CR Vol. 16, No.

2, 2006

150
COMPETITIVE ADVANTAGE WITH
E-BUSINESS: A SURVEY OF LARGE
AMERICAN AND SWEDISH FIRMS


by Hooshang M. Beheshti, Esmail Salehi-Sangari
and Anne Engstrom


EXECUTIVE SUMMARY

Advances in information and communications
technology have allowed for a wide range of
electronic business models and applications. These
applications are providing a competitive advantage
for organizations by creating efficiencies and cost
reductions. Electronic business should be part of the
overall corporate strategy and be integrated into
core business processes. This study provides
interesting insights into electronic business
applications in large corporations and discusses
similarities and differences that exist between
Swedish and American corporations.


INTRODUCTION

Continuous advances in information and
communications technology as well as the decreasing
costs of that technology have made it possible for
organizations to look for ways, more than ever, of
incorporating technology into their business
processes and strategies. Integration of information
and electronic technology into business processes and
strategies can provide a unique opportunity for the
organization to sustain or enhance its competitive
nature by lowering personnel requirements and
reducing both transactions and agency costs of the
business.
In recent years, one of the most significant
opportunities offered by new computing technology
is electronic business. E-business is a way for
companies to conduct business transactions
electronically and to become more efficient and to
promote operational flexibility. In addition,
responsiveness to consumer needs and supplier
relations can be improved. According to Bill Gates,
the way business is conducted will change more over
the next 10 years than in the last 50 years (Dedhia,
2001).
The Internet in general and e-business in
particular have provided business opportunities for
both small and large firms. A study conducted by
Barua, et al (2001) found that small businesses were
utilizing the Internet more than their larger
counterparts. This is believed to be due to fewer
obstacles associated with systems integration and
more flexibility to implement change. However,
large companies are finding e-business to be a
competitive advantage and a powerful management
tool for their complex supply chains. E-business
implementation allows businesses to share
information with suppliers, buyers and partners, and
to better plan and manage supply and demand.
Companies can use e-business to conduct business at
anytime, day or night and to reach potential, Web
connected buyers regardless of their location. In
addition, they can present better customer service and
reduce the costs of production and distribution of
products and services. For example, the entrance of
General Motors, Ford, and Daimler Chrysler into
online bazaar made it possible for these companies to
interact with their major suppliers for price
competitiveness, to decrease personal contact, and to
minimize manual processing. This in turn, allowed
the suppliers to conduct transactions with each other
and to be more competitive on price. This decision by
the three automobile manufacturers resulted in
savings of $2,000 to $3,000 on a $19,000 vehicle
(Barens-Vierya & Claycom, 2001; Barua, et al,
2001).
While corporations can realize many
benefits by using e-business, there are, however,
some disadvantages associated with the application
of this technology. These include: security issues
concerning transmission of corporate information
electronically; access to corporate databases by
hackers; new technology acquisition and
implementation costs; personnel hiring/training costs;
maintenance and operational costs; lower barriers to
entry for new competitors; and lack of proper e-
business strategy (Brache & Webb, 2000; Rodgers, et
al, 2002).
Once e-business is considered a strategic
necessity, the e-business strategy should be integrated
into corporate strategy to achieve maximum results.
The right model and proper implementation can
provide economic and competitive opportunities by
lowering costs, boosting sales, and improving
customer service and supply chain/distribution
channels.


E-BUSINESS MODELS AND STRATEGY

The high costs of e-business development,
implementation, and maintenance on the one hand
and the failures of numerous dot-coms on the other
hand, necessitate the development of a well thought
out e-business plan and model. Follit (2000) suggests
that an effective e-business plan must include five
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151
factors: a champion, a vision, a plan to achieve the e-
transformation, a rigorous communications strategy,
and a healthy company culture. In order to be
successful in implementing an e-business plan,
Cunningham (2000) recommends that corporations
should develop a go to market strategy in order to
iron out issues with the implementation of the
business plan. All groups involved in developing the
plan for business should participate in formulating
the strategy. This strategy should include:
Marketing plan and tactical actions
Press plan and tour
Introduction to new and existing clients
Site traffic promotion
Pricing and packaging information
Introductory offers-if applicable
Partner program-if applicable
Internal promotion and explanation of the
new site and purpose
Validation of the business model
Internal communications
Product development and release schedule
In general, businesses should not implement e-
business just because they can, rather, they should
determine whether or not e-business, as an enabler,
will facilitate the execution of their plan to sustain or
enhance their competitive edge.
During the recent years several e-business
models have been introduced and used by businesses.
Depending on the nature of the business each model
can provide a competitive opportunity for the firm.
There are five common models of e-business:
business to business (B2B), business to consumer
(B2C), portals, websites as goodwill or promotional
vehicles, and peer to peer (P2P) or consumer to
consumer (C2C) systems (Winsor, et al, 2001).
However, the majority of organizations that utilize e-
business use B2B and/or B2C with B2B being the
dominant of the two models in the electronic
marketplace. In fact, B2B accounted for 93 percent of
all e-commerce transactions in 2002 (U.S.
Department of Commerce E-Stats, 2004).


