CC BY
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G. Cyras, Vilnius Gediminas Technical University, Vilnius, Lithuania, jolanta.sabaltyte@vgtu.lt J. Sabaitytè, Vilnius Gediminas Technical University, Vilnius, Lithuania, giedrius.cyras@vgtu.lt
Strategic aspects of interaction between the electronic and mobile businesses
Effective development of nowadays business must be based on scientific knowledge and science-based solutions, which are designed to properly integrate electronic and mobile business models into enterprises current traditional activities . IT-based development should be followed by rightly identified characteristics of electronic, mobile business and participants in this area, analysed strategy aspects and identified the role and importance of business model in this context . The aim of this article is to analyze the effective electronic and mobile business integration to traditional business aspects from the strategic point of view . To achieve this goal, the main characteristics of e- and m-business were identified, information technology-based business strategies and business model classification were analyzed . Research methodology employed: systematic literature analysis and synthesis, grouping, graphic information visualization techniques .
Keywords: e-business; m-business, IT strategy, business model .
Introduction
In information society, due to union between knowledge, technology and information flow, synthesis of traditional and information technology based business has emerged — electronic business (e-business). This created conditions to receive, store, process and transmit information 24/7/365. Later came the need not only to reach the information at any time, but also without being tied to one geographical location, development of information technologies (IT) has determined the emergence of mobile business (m-business). On this day m-business is a rapidly developing branch of business, which was created after development of wireless data networks and companies started to integrate m-solutions into their existing activities. As well as other evolving business branches, it can be described in a number of uncertainties associated with technologies, need and strategy.
Companies are willingly implementing new IT, however not in all processes installation integrity and harmonious continuity is noticeable. Moreover, the pace of IT development is significantly higher than the company's expectations
embedded in technology (which often does not meet the realities of the future). Also because of globalization processes occurring in the world and market liberalization, uncertainty and inconsistencies of various business sectors, including m-business, emerges. Therefore, upsprings a need to anticipate possible uncertainties and after ascertaining them, to form an IT-based strategy encompassing e-business and m-busi-ness characteristics and business models.
Purpose of this paper is to analyze the effective electronic and mobile business integration solutions to traditional business aspects from the strategic point of view. To achieve this goal, electronic and mobile business characteristics, information technology-based business strategies and business model classification will be analyzed. Systemic analysis of scientific literature, information logical comparison and graphic methods are used in this paper.
Electronic and Mobile Business Characteristics
Since information technologies are continuously developing, new ways to improve company's activities are being discovered. In the
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formation of global economy, electronic and mobile businesses, in growing rates, become essential part of business strategy and a strong catalyst for economic development. In order to define electronic and mobile business model and strategy aspects, it is critical to examine the characteristics of these businesses.
The emergence of e-business has fundamentally changed the direction of the commercial relations between individual countries and rest of the world. Information Communication Technology gave new tools for product purchase and sale which overcomes geographical, time, human resource and financial barriers [12]. E-business started in the US and Japan in approximately 1995 year, its emergence has been led by the technological, economic and social factors [17]. First to propose the e-business concept was company IBM in 1996. The essence of the term — continuous improvement of various aspects of activities through digital technologies [20]. Some researchers [25; 7] define e-business as business process automation (internally and externally) in a computer network. Different approach to e-business is presented by J. Cantoni [3], describing e-business as critical competitive strategy that will lead to a breakthrough in the global economy. Chaffey D. [4] describing the e-business focuses on the innovative application of information technologies in enterprise and beyond, in order to increase the competitiveness of the company. According to this conception, internal of external use of information technologies in companies should optimize performance, increase its efficiency to gain a competitive advantage. Summarizing various Lithuanian and foreign e-business definitions, it was discovered that e-business concept emphasizes the positive development of information technology trends and assistance for businesses. Main ebusiness characteristics can be distinguished:
• e-business is based on network technologies, which basically transforms internal and external nature of the interactions;
• e-business — business transactions' execution and enterprise performance organization using information technologies;
• e-business is a process of automation (internal and external environments) within computer network.
• e-business is characterized as a critical strategy that determines a breakthrough in the global economy.
