Cases on Information Technology Series

Web-Enabling for Competitive Advantage 381CURRENT CHALLENGES/PROBLEMSFACING THE ORGANIZATIONThe Internet ApproachThe Internet- (or Web-) based economic model is staggeringly more efficient at thetransaction cost level (Wigand & Benjamin, 1995). For example, the cost of processingan airline ticket through traditional approach is $8, but is only $1 through the Web.Similarly, other efficiencies can be derived from marketing and advertisements, onlineinformation processing with forms that are electronically linked to databases and onlinecustomer support (Hoffman et al., 1995). Elimination of middleman in the distributionchannel (or disintermediation) also can have a big impact on the market efficiency(Michalski, 1995). Other efficiencies are generated due to less or no inventory, storageor real-estate space, larger customer base and 24x7 access at no additional cost (Steinfield& Whitten, 1999). Marketing on the Web can result in additional unit sales at very lowunit cost. In addition to the lower cost, the Web also enables a higher level ofcustomization to the needs of individual clients (Choi & Winston, 2000). Auto manufacturers,such as Ford and GM, are experimenting with custom-designed cars that can bedelivered in less than two weeks to a customer’s home (White, 1999). Thus, Webenablingbusiness processes is particularly attractive in the new economy where productlifecycles are short and efficient, while the market for products and services is global.The Web allows organizations to expand their business reach. One of the keybenefits of the Web is access to and from global markets (Economist, 1997). The Webeliminates several geographical barriers for a corporation that wants to conduct globalcommerce. Political, trade and cultural barriers may still make it difficult to take trueadvantage of the global business environment.While traditional commerce relied on value-added networks (VANs) or privatenetworks, which were expensive and provided limited connectivity (Pyle, 1996), the Webmakes electronic commerce (e-commerce) cheaper with extensive global connectivity.Businesses have been able to produce goods anywhere and deliver electronically orphysically via couriers (Steinfield & Whitten, 1999). This enables an organization theflexibility to expand into different product lines and markets quickly, with low investments.Secondly, 24x7 availability, better communication with customers and sharing ofthe organizational knowledgebase allows an organization to provide better customerservice. This can translate to better customer retention rates, as well as repeat orders.Finally, the rich interactive media and database technology of the Web allows forunconstrained awareness, visibility and opportunity for an organization to promote itsproducts and services (Senn, 2000). This enhances organizations’ ability to attract newcustomers, thereby increasing their overall markets and profitability. Despite the recentdot-com failures (Francis, 2000), e-commerce has made tremendous in-roads in traditionalcorporations. Forrester Research in their survey found 90% of the firms plan to conductsome e-commerce, business-to-consumer (B2C) or business-to-business (B2B), andpredicts e-commerce transactions will rise to about $6.9 trillion by 2004. As a result, thetravel industry has started to believe in the Internet because of its ability to attract andretain more customers, reduce sales and distribution overheads, and increase globalaccess to markets with an expectation of an increase in sales revenues, and higher profits.Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without writtenpermission of Idea Group Inc. is prohibited.