UNIT I: Introduction to e-Commerce: Electronic Commerce and its

Benefits– Impact of Electronic Commerce – Classification of Electronic

Commerce – Applications of Electronic Commerce Technologies –
Business Models – Architectural Framework

What is e-commerce?

E-commerce definition: eCommerce is the process of selling & buying

products and services through an electronic medium without the use of any
papers — these types of all the procedures done over the internet (online).

Scope of e-commerce:

1. Exchange of digitized information

2. Technology-enabled transactions

3. Technology-mediated relationships

4. Intra- & inter-organizational activities

The Benefits of E-Commerce to Business, Consumers and Society

The previous sections have included discussions about what e-commerce is

and its impact, but what are the benefits of e-commerce? What does it offer
and why do it? The benefits of e-commerce can be seen to affect threemajor
stakeholders: Business Organizations, Consumers and Society.

1. Benefits of E-Commerce to Business

a) International Marketplace - What used to be a single physical
marketplacelocated in a geographical area has now become a borderless
marketplaceincluding national and international markets? By becoming e-
commerceenabled, businesses now have access to people all around the
world. Ineffect all e-commerce businesses have become virtual
multinationalcorporations.

b) Operational Cost Savings - The cost of creating, processing,

distributing,storing and retrieving paper-based information has decreased.

c) Mass Customization - E-commerce has revolutionized the way

consumersbuy goods and services. The processing allows for products
andservices to be customized to the customer’s requirements. In the past
whenFord first started making motor cars, customers could have any color
solong as it was black. Now customers can configure a car according to
theirspecifications within minutes on-line via the www.ford.com website.

d) Lower Telecommunications Cost - The Internet is much cheaper than

valueadded networks (VANs) which were based on leasing telephone lines
for thesole use of the organization and its authorized partners. It is also
cheaper tosend a fax or e-mail via the Internet than direct dialing.

e) Digitization of Products and Processes - Particularly in the case of

softwareand music/video products, this can be downloaded or e-mailed
directly to customers via the Internet in digital or electronic format. f) No
more 24-hour-time Constraints - Businesses can be contacted by orcontact
customers or suppliers at any time.
2. Benefits of E-Commerce to Consumers

a) 24/7 Access - Enables customers to shop or conduct other transactions

24hours a day, all year round from almost any location. For example -
checkingbalances, making payments, obtaining travel and other
information.

b) More Choices - Customers not only have a whole range of products

thatthey can choose from and customize, but also an international selection
ofsuppliers.

c) Price Comparisons - Customers can ‘shop’ around the world and

conductcomparisons either directly by visiting different sites, or by visiting
a singlesite where prices are aggregated from a number of providers and
compared.

d) Improved Delivery Processes - This can range from the immediate

deliveryof digitized or electronic goods such as software or audio-visual
files bydownloading via the Internet, to the on-line tracking of the progress
ofpackages being delivered by mail or courier.

e) An Environment of Competition - Where substantial discounts can be

foundor value added, as different retailers vie for customers. It also allows
manyindividual customers to aggregate their orders together into a single
orderpresented to wholesalers or manufacturers and obtain a more
competitiveprice.

3. Benefits of E-Commerce to Society

a) Enables more Flexible Working Practices -This enhances the quality
of life for a whole host of people in society, enabling them to work from
home. Notonly is this more convenient and provides happier and less
stressful workingenvironments, it also potentially reduces environmental
pollution asfewer people have to travel to work regularly.

b) Connects People - Enables people in developing countries and rural

areasto enjoy and access products, services, information and other people
whichotherwise would not be so easily available to them.

c) Facilitates Delivery of Public Services - For example, health services

availableover the Internet (on-line consultation with doctors or nurses)
filingtaxes over the Internet through the Inland Revenue website.

The Barriers of E-Commerce:

The drivers of e-commerce were identified and summarized there are

barriers to the growth and development ofe-commerce. Numerous reports
and surveys identify the different kinds ofbarriers, and many of them focus
on security as being one of the largestinhibitors to and problems for e-
commerce. Different nations are atdifferent stages of development of
ecommerce and as such the issues thatare relevant to one nation may not be
relevant to another. Similarly, theissues that are relevant to the type of
organization also differ. Overall, all kindsof organizations have similar
barriers but with different emphases for discuss as follows:

1. Commercial Infrastructure - Relates to issues such as international

trade agreements, taxation laws and other legal agreements that facilitate all
kinds of on-line trading and so is a barrier relevant to all types of
businesses.

