Business Operations And Their Commercial Environment

Published Date: 02 Nov 2017

1. Introduction

‘Over time, trade became a more formalized, structured process, evolving from one-to-one transactions into many-to-many exchanges’ (PricewaterhouseCoopers LLP SAP AG, 2001, P1); in addition, modern business is partial to be built electronically on a network in order to be more efficient and convenient. This report will chiefly discuss how the online presence websites impact on the business operations which cover procurements and sales, employment, promotions, and security and privacy; furthermore, introduce the significant changes which are brought by the websites on the commercial environment. Finally, both benefits and limitations of blogging & microblogging, search engine marketing, and online social networking also will be demonstrated.

2. Traditional conditions and issues in business operations and commercial environment

2.1 Previous situations of operating business and the relevant environment

In the old days, traditional business used to create connections with various units in a complicated process. A brick-and-mortar company purchased materials from suppliers and produced in the manufacturing factory; on command it distributed products to its physical stores or retailers for selling to the client. Additionally, the enterprise generally advertised new products or services through cooperating with the mass media. Sometimes it understood consumer responses via contracting with market research companies or collected customer complaints from the call centre; in fact, it distanced from the client. At that time, within the same industry interfirm rivalry always related to pricing, promotion, and innovation. There is a definite top-down structure within a traditional organization; moreover, the company has rigid relationships with fixed duties. Normally the information is passed from the top to the bottom in a single direction; meanwhile, communications among departments are also relatively limited (Schmaltz, 2011).

2.2 Issues generating along with time increased

Schmaltz (2011) said, ‘Traditional businesses always live in their ivory tower from which they look down on their customers’; as most traditional enterprises chose mediums rather than directly contacting with consumers. For example, they preferred to approach research companies for market information; consequently, very few consumers have enough patience to wait for their delayed improvements. The firm would lose an increasing number of customers; because the client could not be satisfied in time. Collaborations are necessary in business; however, much time were wasted partners on going through companies for negotiating. Cost also played a predominant role in the traditional business; as a company would lose strong competitiveness if its competitors have price advantages. For example, Dell lost exceeded ﹩100 million in 1994 since a price war was caused in the computer industry at that time (Turban & Volonino, 2010). Regarding with the previous internal communication, employees can only accept the information transmitted from the top; thus, the top management has little chance of hearing from them. There are also information gaps except the company policy among departments; as a result, limited communications within the firm lead to the low working efficiency.

3. The rise of online presence in modern business

Every ambitious enterprise devotes to the constantly improvements of their business, or focuses on creating more available value. As the network era continuous to develop, numerous companies gradually increase sales and expand scales via developing electronic business. E-business means ‘one firm conducts its day-to-day business functions over the internet and/or other electronic networks’ (Business Dictionary, 2012). The online presence which is the collective existence online of enterprises and individuals should be an indispensable element in the e-business; additionally, it normally takes the form of websites, search engines, social networks and et al. At the present time, a considerable number of people spend the bulk of their time on searching internet; hence, majority of companies establish official websites to provide commercial information and promote their products and services via other online channels. Meanwhile, partners and employees could be found online is therefore to save costs and give rise to opportunities for firms.

4. One kind of online presence --- websites

Website is the ‘virtual location on WWW, containing several subjects or company related webpages and data files accessible through a browser’ (Business Dictionary, 2012). It is the most commonly used form of online presence for organizations. A substantial number of companies establish official websites for business; moreover, they collaborate with other websites to sell or advertise goods and services.

4.1 Impacts of websites on business operations

Website as an online presence would produce apparent changes on the value chain of a company. The value chain is the process of generating a profit margin via primary activities which includes inbound logistics, operations, outbound logistics, marketing & sales, and service. (QuickMBA, 2010) Websites would improve the way of selecting suppliers; likewise the process of receiving and order fulfillments. In particular, it would modify the personnel assignment within the firm and develop a new channel of recruitment. Meanwhile, the enterprise could save cost of promotions by the websites because of the conveniently advertising online. However, some legal issues also would be arised while supplying online services.

