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Ecommerce Unit - 1

E-Commerce Notes
Unit-1
Lecture-1
Introduction to Commerce
•      Commerce is basically an economic activity involving trading or the buying and selling of goods.
For e.g. a customer enters a book shop, examines the books, select a book and pays for it. To fulfill
the customer requirement, the book shop needs to carry out other commercial transactions and
business functions such as managing the supply chain, providing logistic support, handling payments
etc.
As we enter the electronic age, an obvious question is whether these commercial transactions and
business functions can be carried out electronically.
In general, this means that no paperwork is involved, nor is any physical contact necessary. This often
referred to as electronic commerce (e-commerce).
The earliest example of e-commerce is electronic funds transfer. This allows financial institutions to
transfer funds between one another in a secure and efficient manner.
Later, electronic data interchange (EDI) was introduced to facilitate inter-business transactions.

E-Commerce
•  “E-Commerce or Electronic Commerce, a subset of E-Business, is the purchasing, selling and
exchanging of goods and services over computer networks (such as Internet) through which
transactions are performed”.
•      “E-Commerce can be defined as a modern business methodology that addresses the needs of
organizations, merchants and consumers to cut costs while improving the quality of goods and
services and increasing the speed of service delivery by using Internet”.
•  E-Commerce takes place between companies, between companies and their customers, or between
companies and public administration.

FEW EXAMPLES OF E-Commerce are:


•      Amazon.com, an online bookstore started in 1995 grew its revenue to more than 600$ million in
1998.
•      Microsoft Expedia, an integrated online travel transaction site helps to choose a flight, buy an airline
ticket, book a hotel, rent a car etc. in only a few minutes.

E-Commerce vs Traditional Commerce


•      E- Commerce is about the sale and purchase of goods or services by electronic means, particularly
over the internet. In a pure e-commerce system, transactions take place via electronic means. In this
case, you will access a cyber-bookstore and download a digital book from a server computer.
•      In a physical or traditional commerce system, transactions take place via contact between humans
usually in a physical outlet such as a bookstore.
For e.g. if you want to buy a book, you will go to a physical bookstore and buy the physical book
from a salesman.
•      E-Commerce is more suitable for standard goods, intangible goods; whereas traditional commerce is
more suitable for non standard goods, perishable goods, and expensive goods.
•      Complex products such as cars are better served by integrating e-commerce and physical commerce.

Difference between Traditional Commerce and  E-commerce


E-Business

•      “E-Business is the conduct of business on the Internet, not only buying and selling but also servicing
customers and collaborating with business partners”.
•      E-Business means connecting critical business systems directly to customers, vendors and suppliers-
via the Internet, Extranet and Intranets.
•      Therefore it means using electronic information to boost performance and create value by forming
new relationships between and among businesses and customers.
•      One of the first to use the term was IBM, in October 1997, when it launched a campaign built around
e-business.
Nature of E-commerce
It is also described as a “fusion of telecommunication and computing technology to conduct business.
That is the creation and management of relationships between buyers and sellers ,facilitated by an
interactive and pervasive electronic medium “.Some of the main reasons for the increase in electronic
trading are:-
1. The drive to reduce the costs
2. Easy accessibility to the internet
3. The lack of regulation on the internet
4. Access to global markets for vendors
5. Greater choice and potentially lower prices for purchasers
6. Lower inventory costs for vendors
7. The ability to enter new markets more easily.

E-Business enables organizations to accomplish the following goals:-


•      Reach new markets.
•      Create new products or services.
•      Build customer loyalty
•      Make the best use of existing and emerging technologies.
•      Achieve market leadership and competitive advantage.
•      Enrich human capital.

Advantages of E-Commerce to Customers

•      Reduced Prices:- Costs of products are reduced since the stages along the value chain are
decreased. For instance, intermediaries can be eliminated by the company directly selling to the
customers instead of distributing through a retail store.
•      24-Hour Access:- Online businesses never sleep as opposed to brick and mortar businesses. E-
Commerce allows people to carry out businesses without the barriers of time.
•      Global Marketplace:- Consumers can stop anywhere in the world. Currently according to World
Trade Organization (WTO) there are no custom duties put on products bought and traded globally
electronically. This also provides wide selection of products and services to consumers.
•      More Choices:- Provides consumers with more choices. For e.g. before making any purchase,
customer can study about all the major brands and features of any item. It also provides consumers
with less expensive products and services by allowing them to shop in many places.

