E-commerce is the use of internet platform to carry out business transactions. It entails digitalization of all business activities between an organization and its customers or clients. On the other hand, e-business refers to digitalization of transactions and processes within an organization. However, the two concepts have similarities owing to the fact that they intersect in many processes of an organization.
In the contemporary business environment, e-commerce and e-business have become critical elements of organizations’ strategies. The rationale is that they act as catalysts for improved financial performance. This implies that businesses have integrated information and communication technologies (ICT) in their activities and transactions considerably (Chan et al. 56).
By adopting internet and web technologies, a business that has a competitive advantage over rivals will be able to revolutionize business relationships within an organization (Nissanoff 160). This involves the improvement of communication between an organization and other organizations as well as individuals.
As such, the use of internet and web to conduct business activities leads to improved performance, increased customer involvement, reduced operational costs and enhanced customization (Kotler 52). This research paper is a literature review of e-commerce and e-business.
It analyzes ways in which businesses have benefited from internet and web technologies. Besides, the paper analyzes ways in which e-commerce and e-business have become an integral component of modern organizations. This is in addition to the impacts of the internet and web technologies on organizations.
Literature Review on E-commerce
Kotler asserts that e-commerce has developed speedily over the past few years (2). Also known as electronic commerce, e-commerce involves a myriad of concepts. While many people know of the phrase ‘e-commerce’, they do not understand many things about the business platform. According to Kotler, e-commerce goes beyond purchasing and selling of goods over the internet and web technologies (32).
It involves electronic exchange of goods, data and information between organizations and individuals. It also includes transfer of funds through electronic means and use of smart cards among many other business transactions that are possible over the internet. Chan et al. assert that e-commerce aims at integrating all stakeholders of an organization into one platform where they communicate effectively (45).
There are various distinct categories of e-businesses and e-commerce. First, e-commerce can take the form of business-to-business (B2B). It refers to a category of e-commerce where an organization exchanges goods and services with other business entities and organizations. For instance, an organization may embark on supplying raw materials to another organization that uses the raw materials to produce finished goods.
According to Dave, such transactions are classified as B2B (23). Moreover, B2B transactions such as selling certain capital equipment, contracting other firms to provide specific services and purchasing insurance policies qualify to be B2B transactions (Nissanoff 162). In such transactions, organizations use the internet platform to enhance their efficiency and productivity.
In other words, B2B transactions over the internet enhance the efficiency of supply chains and procurement processes in general. Second, business transactions between an organization and the client or customers are referred to as business-to customer transactions (B2C). The transactions reflect the exchange of goods and services between an organization and the customers.
Like B2B transactions, B2C transactions takes place in the context of internet technology and enrich the relationships between an organization and customers. B2C transactions are common in organizations that sell goods and products directly to the consumers.
It is imperative to assert that B2C transactions have increased tremendously to include online banking services, real estate websites and online information among many other services that consumers enjoy via the internet.
Third, e-commerce can take the form of consumer-to consumer business transactions (C2C). In this category, consumers that participate in internet business are able to sell and buy goods from each other. As elucidated by Dave, C2C transactions have been in existence even in the traditional business environment (32).
However, the development of ICT industry has made the transactions to become more efficient and fruitful than earlier on. Undoubtedly, there are numerous internet platforms where consumers can interact with each other and make the transactions. Ranging from social networks to online groups, consumers are able to sell and buy goods and services from each other. Auction sites and ‘second hand’ avenues have become common.
All these qualify as C2C transactions since they have enhanced the growth of online businesses (Chan et al. 52). Fourth, online transactions that entail exchange of goods and services between an organization and government agencies are called business-to- government transactions (B2G). In such transactions, organizations sell goods and services to government agencies.
Apparently, government agencies and institutions require supply of specific goods and services through contracts. The internet platform therefore allows the agencies to communicate effectively with potential suppliers of the services. This category has been unpopular in the context of businesses but has increased due to exponential growth of the internet connectedness (Chan et al. 65).
Dave says that B2G transactions have increased in the recent past owing to the fact that various governments across the world have begun to appreciate the need and importance of using online platform to find the most reliable and competitive suppliers (256).
Finally, business processes are major categories of e-commerce in all spheres of e-business. In other words, businesses track the information about their customers and are able to keep a profile of the suppliers and employees. This is an important area that e-commerce enriches since it leads to improvement in communication and efficient production in departments of an organization.
