International E-Business

Table of contents

List of Figures

List of Tables

Preface

1 Introduction
1.1 Problem Statement
1.2 Objective
1.3 Relevance of the Topic
1.3.1 Theoretical Relevance
1.3.2 Practical Relevance

2 Literature Review and Theoretical Framework
2.1 State of Research: Descriptive instead of Conception
2.2 Methodology
2.2.1 Definition and Limitation of Research Topic
2.2.2 Research Structure

3 Loyalty and Customer Relationship Management
3.1 Definition of Loyalty and Relationship Management
3.1.1 Benefits of Relationship Management & Customer Loyalty
3.1.2 Transactional View versus Relationship View
3.1.3 The Evolution of Relationship Management
3.2 General Approaches to Relationship Management
3.2.1 IMP Interaction Approach
3.2.2 Five-phase Profit Chain by Bruhn
3.2.3 Dynamic Framework by Dwyer, Schurr & Oh
3.3 Evaluation Criteria for a Concept of Relationship Management
3.4 Chosen Concept

4 International E-Business
4.1 Definition of E-Business
4.2 Value Adding Characteristics/Opportunities of E-Business
4.2.1 Interactivity, Dialogue, Individuality
4.2.2 Customer-Integration and Innovation
4.2.3 Changing Structure of the Value-adding Process
4.2.4 Market-pull and Customized-push instead of Market-push
4.2.5 Global, 24-hour Access

5 Customer Loyalty and International E-Business
5.1 New Model for Customer Loyalty & Relationship Management in E-Business
5.2 Individuality and Interactivity during the Relationship Process
5.3 E-Business Relationship Process
5.3.1 Stage 1: First Contact - Online Surfer
5.3.2 Stage 2: Customer Satisfaction - Online Buyer
5.3.3 Stage 3: Customer Loyalty
5.3.4 Stage 4: Customer Retention - Repeat Business Contacts
5.3.5 Stage 5: Economic success & Long-term Profitability
5.3.6 Influencing factors: External and Internal
5.4 Instruments for Customer Loyalty in the World of E-Business
5.4.1 Knowing your Customers - Customer Profiles & Database
5.4.2 Online Communities
5.4.3 Complaint Management System
5.4.4 Membership Clubs
5.4.5 Datamining
5.4.6 Customer-Integrated Product Innovation

6 Conclusion

References

List of Figures

Figure 2-1 Limitation to Business-to-Consumer Processes

Figure 2-2 Structure of the Thesis

Figure 3-1 Stakeholder Relationships

Figure 3-2 Kano's Model: Expectations, Differentiation and Customer Satisfaction

Figure 3-3 The Transition to Relationship View

Figure 3-4 IMP Interaction Approach

Figure 3-5 Profit Chain of Customer Loyalty

Figure 3-6 Relationship Development Process

Figure 4-1 E-Business Builds Customer Value

Figure 4-2 Value-Adding Characteristics/Opportunities in E-Business

Figure 4-3 Traditional One-To-Many Mass Communication Model

Figure 4-4 Interpersonal Communication

Figure 4-5 Many-to-Many Communication in E-Business

Figure 4-6 Evolution or Revolution of Existing Business Systems?

Figure 5-1 New Model of Customer Loyalty & Relationship Management in E-Business

Figure 5-2 Implications of Communities

List of Tables

Table 3-1

Table 3-2

Table 5-1

Preface

In the year 1876 Jules Verne finished his book “The Propeller Island”. He portrays the life on an artificial island, which is constantly moving around the pacific, following the most favorable climate. The inhabitants employ the latest technology in order to enjoy their live in an ideal world.

One visitor, who is shown around on the island, arrives at a shopping center. “I can’t see any customers” the visitor notes “maybe it is to early”. “Not necessarily, but most of the shopping is done in a tele-autographic way” explains the guide. “We use a machine, which transmits the handwriting like a telephone the voice. With the help of this machine purchase orders are taken, bills are sent and contracts are made.”

What Jules Verne illustrates at the end of the last century is nothing else than E-Business. But not until the development of computer, modem and internet should this fiction become reality.

