INTRODUCTION

1.1 DEFINITION OF E-COMMERCE

To many people, the term “electronic commerce” means shopping on the part of the Internet called the World Wide Web. Actually, electronic commerce (or e-commerce) also included activities like businesses trading with other businesses and internal processes that companies use to support their buying, selling, hiring, planning and so on.

In essence e-commerce is characterized by several features:

a) It is About the Exchange of Digitized Information between parties. This information exchange can represent communication between two parties, coordination of the flows of goods and services, or transmission of the electronic orders. These exchanges can be between organizations or individuals.

b) It is Technology-Enabled. E-commerce is about technology-enabled transactions. The use of internet browsers in the World Wide Web is perhaps the best known of these technology-enabled customer interfaces. Other interfaces like ATMs, electronic data interchange (EDI) between business-to-business partners and electronic banking by phone also fall in the general category of e-commerce.

c) It is Technology-Mediated. The focus is moving away from the simply technology-enabled transaction to a technology-mediated relationships. The transaction is mediated not so much through human contact but largely by technology. The place where buyers and sellers meet to transact is moving from the physical-world “marketplace” to the virtual-world “marketplace”. Hence, the success of the business rests on screens and machines in managing customers and their expectations.

d) It includes Intra and Interorganizational Activities That Support the Exchange. The scope of e-commerce including all electronically based intra and interorganizational activities that directly or indirectly support marketplace exchanges.

1.2 THE FRAMEWORK FOR THE FIELD OF E-COMMERCE

The core of e-commerce activities is the strategy of the enterprise. Wrapped around this strategy process are four critical infrastructures, there are technology, capital, media and public policy. These four infrastructures provide the context – both the opportunities and the constraints in which the strategy operates.

Technology Infrastructure. The technology infrastructure of the internet is both an enabler and a driver of change. An infrastructure is defined as “the foundation of a system”. In this case, the technological foundation of the internet enables the running of the e-commerce enterprises. The hardware backbone of computers, routers, servers, fiber optics, cables, modems and other network technologies provides half of the technology equation. Another half includes the software and communications standards that run on the top of the hardware, including the core

protocols for the web. Understanding technology infrastructure is necessary in formulating a company’s vision and strategy.

Capital Infrastructure. Senior e-commerce manager must understand the capital infrastructure and know how to secure funding for the venture and subsequently value that business.

Media Infrastructure. Managers who run e-commerce enterprise must learn to manage a staff responsible design interface, stylistic choices, editorial policies, content choices associated with this new communication venue. Now, the e-commerce manager is work as publisher of digital content on the web. Hence, the manager must make choices on the types of media employed like print, audio video, the nature of the media and editorial policy (including style, content and look and feel).

Public Policy Infrastructure. All of the decisions related to strategy, technology, capital and media are influenced by the laws and regulation or called public policy decisions. The public policy infrastructure can affect the growth of the business and other competitors. Therefore, senior manager must understand both the current laws and how the laws may change to hurt the business. In same time, understanding how the Internet is affecting society and how society is affecting the internet can help the manager view the potential market for the business.

1.3 The Difference Between E-commerce and E-business

There is a debate among consultants and academics about the meaning and limitations of both e-commerce and e-business. Some argue that e-commerce encompasses the entire world of electronically based organizational activities that support a firm’s market exchange- including a firm’s entire information system’s infrastructure (Rayport and Jaworksi, 2003) On the other hand, that e-business encompasses the entire world of internal and external electronically based activities, including e-commerce ( Kalakota and Robinson ).

E-business does not include commercial transaction involving an exchange of value across organizational boundaries. For example, a company’s online inventory control mechanisms are a component of e-business, but such internal processes do not directly generate revenue for the firm from outside businesses or consumers, as e-commerce. However, that a firm’s e-business infrastructure and skill sets are involved in both e-business and e-commerce.

E-commerce and e-business systems blur together at the business firm boundary, at the point where internal business systems link up with suppliers or customers. E-business applications turn into e-commerce precisely when an exchange of value occurs.

7 Unique Features of E-Commerce Technology

There are seven unique features of E-Commerce Technology such as ubiquity, global search, universal standards, richness, interactivity, information density, and personalization or customization.

In traditional commerce the marketplace reference to a physical place that occur the transaction. For instance, television typically motivate consumer go someplace to purchases. E-commerce is characterized by its ubiquity and available in everyway anytime. It restricts to a physical space and makes it possible to shop from the internet in computer in home or work, or

use the mobile commerce in car. This result the market space that is a marketplace extended beyond traditional boundaries and removed from a temporal and geographic location. Ubiquity can reduces the transaction cost, and that is no necessary to consumer spend time and money in the market. At a broader level, the ubiquity of e-commerce lowers the cognitive energy required to transact in marketplace. Cognitive is defined as the mental effort requires completing a task.

