Profit (economics) In economics, the term profit has two related but distinct meanings.

Normal profit represents the total opportunity costs (both explicit and implicit) of a venture to an entrepreneur or investor, whilst economic profit (also abnormal, pure, supernormal or excess profit, as the case may be monopoly or oligopoly profit, or simply profit) is, at least in the neoclassical microeconomic theory which dominates modern economics, the difference between a firm's total revenue and all costs, including normal profit. In both instances economic profit is the return to an entrepreneur or a group of entrepreneurs. Economic profit is thus contrasted with economic interest which is the return to an owner of capital stock or money or bonds. A related concept, sometimes considered synonymous in certain contexts, is that of economic rent - economic profit can be considered as entrepreneurial rent. Other types of profit have been referenced, including social profit (related to externalities). It is not to be confused with profit in finance and accounting, which is equal to revenue minus only explicit costs, or superprofit, a concept in Marxian economic theory. Indeed, the dominant definition of the term today - and the one in use in this article - should be differentiated from that of the previously dominant school of classical economics, which defined profit as the return to the employer of capital stock (such as machinery, factories, and ploughs) in any productive pursuit involving labor. The definitions of neo- and classical theory are actually, however, equivalent, if one considers that profits return to those who invested (financial) capital. Normal profit Normal profit is a component of (implicit) costs, and so not a component of economic profit at all. It represents the opportunity cost for enterprise, since the time that the owner spends running the firm could be spent on running another firm. The enterprise component of normal profit is thus the profit that a business owner considers necessary to make running the business worth his while i.e. it is comparable to the next best amount the entrepreneur could earn doing another job. Particularly if enterprise is not included as a factor of production, it can also be viewed a return to capital for investors including the entrepreneur, equivalent to the return the capital owner could have expected (in a safe investment), plus compensation for risk. In other words, the cost of normal profit varies both within and across industries; it is commensurate with the riskiness associated with each type of investment, as per the risk-return spectrum. Only normal profits arise in circumstances of perfect competition when long run economic equilibrium is reached; there is no incentive for firms to either enter or leave the industry. Economic profit An economic profit arises when revenue exceeds the opportunity cost of inputs, noting that these costs include the cost of equity capital that is met by normal profits. If a firm is making an economic loss (its economic profit is negative), it follows that all costs are not being met in full, and the firm would do better to leave the industry in the long run. In terms of the wider economy, economic profit indicates that resources are being employed in useful endeavours, while economic losses indicate that those resources would be better employed elsewhere.[3] In competitive and contestable markets

Only in the short run can a firm in a perfectly competitive market make an economic profit. Economic profit does not occur in perfect competition in long run equilibrium; if it did, there would be an incentive for new firms to enter the industry, aided by a lack of barriers to entry until there was no longer any profit.[2] As new firms enter the industry, they increase the supply of the product available in the market, and these new firms are forced to charge a lower price to entice consumers to buy the additional supply these new firms are supplying (they compete for customers).[4][5][6][7] Incumbent firms within the industry face losing their existing customers to the new firms entering the industry, and are therefore forced to lower their prices to match the lower prices set by the new firms. New firms will continue to enter the industry until the price of the product is lowered to the point that it is the same as the average cost of producing the product, and all of the economic profit disappears.[4][5] When this happens, economic agents outside of the industry find no advantage to entering the industry, supply of the product stops increasing, and the price charged for the product stabilizes.[4][5][6] The same is likewise true of the long run equilibria of monopolistically competitive industries and, more generally, any market which is held to be contestable. Normally, a firm that introduces a differentiated product can initially secure market power for a short while. At this stage, the initial price the consumer must pay for the product is high, and the demand for, as well as the available of the product in the market, will be limited. In the long run, however, when the profitability of the product is well established, and because there are few barriers to entry. [4][5][6] The number of firms that produce this product will increase until the available supply of the product eventually becomes relatively large, the price of the product shrinks down to the level of the average cost of producing the product. When this finally occurs, all monopoly associated with producing and selling the product disappears, and the initial monopoly turns into a competitive industry.[4][5][6] In the case of contestable markets, the cycle is often ended with the departure of the former "hit and run" entrants to the market, returning the industry to its previous state, just with a lower price and no economic profit for the incumbent firms. Profit can, however, occur in competitive and contestable markets in the short run, as firms jostle for market position. Once risk is accounted for, long-lasting economic profit in a competitive market is thus viewed as the result of constant cost-cutting and performance improvement ahead of industry competitors, allowing costs to be below the market-set price. In uncompetitive markets

A monopolist can set a price in excess of costs, making an economic profit (shaded). The above Picture shows a Monopolist (only 1 Firm in the Industry/Market). An Oligopoly usually has "Economic Profit" also, but usually faces an Industry/Market with more than just 1 Firm (they must share available Demand at the Market Price). Economic profit is, however, much more prevalent in uncompetitive markets such as in a perfect monopoly or oligopoly situation. In these scenarios, individual firms have some element of market power: Though monopolists are constrained by consumer demand, they are not price takers, but instead either price-setters or quantity setters. This allows the firm to set a price which is higher than that which would be found in a similar but more competitive industry, allowing them economic profit in both the long and short run.[4][5] The existence of economic profits depends on the prevalence of barriers to entry: these stop other firms from entering into the industry and sapping away profits,[7] like they would in a more competitive market. In cases where barriers are present, but more than one firm, firms can collude to limit production, thereby restricting supply in order to ensure the price of the product remains high enough to ensure all of the firms in the industry achieve an economic profit.[4][7][8] However, some economists, for instance Steve Keen, argue that even an infinitesimal amount of market power can allow a firm to produce a profit and that the absence of economic profit in an industry, or even merely that some production occurs at a loss, in and of itself constitutes a barrier to entry. In a single-goods case, a positive economic profit happens when the firm's average cost is less than the price of the product or service at the profit-maximizing output. The economic profit is equal to the quantity of output multiplied by the difference between the average cost and the price. Government intervention Often, governments will try to intervene in uncompetitive markets to make them more competitive. Antitrust (US) or competition (elsewhere) laws were created to prevent powerful firms from using their economic power to artificially create the barriers to entry they need to protect their economic profits.[5][6][7] This includes the use of predatory pricing toward smaller competitors.[4][7][8] For example, in the United States, Microsoft Corporation was initially convicted of breaking Anti-Trust Law and engaging in anti-competitive behavior in order to form one such barrier in United States v. Microsoft; after a successful appeal on technical grounds, Microsoft agreed to a settlement with the Department of Justice in which they were faced with stringent oversight procedures and explicit requirements[9] designed to prevent this predatory

behaviour. With lower barriers, new firms can enter the market again, making the long run equilibrium much more like that of a competitive industry, with no economic profit for firms.

