Unit 1

What is Business?

A business is defined as the Commercial activities in Individuals or group engaging in some kind of financial
transaction.

 The organized efforts and activities of individuals to produce and sell goods and services for profit. Businesses
range in scale from a sole proprietorship to an international corporation. Several lines of theory are engaged
with understanding business administration including organizational behavior, organization theory, and strategic
management.
Business is either an occupation, profession, or trade, or is a
commercial activity which involves providing goods or services in
exchange for profits.

Profits in business are not necessarily money. It can be a benefit in

any form which is acknowledged by a business entity involved in a
business activity.

To make things clearer, let us divide the business definition

into business entity definition and business activity definition.
• Concept Of Business

 The business concept is the fundamental idea behind the business. The 
business model, plan, vision, and mission are developed based on this concept. 
Uber, for example, was started on the concept of aggregating taxi drivers and
providing their services on demand under one brand. Every other business
strategy was developed based on this concept.
• Objective Of The Business

 The business objective is what makes the business go on and conduct its activities
in a long run. It is the reason why the business exists. While most of the people
argue that profit making is the core objective of every business. Few have come
up with the new underlying objective.
 According to the traditional concept, business exists only to earn profits by
providing the goods and services to the customers.
 According to the modern concept, the underlying objective of every business is
customer satisfaction as this is what results in most profits. If the customer is
satisfied, business excels.
Business operations
 Business operations refer to activities that businesses engage in on a daily basis to increase the
value of the enterprise and earn a profit. The activities can be optimized to generate sufficient 
revenues to cover expenses and earn a profit for the owners of the business. Employees help
accomplish the business’ goals by performing certain functions such as marketing, accounting,
manufacturing, etc.
 Business operations is the harvesting of value from assets owned by a business. Assets can be
either physical or intangible. An example of value derived from a physical asset, like a building,
is rent. An example of value derived from an intangible asset, like an idea, is a royalty. The
effort involved in "harvesting" this value is what constitutes business operations cycles.
 Business operations encompass three fundamental management imperatives that collectively
aim to maximize value harvested from business assets (this has often been referred to as
"sweating the assets"):
1. Generate recurring income
2. Increase the value of the business assets
3. Secure the income and value of the business
  This is the most straightforward and well-understood
1. Generating management imperative of business operations. The
primary goal of this imperative is to implement
recurring a sustained delivery of goods and services to the
business's customers at a cost that is less than the funds
income acquired in exchange for said goods and also self-
employee services—in short, making a profit.
 The funds directly acquired by the business in exchange
for the goods and services it delivers is the business's 
revenue.
 The cost of developing, producing, and delivering these
goods and services is the business's expenses.
 A business whose revenues are sufficiently greater than
1. Generating

its expenses makes profit or income. Such a business is 
profitable. As such, generating recurring "revenue" is
recurring not the focus of operations management; what counts is

income management of the relationship between the cost of

goods sold and the revenue derived from their sale.
Efficient processes that reduce costs even while prices
remain the same expand the gap between revenue and
expenses and derive higher profitability.
 Types of recurring income:
1. Generating


 Long-term sales contracts: monthly to

recurring yearly based contracts for service or product;
 Examples: mobile phone contracts/plans.
income  Multiple revenue streams: different
sources of business income that support each
other;
 Examples: sell printers and toners.
 The more profitable a business is, the more valuable it
2.Increasing

is. A business's profitability is measured on the basis of
how much income it generates for the:
the Value of  Amount of assets its business operations employ—

the Business. 
its business return.
amount of revenue it realizes — its business margin
.
2.Increasing the
Value of the
Business. Methods of increasing value
1. Growth strategies
2. Management systems
• 1.Growth strategies

1. Expand market: offer a product or service to a wider section of an

existing market or to a new demographic, psychographic or
geographic market.
2. Develop brand: a recognized, respected and developed brand is
highly valuable. Develop through research, design and marketing
of companies name, logo and tagline.
2.Management systems
1. Show growth potential: create a business that has potential to be efficiently
expanded;
 Example: developing an efficient business system and operating manuals
allows the business to potentially be franchised or licensed.
2. Maintain intangible assets: Maintaining intangible assets can protect elements
that add value to a business;
 Examples: patenting, copyrighting or trademarking anything believed to be an
intangible asset.[3]
3. Protect and maintain physical assets: protecting physical assets will also help
protect the overall value;
 Examples: regular maintenance and insuring viable physical assets.
  Desirability or demand for its goods and services
3.Securing the  Ability of its customers to pay for its goods and services

income and value  Uniqueness and competitiveness of its business model

 Control exerted over the quality and efficiency of
of the business production activities
 Public regard for the business as a member of the
community
A business that can harvest a significant amount of value from
its assets but cannot demonstrate an ability to sustain this
effort cannot be considered a viable business.
 1. Economic activity
2. Buying and Selling
3. Continuous process
4. Profit Motive
5. Risk and Uncertainties
Basic features 6. Creative and Dynamic
Customer satisfaction
of Business 7.