Advantages of E-Commerce to Businesses

•      Increased potential market share:- The internet enables businesses to have access to international
markets thereby increasing their market share. Companies can also achieve greater economies of
scale.
•      Low cost Advertising:- Advertising on the internet costs less than advertising on print or television
depending on the extent of advertisement.Advertising on the internet itself is less costly since there is
less cost   associated with it in terms of printing and limited television spots.
•      Low barriers to Entries:- Anyone can start up a company on the internet. Start-up costs are a lot
lower for companies since there is less need for money for capital.
•      Strategic Benefits:- The Strategic benefits of making a business e-commerce enabled is that it helps
reduce the delivery time, labour cost and the cost incurred in document preparation, data entry, error
detection etc.

Disadvantages of E-Commerce

•      Hidden Costs:- Although buying online is convenient, the cost of this convenience is not always
clear at the front end. For e.g. on-line purchases are often accompanied by high shipping and re-
stocking fees, a lack of warranty coverage and unacceptable delivery times. In fact, too many e-
commerce companies have developed a reputation of overcharging for shipping and handling.
•      Lack of Security:- One of the main roadblocks to the wide acceptance of e-commerce by businesses
and consumers alike is the perceived lack of adequate security for on-line transactions.
For e.g.  Consumers are growing increasingly worried about providing credit card information over
the Internet.
During the past few years, the press has been filled with reports about hackers breaking into e-
business and stealing credit card information.
•      Lack of Privacy:- Customers also worry about the privacy implications of data gathered by
organizations of all types and sizes. Even at the simplest data level, sales information is stored in
databases connected to web servers, thus exposing the information to cyber criminals. Because data
gathering on the web is so easy, databases routinely contain information about customer purchasing
habits, credit information and so on. In many cases, companies sell customer database information to
marketing companies. In turn, the marketing companies engage in massive e-mail campaigns to attract
new customers. It doesn’t take long for the customer’s email box to be filled with unwanted email
(also known as Spam).
•      Network Unreliability:- Although the Internet is designed to overcome the single point of failure
problem, there have been several well-publicized incidents of network failures during the past few
years. Network reliability problems may be generated by such factors as:-
 Equipment failure in the network connection provider.
 Accidental problems caused by nature-such as lightning, floods, earthquakes that affect communication
lines.
 Long response time due to increased network traffic or inadequate bandwidth.
•      Low Service Levels:- Another common complaint about doing business online is the low level of
customer service that online companies tend to provide. Although technology has automated business
transactions to a large extent, there remains a real need for the human touch. Therefore e-commerce
websites must provide:-
 A pleasant and problem free pre-ordering and ordering experience. The website design is an important
interface.
 Readily available easily used feedback options.
 Quick complaint resolution.
 Timely and low-cost shipping delivery to customers.
Scope of E-Commerce

•      E-Commerce is a general concept covering any form of business transaction or information exchange
executed using information and communication technologies ((ICT’s).
•      It includes electronic trading of goods, services and electronic material.
It takes place between companies, between companies and their customers or between companies and
public administrations.

•      Electronic Markets:-
 An electronic market is the use of information and communication 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
 e.g. Airline Booking System
•      Electronic Data Interchange:-
 It provides a standardized system for coding trade transactions so that they can be communicated from
one computer to another without the need for printed orders and invoices & delays & errors in paper
handling.
 It is used by organizations that make a large no. of regular transactions.
e.g. EDI is used in the large supermarket chains for transactions with their suppliers.
•      Internet Commerce:-
 Information and communications technologies can be used to advertise & make sales of wide range of
goods & services.
 This application is both for business to business & business to consumer transactions.
e.g. The purchase of goods that are then delivered by post or the booking of tickets that can be picked
up by the clients

