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Table of Contents

New Technology Development on Canadian Jewelry Industry - Part 3


2.2 Globalization of Business

One of the most debated topics in recent years is the globalization of economic activity. In this regard, particular relevance acquires the study of new opportunities for the internationalization of marketing activities via computer network, which is one of the major sources of globalization. Such activities provide a new global communicative environment (Levitt, T., 1983) [14] and the market with hundreds of millions of potential customers scattered throughout the world.

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Until the early 20th century, the internationalization of economic life was caused, primarily, by the need to find new markets and had an extensive nature. However, since the second half of last century, an intensification of the process has begun.

In the context of globalization the significance of the communicative marketing functions greatly increases. As written by Das, D., (2010) [15], it activates the exchange of information and knowledge between any (including far – distant from each other) partners of the world economy. Unstable state of the company environment sharply raises the question of the necessity to establish a dynamic negotiation between marketing mix of international company and changing needs of its target market.

Another important trend in the modern world is the global growth of competition, which forces companies to increase the use of individual approach to each client. According to Johnson, G, Scholes, K., Whittington, R., (2008) [16], solving these problems helps organization to integrate effectively the Internet in a program of international marketing communications. So an interaction between partners of the world economy is simplified, accelerated and cost cheaper. Internet marketing is becoming a critical resource for increasing business competitiveness.

There is a view of the classical version of the marketing mix, proposed by J., McCarthy (1982) [17] and widely popularized by Ph., Kotler, (2006) [18]. It is understood as a set of marketing tools, classified in four areas: product, price, place (i.e. distribution) and promotion. These tools are used by the company to solve marketing problems in the target market. Thus, the relevance of research topic due to the importance of integrating the Canadian jewelry business into global information business community, formed on the basis of the online marketing environment.

Whether the author likes it or not, a steadily accelerating process of globalization of economic activities has been almost irreversible, and already reached such high levels that some global companies entered into competition with each other.

For example, on a global scale Coca-Cola and Pepsi are competing in the soft drinks market; Ford and Toyota - in the cars market; Boeing and Airbus - in the aircraft market; Reed Elsevier, Reuters, Dow Jones, Dialog Thompson and West Group in the market of online business information services; Microsoft and AOL in the market of providing access to the Internet; Intel and AMD in the microprocessor market; Procter & Gamble, Unilever and Colgate-Palmolive in the market of detergents.

One of the most important trends in the global economy over the next 15-20 years will be increased globalization of markets and companies' activities (Daniels, J., 2011) [19]. To underline the significance of these phenomena it can be judged by a sharp public debate on this subject, which has passed, sometimes in open confrontation.

The Internet as a primary mean of business globalization has a significant impact on the competitiveness of companies, enabling them to adapt quickly to changing conditions of the business environment, to apply modern marketing strategy. The companies in the world economy, which do not take active steps to integrate its infrastructure into information technology and the Internet, are doomed to chronic underdevelopment, because they cannot use many new features associated with economic globalization [20].

The conceptual foundations of Internet marketing and its role in enhancing competitiveness of companies in the global market, were explored by Hoffman, D., and Novak, T., the representatives of Vanderbilt University (US) [21]. Issues of e-business and marketing on the Internet are discussed in detail in the works of Gates, B., [22].

2.2.1 Internet Advertisement

The main means of Internet advertising is banner advertising. Typically, banners used to advertise the company's website; however, they can also be used for advertising brands, products promotion, etc. Successful advertising of an official company’ internet site is required considerable time and / or financial costs [23]. To make Internet users to learn about the existence of the site (the brand, new product), the site should be referenced in the most visited internet sites. Banners can be placed in banner interchange networks, sites of similar topics, in the search engines. Another method of online advertising is the e-mail advertising in a case conference.

2.2.2 E-Commerce

Development of international e-commerce due to the same factors as for the world trade: economic growth in most countries of the world and division of labor by an increase of specialization and cooperation. However, there are specific factors that largely contribute to high rates of growth in this sector of business.

The term "electronic commerce" appeared in the mid 90's with regard to opened opportunity of executing transactions for the International Sale of goods (and services) via Internet.

The main directions of e-commerce is implementation of marketing research via the Internet, financing purchases of goods for resale, execution of commercial operations (including order, payment and delivery of goods), execution of foreign trade transactions (taxes, customs, authorizations, accounting, etc.), execution of logistics operations [24]. Any commercial operation such as order of goods, sale contract, registration and delivery the product to the buyer, billing and payment can be quickly and fully realized through the Internet.

The significance of the world's electronic commerce over the Internet is clearly evidenced by the fact that at the EU summit in Lisbon in November 2010 one of the main issues for discussion by the heads of government from 15 European countries was the problem of coordinated activities designed to ensure that catch up with America in the area of information technology, serving primarily e-commerce. Since 60% of e-commerce services now accounts for the U.S. and only 30% - for Europe. So interest and demand for Internet services in Europe are much more than the Internet offer.

