Chapter 1: Introduction


1.0 Background Outline   


The rapid growth of technological advancement in the society has brought people so much ease in all the things they do. Part of this technological advancement is the emergence of the Information Technology. Information Technology (IT) management along with the internet context is often regarded as the unquestioned cornerstone towards competitiveness in the 21st century. These technological advancements have brought people especially those in the business world to utilize a strategy that would be helpful in enhancing the business value of any organisation (1999). Furthermore, this development has made changes and development of the plans and strategies of the management of any organisation especially those in the marketing environment.  Within the market place, one of the most important things to consider is to establish a strategy that will be useful for different activities of the organisation and enhance the value of the business as a whole with the use of the information technology.


With the emergence of the World Wide Web and information technology, more and more businesses are trying to adopt a new marketing approach attached or aligned with the internet. For instance, those retailing industries, attempted to gain competitive advantage thought the use of internet. Internet businesses or e-businesses have emerged leaving behind non e–business companies.  Accordingly, business model is an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets (1999).  Only firms that continuously upgrade their competitive advantages over time are able to achieve long-term success with their strategy and implementation. 


Choosing the appropriate business model is intended to create differences between the industry’s positions relative to those of its rivals (1996). To position itself a firm must decide to whether it intends to perform activities differently or to perform the different activities as compared to its rivals.  Thus, the firm’s business model is a deliberate choice about how it will perform the value chain’s primary and support activities in ways to create unique value. Over the years, different companies and organization are trying to utilize the business model in which they think should bring success to the over-all performance of a business.  In addition, business model is also referred as the mechanism or system by which any firm or business aims to produce profit or revenue.  It is the totality of how the industry intends to serve its target market.  It involves both the marketing strategy and its strategic implementation.   Throughout the years, the uses of business model are regarded as complicated and sophisticated.  Business models have different kinds. 


Prior to the use of Internet, business industries competition depend largely on how they locked their consumers.  This means that the business industries are in control of their consumers by means of the kind of products or services that the business industries will offer.  The relationship between the organization and the consumers are being embedded to consumer as a buyer and the organization as the producer.  In this manner, the consumer would tend to buy the products from the store just to avail what they want. However, because of the globalization and information technology, different models of business have emerged. Primarily, the main goal of this dissertation is to analyse the latest techniques in Internet presence and study how these techniques impact/compliments existing brick-and-mortar businesses from marketing, cost effectiveness, customer relationship management and international reach.


 


1.1 Problem Theme


As mentioned, the existence of internet has been able to transform the business environment. The use of the internet as part of business marketing and retailing is changing rapidly. It is said that the internet provides the retail market a new market model which cater not just for cloths, books and music but almost every products or service buyable and sellable. Among the most recognized brands and products sold in the internet retail are books, drugs, apparel, and electronic and technological gadgets.  Accordingly, the use of internet retailing has been able to create virtual communities which assure better communication and larger profits for the company. The latest techniques associated with internet retailing enables the company to gain competitive advantage as internet served as a platform for advanced technology and applications which allows the retailers by having better recognition both in the national and international level. In addition, internet retailing marketing techniques also has the ability to gain competitive advantage because of its availability in the internet market 24/7 with fewer or most of the time unlimited geographic boundaries. The internet approach also has interactive two-way communication, automation, personalization or customization, search facilitation and most of all knowledge or information sharing ( 2004).


Such abilities are known to create advantage, attract, and satisfy consumers from any walks of life globally as well as increase profits.  As customers’ convenience is indulged by a wealth of personalized information services and availability, they can enjoy shopping ( 2001).The Internet also brings an easier integration of past business models and functions such as data collection and sharing.  Wang and his colleagues put the idea simply that the Internet is combined communication medium and distribution/transaction channel, which is quite different from traditional marketplaces allowing simple to multiple tasks to be performed at the same time and at the same environment.


In addition, the internet retailing also allows the company to gain good customer relationship easily because of their ability to create customer participation and customization among other wide-ranged access to services.  Consumers are granted powers that traditional markets limit (primarily due to the presence of intermediaries, the lack of speedy processes, cost-effectiveness, integration, and combination the Internet medium can provide).  With capabilities such as this, it is inevitable for retail markets adapt to the Internet set-up, as a new marketplace and a new marketing tool, quickly.  Customer value has become the centre of all business models online.  recognize however that not all e-businesses survive due to the turbulent and competitive nature of the Internet and the fact that studies regarding consumer behaviour must continue to be conducted.