1 Introduction

This chapter

- points out the problem around E-Business and customer loyalty
- describes the objective of the thesis
- explains both the theoretical and practical relevance of the thesis

1.1 Problem Statement

For many years, successful neighborhood merchants, restaurants and pubs had real customer relationships. They knew their customers personally, understood what they wanted, and, as best they could, satisfied their needs through personalized service. As a result, they earned loyalty and a large share of their customers' business. Some of the best examples of building customer loyalty can be found in those traditional small businesses.

Now the question arises how customer relationships can be built in the world of E-Business. E-Business - the buying and selling of products and services over the Web - and its impact is comparable with the industrial revolution at the end of the last century. After hysteric times of E-Business startups and well known bursting bubbles the point of disillusion has come. Some internet companies recognize that traditional business concepts are not necessarily outdated. They realize that focusing only on customer acquisition is not enough. Acquiring customers on the international marketplace of E-Business is enormously expensive and unless those customers stick around and make lots of repeat purchases over the years, profit will remain uncertain. For lasting success companies have to intensify their efforts towards customer loyalty and customer relationship management. Without loyalty even the best-designed E-Business model will collapse.

The described problem leads to the following objective.

1.2 Objective

The objectives of the thesis are

- to combine the concept of customer loyalty with the characteristics of E-Business
- show how companies can build loyalty with customer relationship management

1.3 Relevance of the Topic

1.3.1 Theoretical Relevance

Concerning E-Business there exist plenty of literature mainly from a technical point of view. On the other hand, academic discussions about business concepts like customer loyalty and relationship management have a long tradition among researchers.

The drawback is that although loyalty and relationships are seen as very important factors in the context of international business, the question has obtained scarce attention in literature about E-Business. Existing studies in this area mainly have descriptive character or try to offer quick-fix over-optimistic internet solutions, which become obsolete pretty fast.

The theoretical contribution of this thesis is to fill that gap and offer a more conceptual/systematic as well as critical perspective towards the topic.

The thesis

- Transfers the concept of relationship management into the environment of E-Business
- Points out potential conflicts
- Demonstrates benefits and show ways to increase online customer-loyalty

1.3.2 Practical Relevance

Companies in E-Business already realize that focusing only on customer acquisition is not enough for lasting success and are therefore intensifying efforts towards customer loyalty. According to recent studies only a small part of the companies know how many visitors they have on their Websites. And only some of them know the number of frequent/loyal buyers. A lack of customer knowledge and relationships with customers can get dangerous, especially in a scenario, where the competitive offer is only one “click” near by.

The benefits of customer loyalty are directly measurable, knowing that the costs of taking care after loyal customers are many times below those of customer acquisition. From a practical point of view the aim of the thesis is to show how companies can build loyal online-customers in order to develop long-term business relationships.

2 Literature Review and Theoretical Framework

This chapter

- describes the state of research concerning the topic of the thesis
- points out how the problem of this thesis is solved in order to reach the objective and why exactly this way
- explains the limitations of the research topic

2.1 State of Research: Descriptive instead of Conception

The proliferation of the internet is unparalleled in the history of communications. No surprise then that the phenomenon has become a hot topic in the popular press. Use of the internet as a business platform is quickly capturing the attention of management academicians as well, despite the fact that transactions on the Internet form a minuscule part of the total trade through all possible avenues.^[1] A number of demographic studies exist concerning the development around E-Business. Traditional demoscopic institutes expand their comprehensive and representative surveys with topics about spreading of technology and use of the internet (e.g. number of users). However those studies are only descriptive. Due to the dynamic development the mentioned studies merely have a short-term value and get obsolete pretty fast. Although the basic growth trend of E-Business is confirmed, the studies hardly can function as a basis for sound management planning.

An exception are studies of international consulting companies like Accenture, Arthur D. Little, Booz, Allen & Hamilton, Boston Consulting Group, McKinsey & Company, KPMG, Roland Berger & Partner etc. Those studies could contribute to the conceptual building of E-Business know-how, since they go beyond demoscopic surveys and work on problem-oriented solutions. Unfortunately the studies are normally not public accessible, because of their preparation during consulting projects. Often consulting companies publish only excerpts or single results in press releases or on their Websites.^[2]

2.2 Methodology

How is the problem solved/the objective reached and why exactly this way?

