Execution of Business Transactions through Electronic Media - Case Study Example

Table of Contents 3 Introduction 3 2. Types of E-Commerce 4 2 Business-to-Business, B2B 5 2.2 Business-to-Consumer, B2C 5 2.3 Consumer-to-Business, C2B 5 2.4 Consumer-to-Consumer, C2C 6 2.5 Mobile Commerce, m-commerce 6 3. Benefits and Limitations of e-Commerce 7 3.1 Advantages 7 3.2 Limitations of e-Commerce 8 4. Contribution 9 5. Conclusion 12 Bibliography 14 E-Commerce Abstract E-commerce entails the execution of business transactions through electronic media, popularly the Internet. This paper seeks to deduce critical facts on e-commerce from secondary sources and critically analyse the findings so as to come with a critically analysed article on e-commerce. As such, a historical background sets the context for a discussion on what e-commerce is and how it has been incorporated in businesses around the world. An analysis of the various types of e-commerce provides in-depth understanding of the operations involved. Furthermore, an evaluation of the benefits and limitations associated with e-commerce sets forth a critical contribution on the topic, thus the proposed recommendations aimed at fostering the benefits of e-commerce and minimizing on the associated risks. In the conclusion, this paper gives a summary of the findings from the articles used and the critical analysis thereof. 1. Introduction Technological advancements have been witnessed immensely across the world due to globalization and increased competitiveness pressure. The Internet is a critical invention that has revolutionized business processes, making it more effective to trade even across geographical limits. Among the advancements brought forth by this technology in economy is a style of trading known as electronic commerce, also referred to as e-commerce or eCommerce. There is no single agreed definition of e-commerce. It is defined by Nanehkaran as an interaction of communication, data management and security systems for exchange of commercial information with regards to the sale of products.1 It is basically an electronic mediated platform that facilitates commercial exchanges between parties. E-commerce is founded on technologies like electronic funds transfer, Internet marketing, inventory management systems, automated data, mobile commerce, supply chain management, transaction processing and electronic data interchange, EDI among others.2 Whereas e-commerce entails conducting business through electronic media, the Internet is the most common electronic media used. Thus, it could be defined in other ways as a business transaction via the Internet. Just like other popular technological advents, ecommerce has a history. E-commerce in the 1970s meant electronic data exchange for the purpose of sending business documents. With technological advancement, the terminology came to mean business conducted through the web. With the introduction of the World Wide Web in 1994, web-based business became a critical component of the world economy. With the globalization of http based protocols four years later, e-commerce was borne in the US and some European countries in 1998. It extensively spread in cities of the US, East Asia and Europe in 2005 and later to the rest of the world.3 According to Al-Fadhli, more than 875 million consumers shop online with Kuwait, Saudi Arabia, UAE and Lebanon posting US$ 4.87 billion in sales from e-commerce from its more than 5.1 million e-commerce customers in 2007.4 The sectors of the economy that use e-commerce cut across board including the government, education, manufacturing, transportation and the service sectors. This, therefore, shows that e-commerce has become a critical aspect of the economy that has a widespread adoption across the world. 2. Types of E-Commerce There are various classifications of e-commerce. Similarly, many different methods have been employed to characterize each of these classifications. According to Nanehkaran, each of these classifications illustrates the cluster given from a unique point of view.5 They are guided by the parties in the transaction and the way the products, service and information move between these parties. As such, there are six generally acceptable classifications of e-commerce: business-to-business, business-to-consumer, consumer-to-consumer, consumer-to-business and mobile commerce. 2.1 Business-to-Business, B2B This type of e-commerce entails transactions occurring between businesses. It could also be the transaction that occurs between a company and another. The ultimate goal would be to transfer products and services between the involved parties.6 This encompasses online wholesaling where businesses sell products, services and materials to other businesses through the website. In 2004, it was a significant contributor to e-commerce at US$ 9 billion.7 This means that businesses also leverage on the Internet to transact among themselves. 