E-business in its current form has existed for two decades. In this stage of e-business development, one of the most important aspects is communication and cooperation intensity. This is evidenced by the Information Society Development Committee under the Government of Republic of Lithuania prepared e-business development promotion for 2010-2015 year program's action plan (2009), which distinguishes business areas of IT application: cooperation environment between government institutions and business entities, cooperation environment amongst business entities, the application of IT solutions in enterprise activities, use of IT in the international activities of enterprise. Information management solutions organization «Endeca» (2011), argue that the expansion of the network to the mobile and social channels, increases opportunities to reach customers, however, marketing and sales teams have to evaluate larger quantities of information sources, thus changing the systems used in organization internally — information synthesis and analysis tools. It can be stated that main characteristics of e-business are electronic decisions designed to optimize the company's internal processes and interact with the external partners, customers, authorities, suppliers and financial institutions (see Fig. 1). Based on the literature analysis [27; 14; 7; 13], it is possible to distinguish the main e-business characteristics: the external and internal environment, each of which is characterized by two types of dimensions: interaction and strength; creation of value and productivity. Interaction dimension describes IT solutions which ensure stable communication, opportunities to gain new connections through new contacts. Interaction dimension also includes the impact on information — its assimilation, selection. Strength dimension defines IT solutions' impact on the company's ability to take into account a num-
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ber of various changes (government regulation, buyers' models, macroeconomic conditions), which should be monitored. Faster response, solutions for damage (risk) reduction are available when using IT. Value creation dimension describes the company's ability to stand out. Innovative, value creating solutions must be implemented as soon as the need emerges in the market. Information technologies enable to take valuable actions, to coordinate operation and work flows. Productivity dimension describes the impact of information technologies on enterprise's productivity. The company, through IT solutions, has to distinguish core business areas and to identify effective methods of production or service lines. From the external environment, the need for IT solutions and internal environment of IT solutions opportunities, causal ambiguity arises, which affects IT solutions in both, quantity and quality, which would optimally allow for internal capabilities to meet external requirements — from financial feasibility, business processes, IT resources, human resources, points. When shifting processes to the virtual space, it must be evaluated what innovative IT solutions company requires and what changes it will cause.
It can be argued that e-business encompasses all business processes — both external and internal. Meanwhile, the first mobile busi-
ness definitions (m-business) have concentrated on a specific function of the external environment — money transfer via wireless devices. At the same time often erroneously equated mobile commerce and mobile business concepts. It should be noted that the mobile business — is a process which enables preconditions for better accomplishment of the operations, use of actives, increase sales efficiency and customer service quality, improve access to critical data while doing specific work, speed up communication and improve decision-making for enterprises [2].
M-business relatively recently formed, but very promising branch of business, formed as a result of developed and widespread wireless network. This enabled the merge between internet, e-business and wireless technologies. Like in the case of other emerging business branches' or even industries', mobile business distinguishes as constantly changing and challenging environment, which is created by significant, different, technological, individualized needs' and strategies', uncertainties. Uncertainties in the technological level are caused by rapid technological pace and fight for the existing standards. This is a characteristic of the industries or business branches in the initial stages, which are a result of technological innovation. The analysis of demand level shows that
Partners —Customers - Government-Suppliers - Financial institutions
Interaction dimension
IT decisions
l Strength dimension
External environment
I
Causal ambiguity
Internal environment
IT assets
К
Human resources
IT skills
— * luiiidi i i ou
Business pi
, Productivity dimension J
Business process Value creation dimension J
Fig. 1. Structure of the electronic business model (compiled by authors)
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despite the general impression about huge mobile services business potential, is not known how exactly to use the new technology-enabled capabilities in order to create a useful services, which would be used and paid for by the user. Uncertainty of strategic level is a common situation in new industries or business branches. From the perspective of strategy-making position, this leads to a situation where rules of the ''game'' have not yet been established. As a result of this, business participants have a lot of experimentation in order to shape different strategic approaches. Therefore, in order to find the most appropriate competitive position in the market, they constantly have to adapt strategic decisions. Based on mobile business market structure formed by these assumptions, which's basic idea is related to the fact that to have a better understanding of reality all different aspects of the market must be involved (in this case, adequate market element's possible or likely development) and combined into a single entirety. Prospects are formed in order to be able to combine all of the above-mentioned, various uncertainties. Each perspective covers a particular dimension of mobile world and requires specific analysis tools. Innovation perspectives cover the development of the mobile world in the future and using different scenario planning approach combines technological uncertainties. A consumer perspective includes specific branch needs and analyzes need uncertainties through market survey and application feasibility studies. Industry perspectives
overlook the supply side and identify strategic uncertainties using competitive and business model analysis. Financial perspectives assist in identifying the durability and attractiveness factors for different users, services and technologies.
