S T R A T E G I E S FOR1 RANSITIONING O L D ECONOMY FI.docx

S T R A T E G I E S FOR
1 RANSITIONING
' O L D ECONOMY' FIRMS
TO E - B U S I N E S S
SliKVHYiNCi THl- WKt-CKAGi; OP THH IXVl-COM MllLT-
down oi 2001, it is easy to overlook the persistence and
rapid growth of c-btisincss throughotit the U.S. ecoiv
otny. While many high-Hying dot-com firms, includ-
ing Bcyond.com [2], Boo.cotn | 3 | , DrKoop.com [8],
Kozmo.com [1], atid Webvan |51 vanished, use of the
Iinertict as an essential business tool continued to grow
d ran lilt ically. At the peak of the e-business hype in
2000, most pundits ignored the tiascent efforts of large
IcgiKy firms, or those that existed before the advent of
e-business and had yet to
embrace the Net. A com-
mon mispcrception about
e-business was and still is
that you either got it or you
didnt get it. By definition,
flashy e-business purc-plays,
or the dot-coms, got it, and
except for a few visionaries,
legacy firms didnt. Ibday, legacy firms represent the
future ol e-busiiifss, and understanding e-business
from their perspective gives us a clearer picture of how
e-business will develop in the future. The online gro-
cers represent a clear example. I he pure-plays Home-
grocer and Webvan received enormous media attention

and heavy investment from venture capitalists. Today,
both arc out of business, while traditional British gro-
cer Tesco has emerged as the tnost successilil grocer
online.
When devising an e-business strategy for
legacy firms, be wary of the five myths of
e-business development white embracing
the five guidelines of managerial
responsibility and leadership.
T h e hype surrounding e-business has inspired a set
of myths about legacy firms and the nature of e-busi-
ness that might give tnanagcrs an oversimplified and
misleading view of the wired economy. Careful analy-
sis of the e-business initiatives and strategies of legacy
firms helps get us past the myths toward a more real-
istic perspective on e-business. It is far too early in the
liistory of the e-busines.s phenomenon to declare win-
ners and losers, but by reporting what is happening in
the field and challengitig the myths, we hope to give
niatiagers of legacy firms a
better picture of the strate-
gic choices available to
them in preparing their
organizations for e-busi-
ness and the key factors
they need to weigh when
making their decisions,
i he result is a clearer indi-

cation of what it takes to make sustainable use of the
Internet in business.
During the winter and spring of 2000, we identi-
fied nearly 200 senior managers throughout North
America with major roles in formulating or imple-
menting their organizations' e-business strategies; we
call them chief e-commerce officers, or CeCOs,
thotigh they have a dozen different titles. We con-
ducted in-depth interviews with 35 of them to under-
stand their roles, how their jobs were defined, and
EDIEAL J. PINKER, ABRAHAM SEIDMANN, AND
REGINALD C . FOSTER
COMMUNICATIONS OF THE ACM May 3002/Vol 4S. No 5 7
7
W I T H O U T A SOUND
E-BUSINESS STRATEGY,
ANY FIRM, NEW ECONOMY OR OLD,
IS AT A SERIOUS
DISADVANTAGE.
how their organizations were preparing to enter the
Internet economy. We also wanted to understand why
some organizations move aJiead and why others are
stuck in neutral. Included were Chubb, Fannie Mae,
Kraft Foods, Kodak, Prudential, Texaco, and other
large legacy Firms.
Myth 1. The first-mover has the advantage, and
everyone else is online anyway, so pve up. The impli-

cation is that slow-moving legacy firms are not able to
compete with the dot-coms that entered the e-market
first and established brand loyalty with high switching
costs and a network ot loyal users, customers, and sup-
pliers. However, the Internet land grab is not over,
mainly because the notion of being online is still not
well defined. To some organizations, being online
means having a corporate Web site; for others, it s the
ability to conduct transactions through the network.
For us, being online means having a sound e-business
strategy. One day, economists may convincingly prove
or disprove the assertion that in e-business there is a
strong first-mover advantage. Meanwhile, we know
that without a sound e-business strategy, any firm,
new economy or old, is at a serious disadvantage.
The mistaken fixation on Web sites and their func-
tionality is a result of the natural tendency to focus on
the tangible. Much more difficult is to appreciate
what goes on behind a Web site: the business
processes; the integrated systems; the firms overall
e-strategy. Believing the myth of overwhelming first-
mover advantage is dangerous for two reasons: It can
lead to misinterpreting the competitive landscape, and
tt can divert management attention away frotn the
formulation of an e-strategy to observable technical
milestones that add little value [6].
In our study, we found that as of the summer of
2000, many well-known, well-regarded legacy firms
lacked any Web site at all (admittedly, this was a pass-
ing phenomenon) and matiy firms had Web sites
designed primarily to support investor-relations com-
munications or display basic product brochures. For
example, Ann Taylor, a U.S.-based women's clothing
retailer, did not even have a Web site, giving the

7 8 May 20a7/Vot 4S.No S COMMUNICATIONS OF THE ACM
appearance of being behind the times; Ann laylor.Lom
eventually rolled out in November 2000. AnnTay-
lor.coni outsources order fiilfillment logistics to J.C^
Penny and is listed prominendy on the Yahoo.com
shopping site. The site today has sophisticated fea-
tures linking the online experience to that in Ann Tay-
lors brick-and-mortar stores. Ann Taylor is not alotic
among clothing retailers moving online. 7 he Brooks
Brothers online catalog allows retail customers to
order custom-made shirts, and Men's Wearhouse, Tal-
bots, and The Gap have each developed a strong pres-
ence on the Web. Rather than being eclipsed by
dot-com rivals, these firms are steadily developing the
new channel to complement their existing stores and
catalogs.
Successful e-business requires a firm to define its
strategic objectives for that business. Building on these
objectives, it sets particular technical milestones.
Determining the strategic objectives, or what e-busi-
ness means to a firm, then organizing to effectively
achieve these goals, are managerial challenges. In the
following sections, we explore some of the reasons this
effort remains a management challenge.
Myth 2. It's all about finding the next killer appli-
cation, lhe popular business press has reinforced the
notion that the only way for firms to successfully
involve themselves in e-business is to develop an inno-
vative new product incorporating the Internet and
revolutionize their core business models [4]. Examples
include American Airlines' NetSAAver email system,
which almost overnight attracted close to two million

subscribers for its weekly specials, and Cisco Systems'
online customer support systems. Another interesting
case is the online auction. While eBay developed this
application into the heart of its business, its purely
online business strategy is the exception rather than
the rule. In fact, a growing number of online auctions
are managed by legacy firms, including Dell C ôm-
puter, Lufthansa, and Sam's Club [9, 10]. These firms
use online auctions as a complementary distribution
channel. Managers accepting the killer application
myth as gospel live in fear of competitors developing
one first and arc seduced by quick-hit thinking that
distracts thetn from the less exotic goal of determining
how their firms might harness the power of the Inter-
net to improve how they do business. These managers
risk diverting critical resources to high-risk, low-return
technology projects or to the rapid acquisition of star-
tups promising to complement existing business lines
without careful attention to the costs of integration.
Our study found that managing an e-business tran-
sition is more about leading the design and imple-
mentation of a comprehensive and contintiously
evolving e-business architecture than buying a tech-
nology solution. We asked participants to describe
what they thought were the most daunting obstacles
to e-business success in their organizations. By far, the
most cited were what we term organizational obsta-
cles. CeCOs face the challenge of justifying support
for an inherently risky endeavor whose success is diffi-
cult to measure and is likely to dramatically change an
organization's internal power structure. The protracted
debate at Merrill Lynch in 1999-2000 on the merits

