Managing Information System
Developments of E-Commerce in the Business World

Executive Summary

E-commerce has emerged in the recent years as one of the important determinants of the success of a company, from various industries. There are a lot of literatures done by academician in this context. This paper has a limited review on these literatures available. First of all, we will go through some introduction on the basic concepts of e-commerce. Some previous literatures on these areas are discussed. The development of the new field is discussed and outlined. Then, e-commerce and the current technology supporting the implementation of the concepts are discussed. Then the concept of e-commerce is also discussed from the consumers’ perspectives. The paper here also discussed some cross-cultural studies on e-commerce in this context. Apart form that, the implementation of e-commerce in various industries are also discussed. In the last few sections, the opportunities, barriers and success strategies in implementing e-commerce is also outlined.

 

Introduction

Electronic commerce, commonly known as e-commerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily since the spread of the Internet. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction’s lifecycle, although it can encompass a wider range of technologies such as e-mail as well. Different authors may have different views or definitions for e-commerce. However, generally, the terms can be defined as follow. According to Fjermestad and Romano (2004), e-commerce marketing is at the intersection of ICT, traditional marketing, and the customer interface. In the broader sense E-commerce is comprised of electronic-based activities that facilitate manufactured goods and services by the producer to satisfy the wants and needs of the consumer. Up to date, e-commerce marketing is concerned with strategies to persuade customers to purchase online, market research, distribution, customer relationship management and customer satisfaction.

A large percentage of electronic commerce is conducted entirely electronically for virtual items such as access to premium content on a website, but most electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all big retailers have electronic commerce presence on the World Wide Web.

Electronic commerce that is conducted between businesses is referred to as business-to-business or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that is conducted between businesses and consumers, on the other hand, is referred to as business-to-consumer or B2C. This is the type of electronic commerce conducted by companies such as Amazon.com.

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions.

 

The Recent Rise of E-commerce

As mentioned by Rama P Kanungo (2004), in the last 2 decades the application of e-commerce is evolving from technology driven to more users driven. The e-commerce has become synonymous with communication, strategy and business practices. Example, e-commerce is able to assist in exchange of info and execute transactions among enterprises and individuals. According to Lin Chai and Paul Pavlov (2004), globalization and the ubiquitous nature of the internet facilitate e-commerce across nations.

 

The Academic Researches and Previous Literature on the Topic

Since the Internet began to be used in business, both practitioners and academics have been interested in identifying the factors affecting the activities of e-commerce, and understanding how they affect its development or the extent of its use. At present, it is still important to study the e-commerce phenomenon, since it is continuously evolving, and generalizable evidence is still lacking. As a whole, the empirical work undertaken since the mid-1990s, particularly for advanced economies, has identified a large and varied number of determinants of Internet and e-commerce adoption and development (factors to do with the competitive environment, technological and organizational factors, etc.), which has led some authors  to review them. However, more empirical work is needed to test the choice of these determinants.

Moreover, it is also desirable that the identification and analysis of the determinants of e-commerce take into account the particular characteristics of the competitive environment of each economy or market. The specific determinants affecting e-commerce may be very different depending on the type of competitive environment involved. In fact, specific analyses are required that consider the particular features of e-commerce for the end-consumer markets. Although the potential for development of this type of initiative is extraordinary, particularly in advanced economies, where the majority of consumers has substantial purchasing power and possesses the minimum technological equipment necessary to connect to the Internet, limitations still exist, and these should be identified and analyzed (Inma Rodríguez-Ardura, Antoni Meseguer-Artola and Jordi Vilaseca-Requena, 2008).

 

E-commerce and the Technology

E-commerce is a big business with a growing market size and has been a major driving force in the IT industry for the past decade. Companies now need to provide online shopping or marketing Web presence to allow for direct customer connections. In this context, author Lina and Wang (2008) have reviews some primary e-commerce technologies, including auctions, negotiation, recommender systems, automated shopping, and trading. E-commerce has three main business models: B2C, business-to-business (B2B), and consumer-to-consumer (C2C). B2C, in which online vendors sell products directly to consumers, is the most common. It’s a direct transformation from traditional shops to online shops, enabling location-independent shopping and services that are more convenient and cost less. B2B lets companies make transactions with other companies via the Internet and utilizes Web-based IT to automate business transactions for both digital and physical goods; it involves two or more trading partners using real-time and coordinated market conditions. Finally, C2C provides ways for consumers to conduct transactions with each other via auction or exchange sites. Here, consumers prepare products for sale and place them on marketing sites that provide service engines for viewing, pricing, and matching with other consumers. Companies have deployed other e-commerce business models, such as B2B2C and peer-to-peer (P2P), which provide integrated or slightly different business models than the main three. Regardless of the model, most e-commerce systems have common technologies that integrate Internet portals, server infrastructure, customer and product databases, search and product comparison engines, shopping carts, and payment systems. Many of these technologies already have vendors that provide mature products either off the shelf or that are customizable to individual needs. Bigger e-commerce companies, however, have their own IT teams that can set up more advanced, stable systems and provide more timely support. Strong technical support is critical because e-commerce sites are open around the clock — any service disruptions due to technical difficulties will be very costly to the business both in revenue and in reputation.

