ECOMMERCE NOTES

INTRODUCTION:
In this write up the focus is mainly on e-business. It consists of critical discussion
and analysis of the impact of adopting e-business orientation. It also contains
relevant information on the current state of e-business market.
The report also talks about the differences between, advantages and disadvantages
of e-business and e-commerce. Recommendations and advice have been given in
the end for businesses intending to adopt an e-business dimension.
DEFINITIONS OF E-BUSINESS AND E-COMMERCE:
The terms e-business and e-commerce are closely related but have some elements
of differences between them.
The term e-business was first coined by Lou Gerstner, CEO of IBM. According to
Wikipedia (2006), e-business is any business process that relies on automated
information system, which today is mostly done with web based technologies
(Wikipedia, 2006). The Aberdeen Consulting Group defines e-business as the
automation of the entire spectrum of interactions between enterprises and their
distributed employees, trading partners, suppliers, and customers. (Intel.com,
2006) http://www.intel.com/it/pdf/e-business-value.pdf (27/12/06)
E-business is a wider concept that takes into account all the aspects of use of
information technology in business. Apart from buying and selling, it also includes
servicing customers, collaboration with business partners, and engages
incorporation across business processes and communication within the organisation
(Rowley, 2002)
According to the author, e-business is conducting business on the internet by not
only buying and selling goods, but also servicing clients and collaborating with
business partners by using all the human technologies.
E-commerce definition: E-commerce is about the sale and purchase of goods or
services by electronic means (Chan et al, 2004). This is one of the most simple,
basic and self explanatory definition of e-commerce.
DIFFERENCE BETWEEN E-BUSINESS AND E-COMMERCE:
E-business and e-commerce are terms that are sometimes used interchangeably,
and sometimes they are used to differentiate one vendors product from another. In
both cases, the e stands for "electronic networks" and describes the application of
electronic network technology - including Internet and electronic data interchange
(EDI) - to improve and change business processes (Bartels, 2000)

E-commerce or electronic commerce is carrying out business communications and

transactions through computers and over networks. It involves buying and selling of
goods and services through digital communication. E-commerce also includes
transactions on the World Wide Web and the Internet and means such as electronic
funds transfer, smart cards and digital cash. E-commerce covers outward facing
processes that interact with customers, suppliers and external partners such as
sales, marketing, delivery, customer service, purchasing of raw materials and
supplies for production. It involves new business models and the capability to gain
new revenue. So E-commerce is a subset of e-business.
E-business or electronic business evolved from e-commerce. It is conducting
business on the internet by not just selling and buying of goods but also servicing
customers and join forces with business partners. Most companies have realised
that the internet is a long term thing and will is here to stay. Corporate leaders have
become conscious of the fact that in order to maintain the competitive edge they
must become e-business as well (Altekar, 2005, Supply chain management, Prentice
hall of India, New Delhi,Pg. 373)
E-business includes e-commerce and is a much broader concept than e-commerce.
It also covers internal processes such as production, new product development,
stock management, risk management, finance and HR. E-business is more complex
and more focused on internal processes. It is aimed at improving efficiency,
productivity and cost savings as well (Bartels, 2000)
CURRENT STATE OF E-BUSINESS MARKET:
A research by Forrester research and cowls/samba information showed that in 1994,
240 million dollars worth of business was done on the internet.
Source: Forrester research and cowls/samba information
In the year 1996, that figure quadrupled and rose to 993.4 million US dollars and in
the year 2000 it touched 6.9 billion US dollars. Business through internet is growing
day by day. Most of the companies have realised that internet is a big electronic
market and companies like Google, Amazon and E-bay are prime examples of it.
Most of the companies now days have their own website and business on the
internet have been adopted by large and small organizations (Kosiur, 1997)
GENERAL IMPACTS OF ADOPTING E-BUSINESS:
E-business now is not a new concept. The current state of e-business started taking
its shape at the beginning of this century. The growth and its impact have been
dramatic and will continue to be so. It is promoting a new, borderless global
economy which is not only a technological issue but also a new approach of doing
business. In brief, organisations are externalizing their business applications via

