The Advantages of E-Commerce - Essay Example

E-Commerce Table of Content Topic Page No. Introduction 02 Overview 03 Analysis 03 The Industry 05 SWOT Analysis 08 Appendix 10 A successful online marketing campaign means more than driving clicks to web sites. E-Commerce is about online marketing that attracts qualified prospects and convert those leads into sales. Whether it means selling a product online, promoting a service, generating leads, or simply increasing brand awareness, e-Commerce is the answer. So what is e-Commerce There are many definitions around. Perhaps the following one struck me to be more appropriate. e-Commerce or e-business, as it often referred to as, is the conduct of business transactions between companies (B2B) or between companies and their customers (B2C) that are wholly or partially conducted over the Internet or similar public or private computer networks (Definitions of e-Commerce on the web, www.x-solutions.poet.com). 1.0 Introduction It all began due to a combination of some regulations and innovativeness. Although the predecessor of the Internet appeared in the late 60s, e-commerce took flight with the advent of the World Wide Web (WWW) and browsers in the 90s. This led to a remarkable progress in the field of information technology with the liberalisation of telecommunication and innovations, which greatly expanded the volume and capacity of the sensitive communication sector. In the context of this development, barriers that affected trading fell, and business began to look up. Earlier forms of e-commerce were mostly custom-made, complex, expensive and the province of large firms. This has changed with time. Today, for a few thousand dollars, anyone can become a merchant and reach millions of consumers world-wide. What used to be business-to-business (B2B) transactions among the privileged is today a necessity with any establishment that seeks to do business globally. Millions and millions of dollars change hands across the globe and involve vast numbers of individuals who may never have met before. Internet has revolutionized the way people think and do business. Today, people enjoy the comfort of this technology and the time difference acknowledged with other parts of the globe to their advantage. The advantages are immense and we take a look at some of these in this paper. 2.0 Overview The growth of e-commerce is much more likely to be determined by the B2B segment of business, which accounts for 80% of the total e-commerce activity. The notable factors that can contribute to further growth are: 1. A reduction in transaction costs, and improvement of product quality and customer service 2. A defensive reaction to competitors engaging in e-commerce 3. An insistence by large and medium-sized business houses that their suppliers link into their e-commerce system as a condition of doing business. Internet and web-based electronic commerce allows more business partners to be connected than by the traditional EDI 4. E-Commerce can help reach a more geographically dispersed customer base 5. Procurement costs can be lowered 6. Purchasing cost improves 7. Reduction in inventories 8. Lower cycle times 9. Better customer service 10. Lower sales and marketing costs. 3.0 Analysis Reduced transaction costs have a direct influence on defensive reactions to competitors, and suppliers linking to their business house's e-commerce system. It is most likely that the biggest impact of b2b e-commerce will be on small and medium-sized enterprises (SME), and not the larger ones as expected. This is because many of these large business enterprises have EDI. Accessibility to the Internet makes electronic commerce viable for the numerous SME. The competition surrounding the impact of e-commerce among business houses is closely monitored and guarded such that not much is known about this business segment making it an important student for future studies. The United States undoubtedly, accounts for the major share of this technology. The most significant impact of E-commerce will be on service sectors that primarily transmit information such as the postal service, communications systems like radio and TV, and industries like finance, entertainment, travel agents or stock brokers (The Economic and Social Impact of Electronic Commerce, Organisation for Economic Co-operation and Development Publications, www.oecd.org). The cost and installation cost of an electronic data interchange system (EDI) is high and caters to the upper segment of industries that has enough and more sales volume to justify the development of such a system. This makes the SMEs turn elsewhere to get similar features at reduced costs. A value-added network (VAN) is the answer. VAN can provide for transmission of data, EDI translation, and store and transmit information from time-to-time. Because of the increased ability to transact electronically with one another, sourcing becomes easy and this reduces procurement costs. The same holds for a reduction in inventory as the internet e-commerce allows for monitoring of stocks and supplies and allows the suppliers and purchasers to share updated production forecasts and projected inventory level. By allowing customers to access information before, during and after sales, it enhances a customer-to-company relationship, and develops a healthier and pro-active customer service base. The internet allows companies to reach customers in a low-cost mode (Greenstein & Feinman, Electronic Commerce: Security, Risk Management and Control, Page No.3-4, McGraw-Hill Publishing Company Limited, Edition 2000). Despite all these positives, there remains a major concern for those who use the electronic commerce and internet for their livelihood. A specific form of risk is the possibility that personal or corporate information may be revealed or misused. Security plays an important role in the success of a business. While such issues are not restricted to electronic commerce, they take on special significance in an environment based on the use of sophisticated computer and communications technologies. Concerns over the security of transactions are also a barrier to the growth of Internet commerce. Consumers fear that their financial information may be manipulated and misused either by the intended recipient of a credit card number or by a hacker who intercepts the card number before it reaches its final destination (The Economic and Social Impact of Electronic Commerce, Organisation for Economic Co-operation and Development, OECD Publications, www.oecd.org). 