of offering online trading illustrates this point [11].
Managers should distinguish between the need to
move quickly, spurring innovation, and belief in a sil-
ver-bullet solution to the challenges of e-business. One
common approach to accelerating e-business efforts is
to create a dot-com spin-off, feeling that only within
an independent entity with a separate culture is it pos-
sible to be innovative.
Myth 3. The only way to get started in e-business is
to spin-off or acquire a dot-com. This myth derives
from real internal and external challenges to the credi-
bility of a firm's e-business efforts. Internal develop-
ment projects of complex information systems in many
companies are rarely accomplished on time and within
budget. Moreover, it has been difficult to attract new
employees with e-business skills to legacy firms because
of the difficulty of creating an atmosphere of excite-
ment in firms for which e-business is only one of many
ongoing initiatives, rather than their sole purpose; it is
also difficult to create Internet-oriented working condi-
tions in firms with established policies for the allocation
of decision rights, performance measures, and compen-
sation. A spun-off organization entices managers as a
way to make an end run around corporate obstacles.
For example, some managers told us how challenging it
is to be noticed by senior corporate management as
long ;is traditional business activities perform well; oth-
ers told us that spinning off their early Internet activi-
ties might gain them direct access to the capital
markets, enabling them to raise millions to fuel their
Internet ambitions without going through the requisite
rigor of internal capital budgeting.
I he dot-com spin-of} is an example of crearing a

direct c-business unit, or DBU. Firms perceiving an
immediate threat to their market share or sensing AW
opportunity to leap aliead of the competition might
be prompted to seek to organize their e-business
efforts in ways that achieve quick results. The DBU
provides an enormotis speed advantage. Many retail
firms have thus spun off separate dot-com divisions to
explore this new channel or acquired existing dot-
coms in their industry'. For example, when threatened
by Drugstore.com and PlanetRx.com, CVS acquired
Soma.com; 7bys-R-Us created Toysrus.com to protect
itself against the threat of upstarts like c Toys; and Bar-
nesandNoble.com was spun off to counter
Amazon.com. Later, CVS developed its own
CVS.com, and loysRus.com consolidated its delivery
process with Amazon.com.
The direct approach does not always involve a spin-
off and does not preclude horizontal cooperation and
integration. For exatnplc, in 1999 Kiaft Foods estab-
lished an e-business division; today, it coordinates
Kraft's major e-business initiatives, such as providing
services to vendors of its brands and marketing these
brands direcdy to consumers. This DBU operates as a
test bed for c-busincss activities that will, if successful,
ultimately be reintegrated into the overall firm. Fannie
Mae has also organized its e-business activities as a
DBU but in a much more ambitious way^— .̂reating
e-versions of each of the major activities in its business.
Ultimately, all transactions will be moved online, and
the e-business DBU will encompass the entire firm.
Firms like Kraft and Fannie Mac use the direct orga-
nizational structure to help create next-generation ver-
sions of themselves for the Internet age. They view
e-business a.s having a pervasive effect throughout their

organizations that could not be maximized by spin-
ning of} an online division.
When there are strong process "compIementaritiLV
between the e-business and the conventional channels,
the spin-off model can undermine shareholder value.
Charles Schwab quickly recognized that its market
penetration associated with online services was signif-
icantly greater in cities in which it also had physical
branches. It learned from its customers that establish-
ing a new investment account is a complex activity, as
most prefer direct human supervision and advice in an
office environment [7]. Moreover, because of the dif-
ficulties of systems and process integration, the direct
approach might limit what a firm might achieve in the
realm of e-business. For example, Circuit City gives its
online customers the option of home delivery or pick
up at a store and provides real-time store-by-score
inventory information. This customer-friendly opera-
tion draws customers to the stores, putting them in
touch with salespeople, exposing them to more prod-
COMMUNICAT1ONS OF THE ACM May 2002/Vol 4S. No 79
ucts. and creating an avenue for good customer sup-
port. Integrating online systems with in-storc infor-
mation and inventory systems would have been tough
if the online effort had been spun-oflFas an indepen-
dent dot-com.
A spin-off may be the path of least resistance to e-
business. But because it does nor integrate e-business
with a firms core processes, a spin-off might also leave
che origin;il firm no closer to its ultimate e-business

goals. In addition, as the examples of Schwab and Cir-
cuit City demonstrate, a firm pursuing the spin-off
strategy might miss opportunities for exploiting logis-
tical and product-support synergies between its own
traditional and relatively new e-busincss opcnuioiis.
Myth 4. A single department or functional area
should lead e-business initiatives. Some managers
view the Internet as just another selling channel to be
managed by the markeriiig department; others view e-
business as a technological issue that should be added
to the r r departments set of responsibilities. We also
f-ound situations in which a particular division recog-
nized the most immediate benefit and took the initia-
tive tu participate in e-business. With such
approaches, either no executive has been assigned to
formulate an e-strategy or the strategy is being formu-
lated in a very narrow way.
We found that firms seeking the broadest e-busi-
ness result, not necessarily the quickest, ty'pically orga-
nize themselves in what we call a virtual e-business
organisation. I h i s approach is based on the assump-
tion that e-business activities should exist throughout
an organizations value chain and that e-business
improves coordination among its activities so they
coniptenient one another. 1 he role of an e-business
management team is to coordinate projects, catalyze
efforts across business units and functional areas, and
help formulate the Firm's overall e-business strategy.
The ways firms choose to implement the virtual
approach differ significantly. Sometimes a looser
structure fits the corporate culture better, and many of
these organization;il choices are played out in the var-
ious strategic business units (SBUs). For example, at

Johnson & Johnson, a notably decentralized firm, the
same decentralized structure has been carried over to
e-commerce. 1 he Johnson & John.son Web site pro-
vides investor-relations information and links to its
various brand Web sites. An up-to-date URL is appar-
ently the extent of the firm's coordination i)f e-com-
merce activities. In a large U.S.-based insurance
company that participated in our study, the CIO
meets with representatives from the firm's SBUs to
shape overall e-strategy, though his main function is to
set the technology infrastructure standards for the
entire firm and provide the technical know-how to
support the various SBU Initiatives.
When e-business is viewed as a means of improving
processes, rather than transforming them, the virtual
organization is typically implemented by appointing; a
setiior manager (the CeCO) to head a council of tnan-
agers leading e-business activities in different organi-
zational units. We call this e-business strategy the
weak virtual approach.
We identified several firms where the CEO quickly
felt that e-business was a strategic imperative but was
not current as to the technical knowledge needed to
lead the eflort. In such cases, the CHO delegated
responsibility for e-strategy formulatioti and imple-
mentation to a CcCX .̂ The CeCO initiates, rather
than coordinates, e-business activities and has signifi-
cant ownership over the firms e-strategy; we call this
organizational structure the strong virtual approach.
A large North American banking corporation also
in our study took the strong virtual approach by plac-
ing e-srrategy definition in the hands of a senior vice

president designated as the CeCO. He has piofit-aiul-
loss responsibility for joint ventures with technoiogy
firms in the e-business market. He is responsible for a
cost center operating within the boundaries of the
existing firm with clearly delineated roles, such as
establishing e-b us in ess-related educational programs
antl standards for security and privacy. When orches-
trating the firms c-strategy, he works closely with the
SBUs that actually own the custon^ers, deferritig to
their needs. He also identifies gaps in the firms e-strat-
egy not covered by individual SBU initiatives, A.?> well
as the opportunities for cooperation across SBUs, such
as in business-to-business marketplaces.
Wliile the strong virtual approach might seem
overly complex, it may be the only one capable of
integrating e-business into the entire enterprise with-
out causing major disruptions. Like many multi-
national financial services firms, the bank provides a
range of services to a broad range of customer seg-
ments in hundreds of branches. Its executives rea-
soned that any spin-ofl would leave a huge business
behind ni need of transformation. However, creating
a completely online organization is not feasible tor a
company deriving immense benefit from its presence
in the physical world. Its objective was therefore to
pull together all customer information and banking
applications to provide one-stop shopping via the
Web for all its customers. The bank thus moves in
stages: its Web services initially offered only informa-
tion; transactions were added later; and in the future
relevant services and offerings from third parties, even
competitors, may be added.
Many options are available for reorganizing a firm
for e-business. The choice of organizational structure