2.2 Business-to-Consumer, B2C B2C refers to a type of e-commerce that involves transactions between a business entity and its consumers. Thus, it creates an electronic sorefront offering goods, services and information to consumers from a business in retailing transactions.8 Therefore, this form of e-commerce is a model involving online sales between business entities and its consumers. 2.3 Consumer-to-Business, C2B This involves the transfer of goods, services or information from consumers to businesses. As noted by Nanehkaran, this model involves end users creating products and services to be used by institutions and businesses.9 Such consumers would post their services or products on websites and business entities would give their bids with the highest bidder being selected by the consumer. For this reason, this model would at times be known as demand collection or reverse auction. 2.4 Consumer-to-Consumer, C2C This type of e-commerce refers to a medium that is electronic or Internet facilitated to allow for transactions among users.10 It is a model where consumers engage in business transactions directly with each other through auctions, classified advertisements or though the selling of personal expertise online. 2.5 Mobile Commerce, m-commerce This term came into existence in 1997. Its aim is to enable “the buying and selling of products, information and services via wireless handheld devices such as cellular phones, laptops and personal digital assistants.”11 There would be an interacton between these wireless devices and computer networks which have the ability to execute online merchandise purchases. The transactions under this category of e-commerce continue to expand and cover a wide array of products ad services, bills payment, online banking and delivery of information among many others. These classifications have been adopted by governments into their operations when dealing with citizens, business entities or other government bodies thus influencing their e-commerce strategies in the same manner. As such, governments would have government-to-citizen, G2C models where central and local governments interact with individuals. Government-to-government, G2G models involve the interaction between government departments, organizations or authorities. The government-to-employees, G2E links the government to its employees online. Finally, government-to-business, G2B or business-to-government, B2G enables business entities and government agencies to undertake business transactions via central websites.12 The adoption of e-commerce in government operations seek to enhance efficiency. 3. Benefits and Limitations of e-Commerce Indeed, e-commerce has become a popular activity on the web. It has opened up a myriad of business opportunities that did not exist before. As noted by Al-Fadhli, it has brought the “potential to fundamentally change the way commercial transactions, the business of government, the delivery of services and a host of other transactions are conducted.”13 However, some of the major challenges of this technological advancement emanates from these advantages just as any other emergent technology would have its disadvantages. 3.1 Advantages E-commerce has made it possible to buy and sell products and services 24/7. Since the transaction system is online, anytime a buyer feels appropriate to interact with it, then it would be available. Even while the sellers rest, their buyers could still search for their products, services and information and thereof determine their orders. Secondly, e-commerce has greatly cut on business costs. E-commerce fosters low spending on operational costs and therefore cut down on many unncesarry costs. For instance, those entities selling books make them downloadable online thus cutting the costs involved in transportation logistics. Other costs that e-commerce do away with include the cost of having personnel, marketing and advertising and real estate. The third advantage of e-commerce is that it makes conducting business easy. With this regard, Nanehkaran observes that e-comerce saves on the interaction with physical company setups and dealing with crowds.14 Business transactions could be executed from the comfort of buyers’ homes without moving physically. Thus, it becomes easy to undertake a transaction. Furthermore, comparison of prices is easy. This is because a buyer logs into the website and compares the prices offered for a product or service by different sellers without necessarily engaging them physically. This makes buyers make the most favorable decisions with regards to the cost of their products of interest. Niranjanamurthy et al. argue that with e-commerce, starting and managing a business becomes easy as it eliminates the initial setup costs needed for physical infrastructure.15 Being internet-based, e-commerce enables sellers to keep track of their business transactions promptly and from the comfort of their locations. In the same way, location of products would be much easier with e-commerce as opposed to pushing carts around scouting for products as is the case with a physical retail outlet, customers could use a search box or click through an intuitive navigation to narrow down to their intended products. In fact, some websites keep a memory of customer shopping lists and preferences so as to enhance repeat purchases. E-commerce provides an opportunity to gain new customers due to the visibility provided by search engines. With this regard, it is not unusual for search results of whatever searches to lead to an e-commerce website. 