Introduction ¹

Businesses have been looking for ways to increase their profits and market share since antiquity. Over the centuries, even the millennia, businesses successfully sought to utilize advances in technology to introduce and promote their products. The development of money was one of the key milestones along this continuum. This advance meant that instead of having to carry around the bushels of grain or dried legumes for barter, our ancestors were able to exchange a few small disks of metal for their material and physical necessities. More recently, paper money came into use, as the transaction of large amount of coins become inconvenient. Even more recently, plastic money (credit cards and money cards) has become popular, further enhancing buyers’ and sellers’ convenience. During the past century, the telegraph, the telephone, fax and electronic mail have provided faster, cheaper, and more reliable ways of communicating business information within and between commercial entities. Geographical distance and multiple time zones are no longer intrinsic barriers to business transactions and communications.

The search for more efficient ways of doing business is now driving another revolution in the conduct of business and in our concept of money. This revolution is known as electronic commerce, which is any purchasing or selling through an electronic communications medium. Business planners in institutions and organizations now see technology not only as a supportive cofactor, bur as a key strategic tool.

Since the industrial revolution, many, if not most, businesses have been built in the proximity of what can be called channel of goods distribution. Initially, cities and /or businesses were built near harbors or rivers. Later, they were built close to railroads. Later yet, they were built within easy reach of the highway system. Just in the past few decades, goods intensive businesses may have placed themselves close to airport.

Now, what has become critical is access to a worldwide, integrated-services (data, voice, and video) communication network. This network needs to support both the global nature of the new worldwide corporation, as well as the soon-to-be-common electronic commerce. At the same time, the nature of manufactured goods is changing: either such goods are simply information (e.g., a cash transfer; a credit given; a reservation established; an analysis newsletter, or lecture provided; an electronic order received; or a downloaded movie or musical clip transferred) or are highly dependent on information (e.g., a just-in-time-manufacturing order or a just-in-time inventory transaction). Already, for large companies, the product is an electronic artifact, what can be called an e-product. Unlike the old money made of stones, metal, or paper, the new money is kept in “banks” of magnetic particles, and commerce is undertaken electronically or photonic ally. In the late 1990s, electronic commerce in support of e-products or even real products is becoming an established way of doing business.

As a continuation of this trend, over the next several years, electronic commerce will play an increasingly important role for businesses. Electronic marketplaces enable a plethora of products to be absorbed into the distribution channel at lower costs than possible with traditional methods. For an expense comparable to a print advertisement, or even less, electronic marketers can now develop an electronic storefront with product information databases, downloaded software demos, and communications capabilities for receiving product availability, and place orders.

Electronic commerce is the symbiotic integration of communications, data management, and security capabilities to allow business applications within different organizations to automatically exchange information related to the sale of goods and services. Communications services support the transfer of information from the originator to the recipient. Data management services define the exchange format of the information.

Definition

The commercialization of the Internet and the World Wide Web during the 1990s presented a golden opportunity for thousands of companies scattered across the globe. Large multimedia companies realized that the Internet provided them with the means to better coordinated their worldwide operations, to slash certain operation costs; to market their goods and services to millions, if not billions, of new customers; and generally, to become more efficient, more competitive, and more profitable. The owners and managers of throngs of small and mid-sized companies recognized that the Internet gave them, for the first time, a feasible method for expanding their operations into international markets.²

Electronic commerce or e-commerce is the part of e-business that deals with the buying and selling of goods and services electronically with computerized business transactions using the Internet, networks, and other digital technologies.³ It is also defined as short for electronic commerce; this general term refers to the emerging market for conducting business transaction across the web. Though still in its earliest stages, most industry analysts project steady growth for e-commerce over the next several decades. Instead, many futurists envision a day when the majority of all buying and selling is consummated across the web.⁴

Commerce is the interchange of goods or services, especially on a large scale. In the past, trading typically took place face-to-face between parties. Over the centuries and decades, trading has continued to become more sophisticated. At this time, a large percentage of transactions are no longer done face-to-face, but are conducted over a telephone or via mail, with the exchange of new Plastic money.

The major difference between the way in which electronic commerce has been conducted until now and the way it is now proposed to operate relates to a paradigm shift: moving from using a closed private network, in which two parties have previously established some type of agreement, to utilizing an open public network such as the Internet, without any prior knowledge of the buyer. In effect, that is how regular commerce takes place: anyone can walk into any store and buy something without having to be previously known by the store personnel. The Internet and the ancillary e-commerce software allow transactions between parties that do not previously known each other.

Figure 1: A Definition of Electronic / Web Commerce⁵

Electronic commerce encompasses one or more of the following EDI (Electronic Data Interchange) EDI on the Internet E-mail on the Internet Shopping on the World Wide Web Product Sales and service sites on the Web Electronic banking or funds transfer Outsourced customer and employee care operations Electronic commerce Automates the conduct of business among enterprise, their customers, suppliers and employees – anytime, anywhere. Create interdependencies between your company’s value chain and those of your suppliers and customers. Your company can create competitive advantage by optimizing and re-engineering those value-chain links to the outside. The tools are electronic but the application is commerce Commerce is not accounting or decision support or any other internally focused function. Commerce is externally focused on those with whom you do business. Commerce is doing business, not reporting on it or sending messages about it.

