LitRev Sample 2

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______________________________________Staffordshire University

Assess the impact of Internet-based Electronic Businesson the corporate value chain

A Literature Review in partial fulfillment of the requirements for the degree ofMSc in Information Technology,

Staffordshire University

Name :

MSc ID :

Date :


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Assess the Impact of Electronic-Business on the corporate value-chain. Page 2


Table of Contents

1. Introduction.................................................................................................................32. Electronic Business and the Value Chain Model..........................................................4

3. Electronic Business .....................................................................................................53.1 Electronic Data Interchange (EDI) ........................................................................5

3.2 Internet-based Electronic Business........................................................................74. Electronic Commerce ................................................................................................10

4.1 Defining Electronic Commerce............................................................................ 104.2 The Benefits of Electronic Commerce..................................................................10

4.2.1 Resource Conservation..................................................................................104.2.2 Customer Relationship Management.............................................................11

4.2.3 Value-added Services....................................................................................114.2.4 Sales and Marketing that transcends geographical Limitations ......................12

4.2.5 Real-Time Inventory Management................................................................13

4.2.6 Logistics and Electronic Fulfillment.............................................................. 134.3 Limitations of Electronic Commerce....................................................................15

4.3.1 Implications on security ................................................................................15

4.3.2 Impact on labour and Employment Market....................................................155. Conclusion ................................................................................................................17

6. Appendix A...............................................................................................................187. References.................................................................................................................20


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1. Introduction

Electronic Business has been in existence since the 1960s and 1970s whenexpensive computers were used to communicate business information between

business partners and vendors using the Electronic Data Interchange documentstandard. Although, it has brought enormous benefits in terms of performance tothe core businesses such as cost, time and resource savings, these technologieswere only restricted to larger enterprises which could meet the start-up andmaintenance costs of such complex systems in addition to maintaining Value-added Networks.

The Personal Computer revolution in the late 1980s and early 1990s changedall that. The increasing rate of drop in the per unit processing power coupled withthe launch of the World Wide Web, has encouraged and spurred small andmedium enterprises(SMEs) to utilise the Internet as an alternative business

communication channel. The accessibility and the endless opportunities tocreatively use the Internet has since then brought many implications to theorganisations core business processes as like the EDI counterpart, the Internet-based Electronic Business too generate enormous benefits in terms ofperformance as well as provide greater value-added products and services.

Various business models have been used and there were attempts to assess theimpact the Internet-based electronic business on organisations and to utilise theresult in leveraging this technology to improve the organisations core processes.In this dissertation, the value chain model is used to achieve the above aim.

In this dissertation, the objectives are as follows: To assess the advantages and disadvantages of Internet-based electronic

business on organisations in the context of the value chain model andusing selected case studies from both international and domesticindustries.

To discuss prevailing issues surrounding electronic business poses toorganisations and possible solutions to these problems.

To evaluate different aspects of electronic business and the respectivebenefits and limitations using suitable metrics wherever appropriate.

To draw conclusions from case studies on issues that are industry-relatedand to discuss possibilities of further improving the organisation value

chain

In this literature review, Section 1 will provide a general description of the valuechain model concepts. Section 2 will deal with the evolvement of ElectronicBusiness through the Electronic Data Interchange and Section 3 will deal onInternet-based Electronic Business, a description of the components anddiscussion on Electronic Commerce, a front-end business component ofElectronic Business.


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2. Electronic Business and the Value Chain Model.

The concept of value chain was originally conceived by Michael E. Porter inresponse to the organisationss need to cope with increasing competition bothwithin and across industries. These competition could come in the form of threats

of new entrants, threats of substitute product and services and increasingbargaining power from the buyers and the suppliers as explained in the Portersfive forces model.(Porter M.E, 1985). Globalisation of economies and theincreasing usage of the Internet as a competitive tool has demandedorganisations to re-examine the core business processes and to look foropportunities to streamline and to even completely redesign the processes inresponse to stiff competition. The value chain thus serves not only as ananalytical tool but as a planning tool to improve organisations processes.

The objective of the value chain is to attempt to seek ways to maximise the valueof the activities which contributes to the final product or services by reducing or

eliminating the associated costs. The value chain recognises time as animportant value-determining factor.

The value chain is a systematic way of examining all the activities a firmperforms and how they interact (Porter M.E 1985). It is a generic model,applicable to all industries although some activities within the model could varydepending the nature of the industry.

