The Advantages and Disadvantages of Electronic Commerce

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1 E-COMMERCE - WINNERS' CHOICE COSTEL NISTOR, ROZALIA NISTOR, MIHAELA-CARMEN MUNTEAN Department of General Economics, Faculty of Economic Sciences Dunarea de Jos University N. Balcescu Str., Galati ROMANIA cos_nis@yahoo.com; rozalia.nistor@selir.com; mihaela_c_muntean@yahoo.com Abstract: Simultaneous development of telecommunications and computers has made possible the use of the Internet boom and the creation of specific technologies that will influence key economic and social activities. In such circumstances, will develop extensive e-commerce business that will revolutionize the field and will stimulate international trade. Such changes will give consumers new possibilities of search and selection of the most competitive on the world market. In this context, trade on the Internet can talk about a new field of knowledge. Essentially, it retains some of the characteristics of electronic commerce "traditional" common scheme sales/credit card based systems EDI (Electronic Data Interchange), methods of cryptographic protection of data security management, sites etc. Key words: e-commerce, Internet, business-to-business, business-to-consumer, consumer-to-consumer, consumer-to-business 1. E-commerce - modern form of business Throughout human history, the exchange of goods and services has undergone many forms. If at first, the natural economy, barter exchange form that manufacturers use their surplus production to meet other consumer needs, with the deepening division of labor and developing production for exchange, it takes scope. But trade itself is really just born with the advent of money and social class of merchants, who facilitated the passage of goods from producers to consumers and is steadily rising, accounting for many forms over time. Developments the company had subsequently allowed the continuous improvement of forms of trade. In a very broad sense, electronic commerce is a concept that means the sale and purchase or exchange of goods, services, information, using a computer network, including the Internet. In a narrow sense, electronic commerce can be viewed from four perspectives, namely: from the perspective of communications - is to provide information, products, services, payment, using telephone lines, computer networks or other electronic means; from the perspective of business processes - is a technological application toward business process automation and workflow; from the perspective of services - is a tool that addresses the wishes of companies, consumers and management to reduce costs and improve quality of goods and speed of service; From the theoretical point of view, electronic commerce is defined as "a modern technology to do business, which addresses the needs of organizations, traders and consumers to reduce transaction costs while improving quality of goods and services and increase delivery speed. From the perspective online - is the ability to buy and sell products, information on the Internet or using other online services. From the pragmatic point of view are important and other ways of defining concepts. Of these, particular interest is the following: "All activities conducted online, in order to incite consumer interest before the sale and provide after sales support to consumers (Internet Computing magazine); "Doing business online. This includes buying products through online services and Internet and electronic data exchange with an institution shall inform the computer and transmits purchase orders to another company computer "(Computer Desktop Encyclopaedia) [ "Commercial transactions using automated processing procedures combined with automatic procedures for the exchange of information" (NIST Computer Systems Laboratory) [csrc.nist.gov]; "Electronic commerce refers generally to all forms of transactions that relate to business activities, carried out at company level or buyers, which is based on processing and transmitting information in digital form, including text, sound and images (OECD, 1997); "In the broadest sense, electronic commerce can mean any form of use of electronic technologies in ISSN: ISBN:

2 every aspect of commercial activity" (National Telecommunications and Information Administration - NTIA U.S.) [ 2. Advantages and disadvantages of e- commerce A first step in analyzing the advantages and limitations of electronic commerce is the overview of the causes that led to the emergence of various forms and motivations of launching electronic commerce on the Internet. The first forms of existing e-commerce for decades relied on private networks, telephone networks and between companies. Next stage of e-commerce dates back to '95 - '96 and is the retail sale to consumers. Another wave of developments in electronic commerce has the ability to send secure orders using credit cards. In this period were integrated network applications with databases, offering consumers the opportunity to access a considerable amount of information and provide convenient options for purchasing. The current level of electronic commerce has become possible thanks to software development, the major database producers and products oriented to web links from ever performances of browsers and databases (ODBC, JDBC etc.) protocols and improve security There are mainly two reasons why a company wants to engage in electronic commerce on the Internet: Opportunity to broaden their clientele: the Internet, any company can have a global presence, benefiting customers worldwide. For example, anyone connected to