E-Commerce is the buying and selling of goods and services on the internet. E-Commerce is the act of doing business electronically.
This means that all your transactions are paperless and you use electronic means such as EDI electronic data interchange, electronic mail, bulletin boards, fax transmissions, electronic fund transfers and internet.
E-Commerce is defined as an electronic transaction as the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over computer mediated networks.
The goods and services are ordered over those networks, but the ultimate delivery of the goods or service may be conducted on or off-line.
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E-Commerce is the process of carrying out business online and electronically. E-Commerce covers the vast amount of business to consumer and business to business transactions taking place on the web with the help of internet, website hosting and website monitoring.
Learn about:-
1. Meaning and Definitions of E-Commerce 2. History of E-Commerce 3. Categories 4. Forms 5. Steps 6. Technological Framework 7. Applications 8. Driving Forces 9. Advantages 10. Limitations.
11. Risks and Factors Affecting E-Commerce Implementation 12. Principles 13. Impact on the Business Organizations 14. Impact of Globalisation 15. Impact of Internet 16. Risks.
What is E-Commerce: Meaning, Definitions, History, Types, Strategies, Advantages and Limitations
What is E-Commerce – Meaning and Definition
E-Commerce is the buying and selling of goods and services on the internet. E-Commerce is the act of doing business electronically. This means that all your transactions are paperless and you use electronic means such as EDI electronic data interchange, electronic mail, bulletin boards, fax transmissions, electronic fund transfers and internet.
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E-commerce is the ability of a company to have a dynamic presence on the internet which allows the company to conduct its business electronically.
E-Commerce is defined as an electronic transaction as the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over computer mediated networks. The goods and services are ordered over those networks, but the ultimate delivery of the goods or service may be conducted on or off-line.
In the broad meaning E-Commerce is a means of conducting business using one of the many electronic methods, usually involving telephones, computers or both.
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E-commerce is not about the technology itself, it is about doing business using the technology.
E-Commerce is the process of carrying out business online and electronically. E-Commerce covers the vast amount of business to consumer and business to business transactions taking place on the web with the help of internet, website hosting and website monitoring.
E-Commerce involves the automation of a variety of business to business and business to consumer transaction through reliable and secure connections. It includes the use of electronic transmission medium such as telecommunication or wireless to carry out the exchange of business document including buying and selling products and services digitally from one location to another using computer as component and internet as media.
E-Commerce is a composite of technologies process and business strategies that foster the instant exchange of information within organizations. E-Commerce strengthens relationship with buyers, makes it easier to attract new customers, and improves customer responsiveness and open new markets on a global scale.
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E-Commerce is the application of various communication technologies to provide the automated exchange of business information with internal and external customer, suppliers and financial institutions.
E-commerce can be defined from various perspectives:
1. From Communication Perspective – E-commerce is the delivery of information, products, services or payments via telephone lines, computer networks.
2. From Business Perspective – E-commerce is application of technology towards automation of business transactions and workflows.
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3. From Service Perspective – E-commerce is a tool that fulfills the desire of firms, consumers and management by improving the quality of goods and increasing the speed of service delivery.
4. From Online Perspective – E-commerce provides the capability of buying and selling of products and information on the internet and other online services.
E-commerce (electronic commerce) has emerged as an important way of doing business locally as well as globally. Earlier, e-business and e-commerce were used interchangeably. The basic reason for this was that information technology (IT) was used mainly for online buying and selling of goods and services. Over the period of time, applications of IT spread to all business processes. IBM of the USA used the term e-business for this phenomenon in 1997.
Since then, the term e-business is used in broader context including buying and selling of goods and services electronically. Turban et al observe that e-commerce constitutes the narrower definition of buying selling, transferring, or exchange of products and services, between businesses, groups and/or individuals using the Internet and extranets.
What is E-Commerce – History
E-commerce or electronic commerce, is the buying and selling of products or services via the internet.
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Nowadays the thought of living without E-commerce seems unfathomable, complicated and an inconvenience to many. It wasn’t until only a few decades ago that the idea of E-commerce appeared.
E-commerce was introduced 40 years ago and, to this day, continues to grow with new technologies, innovations, and thousands of businesses entering the online market every year. The convenience, safety, and user experience of E-commerce has improved exponentially since its inception in the 1970’s
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Paving the way for electric commerce was the development of the Electronic Data Interchange (EDI). EDI replaced traditional mailing and faxing of documents with a digital transfer of data from one computer to another. Trading partners could transfer orders, invoices and other business transactions using a data format that met the ANSI ASC X12, the predominant set of standards in North America.
It was apparent from the beginning that B2B online shopping would be commercially lucrative but B2C would not be successful until the later widespread use of PC’s and the world wide web, also known as, the internet. In 1982, France launched the precursor to the internet called, Minitel.
The online service used a Videotex terminal machine that was accessed through telephone lines. The Minitel was free to telephone subscribers and connected millions of users to a computing network.
By 1999, over 9 million Minitel terminals had been distributed and were connecting approximately 25 million users in this interconnected network of machines. The Minitel system peaked in 1991 and slowly met its demise after the success of the internet 3 years later.
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In 1990 Tim Berners Lee, along with his friend Robert Cailliau, published a proposal to build a “Hypertext project” called, “worldwideweb.” The inspiration for this project was modelled after the Dynatex SGML reader licensed by CERN.
