How E-commerce Affects Business Transactions


Literature Review

There are a lot of literature materials which discuss basically all the aspects of e-commerce. A lot of reviews, studies, analysis, and surveys were already formulated by market research firms and organisations with direct interests in the e-commerce business. In this research however, related literature materials which were included were those that mostly concern the business processes and methodologies employed in the use of e-commerce. This section is structured accordingly. First, there is a brief discussion about the definition of e-commerce. Then a justification of e-commerce as a business methodology and its benefits is presented. Different e-commerce applications, issues, and legal concerns were discussed next.

Definitions of E-commerce

There are many confusing definitions of e-commerce. Some see e-commerce as Internet-based activities only while others include any kinds of exchanges of resources (electronic information, applications, methodologies, and strategies). There is one thing common to all of these sets of general definitions however: e-commerce is a process where electronic connections make it possible to exchange resources. E-commerce is a very broad term used to describe modern ways of doing business today. If we take a much broader view, we define e-commerce as the use of the computer to facilitate all of the firm's operations, many of which are internal. These operations are performed within the firm by the functional areas of finance, human resources, information services, manufacturing, and marketing (McLeod, 1998). Finance mainly deals with the financial community, stockholders and owners, and the firm's customers. Human resources have a special interest in the global community and labor unions, and information services interface with hardware and software suppliers. Manufacturing is responsible for dealing with the firm's suppliers and labor unions. Marketing is primarily responsible for interfacing with the firm's customers and competitors. All of these areas interface with the government (McLeod, 1998) E-commerce is the portion of a business that is put online, and to be accessed by anyone worldwide who has access to the Internet. It involves advertising products on the web in order to reach out to more potential customers. It also involves purchasing products and services online. Everything that relates to how we run our business through the use of modern technology can be called an e-commerce. Because the World Wide Web presents a different environment for these activities than traditional media, conventional marketing activities are being transformed, as they are often difficult to implement in their present form. This means that in many cases, these marketing activities have to be restructured such that they can conform to this new medium (Hoffman and Novak, 1996). Even before the widespread use of the Internet for commercial purposes, businesses were already engaged in Electronic Data Interchange or EDI. EDI is an early form of e-commerce where companies engaged in business transactions with only a selected few in a private network.

E-commerce as a modern business methodology

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In order for businesses to cope up with changing customer demands, they must adapt new technologies not only to support their business functions but also to reduce paper works, reduce costs, and improve and increase productions. In this way, e-commerce is seen as a business methodology that addresses both external and internal needs of the business organization. There are facts which tend to support the theory that e-commerce will continue to play a crucial role in running a business. Most business organisations have already invested heavily on Information and Communications Technology (ICT). ICT is already in the forefront of helping the organization run some of their key business functions like purchasing, invoicing, marketing, and customer support. This has enabled the organization to have some aspect of technology needed to transform their core business functions through the use of e-commerce. As a business style, at least one major aspect of e-commerce is already in the mainstream of society. While business organisations have invested heavily on ICT equipments, the prices of hardware and software equipments continue to fall. This was brought about by stiff competition from the different players in the industry. Microsoft, Sun Microsystems, Oracle, and other leading software giants have face some kind of fierce competition from each other and from open source advocates. Intel and Advanced Micro Devices (AMD) continued to dominate the processor and semiconductor industry by constantly developing faster processors while lowering their prices. Established computer manufacturers like International Business Machines (IBM), Dell, Hewlett Packard, and Acer tried to keep their prices within the range of clone computers. Although the IT sector is very dynamic and highly volatile and previously dominant players are giving way to other players, falling prices continue to lure organisations into investing into IT. The Internet industry has grown quite fast, beating market expectations. Internet bandwidth continues to double and triple as compared to a decade ago. The number if Internet users have grown by the millions. The number of applications developed for the Internet commerce has also grown dramatically to new heights. Coupled with low hardware and software prices, established ICT infrastructure, and availability of the Internet to almost every member of society has reinforced the notion that e-commerce is likely to play a major role in every business functions and processes. As a business methodology, e-commerce has allowed organisations to carry out business transactions over networks. Examples of e-commerce activities include online payment of application fees, payment of tuition and student bills, purchases of books, merchandise, materials, procurements between businesses, electronic access to institutional databases, publications, and many more.

Benefits of E-commerce

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The main benefit of e-commerce stems from being able to integrate business operational processes across organizational boundaries and time zones. Operational benefits of Web use for industrial sellers are reduced errors, time, and overhead costs in information processing; reduced costs to suppliers by online bidding, submitting of bids, and awarding of bids electronically. In this manner, it encourages transparency and honesty in certain business transactions. In addition, creation of new markets and market segments, easier entry into new markets of new and small players, and faster time to market is facilitated. The introduction of e-commerce to support business processes has largely revamped a lot of these practices and methods. It has also provided significant benefits to the organization in general and to the whole global economy. These benefits largely revolved around the reduction of overall cost. Storing company and product information on the company database for the web has saved organisations the cost of printing catalogs while giving them the opportunity to reuse and make changes to information in real time. Support services have largely been rendered through the posting of frequently asked questions on the web or through interactive online support services and applications. The use of data warehousing and the development of data mining applications has enabled company executives to make use of digital information for decision support and perform more complex analysis. It also allows their suppliers and customers to get a first hand view of company data and processes and gives them the opportunity to get involved in the decision making process. Companies who outsource most of their applications to third party service providers have saved a lot of money by renting out services instead of investing heavily just to own them. E-commerce has also allowed business organisations to keep track of customer feedbacks and how their customers are satisfied with their products. This has help companies adjust to these feedbacks in the quickest possible time and it allows them to structure their approach in the fastest way they can. E-commerce has also allowed business organisations to expand globally. It opened up a lot of opportunities for them to discover and test new markets for their products just by using the web-enabling their business processes and functions. Aside from these, it also allowed them to manage their offshore sites in a virtual environment.

E-commerce applications

McLeod (1998, p.81) describes the use of the Internet in the context of data communication as a communication tool between the business organization and its immediate environment and within the organization itself. In one article about e-commerce, applications can be classified into three classes (Tapaswi): 1. Intranet 2. Extranet 3. Internet . Intranet applications support the internal processes and functions of the organization using company information in a new strategic way. Extranets support electronic data interchange (or EDI) where company information can be used to support internal processes and can be used by other selected outside users. The Internet allows global computing on a wider scale and facilitates unlimited business-to-consumer electronic commerce applications. According to Rossi et al (n. d.), e-commerce applications are a particular kind of web applications with similar requirements like good navigational structures, usable interfaces, a clear domain model, and others.

Types of E-commerce Applications

E-commerce application categories or types generally indicate what is occurring during the commerce transaction (Franklin, 2002). In a Business to Customer (B2C) application, a business sells a product or a service to an end-user. These transactions are usually short-lived but the revolving process of customer contact allows the business to make promotional advertisements to their customers. Business to Business (B2B) applications (Franklin, 2002) involve multiple businesses using electronic communications to facilitate commerce transactions between organizations. There are complex business rules that govern transactions between these organizations. B2B applications process orders from organizations (not the end-users) by integrating the front-end applications with the suppliers of products. B2B applications handle supply chain management, order procurement, contract processing, logistics, and other similar transactions.