Notes on E-Commerce [ BCA-S309]

Course Code:BCA-S309
Course Name: E-Commerce
UNIT-I
Introduction to E-Commerce: The Scope of Electronic Commerce, Definition of Electronic
Commerce, Electronic E-commerce and the Trade Cycle, Electronic Markets, Electronic Data
Interchange, Internet Commerce, E-Commerce in Perspective.
Business Strategy in an Electronic Age: Supply Chains, Porter’s Value Chain Model, Inter
Organizational Value Chains, Competitive Strategy, Porter’s Model, First Mover Advantage
Sustainable Competitive Advantage, Competitive Advantage using E-Commerce, Business
Strategy, Introduction to Business Strategy, Strategic Implications of IT, Technology,
Business Environment, Business Capability, Exiting Business Strategy, Strategy Formulation
& Implementation Planning, E-Commerce Implementation, E-Commerce Evaluation.

Introduction to E-Commerce

E-Commerce – Introduction
E-commerce means using the Internet and the web for business transactions and/or
commercial transactions, which typically involve the exchange of value (e.g., money) across
organizational or individual boundaries in return for products and services. Here we focus on
digitally enabled commercial transactions among organizations and individuals.
E-business applications turn into e-commerce precisely, when an exchange of value occurs.
Digitally enabled transactions include all transactions mediated by digital technology and
platform; that is, transactions that occur over the Internet and the web.
Hence, e-tailing is a subset of e-commerce, which encapsulates all “commerce” conducted
via the Internet. It refers to that part of e-commerce that entails the sale of product
merchandise and does not include sale of services, namely railway tickets, airlines tickets and
job portals.

E-Commerce – History of E-Commerce

Early Development:

The history of E-commerce begins with the invention of the telephone at the end of last
century. EDI (Electronic Data Interchange) is widely viewed as the beginning of ecommerce
if we consider ecommerce as the networking of business communities and digitalization of
business information. Large organizations have been investing in development of EDI since
sixties. It has not gained reasonable acceptance until eighties. The meaning of electronic
commerce has changed over the last 30 years.

Originally, electronic commerce meant the facilitation of commercial transactions

electronically, using technology such as Electronic Data Interchange (EDI) and Electronic
Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to
send commercial documents like purchase orders or invoices electronically. The growth and
acceptance of credit cards, automated teller machines (ATM) and telephone banking in the
1980s were also forms of electronic commerce. Another form of E-commerce was the airline
and railway reservation system.

Online shopping, an important component of electronic commerce was invented by Michael

Aldrich in the UK in 1979. The world’s first recorded business to business was Thomson
Holidays in 1981. The first recorded Business to consumer was Gateshead SIS/Tesco in
1984. During the 1980s, online shopping was also used extensively in the UK by auto
manufacturers such as Ford, General Motors and Nissan. The systems used the switched
public telephone network in dial-up and leased line modes.
From the 1990s onwards, electronic commerce would additionally include enterprise resource
planning systems (ERP), data mining and data warehousing. An early online information
marketplace, including online consulting, was the American Information Exchange, another
pre Internet online system introduced-in 1991. In 1990 Tim Berners-Lee invented the World
Wide Web and transformed an academic telecommunication network into a worldwide
everyman everyday communication system called internet/www(dot)Commercial enterprise
on the Internet was strictly prohibited until 1991.

Although the Internet became popular worldwide around 1994 when the first internet online
shopping started, it took about five years to introduce security protocols and DSL allowing
continual connection to the Internet. By the end of 2000, many European and American
business companies offered their services through the World Wide Web. Since then people
began to associate a word “E-commerce” with the ability of purchasing various goods
through the Internet using secure protocols and electronic payment services.

The Internet and the Web:

The Internet was conceived in 1969, when the Advanced Research Projects Agency (a
Department of Defense organization) funded research of computer networking. The Internet
could end up like EDI without the emergence of the World Wide Web in 1990s. The Web
became a popular mainstream medium (perceived as the fourth mainstream medium in
addition to print, radio and TV) in a speed which had never been seen before. The Web users
and content were almost doubled every a couple of months in 1995 and 1996.

E-Commerce – Meaning

The term electronic commerce or e-commerce refers to any sort of business transaction that
involves the transfer of information through the internet. By definition it covers a variety of
business activities which use internet as a platform for either information exchange or
monetary transaction or both at times.

For example, the numbers of consumer brand retail sites like Amazon(dot)com and
Flipkart(dot)com which normally provides information about products and also allows
monetary transactions to happen over the internet.

On the contrary there are the auctions sites like Quickr(dot)com and Ebay(dot)com where the
information about certain listed products and services are provided but the monetary
transactions normally happen physically.
Apart from these two categories of e-commerce sites, there are some sites which enable
businesses to exchange trading goods and also service between two or more companies. All
of these forms of internet based business platforms are known as e-commerce.

