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What is e-business? 

Some examples | Dynamic Trading | Getting started in e-business | E-business and offshore companies |

E-Business is fundamentally changing the way companies operate, going far beyond buying and selling over the internet, or e-commerce, into the deeper layers of how companies relate to the whole chain of enterprise from raw materials through to satisfied customers.

Right now most companies use the Internet as a way to introduce their services to customers – a glorified and expensive business card. Others have web sites with catalogues or on-line stores where customers can look over their wares and fill up a shopping cart and pay by credit card. Wholesale companies have sites where customers and suppliers can buy and sell products. Over the past few years these services have combined into a new way of doing business in a super-efficient new electronic marketplace that:

• helps companies lower costs throughout their entire supply and demand chain;
• improves customer relationships;
• redefines business relationships;
• speeds up nearly every stage of doing business;
• keeps all interested parties fully informed of market needs and opportunities.

Who’s leading the pack?

More than 90% of the world’s largest 500 companies believe the Internet will transform the global market place by 2001. America is on the verge of “hyper-growth” in Inter-company trade of goods over the Internet. It is predicted to double every year over the next five years, from $43 billion in 1998 to $1.3 trillion by 2003. If the value of services exchanged or booked online were included the figures would be even more staggering. By contrast, business to consumer, e-commerce is expected to rise from $8 billion in 1998 to only $108 billion during the same time. E-business will grow so quickly compared to e-commerce because companies;

• normally deal with much larger transactions;
• have a known credit/payment arrangement with their business affiliates
• are accustomed to ordering, selling, and coordinating business using electronic media;
• have already become acclimatized to using computers.

Britain and Germany will enter hyper-growth in e-business about two years behind the United States, followed rapidly by France, Japan, and Italy. Computing and electronics have already entered the hyper-growth phase and aerospace, defense, telecoms and cars are not far behind. Companies across the board will be drawn into e-business as major players such as General Electric, Dell, Ford and Visa bring their myriad suppliers and customers into the net. As buyers and sellers invest in the capacity to do business on the Internet and reduce costs and improve efficiency, their business partners will have to do the same, thus creating a self-reinforcing circle.

The International Telecommunication Union (ITU), based in Geneva, in association with the New York-based World Trade Centers Association (WTCA) plan to assist more than 110 nations develop e-business capability. They will set up some 300 e-commerce service centers as The Global Electronic Commerce (GEC) project. Each individual World Trade Center will be a registration authority and a certification authority with local portals and services.

The speed of development in e-business is astonishing. A new E-business can emerge from nowhere and within two years establish a web presence that will dominate its sector. By then traditional companies may be unable to respond.

How about some examples?

There are as many different styles of doing e-business as there are businesses, but a common characteristic is that everybody is included in the information loop and everyone benefits. Some companies network exclusively with other businesses, others transcend the entire chain between the end customer and the suppliers. Fully integrated networks become an “electronic business ecosystem” that saves everyone time and money.

One example of a successful e-business is Dell Computer. Orders placed on the company’s website are sent to the assembly factory and on to its suppliers of hard drives, motherboards, modems and so on. The components roll up to the factory in the back of the building and are shipped out as complete computers a few hours later. Because Dell’s suppliers have instant updated information on orders they can organize production and delivery to ensure Dell has the needed parts to keep the production line rolling. The database also alerts Dell to changes in demand and popular computer models and features, allowing them to respond by pushing specials or dropping unpopular models. The customers can follow the progress of their order on-line, right up to and including the location of the computer from factory to their doorstep, thus cutting down on telephone and fax inquiries that cost everyone money.

Dell’s “fully integrated value chain” creates a three way information partnership between itself, its suppliers and customers. All are collaborators working to improve the efficiency of the entire chain of supply and demand and all share the benefits. Not only does it mean lower prices and a greater share of the marketplace, it also engenders a sense of participation that brings improved customer and partnership loyalty.

How does e-business differ from existing data exchange systems?

E-business over the Internet differs significantly from existing “electronic data exchange (EDI) used by the food and car making industries. EDI was set up to communicate data between suppliers and retailers – like supermarkets – where suppliers replenish stocks in high volumes. EDI uses bar-code cash registers, complex databases and intranets to provide basic information about transactions but is not very adaptable to changing market conditions. It is based on proprietary and very expensive technology rather than open standards and thus locks suppliers and retailers into a closed-loop. Customers are excluded from the loop.