Types of E-Commerce/ E-Commerce Market Models


•      There are five types of E-Commerce:-
 Business To Business (B2B)
 Business To Consumer (B2C)
 Consumer To Business (C2B)
 Consumer To Consumer (C2C)
 Business To Government (B2G)
Business To Business (B2B):- Business to Business or B2B refers to e-commerce activities between
businesses. An E-Commerce company can be dealing with suppliers or distributers or agents. These
transactions are usually carried out through Electronic Data Interchange (EDI). EDI is an automated
format of exchanging information between businesses over private networks.
 For e.g. manufacturers and wholesalers are B2B Companies.
By processing payments electronically, companies are able to lower the number of clerical errors and
increase the speed of processing invoices, which result in lowered transaction fees.
In general, B2Bs require higher security needs than B2Cs.
With the help of B2B E-commerce, companies are able to improve the efficiency of several common
business functions, including supplier management, inventory management and payment
management.
Business To Customer (B2C):- Business to Customer or B2C refers to E-Commerce activities that
are focused on consumers rather than on businesses.
For instance, a book retailer would be a B2C company such as Amazon.com. Other examples could
also be purchasing services from an insurance company, conducting on-line banking and employing
travel services.
Customer To Business (C2B):-
Customer to Business or C2B refers to E-Commerce activities which use reverse pricing models
where the customer determines the prices of the product or services.
In this case, the focus shifts from selling to buying. There is an increased emphasis on customer
empowerment.
In this type of E-Commerce, consumers get a choice of a wide variety of commodities and services,
along with the opportunity to specify the range of prices they can afford or are willing to pay for a
particular item, service or commodity.
Customer To Customer (C2C):-
Customer to Customer or C2C refers to E-commerce activities, which use an auction style model.
This model consists of a person-to-person transaction that completely excludes businesses from the
equation.
Customers are also a part of the business and C2C enables customers to directly deal with each other.
An example of this is peer auction giant ebay.
Business To Government (B2G):- It is a new trend in E-Commerce. This type of E-Commerce is
used by the government departments to directly reach to the citizens by setting up the websites.
These websites have government policies, rules and regulations related to the respective departments.
Any citizen may interact with these websites to know the various details. This helps the people to
know the facts without going to the respective departments.
This also saves time of the employees as well as the citizens.
 History of E-Commerce
•      The history of Ecommerce seems rather short but its journey started over 40 years ago in hushed
science labs
•      In the 1960s, very early on in the history of Ecommerce, its purpose was to exchange long distance
electronic data. In these early days of Ecommerce, users consisted of only very large companies, such
as banks and military departments, who used it for command control communication purposes. This
was called EDI, and was used for electronic data interchange.
•      Originally, electronic commerce was identified as the facilitation of commercial transactions
electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds
Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send
commercial documents like purchase orders or invoices electronically.
•      The growth and acceptance of credit cards, automated teller machines (ATM) and telephone banking
in the 1980s were also forms of electronic commerce
•      In 1982 Transmission Control Protocol and Internet Protocol known as TCP & IP was developed.
This was the first system to send information in small packets along different routes using packet
switching technology, like today's Internet! As opposed to sending the information streaming down
one route
•      Beginning in the 1990s, electronic commerce would include enterprise resource planning systems
(ERP), data mining and data warehousing
•      In 1995, with the introduction of online payment methods, two companies that we all know of today
took their first steps into the world of Ecommerce. Today Amazon and ebay are both amongst the
most successful companies on the Internet
Functions of E-Commerce
•      Marketing:- One of the areas it impacts particularly is direct marketing. In the past this was mainly
door-to-door, home parties (like the Tupperware parties) and mail orders using catalogues or leaflets.
This moved to telemarketing and TV selling with the advance in television technology and finally
developed into e-marketing.
•      Human Resource Management:- Issues of on-line recruiting, home working and ‘entrepreneurs’
working on a project by project basis replacing permanent employees.
•      Business law and ethics:- The different legal and ethical issues that have arisen as a result of a
global ‘virtual’ market. Issues such as copyright laws, privacy of customer information etc.
•      Management Information System:- Analysis, design and implementation of e-business systems
within an organization ; issues of integration of front-end and back-end systems.
•      Product Operations and Management:- The impact of on-line processing has led to reduced cycle
time. It takes seconds to deliver digitized products and services electronically; similarly the time for
processing orders can be reduced by more than 90 percent from days to minutes.
•      Finance and Accounting:- On-line banking ; issues of transaction costs ; accounting and auditing
implications where ‘intangible’ assets and human capital must be tangibly valued in an increasing
knowledge based economy.
•      Economy:- The impact of E-commerce on local and global economies; understanding the concepts of
a digital and knowledge based economy and how this fits into economic theory.

