Impact of E-Commerce on Business

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Impact of E-Commerce on Business

Financial Management of Current Operations
26 April 2013
Executive Summary
This paper examines the proliferation of electronic commerce (E-Commerce) and its implications affecting the business world. In particular it addresses the effect of changes in information technology and government regulation and the financial impact of such changes on electronic commerce.

First, this paper discusses the features of E-Commerce that have contributed to the widespread use of this medium. These features include efficiency, availability of information, and improved customer service.

 Second, it examines the issues relating to E-Commerce transactions. Issues such as electronic data interchange (EDI), electronic stored-value products and security attributes that affect electronic transactions.

Third, the impact of E-Commerce on businesses is elaborated, ranging from financial institutions to small companies.

 Fourth, new developments are addressed. Such as electronic banking, electronic cash (E-Cash), the possibility of a virtual trading floor, and developments in image technology.

Finally the paper concludes with a discussion of the future of E-Commerce and how such issues as; federal regulations and future technological advances will affect an organization’s financial success.

Introduction
E-Commerce is defined as conducting business electronically, whether it is over the internet or through established networks set up between businesses, business to business, or between business and consumers, business to consumers. E-Commerce has moved from being the technology of the future to being today’s imperative way of doing business. The rapid development of industrial-strength software applications designed for real-life transactions has made E-Commerce one of the most effective and reliable methods for conducting business in the 21st Century. U.S. retail E-Commerce sales reached $44 billion in 2002 - representing 1.4 percent of total U.S. retail sales – an increase of 29 percent over 2001 e-sales of $34 billion. In the fourth quarter of 2003 e-sales accounted for 1.9 percent of total retail sales ($17 billion). Today, thousands of companies engage in business on the Internet. They build online catalogs accessible to millions of people worldwide that can be instantly updated and customized for pennies per customer. Companies find new audiences through virtual superstores that offer unlimited selections, but carry no inventory. They also establish thriving online brokerage businesses by charging low flat fees. Manufacturers halved their production cycles by integrating their supply chains with their vendors. Both small and large companies have their reasons to show a presence on the Internet. The following elaborates on the efficiency, information source and customer service features of E-Commerce. Features of E-Commerce

E-Commerce allows companies to sell more, buy smarter, and interact with customers and suppliers in more powerful ways. Businesses everywhere have an opportunity to harness the global reach and immediacy of conducting business through electronic means.

Efficiency in Operations
E-Commerce is accelerating business cycles and changing certain business rules. The computer-based information systems that support quick response retailing and online service were not designed for time-based competition and management. In financial systems, the popular concept of “economies-of-scale” has given rise to do business in “batches,” which means producing all of the output for an incoming period at once. For instance, it is very common for a payroll system to produce all of the checks for the next week postdated to their respective value dates. This is usually not a problem as there are delays in mail and in-house processing. In fact, the practice of “holding back the check” in the proverbial drawer is...
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