E-Commerce CBEC 1103

Question 1

Electronic commerce or e-commerce (EC) is the on-line exchange of goofs, services and money within firms, between firms and their customer. According to Kamlesh K Bajaj (2005), e-commerce refers to the paperless exchange of business information using electronic data interchange (EDI), e-mail, electronic fund transfer, world wide web and other network-based technologies.

E-commerce not only automates the manual processes and paper transactions but it also helps the company to move to a fully electronic environment and change the current way of doing business.

There several advantages offered by e-commerce that attracts lots of organization to use e-commerce as their business platform. These advantages makes the e-commerce seems to be more practical way in doing business in today’s world. Some of the advantages are:

1. Easy access to global market

– E-commerce allows the company to reach their potential market in any part of the world. This is because the company does not need to setup a brick-mortar outlet in specific area to reach their customers. With e-commerce technologies nowadays, the company only need to setup a web-base online store and provide some product information in order to reach their potential market in other countries.

For example, Liverpool Football Club Online Store was developed by Liverpool Football Club to reach their soccer fans around the world. The fans are not required to go to Liverpool Football Club Store located in England just to buy the team jersey. They can now purchase the club merchandize by visiting the club online shop at http://store.liverpoolfc.tv/ and made the purchasing. The purchased item will be delivered to their door step.

2. Lower cost of doing business

– Compared to a brick-mortar type of business, e-commerce business is more cost effective. This is because to setup an e-commerce business it does not require physical type of building in promoting the company’s products. The company just need to purchase web-hosting and setup their own company’s website. Today, the process of setting up online is even easier than before. E-commerce provider such as lelong.com.my is now offer pre-designed online store to interested parties with minimal amount of fee charged to them.

The party interested does not need to be an IT literacy as the setup for online store is very easy. E-commerce also does not require a lot of staff to work with the company. This is because the online store only needs at least 1 staff to update the company’s catalogue in the website. Compared to brick-mortar type of business, a lot of staff are required to be hired since the company needs the staff to manned the shop.

3. Easy and fast updating of product catalogue

– With e-commerce, the process of updating the company’s product catalogue is easy and fast compared to the traditional type of business. This is because the catalogue is posted to the company’s website and the catalogue is no longer printed. The customer may download the catalogue for the company website. In traditional way of doing business, the product catalogue need to be reprinted each time there are new products offered by the company. With online catalogue offered by e-commerce, the company just need to update the catalogue and update it via the company’s website.

4. Better customer service

– E-commerce offers better and quicker customer service. This is because e-commerce provides several ways of customer service that can be used by the customer. E-mail, telephone call, frequent asked questions (FAQs) and online feedback are several ways of customer service method that can be used in e-commerce. The customer may find the FAQs posted in the company’s website as one way of online customer service. Some problem faced by the customer can be solved by reading the FAQs.

Although e-commerce provides competitive advantage for the company over its competitors, there are several ethical issues that need to be aware by the company in conducting an e-commerce business. Some of the e-commerce ethical issues are:

1. Privacy

– There is no guarantee that the customer private details will be kept secretly by the company whose the customer had a transaction earlier. Private details such as e-mails and phone numbers are usually given to third party by the company as a part of their business arrangement. However, this issue has been address in some countries whereby the privacy of individual data is protected by a specific act for instance in USA, the consumer is protected by Privact Act.

2. Security

– Cyber security against cyber attacks such as phishing, virus, trojan, spam and etc are some of cyber attacks are known today. As an e-commerce provider, threat such as phishing and IP spoofing are the major concerns. This is because e-commerce involves not only online catalogue browsing and online order but it also involves electronic financial transaction. Encryption and firewall are the examples of most famous method to be used in minimize cyber attacks threats in e-commerce.

