Electronic commerce as an instrument of international business activity

Todorova, Julia

Electronic commerce as an instrument of international business activity

Zusammenfassung

Inhaltsangabe:Abstract:
The object of research is electronic commerce as an instrument of new economy which has gained a foothold in the western business practice and is developing in Ukraine at a furious pace. The subject of the research is organizational, structural and functional development of e-commerce.
The purpose of the thesis is, basing on the analysis of current state of electronic commerce in the world and Ukraine, to estimate the its prospects for doing business internationally and to develop recommendations for a Ukrainian company X which considers the possibility of introducing e-commerce business models into its business practice.
The information data of the thesis are based on official statistical reports, current web-archives of research and statistical Internet-companies, national Boards of Statistics, Organization of Economic Cooperation and Development, publications on e-business and e-commerce issues, economic literature from the funds of the scientific library of Otto-von-Guericke University (Magdeburg, Germany).
The thesis applies the method of scientific abstractions, cause-effect and functional analysis to understand the mechanism of electronic commerce and its place within the electronic business framework; comparative statistical analysis to study the state of the art in the electronic commerce in the world and in Ukraine, SWOT-analysis to define the strategic potential of electronic commerce; economic-mathematical simulation to estimate the efficiency of the Internet shop for the business activity of the company «?».
The thesis describes the Internet as an environment for doing business, defines the concept of e-commerce, its components, advantages, costs and challenges. It considers the peculiarities of studying international e-commerce, its dynamics in the world and in Ukraine, analyses factors that influence its development in transitional economies. The thesis gives classification of business-models for electronic commerce and provides calculations proving the efficiency of the Internet shop as the simplest and most available business model for a Ukrainian company that considers a possibility to launch e-commerce initiative including the international business activity. Calculations prove that introduction of the Internet shop contributes to increasing the efficiency of the business activity, to improving customer service quality and strengthening the company competitiveness in the home and foreign […]

Leseprobe

Inhaltsverzeichnis

ID 7649

Todorova, Julia: Electronic commerce as an instrument of international business activity

Hamburg: Diplomica GmbH, 2004

Zugl.: Donetsk National Technical University, Universität, Magisterarbeit, 2004

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TABLE OF CONTENTS

INTRODUCTION ... 7

1 THE INTERNET AS BUSINESS ENVIRONMENT ... 10

1.1 Globalization and New Technologies in Business ... 10

1.2 E-business and E-commerce: Definition of Terms ... 12

1.3 The History of the Internet Commerce... 22

1.4 E-commerce: Benefits, Costs, Challenges... 30

2 INTERNATIONAL E-COMMERCE: STATE OF THE ART ... 37

2.1 International e-Commerce Benchmarking ... 37

2.2 Dynamics of E-commerce Development... 41

2.3 Cross-border Electronic Commerce ... 56

2.4 Barriers Affecting E-Commerce in Transitional Economies ... 59

2.4.1 E-Commerce Development in Ukraine ... 59

2.4.2 Factors of Influence... 64

3 CHOOSING A BUSINESS MODEL FOR AN E-COMMERCE

INITIATIVE ... 69

3.1 E-commerce versus Traditional Business ... 69

3.2 Business Models for Electronic Commerce ... 72

3.3 The Internet-shop... 74

3.3.1. Facilities and Configuration ... 75

3.3.2 Organizational Issues... 77

3.3.3 Software and its Cost... 81

3.3.4 Hardware and its Cost ... 82

3.3.5 Information Security... 83

3.3.6 System Integration with Business Process ... 84

3.3.7 Cost... 85

3.3.8 Challenges of an E-shop... 87

3.4 Comparative Analysis of a Business Before and After Introducing E-

shop... 88

3.4.1 Quantitative Indicators ... 88

3.4.2 Qualitative Indicators ... 93

CONCLUSION ... 96

LIST OF REFERENCES... 100

APPENDIX . The List of Standards' Controller Remarks ... 105

APPENDIX B. Validity of the International Comparisons... 106

APPENDIX C. The Internet Penetration by the Company Size and

Industry ... 107

APPENDIX D. Internet and Electronic Commerce Transactions ... 108

APPENDIX E. Barriers to Internet Commerce ... 111

INTRODUCTION

This master thesis is devoted to one of the most urgent issues of the present

day, namely the development of electronic commerce. This sphere of activity is

becoming more and more significant with the tendency towards total globalization

of economy. Information technology (IT) made a tremendous impact on the

business world. With the help of IT, business processes and operations that used to

take days or weeks can now be done in a matter of seconds. Every firm that seeks

to be successful in the future is striving for the implementation of a successful e-

business strategy. It is a hot issue in the business world and is affecting every type

of organization as they attempt to improve efficiency and stay ahead of their

competitors. Overcoming physical frontiers, electronic business raises the question

of developing the measurability parameters for electronic business processes, their

compatibility with each other, traditional business and practice established in

different countries.