8. Social Activity
9. Government control
10. Optimum utilization of resources
1. Economic activity:​

 Business is an economic activity of production and distribution of goods

and services.
  It provides employment opportunities in different sectors like banking,
insurance, transport, industries, trade etc.
  it is an economic activity corned with creation of utilities for the
satisfaction of human wants.
 It provides a source of income to the society. Business results into
generation of employment opportunities thereby leading to growth of the
economy.
  It brings about industrial and economic development of the country.
2. Buying and Selling:

 The basic activity of any business is trading. The business involves buying
of raw material, plants and machinery, stationary, property etc.
  On the other hand, it sells the finished products to the consumers,
wholesaler, retailer etc.
 Business makes available various goods and services to the different
sections of the society.
3. Continuous process:

 Business is not a single time activity.

 It is a continuous process of production and distribution of goods and services.
 A single transaction of trade cannot be termed as a business.
  A business should be conducted regularly in order to grow and gain regular
returns.
 Business should continuously involve in research and developmental activities
to gain competitive advantage.
 A continuous improvement strategy helps to increase profitability of the
business firm.
4. Profit Motive:

 Profit is an indicator of success and failure of business.

  It is the difference between income and expenses of the business.
  The primary goal of a business is usually to obtain the highest possible level of
profit through the production and sale of goods and services.
  It is a return on investment. Profit acts as a driving force behind all business
activities.
 Profit is required for survival,
growth and expansion of the
business.
  It is clear that every business
operates to earn profit.
  Business has many goals but
profit making is the primary goal
of every business.
  It is required to create economic
growth.
5. Risk and Uncertainties:

 Risk is defined as the effect of uncertainty arising on the objectives of the

business. 
 Risk is associated with every business. Business is exposed to two types of risk,
Insurable and Non-insurable.
 Insurable risk is predictable.
 Predictable factors are controllable to some extent, such as:
a) Taxes
b) Change in the volume of expected sales
c) Cost of supplies and equipment
d) Overhead costs) Salaries
f) Cost of goods and services offered
 Unpredictable factors include:
a) Changes in trends and tastes of customers.
b) Impact of the local economy on customer base.
c) Any unexpected action taken by your competitors.
The calculation and management of the risk is vital to ensure the success of a business firm.
Insurance and Risk management helps in minimizing the risk associated with the business.
• 6. Creative and Dynamic:

 Modern business is creative and dynamic in nature.

 Business firm has to come out with creative ideas,
approaches and concepts for production and
distribution of goods and services.
  It means to bring things in fresh, new and
inventive way.
 One has to be innovative because the business
operates under constantly changing economic,
social and technological environment.
 Business should also come out with new products
to satisfy the growing needs of the consumers.
 7. Customer satisfaction:

 The phase of business has changed from traditional concept to modern

concept.
  Now a day, business adopts a consumer-oriented approach.
 Customer satisfaction is the ultimate aim of all economic activities.
 Modern business believes in satisfying the customers by providing
quality product at a reasonable price.
  It emphasize not only on profit but also on customer satisfaction.
 Consumers are satisfied only when they get real value for their
purchase.
 The purpose of the business is to create and retain the customers.
 The ability to identify and satisfy the customers is the prime ingredient
for the business success.
8. Social Activity:

 Business is a socio-economic activity.

  Both business and society are interdependent.
 Modern business runs in the area of social
responsibility.
 Business has some responsibility towards the
society and in turn it needs the support of
various social groups like investors, employees,
customers, creditors etc. by making goods
available to various sections of the society,
business performs an important social function
and meets social needs.
  Business needs support of different section of
the society for its proper functioning.
9. Government control:

 Business organisations are subject to

government control.
 They have to follow certain rules and
regulations enacted by the government.
  Government ensures that the business is
conducted for social good by keeping
effective supervision and control by
enacting and amending laws and rules
from time to time.
Some important acts framed by the government include:

i. The Competition Act, 2002

ii. Foreign Exchange Management Act, 1999

iii. The Environment Act, 1986

iv. Indian Companies Act, 1956

v. Consumer protection Act

• 10. Optimum utilisation of resources:

 Business facilitates optimum utilisation of countries material and non-material

resources and achieves economic progress.
 The scarce resources are brought to its fullest use for concentrating economic
wealth and satisfying the needs and wants of the consumers.
Business
Elements 
Business Elements 
The essentials of starting a business, which is abstract, called elements of the business. Some of the elements are
discussed below:

1. Business idea
2. Entrepreneurship
3. Forecasting
4. Organization
5. Uncertainty
6. Legality
7. Profit-seeking motive
8. Financing
9. Research and Development (R&D)
10. Customer Satisfaction
1.Business idea
 Every business starts with an idea. The idea needs to be justified in respect of its
practicability and lucrativeness.

2.Entrepreneurship
 The birth of business requires some sort of entrepreneurship. It is equally applicable
irrespective of the nature and size of the enterprise.

