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E-Commerce

Assignment 1
An introduction to E-Commerce as a valid business
opportunity for the new and existing business
Author: Sujitta Chantavitaya
Date: 01.03.2016

1460 words

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An introduction to E-Commerce as a valid business opportunity for
the new and existing business

Introduction

Electronic business (or E-Business) is a way for businesses to expand their business presence
through the medium of the internet. This involves the application of information and
communication technology for all business activities, such as:
 Purchasing and selling products
 Service supply and provision
 Payment processing
 Production management and development
 Collaboration with other businesses
 Information sharing
 Human resources

The term e-business was first formed in 1996 by IBM’s marketing and internet department
and since then, the use of the internet to conduct business ventures has become widespread.
(Gerstner L, 2002), (Searchcio, 2016).

Companies do not necessarily use e-business as a means for buying and selling products or
services, but rather to develop the business as a whole. An example of a company using e-

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business would be Coca-Cola working with online companies such as YouTube and Facebook
to advertise and promote its product (information sharing, collaboration).

Electronic commerce (or E-Commerce) is a part of e-business and is widely used in modern
day services as a means for trading and enabling the trade of products. It uses technology and
the internet to carry out the following activities:
 Online retail for consumers
 Customer-to-customer sales (i.e. online marketplaces)
 Inter-business transactions and data sharing
 Demographic data collection and use via social media sites
 Marketing via e-mail or fax to potential and existing customers
 Pretail (i.e. pre-order and reservations) for new business products/service
 Delivery and customer service
E-commerce differs from e-business in the sense that it is aimed at external parties such as
consumers, suppliers and other businesses. An example of e-commerce would be companies
such as E-bay and Amazon providing online platforms for consumers to buy and sell products
over the internet. E-business includes e-commerce but also covers the more internal business
processes described earlier.

Modes of communication

Communication, be it internally between business workers or externally with other


businesses and consumers, is vital for ensuring a business can continue to grow and maximize
its efficiency. Customer service and feedback helps businesses to understand where they
need to make improvements to their service, and so it is within the business’s interests to
have many accessible and easy to use forms of communication. The following are the modes
of communication commonly used by e-businesses:
 Email – Consumers will be encouraged to send emails to the customer services
department. This can be for purposes of refund claims, complaints, product queries
etc. Consumers will often be given a personal reference number so that their issue can

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be tracked by customer services. Businesses frequently use email to communicate
with other businesses and also for advertising new products or services to their
customers.
 Online forums and Live Chat – When consumers have a particular issue with a product
or service that can be solved quickly, businesses sometimes provide an online public
forum for them to use which they can ask their question to a wide audience. If
someone in the online community knows the answer then they can write this on the
forum. Some services also provide resident online personnel to conduct a ‘Live Chat’
with a consumer about a particular issue regarding a product or service.
 Reviews – Although not strictly a form of communication, encouraging reviews about
their products or services online can help promote a business’s relationship with its
customers and outline areas for quality improvement.
 Telephone (call-centers)
 Social media (i.e. Facebook, Twitter)
 Letters

Business models
There are two main business models that are used in e-commerce:
1. Business-to-business (B2B)
2. Business-to-consumer (B2C)
The B2B model involves one business selling a product to an intermediate party who then
sells the product on to the consumer. An example of such a model would be a wholesaler that
purchases items from a company’s website and then sells the product on to the final customer
that visits their store.
The B2C model sells products directly to consumers without any third party involvement. The
consumer orders their product off the company’s website and it is thereby sent to them. An
example of this would be a clothing company (e.g. ASOS) which has its own website where
consumers can browse for and purchase products, with means of purchase processing and
delivery carried out via the company itself. (Tutorialspoint, 2016).