That same year, Lee, using a next computer created the first web server and wrote the first web browser. Shortly thereafter, he went on to debut the web on Aug. 6, 1991 as a publicly available service on the internet. When Berner’s Lee decided he would take on the task of marrying hypertext to the internet, in doing that, the process led to him developing URL, HTML and HTTP.
When the National Science Foundation lifted its restrictions on commercial use of the NET in 1991, the internet and online shopping saw remarkable growth.
In September 1995, the NSF began charging a fee for registering domain names. 120,000 registered domain names were present at that time and within 3 years that number grew to beyond 2 million. By this time, NSF’s role in the internet came to an end and a lot of the oversight shifted to the commercial sector.
From the beginning, there were many hesitations and concerns with online shopping but the development of a security protocol – the Secure Socket Layers (SSL) – encryption certificate by Netscape in 1994 provided a safe means to transmit data over the internet. Web browsers were able to check and identify whether a site had an authenticated SSL certificate and based on that, could determine whether or not a site could be trusted.
Now, SSL encryption protocol is a vital part of web security and version 3.0 has become the standard for most web servers today.
What is E-Commerce – Categories
1. Electronic Markets:
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An electronic market is the use of information and communications technology to present a range of offerings available in a market segment so that the purchaser can compare the prices of the offerings and make a purchase decision. The usual example of an electronic market is an airline booking system.
An electronic market is an inter-organizational information system that provides facilities for buyers and sellers to exchange information about price and product offerings. In a differentiated market there is a variety of product offerings and search problem is more complex.
An effective electronic market increases the efficiency of the market; it reduces the search cost for the buyer and makes it more likely that buyer will continue the search until the “best buy” is found.
2. EDI:
EDI is the electronic exchange of structured business information in standard formats between computers. EDI eliminates the need for a paper-based system by providing an electronic link between companies. This reduces data entry tasks and improves business cycle times. EDI is the automated exchange of structured business documents such as purchase orders or invoices between an organization and its trading partners.
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The structured, machine readable format allows business documents to be transferred, without re-keying, from an application in one location to an application in another location, without human intervention or interpretation.
In EDI information is passed electronically from one computer network without having to be read, retyped or printed. Any company or group which uses EDI is called a trading partner.
3. Internet Commerce:
Information and communication technologies can also be used to advertise and make once-off sales of a wide range of goods and services. This type of E-commerce is identified by the commercial use of the internet.
What is E-Commerce – 3 Forms
1. Business-to-Business (B2B) E-Commerce:
This category of electronic commerce involves both electronic business marketplaces and direct market links between businesses. For example, many companies offer secure Internet or extranet E-commerce catalog websites for their business partners and suppliers. B2B E-commerce portals provide auction and exchange marketplaces for businesses. Few organisations may rely on Electronic Data Interchange (EDI) via the Internet or extranets for computer-to-computer exchange of E-commerce documents with their larger business customers and suppliers.
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2. Business-to-Consumer (B2C) E-Commerce:
In this form of electronic commerce, businesses must develop attractive electronic marketplaces to entice and sell products and services to consumers. For example, many companies offer E-commerce websites that provide virtual storefronts and multimedia catalogs, interactive order processing, secure electronic payment systems, and online customer support. Few example are ScrewFix(dot)com, amazon(dot)com etc.
3. Consumer-to-Consumer (C2C) E-Commerce:
C2C e-commerce provides an interactive platform to consumers where they could directly initiate transactions. Auction type transactions are gaining more popularity among consumers. C2C portal managing companies generate revenue as commission based on predefined percentage of value of transaction. The huge success of online auctions like eBay, where consumers (as well as businesses) can buy and sell with each other in an auction process at an auction website, makes this E-commerce model very attractive to consumers.
What is E-Commerce – Steps in Formulation of E-Commerce Strategy
E-commerce strategy involves deciding the future direction and actions of a firm’s e-commerce business to achieve specific objectives.
Formulation of e-commerce strategy involves the following steps:
Step # 1. Decision about E-Commerce Mode:
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Any firm planning to offer e-commerce should have a long-term vision and an objective of transforming itself into an e-commerce to provide business value to the firm and its shareholders.
The firm may have the following options in adopting e-commerce mode:
(a) To use its website just as a means of advertising; this option is very popular as it involves low cost, no cost of security, payment, etc.
(b) To open online stores to complement existing stores;
(c) To establish a separate online division within the firm; and
(d) To dissolve its regular business and go for a full online business operation.
Before starting formulation of a strategic plan for e-commerce, there is a need to identify which out of the above options is best suited to the overall vision of the firm. The choice depends on the nature of business of the firm, environment of the business, and internal resources available.
Step # 2. Identifying Business Objectives of E-Commerce:
Business objectives behind an e-commerce strategy may include some or all of the following- to improve customer service and interaction; to increase brand awareness and awareness of the firm; to expand geographic reach; to expand into new markets; to reduce operating costs; to be seen as an innovative and progressive firm through being an e-commerce leader; and to compete with bigger rivals on more even terms. The firm should focus its reengineering into areas where it gives more return on investment.
