Electronic Commerce

Chapter 3

3.1 Introduction

This chapter discusses the topic of Electronic Commerce (Ecommerce). A brief history, definition, the main elements, influences, incentives and future prospects of the subject will be provided in the following sections.

3.2 A brief history of Ecommerce

Electronic commerce, being a new field, is still developing its theoretical and scientific foundations. Concepts such as email and file transfer data from the 1960s. In the early 1970s the extent of electronic applications was limited to large corporations, financial institutions, and a few daring small business (Turban, 2000). Since the 1960s and 1970s development such as video links and multimedia applications have evolved. Multimedia offers the potential for a number of innovative applications such as banking transactions, civil administration and commerce activities without using office space. Communication usage via email has rapidly grown, billions of email messages are now sent over the Internet every month, it has been recognised as the fasted growing medium for information exchange today (Black, 2000).

"The commercialisation of the Internet in the early 1990s and its rapid growth to millions of potential customers, the term electronic commerce was coined, and electronic commerce applications expanded rapidly" (Turban, 2000).

3.3 Defining Ecommerce

This section is divided into six parts that briefly discuss the scope of the topic of Ecommerce.

3.3.1 Introduction

Ecommerce is an emerging concept that can be described as business interaction using information and communication technology, which is useful to all business functions (finance, marketing and human resources etc) (Alter, 1999, McLeod & Schell, 2001, Turban, 2000).Ecommerce can support all aspects of trade in physical goods except the actual delivery. Digital goods, on the other hand, can even be delivered electronically (Clarke, 1998).

3.3.2 Key elements of Ecommerce

Mcleod & Schell (2001) have identified three main ecommerce technology choice direct connectivity, value-added networks, and the Internet.

Direct Connectivity is described as an established data communication link with a firm's trading partners. This is the traditional way to build business networks, involving substantial investments in people, hardware, and software to create and maintain a network.

Value-added Networks (VAN) are the most common way to exchange EDI information. EDI has evolved from financial transactions to other transaction processing and has enlarged the participation between companies from financial institutions to manufacturers, retailers, services, and other related activities (Turban, 2000).

VAN is provided by a vendor who offers many services, for example; mapping software, maintaining logs, archive files, and assisting in trading partner training. These VAN vendors are described as costly and direct connectivity is gaining support as a means for trading partners to avoid their charges.

The Internet provides a global communications network that not only links the trading partners but can also include consumers. "Much of the boom in electronic commerce is expected to come from firms that will promote - and in some cases deliver - their products via the Internet. " (McLeod & Schell, 2001). Ecommerce is seen as one of the most effective new developments that might out-date EDI systems. For example order taking, credit checking, production scheduling, technical support, and routine customer support activities will in the future to be available on-line (Laudon, 2000). However, direct connectivity and the Internet do not provide the services available from VAN. Until Internet Services can completely satisfy the EDI needs of firms of all sizes and types, all three-technology types will continue to be used (McLeod & Schell, 2001).

Ecommerce is seen as one of the most effective new developments that might out-date EDI systems. For example order taking, credit cheking, production scheduling, technical support, and routine customer support activities will in the future to be available on-line (Laudon, 2000). However, direct connectivity and the Internet do not provide the services available from VAN. Until Internet Services can completely satisfy the EDI needs of firms of all sizes and types, all three-technology types will continue to be used (McLeod & Schell, 2001).

3.3.3 Public Perception

Many benefits are available to society and consumers providing they have access to the relevant Ecommerce technologies, such as the Internet. Access of the Internet facility has been rapidly growing in countries all over the world since 1990 (Black, 2000). This would suggest that the public has a positive perception of Ecommerce and is embracing the technology.

Ecommerce enables more individuals to work at home and to reduce travelling needs for shopping. It facilitates delivery of public services such as healthcare, education, and the distribution of government social services at a reduced cost and/or Improved quality. Healthcare services, for example, can reach patients in rural areas (Turban, 2000).

For consumers, Ecommerce enables customers to shop or do other transactions 24 hours a day, all year round, from almost any location. Customers are provided with more choice in seleting where they make their puchase and can therefore shop around for better and comparative prices. In some cases, especially digitised products, Ecommerce allows quick delivery.

However poor publicity has alerted consumers and society to many Ecommerce disasters such as companies disclosing customer's credit card details online (Barclay's Bank and Egg well-publicised cases). Other disasters have included the risk of thieves, hackers and corporate spies who want to steal data or corrupt systems. To reduce public concern it is the responsibility of organisations to minimise risk with the use of efficient practises such as careful planning, a well-designed security policy, business practises, procedures and good staff training (MacLeod, 2001).

3.3.4 Business Perception

Ecommerce supports the business vision of the future (Black, 2000). Applications can contribute to increased responsiveness, flexibility, efficiency and accountability in business (See Section