Global reach is the technology reaches across national boundaries, around the earth. E-commerce is enabled across cultural and national boundaries far more conveniently and cost-effectively than is true in traditional commerce. Marketplace is included potentially billions of consumers and million of businesses worldwide. As a result, potential market size for e-commerce merchants is roughly equal to the size of the world’ online population. Compare with traditional commerce is local or regional, for instance, these are the primarily local and regional institution with limited but powerful national network that can attract a national audience. When compare with e-commerce technology, this older commerce technology do not easy cross national boundaries to a global audience.

Universal standard is a standard that are shared by all nations around the world. In contrast, most traditional commerce technology differs from one nation to the next. For instance, television and radio standard differ around the world, as does cell telephone technology. The universal technical standard of the internet and e-commerce greatly lower market entry cost. Market entry cost is the cost merchants must pay just to bring their goods to market. For consumers, universal standard can with e-commerce technologies; it is possible for the first time in history to easily find many of the suppliers, prices, and delivery terms of a specific product anywhere in the world.

Richness refers to the complexity and content of a message. Traditional market and small retail stores have great richness that means they are able to provide personal, face to face service using aural and visual cues when making a sale. The richness of traditional markets makes them a powerful selling or commercial environment.

Interactivity refers to the technology reduces information costs and raises quality. Consumers are engaged in a dialog that dynamically adjusts the experience to the individual, and makes the consumer a co-participant in the process of delivering goods to the markets. E-commerce enables two-way communication between merchant and consumer. E-commerce technologies have changed the traditional tradeoff between richness and reach. The internet and the web can deliver, to an audience of millions, “rich” marketing messages with text, video and audio in a way not possible with traditional commerce technology such as radio, television, or magazines.

Information density is the technology reduces information costs and raise quality. Information processing, storage, and communication costs drop dramatically, while currency, accuracy, and timelines improve greatly. Information becomes plentiful, cheap, and accurate. In e-commerce markets, prices and costs become more transparent.

Personalization or customization is the technology allows personalized messages to be delivered to individuals as well as groups. Personalization of marketing messages and

customization of products and services are based on individual characteristic with the increasing in information density.

Five Categories of E-Commerce

Many e-commerce business model, and more are being invented every day. There are a variety of different types of e-commerce and many different ways to characterize these types. The five major types of e- commerce is Business-to-Consumer (B2C), Business-to- Business (B2B), Consumer-to-Consumer (C2C), Peer to Peer (P2P), and Mobile commerce (M- commerce). The number of such models is limited only by the human imagination, and our list of different business models is certainly not exhaustive. However despite the abundance of potential models, it is possible to identify the major generic types of business models that have been developed for the e- commerce arena and describe their key features.

Categorize business models according to the different e- commerce sectors-B2C, B2B, C2C etc in which they are utilized. For example, the business models of online retailers and e- distributors are quite similar. However, they are distinguished somewhat by the market focus of the sector in which they are used. In the case of e- tailers in the B2C sector, the business model focuses on sales to the individual consumer, while in the case of the e- distributor, the business model focuses on sales to another business.

In addition, the type of e-commerce technology involved can also affect the classification of a business model. M-commerce, for instance refers to e- commerce conducted over wireless networks. The e-tail business model, for instance can also be used in M-commerce, and while the basic business model may remain fundamentally the same as that used in the B2C sector, it will nonetheless have to be adapted to the special challenges posed by the M- commerce environment.

Besides that, at the same time, eBay can also be considered as having a C2C business model. If eBay adopted wireless mobile computing, allowing customers to bid on auctions from their telephones or wireless web machines, then eBay may also be described as having a B2C M- commerce business model. We can also expect many companies will have closely related B2C, B2B, and m-commerce variations on their basic business model. Such is the expanding nature of e- commerce on the Web.

3.1 Business- to -Consumer ( B2C )

The most commonly discussed type of e- commerce is Business – to – Consumer (B2C), in which online businesses attempt to reach individual consumer. Even though B2C is comparatively small (about $65 billion in 2001), it has grown exponentially since 1995, and is the type of commerce that most consumers are likely to encounter. Example, Amazon.com is a general merchandiser that sells consumer products to retail consumers. Seven different B2C business models such as portals, online retailers, content providers, transaction brokers, market creators, service provider, and community providers.

Firstly, portals such as Yahoo.com, AOL.com, and MSN.com offer users powerful Web search tools as well as an integrated package of content and services- such as news, e-mail, instant messaging, calendars, shopping, music downloads, video streaming, and more, all in one

place. Portals generate revenue primarily by charging advertisers for ad placement, collecting referral fees for steering customers to other sites, and charging for premium services.

Secondly, different B2C business models is online retail stores, ofter called e- tailers, come in all sizes and shapes, from giant Amazon.com to tiny local stores who have a Web site. E- tailers are much like the typical brick-and-mortar storefront, expect that customers only have to dial into the Internet to check their inventory and place an order. Some e-tailers, sometimes referred to as “clicks and mortar” or “clicks and bricks” are subsidiaries of existing physical stores and carry the same products. JCPenney, Barnes &Noble, Wal-Mart, and Staples are four examples of companies with complementary online stores.

