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The global economy is becoming integrated due to globalization, which has been spurred by diverse changes. Technological change originating from extensive investment research and development is one of the core drivers of globalization. Organizations are shifting from mass-production manufacturing processes by integrating knowledge-based production systems (Baltzan, Detlor & Welsh, 2012).
Similarly, the emergence of electronic commerce (e-commerce) has revolutionized business transactions significantly. It is projected that investment in digital communication technologies will stimulate the growth of e-commerce. Businesses will experience new opportunities that can improve their operational efficiency if exploited optimally.
One of the business areas in which e-commerce has revolutionized involves contracting. Contracts constitute a fundamental component in business operations as they formalize transactions between a business and its clients. Businesses are gradually adopting e-commerce concepts, for example online selling, in an effort to align their operations with the prevailing changes.
Most businesses are experiencing steady growth in the number of e-commerce transactions. In a bid to improve the efficacy of their e-commerce transactions, it is imperative for organizations to incorporate the concept of e-contracting, which entails a contract that is designed and executive via a software platform.
E-contracting increases the commitment of all the parties involved in e-commerce to execute their respective roles satisfactorily (Hill, 2003). However, e-contracting is relatively challenging as opposed to traditional methods of contracting. Additionally, e-contracting is associated with a wide array of challenges.
Thus, it is essential for firms intending to benefit from e-commerce to understand the prevailing e-contracting challenges in order to implement the optimal measures. This research paper evaluates the various challenges or problems that organizations might experience in their e-contracting processes. The paper intends to provide insight on the areas that businesses and relevant stakeholders should address in order to promote the development of e-commerce.
The objective of e-contracts is to ensure that organizations involved in e-commerce, for example business-to-business transactions, adhere to the outlined stipulations. However, the two parties involved in e-commerce transactions may experience diverse challenges during the contract deployment process. Some of the challenges that organizations should consider in implementing the concept of e-commerce are evaluated in this paper.
Negotiation and enforcement challenges
One of the major challenges that might hinder the effectiveness of e-contracting relates to negotiation. Before entering any contract, it is essential for the parties involved to engage in extensive negotiation in order to understand the terms (Mason, 2012). Negotiation forms the foundation of entering into a mutual agreement.
However, in e-commerce, the process e-contracting mainly occurs through online platforms. Therefore, to enter an electronic contract successfully, organizations have a duty to implement effective and secure e-contracting technologies such as computer-aided negotiation technologies. Such technologies may enable businesses to engage in e-negotiations.
Nevertheless, lack of such technology might affect e-commerce activities adversely due to the increased threat of cyber crime. Increased investment in research and development in the information communication technology (ICT) sector has posed remarkable threat to online transactions.
The threat is evidenced by the emergence of diverse forms of cyber crimes such as hacking and phishing. For example, using ordinary digital platforms such as e-mails in conducting e-commerce transactions may affect the confidentiality of the contract negotiation. Available literature documents numerous cases whereby communication over e-mails has been compromised. Furthermore, it is also possible for the contents of the e-mail to be altered during the transmission process.
In order to deal with this challenge, it is imperative for businesses to evaluate the efficacy of their online security protocols continuously. Some of the security measures that organizations should consider include the implementation of Secure Socket Layer and the Transport Layer Security. These security measures ensure that only the intended parties access the data or information transferred through online platforms.
Businesses involved in e-contracting must ensure that the information being transmitted through online platforms is encrypted optimally. Another major challenge associated with e-negotiation relates to the inability to undertake comprehensive auditing of the electronic documents.
Despite integrating effective e-negotiation technologies, the effectiveness of such negotiations in conducting electronic business transaction may be hampered by lack of well-established legal frameworks to entrench the legality of e-negotiations. Lack of such legal framework especially in the developing economies might hinder contract enforcement. This aspect means that the probability of breach of contract is high as no corrective actions can be undertaken.
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Therefore, the existence of legal and security gaps may affect the e-contracting process negatively, hence an organization’s ability to engage in e-commerce successfully. However, organizations can improve the effectiveness of their e-commerce transactions by considering the elements of authenticity, integrity, and confidentiality.
