1

UNIT-1
E-COMMERCE (BCA 6003)
Introduction to E-Commerce:-
 It can be broadly defined as the process of buying or selling of goods or
services using an electronic medium such as the Internet.
 Electronic commerce (E-Commerce) refers to all forms of transactions
relating to commercial activities, involving both organizations and
individuals
 E-Commerce has created a new environment in business transactions
using internet. It deals with providing information to the consumers
regarding products of their interest.
 It provides a platform of advertisement of products, allows negotiations,
order for raw materials, settlement of financial transactions.
The term "Electronic commerce" (or e-Commerce) refers to the use of an
electronic medium to carry out commercial transactions. Most of the time, it
refers to the sale of products via Internet, but the term e-Commerce also covers
purchasing mechanisms via Internet (for B-To-B).
OR
E-commerce (electronic commerce or EC) is the buying and selling of goods
and services, or the transmitting of funds or data, over an electronic network,
primarily the internet. These business transactions occur either as business-to-
business, business-to-consumer, consumer-to-consumer or consumer-to-
business. The terms e-commerce and e-business are often used
interchangeably. The term e-tail is also sometimes used in reference to
transactional processes for online shopping.
E-Commerce or Electronics Commerce is a methodology of modern business
which addresses the need of business organizations, vendors and customers to
reduce cost and improve the quality of goods and services while increasing the
speed of delivery. E-commerce refers to paperless exchange of business
information using following ways.

 Electronic Data Interchange (EDI)

 Electronic Mail (e-mail)
 Electronic Bulletin Boards
 Electronic Fund Transfer (EFT)
 Other Network-based technologies

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Definition of E-Commerce:-
“E-Commerce is the business environment in which information for the
buying, selling and transportation of goods and services moves
electronically (via internet)”.

According to Kalakota and Whinston “E-Commerce provides the

capability of buying and selling products and information on the internet
and other online services”.
Features of E-Commerce:-
 Non-Cash Payment − E-Commerce enables the use of credit cards, debit
cards, smart cards, electronic fund transfer via bank's website, and other
modes of electronics payment.
 24x7 Service availability − E-commerce automates the business of
enterprises and the way they provide services to their customers. It is
available anytime, anywhere.

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 Advertising / Marketing − E-commerce increases the reach of advertising

of products and services of businesses. It helps in better marketing
management of products/services.
 Improved Sales − Using e-commerce, orders for the products can be
generated anytime, anywhere without any human intervention. It gives a
big boost to existing sales volumes.
 Support − E-commerce provides various ways to provide pre-sales and
post-sales assistance to provide better services to customers.
 Inventory Management − E-commerce automates inventory
management. Reports get generated instantly when required. Product
inventory management becomes very efficient and easy to maintain.
 Communication improvement − E-commerce provides ways for faster,
efficient, reliable communication with customers and partners.

 Ubiquity: E-commerce is ubiquitous, meaning that it is available just

about everywhere at all times.

 Global Reach: E-commerce technology permits commercial transactions

to cross cultural and national boundaries far more conveniently and
effectively as compared to traditional commerce.

 Universal Standards: the technical standards of the internet and

therefore the technical standards for conducting e-commerce are
universal standards i.e. they are shared by all the nations around the
world.

 Interactivity: e-commerce technologies are interactive, meaning they

allow for two-way communication between merchants and consumer.

 Information Density and Richness: The internet vastly increases

information density; it is the total amount and quality of information
available to all market participants, consumers and merchants.

 Personalization: E-commerce technologies permit personalization. So

merchants can target their marketing messages to specific individuals by
adjusting the message to a person s name, interests and past purchases.

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Framework of E-Commerce:-

Elements of E-Commerce Framework

1) Information Super Highway (I-Way): Information superhighway is the
transportation foundation that enables the transmission of content. The
Information Superhighway facilitates the convergence of content and
distribution channels, which brings corporations together. Any successful
e-commerce application will require I-Way Infrastructure. A collection of
many of computers, communications networks, and communication
software forms the emerging Information Superhighway (I-Way).

2) Multimedia Content and Network Publishing: Currently the most

prevalent architecture that enables network publishing is the www. The

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web allows small businesses and individuals to develop content in the

form of HTML and publish on the web server.

