Electronic Commerce

10 October 2016

Age, the Internet economy is said to be the next growth engine. The advanced technology of the Internet has brought traditional business activities to a whole new level, which is electronic commerce. Internet is the strong force which fuels the growth of e-commerce. Electronic commerce refers to a wide variety of online business activities for any forms of products and services. Examples of online business activities are the delivery of business information, the transfer of ownership or rights of goods from one to another, and the establishment of business transactions.

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All these are conducted over the telecommunications networks and the electronic systems such as the Internet. In a similar manner, the parties which are involved in buying and selling interact with each other electronically rather than physical exchange. Electronic commerce has different definitions and explanations in different perspective. From a communication perspective, e-commerce is the trading of information or settling payments electronically. From a service perspective, e-commerce is a tool which addresses the desire of firms, consumers and management while improving the quality of goods and increasing the speed of delivery.

From an online perspective, e-commerce is about the capability of buying and selling products or services. (Kalakota and Whinston 3) In general, 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. In this age of Internet, the development of e-commerce cause information asymmetry from an online perspective, on the other hand, information asymmetry is also reduced from a communication perspective.

The rapid development of e-commerce affect the job market by destroying certain jobs such as salesman, and create new jobs such as web master. Lastly, e-commerce also leads to globalization in business. Information asymmetry is defined as a situation where one party has more or better access of information compared to another rival party in making business decisions. From an online perspective, information asymmetry occurs in between the seller and the buyer when the buyer is uncertain of the physical product.

When a large infrastructure of a physical shop front is replaced by a “blog shop”, where consumers can only see the products online, this causes the lack of sensory information of the product. The buyer is unsure of what material of the product is made of. For example, the products shown on the Internet may look perfectly fine. However, the physical products may not be as good as it was shown. The seller may use some computer software such as ‘photoshop’ to ‘beautify’ the pictures of the products before posting it on the Internet in order to make it more appealing to attract people’s interest.

As such, the buyer will suffer from insufficiency of information in making a business decision. The lack of sensory information and the uncertainty of physical product are the causes of the occurrence of information asymmetry in between the buyer and the seller. Some unethical business man is most likely to take advantage of e-commerce to deceive the people who purchase products online. Without a doubt, this will reduce the levels of trust and confidence of one for e-commerce. On the other hand, from communication perspective, a reduction in information asymmetry occurs.

This is because the Internet is a global system which is consists of a vast of interconnected computer networks. It works just like how the data flows across the Internet, knowledge and information about almost anything are now easily accessible by the people in every corner of the earth. A very good example is online banking. It enables one to access to its account summary information regardless of the location, as long as Internet connection is available. In fact, online banking is one of the fastest growing sectors in e-commerce. Online banking also shows the importance of being innovative.

Failure to be as innovative to keep up with the pace of the others, in terms of information technology, will be eliminated. As such, there is only little chance of protecting a certain innovation to be a monopoly. Internet also provides a wide range of information and communication facilities for people to compare and contrast the information from various websites. For example, there are various websites for one to surf on the Internet to look for jobs. Certain jobs which are similar in terms of position or work load, may not provide the same monthly salary.

Therefore, the asymmetry of information is narrowed down as the job seekers are free to obtain a second opinion on different websites. Although it seems very fantastic how e-commerce narrow down the asymmetries of information, it also has its own flaws. There are several risks to be taken when one establishes business transaction electronically. The possible risks of e-commerce are security of transaction issues, virus attacks, unauthorized access and identity theft. Financial information of the consumers may be stolen or misused.

After all, it is merely the establishment of business transaction between the consumer and the electronic media. As such, businesses have to enhance their security system to be cautious of hackers who may steal valuable information of their customers. E-commerce, through the Internet, will gradually take over the traditional ways of businesses, there can be no doubt that there is human factor to be acknowledged. The transformations of the operation of the firms bring about uncertain changes in the job market due to the changes made in the organization structure of the firm.

