E-Commerce and New Product Development

Introduction

In the 21st century, information technology has resulted into global transformation of the business environment. One of the technologies that have resulted into this transformation is the emergence of electronic commerce such as electronic payment through credit cards. Electronic commerce entails the process of purchasing, selling, distribution and servicing products and services through various computer networks such as the internet. This has resulted into an improvement in firms’ performance. For instance, electronic commerce has resulted into advancements in electronic payment and electronic funds transfer.

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The intensity of competition has prompted firms within the information technology industry to develop higher competitive advantage in their operation. One of the ways in which these firms can attain this is through innovation of new products. Currently, consumers and firms are integrating electronic commerce in their activities. On the other hand, the mobile industry has witnessed a significant growth due to advancement in information technology. For instance, Johnson asserts that in Japan, the mobile industry is becoming more versatile (para.1). The country has a history of devoting to the development of ‘small things’ such as mobile phones. According to Bodart, the increased development in mobile devises has resulted into a consideration of how mobile phones can transform electronic commerce (5). This is evident in the emergence of the concept of mobile payment. This presents a feasible business opportunity to Proprietary Systems, which is a firm that deals with provision of electronic payment systems. The management intends to improve the firm’s competitive advantage by developing a mobile phone that has the capacity of providing services related to those of a credit card. By developing this mobile phone, the firm will improve its performance as well as that of other firms that deal with electronic fund transfer such as Visa Incorporation. Visa Incorporation is a firm that deals with global payment. Its does not have its own network but relays on other service providers (‘Visa Incorporation: corporate overview’ Para. 1). The discussion of this paper involves introducing a mobile phone that would replace the credit card.

Goals of the new product

Product

In developing the new product, the management of the firm intends to effectively integrate consumer demands in relation to electronic commerce. One of the ways in which the firm will ensure this is by incorporating diverse and superior electronic payment features in the mobile phone.

To determine the consumer’s electronic commerce demands, the management of the firm conducted a research on consumer market demand. Through consumer market research, it will be possible for the management to identify the core consumer product preferences. This will enable the management to integrate these features in the development of the new product. Some of these features include:

  • In-built smartcards. In developing the new phone, the firm’s research and development team will ensure that the phone has got smartcard features that are integrated in the phone. This will ensure that there is ease of usage in making electronic payments.
  • High level of security through well-installed authentication features. Authentication will ensure that only authorised individuals can conduct electronic payment using the mobile phone.
  • Non repudiation feature. This will serve to enhance security in the process of electronic payment. Nonrepudiation means that once eligible party have conducted a transaction through the phone, they cannot deny it. The nonrepudiation feature will ensure that there is an increase in the level of confidence amongst the consumers in utilising the system.
  • Privacy- In developing the product, the management of the firm will ensure that there is confidentiality of the payment details by ensuring that it is difficult to hack the payment information. This means that it will be difficult for the parties observing the network to get the details of the transaction. This will be attained by the integration of the concept of data encryption and decryption.

This will culminate into increased customer satisfaction due to the increased efficiency in the process of utilising the mobile phone electronic payment system.

In developing the new phone, the management of the firm will ensure that it incorporates the current mobile payment features such as the Contactless Near Field Communication (NFC) and mobile Wireless Application Protocol (WAP) (Gill Para. 4). Mobile payment is a mode of payment in which money is sent electronically via the mobile device (Bodart 5).

Price

The objective of the management in setting the price of the phone is to attain a high profit margin by setting a price that is consumer friendly. In addition, considering the fact that consumers are price sensitive, the management of the firm intends to set a price that will give the consumers the value of the product. Therefore, in setting the price of the phone, the management of Proprietary Systems will ensure that the consumer’s utility is effectively integrated in the firm’s pricing policy. By considering consumer’s utility, the management of the firm will be able to set the price of the new phone effectively. This is due to the fact that the new phone will have superior electronic payment features that will enable the firm to effectively incorporate the concept of utility pricing. This is a pricing model that entails setting the price of a product on the basis of consumer utility (Matthews 1). Determination of consumer utility will be through conduction of a comprehensive consumer market research. The management intends that the price set will enable the firm to increase its volume of sales.