2.2.1 Definition and Limitation of Research Topic

In general relationship management works as a term for the effort of companies to develop closer relationships with the end customer through personalized communication, customized services, and so forth. The term is widely used as synonymous with database marketing as well. Relationship management seems to also describe the phenomenon of tightening relationships with fewer suppliers as firms consolidate the supplier base, and bring the suppliers into the firm’s continuous improvement process.^[3]

illustration not visible in this excerpt

Figure 2-1 Limitation to Business-to-Consumer Processes^[4]

In this thesis the term relationship management is used in context with business relationships to end customers in order to build customer loyalty (business-to-consumer, B-2-C). Relationships to other stakeholders including suppliers (business-to-business, B-2-C) are not focused on. Furthermore the thesis focuses not on electronic databases, also known as Customer Relationship Management (CRM)-systems, although the topic is considered important in the process of online-relationship management and therefore covered in a later chapter of the thesis. It should be clear that the concept of the thesis has a business perspective, in contrast to a more technical or IT orientation.

2.2.2 Research Structure

The author attempts to reach the objective of the thesis as follows:

illustration not visible in this excerpt

Figure 2-2 Structure of the Thesis^[5]

First the concepts of loyalty and customer relationship management are explained and distinguished. The literature proposes several concepts and definitions of loyalty and relationship management. In the next part the author will explain E-Business and its unique value-adding characteristics.

After having described customer relationship management (chapter 3) on the one hand and E-Business (chapter 4) on the other hand, the two concepts are combined in chapter 5. In other words the business concept of relationship management is transferred into the environment of the internet and a new model is developed. Now potential conflicts, benefits and synergies can be demonstrated. It is possible to show how companies can build customer loyalty in the world of E-Business.

Methodical characteristics of the thesis are

- Drawing from international management literature, focusing on recently published articles in order to take into consideration the developments in the changing marketplace of information technology.
- Successful online companies and their practical experience should illustrate the application of different concepts and methods in a practice-oriented way.
- Systematic/structural approach: Instead of a cursory discussion of loyalty and E-Business, this thesis is written in a systematic and logical manner.
- International perspective: When discussing the topic E-Business, an international perspective is always a prerequisite. Customers around the world have access to a company’s Website. Therefore business relationships cannot be explained from a narrow, local point of view. As soon as E-Business is discussed, it is about business on the international marketplace of the internet.

3 Loyalty and Customer Relationship Management

This chapter

- describes the evolution of customer relationship management
- presents different approaches to relationship management and customer loyalty
- shows an evaluation of different concepts in order to use one concept later in the thesis for model building of customer loyalty in E-Business

3.1 Definition of Loyalty and Relationship Management

Successful competition, whether local, regional or global, can be based on cost leadership, superior customer value, time leadership, reliable relationships or a combination of these categories of competitive advantage.^[6]

Reliable relationships, that is, a network of positive personal and institutional relations with all the important stakeholders in the relevant business system.^[7] Possible stakeholders are suppliers, employees, competitors (e.g. strategic alliances), public organizations (e.g. governments, interest groups) and customers.^[8]

illustration not visible in this excerpt

Figure 3-1 Stakeholder Relationships^[9]

A definition that covers all forms of relational exchange and focus on the process of relationship management is:

Relationship management refers to all management activities directed toward establishing, developing and maintaining successful relational exchanges. ^[10]

Research on industrial business networks and on service firms in highly industrialized regions of the world as well as experience from Arab, Asian and African countries demonstrates how companies can very successfully build their competitive strategies on personal as well as institutional relationships with important stakeholders. Some companies have discovered that the most important factor for long-term success in their markets is the establishment and maintenance of close relationships with their customers. It is much less expensive to keep existing customers than continuously build new customers.^[11]

In the literature a number of definitions exist for the term customer relationship management. Originally the concept is based on Berry^[12] who describes relationship management as “attracting, maintaining and...enhancing customer relationships”^[13]

The building of customer relationships will call for a process of modifying customer behavior over time and learning from every interaction, customizing customer treatment, and strengthening the bond between the customer and the company.^[14]

While its objective is still to add profit to the company, it accomplishes that goal by concentrating on customer benefits and values rather than what a company wants to sell, thereby strengthening the relationship between the customer and the company. It is not an overnight cure but rather a long-term profit builder. It takes business away from the traditional objective of new customer acquisition at any cost to customer loyalty, from developing short-term transactions to developing customer lifetime value^[15]

A final interpretation of relationship management with the link to customer loyalty could be:

Customer Relationship Management involves creating a relationship between producer and individual customer, interacting with the customer and collecting information about him/her, adapting products more closely to the customer’s need, and maintaining two-way communication with the customer, so that the customer becomes loyal.