Internet technology is practically nullifying the factors of physical distance, which is especially important for international trade. So if a factor of physical distance is minimized, severity of the issues of advertisement and search for distribution channels are reduced. Now sellers and buyers are on the same trading floor. The abundance of automated functions further simplifies their interactions. In this case, the cost of participation of operations on an electronic trading platform, such as the electronic exchange, is order of magnitude below the cost of real corporate offices in countries where the consumers locates.

Implementation of commercial transactions over the Internet provides the effect of geographical "affinity" of a partner - wherever he is located. To chat with a partner via e-mail is very fast because the signal has the speed of light. Therefore, the geographical location of the company in terms of establishing the business is not significant [25].

It is a very important factor that vendor’s web sites work 24 hours a day for customers. So regardless of time zones buyers from other countries can come and be served on the seller's web site. The nomenclature of the goods sold consists of thousands of objects, while in stores it consists from a few tens or hundreds. For example, the web site sells about 10,000 items of music recording, whereas in Wal-Mart stores a buyer can choose between "only" about 3000 names. Up to 40% of the turnover of electronic shops is provided by orders from other countries [26].

Experts on the Wall Street have estimated that the cost of storage in the Western world (delivery to the warehouse - storage – delivery to customers) represents 13% of total annual sales of a company. Trading platforms in the Internet make trade transparent, open and standardized. Such transparency appreciated the banks, in this case, they are more willing to lend. Access to financial security of transactions will provide a grace period for payment and a choice for seller to whom sells the products.

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2.2.3 Business to Business

The most important in electronic commerce is business relationships between large and medium-sized companies, which carry through the sphere of e-commerce by buying and selling goods and services (via the Internet trading platform "B2B"). The total share of operations of the enterprises (sales and purchases) via the Internet in the global economy totalled about 80% [27].

The first in the history the Internet auction by scheme B2B was hold by General Motors on December 17, 2000. The company in first time executed the purchase of components from its suppliers through its own company’s website TradeXchange, which was created together with Commerce One Inc. In the first week the online auction was attended by 180 companies which have made about 200 thousand offers. As a result, General Motors purchased equipment for half a million U.S. dollars by selecting the proposals only from five vendors.

GM executives have recognized experience of successful auction and announced that henceforth, all commercial relationships with about 30,000 suppliers, the company would only support via new-born internet site TradeXchange. So already in 2001, while the company spends on procurement of components about $ 87 billion a year, sales through the electronic platform reached $ 50 billion. Transforming business relationships with suppliers to the virtual market, GM did not only reduce costs for the purchase of components, equipment, raw materials, but also earned about $ 5 billion by selling market places on its own site.

GM BuyPower (brokerage online service) contains complete information about 200 car models including options for packaging. GM also provides a comparative analysis made by independent experts of these models with the four models of competitors, dealers’ addresses for immediate contact and information how to buy a car by credit or leasing scheme.

Businesses that need to survive in the competitive struggle have no right to ignore new trends; otherwise, they remain without customers because customers prefer more effective service [28]. In the near future most companies will be forced to participate in e-commerce. Nowadays electronic commerce turns into a highly effective sales tool, which is increasingly used by both manufacturing companies and conventional retail online stores (Business to Customers "B2C").

2.2.4 Business to Customer

B2C is one of the most popular forms of electronic commerce today. In this case the activity is aimed at direct sales to consumers. One of the biggest examples of jewelry marketplace B2C is, a jewelry auction, whose services are used more than 50 million customers worldwide. is the largest auction of fine and costume jewelry. This auction is located in the U.S., California, Culver City. Each registered visitors on the site can take part in the auction and buy jewelry at an incredibly attractive price. At the auction a customer can find modest silver jewelry as well as works of art from famous brands (Faberge, Versace, Di Modolo, Gucci, Chanel and many others).

On auction mainly placed new jewelry, but often used jewelry can also be found. monitors very strictly if quality and product descriptions comply with the image on its site. If different jewelry was delivered to the customer rather than the one which image was on the site, a customer is guaranteed 100% refund of the purchase price, including all shipping costs. As a rule, the final price of the lot does not exceed 15% of the declared retail price of the manufacturer.

B2C is effective toll that eliminates the differences between the major cities and remote regions in terms of availability of goods and services to consumers. B2C creates a new technology of sales that facilitates the delivery of goods and services to consumers anywhere in the world with a minimum number of intermediaries [29]. Elimination of intermediaries is used as opportunity to establish competitive prices and even increase them (excluding intermediaries’ margin), which naturally leads to increase in profits.