It can be stated that the mobile business market is very fragmented, and full-fledged mobile services' solutions requires a large quantity of different market participants to cooperate. You can find many publications that illustrate mobile participants in abundance. Many authors provide a simple basic mobile business market participants' list, in which they classify them in the three major classes: technologies, content and network. However, these three classes are not sufficient. In order to define the full map of mobility, it is appropriate to add such classes as regulations and needs. Structure of mobile business participants is expanded and creates preconditions for more efficient analysis of the mobile services market (Fig. 2).
In m-business center appears user needs related to mobility. In order to meet these needs, three obligatory and mutually complementary elements are required: network (consisting of different subnets), technologies (which includes all the necessary communication hardware, mobile devices and platforms) and the content (consisting of applicability, content and support services). These blocks are combined with regulatory and social environments.
Fig. 2. Structure of the mobile services market (Source: Adapted from Giovanni, Pigneur 2003)
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With this structure it is possible to examine the m-business development opportunities, direction, links between all the participants, to enhance cooperation, strive for excellence, to create efficient operational procedures, including a robust and secure infrastructure, to achieve effective and quick results, the development and improvement of the structure itself.
After analysis of electronic and mobile businesses' main characteristics, it is purposeful to continue to examine the existing information technology-based strategies from the point of view of additional mobile business possibilities' prospect. In order to get competitive advantage one must provide services or products of highest quality with the lowest possible cost, apply progressive technologies, remain reliable and advanced. Having just limited human and capital resources owners and managers of the company must prioritize directions of investments. It is of great importance to estimate if investments made in additional (supporting) activities are worth it.
IT-based
Business Strategies
For successful use of new IT in company, clearly defined, unique e-business strategy is necessary (e-strategy), which provides the key IT-based aspects of the business in the long term perspective [27; 28]. Some researchers [6; 5] define strategy rationally — planning, anticipation and positioning perspective, others
describe it from the cultural, political, learning and growth perspective [1]. Authors describe e-strategy as the company's long-term market position objectives with clearly defined actions such as creating necessary value to customers using information technologies. Each company has to develop a strategy to minimize operational risks — IT application is one of the ways to reduce those risks [27; 14; 28]. Company's e-strategy affects business in three main aspects [15] (see Fig. 3). E-strategy anticipates markets, used technologies and business models. E-strategy precisely defines markets in which business will operate. Each market will be provided with different products or services; therefore a variety of different technologies and the main three e-strategy combinations will be used. As defined by e-strategy there are different markets', technologies' and business models' combinations available.
E. strategy is also defined as an auxiliary tool for achievement of the company's general strategy [13; 1]. In order to gain competitive advantage through e-business model, one of the most important aspects is general strategy's and its e-strategy's alignment task. A fundamental change in corporate strategy is related to e-strategy, it is model application in new business opportunities and threats when facing emergence of the different markets and added value to the existing products or services due to the new digital channels. Doz and Kosenen (2010) state that by changing business models, organizations must have a flexible strategy that will allow transforming
Fig. 3. The impact of e. strategy in business (Sabaitytè, Davidavicienè 2013)
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business models to achieve strategic innovation.
When developing e-strategy is important to define its characteristics [8, 4] focus on the future, emphasis of specific sustainable advantage, which D. Chaffey linked to strategic alternatives, created for achieving the objectives of the digital channels, encompassment, basic business, products or services, scope, market and other settings establishment, company's performance analysis of the external environment and input, adequacy to the company's internal resources, skills and abilities to implement this strategy, company's value and cultural reflection, a clear definition of the company's resources — their use, methods of obtaining them. E-strategy must be directed to the harmony between business and the environment, and to precisely formulate digital channel targets which should reflect marketing goals and the need to terminate no longer used strategies.
Meanwhile, company's m-business strategy is part of electronic strategy. M-business, which is characterized by dynamic transformations, development directly depends on policies of each participant. Naturally, some participants set ambitious targets, but such policy may have an objection programmed in. There is a pretty big chance of incompatibility in solutions, applications and methods used.
M-business branch itself provides a large number of new and specific characteristics such as mobility, network effect, values of new organization. Organizations, developing business models and formulating the overall strategy must take into account these characteristics. Precisely a strategic approach would be right in order to acquire the characteristics.
