Electronic Commerce and Electronic Marketing in Agricultural Markets

Bulletin UASVM Horticulture, 66(2)/2009 Print ISSN 1843-5254; Electronic ISSN 1843-5394 Electronic Commerce and Electronic Marketing in Agricultural Markets Elena COFAS Faculty of Engineering and Economic Management in Agriculture and Rural Development, University of Agricultural Sciences and Veterinary Medicine Bucharest, 59 Marasti Boulevard, Bucharest, Romania; cofasela@yahoo.com Abstract. Commerce is generally acknowledged as the interchange of merchandise on large scale between nations or individuals. Electronic commerce enables more customer input to influence agricultural marketing decisions. As competition intensifies across agricultural sectors, it becomes more important for employees to be well informed of coporate and marketing objectives. Intranets have a key role to play in effective internal marketing. The Internet does have a significant non-selling function for agricultural sector and not-for-profit organizations, especially in terms of information exchange, communication and online customers services. This study aimed at understanding the use of the Internet and the marketing strategies adopted for electronic commerce implementation. Keywords: e-commerce, market, agricultural, Internet, strategy, e-marketing INTRODUCTION Electronic commerce can be considered a major pathway for future strategies related to marketing and efficiency improvement in the agro-food chain. Nevertheless, the adoption of e-commerce by small and medium firms in this sector in Romania is still not frequent, in particular if it is compared with the expectations of the benefits of such instrument. After the disillusion on the performances of the so called "new economy", it is even more relevant to try to understand what the realistic opportunities brought about by e-commerce are and how they can be exploited. In this sense, a higher understanding of the factors affecting the spread of e-commerce in business organizations is required in order to devise strategies able to allow the exploitation of existing opportunities. Currently, through an effective use fully the possibilities offered by the World Wide Web, farms and agricultural companies can benefit of continues increase of the network traffic, but also a range of solutions extensible to adapt to their current position scale adoption of electronic business. Internet sites will replace more and more shops than classical marketing of food products, in conditions in which every day new and new virtual addresses through which it can sell any product. New forms of commerce offer different payment method and fields or different products. MATERIALS AND METHODS Rayport and Jaworski (2001) define electronic commerce (e-commerce) as technology mediated exchanges between parties (individuals or organizations) as well as the electronical based intra- or inter-organisational activities that facilitate such exchanges. The emphasis in most e-commerce definitions has been on digital transactions facilitated at every 130

stage (eg inventory, ordering and payment processing, etc) by technologies such as electronic data interchange (EDI). Standardization of electronic data formats enables computers to speak to each other, speeds information exchanges and reduces transaction costs. Turban et al (2002) suggest that the term e-commerce is a rather narrow constricted definition with its emphasis on the transactional process and that it does not encompass the full range of applications and potential benefits of the Internet. To exploit such opportunities, requires the redesign of the corporate environment and the total integration of information and communications technologies across the business functions. Electronic marketing (e-marketing) is described as the use of Internet and related digital informations and communications technologies to achieve marketing objectives. Mohammed et al (2001) defined Internet marketing as the process of building and maintaining costumer relationships through online activities to facilitate the exchange of ideas, products services that satisfy the goals of both parties. Strauss et al (2003) suggest that e-marketing covers a wide range of IT related applications with three main aims: - transforming marketing strategies to create more customer value through more effective segmentation, targeting differentiation and positioning strategies; - more efficiently planning and executing the conception, distribution, promotion and pricing of goods, services and ideas; -creating exchanges that satisfy individual consumer and organizational customer s objectives. Today, electronic commerce has evolved and turned into a mobile electronic commerce (m-commerce). It can be defined as the buying and selling of goods and services through wireless handheld devices such as mobile phones and personal digital assistants. M- Commerce enables users to access the Internet without needing to find a place to plug in providing anytime, anymore communications technologies of all time - mobile phones and the Internet - will make possible all kinds of new services and create a new market. The emerging technology underpinning m-commerce based on Wireless Application Protocol and third generation (3G) bandwidth technology has led many to believe that m-commerce with its flexibility does have greater potential than the Internet connected a PC. So-called smart phones provides faster, personal and secure handheld communication content and payment abilities for a progressively mobile workforce. With the fat pipe or broadband slowly becoming more accessible in terms of connectivity and cost, the thirst for instant information by some is becoming a reality for individuals and a marketing challenge for organizations. Wireless Internet Access or Wi-fi enables users of handheld devices and laptops to access the Internet on the move without the need for any physical links or attachments via hotspots without the need for any traditional dial up connection. Any modern business model has to address technological issues such as the efficiency of the distribution channels, database applications, and a fully integrated and secure search engine receptive site. When formulating objectives, strategies and tactics it is imperative that the technology is applied with the customer in mind, such as: Ease of site navigation Fast access to product information Ease of ordering and payment processing Effective distribution networks including order tracking for transparency Added value through speed, flexibility, interactivity and convenience. When considering e-marketing, and broader e-busines strategy, the planning tools applied by marketers for decades still have an important role to play in formulating an organisation s future business path. Adoption of electronic business in the farm has evolved as follows: E- 131