3.Forecasting
 A business plan is a written description of the expected future of the business. Forecasting
helps in preparing a business plan.
4.Organization
 Land, labor, and capital are the scattered means of production which are arranged, correlated,
and coordinated by the entrepreneur to turn the idea into reality.

5.Uncertainty
 In the free-market economy, uncertainty is inevitable since there exits the competition in the
field of production as well as in distribution.

6.Legality
 The production and distribution, i.e., the business, need to be legalized. To do so, it has to go
through a legal framework.
7.Profit-seeking motive
 All activities of the business, such as procurement, production, or creation of utilities, distribution, etc.
are guided by the profit-seeking motive, i.e., a surplus of income over expenditure.

8.Financing
 Whether large or small, every business requires two types of capital – fixed capital and working
capital. Thus, the business requires ensuring finance at the lowest cost.

9.Research and Development (R&D)

 To be ahead and increase the market share, R&D remains the only alternative for the business
enterprise.

10.Customer Satisfaction
 The business organization ensures customer satisfaction through the creation of utilities.
Advantages and Disadvantages of Traditional Selling

Traditional selling has been around from a long time and is still being used to buy
products although there are advantages and disadvantages to it.
Advantages:
 Consumers can test the product before purchase.
 It helps a person feel better about the environment they are in. (That is if it is
in a shop)
 The owner cannot lose money since there are no hackers and scammers in the
real world.
 People without internet can visit stores for items.
 Rip-off merchants can be caught easier than scammers
Disadvantages:

 Consumers have to travel a certain distance for the product.

 Not all store and businesses have the exact item for the customer.
 It costs money to build the physical atmosphere
 There is limited time of when the store is opened and shut.
E-COMMERCE
INTRODUCTION TO E-COMMERCE

E-Commerce is the activity of buying or selling of products on online services or over

internet.

E-Commerce or Electronic commerce is a process of buying, selling, transferring, or

exchanging products, services, and/or information via electronic networks and computers
 Definition of Commerce

 The exchange of goods and services for money 

 Consists of
Ø  Buyers - these are people with money who want to purchase a good or service. 
Ø Sellers - these are the people who offer goods and services to buyers. 
Ø Producers - these are the people who create the products and services that sellers
offer to buyers.
INTRODUCTION TO E-COMMERCE

The use of the Internet, the World Wide Web(Web), and mobile apps to transact business
is known as E-commerce.

The Internet is a worldwide network of computer networks.

The Web is one of the Internet’s most popular services, providing access to billions of
Web pages. (way of accessing information over the internet.)

An app (short-hand for application) is a software application.

INTRODUCTION TO E-COMMERCE

E-commerce is based on digitally enabled commercial

transactions between and among organizations and individuals.

Digitally enabled transactions include all transactions mediated

by digital technology,like transactions that occur over the
Internet, the Web, and/or via mobile apps.
INTRODUCTION TO E-COMMERCE

Commercial transactions involve the exchange of value (e.g., money) across

organizational or individual boundaries in return for products and services.

Exchange of value is important for understanding the limits of e-commerce.

Without an exchange of value, no commerce occurs.

The difference between E-commerce and Traditional
commerce

 E-Commerce is completely an in digital and online mode where the communication is

through electronic form completely whereas Traditional Commerce is completely
offline and through in person or face to face.

 E-Commerce is reachable worldwide and has more connectivity whereas Traditional

Commerce is limited to a particular geographical area especially smaller. 

 E-Commerce information of exchange takes place in different forms 

either through digital ads or emails etc.  whereas the information of exchange in
Traditional Commerce happens in the form of hoardings or pamphlets distribution or
through any physical mode of exchange. 

 E-Commerce can have one to one marketing whereas Traditional Commerce can have
only one-way marketing. 
The difference between E-commerce and Traditional
commerce

 E-commerce provides a lot of discounts and at lower rates whereas in Traditional commerce
there will be no or fewer discounts and no other options except to approach different seller
which takes time.

 E-Commerce provides good customer services in different forms such as chat option or
direct call with customer care executive whereas Traditional commerce does not provide
any such customer support. 

 E-Commerce can have several payment modes such as online transactions or cash on

delivery whereas Traditional Commerce can have only cash payment in person. 

 Delivery of goods in E-commerce is either on the same day or any other day depending on
the availability of logistics and several other restrictions depending on the location of the
customers whereas in traditional commerce the delivery of goods is instant.
Origin

 E-commerce originated in a standard for the exchange of business documents,

such as orders or invoices, between suppliers and their business customers.
  Those origins date to the 1948–49 Berlin blockade and airlift with a system of
ordering goods primarily via telex.
  Various industries elaborated upon that system in the ensuing decades before the
first general standard was published in 1975.
  The resulting computer-to-computer electronic data interchange (EDI) standard is
flexible enough to handle most simple electronic business transactions.
Origin