In fact, the e-commerce has been transforming fast. New web-based technology is being introduced and implemented. With the introduction of the World Wide Web, electronic commerce has revolutionized traditional commerce and boosted sales and exchanges of merchandise and information. Recently, the emergence of wireless and mo­bile networks has made possible the extension of electronic commerce to a new application and research area: mobile commerce, which is defined as the exchange or buying and selling of commodities, services, or information on the Internet through the use of mobile handheld devices. In just a few years, mobile commerce has emerged from nowhere to become the hottest new trend in business transactions. This leads to emergence of mobile commerce as discussed by author Wen-Chen Hu, Chyuan-Huei Thomas Yang, Jyh-haw Yeh, and Weihong Hu. The emergence of mobile commerce will be discussed in the paragraph below.

 

E-commerce and the Consumers

While Electronic-Commerce (EC) has become an important issue with the unprecedented proliferation of the Internet, there has been insufficient empirical research concerning the relationship of EC quality factors and purchase decision for consumers, especially of developing countries. EC purchase decision is greatly dependent on many perceived quality factors of EC. For this, Shareef et. al. (2008) presents an exploratory study of a general conceptual model of perceived quality factors required for consumers purchase decisions in EC. It was observed from the investigation that the requirement for E-quality factors related to purchase decision is not the same for developing countries as found from research conducted in developed countries. The authors found out important insights as follow: “Our refined QPI model for developing countries indicates that on-line purchase decision is significantly affected by perceived customer care, perceived customer value, perceived operational security, perceived site security, and perceived trustworthiness. Our TD model for developing countries indicates that perceived trustworthiness toward on-line purchase is significantly affected by trust disposition attitude, perceived local environmental security, perceived operational security, and perceived site security of the web. Trust disposition attitude and perceived local environmental security are the attributes derived from personal behavioral intention, country culture, and social values. At the same time, privacy is not a significant factor for purchase decision whereas for developed countries, privacy plays a very significant role for on-line purchase decision.”

From another perspective, Datta and Chartejee (2008) had another study on this issue. The central theme of their paper is to understand the contextual factors that lead to consumers’ need to trust intermediaries. In developing their arguments, the paper synthesizes perspectives from information economics, transaction cost economics, and literature on institution-based trust to develop the EM-Trust Framework. Drawing from information economics, the paper contends that EM embodies certain inefficiencies, which in turn contribute towards heightening consumer uncertainty, especially under conditions of high information specificity. Heightened consumer uncertainty subsequently reduces consumer trust in EM. It is only in the face of uncertainty and a loss of trust in EM that consumers transfer their need to trust in intermediaries.

In another research done by Bourlakis, Papagiannidis, and Helen Fox, it is stipulated a concep­tual framework illustrating an online retail revolution in connection with consumer trust and e-consumer behavior. Either way, online retailing is here to stay; although difficult to predict with what form and shape. The authors consider this revolution to be very useful to business managers and other stakeholders such as consumer bodies and associations. For example, retail manag­ers should pay further attention to the trust element and should still differentiate their strategies by developing ‘trust-building’ programs with consumers. By doing so, they will be able to move to the next stage, which is the formulation of customer relationship management program, which were found to be very appropriate for future ubiquitous retailing. Consumer bodies and associations should also take into consideration the pro­posed arguments, especially the one related to the future state of the revolution. The authors believe that they will find these points extremely ben­eficial in order to protect and guarantee the welfare and well-being of their members and to minimize their possible exploitation. Last but not least, they also argued that further work is required to confirm / disconfirm their findings, including further empirical research work with retail managers and consumers. The recommended revolutionary process in connection with the trust element requires further attention whilst the possible application of this revolution to other online firms, not just retailers, could form another investigation. Their conceptual framework is outlined as follow:

 

Cross-cultural Studies on E-commerce

Lin Chai and Paul Pavlov had carried out an empirical study using data from Greek and US consumers in order to obtain a better understanding of cross-cultural e-commerce adoption. The results give support for the proposed hypotheses, emphasizing the moderating role of cultural differences on consumer e-commerce adoption. The study contributes to our understanding of global e-commerce, where we could see that a set of inter-relationships between important factors that tend to be associated with transaction intentions in e-commerce was specified, justified, and empirically validated. Other contribution from them is: the placement of fundamentally important variables – attitude, subjective norms, and perceived behavioral control as determinants of e-commerce adoption, drawing from a well-established model of social psychology. Most importantly was the added cultural aspect, that of uncertainty avoidance, which showed significant moderation in the proposed model, reflecting and suggesting the growing importance of globalization in e-commerce.

