PEST, SWOT, Five Forces and Value Chain Analysis

An analysis has been carried out of E-commerce to assist in attaining an overall understanding of the organisation. Various tools have been used. Their results are identified in this section.

PEST Analysis

This technique considers the external factors that may affect E-commerce. It deliberates upon the political, economical, social and technological issues.

Political Issues

- Internet legislation for the conduction of business on the Internet, i.e. E-commerce

- The government's White Paper on E-Commerce

In order for e-commerce to be implemented for any organisation, it needs to ensure that the applications it operates run concurrently with the stated legislation in the government's white paper.

Economical Issues

- Taxation on products and services

- Fluctuation in prices of goods

- Competitors in the form of shop businesses

- Rise in Interest rates

Payment processing in multiple languages The economic success of e-commerce is dependent on the costing and pricing of the products and services it provides to the consumer. Competitors exist in the form of high street shop businesses that may attempt to offer competitive prices to counteract the effects of the quality of service and promotions offered by e-commerce. Issues that will affect the global acceptance of e-commerce and of the goods and services it provides include the stated above.

Social Issues

- Slow population growth in UK

- Division of society by Internet-social strataSocial awareness of E-commerce as a business medium

- Acceptance of E-cash (Digital cash) & E-commerce

- Consideration of multiple languages and multiple cultures

Consideration of multiple shipping and customs rules Global acceptance means that users of varying culture and language understand and are able to use the applications. Success means providing for their needs in the form of currency converters and translators, and raising awareness for the need and success of e-commerce.

Technological Issues

- Millennium problem

- Internet & E-commerce as a sales and transaction medium

- Availability of various languages to develop E-commerce applications i.e. JAVA and SmallTalk

Increased amount of host servers to accommodate E-commerce applications The battle is on for share of the growing number of consumers and businesses attracted to the Internet. ISP's will have to work hard to differentiate their services through value, or risk becoming commodotised in a market that is becoming very price sensitive. In an effort to differentiate an exploit the rise in e-commerce, many ISP's are seeking e-commerce offerings. Diverse languages are being made available to accommodate the e-commerce applications and boost their appeal in the choice for implementation.

SWOT Analysis

This technique considers the strengths and weaknesses within E-commerce, and the opportunities and threats presented by it.

Strengths

- Globalisation

- Rapid increase in Internet users

- Ease of accessibility to the customer

- Diverse range of products and services

- Credibility

Large proportion of major banks online Banks and mainstream telecommunications who are rapidly picking up speed and market share. Electronic commerce is projected to grow at an enormous rate and this will have a tremendous impact on the financial industry. Estimates for this year are 1 billion pounds worth of total revenues. Future growth promises £1.5 trillion by 2010, as more and more users become secure in online financial transactions. No financial institution will be left unaffected by the explosion of e-commerce.

Weaknesses

-Adherence with Internet and E-commerce legislation

- Non-human interaction for assurance and immediate advice

The adherence to the legislation may impose some restrictions on the service, operation or application of e-commerce but its strengths and offerings may heavily outweigh these. The only main difference between e-commerce and high-street shopping is the human interaction between consumer and retailer. While this may be welcomed by some, others may prefer the advice provided.

Opportunities

- Possibility to expand on the current range diverse range of products and services q Possibility of expansion in other countries

- Increase of customers from a potential of 6 billion

The opportunities tie-in with the strengths of e-commerce. The increase in growth of e-commerce, and its acceptance worldwide paves the way towards global expansion for the world's population by providing a diverse range of products and services.

Threats

- Competition from other mediums of trade i.e. high street stores/banks

- Internet crime

- Unauthorised access by hackers

- Non-acceptance from users to make financial transactions online

E-commerce growth is being restrained by security concerns in both the business and consumer sections. Despite the area of security being poorly understood, the resistance is real: through lack of trust is further enhanced by the emergence of Internet crime, and hackers who are also contributing towards the consumers' wariness. Five Forces The rules for this technique have been based on research by Michael Porter. The basis of the model being that an enterprise exists within an industry and in order to succeed, it must effectively deal with the competitive forces that exist within a particular industry. An organisation interacts with its customers, suppliers and competitors, but in addition to these interactions, there are possible new entrants and potential substitutes. To analyse these interactions for E-commerce, the five forces model has been applied to understand the implications in terms of opportunities that occur for gaining competitive advantage. The model shows the entry of new competitors, threat of substitutes, bargaining power of suppliers and buyers, and the rivalry amongst existing competitors.

Value Chain Analysis

Primary Business Activites

Primary activites are those activites that are essential for the day-to-day running of the business, these must be performed effectively, and every primary activity must intergrate with all the other primary activities, for the business to perform well.

Business Support Activites

Support activites are those activites that are requied for the business to develop internally, these activites do hold, or show any tangible value or monetary return, but the intangible vaule of the support activities is exhibited through the primary activites, support activites are effectively the core infrastructre of the bussiness.

Summary of Value Chain Analysis

Porters theories argued that Information Technology plays an important role within business, and that the linking of technology throughout the business could produce a range of business benefits such as; improved efficiency, productivity, empowerment, as well as reduced costs, despite the initial investment required for this Information Technology.

The model provides a way of showing how Information Technology can be used strategically, with the overall effect being the organisation gaining a competitive advantage over its business rivals.

A full diagram of the Value Chain Analysis is available in the Documentation handed in.

Financial Information Systems-John Lindsay-1999