In a regulated industry, the government examines firms' marginal cost structure and allows them to charge a price that is no greater than this marginal cost. This does not necessarily ensure zero Economic profit for the firm, but eliminates a "Pure Monopoly" Profit. If a government feels it is impractical to have a competitive market - such as in the case of a natural monopoly - it will sometimes try to regulate the existing uncompetitive market by controlling the price firms charge for their product. [5][6] For example, the old AT&T (regulated) monopoly, which existed before the courts ordered its breakup, had to get government approval to raise its prices. The government examined the monopoly's costs, and determined whether or not the monopoly should be able raise its price and if the government felt that the cost did not justify a higher price, it rejected the monopoly's application for a higher price. Though a regulated firm will not have a economic profit as large as it would be in an unregulated situation, it can still can make profits well above a competitive firm has in a truly competitive market.[6] Other applications of the term The social profit from a firm's activities is the normal profit plus or minus any externalities that occur in its activity. A firm may report relatively large monetary profits, but by creating negative externalities their social profit could be relatively small. Profitability is a term of economic efficiency. Mathematically it is a relative index a fraction with profit as numerator and generating profit flows or assets as denominator. Maximization Main article: Profit maximization It is a standard economic assumption (though not necessarily a perfect one in the real world) that, other things being equal, a firm will attempt to maximize its profits.[3] Given that profit is defined as the difference in total revenue and total cost, a firm achieves a maximum by operating at the point where the difference between the two is at its greatest. In markets which do not show interdependence, this point can either be found by looking at these two curves directly, or by finding and selecting the best of the points where the gradients of the two curves (marginal revenue and marginal cost respectively) are equal. In interdependent markets, game theory must be used to derive a profit maximising solution. ECONOMIC PROFIT:

The difference between the total opportunity cost of production and the total revenue received by a firm. Economic profit is what remains after ALL opportunity cost associated with production (including a normal profit) is deducted from the revenue generated by the production. Economic profit is one of three alternative notions of profit. The other two are accounting profit and normal profit. Economic profit is THE indicator used by economists when the conversation turns to efficiency. In a perfect world, that is, a perfectly efficient world, no firm receives economic profit. Firms receive economic profit only when price exceeds the opportunity cost of production, which is not efficient. But how would a firm stay in business without generating economic profit? A firm can remain in business and continue producing goods and services so long as it is able to pay ALL opportunity cost. One key opportunity cost is a normal profit, the profit entrepreneurship could earn with alternative production. Because accounting profit is generally the combination of normal profit and economic profit, zero economic profit does not mean zero accounting profit. Revenue Minus Cost Economic profit is the difference between total revenue and total cost. This is commonly summarized with the following equation: economic profit = total revenue - total cost Sources of Economic Profit While a world of perfect efficiency would see no economic profit, in the real world, firms often do receive above-normal, economic profit. In fact, some good can be had with positive economic profit. This can be seen by noting three reasons for economic profit: (1) market control, (2) risk, and (3) innovation.

Market Control: One of the most common reasons for economic profit is market control by a firm. A firm has market control if it can exert some degree of influence, or control, over the market price. Market control, especially that held by monopoly and oligopoly firms, generates profit by inefficiently allocating resources. By controlling the price, a firm is able to generate more revenue, and thus more profit, than it would in a more (perfectly) competitive situation. This is NOT a good type of profit for the economy. It is, however, the type of profit most often encountered in the analysis of short-run production.

Risk: Economic profit is also generated due to the risk of organizing production. Some entrepreneurship is willing to undertake more risky production activities, and in so doing they are rewarded with greater economic profit. Risk profit is generated as a reward for undertaking a risky activity that may or may not succeed, especially launching a new business venture.

Risk profit is a good type of profit for the economy. Without the prospect of "extra" reward, by way of economic profit, for taking the risk of production, such risky activities would not be pursued. And society would miss out on the resulting benefits.

Innovation: Firms also receive economic profit as a reward for innovative activity, that is introducing a new product or a technological innovation, also which may or may not succeed. Innovation profit is the reward for entrepreneurship seeking to be first onto the market with a particular good or service. Risk profit is also beneficial for the economy. Without the prospect of this economic profit, entrepreneurship would lack the incentive to introduce new products. And society would miss out on the resulting benefits of technological innovations. People might still be living in caves, picking berries, and gnawing on mastodon bones.

NORMAL PROFIT: The opportunity cost of using entrepreneurial abilities in the production of a good, or the profit that could be received by entrepreneurship in another business venture. Like the opportunity costs of other resources, normal profit is deducted from revenue to determine economic profit. It is, however, never included as an accounting cost when accounting profit is computed. Normal profit is the opportunity cost of using entrepreneurship in production. The notion that entrepreneurship incurs an opportunity cost in production is often overlooked in the business world because it does not involve an explicit payment, that is, accounting cost. For most business firms, normal profit is invariably combined with economic profit and simply designated as accounting profit. For example, a worker like Phoebe Pankovic might be paid $10 an hour to produce Wacky Willy Stuffed Amigos (those cute and cuddly armadillos and tarantulas) to compensate her for a $10 wage that could be earned producing another good, such as Hot Momma Fudge Bananarama Ice Cream Sundaes. In a similar manner, the entrepreneur who organizes the production of Wacky Willy Stuffed Amigos, William J. Wackowski, foregoes profit that could be earned organizing the production of another good, such as Hot Momma Fudge Bananarama Ice Cream Sundaes. This foregone profit is an opportunity cost of the entrepreneurship, it is normal profit, and is deducted from revenue to calculate economic profit. However, it is NOT deducted from revenue to calculate accounting profit. Normal profit plays a key role in the long-run production decision of a firm, that is, whether or not to remain in business. As a general rule, a firm compares accounting profit generated from one production, with what could be generated from another production. If accounting profit is greater in the alternative activity, then the firm is inclined to shut down current production, and begin the alternative. If, for example, William J. Wackowski can generate more profit selling hot fudge sundaes than stuffed animals, then he is likely to shut down The Wacky Willy Company and start up a Hot Momma Fudge Bananarama Ice Cream Shoppe.

