To What Extent Is an E-Commerce Strategy the Best Way for Businesses to Increase Their Profits? (40 Marks)
To what extent is an e-commerce strategy the best way for businesses to increase their profits? (40 marks)
E-commerce is the online transaction of goods and services, which has completely revolutionized business and the way in which businesses can operate. It’s now easier for customers to compare prices/products with a little time spent browsing the Internet opposed to dragging themselves to the stores. This means that e-commerce is having an impact on what and how much businesses sell, therefore influencing the profits the business gets. In this essay I will consider whether an e-commerce strategy is the best way for a business to increase their profits, or whether e-commerce is not the best strategy to do this. I will be arguing that
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However, e-commerce is allows businesses to reduce the intermediaries in the distribution process and sell directly to consumers. This is because the products are not moved from manufacturers to distributors to physical stores then the consumer. E-commerce cuts out the need for the physical store and so saves transportation costs. This process is called disintermediation. Disintermediation allows greater efficiency and reduced costs, which due to reducing the number of transactions and processes involved. The business is therefore left with an option to either reduce the price of their products, which may lead to more consumers buying the product (PED), potentially allowing an increase in profit. However they could maintain their selling price. This will allow them to increase their profit margin and so potentially increase profit. Dell used e-commerce to apply a disintermediation strategy into his business model in the early 2000’s. As a result of the venture into e-commerce the business increased their sales to $4 million a day. This combined with the money saved through cutting out the middleman resulted allowed Dell to increase their profits. This point shows how e-commerce provides numerous opportunities to businesses to allow them to make processes easier, lower costs and therefore create bigger profit margin – increasing profit.
On the other hand, it’s difficult to commit to the idea that an e-commerce