4.1.1 Procurements & sales

The structure of supply chain has been changing since the enterprise built the websites. ‘A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and distribution of these finished products to customers’ (Bhatnagar, 2009).

Regarding with the procurement, websites serves as a good platform for the firm finding the best price or quality of materials from a wide range of suppliers. In contrast with the traditional procurement which needed to go through companies for negotiating and decisions mainly relied on the reputation of suppliers; modern companies prefer to select suppliers equally via publishing cooperation information and contacts on the websites. For example, J Sainsbury plc sets an option called ‘Supplier’ on its website catalog, which primarily presents the information relates to the suppliers. Particularly, it opens a Sainsbury’s Information Direct program within the ‘Supplier’ page that acts as the portal between Sainsbury’s and its business partners. The web page of SDI program is shown in Figure 1. The existing suppliers can manage their relationships with Sainsbury’s online via this program; similarly, the potential suppliers can complete applications online after learning the collaborative information shown within the program.

Figure 1

(Sainsbury’s official website. Source from: http://www2.sainsburys.co.uk/sid/)

Especially, partners could sit in each office to accomplish the biding and the decision making online rather than wasting time on the way; additionally, websites offer opportunities for creating fierce competitions among suppliers lead to the lower price materials with high quality, which would benefit the buying company on saving costs. For instance, Crown Cork & Seal Co as a manufacturer of containers ever sourced a large area of materials from over 1,400 suppliers; indeed it generated the savings between 12-23% on its procurements based on the web system (Richard, Alan & Rita, 2007).

A sizable number of click-and-mortar companies sell products or services online via their official websites or other websites they have cooperated with, which produce a new sales procedure from introductions to order fulfillments. These companies release product or service information as detailed as possible on the web page for obtaining more consumers; as these information could be available 24 hours which customers could easily access to. Subsequently, they constantly seek to build the most convenient means of online purchasing for the client. For instant, Figure 2 demonstrates a process that how a consumer to place a VAIO laptop order via four simply steps on the Sony official website. Customer can choose the segment of Sony VAIO Laptops from the Shop Categories which installed by Sony on its homepage; then the page of one laptop which the customer interested in could be opened to show detailed features and relevant information. The laptop could be customized after filling some options; finally, an order would be completed since adding the customized laptop into the virtual cart.

Figure 2

(Sony USA official website. Source from: http://www.sony.com/index.php)

Similarly, the firm is driven to establish an efficient order fulfillment process to ensure that the client would be satisfied and retained. A general order fulfillment process is shown in Figure 3. The order information will be transferred into the stock since a consumer placed an order on the website; then, the product will be picked and packaged to ship for the customer. The order could be cancelled as well if the item is out of stock or there has other problems.

Figure 3

(By Josh Walsh, (2008). Source from: http://www.designinginteractive.com/user-experience/designing-the-user-experience/)

4.1.2 Employment

Websites leads to losses of jobs for a certain range while giving employment a push. The human resource arrangement would be implemented since an enterprise owns websites; meanwhile, another recruiting channel of the company could be opened online. The increased demand and productivity by the websites would facilitate the company to establish a department for running and maintaining the websites; which could indirectly create more job opportunities. For example, The National Association of Software and Services Companies ever forecasted that the number in the employment of the Indian IT-enabled services industry would be increased from 68,000 to 1.1 million by 2008 because of the rise of e-commerce (United Nations, 2002). Likewise, websites is as a relatively independent sector within the company’s operation; employees would be transferred by the company to complete the work related with the website, which includes web designing, information updating, and technical supporting and so on.

As for the present, a certain number of companies install the recruiting options within their web pages; as the websites really offers a convenient channel of recruitment with low costs. Namely, the employments advertise information could be free published and updated on the official web pages. That would build direct contacts between the enterprise and applicants; at the same time, the firm receives applications of candidates all year round via the websites which could virtually form a talents database. For instance, TESCO plc explicitly designs two segments of Working for Tesco and Graduate recruitment with clear recruiting information within its Career webpage. As a growing global business with covering a sizable number of countries; Tesco promises to create good jobs for local people. Figure 4 shows a recruitment web page of Tesco in China. In particular, the working positions of Tesco from all corners of China are scrolling posted on the bottom right side of the web page.

