Unit i

E-COMMERCE – II M.COM. MAHENDRA ARTS & SCIENCE COLLEGE (AUTONOMOUS)
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E-COMMERCE
UNIT - I
INTRODUCTION TO E-COMMERCE
1. OBJECTIVES
The objective of this chapter is to get the students acquainted with the basic concept of E-commerce.
This chapter highlights the basic elements e-commerce, the difference between traditional and
electronic business.
Definition: E-Commerce
E-commerce refers to buying and selling of information, products and services over computer
communication networks.
1.1. TRADITIONAL-COMMERCE AND E-COMMERCE
Difference between Traditional Commerce and Electronic Commerce
TRADITIONAL-COMMERCE E-COMMERCE
1. Face-to-face, telephone lines, or mail systems
used.
1. Using Internet or other network communication
technology.
2. Manual processing of traditional business
transaction is done.
2. Automated processing of business transactions is
done.
3. Individual involved in all stages of business
transactions.
3. Individual involved in all stages of transactions.
4. No universal platform for information sharing. 4. E-Commerce provides a universal platform to
support commercial / business activities across the
globe.
1.2. IMPORTANCE OF E-COMMERCE
1. Exploitation of New Business
Electronic commerce emphasizes the generation and exploitation of new business opportunities.
2. Enabling the Customers
Electronic Commerce is enabling the customer to have an increasing in what products are made,
how products are made and how services are delivered.
3. Improvement of Business Transaction
Electronic Commerce endeavors to improve the execution of business transaction over various
networks.

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4. Effective Performance
It leads to more effective performance i.e. better quality, greater customer satisfaction and better
corporate decision making.
5. Greater Economic Efficiency
We may achieve greater economic efficiency (lower cost) and more rapid exchange (high speed,
accelerated, or real-time interaction) with the help of electronic commerce.
6. Execution of Information
It enables the execution of information-laden transactions between two or more parties using
inter connected networks.
7. Incorporating Transaction
Electronic Commerce also incorporates transaction management, which organizes, routes,
processes and tracks transactions. It also includes consumers making electronic payments and
funds transfers.
8. Increasing of Revenue
Electronic Commerce has the Potential to increase revenue by creating new markets for old
products, creating new information-based products, and establishing new service delivery
channels to better serve and interact with customers.
9. Reduction of Friction
The reduction of friction in online commerce will enable smoother transaction between buyers,
intermediaries and sellers.
10. Facilitating of Network Form
Electronic Commerce facilitates the network form of organization where small flexible firms rely
on other partner, companies for component supplies and product distribution to meet changing
customer demand more effectively.
11. Facilitating for Organizational Model
The emerging forms of techno-organizational structure involve changes in managerial
responsibilities, communication and information flows and work group structures.
1.3 MOBILE-COMMERCE
Definition: M-Commerce
M-commerce (mobile commerce) is the buying and selling of goods and services through wireless
handheld devices such as cellular telephone and personal digital assistants (PDAs).
Objectives of M-commerce
Main objectives for M-commerce are as follows:-
1. To find out what are the benefits of M-commerce.
2. To find out what problems are going to face by M-commerce.
3. To find out How M-commerce can be grown.

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1.3.1 BENEFITS OF M-COMMERCE
 It provides a convenient, secure and easy to use communication and distribution network
 It provides a wider reach as most people use cell phones
 It enables a business to target customers effectively
 It reduces transaction and order processing cost
 It encourages competitive pricing
 It streamlines all business processes.
1.4 E-TRADE
E-trading or paperless trading is a method of trading securities (such as stocks, and bonds), foreign
exchange or financial derivatives electronically.
1.4.1 E-Trade Process
E-trade, as a component of the digital economy, also requires specific enabling conditions that build
on those foundations. Businesses require digital skills and entrepreneurship to engage in e-trade, as
well as a sound regulatory framework that addresses challenges such as digital documentation,
signatures and data flows. They also depend on efficient trade facilitation and logistics suited to e-
commerce deliveries. Finally, reaping the full benefits of e-trade requires the capacity to embrace
data as a tool for growth. Figure 1.1 reflects these basic components of the e-trade environment.
Figure 1.1 Basic components of the e-trade environment
1.4.2 Importance or Benefits of Online Trading
1. Lower fees
Online trading is the reduction in transaction costs and high fees associated with traditional
brick-and-mortar brokerage firms.

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2. More control and flexibility
Time is often of the essence when we trade stocks, so the speed of using online trading portals is
a benefit to many investors. With online trading, we can execute a trade almost immediately.
3. Ability to avoid brokerage bias
By taking trading into our own hands, we can eliminate brokerage bias.
4. Access to online tools
In the world of online trading, a lower cost does not mean a poor product. Many of online
trading companies offer customers an impressive suite of tools providing valuable information
and helping optimize trades.
5. Option to monitor investments in real time
Many online trading sites offer stock quotes and trade information that make it easy for people to
investments are doing in real time.
Disadvantages of Online Trading
1. Easier to invest too much too fast
Online trading is so easy — we basically push a button — there is the risk of making poor
investment choices or overinvesting.
2. No personal relationships with brokers
From getting help on how to create an investment strategy to understanding how the results of
feedback mechanisms affect the market, online traders are left to their own devices.
Experts often stress the importance of research, particularly for new traders. We need to learn as
much as we can about the companies in which we invest.
3. Addictive nature
Some investors choose short-term trading strategies that involve investing in risky stocks
offering the potential for large gains but also significant losses. The study concluded “The
structure itself of the two activities gambling and trading is very close”.
4. Internet-dependent
We are at the mercy of our internet connection. If the internet connection is too slow or is
interrupted, we can lose out on a potentially important or profitable trade.