internet in order to gain competitive advantage. The three key areas of focus are: 1)
Business employee (such as intranet e-business sites) 2) Business to business (Esupply chain, e-marketing, e-support) and business to customer (via e-lobby or
enterprise portal) (Hurwitz S J, 1999)
http://www.informationweek.com/743/43uwjh.htm (29/12/06)
The impact of E-business/IT on business relationship has been in theoretical level
two folded. First, it has had a huge impact on internal process like book-keeping and
salary payments, which happen inside a company engaged in a business
relationship. Computerization from large mainframes to inexpensive PCs with
modems is an apparent improvement of internal processes. Secondly, it has had an
impact on the number of connections, I-EDI and new viable connections ERP2 to
other organisations. Both the levels of impacts are interlinked. Before a company
fully engages itself in activities in a business that require digital tools e.g. software
or extranet, the internal information systems and e-business possibilities have to be
in place. The internet and many other new technologies form possibilities for people
and organisations to build, maintain, and end business relationships with
organisations (Salo, J, 2004)
http://www.taloustieteet.oulu.fi/henkilokunnan_sivut/karjaluoto/publications/j8.pdf
(31/12/06)
ADVANTAGES OF ADOPTING E-BUSINESS ORIENTATION:
An e-business solution will not only add value, but offer many other business
advantages as well. Some of them are:
Removes location and availability restrictions - An online business has a global
marketplace. Information about the product can be accessed from anywhere in the
world with the help of internet facility. Similarly orders can also be booked online.
Therefore users need not necessarily be present in the same location where the
company is.
Reduction in time and money spent Many of the traditional business procedures
can be replicated with electronic means. Less paperwork is one of the major cost
cutting factors in an e-business application. Similarly, cost of paying rent at a
physical location can also be saved as compared to cost of maintaining an online
site.
Gives competitive advantage Easy access to real time information is an
important benefit of the internet, enabling a company to give efficient and valid
information. An organisation can gain competitive advantage over those companies
that are not there on the internet (onlinebusiness.com, 2006)
http://onlinebusiness.volusion.com/articles/e-business-advantages/ (31/12)

 Reduced cost of doing business It helps reduce inventory, employees,

purchasing cost, transaction costs, order processing costs related with fax, phone
calls, etc.
LIMITATIONS / DRAWBACKS OF E-BUSINESS:
There are lots of problems and issues with e-business. Some of them are discussed
below:
Trust: People are quite reluctant to buy high value goods or services using
electronic medium. The main reasons for such mistrust are security and hesitation
to release personal information on the internet.
Security: One of the biggest disadvantages of e-business is security. Other people
can easily get personal and financial information of the customers. Most of the
companies dont have authentic and secured transaction systems. Many
developments have been made to make transactions over the internet safe and
secure, like pay pal, secure server, etc.
Technological standards: Technological standards develop quickly in electronic
markets. Some of these standards are not secure or have problem of integrating
with standards in other areas.
Re-intermediation: One of the problems is difficulty in finding the exact suppliers
of goods and services.
Higher number of errors: The amount of mistakes made with customers and
suppliers is much more visible in electronic markets (Davies, 2004)
DIFFERENT FORMS OF E-BUSINESS:
Business to Business (B2B) It involves companies buying from and selling to each
other, on the internet. In other words it is commercial activity between businesses.
Online B2B is growing fast in both horizontal and vertical markets. In a horizontal
market, companies in one industry sell to companies in other industries, whereas in
a vertical market business takes place among companies operating in the same
industry in a sequential supply chain (Oz, 2002)
Business to Consumer (B2C) It applies to any business or organisation that sells its
products or services to consumers on the internet for its own use. About one fifth of
e-commerce takes place between businesses and consumers. B2C is of greater
interest to the public, because most of the online buyers are people (in millions) and
not organisations (Patton, 2006) http://www.cio.com/ec/edit/b2cabc.html (1/1/07)
Consumer to Consumer (C2C) It supports the community chain surrounding the

organisation. In other words C2C e-commerce is a commercial extension of

community activities. It usually takes place between individuals and involves forms
of cash dealings generally for low cost goods or services (Davies, 2004)
PORTERS FIVE FORCES ANALYSIS AND ITS USE IN E-BUSINESS:
To understand the influence of an organisations environment on a company,
Porters five forces model is used. By recognizing the possible impact of e-business
on each of these forces, the influence on the organisations environment is
estimated. The five forces and its use in e-business are as follows:
1. Entry of new competitors E-business can help companies enter into new
markets. Through the internet small and medium organisations can think of gaining
new customers by reaching people in other parts of the world. By using standard
and open systems, switching costs will reduce for customers and suppliers. Capital
requirements will also decrease to enter a new market.
2. Bargaining power of buyers To strengthen the relation between buyers and
suppliers using high software investments were things in the past. Modern
technologies allow forward and backward incorporation in the value chain. The
intermediaries are under pressure e-business enables to have direct links across
various levels in the supply chain. Due to this there is increased transparency in the
market.
3. Bargaining power of suppliers Effects mentioned above for the power of
buyers can be replicated to describe the power of suppliers. In order to find,
expand and retain relationships with customers, suppliers will have to raise their
efforts.
4. Threat of substitutes Due to the increased transparency of markets it is easier
for organisations to develop substitutes for other markets. Huge amount of market
data can be collected and analysed by applying new internet technologies. Also
because of decreased switching costs new substitutes are more likely to enter the
markets.
5. Rivalry among existing competitors As mentioned above, e-business permits
companies from other industries or various countries to enter into new industries.
This gives rise to more players in the same market and eventually increases
competition (Hooft et al, 2001)

