UNIT-I: INTRODUCTION:

E-Commerce: Meaning - Advantages & Limitations - E-Business: Traditional & Contemporary

Model, Impact of E-Commerce on Business Models - Classification of E-Commerce: B2B - B2C -
C2B - C2C - B2E

Applications of Ecommerce: E-Commerce Organization Applications - E-Marketing – E-

Advertising - E-Banking - Mobile Commerce - E-Trading - E-Learning - E-Shopping

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Definitions

Electronic Commerce means buying and selling of goods, products, information, or services over the
internet.

Electronic Commerce is transformation of key business process using Internet

Electronic Commerce where business transactions take place via telecommunications networks,
especially Internet

E-commerce is a modern business methodology that addresses the needs of the firm, consumers and the
merchant by cutting cost and improving quality of goods/services with increase in speed of service
delivery.

Electronic Commerce Key Components:

1. Placement: This component is vital to any e-commerce business. It focuses on visibility and easy
accessibility of products/services online.
2. Merchandise and Audience Size: It focuses on ensuring that the product line is kept in stock and
delivery is on time. The audience size is of the market place to reach across all geographical
boundaries.
3. Presentation: It focus on context or information provided with functions and aesthetics. As the
presentation is key in a faceless market.
4. Payments: It is the capability to integrate with other applications for financial and payment
processing that include the ability to purchase using credit/debit cards.
5. Security: This is given importance in electronic world as it deals with the ongoing concern of
customers. E-commerce should instil trust in its users by ensuring the security of all the
transactions and this can be achieved by using methods like, encryption and authentication.
6. Fulfilment: Once the online purchase has been generated the marketplace can allow buyers and
sellers to manage order fulfilment process which ensures timely delivery

Benefits of E-Commerce

What are the benefits of E-commerce to the organization, consumer and society?

The Benefits of E-commerce is being, ❖ Nature of technology. ❖ Reachable to millions of people within
short span of time. ❖ Rapid growth in supporting infrastructures.
These three reasons mainly result in potential benefits to,
1. Organizations
2. Consumers
3. Society.
1. Benefits to Organization: E-commerce offers a number of benefits to organizations. These include,
 (a) Expansion of Marketplace The market place is expanded from a small region, town, city to
national and international level. This makes the companies to quickly and easily locate, best
suppliers, most suitable business partners and more customers, with a minimum investment. For
expansions of market place, e-commerce provides a number of sites where companies can even
request for manufacturing of a subsystem
(b) Reduction in Purchasing Administrative Costs The cost of creating, processing, distributing,
storing and retrieving paper-based information is reduced due to the introduction of e-procurement
system.
(c) Creating Specialized Businesses: E-commerce helps the organizations in creating specialized
businesses. An example is the website for purchasing cat toys “www.cattoys.com”. In physical
world, cat toys can be purchased at departmental or gallery stores, thus incurring the cost of
travelling to buy a toy.
(d) Reduction in Inventories and Overheads: “Pull” - type supply chain management offered by e-
commerce helps in the reduction of inventories and overheads. The pull-type system uses just-in-
time manufacturing. The implementors of a pull-type system achieves expensive services and
customization of products. For example Dell Computer Corporation.
(e) Reduction in Time: The time between the outlay of capital and the receipt of products and services
is reduced by e-commerce.
(f) Reduction in Communication Cost: The cost of communication is less in e-commerce as internet
is cheaper than VANs.
In addition to these benefits, other benefits are as follows, ❖ Improvement in image and customer service
❖ Compressed delivery and cycle time ❖ Increased flexibility and productivity ❖ Elimination of paper ❖
Faster access to information ❖ Simple processes ❖ Newly found business partners.
2. Benefits to Consumers The benefits offered by e-commerce to consumers are as follows,
(a) Easy Transactions: Shopping or exchanging over web can be done 24 hours a day and 7 days a
week. This is offered by e-commerce to its consumers so that they can shop or do other transactions
from any location and at anytime.
b) Wider Range: The range of products offered by e-commerce is wider than the range choose from
this wider range and do a satisfying e-shopping, offered by many vendors. Customers can choose from
this wide range and get satisfied.
c) Quick Delivery : E-commerce offers the most desirable feature “Quick delivery” to customers. The
quick delivery is more quick in case of digitized products.
d) Less Expensive Products and Services: The cost of products & services offered by Ecommerce is
much less than other vendors by allowing quick comparisons. Thus, achieving good customer
satisfaction.
3. Benefits to Society: The most important benefits offered by e-commerce to society are as follows,
a) Eco-friendliness: Air pollution and traffic on roads are reduced by doing shopping at home. E-
commerce also enables customer to work from home.
b) Increase in Standard of Living : Few merchandise are sold at a lower price so that customers from
any urban/rural area can buy them and increase their standard of living.
c) Delivery of Public Services: Public services are delivered by using e-commerce at a cheaper rate
but with improved quality. These services include education, distribution of government social
services, health-care etc.
Limitations of E-Commerce
The limitations of e-commerce can be either of technical type or non-technical type
Technical Limitations: The technical limitations of e-commerce are given below. However, they can be
reduced by appropriate planning and implementation.
(a) Lack of communication protocols, system security, standards and reliability is the first limitation of
e-commerce.
(b) The telecommunication bandwidth is not sufficient as their is an increase in number of consumers.
(c) Evolution and changes in software development tools are very rapid.
(d) Integration of e-commerce and internet software with few existing applications and databases is very
difficult.
(e) In addition to the network servers, vendors need some special infrastructure .
Non-technical Limitations: The non technical limitations of E-commerce are,
(a) Privacy and Security: Security and privacy issues are very important in B2C type of e-commerce.
Security issues are a big concern even after using good encryption. Privacy measures are improving at
a constant rate. However, convincing customers about secure on-line transactions and privacy in
shopping is little difficult.
(b) Justification and Cost: In order to justify the system, intangible benefits like good customer service
and advertisement should be dealt carefully and appropriately. The cost incurred in in-house e-
commerce development may be high. The reason being, lack of experience, which results in delays.
(c) Lack of Trust and User Resistance: Terms like “paperless transactions”, “e-money”,
“unknown/faceless sellers” are difficult to catch-up in market as customers can’t easily trust on
faceless sellers. Switching from physical stores to virtual stores is a very slow process.
Other Limitations

