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Chapter 2.Literature Review
2.1 Chapter Introduction
In the recent world economies, information and knowledge are the critical factors of production. Technical progress and innovation are some of the major contributions that ensure economic development. E-commerce is a crucial element to ensure competition in enterprises. It ensures access to fresh segments of the market, increases the rate of business development, ensures the commercial policies are flexible, and decreases sales and advertising costs. The effects of E-commerce on society and companies will play a critical role. The chapter provides an analysis of previous research, providing opinion about study topic according to various studies.
2.2 Current situation of E-Commerce Risks
Išoraitė & Miniotienė, (2018) introduced electronic commerce as a business in which information technology is used to increase business efficiency, sales, and provide a basis for new products and services. Ismagilov, (2015) emphases the importance of ecommerce in companies communication with each other, with suppliers, and with customers across the world over the internet. During this process, business exchange various types of information: negotiations, exchange documents, communicate about new products, transmit and accept orders for goods.
However, Quyet & Cuong, (2017) noted the ccritical infrastructures, society, and economy have become largely dependent on computer networks and IT solutions. At the same time, Cyber-attacks have become the biggest threat as far as technology is concerned. According to Jang-Jaccard & Nepal, (2014), cyberattacks costs more than $114 billion every year. If the time spent to recover from cyber-attack is considered, then it would reach a staggering $385 billion. Cyber-attack victims continue to increase significantly. Approximately 14 adults experience cyber-attacks per second, with more than one million attacks per day.
Ismagilov, (2015) study stated that many businesses have faced the threat of being extinct as e-commerce has emerged. E-commerce has offered an opportunity for companies seeking to increase their sales and profits to realize their goals. A study conducted by Falk and Hagsten (2015) on the effectiveness of online platforms such as websites and social media on sales revealed that e-commerce has a significant contribution to sales and revenues. The Quyet & Cuong, (2017) conquers with the findings that e-commerce offers an opportunity for a company to make direct sales to its customers to increase its sales and profit margins. Increased sales translate to an increase in gains. The internet is a critical component in e-commerce that has offered a platform for companies to promote and sell their products and services. Companies have had a chance to direct sales to customers at different levels, such as business to business and business to consumers. Thus, e-Commerce is characterized by an Internet of Things (IoT) has played a critical role in strengthening a company’s customer and financial bases, as Harnani et al. (2020) opined.
However, most of them have been hesitant about whether they should shift to online business. Some of the main risks that have been outlined by major companies include credit card threat, distributed denial of service (DDoS) attacks, E-commerce is opened to numerous security issues that open the firm to risks that can thwart its operations. Distributed Denial of Service (DDoS) attacks can render the website of a company offline following flooding by requests from untraceable IP addresses (Balasubramanian, 2016; Abdelkader & Ahmed, 2019). Malware can infect and disrupt the normal functioning of a website or even making it to go offline. It is imperative to be aware of such possibilities to adopt appropriate measures to safeguard a company’s site.
E-commerce encourages the designing of websites to enhance customer interaction and sell products and services, making it critical to ensure it remains online and safe from potential hackers. E-commerce websites have had the risk of databases being attacked by hackers accessing information as if they are the owner. This kind of attack increase threat of customer or business being stolen. The man-in-the-middle attack is a common risk in the internet world these days. Malware and phishing attacks and lack of human-to-human interaction.
However, Sharma & Kurien, (2019) emphasized on handling customers in person, the study noted that lack of customer service is a critical risk. It undermines the effectiveness of companies in the e-commerce industry. An organization that fails to meet its customers’ expectations is bound to fail in its endeavors, as observed by (Gupta et al. 2018). It is imperative to uphold the quality of customer service to encourage consumers to establish repeat business. Enterprises operating in the e-commerce industry experience problems related to poor customer service that render them with a bad experience whenever they read or hear something about a firm in question (Gupta et al. 2018). The possibility of giving poor service characterized by undelivered products, wrong deliveries, and customer refunds threaten the sustainability of business online. The e-commerce industry requires a firm to offer excellent customer experience to remain loyal, a critical aspect for a company to sustain its operations (Özdemir & Çam, 2016).