3.1.1 Benefits of Relationship Management & Customer Loyalty

A range of authors claim, that ongoing customer relationships are the company's most important business asset.^[16] The main contribution of relationship management to the firm is fivefold. First, it builds up loyalty. Second, it enhances profits form existing customers. because the longer customers are with a company, the more willing they are to pay premium prices, make referrals, and spend more money.^[17] Third, it helps reducing marketing expenditures, mainly because the cost of attracting a new customer may be as large as six times that incurred for retaining an old customer.^[18] Fourth, it facilitates a direct dialogue with customers that in turn increases the attentiveness level of the organization to clients’ needs.^[19] Moreover relationship management helps firms to protect themselves against attacks of new entries and of changing preferences.^[20]

For a better understanding of relationship management the connection between underlying reasons for relationships, differentiation and critical success factors are discussed in the following.

It was mentioned that customer relationships often enable a company to reduce costs. Business relationships, however, might allow a company not only to cut costs, but also other forms of differentiation of its products and services from competitor’s offerings. Furthermore both, reduced costs (which is a kind of differentiation itself) and other forms of differentiation, create barriers to entry to competitors.

Competitive costs are very important in international markets. However, they are usually only a pre-requisite for success in the long-term, because of the enormous competition many companies are facing. Reasons for this big competition are the ongoing globalization of markets (for products and resources), the reduction of trade barriers and trade restrictions through the liberalization of world trade, the deregulation of industries as well as technological advances, e.g. information technology.^[21] In such a situation, success can only be achieved if a company possesses those capabilities and resources which are needed in order to fulfil the decisive expectations and aspiration of customers and other stakeholders. These capabilities and resources, which are so-called critical success factors, allow a company to differentiate its offering positively from those of competitors. Traditionally, such critical success factors have been those allowing a company to provide high quality standards for competitive prices to customers.^[22]

In today’s competitive environment however, differentiation in many markets is hardly attained through quality standards or competitive prices alone, because these factors for many businesses have become a pre-requisite for the existence on the international marketplace. Put differently, providing high quality standards and competitive prices are often related to capabilities and resources a company needs to possess, in order to be regarded as a relevant supplier. These core factors do not allow a company to differentiate itself positively from competitor.^[23] Core factors are related to aspirations and requirements of customers and stakeholders, which must be fulfilled (“Must-requirements”). Success factors on the other hand are related to aspirations and requirements whose fulfillment allows a positive differentiation. “Should requirements” allow a positive differentiation and customer satisfaction if they are fulfilled above a certain minimum degree. “Can requirements” are aspirations and requirements without a minimum degree of fulfillment, because customers and stakeholders have no experience with them. However, if differences in the fulfillment of the requirements are recognizable, they might be rewarded and can fill the customer with enthusiasm. A positive differentiation can be obtained in this case (see following figure).^[24]

illustration not visible in this excerpt

Figure 3-2 Kano's Model: Expectations, Differentiation and Customer Satisfaction^[25]

The increasing importance business relationships have obtained is related to the fact, that relationships are often connected to the fulfillment of should- and can-requirements of customers and stakeholders. In this case, relationships relate to capabilities that are honored by the marketplace and which allow a positive differentiation from competitors.

If a business relationship does not relate to capabilities which are needed in order to fulfil the decisive expectations and aspirations of customers, investments that have been made into relationship specific assets can be regarded as sunk costs. Put differently, in certain environments are long-term relationships not necessarily ideal and feasible because they do not allow a company to positively differentiate itself from competitors.^[26]

3.1.2 Transactional View versus Relationship View

In Webster' call for a paradigm change, he observed that the narrow conceptualization of management as a short-term profit maximization function seems increasingly out of date. He identified the change as one that focuses on relationship management rather than transaction management.^[27] Understanding relationship management requires distinguishing between the discrete transaction, which has a distinct beginning, short duration, and sharp ending by performance and relational exchange, which traces to previous agreements and is longer in duration, reflecting an ongoing process.^[28]

illustration not visible in this excerpt

Figure 3-3 The Transition to Relationship View^[29]