Besides that, content providers also therein type for B2C business models. Content providers distribute information content, such as digital news, music, photos, video, and artwork over the Web. Content providers make money by charging subscription fee. For instance, in the case of MP3.com, a monthly subscription fee providers users with access to thousands of song tracks. Other content provides, such as WSJ.com, Harvard Business Review, and many others, charge customers for content downloads in addition to or in place of a subscription fee.

Sites that process transactions for consumers normally handled in person, by phone, or mail are transaction brokers. The largest industries using this model are financial services, travel services, and job placement services. Online stockbrokers such as E- Trade.com, Ameritrade.com and Schwab.com, for instance, have captured about 20% of retail stock transactions. The online transaction broker’s primary value propositions are saving of money and time. In addition, most transaction brokers provide timely information and opinion. Sites such as Monster.com offer job searchers a national marketplace for their talents, and offer employers a national resource for talent.

Market creators build a digital environment where buyers and sellers can meet, display products, search for product, and establish a price for products. Prior to the Internet and the Web, market creators relied on physical places to establish a market. For example, eBay’s auction business model is to create a digital electronic environment for buyers and sellers to meet, agree on a price, and transact.

While e-tailers sell products online, service providers offer services online. Some charge a fee, while others generate revenue from other sources, such as advertising and by collecting personal information that is useful in direct marketing. Many service providers are computer related, such as information storage at xDrive.com, or provide consulting services, such as at whatsitworthtoyou.com, where consumers can have antiques and collectibles appraised online or my CFO.com, which provides advice and services to high net-worth individuals.

Finally, community providers are sites that create a digital online environment where people with similar interests can transact, communicate with like-minded people, receive interest- related information, and even play out fantasies by adopting online personalities. The basic value proposition of community providers is to create a fast, convenient, one- stop site where users can focus on their most important concerns and interests.

3.2 Business-to-Business (B2B)

Business- to-Business (B2B) activity refers to the full spectrum of e-commerce that can occur between two organizations. Among other activity, this includes purchasing and procurement, supplier management, inventory management, channel management, sales activity, payment management, and service and support. So that, major players such as FreeMarkets, Dell, and General Electric, there are some exciting emerging consortia that combine the purchasing power of heretofore competitors, such as GM, Ford, and Daimler Chrysler, which joined together to create Covisint. Similar initiatives are under way with industry group, including pharmaceuticals, commercial real estate development, and electronic subcomponents.

3.3 Consumer-to-Consumer (C2C) Consumer-to-Consumer provides a way for consumers to sell to each other, with the help of an online market maker such as the auction site eBay. The size of this market is estimated to be over $5 billion and growing rapidly (eBay.com, 2001). In C2C e-commerce, the consumer prepares the product for market, places the product for auction or sale, and relies on the market maker to provide catalog, search engine, and transaction- clearing capabilities so that products can be easily displayed, discovered, and paid for. Example, eBay.com creates a market space where consumer can auction or sell goods directly to other consumers

3.4 Peer-to-Peer ( P2P )

Peer-to-Peer technology enables Internet users to share files and computer resources directly without having to go through a central Web server. In peer-to-peer’s purest form, no intermediary is required. For instance, Gnutella is a peer-to-peer freeware software application that permits users to directly exchange musical tracks, typically without any charge. Since 1999, entrepreneurs and venture capitalists have attempted to adapt various aspects of peer-to-peer technology into Peer-to-Peer (P2P) e- commerce.Napster.com, which was established to aid Internet users in finding and sharing online music files known as MP3 files, is perhaps the most well known example of peer-to-peer e-commerce, although purists note that Napster is only partially peer-to-peer because it relies on a central database to show which users are sharing music files. In 2000, the Recording Industry of America, a trade organization of the largest recording companies, successfully sued Napster for violating copyright law by allowing Napster members to exchange copyrighted music tracks without compensation to the copyright holders.

3.5 Mobile Commerce (M-commerce) Mobile commerce or M-commerce, refers to the use of wireless digital devices to enable transactions on the Web. Mobile consumers can conduct many types of transaction, including stock trade, in store price comparisons, banking, travel reservations, and more. Thus far, M- commerce is used most widely in Japan and Europe especially Finland, where cell phones are more prevalent than in the United Stated, it is expected to grow rapidly in the United States over the next five years. Example, Wireless mobile devices such as PDAs (personal digital assistants ) or cell phone can be used to conduct commercial transactions.

THE ROLES AND RESPONSIBILITIES OF A SENIOR E-COMMERCE MANAGER

A senior manager need to have basic business skill set of traditional managers and must also incorporate new knowledge, skills and capabilities.