3. Intellectual property

– Rights to intellectual property are easy to violate on the Internet, resulting in billions of dollars of losses to the owners of the rights. This is because certain individual or company can easily copied another person or company product and post it to their website. Right to intellectual property are hotly debated nowadays. Although some mechanise have been implement in order to protect intellectual property, the violation to it is still widely happen especially in e-commerce. As the internet is the gateway for all of information stored around the world, the effort to protect the intellectual property is still a long journey to be solved.

Among other issues related to intellectual property are the trademarks, patent and copyrights. As e-commerce allows free way in doing business, some companies may take the advantage by breaching the intellectual property by copy others business model or product without the origin permission or consent.

4. Website Content

– The content of the company’s website also is one of ethical issues in e-commerce nowadays. In designing the website content, the company’s must consider some issues such the sensitivity of the content, view perception and the targeted market segment. As e-commerce business can be reach by almost everybody in the world, the content of the website must be design appropriately. This is because some of the content may perceived in positive side and some may perceived in different ways. For example if a company design its website in one language in Bahasa Melayu, the company may loss it potential customer which do not know the Malay language.

5. Taxation

– This is one of the most exciting issues in e-commerce especially the sales tax. In traditional brick-mortar businesses, a company is required to comply with the government taxation requirements law. However, in e-commerce tax collection and compliance is not easy to be monitored and complied.

This is because e-commerce provides not only a company that operates in local area such Malaysia, but the customer also can reach a company that is operated outside Malaysia. The rule of taxation are differs between one country to another. Therefore, it is very difficult to impose certain pre-defined tax rule to an e-commerce operator.


In order to achieve optimum result in e-commerce, there are several factors that need to be considered by a company while choosing a host for their e-commerce site. Some of the factors are:

1. Reliability of host provider

– The reliability of the provider covers proven track record of the provider and how reliable the hosting provided by the company. Company such as Godaddy.com and e-hosting.com.my are among hosting provider that has proven record in the market. The reliability of the provider also consist the platform used by the provider to host our website. Platform such active server page (ASP) and content management system (CMS) are among well known platform used by the provider. This platform plays important role because some of the hosting platform may not support security for secured transaction for the website such as PayPal and e-money.

2. Customer service and technical support

– This also is one of the factors that need to consider by a company before deciding to choose which company to provide the hosting. This is because the whole business process in e-commerce is totally depending on the website. Problem such server downtime may occur at anytime for e-commerce business. Therefore, providers with reliable 24hours troubleshoot support and knowledgeable support staff can mitigate the loss that may occurred during system down. If the company is new to e-commerce, provider with excellent technical support should be the main deciding factor.

3. Cost

– There are many providers that provide the hosting services. The prices are vary depend on the package offered by the provider. However, there are lot packages offered by the provider. One must consider several factors against the cost that will be charged by then. Factor like the bandwidth size, basic system requirements, domain name and space size are among the factors that need to be considered. A reliable technical support also is among the main factors to be considered in subscribing to the hosting service. This can ensure that the company can run smoothly.

4. Stability of the provider

– Stability refers to the longevity if the provider. Well-known provider such as Godaddy.com and Yahoo Business are among the most popular and stable hosting provider. By having a stable and continuous provider, it can help the company to survive in e-commerce business. This is because some unknown or less popular provider may create trouble to the website whereby some customer may not able to the e-commerce site.

E-commerce has significantly in the supply and value chains in today’s business. Supply chains are the flow of materials, information, money and services from raw materials suppliers to the production until it’s reached the end customer. There are some strengths and weaknesses in the e-commerce supply. Some of the strengths are:

1. Direct access to material supplier

– Some e-commerce companies have designated system that may triggered if the raw materials are running at low stock. This can help the company to reorder the raw material at the right time and at the right quantity. This can support the Just In Time production concept in order to save the production cost such as inventory cost.