the Internet can visit Web pages of a company, regardless of the location of the user. Reducing costs for distribution and customer services provided. Internet use entails significant cost reductions by sharing information, which is important in any business. Thus, mailing a brochure implies a much higher cost than sending electronic brochure "equivalent" or of placing it on a website. Presence on the Internet involves some initial costs, which vary according to desired services ( , web etc.) But it pays off relatively quickly. Advantages of using electronic commerce can be assessed from the perspective of three participants involved: company, consumers and society. In terms of the company shop, the advantages of electronic commerce are: - Expansion of activity for national and international markets, with a minimum capital, a company can quickly and easily to locate customers, suppliers and the best suitable business partners worldwide. - Increased communication speed. - Inventory reduction effort and inventory management. - Reduce the time between capital spending and revenue consideration products and services. - Reducing the costs of creation, processing, distribution, storage and retrieval of information based on paper. - Strengthening relationships with suppliers and customers (the website contains updated information useful to all parties, and EDI (Electronic Data Interchange) involves close liaison partners to establish communication standards). - Providing fast and modern way of providing information about the company (web pages). - Small businesses can compete with large ones. Reduced costs involved in opening an online store, small companies can usually enter markets dominated by large companies. - Facilitate entry to international markets. The Internet is not restricted by boundaries, does not hold anyone, and access and publication costs are reduced. Communicating with a customer on the other side of the world is as easy as communicating with a person in the other room. In terms of consumer benefits are quickly making purchases or other transactions at any time, any day, looking for products and services quickly, with the possibility of technical and economic comparison of tenders, rapid transportation of goods and services, particularly those digital can participate in virtual auctions, virtual communities, electronic meetings, where they exchanged ideas and experiences, facilitate competition, resulting in substantial price reductions. Society benefits from the introduction of electronic commerce are: allow more people to work and to shop from home, thus reducing traffic and pollution, making possible the sale of goods at lower prices, so that low income people can buy more, raising their standard of living, ensure people in "third world" and those in rural areas access to products and services that otherwise would not have been accessible, facilitating the provision of public services such as health, education, distribution of government social services at a reduced cost and improved quality. Limitations and disadvantages of electronic commerce can be grouped into two broad categories: technical and non-technical. We can distinguish between technical disadvantages: the lack of cheap security systems, appropriate standards and protocols for efficient communication, tools development and transformation are rapidly changing, difficult to integrate Internet access and software systems commerce with some existing applications and database systems, vendors need special Web servers and other infrastructure. ISSN: ISBN:

3 In the category of non-technical disadvantages includes: - Cost and justification. Develop a proper system is quite expensive and may pose problems due to lack of experience. It is also difficult to justify and quantify some enhanced services to customers or advertising value. - Security and anonymity. Is addressed, in particular, B2C applications, where anonymity is very important. - Other factors: clients unable to have physical contact through the senses (sight, hearing, touch, taste, smell etc.). With objects, shortcomings of the legal framework, regulations standards, rapidly evolving field, which outruns the possibility of adapting both sellers and the purchasers, insufficient support service. Advantages and disadvantages of electronic commerce should be viewed from the perspective of globalization, one of the assumptions inherent in macro and microeconomic development, including free trade, greater mobility, with lower fees and flexibility in hiring people. Although a global electronic market place for about 20 years in the commercial transactions between large financial firms, it is expensive and difficult to access SMEs. The main obstacles that stand in the way of achieving globalization of electronic commerce related to the following: Framework. Currently several international organizations working in the global legal framework for electronic commerce. Problems in this area are related jurisdictions, regulations export /import, intellectual property, cryptography and information security, contracts, legalization of documents, authentication procedures, protection of anonymity, border transactions, data protection, content control, consumer protection etc. Market access. Refers to telecommunications infrastructure in all areas to reach the world, the bandwidth necessary to carry out properly the activities, technical and economic limitations of user access, companies that want to join a global e- commerce must be Current legal standards and apply fast, technical, economic, always changing. Financial. Refers