Over the last decade the advent of e-commerce has actually transformed the manner in which
people used internet. People now are not only just using internet for gathering information,
leisure or socializing online but also at the same time they are seeking measures to conduct
business.

Even popular social networking sites like Facebook(dot)com are allowing people to promote
and sell products and services online and the introduction of computer and mobile based e-
commerce application software like Shopify provides evidence of how e-commerce have
boomed over the past 5 years.

E-Commerce – The Scope of E-Commerce

E-commerce or Electronic commerce is termed as selling and buying behaviour of products

and services over the internet. It is also referred to as the sales of different items on the
marketplaces in which money transaction activity takes place. There are many e-commerce
marketplace like Amazon, Flipkart, Paytm, Snapdeal, Shopclues, etc. in which commercial
transactional activity is going on.

Nations are developing faster and so as the technology is also developing. The advanced
Smartphones, Computer Systems, Web Access speed, etc has made it easy for the users to
execute their task in a short interval of time and scope of ecommerce achieve high growth in
the future. E-commerce shopping made the online shopping experience safe and secure with
an additional layer of security.

The scope of ecommerce is expanding day by day due to the heavy number of internet users
all over the world. People are spending more time in doing online shopping for various
products available on the ecommerce platforms. Amazon offers items in almost every
category to all the users. Additionally, It also provides the best promotion and discounts
whenever seasonal sales come. The impact of e commerce is really good in all the developing
countries.
The mainstream of E-Commerce consists of these three areas; These are represented as a
diagram in Fig 1.1
 Electronic
Markets

EDI Internet
Commerce

Fig 1.1

E-Commerce – Definition of E-Commerce

E-commerce (electronic commerce) is the activity of electronically buying or selling

of products on online services or over the Internet. E-commerce draws on technologies such
as mobile commerce, electronic funds transfer, supply chain management, Internet
marketing, online transaction processing, electronic data interchange (EDI), inventory
management systems, and automated data collection systems. E-commerce is in turn driven
by the technological advances of the semiconductor industry, and is the largest sector of
the electronics industry.
E-commerce typically uses the web for at least a part of a transaction's life cycle although it
may also use other technologies such as e-mail. Typical e-commerce transactions include the
purchase of products (such as books from Amazon) or services (such as music downloads in
the form of digital distribution such as iTunes Store).[1] There are three areas of e-
commerce: online retailing, electronic markets, and online auctions. E-commerce is
supported by electronic business.[2]
E-commerce businesses may also employ some or all of the following:

 Online shopping for retail sales direct to consumers via web sites and mobile
apps, and conversational commerce via live chat, chatbots, and voice assistants;[3]
 Providing or participating in online marketplaces, which process third-
party business-to-consumer (B2C) or consumer-to-consumer (C2C) sales;
 Business-to-business (B2B) buying and selling;[4]
 Gathering and using demographic data through web contacts and social media;
 B2B electronic data interchange;
 Marketing to prospective and established customers by e-mail or fax (for
example, with newsletters);
 Engaging in pretail for launching new products and services;
 Online financial exchanges for currency exchanges or trading purposes.

“E-commerce (electronic commerce) is the buying and selling of goods and services, or
the transmitting of funds or data, over an electronic network, primarily the
internet”.
E-commerce means using the Internet and the web for business transactions and/or
commercial transactions, which typically involve the exchange of value (e.g., money)
across organizational or individual boundaries in return for products and services.

Features of E-commerce :
Following figure shows the features of electronic commerce :
1) Ubiquity :
E-commerce is widespread, that is, it is available everywhere always. It sets free market from
being restricted to a physical space and makes it possible to shop from computer (such as
desktop, laptop). The result is called a market space.
For consumers, ubiquity cuts transaction costs for exploring products in a market. Consumers
can acquire any information whenever and wherever they want, regardless of their location. It
is no longer necessary that buyer spend time and money for traveling to a market. In all, it
saves the cognitive energy needed to transect in a market space.

2) Global Reach :
E-commerce technologies enable a business to easily reach across geographic boundaries
around the earth far more conveniently and effectively as compared to traditional commerce.
Globally, companies are acquiring greater profits and business results by expanding their
business with e-commerce solutions. As a result, the potential market size for e-commerce
merchants is approximately equal to size of online population.

3) Universal Standards :
Universal Standards are standards shared by all the nations around world. These are technical
standards of Internet for conducting e-commerce. It gives all the ability to connect at the
same "level" and it provides network externalities that will benefit everyone. Universal
technical standards lower entry costs and minimal search costs.

4) Interactivity :
E-commerce technologies permits two-way communication between customer and sellers
which makes it interactive. It proves as significant feature of e-commerce technology over the
commercial traditional technologies of the 20th century.

5) Information Density :
Information density means total amount and quality of information available over Internet to
all market buyers and sellers. Internet vastly increases information density. Information
density offers better quality information to consumer and merchants. E-commerce
technologies increase accuracy and timeliness of information. For example, flipkart.com store
has variety of products with prices.