Further, Manzoor articulates that there are important components of effective e-commerce activities (64). This implies that an organization ought to comprehend various critical elements that are important in enhancing the success or failure of an e-commerce transaction. Therefore, an organization ought to consider some technical issues that allow an organization to reap e-commerce benefits (Manzoor 67).
First, an organization ought to develop a website that has enhanced features of online transactions. This involves the ability of a company to secure its transaction servers. Besides, an organization ought to have an intranet that allows the operations and processes within an organization to be efficient (Kotler 63).
This will require the employees to understand the operations of the internet, be able to manage information flow with efficiency and maintain the entire system. Moreover, an online transaction partner should be in a position to possess an online mode of payment where online business institutions are able to process and transfer funds of the transaction (Chan et al. 65).
They include online services offered by banking institutions such as Mastercard, Visa, Paypal and Payoneer to mention just a few. In addition, an online transaction partners should have national or international freight and courier services to enable the transfer of physical goods from one location to another. In other words, companies should have cost-efficient transport systems depending on the bulkiness of the product (Chan et al. 67).
Moreover, a transaction partner should be able to liaise with authenticating authorities in order to ensure that the sale or purchase of goods and services has the required security and integrity. Manzoor says that the customers also need to be acquainted with online transactions in various ways (70). At the outset, they ought to access the internet and have the requisite knowledge of engaging in e-commerce.
Dave postulates that the consumers should be able to change their mindsets in favor of buying goods and services through the internet (173). In other words, only the consumers that have the correct perception about an online transaction are able and willing to conduct business transactions over the internet.
According to Manzoor, organizations that transact activities over the internet ought to sensitize their potential customers with information that change their perception about the internet transactions (145). Due to the presence of the aforementioned factors in the modern business environment, the use of internet platform to make business transactions has grown over the last decades.
Despite the need to change the mode of conducting business transactions, various governments have installed different regulatory frameworks targeting e-commerce. For instance, Federal Trade Commission (FTC) is the regulatory authority in the United States of America (Chaudhury and Jean-Pierre185). The body regulates such activities as commercial emails and internet marketing.
This is in lieu of the fact that online businesses have potential risks where customers may suffer from fraudulent activities initiated by individuals and organizations. While FTC regulates online transactions and e-commerce in the US, there are other international regulatory authorities across the world.
Particularly, International Consumer Protection and Enforcement Network (ICPEN) is an accredited body that protects online consumers from potential dangers of e-commerce in the entire world (Chaudhury and Jean-Pierre190).
Since its formation in 1991, the regulatory authority has been in the forefront in providing online consumer protection and it cooperates and tackles all problems associated with e-commerce. While these regulatory authorities may have similar objectives, their jurisdiction and efficiency differ significantly (Dave 72). This implies that different governments have different rules and laws that govern online transactions and e-commerce at large.
Further, it is important to note that various governments have regulations and laws that either impede or enhance online transactions. Kotler articulates that such laws ought to be in line with the commercial needs of the customers (117). Specifically, there are countries whose internet infrastructure has developed marginally.
As such, numerous people may be unable to make effective transactions due to lack of connectivity. In such regions and geographical locations, consumers are vulnerable to fraudsters and it is upon the government to erect measures to protect them. While some government have invested immensely in regulatory frameworks, it is important to mention that some laws may impede online transactions in a considerable way (Chaudhury and Jean-Pierre193).
For instance, in countries where internet content is censored, many potential consumers are unable to access the transaction platform implying that online business does not flourish. This does not only present a challenge to numerous people but also leads to underdevelopment of online business.
Analysis of E-commerce and E-business
The rise and growth of e-commerce and e-business
Since its start in 1984, e-commerce has experienced unprecedented growth in the past two decades. There are various reasons that have led to the augmentation of ecommerce in the modern business environment. At the outset, economic forces have led to the increase in utilization of internet and web technologies (Dave 11). Apparently, business transactions via the internet lead to improved economic effectiveness of a corporation.
The reason is that reduced of costs communication and accessible technologies heighten the ability of an organization to address the needs of the customers. In other words, e-commerce leads to the reduction of costs associated with information sharing and marketing. Dave articulates that organizations that adopt e-commerce in their businesses experience external and internal economic integration (16).