1) Cross-Discipline, Integrative Position

First, entrepreneurship is the heart of any online business. The e-commerce manager should keep in mind that Internet is became a significant commercial entity since 1990s. Therefore, the e-commerce manager must be able to act quickly and make strategic decisions in shortly. Second, the executive must possess with knowledge in variety disciplines, including marketing, logistics, accounting and finance. Third, the senior manager must expertise in technology sophistication and media knowledge. The senior executive must familiar with the hardware and software that make business run. Finally, the manager must understand the role of mass communication and what works in terms of media choices and media integration.

2) Responsibilities of the Position

A Flow Diagram of The Strategic Responsibilities

Set Vision

Establish Goals

Formulate Strategy

Drive Implementation

a) Provide a Vision. One of the more importance tasks of the senior manager is to establish the vision for the online business. Focusing too narrowly means you are probably describing the world as it exists today, however, looking too far into future does not provide concrete direction for employees or revenues for company. So, it is difficult to balance the need to be concrete and providing a vision that gives direction to employees. Strong visions provide direction for employees to motivated, prompt investors to invest on the company, and delivery signal to the market that the firm is able to compete in the evolution of industries.

b) Set Process and Outcome Goals. The second major task for the senior leader is to set

the strategic direction of the company by specifying clear performance targets.

c) Formulate Strategic Direction and Choices. After communicating the vision and target goals of the firm, the senior manager must specify its strategy. This involves making concrete choices and associated tradeoffs related to each phase of the e-commerce strategy process,

Be Accountable for Performance

including market-opportunity choice, business-model specification,the design of the customer interface and so on. Much of the groundwork comes from careful analysis of the market and the firm’s capabilities and it is not one person’s job, the most senior manager leads and directs the process. It is that manager’s responsibility to build consensus, make the tough calls and be accountable for the strategic direction.

d) Drive Implementation. Strategy implementation is about making the right choices related people, structure, systems and processes to execute the strategy. The most senior manager must make these choices related to all of executional elements of strategy.

e) Accountable for Performance. The senior manager is responsible for the performance of the organization. While the organization as a whole produces the desired results, it is the senior leader who is accountable to the board or stakeholders.

3) Location in the Organization

Table below is show a framework composed of a cross between the responsibilities (e.g., line versus staff role) and location within the organizational hierarchy (e.g. ., corporate, business unit, stand-alone).

Corporate Business Unit Stand-AloneLine Executive Corporate

site management

Cross business unit integration site

Reports to general manager of business unit.

Separate business from corporate parent.

Staff Executive Supports corporate-wide initiatives

Supports and advises Strategical Business Unit(SBU) e-commerce initiatives

__

a) Line Executive. The senior manager may be a line executive who is responsible for the profit and loss of an online initiative. A general manager who is responsible for all aspects of the business: setting strategy, hiring, supervising technology choices and taking responsibility for success or failure. This is particularly true when the firm shifts its focus to become demand-centric and attempts to combine products or services across the business units of the corporation, or the senior manager may be responsible for a business within a particular business unit of a corporation. Finally, the company could have a stand-alone e-commerce business, perhaps with its own brand name.

b) Staff Executive. A staff executive does not have formal profit-and-loss responsibility for a business. His role is to support the efforts of the line executives in the execution of their strategy. The senior manager may be a staff function at the corporate or business unit level.

Key Challenges For Senior Leadership In Today’s Environment

As the Internet’s “post – bubble” era begins, several challenges must be confronted by the firm’s most senior e-commerce executives. The five major challenges such as understanding customer evolution, charting changing technology, balancing irrational exuberance and irrational doom, integration of offline and online activities and identifying the key levers of competitive advantage. These challenges represent forces related to factors inside the firm, such as the integration of online and offline operation, as well as forces outside the firm, such as changing customer dynamics and the evolution of technology.

Firstly, understanding customer evolution such as customer behaviour evolves. Winning firms anticipate the features and functions that matter most to target customer. Example, Amazon and Barnes & Noble.com compete on a set of benefits such as convenience, price, variety of offerings, trustworthiness, and security. However, the firm are taken for granted or perceived as simply the cost of doing business. In addition, the firms must continually innovate to stay abreast of changes in consumer tastes, desires, and needs. The firm must invest ahead of the customer tastes to produce a product or service that matches the evolution of the market.

Much like the evolution of consumer tastes, the evolution of technology and the firm’s investment in it must coincide with the development of the market. Consumer tastes and technology choice need to match to ensure competitive advantage. It is perhaps obvious to state that what matters most is not the technology itself, but the evolution of consumer needs, the technology support and reinforces those needs. The senior executive must be well schooled in basic and emergent technologies. Hence the role of chief technology officer is critical to online

firms. New technologies are constantly emerging and disappearing. Picking the right ones and investing ahead of the curve is a constant high- stakes gamble for the senior management team.

In addition, challenges for senior leadership in today’s environment involve balancing irrational exuberance and irrational doom. Many pundits who have followed the evolution of technology- intensive innovations argue for normal pattern. The impact of new technology in the first two the three years is typically overestimated, but the impact over 10 years is severely underestimated. Thus the market had expectations that were too high for the year 2000, but perhaps too low for the year 2010. Furthermore, the executive must continually reassure the workforce that the company will weather the current environment, reassure investors that the business model makes sense and that can rally all relevant stakeholders, including partners, customers, and employees.

