Difference between E-commerce and E-business
How e-commerce relates to the broader idea of e-business.
Learning Objectives
- Distinguish e-commerce from e-business using Laudon and Traver's working definitions.
- Identify where e-commerce and e-business intersect.
- Give examples of internal processes that are e-business but not e-commerce.
- Explain why the distinction matters in practice.
Explanation
E-commerce happens when value (money) crosses firm boundaries online. E-business is the digital enabling of a firm's own internal processes; it does not directly involve exchange of value with outsiders.
There is a debate about the meaning of both e-commerce and e-business. Some argue that e-commerce encompasses the entire world of electronically based organizational activities that support a firm's market exchanges, while others argue that e-business encompasses the entire world of internal and external electronically based activities, including e-commerce.
Laudon and Traver make a working distinction. They use the term e-business to refer primarily to the digital enabling of transactions and processes within a firm, involving information systems under the control of the firm. For the most part, e-business does not include commercial transactions involving an exchange of value across organizational boundaries.
For example, a company's online inventory control mechanism is a component of e-business, but such internal processes do not directly generate revenue for the firm from outside businesses or consumers, as e-commerce by definition does. A firm's e-business infrastructure provides support for online e-commerce exchanges, and the same infrastructure and skill sets are involved in both.
E-commerce and e-business systems blur together at the business firm boundary — at the point where internal business systems link up with suppliers or customers. E-business applications turn into e-commerce precisely when an exchange of value occurs.
Key Points & Important Terms
Key Points
- •E-commerce crosses firm boundaries and involves an exchange of value.
- •E-business refers to digitally enabled internal processes under a firm's control.
- •Internal inventory control is e-business, not e-commerce.
- •E-business infrastructure supports e-commerce exchanges.
- •E-business becomes e-commerce at the point where an exchange of value occurs.
- •The two blur at the firm boundary, where internal systems link to suppliers and customers.
Important Terms
- E-commerce
- Digitally enabled commercial transactions that cross firm boundaries and involve exchange of value.
- E-business
- Digital enabling of transactions and processes within a firm, involving information systems under the firm's control.
- Firm boundary
- The point where a firm's internal systems connect with external suppliers or customers.
- Information systems
- Computer-based systems used to manage and support a firm's internal processes.