This decision is conceptually captured by normal profit. Normal profit is what William J. Wackowski would be earning with hot fudge sundae production. By deducting this alternative profit from his reported accounting profit, the result is economic profit. If economic profit is greater than zero, then William is doing better, and earning more, making stuffed animals. If economic profit is less than zero (even though accounting profit is positive), then William could do better, and earn more, by switching his entrepreneurship to hot fudge sundae production.

Role of Computers in Business Computers in business can help to make the workplace better connected and more efficient. Computers in business could also hinder business communication. The effect computer technology has on business depends on the use of the technology in the workplace. 1. Implementing Computers o Inside the workplace computer technology should be used to aid, not substitute for, business communication. For example, use email to set up a meeting, rather than using email to share important information, replacing meetings. Benefits
o

Computer technology gives businesses new marketing tools, such as websites and new mediums for advertising. Businesses can use these tools to expand their marketplace.

Consequences
o

The Internet can serve as a distraction to workers. Using the internet at work for personal use, such as checking email, leads to lost time for companies.

Considerations
o

Whether computers have a positive or negative effect on business depends on how management decides to implement computers in the workplace.

Work From Home

o

Computer technology makes working from home a reasonable option by giving employees access to information otherwise only available while at the workplace.

Role of Computers in Business Entrepreneurs around the globe are increasingly embracing computers to boost the productivity of their businesses. Computers today play a vital role in several business processes. One cannot imagine business being conducted without computers in the modern world. Finance is probably the most important area in business. You need to know how much profit the business is generating. What are the expenses and the revenues? There are several sophisticated accounting software which keeps track of financial transactions. And you can even find good free open source financial software in programs like openoffice from the website openoffice.org. Online transactions are increasingly becoming popular. This is because they are protected and secure and do not involve travel expenses. Most people now prefer to buy items over the Internet. A business now has customers across the globe who live in different time zones and have different cultures. Business processes are automated with the help of computers. Computers generate bills calculate taxes and much more.

One does not need stenographers and type writers anymore. Hence, the overheads of staffing and non-computerized devices are considerably reduced. Manufacturing is one of the areas of business where computers are used. The whole process of manufacturing is now automated. An instance of this is the manufacturing of medical drugs. The outer casing of manufactured items is produced by computer controlled machines. The item is packed in the casing through a computer controlled device. Sensors which display the temperature, pressure, and other items are controlled by sophisticated software. Customer Relationship Management software is prevalent across several businesses. The software contains the data of each customer which enables them to provide superior customer service. The software will tell the customer if the item he desires is available, its cost, and enables him to pay for it online. It is convenient to use. Supply Chain Management is an important aspect in many businesses. There is software which performs this important function. Inventory management software is used in almost all businesses. Most technical aspects of business are executed by complex technical software. There is software which manages all aspects of the business. Software is indispensable in the modern business world and vital for success of entrepreneurs. It is here to stay. The Role of Computers in Business Information Technology, like language, affects us on many levels and has fast become integral to all of our lives. In this course we aim to strike a balance in studying both the social and commercial forces of Information Technology, and networking, in particular. Let's take a moment here to introduce the commercial forces.

I am quite certain that each and everyone of you has witnessed first hand, even if it wasn't readily obvious, the impact that computers and computer networks have had on business. In fact, by now the role of computers in business has risen to the point where computer networks, even more than personnel, are synonymous with the corporate entity. Is this not true? What do I mean? Dell Computers ? isn?t a group of people making and selling personal computers as much as it is a collection of loosely affiliated computer systems that, upon receiving an order or customer service request (all online!), come together in a linear process to do a job. Cisco Systems ? isn?t so much a manufacturer of switches as it is a trusted brand name and expert

marketer who happens to use the Internet and a sophisticated ?network of networks? to weave together suppliers, manufacturers, and distributors to form a coordinated, fully branded, fully customized virtual entity that we know as Cisco. When orders slowed in 1999, Cisco?s response involved rationalizing their supply-base ? leaving capital-intensive subcontractors to squeeze already razor thin margins just to participate in the new, leaner, and ever-responsive sales network. Indeed Cisco?s information systems are their competitive advantage. Computers and computer networks act as the central nervous system of today?s enterprise. Today's regular business people aren?t just relying on them...they're directly administering, monitoring, and configuring them. While IT staff with specialized skills may focus on application development, integration, and support, today?s business professional requires information technology knowledge to navigate and operate IT systems, to design, customize, and test systems for competitive advantage, and to seek out and identify new solutions that can transform their business.

Opportunities and challenges for e-commerce in 2011

Is there anything left online without the word social in it? 2010 was the year social media exploded, transforming all of our online activities. Brands have started to allocate increasingly bigger parts of their budget to integrate social media into all aspects of their business from marketing campaigns, to customer service and of course, sales. The evolution of traditional commerce to social commerce for small, mainstream and luxury brands has made its baby steps in this past year, but seems to be growing at an impressive rate. Customer experience is personalized and customers themselves are the new media outlets. Although weve seen the retail landscape change drastically in 2010, it seems like, with the fast growth of mobile and the deep influence of emerging technologies in our day to day lives, that what weve witnessed so far is merely a preview of the exponential changes that await us. According to a recent report by L2ThinkTank on GenY affluents digital habits: 63% use social media to engage with brands, more than 50% say that Facebook, blogs, and brand videos affect their opinions about products, while websites are as influential as physical stores in shaping Gen Y sentiment, second only to friends opinions. So what trends and challenges lie ahead? Avoiding the Old Media trap: Social Media offer an amazing opportunity to listen to customers and engage with them, building strong relationships. In order to do that though, companies need to adapt their culture to the spirit of conversation in Social Media, as traditional marketing tactics wont cut it anymore. After all, there is no point in buying a Ferrari if you intend to drive it like a Matiz. No matter how innovative a communication platform is, it is nothing but a tool, waiting to be utilized. Social Media acts like a Swiss army knife of communication tools, but it wont