3) Messaging and Information Distribution: Information distribution and

messaging technologies provide a transparent mechanism for transferring
information content over a network Infrastructure layer.
4) Common Business Services: Common business services, for facilitating the
buying and selling process. Securing the transaction, carried out over the
network, requires addressing several security and confidentiality related
issues.

Pillars of E-Commerce Framework

There are two pillars supporting all e-commerce applications and
infrastructure 1)

1) Public Policy and Privacy Issues: Govern issues such as Universal access,
privacy and information pricing. Establishing electronic commerce
related laws and recognized certification authorities provide the legal
framework for electronic commerce.

2) Technical Standards: It means the nature of information publishing, user

interfaces, and transport in the interest of compatibility across the entire
network.

Types of E-Commerce:-
There are six types of E-Commerce:-
1) Business-to-Consumer (B2C):- businesses sell directly a diverse group of
products and services to Customers. Wal-Mart Stores, FlipKart, Amazon are
examples of B2C E-commerce

2) Business-to-Business (B2B):-Business-to-Business e-commerce holds

electronic transactions among and between businesses. For Example:-
IndiaMart, tradeIndia, Walmart, Amazon, AutoGlobalTrade,Alibaba,Quill,
Curbell Plastics, Firerock etc.

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3) Consumer-to-Consumer (C2C):- Using C2C e-commerce, consumers sell

directly to other consumers using the internet and web technologies. For
example eBay.com, OLX, Quikr.

4) Consumer-to-Business (C2B):- E-commerce that involves individuals selling to

businesses may include a service/product that a consumer is willing to sell.
Individuals offer certain prices for specific products/services. For
example:- Freelancer.com,

5) Business-to-Employee (B2E):-Business-to-employee (B2E) electronic

commerce uses an intra business network which allows companies to provide
products and/or services to their employees. For example:-Online insurance
policy management, Online supply requests.

6) Business-to-Government (B2G):- The transactions between the business and

government over electronic network are termed as B2G. For example, when
Classic Shoes Ltd.. Submits the tax returns to the income tax department
through internet, then it is B2G e-commerce.
Business-to-government, also known as business-to-administration, refers to
trade between the business sector as a supplier and a government body as a
customer.

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Example-Business pay taxes, file reports, or sell goods and services to Govt.

Electronic Commerce and Trade Cycle

A trade Cycle is the series of exchanges, between a customer and supplier that
take place when a commercial exchange is executed. A general trade cycle
consists of following stages.
1) Pre-Sales: Finding a supplier and agreeing the terms.
2) Execution: the buyer requests or orders from the vendor that the product is
required and the vendor delivers the goods or service.
3) Settlements: the vendor asks for payment, the invoice, the buyer makes the
appropriate payment.
4) After Sales: Once the sale is completed that is not necessarily the end of the
story: depending on the nature of the exchange there may be a requirement
for after sales activities.

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Scope of E-Commerce:-The mainstream of E-Commerce consists of three areas;

these are represented in

Three Categories of E-Commerce

1) Electronic Markets: - An electronic market (EM) is a market where the
exchange of economic products is coordinated through the electronic
exchange of data, eventually resulting in deals among the market
participants. For example:-Airline booking system.
2) Electronic Data interchange (EDI):-EDI provides a standardised system for
coding trade transactions so that they can be communicated directly from
one computer system to another. EDI involves automated data exchange
between business entities in standardised formats. EDI involves in practical
business terms computer-to-computer exchanges or invoices, orders and
other business documents.
3) Internet Commerce: It means the use of the global internet for purchase
and sale of goods, services, including service and support after sale.
Internet commerce brings some new technology and new capabilities to
business.
4) Other Scope of E-Commerce -Airline, Product sales, Accounting, Online
Shopping, Product service and maintenance,Commerical transactions

Advantages of E-Commerce:
i) Reduced Prices: Costs of products are reduced since stages along the
value chain are decreased. For example, intermediaries can be eliminated by
the company directly selling to the consumer instead of distributing through
a retail store.
ii) Global Marketplace: Consumers can shop anywhere in the world.
iii) 24-Hour Access: E-commerce allows people to carry out businesses
without the barriers of time or distance. One can log on to the internet at
any point of time, be it day or night and purchase or sell anything one
desires at a single click of the mouse.
iv) More Choices: Electronic commerce provides consumers with more