 For beginning just a short while ago, the history of e-commerce is dramatic. In
1969, CompuServe was the first major e-commerce company to be formed in the
United States. 
 Although it seems distant now, computer time-sharing services grew from email
providers to facilitating tele-shopping in the 1970s. 
 While the rest of us were just beginning to celebrate the wonder of cable
television at the beginning of the 1980s, some tech savvy users formed the Boston
Computer Exchange, which was a bulletin board system-based
marketplace established to facilitate the sale or trade of used computers.
  This company was a trailblazer in crafting a fully automated, on-line auction and
marketplace for general commerce.
 For many years, e-commerce existed quietly, but in 1990, the first web browser,
aptly named “WorldWideWeb,” was launched.
 Around this time, development of the internet kicked into high gear, going from
the ability to display basic style sheets to the launch of Amazon and eBay within
just a few short years. Needless to say, those two have become smashing
successes as they evolved into massive e-commerce platforms, selling and
enabling consumers to sell their own wares to others on a global scale, as well as
to subscribe to items they need – no more going to the store to purchase standard
household goods.
 By the late 1990s, we were all getting too much email, and DVDs began to
outpace VHS tapes as the preferred method of viewing films – but that didn’t last
long.

 In 1997, we saw the launch of Netflix as the world’s first online movie rental
store.
 Building their reputation on the model of flat-fee unlimited rentals without
due dates, late fees, shipping and handling fees or per-title rental fees, Netflix
wittingly upped the customer service game of all would-be online merchants
while turning the entertainment industry on its head.
 Just one year later, Paypal, in its first iteration as Confinity, entered the scene as a
tool for transferring money. 
 The company now functions as a bank that executes payment processing for
online vendors, auction sites, personal, and commercial users.
  It’s a service that allows their customers to send, receive, and hold funds in 26
currencies worldwide. Today, PayPal Holdings, and its subsidiary, Venmo are two
huge names in the digital wallet game.
 In 2012, a former Amazon employee launched Instacart in San Francisco. As the
business has grown, Instacart has established partnerships with over 300 national,
regional, and local retailers. Instacart personal shoppers pick, pack and deliver the
order within the customer’s designated time frame.
 By 2014, Apple capitalized on the amount of time that we’re spending on our
portable devices, and developed Apple Pay as a digital wallet and mobile payment
tool. It’s currently supported on iPhone, Apple Watch, iPad, and Mac. CEO Tim
Cook said that ‌Apple Pay‌would be available in more than 40 countries and
regions by the end of 2019, but the current full list of ‌Apple Pay‌countries and
regions are viewable now on Apple’s website. 
 As e-commerce rapidly develops, we’ve seen social sites become shoppable, with
a notable milestone in 2015 when Pinterest added buyable Pins to their boards.
These pins allow board followers to purchase straight from the site without having
to ever leave Pinterest. Additionally, many boards without these shopping enabled
pins are now offering shopping recommendations based on the content displayed. 
Growth of e-commerce

 Electronic commerce has now been on the scene for around three decades, and in
that period it has transformed the processes of buying and selling goods.
  Its continued increase is changing the nature, timing, and technology of both
business-to-business (B2B) and business-to-consumer (B2C) commerce,
influencing pricing, product availability, inventory holding, transportation
patterns, and consumer behavior in developed economies worldwide.
 Business-to-business electronic commerce accounts for the vast majority of total
e-commerce sales and plays a leading role in global supply chain networks. 
 Its rise over the past 20 years has been rapid. In 2003, approximately 21.0% of
manufacturing sales and 14.6% of wholesale sales in the United States-the vast
majority of which constitute B2B trade-were conducted via e-commerce.
 By 2016, e-commerce had taken over, making up 64.8% of manufacturing and 32.4%
of wholesale sales. 
 Although online shopping gets the most popular attention, e-commerce retail sales are
dwarfed by electronic sales in both the manufacturing and wholesale sectors.
 Of the sum of these three, manufacturing e-commerce makes up 56% of e-
commerce sales, wholesale makes up 38%, and retail sales account for a mere 6%.
Basic Technologies
 There is rarely a facet within an industry that hasn’t been touched by technology.
Most notably, big data and machine learning are paving the way for robotics
automation, the instant transfer of data, and a variety of interesting devices.
 The retail industry is no exception when it comes to taking advantage of
technology.
 In fact, successful businesses are setting the bar by implementing technologies
such as artificial intelligence (AI), chatbots, and voice assistants into their
operations.
  The reasons vary, but can include that these technologies help provide excellent
customer experiences through instant communication, providing support without
the help of live employees, data management and security, and much more.
 Many online stores already have integrated e-commerce software, but to stay in
the competition, any e-commerce business must give serious thought into the
following technologies to stay prosperous and maintain customer satisfaction.
1.Artificial intelligence (AI)

 AI is revealing valuable insights into customer preferences — which can guide

marketing campaigns.

