Posts Tagged ‘business’

E-Commerce Supply Chain Analysis

August 16, 2009

E-Commerce has altered business worldwide. Corporations offer products to businesses and consumers, and monopolize the global spread of the internet as a communications and search tool. Both Business-to-Business (B2B) and Business-to-Consumer websites specifically target their chosen demographic in order to generate sales, albeit with different, unique features common to each.

In the following analysis, this author will examine the supply chain relative to both B2B and B2C websites, offering a glimpse at the path a product may take as it is purchased and fulfilled through internet commerce.

First, it is important to note the unique commonality of both B2B and B2C transactions. In many cases, consumer purchases, either on behalf of companies or the individual, now eliminate middlemen, particularly the traditional brick-and-mortar retailer. Whereas a purchase of a Dell computer may once have taken place at a Best Buy outlet (by the consumer) or through contacting Dell’s corporate sales unit (by corporations for large-scale computing purchases), this step in the supply chain no longer exists. There are exceptions among B2B and B2C websites (drop-ship e-commerce websites, for example), but for the most part e-commerce has streamlined the supply chain with this middleman elimination.

However, other unique properties exist in the e-commerce supply chain, and this author will first discuss the B2B transaction. Specifically, B2B commerce deals with the business transactions that occur between businesses. While some businesses may directly purchase products online from a manufacturer for that business’ use, in many cases B2B transactions still have another end-user outside of the B2B transaction.

For example, a manufacturer of redwood playsets has established a website for its retail outlets to select and purchase merchandise for sale in brick-and-mortar stores. While Walmart, Target, and Toys R Us are the “consumer” in this B2B transaction, the ultimate recipient of this purchased product through the play set manufacturer’s website is an individual consumer visiting these retailers.

B2B commerce offers several advantages to both the supplier and the purchaser. First, business procurement specialists can select and compare products at their leisure. In some cases, B2B websites offer a dearth of information regarding the particulars of various products and allow the corporate procurement specialist to compare the advantages of one purchase versus another. Second, B2B commerce eliminates many of the responsibilities bourne by the corporate salesperson. In the past, corporate sales representatives visited potential clients and spent ample time educating these corporations about the offered products. In the case of B2B commerce, businesses can now eliminate many of these time-consuming tasks and streamline their sales departments. If a corporation has questions regarding a large-scale transaction, in most cases it is possible for a lower-level sales associate to handle these queries. Only in highly sophisticated product purchases are executive level salespersons required in a B2B transaction.

B2C commerce has taken consumer retail by storm. Individuals have the luxury to compare prices through price comparison websites and analyze products from the privacy of their home. From a supply chain standpoint, B2C commerce can be more complex, as many e-commerce sites are acting as the online representation of a brick-and-mortar retailer. However, the middleman relationship is not eliminated; many e-commerce companies do not warehouse products. In this “drop-ship” business model, the e-commerce retailer takes an order from a consumer. The order is sent to the manufacturer by the e-commerce retailer. The manufacturer then ships the product to the consumer. It is important to note that in the drop-ship model, it is standard that the e-commerce company will handle all aspects of customer service, including consumer problems experienced after receipt of the product.

Both B2B and B2C commerce have clearly affected business on a global scale. With readily accessible communication provided by the internet, companies and consumers can purchase products instantly. Increasingly sophisticated websites make product information easily available to consumers, allowing individuals and corporations to make better-informed purchasing decisions. While the supply chain part of B2B and B2C businesses are different, in many ways the supply chain has become better organized through the use of automation.

Resources

A-K Strategic Business Solutions (2001). “What Is The Difference Between B2B and B2C?”. Retrieved online November 17, 2007 from http://www.akstrategic.com/b2b-or-b2c.html

Singh, M.P. (Nov.-Dec. 1999). “The End Of The Supply Chain?”. Internet Computing. Retrieved online November 17, 2007 from the EBSCO database, part of the University of Phoenix student library.

The Effects of Regional Integration

August 16, 2009

The ASEAN trading bloc was created in 1967 by five founding member countries: Thailand, Malaysia, Indonesia, Singapore, and the Philippines. As of today, ASEAN also has five other member countries – Brunei, Laos, Cambodia, Vietnam, and Burma. All countries part of the ASEAN alliance are vastly different in culture, demographics, economic resources, and political systems. These ten countries can meet together and establish a mutually beneficial economic partnership despite their diversity. In part, this partnership has been helped by regional integration. (Tan, M.; May 2007).

In the following analysis, this author will describe regional integration. By taking a look at regional integration, we will discuss both the advantages and disadvantages as demonstrated by various global trading blocs. This author will analyze the economic development stages of several countries in the ASEAN bloc. Lastly, the overall economic development of ASEAN has an effect upon global business, and this author will describe these ramifications.

Advantages and Disadvantages of Trading Blocs

When the North American Free Trade Agreement (NAFTA) was established on January 1, 1994, citizens of the United States, Mexico, and Canada were merged into one continental trading bloc. One disadvantage to NAFTA is its ability to displace individual countries’ workers and resources due to market integration. (Foreign Agricultural Service; n.d.).