Wright, (2016) noted that businesses are created mainly for the internet end up not opening a physical store. Online types of businesses are mainly preferred by start-ups for low overhead costs. While both types of business are profitable, they are perceived differently by customers especially on trust. In research conducted by Mazhar, Anwar, & Jam, (2012), the authors recognized customer behavior in online business. Customers perceived products from online differently compared to physical stores. E-commerce cannot be complete without customer trust. The trust issue is mainly due to the many risks involved in buying and selling (Wright, 2016) There are many forms of risks in online purchases, including financial risk, security risk, and risk of overspending. Risk perception is a larger part of the idea of trust. However, trust is earned differently in a physical shop as well as in online ones. The types of stores are different and people have different levels of interactions with the store. The security risk is a real concern in online trading that needs to be addressed. The impact of having a security breach on an e-commerce website is immense that it can affect the entire business.
Apart from security threats, other factors affect customers’ attitudes towards online platforms. Positive experiences in online transactions are the main driver of customers to refer or come back to buy from the platform. Other factors include the complexity of the website making it hard to find products (Khan, 2016).
E-commerce offers an opportunity to provide excellent customer service essential in sustaining a business in a competitive market. A company can meet the consumers’ needs at their convenience, thanks to home delivery. Globalization has offered opportunities to new entrants that have contributed to market flooding. The result has been that companies are unable to realize steady growth in profits owing to increased competition. However, e-commerce has offered an opportunity to reach out to a wide range of customers globally, irrespective of the consumers’ physical distance and location.
2.3 The Contribution of the E-Commerce Industry in Business
The E-Commerce industry has opened companies to lucrative opportunities to help them realize sustainable development in the industry. According to Wang (2017), companies in the e-Commerce industry are keen on seizing the opportunities presented in the sector to realize sustainable competitive advantages. E-commerce entails the use of the internet and other e-commerce tools to sell products to consumers. It explains why companies are striving to command a significant market share in e-commerce to achieve sustainable development.
The assertion conquers with Laudon and Traver (2016) argument that understanding the correlation between business and e-commerce is critical to appreciate why multinational firms are keen on enhancing their online presence to remain relevant. E-Commerce has offered companies an opportunity to strengthen their financial stability by exploiting the opportunities presented by the industry, as Choi and Mai (2018) observed.
E-commerce has offered an opportunity for companies seeking to increase their sales and profits to realize their goals. A study conducted by Falk and Hagsten (2015) on the effectiveness of online platforms such as websites and social media on sales revealed that e-commerce has a significant contribution to sales and revenues. This conquers with the findings that e-commerce offers an opportunity for a company to make direct sales to its customers to increase its sales and profit margins (Harnani ET. Al 2020). Increased sales translate to an increase in gains. The internet is a critical component in e-commerce that has offered a platform for companies to promote and sell their products and services. Companies have had a chance to direct sales to customers at different levels, such as business to business and business to consumers. Thus, e-Commerce is characterized by an Internet of Things (IoT) has played a critical role in strengthening a company’s customer and financial bases, as Harnani et al. (2020) opined.
E-commerce also opens a business to lucrative opportunities that can increase sales, thanks to its attribute that supports pre-sales activities. Translating a company’s views and visits to business leads are vital in increasing its sales and profits (Aziz, 2016). As suggested by Laudon and Traver. (2016). An organization can use its website to generate sales leads that can increase sales and profit margins. It enhances engagement and interaction with customers, an aspect that makes it possible for a company to generate sales leads. E-commerce is a useful platform that offers an avenue to engage potential customers while also providing them with product information that can help them make informed decisions when contemplating purchasing certain products. The platform encourages an individual to consider the items from a given firm based on their visit to company websites (Jungb & Ejermo, 2014).
