The Evolution of the E-Business Value Cycle Through Value Co-Creation during the COVID-19 Pandemic: An Empirical Study from Iran

Abstract

The present study aims to evolve the value cycle of e-business through value co-creation during the Coronavirus pandemic. The population of the study is experts consisting of university professors in the fields of marketing management, e-commerce, and managers of organizations and companies in Iran. Using the snowball sampling method, 50 of them were selected as the sample. This study employs the factor analysis method and structural equation modeling (SEM) approach for identification of the factors. The findings of this study reveal that 10 factors affect the evolution of the value chain into the value cycle, including customer relationship management, e-literacy, value co-creation, e-readiness, and integrated value creation, the logic of service dominance, shared value creation, virtual culture, e-trust, and network economics. Despite the difficulties that COVID-19 has created for businesses worldwide, the evolution of the e-business value cycle through value co-creation in the Coronavirus pandemic can be considered as a positive aspect of the pandemic. In fact, with more pandemics and more customers turning to e-businesses due to the co-creation of customer value, e-businesses can cover their weaknesses and improve their strengths by engaging customers and receiving their feedback, thus transforming their value chain into the value cycle.

1. Introduction

The business world is changing dramatically and countries that are not equipped with e-commerce technology and electronic data interchange will be excluded from the global business environment (Treiblmaier & Sillaber, 2021) As a result, e-commerce has become a vital tool in doing business today. E-commerce is the process of buying, selling, and transferring or exchanging goods, services, or information through computer networks such as telephone, mobile, and the Internet (Zhao et al., 2019). In other words, e-commerce has many benefits for all countries in terms of trade and employment (He & Wang, 2019). E-commerce has brought many benefits to businesses, including small and medium-sized enterprises (Afshar Jahanshahi & Brem, 2017; Nawaser, 2015). Access to more markets, reducing transaction costs, improving productivity, increasing the speed and accuracy of transactions, presence in diverse markets, etc., are some of the benefits listed for e-commerce (Gungor & Cadirci, 2021). Information and communication technology is a tool and platform for development in the field of global competition, with numerous benefits for organizations (Yu et al., 2017).

Today, all manufacturing and service industries are somehow exposed to the developments of this technology and the effects of the use of ICT in the value chain in all areas, from the initial relationship with suppliers to production, service, and customer relations are obvious (Simatupang et al., 2017). One way to understand the importance of e-commerce and its role in global commerce is to pay attention to it through value chain analysis (Peng et al., 2016). The value chain is a set of activities to meet the needs of the business by adding value (or price) at each stage of the process (Seebacher & Winkler, 2015). Value chain refers to a sequence of connected factors and markets that transform inputs and services into products with features that consumers are willing to buy (Cheung et al., 2020). Improving productivity, innovation, local processing, compliance with standards and certifications of the chain and consumption and the use of the latest post harvest technologies are the recommendations for value chain improvement (Babu et al., 2019). Alignment between information technology and business is the key to achieving improved performance, especially in terms of internal processes. In order to make the most of the opportunities that ICT has created in various fields, it seems necessary to design and formulate an optimal and practical value chain. Therefore, it seems that in the context of the COVID-19 pandemic, and because of the importance and prosperity of e-businesses, these businesses pay more attention to their customers and their ideas for improving their services. This returns to businesses in the form of feedback from the customer (Peng et al., 2016), to create a new property called value co-creation and the value chain becomes a value cycle.

In the current situation, the lack of demand due to the policy of social restrictions such as quarantine during the outbreak of coronavirus is one of the things that has affected the business environment (Shi et al., 2020; Andre et al., 2018) and online sales in this period can have favorable results to deal with declining demand (Dirgantari et al., 2020; Jahanshahi et al., 2018; Hashemzadeh et al., 2011). The existence of cyberspace and its major changes in businesses, as well as the feedback generated to provide a service or product (tangible and intangible) between customers and suppliers to improve production and the evolution of research and development, make the value chain inefficient and turn it into a value (He & Wang, 2019). Therefore, interactions and communication with different groups of customers can increase the speed of the organization’s adaptability to changes in the competitive environment. This is why increasing the focus on these intangible assets of organizations leads to the concept of value creation because of its strategic application in both attitude and practice (Frow et al., 2015). Customer co creation value behavior is the relationship that the customer makes through partnerships and cooperation with businesses in the face of goods and services to create value (Muller et al., 2013). Hence, given the value co-creation and feedback that customers constantly give to businesses, it seems that the value chain has become a value cycle. Given what has been said, the present study aims to analyze how the value chain is transformed into a value cycle.