B2C AND B2B MODELS

Companies, implementing the B2C model,
use the Internet to support retail transactions and
derive profit by acting as an intermediary between
suppliers and the ultimate consumers. Today, many
businesses implement a B2C model as a convenience
for their customers and to gain a competitive
advantage or keep up with competitors. Online
buying has increased in the consumer section by 580
percent (Biehn, 2001), and as consumers become
more comfortable and secure in accessing the
Internet, this number should continue to increase.
According to the U.S. Department of Commerce
(2004), e-commerce retail sales were $55.996 billion
in 2004, up from $44.287 billion in 2003. The
volume of these transactions was up by 23.1 percent
during the second quarter of 2004 when compared to
the same period of 2003.
B2B models are designed to streamline the
supply chain, reduce procurement costs, and increase
operating efficiencies. B2B models rely upon the
Internet, intranets, and/or extranets to facilitate the
communications among the users and to improve
efficiency of the processes in an automated
environment.
Once the decision is made to utilize a B2B
model, companies can connect up in several different
ways. There are five different models that a firm can
use: one seller to many buyers, many sellers to one
content aggregator to many buyers, one seller to one
broker to many buyers, many sellers to one buyer,
and many sellers to many buyers (Barnes-Vieyra &
Claycomb, 2001).
In one seller to many buyers, companies
take on the responsibility of building and maintaining
their own websites and processes. Since customers
are directly served, customer service is an important
aspect of this model. Customer service can be
enhanced by implementing several features: order
status, after-sale information, 24/7 access to
information, searchable online catalogs, and technical
information and service. Security is another
important feature that should be considered. It is
important to determine how much access should be
given to the customer and how to protect the integrity
of the system. To successfully use this model
companies should develop new channel strategies
that incorporate e-business with traditional channels.
Involving the customer as well as participation by
every business function in the development of
channel strategies are critical to the success of this
model.
The many sellers to one content aggregator
to many buyers model uses an intermediary as a hub
or portal between the buyers and sellers. To make
the distribution channel more efficient, automation of
processes should be maximized in order to make
search mechanisms and transactions flow smoothly.
Buyers and sellers that utilize this model benefit from
lower transaction costs, productivity gains, and
favorable price negotiations. Two areas of
specialization exist among these aggregators: vertical
and horizontal.
Vertical aggregators or hubs are specific to
the industry and involve electronic transactions up
and down the industrys supply chain. In addition to
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products, they provide a wealth of industry specific
information. Successful vertical aggregators focus on
developing long-term relationships within the supply
chain and overcoming barriers that may exist in the
channel. Horizontal aggregators focus on offering a
specific service such as supplies or logistics across
multiple industries. Horizontal aggregators serve to
add value through automation and reduced process
costs. A successful horizontal aggregator relies upon
its expertise, standardization, its process knowledge,
and its ability to customize for industry-specific
differences.
The one seller to one broker to many buyers
model is basically an online auction or commodity
market and is best chosen in a situation in which
products and services are differentiated or perishable.
Buyers and sellers are typically unrelated and may
see the products value differently. The use of a
broker lessens or eliminates time, distance, and
location hurdles. It is possible that the seller and
buyer could be located on opposite sides of the
world. Buyers can take advantage of lower search
and information gathering costs. Sellers benefit from
a global marketplace which is particularly important
when the product is perishable, an overstock item, or
unique.
The many sellers to one buyer model is
often used when large companies require suppliers to
make electronic transactions. Buyers benefit from
quick delivery, improved inventory planning, reduced
transaction costs, and increased availability of
information. Sellers bid against each other in order to
fulfill the buyer needs, resulting in a price-taker
position for the seller.
Of all available models, the many sellers to
many buyers model is the most challenging to
implement. This is due to the dependency of all
buyers and sellers having compatible systems. All
participants in the model can switch from the role of
buyer to seller. Sellers face price pressures due to the
abundance of information and diminished
competitive advantages as it relates to distribution.
Also, this model allows all participants to
occasionally be on the side of the buyer and take
advantage of buyer benefits as offered by the one
seller to many buyers model (Barnes-Vieyra &
Claycomb, 2001; Chen & Siems, 2001; Kaplan &
Sawhney, 2000).


