It is useful to identify e-business opportunities in terms of whether an organisation is using the Internet to transact with consumers (business-to-consumer – B2C) or other businesses (business-to-business – B2B). Business-to-business transactions predominate over the Internet, in terms of value, if not frequency. Figure 5.7 helps explain why this is the case. It shows that there are many more opportunities for B2B transactions than B2C, both between an organisation and its suppliers, together with intermediaries, and through distributors such as agents and wholesalers with customers. Additionally there is a higher level of access to the Internet among businesses than among consumers, and a greater propensity to use it for purchasing. Table 5.5 gives examples of different companies operating in the business-to-consumer (B2C) and business-to-business (B2B) spheres and also presents transactions where consumers transact directly with consumers (C2C). It has been suggested that employees should be considered as a separate type of interaction through the use of intranets – this is sometimes referred to as employee-to-employee or E2E. Other types of transactions, suchas government, have also been defined.
The role of the Internet in restructuring business relationships
The role of the Internet in restructuring business relationships
The relationship between a company and its suppliers and customers shown in Figure 5.4 can be dramatically altered by the opportunities afforded by the Internet. This occurs because the Internet offers a means of bypassing some of the channel partners. This process is known as disintermediation or ‘cutting out the middleman.
Figure 5.8 illustrates disintermediation in a graphical form for a consumer distribution channel. Further intermediaries such as additional distributors may occur in a businessto- business market. Figure 5.8(a) shows the position where a company markets and sells it products by ‘pushing’ them through a sales channel. Figures 5.8(b)(c) and (d) show three different types of disintermediation in which the retailer (b), wholesaler (c) or the wholesaler and retailer (d) are bypassed, allowing the producer to sell and promote direct to the consumer. The benefits of disintermediation to the producer are clear – it is able to remove the sales and infrastructure cost of selling through the channel. Some of these cost savings can be passed on to the customer in the form of cost reductions.
At the start of business hype about the Internet in the mid-1990s there was much speculation that widespread disintermediation would see the failure of many intermediary companies as direct selling occurred. However, although sales at amazon.co.uk continue to increase this has not led to the demise of bookshops such as Waterstones. Disintermediation can be a powerful force however, for example the travel industry has seen a major shift from the use of travel agents offering packaged flight and hotel bookings to consumers dealing directly with flight providers (for example easyJet, RyanAir, Bmibaby, Jet2, British Airways) and to a lesser extent Internet-based hotel providers (for example www.shangri-la.com, www.hyatt.com).
At the start of business hype about the Internet in the mid-1990s there was much speculation that widespread disintermediation would see the failure of many intermediary companies as direct selling occurred. However, although sales at amazon.co.uk continue to increase this has not led to the demise of bookshops such as Waterstones. Disintermediation can be a powerful force however, for example the travel industry has seen a major shift from the use of travel agents offering packaged flight and hotel bookings to consumers dealing directly with flight providers (for example easyJet, RyanAir, Bmibaby, Jet2, British Airways) and to a lesser extent Internet-based hotel providers (for example www.shangri-la.com, www.hyatt.com).
In fact, although disintermediation has occurred, the creation of new intermediaries between customers and suppliers, termed re-intermediation, has also occurred. For example, in the travel industry sites such as Tripadvisor (www.tripadvisor.com) provide information regarding destinations and hotels and then provide links to hotel providers. What are the implications of re-intermediation for the e-commerce manager? First, it is necessary to make sure that your company, as a supplier, is represented with the new intermediaries operating within your chosen market sector. This implies the need to integrate, using the Internet, databases containing price information with those of different intermediaries. Secondly, it is important to monitor the prices of other suppliers within this sector (possibly by using the intermediary web site for this purpose). Thirdly, it may be appropriate to create your own intermediary, for example DIY chain B&Q has set up its own intermediary to help budding DIYers, but it is positioned separately from its owners.
Intranets and extranets
The majority of Internet services are available to any business or consumer that has access to the Internet. However, many e-business applications that access sensitive company information require access to be limited to favoured individuals or third parties. If information is limited to those inside an organisation, this is an intranet. If access is extended to some others, but not everyone beyond the organisation, this is an extranet. The relationship between these terms is illustrated in Figure 5.10. Extranets can be accessed by authorised people outside the company such as collaborators, suppliers or major customers, but information is not available to everyone with an Internet connection – only those with password access. Note that the term ‘intranet’ is sometimes loosely used to refer to an extranet.
Intranets and extranets
The majority of Internet services are available to any business or consumer that has access to the Internet. However, many e-business applications that access sensitive company information require access to be limited to favoured individuals or third parties. If information is limited to those inside an organisation, this is an intranet. If access is extended to some others, but not everyone beyond the organisation, this is an extranet. The relationship between these terms is illustrated in Figure 5.10. Extranets can be accessed by authorised people outside the company such as collaborators, suppliers or major customers, but information is not available to everyone with an Internet connection – only those with password access. Note that the term ‘intranet’ is sometimes loosely used to refer to an extranet.
Intranet applications
Intranets are used extensively for supporting the marketing function. They are also used to support core supply-chain management activities as described in the next section onextranets. A marketing intranet has the following advantages:
Intranets are used extensively for supporting the marketing function. They are also used to support core supply-chain management activities as described in the next section onextranets. A marketing intranet has the following advantages:
- reduced product lifecycles – as information on product development and marketing campaigns is rationalised we can get products to markets faster;
- reduced costs through higher productivity, and savings on hard copy;
- better customer service – responsive and personalised support with staff accessing customer information via the web
- distribution of information through remote offices nationally or globally. Intranets are also used for sharing these types of information
- staff phone directories;
- staff procedures or quality manuals;
- information for agents such as product specifications, current list and discounted prices, competitor information, factory schedules and stocking levels – all this information normally has to be updated frequently and can be costly;
Extranet applications
Extranets are used extensively to support supply chain management as resources are ordered from suppliers and transformed into products and services delivered to customers. To enable different applications within a company, such as a sales ordering system and an inventory control system that interoperate with each other and databases in other companies, requires an internal company intranet to be created that can then communicate across an extranet with applications on another company intranet. The case study ‘get control of your web site’ describes how the distinction between the locations of applications for intranets, extranets and public web sites in becoming smaller.
Firewalls
Firewalls are necessary when we are creating an intranet or extranet to ensure that outside access to the confidential information does not occur. Firewalls are usually created as software mounted on a separate server at the point where the company is connected to the Internet. Firewall software can then be configured to only accept links from trusted domains representing other offices in the company.
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