Certainly one of the most important unfolding trends is the increasing pressure on offline firms to integrate their online activities. This is particularly true of “customer- facing” activities such as adverting, branding, retail and online store design, service, warranties, and returns. Depending on the executive’s position within the firm, the importance and degree of influence on this integration will vary. The senior executives will be under increasing pressure to be closely aligned in terms of systems, structure, processes, compensation, and employee welfare with the traditional offline business.

Finally, consistent with the idea that the senior leader needs to anticipate changing consumer and technology trends, the executive must also realign the resource system of the firm in advance of these trends. In addition, the key levers of competitive advantage are also likely to evolve as the market evolves. The best senior leaders are able to reallocate their resources and capabilities in anticipation of an evolving competitive landscape.

IMPACT OF EC ON BUSINESS PROCESS AND ORGANIZATION

Bloch et. al. (1996), who approached the impact of EC on organizations from a value-added point of view, divides the impact of e-marketplaces into there major categories: a) Improving marketing and sales, b) Transforming organizations, c) Redefining organizations.

A) IMPROVING MARKETING AND SALES

Traditional direct marketing is done by mail order (catalogs) and telephone (telemarketing).

Bloch et al. (1996), Kioses et. al. (2006), and Singh (2006) describe the following impacts of e-marketplces on B2C direct marketing:

a) Product promotion: Increased the promotion of products and services through direct marketing. Contact with customers has become more information rich and interactive.

b) New sales channel: Because of the direct reach to customers and the bidirectional nature of communications in EC, a new distribution channel for existing products has been created.

c) Direct savings: The cost of delivering information to customers over the Internet results in substantial savings to senders of messages. Major savings are realized in delivering digitized products (such as music and software) rather than physical ones.

d) Reduced cycle time: The delivery time of digitized products and services can be reduced to seconds.

e) Improving customer service: Customer service can be greatly enhanced by enabling customers to find detailed information online.

f) Brand or corporate image: Newcomers can establish corporate images in web very quickly.

g) Customization: EC enables customization of products and services. Buying in a store or ordering from a television advertisement usually limits customers to a supply of standard products.

h) Advertising: With direct marketing and customization comes one-to-one, or direct, advertising, which can be much more effective than mass advertising.

i) Ordering systems: Electronic orders can be quickly routed to the appropriate order-processing site. This process reduces expenses, processing time and mistake, freeing salespeople to develop marketing plans.

j) Accessibility: The ability to access a market anytime from any place (especially with wireless devices) enhances direct e-marketing.

k) Market operations: Direct e-marketing is changing traditional market. In an e-marketspace, goods are delivered directly to buyers upon completion of the purchase, making markets much more efficient and saving the cost of the shipment into and from the brick-and-mortar store.

B) TRANSFORMING ORGANIZATIONS

Two key of this impact are technology and organizational learning and the changing nature of work. To survive, companies will have to learn and adapt quickly to the new technologies. This struggle will offer them an opportunity to experiment with new products, services, and business models, which may lead to strategic and structural changes. These changes may transform the way in which business is done. Corporate change must be planned and managed. Before getting it right, organizations may have to struggle with different experiments and learn from their mistakes.

The natural of some work and employment will be restructured in the Digital Age. The upheaval brought on by these changes is creating new opportunities and new risks and is forcing people to think in new ways about jobs, careers, and salaries. Digital Age workers will have to be very flexible. Few will have truly secure jobs in the traditional sense, and many will have to be willing and able to constantly learn, adapt, make decisions, and stand by them. Many will work from home. The Digital Age company will have to view its core of essential workers as its most valuable asset.

C) REDEFINING ORGANIZATIONS

There are two ways to redefining organizations which is new and improved product capabilities, and new industry order and business models.

New and improved product capabilities which mean E-markets allow for new products to be created and for existing products to be customized in innovative ways. Such changes may redefine organizations’ missions and the manner in which they operate. Customer profiles, as well as data on customer preferences, can be used as a source of information for improving products and designing new ones.

New industry order and business models refer to the E-market affects not only individual companies and their products, but also entire industries (e.g., airlines are moving to electronic ticketing and stocks are moving to online trading). The wide availability of information and its direct distribution to consumers will lead to the use of new business models (e.g., the name-your-own-price model of Priceline.com).

PORTER’S COMPETITIVE FORCES MODEL (2001)

Competitive Forces Model

This model devised by Porter that says that five major forces of competition determine industry structure and how economic value is divided among the industry; analysis of these forces helps companies develop their competitive strategy.

Porter divided the impacts of internet into either positive or negative for the industry. A negative impact means that competition will intensify in most industries as the internet is introduced, causing difficulties to a competing company.

Porter’s Competitive Forces Model: How the Internet Influences Industry Structure

1) Threat of substitute products or services

Positive impact

By making the overall industry more efficient, the internet can expand the size of the market.