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Promotion

In developing the new product, the management of Proprietary Systems intends to reach the global market. The ultimate goal of promotion is to develop and maintain customer loyalty. In developing the new phone, the management of Proprietary Systems intends that the new phone will enable the firm to attain a market share of 25% within the first year of launching the product in the market. This is due to the fact that electronic commerce has been integrated by a wide range of consumers in the global market. This means that the firm will increase the size of its customer base.

In addition, it is the goal of the firm’s management for there to be a continuous awareness of the product’s existence in the global market. The management of the firm considered this concept due to the fact that there is increased threat of competition that faces products in the information technology sector. This will ensure that the firm’s new product thrives in the market that is characterised by intense competition.

Place

It is the goal of the management that the product will have penetrated the entire domestic market within the first year of its launch. This will give an opportunity for the management to venture into the foreign market.

Target market

In developing the new product, the management of the firm has targeted both the domestic and foreign market. This is through consideration of the various customer categories which include individual and institutional consumers. The institutional customers that the management is targeting include global companies that deal with electronic payments networks such as Visa Incorporation. In addition, the management of Proprietary Systems has also targeted travel companies and other merchants. This is due to the fact that these customers are increasingly depending on electronic payment in their operation (John 5). According to John, there has been a hindrance in the operation of these firms due to breakdown of their electronic payment infrastructure resulting into inefficiency (5). With the development of a phone that would enable the tourists to make their payment effectively, there would be increased performance in the operation of the firm. Therefore, these institutional customers present an opportunity for the firm to increase its profits margin. This is due to the fact that they deal with a wide range of customers and they have a high growth potential. This means that the size of the market is large.

Through a market research, the management identified that the consumers are increasingly integrating electronic commerce in their operation. For instance, upon the emergence of credit cards, most of the consumers have integrated them in their purchasing process to make payments for products and services. According to ‘global credit card industry’, the increase in consumer spending has resulted into an increase in the number of consumers using credit cards (Para. 1).For instance, according to a survey that was conducted in Mexico and Brazil, the number of individuals using credit cards increased from an average of 23% during 2004-2008 to a high of 93% in 2008. The increased utilisation of electronic cards emerged from the fact that the consumers do not want to carry hard cash. By integrating the concept of mobile phone payment, there is a high probability of the firm succeeding. This is due to the fact that consumers are increasingly integrating their electronic payment in the purchase of digital and non-digital products.

Benefits derived by the customers

  • By utilising the mobile payment, the customers will be able to conduct their transactions faster. This will result into increased rate of customer satisfaction.
  • Increased security level in making electronic payments. This is due to the fact that the mobile phone will have advanced electronic payment security features such as firewalls.
  • It will be possible for the customers to revisit the site that he or she had previously visited in making the electronic payment. This is due to the fact that the mobile phone will have features of cookies.
  • The consumers can make their payments at any location without the need of physical appearance to make the payment.

SWOT analysis

Strengths Weaknesses Opportunities Threats
Mobile phones are among the small items that the consumers carry around with themselves. This means that the phone will increase the convenience of consumers in conducting transactions. Inter-operability problem. Electronic payment requires a harmony of standards and other computer networks. This means that the market for the phone is limited to those countries that have these systems. Increased market size as more individual consumers integrate electronic payment in their purchasing process. The mobile industry is very volatile. The new product will face intense competition from the already existing smartphone manufacturing companies such as Apple that are integrating the concept of mobile payment.
The mobile phone will serve diverse consumers due to integration of diverse m-payment models such as NFC and mobile WAP. Disputes arising due to electronic payment through mobile phone can be tricky. This is due to the fact that there is no well established legal procedure to solve these disputes. In addition, consumers are sensitive with the security of mobile transactions. Institutions such as telcos and banks are increasingly integrating mobile phone technology in offering their services. This is evident in the emergence of the concept of mobile banking (Hampe & Swatman 64). The technology industry is very dynamic. This makes the firm’s product to face the threat of obsolescence it if it does not consider the concept of innovation.
High security in conducting electronic payment as a result of incorporating the concept of data encryption, decryption, authentication and digital signature. These technologies will increase the efficiency of mobile payment. High cost of investment is required to effectively update the mobile phone electronic payment system. High chance of the firm maintaining a high competitive advantage by adding value to the phone. Competition from new entrants that venture the mobile phone industry.
The operating systems that will be used in the mobile phone will be more susceptible to viruses (Wan, Yin & Sun Para. 1).

