Assignment on E-Business and E-commerce

E-COMMERCE:

INTRODUCTION

In the emerging global economy, e-commerce and e-business have increasingly be-come a necessary component of business strategy and a strong catalyst for economic development. The integration of information and communications technology (ICT) in business has revolutionized relationships within organizations and those between and among organizations and individuals. Specifically, the use of ICT in business has enhanced productivity, encouraged greater customer participation
, and enabled mass customization, besides reducing costs.

With developments in the Internet and Web-based technologies, distinctions between traditional markets and the global electronic marketplace-such as business capital size, among others-are gradually being narrowed down.

The name of the game is strategic positioning, the ability of a company to determine emerging opportunities and utilize the necessary human capital skills (such as intellectual re-sources) to make the most of these opportunities through an e-business strategy that is simple, workable and practicable within the context of a global information milieu and new economic environment.

 With its effect of leveling the playing field, e-commerce coupled with the appropriate strategy and policy approach enables small and medium scale enterprises to compete with large and capital-rich businesses.

On another plane, developing countries are given increased access to the global marketplace, where they compete with and complement the more developed economies. Most, if not all, developing countries are already participating in e-commerce, either as sellers or buyers. However, to facilitate e-commerce growth in these countries, the relatively underdeveloped information infrastructure must be improved.

The areas for policy intervention:

ü  High Internet access costs, including connection service fees, communication fees, and hosting charges for websites with sufficient bandwidth.

ü   Limited availability of credit cards and a nationwide credit card system.

ü  Underdeveloped transportation infrastructure resulting in slow and uncertain delivery of goods and services.

ü   Network security problems and insufficient security safeguards;

ü  Lack of skilled human resources and key technologies (i.e., inadequate professional IT workforce).

ü  Content restriction on national security and other public policy grounds, which greatly affect business in the field of information services, such as the media and entertainment sectors.

ü  Cross-border issues, such as the recognition of transactions under laws of other ASEAN member-countries, certification services, improvement of delivery methods and customs facilitation; and the relatively low cost of labor, which implies that a shift to a comparatively capital intensive solution (including investments on the improvement of the physical and network infrastructure) is not apparent.

Dis-inter mediation:

Through B2B e-markets, suppliers are able to interact and transact directly with buyers, thereby eliminating intermediaries and distributors. However, new forms of intermediaries are emerging. For instance, e-markets themselves can be considered as intermediaries because they come between suppliers and customers in the supply chain. 

What is e-commerce?

Electronic commerce or e-commerce refers to a wide range of online business activities for products and services. It also pertains to “any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact.”

E-commerce is usually associated with buying and selling over the Internet or con-ducting any transaction involving the transfer of ownership or rights to use goods or services through a computer-mediated network. Though popular, this definition is not comprehensive enough to capture recent developments in this new and revolutionary business phenomenon. A more complete definition is: E-commerce is the use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals.

International Data Corp (IDC) estimates the value of global e-commerce in 2000 at US$350.38 billion. This is projected to climb to as high as US$3.14 trillion by 2004. IDC also predicts an increase in Asia’s percentage share in worldwide e-commerce revenue from 5% in 2000 to 10% in 2004.

Three primary processes are enhanced in e-business:

1. Production processes, which include procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes, among others.

2. Customer-focused processes, which include promotional and marketing efforts, selling over the Internet, processing of customers’ purchase orders and payments, and customer support, among others.

3. Internal management processes, which include employee services, training, internal information-sharing, video-conferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Work group communications and electronic publishing of internal business information are likewise made more efficient.

Is the internet economy synonymous with e-commerce and e-business?

The Internet economy is a broader concept than e-commerce and e-business. It includes e-commerce and e-business.

The Internet economy pertains to all economic activities using electronic networks as a medium for commerce or those activities involved in both building the networks linked to the Internet and the purchase of application services such as the provision of enabling hardware and software and network equipment for Web-based/online retail and shopping malls (or “e-malls”). It is made up of three major segments physical (ICT) infrastructure, business infrastructure, and commerce.

What is b2b e-commerce?

B2B e-commerce is simply defined as e-commerce between companies. This is the type of e-commerce that deals with relationships between and among businesses.

About 80% of e-commerce is of this type, and most experts predict that B2B e-commerce will continue to grow faster than the B2C segment.

The B2B market has two primary components: e-restructure and e-markets. Efra structure is the architecture of B2B, primarily consisting of the following:

ü  Logistics - transportation, warehousing and distribution (e.g., Procter and Gamble);

ü  Application service providers - deployment, hosting and management of pack, Oracle and Link share);

ü  Outsourcing of functions in the process of e-commerce- such as Web hosting, e.g., outsourcing providers such as share, Net Sales, ill Enterprises and Universal Access);

ü  Auction solutions software for the operation and maintenance of real-time auctions in the Internet (e.g., Moa Technologies and Open Site Technologies).Content management software for the facilitation of Web site content manage Inter woven and Procure Net); and Commerce One, a browser-based, XML-enabled purchasing automation software).

ü  E-markets are simply defined as Web sites where buyers and sellers interact with each other and conduct transactions.

The more common B2B examples and best practice models are IBM, Hewlett-Packard (HP), Cisco and Dell.

THE IMPACT OF B2B MARKETS ON THE ECONOMY OF DEVELOPING COUNTRIES:

Transaction costs

 There are three cost areas that are significantly reduced through the conduct of B2B e-commerce. First is the reduction of search costs, as buyers need not go through multiple intermediaries to search for information about suppliers, products and prices as in a traditional supply chain. In terms of effort, time and money spent, the Internets a more efficient information channel than its traditional counterpart. In B2B markets, buyers and sellers are gathered together into a single online trading community, reducing search costs even further. Second is the reduction in the costs of processing transactions (e.g. invoices, purchase orders and payment schemes), as B2B allows for the automation of transaction processes and therefore, the quick implementation of the same compared toothier channels (such as the telephone and fax). Efficiency in trading processes and trans-actions is also enhanced through the B2B e-market’s ability to process sales through online auctions. Third, online processing improves inventory management and logistics.

Transparency in pricing

Among the more evident benefits of e-markets is the increase in price transparency. The gathering of a large number of buyers and sellers in a single e-market reveals market price information and transaction processing to participants. The Internet allows for the publication of information on a single purchase or transaction, making the information readily accessible and available to all members of the e-market. Increased price transparency has the effect of pulling down price differentials in the market. In this context, buyers are provided much more time to compare prices and make better buying decisions.

Moreover, B2B e-markets expand borders for dynamic and negotiated pricing wherein multiple buyers and sellers collectively participate in price-setting and two-way auctions. In such environments, prices can be set through automatic matching of bids and offers.

                                                                                      

Economies of scale and network effects

The rapid growth of B2B e-markets creates traditional supply-side cost-based economies of scale. Furthermore, the bringing together of a significant number of buyers and sellers provides the demand-side economies of scale or network effects. Each additional incremental participant in the e-market creates value for all participants in the demand side. More participants form a critical mass, Product orders over the Internet.

The relevant components of an e-business model

An e-business model must have:

Shared digital business infrastructure, including digital production and broadband/wireless networks, content creation technologies and information management systems), which will allow business participants to create and utilize network economies of scale and scope;

 Sophisticated model for operations, including integrated value chains-both supply chains and buy chains;

An e-business management model, consisting of business teams and/or partnerships; and

Policy, regulatory and social systems-i.e., business policies consistent with e-commerce laws, telnet work working/virtual work, distance learning, incentive schemes, among others.

E-COMMERCE APPLICATIONS: ISSUES AND PROSPECTS

Various applications of e-commerce are continually affecting trends and prospects for business over the Internet, including e-banking, e-tailing and online publishing/online retailing.

A more developed and mature e-banking environment plays an important role in e-commerce by encouraging a shift from traditional modes of payment (i.e., cash, checks or any form of paper-based legal tender) to electronic alternatives (such as e-payment systems), thereby closing the e-commerce loop.

What is an electronic payment system? Why is it important?

An electronic payment system (EPS) is a system of financial exchange between buyers and sellers in the online environment that is facilitated by a digital financial instrument (such as encrypted credit card numbers, electronic checks, or digital cash) backed by a bank, an intermediary, or by legal tender.

EPS plays an important role in e-commerce because it closes the e-commerce loop. In developing countries, the underdeveloped electronic payments system is a serious impediment to the growth of e-commerce. In these countries, entrepreneurs are not able to accept credit card payments over the Internet due to legal and business concerns. The primary issue is transaction security.

The absence inadequacy of legal infrastructures governing the operation of e-payments is also a concern. Hence, banks with e-banking operations employ service agreements between themselves and their clients.

The relatively undeveloped credit card industry in many developing countries is also a barrier to e-commerce. Only a small segment of the population can buy goods and services over the Internet due to the small credit card market base.

There is also the problem of the requirement of “explicit consent” (i.e., a signature) by a card owner before a transaction is considered valid-a requirement that does not exist in the U.S. and in other developed countries.

What is the confidence level of consumers in the use of an EPS?

Many developing countries are still cash-based economies. Cash is the preferred mode of payment not only on account of security but also because of anonymity, which is useful for tax evasion purposes or keeping secret what one’s money is being spent on. For other countries, security concerns have a lot to do with a lack of a legal framework for adjudicating fraud and the uncertainty of the legal limit on the liability associated with a lost or stolen credit card.

In sum, among the relevant issues that need to be resolved with respect to EPS are consumer protection from fraud through efficiency in record-keeping; transaction privacy and safety, competitive payment services to ensure equal access to all consumers, and the right to choice of institutions and payment methods. Legal frameworks in developing countries should also begin to recognize electronic trans-actions and payment schemes.

What is e-banking?

E-banking includes familiar and relatively mature electronically-based products in developing markets, such as telephone banking, credit cards, ATMs, and direct deposit. It also includes electronic bill payments and products mostly in the developing stage, including stored-value cards (e.g., smart cards/smart money) and Internet-based stored value products

What is the status of e-banking in developing countries?

E-banking in developing countries is in the early stages of development. Most banking in developing countries is still done the conventional way. However, there is an increasing growth of online banking, indicating a promising future for online banking in these countries. Below is a broad picture of e-banking in three ASEAN countries.

E-COMMERCE IN DEVELOPING COUNTRIES

Important is e-commerce to SMEs in developing countries

For SMEs in developing countries e-commerce poses the advantages of reduced information search costs and transactions costs (i.e., improving efficiency of operations-reducing time for payment, credit processing, and the like). Surveys show that information on the following is most valuable to SMEs customers and markets, product design, process technology, and financing source and terms. The Internet and other ICT  facilitate access to this information. In addition, the Internet allows automatic packaging and distribution of information (including customized information) to specific target groups.

However, there is doubt regarding whether there is enough information on the Web that is relevant and valuable for the average SME in a developing country that would make investment in Internet access feasible. Underlying this is the fact that most SMEs in developing countries cater to local markets and therefore rely heavily on local content and information. For this reason, there is a need to substantially increase the amount and quality of local content (including local language content) on the Internet to make it useful especially to low-income entrepreneurs

Helping SMEs Conquer the E-Business Challenge

The Information and Communication Technology Innovation Program for E-business and SME Development, otherwise known as the ICT-4-BUS, is an initiative by the Multilateral Investment Fund and the Information Technology for Development Division of the Inter-American Development Bank (IDB) to enhance the competitiveness, productivity and efficiency of micro-entrepreneurs and SMEs in Latin America and the Caribbean through the provision of increased access to ICT solutions. This is in line with the regional and worldwide effort to achieve a viable “information society.” Programs and projects under this initiative include the dissemination of region-wide best practices, computer literacy and training programs, and coordination efforts to facilitate critical access to credit and financing for the successful implementation of e-business solutions. The initiative serves as a strategic tool and a vehicle for maximizing the strong SME e-business market potential in Latin America manifested in the $23.51 billion e-business revenues reached among Latin American SMEs.

Empowering the Agricultural Sector through B2C E-Commerce

The International Federation for Alternative Trade (IFAT) is a collective effort to empower the agricultural sector of developing countries. It is composed of 100 organizations (including 70 organizations in developing countries) in 42 countries. Members of the organization collectively market about $200-400 million annually in handicrafts and agricultural products from lower income countries. In addition, IFAT provides assistance to developing country producers in terms of logistical support, quality control, packing and export.

·        It provides avenues for firms in poorer countries to enter into B2B and B2G supply chains.

·        It assists service-providing enterprises in developing countries by allowing them to operate more efficiently and directly provide specific services to customers globally.

E-commerce at Work in the Service Sector

Offshore data processing centers, which provide data transcription and “back office” functions to service enterprises such as insurance companies, airlines, credit card companies and banks, among others, are prevalent in developing countries and even in low-wage developed countries. In fact, customer support call centers of dotcoms and other ICT/e-commerce companies are considered one of the fastest growing components of offshore services in these countries. India and the Philippines pride themselves in being the major locations of offshore data entry and computer programming in Asia, with India having established a sophisticated software development capability with highly skilled personnel to support it.

Is e-commerce helpful to the women sector? How has it helped in empowering women:

In general, the Internet and e-commerce have empowered sectors previously discriminated against. The Guyana experience can attest to this.

Women have gained a foothold in many e-commerce areas. In B2C e-commerce, most success stories of women-empowered enterprises have to do with marketing unique products to consumers with disposable income. The consumers are found largely in developed countries, implying that there is a need for sufficient infrastructure for the delivery of products for the business to prosper and establish credibility.

For example, if an enterprise can venture into producing digital goods such as music or software that can be transmitted electronically or if such goods can be distributed and/delivered locally, then this is the option that is more feasible and practicable.

Unfortunately, the existing legal systems in most developing countries are not sufficient to protect those engaged in e-commerce. For instance, with respect to contracts, existing laws were conceived at a time when the word “writing,” “document” and “signature” referred to things in paper form. On the other hand, in today’s electronic business transactions paper is not used for record-keeping or entering into contracts.

Another important and common legal issue faced by many developing countries is uncertainty regarding whether the courts will accept electronic contracts or documents and/or electronic signatures as evidence. One view is that the issue of admissibility of electronically generated evidence will not be resolved unless a law specifically referring to it is passed. This gap in existing legal systems has caused the emergence of at least two divergent views: one bordering on the conservative interpretation of the word “document” as to exclude non-paper-based ones.