Negative impact

The proliferation of Internet approaches creates new substitution threats.

Rivalry among existing

competitors

Threat of substitite

products or services

Buyersa)Bargaining

power of channels

b) Bargaining power of end users

Barriers to entry

Bargaining of

suppliers

2) Bargaining power of buyers

Positive impact

It will eliminates powerful channels or improving bargaining power over traditional channels.

Negative impact

This will shifts bargaining power to end consumers and reduces switching costs.

3) Barriers to entry

Negative impact:

First, Internet applications are difficult to keep proprietary from new entrants. Second, a flood of new entrants has come into many industries and it also reduces barriers to entry such as the need for a sales force, access to channels, and physical assets. It include anything that Internet technology eliminates or makes easier to reduces barriers to entry.

4) Rivalry among existing competitors

Negative impact:

It will reduce differences among competitors as offerings are difficult to keep proprietary. Beside that, it will widen the geographic market and increasing the number of competitors. Due to the fact, it will migrate competition to price and lowers variable cost relative to fixed cost, increasing pressures for price discounting.

5) Bargaining power of suppliers

Negative impact:

Procurement using the Internet tends to raise bargaining power over suppliers, though it can also give suppliers access to more customers. Beside that, the Internet provides a channel for suppliers to reach end users, reducing the intervening companies. Nevertheless, Internet procurement and digital markets tend to give all companies equal access to suppliers, and gravitate procurements to standardized products that reduce differentiation. On the other hand, it can also reduces barriers to entry and the proliferation of competitors downstream shifts power to suppliers.

BENEFITS AND LIMITATIONS OF E-COMMERCE

Few innovations in human history encompass as many benefits as E-Commerce does. The global natural of the technology, the opportunity to reach hundreds of millions of people, its interactive nature, the variety of possibilities for its use, and the resourcefulness and rapid growth of its supporting infrastructures, especially the Web, result in many potential benefits to organizations, individuals and society. These benefits are just starting to materialize, but they will increase significantly as E-Commerce expands.

8.1 Benefits

Benefits to OrganizationsGlobal reach Locating customers and/or suppliers worldwide, at reasonable cost

and fast.Cost reduction Lower cost of information processing, storage, distribution.Supply chain improvements

Reduce delays, inventories, and cost.

Customization /Personalization

Make it to consumer’s wish, fast and at reasonable cost.

Sellers specialization (niche market)

Seller can specialize in a narrow field (e.g. dog toys), yet make money.

Lower communication cost The internet is cheaper than VAN private lines.Fewer permits and less tax May need fewer permits and be able to avoid sales tax.Business always open Open 24/7/365; no overtime or other cost.Up-to-date company material

All distributed material is up-to-date.

Efficient procurement Saves time and reduces cost by enabling e-procurement.Lower inventories Using customization inventories can be minimized.Rapid time-to-market and increased speed

Expedite processes; higher speed and productivity.

Benefits to ConsumersUbiquity Can shop anytime from any place.More product/services Large selection to choose from (vendor, products, styles).Customized products/services

Can customize many product and/or services.

Cheaper products/ services Can compare and shop for lower prices.Instant delivery Digitized products can be downloaded immediately upon payment.Information availability Easy finding what you need, with details, demos, etc.Convenient auction participation

Do auctions anytime and from any place.

Enable telecommuting Can work or study at home.Electronic socialization Can socialize online in communities yet be at home.Find unique items Using online auctions, collectible items can be found.

Benefits to SocietyIncreased Standard of Living

Can buy more and cheaper goods/services.

Close the digital divide Allow people in developing countries and rural areas to accept more services and purchasing what they really like.

More public services Make education, health, etc., available for more people. Rural area can share benefits; more services for the poor.

Enable telecommuting Facilitate work at home; less traffic, pollution.

Limitations

Limitations or barriers to E-commerce can be classified as either technological or nontechnological.

A) Technological Limitations

Technological limitations include lack of universal standards for quality, security, and reliability and the telecommunications bandwidth is insufficient, especially for m-commerce. Software development tools are still evolving and sometimes special Web servers are needed in addition to the network servers, which add to the cost of E-commerce. Other than that, internet accessibility is still expensive and inconvenient and it is difficult to integrate Internet and EC software with some existing (especially legacy) applications and databases. Besides that, other fulfillment of large-scale B2C requires special automated warehouses.

B) Nontechnological Limitations

Nontechnological limitations include security and privacy that concerns deter customers from buying. Next, people do not yet sufficiently trust paperless, faceless transactions and sometimes it is hard to trust in unknown sellers. Meanwhile, in many cases, the number of sellers and buyers that are needed for profitable E-Commerce operations is insufficient.

Beside that, many legal and public policy issues including taxation, have no yet been resolved or are not clear. Sometimes, national and international government regulations are get in the way. Other than that, it is difficult to measurement some of the benefits of EC, such as online advertising and mature measurement methodologies are not yet available. In addition, online fraud is increasing and it is difficult to obtain venture capital due to the failure of many dot.coms.