6) Richness :
Richness refers to the complexity and content of a message. Richness means all commercial
activity and experience, conducted through a variety of messages. For example, text, pictures,
videos, sound, links, SMS (Short Message Services) etc.

7) Personalisation :
E-commerce technology offers personalisation. Personalisation means designing marketing
messages according to particular individuals by customising it as per customer personal
details like name, interests, and past purchases record. Products or services can be modified
or altered according to the user's choice or past buying record.

Advantages of E-Commerce :
The advantages/benefits of e-commerce can be divided into two categories :

A) Advantages to Customers -

1) Reduced Prices :
The products available on websites have reduced prices because the different stages of value
chain are decreased between source and destination. The intermediaries such as retail store
are eliminated by the company and they sell their products to consumer directly instead of
distributing through intermediaries.

2) Global Marketplace :
E-commerce provides global marketplace from where consumers can purchase products
according to their needs situated anywhere in the world.
According to World Trade Organization (WTO), "there are no custom duties put on
products bought and traded globally electronically".
Global Marketplace also provides large collection of products and services to consumers
With their prices.

3) Anytime Access :
Online businesses are open 24 hours, 7 day a week and 365 days in a year and never sleep.
Consumers can do transactions and enquiry about any product/services provided by company
at anytime and anywhere from globe. Consumer can purchase any product in day or night
using Internet connections and computer at single click of mouse.

4) More Choices :
Online businesses provide their consumers more choices of purchasing. Before purchasing
any product, consumer can study products and their features of all major brands.

5) Quicker Delivery :
E-Commerce offers consumer more options and provides quicker delivery of products and
services. Some e-commerce company provides free home delivery service to their consumers.
6) Relevant Information :
E-commerce provides relevant and detailed information about products and services within
seconds to its consumers. Consumer can compare products and their prices in easy manner.
B) Advantages to Businesses :

1) Low Barriers to Entries :

In today's world, small and large firms have opportunities to start up and conduct business on
the Internet. Firms entry cost to the Internet is minuscule (Very small) because they do not
need the space for rent. All the business over Internet are virtual means that there is no need
of large number of employees to conduct business.

2) Increased Potential Market Share :

Businesses are increasing their market share by making their business internet enabled.
Online businesses are accessed at any time to international markets.

3) Low-Cost Advertising :
Internet provides low cost advertisement as compared to advertisement on newspapers or
television. In today's world, Internet has become inexpensive advertising medium used by
firms for commerce. The different methods of advertising are : e-mail, banners, pop-ups,
steaming video and audio etc.

4) Strategic Benefit :
E-commerce enabled business have many strategic benefits because they :
a) Reduces cost of mail preparation, document preparation and data entry.
b) Finds errors easily.
c) Lowers cost of calling over telephone.
d) Lowers delivery time and labour costs.
e) Lowers data entry and management expenses.

5) Global Reach :
E-commerce enabled business has ability to reach globally at low cost. They are able send
messages world-wide at any time. Since online businesses are globally accessed so e-
commerce helps to attract new consumers and business clients from anywhere in the world.

Disadvantages of E-Commerce :

The disadvantages/limitations of e-commerce can be divided into two categories :

A) Technical Disadvantages -

1) Lack of Security :
Consumer needs to be confident and trust over e-commerce payment providers. Any fraud,
hacking or forgery can break the trust of consumer.

2) Low Bandwidth :
In many countries, network might cause an issue because of low bandwidth.

3) Difficulty in Integrating E-Commerce :

It is difficult to integrate e-commerce software or website with the some existing applications
and databases. Vendors need special web servers to, deal with integration problem in addition
to network servers.

4) Not All Customers have Access to Internet :

Internet access is not universally available so much of the effort made does not actually reach
the consumer. Many potential customers that are living in remote villages have not Internet
access facility.
B) Non-Technical Disadvantages -

1) Initial Cost :
The initial cost to develop e-commerce web site in-house is very high. This may need high
cost of hiring qualified staff to maintain and updating e-commerce web site. There are also
companies have opportunities for outsourcing e-commerce to other e-commerce companies.
But where and how to do outsourcing is a difficult task.

2) Security and Privacy :

The major issues in online businesses are security and privacy. Customers feel hesitant to
disclose credit card numbers over Internet because of security problems such as theft of credit
card number. If consumers do not have any confidence on the online business, they will
refuse to purchase anything over the Internet.

3) Lack of Trust and User Resistance :

Face-to-face contact and paper transactions are important in business deals and transactions
since it is related to trust. So for any consumer switching from physical to online stores is
difficult.

4) Lack of Touch and Feel :

Consumers may want to touch and feel a product before purchasing online. Online businesses
do, not provide the touch and feel experience to consumer on items such as clothes, shoes etc.
5) Customers Relation Problems :
Organisation needs loyal customers to run their online business for long time. Online
businesses cannot continue without loyal customers in today's competition.

