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E-Business
By Raymond Keckler | August 10, 2007
The Internet has changed the way business does business. The speed of transaction in e-Business has increased while reducing some of the business processes. As more companies proceed into electronic commerce, more laws and regulations will be pushed to control what business does. If businesses can regulate themselves and adhere to ethical behavior, regulations won’t be needed. There are many legal areas that are affected by e-commerce practices. When installations are done with software there is always a legal copyright notice and service agreements that a person must agree to before software is installed. As more business use B2B and B2C, other related electronic transactions come into play, such as consumer protections and user agreements (Fustos and Lopez). Consumers must be aware of what they are buying and installing.
Several states have proposed legislation to regulate Internet activities of both a commercial and non-commercial nature (Fustos and Lopez). These statutes have not passed through the judicial review. They have not passed because of the Commerce Clause. The Commerce Clause is a provision in the Constitution of the United States (Article II, section 8, clause 3) that gives Congress the authority to regulate commerce with foreign nations and among the states and Indian tribes (Fustos and Lopez). So any regulation of the Internet must come from Congress. However, Congress cannot restrict free speech or restrict trade that passes from state to state. So making regulations about the Internet will be difficult.
Electronic Business transactions vary form vendor to vendor. Each company develops their own complex and sophisticated electronic payment solutions. Until the market is stabilized and standard solutions have been created, the trend will continue (Fustos and Lopez). The U.S. passed the Electronic Signature in Global and National Commerce Act (Public Law 106-229, June, 2000) that gives details on the use and parameters of validating electronic transactions (Fustos and Lopez). There are many protocols that have come about because of it such as the Electronic Data Interchange Standards and the Java Electronic Commerce Framework. These are necessary because of the ethical situations it produces.
There are plenty of ethical concerns when talking about the Internet. The most common property right with regard to the Internet is intellectual property. Trademarks, copyrights and patents have been protected for a long time. However, when the Internet was started, these property rights seemed to have vanished. Individuals took up domain names of known companies, cyber squatting, but legal cases since then have prevented it from happening again (Maury and Kliener).
E-Businesses are reaching millions of customers. Information on the customer and what the customer is doing is being kept by businesses. The businesses then capitalize on the use of the information. This raises questions on privacy rights of Internet customers (Maury and Kliener). The United States Congress has not acted on this issue except on limited pieces of legislation. It leaves the businesses to self-regulate themselves and let capitalism run the course for the issue. Users are now seeing what is happening concerning their privacy information and pressuring businesses to uphold ethical behavior concerning it. Users are informed that information gathering is being done and allow users to opt out of it. However, when a user has opted out, some parts of the sites are unavailable. The users have to agree to privacy intrusions or be unable to use the site (Maury and Kliener).
Business success is measured by a business’s ability to make money. Many start- ups make money by raising money from investors. In order to sustain the flow of cash, some Internet companies have been engaging in ethically questionable accounting practices (Maury and Kliener). The dot-coms seem to have decided that momentum is the key to the Internet. The long-term protection of investors is not their main concern but the quick capture of cash and then cashing out when they can make a big profit (Maury and Kliener).
EToys started out by wanting to build a site that was based on keeping it s consumers loyal even after established brick and mortar companies came online. EToys lost market share through tough competitors such as Toys “R” Us and Wal-Mart stores. The competitors leveraged their own well-known brands names and lowered prices. The best features eToys used were incorporated into the competitor’s web site (Bannon).
EToys made some financial decisions that increased their costs at critical junctions. It decided to build a new distribution network during 2000. This decision was because of eToys failure to deliver 4% of their orders on time. They outsourced their shipping during the 1999-year. Instead of try to optimize that system while saving money, it spent needed cash on a new design. The poor results in the 2000 Christmas season, some people speculate, is partly due to the unsatisfactory customer experience the year before (Bannon).
Funding was drying out for dot-coms and costs were rising for eToys. Etoys made another financial mistake by trying to tap the market for a secondary offering of stack when its shares were still high. They were forced to raise $100 million form investors specializing in distress financing. The shares declined and more common shares had to be issued, driving the shares down further (Bannon).
One of the major mistakes that they and most dot-coms make is the belief that they will make what they expect to make. Etoys was expecting to make between $210 to $240 million dollars but instead made $130 million (Bannon). Just because you have a site does not mean people are going to use it.
E-Business did play a substantial role in Enron’s accounting problems. However, good technology cannot overcome unsound financial practices (McCarthy). Enron wanted to become the next Exxon, small company that wanted to become a billion dollar energy provider. EnronOnline was launched in October 1999. It was the energy market’s leading e-commerce exchange by trying to dominate markets by buying and selling electricity and bandwidth commodities (McCarthy). What helped Enron’s downfall was the buying and selling of any amount of energy in real time while staying away from the risks. There was no way for Enron to avoid the risk. Enron was trying to leverage more of their network and wireless applications to generate more deals, saying this would equate to more money. However, technology cannot be held accountable for the financial dealings of the corporation. Enron’s demise is not related to technology but to the accounting and financial practices (McCarthy).
The Internet might have changed the way business does business but the bottom line is that no cash in means, no corporation tomorrow. There are several legal and ethical issues that have to be dealt with in any corporation. E-Business is not exception. Each business must adhere to sound business practices to continue to profit from their endeavors. Making decisions in business can dramatically grow the company or bankrupt it.
References
Fustos, Janos T. and Larry M Lopez. “Legal Aspects of E-Commerce practices in the United States and the European Union” Competitiveness Review. Indiana: 2004 Vol 14. Issue ½ pg. 96, 6 pages
Maury, Mary D and Deborah S. Kleiner. “E-Commerce, ethical commerce?” Jounal of Business Ethics. Dordrecht: Mar 2002. Vol 26, Issu ½. Part ½ pg 21, 11 ages
Bannon, Lisa. “E-Business = The eToys Saga: Costs Kept Rising But Sales Slowed.”. The Wall Street Journal. New York, M.Y. Jan 22 2001 pg B.1
McCarthy, Jack. “Trading on the Edge”. InfoWorld, 8/19/2002, Vol. 24 Issue 33, p46, 2p
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Raymond Keckler
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