Theoretical Foundations and Literature Review

The Concept Of E-Commerce

Electronic commerce has been defined in the literature as the use of computer networks for carrying out transactions between buyers and sellers that may be individuals and organizations (Kalakota & Robinson, 2001; Cunningham, 2001; Wigand & Benjamin, 1997; Kauffman & Walden, 2001). The computer networks may be used for interconnections relating to internal applications like purchase order recording, invoicing, etc. They may also be used for external applications such as inter-connecting suppliers/vendors, buyers, and payment systems.

E-commerce has been classified into a number of segments based on the type of external integration and the type of transacting parties i.e., who is selling to whom. Some of the most popular segments are as follows.

B2B or Business-to-Business e-commerce segment includes the e-commerce activities between two or more business organizations. This is perhaps, the largest segment of e-commerce in terms of value of transactions. A number of models of B2B e-commerce are being experimented with, including use of inter-organizational systems, e-Marketplaces/e-exchanges (B2B hubs), etc. B2C or Business to Consumer e-commerce segment refers to e-commerce activities between business organizations and individual consumers. B2C e-commerce is perhaps the most visible segment because a large number of consumers participate on fairly regular basis in this segment. C2C or Consumer-to-Consumer e-commerce segment includes the electronic exchanges between and among individual consumers. This segment mostly involves bidding/auction processes. M-commerce or Mobile e-commerce segment refers to the use of the wireless digital devices in conduct of e-commerce activities. Once connected, mobile consumers can conduct many types of transactions including stock trading, online payments, e-banking etc.

B2b And B2c E-Commerce

B2B and B2C e-commerce collectively form 90% to 95% of total global e-commerce¹. The other forms of e-commerce include C2C, B2G, etc. Although much of the media attention has been on B2C e-commerce, the B2B e-commerce offers greater opportunities both for the e-procurement and e-marketing particularly serving the purpose of automating and integrating supply chains. It will be not be an over statement to say that the real e-commerce revolution is happening in this segment in contrast with B2C which is expected to follow a more evolutionary path. They have many similarities. For example, both of them involve buying and selling processes; both the segments use the computer networks and other digital technologies for conducting business. The key difference lies in the parties to the trade. In B2C segment buyers are individuals buying for personal consumption whereas in B2B segment the buyers are business organizations buying to meet their procurement requirements for their further production. The difference between these segments is significant not only in terms of the parties but also in terms of the other elements of e-commerce environment such as infrastructure and transactions.

Infrastructure: For an effective B2B e-commerce, significant investment has to be made not only in IT infrastructure but also in business process re-engineering. Most companies involved in B2B e-commerce integrate their systems with those of their trading partners to be able to fully exploit the opportunities offered by B2B e-commerce. On the other hand no such integration is required in B2C e-commerce. Thus, the investment in B2B e-commerce infrastructure by the parties is fairly significant. In addition, maintenance costs are to be incurred in the case of B2B e-commerce. Higher costs of infrastructure and its maintenance in B2B e-commerce make it imperative for the companies to focus on the utilization of the infrastructure in order to ensure suitable return on investment.