External integration implies networking of organizations, consumers, suppliers, distributors and other stakeholders into one platform where the engage in effective communication. In such a situation, the stakeholders utilize an internet technology. Internal integration of business refers to the networking that an organization is able to initiate within its departments (Chaudhury and Jean-Pierre195).
This enhances efficiency in business processes and operations. Economic integration allows an organization to store its information in a digital way leading to easy retrieval of information.
In addition, the stored information can be shared electronically between various stakeholders of an organization (Chaudhury and Jean-Pierre196). To enhance internal integration in an organization, Dave says that intranet has become a characteristic of many corporations around the world (56).
In addition, Kotler articulates that market forces have popularized e-commerce in modern organizations (20). The use of internet and web technologies allows businesses to venture into international markets and promote their products to a big population. E-commerce provides a platform where potential customers can access information about a product and experience customer support.
The rationale is that customers are able to ask questions that may be important before making a purchase. For instance, a customer may enquire about the availability of a particular product and receive an instant response. In fact, many of the websites that companies develop have a section where customers can chat with the company’s representatives.
According to Dave, it is easy for companies to ensure that their target markets and customer bases receive information about goods and services available to them (28). This is only possible through the internet and web based technologies. It is important to note that e-commerce enhances the responsiveness of a company and ensures that a company produces goods that are in line with the needs, tastes and preferences of the customers.
The internet allows the customers to compare and contrast prices offered by the other companies with ease and speed (Nissanoff 201). E-commerce therefore enhances market stability and ensures that every consumer has enough information about the market forces and prices of specific goods and services.
While it is true that customers are bombarded with big amounts of information in the internet and may be unable to sieve the right information, it is apparent that they are able to make better choices in terms of buying and selling goods and services. According to Kotler, informed customers allow an organization to predict their behaviors, attitudes and purchasing decisions (44).
This way, an organization designs a strategy that reflects the specific needs of the customers leading to increased revenues since the products are likely to invite a myriad of customers. In other words, e-commerce provides an organization with raw information about the characteristics of the customers and their motivation when making a buying decision (Nissanoff 50).
As such, modern companies have appreciated and recognized the importance of internet and web based technologies in understanding the nature and features of a target market. This does not only imply adoption of the technology but also the development and creation of interactive and innovative internet platforms.
Another factor that has increased the popularity of the internet is the advancement in technological developments. Numerous technological developments have led to the emergence of ICT as a pivotal sector in the world of business. In particular, ICT development has allowed organizations and individuals to digitize their content and enhance the creation of open technological systems (Chaudhury and Jean-Pierre197).
Besides, ICT has allowed different types of data to be compressed and shared by different organizations and individuals (Nissanoff 51). This in turn has led to the convergence of communication systems of numerous organizations. The development and convergence of ICT systems have consequently led to fast, efficient and economical systems of communication between organizations and individuals.
The rationale is that the development of strong ICT infrastructure across the world has diminished the need for companies to utilize such platforms as telephones, televisions and print media to communicate to their customers and other stakeholders. To that end, the ability of businesses and corporations to use one platform to access the customers and clients has reduced communication costs in a considerable way (Nissanoff 212).
In addition, there has been an increase in the uptake of internet services across the world. Kotler says that internet connectivity increased tremendously at the dawn of 21st century (34). The reason is that there has been a growing need among many governments to enhance universal access to the internet.
While initial methods of reaching out to customers have become redundant, the penetration of the internet has allowed companies to establish franchises and subsidiaries in rural and seemingly remote areas all over the world. Manzoor asserts that many corporations are now investing in rural areas due to the likelihood of increasing their revenues (121). Besides, investing in rural areas has incentives for the companies.
This is in recognition of the fact that governments liaise with private sector in an attempt to stimulate economic development. As such, development of ICT serves as a critical technological force that has increased the popularity of e-commerce and e-business in the world.
Further, e-commerce has been able to enhance the trust that was lacking when it begun. Initially, trust and trustworthiness of transacting over the internet had been dwindling owing to the increase of hackers and fraudsters in the world (Nissanoff 54). With such development, the internet has responded to such activities by devising and designing platforms that enhances the safety of online transactions.
Such companies as Amazon, Yahoo and Google have been able to ensure safety of the transactions and enhance increased trust by the customers. In fact, many other companies have experienced unsurpassed growth in online customers as they continue to enhance safety of the business transactions across the world (Dave 62).