We devoted this thesis to responding the question what is the actual

potential of such virtual form of doing business as electronic commerce for a

Ukrainian business.

The purpose of the thesis is, basing on the analysis of current state of

electronic commerce in the world and Ukraine, to estimate the prospects of

electronic commerce for doing business internationally and to develop

recommendations for a Ukrainian company "X" which considers the possibility of

introducing e-commerce business models into its business practice.

The following tasks are supposed to be solved in the course of this

research:

- to study potential possibilities for doing business granted by the Internet;

- to determine specificity of terminology applied for electronic business

and the place electronic commerce occupies in electronic business;

- to estimate the advantages and risks of introducing electronic commerce

basing on the practical experience of the leading western companies;

- to study the peculiarities of international electronic commerce, methods of

its records and research;

- basing on the analysis of statistical data to show the dynamics of e-

commerce formation in the world and in Ukraine;

- to consider the peculiarities of business models applied for electronic

commerce;

- on the example of one business model to show the attractiveness of

electronic commerce for a Ukrainian business considering introducing new

technologies as a means for enhancing competitiveness of its international activity.

The object of research is electronic commerce as an instrument of new

economy which has gained a foothold in the western business practice and is

developing in Ukraine at a furious pace. The subject of the research is

organizational, structural and functional development of e-commerce.

Materials for research were collected in the Internet and from the funds of

the scientific library of Otto-von-Guericke University (Magdeburg, Germany). As

scientific study of electronic commerce has begun quite recently, the main base of

sources comprises current web-archives of research and statistical Internet

companies, national Boards of statistics, the Organization of Economic

Cooperation and Development. Fundamental works on electronic commerce by

Paul Timmers, Michael Shaw, Troy Strader and others were also studied.

The thesis applies the following methods of scientific research: a method of

scientific abstraction, the cause and effect and functional analysis to understand the

mechanism of electronic commerce and its place in system of electronic business,

the comparative statistical analysis to describe the state of the art in electronic

commerce in the world and in Ukraine, economic-mathematical simulation to

estimate the efficiency of the Internet - shop in economic activities of firm "X".

Objects in view have determined the following structure of the thesis. The

first chapter is devoted to description of the Internet as an environment for doing

business, to definition of electronic commerce concept, its components,

advantages, lacks and challenges. The second chapter examines the peculiarities of

studying the international electronic commerce, traces dynamics of its

development in the world and in Ukraine on the basis of the statistical data,

analyzes the factors that influence electronic commerce in transitional economies.

In the third chapter comparison of electronic commerce with traditional business is

given, classification of business models for electronic commerce is provided and

calculations of the Internet-shop efficiency are given to illustrate the simplest and

most accessible business model for a Ukrainian enterprise considering an

opportunity to introduce electronic commerce, including the exit on the

international market.

Certain provisions of the given research were approved in the course of the

author's work in the research group headed by Jorg Martinetz (University Otto-

von-Guericke, Magdeburg, Germany) on the project e-Volution, funded by the

European Union.

1 THE INTERNET AS BUSINESS ENVIRONMENT

This chapter first discusses the attractiveness of opportunities the new

technologies provide for doing business electronically. Then we are going to

review the existing approaches to defining electronic business and electronic

commerce and specify their functional similarities and differences. The history and

some success stories which follow illustrate the irresistible drive which pushed the

new economies come to existence. Finally, we are going to present the benefits,

costs and challenges the electronic commerce face the businesses thinking of

implementing e-business solutions.

1.1 Globalization and New Technologies in Business

The beginning of the XXI century has been characterized with the more

intensive integration of the countries into the global informational community. The

Internet continues to play a crucial part in this current integration. It is worth

noting that the Internet is becoming a platform which is more and more similar to a

common personal computer. The reality in which the users had the opportunity

only to read information comes to its logical end, giving place to a new world in

which the Internet unites a host of web-nodes basing on various systems. This

allows not only reading information but also publish it, summarize and correct it

by means of voice software, programs for distinguishing handwriting and other

innovative technologies.