6) Corporate Vulnerability :
Online businesses have high availability of information related to product, price, catalogs,
and others. This information makes web sites vulnerable to access by competition. This
process of extracting business intelligence from competitor's web pages is called Web
farming.

7) Legal Issues :
When buyers and sellers do not know each other, there is, chance'of fraud over the Internet.
Hence there are many legal problems related to e-commerce. Some common legal issues
encountered in e commerce are :

a) Software and Copyright Violations

b) Credit Card-Fraud and Stolen Identities
c) Illegal Bargains and Criminal Law

Ecommerce Challenges

By 2040, it is estimated that 95% of purchases will be made online, so now is the right time
for retailers to face ecommerce challenges & find solutions for them. With consumers
increasingly relying on online shopping, e-commerce is opening doors of opportunity to
many entrepreneurs.
Furthermore, those ecommerce sale opportunities are growing at a rapid rate. However, as we
all know, there’s no rose without a thorn!

10 Biggest Ecommerce Challenges in 2022

1. Cyber & Data Security

When it comes to eCommerce, one of the biggest challenges faced is security breaches. There
is a lot of information/data that is involved while dealing with eCommerce and a technical
issue with data can cause severe damage to the retailer’s daily operations as well as brand
image.

2. Online Identity Verification

When a shopper visits an eCommerce site, how would the retailer know if the person is who
they say they are? Is the shopper entering accurate information? Is the shopper genuinely
interested in the eCommerce products?

If you do not have the accurate details or information, how do you proceed? Well, it does
become tricky. The solution would be to invest in online identity verification.
3. Attracting the Perfect Customer
Shoppers have a myriad of options to choose from these days. If they are looking to buy a
handbag, they do some thorough research before finalizing on one. If shoppers have several
options, how do you make sure they pick you? How do you go about finding that perfect
customer that wants your product, at your rate and to the places you can ship?

4. Customer Experience

Customer experience or user experience is key to a successful eCommerce website. Shoppers

expect a similar if not same experience as one they would get in a brick and mortar store. The
flow of the website, the segmentation of the website and the retail personalization of products
based on the shopper’s preferences are imperative.
5. Customer Loyalty
Here are two facts that show the importance of customer loyalty: (a) It can cost up to 5 times
more to acquire a new customer than retaining an existing one and (b) the success rate of
selling to a current customer is 60-70% compared to only 5-20% success rate of selling to a
new customer.

The above two facts are testament to how important customer retention or loyalty is. Once a
customer makes a purchase or utilizes a service from a retailer, they have to make sure that
they keep this customer for life. But how is this possible?

6. Converting Shoppers into Paying Customers

One of the biggest ecommerce challenges is to convert visitors into paying customers. An
eCommerce website might have a lot of traffic, a lot of clicks and impressions but they aren’t
making the sales they anticipated. What can they do to get more sales?
7. Competition & Competitor Analysis
Have you heard of a Jam Experiment? Well it has quite a controversial conclusion, which is –
the less you offer customers the more likely they are to actually purchase something. A lot of
people these days are fatigued by all the options that are out there. A simple search for
something like headphones will give you thousands of options – how does one make a
choice?
8. Price & Shipping
We have all heard of customers that prefer to purchase products from places that have free
shipping. eCommerce giants like Amazon provide such attractive shipping deals that
customers seldom want to look at other places. How does one bring down costs for shipping?

9. Product Return & Refund Policies

According to ComScore, more than 60% of online shoppers say that they look at a retailer’s
return policy before making a purchase. When an eCommerce site says “no returns or
refunds” it makes a shopper nervous and less likely to trust the retailer. When shopping
online, customers want the flexibility of making a mistake that doesn’t cost them.

10. Choosing the Right Technology/Partners To Fix Your eCommerce Challenges

Choosing the right technology or partner will make or break your business. A retailer’s
growth might be stunted because their technology is limiting them or because they have hired
the wrong agency to help them manage their projects.

There are a lot of aspects that need to be in place for a successful retail business, but a good
technology foundation is crucial.
E-Commerce – Electronic E-Commerce and the Trade Cycle
The e-Commerce Trade Cycle:
 A trade cycle is the series of exchanges, between a customer and supplier, that take
place when a commercial exchange is executed. A general trade cycle consists of:
Pre-Sales: Finding a supplier and agreeing the terms.
Execution: Selecting goods and taking delivery.
Settlement: Invoice (if any) and payment.
After-Sales: Following up complaints or providing maintenance.
 For business-to-business transactions the trade cycle typically involves the provision
of credit with execution preceding settlement whereas in consumer-to-business these
two steps are typically co-incident. The nature of the trade cycle can indicate the e-
Commerce technology most suited to the exchange.
 Commercial transactions that are repeated on a regular basis, such as supermarkets
replenishing their shelves, is one category of trade cycle. EDI is the e-Commerce
technology appropriate to these exchanges, see Figure 1

 Consumer transactions tend to be once-off (or at least vary each time) and payment is
made at the time of the order.Internet e-Commerce is the technology for these
exchanges, see Figure 2.
  The third generic trade cycle is the non-repeating commercial trade cycle and Internet
e-Commerce or an electronic market is the appropriate e-technology.

