Why do an MBA in E-Commerce?

Business over the Internet is growing at a very fast pace. The first domain name was registered on March 15, 1985. It took another 15 months to register first 100 names, primarily by universities and Fortune 1000 companies. Today, there are close to 12 million active web sites. It is predicted that by 2004 there would be 120 million registered web sites.

In terms of number of users, it is estimated that 1 billion people would be using the Internet in 2001. In a survey of 15,000 online customers by dotcom.com, it was observed that 67% of those surveyed, planned to get a web site within the next year, a majority of them want to start an online business of their own. Thus, a large percentage of consumers themselves are getting ready to identify their own niches and start a business. Total retail sales over the holiday period alone may reach $20 billion this year. Yearly sales over the Internet may reach 400 billion by the end of 2002. The growth in Business to Business (B2B) e-commerce is even more stunning. According to Gartner Group, the worldwide B2B market will grow from $145 billion in 1999 to 7.29 trillion in the year 2004.

Power of the Internet has been harnessed in various ways. Internet has been used to sell things identical to the ones sold in traditional stores, e.g., books by Amazon.com which dominates in retail sales on the web. Internet has also made some services better than the previous mode of delivery, e.g., web-based training and education. It is estimated that web-based corporate training alone would grow to $11 billion by 2003, from 1.1 billion this year.

Still more businesses arose because of the Internet itself, e.g., use of e-mail for communication. Jupiter Communications predicts that e-mail marketing industry would reach over 7 billion by 2005. Even though most of the growth in the past was business to consumer, most growth in the future is projected to be in the business to business sector. The Gartner Group has estimated that by 2004, 10% of e-business would be business to consumer and 90% would be business to business. Theo Mantzanas, Senior Manager in Arthur D. Little's e-Learning and Performance Practice, argues that brick and mortar companies need to know how to transition to B2B to utilize the Internet. This change is taking place at brick and mortar companies. At GE, for example, auction transaction has been estimated to be $5 billion this year, up from 200 million last year.

Early entrants were rewarded handsomely in terms of both the market share and stock evaluations. In the last few years, higher evaluations for these companies were observed as these evaluations were based on revenue projections and not on underlying profits. It was later observed that some businesses were using different accounting practices to show higher revenue projections. In the last few months, a large number of e-businesses saw a sharp decline in their stock prices. This experience underscored the point that the type of business or the mode in which the business is conducted may change, but the business fundamentals do not. The business still needs to be run efficiently, still needs to address issues related to finance, marketing, accounting, etc. and one still needs to comply with various regulations. And, in the end, the business must make money. Bill Clair, CEO, Innovate! EC, compares the web-based system to the tip of the iceberg. Just like most of the iceberg is under water and only the tip is visible above water, in an e-business, only the web-based portion of the business may be visible, but a much bigger effort to have all aspects of brick and mortar kind of business activities, from capacity planning, to forecasting, to inventory management to shipping has be done like the way it is done for a brick and mortar business. It is here that knowledge of the whole business is important.

Some students are struggling with the question of why an MBA in e-Commerce. Some think that they could start working for a high tech company and pick up relevant information through training programs while on the job. However, even tech savvy individuals need to understand fundamentals of running a business to have a successful venture. To put it in context, overall, US corporations spent $16.5 billion on training and education of its managers. A Business Week survey found that, when companies send their executive for further training, most wanted topics are: leadership skills, entrepreneurship, and the Net. What Internet has done is to provide access to the customer as never before. The fundamentals of business, however, have not changed and a successful entrepreneur needs both the knowledge of technology and fundamental aspects of business. An MBA in e-Commerce is designed for addressing this need.

Rustagi, Narendra K.


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