 

Development of E-commerce

One of the work by Inma Rodríguez-Ardura, Antoni Meseguer-Artola and Jordi Vilaseca-Requena, 2008 defines a theoretical model to explain the evolution in B2C e-commerce adoption and development, which considers different types of determinant of this phenomenon. The authors evaluate the validity of the model obtained for a particular context —the Spanish market— using a database from varying sources (public and private) that are representative of the whole Spanish economy during the period 1996-2003.

The first of the determinants considered —the potential market on the Internet— reflects the influence of a commercial factor from the Internet firms’ competitive environment. According to the results obtained here for the Spanish case, this determinant has a decisive importance in the development of e-commerce, far exceeding that of the remaining determinants examined. The authors argue that they appear to have reached a critical mass of users, making up a market with a sufficiently attractive size to firms, thereby ensuring their increasing interest in e-commerce. This would explain why, at the same time as the community of users has grown linearly, the sales volume generated by e-commerce has seen a clearly exponential growth after the number of users passed a particular threshold (which in the market analyzed here would be at around 7 million users). In the light of these results, they author further deduce that future increases in the size of the Internet user community could result in a proportionately higher growth in the sales volume attributable to e-commerce (the elasticity of this variable in the analytical model is 1.09).

However, the authors also find that the size of the potential market and its evolution are not the only type of factor influencing e-commerce adoption and development. Also relevant are other determinants concerning the companies’ technological-legal environment, their commercial offer and the technological infrastructure they have available for Internet services. Regarding the technological and legal environment, we might mention two elements that condition the evolution of ecommerce: the adoption of broadband technology and the definition of a legal framework of consumer protection on the Internet.

From their findings we can deduce that in developed countries such as Spain, in which Internet penetration rates among the population are beginning to be high (over 50% of the population), the diffusion of broadband plays a significant role. This type of technology facilitates users’ access to advanced systems of commercial communication, personalized attention, and so on, making the Internet a more attractive environment for commercial transactions. Its importance is in line with the initiatives of various governments, such as those of the European Union, which are promoting the diffusion of broadband in order to improve the competitiveness and dynamism of their economies.

Equally, the establishment of a legal framework on the question of privacy, although it cannot provide complete protection for consumers on the Internet, is shown to be necessary for the development of e-commerce. The next determinant contemplated (differentiation strategy versus price leadership strategy) reflects the commercial characteristics of the business offer on the Internet. The fact that the price of computers (one of the most sold products on the Internet) has a significantly positive effect when explaining the development of e-commerce according to the analytical model proposed here leads us to deduce, on the one hand, that the computer is no longer an indicator of the barriers to access to the Internet, at least in developed countries that have achieved a critical mass of users.

On the other hand, the positive relation between the price level on the Internet and the sales volume due to ecommerce shows that electronic markets do not lead to a generalized reduction in prices. Instead, this positive relation indicates the importance of the traditional elements in the definition of a differentiated marketing strategy — providing greater value to the consumers, and contributing to building closer relationships with them.

The last factor considered (security in the offer on the Internet), relating to technological aspects of the value proposition, has also been shown to be significant in explaining e-commerce. Once again, consumers’ confidence in the security of the communications and commercial exchange mechanisms provided by the companies is shown to encourage purchasing on the Internet.

Finally, the authors also mention that the object of this study is a dynamic phenomenon that is currently in a relatively immature situation. Thus, the determinants identified here as relevant and their effects on the development of ecommerce could change in the future. With the growing adoption of e-commerce by new strata in the population not corresponding to the profile of the early Internet users (urban population, with a university education, income levels above the population average, and with computer equipment in the home), some of the behaviors observed here (such as the lower price sensitivity, for example) could possibly change. Thus, it is important to continue testing the model with data from later time periods, either to confirm its validity or to find ways of perfecting it.

