E-commerce and E-business

Soorya Haridasan

MBA-IB
Roll no:23
School of Management Studies
CUSAT, Kochi-22
E-mail:[email protected]

Abstract: In the emerging global economy, e-commerce and e-business have

increasingly become a necessary component of business strategy and a strong
catalyst for economic development. To thrive in the e-commerce world, the companies
need to structurally transform their internal foundations to be effective..E-business is
not just about e-commerce transactions; it’s about redefining old business model with
the aid of technology to maximise customer value. If managers seriously want to
develop effective strategies for competing in the new economy, they must understand
the fundamental structure of the next generation e-corporation built on an
interconnected web of enterprise applications.

Key Words: E-Commerce, E-Business, Internet

1.0 INTRODUCTION

To do business differently managers must learn to see differently “seeing differently means
learning to question the framework through which we view and frame competition,
competencies and business models. In the present scenario where everything is based on
internet, organizations should be able to take a competitive advantage and move forward. The
integration of information and communications technology (ICT) in business has
revolutionized relationships within organizations and those between and among organizations
and individuals. Specifically, the use of ICT in business has enhanced productivity, encouraged
greater customer participation, and enabled mass customization, besides reducing costs. E-
commerce and E-business have become the cynosure of all business organizations in the
present scenario.

2.0 E-COMMERCE

Electronic commerce or e-commerce refers to a wide range of online business activities for
products and services.1 It also pertains to “any form of business transaction in which the
parties interact electronically rather than by physical exchanges or direct physical contact.
E-commerce is usually associated with buying and selling over the Internet, or conducting any
transaction involving the transfer of ownership or rights to use goods or services through a
computer-mediated network

E-Commerce can be defined as “the use of electronic informations and digital processing
technology in business transactions to create transform and redefine relationships for value
creation between or among organizations, and between organizations and individuals.”

2.1 TYPES OF E-COMMERCE

The different types of e-commerce are

 Business to Consumer
 Business to Business’
 Business to Government
 Consumer to Consumer
 Consumer to Business
 M-commerce

Business to Consumer e-commerce

Business-to-consumer e-commerce, or commerce between companies and consumers,

involves customers gathering information; purchasing physical goods (i.e., tangibles such as
books or consumer products) or information goods (or goods of electronic material or digitized
content, such as software, or e-books); and, for information goods, receiving products over an
electronic network. It is the second largest and the earliest form of e-commerce. Its origins can
be traced to online retailing (or e-tailing).
B2C e-commerce reduces transactions costs (particularly search costs) by increasing
consumer access to information and allowing consumers to find the most competitive price for
a product or service. B2C e-commerce also reduces market entry barriers since the cost of
putting up and maintaining a Web site is much cheaper than installing a
“brick-and-mortar” structure for a firm. In the case of information goods, B2C e-commerce is
even more attractive because it saves firms from factoring in the additional cost of a physical
distribution network. Moreover, for countries with a growing and robust Internet population,
delivering information goods becomes increasingly feasible. Amazon is the best example for
business to consumer e-commerce

Business to Business e-commerce

B2B e-commerce is simply defined as e-commerce between companies. This is the

type of e-commerce that deals with relationships between and among businesses.
About 80% of e-commerce is of this type, and most experts predict that B2B ecommerce will
continue to grow faster than the B2C segment.

The more common B2B examples and best practice models are IBM, Hewlett
Packard (HP), Cisco and Dell. Cisco, for instance, receives over 90% of its product
orders over the Internet

Business to Government
.
Business-to-government e-commerce or B2G is generally defined as commerce between
companies and the public sector. It refers to the use of the Internet for public procurement,
licensing procedures, and other government-related operations. This kind of e-commerce has
two features: first, the public sector assumes a pilot/leading role in establishing e-commerce;
and second, it is assumed that the public sector has the greatest need for making its
procurement system more effective. Web-based purchasing policies increase the transparency
of the procurement process (and reduces the risk of irregularities). To date, however, the size
of the B2G ecommerce market as a component of total e-commerce is insignificant, as
government e-procurement systems remain undeveloped.