These changes could not but contribute to developing new business

structures which would use innovative power of information technologies, together

with essential experience accumulated in the field of business, and establish

partnership relations being located anywhere in the world. In their turn, territorially

scattered businesses received the opportunity to create a united basic level of

competence and to develop effective processes for goods and services production

with the help of information communication technologies.

To answer the question why the Internet is so attractive environment for

doing business let us enumerate some reasons which are determined by the

specificity of the World Wide Web (WWW):

Absence of geographical frontiers. For business it means that theoretically

the scope of clients is not restricted with the physical location of the business. The

Internet helps to concentrate the company efforts on any client who is interested

and solvent independently on his location.

Internationality. 90% of the WWW exist in English. In the west, and

partially in Ukraine there has been established a certain culture of doing business

electronically. In the west there has been created a legal base and there exist

comfortable means for electronic payment, which makes it more attracted to

construct foreign-partners-oriented business.

Scalability. What does a businessman do when one outlet can not cope with

the client flow? He opens new outlets or moves in a new, more spacious premises.

All this results in significant material costs. What does a businessman do when his

server with an Internet shop stops coping with the client flow? He will increase

memory, replace the processor or install data base server on a separate computer.

These costs are a great deal lower than the premises reconstruction and call for

much less efforts and much shorter terms.

Fast business. The time in the Internet, according to the experts' estimates,

lies 4 times faster that the real time. In the Internet business the activity during a

quarter corresponds to the one which takes one year in a traditional business. It can

be explained by the fact that it is much easier and faster to develop the software

realizing the functions of the shop than to open a real shop.

Thus, the Internet provides favorable conditions for doing business thanks

to its unique qualities: globality, internationality, scalability, and development rate.

WWW is not only a comfortable means of communication but also principally new

step in the field of doing business which allows making money irrespective of

geographical location and amount of initial capital.

Before considering the advantages the Internet provides for doing business

it is necessary for us to determine the difference between the concepts `the

Internet' and the World Wide Web (WWW), which are often used interchangeably

in the literature. The difference lies in the fact that `the Internet' covers the

technical aspect from the point of view of physically existing network of

computers tied together. The concept of `the WWW', in its turn, covers document

aspects from the point of view of virtual network of documents connected with

each other. Hence, the WWW is a global hypermedia document which opens

unlimited access to the information anywhere in the world. The prerequisite to the

WWW functioning is computers' connection to the Internet and their

"understanding" of common standards to access informational resources.

The emergence of web-pages as information carriers in the Internet and

wide spread of personal computers pushed companies Internet-users towards the

idea to use the Net as a gate to enter the global market. This tendency found its

implementation in creating electronic shops and later in emerging other

instruments of electronic commerce. This idea proved to be so successful that those

who were the first to understand the prospects of this business reached outstanding

success. One may take as an example Amazon company (selling books via the

Internet), whose founder

Jeff Bezos earned US$ 16 mln. (1996) just a year after

they started their activity. The ideas and methodology of doing traditional business

are more and more integrating with the possibilities of information distribution

provided by the Internet.

1.2

E-business and E-commerce: Definition of Terms

The electronic commerce (e-commerce) as a concept is an integral part of

the electronic business (e-business). This term was first applied by the chairman of

the Board of Directors and IBM CEO Lou Gerstner [1] in his speech in New York

in 1997. However, since then understanding of the terms has remained

controversial enough. There exist a number of definitions of e-business and e-

commerce which do not always correlate with each other [2].

Let us thus consider how various authors define e-business. E-business

allows for the extended organization to be connected. This means that all

employees, customers/clients, suppliers, and other stakeholders, regardless of

geographic region, are interconnected. E-business uses common electronic data

standards with computer automation technology to electronically interconnect

information systems, integrate internal and external data streams, and automate

business processes between trading partners [3]. E-business facilitates data flows

in business-to-business or system-to-system processes. Figure 1.1 shows the

relationships between the different aspects and terms of e-business.

e-business

Business partners/

suppliers

Extranet

Internet

Own

enterprise

Customers

e-commerce

e-procurement

e-organisation

business-to-business (b2b)

business-to-consumer (b2c)

consumer-to-consumer (c2c)

Supply Chain Management

Customer Relationship Management

internal business

Intranet

e-government

Figure 1.1 - E-business composition

As many researchers emphasize [4], the most important function of e-

business is its interconnectivity and system interaction. As a result of the

automation, many human functions are eliminated from various processes such as

unnecessary key input, intervention, and internal reprocessing of electronic

business information. Efficiency improvement resulting from faster processing and

reduced errors is then realized in routine data processes and business interaction.