 It also can provide for the automation and transfer of data management operations
to increase performance. In the retail and e-commerce world, AI is being relied
upon for several unique aspects of business.
• 2.Personalized user experience
 74% of businesses believe that user experience is important for improving sales and
conversions. AI provides a personalized user experience that 59% of customers say
influences their shopping decisions. Artificial intelligence can facilitate a shopping
experience that is supported by customers’ personal preferences.
 AI, big data, and machine learning can offer analytics and foresight into customer
behavior patterns which can drive advertising campaigns, provide support and services,
and automate communication — all of which increase engagement rates for businesses.
• 3.Recommendations to customers

 Since AI can predict customer behavior patterns, it is able to recommend relevant

and useful information to customers on products and services and more.
 AI and machine learning algorithms can efficiently forecast this information by
taking in a customer’s search history and other third-party data.
 This can lead to effectively proposing applicable information and solutions to
satisfy customer needs.
• 4.Automated campaign management

 Customer behavior patterns are a driving force behind any marketing campaign.
Using AI, businesses are able to target both potential and existing customers by
looking at data such as past certain history. These analytics can be used to provide
a better aimed content marketing strategy for businesses.
 Content and advertisements may then be created with a tone that engages various
audiences and placed on the correct media platform to capture their attention.
Using AI and marketing automation can show a business the data necessary for a
strategic and tactical campaign.
 Get to know your customers: download our B2B Buying Process 2019 Report for
stats and insights into the behavior, preferences and challenges of buyers, based
on a survey of 500+ B2B customers.
• 5.The Cloud

 You will be hard-pressed to find a successful business that does not have at least
one aspect of their business operations posted on the cloud.
 Managing and processing data in the cloud is essential for the instant access of
data by anyone who needs it, on any device.
  Especially for e-commerce businesses, a cloud ERP can improve delivery speeds,
make your store more adaptable, and bring about business stability and growth.
• 6.Chatbots

 Recognized for their customer satisfaction rates and wide-scale availability,

chatbots have pivoted from limited use in call centers to wide-spread e-commerce
website applications.
 Rather than asking questions and providing information to those over the phone,
e-commerce websites that utilize chatbots can provide a variety of services and
solutions.
• 7.  24/7 assistance

 Many businesses cannot provide answers exactly when a potential customer is

searching for them. Additionally, customers may be frustrated when put on hold
because a business does not have the staff to answer and tend to a high volume of
customers.
 Chatbots are available 24/7, day and night, to provide any answers and solutions a
potential customer may inquire about. Having this automated communication can
be valuable for businesses as it frees up employees to focus on other business
operations, efficiently communicates with customers, and may even propose
products and services.
• 8.Respond to queries
 Built into a chatbot’s algorithm is what is called a decision tree.
 Decision trees use machine and deep learning to automate complex business
processes, essentially developing, maintaining, and always expanding upon a
comprehensive network of if/then statements.
 By addressing commonly asked questions and concerns from customers, chatbots are
able to expand upon their decision tree.
 Here, a chatbot can gain information on whether they’ve helped a customer or not.
 If they have helped the customer, this information may be passed on to another
consumer with a similar question.
  If they have not adequately satisfied the customer, the chatbot may continue asking
questions until they provide the customer with the information they are looking for.
 When they have answered the customer, the chatbot now has more choices in their
decision tree to help customers in the future.
• 9.Send shipping and tracking information

 Imagine if Amazon never remembered your address or payment information and never told
you when your order is scheduled to arrive.
  It is a pain for customers to have to enter shipping information every time they want to order
something from your e-commerce website.
  Additionally, it is a best practice for user experience to give a customer a timeframe for when
the order will be at their doorstep.
 Chatbots remember this information and can provide real-time shipping tracking details for
customers.
 This can also help warehouse operations, as they could focus on the supply chain and fulfilling
orders through their order management system rather than telling customers where their
packages are.
• 10.Voice assistants
 Not everyone searches for products and information via mouse and keyboard in the
digital age.
  To accommodate these potential customers, businesses will need to adopt 
voice commerce — using voice recognition technology and allowing customers to use
voice commands to find and purchase products online. 
 Voice assistants such as Siri, the Amazon Echo, and Google Home are 
becoming increasingly popular for their convenience in searching for and purchasing
products.
 In order to stay successful, e-commerce businesses will need to provide this
technology and its benefits to capture a new wave of consumers.
• 11.Audio brand signatures

 Any company jingle, music composition, or auditory tone is considered an audio brand
signature.
 It is a way for businesses to better establish a brand identity, and help customers remember their
name.
 Businesses can command their audio brand signature to play through voice assistants to let their
customers know where they are ordering their products from.
 By associating your brand with an auditory signature, consumers will know and remember they
are ordering from your store – even when laying on their couch, speaking to a voice assistant.
• 11.Shopping lists
 Customers would rather automate their continual shopping needs than frequent a website (or
store) every month for their essentials.
  Through voice assistants, people are able to compile shopping lists — ordering what they need
from who they want.
 This technology learns the preferences of the owners, and many businesses are able to capitalize
on brand loyalty. If a voice assistant knows that a person wants a product from your store
monthly, it can add it to their shopping list.
 This can be beneficial to companies in forecasting sales and balancing order management.
• 12.Assistive technology
 In the marketing world, assistive technology and voice commerce are helping to reach a wide
variety of new audiences — not just the younger generation who are using new devices, but
the visually impaired as well.
 By using speech-to-text technology, the visually impaired can forgo the struggles of
traditional search experience, and order what they need through new and developing assistive
technology.
 All interconnected, AI, chatbots, and voice assistants are becoming necessary for any e-
commerce business to be successful.
  In order to stay with the times, businesses must adapt to these new technologies which appeal
better to potential and existing customers.
 EIGHT UNIQUE FEATURES OF E-
COMMERCE TECHNOLOGY

1. Ubiquity
2. Global reach
3. Universal standards
4. Richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology
Ubiquity

Ø In traditional commerce, a marketplace is a physical place you visit in order to

transact. 