The emphasis in the management literature has shifted from a so-called “transactional” to a “relationship” view. The exchange of a product as the outcome of the production process is at the core of the transactional view. In contrast the relationship view puts the main emphasis on the interaction process between the business partners. In this process a supplier of good or services represented by people, technology, systems and know-how interacts with its customer and other decision makers.^[30] The following table by Webster provides a contrast of the two views.^[31]

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The ethics and values of relationship management are different from the practice of conventional marketing. Although relationship between a company and a customer is commercial, it is a relationship and that requires a long-term view, mutual respect, a win-win strategy, and the acceptance of the customer as a partner and coproducer of value and not just a passive recipient of a supplier’s product. In relationship management, the customer is recognized first as an individual, second as a member of a community or affinity group, and only thereafter as an anonymous member of a segment or a fraction in a large anonymous mass.^[32]

3.1.3 The Evolution of Relationship Management

The importance of developing a lasting relationship with the customer has been an issue discussed the past twenty years. Although Bagozzi^[33] raised the importance of the issue in 1975, until recently it has been only occasionally touched on in the literature. Levitt^[34] noted that the nature of the product of business might dictate the need to develop long-term relationships with customers to provide the company with a return on the resources used in consummating the first sale.^[35]. When marketing emerged as an management discipline in the early 1960’s, it was dominated by the marketing mix theory of the 4 Ps and primarily applied to consumer goods marketing.^[36] The theory of the 4 Ps focuses on how to use the four parameters of product, price, promotion and place to manipulate consumers into buying mass manufactured standardized goods. In reaction to the narrow focus on consumer goods marketing, service marketing and industrial marketing, or business-to-business marketing, evolved in the late 1970’s.^[37] Today service marketing is globally known and acknowledged.^[38] Central to the theories of service marketing is the point of interaction with customers, the “moment of truth”, which also, is a key factor in relationship management.^[39]

Business-to-business marketing broadens this concept to considers the entire network of interactions.^[40] The company is viewed as a node in a network of complex interactions with customers, suppliers, distributors, partners, etc. This network approach emphasizes long-term stable relations with a number of stakeholders, which is an important contribution to relationship marketing as well.^[41] The network approach is well established in Europe, but not in the United States.

Services marketing and the network approach have three variables in common: relationships, networks, and interaction.^[42] Relationship management emerged from service and business-to-business marketing, but is described as a more general theory, not limited to certain types of products or customers. In spite of the claims that relationship management is a universal theory, most academic literature on the topic continues to be analyzed primarily in the context of business-to-business marketing. A driving force to focus consumer marketing on relationships is today’s database and on-line communication technology and more tightly targeted media, which make it possible to create personal relationships with a mass market.^[43]

To sum up, what seems to be a new buzzword, namely “relationship management”, is nothing new to business life. What is new, is the purposeful development of relationships to achieve strategic goals. Relationships between buyers and sellers have always existed since people have started trading goods and services. These relationships from the earliest days of trade evolved, as trust, commitment or even friendship between buyers and sellers developed trough continuous and repeated transactions.^[44]

3.2 General Approaches to Relationship Management

In the following different concepts for relationship management and the building of customer loyalty are described. The scientific discussion around relationship management evolves from the relationships in industrial markets. The IMP model represents these business-to-business markets and not business-to-consumer markets. Nevertheless, the model is of great use in explaining relationships and relational exchange as opposed to transactional exchange, also in business-to-consumer markets.

3.2.1 IMP Interaction Approach

The IMP Group set out originally to research buyer-seller and distribution channel relationships in industrial markets. The results of a large scale pan European research project, containing the study of buyer seller-relationships were first published in 1982 by the IMP Group.^[45] The study described what came to be known as the IMP Interaction Approach, a descriptive and explanatory approach which points out, that maintaining close, collaborative and mutually profitable relationships between industrial/business-to-business partners is the best way of achieving long term stability and success of a company. The Interaction Approach has its roots in two major theoretical models, namely the Inter-Organization Theory and the New Institutional Economic Theory.^[46]

The model contains four major elements as can be seen in the following figure^[47]:

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Figure 3-4 IMP Interaction Approach^[48]

The interaction process

Relationships between buying and selling companies are frequently long term. Thus the IMP Group distinguishes between the individual episodes in a relationship, e.g. the placing or delivering of a particular order, and the longer-term aspects of that relationship. The episodes which occur in an relationship involve exchange between two parties. There are four elements which are exchanged: product or service exchange, information exchange, financial exchange, social exchange.