The value chain comprises of the primary activities, support activities and themargin. While the primary activities are defined as the activities involved in thephysical creation of the product and its sale and transfer to the buyer as well as

after-sale assistance.(Porter, M.E 1985), there is also a virtual counterpart forproduct and services which are digitally created.The support activities supportthe primary activities and each other by providing purchased inputs, technologydevelopment, and human resources and various firm-wide functions(Porter, M.E1985). The margin refers to the difference in the total value-added activities andthe total associated costs.

It is based on the concept that processes can be strategically and technicallydisaggregated into activities, which could be in the form research anddevelopment, procurement, operations and sales and marketing activities.Electronic business refers to the primary as well as the support activities.

See appendix A for the full description of value chain model.


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3. Electronic Business

3.1 Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is electronic communication standard and it

refers to businesses, trading partners and vendors exchanging structuredbusiness messages from computer application to application on a virtual network(NIST, 2002).

EDI is actually a direct response to the organisations especially the enterprise-level players as means to communicate data between organisations instead ofrelying on the traditional telecommunication means such as the telephones,facsimile, postal services to deliver business data and information. With EDI, theorganisation were able to deliver orders much faster with less errors, improvingproductivity and relationships with suppliers, partners and customers. Also, theretends to be reduced administration time and improved flow of information.

EDI has the advantage over the postal system in terms of the performanceimprovements such as higher efficiency and productivity and increased reliabilityof communication of data. With EDI, data and information can be communicatedover to the target organisation using dial-up lines or pre-agreed private networkinterconnection with EDI VAN vendors, often within minutes although thedocuments sent are collected in batches on the recipient side while the postalsystem would inherently introduce delays due to excessive paperwork andbureaucratic processes and also the risk of data errors sent, hence causingfurther delays by resending data and information both on the part of theorganisation and the postal service.

Furthermore, EDI is a set of standards which proved to be inherentlyadvantageous. It standardises the data to be communicated to a set of dataformats that (NIST 2002)

were hardware-independent unambiguous such that they could be used by all trading partners reduced of labour-intensive tasks of exchanging data allowing the sender to have some form of acknowledgement and control

such as the knowledge if the data sent has been received by the intendedrecipient and the time of receipt.

Data exchanged using the EDI conforms to either on of the two widelyestablished standards namely X12 or the EDIFACT or Electronic DataInterchange for Administration, Commerce and Transport. A standard such asX12 is hierarchical in structure. During the transmission of data, the standarddefines that business data elements such as invoice number, weight, exchangerates etc. be aggregated and translated into several levels of structurally complexdata, each level containing control information in standard codes. These control


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information could contain information such as the number of purchase orders,requisition for quotation, each grouped logically, and according to targetedgeographical regions. Aggregation of data would continue until a final high levelcomplex data or final EDI document is produced, ready to be sent using suitabletransport communication protocol. At the receiving end, an EDI translator is

required to decipher the information in the reverse order, decomposing thestructure into several levels until to the level where actual data can be extractedand be used for real work and processing.

Due to proven reliability and relative efficiency and effective data communication,the enterprise-level players with existing EDI systems would not readily disposethe system in favour of the ubiquitous Internet. To date, enterprise-level playerssuch as Daimler-Chrysler AG and Boeing Inc. are still leveraging on the EDI andit is recently that Daimler-Chrysler AG collaborated with its trading partners insharing technical and design information through the virtual value chain. After all,these organisations have invested billions of dollars into these systems for

almost 3 decades and the technology still proved to be disposable for both thepresent and future needs of these organisations. The EDI setup is less complexsince there are few systems in the market hence there is less systeminteroperability issues.

One of the main disadvantages of EDI is the restriction of the usage of thistechnology to the upper-tier market players due to substantial start-up costs asthe initial investment includes purchase of restricted and usually expensivehardware. And the target organisation to which an organisation would wish tocommunicate with must have an equivalent set of corresponding equipment inaddition to separate network connection that is set up separately. If anorganisation wishes to correspond with 100 suppliers or vendors, the cost of setup will be enormously high. Furthermore, the running costs of maintaining thenetwork and cost of line rentals for leased line on which the Virtual PrivateNetwork is based is significant, driving the technology beyond the reach of manySmall Medium enterprises (SMEs). The fact that many Value-Added Resellerswho markets the products further drive the costs higher.

Furthermore, from the technical perspective, data transmitted using the privatenetworks requires a translator software as the EDI document data are notdesigned human readable i.e. in order to obtain meaningful data, an EDItranslator is essential.