E-commerce has also made it possible for companies using the platform to offer post-sales support, an aspect that encourages repeat businesses. Responding to the queries raised by consumers is critical to meeting their needs beyond their expectations, as Lin (2019) observed. The online platform is useful in answering the Frequently Asked Questions (FAQs) to foster healthy customer relations. Companies using the internet are doing well in customer interaction, thanks to e-commerce that encourages the use of electronic media and the internet to facilitate communication. This has empowered the customers with knowledge and helped them distinguish genuine goods from counterfeits (Yu ET. Al 2016).
2.4 Risks that e-commerce companies are facing
E-commerce is opened to numerous security issues that open the firm to risks that can thwart its operations. Distributed Denial of Service (DDoS) attacks can render the website of a company offline following flooding by requests from untraceable IP addresses (Balasubramanian, 2016; Abdelkader & Ahmed, 2019). Malware can infect and disrupt the normal functioning of a website or even making it to go offline. It is imperative to be aware of such possibilities to adopt appropriate measures to safeguard a company’s site (Aziz, 2016). E-commerce encourages the designing of websites to enhance customer interaction and sell products and services, making it critical to ensure it remains online and safe from potential hackers.
There is a high risk of a business running a website that cannot be seen or accessed by targeted viewers who can be leads to sales in the future. E-skimming is also a common security issue that makes it dangerous to trade in the e-commerce industry. It entails stealing vital personal information from payment processes using the online platforms that can result in money laundering, as observed by Alasri and Sulaiman (2018). Malware has also disrupted networks in e-commerce, an aspect that has made it difficult for companies to do business with customers safely. It is critical to be conversant with these security threats when investing in e-commerce to adopt appropriate measures to shield the firm and customers from its adverse effects.
The violation of intellectual property is also a common risk in e-commerce that one should refrain from being successful in the industry. As suggested by Balasubramanian (2016), the failure to protect the Internet Protocol Address (IP) can render a company vulnerable to suffering infringement of copyright. It is of the essence for a business operating in e-commerce to focus on protecting IP’s such as the logo, taglines, products, and images to remain relevant in the market. Competitors with ill motives can breach the intellectual property rights of another company operating in the e-commerce industry. It is critical for a business operating in the sector to remain committed to adopting key measures to protect its IP while at the same time refraining from engaging in similar offenses. The failure to evaluate a company’s IPs to check their similarity or a possible breach of intellectual rights property can expose a business to legal implications that can be expensive (Abdelkader & Ahmed, 2019).
Client disputes and refunds are also common risks that can undermine the success of a business operating in the e-commerce industry. In a study conducted by Han (2019), e-commerce companies incur losses when customers claim refunds on disputed orders and deliveries. This makes it essential to consider the possibility of such risks to formulate informed decisions and strategies to help a business minimize such risks. Wigand, (2016) also stated that companies can fail to deliver the ordered products to customers due to logistical issues and uncertainties. In such cases, customers can not receive the ordered products as scheduled; thus, such individuals are likely to demand refunds (Goh, 2018). There is also the possibility of charging the customer twice or even delivering the wrong products to customers. There is a need for a business operating in the e-commerce industry to put in place measures that can help it to minimize refunds to cut down operational costs.
2.5 Search Engine Optimization Risk
Srivastava et. al (2017) explained the risks associated with Search Engine Optimization (SEO) are also serious risks that can threaten the survival and sustainability in the e-commerce industry. The author emphases the its importance in digital marketing program that can help a business in e-commerce position well in the market in a bid to remain relevant in a given industry. This explains why companies experiencing low SEO ranking find it difficult to promote their products and services online. Low SEO ranking threatens a business’s sustainability since it makes it difficult for the corporation to identify and connect with the targeted audiences who can lead to sales. The possibility of experiencing low traffic to the company’s website is significant, an aspect that threatens its efforts to sustain its online presence and competitiveness (Özdemir & Çam, 2016).
