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Unit 2.4

How E-commerce Changes Business: Strategy, Structure, and Process

IT 204: E-Commerce

Learning Objectives

By the end of this chapter, you will be able to analyze how e-commerce acts as a fundamental disruptive force across every aspect of a business.

  • ✅ Understand how e-commerce transforms business strategy and competitive dynamics.
  • ✅ Explain the impact of e-commerce on organizational structure and culture.
  • ✅ Analyze industry transformation patterns like disintermediation and reintermediation.
  • ✅ Apply these concepts to evaluate strategic responses in Nepali business contexts.

E-commerce: A Transformative Force

E-commerce isn't just a new sales channel; it reshapes the entire business landscape across three critical dimensions.

🎯 Strategy

How businesses compete, create value, and achieve competitive advantage.

📊 Structure

How organizations are designed, managed, and staffed to execute strategy.

⚙️ Process

How work gets done and how value is delivered to the customer.

Activity: Classify the Change

Click a card to select it, then click a bucket to assign it. Get all 6 correct!

🎯 Strategy
—
📊 Structure
—
⚙️ Process
—

Part 1: How E-commerce Changes Strategy

The rules of competition are rewritten in the digital age.

Traditional Business

  • Geography: Local/Regional
  • Barriers to Entry: High
  • Information: Asymmetric
  • Scalability: Linear

E-commerce Business

  • Geography: Global from Day 1
  • Barriers to Entry: Low
  • Information: Transparent
  • Scalability: Exponential

Nepal Example: Bhatbhateni's success is based on physical locations (traditional), while Daraz's success is built on a digital platform and data analytics (e-commerce).

Porter's Five Forces in the E-commerce Era ⚡

E-commerce intensifies the competitive environment across the board.

  • Threat of New Entrants: INCREASED ⬆️
    Anyone can start an online store with minimal capital (e.g., thousands of sellers on Daraz).
  • Bargaining Power of Buyers: INCREASED ⬆️
    Price transparency and easy comparison empower customers (e.g., comparing prices on Sastodeal vs. HamroBazar).
  • Threat of Substitute Products: INCREASED ⬆️
    Algorithms and search make discovering alternatives effortless.
  • Rivalry Among Competitors: INTENSIFIED ⬆️
    Global competition, price wars, and constant innovation are the norm (e.g., Foodmandu vs. PathaoFood).

Overall Result: E-commerce significantly increases competitive intensity, making it harder to sustain a competitive advantage.

Quiz: Which Force Is at Work?

Read each scenario and select the Porter's Five Force it best illustrates.

"Thousands of small vendors have opened stores on Daraz with almost no startup capital, all competing with established brands."
"A customer compares prices for the same laptop across Daraz, Sastodeal, and HamroBazar in under 2 minutes."
"Foodmandu and PathaoFood constantly undercut each other's delivery fees and offer daily discount codes."

Transforming the Value Chain

E-commerce digitizes and optimizes every step of value creation.

Primary Activities

  • Inbound/Outbound Logistics: Automated warehousing & real-time tracking.
  • Marketing & Sales: Shift to digital marketing, SEO, and personalization.
  • Service: Move to chatbots, self-service portals, and 24/7 support.

Support Activities

  • Procurement: E-procurement and automated supplier management.
  • HR Management: Access to global talent pools via remote work.
  • Technology: Moves from a support function to a core competency.

Key Insight: In e-commerce, technology is not just supporting the business—it IS the business.

Activity: Sort the Value Chain

Click each activity to toggle it into the correct category — Primary or Support.

Activities
Primary
Support

Part 2: How E-commerce Changes Structure

Organizational design must adapt for speed and agility.

Traditional Hierarchy

  • Vertical & Siloed
  • Slow, top-down decisions
  • Command-and-control
  • Resistant to change

E-commerce Network

  • Flat & Cross-functional
  • Fast, decentralized decisions
  • Agile & Autonomous
  • Built for adaptation

This shift creates new roles like Data Scientists, UX Designers, and Digital Marketing Specialists.

Part 3: How E-commerce Changes Process

Business Process Reengineering (BPR): The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements.

Process Example: Order Fulfillment

Traditional Process:
  1. Customer goes to store
  2. Selects product
  3. Pays at cashier
  4. Leaves with product
E-commerce Process:
  1. Customer orders online
  2. Order is auto-confirmed
  3. Warehouse picks & packs
  4. Courier delivers with tracking

E-commerce enables automation, transparency, and efficiency at scale.

Part 4: Industry Transformation Patterns 🔍

E-commerce doesn't just change companies; it restructures entire industries.

Disintermediation

The removal of traditional intermediaries (middlemen) from the supply chain.

Manufacturer → Consumer

Nepal Example: Nepali handicraft artisans selling directly to global customers on Etsy, bypassing local exporters.

Reintermediation

The creation of NEW digital intermediaries that add value.

Seller → Marketplace → Buyer

Nepal Example: Daraz (marketplace), eSewa (payment), and Pathao (logistics) are all new, powerful intermediaries.

Activity: Dis- or Reintermediation?

Read each scenario. Click DIS if a middleman was removed, or RE if a new digital intermediary was created.

Nepali tea farmers now sell directly to international buyers through their own website, cutting out export brokers.
eSewa connects buyers and sellers of digital payments, earning a fee on every transaction as the trusted third party.
A Nepali handicraft artisan uses Etsy to sell pashmina shawls directly to customers in Germany, skipping the local wholesale agent.
Pathao acts as a logistics layer between restaurants and hungry customers, making delivery easier for both sides.

The Nepali Context: Opportunities vs. Challenges

Applying e-commerce principles in Nepal requires understanding the local landscape.

Opportunities 📈

  • Global Market Access: Selling Nepali products like pashmina and tea worldwide.
  • Lower Startup Costs: Enabling entrepreneurs to launch businesses from social media.
  • Niche Markets: Serving specific local needs that large retailers ignore.

Challenges 🚧

  • Infrastructure: Unreliable internet and difficult last-mile logistics.
  • Trust & Payments: High reliance on Cash-on-Delivery due to trust issues.
  • Digital Literacy: A significant portion of the population is not yet comfortable shopping online.

Key Takeaways

  • Transformative, Not Incremental: E-commerce demands a fundamental rethink of business, not just minor tweaks.
  • Competition is Intensified: Lower barriers and global reach mean you're competing with everyone, everywhere.
  • Agility is the New Currency: Flat structures, cross-functional teams, and agile processes are essential for survival.
  • Disintermediation AND Reintermediation Occur: The internet removes some middlemen while creating powerful new ones.
  • Local Context is King: Success in Nepal requires solving local challenges like logistics and trust, not just copying global models.

Thank You

Next Topic: Unit 2: "Case Study: Daraz Nepal – Transforming Retail Through E-commerce

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