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Ecommerce is the new frontier in business. There are several benefits associated with ecommerce solutions. To start with, ecommerce enables businesses to attract customers from various regions across the world. Secondly, the increased availability of high speed internet in various countries has acted as a catalyst towards introducing ecommerce solutions. Also, following the recent global financial crisis, it has become necessary for businesses to expand their portfolio. This can be achieved through the introduction of e-Commerce solutions which can help to mitigate the effects of such a crisis.
J& M LTD boosts of a wide range of products including household and pharmaceutical products. In an effort to remain competitive in the market, the company now wishes to introduce an e-commerce solution to the business. The report below shall endevour to analyse some of factors considered prior to the introduction of an e-commerce solution. The report shall entail a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of J & M LTD. In addition, the report shall also explore the benefits and risks associated with an ecommerce solutions like the one that J & M LTD wishes to introduce into the market. Finally, the report shall attempts to provide an analysis of the UK‘s e-commerce market, along with the financial implications of the same on J & M LTD.
PEST Analysis for J & M Limited
PEST analysis is a term used in reference to the political, economic, social and technological factors that affects the activities of a business entity, and the associated products and/or services. J & M’s main products include pharmaceutical as well as household goods. Therefore, the company’s functions revolve around the sale and distribution of the aforementioned goods. PEST analysis of J & M Limited entails the sale of and distribution of the above products. It is also important to note that J & M has a production base in China. This is an important factor that should be taken into account in the above analysis. The UK government is keen on ensuring that the economy recovers fully from the global financial crisis in 2008. The government intends to review the country’s pharmaceutical laws (Jansen, 2012). The main objective of the review of the laws is to revitalize research and development in the pharmaceutical industry. The government, therefore, shall address problems associated with clinical trials processes (Jansen, 2012). This affects operations in the pharmaceutical industry in the UK. J & M Limited can take advantage of increased funding by government towards research and development in pharmaceutical companies. Similarly, the company can take advantage of relaxed patent laws to improve the sale and distribution of some of its products.
The UK economy is projected to grow at a modest rate of 0.2% in 2012 according to a report released by Ernst & Young (2012). The situation, however, is expected to improve in 2013 when the economic growth rate is projected to increase to 2.3%. It is important to note that over the last few years, the demand for household goods in the UK market has decreased tremendously, mainly due to decreased household income. The decrease in household income is as a result of high inflation experienced in the UK. However, the situation is expected to improve by 1.1% in 2013 (Ernst & Young, 2012). In the same way, the demand for pharmaceutical products from local companies in the UK and the European Union has reduced greatly. This is partly due to the emergence of companies from such countries as India. These companies have managed to position themselves in the global pharmaceutical market and provide quality drugs at reduced prices.
Some of the social factors that are likely to affect J & M LTD operations include an aging population that leads to an increase in the demand for pharmaceutical products. Another social factors to consider is an in lifestyle diseases in emerging economies such as India and China. Social factors are closely related to technological factors such as the growth of internet services. An increasingly higher number of people over the age of 55 in the United Kingdom access internet services and buy commodities online. In addition, the introduction of internet services in many countries has enabled companies to launch services virtually. This includes the introduction of e-Commerce solution as part of the marketing strategies of various companies.
J& M LTD SWOT Analysis
· Small management team thus reduced decision making time.
· Extensive product line including household and pharmaceutical goods.
· Products from different suppliers across the world thus enhancing the company’s ability to address needs of customers across the world.
· Production base in China
· Decreased presence in the international market.
· Reduced customer base.
· Decreased competiveness due to reduced marketing.
· Emergence on new markets such as India and China.
· Economies of scale.
· Strategic partnerships with other companies based in other countries
· Introduction of email marketing
· Increased competition from companies in the UK.
· Shrinking pharmaceutical market in the UK and European Union.
Some of the strengths of J & M Limited include a small management team which comprise of three stakeholders. Therefore, it takes a very short time to introduce such critical decisions as an e-commerce solution. At the same time, reduced decision making time ensures that J & M Limited is in a position to take advantage of short-term developments in the technology sector. In addition, J & M Limited boosts of a wide range of products. Therefore, the introduction of e-commerce solution would enable the company to enjoy economies of scale. An online store would for example, enable consumers to analyse the company’s wide range of products. This would allow consumers to place orders for more than one product, in effect improving the company’s bottom line.