This requires well-defined objectives such as to sell more goods and services by using the web site, to provide online customer support, to support its business partners online, and to work more closely with customers and suppliers to improve the tendering process and better administration of huge number of transactions involved in e-procurement.
Step # 3. Analysing Feasibility of E-Commerce:
Once the business objectives of e-commerce are clear, the firm needs to carry out a feasibility study and analyse whether it is possible for the firm to offer online services with the resources available- human and technological. These resources should be evaluated in the light of critical success factors of e-commerce.
Some of the questions to be considered when developing an e-commerce strategy include:
(a) How can the Internet further the firm’s overall business objectives?
(b) What products (goods and services) will the firm offer and deliver on the Internet?
(c) How does the firm incorporate the website into existing lines of business and existing channels of distribution?
(d) How can the firm be sure that its data and that of its customers, suppliers, and partners will be secure?
(e) What will be significant disadvantage if the firm’s competitors provide these capabilities to customers before the firm does?
While answering the above questions, it should be taken into account that an important aspect of e-commerce introduction is the transformation required of core business processes. This requires a thorough understanding of the existing business. Therefore, the firm needs to carry out a full SWOT analysis.
Step # 4. Planning and Design of E-commerce:
E-commerce strategy formulation should depend on the strengths of the firm and opportunities available to it. If both are positive, the firm may proceed for adoption of e-commerce. The first step is to design a website. The contents and complexity of the website depend on the objectives of e-commerce mode which the firm has chosen. In designing website, the firm has two options- website to be designed internally and website to be designed by external experts.
Website can be designed internally if the firm has requisite resources. Generally, firms engaged in IT business design their web sites internally. However, if the firm’s resources are not commensurate with requirements of the website design, it should be done by outside experts in close interaction of the firm’s key personnel. Further, the firm has to decide who will look after web site maintenance which includes web site modification too in the light of changing e-commerce requirements. This question may be solved on the above pattern.
E-Commerce Strategy Implementation:
When the website is complete in all respects, e-commerce is implemented. A major problem in e- commerce implementation is that it promises long term gain but no immediate benefits. However, many firms want quick gains from e-commerce. Therefore, it is important to keep in sight the business transformation as well as the long-term gains.
Whenever possible, e-business projects should be divided into three to six month modules so that immediate benefit can be delivered with flexibility in the overall plan. E-commerce is a new business platform that will grow and evolve. To sustainable e-commerce success is to think and plan not just in terms of overall architecture, but act in incremental steps.
E-commerce Strategy Evaluation:
Like any other strategy, e-commerce strategy needs to be evaluated during and after implementation.
The objectives of e-commerce strategy evaluation are:
(a) To find out whether the e-commerce system is delivering what it was supposed to deliver.
(b) To identify failing e-commerce projects as soon as possible and determine the reasons for failures.
Based on this evaluation, suitable corrective actions may be undertaken to make e-commerce successful.
What is E-Commerce – Technological Aspects of E-Commerce
E-commerce requires great technological support computer networks, internet and www provide strong technological base to E-Commerce. E- Commerce requires computerizing of various departments, doing internal working, getting internet connection, setting up web servers and implementing relational databases.
The technological aspects of E-commerce include:
E-commerce requires the network of computers. Networking ensures interconnection between independent computers in such a way that these are able to communicate with one another and share the resources like printers.
The emergence of networking formed various types of networks like local area network, wide area network, and metropolitan network. The people in network wanted to communicate with people in another network; therefore a network of network was formed. This network of network is known as internet.
It is a subset of internet. Full form of WWW is World Wide Web. It deals with the information service part. WWW is based on client server architecture. It means that computers on WWW are classified into two categories named as servers and clients. Clients – are the computers who seek information and Servers- respond by providing the information so sought.
The World Wide Web is a way of accessing information over the medium of the internet. It is an information-sharing model that is built on top of the internet. The web uses the HTTP protocol, only one of the languages spoken over the internet, to transmit data. Web services, which use HTTP to allow applications to communicate in order to exchange business logic, use the web to share information.
The web also utilizes browsers, such as internet explorer or Firefox, to access web documents called web pages that are linked to each other via hyperlinks. Web documents also contain graphics, sounds, text and video.
The Web and Ease of use- The ease of use is a major driver of web growth. Using a simple graphical interface, the web browser issues the commands, makes the corrections, and transmits the data with point and click simplicity. It allows users to send e-mail and access gopher sites as well as the telnet, FTP and other functions without having to master arcane commands.
In the web, sites are interconnected to each other through highlighted- hyperlinked words. By clicking on the highlighted word, a user can be transported into another web site that contains a related document that other web site is. This process can keep continuing because this new site may contain additional hyperlinks to other sites, thus creating a web of connections.
In a sense, the web makes the internet dummy-proof. Before the advent of the Web, navigating the internet was difficult, requiring technical skills and patience. Because of the intuitive nature of hypertext, many non-technical users are able to navigate the various internet databases without having to learn complicated commands.
Also, the use of graphics and multimedia contributed to a user-friendly environment. Recent advances in multimedia are attracting users who are intimidated or repelled by the next intensive interfaces of DOS and UNIX.
What is E-Commerce – Top 4 Applications: B2B, B2C, C2B and C2C Applications
1. Business to Business (B2B) Applications:
It involves exchange of products, services or information between businesses and supply chain integration. B2B applications focus on the expansion of business through partnerships. It is the fastest growing e-commerce segment. The B2B transactions are much higher than B2C transactions. B2B applications are beneficial to the business as they lead to reduction in costs.