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choices. For example, before making any purchase, customer can study
about all the major brands and features of any product
v) Quicker Delivery: E-commerce allows quick delivery of products and
services (in some cases) especially with digitized products.
vi) Accurate Information: Consumers can receive relevant and detailed
information in seconds, rather than in days or weeks.
vii) Increased Potential market share: Internet enables businesses to have
access to international markets so increasing market share.
viii) E-commerce helps organizations to reduce the cost to create process,
distribute, retrieve and manage the paper based information by digitizing
the information.
ix) E-commerce improves the brand image of the company.
x) E-commerce helps organization to provide better customer services.
xi) E-commerce helps to simplify the business processes and makes them
faster and efficient.
xii) E-commerce reduces the paper work.

Disadvantages of E-Commerce:
1. Technical disadvantages
2. Non-Technical disadvantages
3. There can be lack of system security, reliability or standards owing to
poor implementation of e-Commerce.
4. Software development industry is still evolving and keeps changing
rapidly.
5. In many countries, network bandwidth might cause an issue as there is
insufficient telecommunication bandwidth available.

Difference between traditional commerce and E-Commerce:

BASIS FOR
TRADITIONAL COMMERCE E-COMMERCE
COMPARISON

Meaning Traditional commerce is a E-Commerce means

branch of business which carrying out
focuses on the exchange of commercial
products and services, and transactions or
includes all those activities exchange of
which encourages exchange, in information,
some way or the other. electronically on the
internet.

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BASIS FOR
TRADITIONAL COMMERCE E-COMMERCE
COMPARISON

Processing of Manual Automatic

Transactions

Accessibility Limited Time 24×7×365

Physical Goods can be inspected Goods cannot be

inspection physically before purchase. inspected physically
before purchase.

Customer Face-to-face Screen-to-face

interaction

Scope of Limited to particular area. Worldwide reach

business

Information No uniform platform for Provides a uniform

exchange exchange of information. platform for
information exchange.

Resource focus Supply side Demand side

Payment Cash, cheque, credit card, etc. Credit card, fund

transfer etc.

Business Linear
Relationship End-to-end

Delivery of Instantly Takes some time

goods

E-Commerce in Perspective
There are several ways of looking at e-commerce:
1) Communication: It has the ability to deliver products, services, information,
or payments via networks like the internet.
2) Interface: E-commerce means information and transaction exchange
Business to business, Business to consumer, Consumer to consumer, and
business to government.

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3) Business Process: E-Commerce means activities that support commerce

electronically by networked connections. For example, business processes like
manufacturing and inventory etc.
4) Online: E-commerce is an electronic environment that allows sellers to buy
and sell products, services, and information on the internet. The Products may
be physical like Cars, Computers, Books or services like news or consulting.
5) Structure: E-commerce deals with various media like data, text, video, web
pages.
6) Markets: E-commerce is a World Wide Network. A local store can open a
web front store (Online Shop) and find the customers, suppliers, competitors
and payments services, of Course, an advertising are essential.

SUPPLY CHAINS/VALUE CHAINS:

Supply chain is the relationship between suppliers, wholesalers, retailers and
customers. The web of trade relationships is known as supply chain or value
chain. The business goal is to reduce the cost and improve service. When a
supply chain is managed electronically, usually with web technologies, it is
referred to as an e-supply chain. Supply Chain Management (SCM) involves the
coordination of all supply activities of an organisation from its suppliers and
delivery of products to its customers. Technology is important since managing
relationship with customer, supplier and intermediaries. A supply chain is a
system of organizations, people, technology, activities, information and
resources involved in moving a product or service from supplier to customer.
· Supply chain activities transform natural resources, raw materials and
components into a finished product that is delivered to the end customer.

Benefits of Supply Chain:

1. Order Taking 2. Order Fulfilment 3. Electronic
Payment
4. Managing Risk 5. Inventories can be minimised 6. Better
collaboration
7. Improved quality control. 8. Higher efficiency rate.
9. Keeping up with demand 10. Reduced overhead costs

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Organization
Supplie Custome
Intermediari r
r Intermediari

Inbound Logistics Outbound Logistics

(Buy Side E-commerce) (Sell Side E-
commerce)

Porter’s Value Chain Model: (IMP)

Michael Porter devised the model of the value chain to describe the flow
Value from producers to consumers. According to Porter Model was
concerned with internally activities of the company.