Poor customer service is also a critical risk that undermines the effectiveness of companies in the e-commerce industry. An organization that fails to meet its customers’ expectations is bound to fail in its endeavors, as observed by (Gupta et al. 2018). It is imperative to uphold the quality of customer service to encourage consumers to establish repeat business. However, enterprises operating in the e-commerce industry experience problems related to poor customer service that render them with a bad experience whenever they read or hear something about a firm in question. Richardson, (2002) stated that the possibility of giving poor service characterized by undelivered products, wrong deliveries, and customer refunds threaten the sustainability of business online. Quyet & Cuong, (2017) confirmed that e-commerce industry requires a firm to offer excellent customer experience to remain loyal, a critical aspect for a company to sustain its operations.
Weak authentication methods can also expose a company and its customers to numerous security risks that can adversely affect operations. Cyber-attacks are frequent in e-commerce, making it imperative to put measures that can shield a firm from hacking due to weak authentication methods, as observed by Abdelkader and Ahmed (2019). It is critical to be keen when formulating authentication methods to ensure that they do not render a customer or the firm vulnerable to data and privacy violations. Exposing a customer to data breaches due to weak security and authentication systems can plunge a firm into frictions with customers and other companies (Liu et. al, 2020). It is vital to check against such malpractices to minimize the risks of weak authentication methods to succeed in e-commerce.
2.6 Developments in Solving Risks of e-Commerce organizations
The adoption of appropriate data management and protection practices is critical to fix security issues in e-commerce (Mamtaz, et al., 2014). It is imperative to enhance network security by enforcing a firewall to prevent interference and disruptions. According to Lee (2016), outsourcing web development services can help an organization put security measures to protect its websites from Distributed Denial of Service attacks. The standard ensures that a company’s website remains visible to sustain its businesses and operations in the digital space. It is also critical for the web hosting company to monitor a company’s website and check on potential threats such as malware and viruses to safeguard the networks supporting e-commerce (Abdelkader & Ahmed, 2019; Iqbal, 2019). It is also critical to do business on an e-commerce platform that relies on object-oriented programming to boost its security.
Companies that have been keen on minimizing the risk of customer refunds in e-commerce have thrived in their endeavors by adopting key strategies. Customer satisfaction is critical to encourage them to remain committed to a company. In this regard, Wiśniewski (2019) points out that verifying orders before shipment ensures that the right goods are being shipped as per the customer specifications. This will help an organization to avert a situation whereby it delivers the wrong orders, yet the customer has already paid for them. It is also safe to only collect payments from customers on the arrival of the ordered products on the customer’s confirmation. These practices are effective in avoiding and minimizing the risks associated with customer refunds in e-commerce. There is a need for establishing an order monitoring system until the customer receives the ordered products as per the order made.
Desisting from violating intellectual property rights can help e-commerce businesses to avert the related risks. For instance, it is critical to be original to avoid copying the IP of other companies to remain safe and uphold other (Aziz, 2016). As suggested by Iqbal (2019), a company must continue committed to enforcing strict copyright rules and regulations to deter others from violating its intellectual right property. It is also critical to observe data safety measures such as not revealing sensitive information on public platforms when chatting. Companies that have upheld these practices have managed to minimize the risks to a great extent.
Outsourcing the services of SEO experts in digital marketing is critical to upholding practices and measures that can help an organization attract high traffic. Relying on experienced SEO experts is crucial to enhance the market positioning of a company in e-commerce. This conquers with Rehman ET. Al (2019) argument that improving the critical words for searching on search engines is vital to enhancing SEO ranking when operating the e-commerce industry. Relying on inappropriate search tools increases the risk of experiencing low SEO ranking. Therefore, it is critical to evaluate search engines and tools to select the most appropriate ones to attract high traffic. It is better and cost-effective to outsource SEO experts’ services rather than doing it to eliminate the risk of low SEO ranking.