Figure 4

(TESCO plc Chinese official website. Source from: http://job.cn.tesco.com/)

To a certain extent, unemployment would be caused by the establishment of websites. Websites provides a direct access for sales between the enterprise and the client, which would significantly reduce the work load of agents or brokers; finally, losses of those jobs would be occurred depends on the turnover losses. Similarly, the enterprise could build direct communication and receive feedback from consumers via the websites, which would lead to the elimination of some marketing research intermediaries.

4.1.3 Promotions

An intelligent enterprise would capitalize on every chance to use its existing channel for developing the business such as promotions on websites. The U.S. Small Business Administration ever investigated that ＄300 selling price of each refrigerator includes ＄10 for advertising, which means 300 units should be sold to produce ＄90,000 in sales for ＄3,000 in advertising. The example indicates the cost of advertising literally constitutes a high proportion of the budget (Beest, 2012). Each enterprise strives for reducing the costs; as a result, they optimize the opportunities for the free advertisement on their official websites which could be viewed twenty-four hours a day, seven days a week. This kind of advertisement is quite effective; as consumers have been subconsciously received the advertising when they are going through official web pages for the goods or services what they interested in. An increasing number of enterprises sometimes start new web pages for operating online sweepstakes; thus the effects of invisible advertising would be achieved on people who were attracted by the prizes to view the pages.

Corporations desire to widely release their ads online via cooperating with other websites as well; as they clearly understood the significant influences of the World Wide Web on the modern crowd. Similarly, even many organizations are partial to posting relevant information online to promote the public campaigns in real. Particularly, in order to get more attention from people on-line; the firms usually require placing their ads in the dynamic form within the web pages.

In-game advertising online is gradually utilized by vary enterprises on the official websites or other online game sites. Simply put, in-game advertising is that transforming ads into a game environment. Gaming is a global phenomenon never out of season which facilitates players to spend a certain amount of time on it (Initiative, 2012). Likewise, the wise firms fully optimize this advantage to integrate the ads into the games so that audiences could pay much attention on their products or services in playing the games. For instance, Figure 5 is one screenshot of an online breakthrough game which made by Chupa Chups. The players would be forced to remember the candies of Chupa Chups if they try hard to clear customs; because the background of the game is full of various Chupa Chups products.

Figure 5

(Contributed by B.L. Stryker. Source from: http://www.mobygames.com/game/amiga/zool/screenshots/gameShotId,91011/)

4.1.4 Security and privacy

Websites bring benefits as well as issues for companies; probably the most obvious problems are associated with security and privacy. A secure online electronic payment system should be developed since a company starts offering shopping online for its client; as almost every consumer considers whether paying online is safe enough all the time. In fact, there is a great risk involves in financial losses of customers if the consumer encounters the internet scam or the password of account is stolen.

Over the years, electronic credit cards or debit cards become the most popular payment instruments for e-commerce transactions between enterprises and individuals. A general modern electronic credit cards processing is demonstrated in Figure 6. For instance, the detailed information of a customer’s credit card and the order would be encrypted in the browser if he shops a VAIO laptop on Sony’s official website; then, transfer into a payment server such as CyberSource. CyberSource would send the transaction authorization request via its payment gateway to the third party processor; subsequently, the issuing bank would authorize or decline the request after appropriately and securely judging. The merchant would be received the message from CyberSource; meanwhile, the money would be transferred into the acquiring bank since the issuing bank approves. Finally, the acquiring bank would credit the online Sony account of the customer (CyberSource, 2012).

Figure 6

(Source from: http://www.cybersource.com/developers/learn/getting_started/how_payment_processing_works/)

With regard to this payment, it is convenient with simple steps to save time which could attract customers a lot. Meanwhile, it could be in a relatively safer condition so that a multitude of enterprises prefer to offer this payment pattern. Because both parties could check statues in real time within the process; in addition, the risk-control mechanisms of the third party processor and banks, and credit cards database could serve as the insurances to protect the transactions.