E-Commerce –E-Commerce in perspective

Let’s see how Electronic Commerce (EC) is defined under each perspective.

1. Communications Perspective

EC is the delivery of information, products /services, or payments over the telephone lines,
computer networks or any other electronic means.

2. Business Process Perspective

EC is the application of technology toward the automation of business transactions and work
flow.

3. Service Perspective

EC is a tool that addresses the desire of firms, consumers, and management to cut service
costs while improving the quality of goods and increasing the speed of service delivery.

4. Online Perspective

EC provides the capability of buying and selling products and information on the internet and
other online se
 Supply Chain Management in E-commerce

eCommerce supply chain management includes managing the flow of information,

resources and funds among the different entities and stages of the eCommerce supply
chain, from the supply of raw materials to the delivery of finished products to the
buyer.
The entities in the supply chain include the suppliers, producers, vendors, warehouses,
logistics and transportation companies, distribution and fulfillment centers and the end
buyer. Each entity controls a particular link in the supply chain and contributes to your
overall success or failure in meeting your customers’ expectations

What is a Supply Chain?

Consumers today utilize products/services more than ever and everything and everyone that
is involved in getting those services and products to the consumers go into a supply chain.
These include resources, a system of activities, organizations, information, and the people
involved.

Let’s understand this with a simple example. Consider fresh apples! For these apples to arrive
at your breakfast table, a plethora of activities, transactions, and people are in the motion at
the backdrop. All these are connected through the internal chain and are involved in planting,
cultivating, delivering, and consuming apples. The internal chain connecting people,
establishments, and activities ensures a timely delivery of apples to your doorstep.

Besides the proper flow of physical products like apples, a well-structured works the same
way while availing virtual elements such as information and communication.

What You Need to Know About eCommerce Supply Chain Management

To succeed as an eCommerce merchant or manager, you need more than an amazing website
and a large product catalog. You need a system that enables you to get your products to your
customers as ordered, in record time and at minimal cost, without compromising quality or
integrity. This is where eCommerce supply chain management (SCM) comes in.

Due to the mass movement of physical stores and manufacturers online, eCommerce has
become a very competitive landscape. To thrive, you need to meet your customers’ ever-
changing expectations while remaining profitable.

Your customers now have more buying options and alternatives than ever before. You need
an established, proactive and effective supply chain management strategy to set your
eCommerce brand apart, retain a sizable portion of your market, increase profitability and
improve the customer experience.

These days, 56% of young consumers and 80% of all shoppers expect same-day delivery for
their online purchases. You can’t meet these expectations without a fail-proof and advanced
supply chain system that ensures you have the needed inventory and logistics.

This article covers the things to know about eCommerce supply chain management, including
how it works, its benefits, how to optimize your eCommerce supply chain strategy, and
eCommerce supply chain management best practices.

What Is eCommerce Supply Chain Management?

eCommerce supply chain management includes managing the flow of information, resources
and funds among the different entities and stages of the eCommerce supply chain, from the
supply of raw materials to the delivery of finished products to the buyer.

The entities in the supply chain include the suppliers, producers, vendors, warehouses,
logistics and transportation companies, distribution and fulfillment centers and the end buyer.
Each entity controls a particular link in the supply chain and contributes to your overall
success or failure in meeting your customers’ expectations.

So how do you manage supply chain operations in the eCommerce industry?

 How eCommerce Supply Chain Management Works

The eCommerce supply chain starts with the supplier and ends with the final consumer — the
most important part of your supply chain.

Here’s how the eCommerce supply chain works. Along the value chain, product flows from
the supplier to the end consumer. Cash flows from the end consumer to the supplier, and
information flows in both directions. The manufacturer converts the raw materials from the
supplier to the finished product, which is transported to the warehouse, fulfillment centers
and finally to the end consumer who placed an order.

Supply chain management systems have evolved from manual and traditional SCM systems
to integrated systems using enterprise resource planning (ERP) software solutions and
artificial intelligence to improve efficiency and speed at every stage of the supply chain.

There are five stages in eCommerce supply chain management.

 Planning: In the planning stage, you collect data on your supply chain to determine the
inventory needed to meet your customers’ and market demands.

 Sourcing: In this stage, you search for vendors, suppliers and manufacturers that can provide
the inventory needed to meet your customers’ demands.

 Making: This stage involves converting raw materials into finished products then testing,
packaging and storing them for delivery to the end customers.

 Delivering: This stage is also called logistics. It involves every form of movement of goods
along the chain to the end consumer.

