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Sunday, April 6, 2014

Successful Internet Businesses Match Strategy and Transaction Efficiencies



Small and incumbent businesses seek to make their way online and into the global marketplace. Like new sprouts they try and break ground into a profitable entity. According to research by Howard Rasheed those businesses that embrace online product distribution create significantly higher international sales growth (2009). They studied 240 small businesses who engage in Internet based consumer marketing to find which types of businesses are likely to succeed. 

In the contemporary market, some owners may decide to create truly Internet based businesses that capitalize on the movement of information. Existing businesses may attempt to strengthen their approaches by developing their brick-n-mortar models into brick-n-click businesses that develop a hybrid approach to marketing. In today’s world, few truly brick-n-mortar companies exist in the international market. 

E-commerce businesses often fail due to lacking strong market knowledge, sound business ideas, balanced approaches to development, and failure in long-term planning, poor external relationships, and the improper thinking of management (Martinson, 2006). The internet based businesses are quick and fast paced in the market but often do not think strategically enough to obtain a sustainable threshold. 

Four different types of companies will use the internet for their business: e-commerce companies that market goods with the Internet; content experts who gather and display information from multiple sources; market makers who develop places to sell products; and those that provide Internet services (Afuah & Tucci, 2000). Ultimately each type will have a strategy that fits uniquely to their product and service goals but is inherent to their model.  

When companies do fail it is because they have not developed brand equity. Brand equity is the value of the brand in terms of customer perceptions of loyalty, quality, association, image and awareness (Yoo,  et. al., 2000). The businesses simply weren’t able to create a strong enough following through the murky and often saturated information game. They were unknown and would need to expend greater effort in creating public awareness. 

Online success is due to the high speed travel of information that allows companies to integrate into the various aspects of the market. The Internet provides cheaper transaction costs that help to coordinate activities (Clemmons et. al. 1993).  The author found that purely Internet base firms are more likely to succeed than other businesses but when they do fail it is because of their internal decision making processes. Product sales and distribution in the online environment appear to have advantages but small organizations may have a hard time achieving appropriate pricing against more established businesses. Those services that can digitized, and therefore lower transaction costs across multiple perspectives, appear to have the highest success rates. 

Afuah, A and CL Tucci (2000).Internet Business Models and Strategies. NewYork, NewYork: McGraw-Hill Irwin.

Clemmons, E., et. al.  (1993). The impact of information technology on the organization of economic activity: The move to the middle hypothesis. Journal of Management Information Systems, 10(2), 9–35.

Martinsons, M (2006). Strategic management lessons from e-commerce.Handbook of Business Strategy, 7(1), 337–340.

Rasheed, H. (2009). Contrasting e-commerce business models: performance implications for small enterprises. Journal of Developmental Entrepreneurship, 14 (1).

Yoo, B., et. al.  (2000). An examination of selected marketing mix elements and brand
equity.Academy of Marketing Science Journal, 28, 195–211


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