8 0 Maf 1002/Vol 45.No 5 COMMUNICATIONS OF THE ACM
should depend on the anticipated effect of e-business,
characterized by the immediacy of the threat posed by
e-business competition and the pervasiveness of the
changes the firm wants e-business to bring to its core
(see Figure 1).
E-Commerce Leadership
As In the case of the CeCO in a strong virtual e-busi-
ness organization, transforming the firm to e-busitiess
involves many managerial challenges. It needs to
develop an e-strategy, and the related projects require
some centralized leader-
ship. Many early e-business
projects were bottom-up
initiatives in need of coor-
dination, aiid it was es.sen-
tial for someone to ensure
the firms efforts stayed
focused. Moreover, these
initiatives are often cross-
kinctional, requiring a
senior executive to manage
the process integration.
Finally, e-business fie-
quetitly leads to deliberate
disintermediatioii or to
bitter channel conflicts, as
has been seen in the insur-
ance, airline, photo finish-
ing, and automotive sales
industries where agents

find themselves compet-
ing with their suppliers
through direct online
sales.
These unprecedented
managerial challenges
require politically savvy
executives who synthesize business antl technology
strategies and capabilities. More important, they
require an executive invested with considerable deci-
sion-making authority acting independently of indi-
vidual functional areas. Such a person would represent
what we call the idealized CeCO (see the sidebar
"Emerging Role of CeCO").
Myth 5. The CIO should lead all e-business efforts.
Traditionally, decision making about technology' in a
business involves the interaction of the CFO, CIO,
and CTO, as well as representatives from the SBUs
(see Figure 2). Adding a CeCO to the IT management
team can disrupt the existing roles and boundaries of
a firms leadership. Establishing technology alliances
might have been in the domain of the CIO/CTO and
today, a third party, the CeCO, is involved.
• Figure l . Selecting an
organizational structure for
e-business.
Close
Immediacy

of t h r e a t
Far
Spin-off
Weak
Virtual
(CeCO
coordinator)
Direct
(Next-generation
firm)
Strong
Virtual
(CeCO initiator)
b
Narrow Transformative
Pervasiveness of change
Examples
1. Corporate strategy
2. Brand development
3.Technology alliances
4. Customer relationship
management
5. Enterprise integration
6. Supply chain

integration
7. Infrastructure
potentially advocating an alternative technological
viewpoint. Similarly, while the CIO/CTO tradition-
ally established standards with the SBUs for the cor-
porate intranet and data security, a CeCO seeking
increased external connectivity might advocate contra-
dictory policies and standards.
Solution
s to some of these potential conflicts
involve placing the CeCO
within the office of the
CIO or designating the
CIO as CeCO; we found
both approaches occur fre-
quently in practice. For
example, the CIO of Xerox
Corp. assigned a single
group of IT professionals
to manage development ol
the Xerox.com Web portal,
ensuring consistency In
look and feel when inte-

grating the front-end Web
presence with the back-end
enterprise resource plan-
ning infrastructure. While
the CIO manages the Web
technoiogy and its integra-
tion with the firm's legacy
systems, the individual
business applications are
determined and financed
by the various business
units. Similarly, the CIO of
Bausch & Lomb developed
a set of standards to create a
uniform look and fed for
the firm's Web design,
though the actual Web
implementations are done
by various brands through
independent portals. In
each case, the CIOs role in
e-business strategy develop-
ment is rather limited,

focusing on technology provision and infrastructure.
While this approach smoothes over short-term
organizational conflict, it poses a number of difficul-
ties. For example, many managers fVel that the nature
of the CIOs standard responsibilities makes the job
inherently incompatible with the CeCO (see Table I).
CIOs sit atop large organi/^ations, some with billion-
dollar budgets and thousands of employees, responsi-
ble for providing bulletproof services at low cost. They
are charged with maintaining large mission-critical
legacy systems and may be risk-averse in their use of
A Figure 2. Traditional
loci of decision authority
and control.
COMMUNICATIONS OF THE ACM Nay 2002/Vol 45. No
Table l . Contrasting roles
of CiO and CeCO.

technology. While they manage technology vendors
and outsourcing, they do not typically create tech-
nology alliances to develop revenue-generating
opportunities. The CIO may also be reluctant to
pursue the younger, faster-paced, higher-priced
Internet technology labor market or the more exper-
imental and iterative development approaches at
odds with the traditional software development life
cycle.
Putting the CeCO in the office of the CIO can be
problematic because it would tend to establish the
CeCO as a technical person rather than someone who
understands business
needs and strategy. Accord-
ingly, in our sample we
found that CeCOs report-
ing to CIOs almost always
had notably strong techni-
cal backgrounds. The
CeCO needs to be ori-
ented toward the external
market and business strat-
egy; e-business involves

reinventing business mod-
els, designing processes
that interact with ctis-
tomers. and reshaping
profit strategies, as well iis
creatively rebundllng prod-
ucts and services. These
activities require coordina-
tion with the SBUs, possi-
bly cutting across SBUs
and functions. Technical
workers reporting to CIOs
may find it difficult to
assert organizational lead-
ership in these areas.
In spite of these factors, our study also found that
CIOs play major roles leading e-business efforts, pri-
marily in firms whose strategy emphasizes a business-
to-business focus. Respondents highlighted the CIOs
pivotal role in integrating business processes across
legacy systems and across corporate boundaries in cer-
tain vertical markets. We found that among firms
describing their e-commerce efforts as business-to-
business, 67% had a CIO functioning as the CeCO

or had the CeCO reporting to the CIO. Among firms
describing their e-commerce as business-to-consumer,
only 42% assigned such a direct leadership role to the
CIO; we found more product development and mar-
keting executives serving as CeCOs.
The role of CIO is also evolving. The need for
scale, rapid integration, and reliability will exceed
onels)
Orientation
Performance
Compensation
Direct Reports
Charter
CIO
Internal
Cost^bulletproof

Flat
Many
Operational
CeCO
Internal and external
Profit/reinvention
Performance-based
Few
Transformational
Organization Type
Weak virtual
Strong virtual

Spin-off
Next-generation
Strengths
Broad-based,
not disruptive
Broad-based,
transformative
Fast, not
disruptive
Fast,
transformative
Weaknesses
Not far-reaching,
slow
Slow, disruptive

Narrow,
unintegrated
Disruptive
the capacity of most in-house IT organizations.
leading to greater reliance on external technology
service partnerships. CIOs will have to disperse their
responsibilities among their firms' various business
units and look for other ways to lead the e-business
efFort.
Four Paradigms for Moving Forward
Our research identified four major organizational par-
adigms for moving a legacy firm into e-business: weak
virtual e-business organization; strong virtual e-busi-
ness organization; direct spin-ofF; and next-genera-
tion firm. Although it is too early in the history of
Internet-enabled commerce to determine which
might ultimately dominate, we can already
identify at least some of
their strengths and weak-
nesses (see Table 2).

The spin-off and
n e x t - g e n e r a t i o n - f irni
approaches are the most
likely to yield a more
Focused effort and quicker
results. The spin-off may
leave the original firm rel-
atively unchanged and
unprepared lor e-business.
1 he spin-off and weak vir-
tual approaches tend to
avoid ititerorganizational
friction—the spin-off by
definition and the weak
virtual approach by leav-
ing much of the atithority
and initiative with the
SBUs. The decentralized
weak virtual approach
may result in a fragmented
efFort that does not
achieve a tnajor organiza-
tional transformation.
Also, trying to initiate

change across functions and SBUs in a strong virtual
approach is more challenging and more Hkcly to cause
conflict than the relatively simple coordination ol the
e-business activities of disparate SBUs in the weak vir-
tual model. Although most firms experience manifes-
tations of several paradigms at the same time, we
found they can be characterized as following a single
dominant strateg)'.
In choosing the right organizational strategy, man-
agers should not let themselves be misdirected or dis-
tracted by the five myths described earlier. Rather,
they should apply the following guidelines:
A Table 2. Contrasting
e-business organizational
structures.
8 2 M^y 2002yVol 45 Na 5 COMMUNICATIONS OF THE
ACM
It's early. Even though some oFyour competitors are
online, it is still early in the game for everyone. The

land grab phase is not over, and the first priority
should be to establish a comprehensive e-strategy.
Continuous improvements and data-driven experi-
mentation put you ahead of your competitors.
Dont expect a single application to transform a business.
It is highly unlikely that a single application would
transform any business right away. Develop well-
designed organizational procedures for rapidly
deploying effective e-business solutions for your core
business processes. For most legacy firms, the move
to e-business is evolutionary, not revolutionary.
You face a massive inte^ation challenge. Integrating
e-business into the heart of a firm cannot be solved
through acquisition or development of a spin-ofF;
this approach might even make things worse.
Project a single face. It is important to organize efForts
in a way that presents a single face to customers,
suppliers, and business alliances; maintains system
compatibility across business units and ftinctional
areas; and identifies opportunities for cross-fiinc-
tional synergies. Your e-business efForts should not
be built around a single department but structured

to fit with a cross-flinctional process orientation For
the entire Firm.
It's not only for technical management. Although
implementation oF e-business requires the manage-
ment of complex technologies, it does not mean
that e-business leadership should be put in the
hands oF primarily technical managers. E-business
creates opportunities For strategic innovation and
Emerging Role of CeCO
Deborah Sawyer, managing director ofKorn/Ferry International,
an executive
recruiting firm, reports, "We're seeing the need for
CeCOs across all industries and in every type of
organization we work with. Whether professional
services, banking, hospitality, IT, or publishing,
the need to quickly ramp up Internet and e-com-
merce capabilities is turning client organizations

on their heads." The stature af the CeCO is also
evolving. She adds, "When these types of individu-
als were first hired, they typically resided in either
the chief strategist's office or the affice of the
CIO. Due to the role's increasing importance ta the
overall strategy of organizatians, the CeCO is now
mare frequently reporting to the CEO. The ideal
candidate is a unique combination of strategist,
technologist, and evangelist." B
should thereFore be led by experienced managers
with strategic business vision First and technical
skills second. An emerging option is to designate a
CeCO with strong decision-making authority over
the intersection oF corporate strategy and the e-
business effort.