In such a turbulent and competitive arena, it has been a common goal for all firms and organizations into internet retailing for this matter to create and above all, maintain value for its customers, suppliers, and manufacturers.  The assurance of returning customers is what keeps internet retaining sites alive.  This is performed through shopping deals created through customer loyalty. The key for internet retailing to sustain itself in the market is to be convenient in the best of its ability and this will be performed once a firm is able to adapt to the customer’s many selective tastes best.  Not only will this allow them keep a competitive edge, this will allow its brand to emerge as a dominant web presence.  What’s unique with Internet retailing is how it does not limit itself to a certain industry.  Traditional retail stores, or the so-called brick and mortar type stores, are greatly limited by shelf spaces and cannot thus; attempt to cross sell newly released or related products (that would win consumers).


Brick-and-mortar stores put the baby products in one place, health care in another, and vitamins for pregnancy in another area.  Therefore, everything is split up in the brick-and-mortar store, whereas with online solution retailing, all these items can be bundled together as a ‘new mother’ shelf ( 1996).


The web’s flexibility allows it to cater to various other opportunities that will truly boost sales, serve to the customer’s further appeal, value and not to mention, loyalty, by giving them a wide variety of products to choose from in a one-stop shopping manner.  The customer’s preferences are thus even more customized to his/her personal liking.  Internet retailing brings cross-category selling opportunities, not just in grocery, but in sporting goods and everything else. In this regard, internet retailing can really be considered as one of the most powerful business approach to be considered if the company would want to be known in the global market.


Given that internet has been a major and efficient tool for retailing, it is still important to determine how internet retailing impact non e-business industries in different aspects and determine what implications of internet to retailing are. 


 


1.2 Research Question


The key question that this dissertation will find to address is to know the impact of internet retailing to brick and mortar companies. Specifically, this paper attempts to answer the following queries:


1. What are the internet models available for industries?


1)     What is the impact of internet retailing in terms of providing value to the consumers or customer relationship management?


2)     What is the impact of internet retailing in line with the marketing contexts?


3)     What is the impact of internet retailing in terms of cost effectiveness?


4)     What is the impact of internet retailing in terms of international reach of the industry?


 


 


1.3 Aims and Objectives  


In addressing the research questions, the researcher will be guide by the general aim to conduct a comprehensive analysis of internet retailing and how its presence impacts brick and mortar companies. The following specific objectives will be accomplished.



  • To evaluate the techniques of internet retailing in the market environment?

  • To analyze internet retailing in terms of its effect on customer relationship management.

  • To assess internet retailing impact to business industries in terms of cost effectiveness.

  • To determine the impact of internet retailing in line with international reach of businesses.


 


1.4 Significance of the Study                  


This research will provide a big help to the students and researchers that is engaged to business and information technology sector. The possible findings of this paper will provide a significant impact when it comes to education, politics, business, and to the modern society since attempts to identify how the emergence of internet retailing affects business industries.  Basically, the partial gathering of information reveals that the use of internet retailing in business, particularly for the brick and mortar companies provides a significant role since IT is one of the great factor or tool to use for business promotions or advertisement.


1.5  Scope and Limitations


This dissertation focused primarily in the investigation of the impact of internet retailing to brick and mortar industries. The study examined how the emergence of internet affects the retailing industries in terms of marketing, customer relationship management, cost effectiveness, and international reach.


This research will cover the topics on the intensive differences among the business strategies or approach of these kinds of industries.  The discussion of this study will mainly focus on the analysis internet retailing. The information that will be gathered for this study will be derived from secondary resources since this will consider solely the qualitative approach of research.  The secondary sources of data will come from published articles from social science journals, theses, and related studies on internet retailing, internet retailing or e-marketing, information communication technology and business journals.


Time will be the greatest limitation to this research, which may hinder long-term outcome objectives. Environmental factors, such as socioeconomic factors, are beyond the control of the researcher and can create many variables within the research. As this study will be utilizing a small sample of participants, the results may not effectively represent the general population.