to taxes, local financial regulations and electronic payment systems. Some countries ask for a fee for products ordered from other countries, which increases the price by the buyer. Another factor is the financial exchange rate, which should be available in real time and electronic payment systems to take account of decimals, which in some currencies are more important than others. Other issues, which can be integrated within the role and policy of government to identify the buyer or seller, trust transactions, security, cultural diversity, international and multilateral agreements, language and translation from one language to another, using the local money to purchase. Rate can change every minute, which makes transactions difficult. To eliminate this failure, PSINet has offered a solution (WorldPay System) which allows traders to products in 126 currencies and receive payments in 16 currencies. It is based on the SET protocol (Secure Electronic Transaction) and provides real-time exchange rates. 3. E-commerce models Electronic commerce is widely used today in various forms; one of the most significant ways of grouping is the nature of the transaction. Coinciding with this criterion, the following models of electronic commerce: - Business-to-business (B2B). Represents the most widespread electronic commerce and electronic transactions between organizations included, called IOS type (Inter-organizational Information Systems). There are several types of interorganization systems: electronic data interchange (EDI - Electronic Data Interchange) value added networks (VAN - Value Added Network), electronic funds transfer (EFT), Extranet sites securely connected to the Internet, EDI combines integrated messaging, and electronic forms, databases shared extranet sites, supply chain management (supply chain management). - Business-to-consumer (B2C). Relates to retail transactions by individual buyers (e.g., a buyer from Amazon.com is the consumer model). - Consumer-to-consumer (C2C). Is a model in which consumers sell directly to consumers. For example, people who sell property, houses, cars and other goods, advertisements on the Internet/Intranet business for individual services, sales knowledge, expertise, individual auctions. - Consumer-to-business (C2B). This category includes persons who sell products or services to organizations and those seeking vendors negotiate with them and, finally, there is a transaction. - Non-business. Refers to non-profit activities, academic institutions, religious, social, government agencies, using various forms of electronic commerce to reduce costs, improve services or activities. Involvement of governments in economic activities have created individual models, type government-to-citizen (G2C), government-togovernment (G2G) etc. - Intra-business. Containing internal activities, which usually occur in an intranet and involving exchanges of goods, services, information. Activities can range from selling products to corporate employees to their online training. - Collaboration. Represent a model rising. It is based on the collaboration of several companies - ISSN: ISBN:

4 even competitors - to produce and sell products and services. B2C and B2B models are the most common and their rules are replicated, with slight modifications in other models. Electronic market can be targeted to consumer (B2C model) or the client company (B2B business model) B2C model B2C trade is a series of specific products, topselling retail products on the Internet the following structure: travel, IT software and hardware, grocery, books, apparel and accessories, tickets, gifts, music, toys, electronics etc. For a product to be selling in electronic markets must meet the following requirements: have recognized brand, provide a guarantee from reliable producers, have an acceptable price, to be a commodity with standard specifications, to be bought frequently, have simple procedures use broadcast by audiovisual means. For a company to hold and be successful in the area of electronic commerce on the Internet, you need to control three basic elements: competition, customers and change. The competition is the quality of its products, change management takes the company and customers to earn and maintain hard and harder. To ensure loyalty, the company needs to understand, to know the requirements and preferences. To this end, it recommends an interactive site, showing those things, and tracking customer behavior. For several decades, researchers have tried to understand consumer behavior, for a more complete adaptation of products and services to their buying habits and skills. An adaptation of this model for Internet commerce environment is shown in Figure 1. Making a consumer decision is influenced by external stimuli, individual characteristics, cultural environment, technology and logistics. Research all these factors led to the identification of the following business models that determine the position of a company's market-oriented consumer electronics: Marketing. Marketing can be directly and indirectly, globally and regionally. Marketing directly relates to the fact that manufacturers deal with both advertising and distribution of their products to consumers, using an electronic shop on the Internet or other mediums of telemarketing without the intervention of intermediaries. Indirectly marketing your products are distributed through intermediaries or third parties, such as e- malls. Even if the Internet "covers" the entire planet, some products and services can be provided globally. Thus perishable and grocery products can be transported