There has been quite a lot of progress over the few years that the Internet has become a vehicle for facilitating commerce. However, there is clear indication that a lot still can be done to further enhance the effectiveness of its use. While some of these issues are of a technical nature and thus require technical solutions, there are others that require putting effective management skills to work. In view of the continued growth in importance of the Internet for commerce, we foresee that substantial progress will be made towards addressing them.
In a survey result reported by Sliwa (2000), a significant number of the respondents indicated that the site was so confusing that they could not find the products and that attempts to contact customer service failed. These certainly do not bode well for an e-commerce firm, as they will adversely affect customer service and return purchase. A key question that arises is whether or not the customers needed to contact service representatives in the first place. Could the processes have been better designed for customers to have all the information they required? Providing adequate capacity of customer service representatives to answer customer questions can be quite challenging and costly, and may partly erode the economic benefits of operating in virtual space. Effectively designed processes with websites that provide powerful search engine features will go a long way to mitigate some of these problems. How best to present "how to do" type of information in these search engines will have significant impact on the success of such initiatives. Regular customer surveys to investigate what information was useful or could be useful if provided will facilitate the design of systems to meet these needs. The fact of the matter is, how well information can be adequately represented to meet customer needs, is product-dependent. Balancing the cost requirements for sophisticated process development against cost of providing capacity, in relation to the type of product is worthy of assessment and analysis.
Furthermore, firms need to know the order qualifiers and order winners for their products and services offered through the Internet. While it is true that some may be common with brick-and-mortar companies, understanding the unique aspects can be useful in helping the firm gain competitive advantage. From a research perspective, there is need for the development of models and frameworks that characterize e-commerce organizations in terms of the products and services they offer, and the order qualifiers and order winners that are particularly relevant. Such frameworks will help managers determine appropriate competitive priorities in the virtual environment.
We have observed in the preceding discussions that convenience is one of the key advantages of e-commerce in general and B2C e-commerce in particular. Although potential customers desire to have ordered products delivered to them in a timely fashion, this could lead to excessive market mediation costs (costs incurred in matching demand and supply) on the part of the firm supplying the products. Where in the supply chain should the items for making the products be held to assure prompt delivery, while ensuring that excessive costs are not incurred? Also, how much is the customer willing to trade timeliness of product delivery with costs? These issues have implications for companies engaging in e-commerce transactions where the products have unique characteristics that make them not amenable to a make-to-stock strategy. The development of appropriate models that provide lead-time/cost tradeoff profiles for classes of products will help firms estimate to what extent their product offerings will be acceptable to the customers at a given price. This will thus enable them to institute appropriate price differential strategies for their product offerings. The model development will require a combination of well-designed survey instruments coupled with mathematical modeling. Also, inclusion of information relating to the level of complexity of the product features as well as demographics of the customers will facilitate effective use of the models.
The process of tracking customer or prospective customer behavior in e-commerce transactions has continued to receive attention. Not all customers who visit a company's website or checks on a product eventually makes purchases. How to effectively forecast demand for a given product or related products has continued to be a daunting challenge. Although some progress is being made in this area (e.g., Moe & Fader, 2001), it is apparent that more still needs to be done. Development of sophisticated data-mining techniques, coupled with their integration with forecasting techniques should lead to better forecasting, thus enabling the firm to respond faster, without having to hold excessive amounts of items in inventory.
Success in effectively addressing forecasting in a B2B scenario, especially in a supply chain, lies in the visibility among members across the supply chain. Visibility across the chain leads to reduced costs as information could be used to replace inventory. Still in line with this concept is the evolving paradigm of virtual integration leading to virtual supply chains. Here, instead of the conventional framework of vertical integration between a firm and its key suppliers, loose affiliations are built among them thus, enabling them to replace physical assets with information. Dell Computers is a firm at the forefront in the use of this framework with its suppliers (e.g., suppliers of computer monitors). This has helped Dell tremendously in fostering profitability and growth (Magretta, 1997).
While there has been progress made in some supply chains in terms of information sharing (such as Dell's case described above and the food industry where it has resulted in substantial savings), there is still much that needs to be done in other supply chains. In a survey conducted for some key suppliers in the automotive industry, lack of trust among partners was found to seriously inhibit information sharing (Aigbedo & Tanniru, 2002). These situations arise partly because of the complex nature of the automotive supply chain, whereby a firm that serves as a Tier-1 supplier with respect to one item may be playing the role of a Tier-2 supplier with respect to another item.
There is a need for research into the relationship between product complexity and effective information sharing. How can the principles that have been successfully used in the food supply chain be transferred or adapted to more complex supply chains? Addressing this problem will require consideration of a number of issues, including organizational structure as well as the peculiarities in the parts outsourcing framework adopted by those firms.
Presently, the difficulty with product evaluation and assessment limits the effective use of the Internet for transaction of certain types of products, such as the automobile or fashion clothing. This is exemplified by the issues that Ford Motor Company encountered as it started an initiative to study and adopt Dell Computers online purchase model in its processes (Austin, 1999). The complexity of the automobile as well as the aesthetic feel that goes with purchasing a product such as a car, differ significantly from that of a computer. This issue is also very relevant to the apparel industry where customization and fit of dress is very highly valued by the customer. It is highly unlikely that these same requirements can be completely satisfied in a virtual environment. However, introduction of advanced technology that provide improvements over currently available vision and voice representation will go a long way in facilitating product evaluation by the customer.
The importance of adequate security for customers as well as the firms engaged in electronic transactions cannot be overemphasized. Internet security issues apply to B2C environments as well as B2B environments. There are two major dimensions of the security issues that firms face: passive attacks (access by a third party to customers' private information or firms' strategic information) and active attack (destroying network or corrupting information through cyber attacks by miscreants).
Passive attacks in the B2C environment, includes compromise of credit card information provided by customers as they purchase goods and services online. Studies have shown that some customers are reluctant to provide such information since they are not sure who else will have access to them. Therefore, a firm will lose some potential customers if it does not provide sufficient enough guarantee that there will not be a security breach with respect to such information. In the B2B arena, much of this has to do with protecting trade or technology secrets between two or more partners, rather than credit card payments. For example, firms involved in joint product development of highly competitive products will want to protect such information from competitors, as access could reduce significantly the profitability of the venture.
Active attacks occur in many ways, including virus or worm attacks, fraudulent practices, and destruction of networks, thus resulting in system malfunction and loss of valuable data. There have been several reports about the cost of cyber attacks to firms and the fact that it is on the increase. For example, Harrison (2000) reports on a study by the Computer Security Institute, indicating that U.S. organizations lost more than $266 million in 1999, more than double the average for the previous three years.
Addressing Internet security issues for a firm requires both technological and managerial approaches. The technological aspect relates to the development of hardware and software solutions to counter these attacks. The development in encryption technology will enhance this endeavor. Installation of firewalls and several other software solutions by firms have helped to a large extent to prevent security breaches. In addition, management needs to keep abreast of these developments and make appropriate technology investments in these areas as the need arises. There is also the need to develop and maintain a security policy that makes everyone in the firm aware of his/her responsibility for protecting the firm. This will require training in appropriate practices, including backup and secure storage of sensitive information. Two other important facts in this respect are worthy of note by management: significant losses from cyber attacks are sometimes attributable to system downtime, as sophistication in technology improves, miscreants also tend to develop sophisticated approaches for carrying out their activities. In view of these occurrences, managers should pay particular attention to providing alternatives to keep the systems running in the event of an attack. Further details on addressing the security issues are discussed by other authors in section III of this book.