2. Cheaper cost of raw materials

– E-commerce eliminates the middlemen role in dealing with the raw materials suppliers. By eliminating the middlemen role, the cost of purchasing raw material can be reduced significantly. This process is known as disintermediation. For example is Air Asia whereby instead the traditional way of booking air tickets that are done by the travelling agencies, now the passenger can book their own air ticket via Air Asia website.

3. Cheaper marketing and promotions cost

– By having e-commerce, the company can reduced their market and promotions cost since customers are directly linked with the company via the website. E-commerce also allows customization of the product according the customer need. Dell Computers is an example of company that runs on the e-commerce website and have the high customization feature to its customer. Customer may design their own laptops or PCs specification according to their needs.

4. Increase productivity, reduce expenses and save time

– Some e-commerce companies such as Marshall Industries (www.marshall.com) manage to reduce their operation cost by using the online supply chain management program. This program is combined with data warehousing solutions that provides the company with appropriate information for repurchasing activities. This concept helps in increasing the company’s productivities.

Although, e-commerce provides significant strength to the company supply value chain, it’s also contributes to some weaknesses. Some weaknesses that have been identified are:

1. Ineffective supply chain management

– In e-commerce, the critical success factor in conducting business is how well both parties transacted through the internet. The supply chain management in e-commerce maybe ineffective if the counter party failed to utilised the benefits of the e-commerce. This is because not all party involves in the e-commerce are IT literates. All the parties in the supply chain must know how the processes are in optimizing the e-commerce in the supply chain management.

2. Customer confidence

Although e-commerce provides ease to the both seller and buyer, its also may creates lost of customers’ confidence. For example, if the business allows high involvement of customer in customizing their laptop or PCs purchasing, the customer may try to customize some products which is not be working to the product purchased. However, during the customization the, the system used as interaction between the buyer and seller allow the customization, it may makes the customer lost of confidence towards the customer product. The reliability of the product maybe jeopardize by the customer that lead to negative effect to the company’s name.


Question 2

Encryption is mathematical procedure that scrambles data so that it is extremely difficult for any other than authorized recipients to recover the original message. Nowadays, often we heard about cyber attacks such as spamming, hacking, phishing and ip spoofing. As an industries that utilising the network infrastructures, e-commerce is vulnerable to these attacks. Almost all e-commerce transaction involves cash transaction such as online payment via electronic and via credit card.

Therefore, all of these transactions must be protected so that it can minimize loss for both client and the customer. As the environment in e-commerce is so vulnerable to the hackers that may intercept during the transaction being processed, encryption is the best method to be used. Without encryption, e-commerce is impossible to a success. When a customer shop online or do some internet banking transaction, encryption makes the payment or banking transaction safe.

The encryption will scrambles the data sent by the customer during making the payment so that the data if intercepted by unauthorised party, it cannot be read by the party. The data sent can only be read by the intended recipient. This data can only be read after the decryption process is done by the intended recipient.

Encryption does not only protect the transaction details but also it protects the data privacy during it being transmitted. Nowadays, a lot of e-commerce companies use the encryption techniques in order to make the online transaction safe. One of the most famous encryption technique used is the SSL certificates provide by VeriSign. VeriSign is the leading Secure Sockets Layer (SSL) Certificate Authority enabling secure e-commerce, communications, and interactions for Web sites, intranets, and extranets. Choose the most trusted mark on the Internet and enable the strongest SSL encryption available to every site visitor.

Companies such as Dell and Air Asia where most of the transactions are done via electronic used the encryption technique. Internet banking transactions such as Maybank2u and CIMBClicks are also use the same technique. However, some additional security function such as Transaction Authorisation Code (TAC) is used together with the encryption of data. This will give further protection on the data.

E-commerce is one of fastest technology growing in today’s world. Almost everyday a new e-commerce entity merged in the world. Lots of data are transmitted via internet daily. Most of the data transmitted are very confidential and can cause great loss to the industry if held by unauthorised party. Therefore security feature such as encryption plays vital role in order to ensure that data is safe during the transmission.