great distances too. However, transport costs for large distances, legal issues may limit the scope of service, creating regions or regional marketing. In the virtual environment specific marketing activities, a special role is advertising online, which can be achieved through numerous techniques, such as search engine registration, partnership links (links), marketing pyramid (strategy that encourages recipients to forward the advertisement using its own network of knowledge and resources), public relations, traditional media, advertising, marketing and paid advertising relational (using banners, display paid portals, advertising, Pay Per Sale PPS). Personal Characteristics Age, gender, nationality, education, lifestyle, occupation, knowledge, values, personality Stimuli Marketing: price, promotion, product quality Others: economic, technological, cultural Enviromental characteristics Social, family, community Decision making process Systems controlled by seller Logistics support: pay, delivery Technical Support: Web design, intelligent agents Customer Service: FAQs, , call center, one-to-one Buyer Decision To buy or not? What to buy? Where? When? How to spend? Repeat purchases? Fig. 1: Consumer behavior in electronic commerce Cyber-Marketing. Cyber-Marketing has to measure on-line services, providing information on trafficking held in controlled sites and Internet network user behavior. Cyber-marketing can be fully or partially. At all or simply refers to companies that sell their products and services only through the Internet and were "born" in the era of e- business (such as, for example, Amazon) and one part to companies who use electronic stores as an extension of the traditional (such as, for example, Barnes & Noble, Ford). Electronic distributors and brokers. Using the Internet, manufacturers can sell directly to customers without the need for intermediaries. This is possible if manufacturers sell standard brands are recognized and their sites are renowned. If a site is not sufficiently known, then he needs publicity, being enrolled in an electronic guide or using a ISSN: ISBN:

5 similar service via a website. Electronic brokers offer many services that add value to information available in open networks or from integrated business systems, such as providing customers classified catalogs on your profile, selling business opportunities, investment tips and advice in specialized fields. Online shop (e-shop, e-store). Online shop is managed by a company for marketing and selling their products or services. The minimum in the database of products / services, trade and technical descriptions for each item in the catalog. Minimum version of an electronic shop includes facilities for taking orders (via or interactive forms), and expanded version includes the possibility of making online payment (by electronic means). Gains from cost reduction and sales promotion, and the increase in sales volume. Sales of products with services or services. The sites are designed not only to companies marketing products but also ensure the necessary advice and other services to customers. Some companies have two websites, one for sales and another for service. There are also specialized companies offer online services. They are used both B2C and B2B and concerns in travel services, travel, employment placement, trade stocks, electronic banking, insurance, auctions. Whatever the nature of the services or products sold online, consumers should be awareness of them, remarking that there are some distinct features of the individual in relation to the Organization (Table no 1). Table 1: Characteristics of the retail buyer and the company's buyer Features Retail buyer Company buyer Request Individual Organizational Volume traded Small Big Customer Number Big Small Locating buyers Distribution structure Nature purchases Nature of influence on purchase Type of negotiation Dispersată More indirect More personal Singular Standard Geographically concentrated More direct More professional Multiple Complex Using reciprocity No Yes Using leasing Less More Main promotional method Advertising Personal Sales 3.2. B2B model Business-to-business model is most common on the Internet. Business partners are corporations, companies, corporations and other organizations. Internet is the most economical for B2B, enabling companies to connect, without additional network deployments. B2B goods contribute to lower costs, reduce inventories, logistics efficiency, increase sales, lower costs of sales and marketing. Products most suitable for B2B trade in order to use them are: computers, computer components, consumer electronics (17.5%) public services (5.7%), transport and storage of goods (2%), motor vehicles (2%), petrochemicals (2%), paper and office supplies (0.7%), food and agriculture (0.4%). B2B model covers a broad range of applications, it offers entrepreneurs access to a range of useful information in the following categories: products - products specifications, prices, sales history, customers - sales history and forecasting, supply - the terms of sale, plans production, production line and time, the production process - capabilities, plans, commitments, transportation - costs, charges, time, stocks - levels and their location, supply chain alliances - the key supply contracts, the role and responsibilities of partners, the supply, competitors - market share, competitive product offerings, benchmarking, sales and marketing site - points of sale, promotions, supply chain process and performance - process descriptions, performance measurement, quality, delivery