E-business allows service providers to interact with their suppliers and customers.

This improved relationship causes increased loyalty, and then results in increased

profits and a competitive advantage for the firm.

E-business performs the following functions. E-business provides links to

customers, suppliers, business partners, and employees through the Internet,

intranets, and extranets. Web systems handle transactions for customers and also

provide them e-commerce services. Intranets and Web portals are used to link

employees so they can have access to more information. Intranets are commonly

used for transactional and interactive processes and information sharing purposes.

The increased data availability improves corporate productivity.

Information flowing to and from business partners is facilitated through the

growth and improvement of extranets. Extranets allow more and more firms to

implement e-business solutions. The suppliers of a firm are also linked to their

customers through these extranets. This allows for logistics improvements such as

systems interconnection, production streamlining, and automatic material order.

The integration of logistics is commonly referred to as supply chain management.

The existing research differentiates between the following e-business

components. With the expanded functionality, e-business has gradually increased

its complexity. It is evidenced by the problems occurring at dotcoms during the

holiday season, such as Toys-R-Us [5]. E-business sites were originally focused on

their customers. Expanded e-business applications are expected to handle other

parties such as partners and suppliers, thus increasing complexity.

E-business has caused a need for high-end, highly available computing

platforms [6]. The increased complexity of e-business applications has made many

believe that client/server applications are not going to do the job in the near future

[7].

As a result,

John A. Rodgers et al.

maintain that organizations may be

forced to dispose of legacy systems if they wish to meet the requirements of e-

business [8]. If they decided to keep legacy systems, it is likely that they would be

unable to compete in the long term because their success is tied to the efficiency of

their IT infrastructure.

E-business technology consists of operating systems such as Windows NT,

server hardware, and management platforms scheduled to arrive in the near future.

This will enable IT managers to make significant changes to their system

architectures [9

]

. System or server consolidation has also emerged as an approach

to solving these problems. Infrastructures will then become more important to

managers as systems are re-engineered to become more flexible. Managers also

look for scalability as they experience continuous pressure to expand hardware and

software service levels [10]. They look for hardware and software that can handle

performance scalability as well as maintaining the flexibility required to handle a

mixture of workload requirements. Partitioning of architectures has been one

approach to addressing these data center requirements. Also, many computer firms

are striving to provide various servers that are able to handle e-business functions.

[11]. These products are more powerful, reliable, and scalable than previous

systems, thus improving the quality of e-business solutions.

Organizations will have a need for alliances from their hardware, software,

and service providers. As a result of the increased reliance on these systems,

managers will focus closely on their infrastructure's quality assurance and

performance [12].

Although in most cases e-commerce and e-business are synonymous, e-

commerce implies that goods and services can be purchased online, whereas e-

business might be used as more of an umbrella term for a total presence on the

Web, which would naturally include the e-commerce (shopping) component. E-

commerce may also refer to electronic data interchange (EDI), in which one

company's computer queries and transmits purchase orders to another company's

computer. E-commerce is the buying and selling of goods and services on the

Internet, especially the World Wide Web. For online retail selling, the term e-

tailing is sometimes used. A further specification of e-commerce is mobile-

commerce and micro-commerce.

Mobile-commerce means using smart phones and handheld computers with

wireless connections to place orders and transact business over the Web. Micro-

commerce is low-value transactions in e-commerce. The ability to charge pennies

for a transaction enables pay-per-view services such as selling a single article from

a newspaper or magazine or providing individual lookups from a resource such as

a dictionary or encyclopedia for example. Micro commerce enables services that

are too small to be paid by a single credit card transaction.

Although e-business and e-commerce are two separate concepts, if we

compare them, we can find the following similarities between the two which

explain why these terms are so frequently used interchangeably.