❖ Lack of feel and touch plays an important role in stopping customers to switch from physical to
virtual stores.

❖ Unresolved legal issues and improper government regulations and standards.

❖ There is a rapid change and evolution in e-commerce. But customers look for stable areas before
entering into it.

❖ The number of sellers and buyers in few applications is very less. Thus, no chance for profitable e-
commerce operations.

❖ E-commerce may lead to barriers in human relationships.

❖ Inconvenient and expensive internet access, resist most of the potential users from e-shopping.
Distinguish between E-commerce and E-business.
E-Business: Though both E-commerce and E-business are mostly interchangeable as both use ICT
(Information and communications technology).
E-Business can be defined as the transformation of an organization’s processes to deliver additional
customer value through the application of technologies, philosophies and computing paradigm of the new
economy.”

The differences between e-business and e-commerce are:

E-Business E-Commerce
1. It focuses on customer services, collaboration of 1. It focuses on buying and selling
partners, distributors and suppliers, with buying products, services on internet.
selling and information exchange as its primary focus. 2. Less generic than e-business
2. More generic than e-commerce 3. The support is only for buying and
3. It supports the business processes along the entire selling products, information
value chain. exchange.
4. It enables companies to efficiently and flexibly link 4. It mostly links external process.
their back-office (internal) and front-office (external)
processes.
5. It places the key processes like CRM, SCM and ERP 5. CRM, SCM and ERP are not
on web. included in the selling process of e-
6. The scope of e-business is wider than e-commerce commerce.
7. It is mostly customer Centric 6. Its scope is limited.
8. It may or may not directly involve in financial 7. It is mostly Product Centric
exchange 8. It mostly involves in financial
exchange

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E-Commerce Business Strategy Models:

Recent changes in the information and communication technology is acknowledged to have brought
more choices for customers and supply alternatives have become more varied. This implies that companies
need to develop their businesses into more customer-centric and evaluate their value propositions they
present to customers. A business model explains how value is created and delivered to the customer and
further how payments received are converted into profits. The essence of a business model is to embody
the financial and organisational architecture of a business and is in its simplicity a conceptual, rather than
financial, model of business. The elements of a business model are interrelated with each other, and changes
in one element in a business model can affect the entire model and the outcome of the company's business
operations. Nevertheless, a change in one element, that doesn’t require changes in other elements is fully
possible and does not entail a new business model. If a company’s model declines in its ability to create,
capture, or deliver value, a change in the elements is required. A reason for business model innovation
failures can be dependent on too many small modifications, aimed at temporary benefits in the model.
Though many business strategy models are used worldwide, two popular models are discussed here. They
are
1. ICDT Business Model
2. Three pillars of E-Commerce Mode
1. ICDT Business Model: A business model is a plan for the successful operation of a business, identifying
sources of revenue, the intended customer base, products, and details of financing. The rapid penetration of
Internet allowed companies to rediscover their traditional business in to Internet strategy of business. ICDT
business model is proposed by Albert Angehrn and is used as a systematic framework to guide the
companies for building their business on Internet. ICDT business model takes its name from the four virtual
spaces provided to facilitate the exchange of goods and services through electronic channels. The four
virtual spaces are

1. Virtual Information Space (VIS)

2. Virtual Communication Space (VCS)
3. Virtual Distribution Space (VDS)
4. Virtual Transaction Space (VTS
1. Virtual Information Space (VIS): It consists of the new Internet-based channels through which
companies can display information about themselves and the products and services they offer. The major
concerns in building information space are
➢ The information that is displayed is accurate and correct.
➢ Customers can easily find the site; navigate through it once they have reached the site.
➢ The site is accessible without long wait times.
2. Virtual Communication Space (VCS): It is about interaction. Like a cafe, it provides a “space” for
engaging in relationship-building, exchange of ideas or opinions. Members of the virtual Community can
communicate at high speed, low cost, and bypass traditional physical and geographical constraints. The
major concerns in building communication space are
➢ Provide transparency in exchanging ideas and sharing opinions.
➢ Consider the ideas and suggestions of virtual community members.
3. Virtual Distribution Space (VDS): It is about service delivery. This space is used to deliver the
products or services requested or purchased by the consumer. For virtual delivery to occur, the products
being delivered must be digital (software) or the services performed digitally (online
booking/brokerage/shares). Online news services and software companies have been quick to market rod
deliver their products electronically. The major concerns in this space are
➢ Delivery of products and services to be done only to approved customers.
➢ Reliable delivery of products and service
4. Virtual Transaction Space (VTS): This space is used to initiate and execute business transactions,
such as sales orders and financial transactions. The primary concerns in building transaction space are
➢ Security over data
➢ Accuracy and integrity of processing methods
 ➢ Reliability of vendor
➢ Reputation of trading partner
➢ Privacy concerns by customers
Along with the above four virtual spaces, there are some
other issues to be addressed by business firms to carry
on the business on Internet. They are
1. Legal and self-regulatory environment
2. Taxes
3. Encryption
4. Privacy
1. Legal and Self-regulatory Environment: Electronic commerce (“E-Commerce”) involves the buying,
selling or exchanging of goods, services, and information through electronic networks. As electronic
commerce becomes International commerce, the reality is that commercial disputes will occur creating such
questions as: “Which country’s court has the jurisdiction to hear the dispute?” “Which country’s law is to
be applied to resolve disputes?” A business should have a clear legal policy which can address the above
questions.
2. Privacy: Privacy is one of the most complex legal issues facing E-Commerce ventures today. An e-
commerce privacy policy must be a company’s everyday practice of collecting, managing, and using data
from site visitors. A company should make a Privacy policy of business that takes customer’s permission
before their data is disclosed.
3. Encryption: To make transactions secure and to provide integrity, an E-Commerce business must have
adequate security mechanism. Encryption is a process of converting readable form of data to unreadable
form. It is also important to declare the level of security used to customers.
4. Taxes: There are many factors which influence the tax system in E-Commerce. For E-businesses, a
detailed discussion to be done with experts to make the tax policy clear. Once the tax policy is made, it should
be communicated to the customers.