Furthermore, some customers like to feel and touch products. Also, customers are resistant to the change from shopping at a brick-and-mortar store to a virtual store. Brick-and-mortar (old-economy) organizations means the organizations that perform their primary business off-line, selling physical products by means of physical agents while virtual or pure-play organizations means the organizations that conduct their business activities solely online.

Conclusion

In 2006, E-commerce is alive, well, and growing very fast at double digit rates, bringing about extraordinary changes to markets, industries, individual businesses, and society as a whole. E-commerce is generating thousands of new jobs for young managers in all fields from marketing to a management, entrepreneurial studies, and information systems. Today, E-commerce has move into the mainstream life of established businesses that have market brands and financial muscle required for the long-term deployment of E-commerce technologies and methods.

E-commerce is not only about business and technology. The third part of the equation for understanding E-commerce is society. E-commerce and Internet technologies have important social consequences which mean E-commerce has challenged our concepts of privacy, intellectual property, and even ideas about national sovereignty and governance. As a result of these challenges to existing institutions, E-commerce and the Internet is the subject of increasing investigation, litigation, and legislation.

The twenty-first century will be the age of a digitally and hold out extraordinary opportunities as well as risk for new and traditional businesses to exploit digital technology for market advantage. For society as a whole, the new few decades offer the possibility of extraordinary gains in social wealth offering the possibility of high rates of productivity and income growth in an inflation-free environment.

REFERENCES

Book

1) Laudon, K. C. & Traver, C. G. (2007). E-commerce : Business. Technology. Society. Third Edition. New York: Prentice Hall, Pearson.

2) Rayport, J.F., & Jaworski, B.J. (2002). Introduction to E-commerce. New York: McGraw-Hill.

3) Schneider, G.P.(2006). Electronic Commerce: Sixth Annual Edition. Canada: Thomson Course Technology

4) Turban, E., King, D., Mckay, J., Marshall, P., Lee, J., Viehland, D., (2008). Electronic Commerce 2008: A Managerial Perspective. New York: Prentice Hall, Pearson.

Journal

1) Hobbs, J.E., Boyd, S.L., & Kerr,W.A. (2002) To Be or Not to B-2-C: E-Commerce for Marketing Specialized Livestock Products. Journal of International Food & Agribusiness Marketing, 14 (3), 7-19.

E-commerce securities

1.     What is e-commerce security and why is it important?

2.     How to identify threats to e-commerce?

3.     How to determine ways to protect e-commerce from those threats?

4.     What are electronic payment systems?

5.     What are the security requirements for electronic payment systems?

6.     What security measures are used to meet these requirements?

 

WHAT IS E-COMMERCE SECURITY

E-commerce security is the protection of e-commerce assets from unauthorized access, use, alteration, or destruction. 

 

6 dimensions of e-commerce security (Table 5.1)

1.     Integrity: prevention against unauthorized data modification

2.     Nonrepudiation: prevention against any one party from reneging on an agreement after the fact

3.     Authenticity: authentication of data source

4.     Confidentiality: protection against unauthorized data disclosure

5.     Privacy: provision of data control and disclosure

6.     Availability: prevention against data delays or removal

 

E-COMMERCE THREATS (Figure 5.4)

Threats: anyone with the capability, technology, opportunity, and intent to do harm.Potential threats can be foreign or domestic, internal or external, state-sponsored or a single rogue element.Terrorists, insiders, disgruntled employees, and hackers are included in this profile (President's Commission on Critical Infrastructure Protection) 

 

Concern 2001 2000Loss of Privacy/confidentiality, data misuse/abuse 28% 25%Cracking, eavesdropping, spoofing, rootkits 25% 20%Viruses, Trojans, worms, hostile ActiveX and Java 21% 26%System unavailability, denial of service, natural disasters, power interruptions 18% 20%

2001 Information Security Industry Survey

 

1. Intellectual property threats -- use existing materials found on the Internet without the owner's permission, e.g., music downloading, domain name (cybersquatting), software pirating 

2. Client computer threats

–      Trojan horse

–      Active contents

–      Viruses 

3. Communication channel threats

–      Sniffer program

–      Backdoor

–      Spoofing

–      Denial-of-service 

4. Server threats

–      Privilege setting

–      Server Side Include (SSI), Common Gateway Interface (CGI)

–      File transfer

–      Spamming 

 

COUNTERMEASURE (Figure 5.5)

A procedure that recognizes, reduces, or eliminates a threat

1. Intellectual property protection

–      Legislature

–      Authentication

2. Client computer protection

–      Privacy -- Cookie blockers; Anonymizer

–      Digital certificate (Figure 5.9)

–      Browser protection

–      Antivirus software

–      Computer forensics expert

3. Communication channel protection

–      Encryption

       Public-key encryption (asymmetric) vs Private-key encryption (symmetric) (Figure 5-6)

       Encryption standard: Data Encryption Standard (DES), Advanced Encryption Standard (AES)

–      Protocol

*       Secure Sockets Layer (SSL) (Figure 5.10)

*       Secure HyperText Transfer Protocol (S-HTTP)

–      Digital signature (Figure 5-7)

Bind the message originator with the exact contents of the message

–A hash function is used to transform messages into a 128-bit digest (message digest).