There have been attempts to integrate the Internet with the EDI to become whatis known as the Internet-EDI. Traditionally, the EDI systems promotes a hub andspoke relationship with its trading partners, often the hub companies dictating theterms of trade in their favour. The Internet-EDI attempts to rectify this skewedimbalance in this trading relationship. Furthermore, Internet-EDI is cheapercompared to the traditional EDI systems. Tandem Computer (Wilde, 1997)estimated the cost of EDI system is about USD10 000 while the correspondingInternet-EDI system costs between USD 650 -1000 i.e. 90% of cost savings or


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organisations comprises of mainly enterprise-level companies due to the highcost factor. Some of the prominent manufacturing and assembly organisationssuch as Boeing stood to gain millions of dollars of cost-savings as a result ofincreased efficiency and productivity.

Electronic Business comprises of sell-side electronic commerce, electronicmarketplace, electronic procurement and electronic collaboration and here weassume that the components of Electronic Business are Internet-based.

The late 1980s and early 1990s saw a boom in the sale of personalcomputers(PC) in what was know as the PC revolution as a result of thesignificant decrease of cost per unit processing power, rendering the use ofmachines it virtually accessible to all businesses of all scale. The PC industryduring this period formed the largest computer hardware market segment.

According to International Data Corporation, 113 million units of PC were shippedworldwide in 1999 worthed $190 billion. (Kuglin, F. A. and Rosenbaum, B. A.

2001).

Furthermore, the introduction of the World Wide Web prototype in 1990, thelifting of restriction on commercial use of the Web and introduction of the clientbrowsers such as Mosaic and Netscape in 1993 and 1994 respectively haveaccelerated the number of Internet uses online. While in 1991, the Internet has 3million users around the world with virtually few transactional activities, by 1999,there was an estimated 250 million if users accessing the Internet and at least25% of the figure made online purchases for both business and consumers.(Coppen, J., 2000).

And the number of Internet hosts or servers are correspondingly increasing.According to IBM, every month there are 53 000 new servers, engines ofelectronic business, connected to the Internet. That is 1.2 server connected perminute( Turban, E. et al. 2000). It is clear that there is a sizeable global marketto be tapped and particular more so for business to business commerceactivities. The main global electronic commerce activities mainly take placebetween businesses and business to business electronic commerce is projectedto grow more rapidly than the business to consumer model due to migration fromtraditional EDI systems to Internet and the disintermediation of channels anddealing direct with suppliers. (Coppen, J. ,2000).

Out of response of increasing competition and complexity of customer demand,many organisations have embarked on Business Process Re-engineeringinitiatives to revamp some or all of the core business processes to furthermaintain competitive edge and to reach out to new target market segments.Business Process Re-engineering is the fundamental rethinking and radicalredesign of business processes to achieve dramatic improvements in critical,contemporary measures of performances, such as cost, quality, service andspeed (Hammer ,M. & Champy, J. 2001). Hammer has referred to InformationTechnology as the essential enabler in any part of re-engineering effort. The


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IBM credit processes has been successfully re-designed or re-engineered an theresult was 90% of cycle-time improvement and hundred times improvement inproductivity attributed mainly to the automation and re-engineering project(Hammer ,M. & Champy, J. 2001). Ford Motors had successfully re-engineeredand automated its vendor payment system and the result was a significant

decrease of 80% of the total jobs. Other successful re-engineering efforts toopoint to similar results , highlighting the inherent benefits associated withInformation Technology applied to organisations or electronic business such asfaster delivery of products and services to market, increased efficiency andproductivity which ultimately contributes to cost-savings.

Introducing Electronic Business to organisations demands that organisationspeer into existing practices and processes and gain more insight and facilitateunderstanding. With critical information derived from studying the structure of theprocess and the management of processes, the organisation would be in a moreinformed position to reengineer successful business practices.

Electronic Business can be used to facilitate inductive thinking to encouragebrainstorming and implementation of creative ideas to further improve theperformance of business processes (Hammer ,M. & Champy, J. 2001). This is incontrast to the traditional mode of deductive thinking mode where problemsappear and electronic business tools are utilised often ineffectively to addressand resolve the problems. Furthermore, inductive thinking would encourage andfacilitate constant improvement to the system.