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Three pillars of E-Commerce model:
A model describes how the business elements of a business fit together, which can identify a business model
as a clarification of how an organisation works. Three pillars of E-Commerce model is developed by Peter
Fingar, is another business model that
builds on traditional market spaces and
creates an easy and flexible environment
to conduct business electronically. The
three pillars mentioned in this model are:
(a) Electronic Information
(b) Electronic relationship
(c) Electronic Transaction
Electronic Information: Electronic information is similar to virtual information space in ICDT. The
WWW is viewed as a global repository of documents and multimedia data. Constructing an information
pillar is easy. Most word processing software packages will easily convert it into a web-readable format.
Electronic information space consists of several different elements together create a holistic view of the
company, which are assumed to generate value for customer.
Electronic Relationship: is the central pillar and this is similar to virtual communication space. In this
space customer interacts with the vendor. Generating value for the customer is stated as the most vital
element of the value creation of a business model. In order to bring give value to the customers, the company
must have identified who their customer are. Some additional aspects of the value creating for the customer,
is to reduce potential risks in the purchase, and to offer a product/service that is accessible by making it
available for the customer, and also to make it functional through making it easy to use.
Electronic Tansactions: The electronic transactions pillar is similar to virtual transactions space and also
encompasses virtual distribution space. This element identifies how a company is creating value for
themselves while at the same time providing value for the customers. This formula consists of a revenue
model, a cost structure, marginal model, and resource velocity. Electronic Transaction Pillar should have
➢ The ability to engage in meaningful and sufficient negotiation process.
➢ Security of transaction data.
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Classification of E-Commerce:
The general assumption about E-Commerce is: It is an online commercial transaction between a supplier
and a client. However, and although this idea is correct, it can be more specific and classify E-Commerce
into several types, all with different characteristics. Classification of E-Commerce is done by the nature of
the transaction and identifying the partners directly involved in the transaction. Consider the following
types of E-Commerce.
1. Business-to-Business (B2B)
2. Business-to-Consumer (B2C)
3. Consumer-to-Consumer (C2C)
4. Consumer-to-Business (C2B)

