EVALUATION OF THE ROLE OF E-COMMERCE IN REDUCING OPERATIONAL COST IN AN ORGANIZATION
1.1 BACKGROUND TO THE STUDY
E-Commerce is the process of conducting business electronically among various entities in order to satisfy an organizational or individual objective. A key ingredient of E-Commerce, sometimes referred to as electronic trading, is the advertisement and procurement of goods and services over the Internet (Rhodes & Carter, 1998). The success and volume of E-Commerce on the web has been widely reported. With success in establishing an environment in which E-Commerce can grow and flourish, every computer can become a window open to every business, large and small, around the globe.
The electronic medium we call the Internet has the potential to reduce actual transaction time, processing time and operational cost dramatically, while at the same time making information available globally. Internet-based E-Commerce has been embraced as a means of reducing operational cost and as a high potential means of generating revenue (Levis, 1996). The ubiquity of the web and the availability of browsers across different platforms provide a common base upon which E-Commerce applications can be built, especially in the enterprise. This common platform has reduced the significance of issues pertaining to software distribution and software installation, thus encouraging the expansion of E-Commerce via Intranets, Extranets and the Internet.
E-Commerce provides new channels for the global marketing of tangible goods and presents opportunities to create new businesses providing information and other knowledge-based intangible products (Rhodes & Carter, 1998). Although most E-Commerce is currently at the inter-corporate and inter-organizational level, services targeted at individual customers are evolving rapidly. The Internet is the most obvious example of this and is a major catalyst in the diffusion of E-Commerce, helping to foster a common environment for electronic transactions of all kinds. E-Commerce encompasses all forms of interactive business transactions, which are facilitated by networks of computers. E-Commerce is expanding because of the greater number of businesses and individuals who are able to use these networks and the growing number of ways in which businesses can conduct transactions electronically with other organizations and directly with consumers at a reduced cost (Bartell et al, 1999). At present, business-to-business E-Commerce seems still to be of greater volume than business-to-consumer E-Commerce with the primary motive of operational cost reduction, but this may change in the future. These trends are important to the global economy and to the economy of individual countries because E-Commerce contributes to economic efficiency. E-Commerce contributes to economic efficiency in five important ways. They includes shrinking distances and timescale, lowering distribution and operational costs, speeding product development, providing more information to buyers and sellers and enlarging customer choice and supplier reach (Turban et al, 2000). However, this study is focused on the role of E-Commerce in reducing operational cost in an organization.
Furthermore, when offline stores calculate operational costs, they have to factor in countless business expenditures along with the actual number of transactions. When there are fewer transactions, the cost of per transaction is higher. On the flipside, transactions arriving in high quantity can overwhelm the personnel and distributors. In an E-Commerce business, the operational cost is the same across the board, whether one order or thousands come in.
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1.2 STATEMENT OF THE PROBLEM
Electronic commerce is a popular topic in business management, mass media and in informatics circles as well. Perhaps its impact is most visible in the areas of financial services and retailing. Many E-Commerce initiatives have risen in a short period of time. Those initiatives include innovative smart cards to facilitate E-Commerce, remote payments and electronic checking, online trading of stocks, bonds and related financial instruments, online banking, and online retailing (e-tailing). However, its effect on the reduction of operational cost of organization has been examined in a number of ways comparatively to brick and mortar organizations for instance the money received for every transaction will pay for the item; it will also contribute to the salesperson salary, credit card fees, lease on storefront, electricity, telephone, heating/cooling, taxes, displays, repairs and maintenance to the building. However, the money received for an E-Commerce transaction pays for the item, web hosting, shopping cart software, distribution and little else. The cost overall of maintaining a virtual store is far less than that of a brick and mortar store.
1.3 OBJECTIVES OF THE STUDY
The following are the objectives of this study:
- To examine the role of E-commerce in reducing operational cost in an organization.
- To identify other benefits accruable from E-commerce in Nigeria.
- To identify the limitations and disadvantages of E-commerce in Nigeria.
1.4 RESEARCH QUESTIONS
- What is the role of E-commerce in reducing operational cost in an organization?
- What are the other benefits accruable from E-commerce in Nigeria?
- What are the limitations and disadvantages of E-commerce in Nigeria?
HO: There is no significant relationship between E-commerce and reduced operational cost in an organization.
HA: There is significant relationship between E-commerce and reduced operational cost in an organization.
1.6 SIGNIFICANCE OF THE STUDY
The following are the significance of this study:
- The outcome of this study will educate business managers and the general public on the role of E-commerce in reducing the operational cost of business organizations.
- This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area
1.7 SCOPE/LIMITATIONS OF THE STUDY
This study will cover the benefits of E-commerce with special focus on its influence as regards operational cost reduction in business organizations.
LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work
Bartell, R.L. Blackwood, N.A. Eggenschwiler, D. Nguyen, M. Schnidrig, C. Yatchman, M.J. (1999) The MediaXactt system – a framework for personalised electronic commerce services, Bell Labs Technical Journal 4 (2) 153–173.
Levis, K. (1996) Electronic commerce, British Telecommunications Engineering 14 (4) 281–285.
Turban, E. Lee, J. King, D. Chung, H.M. Electronic Commerce: A Managerial Perspective, Prentice-Hall International (UK) Limited, London, 2000.
Rhodes, E. Carter, R. Electronic commerce technologies and changing product distribution, International Journal of Technology Management 15 (1/2) (1998) 31–48.