Improved customer service is critical to eliminate and or reduce the risks of poor customer service in the e-commerce industry. It is vital to offer excellent customer service to win their loyalty to sustain the firm’s activities in e-commerce. In a study conducted by Lim and Azhar (2017), meeting the consumers’ needs beyond their expectations ensures that they are satisfied. A happy customer is likely to continue doing business with a given company, which can help a corporation sustain its operations in a competitive e-commerce market. Improved accuracy and timeliness in making deliveries is essential in exceeding the expectations of the consumers. It is critical to verify the orders before shipment to ensure that the customer is not disappointed by the wrong deliveries.
Multiple factor authentication methods are effective in eliminating the risks associated with weak authentication methods. Relying on passwords and user ID solely exposes sensitive data to hacking and unauthorized accessibility. However, adopting multiple factor authentication systems ensures that data is safe from both the customer’s and company’s end. For instance, setting the systems to requests security codes from the customers also from the password and user ID is critical in minimizing the possibility of risks associated with weak systems (Lee, 2016; Singh, 2019). It is imperative to focus on improving online security in a bid to winning the trust of customers. The likelihood of customers associating with companies with robust security systems that guarantee their safety online is high; thus, such businesses can sustain their operations online due to support from consumers.
2.7 Role of e-Commerce in Sustainable Development of Companies
The fact that e-commerce is keen on increasing sales through the internet offers a business opportunity to realize sustainable development. In this regard, Yan (2019) points out that e-commerce offers an opportunity for an organization to engage and interact with customers regularly to create links that can result in sales leads. A well-designed website plays a crucial role in promoting a company’s reputation and products to encourage customers to consider purchasing their products and services (Yadav and Rahman, 2017). E-commerce is useful in ensuring a company is making extra sales to secure increased profit margins that can better position it to realize the desired growth. Companies that fail to attract increased sales are likely to struggle in sustaining their operations and activities. Without a doubt, e-commerce is an effective strategy that can help a business to attain sustainable development. An example of a company that has attained sustainability due to e-commerce is Walmart’s company. Hurricane Katrina introduced disaster relief efforts that were a plan for its new sustainability (Debter, 2019). This was advantageous to Walmart because it was able to respond to the threats imposed by the environment. It managed to leverage an impressive distribution network, which enabled it to get important supplies from the customers who needed them.
E-commerce encourages the use of digital platforms to promote the operations of a company. The 21st Century is characterized by increased coverage of the internet and technological advancements that make it inevitable for businesses to consider transforming to remain relevant. For instance, Agnihotri ET. Al (2017) revealed that customers rely on online platforms such as websites and social media to search for information about products to make informed customer purchasing decisions. Therefore, designing sites that enhance navigation and accessibility to information about the company and its brands is critical to winning customer loyalty and trust. A corporation should take advantage of e-commerce tools and platforms to provide accurate and reliable information to protect customers from counterfeits; thus, encouraging them to remain loyal. Social media and websites offer platforms for advertising and selling products. E-commerce provides a company with an opportunity to design and implement a digital marketing program to sustain its operations and market positioning, as observed by Choi and Mai (2018). Relying on digital platforms and e-commerce tools is critical to spurring sustainable growth in business.
E-commerce offers an opportunity to provide excellent customer service essential in sustaining a business in a competitive market. A company can meet the consumers’ needs at their convenience, thanks to home delivery. Globalization has offered opportunities to new entrants that have contributed to market flooding. The result has been that companies are unable to realize steady growth in profits owing to increased competition. However, e-commerce has offered an opportunity to reach out to a wide range of customers globally, irrespective of the consumers’ physical distance and location. Companies that have successfully established their operations in the e-commerce industry have outshined those that have not (Wang ET. Al 2018). This has e-companies outshining their competitors who rely on customers to visit their brick and motor stores to make purchases. Such companies have been forced to shut their operations owing to increased competition from e-enterprises. Kodak is among the companies that shut down due to increase competition. Kodak had dominated the industry of photography in the 20th Century. The company suffered denial for quite a long time losing a chance to be the leading photographic company. According to Don Strickland, who is the former CEO of Kodak company, Kodak developed an improved digital camera, but they did not approve or launch it for the fear that it would have effects on the photography industry (Lucas and Gohn 2009). The exploitation of the untapped markets has been possible thanks to e-commerce that has offered multinational corporations an opportunity to internationalize to become global businesses, as opined by Wiśniewski (2019). Without a doubt, e-commerce provides a platform for a corporation to realize sustainable development to remain viable in a competitive and dynamic business environment.