In recent years, organisations are moving towards partnerships, alliances andmergers. Organisations are forming effective partnerships and alliances that canperform some processes better, leaving the firm to concentrate on their corecompetencies. And also the realisation that through collaboration and sharing ofresources, these formations could generate substantial savings than of anindividual organisation to built all the resources on its own. This is what JamesChampy refer to as X-Engineering, a natural evolution of Business Process Re-engineering(Champy, J. 2002). According to Champy, X-Engineering requiresthat you rethink your whole business and all its relationships, not just withcustomers but also with suppliers, partners, employees-even competitors.Champy, J. 2002). It responds to pull of customer similar to the organisationalconcept of customer-driven and the push of processes across the firmsboundaries. Internet is the prime enabler that not only provide the tools to changebut the creators of change. It is changing the nature of competition itself; it shiftsorganisational thinking from competing to co-operation.


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4. Electronic Commerce

4.1 Defining Electronic Commerce

Electronic Commerce refers to the goods and services sold over computer-

mediated network (Mesenbourg, T. L 2001) while IBM defines electroniccommerce as the ability to buy and sell products and services over the Internet.It includes goods and services ordering billing, customer service and allhandlings of payment and transaction.(IBM 2002).Electronic Commerce provides a platform or channel on which potentialcustomers, partners or suppliers could perform online transactions, search forproduct and services information and tracking of goods and it provides a virtualinterface through web browsers to communicate with host servers.

Electronic Commerce consists of 2 types: sell-side and buy-side. The Businessto Consumer is a typical sell-side Electronic Commerce while The Business to

Business and Procurement are typical buy-side Electronic Commerce.In this chapter, the business to consumer electronic commerce is discussed.The buy-side shall be elaborated as a follow-up to this literature review.

4.2 The Benefits of Electronic Commerce

4.2.1 Resource Conservation

The immediate benefit of sell-side electronic commerce is that the presence of avirtual storefront lowers transaction costs, which could be passed on thecustomers while providing value-added services. Dell Computers Corp, a globalPC manufacturer has estimated the cost of engaging a telephone call with

technical specialist would cost in the region between US$5 to US$15 (Dell ,M.2000). This is compared to the negligible cost of performing the same tasksthrough the virtual storefront. It is the multitude of transactions conductedannually that would realise significant cost savings.

Providing an electronic medium to transact decreases costs of creation,processing, distribution of information as this eliminates or substantially reducespaper-based documents. In fact, Converting paper-based system to a systemsuch as electronic procurement could save up to 85% of administrative costs.(Huff S. et al. 2000). IBM has re-engineered and automated its procurementprocess in 1999 and it is reported that IBM saved USD 5 million worth of

papers(Ferns, D. & Whipple,L. 2000) In addition, payment methods such astraditional cheques and postal orders usually carry a certain amount of overheaddue to administrative handling and processing while an online transaction isvirtually free apart from the negligible telecommunication charges and Internetaccess fees and the availability of online banking services provide the flexibility,reliability for payment with better efficiency. And the Internet-based services areavailable 24/7 with the accessibility from any machine that is connected to theInternet.


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4.2.2 Customer Relationship Management

Electronic Commerce systems demand that many disparate manual and legacy

database systems be integrated to facilitate a common channel for informationflow. Processes involving the use of back-end central repository reinforces dataintegrity, significantly reduces associated resource wastage due to errors.Furthermore, virtual storefronts provide a common channel for routing of data toperform transaction-related analysis such as data warehousing. Analysis of theresults provide information such as customer behavioural patterns andpurchasing habits and can be readily fed back to the sales and marketingdepartment to aid in the development of effective marketing strategy and to thetop management to assist in critical business decision-making. The presence ofvirtual storefront facilitates quick dissemination of marketing information to targetmarket segments. Information on new developments assists customers in

purchasing of products and services by offering various new alternatives.

The virtual storefront contains a host of sales information directly accessible bythe customers using a web browser referred to as literature in demand. Inaddition, there will be online catalogues and technical information related toresolution of problems pertaining to the use of products and services. Instead ofdisplacing or eliminating the sales-related personnel or the sales department, thischannel only serve to support the jobs of consultants and account managers byproviding low-level standard technical details and information, leaving the salesconsultants focus on higher-level and value-added sales activities. The storefrontsaves the time for customers who tirelessly try to engage the services of busy

sales personnel, leading to improved customer services. There is an improvedflow of information to the customers

4.2.3 Value-added Services

Apart from providing search-related services for product and services, thepresence of virtual channels are used as channels for customer feedback in theform of comments or complaints and suggestions for improvement. Informationcollected could be channelled back to the operations to improve the corebusiness processes while indirectly improving customer relationship.