mail Agricultural websites E-commerce agricultural sector E-marketing agricultural sector E-business agricultural strategy Transformed agricultural (agri-food) organisations. RESULTS AND DISCUSSION The Internet is just another channel or communications tool or whether it has actually transformed marketing concepts and practices forever. What are undeniable is the benefits that the Internet has bought to marketers on agricultural markets: Buyers and sellers can reach markets previously inaccessible for geographic, entry barriers or other reasons creating new segments and new players in agricultural market sectors. Electronic commerce and the Internet should increase competition within agricultural sectors leading to a position of equilibrium where demand equals supply. The Internet and related technologies also impact upon employment levels and practices in agriculture; this can be evidenced in two ways: first, automated processes can replace human labor or a combination of the two can lead to job losses. The Internet provides a low cost, effective way of transacting with customers compared to traditional selling costs. A site can be open for business all day everyday providing customers convenience. The Internet is a fast and flexible communications tool. Promotional communications such as e-mail are significantly cheaper and often achieve higher response rates than traditional methods. Buyers search costs are reduced whilst choice is increased with the availability of agricultural supplier information; this may impact on traditional outlets and change consumer behaviour. E-procurement and online payment processing will streamline administrative and buying procedures and cut transaction (e.g. in vegetable and animal sector). Web only models can pass cost of sale savings onto customers and offer very competitive pricing. The Internet has led to disintermediation and occasionally reintermediation in supply chains and distribution channels; this has often resulted in costs being driven out with the elimination of intermediaries. The Internet provides marketers with a rich source of marketing data for decisionmaking purposes. But there are also many problems associated with the Internet that marketers on agricultural markets it must understand and respond to. These are outline below: Customer resistance to change; Public concerns over privacy issues, such as SPAM and chat-rooms; Lingering security doubts over fraud and phishing (hackers) and network security and stability (worms); Lack of trust with unknown agricultural traders; The Internet s sensory boundaries limiting of senses like taste and touch which influence buyer decisions; Limited web access for low-income groups and those in rural areas; Continued high costs of broadband connections deterring high speed take up; Poor levels of online customer service and fulfilment; Technology gap between users and agricultural providers; 132

Complexities of cross-border trading; Failure to provide an exciting and reliable online shopping experience. Agricultural holdings that fails to consider the influences of the environment around it will be in imminent danger. Some argue that marketplaces change so fast that it is not worth the effort planning for the future and good feel and instinct play a more important role. However, it is worth considering the environmental factors that have influenced and driven the Internet s growth and ongoing development, as well as its sway upon the factors (fig. 1). The factors are grouped in micro-environment factors and macro-environment factors. Microenvironment factors - Suppliers: The Internet had a major impact on existing supplier arrangements as partnership relationships and more intimate vertical integration is desired to streamline supply chains and improve efficiency. Technologies such as electronic data interchange (EDI) and extensible mark-up language (XML) have enabled improved information exchanges. The Internet has opened up the market for many agricultural holdings to access potential new suppliers across national boundaries faster. - Distributors: The Internet has impacted upon traditional distribution channels (reintermediation) in existing agricultural markets. In addition, the Internet comes into its own information based products with negligible distribution cost involved once the product has been produced. - Stakeholders: As part of any agricultural holding s promotional planning, communicating effectively with various stakeholders or publics is critical for successful ongoing relationships. With careful use of e-mail and of the corporate web site, intranets and extranets, stakeholders can be informed, influenced, persuaded and sold to in a faster and more flexible way. - Competitors: The reality of the Internet is that it has created more competition both within and across national boundaries. Macroenvironmental factors The wider environmental factors as the analytical frameworks for environmental scanning representing societal (cash rich, time poor; increased leisure time; increased technology ownership), technological, economic and political dimensions. Other academics have extended the model to incorporate regulatory frameworks, the natural environment and legal aspects. Corporate Convenien Competition Communicati Control Customers agricultural markets of Consistenc Coordination Customisatio Creative content Fig. 1. Factors that influence the agricultural markets 133