J & M Limited has a production base in China. It is worth noting that China economy has been recording tremendous growth in the last decade. For example, the country’s average GDP (Gross Domestic Product) now stands at 8% (Das, 2012, p.12). In addition, China also enjoys an abundant physical and human capital. As such, production cost in the country is low and for this reason, an increasingly higher number of multinational companies from the developed world are finding it prudent to build their production lines in China in order to benefit from the cheap abundant and affordable physical and human capital. In the case of J & M LTD, the company would benefit enormously from low cost production and increased customer base, in effect improving the company’s bottom-line.
Some of the opportunities that J & M Limited can take advantage of include an emerging middle class in China and India which has increased consumerism in those economies. There has also been a rapid increased in the demand for products in these markets, including pharmaceutical and household goods. Similarly, change in lifestyle also leads to an increase in lifestyle diseases and conditions in these markets. This would translate into an increase in the demand for J& M LTD’s pharmaceutical products. J & M Limited imports products from across the globe. Therefore, they can establish strategic partnerships with some of the company’s suppliers across the world. One of the benefits of strategic partnerships is market intelligence. J & M Limited can use information from suppliers as they are familiar with requirements of their local markets.
Impact of the introducing e-Commerce solution for J & M Limited
Cost of introducing e-Commerce solution for J & M Limited
In determining the cost of an e-commerce solution there are several factors that are taken into consideration. One of the factors considered is the level of customization needed for the e-commerce solution. J & M Limited e-Commerce solution will involve multi product selling. Therefore, an increased level of technology is needed to ensure in order for the solution to accommodate all the products (Barry, n. d). Another factor that could influence the cost of solutions is the whether the company decides to build a solution, or buy it. Costs of purchasing solutions include the initial investment and licensing fees. Most small companies, however, opt to buy since they may not need complete control of their platforms.
It is important for J & M Limited to identify a viable partner in the process of introducing an e-commerce solution in the company. One of the factors that J & M Limited management should take into account in the search for such a partner is the kind of support services the partner is likely to offer. This is an important point to consider because after the purchase and link of the software, most e-Commerce solutions’ providers do not provide support services to the company that has purchased the software. Therefore, J & M Limited which is a relatively new company may not have the organisational capability to maintain the e-commerce solution adopted.
The initial cost of purchase of an e-Commerce solution which supports one hundred products is £ 100,000. In addition, J & M Limited is also expected to set up back-up systems to link up with the partner’s servers. Therefore, the company is expected to purchase super computer which acts as main server for the company. Other company computers will be connected to this computer. Employees attend clients from these computers. An administrator is responsible for editing and updating content on the company’s e-commerce platform.
Risks of e-Commerce solutions
One benefit of an e-Commerce solution is that it enhances interaction between the company and clients. As a result, customers are in a position to ask specific questions enhancing customer experience which is a good customer retention strategy. Similarly, an online store outlines benefits of the product to the costumer (Sperdea, Enescu & Enescu, 2011, 197). Also, an e-Commerce solution enables companies to analyse product and service quality (Sperdea, Enescu & Enescu, 2011, 198) since customer can give feedback as regards the performance of the company’s product. This helps in the company’s product innovation strategies. Moreover, the company can get valuable feedback on the quality of service on its online store. This way, the company is better placed to incorporate innovation on the online store.
In dealing with pharmaceutical products, J & M Limited will require personal information from some of the customers. Therefore, the company has to institute a policy which identifies the type of information solicited from the clients (Bysinger, 1999, p.25). The information solicited for clients should be relevant and according to the regulatory policies introduced by the government. Also, the company has to ensure the clients understand the need for this particular information.
E-commerce encompasses conducting transactions on the internet. Therefore, J & M Limited has to ensure that transactions are safe. Information given by customers during transactions should be secured and treated with strict confidentiality (Bysinger, 1999, p.27). Also, J & M Limited has to ensure that support services providers contracted are reliable. This reduces interruptions of services resulting in inconveniences for customers and suppliers alike.
Global Impact of the e-Commerce on society
China has a huge population and consumer base. China’s population is more than one billion people and only 30% of the population have access to the internet (Walker, 2012). However, the above figure is expected to increase to 50% by the year 2016. Increased access to internet translates to increase in activity on e-Commerce platforms. Due to increased costs in setting up physically, local and international companies have resorted to use of e-Commerce platforms where they have been in a position to attract Chinese customers.
Economic benefits realised from an expanded e-Commerce sector include increased demand for broadband services. This has contributed heavily towards China Gross Domestic Product (GDP). In 2008, it was estimated at US$ 36.38 billion (Anjam & Tiwari, 2011, p 4). In addition, more females are using online shopping services. In China, online shopping was a predominantly male affair as they were more acquainted with the technological trends. However, as more females familiarize themselves with technology, they are in a position to conduct place orders and conduct online payments.
E-commerce contributes heavily to UK’s economy. In 2002, the government introduced legislation aimed at controlling e-Commerce activities. However, the sector has registered growth and constitutes an average of 6% of the country’s GDP. Moreover, through e-Commerce, companies from the UK have been in a position to negotiate international trade barriers.
Some of the economic benefits associated with e commerce sector in the UK include increased employment levels. For example in 2002, the sector employed up to twenty thousand people. This reduces the unemployment rates in the country and which in turn increases country’s tax reserves. Social benefits of e commerce sector in the UK include interactions between UK employees and other people from different countries. Therefore, they are in a position to understand culture of such customers. This knowledge is invaluable while formulating marketing strategies.
Financial Implications of an e-Commerce solution in the UK market
E-commerce market was worth £121 billion in 2010.
Contributed 8.3% of the Gross Domestic Product.
13.5% of all the purchase in the UK was done online.
Projected growth of e-Commerce is 11% reaching £ 221 billion in 2016
66% of the adult population purchased goods online.
50% of the purchases were clothes and sports goods in 2010
Adults who were more 50 did not report clothes and sports goods as the most popular good.
Number of adults over 55 years and purchasing goods on the internet increased by 26%
Competitiveness of the UK e-Commerce market
UK’s e-Commerce in the sixth largest among the OECD countries.
66% of business entrepreneurs interviewed indicated that they intended to introduce e sales
The above table indicates that the e-Commerce market in the UK continues to grow at fast rate. More people prefer to purchase goods online as it’s convenient and efficient. The projected growth in the industry is estimated to be 16%. Therefore, more companies are exploring e-Commerce as a viable business venture. As indicated above, 66% of the entrepreneurs interviewed indicated that intended to venture or strengthen their e- Commerce platforms. The importance of the e-Commerce sector in the UK is underlined by the contribution of the sector to the country’s GDP. The e-Commerce sector contributes up to 8.3% of the GDP which is in form of taxes and other charges. This includes licence fees associated with services provided under the e-Commerce platform. The government, therefore, remain keen on improving provision of e-Commerce solutions’ services in the country. 56% of pharmaceutical products consumers are more than 50 years. The projected increase the number of internet users above 55 years is expected to increase by 26%. Therefore, more pharmaceutical companies are expected to introduce e-Commerce solutions as part of their operations. E-commerce solutions shall be geared towards capturing the needs of customers from this particular segment. Purchasing pharmaceutical products including drugs on the internet is also convenient for senior citizens. This is because ailing senior citizens might not be in a position to visit physical stores to pick up prescriptions.
Analysis and Recommendations for the installation of an e-Commerce business
The main objective of J & M Limited is to become a leading provider of health care in the UK and worldwide. Therefore, the company is on an expansion path. There are several indicators through which a company’s expansion is measured. These measures include market place, production and non production measures. Market place measures include increased market share and profitability of the company. Production measures include reduced production cost per units and also overall reduction in the total costs. Non production costs include such things as customer satisfaction and loyalty towards the brand. J & M Limited intends to introduce an e-Commerce solution as part of the company’s operations. As such, this analysis looks at the contribution of an e-Commerce solution toward achievement of the company’s main objective. In order to realize its main objective, J & M has to expand its market share. Currently the company has 10 outlets across the UK. If the company’s management for example opts to open more outlets, the company has to have enough resources for the initial capital outlay for such a project. The company may opt to build or rent premises for its new stores. Where the company rents a building to serve as an outlet, initial cost include deposit required under the landlord- tenant agreement. Also, the company shall be expected to meet all health and safety standards. Health standards include provision of clean toilets and water. The premises is also expected to be fitted with fire equipment and checked by a safety engineer before operations can commence. Therefore, such a project requires a huge outlay.