2. Technology Infrastructure - Deals with issues of standardization of

systems and applications, which is a particular concern for larger
organizations who want to implement solutions such as value chain
integration and e-supply chain management.

3. Internet Infrastructure - Deals with issues such as availability and

quality of the Internet in terms of speed and reliability. This barrier is of
particular concern to Business to Consumer organizations, since their
business relies more on general consumers, and so the ease with which the
general public can connect to the Internet has a direct impact on their Web-
based business

4. Security - In its broadest term is one of the most significant barriers toe-
commerce both within the organization and external to it. Identified as
Security and Encryption; Trust and Risk; User Authentication and Lack of
Public Key Infrastructure; Fraud and Risk of Loss it relates to the
development of a broader security infrastructure and it also relates to the
kinds of measures barriers to e-commerce businesses can take to improve
security.

5. Interoperability of systems– This is identified as one of the major

barriers for large USbased Business to Business corporations. This refers
specifically to implementation and compatibility problems of integrating
new e-commerce applications with existing legacy systems and resources
within organizations. This problem also extends to interacting with systems
of business partners and stakeholders.

6. Lack of Qualified Personnel- This is a particularly strong concern

because internally they do not have sufficient resources to attract and
maintain their own support staff to develop a sophisticated technology
infrastructure. With regards to third parties, the qualified personnel tended
to work for larger organizations.

The Impact of Electronic Commerce on Business

E-Commerce and E-Business are not solely the Internet, websites or dot
com companies. It is about a new business concept that incorporates all
previous business management and economic concepts. As such,E-Business
and E-Commerce impact on many areas of business and disciplines of
business management studies.

1. Management Information Systems – Analysis, design and

implementation of e-business systems within an organization; issues of
integration of front-end and back-end systems

2. Human Resource Management – Issues of on-line recruiting, home

working and ‘Intrapreneurs’ works on a project by project basis replacing
permanent employees.

3. Finance and Accounting –On-line banking; issues of transaction costs;

accounting and auditingimplications where ‘intangible’ assets and human
capital must be tangibly valued in an increasingly knowledge based
economy.
4. Economics –The impact of e-commerce on local and global economies;
understanding the concepts ofa digital and knowledge-based economy and
how this fits into economic theory

5. Production and Operations Management –The impact of on-line

processing has led to reducedcycletimes. It takes seconds to deliver
digitized products and services electronically; similarly the time for
processing orders can be reduced by more than 90 per cent from days to
minutes. Production systems are integrated with finance marketing and
other functional systems as well as with business partners and customers.

6. Marketing – Issues of on-line advertising, marketing strategies and

consumer behavior and cultures. One of the areas in which it impacts
particularly is direct marketing. In the past this was mainly door-to door,
home parties and mail order using catalogues or leaflets.

7. Computer Sciences – Development of different network and computing

technologies and languages to support e-commerce and e-business, for
example linking front and back office legacy systems with the ‘web based’
technology.

8. Business Law and Ethics – The different legal and ethical issues that
havearisen as a result of aglobal ‘virtual’ market issues such as
copyrightlaws, privacy of customer information, legality of electronic
contractsetc.

Classification of E- Commerce Business models

Business organizations, Consumers and Government (also called as
Administrations) are the major parties in the E-Commerce. Sometimes
Employees (Informal workers) also indulge in this system. Based upon the
entities involved in transaction, E-Commerce is classified into the following
categories. The model in which the government plays as an entity is termed
as e- Governance. See Figure 15.6

1. Business to Business (B2B)

2. Business to Consumer (B2C)

3. Business to Government (B2G)

4. Consumer to Business (C2B)

5. Consumer to Consumer (C2C)

6. Consumer to Government (C2G)

7. Government to Business (G2B)

8. Government to Consumer (G2C)

9. Government to Government (G2G)

Business to Business (B2B)

In B2B E-Commerce, commercial transactions take place between different

business organizations, through the Internet. For example, a cycle company
may buy tyres from another company for their cycles. When compared to
other models, the value per transaction in B2B transaction is high, because
of bulk purchase. The company also might get the advantage of discounts
on bulk purchases. See Figure 15.7

Out-sourcing and Off-shoring are generally associated with B2B E-

Commerce.