One of the many challenges facing the countries in the Asia-Pacific today is
preparing their societies and governments for globalization and the information and

communication revolution. Policy-makers, business executives, NGO activists,

academics, and ordinary citizens are increasingly concerned with the need to make
their societies competitive in the emergent information economy.
The e-ASEAN Task Force and the UNDP Asia Pacific Development Information
Programme (UNDP-APDIP) share the belief that with enabling information and
communication technologies (ICTs), countries can face the challenge of the
information age. With ICTs they can leap forth to higher levels of social, economic
and political development. We hope that in making this leap, policy and decisionmakers, planners, researchers, development practitioners, opinion-makers, and
others will find this series of e-primers on the information economy, society, and
polity useful.
The e-primers aim to provide readers with a clear understanding of the various
terminologies, definitions, trends, and issues associated with the information age.
The primers are written in simple, easy-to-understand language. They provide
examples, case studies, lessons learned, and best practices that will help planners
and decision makers in addressing pertinent issues and crafting policies and
strategies appropriate for the information economy.
The present series of e-primers includes the following titles:
1. The Information Age
2. Nets, Webs and the Information Infrastructure
3. e-Commerce and e-Business
4. Legal and Regulatory Issues for the Information Economy
5. e-Government
6. ICT and Education
7. Genes, Technology and Policy: An Introduction to Biotechnology
These e-primers are also available online at
http://www.apdip.net/publications/iespprimers
The primers are brought to you by UNDP-APDIP, which seeks to create an ICT
enabling environment through advocacy and policy reform in the Asia-Pacific region,
and the e-ASEAN Task Force, an ICT for development initiative of the 10-member
Association of Southeast Asian Nations. We welcome your views on new topics and
issues on which the e-primers may be useful.
Finally, we thank all who have been involved with this series of e-primers-writers,
researchers, peer reviewers and the production team.

Roberto R. Romulo
Chairman (2000-2002)
e-ASEAN Task Force
Manila, Philippines

Shahid Akhtar
Program Coordinator
UNDP-APDIP
Kuala Lumpur, Malaysia
http://www.apdip.net

Introduction
In the emerging global economy, e-commerce and e-business have increasingly
become a necessary component of business strategy and a strong catalyst for
economic development. The integration of information and communications
technology (ICT) in business has revolutionized relationships within organizations
and those between and among organizations and individuals. Specifically, the use of
ICT in business has enhanced productivity, encouraged greater customer
participation, and enabled mass customization, besides reducing costs.
With developments in the Internet and Web-based technologies, distinctions
between traditional markets and the global electronic marketplace-such as business
capital size, among others-are gradually being narrowed down. The name of the
game is strategic positioning, the ability of a company to determine emerging
opportunities and utilize the necessary human capital skills (such as intellectual
resources) to make the most of these opportunities through an e-business strategy
that is simple, workable and practicable within the context of a global information
milieu and new economic environment. With its effect of leveling the playing field,
e-commerce coupled with the appropriate strategy and policy approach enables
small and medium scale enterprises to compete with large and capital-rich
businesses.
On another plane, developing countries are given increased access to the global
marketplace, where they compete with and complement the more developed
economies. Most, if not all, developing countries are already participating in ecommerce, either as sellers or buyers. However, to facilitate e-commerce growth in
these countries, the relatively underdeveloped information infrastructure must be
improved. Among the areas for policy intervention are:

High Internet access costs, including connection service fees, communication

fees, and hosting charges for websites with sufficient bandwidth;

Limited availability of credit cards and a nationwide credit card system;

Underdeveloped transportation infrastructure resulting in slow and uncertain

delivery of goods and services;

Network security problems and insufficient security safeguards;

Lack of skilled human resources and key technologies (i.e., inadequate

professional IT workforce);

Content restriction on national security and other public policy grounds,

which greatly affect business in the field of information services, such as the
media and entertainment sectors;

Cross-border issues, such as the recognition of transactions under laws of

other ASEAN member-countries, certification services, improvement of
delivery methods and customs facilitation; and

The relatively low cost of labor, which implies that a shift to a comparatively
capital intensive solution (including investments on the improvement of the
physical and network infrastructure) is not apparent.

It is recognized that in the Information Age, Internet commerce is a powerful tool in

the economic growth of developing countries. While there are indications of ecommerce patronage among large firms in developing countries, there seems to be
little and negligible use of the Internet for commerce among small and medium
sized firms. E-commerce promises better business for SMEs and sustainable
economic development for developing countries. However, this is premised on
strong political will and good governance, as well as on a responsible and supportive
private sector within an effective policy framework. This primer seeks to provide
policy guidelines toward this end.