2.2.5 Electronic Data Interchange

Electronic Data Interchange (EDI) is defined as a set of standards for trading and exchange structured business documents. Using EDI technology, the documents are translated into comprehensible standard business language and sent to partners via secure telecommunication channels.

Interchange of commercial information (orders, invoices, bills, etc.), documents in hard copies, are supposed to be inputted manually into a computer system and then to be transferred via fax and e-mail. The use of electronic documents eliminates manual input of documents because everything happens automatically, without delays and inaccuracies. The use of automated procedures increases the speed and accuracy of data and enables companies to concentrate on key aspects of work rather than on routine matters of registration and forwarding paper documents.

EDI allows a customer to automate the forming, sending, receiving and processing of all electronic documents and integrate them with existing business applications. The process of EDI is quite simple: the data which has to be sent from the software application is automatically retrieved and sent by sender's EDI system from one contractor to another (a number of business partners can be unlimited). In the process of sending, EDI system transforms the information into a standard format, retaining the content of document.

Interoperability of business applications of various counterparties does not play any role. Message appears and forms on user-friendly interface. Documents for the end user look like normal form documents, which are offered to fill in for registration on the site, or as forms of information systems (Microsoft Axapta, Oracle E-Business Suite). It should be noted that the fundamental difference between the EDI technologies from the systems of manual document flow is that EDI considers as inter-corporate and even inter-industry system of electronic document interchange.

2.2.6 Management, Planning, Analysis and Control

Management activity is automated by MRP / ERP systems. Currently, some of these systems (Sun System, SAP /R/3, Oracle Application) include tools for integration with solutions based on Internet technologies.

ERP System (the System of Enterprise Resource Planning), an integrated system based on IT, is used to manage internal and external enterprise resource planning (significant physical assets, financial, logistical and human resources). The purpose of the system is to facilitate the flow of information between all business units (business functions) within the enterprise and information support relationships with other companies. The system is built on a centralized database; ERP System generates a standardized single information space of the enterprise.

Historically, the concept of ERP was the development of more simple concepts such as MRP (Material Requirement Planning) and MRP II (Manufacturing Resource Planning). ERP System has the following functions such as production planning, simulation the flow of orders and assesses the feasibility of services and divisions of the enterprise, linking it with the sale.

The core of ERP Systems based on the principle of creating a single data repository that contains all corporate business information and provides simultaneous access to any required number of employees, with adequate powers. The data can be changed by the functions (features) of the system. ERP System consists of the following elements:

  • Control of information flow in the enterprise;
  • Hardware and technical equipment and means for communication;
  • Database, system and provided software;
  • Regulation of use and development of software products.

The main functions of ERP systems:

  • Maintain design and technological specifications that define the composition of manufactured products, as well as material resources and activities required for their manufacture;
  • Formation of sales plans and production;
  • Planning for materials and components, timing and volume of supplies to carry out the plan of production;
  • Inventory management and procurement: management contracts, the implementation of centralized procurement, accounting and optimization of warehouse and shop supplies;
  • Capacity planning of the integrated planning through the use of certain machinery and equipment;
  • Operational management of finances, including drawing up a financial plan and monitoring its implementation, financial and management accounting;
  • Project management, including planning stages and resources.

The choice of ERP Systems, its acquisition and implementation, as a rule, requires careful planning in the long-term project with a partner company - a supplier or consultant. Since the ERP Systems are built in a modular fashion, the customer often (at least in the early stages of such projects) gets not the full range of modules, but the limited set. During the implementation of project, a team customizes the modules within few months.

Application of ERP System allows the use of an integrated program instead of several disparate. Single system can manage the processing, logistics, distribution, inventory, delivery, invoicing and accounting. Introduced in ERP systems, a system of access to information in conjunction with other measures of information security to counter both external threats (e.g. industrial espionage) and internal (e.g. theft). Implemented in conjunction with the CRM-system and system of quality control, ERP System is aimed at meeting the needs of companies in management of business processes.

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Many problems, associated with the functioning of ERP, arise because of inadequate investment in staff training, as well as in connection with the omission of entry policy and support the relevance of the data in ERP. In a competitive environment, the company's success largely depends on its ability to interact with customers [30]. Obtaining the necessary information from clients and skilful use of information can help the company to create a strong, long time and mutually beneficial relationships with customers. Today, technology can help companies to attract, improve service quality and retain their customers. Customer Relationship Management (CRM) is a part of the corporate business support system helping the company to optimize and expand its clients’ network.

E-commerce requires the developed management in the enterprise, as marketing on the Internet is just a set of tools for analysing the supply and demand of goods and services on the market. If the company is unable to organize an effective off line business, on time delivery, commissioning, performance, none of methods even the method of electronic commerce would not help the company to be effective [31].

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