3.2 Limitations of e-Commerce The myriad of advantages that come with e-commerce are the same reasons that elicit the challenges associated with e-commerce. Of critical concern is security. With Internet being accessible to everybody across the globe, there have been cases of fraudulent business accounts opened with the aim of defrauding unsuspecting users.16 These fraudulent activities include identity theft that end up costing users.17 For instance, with credit cards being preferred by 73% of e-commerce users in Kuwait, a great security threat looms for Kuwait e-commerce users since credit cards are among the most common platforms used for online fraud. This is propagated by the advancement in technological know-how which has made people more conversant with Internet interactions to commit fraud.18 The second limitation with e-commerce is that it provides no guarantee for the quality of the product purchased. Indeed, cases of goods being damaged while on transit to the end consumers are a common occurrence. Additionally, there is a possibility that the physical products could not look as good as they appear online. Thirdly, e-commerce erodes social relationships.19 In as much as e-commerce promotes interactions across geographical boundaries, the lack of physical contact among users of this business model leads to lose of social contacts. Closely related to this, Niranjanamurthy et al. point out the loss of personal touch in e-commerce which makes the business model customer unfriendly.20 This makes shopping in retail outlets more refreshing and reassuring as opposed to shopping online. Therefore, it is clear that these limitations are a product of the advantages that come with e-commerce. Finding a balance and measures to suppress the limitations would be of great benefit to this business model. 4. Contribution A review of the findings in this paper appreciates that e-commerce is a critical contributor to the success of global economies. The trend indicates an increasing uptake of this model of trading by various business entities. In fact, with the increased usage of the Internet and its search capabilities, more e-commerce entities have gained greater visibility and thus attract greater customer flow. As such, the sales through e-commerce have grown from $572.5 billion in 2010 to $963.0 billion in 2013.21 With the world fast leveraging on technological advancements to be more efficient and effective in their transcations, sales executed through e-commerce will continue to grow. Such technologies include mobile gadgets with greater computing capabilities that would allow for shopping even when customers are mobile. However, businesses have to understand their customer requirements so as to develop their e-commerce platforms to meet such needs. It would be critical to appreciate that e-commerce is a technologically based business model. This is based on its definition as given by Nanehkaran which the Internet as a major component of the business model.22 As such, this business model would be expected to thrive well in environments that foster technological advancement. It is against this backdrop that the background history of e-commerce pointing to the US and Europe makes sense, these two being highly technological environments across the world. According to Gangeshwer, the US, Europe and Asia top the list of Internet users with over 80%, leaving the rest of the world using the Internet at less than 20%.23 In fact, Niranjanamurthy et al. attribute 34%, 29% and 27% of global e-commerce sales to Europe, the US and Asia respectively, with the rest of the world trailing collectively at 10%.24 In the same way, organizations that foster technological advancements stand greater chances of benefitting from the opportunities brought forth by e-commerce. Through their websites, modern-day organizations that seek to attain and maintain greater competitiveness sell their products. Even with the greater penetration of e-commerce in the global economy, it would be critical to appreciate that B2C model of e-commerce presents greater growth opportunities. As indicated, this is a type of e-commerce where business entities transact with consumers.25 Indeed, majority of those who open online platforms are those seeking to promote their businesses. These platforms provide immense opportunity for cost-effective advertisements and marketing of organizational products. As a consequence, many more users open accounts with these businesses so as to facilitate trade. Hence, the most common model of e-commerce would be that which business entities interact with their end consumers. Such would call for visibility of their interactive forums such as readily available chat options. Also having great potential is m-commerce where users transact on wireless gadgets such as tablets, smartphones and