Ø E-commerce, in contrast, is characterized by its ubiquity: it is available just about

everywhere, at all times.

Ø From a consumer point of view, ubiquity reduces transaction costs—the costs of

participating in a market.

Ø The ubiquity of e-commerce lowers the cognitive energy required to transact in a

marketspace. 
Global reach

 E-commerce technology permits commercial transactions to cross cultural,

regional, and national boundaries far more conveniently and cost-effectively than
is true in traditional commerce.

 The potential market size for e-commerce merchants is roughly equal to the size
of the world’s online population.

 In contrast, most traditional commerce is local or regional—it involves local

merchants or national merchants with local outlets
Universal Standards

 These are technical standards(internet standards) for conducting e-commerce and

they are all the same among all nations.
 The universal technical standards of the internet and e-commerce greatly lower
market entry costs which is the cost that merchants must pay simply to bring their
goods to the market. At the same time, for consumers, universal standards reduce
search cost which is the effort required to find suitable products.
 With e-commerce it is easier to find suppliers, prices and delivery terms of the
products.
Richness

 Information richness refers to the complexity and content of a message.

 Traditional markets, small retail stores have great richness: they are able to provide
personal, face-to-face service using aural and visual cues when making a sale.
 The larger the audience reach, the less rich the message
 The Internet has the potential for offering considerably more information richness than
traditional media such as printing presses, radio, and television because it is interactive
and can adjust the message to individual users.
Interactivity

 e-commerce technologies allow for interactivity, meaning they enable two-way

communication between merchant and consumer and among consumers.
 Interactivity allows an online merchant to engage a consumer in ways similar to a
face-to-face experience.
Information density
 Information density—the total amount and quality of information available to all
market participants, consumers, and merchants alike.
 A number of business consequences result from the growth in information density.
 Information density in e-commerce markets make prices and costs more
transparent.
 Price transparency refers to the ease with which consumers can find out the
variety of prices in a market.
  Cost transparency refers to the ability of consumers to discover the actual costs
merchants pay for products .
 Price discrimination  by  merchants—selling the same goods, or nearly the same
goods, to different targeted groups at different prices.
Personalization/customization

 E-commerce technologies permit personalization.

 Merchants can target their marketing messages to specific individuals by adjusting

the message to a person’s name, interests, and past purchases.
 The technology also permits customization—changing the delivered product or
service based on a user’s preferences or prior behaviour.
Social technology: user content generation and
social networking
 E-commerce technologies have evolved to be much more social by allowing users
to create and share content with a worldwide community. 

 Using these forms of communication, users are able to create new social networks
and strengthen existing ones
Components of E-Commerce

1. Customer Engagement 
2. Quality of your Products 
3. Standardization of your Product Prices 
4. Ensuring your Store Security 
5. Reliable and Trusted Customer Support 
6. Enabling M-Commerce 
7. Utilize the Power of Social Media 
8. Takeaway 
 1. Customer Engagement

 To convert potential consumers, you need to make a good first impression. Your website
represents your online presence, and you need to be creative as well.
 Getting the best design for your website can last your impression, and easy navigation to
your website can give your consumers an excellent shopping experience. You can go for a less
stylish design or go with bold themes with colors to represent your website.
 The pages of your website are also important. Your “About Us” page conveys details about
your business niche, your location, and what you serve. Adding good quality images and a
unique description of your products is also a must. Adding an FAQ page that can answer the
basic questions of your customers will add up to your customer satisfaction experience.
 2. Quality of your Products

 The quality of your products can help you gain you trusted and loyal consumers. This also
reduces your time, cost, and risk of getting return requests for defective products.
 This will create a negative impression that products you sold online are not of good quality. By
ensuring your online consumers that your products are genuine and of good quality, you create a
good impression and brand reputation. Getting ISO accreditation is another way of gaining your
consumers’ trust.
 3.Standardization of your Product Prices

 Online consumers always look for and compare the product prices that you offer. This is the
reason why you must evaluate your product prices.
 Product pricing is considered to be a marketing tool and has a direct effect on your conversion
rates.
 You have to keep in mind that when an online consumer visits a website, the first thing they
look for is the product’s price A proven way to standardize your product pricing is by having a
cost-based model that works in three steps deciding your cost price, wholesale price, and your
retail price.
 By standardizing your product pricing strategy you will always succeed on the type of online
retail business you have.
 4.Ensuring your Store Security