change your business if you use them solely as a loudspeaker to promote your products and offers. Having sponsored celebrity tweets or payed blog posts raving about awesome products is not that much different from a print advertorial campaign. The challenge, apart from listening and learning about your customers, is to find creative ways to engage online creators, like DKNY did with #CozyStyleOff breakfast, where 15 influential fashion tweeters like fashionista_com, nitro_licious, and YuliZ participated in a style competition. The concept was to give them access to the entire store in order to create a head-to-toe look that incorporated DKNYs Cozy cardigan wrap sweater. Photos of the completed looks were posted on DKNYs Facebook page and a weeks likes showed the winner of two shopping sprees. Another example is the 4AM Finds at Alice + Olivias e-shop, a column where they ask people like Jack Dorsey to curate their own set of finds. Will social escape the traditional media fate in the coming year? Providing a unified shopping experience: Social commerce integrates social media into e-retail sites and adds e-commerce functionality to social networks. We often see one of these two happening, but not very often both. For instance Levis has integrated Facebook into the Friends store but doesnt have a Facebook store, (referred to as F-store), while JCPenney has a fully functionable F-store, but hasnt integrated Facebook connect on its e-shop. E-tailers have also been experimenting with alternative platforms to market and sell their products, like Tumblr and YouTube. Taking into account that multichannel shoppers spend 82% more in each transaction than those who only shop in store, retailers face the challenge of achieving the same feel in each one of these facets of the customers experience, by using single logins (not having to login and out every time they change a shopping channel), providing great customer service, fast checkout and customized payment pages. Privacy: Its true that Facebooks constantly changing privacy rules and instant sharing through mobile has made people, especially younger generations, more open to sharing, but privacy still matters to most, with more than 71% of social networking users ages 18-29 changing their privacy settings to limit what they share with others online. The latest hacking wars with high profiled victims like Gawker Media, McDonalds and Mastercard, as well as accidents like the Blippy leak of credit card numbers on Google, have only raised more concern over personal data safety. Trust over customers data will be hard to gain and retain over 2011, the more information focused brands ask customers to share through social features. Provide your customers with a well written and easy to comprehend privacy policy, so they know what they share and with whom, and privacy options so they can opt-out from sharing certain levels of private information. Information wars will be a hot topic in 2011 with multinational brands taking the heat, so be prepared. Customer Engagement: As social networks supersize, brands will need to find ways to rise above the noise and keep an ongoing dialog with their customers. The plethora of social networks will not only confuse the consumer, but also the e-retailer. Brands will have to monitor social media platforms and define which ones fit their message best, as a lot of them with drastically different philosophies seem to thrive equally in popularity. For instance group bartering Groupon, and exclusive Gilt Groupe target different demographics but both do exceedingly well. A trend that soared in 2010 are flash sales, limited time offers and pop up stores, for which the real time feeds of social media seem to be the perfect match, like in the form of pop-up F-stores. Also eretailers need to provide their online fans with exclusive access to unique content like Michael Kors has done on Facebook, by producing click-and-shop videos for the holiday shopping. Mobile Commerce: As competition heats up in the smartphones and tablets market, mobile commmerce is getting a bigger piece of sales. eBay has emerged as a leader in mobile commerce

for 2010, reporting that on Cyber Monday, it saw a 146% increase in mobile transactions compared to last year. Amazon has also found success on mobile with more than $1 billion in sales for its second quarter, which ended on June 30, 2010. Best Buy also has a very popular app that can scan 2D bar codes in store and and provide product info, offers and rewards. Fashion brands like DVF offer mobile shopping as well, with DVFs exclusive promotions for its mobile shoppers. The challenge of 2011 will be utility apps. Users are deleting more than half of downloaded apps within the first month, so e-retailers have to focus on functionality in order to engage their customers in the long run. Mobile should act like the glue between the offline and the online world, as many shoppers use it while shopping in store to discover product information, read reviews and compare prices and offer an intimate and personally relevant customer experience. Crowdsourcing: In 2010, crowdsourcing was used in marketing campaigns, like Doritos maker Frito-Lays competition for its Super Bowl advertising, and also for product development, like Rebeca Minkoffs challenge to Polyvores community to redesign the next Morning After Clutch. Most of all, crowdsourcing has become integral part of companies cultures making them social to their core, a great example of this Toyotas invitation for suggestions on how the brands technology can be used for good in unexpected ways, My Starbucks Idea and LEGO click. In 2011 brands will have to figure out ways to leverage crowdsourcing in product design, while maintaining a strong brand identity. Get into the Game: 2010, with the rise of Zynga, V-commerce (the commerce of virtual goods) and the popularity of Foursquare badges, was also a banner year for the school of gamification, a number of entrepreneurs and marketeers used game mechanics to engage audiences and bring on behavioral change. Most recently, indie fashion retailer Moxsie, created custom Facebook badges to promote #BuyerChat event and entice their followers to act like virtual buyers. Late this year the launch of Microsofts Kinect, a controller-free gaming device that senses the space, movements, faces and voices in front of it, has already made a big impact on the market and businesses are already competing on finding innovative uses for it, like Chevrolets test-drive Kinect Joy Ride, Sprints co-branded retail experience Kinect Adventures and T-Mobiles product placement throughout Kinect Sports. Looks like 2011 is game on for e-commerce! What do you think will be the hottest trends and biggest challenges for e-commerce in 2011?

E-Commerce: Challenges and Opportunities

ABSTRACT E-commerce as anything that involves an online transaction. E-commerce provides multiple benefits to the consumers in form of availability of goods at lower cost, wider choice and saves time. The general category of e-commerce can be broken down into two parts: E-merchandise: E-finance. E commerce involves conducting business using modern communication instruments: telephone, fax, e-payment, money transfer systems, e-data interchange and the Internet. Online businesses like financial services, travel, entertainment, and groceries are all likely to grow. Forces influencing the distribution of global e-commerce and its forms include economic factors, political factors, cultural factors and supranational institutions. This paper is outcome of a review of various research studies carried out on E-

commerce. This paper examines different opportunities of e-commerce viz., Ebusiness, E-learning, E-commerce education integration, E-insurance, E-commerce for the WTO and developing countries and future media of e-commerce. It raises key challenges that are being faced by consumers relating to e-commerce viz., Ethical issues, Perceptions of risk in e-service encounters, challenges for e-commerce education, It act 2000 and legal system. Finally many companies, organizations, and communities in India are beginning to take advantage of the potential of ecommerce; critical challenges remain to be overcome before e-commerce would become an asset for common people. ----------------------------------------------------------------------------------------------------1.0 INTRODUCTION: E-commerce as anything that involves an online transaction. This can range from ordering online, through online delivery of paid content, to financial transactions such as movement of money between bank accounts. This paper has analyzed some of the challenges and opportunities of e-commerce. Elizabeth Goldsmith and others (2000) reported that the general category of ecommerce can be broken down into two parts: 1 E-merchandise: selling goods and services electronically and moving items through distribution channels, for example through Internet shopping for groceries, tickets, music, clothes, hardware, travel, books, flowers or gifts. 2 E-finance: banking, debit cards, smart cards, banking machines, telephone and Internet banking, insurance, financial services and mortgages on-line(Elizabeth Goldsmith and others,2000). Farooq Ahmed (2001) reported that the enormous flexibility of the internet has made possible what is popularly called e-commerce which has made inroads in the traditional methods of business management. All the facets the business tradition with which we are accustomed in physical environment can be now executed over the internet including online advertising, online ordering, publishing, banking, investment, auction and professional services. E commerce involves conducting business using modern communication instruments: telephone, fax, e-payment, money transfer systems, e-data interchange and the internet. The WTO has recognized that commercial transactions can be broken into 3 stages. 'The advertising and searching stage, the ordering, and payment stage, and the delivery stage.' 1:1 GROWTH OF E-COMMERCE: Electronic commerce or e-commerce encompasses all business conducted by means of computer networks. Advances in telecommunications and computer technologies in recent years have made computer networks an integral part of the economic infrastructure. More and more companies are facilitating transactions over web. Ecommerce provides multiple benefits to the consumers in form of availability of goods at lower cost, wider choice and saves time. People can buy goods with a click of mouse button without moving out of their house or office. Similarly online services

such as banking, ticketing including airlines, bus, railways, bill payments, hotel booking etc. have been of tremendous benefit for the customers. Most experts believe that overall e-commerce will increase exponentially in coming years. Business to business transactions will represent the largest revenue but online retailing will also enjoy a drastic growth. Online businesses like financial services, travel, entertainment, and groceries are all likely to grow (http://www.gatewayforindia.com/technology/e-commerce.htm). As per the findings of Internet and Mobile Association India the total value of ECommerce activities within India has Crossed Rs.570 Crore during 2004-05. Internet and Mobile Association India a non-profit organisation founded in January 2004 by leading Indian Internet portals, projects that e-commerce revenues in the country will reach Rs 2,300 Crore in the 2007 financial year, growing at 95 percent over the year 2006. This pertains to the Business-to-Consumer (B2C) segment. Please refer Table 01. Table 01: E-commerce market size of India Year 2002-03 2003-04 Business to130 255 Consumer transaction in Rs. (Crore) Percent Growth 96 Source: (www.iamai.in). 2004-05 570 2005-06 1,180 2007-08 2,300

124

107

95

1:1.1 FACTORS INFLUENCING THE DISTRIBUTION AND FORMS OF GLOBAL E-COMMERCE Nir B. Kshetri (2001) reported that the twin forces of globalization and the Internet have the potential to offer several benefits to individuals and organizations in developing as well as developed countries. Apart from economic benefits such as more choices and the convenience of shopping at home, the twin forces can make progress on educational and scientific development, mutual aid, and world peace; foster democracy; and offer exposure to other cultures. To fully exploit the potential of the Internet and e-commerce, policy makers in developing as well as industrialized countries are taking initiatives to develop the global information infrastructure (GII) and connect their national information infrastructures to the GII (Gore 1996). All countries are not likely to benefit equally from the virtuous circle of Internet diffusion created by globalization and multiple revolutions in Communication technologies (ICTs). Forces influencing the distribution of global e-commerce and its forms include economic factors, political factors, cultural factors and supranational institutions. Economic factors mainly influence perceived relative advantage of Internet use whereas political and cultural factors influence the compatibility of the Internet with a society. Supranational institutions' initiatives are influencing the price, quality and availability of ICT products and services, mainly in developing countries, thereby increasing relative advantage of Internet use. Moreover international institutions are influencing laws, regulations and policies in developing countries making them more compatible with Internet use. The influences of these factors on Internet adoption in general and the three phases of online transaction

advertising and searching phase, payment phase and delivery phase are presented in Table 02. Table: 02 Factors influencing the distribution and forms of Global ecommerce Stage Economic andSocio culturalPolitical legalSupranational infra structurefactors factors institutions related factors Internet Per capita GDP Literacy rate andThe internet'sUNDP-introduction of adoption computer skill democratic naturethe internet in many incompatible withcountries. authoritarian political Availability ofEnglish language skillStructures GATS-competition in telephone and telecom sectors computer Pricing structure Viewed as a tool ofTariff and non tariffITA- reducing the cultural imperialismbarriers to ICTprice of ICT in some products products. Buying/selling Availability of credit Intellectual propertyRedress UNCITRAL model law online protection mechanisms in case of problems in online transactions Advertising Operating speed ofInfluence ofBan on someProducts can be and searchingcomputer andlanguage andwebsite inadvertised and phase modern size symbols used on siteauthoritarian searched globally on visited and purchaseregimes GTPN of UNCTAD decision Payment Penetration rate ofForms of payment:Governments' UNCTAD smart card phase credit cards check, wire transfer,concern on the cash on delivery etc, outflow of foreign currency. Delivery Delivery means andProducts stolen someTariff and non-Electronic delivery phase infrastructure countries tariff barriers free of custom duties in WTO member 1:2A BRIEF REVIEW OF LITERATURE ON E-COMMERCE: CHALLENGES AND OPPORTUNITIES An attempt has been made to put forward a brief review of literature based on few of the related studies undertaken worldwide in the area of e-commerce as follows. Please Refer Table 03. Elizabeth Goldsmith and Sue L.T. McGregor (2000) analyzed the impact of ecommerce on consumers, public policy, business and education. A discussion of public policy initiatives, research questions and ideas for future research are given. Andrew D. Mitchell (2001) examined the key issues that electronic commerce poses for Global trade, using as a starting point the General Agreement on Trade in

