E-commerce Course Code: ITec3093 2011/2019

Chapter one
1. Overview of Concepts, Issues, Theories Underlying E-Commerce
1.1 Definitions of E-commerce
Electronic commerce or e-commerce refers to a wide range of online business activities for
products and services.
E-Commerce is “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.
A more complete definition is: E-commerce is the use of electronic communications and digital
information processing technology in business transactions to create, transform, and redefine
relationships for value creation between or among organizations, and between organizations and
individuals.
1.2 The Difference between E-Commerce and E-Business
While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-
commerce, information and communications technology (ICT) is used in inter-business or inter-
organizational transactions (transactions between and among firms/organizations) and in
business-to-consumer transactions (transactions between firms/organizations and individuals).
In e-business, on the other hand, ICT is used to enhance one’s business. It includes any process
that a business organization (either a for-profit, governmental or non-profit entity) conducts over
a computer-mediated network. A more comprehensive definition of e-business is: “The
transformation of an organization’s processes to deliver additional customer value through the
application of technologies, philosophies and computing paradigm of the new economy.”
1.3 Characteristics of E-Commerce
Establishment of B to B relationship
Electronic payment
e – distribution of products & services
Exchange of information
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E-commerce Course Code: ITec3093 2011/2019

Pre and post – sales support

Customer relationship management
Barriers to entry are low
Marketing niches bound
Revenue sources are many
No dominance in the market
Everyone utilizes the same technology
Access is becoming universal
There is room for team of successful player
Operates on a bonfire basis (no prior arrangement between customer and seller)
Operates over the Internet; using all or any combination of technologies designed to access
data; to exchange data; and to capture data
Unique Features of E-Commerce
Ubiquity (available just about everywhere at all time). Technology is available
everywhere, at work, at home, and elsewhere via mobile device, anytime Marketplace is
created or extended beyond traditional boundaries and removed from a geographic
location. Shopping can take place anywhere. Reduced shopping costs. Customer
convenience enhanced.
Global Reach (total number of users or customers an e-commerce business can have).
Technology reaches beyond national boundaries Commerce is enabled across cultural and
national boundaries seamlessly and without modification. Marketplace includes potentially
billions of consumers and millions of businesses world-wide.
Universal Standards (standards that are shared by all nations around the world). There is
one set of technology standard, namely Internet Standards Lower market entry costs,
Reduce product search cost and by creating a single , one world market place, where price
discovery becomes simpler, faster and more accurate Easily find all the suppliers, prices,
and delivery terms of a specific product anywhere in the world.
Richness (the complexity and content of a message). Video, Audio and Text Messages are
possible E-Commerce technologies have changed the traditional trade off between
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E-commerce Course Code: ITec3093 2011/2019

Richness and the Reach. The Internet and web can deliver to an audience of millions rich
marketing messages in a way not possible with traditional technologies like radio, TV and
magazines.
Interactivity (two way communication). The technology that allows two way
communications between merchant and consumer Consumers are engaged in a dialogue
that dynamically adjusts the experience to the individual, and make the consumer a co-
participant in the process of delivering goods to the market (which is not possible in other
mediums like TV, radio). Similar to face-to-face experience but on a massive global scale.
Information Density (total amount & quality of information available to all market
participants). The technology reduces information cost and raises quality Information
processing, storage and communication costs drop dramatically while accuracy and timeliness
improve greatly. Information becomes plentiful, cheap and accurate e.g., price discrimination
in which a merchant can sell the same good to different targeted market with a different price.
Personalization (targeting of marketing message to a specific individual by adjusting the
message to a person`s name, interest & past purchases). Technology allows personalized
messages to be delivered to individuals as well as groups Personalization of marketing
messages and customization of products and services are based on individual characteristics.
1.4 Types and History of E-Commerce
1.4.1 Types of E-Commerce
Business-to-business
Business-to-business (B2B) describes commerce transactions between businesses, such as
between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
The volume of B2B (Business-to-Business) transactions is much higher than the volume of B2C
transactions. The primary reason for this is that in a typical supply chain there will be many B2B
transactions involving sub components or raw materials, and only one B2C transaction,
specifically sale of the finished product to the end customer. For example, an automobile
manufacturer makes several B2B transactions such as buying tires, glass for windscreens, and
rubber hoses for its vehicles. The final transaction, a finished vehicle sold to the consumer, is a
single (B2C) transaction.
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E-commerce Course Code: ITec3093 2011/2019

B2B is also used in the context of communication and collaboration. Many businesses are now
using social media to connect with their consumers (B2C); however, they are now using similar
tools within the business so employees can connect with one another. When communication is
taking place amongst employees, this can be referred to as "B2B" communication.
The term "business-to-business" was originally coined to describe the electronic communications
between businesses or enterprises in order to distinguish it from the communications between
businesses and consumers (B2C). It eventually came to be used in marketing as well, initially
describing only industrial or capital goods marketing. Today it is widely used to describe all
products and services used by enterprises.
Business-to-consumer
Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes activities of
businesses serving end consumers with products and/or services.
An example of a B2C transaction would be a person buying a pair of shoes from a retailer. The
transactions that led to the shoes being available for purchase, which is the purchase of the
leather, laces, rubber, etc. However, the sale of the shoe from the shoemaker to the retailer would
be considered a (B2B) transaction.
While the term e-commerce refers to all online transactions, B2C stands for "business-to-
consumer" and applies to any business or organization that sells its products or services to
consumers over the Internet for its own use. When most people think of B2C e-commerce, they
think of Amazon, the online bookseller that launched its site in 1995 and quickly took on the
nation's major retailers. In addition to online retailers, B2C has grown to include services such as
online banking, travel services, online auctions, health information and real estate sites. Peer-to-
peer sites such as Craigslist also fall under the B2C category.
B2C e-commerce went through some tough times, particularly after the technology-heavy
Nasdaq crumbled in 2000. In the ensuing dotcom carnage, hundreds of e-commerce sites shut
their virtual doors and some experts predicted years of struggle for online retail ventures. Since
then, however, shoppers have continued to flock to the web in increasing numbers. In fact, North
American consumers adopted e-commerce so much that despite growing fears about identity
theft, they spent $172 billion shopping online in 2005, up from $38.8 billion in 2000.
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 E-commerce Course Code: ITec3093 2011/2019

By 2010, consumers have spent $329 billion each year online, according to Forrester Research.
The percentage of U.S. households shopping online is expected to grow from 48 percent in 2010
to 61 percent by2015.
Business-to-government
Business-to-government (B2G) is a derivative of B2B marketing and often referred to as a
market definition of "public sector marketing" which encompasses marketing products and
services to various government levels - including federal, state and local - through integrated
marketing communications techniques such as strategic public relations, branding, marcom,
advertising, and web-based communications. B2G networks provide a platform for businesses to
bid on government opportunities.
Government agencies typically have pre-negotiated standing contracts vetting the
vendors/suppliers and their products and services for set prices. These can be state, local or
federal contracts and some may be grandfathered in by other entities (ie. California's MAS
Multiple Award
Schedule will recognize the federal government contract holder's prices on a GSA General
Services Administration Schedule).
Consumer-to-business
Consumer-to-business (C2B) is an electronic commerce business model in which consumers
(individuals) offer products and services to companies and the companies pay them. This
business model is a complete reversal of traditional business model where companies offer goods
and services to consumers (business-to-consumer = B2C). We can see this example in blogs or
internet forums where the author offers a link back to an online business facilitating the purchase
of some product (like a book on Amazon.com), and the author might receive affiliate revenue
from a successful sale.
This kind of economic relationship is qualified as an inverted business type. The advent of the
C2B scheme is due to major changes:
o Connecting a large group of people to a bidirectional network has made this sort of
commercial relationship possible. The large traditional media outlets are one direction
relationship whereas the internet is bidirectional one.
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 E-commerce Course Code: ITec3093 2011/2019

o Decreased cost of technology: Individuals now have access to technologies that were once
only available to large companies (digital printing and acquisition technology, high
performance computer, powerful software).
Consumer-to-consumer
Consumer-to-consumer (C2C) (or citizen-to-citizen) electronic commerce involves the
electronically facilitated transactions between consumers through some third party. A common
example is the online auction, in which a consumer posts an item for sale and other consumers
bid to purchase it; the third party generally charges a flat fee or commission. The sites are only
intermediaries, just there to match consumers. They do not have to check quality of the products
being offered.
Consumer-to-consumer (C2C) marketing is the creation of a product or service with the specific
promotional strategy being for consumers to share that product or service with others as brand
advocates based on the value of the product. The investment into conception and developing a
top of the line product or service that consumers are actively looking for is equitable to a
Business-to-consumer (B2C) pre-launch product awareness marketing spend.
This type of e-commerce is expected to increase in the future because it cuts out the costs of
using another company. An example cited in Management Information Systems, is for someone
having a garage sale to promote their sale via advertising transmitted to the GPS units of cars in
the area. This would potentially reach a larger audience than just posting signs around the
neighborhood. In the economic downturn which commenced in 2008 C2C commerce levels
increased dramatically online.
Government-to-Business
Government-to-Business (abbreviated G2B) is the online non-commercial interaction between
local and central government and the commercial business sector, rather than private individuals
(G2C). For example http://www.dti.gov.uk is a government web site where
Businesses can get information and advice on e-business 'best practice'. http://g2b.perm.ru is
another example.
Peer-to-peer
Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions
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 E-commerce Course Code: ITec3093 2011/2019

tasks or workloads between peers. Peers are equally privileged, equipotent participants in the
application.
They are said to form a peer-to-peer network of nodes.
Peers make a portion of their resources, such as processing power, disk storage or network
bandwidth, directly available to other network participants, without the need for central
coordination by servers or stable hosts. Peers are both suppliers and consumers of resources, in
contrast to the traditional client–server model where only servers supply, and clients consume.
The peer-to-peer application structure was popularized by file sharing systems like Napster. The
concept has inspired new structures and philosophies in many areas of human interaction.
1.4.2 History of E-Commerce
The history of E-commerce seems rather short but its journey started over 40 years ago in hushed
science labs. Its early beginnings started during the cold war years when the world was racing to
build missile defense systems but, the history of modern
E-commerce is relativity short having its beginnings in the mid-1990s.
In the 1960s, very early on in the history of E-commerce, its purpose was to exchanging
electronic data long distance. In these early days of E-commerce, 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.
In the late 1970s a new protocol was developed known as ASC X12 which was used for the
exchange of business documents and information electronically.
Another system was being developed at the same time by the Military known as ARPAnet, and
was the first to use the "dial up" method of sending information via telephone networks. It was
considered the grandfather of the modern Internet.
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 todays Internet! As opposed to sending the information
streaming down one route. These were amongst the largest developments in the history of E-
commerce that set the stage for a revolution in the exchange of electronic data, but it was not for
another quarter of a century that Ecommerce became accessible to everyday people like you and
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 E-commerce Course Code: ITec3093 2011/2019

me.
The Internet took a giant leap into the modern age in 1991 when a computer scientist working
under contract for CERN "Tim Berners-Lee" made a huge advancement by communicating via
the Internet using HTTP.
This opened up the door for everyday people like us to use this wonderful new technology,
however it was not until 1994 that the first truly user friendly browser was developed with built
in security protocol to protect people’s personal information online.
This made way for secure transactions to be conducted on the internet. A year later 3rd party
credit card payment services became available to the still small online community. The stage
was set, and the future of Ecommerce was about to take-off.
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 E-commerce. Today Amazon and Ebay are both
amongst the most successful companies on the Internet!
From its humble beginning in 1995, modern E-commerce has become the fastest growing area of
business, showing continued growth year after year.
Technology has advanced further making it so much more accessible to people from all walks of
life, and entire industries have been built around E-commerce.
Today virtually anything can be purchased online, from a pizza to a car. And people love to shop
online, figures show that in the U.S over 60% of adults have purchased goods online this is a
figure that is set to explode over the coming years as the youth of today mature fast, being the first
to have been raised with this exciting environment into all aspects of life.
If there is one thing we can learn from the history of Ecommerce it is that anyone given a little
motivation and drive can become successful. It has never been easier to get a foothold into the
exciting online world of E-commerce, all anyone needs is an internet connection a computer and
an idea. E-commerce has become the great leveler, giving anyone the ability to build an E-
commerce website, and sell to a world-wide market with outstanding results.
1.5 Supporting Environments for E-Commerce
The following are some of the factors that form as the supporting environments for E-
Commerce:
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E-commerce Course Code: ITec3093 2011/2019

• World Wide Web

The web is nothing more than a collection of files stored at locations throughout the world.
These files are written using a special language known as the Hypertext Markup Language
(HTML). A file written using this language will contain text which forms the information
content of the file, together with instructions which define how the text is to be displayed; The
user employs a program known as a browser when he wishes to read a file on the World Wide
Web and the browser will fetch the file. The browser will examine the contents of the page and
will determine from the HTML in the file how it is to be displayed; for example, it might meet
some HTML which switches the display of the material from one font to another font. A file
which is downloaded into a browser is known as a web page. The computer that holds web pages
is known as a web server. The collection of pages which are linked by some theme for example,
they may be pages which all belong to the same retail company – is known as a website. Each
page that is downloaded into a browser will have references to other pages expressed as
hyperlinks. For example, a page belonging to a book retailer will have hyperlinks to the various
sections of the site which deal with different types of books. Hyperlinks can refer to pages within
the same site or can refer to pages within another site; for example, an online magazine might
refer to other online magazines which are part of the same publisher's stable. Web pages can now
contain a wide variety of media including audio files, video files, graphics and even programs
which can execute while the browser is being viewed. Without the World
Wide Web e-commerce would be barely possible: it provides a standard interface to a variety of
documents, products, services and software.
• File Transfer Protocol
It provides the facility whereby files can be downloaded into a computer from another computer
in the internet. There are a number of utilities which enable you to load anything from clip art to
the latest updates for operating systems. There are now also a large number of sophisticated FTP
programs which, for example, allow us graphically to show the structure of the file system on the
remote computer, use drag and drop to download files and resume processing when transfer is
interrupted by a network hang-up. Web documents can also contain FTP links which also enable
the downloading of files.
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E-commerce Course Code: ITec3093 2011/2019

FTP is the mainstay of commercial companies who sell electronic products; it is a simple facility
which has been found on the internet since its inception in the 1980s.
E-Mail
This is one of the most ubiquitous technologies on the internet and, along with the World Wide
Web, is the most used. When you write an email you use a program known as a mailer. When the
email is completed it is sent via a number of computers known as email servers and via a number
of other intermediate computers before it reaches its destination where it is read. In e-commerce
applications email is a subsidiary, but important technology. It is used as the transport medium
for mailing lists, for enabling customers to communicate with a company, for sending documents
and data to customers and for keeping customers up to date about current products and services.
Mailers are sometimes known as mail user agents while mail servers are sometimes known as
mail transfer agents.
Newsgroups
A newsgroup is a collection of internet users who are interested in a particular topic. The topic
may be a technical one, for example the LINUX operating system, or a recreational one such
as fly fishing. Members of a newsgroup send messages associated with a particular issue such
as the date of release of the next version of LINUX or the efficacy of using certain files on
certain rivers. Each message –known as a posting – will contain the user's thoughts on the
topic. Once posted these thoughts are responded to by other users. For example, one user may
say that they have got solid information that the next version of LINUX will be released next
week. The collection of responses to a posting and the original posting is known as a thread.
Newsgroups can be moderated or un-moderated. If a newsgroup is moderated a member will
examine each posting and determine whether it should be posted.
There are a number of reasons why postings are rejected: one major reason is that it is not
relevant to the area that a newsgroup covers; another reason is that the posting is abusive to
another user. There are no restrictions on posting to un-moderated newsgroups.
Newsgroups are accessed by using a special purpose software utility known as a newsreader.
Newsgroups are normally employed by ordinary users of the internet and have not really been
associated with e-commerce. However, a number of companies are beginning to wake up to
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 E-commerce Course Code: ITec3093 2011/2019

their potential. For example, a number of software companies assign staff to read the postings
in newsgroups which are devoted to one of their products in order to field any questions which
might arise about them: it provides a good impression to future and present customers if a
company will provide help about a product without, for example, users having to ring a high
tariff phone line. Other companies are also beginning to embed newsgroup technology into
their web pages in order to create customer feedback groups which enable them to decide on
future upgrades and new products.
Mailing Lists
Mailing lists are groups of users who have some interest in common, for example they may all be
network professionals. Such a list is used by organizations or individuals to inform the members
of topics of interest to them.
While there are many uses for mailing lists within companies there are also plenty of uses in e-
commerce. For example, a mailing list can be used to inform current customers of any new
products or services that are being offered. Most mailing lists are automatically maintained by
specialized software. Such software allows someone to subscribe to a mailing list or drop out of
a mailing list by just sending a simple email message to the software.
1.6 Limitations of E-Commerce
The limitations of E-Commerce can be categorized as per the following three major
stakeholders:
i. Limitations of E-Commerce to Organizations
Lack of sufficient system security, reliability, standards and communication protocols
Rapidly evolving and changing technology Under pressure to innovate and develop business
model to exploit the new opportunities
Facing increased combination from national and international competitors that often leads to
price wars and subsequent unsustainable losses for the organization.
(ii) Limitations of E-Commerce to Consumers
Costs of computing equipment, access to Internet, maintenance in updating the software
to be compatible to the advancements in the technology with time.
Lack of security and privacy of personal data.
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E-commerce Course Code: ITec3093 2011/2019

Physical contacts and relationships are replaced by electronic processes.

(iii) Limitations of E-Commerce to Society
Breakdown in human interaction - a threat of increase in interests of interacting with
people over screens than personal.
Social division – a potential threat of increase in a social divide between technical haves
and have-nots.
Too much of reliance on telecommunications infrastructure, power and IT skills.
Wasted Resources – trouble to dispose the outdated and old hardware.

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