Ecommerce An Introduction

.. le to, say that of the growth in car ownership or the spread of the telephone. The scope of Electronic Commerce Electronic Commerce as a general concept covers any form of business transaction that is conducted electronically, using telecommunications networks. Such transactions occur between companies, between companies and their customers or between companies and public administrations. Electronic Commerce encompasses a broad range of activities.

The core component is addressing the commercial transaction cycle. Electronic Commerce includes electronic trading of physical goods and services and of electronic material. Upstream and downstream of the transactions it also includes the advertising and promotion of products and services, the facilitation of contacts between traders, the provision of market intelligence, pre- and post-sales support, electronic procurement and support for shared business processes. Electronic Commerce impacts upon a large number of business activities. ? Marketing, sales and sales promotion ? Pre-sales, subcontracts, supply ? Financing and insurance ? Commercial transactions: ordering, delivery, payment ? Product service and maintenance ? Co-operative product development ? Distributed co-operative working ? Use of public and private services ? Business-to-administrations (concessions, permissions, tax, customs, etc) ? Transport and logistics ? Public procurement ? Automatic trading of digital goods ? Accounting ? Dispute resolution The whole of the commercial transaction, including ordering, transport and delivery, the invoicing and payment cycle can be supported electronically.

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Dealing with public authorities electronically for customs and tax affairs and in statistics is already well developed. However, a number of issues such as security, IPR protection, legal questions and procedures still have to be addressed as part of the electronic commerce business environment. A distinction should be made between electronic trading of physical goods and services and electronic trading of information-based contents that can be delivered directly through the network (images, voice, text, software, etc.). The electronic trading of physical goods and services represents an evolution of present ways of trading, capitalising on new possibilities offered by technology to improve efficiency in terms of lower costs. Effectiveness in terms of widening market potential and better meeting customers’ needs as well as providing a means for enhanced product and service innovation, notably through customer-supplier interaction.

This form of electronic commerce is expected to have a great impact on competitiveness and a limited impact on employment. The trading of electronic material (software, video, music, images, multimedia works, games, etc.) represents a revolutionary new way of trading, for which the full commercial transaction cycle can be conducted simultaneously via the same network (including delivery), implying specific requirements regarding the proper integration of payment, IPR control, etc. Depending on the solutions that will be successful in the market place, traded electronic goods could create totally new markets and revolutionise some industries, such as publishing. This highly innovative form of electronic commerce is expected to have an important impact on competitiveness and create employment. Examples of Specific Business Benefits of Electronic Commerce ? Reduced advertising costs ? Reduced delivery cost, notably for goods that can also be delivered electronically ? Reduced design and manufacturing cost ? Improved market intelligence and strategic planning ? More opportunity for niche marketing ? Equal access to markets i.e.

SMEs vis–vis larger corporations ? Access to new markets ? Customer involvement in product and service innovation Market intelligence such as information on specific markets and countries, market surveys and automatic generation of marketing statistics can all be provided electronically and improve the commercial environment, though a number of issues such as privacy need to be addressed. Contacts between companies can be facilitated by on-line business directories and improved national and regional information relay centres. Contact between companies and consumers can be supported by various means, including on-line advertising and shopping malls. Companies can provide detailed information on their products and services, including technical specification, guidance on use and answers to common questions, supported by comprehensive navigation and search facilities. Over recent years, efforts to improve business efficiency and responsiveness have increasingly resulted in a blurring of the boundaries between interacting companies and customers. Business processes then cross company boundaries, with each company carrying out its own parts of those shared processes.

An extreme example occurs with the virtual enterprise, where each participating company playing its own role in a closely co-operating network have companies addressing a particular market opportunity. Where companies can jointly form a single virtual enterprise that addresses anything from production of goods and services to distribution and sales, it can be expected that major shifts will happen in the structure of the industries involved. An example of this is the expected impact of teleshopping (i.e. the possibility to partially by-pass the distribution chain) on the balance of power between consumer goods producers and the retail chain. In this case the traditional boundaries between manufacturing and distribution sectors are becoming less important.

Another example of a structural change is observed in the health care industry where electronic commerce is a critical enabling factor for healthcare management companies (HMCs), to become major new intermediaries in the market (between health care providers such as doctors, major health care purchasers, pharmaceutical industry, and government agencies). In this case electronic commerce means the electronic exchange of health care-related information between market players. These HMCs are now so important that recently a process of vertical integration in the pharmaceutical industry started by manufacturers acquiring healthcare companies in order to get access to their huge information databases. Examples of Generic Business Strategies Based on Electronic Commerce ? Electronic Marketplace Presence: sales promotion, interactive TV / Internet shopping ? Efficient Consumer Response Management ? Electronic Trading ? Supply Chain Management ? Vendor Managed Inventory Electronic commerce also enables sector specific strategies such as Value Added Banking Potentially, electronic commerce can provide comprehensive support for shared business processes, regardless of their nature and regardless of the participants being separated by geography and time. Indeed, it could be argued that such shared business processes are the most general form of electronic commerce and that the other facets identified above are simply special cases of this general form. The reasoning and examples above reinforce the argument that electronic commerce is a phenomenon that should be considered from the point of view of several policies and several market sectors. Supplier Opportunities and Customer Benefits of Electronic Commerce As summarised in table 1, electronic commerce offers several opportunities to suppliers and commensurate benefits to customers.

