Electronic Commerce Essay, Research Paper

Electronic Commerce

There are very few successful companies that do not use computers in their

everyday business activities, which also means there are few companies that do not use

e-commerce.

To emphasize the point that the effect of the Internet is so widespread in today?s

business communities, one online article stated that more than 100,000 companies have

Internet addresses, and 20000 companies have home pages on the Internet as of February

1999 (DataQuest, 1999). These numbers have more than tripled since 1995, and the trend

shows no signs of slowing. But what exactly is e-commerce? To most casual Internet

surfers, e-commerce means online shopping; workaholics pointing their web browser to

Amazon.com to order an emergency present because they forgot someone?s birthday

again (Weiss, 1999). As we will soon find out, this is far from the case. Simply put,

e-commerce is the exchange of business information between two or more organizations.

An example of this would be buying and selling products or services over the Internet.

E-commerce became very popular soon after it proved to be an efficient means to

conduct long distance transactions.

The purpose of this report is to discuss some of the advantages and disadvantages

of e-commerce, as well as examining its potential for the future of business.

Electronic commerce, or e-commerce has developed very rapidly in the last few

years and has left some people wondering what it is all about. “Most people think

e-commerce is just about buying and selling things over the Internet.” (Wareham, 2000)

E-commerce is a broad term describing the electronic exchange of business data between

two or more organizations’ computers. Some examples might be the electronic filing of

your income tax return, on-line services like Prodigy, and on-line billing for services or

products received. E-commerce also includes buying and selling any item over the

Internet, electronic fund transfer, smart cards, and all other methods of conducting

business over digital networks. ?The primary technological goal of e-commerce is to

integrate businesses, government agencies, and contractors into a single community with

the ability to communicate with one another across any computer platform.?(Edwards,

1998)

History of E-commerce Electronic commerce was built on a foundation that was

started more than 125 years ago with Western Union’s money transfer as an example of

telegraph technology. In the early 1900?s the advent of credit cards as a payment system

revolutionized the process of automated commerce functions. In the mid 1980?s the

introduction of the ATM card was the latest improvement to electronic commerce. The

Internet was conceived in 1969 when the Department of Defense began funding the

research of computer networking.

The Internet, as a means for commerce, did not become reality until the 1990?s.

Before this time, it was mainly a tool for the army, and a research device for some

American universities. Its popularity grew when it proved to become a fast and efficient

means to conduct long distance transactions, as well as an effective way to distribute

information. Economic Impact Clearly, E-commerce will change the face of business

forever. Companies that are thousands of miles away can complete business transactions

in a matter of seconds as well as exchange information. As one online article explained:

Dell Computers sells more than $14 million worth of computer equipment a day from its

web-site. By taking their customer service department to the web Federal Express began

saving $10,000 a day. The Internet provides businesses with the opportunity to sell their

products to millions of people, 24 hours a day. (Baxton, 1999) Figure #1 shows the

amount of revenues generated by the Internet, dating back to 1996 as well as estimating

possible revenues through the year 2002. With 1998, revenue equaling almost 74 billion

dollars and experts predicting that it will climb to as much as 1,234 billion dollars by the

year 2002, anyone can see that e-commerce is the wave of the future.

Figure #1- Internet generated revenues in US dollars. Source: NUA Internet

Surveys “Without a doubt, the Internet is ushering in an era of sweeping change that will

leave no business or industry untouched. In just three years, the Net has gone from a

playground for nerds into a vast communications and trading center where some 90

million people swap information or do deals around the world. Imagine: It took radio

more than 30 years to reach 60 million people, and television 15 years. Never has a

technology caught fire so fast” (Edwards, 1998).

Advantages of E-commerce ; Speed , Savings , International Distribution ,

Customer Service. The number one advantage that e-commerce possesses is speed. The

Internet and World Wide Web gives businesses opportunities to exchange messages or

complete transactions almost instantaneously. Even with the slowest connections, doing

business electronically is much faster than traditional modes. With increased speeds of

communication, the delivery time is expedited and that makes the whole transaction from

start to finish more efficient. Also, you can find practically any product available for sale

on the Internet, as one author put it ,from books and compact disks (from

www.amazon.com) to French bread .(available from www.sourdoughbread.com),

(Buskin, 1998) Even more significant is the fact that information appearing on the