● If a company’s work is hired to another company, it would be termed as

out-sourcing.

● If the work is outsourced to a company, which is outside its own country,

it is called as off-shoring.
Business to Consumer (B2C)

In B2C E-Commerce, commercial transactions take place between business

firms and their consumers. It is the direct trade between companies and
end-consumers via the Internet. B2C companies sell goods, information or
services to customers through online in a more personalized dynamic
environment and is considered as real competitor for a traditional
storekeeper. An example of B2C transaction is a book company selling
books to customers. This mode is intended to benefit the consumer and can
say B2C E-Commerce works as ’retail store’ over Internet. See Figure 15.8

Business to Government (B2G)

B2G is a business model that refers to business organizations sells products,

services or information to Governments or to its administrations. In other
words, when a company get paid for its goods, services by the Government
through Internet it is called as B2G model. e.g. The Government or its
administration buys laptops for students. See Figure 15.9
Consumer to Business (C2B)

C2B can be described as a form of E-Commerce where, the transaction is

originated by the consumers. The consumers will fix a requirement or
specific price for a service or a commodity. C2B model, is also called as
reverse auction model. Here, customer bid his price for a service or a
product. Then E-Commerce business entity will match the requirement of
the consumer to the best possible extent.

For instance, in a travel website (eg.yatra.com) a consumer may specify his

dates of travel, his source and destination, number of tickets required and
range of hotel etc. The website then finds out the various options for him
which best meets his requirements. These websites generate revenue
through affiliate links, sponsored advertisement or even a small commission
in every booking. e.g. Name-your-price websites. See Figure 15.10
Consumer to Consumer (C2C)

C2C in E-Commerce provides opportunity for trading of products or

services among consumers who are connected through the Internet. In brief
when something is bought and sold between two consumers using Internet
it is called C2C E-Commerce. Here the websites act as a platform to
facilitate the transaction. The electronic tools and Internet infrastructure are
employed to support transactions between individuals. Typically, this type
of E- Commerce works as Consumer to Business to Consumer (C2B2C). It
means that a consumer would contact a business in search of a suitable
customer. Most of the auction websites and matrimonial websites are
working on this methodology.

For example, a consumer who wants to sell his property can post an
advertisement on the website (eg:timesclassifieds.com). Another person
who is interested in buying a property can browse the property,
advertisement posted on this site. Thus, the two consumers can get in touch
with each other for sale/purchase of property through another business’
website. See Figure 15.11
Consumer to Government (C2G)

Citizens as Consumers and Government engage in C2G E -Commerce.

Here an individual consumer interacts with the Government. C2G models
usually include income tax or house tax payments, fees for issue of
certificates or other documents. People paying for renewal of license online
may also fall under this category. See Figure 15.12

Government to Business (G2B)

G2B is closely related to B2G. G2B in E-Commerce refers to a business

model where Government providing services or information to business
organization. It may be a formal offer such as a takeover bid for a road
project. See Figure 15.13
G2B is a part of e- governance. The Government provides information
about business rules, requirement and permission needed for starting a new
business, and other specifications in its portal. The objective of G2B is to
reduce burdens on business, provide one-stop access to information thereby
boost the economy. e.g. ebiz.gov.in See Figure 15.14

Government to Consumer (G2C)

G2C in E-Commerce is very similar to C2G. Here the Government provides

platform for its citizens to avail its services and information through the
Internet. The services may be issue of certificates through online.e.g.
https://csc.gov.in/governmenttocitizen. See Figure 15.15
Government to Government (G2G)

G2G is the online (usually non-commercial) interaction between

Government organizations or departments. G2G’s principle objective is to
implement e-governance rather than commerce. G2G model in e-
governance involves distributing data or information between its
agencies/departments. G2G systems can be classified into two types

● Internal facing or local level - joining up a single Government’s

bureaucracy. e.g. https://www.nic.in/

● External facing or international level - joining up multiple Governments’

bureaucracy.

