Background of the Study


The two most powerful forces affecting the world economy and commerce today are the increasing rate of globalization and advances in information and communication technologies (ICTs). In recent years, the exponential growth in ICTs and the resulting rapid emergence of electronic commerce (E-Commerce) have drastically been reshaping the world of business. Much confusion, however, surrounds the definition of e-commerce; as reckoned by Ihlstrum et al (2003), the confusion stems from whether to define e-commerce as Internet based activities only or as any kind of business exchange on any type of network. On that matter, this study will adopt an all-purpose perspective with regard to e-commerce and attempt to derive the characterization of e-commerce from its two broad components; electronic and commerce.

Electronic is generally presumed to indicate a medium or platform that incorporates the use of Information Communication Technologies (ICTs). Commerce, on the other hand, is largely regarded as the study of how man organizes the distribution and exchange of commodities so as to satisfy his needs in the most efficient manner. Mukiibi (1981) opined that commerce was the chain that links the people who produce goods and services to those who want the same goods and services. Based on the description of the two components of e-commerce, a simple refinement and consolidation of key terms begets the definition of e-commerce that will be used in this study. E-commerce can hence be regarded as any economic or business activity that uses ICT based applications to enable the buying and selling of goods and services and to facilitate the transaction of business activities between and among businesses, individuals, governments or other organizations. E-commerce involves digitally enabled commercial transactions between and among organizations and individuals.

E-commerce intersects at the business firm boundary at the point where internal business systems link up with suppliers. These e-commerce activities include internet retailing (e-tailing), electronic data interchange (EDI), Internet banking, electronic settlements and browsing and selection of products and services over the net.


Forrester Research (2000) estimated that by the end of year 2004, the value of global e-commerce would breach the US $6.8 trillion mark. Of these e-commerce revenues, US based businesses would contribute an overwhelming US $2.7 Trillion and, Asia Pacific region would contribution as much as US $992 Billion. In Australia, where most of the e-commerce studies have been undertaken due to its pervasive internet usage (ranked at second after Finland in the OECD regions), eTForecast (2000) reported that an estimated 1.4 billion electronic transactions were carried out by the end of 1997. It would be noted, as pointed out by Steven J. Kafka of Forrester Research those businesses in the US and other advanced economies are universally preparing to transact their business of buying and selling on-line

Gregory, J. F. (2012) opined that a positive growth of the Atlantic Canadian economy, despite its low population base and distance from highly populated urban areas, is next to impossible without growth at the small and medium enterprise (SMEs) level, where, like in many other parts of the world, these smaller enterprises make up over 90% of all businesses. As a result, researchers worldwide have been tracking the performance of these organizations looking for ways to encourage their growth and thereby stimulate local economies. Much of the recent focus of this research, as Porter, M. E. (2001) would put it, has been on the adoption of Information and Communication Technologies (ICTs) for SMEs as they have been shown to improve operational efficiencies and enhance market reach among other benefits,

To fully fathom the operations of e-commerce, it would be prudent to appreciate its advent and the consequent three-stage metamorphosis over a particular period of time. These stages were informed by Pearson scholarly articles available at (www2.sta.uwi.edu/

…/questions.pdf). The three stages in the evolution of e-commerce are innovation, consolidation, and reinvention.

During the Innovation stage, e-commerce was primarily technology-driven. Innovation took place between the periods of 1995 to mid-2000 and was characterized by excitement and idealistic visions of markets in which quality information was equally available to both buyers and merchants. Startups during the Innovation stage were financed by venture capitalists and, for the most part, e-commerce during this period was largely ungoverned. This phase was characterized by an emphasis on deconstructing traditional distribution channels and dis-intermediating (the removal of middlemen) of existing channels. These early years of


e-commerce saw an infusion of pure online businesses that thought they could achieve unassailable first mover advantages. However, e-commerce did not fulfill these visions during its early years despite firms placing an emphasis on revenue growth, and quickly achieving high market visibility.

After 2000, e-commerce entered its second stage of development: the consolidation stage. In this stage, more traditional firms began to create their online presence via use of the Web to enhance their existing businesses whereas less emphasis was now placed on creating new brands. In the Consolidation stage, there was a rise in the amount of regulation and governmental controls by governments worldwide. Whereas the early years of e-commerce were dominated by the first movers, the Consolidation stage of e-commerce was characterized by the well-endowed and experienced Fortune 500 and other traditional firms. Startups in the Consolidation stage were primarily financed by traditional methods. During the same period, the role of intermediaries strengthened as successful firms adopted a mixed “bricks-and-clicks” strategy which in essence combined the traditional sales channels such as physical stores and printed catalogs with online consumer engagements.

In 2006, though, e-commerce entered its current phase, the reinvention stage, as social networking and Web 2.0 applications (a set of new, advanced applications that have evolved along with the Web’s ability to support larger audiences and more integrated content) reinvigorated e-commerce and encouraged the development of new business models. Today’s e-commerce, while still business-driven, is also audience, customer, and community-driven where audience and social network growth are being emphasized. Today, startups are once again being financed by venture capitalists, albeit with smaller investments. There is a proliferation of small online intermediaries that are renting the business processes of larger firms. There is also the return of pure online strategies in new markets, as well as a continued extension of the “bricks-and-clicks” strategy in traditional retail markets. The concept of first-mover advantages are returning in new markets as traditional Web players catch up. All these activities in the cyberspace have invited extensive government regulation and surveillance to ensure fair play, consumer protection and strict adherence to best business practices.

However it is not all doom and gloom as there are certain pertinent issues that will help define the future of e-commerce over the next few years including: 1.) the continued


proliferation of ICTs and e-commerce applications through all commercial activity; this then dictates that overall revenues will continue to rise rapidly; and the numbers of both visitors and products and services sold will continue to grow. Prices will rise to cover the real costs of doing business on the Web and to pay investors a reasonable rate of return on their capital. 2.) Continued ease of entry onto the electronic commerce trading platforms with steadily increase competition and erode the first mover advantages. Consequently, e-commerce margins and profits will rise to the level of traditional retailers as the revenues from sales and cost of goods sold via e-commerce platforms approaches equality to that of traditional firms. 3.) Continued aggression by the top e-commerce sites will increasingly obtain very well-known brands from strong, older traditional firms. This will be in an effort by the said firms to acquire a larger

footprint into the traditional market place and also in the rapidly expanding market space.

In a nutshell, the number of successful purely online companies will further decline whilst the most successful e-commerce firms will accommodate use of both traditional marketing channels such as physical stores, printed catalogs, and e-commerce Web sites.


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