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E-COMMERCE

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E-commerce is short for electronic commerce. It is similar to traditional commerce system which involves the activities of selling and buying, but it perform these operations using any electronic medium like, TV, fax, radio or internet. Today internet has captured all the e-trade demand with its comparatively greater features, so here we will consider only internet as an e-commerce source.


 

Categories of E-commerce


 

There are two basic categories of e-commerce:


 

  • Business-to-Business (B2B)
  • Business-to-Consumer (B2C)


 

Business-to-Business (B2B)

E-commerce plays an important role in enhancing and transforming relationships between and among businesses.


 

Some B2B applications are:


 

Supplier Management: Electronic applications in this area aid in expediting business partnerships through the reduction of purchase order (PO) processing costs and cycle times, and by maximizing the number of POs processed with fewer people.


 

Inventory Management: Electronic applications make the order-ship bill cycle shorter. For instance, if most of a business's partners are linked electronically, any information sent by mail can be transmitted instantly. Businesses can easily keep track of their documents to make sure that they were received. Such a system improves auditing capabilities, and helps reduce inventory levels, improve inventory turns, and eliminate out-of-stock occurrences.


 

Distribution Management: Electronic-based applications make the transmission of shipping documents a lot easier and faster. Shipping documents include bills of lading, purchase orders, advance ship notices, and manifest claims. E-commerce also enables more efficient resource management by certifying that documents contain more accurate data.


 

Channel Management: E-commerce allows for speedier dissemination of information regarding changes in operational conditions to trading partners. Technical, product and pricing information can be posted with much ease on electronic bulletin boards.


 

Payment Management: An electronic payment system allows for a more efficient payment management system by minimizing clerical errors, increasing the speed of computing invoices, and reducing transaction fees and costs.


 

Business-to-Consumer (B2C)

Business-to-Consumer e-commerce involves customers gathering information, purchasing, and receiving products over an electronic network.

The consumer uses electronic commerce in the following economic transactions:


 

Purchasing products and information: Electronic applications make it possible for consumers to look up online information about existing and new products/services.

Personal finance management: In this field, electronic applications aid the consumers in managing investments and personal finances through the use of online banking tools. Chow.net is a good example of B2C electronic commerce application, particularly of purchasing products online.


 

E-commerce benefits


 

Benefits to Organization

  • Expends the marketplace to national and international markets.
  • Decrease the cost of creating, processing, distributing, storing and retrieving paper-based information.
  • Allows reduced inventories and overhead by facilitating "pull" type supply chain management.
  • The pull type processing allows for customization of products and services which provides competitive advantages to its implementers.
  • Reduce the time between the outlay of capital and the receipt of products and services.
  • Support Business Processes Reengineering (BPR) efforts.
  • Lowers telecommunication cost – the internet is much cheaper than Value Added Networks (VANs).


 

Benefits to Society

  • Enables more individual to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution.
  • Allows some merchandise to be sold at lower prices benefiting the poor ones.
  • Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them.
  • Facilities delivery of public services at reduced cost, increases effectiveness, and/or improves quality.


 

Benefits to Consumer

  • Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location.
  • Provides customers with more choices.
  • Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons.
  • Allows quick delivery of products and services in some cases, especially with digitized products.
  • Customers can receive relevant and detailed information in seconds; rather than in days or weeks.
  • Makes it possible to participate in virtual auctions.
  • Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences.
  • Electronic commerce facilitates competition, which results in substantial discounts.


 

Limitations of E-commerce


 

Technical Limitations

  • Lack of sufficient system's security, reliability, standards, and communication protocols.
  • Insufficient telecommunication bandwidth.
  • The software development tools are still evolving and changing rapidly.
  • Difficulties in integrating the Internet and electronic commerce software with some existing applications and databases.
  • The need for special Web servers and other infrastructures, in addition to the network servers (additional cost).
  • Possible problems of interoperability, meaning that some E-commerce software does not fit with some hardware, or is incompatible with some operating systems or other components.


 

Non-Technical Limitations

  • Cost and justification (35% of the respondents)

The cost of developing an EC in house can be very high, and mistakes due to lack of experience, may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system one needs to deal with some intangible benefits which are difficult to quantify.

