THE INSTITUTE OF FINANCE MANAGEMENT (IFM)

MWANZA CAMPUS
e-Business
ITU 08509
Lecture Two
e-BUSINESS ENVIRONMENT
A business environment can be defined as the sum total of all external and internal
factors that influence a business.

Note Bene: You should keep in mind that external factors and internal factors can influence
each other and work together to affect a business. For example, a health and safety
regulation is an external factor that influences the internal environment of business
operations. Additionally, some external factors are beyond your control.

An e-Business environment is the sum total of all external and internal factors that
influence an e-Business to run over computer network (internet, extranet or internet).

External Factors that influence e-Business

1. Economic situation -Economy is one of the most determining factors to the success
of the company even though it is an external element. Within the economy, some
contributing factors such as the fluctuation of interest rate, economic crisis, and so
on directly and strongly affects the consumption of buyers, and consequently, the
profits of businesses.

2. Laws - The rules and regulations from local government play an integral role in the
development of the business. There are some countries which their laws prevents
the development of some certain industries. That can be a threat to the business. On
the other hand, some industries receive positive and continuous support from local
government via their rules and regulations. Besides, if the laws allow organization
outside the countries invest in local industries, they will indirectly create an
enormous source of financial support for local business.

3. Technological factors - Artificial intelligence, smart internet searches, and other

high tech functions- all kind of technology has been at the forefront of many
business for ages. For instance, American Airlines started using a computerized flight
booking system and Bank of America took on an automated check-processing
system. No matter what the size of your enterprise is, both tangible and intangible
benefits of technology are well-known.

4. Customer demands - One of the most fundamental factors we learn in economics

is that satisfying customer demand is a must for every business survival. It is
obvious that your product is served for the needs of customers then under any
circumstance, your business can develop without following this mission. Beside to be
the leading company entrepreneurs should not only identify but also tailor their
customer’s interest.

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 5. Competition - Competition exists in any field of our life, even in business. When it
comes to competition, business may thrive to be successful or be hurt to lose its
position in the marketplace.

6. Political factors are governmental activities and political conditions that may affect
your business. Examples include laws, regulations, tariffs and other trade barriers,
war, and social unrest.

Factors Determining the Internal Environment that influence e-Business

1. Value System-The value system of an organization means the ethical beliefs that
guide the organization in achieving its mission and objective. The value system of a
business organization also determines its behavior towards its employees, customers
and society at large.
2. Mission and Objectives - The objective of all firms is assumed to be maximization
of long-run profits. But mission is different from this narrow objective of profit
maximization. Mission is defined as the overall purpose or reason for its existence
which guides and influences its business decision and economic activities.
3. Organization Structure - Organization structure means such things as composition
of board of directors, the number of independent directors, the extent of professional
management and share -holding pattern. The nature of organizational structure has
a significant influence over decision making process in an organization. An efficient
working of a business organization requires that its organization structure should be
conducive to quick decision making.

4. Corporate Culture and Style of Functioning of Top Management -Corporate

culture and style of functioning of top managers is important factor for determining
the internal environment of an e-Business. Corporate culture is generally considered
as either closed and threatening or open and participatory.

5. Quality of Human Resources - Quality of employees (i.e. human resources) of a

firm is an important factor of internal environment of a firm. The success of a
business organization depends to a great extent on the skills, capabilities, attitudes
and commitment of its employees. Employees differ with regard to these
characteristics.

6. Physical Resources and Technological Capabilities - Physical resources such as

plant and equipment, and technological capabilities of a firm determine its
competitive strength which is an important factor determining its efficiency and unit
cost of production.

E-BUSINESS COMPONENTS
e-Business involves several major components: Business Intelligence (BI), Customer
Relationship Management (CRM), Supply Chain Management (SCM), Enterprise Resource
Planning (ERP), e-Commerce, conducting electronic transactions within the firm,
collaboration, and online activities among businesses.

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 Figure1. Components of E-Business

1. Business intelligence (BI) is about the activities that a small business may
undertake to collect, store, access, and analyze information about its market or
competition to help with decision making. When conducted online, BI is efficient and
quick, helping companies to identify noteworthy trends and make better decisions
faster.

2. Customer Relationship Management (CRM) refers to a customer service

approach that focuses on building long-term and sustainable customer relationships
that add value for the customer and the company. The goal is to reduce costs and
increase profitability while providing customer satisfaction.

3. Every small business has a Supply Chain, the network of vendors that provide the
raw components that are needed to make a product or deliver a service. The
management of this network is known as Supply Chain Management (SCM). SCM
is about efficiently and effectively improving the way that a company finds those raw
components and then delivers the product or the service to the customer.

4. Enterprise Resource Planning (ERP) is about integrating all departments and

functions across a company (sales, marketing, human resources, finance,
accounting, production, engineering, etc.) into a single computer system that can
serve the particular needs of each department. The objective is to provide
information quickly and efficiently to those who need it.
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 5. e-Commerce is the marketing, selling, and buying of goods and services online. It
generates revenue, which e-Business does not. E-Commerce is typically associated
with e-marketing, but most of this chapter is dedicated to the operational, non-
marketing dimensions of e-Commerce.

6. Conducting electronic transactions within a firm can occur through an intranet, e-

mail, and instant messaging. An intranet is a private network within a business that
is used for information sharing, processing, and communication. The goal is to
streamline the workplace and allow easy information exchange within an
organization.

7. Collaboration can occur internally or externally, and it often involves business

partners. The goal is to help teams or business partners communicate with each
other more effectively and efficiently, manage projects and shared materials, save
companies the costs of travel, and reduce travel-related productivity losses.

8. Online activities between businesses focus on information sharing and

communication via e-mail, online meetings, instant messaging, and extranets. An
extranet is the private network as intranet that is made available to business
partners, vendors, or others outside a company for the goal of extending company
capability. It allows a business to share documents, calendars, and project
information with distributed employees, partners, and customers and it enables 24/7
private, secure access to collaborative tools with just an Internet connection

e-Commerce
e-Commerce or Electronics Commerce sites use electronic payment where electronic
payment refers to paperless monetary transactions. Electronic payment has revolutionized
the business processing by reducing paper work, transaction costs, labour cost. Being user
friendly and less time consuming than manual processing helps business organization to
expand its market reach/expansion. Some of the modes of electronic payments are
following.
 Credit Card
 Debit Card
 Smart Card
 e-Money
 Electronic Fund Transfer (EFT)

o Credit Card - Payment using credit card is one of most common mode of electronic
payment. Credit card is small plastic card with a unique number attached with an
account. It has also a magnetic strip embedded in it which is used to read credit card via
card readers. When a customer purchases a product via credit card, credit card issuer
bank pays on behalf of the customer and customer has a certain time period after which
he/she can pay the credit card bill. It is usually credit card monthly payment cycle.

o Debit Card - Debit card, like credit card is a small plastic card with a unique number
mapped with the bank account number. It is required to have a bank account before
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 getting a debit card from the bank. The major difference between debit card and credit
card is that in case of payment through debit card, amount gets deducted from card's
bank account immediately and there should be sufficient balance in bank account for the
transaction to get completed.

o Smart Card - Smart card is again similar to credit card and debit card in appearance
but it has a small microprocessor chip embedded in it. It has the capacity to store
customer work related/personal information. Smart card is also used to store money
which is reduced as per usage. Smart card can be accessed only using a PIN of
customer. Smart cards are secure as they stores information in encrypted format and
are less expensive/provides faster processing. Mondex and Visa Cash cards are
examples of smart cards.

o e-Money - e-Money transactions refers to situation where payment is done over the
network and amount gets transferred from one financial body to another financial body
without any involvement of a middleman. E-Money transactions are faster, convenient
and save a lot of time. Online payments done via credit card, debit card or smart card
are examples of e-Money transactions. Another popular example is e-Cash. In case of e-
Cash, both customer and merchant both have to sign up with the bank or company
issuing e-Cash. Simply put, electronic money or e-Money is the electronic alternative to
cash. It is monetary value that is stored electronically on receipt of funds, and which is
used for making payment transactions. e-Money can be held on cards, devices, or on a
server. Examples include pre-paid cards, electronic purses, such as M-PESA in Kenya,
or web-based services, such as PayPal. As such, e-Money can serve an umbrella term
for a number of more specific electronic value products and services.

o Electronic Fund Transfer (EFT) - It is a very popular electronic payment method to

transfer money from one bank account to another bank account. Accounts can be in
same bank or different bank. Fund transfer can be done using ATM (Automated Teller
Machine) or using computer. Now a day, internet based EFT is getting popularity. In this
case, customer uses website provided by the bank. Customer logins to the bank's
website and registers another bank account. He/she then places a request to transfer
certain amount to that account. Customer's bank transfers amount to other account if it
is in same bank otherwise transfer request is forwarded to ACH (Automated Clearing
House) to transfer amount to other account and amount is deducted from customer's
account. Once amount is transferred to other account, customer is notified of the fund
transfer by the bank.

WHAT FORCES ARE FUELING E-COMMERCE?

There are at least three major forces fueling e-Commerce: economic forces, marketing
and customer interaction forces, and technology particularly multimedia convergence.

 Economic forces. One of the most evident benefits of e-Commerce is economic

efficiency resulting from the reduction in communications costs, low-cost
technological infrastructure, speedier and more economic electronic transactions with

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 suppliers, lower global information sharing and advertising costs, and cheaper
customer service alternatives.

 Market and customer interaction forces. Corporations are encouraged to use e-

Commerce in marketing and promotion to capture international markets, both big
and small. The Internet is likewise used as a medium for enhanced customer service
and support. It is a lot easier for companies to provide their target consumers with
more detailed product and service information using the Internet.

 Technology forces. The development of ICT is a key factor in the growth of e-

Commerce. For instance, technological advances in digitizing content, compression
and the promotion of open systems technology have paved the way for the
convergence of communication services into one single platform. This in turn has
made communication more efficient, faster, easier, and more economical as the need
to set up separate networks for telephone services, television broadcast, cable
television, and Internet access is eliminated. From the standpoint of firms/businesses
and consumers, having only one information provider means lower communications
costs.

What are the Components of a Typical Successful e-Commerce Transaction Loop?

e-Commerce does not refer merely to a firm putting up a Web site for the purpose of selling
goods to buyers over the Internet. For e-Commerce to be a competitive alternative to
traditional commercial transactions and for a firm to maximize the benefits of e-Commerce,
a number of technical as well as enabling issues have to be considered. A typical e-
Commerce transaction loop involves the following major players and corresponding
requisites:

 The Seller should have the following components:

 A corporate Web site with e-Commerce capabilities (e.g., a secure transaction
server);
 A corporate intranet so that orders are processed in an efficient manner; and
 IT-literate employees to manage the information flows and maintain the e-
commerce system.

 Transaction partners include:

 Banking institutions that offer transaction clearing services (e.g., processing
credit card payments and electronic fund transfers);
 National and international freight companies to enable the movement of physical
goods within, around and out of the country. For business-to-consumer
transactions, the system must offer a means for cost-efficient transport of small
packages (such that purchasing books over the Internet, for example, is not
prohibitively more expensive than buying from a local store); and
 Authentication authority that serves as a trusted third party to ensure the
integrity and security of transactions.

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  Consumers (in a business-to-consumer transaction) who:
 Form a critical mass of the population with access to the Internet and disposable
income enabling widespread use of credit cards; and
 Possess a mindset for purchasing goods over the Internet rather than by
physically inspecting items.

 Government, to establish:
 A legal framework governing e-Commerce transactions (including electronic
documents, signatures, and the like); and
 Legal institutions that would enforce the legal framework (i.e., laws and
regulations) and protect consumers and businesses from fraud, among others.

 And finally, the Internet, the successful use of which depends on the
following:
 A robust and reliable Internet infrastructure; and
 A pricing structure that doesn’t penalize consumers for spending time on and
buying goods over the Internet (e.g., a flat monthly charge for both ISP access
and local phone calls).

For e-Commerce to grow, the above requisites and factors have to be in place. The least
developed factor is an impediment to the increased uptake of e-Commerce as a whole. For
instance, a country with an excellent Internet infrastructure will not have high e-Commerce
figures if banks do not offer support and fulfillment services to e-Commerce transactions. In
countries that have significant e-Commerce figures, a positive feedback loop reinforces each
of these factors.

How is the Internet relevant to e-Commerce?

The Internet allows people from all over the world to get connected inexpensively and
reliably. As a technical infrastructure, it is a global collection of networks, connected to
share information using a common set of protocols. Also, as a vast network of people and
information, the Internet is an enabler for e-Commerce as it allows businesses to showcase
and sell their products and services online and gives potential customers, prospects, and
business partners access to information about these businesses and their products and
services that would lead to purchase.

Before the Internet was utilized for commercial purposes, companies used private
networks such as the EDI (Electronic Data Interchange) to transact business with each
other. That was the early form of e-Commerce. However, installing and maintaining private
networks was very expensive. With the Internet, e-Commerce spread rapidly because of the
lower costs involved and because the Internet is based on open standards.

Types of e-Commerce Models

There are several different types of e-Commerce, but we normally classified e-Commerce
either by market relationship or by technology used.

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Types of e-Commerce by market relationship
1. B2B (Business-to-Business)
B2B stands for Business to Business. It consists of largest form of e-Commerce. This
model defines that Buyer and seller are two different entities, companies doing
business with each other such as manufacturers selling to distributors and
wholesalers selling to retailers. Pricing is based on quantity of order and is often
negotiable. For example: Dell deals computers and other associated accessories
online but it is does not make up all those products. So, in govern to deal those
products, first step is to purchases them from unlike businesses i.e. the producers of
those products.

2. B2C (Business-to-Consumer)
B2C stands for Business to Consumer as the name suggests, it is the model taking
businesses and consumers interaction. Online business sells to individuals.
Businesses selling to the general public typically through catalogs utilizing shopping
cart software. The basic concept of this model is to sell the product online to the
consumers. For example: if you want to sell goods and services to customer so that
anybody can purchase any products directly from supplier’s website.

3. C2B (Consumer-to-Business)
C2B stands for Consumer to Business as the name suggests. A consumer posts his
project with a set budget online and within hours companies review the consumer's
requirements and bid on the project. The consumer reviews the bids and selects the
company that will complete the project. An example of this could be a job board
where a consumer places her/his requirements and multiple companies bid for
winning the project. Another example would be a consumer posting his requirements
of a holiday package, and various tour operators making offers.

4. C2C (Consumer-to-Consumer)
C2C e-commerce is where consumers sell products and personal services to each
other with the help of an online market maker (such as eBay or kupatana) to provide
catalog, search engine, and transaction-clearing capabilities so that products can be
easily displayed, discovered, and paid for. eBay is an auctions, and forums where
individuals can buy and sell thanks to online payment systems like PayPal where
people can send and receive money online with ease. eBay's auction service is a
great example of where person-to-person transactions take place every day since
1995.

A point to remember: G2G (Government-to-Government), G2E (Government-to-

Employee), G2B (Government-to-Business), B2G (Business-to-Government), G2C
(Government-to-Citizen), C2G (Citizen-to-Government) are other forms of e-Commerce that
involve transactions with the government; from procurement to filing taxes to business
registrations to renewing licenses. There are other categories of e-Commerce out there, but
they tend to be superfluous.

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Types of e-Commerce by technology used
1. Peer to Peer (P2P)
It is a discipline that deal itself which assists people to instantly shares related
computer files and computer sources without having to interact with central web
server. If you are going to implement this model, both sides demand to install the
expected software so that they could able to convey on the mutual platform. This
kind of e-commerce has very low revenue propagation as from the starting it has
been tended to the release of use due to which it sometimes caught involved in
cyber laws. For example: Tamago launched the world’s first P2P commerce system
in 2005, which allowed people to sell every type of digital media directly from their
computers to customers all over the world. People who publish videos, photos,
music, e-Books, and so forth can earn royalties, while buyers earn commissions for
distributing media to others.

2. M-Commerce
M-commerce refers to the purchase of goods and services through wireless
technology, such as cell phones, and handheld devices, such as Blackberries and
iPhones. Mobile Commerce involves the change of ownership or rights to utilize
goods and related services.

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