E-business advantages & disadvantages

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E-business has transformed the way companies function in today’s economic marketplace. The technological advances of the past few decades have given businesses the ability to grow and expand beyond their local market.

The Internet allows small businesses to reach national or global consumers with their products and services, increasing their sales and profits. Along with these advantages come some disadvantages, creating higher levels of economic challenges not previously seen.

Low Business Costs

One big advantage of e-business is the low start-up costs needed to begin business operations. Many small companies today simply start via the Internet, expanding into traditional brick and mortar stores once they have increased their working capital. Depending on their business success, companies may choose to simply expand their Internet footprint rather than creating a physical storefront. Internet storefronts are relatively cheap, with businesses needing a computer, website hosting service and Internet connection as their main operating equipment.

Multiple Market Segments

E-business allows companies to expand into new markets, both nationally and internationally. Entry barriers to these new markets are relatively low, depending on the type of goods or services sold via the e-business website. Government regulation may also be easier when conducting e-business as local and national governments have not imposed heavy regulations on many or all sectors of e-business. Goods may also be purchased by consumers for uses other than originally intended, creating a new secondary market for the e-business's products.

More Competition

A major disadvantage of e-business is the increased levels of competition. Because individuals and traditional businesses may enter the e-business marketplace, sellers must find a competitive advantage over more competitors than usual. Foreign companies may also be entering the e-business marketplace flooding the market with cheap or inferior goods. Companies may also offer substitute goods at a cheaper price, giving consumers more purchasing options than before. These types of competition can limit a new e-business from getting off the ground, much less succeeding in the marketplace.

Difficult Customer Relations

Another major disadvantage of e-business is the difficulty of creating positive goodwill through a website and computer. Consumers traditionally place high value on customer service in the brick and mortar business environment. Creating this same type of positive customer service is difficult for e-businesses, considering that their customers may be hundreds or thousands of miles away from the e-business’s operations. Consumers may also have difficulty understanding mistakes or errors since impersonal e-mail is a common form of communication in e-business.