     


1.6  Research Outline


This study is divided into five chapters in order to provide clarity and coherence on determining the impact of internet retailing to brick and mortar industries. The first part of the dissertation will be discussing the problem uncovered by the researcher and provide ample background of the topic. The chapter shall constitute an introduction to the whole dissertation, and the statement of the problem in order to present the basis of the study. Moreover, the chapter shall also have a discussion on the scope of its study as well as the significance of the study to society in general.


The second chapter shall be discussing the relevance of the study in the existing literature. It shall provide studies internet retailing, its advantages and disadvantages and also the companies that use internet retailing. After the presentation of the existing related literature, the researcher shall provide a synthesis of the whole chapter in relation to the study.


The third part of the study shall be discussing the methods and procedures used in the study. The chapter shall comprise of the presentation of the utilized techniques for data collection and research methodology. Similarly, it shall also contain a discussion on the used techniques in data analysis as well as the tools used to acquire the said data.


The fourth chapter shall be an analysis on the contents gathered through secondary research and qualitative research approach. This part will discuss the answers based on analysis, to the questions provided in Chapter 1.


The last chapter shall comprise of three sections, the summary of the findings, the conclusions of the study, and the recommendations. With the three portions, the chapter shall be able to address the problem stated in the initial chapters of the study.


Chapter 2: Literature Review


2.1   The concept of Internet


The world today has long been characterized by modernization and technological advances. But before these comforts that we enjoy today, the world has first undergone multi-level changes. The society we are living in at present is very different three decades ago when the Internet is yet experienced. The introduction of the Internet has changed not just the lives of the people in their respective professions but also of the lives of the ordinary people. The history of the Internet is composed of gradual advances in the demands of the military intelligence in the United States.


The Internet with the advent of internet retailing has provided major changes on the way business is done. Without the need for physical presence and sometimes only at the touch of a button, business transactions, financial trading and even customer service is being carried on (1998). The Internet has proven to provide efficient communication links between companies and their clients cutting down the resources spent on public relations. The use of internet in business industry has emerged for at least two crucial reasons. Firstly, it serves as a new alternative channel pf communication other than traditional branch network for customers to contact and communicate with the firms. Nowadays, more and more customers, especially younger ones who are quicker to accept new technology, are accessing remote channels-telephone marketing; computer transactions and other virtual transactions-to transact their business affairs. These on-line customers demand even more control over their personal finances and value “anytime, anyplace, any where” customized access to financial services (2001).


There are varied definitions of internet but they all suggest in some way of the usage of electronic means to conduct business. Perhaps one of the most concrete definitions is given by   (2003) which states that internet retailing is either a free or paid exchange of information translated into goods and services using electronic means in any stage of the supply chain, be it within the organisation, between businesses, between businesses and consumers or even between the government and private sectors. Moreover,  (2003) specifically noted examples of the means of conducting internet retailing as the Internet, networks and other digital technologies.


The word retailing in the term strengthens the definition that the concept is part of a range of activities wherein no direct payment involved within the supply chain. The supply chain expresses the distribution of goods, services and information flows between the players within or among the industries ( 2003). An example of this is a furniture manufacturer where the supply chain involves parts, raw materials, or services supplied by other companies. If the manufacturer exercises total control and optimizes its supply chain, then it will reduce all transaction costs which will then turn into a competitive advantage for the company because it is at the core of the chain.


Since internet retailing is a growing phenomenon in the business, many companies now feel that there is a need to have Internet presence even if not as a business format (1998). This can be attributed to the increase in customer perception that a lack of Internet presence represents obsolete business methods and this can lead the consumer to choose other products instead ( 2002). In addition to this, most purchasing decision may be based on the information provided by the websites whether or not the actual final transaction was done online. This trend has changed the way businesses considered the Internet. It wasn’t just an inexpensive way to reach new target markets because to complete the buying process, there is still the need for traditional advertising and promotions. Thus, the practice is to include the websites to give consumers the chance to access additional information for the product. In this perspective, the Internet gave new meaning to companies as a useful and effective method of disseminating information to aid in the buying process. However, internet retailing does not guarantee profit because despite its popularity, there are still others who do not buy into shopping online. An example of this is the decline of online purchases in 2000 because of the widely publicized Christmas delivery failures in 1999 (2001). With the uncertain dynamics of internet retailing, companies then need to formulate a business strategy which can easily adapt to these changes.