  • Security and Privacy (17% of the respondents)

These issues are especially important in the B2C area, and security concerns are not truly so serious from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive these issues as very important and therefore the E-commerce industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, fairly secure.

  • Lack of trust and user resistance (4%)

Customers do not trust an unknown faceless seller, paperless transactions, and electronic money. So switching from a physical to a virtual store may be difficult.


 

  • Other limiting factors
    • Lack of touch and feel online.
    • Many unresolved legal issues.
    • Rapidly evolving and changing E-commerce.
    • Lack of support services.
    • Insufficiently large enough number of sellers and buyers.
    • Breakdown of human relationships.
    • Expensive and/or inconvenient accessibility to the Internet.


 

TRADITIONAL COMMERCE VS E-COMMERCE


 

Some major comparisons between the traditional commerce methods and modern E-Commerce are listed below:

 

Traditional Commerce 

E-Commerce 

Cost 

Cost is greater due to taxes, advertisement and employees. 

Average cost is much lower than traditional type.

Market 

Product market is limited because of geo-graphical constraints.

Product market is across the world because of non-physical aspects.

Advertisement 

It requires product advertisement on various mediums.

Developers of the websites also makes adds on domains.

Time 

It requires more time to go outside, to choose, compare and evaluate product.

It takes less time to choose and make comparison between several products.

Accessibility 

Less accessible due to time or geo-graphical constraints. 

Products can be accessed at any time and from almost anywhere.

Reliability 

People trust it more because of physical transactions.

Due to lake of awareness this is less popular among people.

Support 

Customers support centers support their customers.

No physical support centers available.

Feedback 

Feedback from customers takes a lot of time.

Feedback is immediate by certain website features.

Interactivity 

Fewer customers can be interacting with at a time because of less physical limitations.

Websites are especially designed for multi-users.


 

ECONOMIC SYSTEMS

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Macroeconomics


 

TWO BIG ECONOMIC SYSTEMS

Capitalism and Communism

In the world there are many economic systems exists among the countries such as:

  1. Socialism
  2. Communism
  3. Capitalism
  4. Islamic Economic System
  5. Mixed Economy Systems


 

There are also many other economic systems developed by human society like Stalinism, Maoism and Feudalism but 'Capitalism' and 'Communism' are the most important from all of them. Both have exactly opposite economical, social and political chrematistics.

COMMUNISM

Communism is an economic system that stands for total public ownership and rejects private property and personal profit. Its main idea of communism had been taken from socialism, thus these has many common characteristics. It enforces the equality of common people in their wealth and power. It can be said as:

"A system of government in which the state plans and controls the economy and a single, often authoritarian party holds power, claiming to make progress toward a higher social order in which all goods are equally shared by the people."


 

About

Karl Marx became the prophet and teacher of socialism whose writings transformed socialist thinking all over the world. Marx was a philosopher and an idealist who studied history and was greatly influenced by the writings of Georg Hegel, the famous German philosopher. In 1848 Karl Marx published, with the help of his long-time friend and collaborator Friedrich Engels, "Manifest der Kommunistischen Partei," more commonly known as "The Communist Manifesto". The Communist Manifesto was a summary of his entire social and political philosophy. The publication of this book occurred at a most propitious time. The book appeared on the eve of the 1848 revolution in France and less than one year before an attempted revolution in Germany. After the failure of the 1848 revolution in Germany he was expelled from his country of origin and moved to London. He later published "das Kapital" or Capital, an analysis of the economics of capitalism. Marxism, a doctrine developed by Marx and to a lesser extent by Engels, consists fundamentally of two interrelated ideas: a philosophical view of man and a theory of history.


 

Countries

Following countries are the leading as communist countries:

  • China
  • Cuba
  • Laos
  • North Korea
  • Russia
  • Vietnam


 

CAPITALISM

Capitalism is a political system in which all the property and factors of productions are owned privately in order to create profit for the owner. Prices of goods and services fluctuate depending on the desire of the desire of consumer and availability of goods and services. There will be significant difference of wealth and power between those who have capital and those who don't have it. Hence its definition can be:

"An economic system in which all or most of the means of production are privately owned and operated, and where investment and the production, distribution and prices of goods and services are determined privately by producers, rather than by the state. The means of production are usually operated in pursuit of profit".