 Handling returns: Also known as reverse logistics, this stage involves processing returned
goods from your customers and returning defective and expired products from your
warehouse to your supplier.
Each stage of the supply chain management system contributes to the overall efficiency of the
supply chain. An improvement or dysfunction in one stage ripples through the entire chain.
 Benefits of Supply Chain Management in the eCommerce Industry

Here are eight benefits for optimizing your supply chain management system:

 Transparent operation: An optimized SCM system provides visibility and real-time data on
your entire supply chain, making it easy to identify the cracks and bottlenecks in your supply
chain.

 Reduced cost of operation: An efficient SCM system ensures the accurate product gets to
your customers. This reduces the cost incurred in processing returns and the loss of sales that
it may lead to.

 Reduced delays: Especially in logistics, an efficient supply chain system ensures strategic
positioning of vendors and warehouses to provide quick response and delivery to your
customers. This increases your customers’ trust and satisfaction in your brand and leads to
more revenue for your business.

 Effective multi-channel selling: With visibility into your supply chain, you can sell to
customers where they already are and effectively combine different vendors, warehouses and
fulfillment centers.

 Accurate forecasting: Transparency provides real-time data on your customers’ needs, your
warehouse’s capacity, product life cycles and the capacity of your logistics. This data enables
more accurate forecasting of your customers’ demands so you can proactively procure the
inventory needed to meet these demands. Without loss of revenue due to understocking or
wastage due to overstocking. A phenomenon called the bullwhip effect.

 Quicker response to fluctuations: Efficient supply chain management establishes a clear

line of communication between entities in the supply chain. This transparent communication
between vendors, manufacturers, dealers, producers and suppliers enables proactive
responses to fluctuations and changes in demand.
 Constant stock availability and high service level: An effective eCommerce supply chain
ensures you always have the inventory to meet your customers’ demands and maintain a high
service level.

 Expansion of your market: A well-established SCM system makes entering into a new
market seamless and easy.
On the flip side, the absence of an established eCommerce supply chain system presents a lot
of challenges to your business. For example, the lack of visibility, clear communication and
accurate forecasting can lead to a loss in revenue, reduced customer satisfaction due to
delayed or inaccurate fulfillment of orders, unavailability of inventory to meet increasing
customer demands and inefficient multi-channel selling and order fulfillment.

What is the Porter’s value chain?

The Porter’s value chain concept says that there is a chain of events which occur in a
company right from the procurement of raw materials to the delivery of goods as well as the
post sales service.

This chain is made up of 9 steps and the process can be changed in any of the nine steps to
add further value to the final product. The value chain model can be
a reference for Holistic marketing. If a company wants to add customer value in all the
processes that it does, it has to refer to the Value Chain.

The Value-chain of michael porter comprises of total 9 steps

The first 5 are the primary activities which are the basics in any company and are the
activities which provide strength and sustainability to the company. The remaining 4 are the
support activities or also known as the secondary activities and these are used by the
company for differentiation as well as maintenance of the organization. Both, the primary as
well as the secondary activities are necessary for the firm to survive.
Overall, we will discuss the primary activities and the secondary activities in relation to each
other.

Primary activities of Porters Value chain

1) Inbound logistics
Bring raw material from source to the company. The value chain can be enhanced in this step
by improving the quality of raw material as well as optimizing the cost of inbound logistics.

2) Operations
Converting the raw material to finished goods is the job of Operations. The customer value is
increased majorly in this step if the operations are up to mark and the product is
manufactured in the right manner and meets quality standards. You can take example of
Television or Air conditioners to understand the importance of Operations and manufacturing
in the Value chain.

3) Outbound logistics

Sending finished goods from manufacturing point to distributors and retailers. The value
chain receives a boost if the out bound logistic activities are carried out in time with optimal
costs and the product is delivered to end customers with minimum affect to the quality of the
product. Food products can be an example of how value can be added during outbound
logistics by delivering product on time with best quality.

4) Marketing and sales

The marketing and sales apply push as well as pull strategy to increase the sales of the
product. The company exists to make profits and if profits can be increased by marketing and
sales, than the company has to use these tools. However, marketing needs to be done in the
right manner to build brand equity and sales should be done in the proper channel without
any false commitments given to customers to add value to the end product and the brand.

5) Service
The post sales service is the most important because it directly affects the word of
mouth publicity of the product. If the service is not upto mark, no one will buy the product
and the brand will lose market share and may be taken out of the market eventually. Thus
service is very important in the Porters value chain.

Secondary activities involved in the Value chain are as follows

6) Procurement
The management of vendors and the procurement of the raw material on a timely basis is
where procurement comes in.

7) Technology development
No product can survive if the company does not keep it updated as per the latest technology.

8) Human resource management

The right people in the right place can make all the difference for the company and hence the
HR department is a support activity most important for the firm.

9) Firm infrastructure
Without a proper infrastructure, and lack of government handling or legal support, a firm
might face a big hurdle. Similarly, administration department will help in maintenance of the
facilities in a firm.

The secondary activities like Technology and the right people are the elements which add
differentiation for the company. Samsung proved that Technology can destroy a big
competitor like Nokia. Similarly, Southeast airlines proves that people are important to a
company and that you can be the most favored airline because of the people in your
organization.