Consumer to Consumer E-commerce

Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals

or consumers. This type of e-commerce is characterized by the growth of electronic
marketplaces and online auctions, particularly in vertical industries where firms/businesses can
bid for what they want from among multiple suppliers.16 It perhaps has the greatest potential
for developing new markets.
This type of e-commerce comes in at least three forms:
● auctions facilitated at a portal, such as eBay, which allows online real-time bidding on items
being sold in the Web;
● peer-to-peer systems, such as the Napster model (a protocol for sharing files between users
used by chat forums similar to IRC) and other file exchange and later money exchange models;
and
● classified ads at portal sites such as Excite Classifieds and eWanted (an interactive, online
marketplace where buyers and sellers can negotiate and which features “Buyer Leads & Want
Ads”).
e-bay is an example of consumer to consumer e-commerce.

Consumer to Business e-commerce

It is a new form of commerce in which a consumer specifies the requirements to a business,

which provides a product that meet those requirements. These requirements could be as
simple as an acceptable price, or could involve customization of an existing standard product,
or creation of a new product. Consumer-to-business (C2B) transactions involve reverse
auctions, which empower the consumer to drive transactions. A concrete example of this when
competing airlines gives a traveller best travel and ticket offers in response to the traveller’s
post that she wants to fly from New York to San Francisco.

M-commerce

M-commerce (mobile commerce) is the buying and selling of goods and services through
wireless technology-i.e., handheld devices such as cellular telephones and personal digital
assistants (PDAs). Japan is seen as a global leader in m-commerce. As content delivery over
wireless devices becomes faster, more secure, and scalable, some believe that m-commerce
will surpass wireline e-commerce as the method of choice for digital commerce transactions.
This may well be true for the Asia-Pacific where there are more mobile phone users than there
are Internet users.

2.2 Benefits and Limitations

The primary goal of e-commerce is to bring the organizations closer to their actual consumers,
thus providing the customers the product and services much faster and at lesser cost than
possible by the traditional business models. E-commerce is bringing advantage to both
organizations and consumers.

2.2.1 Benefits to organization

a) Expand market reach

Electronic commerce expands the market place to national and international markets. With
minimal capital outlay; a company can easily and quickly locate more customers, the best
suppliers and the most suitable business partners’ world wide.

b) Cost reduction
E-commerce decreases the cost of creating, processing, distributing, storing and retrieving
paper based information. For eg: Electronic procurement System has helped companies to cut
the purchasing administrative costs by as much as 85%.

c) Creating highly specialized business

E-commerce has the ability of creating highly specialised business

d ) Reduced Inventories
E-commerce allows reduced inventories and overhead by facilitating pull type supply chain
management. In a pull type supply chain management the process starts from customer orders
and uses just-in-time manufacturing.

e) Increased flexibility
E-commerce provides increased flexibility to both organization to consumers. It helps to avoid
intermediaries and unwanted procedure thereby facilitating immediate customer response.

2.2.2 Benefits to consumers

a) Available 24/7/365
E-commerce enables customers to shop or do the business transactions 24 hours a day, all
year round , from almost any location.

b) Wider choices
E-commerce provides consumers with more choices, they can select from many vendors and
from more products.

c) Quick comparison
E-commerce facilitates quick comparison because all product information can be made
available by just a single click

d) Quick retrieval of information

 Customers can receive relevant and detailed in forma ion in seconds
e) Virtual auctions
E-commerce makes it possible to participate in virtual auctions.

f) Interaction
E-commerce allows customers to interact with the customers in e-communities and exchange
ideas as well as compare experiences.

2.2.3 Limitations

a) Lack of system security

One of the technical limitation pertaining to e-commerce is the lack of system security,
reliability, standards some communication protocol.

b) Integration problems
The difficulty to integrate internet and e-commerce software with some existing application
databases is another limiting factor of e-commerce

c) Customer acceptance
Many companies are afraid that their customers won’t accept the new channel. There are
consumers who don’t prefer online shopping for some products and therefore e-commerce can
prove to be a failure in case of some products.

d) Pricing
The new economy makes it easier to compare prices. Prices will drop, so quality and add-on
services become important

e) Legal issues
There is no legal framework for the internet that is binding on a worldwide basis

f) Competition:
The competition is growing from a local competition to a world wide application and therefore
the organizations have to more careful while making every decision.

