E – commerce



Commerce is a basic economic activity involving trading or the buying and selling of goods. For example, a customer enters a bookshop, examines the books, selects a book, and pays for it. To fulfill the customer requirement, the bookshop needs to carry out other commercial transactions and business functions such as managing the supply chain, providing logistic support, handling payments, etc. As we enter the electronic age, an obvious question is whether these commercial transactions and business functions can be carried out electronically. In general, this means that no paperwork is involved, nor is any physical contact necessary. This is often referred to as electronic commerce (e‐commerce). The earliest example of e‐commerce is electronic funds transfer. This allows financial institutions to transfer funds between one another in a secure and efficient manner. Later, electronic data interchange (EDI) was introduced to facilitate inter‐business transactions. However, early EDI systems were typically operated over special networks that were complex to set up and costly to administer. For these reasons, EDI has not been as widely deployed as expected. With the advent of internet technologies and advanced cryptographic techniques, it is now feasible to implement e‐commerce over a public network – the Internet. The development of the World Wide Web (www) greatly accelerates the development of e‐commerce and expands its scope to cover different types of applications.



  1. E Commerce is the buying & selling the products ,information & services over the internet


  1. E Commerce is a modern business methodology that address the desire of firms, consumers & management to cut cost while improving the quality of goods &increasing the speed of service


  1. E Commerce is the use of internet & web to transact business. More formally digital enabled commercial transactions between organizations & individuals


ecom transaction

Benefits  of  E-commerce

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 three major stakeholders: organizations, consumers and society.


 Benefits of e-commerce to organizations

International marketplace. What used to be a single physical marketplace located in a geographical area has now become a borderless marketplace including national and international markets. By becoming e-commerce enabled, businesses now have access to people all around the world. In effect all e-commerce businesses have become virtual multinational corporations.

Operational cost savings. The cost of creating, processing, distributing, storing and retrieving paper-based information has decreased (see Intel mini-case).

Mass customization. E-commerce has revolutionized the way consumers buy good and services. The pull-type processing allows for products and services to be customized to the customer’s requirements. In the past when

Ford first started making motor cars, customers could have any color so long as it was black. Now customers can configure a car according to their specifications within minutes on-line via the www.ford.com website.


Enables reduced inventories and overheads by facilitating ‘pull’-type supply chain management – this is based on collecting the customer order and then delivering through JIT (just-in-time) manufacturing. This is particularly

beneficial for companies in the high technology sector, where stocks of components held could quickly become obsolete within months. For example, companies like Motorola (mobile phones), and Dell (computers)

gather customer orders for a product, transmit them electronically to the manufacturing plant where they are manufactured according to the customer’s specifications (like color and features) and then sent to the customer within a few days.

Lower telecommunications cost. The Internet is much cheaper than value added networks (VANs) which were based on leasing telephone lines for the sole use of the organization and its authorized partners. It is also cheaper to send a fax or e-mail via the Internet than direct dialing.


Digitization of products and processes. Particularly in the case of software and music/video products, which can be downloaded or e-mailed directly to customers via the Internet in digital or electronic format. No more 24-hour-time constraints. Businesses can be contacted by or contact customers or suppliers at any time.


Benefits of e-commerce to consumers

24/7 access. Enables customers to shop or conduct other transactions 24 hours a day, all year round from almost any location. For example, checking balances, making payments, obtaining travel and other information. In one case a pop star set up web cameras in every room in his house, so that he could check the status of his home by logging onto the Internet when he was away from home on tour.

More choices. Customers not only have a whole range of products that they can choose from and customize, but also an international selection of suppliers.

Price comparisons. Customers can ‘shop’ around the world and conduct comparisons either directly by visiting different sites, or by visiting a single site where prices are aggregated from a number of providers and compared (for example www.moneyextra.co.uk for financial products and services).

Improved delivery processes. This can range from the immediate delivery of digitized or electronic goods such as software or audio-visual files by downloading via the Internet, to the on-line tracking of the progress of packages being delivered by mail or courier.

An environment of competition where substantial discounts can be found or value added, as different retailers vie for customers. It also allows many individual customers to aggregate their orders together into a single order presented to wholesalers or manufacturers and obtain a more competitive price (aggregate buying), for example www.letsbuyit.com.


Benefits of e-commerce to society

Enables more flexible working practices, which enhances the quality of life for a whole host of people in society, enabling them to work from home. Not only is this more convenient and provides happier and less stressful working environments, it also potentially reduces environmental pollution as fewer people have to travel to work regularly.

Connects people. Enables people in developing countries and rural areas to enjoy and access products, services, information and other people which otherwise would not be so easily available to them.

Facilitates delivery of public services. For example, health services available over the Internet (on-line consultation with doctors or nurses), filing taxes over the Internet through the Inland Revenue website.

Impact  of e-commerce  on business  models


}  A web site helps the business to reach out to a worldwide customer base at a very low cost

}  Reduction in order processing cost as manual data entry is greater reduced. Business carried out faster, as all documents are exchanged faster , as all documents are exchanged electronically

}  Inventory size reduced because of reduction in transaction time

}  Funds transfer is faster

}  Large no. of potential business partners can be quickly found & contacted using appropriate search enquires & e-mails

}  In some cases ,middleman such as retailers can be eliminated as a manufacturer can reach out directly to the customer to reduce cost & delays

E.g.-Dell computers sells PCs in USA directly to customers







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