Porter’s Value Chain

Primary Activities:-
1. Inbound Logistics:-Handling goods that are brought into the company, storing
them and making them available to operations as required.
2. Operations: - The production process, in many cases a series of sub-activities.
Activities involved in the transformation of inputs into final product.
3. Outbound Logistics: These include activities, which are associated with
collection, storage and physical distribution of finished goods to the
Customers.
4. Marketing and Sales: This category includes activities such advertising. Sales
promotion, sales force management, channel selection, channel relations,
and pricing.

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5. Service: - These are activities aimed at providing service to enhance or

maintain the value of the product, like installation, repair, training, Supply
of parts and product adjustment.

Support Activities:-
1. Procurement: Procurement activities which include purchase of raw
materials and service inputs, equipment and machinery etc.
2. Technology Development: Technology involved in product designing and
manufacturing processes require activities to be performed for perfection
and up-gradation.
3. Human Resource Management: Management of human resources
recruitment, training and development of Manpower.
4. Firm Infrastructure: They relate to general management, accounting and
finance, legal affairs, strategic planning, etc.

Inter Organisational Value Chains

The value chain system within a company is a miniature (smaller part) of the
overall value chain. The overall competitive advantage of an organization is
not just dependent on the quality and efficiency of the company and quality
of products but also upon that of its suppliers and wholesalers and retailers it
may use. The analysis of overall supply chain is called the value system. Value
chain differ across various trade sectors and between different
organizations within the trade sector is called inter organizational value
chain.

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Porter’s value System(Single Firm)

The organizations needs to analyse its own value chain and it should apply
similar techniques to its overall value chain. The organizations needs to
establish its inter organizational relationship (different organization
relation) adds to its competitive advantage. The various linkages in the value
chain system have to be managed. The physical linkages involve goods
handling, transport and warehousing (collect goods). The essential stages of
trade cycle linkage are:-
(i) Presale:- finding supplier and agreeing contract terms
(ii) Execution:- placing order and taking delivery of the goods
(iii) Settlement- requesting and receiving payments
(iv) After sales:- any subsequent support activities.
These stages can also be co-ordinated effectively using ecommerce
techniques and technologies. The efficient organization of the supply chain or
value chain is an important source of competitive advantage.

Value Chain in Different Areas:

Value chains differ considerably across trade Sectors and between different
organisations within a trade sector. Value system in automobile assembly,
food, Supermarket, and insurance sector are summarised as follows:
1) Automobile Assembly:

Automobile assembly uses a vast number of Components. The making of a

car is a component assembly job. Some of the components, such as engines
and body panels may be produced by the company.

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2) Food Supermarket: Food retailer is dividing into two parts:-

i) Large supermarket chains (direct deal with manufacturer)

ii)Small retailers (deal with wholesaler rather than manufacturer)
Supermarket supply chain is start from food manufacturer. Product is
eitherdelivered to a regional distribution depot or direct to the shop.

3) Insurance Sector:

Insurance is a service industry and it is not directly dependsto its suppliers, its
value system is therefore focused on sales. Insurance policies to the public
can be sold by an agent (company employee).

Value Chain in Organisation

An organisation needs to analyze its own value chain and it should apply
similar techniques to its Overall value system. The organisation needs
toestablish which of its inter-organizational relationships working well,
providing profit and which fail to achieve appropriate level of quality and
prices. The linkage in the value system has to be managed. The physical
linkage involve goods handling, transport, warehousing. And including
following aims to accomplish:
1) Pre-Sale: Finding suppler & agreeing terms
2) Execution: Order, delivery
3) Settlement: Invoice, payment
4) After-sales: Supportive services

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Competitive Advantages:
A) Competitive Strategy
Competitive strategy refers to how a company competes in a particular
business.
Overall strategy for diversified firms is referred to as corporate strategy.
Competitive strategy is concerned with how a company can gain a
competitive advantage through a distinctive way of competing. Competitive
advantage is defined as the strategic advantage one business entity has over
its rival entities within its competitive industry. Achieving competitive
advantage strengthens and positions a business better within the business
environment. The ability and capability of an organization to grow and
prosper arises from its competitive advantage over other organization.
According to Porter the three basic strategies for competitive advantage are
cost leadership, differentiation and focus.
a) Cost Leadership-refers to ability to sell the products at lower price.
b) Differentiation-refers to goods that provide some quality.
c) Focus-is concentration on a single aspect of the market.