2. Business to Consumer (B2C) Applications:
E-commerce is mostly understood as B2C only, this is not so. Under this model, the commercial transactions take place between business firms and consumers. For instance, Shoppers stop, Reliance trends, Amazon sell products online.
B2C is beneficial to customers as they get the access to a wide variety of products, lower prices and the stores otherwise beyond their reach. It includes retail web sites selling goods such as – books, electronic devices, cell phones, garments, etc. Recently, both Indian and multinational departmental stores are offering online shopping facility to the consumers.
3. Consumer to Business (C2B) Applications:
This e-commerce model enables the buyers to set their own price, which is binding for specific goods or services. The website collects the bids from large groups of people and then offers the bid to participating sellers. It benefits the business as the customers give their own price and earn profit by getting goods and services at a reduced price.
Another form of C2B application is a complete reverse of the traditional business, wherein the consumers offer products and services to the business and the business pays. For example, on-line advertising on Google and Amazon.
4. Consumer to Consumer (C2C) Applications:
In this model, the consumers trade directly with each other using a third party business to execute the transaction. One way is online auctions when an individual can place his goods on sale and others bid for it like Ebay. Other way is the online classified advertising sites like Amazon, which allow individuals to sell the products through their websites.
This model has the advantage of low cost, ease of locating the product and higher profitability. However, it suffers from some serious drawbacks of lack of quality control and payment guarantee.
What is E-Commerce – Driving Forces
Today’s business world is transforming rapidly. Inventions of multiple technologies, shortening of product life cycles and evolving changing markets are forcing the adoption of e-commerce technology.
Some of the driving forces are explained as under:
In today’s competitive world, the firms can only survive when they are able to cut the costs. So, economic factors helps in reducing transaction costs and agency costs forcing firms and companies highly to adopt E-commerce technology.
(i) Transaction Costs:
Use of technology leads to the reduction of transaction costs. Network helps the companies in reducing the cost of market participation and this result in reduction of transaction costs. Earlier it was quite expensive to use markets because heavy costs were involved in locating and communicating with the suppliers located at long distance, monitoring contract compliance, obtaining information about the products and so on.
So it required companies to hire more employees. But now with the computer links to suppliers have been able to reduce transaction costs as it has become easier and cheaper for business to buy product from market place rather than making it.
(ii) Agency Costs:
Besides reducing transaction, cost economic forces proves that e-commerce and information technology also help in reducing agency cost. As an owner appoints agents to work on his behalf, these agents have to be supervised otherwise they start pursuing their own individual interests rather than those of organization and owner. So in the form of supervision and agency costs, businesses have to incur agency costs.
With the use of information technology and e-commerce, the cost of acquiring and analysing information is decreased. This results in to reduction of agency cost as it becomes easier for managers to oversee more employees.
Marketing and Customer Interaction Forces:
Companies also employ electronic commerce to provide marketing channels, to target micro segments or small audiences and to improve post sale customer satisfaction by creating new channels of customer service and support. Companies want to supply target customers with product and service information in greater detail than that provided in a television or full page advertisement.
As more companies flood the marketplace with new products, target marketing is becoming an increasingly important tool of differentiation. Not only new types of products emerging, but so are new players in old product categories, new spins on traditional plans, new pricing strategies, new target markets, new market research methods and more.
The message for marketers is clear- the purchasing climate and products change quickly. In order to be competitive, marketing executives must employ technology to develop low cost customer prospecting methods, establish close relationships with customers and develop customer loyalty.
Marketers must adapt to a business world in which traditional concepts of differentiation no longer hold, in this world “quality” has new meaning, “content” may not equated with “product”, and “distribution” may not automatically mean “physical location”.
In this new environment, brand equity can rapidly evaporate and marketers need to understand how customers allocate their loyalty. Given the proliferation of choices, consumers view brand names with growing indifference. For the manufacturer, establishing a new brand is formidable task and with increased competition it is taking longer to break through and develop the customer base.
Maintaining an existing brand is not much easier. In light of this, marketers in all industries are seeking new ways of interacting with customers and delivering services.
Now, we are entering the age of customization, where product is produced as per the needs of and preferences of the customer. So this type of shifts towards customer oriented marketing has forced companies to adopt e-commerce technology.
Now days, marketing professionals are using e-mails, internet and e-commerce enabled web sites to interact with customers in new and attractive manner.
Because of high competition, markets are no longer protected as competition can arise unexpectedly from anywhere. So, companies have to be more innovative to maintain market share and leadership.
Therefore, to survive in this competitive world, companies are adopting e-commerce enabled business operations to be carried out 24 hours a day by linking the organization with customers, suppliers and supporting business infrastructure. Thus it is getting proved that in today’s time e-commerce technology lets the business to survive and grow in the world of cut throat competition.
Technological Forces and Digital Convergence:
One of the main drivers that demand the adoption of E-commerce is technological forces. Most of the famous business grew out of technological changes that they were able to exploit. It is too crucial for an organization to understand information technology and e-commerce technology to become a successful business in today’s rapidly changing and high competitive world.