2.8 Sustainable Development Initiatives of e-Commerce Companies
Technology companies have been at the forefront of adopting sustainable practices that have enhanced their positioning in e-commerce. For instance, such companies have resorted to e-commerce to meet the fast-growing demand for their products and services. Globalization has seen the world becoming a global village with a high demand for technological products and services for connections and interactions (Kumar et al. 2016). This has seen technology companies investing in e-commerce in a bid to seizing the opportunities presented while at the same time meeting the needs of its customers satisfactorily. The commencement of home delivery services for the purchased products is a significant trend that characterizes the technology company operating in the e-commerce industry. The monitoring of supply chains and logistics has helped the firms improve their time to deliver an order to a customer.
Technology companies are relying on feedback from customers using e-commerce tools to survive in the industry. As already mentioned, e-commerce supports pre and post-sales support to encourage repeat business as opined by Singh (2019). This explains why technology companies are striving to interact with customers before and after-sales to strengthen and maintain healthy customer relations. IT (Information Technology) firms are keen on socializing and engaging with audiences on their official websites and social media platforms to gather views and suggestions that have helped them develop appropriate technologies and products that satisfy their needs. Technology firms are consumer-oriented because they are driven by the needs, demand, and desires of the customers to generate technological solutions that have seen them sustaining their marketing positioning and competitiveness in e-commerce (Kumar et al. 2016). Technology firms are developing answers to the Frequently Asked Questions to empower their customers with vital information that has helped them appreciate the role of firms in addressing their changing needs.
The allocation of vast resources for Research and Development (R&D) has also boosted the efforts of technology companies in e-commerce to sustain their operations while at the same time showing positive progress to realize the desired growth (Kumar et al. 2016; Wiśniewski, 2019). R & D has opened technology firms to developments that have better positioned them to meet their customers’ technological needs. The commitment has significantly contributed to the corporations sustaining high traffic of consumers online to realize sustainable growth. According to Yu, Huo, and Zhang (2020), the continuous improvement of technologies is critical to meeting people’s changing needs following the emergence of new technological challenges. R&D has helped technology companies in e-commerce to identify and exploit business opportunities that have promoted innovation. This has led to the development of new products and services that have enhanced the formulation of technological solutions to the technical problems in the 21st Century.
Technology companies in e-commerce have resorted to strategic alliances to sustain their operations in the dynamic business environment. The global business environment has been characterized by increased changes that have transformed the way companies are doing business. Strategic alliances have offered opportunities to the technology companies to identify and partner with other firms to sustain their operations in the e-commerce industry. According to Wang (2018), forces in the market, such as increased rivalry, can threaten another company’s survival, rendering it vulnerable to shutting down. This explains why technology companies in e-commerce have failed to cope with market pressure, some being left open to acquisition and merging. It is critical to acquire and merge with companies exhibiting great technology potential to remain relevant (Agnihotri et al. 2017). Adopting a similar trend in e-commerce is crucial to thriving in the industry to attain sustainable growth and development goals.
In summary, numerous gains are related to efficiency and productiveness that are generated by e-commerce. The impacts of e-commerce are much promising, and ignorance of e-commerce would lead to low production of the companies. The literature review shows various types of e-commerce risks. The section provides a framework for further analysis based on a case study. Alibaba has emerged to be the leading e-commerce website. It also developed unique products to reduce these risks (Ismagilov, 2015).
2.10. Research Questions
The research will be guided by the following research questions;
- What are the potential risks that the technology company faces?
- What are the countermeasures that can be implemented to manage potential risks?