Activities such as after-sales services are carried out mode efficiently ascustomers intending to search for product or sales information could be obtainedfrom the virtual site and without technical sales personnel assistance. Mostelectronic commerce sites offer a range of technical support packages with themost basic services to comprehensive, time-critical maintenance and supportalthough some come with high fee charges. Considering the difficulties engagingfull-time services of the technical specialists more so if the regional office isbased offshore, purchasing suitable technical support packages are still viewedfavourably amongst businesses. Furthermore, most technical packages are


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designed to respond to emergency situations where servers are required to behigh in availability i.e. any break down of system must be brought up again withthe minimal downtime. And after sales online support will indirectly improve theresponsiveness to customer. Registering and payment for the relevant technicalpackages are simple and payment can be made real-time, cutting across

inefficient processes and its associated costs of corresponding throughtelecommunications and payment be made through traditional postal orders.Organisations such as Intershop, a electronic commerce software platformprovider, although they do not have regional office in South-East Asia, provide afull range of technical support ranging from one days response time to as fast as2 hours of response and resolution time.

Virtual storefronts, apart from selling standard products and services from onlinecatalogues, provide a channel on which customers can customise the design ofthe product or services. Computer modelling tools are effective means to allowcustomers to experiment and seek area to save cost by -savings as it is, in most

cases, simple and cost-effective and more importantly to achieve customersatisfaction.

Some organisations which traditionally provide services such as car rentals andhire through the traditional telecommunication means such as telephone areembracing the Internet to provide additional value-added services i.e. providingadditional channels to interact with customers. An excellent example is

AutoByTel.com, the Dell of the Car Industry.

4.2.4 Sales and Marketing that transcends geographical Limitations

The presence of a virtual site transcends geographical boundaries to reachremote and foreign markets something which tradition physical store would nothave made possible without the presence of another physical store in closeproximity. Not only significant cost-savings are possible, the fact that there arenew group of potential buyers could be reached further doubles the impact onmarketing and sales.

Electronic Storefronts can be used as means to promote brand and corporateimage. Promoting the storefront through registering sites with search engines orplacing advertisement banners on prominent web sites and through offeringcontinuous fast, efficient and reliable services through the sale of products not

only enable the products and services could be better marketed, a virtualpresence will continually re-affirm the image of the organisation. Amazon.com isan excellent example in addition to companies such as Wal-Mart, Dell Computersand Intel, Furthermore, promotion of products through virtual presence proceedat a faster rate compared to using traditional medium as Amazon.com hasproven.


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4.2.5 Real-Time Inventory Management

Furthermore, on-line transactions would generate real-time information which areused to match inventory supply and demand in order to reduce inventory levels.Companies such as Dell Computers Corp and U.S-based W.W Grainger hassuccessfully reduced capital tied up due with high inventory. Dell Computers, for

example, has decreased inventory velocity from 6 days to 4 after implementationof the corporate web site www.dell.com in 1996, which enables the practise ofeffective methods such as Just-In-Time manufacturing. This indirectly assists thesuppliers to better plan and adjust their inventory schedules as well as tofacilitate in balancing production load in factories, thereby minimising costs.

Also, it supports Collaborative planning, forecasting and replenishment (CPFAR),A US-based initiative which is a set of standard and guidelines to formingrelationships with manufacturers and retailers to exchange forecasts and toprovide real-time ordering. In recent years, the retailers usage of CPFAR havebeen gaining momentum. It has one limitation though in that most of them areimplemented as one to one collaborative partnership between trading partners.

4.2.6 Logistics and Electronic Fulfillment

Electronic Commerce provides means to reduce the time taken from thepurchase of products and services to the receipt of them. Online paymentmethods such as the credit or debit card payment can be made and the productsto be shipped can be immediately despatched. Furthermore, in most instances,for physical products, most organisations provide online options of deliveryranging from the standard package to the express delivery, which takes up to afew days to remote corners of the globe. This is in contrast with the traditionalmethods of using telecommunication channels such as finalising purchase order

details which itself could take days in addition the risk of errors introduced orinsufficient or unclear details which stalls payment process. In addition, thelogistic channel can be integrated with the corporate virtual storefront and it canprovide value-added services such as tracking shipment, warehousing facilitiesand the scheduling of transportation in order to deliver the shipment within thestipulated time frame. In the case of software, the software products could bedownloaded almost immediately bypassing the need for logistics.