iPads among others. The widespread use and improved capabilities of these wireless devices present immense opportunities for m-commerce to thrive. However, even with this appreciation, there are also a myriad opportunities for the other models of e-commerce given the increased usage of the Internet across the world. Thus, just as businesses seek to meet their potential customers online, consumers will likewise seek to interact with their fellow consumers and business entities thus the spread of the other forms of e-commerce. E-commerce, therefore, has a great future growth opportunity. The growth of e-commerce could be attributed to the numerous benefits that come with the business model. This has been further boosted by the widespread usage of online platforms to undertake business transactions. Thus, e-commerce provides immense opportunities that come with Internet capabilities. Critically, it would be observed that with each of these benefits, so do limitations arise. When Niranjanamurthy et al. argue for no need for physical movement on part of the user as an advantage, it would be noted that at the same time, this inhibits physical interaction among the involved parties and thus the loss of personal touch that consumers look for thus making the physical retail outlets still preferable.26 Additionally, whereas e-commerce promotes 24/7 operation, it also leaves loopholes that become a security threat to users transacting online, thus fraudulent activities like identity theft. Therefore, even as humans seek to reap maximum benefits from e-commerce, they have to compromise on limitations that come with the technology. Even with the appreciation of the limitations associated with e-commerce, there are critical measures that could be taken to maximize on the benefits and minimize on the disadvantages. Among the basic security measures to undertake involves educating and training enterprises and buyers involved in e-commerce on security consciousness. This would make users aware of the security threats and be informed on the appropriate measures to take when faced with a security situation. Crytography and multilayered network would foster information security. These measures protect the information stored or shared in the e-commerce platforms against unauthorized access and use thus protecting the interest of the involved parties. Furthermore, enterprises in e-commerce should also enhance their risk analysis processes together with prevention and control so as to act promptly and effectively on reported security breaches. This would help arrest security breaches and help in the development of effective strategies to deter attacks on users. Finally, effective e-commerce legislation would deter crimes commited online against users of e-commerce platforms.27 In as much as legislation of laws to prosecute culprits could be difficult based on the rapid changes in technology, basic legislative instruments would play a critical part in protecting users against online risks. Therefore, in as much as e-commerce presents its limitations, there are measures that could be taken to keep the impact of such limitations on the low. 5. Conclusion Technological advancement has had a major impact on business with the advent of e-commerce. Occurring in different types, based on the parties involved and the direction of movement of products, services and information, this form of trading basically entails the use of electronic media, especially the Internet, to execute business transactions. Having first gained popularity in regions with vast technological knowhow, this form of trading has come to be widely adopted across the world because of its numerous benefits in trade. These benefits would mostly be attributed to the fact that e-commerce eliminates the need for physical interaction among the parties involved, allowing for 24/7 online transactions. However, the reasons for these benefits are the same reasons for the limitations of this mode of trading, security being the most critical. As such, measures to safeguard e-commerce platforms should be reinforced by users with education being the driver for acquisition of knowledge on effective security measures. All in all, e-commerce presents immense opportunities for economies to leverage on, thus its continued incremental adoption in future. Bibliography Al-Fadhli, Salah. “Critical Success Factors Influencing E-Commerce in Kuwait.” Journal of Internet Banking and Commerce 16.1 (2011): 1 – 7. Web. 6 Nov. 2014. Gangeshwer, D. K. “E-Commerce or Internet Marketing: A Business Review from Indian Context.” International Journal of u- and e- Service, Science and Technology 6.6 (2013): 187 – 194. Web. 6 Nov. 2014. Nanehkaran, Yaser Ahangari. “An Introduction to Electronic Commerce.” International Journal of Scientific & Technology Research 2.4 (2013): 190 – 193. Web. 6 Nov. 2014. Niranjanamurthy, M., et al. “Analysis of E-Commerce and M-Commerce: Advantages, Limitations and Security Issues.” International Journal of Advanced Research in Computer Communication Engineering 2.6 (2013): 2360 – 2370. Web. 6 Nov. 2014. Read More