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Unit 2.4

How E-commerce Changes Business: Strategy, Structure, and Process

IT 204: E-Commerce

Learning Objectives

By the end of this chapter, you will be able to analyze how e-commerce acts as a fundamental disruptive force across every aspect of a business.

  • ✅ Understand how e-commerce transforms business strategy and competitive dynamics.
  • ✅ Explain the impact of e-commerce on organizational structure and culture.
  • ✅ Analyze industry transformation patterns like disintermediation and reintermediation.
  • ✅ Apply these concepts to evaluate strategic responses in Nepali business contexts.

E-commerce: A Transformative Force

E-commerce isn't just a new sales channel; it reshapes the entire business landscape across three critical dimensions.

🎯 Strategy

How businesses compete, create value, and achieve competitive advantage.

📊 Structure

How organizations are designed, managed, and staffed to execute strategy.

⚙️ Process

How work gets done and how value is delivered to the customer.

Part 1: How E-commerce Changes Strategy

The rules of competition are rewritten in the digital age.

Traditional Business

  • Geography: Local/Regional
  • Barriers to Entry: High
  • Information: Asymmetric
  • Scalability: Linear

E-commerce Business

  • Geography: Global from Day 1
  • Barriers to Entry: Low
  • Information: Transparent
  • Scalability: Exponential

Nepal Example: Bhatbhateni's success is based on physical locations (traditional), while Daraz's success is built on a digital platform and data analytics (e-commerce).

Porter's Five Forces in the E-commerce Era ⚡

E-commerce intensifies the competitive environment across the board.

  • Threat of New Entrants: INCREASED ⬆️
    Anyone can start an online store with minimal capital (e.g., thousands of sellers on Daraz).
  • Bargaining Power of Buyers: INCREASED ⬆️
    Price transparency and easy comparison empower customers (e.g., comparing prices on Sastodeal vs. HamroBazar).
  • Threat of Substitute Products: INCREASED ⬆️
    Algorithms and search make discovering alternatives effortless.
  • Rivalry Among Competitors: INTENSIFIED ⬆️
    Global competition, price wars, and constant innovation are the norm (e.g., Foodmandu vs. PathaoFood).

Overall Result: E-commerce significantly increases competitive intensity, making it harder to sustain a competitive advantage.

Transforming the Value Chain

E-commerce digitizes and optimizes every step of value creation.

Primary Activities

  • Inbound/Outbound Logistics: Automated warehousing & real-time tracking.
  • Marketing & Sales: Shift to digital marketing, SEO, and personalization.
  • Service: Move to chatbots, self-service portals, and 24/7 support.

Support Activities

  • Procurement: E-procurement and automated supplier management.
  • HR Management: Access to global talent pools via remote work.
  • Technology: Moves from a support function to a core competency.

Key Insight: In e-commerce, technology is not just supporting the business—it IS the business.

Part 2: How E-commerce Changes Structure

Organizational design must adapt for speed and agility.

Traditional Hierarchy

  • Vertical & Siloed
  • Slow, top-down decisions
  • Command-and-control
  • Resistant to change

E-commerce Network

  • Flat & Cross-functional
  • Fast, decentralized decisions
  • Agile & Autonomous
  • Built for adaptation

This shift creates new roles like Data Scientists, UX Designers, and Digital Marketing Specialists.

Part 3: How E-commerce Changes Process

Business Process Reengineering (BPR): The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements.

Process Example: Order Fulfillment

Traditional Process:
  1. Customer goes to store
  2. Selects product
  3. Pays at cashier
  4. Leaves with product
E-commerce Process:
  1. Customer orders online
  2. Order is auto-confirmed
  3. Warehouse picks & packs
  4. Courier delivers with tracking

E-commerce enables automation, transparency, and efficiency at scale.

Part 4: Industry Transformation Patterns 🔍

E-commerce doesn't just change companies; it restructures entire industries.

Disintermediation

The removal of traditional intermediaries (middlemen) from the supply chain.

Manufacturer → Consumer

Nepal Example: Nepali handicraft artisans selling directly to global customers on Etsy, bypassing local exporters.

Reintermediation

The creation of NEW digital intermediaries that add value.

Seller → Marketplace → Buyer

Nepal Example: Daraz (marketplace), eSewa (payment), and Pathao (logistics) are all new, powerful intermediaries.

The Nepali Context: Opportunities vs. Challenges

Applying e-commerce principles in Nepal requires understanding the local landscape.

Opportunities 📈

  • Global Market Access: Selling Nepali products like pashmina and tea worldwide.
  • Lower Startup Costs: Enabling entrepreneurs to launch businesses from social media.
  • Niche Markets: Serving specific local needs that large retailers ignore.

Challenges 🚧

  • Infrastructure: Unreliable internet and difficult last-mile logistics.
  • Trust & Payments: High reliance on Cash-on-Delivery due to trust issues.
  • Digital Literacy: A significant portion of the population is not yet comfortable shopping online.

Key Takeaways

  • Transformative, Not Incremental: E-commerce demands a fundamental rethink of business, not just minor tweaks.
  • Competition is Intensified: Lower barriers and global reach mean you're competing with everyone, everywhere.
  • Agility is the New Currency: Flat structures, cross-functional teams, and agile processes are essential for survival.
  • Disintermediation AND Reintermediation Occur: The internet removes some middlemen while creating powerful new ones.
  • Local Context is King: Success in Nepal requires solving local challenges like logistics and trust, not just copying global models.

Thank You

Next Topic: Unit 3.1 - E-commerce Marketing and Advertising

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