E-Commerce Essay, Research Paper

Table of Contents Introduction…………………………………………………………………2 History of E-commerce……………………………………………………..4 Economic Impact……………………………………………………………5 Advantages of E-commerce…………………………………………………5 Disadvantages of E-commerce………………………………………………7 The Future of E-commerce………………………………………………….9 Summary……………………………………………………………………11 References………………………………………………………………….12 Electronic Commerce 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, on-line banking 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). With the astonishing growth of the Internet, many companies are finding new and exciting ways to expand upon their business opportunities. 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 20,000 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 the most casual Internet surfer, e-commerce means online shopping. Internet surfers cruise the web purchasing anything from books to hockey tickets. As we will soon find out, there is much more to e-commerce than a simply internet surfer buying personal consumables. 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. The worldwide market for commercial electronic commerce is expected to exceed growth of 69 per cent over the next five years. In 1998, approximately $77 billion was spent through commercial trading over the Internet (France, 1999). Using the web sites www.forrester.com www.nielsenmedia.com www.zonaresearch.com and www.jup.com the following data has been composed: ? Of the 17 countries studied, 94 per cent of purchase volume will be focused in five countries: France, Germany, Japan, UK and USA ? The US represents 59 per cent of volume with Europe and Asia Pacific each representing nearly 20 per cent (Figure 1) Figure 1: E-commerce Use ? The services and manufacturing sectors will be the largest users of Internet technologies to carry out commercial transactions, followed by government/education, financial services, and retail trade ? While medium (50-249 employees) and very large (500+ employees) businesses have the highest volumes, small businesses (1-49 employees) will see the fastest ? 39 per cent of purchases will be from businesses providing maintenance, repair and operational services such as temporary and janitorial services, training classes and office supplies. Some 12 per cent will be travel related purchases, such as booking business flights and hotels 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). “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 give 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 to 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’ 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, and 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 the future of e-commerce 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 Amazom.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 tools and options, warrants and shares that is 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. In summary, the current status of electronic commerce is astounding. The freedom of expansion and opportunity for increased proficiency has promoted a growth that has far exceeded anyone’s expectations. Any business not using the Internet and Information Technologies as a substantial platform for doing business will most certainly face certain death. The Internet has changed the face of communications and how business is conducted and to remain competitive a business must take advantage of this rapid growth. 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 (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]. 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