Internet can be changed extremely rapidly. This gives business owners the ability to

inform customers of any changes to the service that you are offering. This also allows for

you to update marketing and promotional materials as often and as frequently as you

would like. The second advantage of the electronic commerce is the opportunity it offers

to save on costs. By using the Internet, marketing, distribution, personnel, phone, postage

and printing costs, among many others, can be reduced. You can start doing business in

cyberspace for as little as $100. Most businesses will spend more than this but compared

to the cost of opening a physical store, the savings are tremendous. These funds can then

be diverted to marketing and advertising of your product or service. Cyberspace knows

no national boundaries. That means you can do business all over the world as easily as

you can in your own neighborhood. Since the Internet connects everyone in cyberspace,

information is transmitted at the speed of sound or the speed of light, depending on your

connection. Either way, distance becomes meaningless, which makes you able to link to

anyone on the globe and anyone on the globe can link to you. The ability to provide links

makes doing business on the Internet attractive to customers in any part of the world.

Using the web to provide customer support is an excellent vehicle to help build the

reliability and effectiveness of your product or service. The ability to provide on-line

answers to problems through email or an provide an archive section of frequently asked

questions 24 hours a day, 365 days a year, builds customer confidence and retention. In

fact, a whole series of IBM E-commerce commercials were based on this one single

point. The Internet tends to be a more personal environment. People expect to get a real

person when they send mail. This can work to your advantage as a small start-up

company, or when you are a large corporation. No matter what business you are involved

in, an online-help feature is an extraordinary advantage to have.

Disadvantages of E-commerce ; Privacy and Security , Willingness to Pay ,

Technical Challenges , Organizational Commitment. A potential source of trouble is

customer concerns with privacy and security. Anything sent over the Internet is sent

through several different computers before it reaches its destination. The concern

regarding Internet security and privacy is that unscrupulous hackers can capture credit

card or checking account data as it is transferred or break into computers that hold the

same information. Security on the Internet is much like security for your home. There is a

point when the effort outweighs the advantages. As with your home you usually stop

adding security features when you feel safe. Making a customer feel safe is what is

important in doing business on the Internet. Even though no one can guarantee 100%

security of transferring financial information over the Internet, e-commerce is still safer

than using credit cards at an actual store or restaurant, or paying for something with the

use of a 1-800 number (unknown author, 1999). Also, every time you throw away a credit

card receipt you could make yourself vulnerable to fraud. But how do we, as consumers,

know this for sure? What precautions do e-commerce websites take to avoid such

problems? The answer is simple: encryption. Ever since the 2.0 versions of Netscape

Navigator and Microsoft Internet Explorer, transactions can be encrypted using Secure

Sockets Layer (SSL), an Internet protocol that creates a secure connection to the server,

protecting the information as it travels over the Internet. SSL uses public key encryption,

one of the strongest encryption methods around. A way to tell that a Web site is secured

by SSL is when the URL begins with https instead of http. Browser makers and credit

card companies are also promoting an additional security standard called Secure

Electronic Transactions (SET). SET encodes the credit card numbers that sit on vendors

and servers so that only banks and credit card companies can read the numbers.

Obviously no e-commerce system can guarantee 100-percent protection for your credit

card, but you are less likely to get your pocket picked online than in a real store(Weiss,

1999).

E-commerce is based on the assumption that the participants will pay for what

they buy. There has been a noted reluctance among Internet users to actually pay,

particularly for the digital goods and services. As a result, much of the current business

on the Internet is funded using business models other than user-pays, primarily

advertising and sponsorship. If a company is selling something, then they need to find a

way to accept payment that is not only convenient for them, but most importantly,

convenient for the customers.

Setting up a simple web site can be very inexpensive, but if you are unsure of how

to go about creating one, a simple web site thus may not be so simple. And if you don?t

know what you are doing, your site will definitely not be effective. A functional web site

with online ordering requires expertise in four different areas. If a business owner does

not have HTML , CGI scripting, ODBC, or special programs for online clearing options

experience, they may want to consider outsourcing.

Outsourcing is the use of a third party service company to provide the missing

pieces to complete the total functionality of the business. This is a cost-effective way to

allow a site to get up and running much faster and concentrate on the product or service

rather than getting overwhelmed with the technical challenges. (DeCourey, 1999) Finally,

a possible disadvantage to e-commerce is not having a strong organizational

commitment. A functional web site that is going to be successful will soon need

additional resources in technology and skills. E-commerce is evolving at a very rapid rate

and the business owner must be willing to evolve with it. Newer and more advanced

technology will cost more, but should be supplemented by additional revenues. Also, the

company must be willing to change the entire business or start a new one when they can

see the need for change.