1.B2B E-Commerce can be simply defined as the commerce between companies. In Business-to-
Business type of electronic commerce system, companies do business with each other. For example, a
manufacturer, selling a product to a wholesaler, a wholesaler selling a product to the retailer. Here
manufacturer, wholesaler and retailer all are doing their separate businesses. B2B applications provide
new opportunities to leverage emerging technologies to build their businesses
Advantages of B2B
• Improving the speed of communication.
• Clear structure and collaborative shopping.
• The opportunity to expand the business.
• Improved efficiency in ordering material.
• Just-in-time environment that minimises inventory sitting in the warehouse.
Disadvantages of B2B
• Low barriers to entry for competitors.
• Limited Market opportunities.
2. Business-to-Consumer (B2C): B2C model runs as its name suggest. In this model, the company
sells their products, goods or services directly to the consumer online. Here the customer can view
products on the website that they want to buy and can order it. After receiving the order details, the
company will process the order and then send the products directly to the customer. The most common
example of a B2C application is a retail website featuring the business's products or services that can
be directly purchased by the consumer, i.e., Amazon, Flipkart etc.
Advantages of B2C
• Extensive search capabilities by item, corporate name, division name, location, manufacturer,
partner, price or any other specified needs.
• Reduced marketing and advertising expenses to compete on equal balance with much bigger
companies; easily compete on quality, price and availability of the products.
• The Internet gives customers the opportunity to browse and shop at their place. They can access
the services from home, office at any time.
• The Internet allows the companies to reach people around the world, offering many products to
a global customer.
• It has reduced inventory, employees, purchasing costs, order processing costs associated with
faxing, phone calls, and data entry, and even eliminate physical stores.
Disadvantages of B2C
• Need staffs that give customer service and sales support service.
• The list of products or services needs to regenerate every time when there is some new
information or items to add in
3. Consumer-to-Consumer (C2C): Consumer-to-consumer E-Commerce or C2C is simply commerce
between private individuals or consumers. Though there is no visible intermediary involved but the
parties cannot carry out the transactions without the platform which is provided by the online market
maker such as eBay. This type of E-Commerce is characterised by the growth of electronic marketplaces
and online auctions, particularly in vertical industries where firms/businesses can bid for what they
want from among multiple suppliers. It perhaps has the greatest potential for developing new markets.
Social networking websites and e-commerce sites such as OLX, Quicker and e-bay follow this type of
business model.
Advantages of C2C
• Customers can directly contact sellers and eliminate the middle man.
• Sellers can reach both national and international customers.
• Simplified buying and searching process.
• Minimised searching and distribution cost.
Disadvantages of C2C
• The numbers of internet-related auction frauds have also increased.
• Unnecessarily inflated prices by creating multiple buyers.
• Illegal or restricted products and services have been found on selling process.
Example: illegal drugs, pirated works.
• More credit card/Payment frauds.
4. Consumer-to-Business (C2B): Customer to Business (C2B), also known as Consumer to Business,
is the most recent E-Commerce business model. In this model, individual customers offer to sell
products and services to companies who are prepared to purchase them. C2B or Consumer-to-Business
is a business model where the end consumers create products and services which are consumed by
 businesses and organisations. It is diametrically opposite to the popular concept of B2C or Business-to-
Consumer where the companies make goods and services available to the end consumers.
In C2B, the companies typically pay for the product or service. However, it can assume different forms
like an idea generated by an individual (like an innovative business practice) which may be used and
implemented by an organisation. Another possible form of C2B is where a consumer specifies a need
and the various businesses compete or bid to fulfil that need.
E-Governance: E-Governance, expands to electronic governance, also called e-administration, is the
coordination of Information and Communication Technology (ICT) in every one of the procedures, with
the point of improving government capacity to address the necessities of the overall population. The main
advantage of e-governance is to improve forms for all, i.e., government, natives, organisations, and so on
at National, State and local levels. In short, it is the use of electronic means, to promote good governance.
E-governance has a great role to play, that improves and supports all tasks performed by the government
department and agencies, because it simplifies the task on the one hand and increases the quality of work
on the other. E-governance can only be possible if the government is ready for it. It is not a one day task,
and so the government has to make plans and implement them before switching to it. Some of the measures
include Investment in telecommunication infrastructure, budget resources, ensure security, monitor
assessment, Internet connectivity speed, promote awareness among public regarding the importance,
support from all government departments etc.
Benefits of E-governance
1. Reduced corruption
2. High transparency
3. Increased convenience
4. Growth in GDP
5. Direct participation of constituents
6. Reduction in overall cost.
7. Expanded reach of government
Depending on the nature of the transaction and the parties involved E-Governance is also classified in to four
categories. They are
1. Government-to-Government (G2G)
2. Government-to-Citizen (G2C)
3. Government-to-Business (G2B)
4. Government-to-Employees (G2E)
1. Government-to-Government (G2G) is the electronic sharing of data and/or information systems between
government agencies, departments or organisations. The goal of G2G is to support government initiatives
by improving communication, data access and data sharing. G2G initiatives are also being driven by
budgets and funding. By sharing information and systems, governments are able to reduce IT costs
government offices can be more efficient and streamline procedures, allowing citizens to access
information over the Internet.
2. Government-to-Citizen (G2C): The goal of G2C is to provide one-stop, online access to information and
services to individuals. Citizens should be able to find and access what they need quickly and easily. This
category of e-governance focuses on interaction between government and citizens to support transactions
 such as tax payment, licenses, and obtaining passports etc. It can facilitate involvement and interaction
with the government, enhancing the quantity and quality of public participation in government.
3. Government-to-Business (G2B): This category of e-governance focuses on interactions between
government and various organisations, including businesses and non profits, to support transactions such
as contract bids, data collection, and grants. The objective of G2B is to reduce burden on business, provide
one-stop access to information and enable digital communication. Government-to-Business transactions
involve the sale of government services and goods along with procurement facilities, providing benefits
for both businesses and governments. For businesses, G2B interactions can result in increased awareness
of opportunities to work with the government and in cost savings and improved efficiency in performing
transactions. For governments, G2B interactions offer benefits in reducing costs and increasing efficiency
in procurement processes plus providing new avenues for selling surplus items
4. Government-to-Employees (G2E): Government-to-employees is the online interactions through
instantaneous communication tools between government units and their employees. The government of any
country is the biggest employer and so it also deals with employees on a regular basis, as other employers
do. ICT helps in making the interaction between government and employees fast and efficient, along with
raising their level of satisfaction by providing perquisites and add-on benefits.
G2E is an effective way to provide E-Learning to the employees, bring them together and to promote
knowledge sharing among them. It also gives employees the possibility of accessing information in regard
to compensation and benefit policies, training and learning opportunities and civil rights laws. G2E services
also include software for maintaining personnel information and records of employees.
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Topics for Seminar

E-Marketing – E-Advertising - E-Banking - Mobile Commerce - E-Trading - E-Learning - E-
Shopping