It is important to highlight that numerous businesses have provided the customers and other internet users with information about the company’s financial situation. This does not only lead to increased accuracy of investors when buying stocks but also ensures that the investors have ample information when making transactions.
As Kotler puts it, it is important to understand that e-commerce and e-business include all activities and processes of a business enterprise (29). As such, information about the financial performance of an organization is important in ensuring that the potential stockholders have the right information.
While it is apparent that the e-commerce and e-businesses have increased rapidly, it is essential to analyze the impacts that the two concepts have had on the traditional way of conducting business transactions. In other words, it is important to highlight the effects of online transactions on the nature, characteristics and type of business. Kotler attests that e-commerce has reduced the essence of the traditional business structures (34).
In other words, e-commerce has led to the reduction of office space that an organization required to set up an effective department. This is in consideration of the fact that online businesses require ‘virtual space’ to conduct their transactions. For instance, it is common to locate various sections and departments of an organization by simply logging into their websites.
Initially, this would have required an organization to set up physical structures (brick and mortar buildings) to address the queries of the customers. Nonetheless, the development of online business platforms has increased the efficiency of organization by reducing the costs that an organization would have incurred by setting up physical structures.
Manzoor states that e-commerce has also helped various organizations to achieve their goals of addressing specific needs of a client or customer (39). The internet platform provided by organizations allows the customers to express their needs to the company. The company in turn embarks on producing customized goods for the clients leading to improved customer satisfaction and loyalty (Nissanoff 54).
On the contrary, traditional businesses produced goods for customers without allowing them an opportunity to contribute their opinions and views about the characteristics and the type of products. This led to failure and poor performance by the traditional organizations, which have failed to offer their customers with goods that suit their needs perfectly.
In addition, Dave says that e-commerce and e-business have allowed the modern organizations to address customers’ questions and enquiries expeditiously (238). This is because e-commerce allows an organization to establish centers where the customers can speak directly to the customer care representative without having to book an appointment.
This does not only increase the loyalty of the customer but also ensures that the customer experiences satisfaction. Kotler pinpoints that customer loyalty and satisfaction are integral components of the strategy that a company adopts as well as the performance of the same (169). As such, e-commerce has increased the satisfaction of customers more than the traditional organizations.
Critics cite that e-commerce has also led to loss of employment opportunities and as such, it is a major driver of high rates of unemployment witnessed across the word. Manzoor says that e-commerce has addressed the need for organizations to reduce costs associated with labor in many departments (76).
The integration of all business processes and operations has reduced the need for business to hire employees for such purposes as communicating with its customers.
Internet and website technologies have therefore allowed the companies to downsize and lay off numerous employees in an attempt to remain profitable and competitive in the modern business environment. Nonetheless, the corporations have improved efficiency leading to an increase in the business activities across the world.
Benefits of E-commerce and E-business
In the above section, the paper has highlighted various factors that have increased the uptake of online transactions and activities. According to Dave, consumers have experienced several benefits from e-commerce and e-business (172). First, e-commerce allows the sellers and companies to reduce their production and operational costs significantly.
This is in recognition of the fact that an internet platform enhances the ability of an organization to automate its transactions leading to a reduction in the number of employees that it may need to carry out a specific business transaction (Nissanoff 56). As such, e-commerce provides an organization with a platform where it can reduce its labor costs. In addition, organizations are able to cut their marketing costs especially in advertising.
The rationale is that organizations’ ability to reach numerous customers over the internet is enhanced. Therefore, companies find it important to ensure that online commercials are only for the online consumers.
Moreover, a company that embarks on e-commerce experiences improved efficiency in supply chain management (SCM). This implies that the company is able to reduce its overhead costs especially those associated with slow supply chain (Chaudhury and Jean-Pierre 73).
Second, e-commerce enhances the ability of small and big organizations to reach out to global consumers. Manzorr states that e-commerce serves as an important aspect of business that equalizes all organizations (142).
In developing countries therefore, small and medium sized businesses are able to access the global market and compete with other organizations in the same platform. This in turn has reduced the cost of entry in business across the world. To that end, e-commerce and e-business has increased the ability of individuals to set up businesses (Chaudhury and Jean-Pierre 74).
Moreover, it is important to mention that online transactions are beneficial to consumers in a number of ways. Particularly, e-commerce allows individuals and consumers to order goods and services that suit their unique and personal needs. Dave asserts that e-commerce allows for customization of goods and services (72). For instance, e-commerce allows the consumers to make choices about goods and order them according to their needs.