Economic factors affecting the idea

Over the past few years, there has been a rampant growth in the economic performance of various economies which has resulted into an increase in consumers’ disposable income. The effect is that consumers have increased their rate of consumption of telecommunication products such as the mobile telephones. In addition, the price of the mobile phones has been reducing over the years due to increase in foreign competition within the domestic market. This consumption trend has been reversed due to the current financial crisis. Currently consumers are more concerned with spending on basic commodities.

However, there is a potential of this trend reversing in the near future upon the recovery of the global economy from the recession. This presents an opportunity for the firm in that the market for mobile phones will be reversed.

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Considering the fact that the product is in the introduction phase, there is a high probability of the firm making high profit from the sale of the phone upon the recovery of the economy.

Regulation

There are various regulations that have been put in place by the government to regulate the domestic mobile phone industry. Some of these regulations are aimed at protecting the entry of a large number of foreign brands into the domestic market. For instance, various governments have formulated a law that enable entrepreneurs to patent their products. Through patents, there is a high potential of the new product succeeding in the domestic market (Niina 23).

Strategies to minimise weaknesses and threats of the idea

Investing in research and development

The management of the firm has formulated a strategy that will ensure continuous value addition to the phone through innovation. For the innovation to be effective, the management of the firm has invested in research and development. The firm’s research and development team will ensure that the phone is continuously upgraded by incorporating the changes that occur in relation to electronic payment to the phone.

Through innovation, it will be possible for the firm to minimise the threat posed by competing products from firms entering the market. This is due to the fact that innovation will minimise the risk of obsolescence.

Sources of finances

Considering the fact that the cost of innovation may be prohibitive, the management of the firm will rely mostly on its retained profits as a source of finance. In addition, the management of the firm will source for funds from external sources. However, the management will ensure that the firm’s debt to equity ratio is kept low.

Establishment of point of sale

To minimise the interoperability problem, the management of the firm will establish various point of sale in the domestic and the foreign market. These points of sale will enable the consumers to be able to make their transactions effectively since the network will be compatible with that of the phone. The point of sale will increase the products market scale.

Integration of firewalls and current antivirus software

To ensure security of the transactions, the management of the firm will incorporate the firewalls in its payment system and the current antivirus software. The software will help in detection and cleaning of the viruses while firewall will limit the hacking of the data.

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Strategies and tactics to be implemented to achieve the goals

Product development

The management will ensure that the mobile phone is effectively designed. In developing the product, the management of the firm will first undertake a pilot project. This will enable in the determination of the phones efficiency in conducting electronic payment before launching the product in the entire market.

Promotional strategy

The initial step in reaching the global market is ensuring that there is effective product awareness in the market. The goal of the management in promoting the product is to ensure that the consumers are aware of the products features, how the product will be used and the benefits that they will attain by using the product. This will form the basis of persuading the consumers to incorporate the mobile phone in their electronic payment processes.

To reach the global market, the management of the firm intends to integrate various product awareness strategies in its promotion strategy. The management of the firm will integrate the concept of electronic marketing. The firm will form alliance with major search engines such as Google and Yahoo where it will be posting its advertisement. In addition, the firm will also advertise through television, radio and the print media. The promotional strategy also entails the use of public relations such as sponsoring sporting activities and other social events.

Pricing strategy

The management of the firm intends to develop a competitive advantage by incorporating a competitive pricing strategy in the new product. This will be attained by considering the price set by the competitor firms through conduction of a comprehensive competitor analysis. Through the competitor market research, the management of the firm will be able to formulate an effective pricing strategy. In addition, the management of the firm intends to incorporate the concept of discount pricing in its pricing strategy. Discount pricing will enable the firm to increase the revenue volume through increased volume of sales.

