4.2: E-Business and E-Commerce – The Difference

As stated in “Foundations for Small Business”, e-business and e-commerce are terms that are often used interchangeably. But e-business and e-commerce are not the same. This section will elaborate on the differences between the two and some of the foundational knowledge that is critical to understanding and using e-commerce in particular.

“Foundations for Small Business” talked about e-business in terms of using the Internet and online technologies to create operational efficiencies, thereby increasing customer value. Kelly Wright, “E-Commerce vs. E-Business,” Poole College of Management, November 27, 2002, accessed October 10, 2011, scm.ncsu.edu/scm-articles/article/e-commerce-vs.-e-business . It is important that small businesses understand the nature of e-business and how it can facilitate operations as well as growth—if growth is desired. It has been said on other occasions, and it will continue to be said, that not all small businesses look for growth, choosing instead to happily remain small. For the small businesses that do want to grow, however, e-business can help them do it.

E-Business Components

E-business involves several major components: Terri C. Albert and William B. Sanders, e-Business Marketing (Upper Saddle River, NJ: Prentice-Hall, 2003), 2–4; and Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 4. business intelligence (BI), customer relationship management (CRM), supply chain management (SCM), enterprise resource planning (ERP), e-commerce, conducting electronic transactions within the firm, collaboration, and online activities among businesses.

Figure \(\PageIndex{1}\): Components of E-Business

Business intelligence is about the activities that a small business may undertake to collect, store, access, and analyze information about its market or competition to help with decision making. When conducted online, BI is efficient and quick, helping companies to identify noteworthy trends and make better decisions faster. BI has been described as “the crystal ball of the 21st century.”Lena L. West, “Business Intelligence: The Crystal Ball of Champions,” Small Business Computing.com, April 11, 2006, accessed October 10, 2011, www.smallbusinesscomputing.com/biztools/article.php/3598131/Business -Intelligence-The-Crystal-Ball-of-Champions.htm.

As defined in Chapter 2 “Your Business Idea: The Quest for Value”, customer relationship management (CRM) refers to “…a customer service approach that focuses on building long-term and sustainable customer relationships that add value for the customer and the company.”Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson/Prentice Hall, 2008), 759. It is a company-wide strategy that brings together information from all data sources within an organization (and sometimes from external data sources) to give one holistic view of each customer in real time. The goal is to reduce costs and increase profitability while providing customer satisfaction.“What Is CRM?,” cestinationCRM.com, February 19, 2010, accessed October 10, 2011, www.destinationcrm.com/Articles/CRM-News/Daily-News/What-Is-CRM-46033.aspx. CRM applications are available for even the smallest businesses.

Every small business has a supply chain, the network of vendors that provide the raw components that are needed to make a product or deliver a service. The management of this network is known as supply chain management (SCM). SCM is about efficiently and effectively improving the way that a company finds those raw components and then delivers the product or the service to the customer. Thomas Wailgum and Ben Worthen, “Supply Chain Management Definition and Solutions,” CIO, November 20, 2008, accessed October 10, 2011, www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions. SCM applications are now available for small businesses. More details about SCM are presented in Chapter 12 “People and Organization”.

Enterprise resource planning (ERP), as mentioned in Chapter 1 “Foundations for Small Business”, is about integrating all departments and functions across a company (sales, marketing, human resources, finance, accounting, production, engineering, etc.) into a single computer system that can serve the particular needs of each department. The objective is to provide information quickly and efficiently to those who need it. Small businesses have many vendor choices for ERP systems. There are more than thirty vendors in the field, and they are looking to small and midsize businesses as their primary growth market. Mary O. Foley, “ERP for Small Business: The Time is Ripe,” Inc., October 1, 2007, accessed October 10, 2011, technology.inc.com/2007/10/01/erp-for-small-business -the-time-is-ripe. More details about ERP are provided in Chapter 12 “People and Organization”.

E-commerce, as defined in Chapter 1 “Foundations for Small Business”, is the marketing, selling, and buying of goods and services online. It generates revenue, which e-business does not. E-commerce is typically associated with e-marketing, discussed in Chapter 8 “The Marketing Plan”, but most of this chapter is dedicated to the operational, nonmarketing dimensions of e-commerce.

Conducting electronic transactions within a firm can occur through an intranet, e-mail, and instant messaging. An intranet is a private network within a business that is used for information sharing, processing, and communication. The goal is to “streamline the workplace and allow easy information exchange within an organization.”Dachary Carey, “What Is Intranet Technology Used For?,” Life123, accessed October 10, 2011, www.life123.com/technology/internet/intranet/what-is-intranet.shtml.

Collaboration can occur internally or externally, and it often involves business partners. The goal is to help teams or business partners communicate with each other more effectively and efficiently, manage projects and shared materials, save companies the costs of travel, and reduce travel-related productivity losses. Gerry Blackwell, “Altogether Now: Comparing Collaboration Software,” Small Business Computing.com, January 28, 2008, accessed October 10, 2011, www.smallbusinesscomputing.com/buyersguide/article.php/10729_3724501_/Altogether-Now-Comparing-Collaboration-Software.htm. E-mail, instant messaging, newsgroups, bulletin boards, discussion boards, virtual team rooms, online meetings, and wikis are common means of collaboration. A wiki is a web page that can be viewed and modified by anybody with a web browser and access to the Internet unless it is password protected.“7 Things You Should Know about Wikis,” Educause Learning Initiative, July 2005, accessed October 10, 2011, net.educause.edu/ir/library/pdf/ELI7004.pdf. The most well-known wiki is Wikipedia.

Online activities between businesses focus on information sharing and communication via e-mail, online meetings, instant messaging, and extranets. An extranet is the part of an intranet that is made available to business partners, vendors, or others outside a company. It allows a business “to share documents, calendars, and project information with distributed employees, partners, and customers” and “it enables 24/7 private, secure access to collaborative tools with just an Internet connection.” “Communicate Quickly and Efficiently Through Intranets, Extranets and Portals,” Gozapit Interactive, 2009, accessed October 10, 2011, www.gozapit.com/intranet-extranet.htm. They make communication easier, eliminate redundant processes, reduce paperwork, increase productivity, provide immediate updates and information, and provide quick response times to problems and questions.“Communicate Quickly and Efficiently Through Intranets, Extranets and Portals,” Gozapit Interactive, 2009, accessed October 10, 2011, www.gozapit.com/intranet-extranet.htm. The result is money and time saved for employees, the company, vendors, and your customers. Commercial transactions typically do not take place on extranets.

As integral as e-business may be to many small businesses, however, there will be small businesses that choose not to go the e-business route. Small businesses that are nonemployers and/or are very small operations that choose to stay that way—for example, local delis, gift shops, restaurants, dry cleaners, and ice cream shops can be and are successful without having to make a commitment to e-business. Therefore, a small business can choose to incorporate all, some, or none of the e-business components. Given the ways in which the Internet continues to transform small businesses, however, it would be virtually impossible for a small business to operate totally outside the realm of e-business.