In today’s time information Technology is developing at digital level and by this it has redefined information. It was for the first time that any kind of information such as number; text, sound, and video can be put in to digital form that any computer can store and process. Technological innovation in the areas like palmtops, laptops, credit cards, debit cards and smart cards leads to the adoption of E-commerce technology and practices.
What is E-Commerce – Benefits to Business Organizations, Consumers and Society
An E-Commerce website offers many advantages.
Benefits of E-Commerce to Business Organizations:
1. Increase in Sales – The total sale of the business is bound to increase when business is supported by internet based selling.
2. Expansion of Market Size – Firms can reach more geographically scattered customer base by bringing the business to internet.
3. Better Customer Service – By using E-commerce firms and companies provide better customer services because E-commerce technology considerably increases service efficiency during and – after sales.
4. Availability of Current Information – E-commerce enabled websites provide latest information about product prices. Whenever there is change in price or in any feature of any product the companies can immediately display by editing the web pages.
5. Efficient Procurement of Stock – E-procurement decreases lead time, the time gap between placing an order and actual receipt of goods. E-commerce also reduces the quantity of inventories to be held in stores.
6. Rise in Marketing Efforts – E-commerce initiatives raise to marketing strategy as offline marketing efforts are supported by online marketing initiatives.
7. Decrease in Costs – There is a big reduction in costs such as cost of Information processing, cost of processing customer orders, costs of distribution and marketing etc. For Example- Microsoft allows download of some software rather than sending the CDs thereof by mail. By this way E-commerce helps to reduce distribution costs.
Benefits of E-Commerce to Consumers:
1. Convenient Shopping – E-commerce gives the benefit of convenient shopping to consumers as they can do shopping from home or office or from any place in the world at any time.
2. More Choices – E-commerce provides ability to consumers to search for more vendors and products over the Internet. So the consumer’s access is not limited to sellers situated in a limited geographical area that they can cover by walking or driving. Rather they have greater choice of goods offered by global E-commerce enabled companies.
3. Hub of Information – Customers can get access to greater volume of information by using search engines like Google. By this customer are enabled to purchase products with best feature and at competitive prices as well.
4. Quick Delivery – Online products can be downloaded from corporate websites rather than getting through offline channels.
Benefits of E-Commerce to Society:
1. Improvement in Standard of Living – Huge spending on information technology directly leads to economic development and higher standard of living.
2. More Employment – E-Commerce provides greater opportunity of employment as more persons can work off site with the help of E- Commerce tools.
1. Access to a Global Market:
The Internet allows companies to have access to a global market rather than just the potential customers in the surrounding area of their physical location. Due to the fact that the website is open 24-hours a day so, time differences between countries are no longer a problem.
2. Cutting out the Middleman:
Business can sell direct to the consumer rather than having to sell to a supplier and then sell it on, this means the company can usually offer the product at a discount compared to their retailers because only one company has to make profit rather than two or more.
3. A Level Playing Field:
A small business can compete and show itself as professional as much as, large ones as budgets for setting up a professional site are relatively cheap to the amount of return you can get on them.
4. Open 24 Hours a Day:
With fully automated payment and order processing systems your site need never be closed even if your office/warehouse is. Orders can be dispatched during opening hours while orders can be taken 24 hours a day, this has great advantages for people who might be at work or busy during normal working hours.
5. Greater Customer Satisfaction:
An E-Commerce website can be a powerful tool for building customer loyalty if it is effective enough, a well-designed website puts the customer in charge of the relationship, they can buy, browse, ask for help or track the progress of order they have placed where they want and when they want.
6. Better Customer Information:
You can quickly and easily analyse your customers by location and area as well as the products they buy as you will have to request a customer’s name and address from them when processing a transaction.
As well as you being more informed about your customers, your customers are also more informed as generally on E-Commerce sites there is more information on a product including reviews etc. to help the customers choose ,the right product for them.
Therefore e-commerce brings benefits to one and all. For business organizations e-commerce helps in reducing service costs and gaining competitive advantage over rival firms. To consumers it provides access to more information and wider product choice. To nations, e-commerce can serve as vital role for building knowledge driven modern economy.
What is E-Commerce – Technical Limitations and Non-Technical Limitations
Despite of many benefits offered by E-Commerce it also has some limitations.
A. Technical Limitations:
1. The speed of E-commerce depends on telecommunication bandwidth, which is limited in developing countries.
2. Protocols used in E-commerce are not yet standardized and many countries have their own versions.
3. There is a great lack of security of information and there is always possibility that hackers can make unauthorized access to digitized information and electronic records.
4. It is tedious technical job to integrate information technology with business systems. Many of the organizations do not have right infrastructure needed for E-Commerce. Hence they face difficulties in integrating E-Commerce infrastructure with existing business processes.
5. There is high cost of technical solutions. These may be up to millions of rupees.
6. Another technical limitation is that programming languages and software are evolving constantly. Programming languages are changing rapidly and programmers have to constantly update their skills. Changes are happening so fast and diversified as well that business managers are in affix while selecting right infrastructure for the organization.
7. Browsers are not standardized. They differ in their ability to display web pages. That is why, before uploading to web server, web pages and websites must be tested in various browsers i.e. internet explorer and netscape navigator, google chrome etc.