2. Theoretical Framework

2.1. Evolution of the Value Chain into Value Cycles

A value chain is a business model that describes the full range of activities needed to create a product or service. The value chain is the scope of all those activities that include the presentation of a product or service from the stage of idea and concept to different stages of production, delivery to the final customer, and recycling (Frederiksen & Brem, 2016). This process includes activities such as design, production, marketing, distribution, and support services for end consumers (Potluri et al., 2017). Value chain activities can be achieved independently from one company or between different companies. The term value chain refers to the fact that value is added to primary products through a combination of different sources (Hernandez & Pedersen, 2017). The value chain approach in the analysis of internal organizational activities is an effective tool in identifying strengths and weaknesses and making decisions about each of these activities (Suong, 2017). This chain is related to the most effective environmental factors, namely suppliers and customers (Alsagheer & Ahli, 2011). The value chain model is the basic tool for recognizing competitive advantage and finding ways to promote the firm and help it achieve common solutions. In fact, the idea of a value chain is based on having a process view of the firm (Sargey et al., 2008; Gholamzadeh Chofreh et al., 2019). In his value chain model, Michael Porter divides company activities into core activities and support (Porter, 1998). The main activities begin with the arrival of raw materials in the organization and end with the provision of customer service. These activities are supported by support activities. The main activities of the value chain include in-house logistics, production operations, out-of- organization logistics, sales and marketing, and after-sales service. Support activities also include organizational infrastructure, human resource management, technology development, and procurement (Reimann et al., 2017). Value chain indicators are 1. Innovation, 2. Quality, 3. Customer Relations, 4. Management Capabilities, 5. Promises, 6. Technology, 7. Brand Value, 8. Employee Relations, 9. Community and Environmental Issues (Findlay & Hoekman, 2020). The following figure shows the value chain developed by Porter (Figure 1).

Figure 1: Value Chain

As can be seen, the customer value chain does not provide feedback to the company and this chain is without feedback. While in the value cycle, based on the value co-creation of customer and company, and based on the feedback that customers give to businesses, this chain is transformed into a cycle (Jason et al., 2010). In fact, customers and businesses work together to create value cycles for mutual benefit, which is based on providing customer feedback to the business (Sturgeon et al., 2011). This both eliminates the weaknesses of businesses and better meets the needs of customers (Fonseca et al., 2019). Hence the value cycle can be plotted as follows (Figure 2).

Figure 2: Value Cycle

2.2. Value Co-Creation and Value Cycle Evolution

Value co-creation is a deliberate attempt to create value by using products and services in an ecosystem (Cheung et al., 2020; Ro et al., 2018). Value co-creation refers to the amount of knowledge, capabilities, and information that the customer uses to create value (Keeling et al., 2021). In other words, the process of value co-creation can be considered as a set of activities and actions performed by the customer to help achieve individual and organizational goals (Caic et al., 2018). In fact, value co-creation behavior can be the high level of customer participation in product creation and customization, which helps the evolution of the value cycle in the organization (Kristensson et al., 2008). Value co-creation behavior is known as the interaction between customers and the organization, which will result in the provision of appropriate customer feedback to the organization. Customers can be effective in improving the value cycle by informing the organization about strengths and weaknesses (Akin Ates et al., 2021; Qudrat-ullah & Kane, 2010; Gharleghi et al., 2018). In a study, a value cycle is an important approach in providing a valuable product or service to customers, and the purpose of its analysis is to provide maximum value at the lowest possible cost. In other words, the value co-creation approach speaks of engaging customers in the organization’s activities. In this way, this participatory activity can lead the organization to implement long-term plans, including quality improvement plans (Oyner & Korelina, 2016). Environmental crisis and changes such as COVID-19 have highlighted the role of value cycle evolution, as creating value cycles helps increase productivity and long-term business growth. Value is created equally during the process of interaction between the organization and the customer, and this suggests that value co-creation is created by both parties. Customers play an active role in value cycle evolution by providing feedback (Shi et al., 2020).

2.3. The Effects of COVID-19 on Electronic Businesses

The COVID-19 epidemic has strongly influenced the business environment and has made a new challenge, so decision-makers should be careful about such sudden changes (AL-Mansour & AL-Ajmi, 2020; Zhang et al., 2020; Kuijpers, 2020). Due to industrial closures, supply chain disruptions, a rapid drop in demand for their goods and services, and a decrease in GDP during the COVID-19 outbreak, some jobs have been unable to cover their debts. Dinesh and MuniRaju (2021) conducted research showing that the number of online consumer purchases has increased significantly since the outbreak of the Coronavirus. Therefore, this has created great opportunities for the development and expansion of e-commerce activities. Looking at the English language newspapers of the world, it can be said that many businesses in all countries have lost their previous market due to the spread, or the fear of the spread of Coronavirus. However, some experts around the world believe that online businesses and e-commerce have experienced the least negative impact compared to other industries. Online shopping is a response to people’s concerns in the days of the Coronavirus outbreak and providing a web platform provides a direct basis for the supply of goods via the Internet (Jilkova & Kralova, 2021).

