Unit-1

Definition of E-CommerceElectronic Commerce (EC) is where business

transactions take place via telecommunications networks, especially the Internet.Electronic commerce describes the buying and

selling of products, services, and information via computer networks including the Internet.

The infrastructure for EC is a networked computing environment in business, home, and government.

E-Business describes the broadest definition of EC. It includes customer service and intra business tasks. It is frequently used interchangeably with EC.

E-commerceE-Commerce or modern Electronics Commerce

is a methodology of business which addresses the need of business organizations, vendors and customers to reduce cost and improve the quality of goods and services while increasing the speed of delivery. E-commerce refers to paperless exchange of business information using following ways.

Electronic Data Exchange (EDI)Electronic Mail (e-mail)Electronic Bulletin BoardsElectronic Fund Transfer (EFT)Other Network-based technologies

Electronic CommerceElectronic commerce (e-commerce)

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Electronic Commerce under different perspectives:

Communications Perspective EC is the delivery of information, products /services, or payments over the telephone lines, computer networks or any other electronic means.

Business Process Perspective EC is the application of technology toward the automation of business transactions and work flow.

Service PerspectiveEC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.

Online PerspectiveEC provides the capability of buying and selling products and information on the internet and other online services.

Features of E-Commerce Non-Cash Payment: E-Commerce enables use of credit cards, debit

cards, smart cards, electronic fund transfer via bank's website and other modes of electronics payment.

24x7 Service availability: E-commerce automates business of enterprises and services provided by them to customers are available anytime, anywhere. Here 24x7 refers to 24 hours of each seven days of a week.

Advertising / Marketing: E-commerce increases the reach of advertising of products and services of businesses. It helps in better marketing management of products / services.

Improved Sales: Using E-Commerce, orders for the products can be generated any time, any where without any human intervention. By this way, dependencies to buy a product reduce at large and sales increases.

Support: E-Commerce provides various ways to provide pre sales and post sales assistance to provide better services to customers.

Inventory Management: Using E-Commerce, inventory management of products becomes automated. Reports get generated instantly when required. Product inventory management becomes very efficient and easy to maintain.

Communication improvement: E-Commerce provides ways for faster, efficient, reliable communication with customers and partners.

Traditional Commerce v/s E-Commerce

Traditional Commerce E-Commerce

Heavy dependency on information exchange from person to person.

Communication/ transaction are done in synchronous way. Manual intervention is required for each Communication or transaction.

Information sharing is made easy via electronic communication channels making little dependency on person to person information exchange.

Communication or transaction can be done in asynchronous way. Electronics system automatically handles when to pass communication to required person or do the transactions.

Traditional Commerce v/s E-Commerce

Traditional Commerce E-CommerceIt is difficult to establish

and maintain standard practices in traditional commerce

Communications of business depends upon individual skills.

Unavailability of a uniform platform as traditional commerce depends heavily on personal communication.

No uniform platform for information sharing as it depends heavily on personal

communication.

A uniform strategy can be easily established and maintain in e-commerce

In e-Commerce or Electronic Market, there is no human

intervention.E-Commerce website

provides user a platform where al l information is available at one place.

E-Commerce provides a universal platform to support commercial / business activities across the g lobe.

Pure Vs. Partial Electronic Commerce

Three dimensions the product (service) sold [physical / digital]; the process [physical / digital] the delivery agent (or intermediary) [physical /

digital]Traditional commerce

all dimensions are physicalPure EC

all dimensions are digitalPartial EC

all other possibilities include a mix of digital and physical dimensions

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Elements of CommerceYou need a Product or service to sellYou need a Place from which to sell the

productsYou need to figure out a way to get

people to come to your place. You need a way to accept orders. You also need a way to accept money. You need a way to deliver the product

or service, often known as fulfillment. Sometimes customers do not like what

they buy, so you need a way to accept returns.

You need a customer service and technical support department to assist customers with products.

