Electronic commerce or e-commerce is the term used to describe all forms of information exchange and business transactions based on information and communication technologies. There are different types of formal definitions of e-commerce, but the wide scope involved has resulted in many definitions focusing on only certain aspects. A fairly comprehensive definition covers e-commerce from four different perspectives (Kalakota and Whinston, 1997, p.38) - communications, business process, service and online. From a communications perspective, e-commerce is the transfer of information, products, services and payments over communication and electronic networks. The business process is about application of information and communications technology for automation of business activities and transactions. From a service perspective, e-commerce provides solutions to consumers and organizations for enhancing business performance and efficiency such as improvement in quality, deliverables and resolving customer complaints in quick time. The online element of e-commerce allows buying and selling of products on the internet and other online systems. Since, e-commerce involves transactions between business partners; there is a common tendency to use the term e-business as an alternative. The terms are also used interchangeably. It is generally accepted that e-business is a broader version of e-commerce and includes not just buying and selling, but also servicing customers, collaborating with business partners and carrying out electronic communications within the organization. In the words of Lou Gerstner's who served as Chief Executive Officer of IBM, "E-business is all about cycle time, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage." (Turban, Lee; King and Michael, 2000, p.78)
Electronic commerce is commonly classified by the nature of transaction. Business-to-business (B2B) is one of the most common forms of transactions that takes place across the world and includes inter-organizational system transactions and electronic market transactions. Business-to-consumer (B2C) includes retailing transactions, with sellers offering goods and services to individual shoppers and consumers. In the consumer-to-consumer (C2C) category, the transaction is between consumers themselves, without the intervention of producers; middlemen may or may not be involved. C2C is mostly personal in nature as the transaction is between one individual and another. Examples include sale of residential property, antiques, cars and personal computers. Consumer-to-business (C2B) is essentially the reverse of B2C, where consumers, mostly individuals sell products and services to organizations or other sellers. A growing type of e-commerce is the non-business type, wherein academic institutions, non-business and non-profit organizations use electronic commerce to reach out to more people, reduce costs and improve service. Intra-business or organizational e-commerce refers to activities and transactions within the organization. This is used for ensuring instant and cost-effective communication among employees spread over wide geographical area, exchange of data and information on the business and online training. (Whiteley, 2000, p.88)
There are three broad categories of e-commerce - electronic markets, electronic data interchange and internet commerce. While the categorization is based on differences in application and functional attributes, in practice they often overlap each other. An electronic market is an information system that enables buyers and sellers to exchange information about products and prices. (Been, et al., 1995, p.3). Thus, the primary function of electronic markets is to assist the buyer in her search for the required products; for the sellers, it facilitates spread of information of the products to several buyers simultaneously, thus enhancing the probability of sale. Electronic market is generally associated with B2B or B2C categories of e-commerce. It is very effective in commodity markets, where products and price offerings are more or less similar across the entire market. For example, international trade in commodities such as wheat, rice, cotton, edible oils, cotton, and metals is greatly benefited by electronic markets, where buyers can have multiple options in terms of product specifications, price, and place of delivery while the sellers can have access to large number of customers across the world. In view of the global reach of the electronic markets, buyers are increasingly carrying out extensive searches till they find the best buy at the lowest cost. Thus, there is a view that electronic market in the commodity business is more efficient distribution of market information which can lead to 'best buys' for buyers and decreasing profit possibilities for sellers (Been et al., 1995, p.4). A major world wide application of electronic markets is in the commercial airline passenger booking system. Passengers can locate available seats, decide on the time and type of airline and also bargain for attractive prices.
In electronic markets, two types of buyer-seller relationships exist. One, the linkage between buyer and seller is established at the time of transaction and may be for one transaction only. Two, there is a definite purchase agreement between the seller and buyer, over a period of time, which is also referred to as subscription transaction. Electronic markets are invariably built around freely accessible networks and online service providers generally play the role of market makers. Typically, the sellers, in collaboration with market makers decide which business transactions they will offer in the electronic market. Communication networks are usually decided both by the sellers and consumers and may vary for different transactions. A distinct feature of electronic markets is that no joint guidelines are framed in advance between buyer and seller. (Amor, 1999, p.25)
Electronic Data Interchange (EDI) is used for routine transactions that occur on a regular basis in organizations. It is popularly referred to as paperless trading. The International Data Exchange Association has defined EDI as 'the transfer of structured data, by agreed message standards, from one computer system to another, by electronic means.' This definition comprises of four elements, integral to all EDI systems. Structured data refers to the codes, values and pieces of text that are used in EDI transactions. For instance in the process of selling products, each customer is assigned a code, each order has a unique identification number, each product has unique code and every order is quantified and valued. The method of structuring data is useful as all transactions can be recorded systematically, business done during any period can be estimated quickly and information made available on delivery, payments received and due from customers. These valuable data can be stored for years and retrieved as and when necessary for analysis, which can help in formulating future strategies. (Berge, 1991, p.45)
The second component in the definition is 'agreed message standards', which implies that any EDI transaction must have a standard format. The objective of a standard format is to enable the business deal with all customers uniformly and to eliminate confusions while dealing with several customers. In an organization, purchase orders, work orders and service contracts generally have standard formats; these are examples of agreed message standards. The third element is 'from one computer system to another', that is EDI messages are sent from one computer to another; it is not necessary for people to read the message or once again key it into the receiving system. It is done automatically - for example, there could be an EDI system between a supplier and a buyer in such a way that the buyer can place an order on the EDI, which would be automatically received and processed at the supplier's end. The final element in the definition is 'by electronic means'. EDI messages are generally transferred by data communication systems or networks; however, physical transfer using a floppy disk, magnetic tape or compact disk would also come within the ambit of EDI.
Traditionally, EDI systems functioned on the expensive value added networks, which were generally confined among large companies, due to the investment involved. For instance, the United Nations EDI for administration, commerce and trade (EDI-FACT), is one of the most popular traditional EDIs. In the United States, ANSI X.12 is widely used. Traditional EDI companies such as IBM and AT&T use leased or dedicated telephone lines or value added network for data exchanges. Global manufacturers and retailers such as Unilever, Procter and Gamble, Toyota and Wal-Mart have used successful EDI to improve quality and service to customers and reap rich profits. However, the traditional EDI prevented such large companies having business links with numerous small companies from using the EDI. The advent of internet has revolutionized the usage of EDI, as it enables all companies, irrespective of size to communicate effectively. The internet seems to be the best suited medium for EDI, for a variety of reasons:
the internet is a freely accessible network with little or no geographical and political constraints the global reach of internet is far superior to any other form of communication medium usage of internet is cost effective and the costs are going down as the number of users increase the internet is user-friendly, self-supportive and can communicate from any part of the world using the internet for EDI is in line with the growing interest of businesses to deliver information electronically, especially through the world wide web (Commission of the European communities, 1992, p.3)
In view of the above advantages, internet-based EDI has the potential to completely replace…