E-commerce Notes | MCA Notes | Download MCA Notes

1.         What is commerce & E-Commerce?


  • Commerce:

Commerce is a negotiated exchanged of valuable objects or services between at least two parties & includes all activities that each of the parties undertaken to complete the transaction.


  • Buyers & Sellers can engage in these transactions not just for products, but for services too.
  • It can involve individuals business firms, not for profit organizations & governmental entities as both buyers & sellers.


  • E-Commerce:

The term e-commerce is used in its broadest sense: business activities conducted using electronic data transmission technologies, such as those used on the Internet & the World Wild Web.

  • “The transformation of key business processes through the use of Internet technologies.



Online Reservation

Online Exam

Online Purchase


2.         Explain concept of EFT & EDT.



EFT stands for Electronic Funds Transfers.


  • For more than so years, banks have been using electronic funds transfers (EFT), which are electronic transmissions of account exchange information over private communications networks.
  • It is also known as wire transfers.



EDI stands for Electronic Data Interchange.

  • EDI occurs when one business transmits computer readable data in a standard format to another business.


3.         Explain term value added network.


  • A value added network (VAN) is an independent firm that offers connection & transaction-forwarding services to buyers & sellers engage in EDI.
  • Before the Internet came into existence as, VANs provided the connections between most trading partners & were responsible for ensuring the security of the data transmitted.
  • VANs usually charged a fixed monthly fee plus a per-transaction charge adding to the already significant expense of implementing EDI.
  • The companies that operated VANs have gradually moved EDI traffic to the Internet, but many other companies have developed other way to do EDI types of transaction on the Internet.


4.         What is merchandising?


  • Retail merchants have years of traditional commerce experience in creating store environments that help convinced customers to buy.
  • This combination of store design, layout & product display knowledge is called merchandising.


5.         What is commodity?


  • A commodity item is a product or service that is hard to distinguish from the same products or services provided by other sellers.
  • Eg. Gasoline, office supplies, soap, computers & airline transportation.


6.         What is Market?


  • A real or virtual space in which potential buyers & sellers come into contact with each other & agree on a medium of exchange.
  • Eg. Currency or barter.


7.         What is Hypertext?


  • Hypertext is a system of navigating between HTML pages using links.s


8.         What is WWW & Internet?


  • WWW: Stands for World Wide Web.

The part of the Internet known as the World Wide Web, or more simply the Web is a subset of the computers on the Internet that are connected to each other in a specific way that makes then & their contents easily accessible to each other.

  • Internet: A global system of interconnected computer networks.

Using the Internet, you can communicate with other people throughout the world by means of electronic mail; read online versions of newspapers, magazines, academic journals & books, join discussion groups on almost any conceivable topic; participate in games & simulations & obtain free computer software.

In recent years, the Internet has allowed commercial enterprises to connect with one another & with customers.



Q-2   Give answers in brief.


1          Step for buyers & seller in traditional commerce.


  • Steps for buyers in traditional commerce:

v  Identify specific need.

v  Search for products or services that will satisfy the specific need.

v  Select a vendor.

v  Negotiate a purchase transaction including: (1) Delivery logistics. (2) Inspection, testing & acceptance.

v  Make payment.

v  Perform regular maintenance & make warranty claims.


  • Steps for sellers in traditional commerce:

v  Conduct market research to identify customer needs.

v  Create product or service that will meet customer’s need.

v  Advertise & promote product or service.

v  Negotiate a sale transaction, including: (1) Delivery logistics. (2) Inspection, testing & acceptance.

v  Ship goods & invoice customer.

v  Receive & process customer payments.

v  Provide after-sale support, maintenance & warranty services.


2.         State difference between traditional commerce & E-commerce.


No. Traditional commerce E-Commerce
1 Commerce is a negotiated exchanged of valuable objects or services between at least two parties & including all activities that each of the parties undertakes to complete the transaction. The term e-commerce is used in its broadest sense: business activities conducted using electronic data transmission technologies such as those used on the Internet & the WWW.
2 In this commerce buyer & seller has to be present. In this commerce buyer & seller have not necessary to be present.
3 Eg. To buy car from showroom. Eg. Online shopping.




3.         Items suitable & not suitable for E-commerce.



  • Items suited to E-commerce:

v  Sales/purchase of books & CDs.

v  Online delivery of software.

v  Sales/purchase of travel services.

v  Online shipment tracking.

v  Sale/purchase of investment & insurance products.


  • Items not suitable to E-commerce:

v  Sale/purchase of impulse items for immediate use.

v  Sales/purchase of perishable food products.

v  Small-denomination purchases & sales.

v  Sale/purchase of high-value jewelry & antiques.