SCOPE OF E-COMMERCE Selling can be focussed to the global customer Pre-sales, subcontracts, supplyFinancing and insurance Commercial transactions: ordering, delivery, payment Product service and maintenance Co-operative product developmentDistributed co-operative workingUse of public and private services Business-to-administrations (e.g. customs, etc) Transport and logisticsPublic procurementAutomatic trading of digital goodsAccountingDispute resolution

E-COMMERCE ADVANTAGESE-Commerce advantages can be broadly

classified in three major categories:Advantages to OrganizationsAdvantages to ConsumersAdvantages to Society

Advantages to OrganizationsUsing E-Commerce, organization can expand their market

to national and international markets with minimum capital investment. An organization can easily locate more customers, best suppliers and suitable business partners across the globe.

E-Commerce helps organization to reduce the cost to create process, distribute, retrieve and manage the paper based information by digitizing the information.

E-commerce improves the brand image of the company.E-commerce helps organization to provide better

customer services.E-Commerce helps to simplify the business processes and

make them faster and efficient.E-Commerce reduces paper work a lot.E-Commerce increased the productivity of the

organization. It supports "pull" type supply management. In "pull" type supply management, a business process starts when a request comes from a customer and it uses just-in-time manufacturing way.

Advantages to Customers24x7 support. Customer can do transactions for the

product or enquiry about any product/services provided by a company any time, any where from any location. Here 24x7 refers to 24 hours of each seven days of a week.

E-Commerce application provides user more options and quicker delivery of products.

E-Commerce application provides user more options to compare and select the cheaper and better option.

A customer can put review comments about a product and can see what others are buying or see the review comments of other customers before making a final buy.

E-Commerce provides option of virtual auctions.Readily available information. A customer can see the

relevant detailed information within seconds rather than waiting for days or weeks.

E-Commerce increases competition among the organizations and as result organizations provides substantial discounts to customers.

Advantages to SocietyCustomers need not to travel to shop a product

thus less traffic on road and low air pollution.E-Commerce helps reducing cost of products

so less affluent people can also afford the products.

E-Commerce has enabled access to services and products to rural areas as well which are otherwise not available to them.

E-Commerce helps government to deliver public services like health care, education, social services at reduced cost and in improved way.

Disadvantages of E-CommerceE-Commerce disadvantages can be broadly

classified in two major categories:Technical disadvantagesNon-Technical disadvantages

Technical DisadvantagesThere can be lack of system security, reliability or

standards owing to poor implementation of e-Commerce.Software development industry is still evolving and keeps

changing rapidly.In many countries, network bandwidth might cause an

issue as there is insufficient telecommunication bandwidth available.

Special types of web server or other software might be required by the vendor setting the e-commerce environment apart from network servers.

Sometimes, it becomes difficult to integrate E-Commerce software or website with the existing application or databases.

There could be software/hardware compatibility issue as some E-Commerce software may be incompatible with some operating system or any other component.

Non-Technical DisadvantagesInitial cost: The cost of creating / building E-

Commerce application in-house may be very high. There could be delay in launching the E-Commerce application due to mistakes, lack of experience.

User resistance: User may not trust the site being unknown faceless seller. Such mistrust makes it difficult to make user switch from physical stores to online/virtual stores.

Security/ Privacy: Difficult to ensure security or privacy on online transactions.

Lack of touch or feel of products during online shopping.

E-Commerce applications are still evolving and changing rapidly.

Internet access is still not cheaper and is inconvenient to use for many potential customers like one living in remote villages.

Basic Benefits of E-CommerceThe major benefits are increasing sales and

decreasing costs. The other benefits are as follows:

1. Increased accessibility to customers i) Allows people to carry out operations without

barriers of time i.e. 24 hours a day, seven days a week.

ii) To reach out to global consumers easily and is also cost effective.

iii) It helps business to reach out new markets.

iv) Consumers and suppliers can be directly approached over the Internet.

v) Acquisition of new consumers over the internet is considerably cheaper..