Although encryption is used to protect the data in e-commerce environment, hacking activities will never stops. Additional security features such TAC, digital certificates and digital signature are example of security add-ons that are widely used in e-commerce environment.

One of e-commerce scope is the electronic data interchange (EDI). EDI is the inter-organization exchange of documents in standardized electronic form directly between computer applications. It is a computer-to-computer based transfer of business information. The information exchange could be the transaction data, order acknowledgement, shipping information and other information pertaining to business transaction.

Compared to the traditional data exchange, EDI is paperless based of information exchange. In the traditional data exchange, most of information is shared or exchanged in black and white format. However, in EDI the information share or exchange are directly shown to the recipient computer system.

The primary goal of EDI is to make the business communication easy, fast and cheap. This is because by using EDI, the information needed is set in pre-format design and it is paperless. Compared to the traditional way, most of the information is kept in hardcopy format and the presentation of the data maybe varies depending to the recipient request.

EDI has been used since the early 1970s’. Most of big companies such as AT&T and IBM used dedicated telephone line to carry the EDI. The other goal of EDI is to reduce the amount of data capture. Only important data will be share and exchange between two parties. Compare to the traditional way, some unnecessary data also included in the information given to the recipient.

EDI allow faster data capturing compared to the traditional data exchange. This is because some of the information is directly key-in to the EDI system and is ready to be exchanged by the counter party. For example in lelong.com.my, once the buyer key-in the delivery address after making the payment to the buyer, the address keyed-in is automated share with the courier provider agent appointed by the seller. Comparing to the traditional way, the delivery process may promotes delay and waste of time.

The traditional of data exchange may involve a lot of handling cost. Handling cost such as data storing and paper may affect the company’s operating cost. By using EDI, these handling costs can be reduced significantly. This it due to that all data capture and exchanged are made through a computer. It also save space for the company as the traditional way may require large space for filing and data storage.

The risk of lost of data also can be minimised by using the EDI. This is because most of the data kept in EDI technique can be save and back up easily since all the data is kept in softcopy format. The data kept in traditional way are kept in hardcopy format which is very difficult to make a back up copy. EDI also permits data exchange regardless of the counter party location. The sender maybe in Malaysia whiles the recipient maybe in Italy. With EDI, the information can be exchange easily and can be done in a short period. The sender and the recipient only need an internet line to be connected to each other, Comparing to the traditional way, the business information may takes a while to arrive to the recipient.

E-commerce is one of the virtual organization members. Virtual organization is a set of legal entity that utilised and communicates through the computer network. The virtual organizations solely use telecommunication as main hub of communication among the members. All the organization goals are shared among the members through communication. Most of the interaction is done via computer network and rarely the team member met face to face.

According to Oxford Advanced Learner Dictionary (2003), the word of virtual means almost or nearly to the thing described. Virtual can be seen as a mirror or a fake version of something that we described. A virtual organization is a mirror of an organization that can be seen at most of place in the world. However, the different between virtual and normal organization is the virtual is more to non brick-mortar type of organization that the member of the virtual organization may not necessarily working under the same roof. The normal operating organization requires the team members to work under the same roof and most of the time they have a face-to-face interaction.


References

  1. http://wiki.media-culture.org.au/index.php/ECommerce_-_Legal_and_Ethical_Issues

  1. http://en.wikipedia.org

  1. Steve Fall et. al (2007). Open University Malaysia: CBEC 1103: Elements of E-Commerce. Kuala Lumpur. Meteor Doc Sdn Bhd

  1. Efraim Turban & David King (2003). Introduction to E-Commerce – International Edition. New Jersey. Pearson Education Ltd

  1. Elias Awad (2002). Electronic Commerce : From Vision to Fulfillment. New Jersey. Pearson Education Ltd

  1. http://www.godaddy.com

  1. http://www.e-hosting.com.my

  1. http://www.lelong.com.my

  1. http://www.marshall.com

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