RESEARCH METHODOLOGY AND
OBJECTIVES

The purpose of this study is to evaluate the
impact of e-business in large corporations in the
United States and Sweden and to establish a
foundation for further research. Given that the use of
electronic technology transcends cultural and
geographical boundaries in the business world, the
study sought data from top 500 American and
Swedish firms for a comparative analysis. In order to
compile a representative sample of large firms in
both countries, selections were not limited to a single
industry or sector. To gather data and to increase
response rate, two population groups were surveyed
using an easily completed questionnaire with a cover
letter and a return envelope.
Mailing to the US corporations provided 95
responses of which eight responses were not usable
due to missing data. Thus, 87 usable responses
(17.4%) supplied data for analysis. A second mailing
was made to 500 Swedish firms. There were 114
complete and usable returns constituting a 22.8
percent response rate.


TABLE 1

E-Business Models Used by Respondents


Model

Sweden (%)


United States (%)

B2C
B2B
Both

12
61
27

9
59
32






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153
E-BUSINESS MODEL USAGE AND
DEVELOPMENT

All respondents from both countries
indicated that they use electronic business models in
their businesses. A majority of Swedish (61%) and
the United States respondents (59%) reported that
they were using a B2B model. More Swedish firms
(12%) used only a B2C model than those in the
United States (9%). Table 1 compares the
percentages of businesses using these models. All
percentages are rounded to the nearest percent.
The differences in B2C and B2B users are
not significant between the two countries and the
higher percentage of the usage of both B2C and B2B
models in businesses in the United States (32%
versus 27%) probably reflect the earlier start of these
organizations in e-business implementation. Table 2
compares the development of e-business models used
by the responding firms. A firm may decide to have
an outside party to develop the e-business model
rather than developing it in house. The decision to
seek an outside agency to develop the proper e-
business model is generally based on economics and
does not diminish the strategic value of the model to
the firm.
It is clear that the majority of U.S. firms
have opted for in-house development of their e-
business applications. This could be attributed to the
unusual economic growth and the explosion of the
Internet in the United States during the 1990s. In
Sweden, however, only the majority of the firms that
use both B2C and B2B developed them in house.
However, the majority of Swedish B2C or B2B
model users outsourced their development to an
outside agency.

THE IMPACT OF E-BUSINESS ON
ORGANIZATIONAL STRUCTURE

In general, integration of new technology
often results in a major change on the structure of the
organization by streamlining business processes,
reducing layers of management, and changes in job
design. Perhaps, in recent years, the most significant
impact of new technology on the organization has
been the reduction in management levels and staff in
large organizations. This allows the organization to
be more flexible and react to changes in the market
conditions more quickly.
The majority of Swedish firms that
implemented B2C (57%) or both B2C and B2B
(55%) reported that changes were made to their
organizational structure. The highest degree of


TABLE 2

Development of E-Business Models


Sweden


The United States



Model
In-House (%)


Outside
Agency (%)

In-House
(%)

Outside
Agency (%)

B2C
B2B
Both

46
43
79

54
57
21

63
52
71

37
48
29


change (62%), however, was reported by the U.S.
corporations that deployed a B2C model. The least
amount of change occurred in both population
groups, Swedish firms (38%) and U.S. companies
(41%), using a B2B model. Considering that
Electronic Data Interchange (EDI) was the start of
B2B electronic business, it is safe to assume that
many of the surveyed organizations had made

structural changes during EDI implementation and
did not find it necessary to make major structural
adjustments. Table 3 shows these changes.
Although it is expected that the new
technology reduce the layers of management in most
companies, there are instances, however, that the
organization needs additional managers and
employees. The highest percentage of reduction in
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154
the number of managers working for the responding
groups was reported by U.S. firms (12%) and
Swedish companies (7%) that use a B2C model. It is
interesting to note that U.S. corporations using both
B2C and B2B models increased the number of
managers working for them by four percent.
However, the opposite is true for Swedish firms that
use these models and reported a decrease in the layers
of management by three percent.


