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REFERENCES 535in which larger businesses, with their greater resources,
are not competing. SMEs are currently using informa-
tion technology to gain distinctive advantages. Compa-
nies with 500 or fewer employees spent over $200 billion
on technology products and services in 1998, more than
five times as many dollars as larger companies (Caldwell
& Wilde, 1998; Wilde, 1998). Small businesses are using
Web sites, intranets, and e-mail at close to the same per-
centages as larger businesses (Wilder, 1999). E-commerce
applications have been slower to be accepted; this could be
due to the relatively high cost of setting up and maintain-
ing e-commerce applications. Outsourcing e-commerce
to other e-commerce companies can lower these costs
(De Soto, 1998).
Table 3 outlines the results of a survey of more than 400
information technology managers worldwide and shows
the main strategies that SMEs should use to compete in a
global arena. In addition to these competitive strategies,
smaller businesses are often more innovative, faster to re-
spond to environmental demands, and willing to change
business models in order to gain competitive advantages.
The recommendations given to SMEs center on their abil-
ity to focus on the customer. SMEs do have an opportu-
nity to hold their current customers if they can leverage
e-commerce tools and techniques before their larger com-
petitors enter their market.CONCLUSION
E-commerce tools and techniques have become a vital
part of both online-only and brick-and-mortar firms’ busi-
ness models. This requires that these firms consider their
e-commerce value chains when determining how to gain
competitive advantage in the marketplace. The environ-
mental turbulence that firms faced in the 1990s is likely
to increase as newer, faster, and more integrated informa-
tion technologies such as wireless Internet are adopted by
both consumers and businesses.
Gaining and maintaining competitive advantages will
require that businesses constantly reevaluate their busi-
ness models and their value chains. This chapter lays the
foundation for this process.GLOSSARY
Business model The basic process flow indicating how
a business operates.
Commoditization of markets A situation where prod-
ucts are no longer seen as by buyers differentiated, re-
sulting in a lowering of prices.
Disaggregation The process of breaking out functions
in the value chain.
Disintermediation The removal of intermediaries from
the distribution process.
Drop shipping The storage and shipping of products by
an intermediary such as a shipper or warehouse.
Dynamic pricing The lack of fixed prices. Two examples
include database systems, which can offer different
prices depending on variables such as demand, buyer
type, and sales channel, and negotiated pricing through
auctions or other interactions.E-commerce value chain A value chain framework
where information technology is seen as a part of a
business’s overall value chain and adds to the compet-
itive advantages of a business.
Environmental turbulence Rapid and unpredictable
change in both competitors’ offerings and in custo-
mers’ needs.
Functional business model The interaction of func-
tions within a business.
Hypermedia Electronically based media that allow hy-
perlinks, or the ability to click on a link to new infor-
mation. A prime example is the World Wide Web.
Lifetime value of customers The process of viewing
the customer as a stream of future revenue rather than
as a single transaction. This allows the identification of
customers who provide value to the firm.
Margin The difference between the potential value de-
livered and the cost of creating that value.
Market of one The process of treating each customer
as an individual. Often this is made possible through
the use of data collected in databases and mined for
information.
Online marketplaces (e-marketplace) A centralized
online location for the trading of information, goods,
services, or other commodities.
Primary activities Inbound logistics, operations, out-
bound logistics, marketing and sales, and service.
Support activities Procurement, technology develop-
ment (including R&D), human resource management,
and infrastructure (systems for planning, finance, qual-
ity control, information management, etc.).
Value chain analysis process The process of disaggre-
gating the activities of buyers, suppliers, and the firm
into a chain of interrelated value creating activities.
Value chain A way of envisioning the collection of ac-
tivities that a business undertakes in order to design,
produce, market, deliver, and support products or ser-
vices.
Value web The horizontal and vertical relationships
that exist in competitive systems, in which alliances
can be virtual and arrangements temporary.
Virtual value chain A value chain framework where a
firm captures information along its entire value chain
and then uses that information to enhance value and
improve customer relationships, or sells the informa-
tion.CROSS REFERENCES
SeeBusiness-to-Business (B2B) Internet Business Mod-
els; Business-to-Consumer (B2C) Internet Business Mod-
els; Electronic Commerce and Electronic Business;
E-marketplaces; Supply Chain Management.REFERENCES
Caldwell, B. (1999, February 8). Time and money pay off.
Information Week, p. 16ER.
Caldwell, B., & Wilde, C. (1998, June 29). Emerging enter-
prises.Information Week, 53–60.
Carr, D. F. (2001, June 15). Forging 21st-century value
chains.Internet World, 26–32.