external factors. It is obvious that they only scratch on the surface but show the implications eBusiness can have on the value chain.

Transformation of the value chain (Virtual Value Chain)

Bliemel/Fassot/Theobald describe the transformation of a physical28 value chain to a virtual value chain. The model below is based on the value chain model from Michael E. Porter (shown above). All single steps of the value chain are analyzed within a company to manage internal and external processes more efficiently. Information plays the key element to reach new market opportunities.

Through the digitalization of information it is, according to Bliemel, nowadays possible to process information in many different ways. Managing information is a factor, which will become more and more important for companies and organizations. Internal processes like collecting, systemizing, selecting, intensifying and distributing information can now be supported through information technology. Bliemel describes this as the virtual value chain process. One result of this process through the accessibility of more high quality information could be an improvement of real products in the marketplace.

The model also shows the transformation of the physical value chain to a virtual value chain. In a first step Bliemel/Fassot/Theobald see the necessity to describe the physical value chain in a virtual world (Virtual-Real-Value Chain). With this description it is now possible to manage information more efficiently for each business process (Logistics, Sales etc.) and achieve even more high-quality information. The transformation generates three potential market opportunities for companies: (1) improvement of real product offers, (2) generation of original marketable performances in the market space (e.g. Internet), (3) creation of additional customer values in the market space.

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Picture 3: coming from a physical to a virtual value chain (Bliemel/Fassott/Binder, p. 50)

Interfaces from Internet to business processes and the value chain

As outlined before globalization, the need for cost and time reduction and the understanding that customer relationship management has a mayor influence on profitability, force organizations to rethink their value chains to be prepared for the new "Internet-age". The following models are two examples for integrating the value chain as well as stakeholders in the eBusiness concept.

There are many factors, which have an influence on business and organizations. The model below from Kurz/Ortwein from the consultancy Arthur D. Little presents the implications of these influences on the value chain and continuing on eBusiness. They see business-to- business initiatives as the interaction of all business networks of a company with its suppliers, distributors, partners, logistic services and customers. These business-to-business initiatives show the company's strategies and do have an effect on all electronic co-operations and the whole value chain.29

Kurz/Ortwein describe four types of business networks: (1) co-ops (cooperative operations) which are partnerships between single market actors, value networks where either one buyer operates with many sellers (e.g. suppliers)- (2) seller value network; or where one seller works with many buyers (e.g. customers) - (3) buyer value networks, and (4) electronic marketplaces, where many sellers interact with many buyers.30

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Picture 4: Business-to-business initiatives (Eberhard Kurz/Eckhard Ortwein, p.130)

There are many interfaces from eBusiness to the value chain in known fields like marketing (through web sites), recruiting (online applications for a job), communications (email), sale (online trading), etc. One of the first forms of electronic business as said before was EDI, but eBusiness offers opportunities for more fields like distribution planning, marketing planning, sales and services through various kinds of applications as shown in the diagram 5 below. Stephan Salb works for Compaq where the company's strategy is to create a supply chain oriented electronic commerce solution, which integrates internal and external processes along the value chain. Common business processes link to eBusiness or are a part of it. The main goal is it to create a network where value is created for both parts - the company and the customers, partners, banks etc. Information technology is the tool that makes these connections along the value chain possible.

The emphasis at Compaq lies on EDI (Electronic Data Interchange), which connects all suppliers in one network and allows the exchange of business data.31

The advantages of such a concept are obvious: an intensive customer relationship management, fast and actual data exchange, effective business processes and a strong network of all business subjects (e.g. suppliers). Hence Compaq is able to stay on the competitive edge.

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Picture 5: Information technology integrates partner and processes along the value chain (Stephan Salb p. 314)31

3.2 Solutions and strategies for eBusiness

It is necessary for an organization to find a proper strategy to integrate the business processes into the eBusiness concept and hence to optimize them and reach optimum profit. It is crucial in a first step to harmonize all business activities and processes for an optimized output. This also means finding a standardized solution for the business process model or value chain. These activities need to be connected or included in the eBusiness concept. As mentioned before this step could mean an adaptation to the new conditions or a total change of the process itself. Speaking from my own experience it is essential to define exact business requirements in this first stage and not focus only on technology.