Mobility — one of the most important characteristics of the mobile business, influencing policy-making particularities. Mobility provides many unique advantages as freedom of movement, omnipresence (access services anywhere, disregarding the location), localization (information can be used to implement services in the constant location), availability (user is accessible anywhere, anytime), convenience
(in the sense that the mobile device is always on hand), continuous availability and personalization (e. g. telephone is a personal device and it can store personal information, it also can be adapted to provide personal services) [18]. However, the assessment of the mobility from the strategic approach is faced with some obstacles and incompatibilities. Wireless services are at a lower level than their equivalent in fixed spaces. Mobile solutions are limited by the limited and expensive communication channel bandwidth (spectrum) and equipment. Broadband restrictions are influenced by radio frequency restrictions and strict monitoring. Number of objections is being raised by mobile devices themselves. On the one hand it is intended to make them comfortable, small and light. But on the other hand, these aspirations reduce the possibilities — small screen, battery susceptibility (i. e. continuous working time limitation), a small number of input and output ports. This limits the use possibilities for mobile devices.
Even if it is stated that through mobility, valuable services are being created, looking from the strategic point of view, it is important not to forget the need to exploit newly emerging mobile features, combine them with e-business services' benefits, and consequently get higher value from the point of view of consumers.
When forming m-business strategy, it is important to examine the changes resulting from the technology and network development. Formal networks analysis states that they consist of many components interconnected by relations. Since typical service supply requires few components, they complement each other. Because of these properties networks reveal economically phenomenal characteristic known as network effect. Exteriority is found when interaction between the two parties, causes side effects — a third party, which is exterior to this interaction.
Network exteriority highlights the fact that the product's value increases to the size of the expected number of units sold [9]. User is identified with network components' help which is common in bilateral co networks. This type
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of exteriority plays an important role in the telecommunications market, where the benefits of engaging in a communication network is positively associated with the number of participants in the network. In this case, the network effect is defined as the possibility of communication between a large numbers of different users. In another respect, increase in number of network users causes adverse external factors, such as network congestion.
In communicative network, there is also existence of indirect external factors, when consumer receives benefits regardless of the network size. E. g., when additional user potentially increases the number of services available to other users. Therefore, the higher the demand for services, service delivery becomes more profitable and more suppliers are willing to offer them.
When evaluating strategic approach it can be said that the network externalities influence:
• consumers when they decide whether or not to implement new technology [11];
• manufacturers when they decide whether or not to standardize their product in order to achieve compatibility with other manufacturers' solutions, determined product quality and chosen correct pricing [9].
After strategically looking through the most important electronic and mobile business characteristics, it can be concluded that a full-fledged electronic and mobile services provision requires interaction between a number of market participants, especially among the network operators and device manufacturers. Mobility is becoming more complex in relation with content's and services' development. Therefore, more broad service provider's competence is required, but it is achievable only by expanding the partnership. Network effect requires different networks', devices' and adaptability's mutual compatibility, which requires closer partnerships forming mutually acceptable standards. Due to strategic incompatibility in reality, till this time no market participant succeeded to install ''fully complete'', from the beginning to the end synchronized solution between the content owner and the end
user. Partnership management becomes the core activity for many organizations, which implement electronic and mobile business decisions.
Business models
While the business model concept is widely used and considered as very important, there is no unified definition of the business model. Often encountered in literature definition of the business model describes the business system's logic, value creation, which is based on the actual processes. Also the model can be defined as a detailed strategy of the organization concept at an abstract level, which is used as the basis for the implementation of business processes.
It is established that researchers analyze e-business models from the two main directions — describing e-business model's common characteristics, typologies and investigating e-business models' components and their detailed characteristics. Davidaviciene, Sabaityte [22] in detail examined e-business model's concept and characteristics; therefore it is now important to determine e-business models' classification and relationship with e-and m- business's strategy and characteristics in scientific literature.
Scientists [8; 7; 21] widely describe e-business models, taking into account the interacting parties. However, when analyzing e-business models it is important not only to determine business model's synergistic parties, but also models reflecting e-business organization methods.
Timmers [24] in detail describes 11 common e-business model types, from e-stores and e-public procurements to trust in third-party services. Tapscott and others (2000) describe 5 value network types — b-networks (business networks), which differ depending on the degree of economic control and value integration. Rappa [21] classifies organizations, according to their value positioning nature and ways to generate income. Weil and Vitale [26]
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describe 8 business models, each of which describes the different ways to conduct business in cyberspace.