4.0 The Industry E-Commerce is perhaps the solution to a lot of problems facing man today. Business transactions, reports, analysis, planning, execution, payments are all part and parcel of organisational strategies to compete and excel in their respective fields. The internet and e-commerce allows for free flow of data and instruments much needed by industries to survive competition. The primary payment mechanisms such as cash, debit cards, credit cards, electronic cheques, and electronic money transfer are all a part of our life. These tools help in protecting our money and serve as an alternative to carrying cash. MasterCard and Visa jointly promoted the Secure Electronic Transaction (SET) with the intention of providing customers a secure payment option through transmission of data electronically. This is secure and helps prevent thefts. Banks rolled out this scheme with the idea of serving customers with features such as fund transfers, initiate payments, and maintain their accounts. Most establishments accept electronic payments made through debit and credit cards today, like airlines, railways, hotels and restaurants, amenities billings, petrol stations, super markets and so on. What we have today is just about everything in electronic. E-Ticketing, e-Card, e-Banking, e-Marketing are but a few of the prominent sectors covered by electronic commerce. Banks offer more and more payment options to consumers and business houses. The most conspicuous benefits derived from such schemes is the reduced operational cost, cut in processing time, increased interoperability, and increased payment options. ATM machines are seen everywhere. These machines help in both downloading and remitting of cash. Another important aspect of e-commerce is in buying and selling of products from around the globe. The internet has been ideal platform for companies like eBay to promote their business worldwide. Paypal is another company that manages its business through the use of the internet. It makes payments to its customers and at the same time buys products for its client by disbursing the required money through electronic transfers. Important decisions can be taken by using the internet from your living or bedroom. (Electronic Commerce: Payment Mechanism, Page 295-322, McGraw-Hill Publishing Company Limited, Edition 2000). Individuals with special needs could be among the greatest beneficiaries of electronic commerce and information technology. Advanced computer software can help decipher one format of text to another; texts to verbal to Braille for the visually impaired, and closed captioning for the hearing-impaired to understand television transmissions better. Also, electronic commerce helps physically challenged individuals to participate effectively. Health education helps cut medical expenses and improves the health of workers. This in turn helps production. Improved health conditions and access to health Information which is possible through the electronic media can contribute significantly to economic growth (The Economic and Social Impact of Electronic Commerce, Organisation for Economic Co-operation and Development, OECD Publications Health, Page 147, www.oecd.org). 5.0 SWOT Analysis SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The significant economic growth of electronic commerce can be seen in the following graph. It is estimated to be very high on the agenda of many public and private sector undertakings. Starting from zero in 1995, electronic commerce is estimated at $26 billion in 1997; $330 billion in 2001-02 (near term) and $1 trillion in 2003-05 (future). Though these estimates are speculative and rank among the highest of the dozen estimates generated by various management consultancy or market research firms, they are adopted to ensure complete geographical and product coverage. The following show the strengths and Opportunities arising from e-commerce. Comparison of various total e-commerce estimates in US$ Millions Activity 1995-97 2000-02 Total IDC 1000 117000 INPUT 70 165000 VeriFone 350 65000 ActivMedia 24/400 1522000 Data Analysis 2800 217900 Yankee 850 144000 E-Land 450 10000 EITO 475 262000 AEA/AU 200 45000 Hambrecht &Quest 1170 23200 Forrester 8000 327000 Morgan Stanley 600 375000 Median Value 725 154500 Sources: Girishankar, 1998 a; http://www.tpn.geis.com (10 May 1997); Morishita, 1997; Borland, 1997 b; Morgan Stanley Dean Witter, 1997; Direct Newsline, Media Daily Archive, 1998; Strassel, 1997 b; Margherio et al., 1998; ''PC Week's Top-10 E-commerce Sites'', http://www.pcweek.com (14 January 1997); ''Lawsuite Aside, Amazon.com Racks Up Sales'', www.techweb.com (16 February 1998); ''Barnes and Noble Sees $100M in Online Sales'', www.techweb.com (19 January 1998); Jackson, 1997 b; ''The Once and Future Mall'', The Economist (1 November 1997); Margolis, 1998; ''CyberSex'', The Economist (4 January 1997); Weber, 1997; Sussman, 1997; Macavinta, 1998; Schwartz, 1995; Brunker, 1997; ''Competition on the Rise as Net Music Sales Take Off'', www.internetnews.com (13 February 1998). Risk: The possibility that personal or corporate information may be revealed or misused is the prime concern for those dealing with e-commerce applications. Security plays an important role in the success of a business. While such issues are not restricted to electronic commerce, they take on special significance in an environment based on the use of sophisticated computer and communications technologies. There should be a fool-proof arrangement that can mitigate this general belief by a majority of industries today. Once this security concern is addressed, e-commerce will be widely accepted and will grow from strength-to-strength. 6.0 Appendix Definitions of e-Commerce on the web, www.x-solutions.poet.com/eu/newsevents/glossar The Economic and Social Impact of Electronic Commerce, Organisation for Economic Co-operation and Development, OECD Publications, http://www.oecd.org/dataoecd/3/12/1944883.pdf Marilyn Greenstein & Todd M. Feinman, Electronic Commerce: Security, Risk Management and Control, Page No.3-4, McGraw-Hill Publishing Company Limited, Edition 2000 Read More