About

No one can say when capitalism first began. Clearly the development of capitalism was not revolutionary like that of communism. Instead it emerged gradually without anyone making a plan of what it should become.

In 1776 Adam Smith, a Scottish university professor, produced a book which described the workings of a capitalist society. He believed that a country's wealth depends on all people pursuing their own interests. If a person promotes his own interest he or she is unintentionally promoting his country's interest. Smith thought that governments should promote free trade and not interfere by protecting certain industries from competition. The only duty of governments, Smith wrote, was to provide services that couldn't be profitable like the building of roads, schools and churches.

Countries

These countries are the capitalist in all terms:

  • United Kingdom
  • Finland
  • Canada
  • Norway
  • United States of America


 

CAPITALISM VS COMMUNISM

Gross Domestic Production (GDP)

For the Year 2005 (in billions $US)

Communist Countries

Capitalist Countries

Country Name

GDP

Country Name

GDP

China

1843.12

United Kingdom

2295.04

Cuba

125.71

Finland

204.38

Laos

2.66

Canada

1098.45

North Korea

720.77

Norway

285.60

Russia

755.44

United States

12438.87

Vietnam

47.11

  

Reference: IMF World Economic Outlook (WEO)


 

The above chart shows that overall capitalist countries are creating high GDP rates.


 

Characteristics

The following are the comparative characteristics of these systems based on criticism and favors on them:

Capitalism

  • Only private sector operates all business.
  • People can have their own properties and factors of productions.


 

  • Each business has been operated to have personal profits.
  • Those who have capital, they have more wealth and power than others who doesn't have.
  • There is great competition among private businesses.
  • Investors take risks in investments as the self-organization.
  • The existence of markets (including the labor market.


 


 


 

Communism

  • Communist party holds as Government to operate all kinds of businesses.
  • There is no concept of private property and all the means of productions are owned by Government.
  • People work for common welfare and grades not for personal profit.
  • All the peoples are same in power and wealth.


 

  • No competition exists. Only Government is the monopolist in all businesses.
  • No entrepreneurship exists.


 

  • There are no markets.


 

WHAT I SHOULD SAY

As being a Muslim I must say that Islamic Economic System is the best from all of these economic systems. It enforces a total interest free economy, but it has not been applied successfully in any country across the globe. In Pakistan we are facing a mixed economy system. All the major businesses are owned by Government or had been owned by Government and it didn't have any competitor in these businesses. Pakistan Tele Vision (PTV), Pakistan Railways, Pakistan Tele Communications Ltd. (PTCL), Pakistan International Airlines (PIA), WAPDA, Water and Sewerage Authority (WASA), Sui Northern Gas Pvt. Ltd. and State Bank of Pakistan are the kind of business those had been monopolist under the Government authorization. Now a day only some of them have been privatized or have been facing competitors and other of them are still monopolist and these are still owned by Government.


 

Communism, as it exists in the world today, and capitalism are the same things. True communism doesn't, and can't, exist. True communism depends on human nature being basically altruistic. For communism to work, the members of the society either need to be altruistic enough to want to work for the benefit of their neighbors, or they need to be forward thinking enough to see that what benefits the whole benefits themselves. They must be very far-sighted indeed, because large-scale social benefits tend to be more abstract in nature, and more difficult to recognize. Communism was a major cause in break down of Russia.


 

Capitalism encourages non-contributing, support structure industry. Many organizations make fortunes simply by shifting money back and forth, from one place to another. While this is all very integral to our economy, it only exists as a side effect -- it doesn't actually produce anything.

Capitalism allows people to starve. However, unlike communism, capitalism also allows people to better themselves and their situation. Capitalism also allows people to ensure a better future for their offspring, should they have any, and to contribute surplus resources to organizations that they believe in. To quote the old hack, it may not be a perfect system, but it is the best one we have.