E-business

E-business is short for “elec­tron­ic business.” As an over­ar­ch­ing term, it refers to any method of utilizing digital in­for­ma­tion and com­mu­ni­ca­tion tech­nolo­gies to support or stream­line business processes – from prepa­ra­tion to im­ple­men­ta­tion. However, it can also refer more specif­i­cal­ly to the business processes of online stores or other internet-based companies.

These two slightly different in­ter­pre­ta­tions of the term have led to a problem: a widely accepted, precise de­f­i­n­i­tion of e-business does not yet exist. As a result, it’s in­ter­pret­ed broadly, and is commonly mis­un­der­stood – mainly in relation to e-commerce. Although there is some overlap, e-commerce refers to trading products and services online, and so is strictly only speaking of one aspect of e-business.

The word e-business became popular following an IBM ad­ver­tis­ing campaign about com­put­er­ized pro­ce­dures to automate business processes. On October 7^th, 1997, the IT and con­sult­ing firm published an eight-page essay in the Wall Street Journal and used the term to describe how corporate systems would fun­da­men­tal­ly change in the digital era.

At the time, IBM un­der­stood e-business as “re­design­ing strategic business processes and meeting the chal­lenges of a new market in­creas­ing­ly char­ac­ter­ized by glob­al­iza­tion, and based on new knowledge.” Although the company wanted to present itself as an expert on this topic, they nev­er­the­less decided against patenting the term in the hope that other companies would engage with the concept and help to form a new industry.

The core com­po­nents of e-business are in­for­ma­tion, com­mu­ni­ca­tion, and trans­ac­tion. Business partners use digital networks (i.e. public or private com­mu­ni­ca­tion networks) to conduct business processes using in­no­v­a­tive tech­nolo­gies to improve ef­fi­cien­cy. Three key areas are par­tic­u­lar­ly important for e-business:

E-pro­cure­ment: the elec­tron­ic sourcing of products and services by companies, focused on reducing costs and effort.

Online stores: the elec­tron­ic sale of products and services via ap­pro­pri­ate platforms, such as online stores.

Online mar­ket­places: elec­tron­ic commerce via digital networks, con­nect­ing the buyers and suppliers of products and services.

There are also two further areas of e-business:

Online com­mu­ni­ties: elec­tron­ic com­mu­ni­ca­tion network between in­di­vid­u­als and or­ga­ni­za­tions, which supports data and knowledge sharing as well as the prepa­ra­tion of trans­ac­tion decisions.

Online companies: elec­tron­ic business co­op­er­a­tion for con­nect­ing in­di­vid­ual company services, resulting in a virtual business with a common trans­ac­tion offer.

To fully un­der­stand the concept of e-business, you must first grasp the link between e-business and the net economy and know who the typical market par­tic­i­pants are in the industry.

The range of e-business is de­ter­mined by the net economy. This refers to the com­mer­cial use of digital data networks for handling in­for­ma­tion, com­mu­ni­ca­tion, and trans­ac­tion processes via various platforms.

Since the late 90s, or even earlier, the de­vel­op­ment of dig­i­tal­iza­tion not only led to a major struc­tur­al change in society, but also in the economy. Since then, the focus has shifted to the in­for­ma­tion sector. The sys­tem­at­ic use of tech­nol­o­gy to collect and utilize in­for­ma­tion laid the foun­da­tions of a so-called “in­for­ma­tion economy,” in which com­pet­i­tive­ness is achieved through knowledge su­pe­ri­or­i­ty.

This section of the economy, known as the “net economy,” now exists in parallel with the tra­di­tion­al, “real economy.”

E-business can take place between a large number of market par­tic­i­pants: between busi­ness­es and consumers, various private in­di­vid­u­als, public ad­min­is­tra­tions, and other or­ga­ni­za­tions such as NGOs.

Generally speaking, these various market par­tic­i­pants can be divided into three distinct cat­e­gories:

• Business (B)
• Consumer/citizen (C)
• Ad­min­is­tra­tion (A)

All three cat­e­gories can play the role of either buyer or service provider within the market, meaning there are nine possible com­bi­na­tions for e-business re­la­tion­ships. Within this context, B2C and B2B belong to e-commerce, while A2B (ad­min­is­tra­tion-to-business) and A2A (ad­min­is­tra­tion-to-ad­min­is­tra­tion) are a part of the so-called e-gov­ern­ment sector (also a part of e-business).

The most important role of elec­tron­ic business is “elec­tron­ic value creation” – the gen­er­a­tion of elec­tron­ic added value. The forms of elec­tron­ic added value are usually dis­tin­guished in the following way:

• Struc­tur­ing value: an online offer achieves an overview of a large quantity of in­for­ma­tion
• Selection value: an online offer provides specific database in­for­ma­tion upon request
• Matching value: an online offer makes it possible to merge inquiries from supplier and buyers more ef­fi­cient­ly
• Trans­ac­tion value: an online offer makes a business more efficient
• Co­or­di­na­tion value: an online offer allows different providers to better combine their services
• Com­mu­ni­ca­tion value: an online offer improves com­mu­ni­ca­tion between different consumers

Depending on which type of value a company decides to pursue, they can choose one or more value ac­tiv­i­ties – for example the col­lec­tion, struc­tur­ing, pre-selection, summary, or dis­tri­b­u­tion of in­for­ma­tion. A so-called “digital in­for­ma­tion product” can also be created, offering added values which the customer is prepared to pay for. This in­for­ma­tion product may be a website, blog com­par­i­son portal, e-book, or a software ap­pli­ca­tion.

The elec­tron­ic value creation process involves the following steps:

• Col­lect­ing large quan­ti­ties of in­for­ma­tion to identify data relevant to the product
• Pro­cess­ing the in­for­ma­tion and trans­form­ing it into a product
• Trans­fer­ring the final in­for­ma­tion product to the customer
• Repeat this process whenever new in­for­ma­tion becomes available – in­for­ma­tion products are not static and must be kept up to date

Besides the gen­er­a­tion of elec­tron­ic added value, the various long-term goals of the e-business must be de­ter­mined, such as how best to automate com­mer­cial processes, or es­tab­lish­ing new business models (such as cutting out middlemen).

There are countless examples of different e-business ac­tiv­i­ties, but here is a brief selection.

The e-pro­cure­ment sector includes the following ac­tiv­i­ties:

• Organize the im­ple­men­ta­tion of a desktop pur­chas­ing system (DPS) that supports the whole pro­cure­ment process, such as checking stock avail­abil­i­ty and handle the order and payment
• Con­struct­ing and operating an online mar­ket­place for products and services
• In­te­grat­ing various elec­tron­ic supplier catalogs into your own en­ter­prise resource planning (ERP) system to support pro­cure­ment, warehouse man­age­ment, order pro­cess­ing, pro­duc­tion man­age­ment, and logistics

The e-commerce sector includes the following ac­tiv­i­ties:

• Designing and main­tain­ing an internet presence and/or an online store including: products or services ac­ces­si­ble from anywhere at all times, multiple payment options, automatic e-mail no­ti­fi­ca­tions on orders, and customer support (live chat, hotlines, or help centers)
• De­vel­op­ing and pro­vi­sion­ing ad­di­tion­al content, such as an in­for­ma­tion­al blog or com­par­i­son portal
• Expanding online marketing and targeting ad­ver­tis­ing to customers, for example by using big data from cookies, purchase behavior, and customer data

It’s worth noting that new tech­nolo­gies like the internet of things will likely increase the im­por­tance of other e-busi­ness­es not mentioned here.