Firms whose path to an e-strategy is not clearly
marked need to organize themselves in ways that allow
opportunities For experimentation and learning. Don't
expect it to be easy. Q
REFERENCES
1. Blair, J. Kozmo to end operacions; 1.100 people to lose jobs.
New York
Times {Apr. 12.2001).
2. Buckman, R. Beyond.com files tor bankruptcy protection, to
sell assfts to
Digital River for Si I million. Wall Street Jourm! {]2.a. 28.
2002).
3. Cooper C. and Portanger. E. Spooked: Money men liked Boo.
and Boo
liked money; then it all went poof. Wall Street Journal (June 27,
2000),
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4. Downes. L. and Mui. C. Unleashing the KitUr App: Digital
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Market Dominance. Harvard Business School I'ress, Catnbtidge,
MA,
1998.
5. Maiigalindan. M. Webvan seeks protection ftom creditots.
Wall Screet
Journal (July Id, 2001).
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blueprint. Com-
puterworU {Apr. 17, 2000), 38.
7. Mendelson. H. Srhwab.com. Graduate School of Business,
Stanford Uni-
versity, Case Number EC-18. Apr. 2000.
8. Ohison. K. Troubled DrKoop.com is barely breathing.
Computerworld
(Aug. 28, 2000).
9. Pinker E., Seidmann A., and Vakrat Y. The Design ofOnlifie
Auctions:
Business Issues and Current Research. Working paper ClS-OI-
O'i. Simon
School. University of Rochester, 2001.

10. Pinker E., Seidmann A., and Vakrat Y. Using Transaction
Data for the
Design of Sequential, Multi-unit, Online Auctions. Working
paper CIS-00-
3, Simon School. University of Rochester. 2000.
11. Smi[h, R. and Gasparino, C. E-commerce: O n die
battlefield: Late to che
party; Whai took Merrill [,ynch so long to respond to the Weh?
Its C E O
says it had good reasons. Wull Street Journal {}uy 17. 2000),
R34.
E D I E A L J . P I N K E R ([email protected]) is the Xerox
Assistant Professor in the W . E . Simon Graduate School of
Business
Administration of the University of Rochester, Rochester, NY.
A B R A H A M S E I D M A N N ([email protected]
mon.rochescer.edu) is the
Xerox Professor in rhe W . E . Simon Graduate School of

Business
Administration of the University of Rochester, Rochester, NY.
R E G I N A L D C . F O S T E R {[email protected] nc.com) is
the chief
e-commerce officer of American M a n a g e m e n t Systems.
Fairfax. VA.
We thank American Management Systems for ics generous
support of this research.
Permits inn ru make difiiral or hard topics otall or parr of this
work tor personal or class-
riKim use is granted without fee provided ihai copies are nor
madt or distributed for profit
or iiimmercial advancagc and that copies brJr chis notitv and
the (iill citation on the first
piige. Tu copy Dlherwi.se, cn republish. w jiost on servers or lo
rtdisiribulc- tu lists, requires
pritir specific permission and/or a fee.
® 2002 ACM ()O02-()782/n2/O5t>0 J5,00
COMMUNICATIONS OF THE ACM May 2002/Vol. 45, Nt>.

83
Reproduced with permission of the copyright owner. Further
reproduction prohibited without permission.
ICT and Business in the New Economy: Globalization and
Attitudes Towards eCommerce
Sagi, John;Carayannis, Elias;Dasgupta, Subhashish;Thomas,
Gary
Journal of Global Information Management; Jul-Sep 2004; 12,
3; ProQuest Central
pg. 44

Annals of the „Constantin Brâncuşi” University of TârguJiu,
Economy Series, Issue 2/2013

„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 1844 – 7007
THE ELECTRONIC MARKET LIBERALIZATION IN A
KNOWLEDGE BASED
ECONOMY
Stegăroiu Carina-Elena,
Lecturer Phd, “Constantin Brancusi” University Of Targu Jiu,
Faculty Of Economics And Business Administration
[email protected]
Abstract
In the current context of economic globalization and the advent
of the virtual business environment,
organizations have registered profound transformations that
force companies to reconsider their strategic objectives,

especially taking into consideration the opportunities created by
the new information and communication technologies.
Regardless of their reactive or proactive strategies when facing
the changes in the competition, most
companies in the developed countries and more and more of the
Romanian enterprises are interested in developing
technologies and information systems at a intra, inter and extra
organizational level, with integrated traits, which are
capable to sustain both the managerial process and the
traditional functions of the organization.
That being said, we herald now the expansion of the electronic
commerce or eCommerce, which represents
the automatization of the commercial transaction by using
information systems and communication technologies.
Developing an eCommerce system based on a business-to-
business application consists of de-structuring the

chain of value in managerial processes and then re-structuring it
in order to identify the areas that can be made
efficient through electronic means.
This study is meant to aid the development of existing models
by developing the services in certain less
accessible to electronic commerce areas of a knowledge-based
economy.
As it stands, electronic commerce offers the opportunity of
selling products world wide and this increasing the
number of potential clients by eliminating the geographical
barriers between buyers and seller.
Opting for electronic commerce is a solution when the company
wants to diversify its services and when it
wants to reduce market related costs.
Key words: organization, Specific activities, models, electronic

JEL Classification: A10, B23, C61
1. Introduction
Regardless of their reactive or proactive strategies when facing
the changes in the competition, most
companies in the developed countries and more and more of the
Romanian enterprises are interested in developing
technologies and information systems at a intra, inter and extra
organizational level, with integrated traits, which are
capable to sustain both the managerial process and the
traditional functions of the organization.
In the current context of economic globalization and the advent
of the virtual business environment,
organizations have registered profound transformations that
force companies to reconsider their strategic objectives,

especially taking into consideration the opportunities created by
the new information and communication technologies.
Commercial transactions are the activities through which
money, goods, services or obligations are transferred
between individuals or organizations. The dynamic structure of
the new economy based on eCommerce dictates that
company managers develop policies and strategies that can
stimulate a raise in demand and consumption.
With the advent of electronic commerce, the companies have
identified new opportunities of expanding the
business. The worldwide roll-out of digital markets, which
allow for any type of product to be sold through electronic
means, has generated the emergence of business-to-business
commercial networks, as a main source of profit for the
organization.
2. The development of the eCommerce model

The activities specific to this type of commerce have been
divided by specialists in two categories: those that
facilitate the transfer of products and services and those that
endure the infrastructure of the online activity of
commercial transactions.
Developing an eCommerce system based on a business-to-
business application consists of de-structuring the
chain of value in managerial processes and then re-structuring it
in order to identify the areas that can be made efficient
through electronic means.
262

This study is meant to aid the development of existing models
by developing the services in certain less
accessible to electronic commerce areas of a knowledge-based
economy.
The business-to-business models are the most common and their
rules are replicated with slight modifications
in other methods, and therefore in a large company this model
of electronic commerce is representative.
As an example, we have c – unit deposit expenses, and k –
expenses for the prime merchandise. Then total
annual expenses:
k
S
Q

