What is an electronic business (e-business)?

Electronic business uses electronic, computing, and internet-based technologies to replace the existing traditional methods of doing a business. The aim is to add or use more efficient and effective methods to the business and eliminate ineffective methods of the organization's supply chain and value chains. The business resources such as human resources, materials, money, and time are redistributed to increase the revenue and profits of customers and suppliers.

Users can access an e-business by using the internet, intranet, or extranet (with a username and password).

Benefits of an electronic business

There are several benefits of choosing an e-business over a traditional business. Some are listed below:

• E-businesses are not limited to a specific region. Hence, they increase sales.
• The costs such as distribution costs, product creation costs, processing costs, storage costs, and promotion/ marketing costs for e-businesses are lesser than traditional businesses.
• The profit margins are high in e-businesses.
• It allows to target a specific group of customers by market segmentation.
• Product customization is easier.
• Innovative business models can be created and implemented.
• It increases productivity.
• It is possible to expand the business globally.

Drawbacks of an electronic business

Although an e-business opens up a world of opportunities to earn more revenue, this model has certain limitations. These include:

• Not all clients would be convinced to use the e-business model.
• Some protocols may be standardized in one country but not in another country.
• Customer information privacy should remain the top priority for e-business owners.
• Such businesses may often encounter cyber attacks.

Mistakes to avoid in an electronic business

Now that an electronic business is a newer concept, lots of business owners fail to understand the e-business fundamentals. As a result, they make mistakes, and e-businesses fail. Some of the key reasons behind the failure of e-businesses are:

• High expectations - E-business or electronic commerce (e-commerce) business owners often have unrealistic expectations from their businesses. It is necessary to understand that all desires cannot be achieved from e-business. If the business fails, they should identify the mistakes in the business and try to look for methods to solve them.
• Not improvising the strategies - It is crucial to analyze and improve the strategies in a business regularly. The services and information provided in the e-business should be up-to-date and should fulfill the customers' requirements.
• Incomplete implementation - Each e-business model should be implemented entirely. It should not meet its requirements partially. Otherwise, this will lead to restrictions in the business.

Types of e-businesses

An electronic business is mainly of three types:

• Business to Consumer (B2C).
• Business to Business (B2B).
• Business to Government (B2G).

Business to Consumer

B2C is the most widespread form of e-business. In this business model, information, products, and services are exchanged between the business and consumer using the internet. In B2C, the transaction costs can be reduced by increasing consumer access to information and finding the most competitive price for a product or service.

This business model cuts down market barriers since putting and maintaining products online is cheaper than doing it physically. The B2C model is growing rapidly and more customers use this approach to purchase products and access information.

B2C businesses can be exemplified by Amazon.com, ebay.com, and beyond.com.

Business to Business

B2B is the largest type of e-business based on the monetary resources spent. This type of business occurs between two businesses (organizations). This indicated that the products or services are exchanged between two businesses using a low-cost sales channel.

B2B applications mainly occur in supply chain management, inventory management, distribution management, and payment management. Some examples of B2B companies are IBM, Cisco, and Dell.

Business to Government

B2G businesses occur between a company and the government (public sector) agencies. These types of transactions are also referred to as e-government. The use of the internet for public procurement, licensing processes, legal issues, and other government operations fall under this type of business.

A typical example of B2G is electronic tax filing through the income tax website.

Functional elements of an electronic business

To run a successful e-business, business owners need to understand the following e-business fundamentals. These are the core functional elements needed in most e-businesses:

• Product creation and sourcing- The types of products, information, or services offered by one e-business may be similar to another business. As a business owner, it is necessary to identify and solve the logistic issues involved in manufacturing or sourcing a product or service.
• Warehousing- Most e-businesses do not require space for warehouses or to run the business. However, if it requires a warehouse, the owner has to make arrangements for the storage space. Moreover, the addition of these costs may reduce the profit margins.
• Marketing- The primary purpose of marketing in e-business is to increase the number of visitors to the website (website traffic). There are several methods to do that. However, most e-businesses increase traffic using search engine optimization (SEO) and by running paid online advertisements on search engines and social media sites.
• Customer service- Each e-business should offer excellent customer service using live chat, email, or telephone. This method helps address the customer's issues and queries regarding the product or service.
• Payment gateway- Payment gateways help in receiving and paying money online smoothly. It is essential to set up a reliable and intuitive payment gateway that accepts payments in various methods.
• Information technology- A website, software, or application to run an e-business can be developed with information technology. For this, business owners need to hire information technology experts to create, maintain, and update the system regularly.

E-commerce vs E-business

E-commerce and E-business both occur online. The significant differences between these two terminologies are as follows:

Context and Applications

E-business is a concept of information technology and it is covered in degree courses such as:

• Bachelors of Science in Information Technology
• Masters of Science in Information Technology

Practice Problems

Q1) Which of the following is a type of e-business?

1. B2F
2. B2E
3. B2G
4. B2M

Answer: Option c

Explanation: B2G, B2B, and B2C are all types of e-business.

Q2) Which type of companies are amazon.com and ebay.com?

1. B2B
2. Electronic economy (e-economy)
3. Web-based
4. B2C

Answer: Option d

Explanation: ebay.com and amazon.com are both business-to-consumer organizations. Businesses or product manufacturers sell products to customers using these websites.

Q3) Which type of crime is most likely to occur in online business organizations?

1. Cybercrime
2. Case studies stealing
3. Peter Eckersley
4. Paul Jackson

Answer: Option a

Explanation: Cyberattacks such as stealing customers' information are most likely to occur in e-businesses.

Q4) Which of the following is an online marketing approach?

1. Brochures
2. Flyers
3. Paid advertisements on search engines
4. None of the above

Answer: Option c

Explanation: Online paid advertising on search engines and social media sites to market business products and services.

Q5) Which of the following describes e-commerce?

1. Doing business online
2. Doing business offline
3. Both a & b
4. None of the above

Answer: Option a

Explanation: E-commerce refers to online business.

Common Mistakes

Most students consider e-commerce and e-business as the same terms. However, in the real world, e-commerce is a subset of e-business. Hence, they are different terms and should not be interchanged.

Related Concepts

• Fundamentals of e-commerce
• Business planning and strategy
• Internet
• Information technology