The participants in the interaction process

The process of interaction and the relationship between buyers and sellers will depend not only on the elements of the interaction but also on the characteristics of the parties involved. It also includes the product which the selling company offers, the production and application technologies of the two parties and their relative expertise in these areas.

The environment within which interaction takes place

The interaction between buying and selling firm is not analyzed in isolation, but considered in a wider context. Hence, aspects such as the concentration of buyers and sellers in a market, the position in the manufacturing channel, the market dynamism or the degree of internationalization constitute the macro environment of the IMP Interaction Model in which the interaction process is embedded.

The atmosphere affecting and affected by the interaction

One of the main aspects of the business relationship which may be affected by conscious planning is the overall atmosphere of the relationship. This atmosphere is described in terms of the power-dependence relationship, the state of conflict or co-operation and overall closeness or distance of the relationship as well as by mutual expectations.

3.2.2 Five-phase Profit Chain by Bruhn

Bruhn’s model describes a sequence of stages, which a company has to run through, in order to reach customer loyalty and economic profit. The profit chain is built of links named first contact, customer satisfaction, customer loyalty, customer retention and economic profit.^[49]

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Figure 3-5 Profit Chain of Customer Loyalty^[50]

Phase 1 of the chain includes the first contact between the customer and the company, either trough the purchase of a product or by using a service. After completion follows phase 2, where the customer evaluates the experience and the interaction with the seller. The outcome forms the customer’s personal satisfaction level. In case the evaluation turned out to be positive or the customer’s expectation was surpassed customer loyalty can develop in phase 3. This customer loyalty consists of a fundamental relationship of trust, a general positive attitude and the acceptance of the customer concerning the partner’s competence. At this point the customer already shows a reduced intention to change to competitors and decides to select the same brand, product or shop next time. The transition to customer retention takes place in phase 4, where the intention is reflected in real behavior which could be repurchase, cross-buying or recommendations to other potential customers. The chain closes in phase 5 with increasing economic profit due to the aforementioned effects. The whole profit chain is influenced by external and internal factors, which either have a positive or negative influence on the desired process.^[51]

The main feature of the so-called profit chain is the thinking in cause-and-effect relations. Not the close connection e.g. between customer satisfaction and customer loyalty is in the center of the model, but the whole cause-and-effect chain and its interdependencies with regard to the optimization of the last link in the chain namely value of a customer and economic success.^[52]

3.2.3 Dynamic Framework by Dwyer, Schurr & Oh

Although the dynamic aspects of a relationship are taken into consideration in the IMP-interaction approach, a closer look towards a model which introduces time as an additional variable makes sense. The following concept by Dwyer/Schurr/Oh^[53] focuses on long-term relationship development, which can result from interactions between buyer and seller.^[54] The authors also attempted to offer a model that has sufficient generality to cover both business-to-business and consumer relationships.^[55]

A five phase model is proposed that includes the general phases through which customer loyalty evolve^[56]:

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Figure 3-6 Relationship Development Process^[57]

Awareness of a feasible exchange partner

This phase refers to party A’s recognition that party B is feasible exchange partner. Interaction between parties has not transpired in phase 1. Though there may be “positioning” by the parties to enhance each one’s own attractiveness to a specific other, these actions are unilateral. According to Dwyer/Schurr/Oh, any type of bilateral interaction marks the beginning of the next phase of possible relationship development.

Exploration - the search and trial phase

Exploration is a search and trial phase. In this phase potential exchange partners first consider obligations, benefits and burdens, and the possibility of exchange. Trial purchases may take place. The exploration phase may be very brief, or it may include an extended period of testing and evaluation. The phase is conceptualized in five subprocesses: attraction, communication and bargaining, development and exercise of power, norm development and expectation development.