3.0 E-BUSINESS

The term e-business was coined by IBM in 1997.IBM defines e-business as “ a secure, flexible
and integrated approach to delivering differentiated business value by combining the systems
and processes that run core business operations with the simplicity and reach made possible
by internet technology.”
E-business in addition to encompassing e-commerce, includes both front and back-office
applications that form the engine for modern business-business is not just about e-commerce
transactions’ it is about redefining old business models, with the aid of technology, to maximize
customer value.

3.1 Three primary processes are enhanced in e-business:

1. Production processes, which include procurement, ordering and replenishment of stocks;

processing of payments; electronic links with suppliers; and production control processes,
among others;
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2. Customer-focused processes, which include promotional and marketing efforts, selling
over the Internet, processing of customers’ purchase orders and payments, and customer
support, among others; and

3. Internal management processes, which include employee services, training, internal

information-sharing, video-conferencing, and recruiting. Electronic applications enhance
information flow between production and sales forces to improve sales force productivity.
Workgroup communications and electronic publishing of internal business information are
likewise made more efficient.

3.2 Components of an e-business model

An e-business model must have:

1. A shared digital business infrastructure, including digital production and distribution

technologies (broadband/wireless networks, content creation technologies and information
management systems), which will allow business participants to create and utilize network
economies of scale and scope.

2. A sophisticated model for operations, including integrated value chains-both supply

chains and buy chains.

3. An e-business management model, consisting of business teams and/or partnerships;

4. Policy, regulatory and social systems-i.e., business policies consistent with e-commerce
laws, teleworking/virtual work, distance learning, incentive schemes, among others.

3.3 E-business design

The challenge confronting managers is in the creation and execution of the e-business design.
Business designs are strategic weapons in the digital economy. The business design
dimension is no longer an optional part of corporate strategy; rather it’s the very core one. An
e-business design should be able to meet customer’s priorities not only today but tomorrow as
well. The greatest challenge in e-business is linking emerging technology to new business
designs. As technologies emerge, they affect customer needs; customer needs influence
business designs. As business designs emerge, they affect the processes; processes influence
the next generation technology.

Fig. 1 E-business design

3.4 Advantages

a) Global Accessibility and sales reach

Business can expand their customer base, and even expand their product line.

b) Closer relationships
Business-to-business sellers can grow closer relationships.

c) Free samples
Products can be sampled through the web fast, easily and free of charge.

d) Reduced costs
Businesses can reduce their costly production by dynamically adjusting prices.

e) Media breaks
The internet reduces the time breaks that are necessary to transport information.

f) Time to market
The time to market becomes shorter and faster response time to changing market
demands.

g) Customer loyalty
Improved customer loyalty and service through easier access to the latest information and a
never closing site

3.5 E-business Application Architecture

E-business is the complex fusion of business process enterprise applications and

organizational structure necessary to create a high performance business model. Modern
business designs are constructed from well integrated building blocks called enterprise
applications.

The examples enterprise applications are:

 Enterprise resource planning
 Customer relationship management
 Supply chain management
 Selling chain management
 Figure. 2 e-business Application Architecture

4.0 Conclusion

E-commerce and E-business has revolutionized the way we do business. It is becoming crystal
clear that with e-commerce we have entered a new phase: the age of e-business design. The
e-business design built on an application architecture is no longer merely a concept; it has
become a wide spread reality as more companies integrate applications to streamline
operations and compete in the e-commerce arena. Integration of enterprise applications is
what that matters to succeed in the present business scenario.

5.0 References

1. Anonymous, 2008, E-commerce and E-business

http://en.wikipedia.org/wiki/Electronic_commerce downloaded on 28.09.09.
2. Zorayada Ruth Andam,2003 E-commerce and E-business
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3. Anonymous,http://ezinearticles.com/?E-Business-and-Its-Advantages&id=280089 downloaded
on 01.10.09
4. Dr.Ravi Kalakota and Marcia Robinson, 2000,”e-business, Roadmap for success”, Pearson
Education Asia .
5. Anonymous, 2008, Benefits of e-commerce http://www.sescommerce.com/ecommerce-
growth.asp downloaded on 13.09.09.
6. Anonymous,Advantages of e-commerce, http://www.isos.com.my/ecommerce/advantages.htm
downloaded on 13.09.09.
7. Henry Chan, 2001,E-commerce-fundamentals and applications,Wiley.
8. Daniel Amor,2000, E-business Revolution, Pearson Education Asia.