See Figure 15.16

Popular E-commerce Applications
We briefly discussed the two perspectives on e-commerce applications in
the preceding section. Let us now dig into them in greater depth.

1. Retail

E-retailing, often known as online retailing, is the sale of products and

services by businesses to customers via online stores. This is done through
the use of tools such as virtual shopping carts and e-catalogs. There are
several e-commerce applications in this industry.

2. Accounting

Finance and e-commerce are more intertwined than ever before. Banks and
stock exchanges make extensive use of e-commerce in their operations.
Balance checks, bill payments, money transfers, and more services are
available through online banking. Online stock trading allows users to trade
stocks online by providing information about equities such as performance
reports, analysis, charts, and so on via websites.

3. Production

In the manufacturing industry, e-commerce serves as a platform for firms to

conduct electronic transactions. Groups of firms can carry out their
activities more smoothly by combining purchasing and selling, exchanging
market conditions, inventory check information, etc.

4. Trade
Applying e-commerce to trade elevates it to a higher level, allowing
individuals to participate without regard for geographical borders. This
encourages more participation, more bargaining and contributes to the
success of the trade.

5. Advertising

Development and commercialization strategies like pricing, product

characterization, and customer relationship can be boosted by utilizing e-
commerce. This will give consumers a more enriched and personalized
purchasing experience. Digital marketing tactics have grown in importance
as a means of promoting enterprises.

6. Digital Shopping

People's buying habits have shifted dramatically in the previous several

years. "Go online" has become a success mantra for all enterprises. Online
shopping is easy, pleasant, and, in most cases, inexpensive. The success of
online shopping applications like Flipkart and Amazon demonstrates this.

7. Web and mobile applications

Mobile commerce or m-commerce application is a subset of retail e-

commerce. Mobile or web application development has become a must-
have for companies looking to showcase their skills. Purchases are made by
the consumer using mobile or web applications that are optimized for the
merchant. These programs also provide payment security by utilizing
secure e-payment mechanisms.
8. Digital Reservations

Travel and tourism is a flourishing sector today, and online booking is

a developing e-commerce application. Online booking allows customers
to buy travel necessities such as train/flight tickets, book hotel rooms, get
tourism packages, transportation services, and so on. It makes people's trips
comfortable and easy because everything can be set at the tip of their
fingertips.

9. Digital Media

E-books and digital periodicals are gradually displacing traditional printed

publications. It has numerous advantages, including portability, lightweight,
accessibility from anywhere, and so on. They are also environmentally
friendly because they assist in reducing paper use and saving forests.
Because of these factors, internet publication, often known as e-publishing,
has grown in popularity.

10. Internet Banking

E-Banking, often known as online banking, is an e-commerce

program that has streamlined people's time-consuming and complex
banking operations. It allows bank customers to do transactions online
without having to wait in lengthy lines at banks. To provide virtual banking
services to their consumers, most of the banks now have their web
applications.

Architectural Framework for Electronic Commerce

Electronic commerce application architecture consists of six layers of
functionality or services.
•Application services
•Brokerage services, data or transaction management
•Interface and support layers
•Secure messaging, security and electronic document interchange
•Middleware and structured document interchange
•Network infrastructure and basic communication services
–
These layers cooperate to provide a seamless transition between today’s
computing resources and those of tomorrow by transparently integrating
information access and exchange within the context ofthe chosen
application.