One area in the value system where electronic storefronts has significant impactupon is the distribution channel. With some exceptions, disintermediation or theelimination of the traditional distributors such as value-added resellers (VARs),

wholesale distributor and retailers would be common because embracingelectronic commerce enables suppliers or manufacturers to deal directly with thecustomers. Furthermore, manufacturers could provide online technical support,


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saving time and costs due to escalation of technical problems from the channelsfrom the customers. The removal of traditional intermediaries eliminates anadditional layer which would otherwise introduce mark-up prices while passingthe savings in cost directly to the customers. One exception to this is car dealersin the automotive industry where the distributors are relevant to providing

services such as test-drive to customers. However, the virtual counterpart oftraditional intermediaries, the electronic intermediaries appear to be replacingtraditional intermediaries by providing services such as online product selectionagents and search engines. This offers alternatives to customers wishing toengage the services of intermediaries while to the manufacturer, electroniccommerce could be used to provide a single point of virtual contact in theInternet-based distribution. In addition, virtual distribution can be combined withthe physical distribution as we have seen for the case of the automobile industry.

However, it is argued that electronic commerce does not necessarily lead tocomplete removal of the traditional middle men as some organisations would like

to preserve existing business ties and loyalty. These organisations are justleveraging electronic commerce to migrate these relationships into the virtualworld in an effort of not so much of seeking more profit but more of maintainingand enhancing business relationships. This in itself may be seen as providingvalue-added services.

In recent years, 3rd Party Logistics(3PL), the provider of specific traditional logisticservices at departmental or division level, have seen its role of graduallytransforming to what is known as Lead Logistic Provider(LLP), a full-fledged unitusually independent organisation to whom any organisation especially electroniccommerce set-up companies would sub-contract the entire organisation logisticfunctions to mainly the result of increasing need of organisations to focus more ontheir core business activities (Kuglin, F. A. & Rosenbaum, B. A. 2001). While thetraditional tier-based 3PLs operate using a rigid linear supply chain, where ,forexample, large supplier companies such as the automobile industrys OriginalEquipment Manufacturers (OEMs) would obtain raw material and supplier parts firstthrough tier-3 companies to be procured by tier-2 companies and finally tier-1supplier companies, the LLPs operate using a networked supply chain model, whereall supplier companies all directly. While the traditional 3PLs leverage. Supply chainis the tracking and movement of supplier parts and components across a variety ofactual and potential suppliers. Electronic business in areas such as warehouseoperations, freight forwarding and scheduling of vehicles for transportation, LLPsextends the usage of Electronic business by virtue of its new role to include strategicand planning level services, provide integrated and total logistics systems andprovide communications facilities to improve data and information both within andacross networked supply chains from all around the globe. Some of the functionsprovided by LLPs include mass customisation, where customers demand ofspecialised and unique demands, configuration, packaging and shipping are cateredfor, Real-Time order tracking that not only include the status and location of theshipment but also whether the shipment is being delivered according to schedule,formation of multi-modal network of carriers, freight forwarders,


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custom brokers and financial institutions on a global scale (Kuglin, F. A. &Rosenbaum, B. A. 2001).

4.3 Limitations of Electronic Commerce

4.3.1 Implications on securityWith increasing users on a worldwide scale making online payments involvingtens of thousands of dollars in transaction, it is inevitable the issue of InternetSecurity becomes one of the Internet users main concern. The issue ofunauthorised access and the threat of hacker are not new. There are increasingincidents of intrusion and hacking into corporate systems and stealing sensitivedata in the United Kingdom, United States and in the Asia Pacific in recent yearsand this will continuously pose threats to especially to users who send paymentdetails while making online transactions through the Internet as well as corporatesystems. Although, there are existing security services available such as SecureSocket Layer, which encodes data to up to 128-bits while transmitting data

between the client browser and the host server and the use of digital certificatesvia asymmetric key pairs with digital certificate authority, SET, the threat ofunauthorised personnel and hackers compromising still lurks and it becomesincreasingly easier as price per unit processing continues to drop further,allowing to access huge amount of computation power to bypass existingsecurity measures in place. Customer details and payment information are at thegreatest risks of being accessed and abused. In recent years, it has beenreported in the United Kingdom that there is increasing web attacks on businessservers. In a BBC survey, about 44% of UK businesses suffered some form ofmalicious attack on corporate information systems although a significant 27% ofthe firms have spent more that 1% of the total IT budget on security (BBC Online

Network 2002).