B. Non-Technical Limitations:
E-commerce requires people’s positive attitude towards information technology. Lack of positive attitude, trust and resistance to change has always created barriers in the development of e-commerce.
Some of the major non-technical limitations of e-commerce:
1. It is difficult to-
(i) Calculate return on investment
(ii) Integrate existing databases and transaction-processing software into software that enables e-commerce
2. Cultural and online fraud is increasing.
3. Some customers like to feel and touch products. Also, customers are resistant to the change from shopping at a brick-and-mortar store to a virtual store.
4. There is lack of awareness about E-commerce technology in underdeveloped and developing countries.
5. There is requirement of heavy investment for the implementation of E-commerce solutions.
6. There is lack of customer confidence. Because there is always fear of misuse of vital information like credit card numbers provided to suppliers through websites.
7. High possibility of frauds and cyber-crimes.
8. Cultural and Language differences prove to be a limitation of E- Commerce.
9. In many countries like India people prefer to visit places physically examine the goods, bargain, and then purchase. People having such type of habits do not like online shopping.
10. Cyber laws are evolving. Many legal issues relating to E- commerce do not have final solutions and verdicts.
It requires thorough research and development to overcome the technical limitations. But no-technical limitations requires change in mind-set of people and this is a more challenging task.
What is E-Commerce – Risks and Factors Affecting E-Commerce Implementations
The industry perceives the following risks:
(1) Lack of commercial and legal system
(2) Lack of infrastructure
(3) Lack of awareness of technology and its benefits
(4) Lack of legal issues like trust and liabilities
(5) Lack of encryption like trust and assurance
(6) Lack of consumer protection laws
(7) Lack of consistent taxation laws
Workflow issues, such as how incoming orders are handled, must be addressed before online selling can be effectively integrated into operations. Getting operations logically- organized may be seen as the biggest chore in moving to e-commerce.
Working with banks to establish merchant accounts and coordinating with other financial institutions can also be seen as a lot of work even though comprehensive solutions are available to take care of this.
External and Internal Factors:
E-commerce implementations in India have been affected by both external and internal factors.
External Factors:
It include a low number of customers accessing the net for their purchasing needs, poor communications infrastructure, gaps in legal and regulatory frameworks and issues concerning payment gateways; In addition to this competition, collaboration etc. are some other factors.
Internal Factors:
It includes perceived uncertainties with regard to benefits, territory protection issues and a lukewarm response from business partners. It also include improve productivity and better decision making capabilities. In most companies, IT systems and processes are not geared to maximize the benefits of e-commerce. The internal penetration rate is very low. Moreover, less than 5 percent of internet users buy product/services online.
What is E-Commerce – Principles
Most e-commerce merchants leave the mechanics to their hosting company or IT staff, but it helps to understand the basic principles.
Any system has to meet four requirements:
i. Privacy – information must be kept from unauthorized parties.
ii. Integrity – message must not be altered or tampered with.
iii. Authentication – sender and recipient must prove their identities to each other.
iv. Non-repudiation – proof is needed that the message was indeed received.
Privacy is handled by encryption. In PKI -public key infrastructure- a message is encrypted by a public key, and decrypted by a private key. The public key is widely distributed, but only the recipient has the private key.
For authentication (proving the identity of the sender, since only the sender has the particular key) the encrypted message is encrypted again, but this time with a private key. Such procedures form the basis of RSA (used by banks and governments) and PGP (pretty good privacy, used to encrypt emails).
Unfortunately, PKI is not an efficient way of sending large amounts of information, and is often used only as a first step – to allow two parties to agree upon a key for symmetric secret key encryption. Here sender and recipient use keys that are generated for the particular message by a third body- a key distribution centre.
The keys are not identical, but each is shared with the key distribution centre, which allows the message to be read. Then the symmetric keys are encrypted in. the RSA manner, and rules set under various protocols. Naturally, the private keys have to be kept secret; and most security lapses indeed arise here.
Digital Signatures and Certificates:
Digital signatures meet the need for authentication and integrity. To vastly simplify matters (as throughout this page), a plain text message is run through a hash function and so given a value- the message digest.
This digest, the hash function and the plain text encrypted with the recipient’s public key is sent to the recipient, The recipient decodes the message with their private key, and runs the message through the supplied hash function to that the message digest value remains unchanged (message has not been tampered with). Very often, the message is also time stamped by a third party agency, which provides non-repudiation.
What about authentication? How does a customer know that the website receiving sensitive information is not set up by some other party posing as the e-merchant? They check the digital certificate.
This is a digital document issued by the CA (certification authority- Verisign, Thawte, etc.) that uniquely identifies the merchant. Digital certificates are sold for emails, e-merchants and web-servers.
Sensitive information has to be protected through at least three transactions:
i. Credit card details supplied by the customer, either to the merchant or payment gateway, handled by the server’s SSL and the merchant/ server’s digital certificates.
ii. Credit card details passed to the bank for processing handled by the complex security measures of the payment gateway.
iii. Order and customer details supplied to the merchant, either directly or from the payment gateway/credit card processing company. Handled by SSL, server security, digital certificates and payment gateway sometimes.