–The sender’s private key is used to encrypt the message digest (digital signature)

–The message + signature are sent to the receiver

–The recipient uses the hash function to recalculate the message digest

–The sender’s public key is used to decrypt the message digest

–Check to see if the recalculated message digest = decrypted message digest

4. Server protection

–      Access control and authentication

       Digital signature from user

       Username and password

       Access control list

–      Firewalls (Figure 5.11)

International Computer Security Association's classification:

       Packet filter firewall: checks IP address of incoming packet and rejects anything that does not match the list of trusted addresses (prone to IP spoofing)

       Application level proxy server: examines the application used for each individual IP packet (e.g., HTTP, FTP) to verify its authenticity.

       Stateful packet inspection: examines all parts of the IP packet to determine whether or not to accept or reject the requested communication. 

 

HOW TO MINIMIZE SECURITY THREATS (Figure 5.12)

1.     Perform a risk assessment à a list of information assets and their value to the firm

2.     Develop a security policy à a written statement on:

*       what assets to protect from whom?

*       why these assets are being protected?

*       who is responsible for what protection?

*       which behaviors are acceptable and unacceptable? 

3. Develop an implementation plan à a set of action steps to achieve security goals

4. Create a security organization à a unit to administer the security policy

5. Perform a security audit à a routine review of access logs and evaluation of security procedures

 

ELECTRONIC PAYMENT SYSTEMS

A medium of payment between remote buyers and sellers in cyberspace: electronic cash, software wallets, smart cards, credit/debit cards.

 

Offline payment methods

Number of transactions: cash (42%), check (32%), credit card (18%) (Figure 6.1)

Dollar amount: check(52%), credit card (21%), cash (17%) (Figure 6.2)

Payment systems

PropertiesCosts Advantages Disadvantages

Electronic cash

e.g., PayPal

–    31% of US population do not have credit cards

–    micropayments (< $10) 

–    Independent 

–    Portable 

–    Divisible

–    Internet cash transfer: no fixed cost of hardware

–    No distance costs 

–    Small processing fee to banks

–    Efficient

–    Less costly

–    Money laundering

–    Forgery 

–    Low acceptance 

–    Multiple standards

Electronic wallets

e.g., Passport

–    Stores shipping & billing information

–    Encrypted digital

–    Lengthy download for client-side wallets

–    Enter information into checkout forms automatically

–    Client-side wallets are not portable

–    Privacy issue for

certificate server-side walletsSmart cards

e.g., Blue

–    Embedded microchip storing encrypted personal information

–    Time value of money –    Convenience –    Need a card reader

–    Card theft 

–    Low acceptanceCredit cards

e.g., VeriSign

–    Line of credit

–    Purchase dispute protection 

–    Secure Electronic Transaction (SET) Protocol

–    Unpaid balance charge

–    $50 limit on frauds 

–    Processing fee

–    Most popular

–    Worldwide acceptance

–    Costly

 

 

SECURITY REQUIREMENTS

1.     Authentication of merchant and consumer

2.     Confidentiality of data

3.     Integrity of data

4.     Non-repudiation 

 

SECURITY MEASURES

1. Secure Electronic Transaction (SET) protocol: developed jointly by MasterCard and Visa with the goal of providing a secure payment environment for the transmission of credit card data. 

 

Features SSL SETEncryption of data during transmission Yes YesConfirmation of message integrity Yes YesAuthentication of merchant Yes Yes

Authentication of consumer No YesTransmission of specific data only on a "need know" basis No YesInclusion of bank or trusted third party in transaction No YesNo need for merchant to secure credit card data internally No Yes

 

SET payment transaction:

       A shopper makes a purchase and transmits encrypted billing information with his/her digital certificate to the merchant.

       The merchant transfers the SET-coded transaction to a payment card-processing center.

       The processing center decrypts the transaction.

       A certification authority certifies the digital certificate as belonging to the shopper.

       The processing center routes the transaction to the shopper's bank for approval.

       The merchant receives notification from the shopper's bank that the transaction is approved.

       The shopper's payment card account is charged for the transaction amount.

       The merchant ships the merchandize and transmits the transaction amount to the merchant's bank for deposit. 

 

2. Disposable credit numbers: one-time-use credit card numbers (private payment number) are transmitted to the merchant

–      Register with American Express or Discover

–      Download software (a Private Payment icon tray will be displayed on the screen)

–      Shop online

–      Click on the Private Payment icon

–      Log-in

–      Select the credit card to be used

–      View unique, one-time-use credit card number and expiration date

–      Enter the one-time-used credit card number and expiration date into merchant's standard form