time, satisfying consumers. The most common forms of commerce are B2B oriented company salesman, buyer, or to the intermediate. Market-oriented company that sells (Supplieroriented). Represents the most widespread of the B2B model. As such, both individual buyers and companies that buy using the same market (supplier-provider). Architecture that forms is largely the same as in B2C and purchase process is similar. The only difference from B2C retailers are: customers are companies, which integrate information management systems orders of purchases is crucial, each buyer company may have its own catalog and price policy, company-buyer behavior differs from the behavior of retail buyer. It also differs from B2C B2B platform, because the company's customer orders are stored on company servers bidding and integrates easily with the client company's computer system. To purchase goods and services, large companies and public authorities hold electronic auctions to purchase. The tender specifications published on the Web to reduce both time and cost of transmission, most important being that the increase in the number of companies that take timely informed about the auction, which eventually lead to increasing competition and therefore lower price. ISSN: ISBN:

6 Personal Characteristics Age, gender, nationality, education, lifestyle, occupation, knowledge, values, personality Stimuli Marketing: price, promotion, product quality Others: economic, technological, cultural Enviromental characteristics Social, family, community Decision making process Systems controlled by seller Logistics support: pay, delivery Technical Support: Web design, intelligent agents Customer Service: FAQs, , call center, one-to-one Organization influences Policies and procedures, organizational structure, centralization/ decentralization, systems used, contacts Buyer Decision To buy or not? What to buy? Where? When? How to spend? Repeat purchases? Fig. 2: Consumer company behavior model Markets oriented parties (3th party Market Place) are based on electronic interface between seller and buyer. Single interface to multiple buyers and producers of goods is known, is attached to frequently accessed information channels. Intermediaries are the same in both B2C and the B2B products when buying common to both models (books, computers, stationery etc.) and different products for general business (industrial machinery, engines etc.). On this market and enable service providers to add e-commerce channels. 4. Conclusions New methods of trade will open new markets for them. Interactive exchange of information electronically between companies and governments will simplify procedures. Information technologies allow to minimize distribution costs, for example, sale and distribution of information in a communication network. Will be possible; therefore, reduce distribution costs from end to end supply chain. Electronic links between manufacturers and retailers allow reduction in costs by reducing paper transactions and/or replacing them entirely electronic transactions. It highlights the need for security in computer systems, this based on the following: financial fraud known a considerable decrease, largely because of modern security technology implementations, flood-type attacks (DDoS) which are main target sites of companies that are online sales are growing alarmingly, theft of information (intellectual property) to high levels, similar to the previous year as a result have a higher piracy rate. E-commerce provides opportunities to suppliers and customers commensurate advantages: global presence/global choice, increased competition/ service quality, production scale individualized/ personalized products and services, shortening or removing the supply chain/rapid response requirements of beneficiaries, reduce costs/lower prices, new business opportunities/products and services. E-commerce seems to be able to capture a large share of the market new division of the market will work, probably at the expense of traditional forms of sale such as small shops. Electronic commerce is an alternative distribution channel to classical. Distribution channels used by several commercial firms in order to meet better or more categories of consumers. Appealing to more distribution channels, companies gain significant advantages: better market coverage, lower distribution costs, a "personalization" of higher sales process. Electronic commerce can be viewed as a special type of commercial service offered in the context of trade "outside the store, carrying out commercial transactions on-line seller and there is no physical store. References: [1] Barefoot C. - Revoluţia comerţului electronic, Editura Amaltea, 2004; [2] Barner, S., Hunt, B. - E-commerce & E- business, Florence Production Ltd., Devon, Marea Britanie, 2001; [3] Bucur, C. - Comerţul electronic, Editura ASE, Bucureşti, 2002; [4] Gates, B. - the speed of thought, Warner Books, 1999; [5] Ghilic-Micu, B., Stoica, M. - E-activităţile în Societatea Informaţională, Editura Economică, Bucureşti, 2002; [6] Hedges, B. - Afacerea-de-vis.com, Editura Curtea Veche, Bucureşti, 2003; [8] Quain, B. - Comerţ. Avantajele vânzării în reţea, Editura Curtea Veche, Bucureşti, 2002; [9] Roşea, Gh. I., Bucur C.-M., Timofte-Stanciu C., Paiu O., Vişean M. - Comerţul electronic. Concepte, tehnologii şi aplicaţii, Editura Economică, 2004; [10] Timofte-Stanciu, C. - Baze de date pentru comerţ electronic pe internet, Editura Oscar Print, Bucureşti, 2002; [11] Turban, E., King, D. - Electronic commerce A managerial perspective, 2-nd edition, Prentice Hall, 2002; ISSN: ISBN: