Electronic Commerce

As we race towards a new millennium, business is dramatically changing. Greater global interaction and competition, more efficient supply capabilities and ever-increasing customer expectations are some of the challenging issues that small businesses have to face.

To meet the challenges many businesses are having to redesign their business processes in order to lower the barriers between themselves, their customers and their suppliers. Electronic Commerce (EC) is a means of meeting the challenges on both a local and global scale.

What is Electronic Commerce?
Electronic Commerce can be defined as:

"Any form of business transaction in which the parties interact electronically rather than by physical exchanges or direct physical contact."

or:

"A process or event that results in the electronic transfer of value between two or more parties."

While both definitions are useful, the spirit of EC is better viewed as one of those rare instances where changing needs and new technologies merge to revolutionise the way in which business is conducted.

Why embrace Electronic Commerce?
EC provides an environment where transactions between commercial organisations can occur efficiently and effectively.

By electronically linking the various sections within an organisation and the organisation itself with it’s customers, suppliers, shareholders, government authorities, trade associations, etc., a comprehensive range of commercially related activities can occur.

The range of activities covered by EC varies between organisations but can cover the full spectrum of production planning, purchasing, manufacturing, inventory managing, invoicing, delivering, collecting, supporting & servicing, marketing & selling, promoting & informing.

How does Electronic Commerce work?
The Internet, and more specifically the section of it known as the World Wide Web is the best known delivery mechanism for EC, however there are many others, including:

E-Mail
Electronic transmission of messages and data via a computer

Fax
Electronic transmission of messages via telephone lines

EFTPOS
An acronym for Electronic Funds Transfer at the Point Of Sale and used to describe the electronic movement of funds from the buyer’s to the seller’s bank account, a cashless transaction

Intranet
A type of "closed circuit" Internet where interactivity can only occur between predetermined individuals and departments within a particular organisation

Extranet
Another type of "closed circuit" Internet where interactivity can only occur between predetermined parties e.g. a group of government agencies or a group of traders)

Chat Lines
Live electronic forums where any number of people can communicate with each other (by keyed-in messages) directly or through a moderator

Video Conferencing
The use of ISDN telephone lines and satellites to facilitate live forums that provide both video and audio links for all participants.

Who can use Electronic Commerce?
Any person or organisation can use EC. The transactional paths can be sub-divided into four distinct communication categories:

Business-Business
e.g. A company that uses a network for ordering from its suppliers, receiving invoices and making payments (the "paperwork" side of things is often referred to as Electronic Data Interchange or EDI)

Business-Consumer
Primarily electronic retailing (or E-tailing). This category has expanded rapidly with the advent of the World Wide Web and is now used by millions of consumers around the world to buy all sorts of products and services.

Business-Government
e.g. Details of forthcoming tenders are publicised on the internet and businesses can respond electronically by downloading a hard copy of the tender documents (or in some cases, actually submitting a tender)

Consumer-Government
e.g. Submission of electronic tax returns or on-line payment of parking fines by credit card

What are its benefits of Electronic Commerce and what opportunities does it offer?

EC is a means of enabling and supporting changes to business processes on a global scale. It enables businesses to be more efficient and flexible in their internal operations, to work more closely with their suppliers and to be more responsive to the needs and expectations of their customers.

Supplier Opportunity - Customer Benefit
Global presence - Global choice
Improved competitiveness - Quality of service
Mass customisation & customerisation - Personalised products & services
Shorten or eradicate supply chains - Rapid response to needs
Substantial cost savings - Substantial price reductions
Novel business opportunities - New products & services

These opportunities and benefits are to some extent inter-related e.g. improvements in competitiveness and quality of service may be in part derived from mass customisation, while shortening of supply chains may contribute to cost savings and price reductions.

What are the steps to achieving Electronic Commerce success?
At the outset, it is vital to identify and engage experienced EC service providers to guide the organisation through the following steps:

Set clear objectives.
Identify the business benefits to be sought from EC before focusing on equipment and processes.

Understand how other parties will react.
This requires a good deal of research to get a clear picture of whether they too are ready to embrace EC. Set up clear lines of communication and be proactive in dealings with other parties.

Identify the existing information flow.
Being clear on what information currently flows between the parties to the transactions.

Articulate the new information flow.
What information will be needed and how will it flow?

Identify information sources.
From where will the information be gathered?

Identify automation solutions.
What hardware and software will be required to automate the information flow?

Integrate the solutions with the existing information.
Making sure the new system can receive information from and send information to the existing systems.

Develop the user interface.
Develop a functional, easy to use system.

Where to from here with Electronic Commerce?
Electronic Commerce is here now and growing rapidly. The enormous impact of Electronic Commerce will continue to grow both in business and society generally. Whilst the more advanced levels of EC present substantial challenges, the more basic levels are well established and supported by "off the shelf solutions". The best way of gaining the mastery of EC that will be vital in tomorrow’s markets is to start today!

Small Business Development Corporation
553 Hay Street Perth (Corner Pier Street)
Phone: (08) 9220 0222
Fax: (08) 9221 1132
E-Mail: info@sbdc.com.au