Yahoo started as a commercial operation in 1995, with a simple, if enormous, list

of Web sites to help people navigate the Web. But like the Web itself, Yahoo is changing

fast. The once amazing ability to search the entire World Wide Web became outdated in

a Net instant, so Yahoo, at the tender age of two years, began reinventing itself as a place

to trade stocks, make travel reservations, and conduct commerce (Hof, 1998).

The Future of E-commerce, Rest assured, is intact and ever changing. “Like

electricity, antibiotics, or the car, the Internet is a revolutionary technology.”(France,

1999) It is quite evident that e-commerce is only gaining speed. As one article stated, The

growth of e-commerce won?t diminish, it will become such a pervasive influence on how

a company works that all functions within an organization will have a stake in their

e-commerce strategy (Wareham, 2000).

With Internet traffic doubling every 100 days the digital economy is alive and

growing. The huge growth of virtual communities are causing shifts in economic power

from large corporations to smaller businesses. “Virtual communities erode the marketing

and sales advantages of large companies. A small company with a better product and

better customer service can use these communities to challenge larger

competitors–something it probably could not do in the real world.” (CommerceNet,

1999) With many of the technological advances in the banking, on-line trading and retail

industries, e-commerce will soon become the foundation of our life just as radio,

telephone and television have in the past.

Technology has a place in everyone’s day to day activities and soon e-commerce

will be a major factor in the decisions we have to make. Remember, e-commerce is more

complex than just buying that special someone?s birthday present. E-commerce, along

with the Internet, is an outlet for business. It is a way for the new guy to compete with the

proven giants in the industry. An example of this would be the launch of Wal-Marts new

web site intended to compete with industry monster Amazon.com. Their new business

venture allows Wal-Mart to go outside its usual corporate sphere for Web-savvy talent

geared for dot.com commerce, such as engineers, programmers and marketers. It also

provides them with the necessary Web-wampum ; such as options, warrants and shares

that?s essential to attracting top talent. (Veverka, 2000) Simply put, the Internet and the

use of e-commerce provides many opportunities for even the smallest of businesses to

compete with large corporations, in essence leveling the playing field. With the steady

growth of the Internet, and the fact that every year more and more families are plugging

in and surfing the web, can a company survive without the use of the Internet and

e-commerce? Probably, but not for long. The Internet and e-commerce are here to stay,

so businesses can either change with the times, or get left behind. The choice is theirs to

make.

References

Baxton,J. Electronic Commerce [online]. Available:

http://www.people.virginia.edu/~jwb7w/icomm/home.html. (April 15, 1999)

Buskin,J. Tales from the Front ,Firsthand look at buying online, Wall Street Journal

[online].Available:http://interactive.wsj.com/public/current/articles/

SB912721174926656000.htm#top (December 7, 1998)

CommerceNet. Questions and Answers about Electronic Commerce Basics [online].

Available: http://www.commerce.net/resources/efaq.html. (1999)

Dataquest Technologies. E-commerce ,An Overview [online]. Available:

http://www.dqindia.com/nov3099/ (1999)

DeCourey, G. The ABC’s of E-Commerce [online]. Available:

http://www.virtualpromote.com/guest5.html. (April 5, 1999)

Edwards,P. Making Money in Cyberspace. New York: Penguin Putnam Inc. (1998)

France, M. A . New Voice for the Web’s Worldwide Business Community [online].

Available: http://www.businessweek.com/ebiz/perspect/index.htm. (December 19, 1999)

Hof,R. The Click Here Economy [online] Available:

http://www.businessweek.com/1998/25/itspec98.htm. (January 22, 1998)

NUA Internet Surveys. Index of Graphs & Charts – Comparisons/Predictions [online].

Available: http://www.nua.ie/index.html. (April 15, 1999)

Unknown Author. E-Commerce [online]. Available:

http://members.tripod.com/Satta_Krit/engr923/ecommerc.htm (1999)

Veverka, M. Plugged In: Wal-Mart gets serious about the Web, Amazon shrugs, but

maybe it should watch its back, Barron??s, Volume 80, issue 2, pg. 37 (January 10, 2000)

Wareham, E. E-commerce makes the grade, Computing Canada, Volume 26, issue 1, pg.

35 (January 7, 2000)

Weiss, J. 10 Questions About E-commerce [online]. Available:

http://builder.cnet.com/Business/Ecommerce20/. (August 31, 1999)