2
5
, (1)
where S - the size of an acquisition unit.
S
D
we determine ,
2*
c
kQ

ckQk
Q
cD 2
5
*2
5
*
*
(2)
Without online commerce total costs constitute:
ckQD 2
*
Traditional commerce, sustained also by online commerce, has
the following costs

ckQDkQcD 22
*
(4)
or
2
11
c
c
D
D
From which
2

1*
1
c
c
Moreover, online commerce also contributes to the increase in
demand, to reducing costs for extending the
traditional commerce networks. The increase in demand
stimulates the increase in offers and therefore the GDP will
also increase.
The material expenses within the informational ones are in
reverse dependence, meaning:
X
a

where Y – material expenses, X – informational expenses
(intellectual products, ideas).
3. Benefits of the eCommerce model
Intellectual products, breakthroughs in science allow highly
developed countries to successfully sustain
electronic commerce.
Electronic commerce technology is vast and includes elements
from various areas – hardware, software,
legislation, artificial intelligence, telecoms – elements which
influence its development.
Such a development - t can be represented through the
analysis is

of the Y
indicator can be continued or discreet. According to the time
interval criteria, the values of the indicator can be given at
a given moment (e.g. the number of economic agents in the year
t) or in given interval (e.g. development in year t)
The indicators that define the development of electronic
commerce are the absolute rhythm and the rhythm of
growth, the security protocols, the search and indexing
mechanisms, the intelligent software agents for electronic
commerce on the Web, the electronic commerce software
products, the electronic payment systems.
t and the
represents the absolute rhythm, and the economic index or
growth coefficient that determines how many times did the
0

1
10
Y
Y
s called the rhythm of growth.
263
Therefore, the rhythm of growth is equal to the percentage of
the 1Y indicator in comparison with 0Y ,
%100
0
1

Y
Y
The basic year is an arbitrary year and that is why it can change
or not. For each year, the previous year can be
a comparison year for the evolution analysis. Because the basic
is variable, we are dealing with “chain” comparisons.
Therefore, the characteristics: absolute rhythm and growth
rhythm can be calculated in relation with the basic
The absolute rhythm and the growth rhythm of the Y indicator
in the year t , expressed with the prices of the
0
0

Y
Yt
Expressed in the prices of the previous year –
1
1,
t
t
tt
Y
Y

The product:
0112
3
1
2
0
1
Y
Y
Y

or
0
1,322110
Y
Yt
The division:
1
2
0

The above mentioned indicators can be examined in the case of
the continuous values in order to extend the
methods applied in economic analysis, allowing for the use of
differential calculus.
The absolute rhythm in the case of the discreet values
a time unit, meaning
t
YY
t
tttttt

, from the hypotheses that the tY variable is continuous we
can reach the limit:
dt
tdY
t
YY
t
t
ttt
t

264
se or
decrease of the Y indicator in a time unit, which
correlates with the speed of change.
4. Conclusions
The electronic commerce can take a variety of shapes and it
profoundly influences businesses, whether on a

ascending or descending slope. The main domains affected by
this influence are the exchange of information related to
products and services, catalogues, user guides and financial
briefings, product and service offers and conducting
services between economic agents.
Opting for electronic commerce is a solution when the company
wants to diversify its services and when it
wants to reduce market related costs.
In conclusion, as it stands, electronic commerce offers the
opportunity of selling products world wide and this
increasing the number of potential clients by eliminating the
geographical barriers between buyers and seller.
5. REFERENCES

[1] Arcanu B., Paul F., General operating bases PC, Romanian
Reality Publishing, 2005.
[2] Bari John, Globalization of the economy, Economic
Publishing House, Bucharest, 2005.
[3] Fratoştiţeanu Cosmin, International economic organizations,
Universitaria Publishing House, Craiova, 2008.
[4] P. Hirst, G. Thompson, Globalization in question, House
Three, Bucharest, 2002.
[5] Stegăroiu Carina-Elena, Automatic data processing
techniques in business, Brancusi Academic Publishing, Tg-Jiu,
2010.
[6] Joseph E. Stiglitz, Globalization. Hopes and
disappointments, Economic
265

TEM Journal. Volume 7, Issue 1, Pages 118-127, ISSN 2217-
8309, DOI: 10.18421/TEM71-14, February 2018.
118
TEM Journal – Volume 7 / Number 1 / 2018.
Drivers and Barriers to Online Shopping in
a Newly Digitalized Society
M. Shakaib Akram
College of Business Administration, King Saud University,
Riyadh, KSA
Abstract – Despite the massive penetration of
internet in the developed and the developing world, e-
commerce is still struggling in most of the developing
and emerging economies. In this context, this study

investigates why the customers, in developing
countries, do not prefer online shopping for apparel
despite the several benefits such as convenience,
control, variety and enjoyment being offered by this
mode of shopping. Moreover, the study assesses the
boundary conditions under which consumers’
perceived risk diminishes online shopping benefits.
With data from prospective online customers in an
emerging economy, the proposed concept is tested
using SmartPLS 3.0 based SEM approach. The results
indicate a significant positive effect of online shopping
benefits on consumers’ purchase intention for online
shopping. In addition, the relationship between online
shopping benefits and purchase intention is contingent
on the consumers’ level of perceived risk in the digital
environment. The paper concludes with a discussion on
the managerial and the theoretical implications.
Keywords – convenience, control, variety,
enjoyment, online shopping, risk

DOI: 10.18421/TEM71-14
https://dx.doi.org/10.18421/TEM71-14
Corresponding author: M. Shakaib Akram,
College of Business Administration, King Saud University,
Riyadh, KSA
Email: [email protected]
Received: 25 September 2017.
Accepted: 26 December 2017.
Published: 23 February 2018.
© 2018 M. Shakaib Akram; published by
UIKTEN. This work is licensed under the Creative
Commons Attribution-NonCommercial-NoDerivs 3.0
License.
The article is published with Open Access
at www.temjournal.com
1. Introduction

In the past decade, internet has penetrated into our
daily life and has become an essential medium of
communication both for individuals and for
businesses. This has helped companies to
communicate with their customers electronically and
sell their products and services online. However,
many e-commerce surveys reflect that although
companies are trying their best to satisfy their
customers yet a large number of customers are
reluctant to purchase online due to their concerns
about privacy and security of their online
transactions. This is especially relevant to the
developing countries where digital commerce is
gradually emerging.
E-commerce offers some benefits to the
consumers, as compared to traditional commerce, in
terms of convenience, a variety of products, greater
control over their buying and entertaining
experience. Past research shows a positive impact of
e-commerce benefits in developing consumers’
favorable attitude toward online shopping and also in
enhancing their likelihood for online buying various

products and services [6,7,11,18]. So, in this research
perceived benefits of online shopping, namely:
Perceived Convenience, Perceived Control,
Perceived Variety and Perceived Enjoyment are
incorporated as the drivers of online shopping.
As the perceived risk may vary across various
products and services and also on the basis of
customers’ personal profile, so this study is restricted
to the examination of drivers and barriers to online
shopping of apparels. Further, commonly for
apparels, a physical examination for such products is
greatly desired and thus offers a greater perceived
risk [1]. Apparels offer to be a suitable product
category for this study, as we want to assess the
conditions under which the impact of perceived
benefits of online shopping strengthens or diminishes
consumers’ purchase intention from online websites.
https://dx.doi.org/10.18421/TEM71-14
http://www.temjournal.com/

8309, DOI: 10.18421/TEM71-14, February 2018.
119
Many surveys have reported that most internet
surfers are not making any online transaction because
they are concerned about internet security [17]. The
customers making online transaction have
apprehension about passing along their credit card
numbers and other confidential information on the
internet. Internet fraud is one of the major factors
causing growing concern in the minds of online
customers. Consumers’ personal risk profile (i.e.,
being risk-take or risk-averse) also plays a key role in
their online shopping decisions. Generally, it is
observed that “risk neutral consumers are more likely
than risk-averse consumers to consummate a
purchase transaction when faced with buying a
product (or service) with uncertain outcomes or
possible loss” [15]. Therefore, those consumers
having higher risk perception in the online channel
may avoid or delay their buying decision through this
channel.

