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
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[online].Available:http://interactive.wsj.com/public/current/articles/
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Hof,R. The Click Here Economy [online] Available:
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Unknown Author. E-Commerce [online]. Available:
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