These include: Supplier opportunity Customer benefit Global presence Global choice Improved competitiveness Quality of service Mass customisation & customerisation Personalised products & services Shorten or eradicate supply chains Rapid response to needs Substantial cost savings Substantial price reductions Novel business opportunities New products & services Table 1: Opportunities and benefits Global presence / Global choice The boundaries of electronic commerce are not defined by geography or national borders, but rather by the coverage of computer networks. Since the most important networks are global in scope, electronic commerce enables even the smallest suppliers to achieve a global presence and to conduct business world-wide. The corresponding customer benefit is global choice – a customer can select from all potential suppliers of a required product or service, regardless of their geographical location. Improved competitiveness / quality of service Electronic commerce enables suppliers to improve competitiveness by becoming closer to the customer. As a simple example, many companies are employing electronic commerce technology to offer improved levels of pre-and post-sales support, with increased levels of product information, guidance on product use, and rapid response to customer enquiries.

The corresponding customer benefit is improved quality of service. Mass customisation / personalised products and services With electronic interaction, suppliers are able to gather detailed information on the needs of each individual customer and automatically tailor products and services to those individual needs. This results in customised products comparable to those offered by specialised suppliers but at mass market prices. One simple example is an on-line magazine that is tailored for the individual reader on each access to emphasise articles likely to be of interest and exclude articles that have already been read. Shorten or eradicate supply chains / Rapid response to needs Electronic commerce often allows traditional supply chains to be shortened dramatically. There are many established examples where goods are shipped directly from the manufacturer to the end consumer, by-passing the traditional staging posts of wholesaler’s warehouse, retailer’s warehouse and retail outlet.

Typically the contribution of electronic commerce is not in making such direct distribution feasible, since it could also be achieved using paper catalogues and telephone or postal ordering – but rather in making it practical in terms of both cost and time delays. The extreme example arises in the case of products and services that can be delivered electronically, when the supply chain can be eradicated entirely. This has massive implications for the entertainment industries film, video, music, magazines, newspapers, for the information and publishing industries including all forms of publishing, and for companies concerned with the development and distribution of computer software. The corresponding customer benefit is the ability to rapidly obtain the precise product that is required, without being limited to those currently in stock at local suppliers. Substantial cost savings / Substantial price reductions One of the major contributions of electronic commerce is a reduction in transaction costs. While the cost of a business transaction that entails human interaction might be measured in dollars, the cost of conducting a similar transaction electronically might be a few cents or less. Hence, any business process involving routine interactions between people offers the potential for substantial cost savings, which can in turn be translated into substantial price reductions for customers. Novel business opportunities / New products and services In addition to re-defining the markets for existing products and services, electronic commerce also provides the opportunity for entirely new products and services.

Examples include network supply and support services, directory services, contact services (i.e. establishing initial contact between potential customers and potential suppliers), and many kinds of on-line information services. While these various opportunities and benefits are all distinct, they are to some extent inter-related. For example, improvements in competitiveness and quality of service may in part be derived from mass customisation, while shortening of supply chains may contribute to cost savings and price reductions. Examples in electronic commerce There are many well-established examples of electronic commerce in a wide range of industry sectors and a wide range of application areas. A few of these will serve to illustrate the nature of current activity. ? Retail: – The Internet Book Shop.

Virtual Vineyards ? Finance – Barclays Bank. Electronic Share Information ? Distribution: -DIPA GmbH. Oracle ? Pre/post sales support: -Hewlett Packard. GE Plastics ? Engineering design: -Ford. The Global Engineering network.

? Business support: -CitiusNet. ? Publishing: -The Times. The Irish Independant ? Shared business processes: – Tesco. Levels of electronic commerce As the above examples help to illustrate, there are various levels at which electronic commerce can be conducted, ranging from a simple network presence to electronic support for processes that are jointly owned and enacted by two or more companies. Various levels of electronic commerce are listed above.

Electronic commerce is more complex at the international level than the intranational level because of such factors as taxation, contract law, customs payments, and differences in banking practices. This highlights the distinction between national transactions and international transactions. The sources of this distinction are not technical – as already emphasised; electronic commerce is essentially global in concept, but rather legislative. The lower levels of electronic commerce are concerned with a basic network presence, company promotion, and pre- and post-sales support. By using available off the shelf technologies, these levels can be both cheap and straightforward to implement, as thousands of small companies can already testify. By contrast, the more advanced forms of electronic commerce pose complex problems that are as much legal and cultural as technological.

At these levels there are no off the shelf solutions, so companies are forced to develop their own custom systems. Thus at present it tends to be only the larger and richer companies that are pioneering these levels. However, over time the boundary of what is commonplace will gradually move up to encompass the more complex levels of electronic commerce, and further off the shelf technologies will be established to support these higher levels, just as they have been for the lower levels. Bibliography none.