Previous studies have identified perceived risk as a
key factor in customers’ participation in e-commerce,
while others have highlighted the role of perceived
risk as an antecedent to the willingness to be profiled
online. This research contributes to the literature by
examining the role of consumers’ risk profile on the
relationship between online shopping benefits and
purchase intention. The proposed conceptual model
has been empirically tested with data from
prospective online shoppers in an emerging
economy.
The rest of the paper is organized as follows: the
next section is dedicated to theoretical background
and hypotheses development, the methodology is
discussed in the third section, the following section is
devoted to analysis and the results and the last
section concludes the paper with the discussion and
the implications for academicians and practitioners.
2. Theoretical background and hypotheses
This section is divided into three parts, i.e., online

shopping benefits, perceived risk, and demographics.
In the following section, the perceived benefit of the
online shopping has been discussed and substantiated
by literature.
2.1. Perceived Convenience (CNV)
Literature has mainly focused on the service
convenience in the context of traditional stores [18],
but this study focuses on the website convenience
aspect. Jiang et al. (2013) proposed five dimensions
of perceived convenience in an online shopping
context including access, search, evaluation,
transaction, and possession/post-purchase.
Customers’ CNV is considered one of the major
motivators for online shopping environment [7] due
to several reasons such as time-saving, avoiding
crowds, flexibility, 24/7 availability, etc.
These days, people do not have enough free time
to go to the market and stand in the long queues.
Therefore, online shopping websites have provided
them with an alternative for conveniently conducting
their purchasing needs according to their flexible

schedule.
Unlike the brick and mortar stores, an online
store’s website plays a crucial role in forming
customers’ pleasant experience. In fact, an online
store website acts as an environment element
throughout the shopping process and is directly
linked to customers’ perceived convenience [8].
Customers’ effortless experience will help them form
a positive attitude towards the online website, and
their likelihood of engaging in online store will
increase. Website quality characteristics such as easy
to navigate, easy to search, easy to transact and easy
to order also contribute to customers’ convenience
[14].
Based on the above arguments, it is expected that
consumers’ perceiving online channel to be
convenient will have a favorable attitude toward this
channel. Hence, it is hypothesized:
H1: Perceived convenience of shopping from an e-
retailer positively impacts customers’ purchase
intention.

2.2. Perceived Control (CNT)
According to [2], perceived behavioral control is
an individual’s belief of “perceived ease or difficulty
of performing behavior” (Ajzen, 1991, p.188). In
Theory of Planned Behavior (TPB), perceived
control is proposed as a part of individuals’ beliefs
affecting their intention which consequently results
in their actual behavior. Thus, perceived behavioral
control depicts consumer’s perception of their control
over their actions. In the context of online shopping
perceived control is the level of control that the
customers perceived in the online buying process
[11].
Moreover, the Unified Theory of Acceptance and
Use of Technology (UTAUT), [24] argued that
facilitating conditions capture the essence of the
TBP’s construct perceived control over behavior.
This means that the facilitating conditions such as
availability of resources, ease of use, ability to search
and customization of the products help increase the
degree of perceived control on online transactions.
Therefore, in case of online shopping customers’
greater control over their shopping experience helps

them develop a favorable attitude toward e-
commerce.
Generally, online stores provide customers with a
large number of products and services as compared
8309, DOI: 10.18421/TEM71-14, February 2018.
120
to their traditional brick and mortar counterparts. In
addition, customers can quickly navigate into the
catalog and thus feel more control over their product
selection. High-quality online shopping websites
provide many options such as product search,
selection, customization and so on. Through all their
online shopping experience, customers have a lot of
flexibility, and they are in full control of their
decision. This control builds their positive attitude
and enhances their likelihood of engaging in online
shopping. Literature has also supported the influence

of perceived control for online shopping [11,19,25].
Martin et al. (2015) reasoned that ease of use and
customization are major drivers of perceived control
that eventually leads to customers’ satisfaction and
repurchase intentions.
From the above discussion, we can conclude that
perceived control is an important factor in
determining information systems usage intention and
adoption. Therefore, we argue that customers’
perceived control would positively contribute toward
their online purchase decision, and this leads to the
following hypothesis:
H2: Customers’ perceived control on their online
shopping positively impacts their purchase intention.
2.3. Perceived Variety (VRT)
Product variety mostly signifies the depth and
breadth of product collection. A large product
assortment of online stores allows customers’ greater
choices and more comparisons [7]. This helps them
develop a favorable attitude toward the online store
and consequently their likelihood to purchase online

increases. With not much location/space constraints,
online stores, generally, may offer a greater product
choice to their customers as compared to the
traditional stores. This is because these do not face
certain limitation as faced by a traditional outlet such
as an expensive prime location, limited shelf space
and these may offer as many products as these can
and so provide a greater choice of products to the
consumers. Chang (2011), through her study
conducted in Taiwan, examined the impact of
product categorization on product variety and found
that participants with more product subcategories
perceived greater product variety on the website and
they showed favorable attitude toward e-commerce.
Therefore, a greater product/service assortment or
product/service variety of online store may positively
contribute to form favorable customer evaluations of
this channel.
Literature signifies that it’s not the actual rather the
perceived product variety that influences consumer
behavior [6]. Therefore, online shopping website,
taking advantage of the technology, can categorize
and portray the products in a way that gives an

impression of a greater assortment.
Product assortment or variety is generally
addressed in literature from traditional shopping
environment, but its benefits from online shopping
perspective are not systematically addressed [12].
Therefore, this study is an attempt to examine how
product assortment may affect consumers’ decision-
making in the digital environment. Specifically, this
study assesses the influence of perceived variety on
the consumers’ purchase intention for online
shopping in an environment where e-commerce is at
an initial stage of its development and e-commerce is
an emerging trend. Thus, our hypothesis is:
H3: Product variety at an e-retailer has a positive
impact on customers’ purchase intention.
2.4. Perceived Enjoyment (ENJ)
Perceived enjoyment refers to “the extent to which
the activity of using a specific system is perceived to
be enjoyable in its own right, aside from any
performance consequences resulting from system
use” (Venkatesh, 2000, p.351) [23]. Thus in case of

online shopping perceived enjoyment will be the
consumers’ enjoyable experience of using e-
commerce website to explore and buy products
online. The interactive nature of online shopping is a
source of entertainment for some online consumers.
As there is no external intervention, this allows
consumers to focus on buying their preferred
products in their own way. Online merchants can
decrease consumers’ risk perceptions and increase
their trust by providing them with an entertaining
environment, an environment where consumers can
make their buying decisions in a playful manner.
Online shopping can do so with the help of a high-
quality interactive website.
Literature has established perceived enjoyment’s
role in intrinsic motivation to describe information
system’s adoption [9,11,22]. Thus, considering the
importance of perceived enjoyment as a critical
factor in forming consumers’ decision making in an
e-commerce environment, the next hypothesis is:
H4: Perceived enjoyment of shopping from an e-
retailer positively impacts customers’ purchase
intention.

2.5. Perceived Risk (PR)
The concept of perceived risk was introduced in
the late 60’s by Bauer as “the likelihood of
unfavorable outcomes, and consequences” of one’s
actions [3–5]. Forsythe and Shi (2003), defined
perceived risk in online shopping to be a subjective
evaluation of expected loss due to online shopping.
So in terms of online shopping, perceived risk will be
8309, DOI: 10.18421/TEM71-14, February 2018.
121
any potential uncertain negative outcome from their
online interaction.
The consumers, making an online transaction, may
be reluctant to purchase on the web because the sense
of risk may be far more as compared to the

traditional mode of shopping, where he can touch,
feel, and even try the product before finally
purchasing it. While purchasing online, a consumer
has to provide personal information and even
confidential credit card information. After providing
the necessary information, the consumer can only
hope that the transaction will be processed
completely, accurately and on time.
Historically, perceived risk is considered a barrier
towards online shopping. The negative impact of
consumers’ risk is linked to lower purchase
intentions. Literature highlighted that consumer’s
higher risk perceptions in the online channel leads to
their lesser chances of using this channel (Lim,
2003). Depending on consumers’ personal profile
and the product/service characteristics, their risk
perceptions may vary. Thus, the impact of perceived
risk may also be different for different consumers.
This study extends beyond exploring simple, direct
effects of perceived risk on purchase likelihood and
examines how consumers’ higher/lower risk profile
may play a moderating role in the relationship
between online shopping benefits and purchase

intentions. Though many types of perceived risk have
been presented in the literature [1,17] yet this study
focuses on the moderating role of overall risk due to
the online channel. Therefore, we hypothesize:
H5: Consumers’ perceived risk moderates the
relationship between online shopping benefits
(convenience, control, variety, and enjoyment) and
their purchase intention such that the relationship is
stronger (weaker) for lower (higher) risk levels.
2.6. Demographics
Consumers’ risk perception as well as their attitude
and purchase intention through online channels may
vary depending upon their profile. For instance,
customers’ demographics such as gender, age,
education, experience, may play a significant role in
their decision to use or not to use the online channels.
Thus, we include customers’ demographics as
covariates in the model (see Figure 1).

