This Assignment is based on a toy retailer in Sri Lanka –My Toys who is currently
carrying out its operations with in the domestic boundaries. The aim of this assignment was to evaluate the suitability of implementing an E-Commerce system and assess different requirements of different stakeholders in the business. The document brings out an analysis on stakeholder in the beginning and later in a different section it evaluates the benefits and negative impacts of introduction of this system to both customers and the business. And in latter sections the document has evaluated the potentials for introducing the system practically considering different factors such as benefits, costs and market potentials.
Organizational Profile and business operations
My toys (Pvt) Ltd. is a Sri Lankan based toy retailer that currently operates in Sri Lankan domestic boundaries. It offers a wide range of toys to satisfy the needs of children belonging to different age groups. My toys (Pvt) Ltd was established in 2015 and currently holding branches at Bambalapitiya, Nugegoda and Dehiwale. The main business operations of My toys (Pvt) Ltd is the trading of toys which includes buying and selling toys. They purchase domestically produced plastic and rubber toys while importing a majority of products from china at a considerable lower price. Such imported toys are sold in the domestic markets with a considerable profit margin while considering the prevailing market prices.
My Toys imports all kinds of plastic, rubber, metallic and other material based toys from china through direct agents. A considerable cost is incurred on importing such toys and the impact of such incremental costs is reduced by importing in large quantities (Economies of Scale). Once the toys are imported through the assigned agent, My toys sell them in their own branches to maintain the price advantage. But they also engage in wholesaler operations by selling the imported toys to small retailers I the country. Therefore they operate as an agent for certain domestic toys retailers as well. Therefore their main business operations can be identified as importing toys from china, purchasing domestically produced toys, operating as an agent for domestic retailers and retailing toys by themselves.
At present My toys only operate in the domestic boundaries and they expect to enter in to foreign markets in the Asian region as well. In doing so, they initially expect to set an e-commerce platform to enhance the selling efforts and information sharing abilities of the business. Such attempts will be discussed in detail in later sections.
Based on the operations of My Toys (Pvt) Ltd several stakeholders could be identified easily.
- Domestic customers (Consumption purpose)
- Domestic customers (Reselling Purpose – Wholesalers and Retailers)
- Foreign Agent
- Domestic Suppliers (Manufacturers)
1. Domestic Customers (Consumption Purpose)
These are the most important stakeholders for My Toys (Pvt) Ltd. They are the reason behind the operations of My Toys. These stakeholders will be the loyal stakeholders who would stick with the organization. And even in terms of unit profit, individual customers provide the highest unit profit. Therefore the business should aim to attract as many such customers as possible. The promotional efforts and advertising efforts have to persuade potential customers to try out the products as much as possible. Not even domestic customers, if My Toys (Pvt) Ltd was to reach the international customers they should aim at attracting such customers as well.
Mere attraction of customers is not adequate. Business should also strive to retain their customers as much as possible. Creating loyalty should be one of the major aims of the business towards their individual customers, because it costs less to serve and existing customer than serving to a new customer. And such loyal customers will also help attracting new customers without any expensive promotional efforts.
2. Domestic Customers (Reselling Purpose- Wholesalers and Retailers)
With regard to these customers, the aim of My Toys should be to increase the sales, because these customers are vital in selling large quantities of products through a single transaction. In addition to that benefit, such large purchases help My Toys to import large quantities with confidence to reduce per unit import cost and take the benefits of large scale imports. Therefore as similar to previous type of customers, My Toys should strive to attract more of this type of customers as well.
3. Foreign Agents
What My toys should expect from its foreign agent is to maintain the smooth inflow of products to the island. Because if they failed to comply with their task, that would cost a stock out in the domestic inventory. And my toys should also be aware of the fact that such agents act faithfully without trying to be opportunistic in earning huge profit margins on the products. Agents should select the lowest cost manufacturers providing defect less products to My Toys (Pvt) Ltd.