For example, livestock and agricultural farmers in the United States now compete with products from Mexico. Due to inexpensive labor costs and inexpensive agricultural land, Mexico has a clear advantage when exporting their goods to the U.S. As a result, farmers and ranchers in the U.S. are forced to continuously search for ways to make their operations less expensive, in order to compete. (Knutson, R.D. & Ochoa, R.; Jan. 2004)

However, advantages are also brought forth by trading blocs. For example, after the Korean and Vietnam Wars of the 1950s, 60s, and 70s, much of Southeast Asia was left economically decrepit, with very little ability to exert market influence on the global economy. Since the creation of the ASEAN trading bloc, however, Southeastern Asia has successfully negotiated profitable trade agreements, therefore allowing the ASEAN countries to individually improve their economic progress. For example, luxury hardwoods, such as teak and bamboo, are now exported on a massive scale to industrialized nations, helping to manufacture flooring and furniture. These hardwoods are largely harvested from ASEAN countries such as Thailand.

Economic Development Stages

Thailand, one of the countries part of the ASEAN trading bloc, seems to be in the middle of the economic development stages. While the country has experienced fairly high growth rates (6.7% per annum), Thailand still seems unable to control internal market forces and anticipate external changes, in order to create a stable, functioning, dynamic economy. In particular, Thailand is internally held back by several factors. First, its financial, metropolitan, and trading center resides in the capitol city of Bangkok. This does not allow the country to diversify its economic center. If Bangkok isn’t doing well infrastructurally, then Thailand’s economic forecast will soon become gloomy. Second, Thailand still bears an unfortunate illiteracy rate. The majority of the population is employed in production (blue-collar) jobs, and this demographic does not lend itself to economic development. (Jitsuchon, S.; July 1991).

Another ASEAN country with a very different economic development stage is the nation of Brunei.

“The economy is a mixture of foreign and domestic entrepreneurship, government regulation and welfare measures, and village tradition. It is almost totally supported by exports of crude oil and natural gas, with revenues from the petroleum sector accounting for more than 50% of GDP Per capita GDP is $8,800, and substantial income from overseas investment supplements domestic production. The government provides for all medical services and subsidizes food and housing “ (ASEAN Association for Planning and Housing; n.d. Pg. 1 ¶ 4)

Brunei has succeeded in using its wealthy resources to improve the nation economically. Unlike other oil-producing nations in the middle east, Brunei, also a Muslim state, invests its earnings in both other, diversified economic development and in the improvement of the state. Brunei is at a significantly higher economic stage than its ASEAN counterpart, Thailand.

Global Effects of ASEAN Economic Development

ASEAN countries were once the most impoverished nations of the world. However, due to increasingly successful trading agreements and leveraged tariffs, the countries are quickly improving economically, despite their history of wars, internal strife, and political unrest. With the developed strength of the ASEAN bloc, other nearby trading blocs such as APEC may be affected. While APEC has several wealthy, industrialized nations as members, this may be a disadvantage to the trading bloc. On the other hand, ASEAN countries fall somewhere on the lower to mid-range scale of economic development. Due to their relative lack of development, ASEAN countries may be able to negotiate incredibly low bids for labor, and thus attract foreign companies interested in new production facilities.

Another global effect of ASEAN economic development revolves around the timber industry. At this time, many furniture and flooring manufacturers avoid using luxury hardwoods from the South American rainforests. ASEAN countries are providing an alternative, and many lumber countries in Sri Lanka, Thailand, and Laos are engaging in environmentally sustainable logging practices – a clear enticement to western interests. As a result of this developing industry, ASEAN countries could soon have a successful monopoly on luxury hardwood materials.

Conclusion

The ASEAN countries are not the most impoverished in the world, but are still seeking growth and improvement to begin a sound economic foundation. Through further work with trade agreements, tariffs, and diplomatic partnerships with industrialized nations, ASEAN countries can expect external forces to help them improve economically.

Resources

ASEAN Association for Planning and Housing (n.d.). “Planning & Development (Brunei)”. Retrieved online September 17, 2007 from http://aaph.net/planning-development/brunei/.

Foreign Agricultural Service (n.d.). “North American Free Trade Agreement”. Retrieved online September 16, 2007.

Jitsuchon, S. (July 1991). “Retrospect’s and Prospects of Thailand’s Economic Development”. Retrieved online September 17, 2007 from http://www.esri.go.jp/en/archive/wor/abstract/wor02-e.html

Knutson, R.D. & Ochoa, R. (Jan. 2004). “Achieving Market Integration – North American Free Trade Agreement”. Retrieved online September 17, 2007 from http://findarticles.com/p/articles/mi_m3723/is_1_16/ai_114328140.

Soomer, J. (2003). “Why Regional Integration Benefits”. Retrieved online September 16, 2007 from http://www.eccb-centralbank.org/PDF/newspaper3.pdf.

Tan, M.(May 2007). “Asean Plus”. Retrieved online from Michael Tan’s weblog Pinoy Kasi, part of the Philippine Daily Inquirer opinion column. Retrieved online September 15, 2007 from http://michaeltanpinoykasi.blogspot.com/2007/05/asean-plus.html