Online businesses were welcomed by businesses and startups even before the global outbreak of Coronavirus but took a more serious form after the outbreak of the COVID-19 virus (Yu et al., 2017). Many of the world’s leading business experts and consultants have recommended e-commerce and online businesses in various fields, and it is not a new phenomenon, but with the global outbreak of the Coronavirus and the loss of traditional businesses, many businesses around the world are focusing on selling and providing their services online. (Villa & Monzon, 2021). A study of the negative and positive impact of Coronavirus on IT businesses shows that this epidemic has had the most negative impact on tourism startups and a positive impact on online shopping startups. Evidence shows that some businesses, especially in the field of communications and information technology, have continued to flourish and even expanded throughout the coronavirus quarantine. Changing the lifestyle and consumption of users and combining the demand for services, and disruption of the value chain of services and manpower in the supply sector, are among the factors that play an effective role in the sustainability of businesses in the field of communication and information technology.

Hussain et al. (2021) also showed that the prevalence of COVID-19 has driven the desire of companies to e-commerce day by day. The infrastructure of an online sale includes more than just a store, a product, and a buyer; it also includes systems that allow people to receive their rights in the event that they are lost, as well as high speed Internet infrastructure and good websites. Given the increasing advances in technology and the intensification of competition in global markets, the main challenge facing any organization is to establish timely and constructive communication with the customer. In the shadow of the customer value co-creation system, maintaining a steady relationship with consumers can aid the organization’s ability to provide better and creative services (Caic et al., 2018; Ndiritu, 2020; Bazgosha et al., 2012; Moezzi et al., 2012). A study showed that digital technologies and the digital revolution that increase the role of the value chain can be an important factor in improving the activities of the organization after the COVID-19 epidemic.

Guo et al. (2020) also found in their study that e-commerce plays an important role in the time of the COVID-19 epidemic. In fact, by relying on the right infrastructure, the growth and scope of electronic activities can be developed and a major step can be taken in the prevalence of COVID-19. Existence of interactions and feedback between customers, organizations, industries, and various economic sectors to improve production has caused the value chain (as a concept or tool) to lack the necessary efficiency to analyze many economic aspects of cyberspace (Moeller et al., 2013). Thus, by repeating feedback, the value chain becomes a value cycle (Shi et al., 2020; Giones & Brem, 2017). Value is created equally and jointly between the organization and customers during the interaction process. One party alone cannot create value for the other, but value co-creation is formed by both parties (Vargo & Lusch, 2004).

3. Methodology

This research is a mixed-method based on qualitative and quantitative research. It is applied in terms of purpose and is exploratory research in terms of data collection. Data collection tools in the qualitative part were interviews and in the quantitative part was a questionnaire, the validity, and reliability of which were confirmed using the CVR index, Kappa Cohen test, content validity, and reliability of the retest, respectively. It is necessary to explain that since the present study is mixed research with an exploratory approach, first a qualitative study, and then a quantitative study should be done. Therefore, qualitative data was reviewed using the opinions of 30 experts and to the extent of information saturation and achieving theoretical adequacy. Then, a quantitative study was conducted using the opinions of the same 30 people who constitute the expert sample of the research. Qualitative data was analyzed with ATLAS.ti software and coding method and quantitative data were analyzed with PLS software. In a way that, first using qualitative data obtained from exploratory interviews, the types of factors that affect the evolution of the value chain to the value cycle are identified, then by extracting the factors, through quantitative research and factor analysis method, the importance and the priority of these factors is determined.

3.1. Sample

The qualitative part of the statistical population of the research includes experts consisting of university professors in the fields of marketing management, e-commerce, accounting, human resource management, and managers of organizations and companies active in the field of e-commerce in Iran. Using the snowball sampling method and based on the principle of theoretical adequacy, 50 of them were selected as sample members. The reason for choosing this statistical community is that experts, as people familiar with the labor market and its changes and developments, can analyze and evaluate the factors influencing the evolution of the value chain as a value cycle. In addition, customers are the quantitative part of the statistical population and are considered as a sample of the quantitative part of the research (Table 1).

The characteristics of the quantitative sample are as follows (Table 2).

Table 1: Demographic Characteristics of Qualitative Samples

Table 2: Demographic Characteristics of the Quantitative Sample

4. Results and Findings

4.1. Findings of the Qualitative Section

Using interviews with experts, a set of factors were identified that influence the evolution of the value chain into the value cycle. In explaining the method of extracting the factors, it is necessary to explain that this was done by reviewing the texts of the interviews with the help of ATLAS.ti software and coding method. After interviewing the experts, the factors that affect the evolution of the value chain to the value cycle were identified, the full description of which is presented in Table 3.

