E-CommereceE-Commerece

CSCI:6303Jarubula PraveenKumar

Based on Lectures by Dr. AbrahamUniversity Of Texas-Pan American

11/24/2008

What is Commerce?What is Commerce?Commerce is a division of trade or production which

deals with the exchange of goods and services from producer to final consumer.

It comprises the trading of something of economic value such as goods, services, information or money between two or more entities.

Commerce primarily express the fairly abstract notions of buying and selling.

What is E-Commerce?What is E-Commerce? E-commerce is the use of electronic communications and digital

information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and

individuals. E-commerce refers to aspects of online business involving

exchanges among customers, business partners and vendors. For example, suppliers interact with manufacturers, customers interact with sales representatives and shipment providers interact with distributors.

Advantages of E-Advantages of E-Commerce?Commerce? Increased Access:  Now, consumers can buy and get access to

goods all around the country even the world.  Consumers can sit at home and get all their products and services without even leaving the house.  Businesses can not have to worry about pickup and the use of e-commerce has made it easier for businesses to run their operation without the hassle of going to their supplier. 

Cost of doing business is reduced is minimized by e-commerce. Convenience: Businesses and consumers now don't have to go out

of their way to buy products and services.  Businesses who buy overseas are unable to physically go to buy their services.  Businesses can go to their supplier's website and order the products they need. 

Expansion: Before e-commerce, businesses were restricted to either their states or to certain areas because it was too costly to set up offices in different areas.  With the coming of e-commerce, businesses have access to consumers and other business in all 50 states and even the entire world!

Disadvantages of E-Disadvantages of E-commerce?commerce?Security: Biggest problem of ecommerce, is the issue

on security. As cash is exchanged on the web across borders and continents, many unscrupulous individuals are enticed to target this activity to perform illegal means to earn money. Identity theft and hacking of personal information have become one of the serious problems in the internet today.

Tax to the government: As business can be done in the internet just as easily as clicking a button, paying the appropriate tax can be easily is evaded. 

Comparison between E-commerce and Traditional Comparison between E-commerce and Traditional CommerceCommerce

Traditional Face to Face Printed & written documents Telephone communication Postal mail Payment by Cash, check or CC Ads: print med, radio, tv Merchandize deliver immediately. Customer takes merchandise home. E-Commerce No personal contact Documents on the web. Web pages personalized for a particular customer. E-mail or webmail communication. Ads on web, radio, tv Payment: credit card, direct withdrawal, fund transfer (paypal). Merchandise deliver home 2-5 days.

Business ModelsBusiness ModelsBrick-and-Mortar Businesses: Businesses that

have only a physical presence. Click-and-Mortar Businesses: Businesses that

have both an online and an offline presence.Combined Businesses: Businesses that have both

physical presence and online presence.Store Front Model Businesses: Enhance brick-and

mortar business through web presence.

Types of E-commerceTypes of E-commerce

The major different types of e-commerce are: Business-to-Business(B2B) Business-to-Consumer (B2C) Business-to-Government (B2G) Consumer-to-Consumer (C2C) Mobile commerce (m-commerce)

What is B2B e-commerce?What is B2B e-commerce?

B2B e-commerce is simply defined as e-commerce between companies.

B2B E-commerceB2B E-commerce

Logistics - transportation, warehousing and distribution (e.g., Procter and Gamble).

Application service providers - deployment, hosting and management of packaged software from a central facility (e.g., Oracle and Linkshare).

Outsourcing of functions in the process of e-commerce, such as Web-hosting, security and customer care solutions (e.g., outsourcing providers such as eShare, NetSales, iXL Enterprises and Universal Access).

Auction solutions software for the operation and maintenance of real-time auctions in the Internet (e.g., Moai Technologies and OpenSite Technologies).

Content management software for the facilitation of Web site content management and delivery (e.g., Interwoven and ProcureNet)

Web-based commerce enablers (e.g., Commerce One, a browser-based, XMLenabled purchasing automation software).

Examples of B2B E-Examples of B2B E-CommerceCommerceImporters.comAlibaba.comEC21.comECplaza.comGlobalSources.comTradeKey.comMade-in-China.comBusytrade.comDIYtrade.comTradeIndia.comIndia-Mart.com

What is B2C e-commerce?What is B2C e-commerce?

Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods (i.e., tangibles such as books or consumer products) or information goods (or goods of electronic material or digitized content, such as software, or e-books); and, for information goods, receiving products over an electronic network.

B2C e-commerceB2C e-commerceB2C e-commerce reduces transactions costsmodel the cost of the product is reduced as we can

eliminate the middle menmajor thing in B2c model is customer care

Pre-Cautions of B2C E-Pre-Cautions of B2C E-commercecommerceCheck for digital certificates of

the site and it hacker free.Check for shipping price.See the previous service going

through the reviews of the old customers

Purchasing with the appropriate cards.

Some of the examples of the B2C model Some of the examples of the B2C model are:are:

www.llbean.comwww.landsend.comwww.bestbuy.comwww.sony.comwww.dell.comwww.amazon.comwww.store.microsoft.com

What is B2G e-commerce?What is B2G e-commerce?

Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector.

It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations.

Examples of B2G E-commerce Examples of B2G E-commerce are:are:

www.fcw.com www.washingtontechnology.com www.Gcn.com www.signalmag.com www.governmnmentexecutive.com

What is C2C e-commerce?What is C2C e-commerce?

Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers.

This type of e-commerce is characterized by the growth of electronic marketplaces and online auctions, particularly in vertical industries where firms/businesses can bid for what they want from among multiple suppliers.

C2C e-commerceC2C e-commerceThis type of e-commerce comes in at least three forms:auctions facilitated at a portal, such as eBay, which

allows online real-time bidding on items being sold in the Web.

peer-to-peer systems, such as the Napster model (a protocol for sharing files between users used by chat forums similar to IRC) and other file exchange and later money exchange models.

classified ads at portal sites such as Excite Classifieds and eWanted (an interactive, online marketplace where buyers and sellers can negotiate and which features “Buyer Leads & Want Ads”).

Examples of C2C E-commerce are:Examples of C2C E-commerce are:

www.ebay.comwww.napster.com

What is m-commerce?What is m-commerce?

M-commerce (mobile commerce) is the buying and selling of goods and services through wireless technology-i.e., handheld devices such as cellular telephones and personal digital assistants (PDAs).

Applications of M-commerce Applications of M-commerce are:are:

Mobile Ticketing Information ServicesMobile Banking

Internet Advertising:Internet Advertising:

Advertising is a form of communication whose purpose is to inform potential customers about products and services and how to obtain and use them.

Advertising in the web pagesAdvertising before playing any videosAdvertising in between the videosAdvertising while the pages loadsAdvertising by search enginesAdvertising as a scroll bar while playing videos

Security:Security:

Most ecommerce merchants leave the mechanics to their hosting company or IT staff, but it helps to understand the basic principles. Any system has to meet four requirements:

privacy: information must be kept from unauthorized parties.

integrity: message must not be altered or tampered with.authentication: sender and recipient must prove their

identities to each other.non-repudiation: proof is needed that the message was

indeed received.

ManagementManagementBusiness PlanStarting a businessRequirements to start a BusinessTaxes Insurances

Business PlanBusiness Plan Is a formal statement of a set of business goals,

the reasons why they are believed attainable, and the plan for reaching those goals? It may also contain background information about the organization or team attempting to reach those goals.

Though business plans have many different presentation formats, business plans typically cover five major content areas:

Background information A marketing plan An operation plan A financial plan A discussing of the decision making criteria that

should be used to approve the plan.

Starting a businessStarting a business

Time commitmentCommitment to educationCapital

Requirements to start a Requirements to start a businessbusinessStep 1: Determine the legal structure of the business and

properly file the business name with the state and/or county.

Step 2: Determine the potential tax responsibilities of the new business on the federal, state, and local levels.

Step 3: Determine necessary licenses, permits, certifications, registrations, and/or authorizations for a specific business on the federal, state, and local levels.

Step 4: Determine federal and state employer requirements. There are various laws relating to employment of personnel.

TaxesTaxes

Methods of AccountingAccounting PeriodType of Taxes

Methods of AccountingMethods of Accounting

Each taxpayer must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses.

There are two types of accounting methods, which dictate how the company’s transactions are recorded in the company’s financial books: Cash-basis accounting and Accrual accounting. The key difference between the two types is how the company records cash coming into and going out of the business.

Accounting PeriodAccounting Period

A “tax year” is an annual accounting period for keeping records and reporting income and expenses. An annual accounting period does not include a short tax year. The tax years you can use are:

Calendar yearFiscal year

◦A fiscal year is 12 consecutive months ending on the last day of any month except December.

52 – 53 – Week Tax Year you can elect to use a 52 – 53 – week tax year

Types of taxesTypes of taxesW-4 (Employee’s withholding allowance

certificate)SS – 6.2% employer and employee

◦Base limit is $102,000 (for 2008)Medicare – 1.45% for employer and

employeeFile 941 (forms)Federal Unemployment Tax Act (FUTA)

authorizes the IRS to collect a federal employer tax used to fund state workforce agencies.

InsurancesInsurances

Building◦ Fire, wind, etc. replacement cost

Liability◦ Comprehensive liablity: personal and

advertising injury, fire legal liability, medical expenses, customer falling, etc.