1. Electronic Commerce Application Services

–
Three distinct classes of electronic commerce applications
•Customer to business
•Business to Business
•Intra organization

Consumer-to-Business Transaction
This is called market place transaction. In a market place transaction,
customers learn about productsdifferently through electronic publishing,
buy them differently using electronic cash and securepayment systems and
have them delivered differently.
•
Business-to-Business Transactions
–
This is called market link transaction. Businesses, government and other
organizations depend oncomputer-to-computer communication as a fast, an
economical, and a dependable way to conductbusiness transactions.
Business-to-Business transactions include the use of EDI and electronic
mail forpurchasing goods and services, buying information and consulting
services, submitting requests forproposals and receiving proposals.
•
Intraorganizational Transactions:
–
This is called market driven transactions
–
A company becomes market driven by dispersing throughout the firm
information about its customersand competitors; by spreading strategic and
tactical decision making so that all units can participate;and by
continuously monitoring their customer commitment by making improved
customer satisfactionan ongoing objective.
–
Three major components of market driven transactions are
•customer orientation through product and service customization;
•cross-functional coordination through enterprise integration
•advertising, marketing and customer service.
2. Information Brokerage and Management:
–
Information brokerage andmanagement layer provides serviceintegration
through the notion ofinformation brokerages, thedevelopment of which is
necessitatedby the increasing informationresource fragmentation.
–
Information brokers are becomingnecessary in dealing with thevoluminous
amounts of informationon the networks. With the complexityassociated
with large number of on-line databases and service bureaus, it is impossible
to expecthumans to do searching. Information broken or software agents
that act on the searchers behalf.
–
Ex: In foreign exchange trading, information is retrieved about the latest
currency exchange rates inorder to hedge currency holdings to
minimize risk and maximizing profit.
–
Brokerage function supports data management and traditional transaction
services. This isaccomplished by tools such as software agents, distributed
query generator, the distributed transactiongenerator, and the declarative
resource constraint basewhich describes a business’s rule andenvironment
information.
3. Interface and Support Services
–
This layer provides interfaces for electronic commerce applications such as
interactive catalogs andwill support directory services
–
functions necessary for information search and access.
–
Interactive catalogs are the customized interface to consumer applications
such as home shopping.
–
Directories operate behind the scenes and attempt to organize the enormous
amount of informationand transactions generated facilitate electronic
commerce.
–
The primary difference between the two is that unlike interactive catalogs,
which deal with people,directory support services interact directly with
software
4. Secure Messaging and structured Document Interchange Services
–
Messaging is the software that sits between the network infrastructure and
the clients or electroniccommerce applications, masking the peculiarities of
the environment.

Messaging services offer solutions for communicating non-formatted data

–letters, memos, reports as well as formatted data such as purchase orders,
shipping notices, and invoices.
–
Unstructured messaging consists of Fax, e-mail, and form based systems
like Lotus Notes. Structureddocuments messaging consists of the automated
interchanging standardized and approved messagesbetween computer
applications. Ex: EDI
–
Messaging supports both synchronous and asynchronous message delivery
and processing. It is notassociated with any particular communication
protocol. With messaging tools, people can communicateand work together
more effectively.
–
Due to lack of standards, there is often no interoperability between different
messaging vendorsleading to islands of messaging.
–
Security, privacy and confidentiality through data encryption and
authentication techniques areimportant issues that need to be resolved for
ensuring the legality of the message based transactions.
5. Middleware Services
–
With the growth of networks, Client Server technology, and all other forms
of communicatingbetween/among unlike platforms, the problems of getting
all the pieces to work together became anecessity.
–
Middleware helps to mediate between diverse software programs that
enables them talk to oneanother. To achieve data-centric computing,
middleware services focus on three elements;transparency, transaction
security and management and distributed object management and services.
•Transparency:
–
Transparency implies that users should be unaware that facilitates a
distributed computingenvironment.
–
Transparency is accomplished using middleware that facilitates a
distributed computing environment.This gives users and applications
transparent access to data, computation, and other resources
acrosscollections of multi vendor, heterogeneous systems.
•
Transaction Security and Management
–Security and management are essential to all layers in the electronic
commerce model.At the transaction security level, two broad general
categories of security services exist; authenticationand authorization. For
electronic commerce, middleware provides the qualities expected in a
standardTP system: ACID properties.
6. Distributed Object Management and Services
–Object orientation is proving fundamental to the proliferation of network
based application.–Instance of an object in electronic commerce is a
document. The term object is being usedinterchangeably with document
resulting in a new form of computing called document orientedcomputing.
The trend is moving from single data type documents to integrated
documents known ascompound architectures