On My Toys perspective they should take necessary steps to find more potential agents in case of an emergency. This would be a good strategy to minimize the bargaining power of suppliers.
4. Domestic Manufacturers
Even though domestic manufacturers do not supply a greater input of products, certain product items can be acquired from domestic manufacturers at a lower cost. The aim of holding domestic suppliers is to acquire stocks at a lower price than what it could be bought from the foreign markets.
This is a crucial stakeholder for any business. Government decisions impact on any business. Therefore especially My toys being a business which engages in foreign transactions, the government policies will impact on its operations. Therefore My toys should keep track on the developments and changes in government policies and act accordingly.
Introducing E-Commerce to My Toys (Pvt.) Ltd
Through the introduction of E-commerce to My Toys, the business will be in a better ground to share their product information to a greater and wider group of customers- both existing and potential. Not only product information sharing, but also carrying out its business transaction with both domestic and international customers will be facilitated through the introduction of E-Commerce. This would even support My Toys aim of reaching out for international markets in Asia.
The introduction of the E-commerce system will benefit both customers and the business. Similarly it will also have negative impacts on both parties as well. This section will analyze the potential benefits and negative impacts to customers and the business.
Benefits to Customers
- Enhanced customer choice
1n the absence of a basic e-commerce system (A Web site and other Social media) to share product information; customers have to visit the showrooms to get product information. But through a properly updated and maintained web site, such product information could be acquired by staying at home. This would enhance the product purchase decision making process as customers have already made the purchase decisions when they leave their places. Therefore even the customers who are not aware of a retailer known as My Toys (Pvt.) Ltd would get to know about their product offerings when they browse the web for the needed products.
- Enhanced purchasing and reservation process
There is a growing tendency in both domestic and foreign customers to purchase products on line. They prefer to save their time on visiting the branches or outlets to make the needed purchases. Commencing E-commerce operations will provide customers the opportunity to purchase, check the availability and reserve products on online.
- Ability to Compare
Certain expensive toy items can be compared on line against similar products of competitors. This will enhance the decision making process of the customer.
Negative Impacts to Customers
- Security Issues
The biggest concern for customers in conducting business operations online is the security issue. Customers are reluctant to enter their personal details and sensitive information to unknown, unfamiliar web sites. This would even discourage their purchase intentions to a greater extent.
- Credibility Concerns
Even in the digital era, customers do not trust carrying out transactions online. Customers prefer to hold someone responsible for carrying out each and every stage of the transaction. Therefore they are concerned about; “Who will be responsible if the transaction goes wrong”. Therefore the lack of responsibility on the quality and the order requirements is a huge concern for customers.
Benefits to Businesses
Ability to wide spread operations
When transactions are performed online, it provides the opportunity to extend the market operations overseas. E-commerce systems would facilitate the information sharing purpose and e booking ability to customers, thereby customers from all over the world can make orders.
Supply chain and logistic advantages
Once the target customer base has been enhanced using E-commerce systems, organization possesses the ability to conduct transactions online. In such a background, the foreign demand can be served directly from the manufacturing country rather than importing the product to Sri Lanka and then again exporting to relevant countries.
Negative Impacts to Business
Customer gets the ability to compare the products
This is a great disadvantage for a business, because customers tend to compare the information provided on line against those of competitors. In such a background, My Toys will be at a disadvantage if its competitors supply the products at lower prices.
Negative image created will impact the business operations
Online transactions will not always create favourable perceptions. Negative image created on line will continue to become the general impression of the general public on the business.
Global Impact of E-Commerce
E-Commerce has been an emerging trend since the beginning of the 21st Century. It has made both positive impact and negative impact on the society. But generally the positive impacts tend to outweigh the negative impacts of the society.
The expansion of business operations around the world, ability to practice mass marketing, enhanced supply chain and logistics operations have improved the modern day business operations and its related activities. Even the supporting services have improved their influence on business operations due to the improvements in E-Commerce.