Workers Compensation:◦ Employees’ injury related to work

Life Insurance for partner, employees, etc.– owned by who..beneficiary?◦ Whole life◦ Term

Umbrella: coverage over comprehensive.

Maintain a business:Maintain a business:

Cash Flow StatementBalance Sheet:Income Statement:

Cash Flow StatementCash Flow Statement

Company’s incoming and outgoing money for one year.

Visibility of company depends upon cash flow

Reconcile bank statements

Balance Sheet:Balance Sheet:

List all of your assetsAll of your liabilitiesThe difference is Owner’s Equity

Income Statement:Income Statement:

An Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into net income .

The purpose of the income statement is to show mangers and investors whether the company made or lost money during the period being reported.

Employee benefits:Employee benefits:

HolidaysSick leave (8 hours per month)VacationMedical insuranceRetirement planProfit sharingBonus

Business EntitiesBusiness EntitiesSole proprietorshipGeneral partnershipCorporation

Sole proprietorship:Sole proprietorship:

An Individual – also known as the owner or self-employed person.

Performs all functions required to operate a business starting with acquiring capital.

Accepts all profits and losses and pays all taxes.

Fully responsible for all debts and obligations

Unlimited liability: a creditor can claim against all of the owners assets whether business or personal.

The advantages of a The advantages of a Sole proprietorship Sole proprietorship ::

It is easy to form and to dissolve All decision making power

resides with the sole proprietor. The profits of the proprietorship

are taxed only once.

The disadvantages of Sole The disadvantages of Sole proprietorship:proprietorship:sole proprietorship faces

unlimited liability expansion. It has limited ability to raise

funds for business expansion. It usually ends with the death of

the proprietor.

General partnership: General partnership: A partnership is a form of

business that is owned by two or more co-owners (partners) who share any profits the business earns and who legally responsible for nay debts incurred by the firm.

The advantages of a General The advantages of a General partnership : partnership : It is easy to organize It is an effective form of business

organization in situations where team production involves skills that are difficult to monitor

The benefits of specializations can be realized.

The profits of the partnership are taxed only once.

The disadvantages of General The disadvantages of General partnership are:partnership are:

The partners have unlimited liability

Decision making can be complicated and frustrating.

The voluntary withdrawal of a partner from the firm or the death of a partner can cause that partnership to be dissolved or restructured.

Limited partnership: Limited partnership:

For the purpose of combining capital, not to manage the business.

General partners and limited partners. Limited partners not involved in

managing the business. Limited partners are not liable for the actions of the general partners. They are liable to the extent of their investment. They can lose the capital they invested.

General partners are fully liable; may take more profits.

Corporation:Corporation:A corporation is a legal entity that

can conduct business in its own name.

Corporations account for the vast majority of total business revenues.

The Corporation may become a public corporation, with its shares being bought and sold either through a stock market or "over the counter".

There is no limit on the number of shareholders and shares may be held by people who are neither citizens nor residents of the United States.

Disadvantages of Corporation:Disadvantages of Corporation:

The profits of the corporation are taxed twice.

There are problems associated with separation of ownership from control

Advantages of Corporation:Advantages of Corporation:

The owners (stock holders) of the corporations are not personally liable for the debts of the corporation; there is limited (not unlimited) liability.

The corporation continues to exist even when an owner sells his or her shares of stock or dies.

Corporations are usually able to raise large sums of financial capital for investment purposes.

Financial ManagementFinancial Management Real EstateReal Estate

◦ RentRent◦ OwnOwn

Cash depositsCash deposits◦ Non interest bearingNon interest bearing◦ Interest bearing – Money market, int bearing Interest bearing – Money market, int bearing

checking, savings, fixed deposits, jumbochecking, savings, fixed deposits, jumbo Bonds (short term and long term)Bonds (short term and long term)

◦ Non-taxableNon-taxable◦ TaxableTaxable

StocksStocks◦ Buy, Sell, Historical trendsBuy, Sell, Historical trends◦ Put, callPut, call◦ Mutual fundsMutual funds

BiblioGraphyBiblioGraphy6314 E-commerce notes and slides by

Dr.John.P.Abrahamhttp://en.wikipedia.org/wiki/Commercehttp://www.iit.edu/~peacjen/cs485/

ecommerce2.htmhttp://www.marketmyarticle.com/Article/

Benefits-and-Disadvantages-of-Ecommerce/3596

http://www.importers.com/tradeblog/index.php?/archives/10013-Choosing-the-Best-B2B-Site.html

http://www.importers.com/tradeblog/index.php?/archives/10013-Choosing-the-Best-B2B-Site.html

http://en.wikipedia.org/wiki/Business-to-government

Thank You

Clarifications?