Internet technology is open to everybody. The familiar point-and-click browser is easy to use and flexible enough to use as an intranet within an organization or an open Internet or a secure Extranet. It is cheap to set up and run and is global. Best of all the flexibility and open standards give great latitude in creating new business models. Formerly isolated information domains, like logistics, manufacturing, finance, procurement, and human resources can talk to each other and to equivalent systems in other companies, giving and getting information as needed, when needed. IBM’s Internet Division chief Wladawsky Berger says, “A quantum leap in collaboration with partners and customers is now possible.”

The British Safeway supermarket constructed a web-based integrated value chain. On the buying side, any supplier can access the Safeway database over the Internet to see how well each of their products are selling in any store. They can then fit production and delivery to demand and ensure that Safeway never runs out of stock. On the selling side, the website promotes shopping, tells customers about specials and stocks, and gathers information on consumer preferences so it can personalize promotions.

Business transparency speeds up the action with Dynamic Trading

There is a big difference between the traditional thinking of a business as a stand-alone enterprise carefully guarding information and the open networking of e-business. Trust is vital. Partners who are not in the information loop or who hoard information lose vital speed to other e-business networks. Usually there is a hub company that organizes a focus for business. The hub company out sources its manufacturing and distribution to trusted partners.

Cisco Systems, the leading supplier of data-networking equipment bootstrapped its e-business from about $1 billion in 1997 to over $10 billion in 1999 by adopting a new open partnership Internet business approach. Their suppliers post quotes and forecasts on Cisco’s website each quarter which is a form of bidding. But the lowest offer is not always accepted. Cisco works closely with suppliers to be sure they are profitable. For example, their website helps suppliers keep stocks low and Cisco pays them within days and invites supplier input during the design phase of new products.

The Internet’s key role is allowing company networks to form a customized response to current demand. This is called “dynamic trade” and expands the customary buying and selling of goods into the realm of customer services. For example;

• web sites help customers decide what they want to buy, giving them full information about different choices;
• business partners obtain information that helps them manage stocks, expansion and finances;
• one-stop shopping can integrate a whole business ecosystem;
• demand drives production;
• prices can vary to meet market conditions and individual customers.

Customized responses can greatly leverage value to buyers and sellers. The sale of an airline ticket on-line offers the potential for arranging related services like hotel bookings, car rentals, insurance, entertainment, flowers, or currency transactions. Dynamic trading allows bundling services to the benefit of all concerned.

Cooperation between companies in an e-business ecosystem is much different than the concept of a single company trying to dominate all aspects of production and sales. Networks tend to be more efficient because they enable open competition as well as open information. Each link in the corporate network will have its own competence that gives them a competitive edge. The Internet and new integrating software lets them link smoothly into a common project-oriented business. The partners need to collaborate from stage one to target their audience. Instead of trying to do everything on their own, each partner contributes what it does best, playing to each other’s strong points.

Getting started in E-Business

The first step is deciding how much help your company will need; development of an entire e-business strategy or simply the construction of a website integrated with its back-office processes and systems? How much outsourcing will be practical: will it be managed in-house, hosted by your ISP, or will the entire e-business be hosted and your company linked to it as a partner? There are costs and advantages to each. Although there are many consultants and consultant firms ready to help you with these decisions, they all have a similar message:

1. You need an e-business strategy to survive.

2. You will only succeed by making your business culture more transparent.

3. Put the right technological infrastructure in place, use adaptable and easy to use open systems and avoiding proprietary specialized software.

4. Start now.

Where do Offshore corporations fit in?

How does this influence global trade and, in particular, offshore international corporations? In other words, how can Moores Rowland and e-Business Incorporated help you maximize your profit margins and accelerate your e-business solutions?

First of all, once you grasp the essentials of e-business you realize it is truly a global activity. Your customers and suppliers can be anywhere in the world, dealing with a multitude of currencies and tax regimes. Your web site can be hosted in one country, mirrored in another to improve band-width access. Your distributors can be set up in high-income, high technology, high-tax countries and your manufacturing capability can be close to your natural resources and where labor and building costs are lower. The nexus, the central hub of your enterprise can be in a small country that needs foreign exchange to help its own development and has established a tax haven to attract investors.

It does not matter if you are involved in the export-import industry, shipping, or provisions of services – with the Internet your company can be located anywhere on earth where there is a reliable communication system. Vanuatu, for example, realizes this need and, like most small countries these days, uses reliable satellite communications to assure communications get through.

Vanuatu’s new legislation allows you to operate from within a tax-free haven to spur investor interest in the country and bring much needed foreign capital exchange into its banking system. Moores Rowland and e-Business Incorporated have taken the initiative in establishing a network designed from the ground up to maximize the tax advantages of Vanuatu's E-Business Act.

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