PEOPLE
POOR

PERFORMANCE

POWERFULL
PRODUCTIVITY

PROFIT
Above is an image of Michael porter who presented the concept of Value chain. Porter has
suggested many ground breaking strategic concepts like Porters five forces, competitive
strategy, and others. In the new marketing era, with the rise of retail and e-commerce,
companies have realized that your value chain will be further strengthened if you have better
co-ordination between all departments. Thus, the concept of holistic marketing will further
strengthen your value chain.

E-Commerce Formulation and Implementation

Following are the main differences between Strategy Formulation and Strategy Implementation-

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning and decision-making Strategy Implementation involves all those means related to
involved in developing organization’s strategic goals and executing the strategic plans.
plans.

In short, Strategy Formulation is placing the Forces before In short, Strategy Implementation is managing forces during
the action. the action.

Strategy Formulation is an Entrepreneurial Activity based on Strategic Implementation is mainly an Administrative

strategic decision-making. Task based on strategic and operational decisions.

Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.

Strategy Formulation is a rational process. Strategy Implementation is basically an operational process.

Strategy Formulation requires co-ordination among few Strategy Implementation requires co-ordination among many
individuals. individuals.

Strategy Formulation requires a great deal of initiative and Strategy Implementation requires specific motivational and
logical skills. leadership traits.

Strategic Formulation precedes Strategy Implementation. STrategy Implementation follows Strategy Formulation.

Strategy Evaluation Process and its

Significance
Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the
comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current
strategy in todays dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final
phase of strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups,
departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as -
developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic
management process, judging the validity of strategic choice etc.

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what
benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to
be set, it is essential to discover the special requirements for perf orming the main task. The performance indicator
that best identify and express the special requirements might then be determined to be used for evaluation. The
organization can use both quantitative and qualitative criteria for comprehensive assessment of performance.
Quantitative criteria includes determination of net profit, ROI, earning per share, cost of production, rate of employee
turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies,
risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to
be compared. The reporting and communication system help in measuring the performance. If appropriate means
are available for measuring the performance and if the standards are set in the right manner, strategy evaluation
becomes easier. But various factors such as managers contribution are difficult to measure. Similarly divisional
performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must
be created against which measurement of performance can be done. The measurement must be done at right time
else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet,
profit and loss account must be prepared on an annual basis.
3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there
may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between
which the variance between actual and standard performance may be accepted. The positive deviation indicates a
better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern
because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation
and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to plan for a corrective
action. If the performance is consistently less than the desired performance, the strategists must carry a detailed
analysis of the factors responsible for such performance. If the strategists discover that the organizational potential
does not match with the performance requirements, then the standards must be lowered. Another rare and drastic
corrective action is reformulating the strategy which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and consequent means going to the beginning point of
strategic management process.

A 7-Step Framework for Successful Ecommerce Implementation

Suc cessf ul impleme ntatio n of any ecommerce business is dependent on implementing or

adopting the se seve n key steps:

 Planning for eC omm erce Business

 Techn ology S election/W ebsite Audit & Analysis
 Customer Acquisition
 Customer Eng ag em ent
  Customer Ret ention
 Optimizing K ey M etrics, and
 Business Analysis & Custom er Insights

Each of these steps has a positive and cascading effect on the other steps and henc e implem enting
each of them in the right priority and in a phas ed manner is of utmost importance.

For an e-comm erce business to get the maximum ROI on their investment, it is the execution of these 7
steps arou nd the 4 core pillars that will be your mantra f or success!

1. Strategic busine ss pla nning and roadmaps – Strategy is about making the right choices that will
help reach the stated busin ess obj ectives.

Th ere should to be a clear cut vision, mission and obj ective about what will be achieved, in how much
time, within what budg et, identification of the right resources for and constraints in the face of
execution of the strategy m ention ed in the business plan, and what elem ents will be considered for
roadm ap.

Kn owled g e an d deep und erstanding of the digital m arketing tools and techniques that will help in
reaching and acquiring customers is required. Your business must reach out to customers who are
on lin e across multiple dim ensions and d evic es.

So, the assumptions consider ed in prep aring the strategic busines s plan should be in alignm ent with
the ec omm erce industry’s norms and trends.

2. Technology selection/ w ebsite audit and analysis – In order to provide the maximum benefit to the
en d customer, your chosen ec omm erce technology should be fully capable of being customizable, and
be able t o complem ent the busin ess mod el, and adher e to the existing best practices in offline retail.

If you’re a retailer taking the first -time plunge int o ec om merce, various functionalities on the e -
comm erce website shou ld b e carefully thought over based on the industry, audience being targeted,
various customer segm ents who may b e buying the offered products and services.