In addition, the destructive variants of malicious codes such as worms andviruses travelling through Internet channels such as the mail and web servers arecapable of compromising corporate systems, rendering the system inaccessibleto users, contributing to an expensive period of downtime in terms of loss ofpotential sales and generates a group of frustrated users who could not accesstimely product and services information. Furthermore, some of these viruses areso destructive that once a system is rendered inoperable, it quickly replicate andspread beyond the system, attacking other systems residing in local areanetwork and inflicting further damage.

4.3.2 Impact on labour and Employment Market

As discussed, electron commerce impacts the traditional distribution channel byeliminating the intermediaries while electronic intermediaries replaces the formerrole. This phenomenon has brought two major changes to the labour andemployment market. Firstly, there would be a transition of skill requirements fromnon-IT based jobs to Information Technology-oriented tasks. Organisations areincreasingly procuring workers who possess system management skills such as


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integrating back-end systems, implementing new systems and to administer andmanage network, security and firewall implementations. This phenomenon isobserved in major industries although different sectors have different potentialand growth of implementing electronic commerce thus a variation of labourmarker for different sectors in terms of level of IT skills and the relative demand

for them.

Secondly, the skewed labour demand which favours IT skilled workers are slowlydriving the average wages up as there is a shortage of these workers inespecially very specialised IT disciplines such as network and databaseadministration. According to IDC, 20% of IT jobs has to be filled in the UnitedStates market alone and it is predicted that by 2002, Western Europe will face ashortage of 1.4 million IT-skilled workers ( Huff S. et al. 2000). Someorganisations overcome this shortage and high wages by turning towards foreignIT specialists market and outsourcing complex tasks to these similarly skilledworkers or to recruit them to meet their requirements although in the long run,

wages cost would still be a problem to some organisations.

As Electronic Commerce involves the Internet which is globally accessible, oneimplication is that working conditions have become more flexible and dynamic asthere is no longer a constraint to be in a traditional office to perform their tasks.Workers involve in IT-related works have the opportunity to work anytime andanyplace through collaboration in the virtual platform. Althoughtelecommunication infrastructure is developing in Europe and United States andin Asia Pacific, electronic commerce is still constrained by the existingtelecommunication lines which have limited communication bit rate. Thisindirectly impacts performance of web applications and creating difficulties inperforming real work through the Internet. An upgraded communication networksuch as broadband type communication network involving bit rates of up to 1.5 to2.0 Mbps would partly reduce the intensity of this problem.


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5. Conclusion

Internet-based Electronic Business has enabled small-medium scaleorganisations to the capability to achieve both direct and indirect benefits

previously restricted to large enterprises using EDI at a less prohibitive cost ofimplementation, integration and maintenance. Also, it serves as a technologyenabler to facilitate business process re-engineering to streamline businessprocesses.

A major component within Electronic Business, Electronic Commercedemonstrates how organisations could alter the traditional supply chain structure,bypassing the channels to deal direct with customers. It is in direct contact withsuppliers, the benefits spill over to the back-end through feedbacks andcustomer-relationship management analysis to improve core businessprocesses.

Electronic Commerce suffers from poor perception on security and insufficientsecurity levels compared to that of its predecessor, Electronic Data Interchange.While the introduction of Electronic Commerce shifts labour requirements tofavour Information Technology-related skills, it impacts the labour market bymaking redundant traditional roles particularly in the distribution channels and asignificant redefinition of the role by integrating many functions and the use ofinformation-technology related skills.

The other significant components of electronic business such as electronicmarket-place, electronic procurement and electronic collaboration shall be

discussed following this literature review.


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6. Appendix A

Margin

OperationsSales andMarketing

Human Resource Management

Procurement

Firm Infrastrucure

Technology Development

InboundLogistic

OutboundLogistic

Services

Figure 1: Generic Value Chain

The generic value chain consists of two groups of activities: Primary Activitiesand Support Activities as seen in Figure 1.

The primary activities are categorised into Inbound Logistics, Operations,Outbound Logistics, Sales and Marketing and Services. The inbound logistics areactivities related to the reception, storage and delivery of input that is required foroperations. These include material handling, inventory control. The operationsare activities of transforming the input to output product and services such asmachining, packaging and testing. The output logistics are activities related tocollection, storage and physical distribution of goods and services. Sales and

Marketing activities relate to the means of which customers have access orpurchase goods and promotion of products and services. Services are activitiesassociated with post-sales maintenance and repair used to maintain or upgradethe value of product or services.

The support activities can be classified into procurement, TechnologyDevelopment, Human Resource Management and Firm Infrastructure.Procurement activities relate to the function of procuring the input. Technologydevelopment include the research and development, product design, and testingof new products. Human Resource Management relates to activities that includethe hiring, training, recruitment, development, evaluation and compensation of all

personnel. Firm Infrastructure relates to activities which include generalmanagement, planning, finance, accounting, legal, government affairs and qualitymanagement.