Table 3: Identified Variables

4.2. Findings of the Quantitative Section

4.2.1. The Structural Model

SEM method was used in this research to assess the proposed model. The result is shown in Figure 3. Variance, statistical significance, and path coefficient have been determined. In addition, the amount of R² for endogenous constructs has been provided as an index for predicting the power of the recommended model.

Figure 3: Model Output

4.2.2. Model Test

In this research, the AMOS software and confirmatory factor analysis test were used in the model test and assessment. The complete details of this test are as follows (Table 4).

Table 4: Confirmatory Factor Analysis Test Conclusions

According to Figure 3, as all factors have reasonable amounts in terms of path coefficients, T statics, and level of significance, it can be said that the identified factors are absolutely effective in promoting a value chain into a value cycle. (Table 4).

5. Discussion and Conclusion

E-business generally involves the application of new technologies to establish chain relationships between suppliers and customers, resulting in better decisions, lower costs, and the opening of new channels. The value chain model is the basic tool for recognizing competitive advantage and finding ways to promote the firm and help it achieve common solutions. The increasing development of information technology in businesses and the importance of interaction between suppliers and buyers and paying attention to customer feedback helps value creation, and repeating this process turns the value chain into a value cycle. The main purpose of this study is to investigate the evolution of the e-business value cycle based on the co creation of customer and company values.

The results show that in customer relationship management (CRM), accurate identification of customer needs at the right time and place and meeting their wants and needs are of the most important issues of organizations, and paying attention to customer feedback creates interaction. As this process continues, the value chain evolves into a value cycle. According to this research, e-literacy (the ability to understand information through electronic media), can cause communication and interaction and ultimately feedback from customers to organizations and therefore leads to the transformation of the value chain into a value cycle. In the value co-creation approach, the organization must create value for success through communication and interaction with other elements of the industry. When business customers participate in the creation of products and services, the organization acquires new possibilities and opportunities, and because of interactions and feedback, another factor that transforms the value chain into a value cycle is value co-creation. Electronic readiness is the ability to accept, use and apply information and communication technology in different societies. Therefore, due to the existence of connections and interactions between organizations and customers, the value chain becomes a value cycle. Another factor is the creation of integrated value, which is achieved by integrating management systems and value chain links with an emphasis on customer life cycle thinking to respond to stakeholder expectations. Due to valuing customer expectations and feedback and continuing this trend, the value chain loses its efficiency and evolves into a cycle. According to the logic of service dominance, e-business models, which are based on the needs of customers’ life cycle and also meet the demands of customers and vendors in a timely manner, turn the value chain into a value cycle. Based on the creation of shared value, customers can interact with suppliers at any stage of production, from design to supply. This type of interaction should lead to a two-way learning process. In other words, based on new approaches, customers and suppliers will be able to work together to create shared value. As a result of communication and feedback from customers and suppliers, the value chain no longer has the necessary efficiency and the value chain becomes a value cycle.

Virtual culture is an emerging culture of using technology in business. The change in business culture due to the increasing advancement of technology and the importance of customer feedback and the need to apply it to improve production and the continuation of this cycle causes the inefficiency of the value chain and its transformation into a value cycle. Another influential factor is e-trust. Because of the development of information technology in businesses and also the necessity for customers to gain an advantage, organizations must pay attention to customer feedback, because they create value for the organization. As a result of evaluating these feedbacks and repeating this cycle, the value chain becomes a value cycle. With the emergence and expansion of the network economy, interactions and feedback between organizations, industries and customers and various economic sectors increased to create value. The value chain now lacks the efficiency needed to analyze many economic aspects of cyberspace, so due to the existence of value chain networks, it becomes a value cycle. According to a review of relevant research, it was found that no research has so far directly examined how the value chain is transformed into a value cycle. Therefore, the study of value chain conversion into the value cycle can be considered as an innovative aspect of this research. Given what has been said, the organization can turn the value chain into a value cycle by paying attention to customer feedback, applying them to improve production, the evolution of R&D, and repeating this cycle.

The results of the present study and similar research show that customers are the most important and effective assets of any organization. Due to the importance and prosperity of e-businesses, organizations have focused more on this intangible asset, which is in the form of feedback from customers to businesses, and the continuation of this cycle turns the value chain into a value cycle. Policymakers for e-commerce development in small and medium-sized enterprises are encouraged to focus on e-commerce skills at the level of managers and employees and inform them of the usefulness of this phenomenon, establish and facilitate e-commerce legislation, work on the e-supply chain of small and medium-sized enterprises, and provide a more general platform for the use of information technology and e-commerce. This study also advises small and medium sized enterprises to focus more on developing e-commerce strategies and coordinating them with enterprise strategies while gaining e-commerce skills. According to the results of this study, to prevent and deal with violations and promote trust in this space, the existing laws in the field of e-commerce should be reviewed and the existing weaknesses and shortcomings and redundant and cumbersome laws in this area should be addressed. Then, necessary corrections should be made.