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Electronic Commerce Essay, Research Paper

ABSTRACT:

Many new and exciting business opportunities are becoming available due to the phenomenal advance of the Internet and peoples’ interest to save time and money by purchasing goods via the web. The advantages of e-commerce are its speed, savings, international distribution and customer service capability. However, the disadvantages are privacy and security, consumer willingness to pay, technical challenges for new e-businesses, organizational commitment, and data quality. 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. The Internet and e-commerce are here to stay, so businesses can either change with the times, or get left behind.

Many new and exciting business opportunities are becoming available due to the phenomenal advance of the Internet and peoples’ interest to save time and money by purchasing goods via the web. If you are asked to think about all of the known companies that don’t use computers for their everyday business; then you are either unable to think of one, or will just think of one that will soon be forced to evolve in order to avoid going out of business. There are very few successful companies that do not use computers in their everyday business activities. There are also few companies do not use some form of e-commerce. Since the beginning of the 1990’s, the number of companies on the internet have quadrupled. Now you might be thinking, “Just what exactly is e-commerce?” To most casual Internet users, e-commerce means online shopping or simply purchasing Christmas presents via your personal computer and any Internet browser. As we will soon find out, this is not precisely the definition of e-commerce but rather one of its many capabilities.

In the simplest terms, 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. After e-commerce proved to be an efficient means to conduct long distance transactions, it became very accepted in the business world. This paper shall discuss some of the advantages and disadvantages of e-commerce, as well as predicting its potential for the future of business. -1-

Electronic commerce, or e-commerce has developed very rapidly in the last few years and has left some in the cold. The majority of people think e-commerce is just about buying and selling things over the Internet like through auctioning sites such as E-Bay and U-Bid. However, 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 job applications, on-line services like America online, and on-line billing that automatically pays specified bills each month so you don’t have to mail a check. E-commerce also includes buying and selling any item over the Internet, electronic banking so you can transfer funds between accounts or stocks, smart cards, and all other methods of conducting business over digital networks. The main technological purpose of e-commerce is to integrate different entities such as businesses, government agencies, and contractors into a single community. The integrated community members have the means to communicate with one another across any given computer platform.

Electronic commerce began over 130 years ago by telegraph technology. This is similar to wiring money though an electronic agency for a small fee. The arrival of credit cards as a payment system began the revolution of the automated process of commerce that we are so familiar with today. The introduction of the ATM card in the mid 80’s was one of the most recent improvements to electronic commerce and its capabilities. -2-

In 1969 when the Department of Defense began funding the research of computer networking. This is when the idea Internet was conceived. By the 80’s, the Internet was still in its youth and very few households had access to this new medium; however, this was achieved at extremely slow speed. 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. When faster, more readily available, and relatively inexpensive means of accessing the Internet were introduced, people started to realize how they could capitalize on a greater market. They began to use the Internet as a fast and efficient means to conduct long distance transactions, as well as an effective way to distribute information.

Clearly, E-commerce will change the face of business forever. Companies that were one thought too far away to conduct business can complete business transactions in a matter of seconds and exchange information. “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)

-3-

In 1998, revenue equaled almost 74 billion dollars and experts predicting that it will climb to as much as 1,234 billion dollars by the year 2002. “E-business is expanding dramatically. “Consumer online purchases in the United States are estimated to increase from approximately $20 billion in 1999 to over $180 billion by 2004 (Murphy, 2000). Also, “enormous growth in the volume and complexity of electronic transactions is requiring companies to transform themselves into an entirely new kind of organization – the integrated enterprise” (Carlucci, 2000). With statistics like this, anyone can see that e-commerce will be the thing of the future. No doubt, the Internet is bringing in an era of drastic transformation that will omit no business or industry. In a time span of three years, the Net has evolved from a playground of nerds into a boundless communications and trading center where some 90 million people trade information or perform deals internationally. In a broader perspective, radio took more than 30 years to reach 60 million people, and television 15 years. We have never seen the likes of this phenomenon.

The advantages of e-commerce are its speed, savings, international distribution and customer service capability. However, the disadvantages are privacy and security, consumer willingness to pay, technical challenges for new e-businesses, organizational commitment, and data quality. These advantages and disadvantages will be discussed henceforth.

-4-

The number one advantage that e-commerce possesses is speed. The Internet and World Wide Web give 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 this makes the whole transaction more efficient from start to finish. Also, you can find practically any product available for sale on the Internet; from books, and compact disks, to performance car parts. Even more significant is the fact that information appearing on the Internet can be changed extremely fast. This gives business owners the ability to inform customers of any changes to the services being offered. This also allows for the updating of marketing and promotional materials as often and as frequently as necessary.

The second advantage of electronic commerce is the opportunity it offers in terms of cost effectiveness. 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; however, compared to the cost of opening a physical store the savings are tremendous. These funds can then be diverted to marketing and advertising of the organization’s products or services.