There are many studies that have been conducted on the new innovation of online shopping. Because of the many researches and studies made on the growing number of online shoppers, companies are improving their online marketing strategies. There are reports that there are three reasons why this is happening. First is that the size of the market is growing from US 6 billion in 2000 to .2 trillion in 2004 (2000). This market will be dominated by consumers outside North America. Second, because there are only a few dominant online players, the marketplace is still an area for a big business opportunity. Lastly, the cost and maintenance of brick and mortar facilities are lower than the cost and maintenance of globalization costs of international web presence.


2.2   Advantages of Internet retailing


2.3   Disadvantages of Internet retailing


2.4   Companies that Use Internet retailing      


Every organisation wants to initiate a management system and strategy that could maintain the organization’s capability, strength and competitiveness. It is important that the management team and the organisation per se should always open their mind for changes that they might encounter in order to cope and adapt to the latest development that are happening within and outside their environment. Retail marketing works on the premise that direct sales is a potent force in attracting consumers because of personal interaction and negotiation. Further, the product is readily seen by the consumers thus, the urge to purchase a good and the probability that it will meet expectation of the customer are higher. However, retailing is not an easy process. Inherent are problems, issues and challenges that must be faced and solved in order to succeed in the competitive retailing world (1994).


The concept of retailing is simply defined as the direct sale of commodities to consumers. However, to be able to succeed in this kind of venture, a considerable number of considerations must be identified. The tool that one uses to measure its success often defines the vision and strategy in retailing ( 2002). It is said that the net present value of the customer base should be at the top of the measurement hierarchy. Lifetime value is the net present value of the profit to be realized on the average new customer during a given number of years.  (2002) suggested that one should get customers to give data, and build it into a database complete with purchase history. For a retailer, that means that one have to keep track of their spending. Moreover, he asserted that building a relationship with customers only works if the customer benefits from the relationship.


The trick in retailing, therefore, is to find things that one can do for customers that will modify their behaviour in profitable ways. What the retailer provides to customers has to be something that they will appreciate and value, but which do not cost you too much. In retailing, the margins are often thin ( 2002).


               The problem arises when retailers can’t adapt to the rapid changes of their environment. There is pressure in competition.  While it is being said that advancement on marketing operations and adapting to the current forms of retailing methods will drive you to ultimate success, however there are other factors that will block your way. It has been noted that the most ambiguous, accommodating and changeable, yet the most persistent and potent forces that control retail competition are custom, consumer expectations, and social pressure (, 1995). The market in a lot of ways limits what retailers can do.  There is a constant adjustment to customer needs and tastes.  The relationship between retailing and its environment is complex.  The ability of the small firms to successfully operate and compete its environment, could hinder their success against the market competitors in all areas. The importance of high quality services and products is consistently taken as a component of successful firms (Hofer & Sandberg, 1987).                The proper use of technology is really an advantage for every business, like in the case of Wal-Mart, known to be the world’s largest retailer.  Their techniques lie in their strategies to adapt new ways in order to sustain their growth.  Their use of modern technology is a big factor. Wal-Mart is the first one to utilize computer-based information systems.  This situation gives them the edge towards their competitors. They are one of the models who made it through the top because of their constant innovations ( 1999).

            Competitors who are not apt to seek new ways are most likely being left behind. Another significant factor of technology integration consists of the development and use of database. A database proposes merchants a technique of maintaining clients with regular communications while working to congeal image and personality. It is stated by the Centre for Retailing Studies at  that the average business loses 20 – 40% of their consumer base each year ( 2004)


           


Chapter 3: Research Design


3.1 Research Methodology                                                    


3.2 Data Collection


3.3  Data Processing                                                                            


Chapter 4: Results Discussion and Presentation


4.1  Data presentation and analysis


4.2  Analysis and Discussion


Chapter 5: Conclusion


5.1 Summary


5.2  Conclusion and Implication of the Study


5.3  Future Development and Recommendations                                                          


Appendix: Questionnaire


 


 


 



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