4.         Advantage & Disadvantages of the E-commerce.



  • Advantage of the E-commerce:
  1. E-commerce can increase sales.
  2. It can decrease coasts.
  3. The Web is useful in creating virtual communities that become ideal target markets for specific types of products or services.
  4. A business can reduce the coasts of handling sales inquiries, providing price quotes & determining product availability by using sales support & order-taking processes.
  5. E-commerce increases the speed & accuracy with which business can exchange information, which reduces costs on both sides of transactions.
  6. E-commerce provides buyers with a wider range of choices than traditional commerce because buyers can consider many different products & services from a wider variety of sellers.
  7. Electronic payments of tax refunds, public retirement & welfare support cost less to issue & arrive securely & quickly when transmitted over the Internet.
  8. E-commerce can make products & services available in renote areas.


  • Disadvantages of E-commerce:


  1. Most common disadvantage of E-commerce is that stem from the newness & rapidly developing pace of the underlying technologies.
  2. Perishable grocery products are harder to sell online because customers want to examine and select specific items that are still fresh and appealing.
  3. To calculate return-on-investment numbers before committing to any new technology has been difficult to do for investments in electronic commerce.
  4. Many firms have had trouble recruiting & retaining employees with the technological, design, & business process skills needed to create an effective e-commerce presence.
  5. Many business face cultural and legal obstacles to conducting electronic commerce.
  6. The legal environment in which e-commerce is conducted is full of unclear and conflicting laws.
  7. In many cases, government regulators have kept up with technologies.


5.         What is transaction cost? Explain with example.


Transaction cost:-


The total of all costs incurred by a buyer & seller as they gather information & negotiate a transaction is called transaction cost.




-          A sweater dealer could obtain sweaters by engaging in market transactions with a number of independent sweater knitters.

-           Transaction costs incurred by the dealer would include the costs of identifying the independents knitters, visiting them to negotiate the purchase price, arranging for delivery of the sweaters & inspecting the sweaters on arrival.

-          The knitters would also incur costs such as the purchase of knitting tools & yarn.

-          Since individual knitters could not know whether any sweater dealer would ever buy sweaters from them. The investments they would need to make to enter the sweater-knitting business would have an uncertain yield.

-          This risk is a significant transaction cost for the knitters.


  1. 6.                  What is Vertical Integration?

Ans.    The practice of an existing firms replacing one of its suppliers with its own strategic business unit that creates the supplied product.


  1. 7.                  Solution & Role of E-Commerce for minimizing transaction cost.


    • To reduce transaction costs by improving the flow of information & increasing the co-ordination of actions.
  • By reducing the cost of searching for potential buyers and sellers and increasing the no. of potential market participate electronic commerce can change the attractiveness of vertical integration for many firms.
  • We can take an example to see how electronic commerce can change the level and nature of transaction costs consider an employment transaction
  • The equipment to employee a person has high transaction costs or the seller the employee who sells his or her services.
  • These transaction costs include a commerce for go other employment and career development opportunities.
  • Individuals make a high investment in learning and adapting to the culture of their employee.
  • It accepting the job involves a movie the employee can incurs very high costs, including actual costs of the move and related costs of the move and related costs such as a loss of a spouses job.
  1. 8.                  Explain value chain for E-Commerce and role that E-Commerce plays for value.

Ans.    Chains.

There are two different types of value chains.

(1)   Strategic Business Unit Value Chains.

(2)   Industry value Chain.


Strategic Business Unit Value Chains

  • A Value chain is a way of organizing the activities that each strategic business unit undertakes to design, produce, promote, market, deliver and support the products or services it sells.
  • In addition to these primary activities, porter also includes supporting activities such as human resource management and purchasing in the value chain mode.


Industry value Chain

  • Porter uses the term value system to describe the larger stream of activities into which a particular business unit’s value chain is embedded.
  • However, many subsequent researchers and business consultants have used the term industry value chain when referring to value system.
  • By becoming aware of how other business units in the industry value chain conduct their activities. Managers can identify new opportunities for cost reduction, product improvement or channel reconfiguration.


The role of E-Commerce

As they examine their industry value chains, many businesses are finding

that electronic commerce can play a role in reducing costs, improving product

quality, reaching new customers or suppliers and creating new ways of selling

existing products.

  • The value chain concept is a useful way to think about business strategy in general.

When firms are considering electronic commerce, the value chains can be an excellent way to organize the examination of business processes within their business units and in other parts of the product’s life cycle.

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