Components of a Typical Successful E-Commerce Transaction Loop and Advantages

Components of a Typical Successful E-Commerce Transaction Loop

E-commerce does not refer merely to a firm putting up a Web site for the purpose of selling goods to buyers over the Internet. For e-commerce to be a competitive alternative to traditional commercial transactions and for a firm to maximize the benefits of e-commerce, a number of technical as well as enabling issues have to be considered. A typical e-commerce transaction loop involves the following major players and corresponding requisites

The Seller should have the following components

A corporate Web site with e-commerce capabilities (e.g., a secure transaction server);

A corporate intranet so that orders are processed in an efficient manner; and

IT-literate employees to manage the information flows and maintain the e-commerce system.

Transaction partners include

Banking institutions that offer transaction clearing services (e.g., processing credit card payments and electronic fund transfers);

National and international freight companies to enable the movement of physical goods within, around and out of the country. For business-to- consumer transactions, the system must offer a means for cost-efficient transport of small packages (such that purchasing books over the Internet, for example, is not prohibitively more expensive than buying from a local store); and

Authentication authority that serves as a trusted third party to ensure the integrity and security of transactions.

Consumers (in a Business-to-Consumer Transaction) who

Form a critical mass of the population with access to the Internet and disposable income enabling widespread use of credit cards; and

Possess a mindset for purchasing goods over the Internet rather than by physically inspecting items.

Firms/Businesses (in a business-to-business transaction) that together form a critical mass of companies (especially within supply chains) with Internet access and the capability to place and take orders over the Internet. Government, to establish

Pp legal framework governing e-commerce transactions (including electronic documents, signatures, and the like); and

Legal institutions that would enforce the legal framework (i.e., laws and regulations) and protect consumers and businesses from fraud, among others.

And finally, the Internet, the successful use of which depends on the following

A robust and reliable Internet infrastructure; and

A pricing structure that doesn’t penalize consumers for spending time on and buying goods over the Internet (e.g., a flat monthly charge for both ISP access and local phone calls).

For e-commerce to grow, the above requisites and factors have to be in place. The least developed factor is an impediment to the increased uptake of e- commerce as a whole.

For instance, a country with an excellent Internet infrastructure will not have high e-commerce figures if banks do not offer support and fulfillment services to e-commerce transactions. In countries that have significant e-commerce figures, a positive feedback loop reinforces each of these factors.

Advantages of E-Commerce for Businesses

E-commerce serves as an “equalizer”. It enables start-ups and small- and medium-sized enterprises to reach the global market.

However, this does not discount the point that without a good e-business strategy, e-commerce may in some cases discriminate against SMEs because it reveals proprietary pricing information. A sound e-business plan does not totally disregard old economy values. The dot-com bust is proof of this.

E-commerce makes “mass customization” possible. E-commerce applications in this area include easy-to-use ordering systems that allow customers to choose and order products according to their personal and unique specifications. For instance, a car manufacturing company with an e-commerce strategy allowing for online orders can have new cars built within a few days (instead of the several weeks it currently takes to build a new vehicle) based on customer’s specifications. This can work more effectively if a company’s manufacturing process is advanced and integrated into the ordering system.

E-commerce allows “network production.” This refers to the parceling out of the production process to contractors who are geographically dispersed but who are connected to each other via computer networks. The benefits of network production include reduction in costs, more strategic target marketing, and the facilitation of selling add-on products, services, and new systems when they are needed. With network production, a company can assign tasks within its non- core competencies to factories all over the world that specialize in such tasks (e.g., the assembly of specific components).