Beginners Guide to e-commerce success

E-commerce trade

Undoubtedly the largest sector in e-commerce involves trade in buying and selling of commodities, conveniently done online. It is one of the fastest growing sectors in the global economy, and involves transactions worth billions of dollars on a daily basis. Traditionally, the primary focus in e-commerce was on trade in physical tangible commodities. Recent events have however seen a general shift in focus as evidenced by a remarkable upsurge in the value of business transactions involving trade in intangible commodities like, online software, video and audio downloads, patents rights, licences, tutorials, data, etc.

Regardless of the rapid growth in e-business sector, major beneficiaries remain the traditional industry leaders. New entrants struggle to establish themselves in a very competitive and fast paced environment, characterised by monopolies in the entire value chain system, from supplies to the markets. However viable survival and growth options are available for small beginner firms, but likewise require careful planning and implementation. It is very important for a business to be focused, most importantly maintain focus on specific commodities and markets. Business is established to fulfil market needs and in the process, make profit. It is easier to choose the specific product to focus your business, however identify a viable market will involve a lengthy process of market segmentation.

Business idea/choosing the right business

Might seem like a simple and easy thing, but is surprisingly where most new business gets it wrong, they choose some business because they know people making money from it, maybe it is what everyone is talking about these days, or maybe their family or society or culture has a history with that business. In choosing a business venture, you need to select a business concept based on your strength and capabilities.

You are more likely to succeed in business that utilise your capabilities e.g. you cannot offer accounting services yourself if you are not an accountant, or try to run a medical surgery when you are not a doctor.

And obviously you cannot pursue a business that will bring a poor return. Business idea needs not only to be feasible, but also financially and legally viable. In determining financial viability, must consider the capital requirement, expected return, the risk involved and life span of the business. It is also common practice and relevant to know that your expected return must always exceed the opportunity cost of capital.

Every serious business idea should be backed by a proper business plan of action. Good and effective plans will only come as a result of some careful and quality research. Whether you are new to business, or you have been in business but seeking to grow into e-business, it is essential that you understand concepts of, market segmentation, SWOT analysis, strategic business planning, and implementation, as they are key concepts in business. For purposes of illustrating these concepts, I will assume that you are already in serious business.

Market segmentation

Market segmentation is a method used to divide the overall commodity market into smaller segments for the purposes of targeting a particular segment. By investing more time and effort in satisfying a specific segment, we develop and build strong competitive advantages over our competitors. This is achieved through developing customised product and marketing concepts targeted for that niche markets.

For proper and effective market segmentation, it is very important to split the market according, to the most relevant and visible market characteristic. Segmenting criteria are those visible differences in market character that affect consumer buying behaviour such as physical geographical location, traditional beliefs, fashion tastes, population demographics like age group, income variations, etc. This stage is followed by segment selection and involves picking the most viable segment given our situation. Depending on the size of your business and segment market, options are available to customize your segment concept by taking more segments if it is too little or further splitting your current one if you consider it too big for the business to handle.

SWOT ANALYSIS

Business research normally involves digging for information from various sources covering all pertinent issues relating to the business. Normally we classify factors affecting the business as either internal or external factors, for purposes of a SWOT analysis, which enables a business a thorough and complete evaluation of its Strengths, Weaknesses, Opportunities and Threats, for purposes of developing a strategic plan for the business.

The internal factors may be viewed as strengths or weaknesses depending upon their impact on the organization's objectives. Strengths refer to our firm’s unique resources and capabilities giving us a competitive advantage e.g. good reputation with customers, personalised customer service, unique cost advantages like access to cheaper supplies of resources, flexible trading hours convenient for customers, patents rights, exclusive access to markets, exclusive labour skills, unique technological advantage and many more.

On the other hand the opposite can be viewed as weaknesses, say for example, bad reputation with customers, rigid inconvenient trading hours etc.  Internal environmental analysis is useful in identify a firm’s strengths and weakness, so that it can make plans that will capitalise on its strengths and either neutralise or manage its weakness by minimising their disadvantageous effect to the business.

 The external environment presents the business with opportunities and threats emanating from changes in legislative, political, socio-cultural, macroeconomic and technological environment as well as changes in the marketplace or competitive position that will affects business in a positive or negative way. Practical examples includes, withdrawal or introduction of a major competitor presenting  an opportunity and threat respectively, loosening or tightening of trade barriers, changes to import and export regulations, availability or lack of substitute products, shift in customer taste, etc will all presents opportunities or threats in some way.