Distribution strategy

To enable the new phone be accessible in the entire domestic market, the management of the firm will establish stores in various geographical locations. The management has also considered using the services of credible distributional agents. These agents will aid in supplying the product both in the domestic and the foreign market.

To ensure effective penetration of into the foreign market, the management of the firm has considered foreign direct investment (FDI). Through FDI, the management will establish distributional stores in the foreign market.

Project result of the idea

Through this project, the management of the firm will be able to venture into the mobile payment field effectively. Considering the fact that consumers are increasingly adopting mobile payment, the project will enable the firm’s scale of operation to expand from the increased profits. Through expansion in the domestic and foreign market, the firm will attain economies of scale. This means that the firm will be able to conduct its innovations more cost effectively. This will trickle down to the consumers in terms reduced product prices resulting into increased customer base and customer loyalty.

Research conducted

In developing the idea, a number of researches were conducted. These include the following;

Consumer market research

The objective of the research was to identify the consumers’ needs in relation to electronic payment products. This enabled them to integrate these needs in the development of the phone thus resulting into a product that would effectively result into customer satisfaction. Through this research, the management of the firm realised that consumers product needs are dynamic. This will enable the firm to continuously conduct consumer market research in the process of adding value to the product.

Competitor market research

To effectively differentiate the product in the market, the management of the firm conducted a competitor market research particularly with reference to mobile phone and credit card companies. The research was aimed at identifying the electronic payment features that have been incorporated by these companies in their products. This market research enabled the firm to identify the competitor trends such as their competitive plans. It also enabled the management of the firm to learn that other firms’ weaknesses can form a basis of the firm’s opportunity.

Technological market research

The management of the firm also conducted a technological market research which enabled the firm to identify the most efficient and current electronic payment technology that will be compatible with the mobile payment. The research increased the probability of the project succeeding since the product to be developed would be effective and efficient in utilising it. Through this research, the management of the firm identified the dynamic nature of the electronic payment systems and hence the need to continuously upgrade its systems.

Conclusion

Developing a mobile phone that would enable efficiency in conducting electronic payment is one of the ways in which Proprietary Systems can attain competitive advantage in the global market. The product developed should result into customer satisfaction which will culminate into customer loyalty. This means that the firm will increase its customer base and hence the profit margin. A comprehensive market research should be conducted prior to and after development of the product. This will enable the firm to add value to the new phone.

Recommendation

The management of the firm should implement the idea and develop the new phone. This will contribute towards the firm attaining its profit maximisation objective in the long run. This is due to the fact that there is a high market potential since individual and institutional customers are integrating electronic payment in their operation (Tomi & Mallat 1).

Works cited

Bodart, F. “Electronic payment systems.” HEC Lausanne: University De Lausanne.2004. Web.

Dahlberg, Tomi and Nina, Mallat. “Mobile payment market and research: past, present and future.” Jan Ondrus: University of Lausanne. 2007. Web.

Elkins, John. “Electronic payment: a catalyst for tourism and economic growth.” Visa International.2008. Web.

Gerson Lehrman Group. “Mobile phone replacing credit card is a solution in search of a problem.” 2008. Web.

Hampe, Felix and Swatman, Paula. “Mobile payment: opportunities, challenges and solutions.” Landau: University of Koblenz. 2006. Web.

Montia, Gill. “Mobile phone to replace credit cards.” Banking Times. 2008. Web.

Niina, Mallat. “Exploring consumer adoption of mobile payment: qualitative study.” Helsinki: Helsinki School of Economics. 2007. Web.

PROlog. “Global credit card industry: emerging markets” RNOC market research. 2009. Web.

Rees, Matthews. “An evaluation of alternative pricing models for utilities convergence.” Charterlis PLC. 2009.

Tim, Johnson. “In Japan , mobile phones replacing wallets, keys and credit cards.” Government Technology. 2006. Web.

Visa Incorporation. “Company overview”, 2009. Web.

Wan, Zhong, Yin, Weifeng and Sun, Ronggao. “Design and implementation of mobile payment based on multi-interface of mobile terminal.” Guide to computer literature. 8:1(2009) 93-102. 2009. Web.

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