Challenges ⁶

At a more global level, the challenge for organizations now is how to respond to and use an ever increasing avalanche of data from diverse sources, in a timely and effective manner. Vital information from a nearby office or from an office on the other side of the world may be lost or unnecessarily delayed unless it can be extracted from the immense body of chaff that typically accompanies it. Many businesses are coping with the data avalanche by shifting their routine data processing and business transaction to automated, electronic information systems. However, differences in information systems frequently require that trading partners manually translate from one system to another, reducing the speed of information exchange.

The on-line media offer a variety of opportunities to companies that want to market their products and services. Computer networks have already changed the way people communicate. The number of business-and-home based PC users is approaching critical mass, providing marketers with a large potential audience for advertising messages and on-line commerce. In addition to generating revenue-impacting transactions, marketers can use on-line media to facilitate the order entry process, create brand and product awareness among targeted audiences, and develop a prospects database by soliciting direct feedback from on-line user. The following lists the principle opportunities available through Web commerce.

• Usage fees paid to Internet services providers

• Content fees for downloading information

• Advertising fees

• Transaction processing fees.

Benefit of E- Commerce

Information commerce, that is, transacting e-products, has many benefits because there is no need for delivery of tangible objecs, and the cost of predicting information versus cost of inventory is relatively small. Electronic information can be delivered cheaply because there is no need for packing, trucks, warehouses; subscribes simply pay the cost to access the market. Currently, the largest cost components of merchandise are not the costs of raw goods but of the purchasing, shipping, receiving, payment, and inventory processes.

The electronic commerce transactional models vary between proposed offerings, each having a different level of attraction or detraction depending on the industry and level of acceptable risk. As the venue by which people conduct transactions and the media of money changes, so do the financial risk.⁷

Electronic commerce increases the speed, accuracy, and efficiency of business and personal transactions. At this time, business-to-business electronic commerce is already being used for cutting costs related to the purchasing process. Commerce over the Internet is relatively inexpensive. In most instances this is cheaper that the rent a store owner would have to pay for (prime) physical real estate, while at the same time it has a much broader reach. The benefits of electronic commerce include the following:⁸

• Reduced costs to buyers from increased competition in procurement, as more suppliers are able to compete in an electronically open marketplace/

• Reduced costs by electronically accessing on-line data-based of bid opportunities, by on-line abilities to submits bids, and by on-line review of awards.

• Reduces errors, time, and overhead costs in information processing by eliminating requirements for reentering data.

• Reduced inventories, as the demand for goods and services are electronically linked through just-in-time-inventory and integrated manufacturing techniques.

• Increased access to real-time inventory information, faster fulfillment of orders, and lower costs due to the elimination of paperwork.

• Reduced time to complete business transactions, specifically reduced time from delivery to payment.

• Reduced overhead costs through uniformity, automation, and integration of management processes which enable flatter, wider, and more efficient processes.

• Better quality of goods as specifications are standardized and competition increases; also, better variety through expanded markets and the ability to produce customized goods.

• Creation of new markets through the ability to easily and cheaply reach potential customers.

• Easier entry to new markets, especially geographically remote markets, as the playing field becomes more even between the companies of different size and locations.

• Faster time to market as business processes are linked, eliminating time delays between steps and the engineering of each sub process within the whole process.

• New business opportunities. Businesses and entrepreneurs are continuously on the look-out for new and innovative ideas as viable commercial ventures; electronic commerce provides such opportunities.

• Optimization of resource selection as businesses build cooperative teams to better tailor capabilities, to work opportunities to increase chances of success, to share economic success more broadly, and to give the customer a mix of capabilities more precisely meeting the customer’s requirements.

• Increased access to a client base. Identifying and locating new clients and new markets is not a trivial task since it involves analysis, product marketing, and customer-base testing; electronic commerce and alleviate this challenge.

• Improved product analysis as businesses are able to perform product analyses and comparisons and report their findings on the Internet and on-line.

• Improved Market analysis. The large and increasing base of Internet users can be targeted for the distribution of surveys for analysis of the marketability of a new product or service idea. Survey can reach many people with minimal effort on the part of the surveyors. Once a product is already marketed, businesses can examine the level of customer satisfaction.

• Wider access to assistance and to advice from experts and peers. Users can utilize the Internet to obtain expert advice and get help.

• Rapid information access. Accessing information on-line and over the Internet is faster (on most occasions) than transmissions via fax or transfers via courier services. Businesses can access information from countries around the world and make interactive connections to remote computer systems.

• Rapid interpersonal communications. Contacting other individuals through e-mail provides a new method of business communications. E-mail has both the speed of telephone conservations and the semi-permanence of regular mail. E-mail can be sent from nearly anywhere there is an Internet service or (dial-up) access. Business persons or travelers on the go can keep in touch with the office or site.

• Wide-scale information dissemination. One can place documents on servers on the Internet and make them accessible to millions of users. Creating web documents and Web sites improves the availability of the documents to a client base larger that the circulation of many major newspapers.

• Cost-effective document transfer. Transferring on-line documents over the Internet takes a short period of time, particularly if they are text-based (rather than multimedia-based); this can save money on regular mail or courier services. Most, if not all, Internet access providers do not charge by the raw numbers of bytes transferred across their links, unlike other commercial information services.