Study: Winning at E-Commerce Requires Evolved Management Style

Companies that want to take advantage of the opportunities posed by e-commerce will have to do a better job managing dynamic pricing strategies, intellectual property rights, and partnership relationships, researchers at the University of California-Irvine Graduate School of Management announced Thursday.

By developing their management techniques in those areas, traditional manufacturing firms will improve their standing with high-tech firms, said Kevin Zhu, UC Irvine assistant professor of information technology.

To date, Zhu said, e-commerce has reduced costs for New Economy and high-tech firms, but actually has increased costs for Old Economy or traditional manufacturing firms.

In a few more years, the Old Economy companies will catch up in terms of Internet capabilities, back-end information technology resources, information-technology-familiar staff and decentralized management styles, Zhu predicted.

Price is Right

The management of dynamic pricing strategies is key to e-commerce success , according to related research conducted by Vijay Gurbaxani, UC Irvine professor of information systems and management.

Managing dynamic pricing strategies -- which involve constantly analyzing data and changing prices -- is one of major changes brought by moving transactions to the Internet.

Indeed, e-businesses are finding that it is critical to change prices often in response to fluctuating supply and demand, the research showed.

Patent Parade

Also critical to e-business success is the management of intellectual property rights, UC Irvine found.

Examples of intellectual property accomplishments by e-commerce firms include the patents obtained on Priceline.com's reverse auction and Amazon.com's 1-Click shopping system.

Using an e-business patent has become the weapon of choice for Internet giants, with a series of patent cases between powerhouses determining who can -- and who cannot -- use certain e-commerce shopping technologies.

Not only is digital rights management the focal point of a number of high-profile lawsuits, the development of digital rights management tools is a hot bed for venture capital investment.

Howdy, Partner

The UC Irvine researchers also found that managing partner relationships is crucial in the development of online business-to-business (B2B) exchanges.

The researchers noted that B2B exchanges often give partners access to proprietary information.

To build trust between cooperating companies -- and prevent opportunistic behavior -- partners need to be able to develop appropriate rules of exchange and maintain the relationship at the same time, the professors found.

Big Picture

In other research, Kenneth L. Kraemer, professor of information systems and director of UC Irvine's Center for Research on Information Technology and Organizations, found that while developed countries are throttling forward with e-commerce, developing countries are lagging.

The result is an increasing rift between the two, which goes against prevailing thought that the Internet is actually bringing the world together.

"The problem is that developing countries don't have the resources or skills it takes to get on the Internet," Kraemer told the E-Commerce Times. "They have neither the adequate infrastructure to create the demand for the Internet, nor the computer literacy in their populations to use it."

Ready or Not

In a recent presentation to government officials, Kraemer unveiled research that suggested that the world could be divided into the following five categories of e-commerce readiness:

• Innovators, or about 13 percent of countries, including the United States, Singapore and Germany.

• Fast-followers, or about 11 percent of countries, including Italy, Hungary and Kuwait.

• Up-and-comers (20 percent), including South Africa, Chile and Russia.

• Beginners (19 percent), including China, Egypt and the Philippines.

• Laggards (37 percent), including Kenya and Vietnam.

Kraemer argued that over half the world consists of e-commerce beginners and laggards because of the non-existent or insufficient national policies on Internet issues. Kraemer said that the technology gap will continue to broaden as long as the governments of developing countries take passive stances on Internet advancement.

Not One World

Kraemer said his research debunks the "myth of democratization," or the idea that globalization of information technology is closing the gap between rich and poor nations.

"Computers and information technology actually reinforce the existing power structure," he said. "The Internet may increase the Digital Divide, not decrease it."

Kraemer said that it is critical to change the business practices in developing countries.

"It's not just a matter of giving technology to poor countries," he said. "A country needs institutional and organizational changes -- open, honest, merit-based bureaucracies instead of corrupt ones. These institutions, once created, can make efficient use of computers."