E-Commerce Applications
•      E-Marketing
•      E-Advertising
•      E-Banking
•      E-Learning
•      Mobile Commerce
•      Online Shopping
•      Entertainment

•      E-Marketing:-
 E-Marketing also known as Internet Marketing, Online Marketing, Web Marketing.
 It is the marketing of products or services over the internet.
 It is consider to be broad in scope because not refers to marketing on the internet but also done in Email
and wireless media.
 E-Marketing ties together the creative and technical aspects of the internet, including design
development, advertising and sales.
 Internet marketing is associated with several business models i.e., B2C, B2B, C2C.
 Internet marketing is inexpensive when examine the ratio of cost to the reach of the target.

•      E-Advertising:-
 It is also known as online advertising it is a form of promotion that uses internet and World Wide Web
to deliver marketing messages to attracts customers.
Example: Banner ads, Social network advertising, online classified advertising etc.
 The growth of these particular media attracts the attention of advertisers as a more productive source to
bring in consumers.

•      E-Banking:-
 Means any user with a personal computer and browser can get connected to his banks, website to
perform any of the banking functions. In internet banking system the bank has a centralized data base
i.e., web-enabled.
 Best example for E-Banking is ATM.
 An ATM is an electronic fund transfer terminal capable of handling cash deposits, transfer, Balance
enquiries, cash withdrawals, and pay bills.
•      SERVICES THROUGH E-BANKING:
 Bill Payment Service
 Fund Transfer
 Investing through Internet Banking
 Shopping

•      E-Learning:-
 E-Learning comprises all forms of electronically supported learning and teaching.
 E-Learning applications and processes include web-based learning, computer-based learning.
 Content is delivered via. The internet, intranet/extranet, audio, or video tape, satellite TV.
 E-Learning is naturally suited to distance and flexible learning, but can also be used conjunction with
face-to-face teaching.
 E-Learning can also refer to the educational website such as those offering learning scenarios worst and
interactive exercises for children.
 A learning management system (LMS) is software used for delivering, tracking, and managing
training /education.

•      Mobile Commerce:-
 Mobile Commerce also known as M-Commerce, is the ability to conduct, commerce as a mobile
device, such as mobile phone.
 Banks and other financial institutions use mobile commerce to allow their customers to access account
information and make transactions, such as purchasing, withdrawals etc.,
 Using a mobile browser customers can shop online without having to be at their personal computer.
•      SERVICES ARE:
1. Mobile ticketing
2. Mobile contract purchase and delivery mainly consumes of the sale of ring tones, wallpapers and
games of mobile phones.
3. Local base services
•      Local discount offers
•      Local weather
4. Information services
•      News
•      Sports, Scores

•      Online Shopping:-
 Online shopping is the process whereby consumers directly buy goods or services from a sell in real
time, without intermediary services over the internet.
 An online shop, e-shop, e-store, internet shop web shop, web store, online store, or virtual shop evokes
the physical analogy of buying products or services in a shopping center.
 In order to shop online, one must be able to have access to a computer, a bank account and debit card.
 Online shoppers commonly use credit card to make payments , however some systems enable users to
create accounts and pay by alternative means ,such as 
•       Cheque.
•       Debit cards.
•       Gift cards
 Online stores are usually available 24 hours a day

•      Entertainment:-
 The conventional media that have been used for entertainment are
1. Books/magazines.
2. Radio.
3. Television/films.
4. Video games.
Online books /newspapers, online radio, online television, online firms, and online games are
common place in internet where we can entertain.
  Online social networking websites are one of the biggest sources of E-entertainment for today’s tech-
savvy generation.

 E-Commerce Notes
Lecture-3
E-Commerce Trade Cycle
•      E-Commerce can be applied to all, or different phases of the trade cycle.
•      The trade cycle varies depending on:-
 The nature of the organization (or individuals) involved.
 The nature and type of goods or services being exchanged.
 The frequency of trade between the partners to the exchange process.
•      The trade cycle has to support:-
 Finding goods or services appropriate to the requirement and agreeing the terms of trade often referred
to as search and negotiation.
 Placing the order, taking delivery and making payment i.e., execution & settlement of transaction.
 After sales activity such as warrantee, service etc.
        There are numerous categories of trade cycles depending on the factors outlined above and, for
many transactions, further complicated by the complexities of international trade.
•      Three  generic trade cycles can be identified:-
1.     Regular, repeat transactions between commercial trading partners (Repeat Trade Cycle).
2.     Irregular Transactions between commercial trading partners where execution and settlement  are
separated (Credit Transactions)
3.     Irregular transactions in once-off trading relationships where execution and settlement are typically
combined (Cash Transactions)

•      Electronic Markets:-
 It 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.
 It exists in financial markets & they are also used in airline booking system.
 It is irregular transaction trade.
•      Electronic Data Interchange:-
 It is used for regular repeat transactions.
 It takes quite a lot of work to set up systems.
 Mature use of EDI allows for a change in the nature of the product or service.
   e.g. Applications are sending test results from the pathology laboratory to the hospital or
dispatching exam results from exam boards to school.

•      Internet Commerce:-
 The first stage
•      Advertising appropriate goods and services.
•      Internet sites offer only information & any further steps down the trade cycle are conducted on the
telephone.
 The Second stage
•      An increasing no. of sites offer facilities to execute & settle the transaction.
•       Delivery may be electronic or by home delivery depending on the goods and services.
 The final stage
•      After-sales service.
•      On-line support & On-Line services.
Tools & Technologies for E-Commerce
•      Electronic data interchange (EDI)
•      Bar codes
•      Electronic mail
•      Internet
•      World Wide Web
•      Product data exchange
•      Electronic forms
•      Electronic Data Interchange (EDI)
 EDI is the computer-to-computer exchange of structured business information in a standard electronic
format. Information stored on one computer is translated by software programs into standard EDI
format for transmission to one or more trading partners. The trading partners’ computers, in turn,
translate the information using software programs into a form they can understand.
•      Bar Codes
 Bar codes are used for automatic product identification by a computer. They are a rectangular pattern of
lines of varying widths and spaces. Specific characters (e.g. numbers 0-9) are assigned unique
patterns, thus creating a "font" which computers can recognize based on light reflected from a laser.
 The most obvious example of bar codes is on consumer products such as packaged foods. These codes
allow the products to be scanned at the checkout counter. As the product is identified the price is
entered in the cash register, while internal systems such as inventory and accounting are automatically
updated.
•      Electronic Mail
 Messages composed by an individual and sent in digital form to other recipients via the Internet.
•      Internet
 The Internet is a global network of millions of diverse computers and computer networks. These
networks can all "talk" to each other because they have agreed to use a common communications
protocol called TCP/IP. The Internet is a tool for communications between people and businesses.
The network is growing very, very fast and as more and more people are gaining access to the
Internet, it is becoming more and more useful.
•      World Wide Web
 The World Wide Web is a collection of documents written and encoded with the Hypertext Markup
Language (HTML). With the aid of a relatively small piece of software (called a "browser"), a user
can ask for these documents and display them on the user’s local computer, although the document
can be on a computer on a totally different network elsewhere in the world.
 HTML documents can contain many different kinds of information such as text, pictures, video, sound,
and pointers, which take users immediately to other web pages.
 It is this ability to jump from site to site that gave rise to the term "World Wide Web." Browsing the
Web (or "surfing the Net") can be a fascinating activity, especially to people new to the Internet. The
World Wide Web is by far the most heavily used application on the Internet.
•      Product Data Exchange
 Product data refers to any data that is needed to describe a product. Sometimes that data is in graphical
form, as in the case of pictures, drawings and CAD files. In other cases the data may be character
based (numbers and letters), as in the case of specifications, bills of material, manufacturing
instructions, engineering change notices and test results.
 Product data exchange differs from other types of business communications in two important ways.
 First, because graphics are involved users must contend with large computer files and with problems of
compatibility between software applications. (The difficulty of exchanging CAD files from one
system to another is legendary).
 Second, version control very quickly gets very complicated. Product designs, even late in the
development cycle, are subject to a great deal of change, and because manufacturing processes are
involved, even small product changes can have major consequences for getting a product into
production.
•      Electronic Forms
 Electronic form is a technology that combines the familiarity of paper forms with the power of storing
information in digital form. Imagine an ordinary paper form, a piece of paper with lines, boxes,
check-off lists, and places for signatures. To the user an electronic form is simply a digital analogue of
such a paper form, an image, which looks like a form but which appears on a computer screen and is
filled out via mouse, and keyboard.
 Behind the screen, however, lie numerous functions that paper and pencil cannot provide. Those extra
functions come about because the data from electronic forms are captured in digital form, thus
allowing storage in data bases, automatic information routing, and integration into other applications.
Framework of E-Commerce
•      This framework, first developed by Kalakota and Whinston, Professors of Information Systems and
prolific authors on the subject, takes a holistic view and identifies the different components of
business and technology that make up e-commerce. Using the analogy of the architecture of a
building illustrated in Fig., they explain how the different components fit and interact together,
emphasizing the relative importance of each component.

•      Kalakota and Whinston use the analogy of a traditional transportation company to describe the
complexity of the network and how the different components that make up the technology
infrastructure are interlinked.
 The network infrastructure is like the network of roads that are interconnected and are of different
widths, lengths and quality – for example, the Internet, local area networks, intranets. Network
infrastructures also take different forms such as telephone wires, cables, wireless technology (such as
satellite or cellular technology).
 The publishing infrastructure (including the WWW, Web servers) can be seen as the infrastructure of
vehicles and warehouses, which store and transport electronic data and multimedia content along the
network. Multimedia content is created using tools such as HTML and JAVA. This content can be
very different with varying degrees of complexity similar to different vehicles travelling on the roads.
For example, text only, or more complex is an application, such as a computer game, containing
audio, video, graphics and a programme.
 Messaging and information distribution infrastructure are the engines and fuel, which transport the data
around the network. Once the multimedia content is created, there has to be a means of sending and
retrieving this information, for example by EDI, e-mail, Hyper Text Transfer Protocol.
 Once content and data can be created, displayed and transmitted, supporting business services are
necessary for facilitating the buying, selling and other transactions safely and reliably. For example,
smart cards, authentication, electronic payment, directories/catalogues.
•      The next components which facilitate and enable e-commerce and which are built on the foundations
of technology are:
 Public policy, regulations and laws that govern issues such as universal access, privacy, electronic
contracts and the terms and conditions that govern e-commerce.
 Universal agreement of technical standards dictate the format in which electronic data is transferred
over networks and is received across user interfaces, and the format in which it is stored. This is
necessary so that data can travel seamlessly across different networks, where information and data can
be accessed by a whole range of hardware and software such as computers, palmtops, and different
kinds of browsers and document readers.
 The interaction of people and organizations to manage and coordinate the applications, infrastructures
and businesses are all necessary to make e-commerce work.
        All these elements interact together to produce the most visible manifestation of e-commerce.
These applications include on-line banking and financial trading; recruitment; procurement and
purchasing; marketing and advertising; auctions; shopping are just a few examples.
        This is a particularly useful framework for managers to understand the importance of technology
and business, both within the organization and external to it, in the planning and development of any
e-commerce or e-business solution.

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