The Development and Future Perspectives of E-Commerce
The introduction of smart-phones, portable electronic devices, and tablets has revolutionized electronic commerce. It is defines as the extensive application of information technology and the internet for communication, trade, socialization, and monetary transfers. Since 2000, the numbers of business transactions conducted via online platforms have more than tripled. May (2000) established that e-commerce accounts for over 60% of retail transactions globally. Information technology has directly impacted on the business sector by expanding customer bases, increasing product information symmetry, and improving product/service quality. Internet serves as an interactive medium where the business community congregates and transacts. Besides, this medium helps in eliminating geographic barriers to trade and commerce. E-commerce is critical in the strengthening of customer relations as well expansion of market capitalization.
Technological diffusion and innovation are keys to electronic commerce. Their advancements have led to the acceleration of online trade. Computerized devices have been evolving since their introduction, with more user-friendly alternatives getting developed. These additional features make them highly adoptable and multi-functional, thus helping in business management. Mariga (2003) pointed out that the introduction of online commerce has resulted in the widening of customer base globally. Through e-commerce, the word has become ‘one global village’ where people freely interact; a process that leads to the broadening of market bases. For instance, in an interview, Ms Goldfeld (the Paypal director for the Sub-Saharan Africa) revealed that their company has over 50 million clients in the 212 countries in which it operates. This is an indication that electronic commerce helps in the expansion of a firm’s areas of operation.
In a study titled “The Cost of Doing Trans-boundary Businesses”, Plant (2000) established that e-commerce and related technologies reduce the costs of doing multinational business by approximately 21%. Through e-technologies, buyers have access to a range of products and services at relatively affordable costs. They can acquire their preferred products or services at the comfort of their seats. Therefore, travelling-related costs are abolished. This has been made possible by the development of online-shopping malls; where customers order for goods through the website. The orders are then shipped to the customers at discounted shipping charges. This technology has also led to a drastic drop in transaction costs involved in multinational business operations. As a result, merchants enjoy increased profit margins.
According to Goldstein and O’Connor (2000), e-commerce increases market capitalization. Perfect examples of companies that currently enjoy higher market capitalization and better economies of scale are E-bay and Amazon. Though the two have countable retail outlets globally, they have been successful than Barnes & Noble Ltd. that has 1000 decentralized outlets. Many multinational companies have introduced web-based businesses in order to compete fairly with other players. Stiff competition for limited market share has prompted small firms to reconsider their position on adopting electronic commerce. A cost-benefit analysis conducted by Epstein (2004) showed that infant firms equally reap economic gains from e-technologies. This is an indication that e-commerce has the capacity to improve a firm’s profitability performance through increased marketability, enlarge customer base, reduce cost of doing institutions, and help to increase competition.
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