B) Porter’s Model Five Forces

Porter's Model helps a firm to identify threats to its competitive position
and to devise plans including the use of IT and e-commerce to protect or
enhance that position. Porter identified five forces or competitive rivalry
described as under:
1) Threat of potential/new entrants to the sector
2) Threat of substitute product or service in the existing trade
3) Bargaining power of the buyers
4) Bargaining power of the suppliers
5) Competition between existing players

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1) Threat of New Entrants: This threat relates to the ease with which a new
company or a company in different product area can enter a given trade
sector. Typically, barriers to entry are capital, knowledge or skill.
2) Threat of Substitution: This threat arises when a new product is available
that provides the same function as existing product service. For example,
cotton fibres were, in the past, replaced by synthetic fibres, and glass bottles
were substituted by plastic ones.
3) Bargaining Power of Buyers: The cost of producing and distributing a
product should be less than the price it can bring in the market in order to
be profitable. Number of competitors and the supply of a product are the
two major factors that determine Bargaining power of the buyers. A buyer is
in a strong position to bargain for low price if there are many competitors
and the supply of the product in the market is surplus. With the help of e-
commerce, low production cost, more inventory control and quick response
time can be achieved.
4) Bargaining Power of Suppliers: Businesses try to find mere favourable
terms from their own suppliers. If supply of raw material is plentiful and/or
there are many Suppliers, the supply can be procured at a low price.
Otherwise position is more favourable to the supplier having more
bargaining power. Ability to trade electronically is a factor in the quality of
service and may be requirement of buying organizations.
5) Competition between Existing Players: Competition among businesses is
to get more buyers and trade at a price that produces an acceptable profit. If
there are many players of the same size, capacity and strategy having little
difference between their product/service, then there is more competition
among them as regards the price of the product.

C) First Mover Advantage:

The First-Mover Advantage refers to the advantage gained by the first
company that enters a certain market. There are a number of reasons this
advantage exists. A company that is able to increase sales quickly is able to
reduce the average cost of the product, over other competitors. This allows
the first company to have more flexibility with pricing, either reducing the
price to make it less attractive for new entrants (increasing
barriers to entry) or increasing the margin and therefore profit while prices
remain fixed, this additional profit can then be used for further innovation.
The business, IT, and e-commerce worlds all have examples of companies that
Succeeded with first-mover advantage, companies that failed despite first-

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mover
advantage, and late movers that are now success stories.
A first mover is a service or product that gains a competitive advantage by
being the first to market with a product or service. Being first typically enables
a company to establish strong brand recognition and customer loyalty before
competitors enter the arena. Other advantages include additional time to
perfect its product or service and setting the market price for the new item.

D) Sustainable Competitive Advantage

Sustainable competitive advantages are company assets, attributes, or
abilities that are difficult to duplicate or exceed; and provide a superior or
favourable long term position over Competitors. A Company has a
sustainable competitive advantage when it acquires some qualities or
attributes which are different from other competitors in the market and which
makes it outstanding in the market. When the favourable competitive
advantages last for many years, then they are known as sustainable
competitive advantages. In today’s competitive environment it is very
important to have a sustainable competitive advantage to sustain. It can be
measured by looking at the profits of the company with the advantage which
should be more than its competitors in the market. A well-known example of a
company with a sustainable competitive advantage is Wal-Mart.

Business strategy:-
A business strategy is a set of plans for achieving superior long-term returns on
the capital invested in a business firm. A business strategy is a plan for
making profits in a competitive environment over the long-term. A business
strategy is the profit made by the owners to run a successful business. There
are Four Strategies for achieving a profitable business.1) Differentiation
2) Cost 3) Scope, and 4) Focus.
1) Differentiation- to run business new plans is made to gain profit.
2) Cost- to run the business the cost must be changed according to the
market.
3) Scope-To run a successful business the scope of business must exist.
4) Focus-to run business we must focus on business strategies.

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Strategic Implication of IT:-

IT initially used for administrative automation. 1CT (Information and
Communications Technology) used for 1) Intra-organisational systems.
2) Inter-organisational systems,
3) Public access networks (Internet),
4) Mobile data communications.
The use of ICTs can have strategic implications for small and large
organisations.
IT has and will continue to revolutionise management. Following are few
contributions of IT:
1) Provides new ways to design organisations and new organisational
structures.
2) Creates new relationships between Customers and suppliers who
electronically link themselves together.
3) Presents the opportunity for electronic commerce, which reduces
purchasing
cycle times, increases the exposure or suppliers to Customers
4) Enables tremendous efficiencies in production and service industries
through
5) Changes the basis of competition and industry structure, e g., in the airline.

E-Commerce Strategy inputs:-

Traditionally an f strategy would be subservient to the business strategy. For e-
commerce the IT strategy becomes a central component in business strategy
E-Commerce Strategy inputs: A) Technology B) Business Environment
C) Business Capability D) Existing Business Strategy
Technology An E-commerce technology includes:-
1) EDI: Streamline supply logistics and facilitate decreases in trade cycle times.
2) Electronic Markets: Re-define the operation of a market sector.
3) Internet E-Commerce: Provides new direct sales opportunities.
Business Environment: - All Businesses operate within an external
environment. They can influence that environment but their activities are also
enabled by that environment.
Business Capability:-it has skills and infrastructure to run the business.
the following are business capability of e-commerce
1. Improved Productivity
2. Cost Savings
3. Better Customer Service
4. Opportunities for new business

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Existing Business Strategy:-

The organisation has a business strategy and changes, evaluation on strategy
can be done.

Strategy Planning Cycle:-

E-business competitive strategy is normally formed and implemented
according
to a planning cycle which is Called strategic planning cycle.
There are four stages in this planning cycle are-
A) Industry and Competitive Analysis B) Strategy Formulation
C) Implementation D) Performance Assessment

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Strategy Formulation: (IMPORTANT)

Based upon study of internal and external business environment and in light of
a company Strengths and weaknesses, a competitive business strategy is
formed.
It may be a strategy of cost leadership, product differentiation or focus. One
can also identify ways how information technology can be used to implement
such strategy.
The inputs to the strategy formulation process are the results of evaluating e-
commerce technology, the business environment, capabilities of the
organisation plus the existing business strategy. These inputs to the strategy
formulation process, together with the subsequent steps of implementation
and evaluation are shown in figure:-

The strategy once adopted then needs to be translated into a plan for
implementation.

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Implementation Planning-In the implementation stage, one build a plan to

identify steps needed to put the strategy into action and practically take those
steps. For example, web-based (call centre) through which the customers can
immediately register their Complaints
A strategic plan can be at times initially implemented in terms of a pilot project
before launching into a full scale.
Strategy Assessment: - Results of implementation plan are monitored and
assessed so that any corrective measures or expansion plan can take place.
E-Commerce Implementation: -The strategy diagram divides implementation
into the technical and the business aspects and these are briefly considered
below:
1) Technical Implementation: The approach to technical implementation of an
e-commerce system depends on the business objectives, business
requirements and technologies that have been selected.
2) Business implementation: Building its e-shop (or other C-commerce facility)
the organisation needs to:
1) Put in place the business infrastructure to support the new E-commerce
facility.
2) Market the new e-commerce facility to the intended users.
E-Commerce Evaluation-All new information system (IS) systems should be
properly evaluated after implementation and this is particularly important for a
system that 1s used by people outside the company. Evaluating an e-
commerce system will include the internal stakeholders but crucially there
needs to be a way of assessing customer reaction to the system (and potential
customers who gave up before completing a transaction are particularly
inaccessible).Loopback (test) from the evaluation is shown at three levels
1) improve it: Feedback from customers and testing using people not involved
in the Site development can indicate where changes are needed; the site can
be improved.
2) revise it: Business results from the use of e-commerce may indicate the
need
to change the e-commerce Strategy and the implementation plan: the planning
can be revised.
3) Update it: Developments in the competitive position, changes in the
company or the emergence of new e-commerce technologies may indicate the
need to re-Visit the strategic process; the strategy can be updated.

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