Services (GATS), the World Trade organization (WTO) agreement most relevant to ecommerce. Nir B.kshetri(2001) This paper attempts to identified and synthesized the available evidence on predictors of magnitude, global distribution and forms of e-commerce. The analysis indicated that the twin forces of globalization and major revolutions in ICT are fuelling the rapid growth of global e-commerce. Jackie Gilbert Bette Ann Stead (2001) reviewed the incredible growth of electronic commerce (e-commerce) and presented ethical issues that have emerged. Security concerns, spamming, Web sites that do not carry an "advertising" label, cybersquatters, online marketing to children, conflicts of interest, manufacturers competing with intermediaries online, and "dinosaurs" were discussed. Mauricio S. Featherman, Joseph S. Valacich & John D. Wells (2006) examined whether consumer perceptions of artificiality increase perceptions of e-service risk, which has been shown to hamper consumer acceptance in a variety of online settings. Young Jun Choi1, Chung Suk Suh(2005)examined the impact of the death of geographical distance brought about by e-marketplaces on market equilibrium and social welfare. Prithviraj Dasgupta and Kasturi Sengupta(2002)examined the future and prospects of e-commerce in Indian Insurance Industry. (Arvind panagariya,2000) examined Economic issues raised by e-commerce for the WTO and developing countries. E-commerce offers unprecedented opportunities to both developing and developed countries. Table: 02 A brief review of literature on E-commerce: Challenges and opportunities No. Title Author Area of research Findings 1 Towards (Andrew D. Mitchell,2001) Important function played1)At the level of global compability: by GATS,WTO in e-trading system, The future of ecommerce exploring how commerce recognition of electronic within the commerce as a global global trading public good may help system reduce the digital divide between developed and developing countries. 2 E-commerce ,(Arvind panagariya,2000) Economic issues raised by e-1)E-commerce offers WTO and commerce for the WTO andunprecedented developing developing countries.opportunities to both countries access to e-commerce developing and developed countries. 3 Ethical Issues in(Bette Ann Stead andEthical issues in e-commerce1) The ethical issues e-commerce Jackie Gilbert, 2001) presented in this article are all very real.

4.

Will E-business(Diana Oblinger, 2001) shape the future of open and distance learning?

E commerce an(Farooq Ahmed, 2001) Indian perspective:

Determinants of(Nir B kshestri, 2001) the locus of Global Ecommerce

TV, PC or(Patric Barwise,2001) Mobile? Future media of ecommerce:

2) Rapidly changing technology is continually bringing new products/services to the market accompanied by new strategies to sell them. Therefore, it may also conclude that new ethical issues will emerge. Impact of e-business on1) Open and distance open and distance learning learning institutions are finding that the need and demand for their services are increasing. 2) E-business can provide education with insight new ways to create greater efficiencies and economies of scale as well as practices that ensure learners stay with the institution for their lifetime. IT act, Contract act,1) Many issues raised by challenges for the legalthe e-commerce await system judicial resolution. 2) The information transferred by electronic means which culminates into a contract raises many legal issues which can't be answered with in the existing provisions of the contract act. Factors influencing the1) The analysis indicated distribution of global e-that the twin forces of commerce globalization and multiple revolutions in ICT(communication technologies) are fuelling the growth of global ecommerce. Various new media for1) Consumer marketers B2Band B2C e-commerce. are still in the early stages of adjusting to the unprecedented complexity of a world with so many physical, online and traditional offline consumers.

E-Commerce in(Prithviraj dasgupta and E-commerce the IndianKasturi Sengupta,2002) industry Insurance Industry: prospects and future

in

Indian1) The study has identified that einsurance offers a potentially vast source of revenue for insurance companies that venture to go online. 2) E-insurance also makes the insurance procedure more secure since the policy details are stored digitally and all transactions are made over secure channels.

The death of(Young Jun Choi Traditional market place1) The study has shown that physical distance:and Chung Sukand e-market place overcoming spatial barriers by An economic suh, 2005) means of e market places lowers analysis of the the price level. emergence of 2) This article has analyzed the electronic economic consequences of the marketplaces death of geographical distance due to the emergence of emarketplaces. 10 Electronic (Zabihollah The scope and nature of1) E-commerce programs and Commerce Rezaee, Kennethe- commerce education courses are likely to grow and education: AnalysisR. Lambert & W. thus, the structure, content, and of existing courses Ken Harmon, delivery of e-commerce 2005) education are evolving and they should be tailored to the particular discipline. 11 Is that authentic or(Mauricio S.Customers' perception1) E-services are the application artificial? Featherman, about e-services. of IT to mediate the production Understanding Joseph S. Valacich and distribution of services consumer & John D. directed towards an individual's perceptions of riskWells,2006) mind or intangible assets. in e-service 2) The results from this study encounters. supported the contention that eservices of less risky e-service categories will be perceived as more authentic and less risky to use. Thus, e-service providers must carefully assess their respective categories and plan accordingly. 1:3 OPPORTUNITIES FOR E-COMMERCE: Young Jun Choi1, Chung Suk Suh(2005) reported that the development of the internet in the 20th century led to the birth of an electronic marketplace or it is called e-marketplace, which is now a kernel of electronic commerce (e-commerce). An e-marketplace provides a virtual space where sellers and buyers trade with each

other as in the traditional marketplace. Various kinds of economic transactions and buying and selling of goods and services, as well as exchanges of information, take place in e-marketplaces. E-marketplaces have become an alternative place for trading. Finally, an e-marketplace can serve as an information agent that provides buyers and sellers with information on products and other participants in the market. These features have been reshaping the economy by affecting the behavior of buyers and sellers. 1:3.1 E-business E-business affects the whole business and the value chains in which it operates. It enables a much more integrated level of collaboration between the different components of a value chain than ever before. Adopting e-Business also allows companies to reduce costs and improve customer response time. Organizations that transform their business practices stand to benefit immensely from innumerable new possibilities brought about by technology (www.ficci.com/sectors/task-forces/ebusiness/e-business.htm). E-commerce as anything that involves an online transaction. This can range from ordering online, through online delivery of paid content, to financial transactions such as movement of money between bank accounts. One area where there are some positive indications of e-commerce is financial services. Online stock trading saw sustained growth throughout the period of broadband diffusion. E-shopping is available to all these who use a computer. Over the past year Amazon.Com, ebay India, Indiatimes have seen a rapid growth in categories such as mobile handsets, jewellery, fashion apparel, books, gift items and other items. Naukri.com India's premier recruitment site has captured around 50% of the recruitment market. ICICIDIRECT.com - Stock trading simplified, Icicidirect.com is today the country's premier trading portal. Baaze.com the country's premier shopping site started as an auction site and graduated to be the most popular platform-shopping site. Irctc.com - One of the best things about this site is that a credit card is not an essential requirement for buying tickets here. Instead the site offers a direct debit facility having tied with most of the popular banks (www.rajindraflorist.com). It is being estimated that the online travel market in India was estimated at $300 million in 2005 and has crossed $750 million in 2006. By 2008, it is expected to exceed $2 billion( http://www.m-travel.com/news/2006/10/online_travel_m.html). Young Jun Choi1, Chung Suk Suh(2005) reported that the economic consequences of the death of geographical distance due to the emergence of e-marketplaces. It has shown that overcoming spatial barriers by means of e- marketplaces lowers the price level. Since e-marketplaces achieve economies of scale by aggregating dispersed demands, they allow the economy to have more varieties that did not exist before their emergence.

1:3.2 E-commerce integration Zabihollah Rezaee, Kenneth R. Lambert and W. Ken Harmon(2006) reported that the rationale for infusion of e-commerce education into all business courses is that technological developments are significantly affecting all aspects of today's business. An e-commerce dimension can be added to the business curriculum by integrating ecommerce topics into existing upper-level business courses. Students would be introduced to e-commerce education and topics covered in a variety of business courses in different disciplines e.g. accounting, economics, finance, marketing, management, management information systems. To help assure that all related business courses in all disciplines such as e.g., accounting, finance, economics, marketing, management, information systems pay proper attention to the critical aspects of e-commerce, certain e-commerce topics should be integrated into existing business courses. 1:3.3 Open and distance learning Diana Oblinger (2001) reported that one is that education and continuous learning have become so vital in all societies that the demand for distance and open learning will increase. As the availability of the Internet expands, as computing devices become more affordable, and as energy requirements and form factors shrink, elearning will become more popular. In addition to the importance of lifelong learning, distance education and e-learning will grow in popularity because convenience and flexibility are more important decision criteria than ever before. E learning will become widely accepted because exposure to the Internet and e-learning often begins in the primary grades, thus making more students familiar and comfortable with online learning. In fact, for many countries, distance education has been the most viable solution for providing education to hundreds of thousands of students. 1:3.4 E-commerce and E-insurance Prithviraj Dasgupta and Kasturi Sengupta (2002) reported that the recent growth of Internet infrastructure and introduction of economic reforms in the insurance sector have opened up the monopolistic Indian insurance market to competition from foreign alliances. Although the focus of e-commerce has been mainly on business to consumer (B2C) applications, the emphasis is now shifting towards business to business (B2B) applications. The insurance industry provides an appropriate model that combines both B2C and B2B applications. Traditional insurance requires a certificate for every policy issued by the insurance company. However, paper certificates encumber problems including loss, duplication and forging of the certificate. The conventional certificate is now replaced with an electronic certificate that can be digitally signed by both the insurer and the insurance company and verified by a certifying authority. Online policy purchase is faster, more user-friendly and definitely more secure than the traditional processes. Therefore it is more attractive to the insurer. At the same time it incurs less cost and requires fewer resources than traditional insurance and is therefore more profitable for the insurance company. E-insurance also makes the insurance procedure more secure since the policy details are stored digitally and all transactions are made over secure channels. These

channels provide additional market penetration that is absent in traditional channels and help in earning more revenue than traditional insurance processes. 1:3.5 Future media of e-commerce: Patric Barwise (2001) reported that Probability 99% of e-commerce today is done using PCs either desktops or laptops. For B2B e-commerce this is unlikely to change .For B2C e-commerce however, things will be more complex. There will be wider range of relevant media, including interactive digital TV, and a range of mobile and wireless services. There will be huge difference between different consumers' ownership of equipment and access technology. Some will have broad band access and others have no digital communication at all. Current and future B2C digital media Digital media able to support consumer e-commerce can be grouped under five main headings, with in the home PCS, IDTV and with in next five years a range of other online device such as games, computers, utility meters etc. In summary, the online PC is well established while the other B2C digital media are still emerging. 1:3.6 Economic issues raised by e-commerce for the WTO and developing countries. Arvind panagariya(2000) reported that access to e-commerce, which in the WTO parlance often means access to e-exports, has two components that must be distinguished sharply: access to internet services and access to services that can be traded electronically. The former deals with to access to Internet infrastructure while the latter relates to specific commitments in electronically tradable services. E-commerce offers unprecedented opportunities to both developing and developed countries. In the short run, the gains are likely to be concentrated in developed countries have more to benefit. This is because, in the short run, developing countries lack the infrastructure necessary to take full advantage of Internet. For many countries, especially developing ones, in these countries, most consumers do not have computers or Internet access. A likely scenario, therefore, is one in which a handful of independent entrepreneurs will receive the product by Internet, convert it into physical form such as CDs and sell the latter to consumers. But this activity may itself be costly, using up real resources. But in the long run, they can leapfrog, skipping some of the stages in the development of information technology through which developed countries have had to pass. Some efficiencies issues must be addressed. The issue of tariffs, which are applicable to products imported in physical form but not when transmitted electronically. As long as the cost of electronic transmission is lower than that of physical delivery, the presence of tariffs on the latter poses no problem. Effectively, the electronic transmission offers the product to the country at a price lower than that available through physical delivery.

1:4 CHALLENGES FOR E COMMERCE: Internet based e-commerce has besides, great advantages, posed many threats because of its being what is popularly called faceless and borderless. Some examples of ethical issues that have emerged as a result of electronic commerce. All of the following examples are both ethical issues and issues that are uniquely related to electronic commerce. 1:4.1 Ethical issues: Jackie Gilbert Bette Ann Stead (2001),reported the following ethical issues related to e-commerce. 1) Privacy Privacy has been and continues to be a significant issue of concern for both current and prospective electronic commerce customers. With regard to web interactions and e- commerce the following dimensions are most salient: (1) Privacy consists of not being interfered with, having the power to exclude; individual privacy is a moral right. (2) Privacy is "a desirable condition with respect to possession of information by other persons about him/herself on the observation/perceiving of him/herself by other persons" 2) Security concerns In addition to privacy concerns, other ethical issues are involved with electronic commerce. The Internet offers unprecedented ease of access to a vast array of goods and services. The rapidly expanding arena of "click and mortar" and the largely unregulated cyberspace medium have however prompted concerns about both privacy and data security. 3) Other ethical issues Manufacturers Competing with Intermediaries Online "Disintermediation," a means eliminating the intermediary such as retailers, wholesalers, outside sales reps by setting up a Website to sell directly to customers. Disintermediation include (1) music being downloaded directly from producers (2) authors distributing their work from their own Web sites or through writer co-operatives.

