TOPIC ONE: INTRODUCTION TO ELECTRONIC COMMERCE

Expected Learning Outcomes

By the end of this lesson, the learner should be able to:

1. Explain the difference between e-commerce and e-business

2. Discus she advantages and challenges of ecommerce

Lesson Overview

This topic focuses on brief history of ecommerce, definition and the reasons why most firms are
adopting ecommerce today. The lesson also stipulates the challenges firms may encounter in
electronic commerce.

Electronic Commerce and Electronic business have been used interchangeably to refer to online
trading activities. E-business is aimed at enhancing the competitiveness of an Organisazation by
deploying innovative information and communications technology throughout an organization and
beyond, through links to partners and customers. It encompasses electronic commerce and also
includes all electronic transactions within a firm. E-business is the transformation of key business
processes through the use of internet technologies.

According to Zwass (1998) E-Commerce is the sharing of business information, maintain business
relationships and conducting business transactions by means of telecommunicating networks.

The UK government referred defined electronic commerce as the exchange of information across
electronic networks at any stage in the supply chain whether within an Orgainsation, between
businesses, between businesses and consumers whether paid or unpaid.
(E-commerce@itsbest.uk,1999).

Kalokota and Whinston (1997) refer to a range of different perspective for e-commerce.

1. A communications perspective-the delivery of information, products/service or payment by

electronic means.

2. A business process perspective- the application of technology towards the automation of

business transactions and workflows.

3. A service perspective- enabling cost cutting at the same time as increasing the speed and
quality of service delivery.
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 4. An online perspective- buying and selling of products and information.

HISTORY OF ELECTRONIC COMMERCE

The roots of electronic commerce developed over two decades ago with the electronic data
interchange system was formed. EDI” was driven primarily by the recognition that firms in
transactional economic relationships were wasting time and money by printing, transferring, then
having to re-key interorganisational transaction data from one firm’s computer to another. To avoid
this cumbersome process, a few firms worked together to agree on common formats and structures
for exchanging computer based data. Exchanging computer data was eventually replaced by the use
of telecommunication network which has been made possible through the use of the Internet.

Differences between Electronic Commerce and traditional commerce

- The major difference is the way information is exchanged and processed:

Traditional commerce:

•face-to-face, telephone lines or mail systems

•manual processing of traditional business transactions

E-Commerce:

•using Internet or other network communication technology

•automated processing of business transactions

•pulls together all activities of business transactions, marketing and advertising as well as service and
customer support

BENEFITS OF ECOMMERCE

 Wider customer reach hence increased sales

 Marketing cost reduction due to reduced printing and distribution of costs of marketing
communication and reduced time in customer service

 Supply chain cost reduction and management. A firm is able to manage its inventory levels
through the shorter cycle time in ordering and also ensures it has no stock outs which can
affect production. Overstocking again will affect the profitability of the firm.

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  Administrative cost reductions from more efficient routine business processes such as
recruitment, invoice payment, generally administration etc.

 Faster product development lifecycle enabling faster response to market needs

 Improved customer service and feedback

 Learning for the future and the ability to prepare for any change in the environment

 More rapid, more responsive marketing communications including PR and better

management of marketing.

Progress Assessment

Discuss areas in which ecommerce is applied in todays business processes and how it affects such
processes.

Disadvantages of Ecommerce

E-Commerce disadvantages can be broadly classified in two major categories:

 Technical disadvantages

 Non-Technical disadvantages

Technical Disadvantages

 There can be lack of system security, reliability or standards owing to poor implementation of
e-Commerce.

 Software development industry is still evolving and keeps changing rapidly.

 In many countries, network bandwidth might cause an issue as there is insufficient

telecommunication bandwidth available.

 Special types of web server or other software might be required by the vendor setting the e-
commerce environment apart from network servers.

 Sometimes, it becomes difficult to integrate E-Commerce software or website with the existing
application or databases.

 There could be software/hardware compatibility issue as some E-Commerce software may be

incompatible with some operating system or any other component.

Non-Technical Disadvantages

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  Initial cost: The cost of creating / building E-Commerce application in-house may be very high.
There could be delay in launching the E-Commerce application due to mistakes, lack of
experience.

 User resistance: User may not trust the site being unknown faceless seller. Such mistrust
makes it difficult to make user switch from physical stores to online/virtual stores.

 Security/ Privacy: Difficult to ensure security or privacy on online transactions.

 Lack of touch or feel of products during online shopping.

 E-Commerce applications are still evolving and changing rapidly.

 Internet access is still not cheaper and is inconvenient to use for many potential customers like
one living in remote villages.

DRIVERS FOR ECOMMERCE AND EBUSINESS ADOPTION

Different factors have contributed to the increase in adoption of ecommerce as opposed to traditional
commerce activities. They are based on benefits achieved through ecommerce and are classified into
two:

Cost/Efficiency Drivers

1. Increased speed of communication with suppliers and ability to obtain goods faster

2. Reduced sales and purchasing costs

3. Reduced operating costs

Competitiveness drivers

4. Improving the range and quality of goods

5. Enhanced customer support

Some of the key success factors for e-commerce include:

 Providing value to customers

 Providing service and performance

 Continued advertising

 Giving Personal attention to customers

 Providing reliability and security of transaction and customer information

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Lesson Summary

Ecommerce has revolutionalised traditional business activities by increasing business reach, sales
while reducing cost of operation. To compete favourably a firm needs ecommerce.

Revision Questions

1. Choose a business you are familiar with and explain how the business has adopted
ecommerce.

2. Explain benefits of using ecommerce to a firm.

Further Reading

1). Sid L. Huff, Michael Wade, Peter Newson (2000). “Cases In Electronic Commerce”, Irwin McGraw-
Hill. (PG 1-8)

2). Dave Chaffey (2002), “E-Business and E-Commerce Management” Pearson Education, Prentice
Hall. (PG 1-17)

3). Robert C. Elsenpeter and Toby J. Velte,(2001). “Ebusiness, A Beginners’ Guide” McGraw-Hill (PG
1-27)

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