2. Convenience of making comparisons: E-commerce helps consumers to make

comparisons while shopping . Automated online shopping assistants called hopbots score are available to find deals on anything from flowers to perfume

3. Increased Profitability i) The direct cost to sale for an order taken

from an web site is lower as compared to traditional means. Moreover processing errors are virtually eliminated in e-selling besides being faster and more convenient to visitor.

ii) It provides the solution by decimating the costs, which are incurred.

4. Innovation:E-commerce enables business organization to create new

products or services.5.Improvement in consumer service:There is a direct benefit in improvement of consumer

service. High levels of customer satisfaction generate increased sales and increased profits.

6. Tangible advantages: From the buyer’s perspective e-commerce provides a lot of

tangible advantages: i. Reduction in buyers sorting out time ii Better buyer decisions. iii.Less time spent in resolving invoice and order

discrepencies.iv. Increased opportunities for buying alternative products.

7. Stratergic Benefits:It helps to reduce delivery time,labour cost and

also the cost incurred in the following areas:i) Document prepration.ii) Error detection and correction.iii) Reconciliation.iv) Mail Prepration.v) Telephone calling.vi) Data Entry.vii)Overtime.viii)Supervision Expenses.

DRIVING FORCES OF E-COMMERCE

Environmental factors that create Business Pressures:

Economic Forces

Market Forces

Technology Forces

Societal and environmental forces

Lower marketing costs: marketing on the Internet maybe cheaper and can reach a wider crowd than the normal marketing medium.

Lower sales costs: increase in the customer volume do not need an increase in staff as the sales function is housed in the computer and has virtually unlimited accessibility

Lower ordering processing cost: online ordering can be automated with checks to ensure that orders are correct before accepting, thus reducing errors and the cost of correcting them.

New sales opportunities: the website is accessible all the time and reaches the global audience which is not possible with traditional storefront.

Economic Forces

Market Forces

Strong competition between organizations,

extremely low labor cost in some countries,

frequent and significant changes in markets and

increased power of consumers

Technology Forces

The development of information and communications technology (ICT) is a key factor in the growth of ecommerce.

This in turn has made communication more efficient, faster, easier, and more economical as the need to set up separate networks for telephone services, television broadcast, cable television, and Internet access is eliminated.

From the standpoint of firms/ businesses and consumers, having only one information provider means lower communications costs.

Societal and environmental forces Changing nature of workforce

Government deregulations

Shrinking government subsidies

Increased importance of ethical and legal issues

Increased social responsibility of organizations

Rapid political changes

Major Business Pressures

Market andeconomic pressures

Strong competitionGlobal economyRegional trade agreements (e.g. NAFTA)Extremely low labor cost in some countriesFrequent and significant changes in marketsIncreased power of consumers

Societal andenvironmental pressures

Changing nature of workforceGovernment deregulation of banking and other servicesShrinking government budgets subsidesIncreased importance of ethical and legal issuesIncreased social responsibility of organizationsRapid political changes

Technological pressures Rapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost Vs. performance ratio

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Physical agent

Digital agent

Digital Product

Physical Product Physical process

Digital process

Virtual process

Virtual delivery agent

Vir

tual

pro

du

ctElectronic commerce areas

The core of electronic commerce

Traditional commerce

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Figure shows that the EC applications are supported by infrastructures, and their implementation is dependent on four major areas (shown as supporting pillars) people, public policy, technical standards and protocols, and other organizations.

The EC management coordinates the applications, infrastructures, and pillars. It also includes Internet marketing and advertisement.

The Electronic Commerce Field

A Framework for Electronic Commerce 9

Electronic Commerce Applications• Stocks Jobs • On-line banking

• Procurement and purchasing• Malls • On-line marketing and advertising• Home shopping • Auctions • Travel • On-line publishing

People:Buyers, sellers,intermediaries,

services, IS people,and management

Publicpolicy,

legal, andprivacyissues

Technical standardsfor documents,security, and

network protocolspayment

Organizations:Partners,

competitors,associations,

government services

Infrastructure

(1)Common business

services infrastructure(security smart

cards/authenticationelectronic payment,

directories/catalogs)

(2)Messaging and

information distributioninfrastructure

(EDI, e-mail, Hyper TextTransfer Protocol)

(3)Multimedia content

and networkpublishing infrastructure

(HTML, JAVA, WorldWide Web, VRML)

(4)Network infrastructure

(Telecom, cable TVwireless, Internet)(VAN, WAN, LAN,

Intranet, Extranet)

(5)Interfacing

infrastructure(The databases,customers, and

applications)

Management© Prentice Hall, 2000

Impact of e-commercee-commerce will eliminate mediation process as

producers can sell direct to consumers.

firms will have fast knowledge of what customers want.

Firms can use this knowledge to guide the development of their product lines and to identify new growth areas at their earlier stages.

e-commerce will also help small- and medium-sized enterprises (SMIs) to gain greater market reach for their products and services.

Impact of e-commerceIn fact, e-commerce can be an efficient and

economical way for many SMIs to enter an export market.

E-commerce offers consumers a wide range of new opportunities to do direct shopping and banking using the convenience of a home computer or other communication devices.

Consumers will also benefit in terms of lower final prices due to lower transaction costs as described above.

e-commerce consumers will have a wider and direct access to producers of goods and services without intermediaries.

Impact of e-commerceWith a wider choice of products and services

offered to them, they can cast their preferences by describing what they want.

In this environment, e-commerce will hasten the shift of market power of consumers, from a "product taker" to a "product maker".

As a result, this process will lead to greater competition among firms to protect their market share.

e-commerce will result in higher investment by the Government, firms and consumers.

Impact of e-commerce Coupled with higher investment in IT, e-

commerce will result in higher efficiency and productivity of the economy.

e-commerce will contribute to higher total factor productivity of the Malaysian economy which is needed to sustain economic growth in the long term.

E-commerce will create new activities and a variety of new industries which utilize IT.

This will lead to the creation of new job opportunities.

Brief HistoryEarly 1970s saw introduction of Electronic Fund

Transfers (EFT) Limited to large organizations, financial institutions, few

daring small business

Late 1970s and early 1980s – Electronic data interchange(EDI)for e-commerce within companies Used by businesses to transmit data from one business to another to include other transaction processes besides financial;

included manufacturers, retailers, services, etc

1990s- the World Wide Web on the Internet provides easy to use technology for information publishing and dissemination Cheaper to do business (economics of scale) Enable diverse business activities (economics of scope)

Between 1997 and 2000, more than 12000 Internet-related business were started

Copyright © 2010 Pearson Education, Inc.

E-commerce: A Brief History1995–2000: Innovation

Key concepts developedDot-coms; heavy venture capital investment

2001–2006: ConsolidationEmphasis on business-driven approach

2006–Present: ReinventionExtension of technologiesNew models based on user-generated content,

social networking, services

Slide 1-38

E-commerce infrastructureInformation superhighway infrastructure

Internet, LAN, WAN, routers, etcTelecom, cable TV, wireless, etc

Messaging and information distribution infrastructureHTML, XML, email, HTP, etc

Common business infrastructureSecurity, authentication, electronic payment,

directories catalogs, etcWeb architecture

Client/server modelN-tier architecture; e.g. web servers, application

servers, database servers, scalabilty

The process of e-commerceAttract customers

Advertising, marketingInternet with customers

Catalog, negotiationHandle and manage orders

Order capturePaymentTransactionFulfillment (physical good, service good, digital good)

React to customer inquiriesCustomers serviceOrder tracking

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Buyer and Seller Roles In Commerce