Dwyer/Schurr/Oh argue that the exploratory relationship is very fragile in the sense that minimal investment and interdependence make for simple termination.^[58] Therefore trust is an important factor in this early stage of a relationship and an essential precondition for the relationship to move to more committed stages of development.^[59]

Expansion - the continual increase in benefits and interdependence

Expansion refers to the continual increase in benefits obtained by exchange partners and to their increasing interdependence. The critical difference from the exploration phase is that rudiments of trust and joint satisfaction established in the exploration stage now lead to increased risk taking within the dyad. Consequently, the range and depth of mutual dependence increase. When a party fulfills perceived exchange obligations in an exemplary fashion, motivation to maintain the relationship increases, especially because high-level outcomes reduce the number of alternatives an exchange partner might use as a replacement. The intensive business growth strategies of market penetration and product development depend on the process of expansion.^[60]

Commitment - customer loyalty is achieved

Commitment refers to an implicit or explicit promise or relational continuity between business partners. At this most advanced phase of buyer-seller interdependence the business partners have achieved a level of satisfaction that virtually keeps out competitors who could provide similar benefits. Customer loyalty is achieved. At this level the parties provide relatively high level of inputs to the relationship. Significant economic, communication, and emotional resources may be exchanged.^[61]

Dissolution

The possibility of withdrawal or disengagement is implicit throughout the relationship development process. That is, not every dyadic linkage of which the buyer or seller is aware enters the exploration phase, and not every relation probed and tested in exploration enters expansion or becomes soldered by loyalty.^[62]

3.3 Evaluation Criteria for a Concept of Relationship Management

After having introduced various concepts of relationship management, evaluation criteria for the application of such a concept in the present thesis have to be established.

1. First of all, the concept of relationship management should be applicable to the study of E-Business, because one objective of the thesis is to combine the concept or relationship with the characteristics of E-Business.
2. Second, the level of abstractness should be in a range, which makes it possible to use the concept for management and practical implementation. This is because another objective of the thesis is to show ways/methods to build customer loyalty.
3. Third, the concept has to include company internal dimensions (micro level) as well as influencing factors from the environment (industry or macro level). This systematic perspective is a prerequisite in order to allow a more critical point of view opposed to a narrow, over-optimistic view which is quite common in the discussion around E-Business.
4. Finally, the concept should be applicable to the area of business-to-consumer relationships (B-2-C) in contrast to business-to-business or industrial business relationships.

3.4 Chosen Concept

As can be seen in the following table the only approach that complies with all of the established criteria for a concept of relationship management is the one developed by Bruhn.

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4 International E-Business

This chapter

- defines the term E-Business
- outlines the value adding characteristics/opportunities a company has in E-Business

4.1 Definition of E-Business

The GartnerGroup E-Business Glossary relies on the definition:

“E-business is any Internet- or network enabled business activity that transforms internal and external relationships to create value and exploit market opportunities."^[63]

E-Business is about doing business digitally, everything from buying and selling on the Web to extranets that link a company to suppliers; from intranets that enable an organization to better manage its knowledge to enterprise resource planning systems that streamline an enterprise's supply chain; from electronic customer support to automated order tracking.^[64] E-business includes the reengineering of business processes and the use of the World Wide Web to disseminate information electronically. An E-Business is a collaborative enterprise that establishes a close partnership among its stakeholders, employees, customers, and suppliers. It leverages technology to minimize the distance between its business and its partners and to automate transaction processing, strengthen relationships, and reduce costs.^[65]

To sum up an E-Business connects critical business systems directly to customers, employees, suppliers, and distributors via the Web. To achieve these benefits, existing businesses must transform their traditional business processes with E-Business applications.^[66]

4.2 Value Adding Characteristics/Opportunities of E-Business

Modern computer and communication technology provides a means for companies to conduct organizational redesign and business process re-engineering which is required by the intensified competition.^[67] Figure 4-1 gives an overview what kind of customer value E-Business can deliver. Arranged according to the extent of customer value a company can offer information, interaction, transaction, integration and innovation.

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Figure 4-1 E-Business Builds Customer Value^[68]

In the following chapter the value adding characteristics of E-Business are outlined, in order to get a picture of the opportunities a company has in the new marketing environment (See Figure 4-2).

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Figure 4-2 Value-Adding Characteristics/Opportunities in E-Business^[69]

[...]

^[1] Sindhav, 1998, pp. 120-121

^[2] e.g. Boston Consulting Group, 1999, BCG E-Commerce Studie; Roland Berger & Partner, 1999, Erfolgsfaktoren im E-Commerce; McKinsey & Company, 2001, Qualitysearch, URL: http://www.qualitysearch.mckinsey.de/archive

^[3] Cooper/Gardener, 1996, p. 146

^[4] Source: own illustration

^[5] Source: own illustration

^[6] Wright/Kroll/Chan/Hamel, 1991, pp. 245-254.

