Fundamentals of Accounting Computers in Accounting and Management 20. Concept of E - Commerce Considering that the basic philosophy of any marketing activity is to provide value and satisfaction to customers and given the globalization of marketing operations today, it is very essential for every organization to create and establish such facilities which can reduce the gap between existing and prospective consumers. This lesson will help you to understand how e-commerce is helping organisations meet these challenges.
20.0 Objectives After going through this lesson, you will be able to: • • •
Understand the conceptual aspect of e-commerce (electronic commerce) Understand the organisational and technical considerations for a successful e-Commerce venture define the benefits and problems of e-commerce with special reference to the Indian market
20.1 Introduction Today’s marketing environment calls for convenience, effective information management and efficient marketing processes especially selling & promotion transactions. Development of internet technology and information technology has addressed this concern. Large scale marketing or market related activities, today, can be easily conducted over the Internet, be it a simple process such as providing product information or more complex transactions such as online sales.
20.2 E-Commerce: Past & Present According to Person Halls Book, e-commerce started in 1994 with the first banner advertisement being placed on internet. Originally, e-commerce meant the facilitation of commercial transaction electronically using technologies like EDI and Electronic Funds Transfer (which were introduced in late 1970s). However today, it encompasses a very wide range of business activities and processes.
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Significant growth of e-commerce was recorded only after 1994 when the World Wide Web became well known among the general public. Modern industries today heavily depend upon electronically enabled commercial processes like supply chain management system, customer relationship management system, inventory control systems, financial systems etc. E-Commerce or Electronic Commerce is analogous to a market place on the World Wide Web. It consists mainly of the marketing of products and services over electronic systems such as the Internet or other computer networks. It can also be defined as “electronic business applications aimed at commercial transactions.” E-commerce involves: • • • • • • • • •
E-Marketing Supply chain management Online transaction processing Electronic funds transfer Electronic data interchange (EDI) Automated Inventory Management Automated data collection systems Online marketing research Online promotion of products and services, etc. E-commerce typically uses communication and information technology as its platform for specific activities. Although e-commerce frequently depends on computer technologies it also includes transportation of physical goods sold via e-commerce.
20.3 Components of E-Commerce E-commerce has two broad components:
E-Commerce
B2B (Business to Business)
B2B (Business to Consumer)
Although both these components are equally important, the B2C area has greater challenges and opportunities.
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20.4 Organisational & Technical Consideration for e-Commerce The success of an e-commerce venture depends on many organizational and technical considerations on the part of the organization. Some of the key considerations are as follows: •
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Sufficient degree of market research is required before launching an ecommerce venture because fundamental laws of demand & supply and financial constraints apply equally to these business processes also A secured and easy way for customers to transact online is very essential, without which the reliability factor will go down and negatively affect the online business Publishing of complete product information and related aspects is very important from a long-term point of view Tracking of technological changes and updating the e-commerce venture as per these is very essential for success Adopting an efficient feedback system to track social, economical and physical environment is necessary to ensure viability of the venture
20.5 Benefits of e-Commerce Marketing electronically is far more advantageous to both consumers and sellers than conventional marketing. E-commerce has brought about convenience in marketing, efficiency in selling and effectiveness in the promotional drive. With rapid advancements in Internet and information technology, e-commerce has become a much more reliable and inexpensive means of effective marketing than before. E-commerce provides instant access of information to consumers as well as a platform for comparing the product with those of competitors. The key benefits of e-commerce can be summarized as follows: • • • • • • • •
Reliable Readily accessible Inexpensive means of bringing together buyer and seller Convenience of purchasing (even across different countries) Enhanced productivity of marketing activities Significant reduction in transaction, channel and promotion costs Ability to react quickly to changes in environment Greater options for the buyer and ability to compare across companies
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20.6 Important Concern of e-Commerce Consumers have accepted e-commerce business model rather slowly than predicted. Even today, the following concerns plague the e-commerce industry: • • • • • • • •
Fund transaction security and credit card frauds Customer dissatisfaction with e-purchases Delays in physical transportation of products purchased online Low penetration rate of Internet in some sectors / countries Poor design of e-commerce ventures Consumer caution in the wake of virus infections etc. Difficulties in product exchange and product return Identity theft Problems of E-Commerce in India (Specific Situation)
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Low density of telephone, Personal Computers and Internet Bandwidth limitations Networking limitations Non admissibility of e-documentation in the legal framework
Self-Check Questions Answer True or False 1. World Wide Web is the backbone of e-Commerce 2. E-commerce is not helpful as it doesn’t uproot the middleman from the supply chain of goods / services from business to end consumer Fill in the Blank 3. ____________ and _____________ are components of e-commerce.
20.7 Summing Up In this lesson you learnt about: • • •
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Origin of e-commerce Components of e-commerce Considerations that an organisation has to keep in mind when launching an ecommerce venture
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Benefits and concerns related to e-commerce E-commerce has become a very effective tool for marketing and sale of products and with the expected growth in connectivity and reduction in bandwidth limitations, this medium is expected to witness significant growth in the future
20.8 Answers of Self-Check Questions 1. True 2. False 3. B2B & B2C
20.9 Terminal Questions 1. Explain e-Commerce. In what way is it different from conventional commerce? 2. What are the advantages of E-Commerce operations? What problems may occur during the operation? 3. What are the organizational and technical considerations of a successful ecommerce activity?
20.10 Suggested Readings • • • •
K. K. Bajaj & Debjani Nag, E-Commerce – The Cutting Edge of Business Ravi Kalakota & Don Tapscott, E-Business- Roadmap for Success Rob Smith & Mark Thompson, The Complete Idiot’s Guide to E-Commerce http://www.ecommercetimes.com
20.11 Glossary •
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E-Commerce: The conducting of business communication and transactions over networks and through computers. Specifically, ecommerce is the buying and selling of goods and services, and the transfer of funds, through digital communications B2B (Business-to-Business): it refers to inter-enterprise e-commerce where one business organization sells its product and services to other business B2C (Business-to-Consumer): it refers to marketing of products and services to final consumers Internet: A network of computer networks which operates world-wide using a common set of communications protocols E-marketing: The Marketing side of eCommerce - company efforts to communicate about, promote, and sell products and services over the Internet
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