Benefits and limits of e-business

Benefits of e-business:

• Ease of formation and lower investment: an online business needs little capital, and no shop in an expensive market.
• Convenience: it is open 24 × 7 × 365, every hour of every day of the year.
• Speed: buying and selling information moves in seconds, and stock can be refilled quickly instead of passing an order from shop to distributor to company by phone.
• Global reach: a seller can reach buyers anywhere in the world.
• Movement towards a paperless society: the Information Technology Act, 2000 gives electronic records and digital signatures legal recognition, so dealings without paper are legally valid.

Limitations of e-business:

• Low personal touch: you cannot feel the cloth or try on the shoes.
• Delivery is slower than ordering: the order goes through in seconds, but the goods still take days to arrive.
• Need for technology skills: many people are not familiar with computers and the internet. The gap between those who are and those who are not is called the digital divide.
• Risk from anonymity: you may not know who is really at the other end.
• People's resistance to new ways.
• Ethical fallouts, such as firms checking their employees' email.

Comparing e-business with traditional business (Table 5.1 in the book): e-business is cheaper to set up and to run (a shop must pay rent even in months when it cannot open); it needs no particular location; it puts the firm in direct contact with its customers; its organisation is flatter, with fewer levels; and its business cycle is short, whereas goods from a traditional factory may take weeks to pass through distributors and shops. But its transaction risk is higher, because buyer and seller do not meet.

Most of these limitations are slowly being overcome, as more people go online and delivery and payment systems improve. E-business is here to stay.