In the next phase could follow the integration of value chains of different companies within the eBusiness concept by using the Internet (see model from Stephan Salb). This means the integration of technologies, systems and processes within an organization but also the integration of partners, suppliers, etc. This would link different value chains together to create value on both sides.

Many companies do not have the knowledge and resources to do such difficult and complex processes on their own. One growing sector, which fulfils this demand, is consulting.

Consulting

Highly specialized people analyze companies and find the optimum solution for them. There are also companies, which focus on the issue of integrating the value chain in organizations. Due to the complexity of value chains it is often necessary to seek external advice to find an optimum solution. It is obvious that this often results in high costs and time expenses, which many companies do not think about.

As I already pointed out there is not much comprehensive literature available on the topic of value chains and eBusiness. But I found that publications from leading consultancies prove to be of a more sophisticated character. Studies from the Boston Consulting Group name problems that will come up with eBusiness, the challenges for companies and they address the implications of business processes and value chain.

Business concepts and not Technology

But the main aspect is that business should initiate technology and innovation. The business concept behind eBusiness should be clearly defined. As mentioned before technology and systems are changing and need to be updated constantly. It becomes more important to have defined requirements, business processes and work with clear economics within an organization to stay on the competitive edge.

3.3 Examples: Integrated Solutions, Marketplaces, Portals

It is vital at this stage to name some eBusiness examples, which support the integration of conventional business processes with the new electronic model.

Integrated solutions

There are integrated solutions on the market focusing on business processes and value chains. One mayor company offering an eBusiness solution is SAP with mySAP.com. The concept behind it is that SAP offers an eBusiness platform which can have interfaces to back-end systems (like SAP R/3 for Finance, Controlling, Sales and Distribution etc.). "mySAP.comTM delivers a comprehensive e-business platform designed to help companies collaborate and succeed - regardless of their industry or network environment. From employee portals to mobile business solutions, the mySAP.com e-business platform provides all the solutions and services companies need to eliminate enterprise boundaries and participate in a global marketplace." 32

But there are also many companies on the market selling standardized solutions like Intershop33, Broadvision34 etc. These solutions vary in size and complexity. Here it is very important to see what the requirements are for an organization and what is really needed.

There might be cheaper solutions on the market but a company should always ask the question what they would like to achieve with their eBusiness solution.

Virtual market places

Virtual or electronic marketplaces as shown in the model of Kurz/Ortwein function like real marketplaces, that means: companies and other market subjects use a common place to present themselves and sell their products. They may also have additional features like regional maps, free email, guides, city information, opening hours of public places, directories etc. A virtual marketplace is also a way to connect the activities of different companies. Good examples for such places are: Evita - the virtual marketplace of the Deutsche Post AG 35, Virtueller Marktplatz Rhein-Neckar 36 or Virtueller Marktplatz Bodensee (http://www.bodensee.de) which can have like the later a very regional character but are accessible world wide.

Portals

Portals are virtual front ends, which offer many facilities to customers, employees, partners, and other stakeholders. Portals may include many features like the following presented in the diagram below.

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Picture 6: Model of a Portal (Esprit Consulting)

UMS - the unified messaging system is an all-in-one solution providing Fax, email, Voice mail etc. Feeds are information accessible for users (like news, product details, etc.). Back- ends describe applications that can be used via the Internet. This may be a simple mail or office program, but as well complex financial accounting systems, SAP R/3 or a storage system. Communities can be special marketing communities to strengthen the customer relationship.37

People accessing the portal need user identification and hence receive personalized information via the portal. Therefore the portal offers the opportunity to interlink not only companies and customers but also business and business and business and employees. One very common version of a portal is MyYahoo!38 a free service offered by the company Yahoo! supplying services like email, personalized news, stock quotes, a messenger system and so on.

These three examples are just an excerpt of all the solutions that are available on the market. But is definitely to say that eBusiness offers many opportunities for companies - both enterprises selling eBusiness tools and organizations actually doing eBusiness. As a conclusion the following part will outline some of the opportunities but also problems regarding eBusiness.

3.4 Opportunities and Benefits resulting from eBusiness

EBusiness contains many benefits which few innovations have reached so far - the global nature of the technology, low costs, opportunity to reach millions just to name a few. EBusiness holds opportunities for organizations but as well customers and society. Turban/McLean/Wetherbe provide a comprehensive list of pros and cons of eBusiness or eCommerce as they name it. Some of them still need to be explored.

-decrease in costs of creating, processing, distributing, storing and retrieving paper- based information

-reduction of inventories and overheads by facilitating "pull"-type supply chain

management ("In a pull type system the process starts from customer orders and uses just-in-time processing"39 )

-support of Business Process Reengineering
-enables organizations to reach customers outside their immediate area at a minimum cost
-allows organizations to reach a wide range of suppliers, hence reducing costs of supplies and services
-permits the creation of efficient markets in an industry in which buyers and sellers can share benefits
-allows companies to auction surpluses or obsolete products fast and with little expenses
-facilitates global trade, allowing companies to penetrate foreign markets40
-individuality and interactivity of the Internet
-image improvement for companies for being modern and innovative organizations

But not only organizations will profit from eBusiness. There are also benefits for customers and to society. Customers for example gain from more choices, less expensive products, quicker delivery, transactions 24 hours a day, year round from almost any location in the world. They also receive relevant and detailed information within seconds and have the possibility to buy customized products at competitive prices. According to Turban/MacLean/Wetherbe the market will move from a market-centric to customer-centric environment focusing on the individual need.41

3.5 Challenges and limitations

But is obvious that there will be and are limitations to eBusiness which might resolve in the future but are important to be named today. These limitations can be of technical and nontechnical nature and show the need for action in certain fields.

Limitations - technical

-lack of system security, reliability,42 standards, and communication protocols
-insufficient telecommunication bandwidth
-difficulties in integrating the Internet and electronic commerce software with some existing applications and databases
-accessibility to the Internet is still expensive and/or inconvenient for many potential customers

Limitations - nontechnical

-legal issues are yet unresolved, Issues43 like copyright and intellectual property, tax regulations and so on are still not defined, especially concerning international transactions.
-government regulations and standards and not refined enough for many circumstances
-benefits of eBusiness are yet difficult to measure
-eBusiness is still evolving and changing rapidly
-customers resist change. To switch from a real to a virtual store may be difficult for many people. Issues of trust play an important role here.
-There is not yet a sufficiently large number of sellers and buyers that is needed for profitable eBusiness operations.
-Many critics fear eBusiness could result in a breakdown of human relationships

4 Critical Analysis and Conclusion

Even though the main aspect of this paper concerns eBusiness and the Value Chain I would also like to give a critical analysis with some recent issues. I find this aspect very significant to round up the whole picture without loosing clarity of the content.

It is vital to notice that Information Technology does not guarantee success in any case. But it still offers a lot of opportunities for the future and companies, which are willing to face the challenges.

But with all the euphoria concerning eBusiness one should not forget to mention that they are failures as well. Some recent examples are the online fashion retailer Boo and the music retailer Boxman.

Boxman faced liquidation according to an article from The Times. The company was established in 1997, had operations in 8 European countries and was selling music online. The company wasted millions of pounds, e.g. £24.1 Million in 6 month alone with a turnover of only £5.8 Million.44

Boo - a fashion online retailer was launched last November and has since then used about £40 million alone for marketing expenses. Altogether the total expenses are estimated by £70 million in one year. Boo still faces huge problems due to the bad money policy but the site and the online retailer is continuing to work under a different owner.45

These scenarios prove that eBusiness needs to be done properly within an organization. There are very high investments in the first place, which many do not consider but the cases of Boo and Boxman show clearly. This concerns not only the technological aspects but more significant the business concept, organizational issues, value chain and logistic problems and overall the human factor. Siemens as a point in case invests at present about one billion in eBusiness to change to an e-company.46

EBusiness changes the organization and business processes and this will be a mayor challenge for organizations in the future. The task is it to build networks to profit from each other. The Boston Consulting Group states that companies should use eCommerce to fundamentally rethink their offerings. Organizations should be able to expand the richness of products and services through eBusiness by increasing information content and the degree of customization.47

From my own experience I can support this point - the importance of business concepts and defined business processes. EBusiness contains many opportunities but problems as well which companies need to consider. This paper was only focusing on value chains and had the task to reach a basic understanding on the new issue eBusiness and some of its implications. There are so many other things, which play an important role here as well. Issues like security, legal rules and laws, human factors, technologies and so on. As a conclusion one needs also to ask questions like will the Internet and eBusiness create a cultural gap in the population? How will technology influence organizations and society? What kind of impact will have eBusiness and Information technology on the evolving economies? Economies, which have a bad infrastructure and not enough financial assets to invest in these new technologies, will they be able to catch up?

To put it in a nutshell, eBusiness will definitely become one of the mayor challenges for the next years. Many issues are not yet resolved and the wide field of eBusiness still needs to explored to its fullest. It will show if organizations are prepared for the change and if they will be able to cope with it.

I will end with the words of Victor Hugo that "the most powerful thing in the world is an idea whose time has come." The time of the Internet and eBusiness has definitely come and the implications for the economy and will be powerful.

5 References

Bliemel, Friedhelm/Fassott, Georg/Theobald, Axel. 1999. Electronic Commerce, Gabler, Wiesbaden

Baumann, Martina/Kistner, Andreas C. 1999, e-Business, C&L Computer und Literaturverlag, Vaterstetten

Daum, Bethold/Scheller, Markus. 2000. Electronic Business, Addison-Wesley, Munich

Hagel, John III/Armstrong, Arthur G. 1997. Net Gain - Profit im Netz, Märkte erobern mit virtuellen Communities, Gabler, Wiesbaden

Hermanns, Arnold/Sauter, Michael.1999. Management Handbuch Electronic Commerce, Verlag Franz Vahlen, München

Kauffels, Franz-Joachim.1998. E-Business: Methodisch und Erfolgreich in das E- Commerce-Zeitalter, MITP Verlag, Bonn

Kotler, P./Bliemel, F. 1999. Marketing-Management. 9. ed. Stuttgart: Schaeffer-Poeschel, p. 1133

Porter, Michael E. 1985. Competitive Advantage, Creating and Sustaining Superior Performance, The Free Press, New York

Rebstock, Michael/Hildebrand Knut. 1999. E-Business für Manager, MITP-Verlag GmbH, Bonn

Scheer, August-Wilhelm/Nüttgens, Markus (Hrsg.). 1999. Electronic Business Engineering, 4. Internationale Tagung Wirtschaftsinformatik 1999, Physica-Verlag, Heidelberg

Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, Making connections for strategic advantage, John Wiley & Sons. Inc, New York

Freeland, D. Grant. 2000. Perspectives - The Organizational Challenge of eCommerce. Boston Consulting Group, Inc. 2000, available: http://www.bcg.com

Frantz, John R./Hout, Thomas M. 1993. Perspectives - The New Vertical Integration. Boston Consulting Group, Inc. 1993, available: http://www.bcg.com

Rhodes, David/Dea, Joan/Hemerling, Jim. 1999. Opportunities for Action - Building a successful experience brand. Boston Consulting Group, Inc. 2000, available: http://www.bcg.com

Stalk, George Jr./Trudeau, Robert. 1999. The Hidden Opportunity in Business-to-Business eCommerce. Boston Consulting Group, Inc. 2000, Ed. No. 382, available: http://www.bcg.com/publications/search_view_perspectives.asp?pubID=439

Boston Consulting Group 2000: E-Commerce in Deutschland: Vom Goldrausch zur Gold- gewinnung, available: http://www.bcg.de/publikationen/studien/archiv/Goldrausch.asp?sel=1

Boston Consulting Group 2000: The State of Online Retailing III, available: http://www.bcg.de/publikationen/studien/archiv/OnlineRetailingIII.asp?sel=4

Boston Consulting Group 2000: E-Commerce im Business-to-Business Bereich, available: http://www.bcg.de/publikationen/studien/archiv/Business2Business.asp?sel=6

Economist online.2000: Catch up if you can, Europe and Japan cannot afford to miss the boat, available: http://www.economist.com/library/focus/display.cfm?id=348963, 23rd September 2000

KPMG. 2000. eBusiness in der Immobilienwirtschaft - Status Quo und Perspektiven, available: http://www.kpmg.de/library/surveys/

KPMG. 2000. One-to-One Marketing im Electronic Commerce - Status Quo und Perspektiven, http://www.kpmg.de/library/surveys/

Times Newspaper Ltd. (2000), Boxman faces liquidation (article 11th October 2000) available: http://www.thetimes.co.uk/article/0,,17869,00.html

Times Newspaper Ltd. (2000), Dominic Rushe, E-tail fashion queen shrugs off the boos (article from 13th February 2000) available: http://www.sunday- times.co.uk/news/pages/resources/ aboutus1.n.html

W&V online 2000: Renaissance B2B-E-Commerce in Deutschland, available: http://www.wuv-studien.de/wuv/studien/082000/73/index.htm

W&V online 2000: Cap Gemini: E-Business-Umfrage. Available: http://www.wuv- .de/studien/capgemini_0500/index.htm

W&V online 2000: VDI/ADL: B-to-B E-Commerce-Studie, available: http://wuv.de/studien/little_0300/index.html

Boston Consulting Group. 2000. available: http://www.bcg.de, Germany

Boston Consulting Group, Inc. 2000. available: http://www.bcg.com, United States of America

Broadvision. 2000. available: http://www.broadvision.com

Esprit Consulting. 2000. Company Information, Munich, Germany

Evita (Deutsche Post AG). 2000. available: http://www.evita.de

Intershop. 2000. available: http://www.intershop.com

KPMG. 2000. available: http://www.kpmg.de, Germany

SAP. 2000. available: http://www.sap.de

Siemens AG. 2000. available : http://www.siemens.de

The Economist. 2000. available: http://www.economist.com

The Times. 2000. available: http://www.thetimes.co.uk, Great Britain

Virtueller Marktplatz Rhein-Neckar. 2000. available: http://www.vi-ma.de

Werben und Verkaufen online (W&V). 2000. available: http://www.wuv.de, Germany

Yahoo. 2000. available: http://www.yahoo.de or http://www.yahoo.com

Course: English 1st Language 10.11.00

[...]


1 Kotler, P./Bliemel, F. Marketing-Management. 9. ed. Stuttgart: Schaeffer-Poeschel, 1999. p. 507

2 Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, Making connections for strategic advantage, John Wiley & Sons. Inc, New York, p. 211 f

3 ibid, p. 785 f

4 Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, John Wiley & Sons. Inc, New York, p. 785 f

5 ibid, p.785

6 Kotler, P./Bliemel, F. Marketing-Management. 9. ed. Stuttgart: Schaeffer-Poeschel, 1999. p. 1133

7 Bliemel, Friedhelm/Fassott, Georg/Theobald, Axel. 1999. Electronic Commerce, Gabler, Wiesbaden, p.2

8 Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, John Wiley & Sons. Inc, New York, p. 211

9 KPMG. 2000. eBusiness in der Immobilienwirtschaft, available: http://www.kpmg.de/library/surveys/

10 Rebstock, Michael/Hildebrand Knut. 1999. E-Business für Manager, MITP-Verlag GmbH, Bonn p.20

11 Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, John Wiley & Sons. Inc, New York, p. 221

12 Rebstock, Michael; Hildebrand Knut. 1999. E-Business für Manager, MITP-Verlag GmbH, Bonn p.20

13 ibid, p. 20

14 W&V online: Media Gruppe Digital: @facts April 2000. available: www.wuv.de/studien/afacts_0500/2.html

15 W&V online: Allensbacher Computer und Telekommunikations-Analyse ACTA 2000, available: www.wuv.de/studien/acta_0500/2.html

16 ibid

17 W&V online. 2000: BCG Studie. available: http://www.wuv- studien.de/wuv/studien/082000/73/index.htm

18 W&V online: VDI/ADL available: http://www.wuv.de/studien/little_0300/index.html

19 Economist online.2000: Catch up if you can, Europe and Japan cannot afford to miss the boat, available: http://www.economist.com/library/focus/display.cfm?id=348963, 23rd September 2000

20 ibid, 23rd September 2000

21 ibid, 23rd September

22 Porter, Michael E. 1985. Competitive Advantage, The Free Press, New York, p.36

23 ibid, p. 38f.

24 ibid, p. 37

25 Turban, Efraim; McLean, Ephraim; Wetherbe, James. 1999. Information technology for Management, Making connections for strategic advantage, John Wiley & Sons. Inc, New York, p.116

26 ibid, p.116f

27 ibid, p.117

28 Bliemel, Friedhelm/Fassott, Georg/Theobald, Axel.1999. Electronic Commerce, Gabler, Wiesbaden p. 49f

29 Kurz, Eberhard/Ortwein, Eckhard. 1999. Integrierte Unternehmensstrategien für Electronic Commerce im Business-to-Business Bereich in Hermanns, Arnold/Sauter, Michael.1999. Management Handbuch Electronic Commerce, Vahlen, p. 130 f

30 ibid p. 130 f

31 Stephan Salb. 1999. Integration der Geschäftsprozesse durch Electronic Commerce. in Hermanns, Arnold/ Sauter, Michael.1999. Management Handbuch Electronic Commerce, Vahlen, p. 314 f.

32 mySAP. 2000. available: http://www.mysap.com/solutions/index.htm

33 Intershop. 2000. available: http://www.intershop.com/products/

34 Broadvision. 2000. available: http://www.broadvision.com/OneToOne/SessionMgr/home_page.jsp

35 Evita. 2000. available: http://www.evita.de

36 Virtueller Marktplatz Rhein-Neckar. 2000. available: http://www.vi-ma.de/

37 Esprit Consulting. 2000. Company information. Munich (available: http://www.esprit- consulting.de)

38 MyYahoo or Mein Yahoo. 2000. available: http://de.my.yahoo.com/

39 Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, Making connections for strategic advantage, John Wiley & Sons. Inc, New York, p. 217

40 ibid, p.217

41 Turban, Efraim/McLean, Ephraim/Wetherbe, James. 1999. Information technology for Management, Making connections for strategic advantage, John Wiley & Sons. Inc, New York, p. 218

42 ibid, p. 218

43 ibid, p. 218

44 Times Newspaper Ltd. (2000), Boxman faces liquidation (article 11th October 2000) available: http://www.thetimes.co.uk/article/0,,17869,00.html

45 Dominic Rushe, E-tail fashion queen shrugs off the boos (article from 13th February 2000) available: http://www.sunday-times.co.uk/news/pages/resources/aboutus1.n.html

46 Siemens AG. 2000. available: http://www.siemens.de

47 Stalk, George Jr./Trudeau, Robert (1999). The Hidden Opportunity in Business-to- Business eCommerce. available: http://www.bcg.com

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2001
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Title: eBusiness and the value chain