W ith respect to retailer s who have imp lem ent ed an ec ommerce strategy and have not yet received the
rew ards of the complete cap ability of the ecomm erce technologies, there needs be a complet e
assessment of how the websit e can perform better by exam ining the store front and custome r flow,
an alysis of comp eting w ebsites, identification and implement ation of solutions bas ed on the gap
an alysis carried out (‘as -is’ and ‘to-be’). It is equally important to measure and monit or the process that
was mad e b ec ause of the implem entation of th e suggested changes.

3. Customer acquisitio n – Onlin e or popular digit al m arketing enc ompasses multiple tools for reaching
out to the new g en er ation of custom ers, who are actively engaged in using multiple devices, through
search engin e optimization, search engin e marketing (paid advertisement that includes both cost per
click and cost per thousan d impressions), social media marketing (that includes both cost per click and
cost per thousand impressions), email campaigns, display advertisem ents using vario us ad networks,
referral progr ams and re-targeting camp aigns.
Going by the sales principles of AIDA (awar eness, interest, desire and action), it’s important to note
that the cost of customer acquisition will b e very high for brands and retailers that are n ewly
establishing their product offerings exclusively online.

How ever, for brands that are well established offline and are pursuing ecomm erce strategy, the cost of
customer acquisition is lesser comp ared to the new entrants.

4. Customer engagem e nt – Customers these days are actively seeking to engage with brands to
und erstand the core ben efits and uniqu e value proposition that the brand offers, discount and offers
during s pecial seas ons, a robust support mechanism for queries/clarifications regarding the products
displayed and inter action with customer support executives to know more about policies on returns and
exch ang e, etc.

Eng agin g customers through various social medi a channels also instills superior trust in the minds of
customers.

5. Customer retention –W ith the advent of sophisticated e-comm erce technologies, new age ret ailers
will b e able to lever ag e an alm ost on e-to-one custom er experience and that’s the best a custom er can
really exp ect.

How ever, it should b e n oted th at to fully leverage best -in-class technology, there needs to be a
constant effort to look out for features an d functionalities that will enhanc e the custom er experience.

6. Optimization based on key metrics – Some of the key m etrics to measure the health of an
ec omm erce venture are th e total revenu e gener ated, cost of customer acquisition, % of custom ers
converted, and % of customers entering the w ebsite through various channels.

How ever, these m etrics may vary significantly based on the business obj ectives and so every business
needs a fully customized ap proach for defining the key metrics and further analysis.

Once these are d efin ed and ther e ar e a substantial num ber of customers visiting the web site, a deeper
level of optimization is need ed at 2 levels – on the technology and the business front.

 Tec hnolo gy – This gen erally includ es optimizing the page load speed, shopping cart, check -out
an d other web p ag es, a/b and multivariat e testing, etc. Creating unique and w ell -researched blog
content, refining the titles & head ings in the content, and using engaging met a descriptions are
oth er ways to attract organic traffic to your website. Learn more about Search Engine
Optimization h ere.
 Bus iness – Optimization h ere includ es analys is of the tot al revenues gener ated, total spends for
running the e-comm erce op erations, optimizing the gross net margins, conversion rates from each
of the various chann els, custom er loyalty and retention rat es, rate of repeat purchase, frequency
of rep eat customers (across multiple dim ensions), % of carts abandoned, etc.
 Th ere are a lot of features and functionalities to helping online ret ailers improve thes e numbers.
Th ere is a lot of research evid enc e supporting the incorpor ation of features like reviews and
ratings, and display of the right products either through up -selling or cross-selling.
  Bas ed on the statistics, 47% of shoppers read product reviews prior to their online purchases and
63% are m ore lik ely to buy from websites with online r eviews or ra tings [1]. Similarly, online
comp anies that lever ag e a recomm endation system can increas e sales by 8 -10%.

7. Business analysis and customer ins ig hts – The final step in the entire proc ess is about fine -tuning
an d und erstanding the product categ ories that have perform ed well compar ed to other products
displayed in the w ebstore. Assessing this is crucial since each of these categories and pro ducts within
those categ ories occupy the prime real estate in the online w orld – the web store.

 It also should consist of understanding the custom er segments, demographics, profitable

customers, source of chann els through which the profitable customers cam e to the web store, %
of revenu e each profitable customer contributes to and the m arketing spends that has gone into
acquiring thes e customers.
 Th ese metrics are only a small repr esent ation of a larger list that can be optimized further. These
metrics vary based on the busin ess needs and require a customized appr oach for defining,
mon itoring and optimization.

In tod ay’s “comp et e hard or perish” environm ent a holistic e -commerce strategy, if planned and
execut ed well, can be an imp ortant means of bolstering revenues, increasing brand aw areness,
provid ing b est in class support and shopping experience to the new generation of customers.

Th e successful implem ent ation of an e-comm erce strategy helps in gaining a competitive edge over the
existing competitors, no matter whether they ar e online or offline.

It’s evid ent: a clear winn er in the gam e of e-comm erce pow er play will be one who understands the role
of deep integr ation of these 4 core pillars along with the importanc e of executing a 7 step appr oac h
ar ound thes e pillars.