It is very important that the SWOT analysis produce valuable information essential for a business to develop a viable business strategy. The overall business plan meant to achieve the mission is known as a strategic plan and is a product of thorough business research and SWOT analysis.

Strategic Business planning  

 Strategic business planning is the most important planning phase for a business as it involves identifying the overall business objective (mission) and devising an overall general plan to achieve the goal. Once the main objective has been set, the business needs to devise, policies and procedures that are necessary in order to achieve our main objective as part of strategy. The overall business strategy should be split, into functional strategies e.g. marketing, human resources, IT plans, for purposes of its implementation and further into short term tactical and immediate plans in each functional department. Thus a detailed and properly done SWOT analysis is essential for effective business planning.

Implementation of business plans and strategies

Implementation involves putting the plan into effect. Many businesses are able to come up with very good and viable business plans, but however fail to implement them properly. As required the overall business objectives should be split into shorter periodic and measurable objectives for purposes of implementation. Say for example we are in the retail sector and our mission statement set us to grow our market share to 10% of total national market and to have retail branches in all national provinces by end of the decade, through continuous service improvement and customer satisfaction.

Business needs to adopt and implement policies and procedures that are in line with their mission statement e.g. promoting absolute customer satisfaction and continuous product improvement and innovation, in the above example. Large organisations normally have well established codes of conduct, while newly established business only need to simply have small but effective codes of conduct. The overall business goal should be translated into measurable financial objectives, which can be split into annual financial objectives for implementation purposes.

From a financial perspective implementation is effected through budgeting and controlled by the budgetary control system. Cash budget is the main budget that each business must prepare and consists of mainly two sections i.e. income and expenditure. Income includes all received revenue, from business operations and any capital inflows, while expenditure will cover all expenses and capital expenditure.

Budgets are effective cost and performance control measures as they set limits in expenditure and performance targets that must be achieved, any variation should be investigated and justified.   Budgetary control divides performance variations into two main types adverse variation (unhealthy) and favourable variations (healthy). An adverse variation occurs when actual expenditure exceeds budget limit, or when income earned for the period fall short of budget target.  A business must always try to limit such unfavourable discrepancies, take each variance very serious and investigate its cause so as to avoid it in future if possible. Favourable discrepancies are very healthy as they indicate that the business has managed to exceed its income earning target, or has effectively saved expenditure compared to what was budgeted for, Ceteris Paribas.

Apart from a cash budget, other forms of budgets that can be prepared and are very useful include, production budgets i.e. where business is involved in production and a Master budget which is merely a profit and loss forecast for the coming period and is derived from production and cash budgets. It is very important to set realistic and relevant targets in order to gain the full benefit of effective budgeting and budgetary control.  

E-business trade platforms

On-line trade platforms refers to interactive websites where sellers and buyers from across the globe meet to do business online, and transactions are done according to the website’s trading procedures. It is advisable for international trade beginners to register with these platforms and do all transactions within the confines and regulations of the platform, as it minimise their exposure to scam risk. However most of these large and well established platforms also subject their innocent members to big scam risks, by allowing registrations of unverified businesses, even giving them gold card membership. To avoid scammers please follow the key guidelines details of our scam checking.  

Alibaba is the words largest trade platform (over 5 million members), but I find Tradekey (second world largest with close to 3 million members) better for beginners, as it offers a lower density of scammers. Most advisable are smaller commodity specialist trade platforms, focusing on a narrow, specialised range of commodities. If you plan to trade in branded products, I specifically recommend trading directly with the manufacture. Say you want to import Nike footwear, and then buy it from Nike manufactures, not anywhere else, as you will certainly get poor quality fact products.

Below list link you some of the world’s largest trade platforms.

1.              Tradekey

2.              Alibaba

3.              Go4worldbusiness

Related reading
1. On-line Beginners Guide
2. Independent freelancer jobs
3. Checking for Scammers
4. How to build a profitable e-commerce business

I seriously recommend that you do further research on this topic. You are free to post your comments and suggestions directly to this blog, constructive criticism is always welcome, or you can chose to join and participate in our member discussion forums. You will only need to spend less than 30 minutes a week, only when you choose to, giving your opinion on the topic tabled for discussion. We have just started this forum and believe your participation will grow it to levels were we can influence decisions at international level and help make this a better world for online business starters. 

Thank you for taking your time to read this guide and, may God bless your endeavours.

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