Market Potentials for Introducing an E-Commerce System to My Toys
My Toys is a Sri Lankan Toy retailer who imports toys from less expensive countries which engage in mass production. Even though their current market consists only of Sri Lankans, they expect to expand their operations to certain Asian countries as well. Therefore implementation of an E-commerce system will create considerable market opportunities for My Toys.
Implementation of an E-commerce system will create market potentials in terms of generating a wider group of customers from both domestic markets and foreign markets. This would enhance the business operations and create a considerable market potential for My Toys to generate a much greater level of income. And thus this is a toy retailer; customers would like to take a preview of the items that are available in the shops before visiting the shops. Therefore domestic customers residing in close proximity to the shop and in distant places would visit as the information is received by customers in equal proportions.
As mentioned in the earlier section as well, the supply chain and logistics management activities will be hugely supported by the proposed e-commerce system. Through a frequently updated and systematically used supply chain and logistics system, the flow of products can be managed efficiently and effectively. And even in catering to foreign markets, e-commerce system would be of huge importance.
The development of the telecommunication systems, growing development and spread of wireless communication mediums, use of smart phones and high customer involvement in social media has caused to increase the potential for E-commerce systems to succeed. In this background, customers fancy to do their transactions on line.
The increasing popularity of social media such as Facebook has also contributed to the success potentials of E-commerce. One of the dominant reasons for the growth of E-Commerce has also been the increasing popularity of Social media. Marketers had seen a huge potential in reaching out for customers in dynamic ways through Social Media. And E-Commerce has also created the platform for actively involved marketing with customers.
Proposed E-Commerce System and its Feasibility
Developing an E-commerce platform will generate considerable revenue for the organization and it will also incur a considerable initial cost in terms of Initial capital. The Development of an E-Commerce platform has to be done through several stages.
Development of an advanced Web site with the capacity to provide the E-commerce functions; entering in to agreements with banks and other financial institutions; recruiting and managing a team of IT professionals to maintain the E-Commerce system are some of the needed stages to implement the E-Commerce System.
Web site development will be the less expensive item out of the mentioned proposed steps in developing an e-commerce system. This would include a development fee and a designing fee. The biggest cost generating item would be to develop the needed infrastructure together with the banks and other financial institutions. This would need a lot of legal agreements between the organization and the financial institutions which cost a considerable amount of money.
The most essential element of creating and developing an e-commerce platform is recruiting and managing the IT Team to carry out the needed support services to ensure the smooth flow of the E-Commerce activities. This would needed My Toys to recruit a talented team of IT professionals and pay them monthly for their services on a continuous basis. These costs all together will be way higher than the expected at the initial stages of implementation, because the outcome of implementing the system in terms of profits would not be as high as the cost.
Suitability of the E-Commerce System to My Toys
As discussed throughout the document, implementation of an E-commerce system has both positive and negative impact on the business as well as on the customer. Therefore the suitability of implementing the e-commerce system will depend on the potential benefits and costs to each of the parties involved in the system.
As it was obvious in the earlier section, at the beginning of implementation period; My toys will not be receiving the expected return on the investment. But if My Toys was to be expanded as an international brand having an e-commerce system is of paramount importance. Therefore the need of an E-Commerce system cannot be disregarded considering the high initial cost, because the long term objectives have to be prioritized before short term objectives. And the presence of an E-Commerce system would provide the needed services to international customer in making the selection and purchase decisions.
The security and credibility issues should also be considered in determining the implementation of the E-Commerce system. Requesting customers to provide their most sensitive information during a transaction would require high level of credibility and the presence of a sound IT system that could stand against unauthorized intrusions over the networks. This is a huge concern for businesses as this would need My Toys to receive the services of IT professionals who are specialized in the field. Therefore the decision on the suitability of implementing the system will depend on the priorities. Based on the small case that was given as the foundation for the Assignment, it could be concluded that the most the E-Commerce system should be implemented by bearing the negative return on the investment.
- Kotler, P. & Keller, K. 2011. Marketing Management 14th Edition, Upper Saddle River, NJ, Prentice Hall