(1) Make e-commerce a part of your company’s vision
(2) Make your organization and stakeholder’s e-ready
(3) Identify e-commerce objectives
(4) Set up an e-commerce tasks force
(5) Allocate funds and develop IT infrastructure
(6) Start e-commerce implementation in small steps, but start now
(7) Set e-goals for better customer service and cost control
Vendor Participation in the E-Commerce:
Customer participation may not be a major problem area. But companies are likely to face hurdles in integrating a large number of channel partners across the country with their e-commerce initiatives. Lack of IT awareness and infrastructure and general reluctance to invest in e-commerce by channels partners are highlighted as other major problem areas.
Companies use web sites primarily for information dissemination and as a marketing tool. Most companies are in the process of laying the basic foundation in terms of infrastructure and internal systems for an eventual full-scale e-commerce implementation.
There are no major size- wise trends as far as use of company web sites are concerned, though larger companies are slightly ahead in receiving orders online. They also lead in e- commerce enabling their web sites.
E-commerce in India is growing into maturity without the hype of a million jobs. But legal issues and infrastructure are the main threats. We have opportunities in the SME -small and medium enterprise segment, new-generation firms and in rural areas.
What is E-Commerce – Impact on the Business Organizations
In the present global market, e-commerce has substantial impact on the business organizations.
This impact is in the following forms:
1. Wide Market Area:
E-commerce creates a wide market area because of lack of physical limitations. In fact, through e-commerce, a seller can reach the whole population of the world. In the same way, a buyer can reach whole of the sellers worldwide. Thus, wide area market provides more flexibility to both sellers and customers to transact their selling buying.
2. Ease of Operation:
E-commerce provides easy operation of selling/buying. This helps both sellers and customers. Since transaction is done on-line, placing of an order can be completed within seconds. Similarly, many of the services can be provided on-line. This results in operational efficiency in whole commercial operation.
3. Lower Transaction Costs:
E-commerce lowers transaction costs as it saves costs of paper work—drafting and typing order, sending order through postal mail, etc. From the seller’s side, costs are saved by eliminating paper work. Further, sellers can eliminate costs of displaying various products physically. Displaying of products in physical form involves lot of costs— building rent, salary and benefits of personnel involved in displaying, electricity charges, etc.
4. Lower Inventory Requirement:
Since e-commerce centralises distribution channel and eliminates many intermediaries in the distribution process, volume of finished product inventory required is reduced considerably. That results in much lower inventory carrying costs. This may enable the sellers to pass a part of benefits to their customers.
5. Shopping from Home/Workplace:
E-commerce provides facility to customers to shop from their home or workplace. This is possible because e-commerce does not require physical contact between sellers and customers. Shopping from home or workplace suits them who have very busy work schedule or social engagement. It also suits them who do not like to bear the botheration of visiting shops physically.
6. Increased Seller-Customer Interaction:
E-commerce allows sellers and customers to interact more freely. This is possible because sellers and customers are not required to interact physically but they interact through websites. Increased seller-customer interaction provides more satisfaction to customers.
What is E-Commerce – Impact of Globalisation on Internet/Electronic Commerce
Exceptions apart, majority of the corporate bodies were successful and were contented with manufacturing and marketing goods and service well within the national boundaries. That is international considerations were the least. Profits earned from exporting products to foreign countries were considered as cream on the cake but not really essential to the corporate success.
Even in advanced nations until 1960s, most of the companies organised by having number of product divisions which made and sold goods only in their respective countries. All manufacturing and sales outside those advanced nations were managed through a separate international division. An international assignment was considered a message that the person was no longer promotable and should be looking for another job.
In the current century everything has changed drastically. Experts have defined the term “globalisation” in many ways; of which one very simple definition runs as “economics without national borders — an arrangement under which goods and services, capital, knowledge and know-how as well as labour more freely more under the force of markets”.
Strictly speaking, globalisation refers to doing business abroad while adopting international standards for conducting business transactions with others. As such, the interdependence of countries under globalisation helps to promote cross-border flow of goods and services capital and technology.
In the final analysis, as per the theory of comparative advantage, specialisation is also achieved for increasing production and productivity. The advocates of globalisation claim that final result of globalisation is removal of world poverty through trade and tickle down effect.
Each country gets a wider span of benefits from different opportunities arising around the world. The term “globalisation” means convergence of national market and putting international trade on the fore front of strategic importance in the development process.
The process of globalisation has created many opportunities for India.
These are:
(1) Exposure to strongest in the world village.
(2) Infrastructural gaps-filled
(3) Idle resources are fully used.
(4) Research and development activities encouraged.
(5) Forex reserves built up.
(6) Caring for environmental balance.
On the other hand challenges and risks in its trail are:
(1) World poverty.
(2) Financial crisis.
(3) Pressure on the environment.
(4) Heavy dependence on dollar.
(5) Corruption.
(6) Fiscal deficit and inflation
(7) Fluctuating employment opportunities.
(8) Divestment and reforms.
(9) Due weightage to technology updating.
(10) Domestic savings
The Strategies to Control/Managing Globalization:
Globalization is the order of the day; more it ripens more its taste will be. Hence, there is need to have specific strategies to manage successfully globalisation.
These strategies are:
(1) Control inflation.
(2) Cutting of wages.
(3) Remove restriction on foreign investments.
(5) Match employment generating policy with investment policy.
(6) Reject corporate and MNC driven technology growth.