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5. Buying errors due to computer missteps
With online trading, to simply assume a trade was not completed can cost our money. Investors
who believe their trade was not completed might make the trade again and end up investing
twice as much as they intended.
1.5 E-BUSINESS AND ITS ACTIVITIES
E-business
E-business refers to any business that uses Internet technology to improve productivity and
profitability.
E-business can benefit all types of businesses. It is not limited to technology-related products and
services; E-Business can be applied to any part of a company's operations, including marketing and
sales, purchasing, production, design and engineering etc...,
Importance of e-business:
 E-Business merges internet technology with business processes to create new business value,
new relationships & build trust for an enterprise.
 E-Business refers to the paperless exchange of business information using network-based
technology.
 Online purchase is very convenient for customers and can provide a competitive advantage
for vendors.
E-Business Activity
E-business or e-commerce activities are any activities by which goods or services are bought or sold,
or revenues are raised, by use of the Internet.
Examples of e-business activities at the University include:
The sale of tickets to athletic events, acceptance of application fees and tuition fees, and acceptance
of donations to the University.
1.6 E-BUSINESS MODELS
A business model is the method of doing business by which a company can sustain itself, that is
generates revenue. The business model spells out how a company makes money by specifying where
it is positioned in the value chain.
There are many different ways to categorize e-business models can be classified as follows:
a) E-business model based on the relationship of transaction parties.
b) E-business model based on the relationship of transaction types.
c) Classification by revenue model.
d) Classification by distribution channel.

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1.6.1 E-Business Model Based on The Relationship of Transaction Parties
E-commerce can be classified according to the transaction partners such as
1. Business-to-Consumer (B2C)
2. Business-to-Business (B2B)
3. Business-to-Government (B2G)
4. Consumer-to-Consumer (C2C) and
5. Consumer-to-Business (C2B).
1. Business-to-Consumer (B2C)
Business to Consumers means e-commerce transactions taking place between business organizations and
consumer directly.
Example: amazon.com, autobytel.com, eDiets.com, Pets.com.
2. Business-to-Business (B2B)
Business to Business, means e-commerce transactions taking place between business to business
organizations.
Example: MetalSite.com, VerticalNet.com, SHOP2gether.com.
3. Business-to-Government (B2G)
Business to Government e-commerce means transactions taking place between business to
Government sector.
Example: iGov.com
4. Consumer-to-Consumer (C2C)
Consumer to consumer e-commerce means e-commerce transactions taking place between consumers
to consumer.
Example: ebay.com, InfoRocket.com
5. Consumer-to-Business (C2B)
Consumer to business e-commerce means e-commerce transactions taking place between consumers to
business organizations.
Example: Priceline.com
Figure 1.2 Business transaction model

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1.6.2 E-Business Models Based on the Relationship of Transaction Types
This business model is essentially ruled by the following two parameters:
On the basis of value addition: The addition of value to a product or service of the opportunities
offer on the web.
On the basis of control: The control is done through the polices of the website.
Based on these, nine types of transactions can be identified as listed below:
 Brokerage
 Aggregator
 Info-mediary
 Community
 Value chain
 Subscription
 Manufacturer
 Advertising
 Affiliate
1.7 VALUE OF INTERNET IN BUSINESS
 Internet is the easiest way for a business to connect with customer and clients.
 Internet is the backbone of offline business to sell online and the Internet is a heart for online
business.
 Internet is important for business development. Internet technology provides powerful
communication and marketing tools.
 Internet helps businesses to grow, achieve goals and become successful in this competitive
market.
 Internet provides great benefits for entrepreneurs to create business infrastructure based on
customer’s data and information.
 Internet technology provides great data management sources for businesses to launch unique
and creative solutions for customers.
 Internet plays an important role to advertise & market products and services around the world
to get more customers.
 Internet advertising and marketing is reasonably priced for all kinds of small and big business
as compared to traditional marketing costs.
 Internet helps businesses to test and collect the data behind the idea of product and services.
 Without the use of internet in business it’s impossible today to grow business and earn
profits.

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1.8 ADVANTAGES AND DISADVANTAGES OF ECOMMERCE
The invention of faster internet connectivity and powerful online tools has resulted in a new commerce field.
E-commerce offered many advantages to companies and customers but it also caused many problems.
ADVANTAGES OF ECOMMERCE
 Faster buying/selling procedure, as well as easy to find products.
 Buying/selling 24/7.
 More reach to customers, there is no theoretical geographic limitations.
 Low operational costs and better quality of services.
 No need of physical company set-ups.
 Easy to start and manage a business.
 Customers can easily select products from different providers without moving around physically.
DISADVANTAGES OF ECOMMERCE
 Any one, good or bad, can easily start a business. And there are many bad sites which eat up
customers’ money.
 There is no guarantee of product quality.
 Mechanical failures can cause unpredictable effects on the total processes.
 As there is minimum chance of direct customer to company interactions, customer loyalty is always
on a check.
 There are many hackers who look for opportunities, and thus an ecommerce site, service, payment
gateways, all are always prone to attack.
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