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Emerging business models
There are many new business models being introduced and developed in modern day
business. Two of these business models will now be discussed:
1. One-off Experience Business Model
This involves social media companies promoting third party products and services as a ‘one-
off experience’. This model exists in markets of abundance and generally involves offline
event organisers, pop-up stores and retailers, offering unique experiences to consumers at a
particular time and place. Experience-seeking consumers will then make a financial
contribution, while commissions from the the offline businesses will help fund the social
media’s hosting, presence and findability costs. An example of this would be Facebook
advertising for a music concert. The company running the concert would be paid by the
consumers, but would then pay Facebook facilitating the promotion of the event (Linked In
Slideshare, 2010).
2. Low-Budget Innovation Business Model
By communicating with customers and involving them in the development process, low-
budget companies are able to make the necessary improvements to their products through a
co-creation process. Early consumers (or adopters) are able to sample the product and make
suggestions, while their consumer behaviour, social and individual lifestyle patterns are then
analysed by the business in order to make necessary product changes before the product is
expanded. For example volunteers are invited to try a product or service at low cost (or for
free) and give their feedback on how they feel about it and any changes they would make.
This could be done by filling out an online form or email submitted to the company’s website
which could then be used to innovate the product (Linked In Slideshare, 2010).

Development of E-commerce on the current market


E-commerce has become a much greater part of business in recent years. This has occurred
for the following reasons:

 The vast increase in the number of internet users


 Improved access to broadband internet

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 The development and availability of internet-capable smart-phones
 The success of social media

The global revenue for B2C e-commerce was estimated at $1.25 trillion for 2013 by the
Interactive Media in Retail Group (World Trade Organisation, 2013), although this growth has
not been as great as once predicted. Still, the role of e-commerce continues to grow in
modern day business. Developed economies such as Western Europe and North America are
at the forefront of e-commerce sales. However, developing economies such as Asia are also
growing in this respect. In China, for example, e-commerce has grown by 120% a year since
2003 and is now the largest e-commerce market (World Trade Organisation, 2013).

Summary and Conclusion

In response to its increasing popularity, more and more companies are embracing the idea of
e-commerce as a viable business venture, with competition for online presence becoming
more and more apparent. However, there are a number of benefits and barriers that will now
be discussed:

E-commerce has allowed businesses to connect with their customers, improve their product
availability and distribution and increase business and economic growth. It has given
developing countries access to new markets, with geographical distance no longer an issue,
and has given them the ability to interact with governments to outsource their products and
provide assistance. Consumers are able to access goods and services at reduced costs, as well
as the increased access to information and technology with the success of e-commerce.

The issues that present themselves in e-commerce are, however, quite extensive:
 The cost of ICT equipment
 Producers and users need to be comfortable using ICT
 The security of electronic payment systems can be questionable
 The potential for ‘spam’ producers to sell fake products/services
 Delivery and distribution issues

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 Tracking, monitoring and taxing transactions
 Achieving recognition for small businesses, with risk of unfair competition

In my opinion, e-commerce is, on the whole, beneficial for businesses and consumers and as
long as the correct business models are used, such as involving the consumer in
product/service development, e-commerce (and e-business) can continue to improve.

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References

Beynon-Davies P. (2004). E-Business. Palgrave, Basingstoke.

Gerstner, L. (2002). Who says Elephants Can't Dance? Inside IBM's Historic Turnaround. pg
172.

Linked In – Slide Share. (2010). 10 New Business Models for this Decade. Available at:
http://www.slideshare.net/oukearts/10-new-business-models-for-this-decade. [Accessed
25/03/2016].

Searchcio. (2016). Definition of e-business. Available at:


http://searchcio.techtarget.com/definition/e-business.
[Accessed: 20/03/2016].

Tutorials Point. (2016). E-commerce business models. Available at:


http://www.tutorialspoint.com/e_commerce/e_commerce_business_models.htm.
[Accessed: 20/03/2016].

World Trade Organisation. (2013). E-commerce and development: Key issues and trends.
Available at:
https://www.wto.org/english/tratop_e/devel_e/wkshop_apr13_e/fredriksson_ecommerce
_e.pdf. [Accessed 25/03/2015].