Both, e-business and e-commerce solutions incorporate newly developed

Web technology into organizational and business processes. The use of Web

technology results in improved efficiency. Since new technology is required for e-

business and e-commerce implementation, the firm needs to improve its system

hardware, software, and technological infrastructure.

While similarities exist between e-business and e-commerce, there are also

differences that distinguish both concepts.

E-commerce refers primarily to the buying and selling activities over the

Internet. This includes such transactions as placing orders, making payments, and

tracking delivery of orders on the Internet. In an e-commerce transaction, an

individual remotely has access to electronic information, products, or services,

typically within a client/server based environment, via the Internet, proprietary

intranet, or extranet. Thus, e-commerce transactions require human interaction

when the information is processed by the client and then stored in databases.

Therefore, e-commerce activities are considered as contact-driven processes since

the client needs to get in touch with the firm. This makes the business process

slower when compared to an e-business approach. E-commerce basically increases

the amount of information available to prospective customers, thus improving a

firm's marketing capabilities. The focus of e-commerce is typically on the

customer side as well. All other stakeholders of the organization, including

employees and suppliers, are generally not the main concern for e-commerce.

Another characteristic of e-commerce is that it is typically limited to client/server

software with a high degree of system functionality. It therefore relies on client-to-

server or port-to-port data flow [13].

On the other hand, e-business infrastructure is much more technologically

advanced than e-commerce. E-business generally refers to the use of the Web and

Internet-related technology to connect the extended organization. As mentioned

earlier, this extended organization goes beyond customers/clients to include such

entities as suppliers, employees, and regulatory authorities. Therefore, e-business

encompasses e-commerce. E-business allows for the sharing of files among

different locations and firms, as well as the remote connection of suppliers and

customers.

As discussed above, e-business and e-commerce are two different concepts.

While e-commerce uses the Web to connect customers with firms, e-business

includes the Web as well as other means necessary to interconnect information

systems and data streams, both internal and external. Also, e-commerce requires

human interaction for form filling during the purchasing process. However, e-

business allows many processes to be fully automated, thus improving the

efficiency of business processes and removing the error of human interfaces.

However different `e-commerce' and `e-business' are, let us consider the

relationship between them to see why these terms are still used interchangeably.

Since e-commerce is generally less complex than any e-business solution, a firm

must start with e-commerce initiatives before creating e-business tasks. This

project usually requires the creation of a technological infrastructure that allows for

various parties to interconnect. Once a firm has successfully implemented its e-

commerce functions, it may then begin to work on e-business solutions. As

J.Rogers et al. mention, without the e-commerce infrastructure, it will be difficult

for firms to incorporate e-business functions [14]. A firm can use the knowledge

collected from the e-commerce project to make the e-business implementation

much easier. If a company should decide to skip the e-commerce part and jump

directly to e-business, this project would be much more costly and time

consuming. Therefore, it is necessary for a firm to create an e-commerce capability

before it pursues e-business solutions.

Having paid tribute to existing debates on understanding the concepts "e-

business" and "e-commerce" and recognizing the vagueness of these terms'

definitions, the similarities and differences of these concepts, we will use as a

working definition of the electronic commerce the one we synthesized basing on

several sources, namely: the electronic commerce is a business concept that

comprises all business activities (entrepreneurial actions) which are supported

with the services of the Internet and the Intranet. As the given master thesis is not

aimed at contributing to the terminology discussion, we will follow the example of

many researchers and use the concepts the Internet-commerce, the Internet-

business, electronic commerce, electronic business, electronic and the Internet

trade as synonyms. We should also take into account that with the time being e-

commerce and e-business are becoming more global concepts which comprise

electronic trade as just a segment.

According to Michael J.Shaw [15], the focus of electronic commerce must

be viewed from the following dimensional perspectives:

Technology: Electronic commerce is made possible by the global networks

where the business processes, inter-organization translations, and market

trading take place. The internet is the major contributor, but other

communication networks, such as value-adding networks for carrying out

electronic data interchange, also pay a role.

Marketing and "new consumer processes". Electronic commerce is the new

channel to connect with customers and a new media to promote products.

Electronic commerce expands the boundaries of enterprises to reach out directly

to their customers.

Economic. Electronic commerce is a new economy that is information based

and shaped by the new institutional and industrial organizations. Electronic

commerce creates new markets and economic activities that are characterized

by instant information flows, the delayering of value chains, the emergence of

new intermediaries, and the shifting economic rules and market dynamics. The

fundamental valuation has been transformed by these changes, leading to needs

for new strategies and business models.

Electronic linkage. Electronic commerce provides new linkages to achieve

more efficient economic activities, including: (a) the interface between

businesses to consumers; (b) the linking of a business to its channel; and(c) the

coordination of different units within a business.

Information value-adding. Electronic commerce accelerates the separation of

the information-based value chains from the physical value-adding chains. The

information-based or the virtual value chains create new ways to compile,

synthesize, package, distribute, and market information as products and

services.

Market-making. The global networks supporting electronic commerce have

provided opportunities to form electronic markets to match buyers and sellers.

This new market space features real-time information transmission, interactive

communication, wide reach and connectivity, and rich content. These

characteristics potentially can form more efficient markets for exchanging

goods, resource allocation, and trading.

Service infrastructure. Electronic commerce needs a variety of services to

support all potential, functions activities, requirements, and applications. These

services need a coherent infrastructure to ensure integrity, uniformity,

efficiency and effectiveness. Examples of the infrastructure include

infrastructures for public-key, payment and banking, information services for

organizing, searching, retrieving, filtering, and summarizing information, and

for processing B2B transactions, sharing supplier-catalog information, and

supply-chain coordination.

Legal, privacy, and public policy. All the structural, institutional, process, and

technological changes brought by Electronic commerce necessitate a new

framework for addressing the legal, privacy and policy needs. This is a difficult

task due to the number and diversity of interest groups involved. Yet, this is the

one dimension that needs to be taken into account early in the development of

EC3: Interface with consumers

Web Marketing

E-Shopping

Information & On-line Services

Entertainment on Demand

Trading in E Markets

Customer Services& sales

management

Market Intelligence, Consumer

Information Gathering

the Electronic commerce to protect the interests of the general public.

Addressing the issues involved requires a balanced approach that takes into

account the interests and potential conflicts among different parties.

The scope of electronic commerce is depicted in Figure 1.2 [16], where, in

addition to linking with suppliers (EC5), and distributors (EC4) it also includes the

interface with consumers (EC3), and the management within the enterprise (EC1).

Finally, electronic commerce also addresses the infrastructure issues, and the

information infrastructure.

Figure 1.2 - The Scope of electronic commerce

Electronic commerce provides unprecedented opportunities to integrate

various types of communication networks, including the three primary types

depicted in Figure 1.3 [17].

EC1: Enterprise

management

Product development

Logistics and supply-

chin Support

HRM

Training Resource

management

Accounting

Financial planning

EC4: Linking with

distributors/ retailers

Market response

Inventory

replenishment

Product Information

Distribution

Order fulfillment

Account receivable

management

Parts Services and

Contract Mgm.

EC2: Global EC infrastructure

Security

Digital payment

E. Banking

Legal issues

E. market formation

Human /Computer interface

National/ Global infrastructure

EC5: Linking with

suppliers

Product Sourcing

Product

Information

Collection

Purchase Process

Management

Supplier

Management

Account Payable

Management

These three types of networks have taken up their own specialization. The

Intranet for process, knowledge and internal communication management, the

Extranet for external coordination and information sharing with channel partners

such as suppliers, distributors, and dealers, and the Internet for setting up

electronic storefronts, providing customers services and collecting market

intelligence. In developing electronic commerce, there is a constant need for new

business models suitable for the new products (e.g. digital ones), new industrial

organizations (e.g. virtual organizations), and new economic structures (e.g.

information intermediaries).

Figure 1.3 - Web Centric Enterprise

Figure 1.2 and 1.3 together summarize the major impacts of the web on

managing a company. The web provides the infrastructure for collecting,

distributing and sharing information. It serves as new channels for making sales,

promoting products, and delivering services. Finally it integrates the information

organization for managing activities on all levels of the company and provides new

electronic links out to the customers and supply-chain partners.

Four types of e-commerce transactions have been identified [18]

accordance with the relations between legal entities which are set to complete a

transaction successfully. These transactions are defined as follows:

Enterprise

Knowledge

management

Internal

communication

Project management

Intranet

Electronic Storefront

Business intelligence

Customer Services

Information Dissemination

Suppliers

Financial

Services

Distributors

Logistics

Provider

B2B refers to e-commerce transactions between or among multiple

businesses and is currently the largest form of electronic trade in terms of

volume. It includes retail sales in the Internet such as selling book by

Amazon.com or broker activity by Charles Schwab.

B2C includes transactions between a business and its customers.

C2B refers to exchanges between a consumer and a business. This sector is

smaller and uses the Internet to do transactions "vice versa" (for example

passengers are bargaining for airline tickets on the site Priceline.com,

leaving it for the airline companies to decide whether to accept their bid or

not.)

C2C involves transaction between consumers such as online auction houses.

This sector organizes auctions among physical entities, for example the site

eBay.com.

Not meaning to turn into the independent industry the Internet business has

received the status of an extraordinary, universal and highly effective instrument

for doing business which is extremely promising to be applied by the

representatives of all profiles, regions and layers of the global economic

community. This environment has its market segments set up, has its peculiarities

of the competition revealed, and has its leaders and outsiders defined. "If someone

from strategically thinking businessmen have not determined their place in the

world electronic commerce," states M.Polson, the senior partner at the consultancy

firm Accenture, "this uncertainty concerns, as a rule, just a particular form of

participation. In principle, everybody understood long ago that the Internet is a

new, quite real and very powerful economic wave and it is better to swim on it than

to sink" [19].

1.3 The History of the Internet Commerce

In the historical context one cannot help noticing that using the Internet as

an environment for doing business led to the overturn in the field of trade. Various

trade services provided in the Internet gave additional impetus to the development

of buying/selling processes, payment organization, etc. However, all progressive

innovations in the field of e-commerce were results of reactions on objective

difficulties which the first Internet users had to face while doing business in the

Internet at the initial stages of its development.

Majority of entrepreneurs who made their minds in favor of introducing e-

business instruments maintain unanimously that global networks that were

established at that period, for example in the field of suppliers' connections, were

extremely complicated. The input of data on suppliers alone in the electronic

catalogues customary for today's user was extremely complicated and labor

consuming, to say nothing of this information further management.

However, it was not only a businessman who faced difficulties; the

clientele also had a hard time. They had to make head or tail in the confusing

structure of the catalogues, endless cross references for goods, prices, terms of sale

these are just a few of problems client had to face then.

Besides, finding suppliers and making contacts with them via the Net

proved to be even more complicated. This was connected firstly with the fact that

while looking for potential suppliers companies-buyers found out that most of

them apply absolutely different incompatible communicational standards.

According to the data provided by the Aberdeen Group, the analysis of the

starting period of the Internet trade formation has found no purchasing

organization, which could find for itself more than 10-15 suppliers on the

electronic market, under conditions of complicated catalogue management and

difficulties connected with variety of data exchange protocols applied by sellers

[20].

Awareness of the fact that there are no effective instruments and models for

e-commerce convenient both for buyers and sellers gave impetus for WWW

software development.

It is necessary to pay tribute to both parties: programmers took and are

taking a lot of efforts to contribute to efficiency and convenience of the web-

environment for all participants of the trade process; businessmen, in their turn, are

patient enough to first wait for the necessary solutions and then to adapt them to

the trading practice (or, to be more precise, to adapt themselves and their practice

to these solutions).

Thus, under the goals and tasks of an average business the means to reach

and solve them have changed radically. Kristen Onken, Logitech's senior vice

president of finance, maintains that nowadays the Internet-business architecture

allows a company to clearly orient itself within a market stock-list and correlate it

with the number of commodity units stored at the shops' shelves. «We are now

planning the deliveries three weeks ahead, do not allow empty counters and keep

the level of unsold stock low," he says. "The web system we apply is capable to

control about 70% of our products sales volume on the territory of the US and 50%

in Europe. We are ready to improve these indicators but the deterrent factors are

technological capacities of the firms-distributors" [21].

Oncology Therapeutics Network (OTN) combined more than 30 separate

clients' data bases into one complex network version which helps distribute

oncological preparations and pharmaceutical services rendered more efficiently.

For ten years of its existence the company consistently followed the course on

`internetization' and has become almost completely electronic. If three years ago

OTN carried out less than quarter of its transactions in the Internet, today this

figure exceeds 80%, and next year will reach 90%. At the expense of savings

received the company was able to significantly expand the scope of goods and

services sold. "It has become simpler and more convenient for the clients to

communicate with us," says S.Dubman, OTN vice-president and CIO. "But

unfortunately with the time being we are coming to the necessity of self-restriction

retaining only those elements of our web-structure which are connected with profit

or are vitally important for the whole corporate system. For now, we, for example,

decided to stop developing the content of our site. Its further expansion would

obviously useful for our clients but we would earn nothing on it." [22

]

The opinion

of Dubman is supported by the experts of Meta Group agency who witness that

similar atmosphere exists in many companies of e-commerce: "Earlier everybody

needed a beautiful, dynamic, expanded site. Now many people think that it is better

to pay attention to internal network rationalization which pays back immediately"

[23]

Many analytical papers devoted to the history of the Internet as a means of

doing business emphasize the change in the attitude of the corporate top

management towards the introduction of e-commerce methods and instruments.

The justified worries about entering absolutely unknown market and technological

field were replaced by realizing the fact that only those companies that will enter

the Internet economy in time will be able to survive in the following competition

and not to become the outsiders. Fears "to overdo", in the period of forming the

Net infrastructure when all accompanying technologies were only under

development, were replaced by panic unwillingness "to miss the train" and to find

oneself in the role of a catching up company when all main market niches have

been shared among the leaders.

As a result, according to the estimates of the research company Forrester

Research, by the beginning of 2000 absolutely all flourishing companies in the

world «Fortune Global-500» have either developed original software-hardware

complexes for network trade or constructed their own prototypes on the base of

existing solutions, or started to apply the ready-made systems offered by providers

[24].

However the promising prospects for the electronic commerce

development became clouded by the crisis, moreover the Internet represented by

the dot.coms was not the last factor of the recession. Having questioned in

September 2000 more than a thousand of managers of firms listed in «Global-

3000», the company Forrester Research found out that during the first half of the

year less than 20% of them were able to increase their Internet-business

development spending, but 27% had to cut them. 48% were ready for further

reduction of investing in the Internet-commerce while there was no clear evidence

of the economic rise. The general manager of every third company expected that

his receipts from trade transactions in the Internet should obligatorily drop in the

nearest future. Only very few respondents (mainly representatives of insurance

business and service sphere) were optimistic counting on improvement of the

situation soon [25]. A similar opinion poll carried out at the same time by Yankee

Group demonstrated the total drop in the top-management interest to on-line

business: for about six or eight months the number of managers who positively

estimate its prospects has dropped by almost one third [26]. Very many business

representatives who had not managed to shift the focus of their business towards e-

commerce by the beginning of the crisis hurried up to reject this task. Those

internet-business representatives who risked continuing to work in the Net suffered

hard time. A huge number of small firms focused on new technologies have just

stopped to exist. There emerged the famous in the world economic literature

"bubble effect" when boom caused by introducing the Internet technologies into

business resulted in emerging small and very small firms whose share were bought

like hot cakes at price many times exceeding their real value. However the

successful start did not mean further successful operation: many companies existed

only in the net having no real assets behind them, and, in fact, any person owning a

personal computer with the Internet access at home could become an owner of an

Internet company. Very many firms worked at a loss and by no means were able to

pay dividends to their shareholders. Those shareholders who managed to realize

this tried to get rid of the shares at knock-down prices, however compared to the

millions of investors these were only individuals. One after another virtual

companies that worked at a loss became bankrupts.

The crisis also damaged the first Internet giant electronic exchange eBay.

Even such basic Internet structure as Yahoo! found itself on the verge of a

catastrophe. Since the first quarter 2000 its profits started plummeting and by the

end of 2001 exchange rate of shares came to collapse: the very fact of its decrease

up to US$ 8-9 made everyone forget that less than two years ago it exceeded the

level of US$ 200. "During the initial period of the company's activity 3,000

Yahoo! employees has worked hard to attract the attention of the wide users'

Details

Seiten
Erscheinungsform: Originalausgabe
Jahr: 2004
ISBN (eBook): 9783832476496
ISBN (Paperback): 9783838676494
DOI: 10.3239/9783832476496
Dateigröße: 1.1 MB
Sprache: Englisch
Institution / Hochschule: Донецький національний технічний університет – Economics and Management
Erscheinungsdatum: 2004 (Januar)
Note: 1,0
Schlagworte: geschäftsführung

Autor

Julia Todorova (Autor:in)

Electronic commerce as an instrument of international business activity

Zusammenfassung

Leseprobe

Inhaltsverzeichnis

Details

Autor

Julia Todorova (Autor:in)