^[7] Mühlbacher/Dahringer/Leihs, 1999, p. 385.

^[8] Hinterhuber, 1996, pp. 2-3.

^[9] Source: own illustration

^[10] Morgan/Hunt, 1994, p. 22.

^[11] Mühlbacher/Dahringer/Leihs, 1999, p. 385.

^[12] Backhaus, 1998, p. 21.

^[13] Berry, 1983, p. 25.

^[14] Newell, 2000, p. 2.

^[15] Newell, 2000, pp. 1-11.

^[16] Webster, 1992, pp. 1-17.

^[17] Duncan, 1998, pp. 1-13.

^[18] Rosenberg/Czepiel, 1983, pp. 45-51.

^[19] Shani/Chalasani, 1992, pp. 330-342.

^[20] Laker/Pohl/Dahlhoff, 2000, pp. 127-140.

^[21] Hill, 1998, pp. 10-15.

^[22] Mühlbacher/Dahringer/Leihs, 1999, pp. 310-319.

^[23] Mühlbacher/Dahringer/Leihs, 1999, pp. 310-319.

^[24] Bailom./Hinterhuber/Matzler/Sauerwein, 1996, pp. 117-126.

^[25] Source: from Kano, 1984, pp. 39-48 quoted in: Matzler/Bailom, 2000, p. 220.

^[26] Mühlbacher/Dahringer/Leihs, 1999, pp. 310-319.

^[27] Webster, 1992, pp. 1-17.

^[28] Dwyer/Schurr/Oh, 1987, p. 13

^[29] adapted from Payne, 1992, p. 30.

^[30] Grönroos, 1997, pp. 322-340.

^[31] Webster, 1992, pp. 1-17.

^[32] Gummesson, 1998, pp. 242-243.

^[33] Bagozzi, 1975, pp. 32-39.

^[34] Levitt, 1983, pp. 87-94.

^[35] Berry, 1995, pp. 236-245.

^[36] Gummesson, 1987, p. 10.

^[37] Homburg/Bruhn, 1999, pp. 3-35.

^[38] Gummesson, 1998, pp. 243-244.

^[39] Moriarty/Gronstedt/Duncan, 1996, pp. 162-163.

^[40] Ford/Håkansson/Johanson, 1986, pp. 26-41.

^[41] Moriarty/Gronstedt/Duncan, 1996, pp. 162-163.

^[42] Gummesson, 1998, pp. 243-244.

^[43] Moriarty/Gronstedt/Duncan, 1996, pp. 162-163.

^[44] Wilson/Jantrania, 1996, pp. 55-66.

^[45] Easton, 1992, p. 4.

^[46] IMP Group, 1982, pp. 10-27.

^[47] IMP Group, 1982, pp. 10-27.

^[48] Source: IMP Group, 1982, p. 16.

^[49] Homburg/Bruhn, 2000, p. 10-11.

^[50] Source: Homburg/Bruhn, 2000, p. 10.

^[51] Homburg/Bruhn, 1999, pp. 3-35.

^[52] Bruhn, 2000, pp. 23-48.

^[53] Dwyer/Schurr/Oh, 1987, pp. 11-27.

^[54] Renz, 1997, p. 217.

^[55] Dwyer/Schurr/Oh, 1987, p. 20.

^[56] Grayson/Ambler, 1999, pp. 132-141.

^[57] Source: Dwyer/Schurr/Oh, 1987, p.21.

^[58] Dwyer/Schurr/Oh, 1987, pp. 16-18.

^[59] Grayson/Ambler, 1999, pp. 132-141.

^[60] Dwyer/Schurr/Oh, 1987, pp. 18-19.

^[61] Dwyer/Schurr/Oh, 1987, p. 19.

^[62] Dwyer/Schurr/Oh, 1987, pp. 19-20.

^[63] The GartnerGroup, 2000, pp. 7-10.

^[64] Brache/Webb, 2000, pp. 13-17.

^[65] Dalton, 1999, pp. 74-77.

^[66] Flurry/Vicknair, 2001, pp. 8-24.

^[67] Tanga/Sheeb/Tang, 2001, pp. 49.68.

^[68] adapted from: Roland Berger & Partner, 1999, p. 15.

^[69] Source: own illustration