In car manufacturing industry, customers are able to specify their needs making it possible for the manufacturers to produce customized cars for the customers. This is unlike traditional business models where customization was almost impossible. Chaudhury and Jean-Pierre argue that the ability of the customers to issue advanced orders allows the manufacturers to integrate these considerations when producing goods (93).
E-commerce enhances network production. It refers to the ability of an organization to outsource production process to companies that are located in different areas of the world (Chan et al. 168).
This does not only lead to effective contracts but also enhanced ability of an organization to choose the most appropriate contractor for a specific production process. In other words, network production leads to lowered costs, strategic marketing and adoption of the most appropriate procedures (Dave 189). Indeed, Manzoor says that a company is able to assign some of its tasks to other more efficient companies located all over the world.
Finally, e-commerce has allowed consumers to make business exchanges with other customers over the internet. Customers have access to information about the manufacturing and delivery of specific products. This broadens the choices at the disposal of a consumer. According to Kotler, e-commerce allows the consumers a significant influence over the transactions (82).
This ensures that the customers have increased control and are able to access goods and services in a fast and expeditious way. In addition, consumer-to-consumer transactions dictate the manner in which consumers interact with other individuals via the internet. As such, interaction patterns of consumers lead to increased access to information that makes it possible for customers to make informed buying decisions (Kotler 196)
Shortfalls of E-commerce and E-business
Despite numerous benefits that individuals stand to gain from online transactions, equally many shortfalls typify e-commerce and e-businesses. At the outset, e-commerce has led to loss of jobs and as such, it has created massive unemployment.
The rationale is that the internet has been in a position to substitute manual tasks with automated tasks. Therefore, employees whose work can be done over the internet have been laid off consistently. In addition, e-commerce has become an avenue where companies that seek to reduce labor costs venture. Therefore, it creates momentous advantages for the seller but fails to highlight its impacts on consumers.
Second, there has been an increase in fraudulent activities associated with e-commerce. Particularly, e-commerce thrives under the premise that individuals (consumers) are able to protect themselves from fraud. However, not all consumers are able to detect, identify and enhance their safety on the internet.
Apparently, many governments have been irresponsive to the security needs of online transactions and as such, they have been unable to counter the threat. Undoubtedly, a myriad of customers have lost momentous amount of money by transferring funds to erroneous organizations.
This does not only threaten the ability of the business to withstand such an insecure environment but also scares away customers who would have created a market for specific goods.
Kotler says that internet transactions flourish under the assumption that all sellers, consumers and suppliers have the ability to enhance their security and access information about fraudsters (76). In other words, Chaudhury and Jean-Pierre assert that e-commerce is possible only when the involved parties trust each other (135).
In essence, e-commerce refers to online business transactions. While e-commerce and e-business are used interchangeably, the latter refers to all business activities that are conducted via the internet.
There are various categories of e-commerce that include business-to-business (B2B), business-to-customers (B2C), business-to-government (B2G), customers-to business (C2G) and customers-to-customers (C2C). Due to the benefits that businesses stand to gain from e-commerce, there has been an increase in online transactions in the past decades.
The rise of e-commerce is attributable to market, economic and technology forces that have typified the modern business environment. Nonetheless, online businesses suffer from insecurity and they create unemployment in the short term. It is therefore important for regulatory authorities to increase their ability to address the shortfalls of e-commerce and e-businesses.
It is also worth mentioning that e-commerce has reduced production, communication, marketing and operational costs of a myriad of organizations around the world (Chaudhury and Jean-Pierre 247). This is because of an increase in network production and enrichment of consumers’ knowledge of e-commerce.
Chan, Henry, Lee, Raymond and Dillon, Tharam. E-commerce: Fundamentals and Applications. Washington DC: Wiley & Sons, 2007. Print.
Chaudhury, Abijit and Jean-Pierre Kuilboer. E-Business and E-Commerce Infrastructure. New York: McGraw-Hill, 2002. Print.
Dave, Chaffey. E-Business and E-Commerce Management. Upper Saddle River, New Jersey: Pearson Publishing, 2008. Print.
Kotler, Philip. Marketing Management. New Jersey: Prentice-Hall, 2012. Print.
Manzoor, Amir. E-commerce. New York: Sage Publishers, 2010. Print.
Nissanoff, Daniel. FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. London: The Penguin Press, 2006. Print.