 Your online store must be secured so that your consumers will have the confidence to purchase
your products.
 Your online retail shopping cart should have excellent security features that will prevent your
consumers’ personal information from falling into the wrong hands. This can directly improve your
business’ reputation.
There are different ways to secure your eCommerce website.
1. One is by using an SSL (Secure Socket Layer) certificate that encrypts data on your website to
secure it from online threats.
2. Another is implementing advanced verification methods. This will earn your consumer’s trust
because they know you are taking good security measures. 
 5. Reliable and Trusted Customer Support

 Online consumers trust the reliability part. If your customer support attends to their questions,
queries, and problems relating to product purchase, payment, returns, and delivery adds
reliability and trust to your brand.
 Your customer service should be available 24/7 and must provide your consumers with an
excellent approach. Additionally, you can use a chatbot for connecting with your audience on a
personal level.
 Having good customer service will help you gain and retain consumers. This will also help you
build your brand identity.
 7. Utilize the Power of Social Media

 There are approximately 4.4 billion internet users worldwide, out of which 3.44 billion are
active on social media. Most companies are selling products or services on Instagram
Shopping as it generates more attention and engagement than Facebook.
 Therefore, promoting your eCommerce business on social media will surely boost your
store’s presence, engagement, and conversion rate.
 8. Takeaway

 These components will surely assist you in making a successful eCommerce business strategy and
will help you stay in the competitive online market, giving you a much better chance of getting your
ROI.
 Advantages of Ecommerce

1. Faster buying/selling procedure, as well as easy to find products.

2. Buying/selling 24/7.
3. More reach to customers, there is no theoretical geographic limitations.
4. Low operational costs and better quality of services.
5. No need of physical company set-ups. 
6. Easy to start and manage a business.
7. Customers can easily select products from different providers without moving around
physically.
Limitations or Disadvantages of Electronic
Commerce
1. Security
 The biggest drawback of e-commerce is the issue of security. People fear to provide
personal and financial information, even though several improvements have been made in
relation to data encryption.
 Certain websites do not have capabilities to conduct authentic transactions.
 Fear of providing credit card information and risk of identity limit the growth of e-
commerce.
2. Lack of privacy
 Many websites do not have high encryption for secure online transaction or
to protect online identity. 
 Some websites illegally collect statistics on consumers without their permission. 
 Lack of privacy discourages people to use internet for conducting commercial
transactions,
3. Tax issue
 Sales tax is another bigger issue when the buyer and seller are situated in different
locations.
 Computation of sales tax poses problems when the buyer and seller are in
different states.
 Another factor is that physical stores will lose business if web purchases are free
from tax.
4. Fear
 People fear to operate in a paperless and faceless electronic world. Some of the
business organizations do not have physical existence, People do not know with
whom they are conducting commercial transactions. This aspect makes people to
opt physical stores for purchases.
5. Product suitability
 People have to rely on electronic images to purchase products. Sometimes, when
the products are delivered, the product may not match with electronic images.
Finally, it may not suit the needs of the buyers. The lack of ‘touch and feel’
prevent people from online shopping.
6. Cultural obstacles
 E-commerce attracts customers from all over the world. Habits and culture of the
people differ from nation to nation. They also pose linguistic problems. Thus,
differences in culture create obstacles to both the business and the consumers.
7. High Labour cost
 Highly talented and technically qualified workforce are required to develop and
manage the websites of the organization. Since internet provides a lot of job
opportunities, business organizations have to incur a lot of expenses to retain a
talented pool of employees,
8. Legal issues
 The cyber laws that govern the e-commerce transactions are not very clear and
vary from country to country. These legal issues prevent people from entering into
electronic contracts.
9. Technical limitations
 Some protocol is not standardized around the world. Certain software used by
vendor to show electronic images may not be a common one. It may not be
possible to browse through a particular page due to lack of standardized software.
Insufficient telecommunication bandwidth may also pose technical problems.
9. Huge technological cost
 It is difficult to merge electronic business with traditional business. Technological
infrastructure may be expensive and huge cost has to be incurred to keep pace
with ever changing technology.
 It is necessary to allocate more funds for technological advancement to remain
competitive in the electronic world.
 TYPES OF E-COMMERCE
 There are several different types of e-commerce and many different ways to
characterize them.
 Different types of e-commerce can be distinguish by the nature of the market
relationship—who is selling to whom:
 B2C—business-to-consumer
 B2B—business-to-business
 C2C—consumer-to-consumer
 C2B-consumer-to-business
TYPES OF E-COMMERCE
Summary of E-Commerce Transaction models
B2C—business-to-consumer
B2C—business-to-consumer

Some of the reasons why should opt for B2C

1. Inexpensive costs, big opportunities.
2. Globalization.
3. Reduced operational costs.
4. Customer convenience.
5. Knowledge management.
PROCESSES IN B2C (HOW DOES B2C WORK?)
B2C—business-to-consumer

 The most commonly discussed type of e-commerce is business-to-consumer

(B2C)e-commerce, in which online businesses attempt to reach individual
consumers.
 B2C commerce includes purchases of retail goods, information goods, e-books
etc.
 It is the type of e-commerce that most consumers are likely to encounter .
 Eg. the purchase of books fromamazon.co.uk, CDs/DVDs from play.com, or even
doing the weekly shopping online at Tesco.
B2C e-commerce reduces transactions costs by increasing
consumer access to information and allowing consumers to
find the most competitive price for a product or service.