 

E-commerce Application in Various Industries

E-commerce in Pharmaceutical Industry. According to Rama P Kanungo (2004), for R&D intensive industry like pharmaceutical industry, the implementation of innovative technology to gain competitive advantage is inevitable. E-commerce able to provide the pharmaceutical industry with better mode of transaction to achieve competitive advantage and sustainable growth. E-commerce has a considerable impact on the B2B application, where a diverse group of enterprises become involved in the decision making process particularly in the pharmaceutical industry. This enhances the value of the industry through key underlying processes such as, high value drug innovation, clinical development and trial, project and people management, marketing and sales. A mutually supportive and internally consistent of e-commerce application and corporate strategy will create significant value for this industry. To be precise, the achievement of real value through e-commerce has three major impacts. First, it enhances the value of the latest clinical developments. Secondly, it increases shareholders’ value. Thirdly, it successfully reduces the time-cycle of research and application. These achievements add substantial value to the industry. Today and looking into the future, the change in the pharmaceutical industry through e-commerce is an on-going process. As technology is developing everyday, the prospect of new achievements and success is becoming more assured. The author finally also argues that e-commerce has served the pharmaceutical industry with substantial success.

E-commerce in the Services Industry. McCole (2002), however, argue that the role of trust in economic exchange over the Internet is an important marketing consideration that has received insufficient research. Trust is at the center of e-commerce with much academic discourse surrounding security, promise fulfillment, and confidence. Relationship marketing has the potential to succeed in this environment through the ability of one-to-one electronic marketing. This research examines the effect of trust on the propensity of purchase through the Internet for travel-related, intangible, commodities. Contemporary Internet consumers of services demand: 1. open and convenient access, 2. real-time specialist information, 3. transparency of processes, 4. fair pricing, 5. choice, and 6. control of information.

E-commerce and online marketing. Besides, Dr. Kamlesh T. Mehta and Raleigh also addresses the role of the on-line marketing as it relates to the distribution strategies, strategic on-line challenges faced by multinational companies, positioning strategies for engagement on the Internet, existing distribution channels and the Internet, and challenges for global retailers and manufacturers. Several examples of companies using the Internet distribution strategies are discussed. The development and implementation of the Internet distribution strategies among global companies are very difficult and complex. They can be disruptive, thus global companies need to realize that building a global market presence does not automatically translate into global competitive advantage. The advancements in e-commerce applications will reinvent important business aspects of business organizations, redefining the ways global companies approach the on-line marketing in the future.

 

The New Potential in Development of E-commerce

There are many opportunities available in the context of e-commerce for business world. Three authors had done a detail research on this matter, namely, Vassilakis, Lepouras, and Skiadopoulos. According to them, Electronic commerce, nowadays, is trying to extend its target audience and elevate the quality of services offered to end-users. Two important directions towards meeting these goals are the embracement of mobile users, whose number grows following the advent of communication technologies, and the inclusion of context-aware features in the delivered services to improve the efficiency of the dialogues between users and systems. The context taken into account may involve characteristics regarding the human user, the geographical location and the time of access, the devices employed to access the service, the network through which the user communicates with the system, the nature of the transaction carried out and so forth. Mobility and context-awareness are two important directions that open new potential to e-commerce, but introduce a number of issues and challenges that need to be addressed to fully deliver their promises to end-users. Research efforts have already delivered a number of proposals for tackling individual topics, but a number of issues still remain open and standardization activities need to proceed fast to enable organizations to proceed to investments without high risks of purchasing systems that will soon be obsolete due to market direction changes. Social issues, such as trust development towards services, information technology literacy and technology penetration for distinct user and social groups need to be studied and taken into account, since technology itself has proven not to be a sufficient guarantee for the success of e-commerce initiatives.

The evolution of e-commerce has lead to many advancement and one of them is the emergence of mobile commerce. Wen-Chen Hu, Chyuan-Huei Thomas Yang, Jyh-haw Yeh, and Weihong Hu argued that: The emerging wireless and mobile networks have extended electronic commerce to another research and application subject: mobile com­merce. A mobile or an electronic commerce system involves a range of disciplines and technologies. This level of complexity makes understanding and constructing such a system an arduous task. To facilitate this process, this article divided a mobile or an electronic com­merce system into six components, which can be summarized as follows:

  1. Applications: Electronic commerce ap­plications are already broad. Mobile commerce applications not only cover those applications, but also include new applications, which can be performed at any time and from anywhere by using mobile computing technology.
  2. Client computers or devices: Desktop and notebook computers are for electronic commerce and mobile handheld devices, including smart cellular phones and PDAs, are used to perform mobile transactions. Handheld devices are convenient and have many advantages over desktop computers, but they are limited by their tiny screens, small memory, low processing power, and short battery life, and suffer from wireless network transmission problems. Numerous mobile devices are available in the market, but most use one of three major operating systems: Palm OS, Microsoft Windows Mobile, and Symbian OS. At this moment, Symbian OS leads the market, although it faces a serious challenge from Windows Mobile.
  3. Mobile middleware (mobile commerce systems only): Mobile middleware is used to facilitate mobile communication. It is not required for mobile commerce systems, but it can greatly reduce the complication of mobile communication. WAP and i-mode are the two major kinds of mobile middleware. WAP is widely adopted and flexible, while i-mode has the highest number of users and is easy to use. It is difficult to predict which middleware will be the eventual winner in the end; it is more likely that the two will be blended somehow at some point in the future.
  4. Wireless networks (mobile commerce systems only): Wireless communication capability supports mobility for end users in mobile commerce systems. Wireless LAN, MAN, and WAN are major compo­nents used to provide radio communication channels so that mobile service is possible. In the WLAN category, the Wi-Fi standard with 11 Mbps throughput dominates the current market. It is expected that standards with much higher transmission speeds, such as IEEE 802.11a and 802.11g, will replace Wi-Fi in the near future. Compared to WLANs, cellular systems can provide longer transmission distances and greater radio coverage, but suffer from the draw­back of much lower bandwidth (less than 1 Mbps). In the latest trend for cellular systems, 3G standards supporting wireless multimedia and high-bandwidth services are beginning to be deployed. WCDMA and CDMA2000 are likely to dominate the market in the future.
  5. Wired networks: This component is a requirement for electronic commerce systems, but not necessary for mobile commerce systems, though mobile com­merce systems will be greatly benefited by applying wired networks to its data communication because data transmission using wireless networks is more expensive than using wired networks. Among several types of wired networks, three major types are (i) LAN (local area network), (ii) MAN (metropolitan area network), and (iii) WAN (wide area network) based on the sizes of their covering areas.
  6. Host computers: Host computers process and store all the information needed for mobile and electronic commerce applica­tions, and most application programs can be found here. They include three major components: (i) Web servers, (ii) database servers, and (iii) application programs and support software.

Another important issue about mobile and electronic commerce systems is application programming. Electronic and mobile com­merce programming, involving a wide variety of technologies and languages, consists of two kinds of programming:

  • Client-side programming, which is to develop software running on client com­puters or devices. It is mostly related to Web interface construction. The popular languages for Web interface construction include CSS, DOM, (X)HTML, JavaScript, WML, WMLScript, XML, XSL(T), and so forth.
  • Server-side programming, which is to develop software running on servers. The software normally receives requests from browsers and sends the results from data­bases/files/programs back to the browsers for display. The popular server-side lan­guages include C/C++, Java, Perl, PHP, and so forth.

 

Successful Strategies for E-commerce

A few obstacles usually stand in the way of firms in developing countries to enter into e-commerce successfully. The McConnell International framework offers to take the following categories of national e-readiness into account:

  • Connectivity: easy and affordable access and use of network connections.
  • E-leadership: quality of partnerships among stakeholders.
  • Information security: level of trust in processing and storage of networked information.
  • Human capital: availability of a skilled and efficient workforce.
  • E-business climate: regulatory openness.

 

As seen before, E-commerce readiness can vary among industry sectors. There are also differences among SMEs because they vary by size, sector, location, knowledge base, motivation and others. Managers usually play a determining role in adopting e-commerce. In most developing countries, the majority of businesses are micro and small businesses, therefore lacking in financial, technological and human skills resources. Both businesses and customers do not use technologies, which limit the size of the online market relative to in-store buying. (Emerald Group Publishing Limited, 2008)

 

Barriers in Implementation of E-commerce by SME

It is found that implementation of E-commerce is not something easy, although the benefits might be huge. For this, Chitura, Mupemhi, Dube and Bolongkikit (2008) had compiled a list of barriers in implementing E-commerce. The results and discussions are reproduced as follow:

Summary

E-commerce is an area of study that has practical applications and a prominent future. Although the Internet bubble has generated some negative sentiment about the industry, many previously unsuccessful e-commerce ventures and business models have now reemerged and become feasible and profitable. With ubiquitous broadband connectivity and powerful personal devices (including PCs, mobile phones, and media players), e-commerce has become a growing part of our daily lives. More important, endless opportunities still exist to deploy new e-commerce products and services that are simply impossible without automated Web-based support. Identifying such an unexplored market and creating new products and services using intelligent e-commerce technologies will be a rewarding experience for researchers in the coming years (Lin and Wang, 2008).

 

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