Jobs are destroyed and created as traditional businesses gradually transform into electronic commerce. The transformation of the way firms operate destroys certain jobs such as the workers of retailers, travel agencies and salesman. When a major shop front has become unnecessary, businesses need not to hire workers to look after the shop and provide services to the customers. Customers could access the website to purchase goods and settle their payment electronically. This causes workers of retailers such as cashier to lose their jobs. In times of past, salesman is a necessity for every business to promote their products.

However, salesman have been replaced by Internet. The Internet is the best medium for advertisements. A very good example would be InterWorld, which is an e-commerce consulting firm, posts advertisements on its webpage rather than publishing it elsewhere. It is also a form of lower cost of advertisement compared to other forms of advertisements. Most search engines such as Google and Yahoo earns revenue by matching relevant advertisements to one’s search topic. Depending on the rate of success of e-commerce, there are some indirect jobs will be affected.

If the business attracts more customers using e-commerce, the demand of the products increases, indirectly increasing the productivity of the firms. This will increase the number of factory workers to manufacture more products to meet the demand. As e-commerce develops, he demands for certain skills increases, which are experts who excel in the field of Information Technology to set up businesses on the Internet. The employment of finance and commerce related sectors are expected to increase. Although some jobs are destroyed due to the growth of e-commerce, as e-commerce develops, new jobs are also created.

For instance, new job creations are namely website creation and maintenance, credit card processing, Internet security, inventory management, and web master. However, all these jobs are involved in teleworking, which means an employment at home and communicates with workplace through computer networks. There are a few advantages as well as disadvantages of teleworking. The advantages are reduction in workplace conflicts and enhanced employees’ control over their schedules. Whereas the disadvantages are decreased opportunities for development, social isolation and reduced job security.

Despite the disadvantages of teleworking brings, it seems to be a good planning for the transition of traditional business to electronic commerce. However, the technology that drive the Internet will continue to change. With the astonishing growth of e-commerce, firms now have the opportunity to find new methods to expand their business. According to business dictionary, globalization implies the opening of local and nationalistic perspectives to a broader outlook of an interconnected and interdependent world with free transfer of capital, goods, and services across national frontiers.

By transforming the old business model to electronic commerce, businesses now have access to new markets. Due to the high cost of business, strict regulation, existence of barriers and resources such as labor and capital, traditional businesses do not have access to expand markets globally. However, e-commerce helps to reduce cost by saving the money for rent and employee because a physical shop front is not a necessity. E-commerce provides direct sale to customers, which lowers its cost of sale, hence earning higher profits.

In fact, e-commerce offers low cost technological infrastructures, which is an attraction for businesses. E-commerce allows companies to increase their sales in local and international markets. The flexibility of time and location afforded by the Internet provide less costs for communications. E-commerce not only reduces communication costs, but also increases flexibility in locating activities. On the other hand, globalization of business may bring in various competitors from different countries into the growing markets. Consequently, this may opens the local enterprises to unsustainable competition.

Throughout the history, international trades have only consisted of mainly manufactured products. However, with the aid of the Internet, services such as banking, consulting and retailing can be provided to all parts of the world through a website that is globally accessible. The Internet is said to be the backbone of greater service trade ( Mandel 8 ) However, advertisements need to be done to open the type of service provided to exposure. According to BBC news, large firms with big businesses cannot afford to not have a Web Page to advertise the offered products to promote high sales.

This shows that the Internet is an effective marketing tool. eBay and Amazon are the successful companies which are globalized. On the eBay auction site, someone who puts a product on sale can find a buyer easily. eBay also provides directions for people about the way to ship products internationally to promote globalization of its website. – With the establishment of e-commerce, information asymmetry is now on the decline this is because one could look up for personal account’s information and seek for information regardless of location. However, unethical business man may take advantage of e-commerce by deceiving customers. – The job market is affected both positively and negatively. – This is because there is a change in the organization structure of the firms. – Experts in IT are expected to be in high demand. – The increase in internet-based technologies is a sign of a stimulus for globalization. – Companies that have business relationship setup an automated and fast info exchange such as stock deliver. This enables globalization because a business man in home country can now look for suppliers out of the country.

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