E-Commerece

CSCI:6303
Jarubula PraveenKumar
pjarubula@broncs.utpa.edu
University Of Texas-Pan American
11/24/2008
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?
 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-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-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 Commerce

 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 Models
 Brick-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-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?

B2B e-commerce is simply defined as e-

commerce between companies.
B2B 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-Commerce
Importers.com
Alibaba.com
EC21.com
ECplaza.com
GlobalSources.com
TradeKey.com
Made-in-China.com
Busytrade.com
DIYtrade.com
TradeIndia.com
India-Mart.com
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-commerce
 B2C e-commerce reduces transactions costs
 model the cost of the product is reduced as we can
eliminate the middle men
 major thing in B2c model is customer care
Pre-Cautions of B2C E-commerce
Check 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 are:

www.llbean.com
www.landsend.com
www.bestbuy.com
www.sony.com
www.dell.com
www.amazon.com
www.store.microsoft.com
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 are:

 www.fcw.com
 www.washingtontechnology.com
 www.Gcn.com
 www.signalmag.com
 www.governmnmentexecutive.com
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-commerce
 This 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:

 www.ebay.com
 www.napster.com
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 are:

 Mobile Ticketing
 Information Services
 Mobile Banking
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 pages
 Advertising before playing any videos
 Advertising in between the videos
 Advertising while the pages loads
 Advertising by search engines
 Advertising as a scroll bar while playing videos
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.
Management
 Business Plan
 Starting a business
 Requirements to start a Business
 Taxes
 Insurances
Business Plan
 Isa 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 business

Time commitment
Commitment to education
Capital
Requirements to start a business
 Step 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.
Taxes
 Methods of Accounting
 Accounting Period
 Type of Taxes
Methods 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 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 year
Fiscal 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 taxes
 W-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 employee
 File 941 (forms)
 Federal Unemployment Tax Act (FUTA) authorizes
the IRS to collect a federal employer tax used to
fund state workforce agencies.
Insurances

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:

Cash Flow Statement

Balance Sheet:
Income Statement:
Cash Flow Statement

Company’s incoming and outgoing

money for one year.
Visibility of company depends upon cash
flow
Reconcile bank statements
Balance Sheet:

List all of your assets

All of your liabilities
The difference is Owner’s Equity
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:

Holidays
Sick leave (8 hours per month)
Vacation
Medical insurance
Retirement plan
Profit sharing
Bonus
Business Entities
Soleproprietorship
General partnership
Corporation
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 Sole proprietorship :

Itis 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 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:
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 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 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:

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:
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:
The profits of the corporation are taxed
twice.
There are problems associated with
separation of ownership from control
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.
BiblioGraphy
 6314 E-commerce notes and slides by
Dr.John.P.Abraham
 http://en.wikipedia.org/wiki/Commerce
 http://www.iit.edu/~peacjen/cs485/ecommerce2.htm
 http://www.marketmyarticle.com/Article/Benefits-
and-Disadvantages-of-Ecommerce/3596
 http://www.importers.com/tradeblog/index.php?/archi
ves/10013-Choosing-the-Best-B2B-Site.html
 http://www.importers.com/tradeblog/index.php?/archi
ves/10013-Choosing-the-Best-B2B-Site.html
 http://en.wikipedia.org/wiki/Business-to-government
Thank You
Clarifications?
Thank You