8309, DOI: 10.18421/TEM71-14, February 2018.
122
3. Method
3.1. Sample Profile
An online survey is used to collect data from
potential users of online shopping websites in Saudi
Arabia. At the beginning of the survey, the
respondents were asked about their recent purchase
of apparels online. Only those respondents were
allowed to participate in the survey who answered
yes to the screening question. The online survey
resulted in 284 responses. After dropping the
incomplete or invalid responses, 260 were retained
for the final analysis. For detailed respondents’
demographic profile see Table-1:

3.2. Instrument
To retain the essence of the original scales and face
validity, most of the scales in this study have been
adapted from the well-established literature. Multiple
items have been used to measure each latent
construct in the conceptual model. The scale to
measure perceived convenience and perceived
variety is adapted from [7]. The perceived risk is
measured using the scale adapted from Chakraborty
et al. (2016). The perceived enjoyment and the
purchase intention are measured by the scales
adapted from [21]. The scale for the perceived
control has been adapted from [11] and [10].
4. Analysis
After initial screening of the data, the structural
equation modeling (SEM) served the purpose of data
analysis. The psychometric properties of the scale

and the hypotheses have been tested using Partial
Least Squares based Structural Equation Modeling
(PLS-SEM) method by SmartPLS 3.2. There are four
independent, one dependent and one moderating
variable in the conceptual model. So, first of all, the
reliability and validity of these latent constructs are
assessed. The scale reliability is examined in terms of
internal consistency (Cronbach Alpha’s) and
composite reliability (CR). The coefficients’ (α)
values range from 0.78 to 0.89 while the CR values
range from 0.87 to 0.93. Table 2 shows that all these
values are above the minimum threshold of 0.7 [20],
thus indicating the high reliability of the used scales.
After setting up the scale reliability, it is assessed
for convergent and discernment validity. According
to [13], a scale should explain at least 50% of the
variance to meet the convergent validity requirement.
Statistically, to attain convergent validity, each
construct should have an average variance extracted
(AVE) value above 0.50. This condition is met for
each latent construct (Table 2), thus, proving
convergent validity. Finally, to assess the
discriminant validity, we compared the AVE values
for relevant shared variance [13]. Table 2 confirms

that the diagonal values (square root of AVE) for
each construct is significantly greater than off-
diagonal values (correlation with other constructs),
thus establishing discriminant validity.
4.1. Direct Effects
In Hypotheses 1 to 4, it is argued that the
dimensions (i.e., convenience, control, variety, and
enjoyment) of online shopping benefits positively
affect consumers’ purchase intention. PLS-SEM
8309, DOI: 10.18421/TEM71-14, February 2018.
123
results indicate a significant effect of each of these
four perceived benefits (convenience, control,
variety, and enjoyment) on PI (Table 3). Out of these
benefits, the perceived convenience of the online
channel has emerged as the strongest predictor of

consumers PI from this channel. The results also
confirm a strong negative impact of consumers’ risk
perceptions on their PI.
Broadly, our results confirm that consumers’
perception of convenience, control, variety, and
enjoyment of the online channel positively contribute
to their decision to engage in online shopping.
Therefore, the online store managers need to design
their store in a way that their customers have a sense
of convenience, control, variety, and enjoyment
while they are on their website.
Table 3: Direct Effects
As far as the consumers’ demographics are
concerned, we did not find a significant impact of
any of the demographic variables except past online
shopping experience. This suggests that the
consumers having a great experience with the online
retailers are more likely to engage in online buying in
future as well. Table 3 summarizes the results.

4.2. Moderating Effects
In H5, we hypothesize that the relationship
between the online shopping benefits (convenience,
control, variety, and enjoyment) and the PI is
moderated by customers’ risk profile and this
relationship is stronger (weaker) for lower (higher)
risk levels. As both the predicting and the moderating
variables are continuous, so we use product indicator
method in SmartPLS 3.2 to calculate interaction
effects.
Table 4: Moderating Effects
Relationship Estimates T-Values P-Values
PR*CNV -> PI -0.16 2.70 0.01
PR*CNT -> PI -0.20 3.35 0.00
PR*VRT -> PI -0.24 5.45 0.00
PR*ENJ -> PI -0.07 0.97 0.33
CNV: Perceived Convenience (CNV), CNT: Perceived Control
(CNT),
VRT: Perceived Variety (VRT), ENJ: Perceived Enjoyment
(ENJ), PR:

Perceived Risk, PI: Purchase Intention
The interaction effect of PR with each of the
predictors (convenience, control and variety and
enjoyment) turned out to be significant (Table 4).
Figure 2-4 also reflect these moderating effects or
higher and lower PR. The slopes of the line
presenting the impact of each of the variables
(convenience, control, and variety) on PI is stronger
for the lower values of PR and weaker for higher
values of PR (Figure 2-4).
However, we do not find any impact of the
interaction term between PR and enjoyment. Thus
enjoyment does not moderate the effect of the PR on
the PI. Figure 5 also depicts this fact as there is no
significant difference between the slope of the two
lines for the relationship between enjoyment and PI
for higher and lower PR values.
The empirical results affirm that the impact of
online shopping benefits on PI is dampened
(strengthened) for higher (lower) levels of PR values.
This implies that customers’ shopping decision from

the electronic channel is contingent on their risk
profile (i.e., high vs. low perceived risk).
Figure 2: Moderating effect or CNV
8309, DOI: 10.18421/TEM71-14, February 2018.
124
Figure 3: Moderating effect or CNT
Figure 4: Moderating effect of VRT

Figure 5: Moderating effect of ENJ
5. Discussion and Conclusions
In the perspective of the emerging online shopping
trends in the developing economies, this paper
investigates the role of the customers’ perceived
benefits on their purchase decision through online
convenience, control, variety a
online shopping are identified and their impact is
empirically tested on the PI. In addition, the paper
also extends the literature by studying the role of
perceived risk in a developing country context where
online stores are at an emerging stage. Though we
find that penetration of internet and social media is
quite high yet people are not much comfortable to
purchase products online, especially the apparels.
Empirical results demonstrate a significant effect
of consumers’ perceived benefits from online stores
on their PI from such stores. Our results endorse that
perception about potential benefits of the online

channel enhances consumers’ likelihood to engage in
online shopping activity.
Perceived convenience has emerged as the most
dominant variable, among the others, influencing PI
from online stores. Our research is also in line with
the literature which shows that consumers’ perceived
convenience in online vendor positively influences
their attitude and purchase intention. For instance,
Jiang et al. (2013) argued that convenience is one of
the major motivators behind consumers’ online
purchase intention. Similarly, [16] demonstrated
perceived convenience and perceived enjoyment to
be the key determinants of mobile shopping.
The empirical results assert the positive impact of
perceived control on customers’ online purchase
intention. This result shows that individuals’
perceived control over their buying process boosts
their confidence and they feel more involved and
independent. Unlike traditional brick and mortar
stores’ environment, the consumers have no
dependence on the store assistance; rather, if
required, they may take independent opinion from
other consumers on the internet. In this way,

consumers are in control of their shopping, and they
may avoid upselling and cross-selling from the store
employees. This finding is also in line with the past
research. For instance, Elwalda et al. (2016)
proposed that consumers’ level of control on their
online shopping activity helps in developing a
positive attitude toward online stores.
Product variety at online stores has emerged to be
another significant benefit of online shopping.
Generally, customers feel comparatively more
product/service options and variety on the online
stores than the traditional ones. This argument is true
to some extent; as online stores don’t face limitation
such as location. They can also take advantage of
8309, DOI: 10.18421/TEM71-14, February 2018.
125
technology to present even small number of products