The marketing audit, SWOT Analysis, Porter s five forces and so on continue to provide useful analytical frameworks to snapshot the internal and external environments that impact upon activities and performance. For example, the list of issues below - by no means an exhaustive one - might need serious consideration for a business setting out its e or multichannel strategy: the rate of net adoption by traditional customer segments the impact of new market entrants changes in the supply chain perhaps where manufacturers can go direct and cut out intermediaries increased competition in both domestic and transnational agricultural markets the impacts of existing and future technological changes to remain competitive from both an investment and training perspective market penetration, e.g. by superior online customer service product development, e.g. new trading exchanges to existing markets market development, e.g. reaching new markets by online selling diversification, e.g. customization of industry specific products. A marketing plan for online markets in the agro-food sector combines four key elements specific, including the takeover and management context in which the plan: 1. Positioning - building a brand online and using search in depth, corresponding information in the agro-food sector. 2. Permission - initiating dialogue with potential new customers in the agricultural sector and management relationships with those customers 3. Partnership - including affiliate marketing, co-promotions and business partnerships in the agro-food sector 4. Performance - marketing strategies incorporate the use of web analysis. Regarding the marketing strategy (Fig. 2) - strategic planning of agro-marketers - it must be directed and conducted by the customers from the agriculture and include: strategy and financial planning, strategy and human resource planning, strategy and production planning, distribution for agricultural branch and the IT strategy and planning. Strategic e-marketing in the agro-food sector Elements of planning Elements implemented Elements of control agricultural marketing research review setting objectives strategic development (including programs and budgets arising from the holding / agricultural company strategy) coordination with agencies, suppliers, distributors functions of internal webdesign logistics web hosting monitoring the development of appropriate strategic / tactical objectives previously established performance and benefits of using measurement tools and web Fig. 2. Cycle stages of strategic e-marketing in the agro-food sector 134

CONCLUSIONS The results show a low level of implementation of the instrument and a limited variety of adoption strategies. Agro-food firms actually invest very little in e-commerce focusing their efforts on the Internet as promotion tool, while web-based direct selling is confined to market niches. The view that the Internet would reverse the disadvantages of small firms appears by now non realistic, even if interesting opportunities for further development are still present. Altogether, while the Internet and e-commerce can be perceived as a powerful way of communication and information, the direct sell of products is still confined to market niches. The illusion that the age of Internet would reverse the disadvantages of small firms presently appears unrealistic, even if signs of a certain interest by small/medium companies in the lower stage of the agro- food chain may still be caught. To conclude, in agro-business the exploration of the new channel represented by e- commerce is still underway and proceeds slowly. Yet, the technological delay offers development prospects in the agro-food sector, where operators may learn from the mistakes of those already working (and losing money) with e-commerce in other business areas, considering that every stage of on line shopping should still be improved, from the website design to delivery. Investments must be made in view of satisfying the expectations and the needs of costumers, regardless to the business model adopted. However, interesting opportunities for further development in the agro-food sector are still to be explored, i.e. on the pathway of strengthening the connections throughout the supply chain. Further technical advance, as well as the reduction of Internet divide among consumers may act as relevant factors for future developments. REFERENCES 1. Doyle, P (1998). Marketing Management and Strategy, 2 rd edition, Prentice Hall Erope, Hemel Hempstead, England, pp. 96-97. 2. Holland C. P. and Lockett A. G. (1997). Mixed mode operation of electronic markets and electronic hierarchies. In: The formation of inter-organizational networks; Ebers M. (ed.); Oxford University Press: Oxford. pp.238-261. 3. Kuhlmann, F. and Brodersen C. (2001). Information technology and farm management: developments and perspectives, Computers and electronics in agriculture, pp.71-83. 4. Liao, Z. and Cheung M. T. (2001). Internet based e-shopping and consumer attitudes: an empirical study, Information& Management, pp.299-306. 5. Lucas Jnr, H. C. (2002). Strategies for Electronic Commerce and the Internet, Massachusetts Institute of Technology, USA, pp.51. 6. Mohammed, R et al. (2001). Internet Marketing, McGraw Hill, pp.4. 7. Raypot, J. F. and Jaworski B. J. (2002). Introduction to E-commerce, McGraw Hill, New York, pp.141. 8. Strauss, J. et al. (2003). E-marketing, 3 rd edition, Prentice Hall, Upper Saddle River, NU, pp.2 9. Turban et al. (2002). Electronic Commerce A Managerial Perspective, Prentice Hall, pp.6 10. Wilson, R. (2002). Planning your Internet Marketing Strategy, John Wiley & Sons Ltd, New York, USA, pp.228-238. 135