There are 3 types of activities consisting of direct, indirect and quality assurancetypes. Direct-type activities are those that add value to products and services forthe buyer such as assembly, machining and advertising.


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Indirect-type activities are those that make possible for the direct activities to takeplace in a continuous manner such as maintenance, research and sales forceadministration.

Quality assurance related to activities that ensure the quality of other activities

such as monitoring, inspection, testing, reviewing and reworking.

The value chain is a set of interdependent activities that are related by linkages.Linkages are relationships between the way one value activity is performed andthe cost or performance of another.

Supplier Firm Channel BuyerValue Chain Value Chain Value Chain Value Chain

Figure 2 : Value System

The firm value chain forms part of an overall stream of activities called the valuesystem as seen in figure 2. The supplier value chain form the upstream value,providing products and services input to the firm. The channel value chain formthe channel value, providing additional activites that affects the firma and thebuyers value chains. Eventually, the firms products and services would end with

the buyers value chain.


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7. References

1. Amer, D. 2000, The E-Business (R)evolution, Prentice Hall Inc. UpperSaddle River, New York.

2. Angels,R. 2000, Revisiting the role of Internet-EDI in the current electroniccommerce scene, Logistics Information Management, Vol 1, No 1.,pp 45-57.

3. BBC Online Network: Web attacks on the rise in the UK, URL:http://www.nua.com/surveys/?f=VS&art_id=905357851&rel=true[16 April 2002]

4. Champy, J. 2002,X-Engineering the Corporation: Reinventing yourBusiness in the Digital Age, Warner Books, New York.

5. Dell, M. and Fredman, C. 2000, Direct from Dell: Strategies thatRevolutionized an Industry, HarperCollinsBusiness, London.

6. Fallenstein, C. and Wood, R. 2000, Exploring E-Commerce, Global E-business, and E-societies, Prentice-Hall, New Jersey.

7. Ferns, D. & Whipple, L. 2000, Building an Intelligent E-Business, PrimaTech Publicshing, Redwood California.

8. Forrester Research Press Release: Europe's eBusiness Winners WillSpeed Their Migration From Closed EDI To Net-Based Processes,URL: http://www.forrester.com/ER/Press/Release/0,1769,457,FF.html[2 April 2002].

9. Hammer, M. 1990, Re-engineering Work Dont Automate, Obliterate,Harvard Business Review, July-August 1990.

10. Hammer, M. and Champy, J. 2001, Re-engineering the Corporation: AManifesto for Business Revolution, Nicholas Brealey Publishing Ltd.

11. Huff S. et al. 2000, Cases in Electronic Commerce, Mc-GrawHill, USA.

12. IBM, URL: http://www-3.ibm.com/e-business/glossary/IBM e-businessGlossary.htm [17April 2002]

13. Jones, G., Lawson, A. and Thompson, M. , E-Supply Chain: Modelling theSupply Chain in the New Market Economies, The Butler Group, December2000.


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URL:http://www.butlergroup.com/research/DocView.asp?ID={DAC1DF2E-FBF1-11D4-9063-00105A3037C6} [1st April 2002]

14. Kuglin, Fred A. and Rosenbaum, Barbara A. 2001, The Supply ChainNetwork@ Internet Speed: Preparing your Company for the E-Commerce

Revolution, Amacom, New York.

15. Lawrence, E. et al. 2000, Internet Commerce: Digital Models for Business,2nd edn, Wiley, Australia.

16. Mesenbourg, Thomas L. Measuring Electronic Business, US Bureau ofCensus August 2001.URL: http://proquest.umi.com/pqdweb?Did=000000103157440&Fmt=3&Deli=1&Mtd=1&Idx=2&Sid=2&RQT=309 [1st April 2002]

17. Peppard, J. and Rowland, P. 1995, The Essence of Business Process

Re-engineering, Prentice-Hall, England.

18. Porter, Michael E. 1985, Competitive Advantage: Creating and SustainingSuperior Performance, The Free Press, New York.

19. Turban, E. et al. 2000, Electronic Commerce: A Managerial Perspective,Prentice-Hall, New Jersey.

20. NIST 2002: EDI, National Institute of Science & Technology 2002.URL: http://www.itl.nist.gov/div896/ipsg/eval_guide/subsection3_5_6.html[1st April 2002].

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