Globalisation or internationalisation of markets and corporations has drastically changed the way modern corporations do the business. To reach the economies of scale essential to achieve the low costs, and, hence low prices, needed to be competitive the companies are now thinking of a global or world-wide market instead of a national market.
Whether it is two wheeler or four wheeler, a pair of shoes, electronic household goods even, furniture we commonly see particularly in every country- particularly from advanced nations to developing nations.
Instead of using one international division to manage everything outside the home country, large companies are now using matrix structures in which product units are interwoven with country or regional units. Now international assignments are considered almost key for anyone keenly interested in reading top management.
As more and more industries are turning global, strategic management is becoming increasingly significant way to keep track of international developments and position the company for long- term competitive advantage.
The world known companies for consumer durables and non-durables have started acquiring and merging with other nations’ companies to avoid the dangers of competitive disadvantage in fast changing business all over the world.
That is international considerations have led to the strategic alliance both in product and service industries between developed and developed nations on one hand and the developed and developing nations on the other.
What is more significant is that the corporate world of developing nations has now woke up and getting consolidated to be the “global players” from being the state of “local players.” There is no go, unless they become competitive to face international standards of quality and prices of goods and services.
What is E-Commerce – Impact of Internet
As the world becomes increasingly interconnected, particularly through the internet with its open protocols, forward looking business will be able to make products available to a global market, the largest possible market, without having to create and maintain their own private networks for sales, delivery and customer support.
At fundamental level, the internet is a series of standards for three basic tasks- (1) Sharing a file with one or more parties (2) Sharing e-mail with one or more parties (3) Allowing the user of one computer system to log on to another computer system.
From these three functions Internet applications like World Wide Web (www), file transfer, telnet and others are created. The growth of Internet is accredited to wide-spread acceptance and implementation of the internet standards.
The reasons for faster growth of internet are— Internet is an open system — Internet does not belong to anyone — Internet’s World Wide Web.
The merits of internet are:
Ease of operation-E-tailing does not involve high cost — It has global coverage-It gives better returns of world prices-Products. are at doorstep-Arrival of digital technology—Added advantage to mail order houses- Building closer and long-term relationship – Rapid promotion of sales.
The Demerits of internet are- These are for retailers or e- tailors as well as consumers.
In case of e-tailors these are- The extent of penetration of credit cards in the country. — Delivery is another danger zone. — Sales tax is common to all players in this market. – Unfriendly websites for first-time users. — Traditional marketing tries to maximise the value per transaction. — Need to learn relationship. – Danger of disintermediation. — Need to provide better value for money.
In case of consumers the problems faced are- Misuse of credit card information. – No personal examination of products. – No face to face contact like sales person. — Non-familiarity of internet navigation. — Non-availability of easy Internet access as all customers do not have PCs. — Surfing is time consuming.
However, rise of Internet has influenced business community in several ways.
These are:
1. The internet is forcing companies to transform themselves.
2. New channels are changing market access and branding causing the disintermediation or break -down of traditional distribution channels!
3. The balance of power is shifting to the customers as Internet makes them more demanding due to easy access.
4. The forces of competition are changing. That is new technology driven firms and older traditional competitors are exploiting the Internet to become more innovative and efficient.
5. The pace of business is increasing dramatically. Inter- party relations have become much easier that facilitate faster change.
6. Internet is pushing corporations out of their traditional boundaries. The old or traditional relations between manufacturers, dealers, suppliers and customers have changed. It is due to extranet activities.
7. Knowledge is becoming a key asset and a rich source of competitive advantage.
All these sets of impact have created new challenges to strategic management to get ready to meet the same effectively.
What is E-Commerce – Risks to E-Commerce
The scope for e-commerce in India is no doubt tremendous in the years to come, but still there are some pitfalls in its way of success that should be taken care of.
They are:
1. Studies have revealed that 23% of the customers quit even before they register themselves at a particular site because they hesitate to register themselves.
2. The time of delivery stated is unclear.
3. The time taken for downloading is very long.
4. People in India have habit of buying goods only after feeling the goods. This drawback can only be removed if matured companies enter the e-commerce in whom people have good faith.
In person-to-person transactions, security is based on physical cues. Consumers accept the risks of using credit cards in places such as department stores because they can see and touch the merchandise and make judgments about the store. On the Internet, without those physical cues, it is much more difficult for customers to assess the safety of your business.
Also, serious security threats have emerged:
1. Proofing:
The low cost of Web site creation and the ease of copying existing pa s makes it all too easy to create illegitimate sites that appear to be operated by established organizations. Con artists have illegally obtained credit card numbers by setting up-professional-looking web sites that mimic legitimate businesses.
2. Unauthorized Disclosure:
When purchasing information is transmitted “in the clear,” without proper security and encryption, hackers can intercept the transmissions to obtain customers’ sensitive information—such as credit card numbers.
3. Unauthorized Action:
A competitor or disgruntled customer can alter a Web site so that it malfunctions or refuses service to potential clients.
4. Eavesdropping:
The private content of a transaction, if unprotected, can be intercepted en route over the internet.
5. Data Alteration:
The content of a transaction can be not only intercepted, but also altered en route, either maliciously or accidentally. User names, credit card numbers, and dollar amounts sent without proper security and encryption are all vulnerable to such alteration.