On the other hand, an e-Commerce solution can be used to expand J &M’s market share without the need for a huge capital outlay. The initial capital outlay is used to for purchase of the e-Commerce solution and installation of the relevant equipment. An e-Commerce solution can be accessed on the internet as opposed to physical stores which mainly serves the local community. As noted above, J & M Limited intends to become a leading provider of healthcare products worldwide. The company is expected to implement strategies aimed at increasing its international presence and market share. An e-Commerce solution helps the company establish an international presence where the company is in a position to serve customers across the world. E-commerce solutions provide a virtual store to customers where they can place orders and have goods delivered to a specific location.
The introduction of an e-Commerce solution at J & M Limited increases efficiency within the company. This is because encompasses automated processes thus such things as automatic updates on delivery of goods. Employees are, therefore in a position to inform customers on the status of their goods.
Financial Implications of an e-Commerce solution to J & M Limited
As noted above, consumers mainly purchase clothes, sports goods, films and music. J & M Limited core products are pharmaceutical and household goods. The above analysis indicates that the sale of the above mentioned goods over the internet remains relatively unexplored. The projected growth in the e-Commerce, therefore, correlates to the J & M Limited expansion objectives. A combination of projected expansion of the UK’s and emergence of markets in India and China shall result in an expansion J & M’s bottom line. Therefore, the company will be in a position to realize its initial investment through an improved bottom line. However, the company has to lay down a comprehensive marketing strategy in order to attract more consumers to its online store.
It is important that J & M Limited establishes a comprehensive guideline for the implementation of the e -Commerce solution. The implementation can be divided into three phases. The first phase could involve hardware and software installation. The second phase could involve familiarizing the employees with the operations of the e-Commerce solution. Employees should have adequate skills to ensure that they are in a position to serve customers efficiently. The third phase involves full operation of the e-Commerce site where different products are in displayed. Adequate marketing on both social and broadcast media should be conducted. This can be done in the UK’ and internationally in order to expand the company’s reach.
Design of the E-commerce solution
The design of the e-Commerce solution entails relationship between J & M Limited, credit card companies and banks. When a customer places an order with on the J & M Limited website, the order details are processed. The customer gets a confirmation message on the availability of the good and thus asked to choose his or her preferred mode of delivery. Once the customer chooses his or her preferred mode of delivery, the order’s total cost is sent to the customer. The total order cost also includes import and export tax. Upon confirmation, the customer provides the company with his or her credit or debit card details. The credit card company is expected to liaise with the customer’s bank. Therefore, the credit card company confirms the card where message is sent to J & M Limited. This bank credits J & M bank account and thus goods purchased by customer are retrieved and appropriate arrangements made to ensure that the goods are delivered to the customer in the apportioned time.
Diagram; Design of the E-commerce solution
J &M confirms order and cost
an order with the
Card Co. confirms card
Credit Card Details
Bank bills Customer
Bank Security verifies cards details
Bank credits J & M Limited A/C
Evaluating the suitability of e-Commerce solution
An evaluation looks into the company’s e-Commerce solution or site in relation to the company’s products. This included aspects such harmony in the information provided on the website and relevant support systems. J & M Limited sells a variety of goods and thus information on the above goods should be accurate. This is because customers rely on the above information while making the decision to purchase. Evaluation includes customer feedback. Customer’s comments as regards product and service quality should be taken into account. This information is critical to company’s future strategies. Staff training is also taken into account while evaluating the suitability of the e-Commerce solution. As pointed out above, some e-Commerce solutions providers do not the requisite support functions. Therefore, J &M Limited should ensure that the e-Commerce solutions provider is in a position to offer services including continuous staff training. This ensures that staff is conversant with any changes that might be done on the system. This ensures that staff members are in a position to serve customers efficiently and provide accurate product information.
Increased competition on e-Commerce platform requires that J& M Limited remains innovative in its services on the internet. Other marketing tools such as the use of social networking sites should incorporated thus increasing the company’s reach and customer base. Market segmentation should also be introduced where products provided on the e-Commerce solutions are divided into categories. For example, pharmaceutical products should be divided into categories which reflect on different needs of customers. These needs are related to men’s, women’s, the aged health needs where relevant sub-categories can also be introduced. This eases the customer’s search for a product and thus customer finds it convenient and economical on time.
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