Dinosaurs "Dinosaurs" is a term that refers to executives and college professors who refuse to recognize that technology has changed our lives. When an executive speaks in terms of the Internet being the "wave of the future," it is a sure sign of "dinosaur. 1:4.2 Perceptions of risk in e-service encounters Mauricio S. Featherman, Joseph S. Valacich & John D. Wells(2006) reported that as companies race to digitize physical-based service processes repackaging them as online e-services, it becomes increasingly important to understand how consumers perceive the digitized e-service alternative. E-service replacements may seem unfamiliar, artificial and non-authentic in comparison to traditional service processing methods. Consumers may believe that new internet-based processing methods expose them to new potential risks the dangers of online fraud , identity theft and phishing swindles means schemes to steal confidential information using spoofed web sites, have become commonplace, and are likely to cause alarm and fear within consumers. 1:4.3 E-commerce Integration Beside many an advantages offered by the education a no. of challenges have been posed to the recent education system. Zabihollah Rezaee, Kenneth R. Lambert and W. Ken Harmon(2006) reported that Ecommerce Integration assures coverage of all critical aspects of e-commerce, but it also has several obstacles. First, adding e-commerce materials to existing business courses can overburden faculty and students alike trying to cope with additional subject matter in courses already saturated with required information. Second, many business faculty members may not wish to add e-commerce topics to their courses primarily because of their own lack of comfort with technology-related subjects. Third and finally, this approach requires a great deal of coordination among faculty and disciplines in business schools to ensure proper coverage of e-commerce education. 1:4.4 It act 2000 and legal system Beside many an advantages offered by the IT a no. of challenges have been posed to the legal system. The information transferred by electronic means which culminates into a contract raises many legal issues which cannot be answered within the existing provisions of the contract act. The IT act does not form a complete code for the electronic contracts. Farooq Ahmed(2001) reported that Some of the multifaceted issues raised are summarized in following manner. 1. Formation a) Contracts b) Cyber contracts 2. Validity of e-transactions. of e-data e-contracts interchange

by

3. Dichotomy of offer and invitation to treat. 4. Communication of offer and acceptance 5. Mistake in e-commerce a) b) Unilateral mistake Mutual mistake

6. Jurisdiction: cyber space transactions know no national and international boundaries and are not analogous to 3- dimensional world in which common law principles involved. 7. Identity of parties The issues of jurisdiction, applicable law and enforcement of the judgments are not confined to only national boundaries. The problems raised are global in nature and need global resolution. 1:4.5 Human skills required for E-Commerce: It's not just about E-commerce; It's about redefining business models, reinventing business processes, changing corporate cultures, and raising relationships with customers and suppliers to unprecedented levels of intimacy. Internet-enabled Electronic Commerce: Web site development Web Server technologies Security Integration with existing applications and processes

Developing Electronic Commerce solutions successfully across the Organization means building reliable, scalable systems for 1) security, 2) E- commerce payments 3) Supply- chain management 4) Sales force, data warehousing, customer relations 5) Integrating all of this existing back-end operation. Source: www.wto.org 1:5 MAJOR FINDINGS OF RESEARCH STUDIES:

An attempt has been made to put forward key findings based on review of literature as put forward above in the area of E-commerce as follows. Diana Oblinger(2001) found that E-business can provide education with insight new ways to create greater efficiencies and economies of scale as well as practices that ensure learners stay with the institution for their lifetime. Bette Ann Stead and Jackie Gilbert (2001) found that rapidly changing technology is continually bringing new products/services to the market accompanied by new strategies to sell them. Therefore, it may also conclude that new ethical issues will emerge. Prithviraj dasgupta and Kasturi Sengupta(2002) found that that e-insurance offers a potentially vast source of revenue for insurance companies that venture to go online. E-insurance offers new channels of income through service niche creation, first mover's advantage, and online promotions. Nir B kshestri (2001) indicated that the twin forces of globalization and multiple revolutions in ICT (communication technologies) are fuelling the growth of global ecommerce. Zabihollah Rezaee, Kenneth R. Lambert & W. Ken Harmon(2005) found that Ecommerce programs and courses are likely to grow and thus, the structure, content, and delivery of e-commerce education are evolving and they should be tailored to the particular discipline. Arvind panagariya(2000) found that E-commerce offers unprecedented opportunities to both developing and developed countries. Patric Barwise(2001) found that PC will be used as more effective e-commerce media for high ticket items such as Car, home appliances mobile will be used as more effective e-commerce media for low tickets items such as music and movies. 1:5.1 Concluding remarks: With the development of computer technology, the World Wide Web has become the connection medium for the networked world. Computers from locations that are geographically dispersed can talk with each other through the Internet. As with any new technology, there are positives and negatives associated with its use and Adoption. Finally, an e-marketplace can serve as an information agent that provides buyers and sellers with information on products and other participants in the market. E-commerce creates new opportunities for business; it also creates new opportunities for education and academics. It appears that there is tremendous potential for providing e-business education. As discussed earlier about the different media of e-commerce such as TV, PC or Mobile these new media will be a major preoccupation for marketers over the few years that especially how to combine them within an integrated bricks and clicks marketing mix.

However, rapidly changing technology is continually bringing new goods and services to the market accompanied by new strategies to sell them. Therefore, it may also conclude that new ethical issues related to business will emerge. New ethical issues must be identified and immediate steps and actions should be taken. Initially, new Internet users would be reluctant to conduct any kind of business online, citing security reasons as their main concern. In order to increase consumer adoption of e-services, the sources of consumer confusion, apprehension and risk need to be identified, understood and alleviated. E-commerce provides tremendous opportunities in different areas but it requires careful application for consumer protection issues. Growth of e-commerce would also depend to a great extent on effective IT security systems for which necessary technological and legal provisions need to be put in place and strengthened constantly. While many companies, organizations, and communities in India are beginning to take advantage of the potential of e-commerce, critical challenges remain to be overcome before e-commerce would become an asset for common people.