Privacy issues are always generated in the online transactions as well, which predominantly involve anonymity, disclosure of personal information, and prying of ‘computer information’ over time. Consumers are required to register on each site to be identified; therefore, their relevant information would be collected by the enterprises since they register online. In order to lessen the apprehension of consumers; all organizations post their own independent privacy policies on their websites. For example, Tesco.com privacy policy demonstrates that information collection will only use to provide and personalize their services and prevent fraud rather than selling to internet marketers for additional income.

4.2 Influences of websites on commercial environment

Regarding with the commercial environment, the scale of market has been distinctly expanding since websites were built for commercial activities. The more intensified market competition that resulted in low entry barriers of the internet and numerous benefits could be reaped by the enterprises; consequently, the relevant regulations were issued to coordinate. The websites would progressively close the gap between enterprises and consumers which facilitate the brand building; furthermore, the purchasing intention of the client would be relatively affected.

4.2.1 Industry environment

The market scale has been expanding enormously since numerous companies began to settle down in the World Wide Web. It is said that over one billion people use the World Wide Web of the time and the number is still on the increase (AllBestArticles, 2012), which demonstrates those companies have a huge number of target customers online. Namely, the client demands would significantly increase as the firms could reach a global audience via the websites. The huge market scale would continuously generate opportunities to multiply business value for the enterprises. For example, one click-and-brick company could establish its new brand image on-line.

Websites provide a convenient platform to bring parties close. They could be frequently modified and easy to update relevant information which would maximize exposure and serve for reference of stakeholders; hence, there are plenty of business opportunities could be created. For instance, numerous suppliers and enterprises which have propose of corporation for future could be attracted after visiting the company website. Likewise, shareholders could understand the current state of the company from the files such as annual report which were published on the official site.

The establishment of websites could cause more fierce competition among enterprises. The mortar-and-brick companies would be totally threatened by the click-and-brick ones which could remove the restriction of geography relying on the online presence; as shopping locally could not be the only choice for consumers any more. The competition within the online market has been growing due to the low entry barriers of the internet; in other words, the enterprise would be constantly threatened by the ever-increasing online potential substitutes and competitors from that moment on it entered the wider online market. In particular, enterprises need to release the latest products and services or the newest trends on the sites; which would offer convenience for the competitors to understand their present conditions. Then, the competitors would develop similar products or services to attract consumers which could indirectly conduce to the competition.

The online market seems wider than the offline market so that has the more requirements of the laws and policies to regulate. Over time numerous issues have been producing during the transactions based on the websites; as a consequence, the adapted new laws and regulations are promulgated. For example, Philippine has issued a series of laws to govern the online business such as the Electronic Commerce Act of 2000. The law mainly provides for penalties such as the imprisonment of six months to three years on hacking issues, frauds, and privacy in the electronic commerce (Carlo, 2011).

4.2.2 Social environment

Web-shopping has been influencing the buying patterns of consumers since it appears in the modern society. Convenience and time-saving are the principal driving force for the success of online shopping; to put it differently, an increasing number of customers prefer to sit in front of the computer for purchasing online, not shopping locally to expend time and energy. In addition, they could be offered more plenty of choices by the large network market; which would not restricted by their geography.

Consuming habits have been keeping the impact of the web-shopping. The client is still subject to their five senses which contain touch, smell and taste, as well as see and hear in judging products and services (Marin, 2001). Enterprises make the way of displaying products on the sites to meet the requirements of visual sense and hearing as much as possible; however, online trust could be built after they receiving and touching the products in real. Once the products surpass their expectations; the repurchase intention would be formed as trust could beget loyalty. Additionally, particular needs could be satisfied such as customized goods lead to the greater demands of consumers online. According to 45% of web-shoppers prefer to shop at a clicks-and-mortar site rather than a pure Net site (Marin, 2001); it could illustrate that consuming habits could be relatively based on reputations and brands as well.

Likewise, web-shopping constantly makes effects on the consumption values. For example, the web-shoppers could progressively accept to buy unbranded products; as they could gain the products with lower price which have the similar quality of the branded ones.

5. Advantages and disadvantages of some other online presence

Both of benefits and limitations would be brought on business by some other online presence. Blogs and microblogs could facilitate to shorten the distance between enterprises and customers; nevertheless, they are hard to maintain. Search engines could be the effective channels for marketing which facilitates to obtain target consumers; however, the corporations would have a high expense. Social networking could help the companies to enhance the relationship with their clients and advertising with low costs; nonetheless, it would be a time-consuming work as well.

5.1 Blogs & microblogs

Blogs and microblogs here are web tools which could be used for frequently updating product or service information and stimulating consumption by the enterprises via broadcasting journals or short-messages; hence, they could be as a friendly venue for the communication between the seller and the buyer. There could be a quick and cheap way for the enterprises to promote their products or services; at the same time, it could be the most convenient pattern of collecting the true feelings and suggestions from the client relying on the comment function as consumers could interact with the ‘human face’ of the enterprises via blogs and microblogs (Gerry, 2004).

However, blogs and microblogs are easy to start and hard to maintain. Majority of customers hope the firm to blogging and microblogging at the first time once there are the latest trends; namely, the blogger has to keep on undertaking this time-consuming task otherwise numerous consumers would be lost over time. The blogger is a human-being; thus, sometimes the words with personal emotion could have effects on the corporate reputation and image.

5.2 Search engines

James (2012) said that ‘search engine is a web site which collects and organizes content from all over the internet’. Search engines could be as an effective marketing technique for the corporations. The business websites need the enough traffic flow and to be popular before it becoming a source of the revenue; hence, the firms rush to place their websites at the top of the search results ranks. Search engines offer plenty of opportunities for assisting companies to obtain potential customers; as the consumers could access to those corporation websites by chances when searching general goods or information related to the company products through the search engines.

There would be a high expense which the corporations would spend on the ranking within the search engine site; furthermore, the enterprises would be plunged into the price competition if they want to remain the top ranks. However, a risk could be existed in this marketing way. The search engines still can not guarantee the traffic which the company would get to their sites.

5.3 Social networks

Social networks could be as communities where both organizations and individuals are able to publish multimedia contents about themselves. The corporations have their own public home pages on the social networking sites, which could create small-scale communities for their brands at almost zero costs; moreover, consumers could comment or discuss within these areas. Thus, the companies could develop stronger relationships and brand loyalty with their clients for a long time. Similarly, social networking could promote the effective adverting because of its worldwide connectivity; the potential consumers could be attracted more easily.

Social networking also would be a time-consuming work for the firms to undertake and maintain. Besides, the information which they collected from the sites might not be usable for their business.

6. Conclusion

Online presence literally brings benefits as well as issues for the corporations. Particularly websites could be convenient for the companies optimizing procurement and promoting sales; moreover, new recruiting channels and advertising patterns have been developed relied on the websites. The companies have been completing the payment systems and updating policies on the sites in case there are security and privacy issues. Web-shopping leads to expand the market scale while intensifying the competition; likewise, it continuously influences the buying patterns, consuming habits, and consumption values of the client. Regarding with blogs and microblogs, and social networks, they could help the firms obtaining potential consumers with low costs; nonetheless, all of them are time-consuming work to difficultly maintain. Search engines could be a convenient marketing technique; however, the enterprises could not afford to their high expenses for a long time.

To clicks-and-mortars corporations, they could facilitate the interactive development between their online and offline business. In order to avoid the conflict of the online and offline sales; the firms could encourage the customer customizing the products via the web and collecting the goods in their local stores, which could promote the sales of their physical stores. The companies could consider using the offline promotions to develop their online presence as well. For instance, a clothes firm could distribute its brochure of displaying the latest products; meanwhile, the attached website on the pages could remind the consumers that could purchase these clothes online.