STRATEGIC IMPLICATIONS OF E-BUSINESS

Todays global business, fragmented
marketplace, and information technology
proliferation require that organizations incorporate
customer needs into their processes and to optimize
performance in all areas. Corporations adopt the new
technology if it is believed to add value to the
business or to create a competitive advantage. Porter
(1980) introduced three generic strategies to gain
competitive advantage that are still viable today. In
each strategy, information technology plays an
important role. In developing a competitive strategy a
company must first determine its position with
respect to other firms in the industry.
A structural analysis, which is fundamental in
developing a competitive strategy, relates the firm to
its environment and will identify its critical strengths
and weaknesses. This analysis will help the firm to
decide in what areas a change in strategy will yield
the greatest benefits.



TABLE 3

The Impact of E-Business on Organizations


Sweden

United States


Model
Structural
Change (%)
Reduction in
Management
(%)
Increase in
Management
(%)
Structural
Change
(%)
Reduction in
Management
(%)
Increase in
Management
(%)

B2C
B2B
Both

57
38
55

7
3
3

5
0
0

62
41
49

12
4
0

0
0
4


In general, a firm can increase the value of
its products and/or services by lowering the cost of
the product or service, differentiating the product or
service from the competition, or finding a market
niche. The competitive advantage of being a low cost
producer is that even in tough competitive markets,
the firm can earn above average returns. Those
returns can be reinvested into the firm and used to
purchase new technology, equipment, and facilities
that will help the firm to maintain its low cost
position. Product differentiation involves producing a
product that has some characteristic or feature that
the consumer perceives to be unique. Product
differentiation creates brand loyal customers who are
fewer prices sensitive. Finally, a firm can obtain a
competitive advantage by identifying a market niche
and develop processes to meet the needs of that
specialized market.



Any firm that competes in the marketplace,
regardless of the strategic choice, must have access to
information to make decisions and have
organizational flexibility to execute their decisions in
a timely fashion. Advances in information
technology and the Internet have made it possible for
companies to reach their employees, customers,
suppliers, business partners, and stakeholders
electronically and in real time. In this way, an
organization can react to changes in its internal and
external environment more quickly and remain
competitive.
Table 4 depicts that a significant number of
survey participants, more than 90 percent, reported
that e-business has added value and created a
competitive advantage for their business. The high
scores in both countries reflect an awareness by these
corporations that the marketplace demands product
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155
variety and customer service that are both time and
cost sensitive.
Core competencies are functions that are
critical to the long-term viability of the business.
These competencies are kept within the organization
and given proper resources and attention they require.
If a function is considered to be essential to the
continuity and profitability of the organization but
not a core competency, it can be outsourced.
Building, maintaining, and updating an e-business
system is expensive and complex. For this reason, a
company may decide to outsource this function to
another party. The majority of organizations that use
B2C or both B2C and B2B models in both surveyed


TABLE 4

Strategic Implications of E-Business


Sweden

United States


Model
Value
Added (%)
Competitive
Advantage
(%)
Core
Competency
(%)
Value Added
(%)
Competitive
Advantage
(%)
Core
Competency
(%)

B2C
B2B
Both

93
91
100

93
92
93

57
46
55

100
94
96

100
96
93

63
43
61


groups reported that they considered these models
part of their core competency. However, less than 50
percent of the corporations that use a B2B model
regard it as a core competency in both Sweden (46%)
and the United States (43%).


