______________________________________ Staffordshire University

Assess the impact of Internet-based Electronic Business on the corporate value chain

A Literature Review in partial fulfillment of the requirements for the degree of MSc in Information Technology, Staffordshire University

Name : MSc ID : Date :

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Table of Contents
1. Introduction.................................................................................................................3 2. Electronic Business and the Value Chain Model. .........................................................4 3. Electronic Business .....................................................................................................5 3.1 Electronic Data Interchange (EDI) ........................................................................5 3.2 Internet-based Electronic Business........................................................................7 4. Electronic Commerce ................................................................................................10 4.1 Defining Electronic Commerce............................................................................10 4.2 The Benefits of Electronic Commerce..................................................................10 4.2.1 Resource Conservation..................................................................................10 4.2.2 Customer Relationship Management .............................................................11 4.2.3 Value-added Services....................................................................................11 4.2.4 Sales and Marketing that transcends geographical Limitations ......................12 4.2.5 Real-Time Inventory Management ................................................................13 4.2.6 Logistics and Electronic Fulfillment..............................................................13 4.3 Limitations of Electronic Commerce....................................................................15 4.3.1 Implications on security ................................................................................15 4.3.2 Impact on labour and Employment Market....................................................15 5. Conclusion ................................................................................................................17 6. Appendix A...............................................................................................................18 7. References.................................................................................................................20

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1. Introduction
Electronic Business has been in existence since the 1960s and 1970s when expensive computers were used to communicate business information between business partners and vendors using the Electronic Data Interchange document standard. Although, it has brought enormous benefits in terms of performance to the core businesses such as cost, time and resource savings, these technologies were only restricted to larger enterprises which could meet the start-up and maintenance costs of such complex systems in addition to maintaining Valueadded Networks. The Personal Computer revolution in the late 1980s and early 1990s changed all that. The increasing rate of drop in the per unit processing power coupled with the launch of the World Wide Web, has encouraged and spurred small and medium enterprises(SMEs) to utilise the Internet as an alternative business communication channel. The accessibility and the endless opportunities to creatively use the Internet has since then brought many implications to the organisations core business processes as like the EDI counterpart, the Internetbased Electronic Business too generate enormous benefits in terms of performance as well as provide greater value-added products and services. Various business models have been used and there were attempts to assess the impact the Internet-based electronic business on organisations and to utilise the result in leveraging this technology to improve the organisations core processes. In this dissertation, the value chain model is used to achieve the above aim. In this dissertation, the objectives are as follows: To assess the advantages and disadvantages of Internet-based electronic business on organisations in the context of the value chain model and using selected case studies from both international and domestic industries. To discuss prevailing issues surrounding electronic business poses to organisations and possible solutions to these problems. To evaluate different aspects of electronic business and the respective benefits and limitations using suitable metrics wherever appropriate. To draw conclusions from case studies on issues that are industry-related and to discuss possibilities of further improving the organisation value chain In this literature review, Section 1 will provide a general description of the value chain model concepts. Section 2 will deal with the evolvement of Electronic Business through the Electronic Data Interchange and Section 3 will deal on Internet-based Electronic Business, a description of the components and discussion on Electronic Commerce, a front-end business component of Electronic Business. Staffordshire University

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2. Electronic Business and the Value Chain Model.

The concept of value chain was originally conceived by Michael E. Porter in response to the organisationss need to cope with increasing competition both within and across industries. These competition could come in the form of threats of new entrants, threats of substitute product and services and increasing bargaining power from the buyers and the suppliers as explained in the Porters five forces model.(Porter M.E, 1985). Globalisation of economies and the increasing usage of the Internet as a competitive tool has demanded organisations to re-examine the core business processes and to look for opportunities to streamline and to even completely redesign the processes in response to stiff competition. The value chain thus serves not only as an analytical tool but as a planning tool to improve organisations processes. The objective of the value chain is to attempt to seek ways to maximise the value of the activities which contributes to the final product or services by reducing or eliminating the associated costs. The value chain recognises time as an important value-determining factor. The value chain is a systematic way of examining all the activities a firm performs and how they interact (Porter M.E 1985). It is a generic model, applicable to all industries although some activities within the model could vary depending the nature of the industry. The value chain comprises of the primary activities, support activities and the margin. While the primary activities are defined as the activities involved in the physical creation of the product and its sale and transfer to the buyer as well as after-sale assistance.(Porter, M.E 1985), there is also a virtual counterpart for product and services which are digitally created.The support activities support the primary activities and each other by providing purchased inputs, technology development, and human resources and various firm-wide functions(Porter, M.E 1985). The margin refers to the difference in the total value-added activities and the total associated costs. It is based on the concept that processes can be strategically and technically disaggregated into activities, which could be in the form research and development, procurement, operations and sales and marketing activities. Electronic business refers to the primary as well as the support activities. See appendix A for the full description of value chain model.

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3. Electronic Business
3.1 Electronic Data Interchange (EDI)
Electronic Data Interchange (EDI) is electronic communication standard and it refers to businesses, trading partners and vendors exchanging structured business messages from computer application to application on a virtual network (NIST, 2002). EDI is actually a direct response to the organisations especially the enterpriselevel players as means to communicate data between organisations instead of relying on the traditional telecommunication means such as the telephones, facsimile, postal services to deliver business data and information. With EDI, the organisation were able to deliver orders much faster with less errors, improving productivity and relationships with suppliers, partners and customers. Also, there tends to be reduced administration time and improved flow of information. EDI has the advantage over the postal system in terms of the performance improvements such as higher efficiency and productivity and increased reliability of communication of data. With EDI, data and information can be communicated over to the target organisation using dial-up lines or pre-agreed private network interconnection with EDI VAN vendors, often within minutes although the documents sent are collected in batches on the recipient side while the postal system would inherently introduce delays due to excessive paperwork and bureaucratic processes and also the risk of data errors sent, hence causing further delays by resending data and information both on the part of the organisation and the postal service. Furthermore, EDI is a set of standards which proved to be inherently advantageous. It standardises the data to be communicated to a set of data formats that (NIST 2002) were hardware-independent unambiguous such that they could be used by all trading partners reduced of labour-intensive tasks of exchanging data allowing the sender to have some form of acknowledgement and control such as the knowledge if the data sent has been received by the intended recipient and the time of receipt.

Data exchanged using the EDI conforms to either on of the two widely established standards namely X12 or the EDIFACT or Electronic Data Interchange for Administration, Commerce and Transport. A standard such as X12 is hierarchical in structure. During the transmission of data, the standard defines that business data elements such as invoice number, weight, exchange rates etc. be aggregated and translated into several levels of structurally complex data, each level containing control information in standard codes. These control Staffordshire University

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information could contain information such as the number of purchase orders, requisition for quotation, each grouped logically, and according to targeted geographical regions. Aggregation of data would continue until a final high level complex data or final EDI document is produced, ready to be sent using suitable transport communication protocol. At the receiving end, an EDI translator is required to decipher the information in the reverse order, decomposing the structure into several levels until to the level where actual data can be extracted and be used for real work and processing. Due to proven reliability and relative efficiency and effective data communication, the enterprise-level players with existing EDI systems would not readily dispose the system in favour of the ubiquitous Internet. To date, enterprise-level players such as Daimler-Chrysler AG and Boeing Inc. are still leveraging on the EDI and it is recently that Daimler-Chrysler AG collaborated with its trading partners in sharing technical and design information through the virtual value chain. After all, these organisations have invested billions of dollars into these systems for almost 3 decades and the technology still proved to be disposable for both the present and future needs of these organisations. The EDI setup is less complex since there are few systems in the market hence there is less system interoperability issues. One of the main disadvantages of EDI is the restriction of the usage of this technology to the upper-tier market players due to substantial start-up costs as the initial investment includes purchase of restricted and usually expensive hardware. And the target organisation to which an organisation would wish to communicate with must have an equivalent set of corresponding equipment in addition to separate network connection that is set up separately. If an organisation wishes to correspond with 100 suppliers or vendors, the cost of set up will be enormously high. Furthermore, the running costs of maintaining the network and cost of line rentals for leased line on which the Virtual Private Network is based is significant, driving the technology beyond the reach of many Small Medium enterprises (SMEs). The fact that many Value-Added Resellers who markets the products further drive the costs higher. Furthermore, from the technical perspective, data transmitted using the private networks requires a translator software as the EDI document data are not designed human readable i.e. in order to obtain meaningful data, an EDI translator is essential. There have been attempts to integrate the Internet with the EDI to become what is known as the Internet-EDI. Traditionally, the EDI systems promotes a hub and spoke relationship with its trading partners, often the hub companies dictating the terms of trade in their favour. The Internet-EDI attempts to rectify this skewed imbalance in this trading relationship. Furthermore, Internet-EDI is cheaper compared to the traditional EDI systems. Tandem Computer (Wilde, 1997) estimated the cost of EDI system is about USD10 000 while the corresponding Internet-EDI system costs between USD 650 -1000 i.e. 90% of cost savings or Staffordshire University

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more is possible. This technology too benefits the larger corporations as they are now able to automate the entire supply chain, facilitating the formation of virtual organisations linking suppliers, partners and customers.( Angels,R. 2000 ) And EDI using the Internet is also flexible in that the EDI network can be linked to the Internet by providing additional linkages. The process of conducting EDI over the Internet has several additional processes in addition of the original processes associated with the EDI system. The translation layer formats the outgoing data into an EDI format which can be either X12 or the EDIFACT. The next process involves the encapsulation of the data in Multi-Purpose Internet Mail Extensions or MIME. There are 3 standard formats i.e. EDIFACT, EDI-X12 and EDI-Consent. This is then encrypted by Internet-based mail standard, Private-enhanced Mail (PRM) to maintain integrity of the business data and to provide non-repudiation and authentication. The encrypted and encapsulated data is then aggregated into an RFC822 envelope to be sent to the Internet through Simple Mail Transport Protocol (SMTP). On the receiving end, the process of extraction of data is the reverse of that of sending. The business data is first encrypted, extracted using MIME which is then passed on the translator to convert the result to the original business data or document. Although this has allowed the EDI hubs to be accessible to the smaller organisations and the supplier have extended the market reach, the functions provided by this technology is generally limited, static and most often contain complex business rules (Forrester Research Press Release 2002).

3.2 Internet-based Electronic Business

Electronic Business itself is broad in scope and in general definitions are provided from both the technical and business perspectives. The United States Census bureau defines Electronic Business as any process that a business organisation conducts over computer-mediated networks, where computermediated networks refers to electronically-linked devices that communicated interactively over the network(Mesenbourg, T. L 2001). Fellenstein and Wood define Electronic Business as the use of electronically-enabled communication networks that allows business enterprises to transmit and receive information in a variety of medium.(Fellenstein & Wood, 2000). International Business Machines (IBM, 2002), the leading electronic business platform and solution provider, has given a technical definition although it is generally leaned towards Internet-based application. IBM defines Electronic Business as the process of using the web technology to help businesses streamline processes, improve productivity and increase efficiencies, enabling companies to communicate with partners, vendors and customers, connect back-end data systems and transact commerce in a secure manner. (IBM, 2002). In this dissertation, the IBM definition is adopted. Electronic Business itself is not new. It has been traced to the use of EDI about three decades ago as means to improve operational efficiencies and to reduce administrative work and communication errors between organisations. The Staffordshire University

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organisations comprises of mainly enterprise-level companies due to the high cost factor. Some of the prominent manufacturing and assembly organisations such as Boeing stood to gain millions of dollars of cost-savings as a result of increased efficiency and productivity. Electronic Business comprises of sell-side electronic commerce, electronic marketplace, electronic procurement and electronic collaboration and here we assume that the components of Electronic Business are Internet-based. The late 1980s and early 1990s saw a boom in the sale of personal computers(PC) in what was know as the PC revolution as a result of the significant decrease of cost per unit processing power, rendering the use of machines it virtually accessible to all businesses of all scale. The PC industry during this period formed the largest computer hardware market segment. According to International Data Corporation, 113 million units of PC were shipped worldwide in 1999 worthed $190 billion. (Kuglin, F. A. and Rosenbaum, B. A. 2001). Furthermore, the introduction of the World Wide Web prototype in 1990, the lifting of restriction on commercial use of the Web and introduction of the client browsers such as Mosaic and Netscape in 1993 and 1994 respectively have accelerated the number of Internet uses online. While in 1991, the Internet has 3 million users around the world with virtually few transactional activities, by 1999, there was an estimated 250 million if users accessing the Internet and at least 25% of the figure made online purchases for both business and consumers. (Coppen, J., 2000). And the number of Internet hosts or servers are correspondingly increasing. According to IBM, every month there are 53 000 new servers, engines of electronic business, connected to the Internet. That is 1.2 server connected per minute( Turban, E. et al. 2000). It is clear that there is a sizeable global market to be tapped and particular more so for business to business commerce activities. The main global electronic commerce activities mainly take place between businesses and business to business electronic commerce is projected to grow more rapidly than the business to consumer model due to migration from traditional EDI systems to Internet and the disintermediation of channels and dealing direct with suppliers. (Coppen, J. ,2000). Out of response of increasing competition and complexity of customer demand, many organisations have embarked on Business Process Re-engineering initiatives to revamp some or all of the core business processes to further maintain competitive edge and to reach out to new target market segments. Business Process Re-engineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performances, such as cost, quality, service and speed (Hammer ,M. & Champy, J. 2001). Hammer has referred to Information Technology as the essential enabler in any part of re-engineering effort. The Staffordshire University

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IBM credit processes has been successfully re-designed or re-engineered an the result was 90% of cycle-time improvement and hundred times improvement in productivity attributed mainly to the automation and re-engineering project (Hammer ,M. & Champy, J. 2001). Ford Motors had successfully re-engineered and automated its vendor payment system and the result was a significant decrease of 80% of the total jobs. Other successful re-engineering efforts too point to similar results , highlighting the inherent benefits associated with Information Technology applied to organisations or electronic business such as faster delivery of products and services to market, increased efficiency and productivity which ultimately contributes to cost-savings. Introducing Electronic Business to organisations demands that organisations peer into existing practices and processes and gain more insight and facilitate understanding. With critical information derived from studying the structure of the process and the management of processes, the organisation would be in a more informed position to reengineer successful business practices. Electronic Business can be used to facilitate inductive thinking to encourage brainstorming and implementation of creative ideas to further improve the performance of business processes (Hammer ,M. & Champy, J. 2001). This is in contrast to the traditional mode of deductive thinking mode where problems appear and electronic business tools are utilised often ineffectively to address and resolve the problems. Furthermore, inductive thinking would encourage and facilitate constant improvement to the system. In recent years, organisations are moving towards partnerships, alliances and mergers. Organisations are forming effective partnerships and alliances that can perform some processes better, leaving the firm to concentrate on their core competencies. And also the realisation that through collaboration and sharing of resources, these formations could generate substantial savings than of an individual organisation to built all the resources on its own. This is what James Champy refer to as X-Engineering, a natural evolution of Business Process Reengineering(Champy, J. 2002). According to Champy, X-Engineering requires that you rethink your whole business and all its relationships, not just with customers but also with suppliers, partners, employees-even competitors. Champy, J. 2002). It responds to pull of customer similar to the organisational concept of customer-driven and the push of processes across the firms boundaries. Internet is the prime enabler that not only provide the tools to change but the creators of change. It is changing the nature of competition itself; it shifts organisational thinking from competing to co-operation.

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4. Electronic Commerce
4.1 Defining Electronic Commerce
Electronic Commerce refers to the goods and services sold over computermediated network (Mesenbourg, T. L 2001) while IBM defines electronic commerce as the ability to buy and sell products and services over the Internet. It includes goods and services ordering billing, customer service and all handlings of payment and transaction.(IBM 2002). Electronic Commerce provides a platform or channel on which potential customers, partners or suppliers could perform online transactions, search for product and services information and tracking of goods and it provides a virtual interface through web browsers to communicate with host servers. Electronic Commerce consists of 2 types: sell-side and buy-side. The Business to Consumer is a typical sell-side Electronic Commerce while The Business to Business and Procurement are typical buy-side Electronic Commerce. In this chapter, the business to consumer electronic commerce is discussed. The buy-side shall be elaborated as a follow-up to this literature review.

4.2 The Benefits of Electronic Commerce

4.2.1 Resource Conservation
The immediate benefit of sell-side electronic commerce is that the presence of a virtual storefront lowers transaction costs, which could be passed on the customers while providing value-added services. Dell Computers Corp, a global PC manufacturer has estimated the cost of engaging a telephone call with technical specialist would cost in the region between US$5 to US$15 (Dell ,M. 2000). This is compared to the negligible cost of performing the same tasks through the virtual storefront. It is the multitude of transactions conducted annually that would realise significant cost savings. Providing an electronic medium to transact decreases costs of creation, processing, distribution of information as this eliminates or substantially reduces paper-based documents. In fact, Converting paper-based system to a system such as electronic procurement could save up to 85% of administrative costs. (Huff S. et al. 2000). IBM has re-engineered and automated its procurement process in 1999 and it is reported that IBM saved USD 5 million worth of papers(Ferns, D. & Whipple,L. 2000) In addition, payment methods such as traditional cheques and postal orders usually carry a certain amount of overhead due to administrative handling and processing while an online transaction is virtually free apart from the negligible telecommunication charges and Internet access fees and the availability of online banking services provide the flexibility, reliability for payment with better efficiency. And the Internet-based services are available 24/7 with the accessibility from any machine that is connected to the Internet. Staffordshire University

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4.2.2 Customer Relationship Management

Electronic Commerce systems demand that many disparate manual and legacy database systems be integrated to facilitate a common channel for information flow. Processes involving the use of back-end central repository reinforces data integrity, significantly reduces associated resource wastage due to errors. Furthermore, virtual storefronts provide a common channel for routing of data to perform transaction-related analysis such as data warehousing. Analysis of the results provide information such as customer behavioural patterns and purchasing habits and can be readily fed back to the sales and marketing department to aid in the development of effective marketing strategy and to the top management to assist in critical business decision-making. The presence of virtual storefront facilitates quick dissemination of marketing information to target market segments. Information on new developments assists customers in purchasing of products and services by offering various new alternatives. The virtual storefront contains a host of sales information directly accessible by the customers using a web browser referred to as literature in demand. In addition, there will be online catalogues and technical information related to resolution of problems pertaining to the use of products and services. Instead of displacing or eliminating the sales-related personnel or the sales department, this channel only serve to support the jobs of consultants and account managers by providing low-level standard technical details and information, leaving the sales consultants focus on higher-level and value-added sales activities. The storefront saves the time for customers who tirelessly try to engage the services of busy sales personnel, leading to improved customer services. There is an improved flow of information to the customers

4.2.3 Value-added Services

Apart from providing search-related services for product and services, the presence of virtual channels are used as channels for customer feedback in the form of comments or complaints and suggestions for improvement. Information collected could be channelled back to the operations to improve the core business processes while indirectly improving customer relationship. Activities such as after-sales services are carried out mode efficiently as customers intending to search for product or sales information could be obtained from the virtual site and without technical sales personnel assistance. Most electronic commerce sites offer a range of technical support packages with the most basic services to comprehensive, time-critical maintenance and support although some come with high fee charges. Considering the difficulties engaging full-time services of the technical specialists more so if the regional office is based offshore, purchasing suitable technical support packages are still viewed favourably amongst businesses. Furthermore, most technical packages are Staffordshire University

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designed to respond to emergency situations where servers are required to be high in availability i.e. any break down of system must be brought up again with the minimal downtime. And after sales online support will indirectly improve the responsiveness to customer. Registering and payment for the relevant technical packages are simple and payment can be made real-time, cutting across inefficient processes and its associated costs of corresponding through telecommunications and payment be made through traditional postal orders. Organisations such as Intershop, a electronic commerce software platform provider, although they do not have regional office in South-East Asia, provide a full range of technical support ranging from one days response time to as fast as 2 hours of response and resolution time. Virtual storefronts, apart from selling standard products and services from online catalogues, provide a channel on which customers can customise the design of the product or services. Computer modelling tools are effective means to allow customers to experiment and seek area to save cost by -savings as it is, in most cases, simple and cost-effective and more importantly to achieve customer satisfaction. Some organisations which traditionally provide services such as car rentals and hire through the traditional telecommunication means such as telephone are embracing the Internet to provide additional value-added services i.e. providing additional channels to interact with customers. An excellent example is AutoByTel.com, the Dell of the Car Industry.

4.2.4 Sales and Marketing that transcends geographical Limitations

The presence of a virtual site transcends geographical boundaries to reach remote and foreign markets something which tradition physical store would not have made possible without the presence of another physical store in close proximity. Not only significant cost-savings are possible, the fact that there are new group of potential buyers could be reached further doubles the impact on marketing and sales. Electronic Storefronts can be used as means to promote brand and corporate image. Promoting the storefront through registering sites with search engines or placing advertisement banners on prominent web sites and through offering continuous fast, efficient and reliable services through the sale of products not only enable the products and services could be better marketed, a virtual presence will continually re-affirm the image of the organisation. Amazon.com is an excellent example in addition to companies such as Wal-Mart, Dell Computers and Intel, Furthermore, promotion of products through virtual presence proceed at a faster rate compared to using traditional medium as Amazon.com has proven.

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4.2.5 Real-Time Inventory Management

Furthermore, on-line transactions would generate real-time information which are used to match inventory supply and demand in order to reduce inventory levels. Companies such as Dell Computers Corp and U.S-based W.W Grainger has successfully reduced capital tied up due with high inventory. Dell Computers, for example, has decreased inventory velocity from 6 days to 4 after implementation of the corporate web site www.dell.com in 1996, which enables the practise of effective methods such as Just-In-Time manufacturing. This indirectly assists the suppliers to better plan and adjust their inventory schedules as well as to facilitate in balancing production load in factories, thereby minimising costs. Also, it supports Collaborative planning, forecasting and replenishment (CPFAR), A US-based initiative which is a set of standard and guidelines to forming relationships with manufacturers and retailers to exchange forecasts and to provide real-time ordering. In recent years, the retailers usage of CPFAR have been gaining momentum. It has one limitation though in that most of them are implemented as one to one collaborative partnership between trading partners.

4.2.6 Logistics and Electronic Fulfillment

Electronic Commerce provides means to reduce the time taken from the purchase of products and services to the receipt of them. Online payment methods such as the credit or debit card payment can be made and the products to be shipped can be immediately despatched. Furthermore, in most instances, for physical products, most organisations provide online options of delivery ranging from the standard package to the express delivery, which takes up to a few days to remote corners of the globe. This is in contrast with the traditional methods of using telecommunication channels such as finalising purchase order details which itself could take days in addition the risk of errors introduced or insufficient or unclear details which stalls payment process. In addition, the logistic channel can be integrated with the corporate virtual storefront and it can provide value-added services such as tracking shipment, warehousing facilities and the scheduling of transportation in order to deliver the shipment within the stipulated time frame. In the case of software, the software products could be downloaded almost immediately bypassing the need for logistics. One area in the value system where electronic storefronts has significant impact upon is the distribution channel. With some exceptions, disintermediation or the elimination of the traditional distributors such as value-added resellers (VARs), wholesale distributor and retailers would be common because embracing electronic commerce enables suppliers or manufacturers to deal directly with the customers. Furthermore, manufacturers could provide online technical support,

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saving time and costs due to escalation of technical problems from the channels from the customers. The removal of traditional intermediaries eliminates an additional layer which would otherwise introduce mark-up prices while passing the savings in cost directly to the customers. One exception to this is car dealers in the automotive industry where the distributors are relevant to providing services such as test-drive to customers. However, the virtual counterpart of traditional intermediaries, the electronic intermediaries appear to be replacing traditional intermediaries by providing services such as online product selection agents and search engines. This offers alternatives to customers wishing to engage the services of intermediaries while to the manufacturer, electronic commerce could be used to provide a single point of virtual contact in the Internet-based distribution. In addition, virtual distribution can be combined with the physical distribution as we have seen for the case of the automobile industry. However, it is argued that electronic commerce does not necessarily lead to complete removal of the traditional middle men as some organisations would like to preserve existing business ties and loyalty. These organisations are just leveraging electronic commerce to migrate these relationships into the virtual world in an effort of not so much of seeking more profit but more of maintaining and enhancing business relationships. This in itself may be seen as providing value-added services. In recent years, 3rd Party Logistics(3PL), the provider of specific traditional logistic services at departmental or division level, have seen its role of gradually transforming to what is known as Lead Logistic Provider(LLP), a full-fledged unit usually independent organisation to whom any organisation especially electronic commerce set-up companies would sub-contract the entire organisation logistic functions to mainly the result of increasing need of organisations to focus more on their core business activities (Kuglin, F. A. & Rosenbaum, B. A. 2001). While the traditional tier-based 3PLs operate using a rigid linear supply chain, where ,for example, large supplier companies such as the automobile industrys Original Equipment Manufacturers (OEMs) would obtain raw material and supplier parts first through tier-3 companies to be procured by tier-2 companies and finally tier-1 supplier companies, the LLPs operate using a networked supply chain model, where all supplier companies all directly. While the traditional 3PLs leverage. Supply chain is the tracking and movement of supplier parts and components across a variety of actual and potential suppliers. Electronic business in areas such as warehouse operations, freight forwarding and scheduling of vehicles for transportation, LLPs extends the usage of Electronic business by virtue of its new role to include strategic and planning level services, provide integrated and total logistics systems and provide communications facilities to improve data and information both within and across networked supply chains from all around the globe. Some of the functions provided by LLPs include mass customisation, where customers demand of specialised and unique demands, configuration, packaging and shipping are catered for, Real-Time order tracking that not only include the status and location of the shipment but also whether the shipment is being delivered according to schedule, formation of multi-modal network of carriers, freight forwarders, Staffordshire University

Assess the Impact of Electronic-Business on the corporate value-chain. custom brokers and financial institutions on a global scale (Kuglin, F. A. & Rosenbaum, B. A. 2001).

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4.3 Limitations of Electronic Commerce

4.3.1 Implications on security
With increasing users on a worldwide scale making online payments involving tens of thousands of dollars in transaction, it is inevitable the issue of Internet Security becomes one of the Internet users main concern. The issue of unauthorised access and the threat of hacker are not new. There are increasing incidents of intrusion and hacking into corporate systems and stealing sensitive data in the United Kingdom, United States and in the Asia Pacific in recent years and this will continuously pose threats to especially to users who send payment details while making online transactions through the Internet as well as corporate systems. Although, there are existing security services available such as Secure Socket Layer, which encodes data to up to 128-bits while transmitting data between the client browser and the host server and the use of digital certificates via asymmetric key pairs with digital certificate authority, SET, the threat of unauthorised personnel and hackers compromising still lurks and it becomes increasingly easier as price per unit processing continues to drop further, allowing to access huge amount of computation power to bypass existing security measures in place. Customer details and payment information are at the greatest risks of being accessed and abused. In recent years, it has been reported in the United Kingdom that there is increasing web attacks on business servers. In a BBC survey, about 44% of UK businesses suffered some form of malicious attack on corporate information systems although a significant 27% of the firms have spent more that 1% of the total IT budget on security (BBC Online Network 2002). In addition, the destructive variants of malicious codes such as worms and viruses travelling through Internet channels such as the mail and web servers are capable of compromising corporate systems, rendering the system inaccessible to users, contributing to an expensive period of downtime in terms of loss of potential sales and generates a group of frustrated users who could not access timely product and services information. Furthermore, some of these viruses are so destructive that once a system is rendered inoperable, it quickly replicate and spread beyond the system, attacking other systems residing in local area network and inflicting further damage.

4.3.2 Impact on labour and Employment Market

As discussed, electron commerce impacts the traditional distribution channel by eliminating the intermediaries while electronic intermediaries replaces the former role. This phenomenon has brought two major changes to the labour and employment market. Firstly, there would be a transition of skill requirements from non-IT based jobs to Information Technology-oriented tasks. Organisations are increasingly procuring workers who possess system management skills such as Staffordshire University

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integrating back-end systems, implementing new systems and to administer and manage network, security and firewall implementations. This phenomenon is observed in major industries although different sectors have different potential and growth of implementing electronic commerce thus a variation of labour marker for different sectors in terms of level of IT skills and the relative demand for them. Secondly, the skewed labour demand which favours IT skilled workers are slowly driving the average wages up as there is a shortage of these workers in especially very specialised IT disciplines such as network and database administration. According to IDC, 20% of IT jobs has to be filled in the United States market alone and it is predicted that by 2002, Western Europe will face a shortage of 1.4 million IT-skilled workers ( Huff S. et al. 2000). Some organisations overcome this shortage and high wages by turning towards foreign IT specialists market and outsourcing complex tasks to these similarly skilled workers or to recruit them to meet their requirements although in the long run, wages cost would still be a problem to some organisations. As Electronic Commerce involves the Internet which is globally accessible, one implication is that working conditions have become more flexible and dynamic as there is no longer a constraint to be in a traditional office to perform their tasks. Workers involve in IT-related works have the opportunity to work anytime and anyplace through collaboration in the virtual platform. Although telecommunication infrastructure is developing in Europe and United States and in Asia Pacific, electronic commerce is still constrained by the existing telecommunication lines which have limited communication bit rate. This indirectly impacts performance of web applications and creating difficulties in performing real work through the Internet. An upgraded communication network such as broadband type communication network involving bit rates of up to 1.5 to 2.0 Mbps would partly reduce the intensity of this problem.

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5. Conclusion
Internet-based Electronic Business has enabled small-medium scale organisations to the capability to achieve both direct and indirect benefits previously restricted to large enterprises using EDI at a less prohibitive cost of implementation, integration and maintenance. Also, it serves as a technology enabler to facilitate business process re-engineering to streamline business processes. A major component within Electronic Business, Electronic Commerce demonstrates how organisations could alter the traditional supply chain structure, bypassing the channels to deal direct with customers. It is in direct contact with suppliers, the benefits spill over to the back-end through feedbacks and customer-relationship management analysis to improve core business processes. Electronic Commerce suffers from poor perception on security and insufficient security levels compared to that of its predecessor, Electronic Data Interchange. While the introduction of Electronic Commerce shifts labour requirements to favour Information Technology-related skills, it impacts the labour market by making redundant traditional roles particularly in the distribution channels and a significant redefinition of the role by integrating many functions and the use of information-technology related skills. The other significant components of electronic business such as electronic market-place, electronic procurement and electronic collaboration shall be discussed following this literature review.

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6. Appendix A
Firm Infrastrucure Human Resource Management Technology Development Procurement
Margin

Inbound Logistic

Operations

Outbound Logistic

Sales and Marketing

Services

Figure 1: Generic Value Chain The generic value chain consists of two groups of activities: Primary Activities and Support Activities as seen in Figure 1. The primary activities are categorised into Inbound Logistics, Operations, Outbound Logistics, Sales and Marketing and Services. The inbound logistics are activities related to the reception, storage and delivery of input that is required for operations. These include material handling, inventory control. The operations are activities of transforming the input to output product and services such as machining, packaging and testing. The output logistics are activities related to collection, storage and physical distribution of goods and services. Sales and Marketing activities relate to the means of which customers have access or purchase goods and promotion of products and services. Services are activities associated with post-sales maintenance and repair used to maintain or upgrade the value of product or services. The support activities can be classified into procurement, Technology Development, Human Resource Management and Firm Infrastructure. Procurement activities relate to the function of procuring the input. Technology development include the research and development, product design, and testing of new products. Human Resource Management relates to activities that include the hiring, training, recruitment, development, evaluation and compensation of all personnel. Firm Infrastructure relates to activities which include general management, planning, finance, accounting, legal, government affairs and quality management. There are 3 types of activities consisting of direct, indirect and quality assurance types. Direct-type activities are those that add value to products and services for the buyer such as assembly, machining and advertising.

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Indirect-type activities are those that make possible for the direct activities to take place in a continuous manner such as maintenance, research and sales force administration. Quality assurance related to activities that ensure the quality of other activities such as monitoring, inspection, testing, reviewing and reworking. The value chain is a set of interdependent activities that are related by linkages. Linkages are relationships between the way one value activity is performed and the cost or performance of another.

Supplier Value Chain

Firm Channel Value Chain Value Chain

Buyer Value Chain

Figure 2 : Value System The firm value chain forms part of an overall stream of activities called the value system as seen in figure 2. The supplier value chain form the upstream value, providing products and services input to the firm. The channel value chain form the channel value, providing additional activites that affects the firma and the buyers value chains. Eventually, the firms products and services would end with the buyers value chain.

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7. References
1. 2. Amer, D. 2000, The E-Business (R)evolution, Prentice Hall Inc. Upper Saddle River, New York. Angels,R. 2000, Revisiting the role of Internet-EDI in the current electronic commerce scene, Logistics Information Management, Vol 1, No 1., pp 45-57. BBC Online Network: Web attacks on the rise in the UK, URL: http://www.nua.com/surveys/?f=VS&art_id=905357851&rel=true [16 April 2002] Champy, J. 2002, X-Engineering the Corporation: Reinventing your Business in the Digital Age, Warner Books, New York. Dell, M. and Fredman, C. 2000, Direct from Dell: Strategies that Revolutionized an Industry, HarperCollinsBusiness, London. Fallenstein, C. and Wood, R. 2000, Exploring E-Commerce, Global Ebusiness, and E-societies, Prentice-Hall, New Jersey. Ferns, D. & Whipple, L. 2000, Building an Intelligent E-Business, Prima Tech Publicshing, Redwood California. Forrester Research Press Release: Europe's eBusiness Winners Will Speed Their Migration From Closed EDI To Net-Based Processes, URL: http://www.forrester.com/ER/Press/Release/0,1769,457,FF.html [2 April 2002]. Hammer, M. 1990, Re-engineering Work Dont Automate, Obliterate, Harvard Business Review, July-August 1990. Hammer, M. and Champy, J. 2001, Re-engineering the Corporation: A Manifesto for Business Revolution, Nicholas Brealey Publishing Ltd. Huff S. et al. 2000, Cases in Electronic Commerce, Mc-GrawHill, USA. IBM, URL: http://www-3.ibm.com/e-business/glossary/ IBM e-business Glossary.htm [17 April 2002] Jones, G., Lawson, A. and Thompson, M. , E-Supply Chain: Modelling the Supply Chain in the New Market Economies, The Butler Group, December 2000. Staffordshire University

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URL:http://www.butlergroup.com/research/DocView.asp?ID={DAC1DF2EFBF1-11D4-9063-00105A3037C6} [1st April 2002] 14. Kuglin, Fred A. and Rosenbaum, Barbara A. 2001, The Supply Chain Network@ Internet Speed: Preparing your Company for the E-Commerce Revolution, Amacom, New York. Lawrence, E. et al. 2000, Internet Commerce: Digital Models for Business, 2nd edn, Wiley, Australia. Mesenbourg, Thomas L. Measuring Electronic Business, US Bureau of Census August 2001. URL: http://proquest.umi.com/pqdweb?Did=000000103157440&Fmt=3& Deli=1&Mtd=1&Idx=2&Sid=2&RQT=309 [1st April 2002] Peppard, J. and Rowland, P. 1995, The Essence of Business Process Re-engineering, Prentice-Hall, England. Porter, Michael E. 1985, Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York. Turban, E. et al. 2000, Electronic Commerce: A Managerial Perspective, Prentice-Hall, New Jersey. NIST 2002: EDI, National Institute of Science & Technology 2002. URL: http://www.itl.nist.gov/div896/ipsg/eval_guide/subsection3_5_6.html [1st April 2002].

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