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12 Part 1 Introduction

Activity 1.3 Understanding e-commerce and e-business

Purpose
To encourage discussion of what is understood by ‘e-commerce’ and ‘e-business’ and
their significance to managers.

Activity
Read the extract below and then answer the questions which follow. Although this is
now a dated example, it is still useful as a historic document showing the different
aspects of e-business that a business must address. In one of his last AGM speeches
for General Electric (Welch, 2001), Jack Welch made these comments about GE’s
adoption of e-business.

Like the Amazons of the world, we started out with what we call ‘e-Sell’, primarily
distributing our products on the Internet. Moving our traditional customers to the
Web for much more efficient transactions has been very successful. And in 2000 we
sold $8 billion in goods and services online, a number that’ll grow to $20 billion this
year, making this year-old institution one of the biggest, if not the biggest, e-Business
company in the world.
On what we call the ‘e-Buy’ side, we followed the same path, adopting many of
the dot.com ideas on auctions, having a global network of Six Sigma suppliers. The
concept of reverse auctions was right in the GE sweet spot and we wasted no time
in spreading the new technology across our businesses. We now run global auctions
daily – $6 billion worth last year, $12 billion this year, generating over $600 million in
savings for the company in 2001.
But the biggest breakthrough of all was what we call ‘e-Make’ and that didn’t
come from the dot.coms. They had little infrastructure and few processes. e-Make
came from learning what the Internet could do for internal processes and seeing the
enormous advantage Digitization can give a big old company that actually makes
things, particularly one with Six Sigma methodology already deeply entrenched in its
veins. By digitizing our processes from customer service to travel and living, we’ll
take over a billion dollars of cost out of our operations this year alone.
Last year I told you I believed e-Business was neither ‘old economy’ nor ‘new
economy’, but simply new technology. I’m more sure of that today. If we needed
confirmation that this technology was made for us, we got it. GE was named last

year ‘e-Business of the Year’ by InternetWeek magazine and awarded the same title
last week by WORTH magazine.
Digitization is, in fact, a game changer for GE. And, with competition cutting back
because of the economy, this is the time for GE to widen the digital gap, to further
improve our competitive position. We will do that by increasing our spending on
information technology by 10% to 15% this year despite the weak economy.

Note: the Six Sigma concept of process quality improvement is described in more
detail at www.isixsigma.com, and reverse auctions are explored in Chapters 2 and 7.

Questions
1 Identify the different components of e-business described in this speech and
assess their relative impact on the organization.
2 Where do other ‘e’ terms such as e-CRM, e-marketing, e-logistics, e-procurement,
e-tail and e-government fit within this description?
Answers to activities can be found at www.pearsoned.co.uk/chaffey