in different ways. This gives an impression of a
greater product assortment to the consumers. This
finding is also in line with the literature [7,12]
Finally, perceived enjoyment is also found to be
significantly affecting customers PI from online
stores. This suggests that the sense of playfulness and
enjoyment of online channel helps consumers
develop a favorable attitude toward online stores.
Thus, online retailers need to incorporate interesting
features into their website design that consumers do
not feel boring during their visit to the online store.
This finding is consistent with the past research such
as [11] and [22].
Apart from empirically assessing the impact of
online shopping benefits including convenience,
control, variety, and enjoyment this study contributes
to the literature by extending the current
understanding of direct effects of perceived risk to
incorporating it as a moderator on online shopping
ides an
empirical basis for the varying impact of high/low
relationship. This exhibits that though perceived

benefits may help in developing consumers’
favorable attitude yet their risk levels in the online
channel may dampen or strengthen their final
relationship may vary depending upon the level of
perceived risk. In addition, the impact of
convenience, control, variety and enjoyment on PI
from online stores increases (decreases) for the
consumers with lower (higher) level of perceived risk
in the online channel.
For the role of individual’s demographics, in their
PI from an online store, we did not find any
significant role of gender, age or education but past
experience has emerged to be significantly associated
with PI. Nonetheless, care must be taken with respect
to the impact of gender, age and education on
purchase intention as in our sample majority of the
subjects were male between the age of 20 to 30 years
having a college degree. Therefore, more evenly
distributed sample may provide better insights into
the role of age, gender and education in forming
consumers’ purchase intention for online stores.
5.1. Theoretical and Managerial Implications

The findings of this study will be of interest to
both academicians and online website managers. For
the academicians, this research addresses an
important aspect of consumers’ online shopping
intention and highlights its facilitators and barriers in
the context of an emerging economy. Specifically,
the study reflects on the moderating role of perceived
risk in this phenomenon. Managers of online
shopping websites can employ these findings in
developing strategies to leverage on the highlighted
benefits and minimize consumers’ risk perceptions.
In this age of social media, it is difficult for the e-
commerce companies to control the information. Past
research shows that information asymmetry can
diminish consumers’ perceived trust and escalate
their perceived risks [5], so e-commerce firms need
to regularly update their consumers about potential
online threats and carefully design strategies to
counter this issue of asymmetric information.
Customers should be provided with the community
page where they can exchange their experience with
other consumers. This will help consumers in

building their trust in the online shopping website
and reduce any risk perceptions. For the community
pages, the company may use its own website or can
also take advantage of famous social networking
platforms such as Facebook and Twitter. In addition,
based on the consumers’ feedback and discussions on
the community platforms, the company can provide
answers to the frequently asked questions on their
website. This will not only solve consumers’
problems quickly but also reduce company’s
incoming calls/queries; this will help the company
save the time of its employees.
In this time of smart devices, consumers can easily
search for similar products/services and can compare
prices from the local and the global competitors.
Therefore, attracting not only new consumers but
also their retention is an important issue in this
information age. Thus, online website managers need
to continuously ensure that their consumers are
satisfied with their offerings and are having the
requisite convenience, control, variety, and
enjoyment through their online marketplace.
The study suggests that in order to mitigate

consumers’ concerns regarding online payments
through their credit card they may be offered various
options such as pay on delivery, pay through ATM,
etc.
5.2. Limitations and Future Research
Though the study offers interesting insights and
explains a significant variance in the dependent
variable, yet there are a number of limitations leading
to future research prospects. First, the study relied on
a data from only one emerging economy so its
generalizability may be limited due to differing
economic and technological conditions in other
emerging economies in particular and globally in
general. Second, most of the subjects in this study,
are male having a university education and in the age
range of 20 to 30 years. Further research may address
this issue by relying on more rigorous and
heterogeneous sample. Third, the KSA is one of the
8309, DOI: 10.18421/TEM71-14, February 2018.

126
leading countries in information and communication
adoption, future research may test the proposed
model in other countries to see its generalizability.
Fourth, the study has focused only on apparels but
the consumer’s risks may vary for different product
categories or even for various services, so future
research may take into account moderating effects of
perceived risk for other product categories such as
electronics, books. Fifth, this study has relied on the
overall risk but there may be different types of
perceived risks in online shopping such as financial,
psychological, time, security, etc. It will be an
interesting future research opportunity to see how
each of these dimensions of perceived risk moderates
the relationship between online shopping benefits
and purchase intention.
Acknowledgements
The researcher would like to thank the Deanship of
Scientific Research at King Saud University

represented by the Research Centre at College of
Business Administration for supporting this research
financially.
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Copyright of TEM Journal is the property of UIKTEN-
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copyright holder's express written
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articles for individual use.
CUSTOMER RELATIONSHIP MANAGEMENT | JULY 2016
15www.destinationCRM.com
ON THE SCENE: CRM EVOLUTION
Digital Transformation Requires a
Cultural Change
Day 2 Keynoter Brian Solis urged companies to change
their mind-sets altogether

M
arketers will need to alter com-
pany culture to deliver relevant,
seamless digital experiences to
customers, several speakers urged during
the CRM Evolution conference.
Brian Solis, digital marketing analyst
and principal at the research and advisory
firm Altimeter Group, identified three
key elements of digital transformation:
understanding digital customer
experience, transforming com-
pany vision and leadership,
and building a digital transfor-
mation team. He stressed that
customers do not see mobile
as simply a single channel: “To
them, mobile is not a device—
to them, mobile is a lifestyle,”
he said during the day two keynote.
“Everything on that small screen is how
they interact with the world, yet many of

us are still designing off of processes that
were invented before the Internet, and it’s
time that we evolve that.”
A major problem, according to Solis,
is that executives are not digitally literate.
“They complain about all new aspects of
technology or they belittle it,” he said,
suggesting that a “reverse mentoring” is
necessary to change executives’ attitudes.
Furthermore, he noted, many compa-
nies are risk-averse overall. “I’ll talk to any
company, especially those in finance or
insurance or pharmaceuticals or health-
care, and they’ll say, ‘Oh, but we’re regu-
lated.’…The most interesting companies
I’ve found don’t just challenge regulation,
they look for ways to partner with regula-
tors to find ways of ‘How do we innovate,
if our customers or our patients or our
stakeholders are evolving.’…They find
ways to work together.”
Solis noted that this kind of collabora-

tion is needed to bend culture.
Michael Fauscette, chief research officer
at G2 Crowd, took things a step further
by encouraging companies to embrace the
transparency of the digital world. Fauscette
noted that many companies are “already
naked” in the digital environment, and
customers “are already in control.”
“In this online environment, things
about you, the information about you,
the information about your
products and services, it’s out
of your control and it’s almost
everywhere,” he said.
Fauscette suggested that
rather than being concerned
with what information cus-
tomers can access, companies
should embrace transparency
to build trust—and, eventually, authen-

tic relationships—with customers.
During his session, Robert Bergman, a
marketing professor at Lewis University
in Chicago, emphasized the importance
of crafting stories to connect with cus-
tomers. “Stories trump data,” Bergman
stated. “It’s not about features, functions,
and benefits, although most marketers
use them,” he said. “It’s about stories.
When it comes to persuasion, stories are
easier to understand, and, therefore, sell
your product better.”
In her session, Samantha Stone, who
founded and is senior analyst at The Mar-
keting Advisory Network, emphasized the
importance of creating a persona—a fic-
tional representation of a company’s ideal
customer. According to Stone, personas
are a composite of market research and
serve as a reminder of customers’ “unique
human elements.”

Stone also emphasized the importance
of conducting qualitative interviews
with both customers and non-custom-
ers, saying that if “you want to under-
stand people, talk to people.... It is the
single biggest difference between perso-
nas that work and drive value and per-
sonas that someone checked off their
to-do list. You have to talk to customers
and non-customers—not just the peo-
ple who already understand the context
of your business, but the people who
don’t yet.” —Sam Del Rowe
“To [customers],
mobile is not
a device—to
them, mobile is
a lifestyle.”
SOURCE: MARKETANDMARKETS’ “MOBILE MARKETING
MARK-GLOBAL FORECAST TO 2021” REPORT
Fast Facts & Figures

The current value
of the
global mobile
marketing
solutions market
The projected
value of the global
mobile marketing
solutions market by
2021, growing at a
compound annual
growth rate of 28.1
percent per year
$98.9 billion$28.6 billion
Copyright of CRM Magazine is the property of Information
Today Inc. and its content may

not be copied or emailed to multiple sites or posted to a listserv
without the copyright holder's
express written permission. However, users may print,
download, or email articles for
individual use.

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