B2C e-commerce also reduces market entry barriers, since

the cost of putting up and maintaining a Web site is much
cheaper than installing a “brick-and-mortar” structure for a
firm.

In the case of information goods, B2C e-commerce is even

more attractive because it saves firms from factoring in the
additional cost of a physical distribution network.
 1) Visiting the virtual mall-customer visits the mall by browsing the
outline catalogue.
2) Customer registers-customer has to register to become part of the
site‘s shopper registry
3) Customer buys product.
4) Merchant processes the order-the merchant then processes the

B2C order that is received from the previous stage & fills up the
necessary forms
Credit card is processed:-credit card of the customer is
WORKING:
5)
authenticated through a payment gateway or a bank.
6) Shipment & delivery:-the product is then shipped to customer.
7) Customer receives:-the product is received by customer and is
verified.
8) After sales service:-after sale, the firm wants to maintains a good
relationship with its customers. It is called CRM customer
relationship management.
Business-to-Business (B2B) e-commerce
  Business-to-business (B2B) is electronic commerce
involves sales of goods and services among business,
such as between a manufacturer and a wholesaler, or

Business-to- 
between a wholesaler and a retailer.
It is the largest form of e-commerce(with about $4.7
Business trillion in transactions in the United States in 2013 ).
 There are two primary business models used within the
(B2B) e- B2B arena:

commerce Net marketplaces, which include e-distributors, e-


procurement companies, exchanges and industry
consortia,
 and private industrial networks.
 Eg. Go2Paper.com is an independent third-party
marketplace that serves the paper industry.
MAJOR ADVANTAGES OF B2B

 Direct interaction with customers.

 Focused sales promotion.
 Building customer loyalty.
 Scalability.
 Savings in distribution costs.
 PROCESSES FOR B2B

I. review catalogues
II. identify specifications
III. define requirements
IV. post request for proposals (REP)
V. review vendor reputation
VI. select vendor
VII. fill out purchase orders (PO)
VIII.send PO to vendor
IX. prepare invoice
X. make payment
XI. arrange shipment
XII. organize product inspection and reception.
B2B IS CLASSIFIED AS:-
1. Market place:-a digital electronic market place where
suppliers and commercial purchasers can conduct
transactions.
2. E –distributors:-a company that suppliers products and
services directly to individual business.
3. B2B service provider:-it is a company that access to
internet based software application to another
companies.
4. Infomediary: -a company whose business model is
premised upon gathering information about customers &
selling it to other businesses
Relation between B2B and B2C Models
Consumer-to-Consumer (C2C) e-
commerce
Consumer-to-Consumer (C2C) e-commerce

 Consumer-to-consumer (C2C) e-commerce provides a way for consumers to sell

to each other, with the help of an online market maker such as eBay .

 In C2C e-commerce, the consumer prepares the product for market, places the
product for auction or sale, and relies on the market maker to provide catalogue
and transaction-clearing capabilities so that products can be easily displayed,
discovered, and paid for.
Consumer-to-Business(C2B) e-commerce
Consumer-to-Business(C2B) e-commerce

 Consumer-to-business (C2B) is a business model in which consumers

(individuals) create value and businesses consume that value.
 For example, when a consumer writes reviews or when a consumer gives a useful
idea for new product development then that consumer is creating value for the
business if the business adopts the input.
 In the C2B model, a reverse auction or demand collection model, enables buyers
to name or demand their own price, which is often binding, for a specific good or
service.
 Inside of a consumer to business market the roles involved in the transaction
must be established and the consumer must offer something of value to the
business.[2]
C2B is a kind of economic relationship that is qualified as an inverted
business type. The advent of the C2B scheme is due to:

The internet connecting large groups of people to a bidirectional network; the

large traditional media outlets are one-directional relationships whereas the
internet is bidirectional.

Decreasing costs of technology; individuals now have access to technologies

that were once only available to large companies (digital printing and
acquisition technology, high-performance computers, and powerful software).
 B2C: www.amazon.com,Snapdeal,flipkart

C2C: www.eBay.com,OLX,Quiker

Examples B2B: www.tpn.com

C2B: www.priceline.com
Process of E-Commerce
Process of E-Commerce

 An E-commerce process flow is an area of online retail that is overlooked.

 In order to maximize sales opportunities and stay cost competitive, mapping out
your eCommerce processes can help your business highlight key areas that may
require automation or modification, and ultimately, improve performance.
 Key areas of a typical eCommerce process flow include:
• Receiving orders from your eCommerce system
• Processing order information
• Shipping
End