FINANCIAL IMPACT OF AND
SATISFACTION WITH E-BUSINESS

Corporations have realized that conducting
business electronically reduces costs, improves
revenues, and enables them to manage corporate
resources in a more efficient and effective manner.
Chopra and Meindl (2001) suggest that e-business
will offer enterprises cost-reduction opportunities as
follows:
Shorter supply chain and less product
handling
Postponing product differentiation until
after the order is placed
Reducing facility and processing costs
Decreasing inventory costs through
centralization
Decreasing delivery cost and time with
downloadable products


Improving supply chain coordination
through information sharing
By engaging in e-business, companies can reduce
both transaction and agency costs.
E-business can provide organizations with
the ability to increase sales by using low-cost
networks to reach customers without regard to their
geographic locations. According to Violino (2001),
many businesses in industries such as travel and
hospitality, technology, transportation, financial,
chemical, and pharmaceutical among many others
have improved their sales and expanded their
customer base by conducting business electronically.
In addition, these companies collect data about their
customers to improve marketing strategies, sales, and
customer service.
Table 5 provides the data for costs
reduction, sales volumes, and satisfaction with e-
business. The highest level of cost reduction is
reported by companies that use a B2B model in both
countries, 73 percent and 77 percent for Sweden and
the United States respectively.
This is expected since B2B allows firms to
bypass traditional channels and deal directly with
each other and avoid intermediaries. In addition,
orders can be fulfilled at a fraction of the cost



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TABLE 5

Financial Impact of and Satisfaction with E-Business


Sweden

United States


Model
Reduced
Costs (%)
Increased
Sales (%)
Satisfied
(%)
Reduced
Costs (%)
Increased
Sales (%)
Satisfied
(%)

B2C
B2B
Both

33
73
68

31
7
45

71
76
84

38
77
64

25
8
46

75
78
86


of paper-based processes, automatic billing and fund
transfers, and better supply chain management can
provide significant savings. In both countries, the
percentages drop considerably for B2C users, when
compared to others, with 33 percent in Sweden and
38 percent in the United States. However, in both
countries the users of B2C and B2B reported cost
savings of 68 percent and 64 percent for Sweden and
the United States respectively. The highest
percentage of increase in sales is reported by the
corporations that use both B2C and B2B models
(45% in Sweden and 46 percent in the United States);
the lowest scores are for the Swedish (7%) and
American (8%) B2B users.
Successful implementation of and
satisfaction with a new technology requires planning,
leadership, and the inclusion of the user groups in the
process. It is noteworthy that the users of e-business
models reported almost the same level of satisfaction
for each model in both countries.
The highest satisfaction in Sweden (84%)
and in the United States (86%) was reported by the
users of both B2C and B2B.


CONCLUSIONS

Many factors, in todays competitive and
global business environment, contribute to an
organizations financial success. A business
enterprises management must adopt a strategy that
fully exploits information technologys power as a
key element to optimize the organizations
competitiveness. Recent spectacular technological
advances, in computer networks, the Internet, and
electronic business have made the effective use of
technology a critical, competitive business tool.
There are numerous electronic business models and



strategies available, but it is necessary to thoroughly
examine the requirements of the business and the
requirements of the technology in order to find an
appropriate match.
This study provides data for electronic
business users of large corporations in Sweden and
the Unites States. The study found many similarities
with regard to the impact of e-business on cost
savings, sales, organizational structure, and change in
levels of management between two countries. This is
not surprising; the United States is the world leader in
electronic business and Sweden is considered to be a
leader among the European countries in Internet
access and has a population that is well educated in
Internet usage (Asfaw, el al 2001).
A significant number of responding participants
in both survey groups reported that electronic
business has added value to their business and given
them a competitive advantage. There are, however, a
considerable number of companies that are
dissatisfied with their e-business applications.
Dissatisfaction with e-business could stem from
problems in one or more of the following areas:
Planning and design of e-business model
Hardware and software security
Integration of e-business applications with
internal information systems and business
partners
Telecommunications network and protocols
Web page design and navigation
Further research is needed in this area in order to
determine the reasons why e-business applications
are not working as well as they should for these
companies.




CR Vol. 16, No. 2, 2006

157
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___________________________________________
Hooshang M Beheshti ([email protected]) is
professor of management at Radford University,
Radford, VA 24142.

Esmail Salehi-Sangari (Esmail,Salehi-Sangari@ies.
luth.se) is professor and chair of Division of
Industrial Marketing and e-commerce, Lulea
University of Technology, Lulea Sweden.

Anne Engstrom (Anne,[email protected]) is a
doctoral candidate at Lulea University of
Technology, Lulea Sweden.