Cyberspace knows no national boundaries. That means you can do

-5-

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 it easy to link to anyone on the globe and vice versa. This 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 archive section of frequently asked questions 24 hours a day and 365 days a year, builds customer confidence and helps retention. Many companies actually pride themselves on their on-line customer support and use this tool in market differentiation techniques. People expect to get a real person when they send mail. This can work to the advantage of a small start-up company, or a large corporation. No matter what business you are involved in, an online-help feature is an extraordinary advantage to have.

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

-6-

checking account data as it is transferred or break into computers that hold the same information. One way to look at it si that security on the Internet is much like security for a home. There is a point when the effort outweighs the advantages. As with your home, you would usually stop adding security features when you feel safe. Making a customer feel safe is what is important in doing business on the Internet. E-commerce is still safer than using credit cards at an actual store or restaurant. Every time a credit card receipts are thrown away, the same risks are involved in making yourself vulnerable to fraud. 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’ 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 sure don’t have 100 percent protection walking down the streets either.

-7-

E-commerce is based on the assumption that the participants will pay for what they buy. There is a notorious 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 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, and special programs for online clearing options experience, they may want to consider outsourcing. Outsourcing is the use of a third party service 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.

-8-

Another 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.

One more aspect is the quality of the data. Information is based on data, a lot of which comes from diverse legacy systems with different formats and real-time applications like e-commerce. Even if the data has been transferred from older systems into newer systems, what is really in place to ensure the quality of the data at the character level? “As we enter the new millennium, the same set of character-level problems that resulted in the Y2K problem will continue. The new systems, with their business intelligence functions, may prolong and intensify the effect of data quality problems.” (Atkins, 2000) 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).

-9-

Rest assured the future of e-commerce is intact and ever changing. 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 is 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.” (Caldwell, 1998) 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 Christmas presents. E-commerce, along with the Internet, is an outlet for business. 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

-10-

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.

-11-

Works Cited

Atkins, Mark E. (2000). Data on the move–in pursuit of a competitive advantage. Enterprise Systems Journal [on-line], 15 , 42-47. Available: http:// proquest.umi.com/pqdweb [2001, February 2].

Baxton,J. (2000) Electronic Commerce [2001, February 12].

Caldwell, Kaye. (1998). The Framework for Global Electronic Commerce, One Year Later. CommerceNet, [2001, February 2].

Carlucci, David R. (2000). Evolving in e-business: The integrated

Enterprise. Enterprise Systems Journal, (15), 6 . Available: http:// proquest.umi.com/pqdweb [2001, February 20].

Hof,R. (1998). The Click Here Economy. Businessweek. [on-line]. Available: http://www.businessweek.com/1998/25/itspec98.htm. [2001, February 14].

Norman, Michele M. Portal Technology: Into the Looking Glass. Converge. [on-line]. Available: http://www.convergemag.com/ SpecialPubs/Portal/creating.shtm. [2001, February 20].

Murphy, Paul R., Daley, James M. (2000). An empirical study of Internet

issues among international freight forwarders. Transportation Journal [on-line]

39, (2), 5-13. Available: http:// proquest.umi.com/pqdweb [2001, February 2].

Rysavy, Peter. (2001) E-commerce unleashed. Network Computing,

12, (1), 56-62. Available: http:// proquest.umi.com/pqdweb [2001, February 2].

-12-

Veverka, M. (2000) Plugged In: Wal-Mart gets serious about the Web, Amazon shrugs, but maybe it should watch its back, Barron’s, 80, 37. Available: http://interactive.wsj.com/archive /retrieve.cgi?id= SB947290302253493904. djm&template=barrons.tmpl [2001, February 20]

Wareham, E. (2000) E-commerce makes the grade. Computing Canada 26, (1), 35. Available: http://www.plesman.com/ [2001, February 20].

-13-

ABSTRACT:

Many new and exciting business opportunities are becoming available due to the phenomenal advance of the Internet and peoples’ interest to save time and money by purchasing goods via the web. The advantages of e-commerce are its speed, savings, international distribution and customer service capability. However, the disadvantages are privacy and security, consumer willingness to pay, technical challenges for new e-businesses, organizational commitment, and data quality. 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. The Internet and e-commerce are here to stay, so businesses can either change with the times, or get left behind.

Many new and exciting business opportunities are becoming available due to the phenomenal advance of the Internet and peoples’ interest to save time and money by purchasing goods via the web. If you are asked to think about all of the known companies that don’t use computers for their everyday business; then you are either unable to think of one, or will just think of one that will soon be forced to evolve in order to avoid going out of business. There are very few successful companies that do not use computers in their everyday business activities. There are also few companies do not use some form of e-commerce. Since the beginning of the 1990’s, the number of companies on the internet have quadrupled. Now you might be thinking, “Just what exactly is e-commerce?” To most casual Internet users, e-commerce means online shopping or simply purchasing Christmas presents via your personal computer and any Internet browser. As we will soon find out, this is not precisely the definition of e-commerce but rather one of its many capabilities.