Many authors have tried to identify constitutive elements of the business model. Most commonly business model is characterized as a structure: used in the product, service and information flow definition, including various business participants and their roles in the description; description of potential benefits for business participants; description of sources and findings. In this case, we will take Bouwmann's and Wijngaert's [2] definition, that business model helps organization to describe roles of its customers, relationships of partners and suppliers, also goods', information and money flows between these parties, as well as the key benefits associated with the user.
Examining the business model's relationship with IT-based strategy, it can be said that the business model justifies the strategy at design level, when the interacting parties' roles and relationships are defined, also goods', information and money flows between these parties, as well as the key benefits associated with them and especially the user. In order to examine different participants classes business models' we can refer to formalized e-business models' ontology, in which business models are understood as an entirety which consists of four key elements that illustrate: value definitions, consumer relations, infrastructure and financial aspects. Infrastructure's component consists of internal activity and partnership network with other parties. Since it is determined that strategic inconsistency is due to the lack of the partnership, as well as due to mobile business environment specificity, it is suggested to take greater account of the partnership than the other elements.
Conclusions
1. In summary it can be said that in general e-business is a critical strategy, giving businesses a competitive edge. At this moment ebusiness development is attributed to the third stage, in which main objective becomes val-
ues of digital system associated with the company's operational efficiency and more effective communication in internal and external environments. Defining the essential e-business characteristics, they are divided into external and internal environments belonging to 4 major dimensions (interaction, strength, productivity and value creation), out of which arises causal ambiguity which manifests itself in IT solutions' quantity and quality, which would allow for optimal internal capabilities to meet external requirements (in the sense of financial options, business processes, IT resources, human resources). In the center of e-business base is company, its needs and opportunities in the external and internal environments. Ebusiness allows you to access and share information at any time, while the m-business is part of e-business, emerging from the user's need to be free of the constant geographical workplace, so it can be stated that m-business allows interacting not only at any time, but everywhere. While mobile business consists of network, technologies, content. Also it is stated that characteristics of mobile business should be extended by user needs related to mobility and regulations.
2. Identified that IT-based business strategy must be developed in parallel with the overall strategy of the company, constantly analyzing new IT applications in each company's process. Base of IT strategy has to be close partnership formation directed at m-business.
3. In fact, for each participant, an important part of the business model is partnerships with many of the other participants, who aid in overcoming all the difficulties of implementing a fully complete solution. Electronic and mobile business area is new, different participants are still experimenting with a variety of business models in order to conquer the stable and profitable positions in this promising industry. Which business models will ensure stability is yet to be determined. Purposeful is to believe that the most successful and conditioning stability business models will be those which will be strategically coordinated and directed to mobility, network effects and the natural monopolies' problem-
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solving, and those that will be most profitable for all participants involved in the turnkey development.
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About authors:
G. Cyras, Master, Lecturer, Department of Business Technologies, Faculty of Business Management;
J. Sabaityte, PhD Student, Master, Lecturer, Department of Business Technologies, Faculty of Business Management
For citation:
Giedrius C., Sabaityté J. The strategic approach of the interaction aspects of electronic and mobile business. Prikladnaya informatika — Journal of Applied Informatics, 2015, vol. 10, no. 2 (56), pp. 5 -14.
Г. Чирас, магистр, лектор кафедры Бизнес-технологий
Вильнюсского технического университета им. Гедиминаса, Литва, giedrius.cyras@vgtu.lt
И. Сабайтите, магистр, докторант, лектор кафедры Бизнес-технологий Вильнюсского технического университета им. Гедиминаса, Литва, jolanta.sabaityte@vgtu.lt
Стратегические аспекты взаимодействия электронного и мобильного бизнеса
Эффективное развитие бизнеса должно быть основано на научных знаниях. ИТ-ориентированное развитие должно сопровождаться определением характеристик е- и м-бизнеса, анализом возможной стратегии, определением роли бизнес-модели в этом контексте. Цель этой статьи заключается в анализе эффективной интеграции е- и м- бизнеса в традиционные процесы бизнеса со стратегической точки зрения. Для достижения этой цели были определены характеристики е- и м-бизнеса, проанализированы бизнес-стратегии на основе ИТ и пре-одоставлена классификация бизнес-моделей. Ключевые слова: е-бизнес; м-бизнес, ИТ-стратегии, бизнес-модели