In the simplest terms, 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. After e-commerce proved to be an efficient means to conduct long distance transactions, it became very accepted in the business world. This paper shall discuss some of the advantages and disadvantages of e-commerce, as well as predicting its potential for the future of business. -1-

Electronic commerce, or e-commerce has developed very rapidly in the last few years and has left some in the cold. The majority of people think e-commerce is just about buying and selling things over the Internet like through auctioning sites such as E-Bay and U-Bid. However, 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 job applications, on-line services like America online, and on-line billing that automatically pays specified bills each month so you don’t have to mail a check. E-commerce also includes buying and selling any item over the Internet, electronic banking so you can transfer funds between accounts or stocks, smart cards, and all other methods of conducting business over digital networks. The main technological purpose of e-commerce is to integrate different entities such as businesses, government agencies, and contractors into a single community. The integrated community members have the means to communicate with one another across any given computer platform.

Electronic commerce began over 130 years ago by telegraph technology. This is similar to wiring money though an electronic agency for a small fee. The arrival of credit cards as a payment system began the revolution of the automated process of commerce that we are so familiar with today. The introduction of the ATM card in the mid 80’s was one of the most recent improvements to electronic commerce and its capabilities. -2-

In 1969 when the Department of Defense began funding the research of computer networking. This is when the idea Internet was conceived. By the 80’s, the Internet was still in its youth and very few households had access to this new medium; however, this was achieved at extremely slow speed. 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. When faster, more readily available, and relatively inexpensive means of accessing the Internet were introduced, people started to realize how they could capitalize on a greater market. They began to use the Internet as a fast and efficient means to conduct long distance transactions, as well as an effective way to distribute information.

Clearly, E-commerce will change the face of business forever. Companies that were one thought too far away to conduct business can complete business transactions in a matter of seconds and exchange information. “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)

-3-

In 1998, revenue equaled almost 74 billion dollars and experts predicting that it will climb to as much as 1,234 billion dollars by the year 2002. “E-business is expanding dramatically. “Consumer online purchases in the United States are estimated to increase from approximately $20 billion in 1999 to over $180 billion by 2004 (Murphy, 2000). Also, “enormous growth in the volume and complexity of electronic transactions is requiring companies to transform themselves into an entirely new kind of organization – the integrated enterprise” (Carlucci, 2000). With statistics like this, anyone can see that e-commerce will be the thing of the future. No doubt, the Internet is bringing in an era of drastic transformation that will omit no business or industry. In a time span of three years, the Net has evolved from a playground of nerds into a boundless communications and trading center where some 90 million people trade information or perform deals internationally. In a broader perspective, radio took more than 30 years to reach 60 million people, and television 15 years. We have never seen the likes of this phenomenon.

The advantages of e-commerce are its speed, savings, international distribution and customer service capability. However, the disadvantages are privacy and security, consumer willingness to pay, technical challenges for new e-businesses, organizational commitment, and data quality. These advantages and disadvantages will be discussed henceforth.

-4-

The number one advantage that e-commerce possesses is speed. The Internet and World Wide Web give 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 this makes the whole transaction more efficient from start to finish. Also, you can find practically any product available for sale on the Internet; from books, and compact disks, to performance car parts. Even more significant is the fact that information appearing on the Internet can be changed extremely fast. This gives business owners the ability to inform customers of any changes to the services being offered. This also allows for the updating of marketing and promotional materials as often and as frequently as necessary.

The second advantage of electronic commerce is the opportunity it offers in terms of cost effectiveness. 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; however, compared to the cost of opening a physical store the savings are tremendous. These funds can then be diverted to marketing and advertising of the organization’s products or services.

Cyberspace knows no national boundaries. That means you can do

-5-

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 it easy to link to anyone on the globe and vice versa. This 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 archive section of frequently asked questions 24 hours a day and 365 days a year, builds customer confidence and helps retention. Many companies actually pride themselves on their on-line customer support and use this tool in market differentiation techniques. People expect to get a real person when they send mail. This can work to the advantage of a small start-up company, or a large corporation. No matter what business you are involved in, an online-help feature is an extraordinary advantage to have.

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

-6-

checking account data as it is transferred or break into computers that hold the same information. One way to look at it si that security on the Internet is much like security for a home. There is a point when the effort outweighs the advantages. As with your home, you would usually stop adding security features when you feel safe. Making a customer feel safe is what is important in doing business on the Internet. E-commerce is still safer than using credit cards at an actual store or restaurant. Every time a credit card receipts are thrown away, the same risks are involved in making yourself vulnerable to fraud. What precautions do e-commerce websites take to avoid such problems? The answer

32e


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