This aspect will limit the security risks that might occur during the negotiation process. Conversely, it is essential for governments in collaboration with other stakeholders such as businesses to develop a comprehensive legal framework that will ensure that the prevailing legal gaps are eliminated. Such measures will promote the growth of e-commerce.
Any contract outlines the respective roles and responsibilities of the parties to the contract. Thus, stakeholders in a contract have a duty to assess the conduct of the collaborating parties in order to determine whether their activities align with the outlined stipulations. Contract monitoring can be either reactive or proactive. Reactive monitoring entails the identification of the source of possible anomalies and compensating the affected party.
Conversely, proactive monitoring involves prior identification of possible anomalies and taking the necessary measures to mitigate their occurrence (Laudon & Traver, 2013). In the process of fulfilling the contract, the collaborating parties are required to exchange contract messages in order to ensure that the contract is executed satisfactorily.
However, the ability to exchange such information through e-contracting may be a problem due to lack of effective online services. Thus, the likelihood of establishing a trustworthy e-commerce environment is hindered.
Most project-oriented organizations are incorporating the concept of contract management. Thus, these organizations should integrate effective e-contracting systems in order to maximize their operational efficiency. However, most organizations that have incorporated e-commerce do not have sufficient knowledge on how to manage electronic contracts.
One of the aspects that organizations should consider in implementing the electronic contract management system entails it capacity to support end-to-end integration. The system should be flexible, accessible, and secure in order to improve its capacity to handle complex contracts.
In addition to the above elements, it is essential for organizations to establish a single repository that can be accessed by all the parties to the contract. Moreover, valuable key performance indicators (KPI) should be incorporated in order to assess the performance of the contract. The KPI should form the basis of making the necessary adjustments to the contract.
Another major problem that organizations might encounter in their e-contracting process relates to the existence of different e-commerce standards between the contracts collaborators (Winn, 2002). Subsequently, the process of monitoring the activities of every party may be problematic. Thus, the likelihood of contract violation may increase due to poor monitoring.
Most service and product-oriented organizations are adopting e-commerce in pursuit for operational efficiency and high competitive advantage. However, it is essential for organizations to develop their knowledge on various e-commerce concepts in order to improve the application of e-commerce.
One of the aspects that they should consider in their business-to-business e-commerce transactions entails e-contracting, which covers the process of developing, negotiating ,and maintaining of contractual agreement in electronic form. The effectiveness with which parties to the contract collaborate with each other determines the outcome of the contractual agreement.
Considering the fact that most organizations have not developed adequate knowledge on the application of e-commerce, the likelihood of encountering hurdles in the execution of e-contracts is high. Some of the major challenges that businesses may face relate to negotiation and enforcement of e-contracts, monitoring, and managing e-contracts. Electronic negotiations may be hindered by poorly installed information communication technologies.
For example, lack of effective Internet security measures may compromise e-negotiations. Conversely, lack of a well-developed legal framework may limit the enforcement of contractual agreement in case one of the collaborators violates the set rules and regulations.
Moreover, businesses may encounter challenges in monitoring and managing e-contracts as opposed to traditional contracts on paper. Business entities intending to incorporate e-commerce in their operations should focus on the discussed issues in order to exploit the benefits of e-commerce. Additionally, it is imperative for governments and the business community to collaborate in formulating a comprehensive e-contract legal framework in order to ensure that e-commerce transactions are executed seamlessly.
Baltzan, P., Detlor, B., & Welsh, C. (2012). Business Driven Information Systems (3rd ed.). Whitby, ON: McGraw-Hill Ryerson.
Hill, J. (2003). The future of electronic contracts in international sales: gaps and natural remedies under the united nations convention on contracts for the international sale of goods. Northwestern Journal of Technology and Intellectual Property, 2(1), 1-34.
Laudon, K., & Traver, C. (2013). E-commerce 2013 (9th ed.). Boston, MA: Pearson.
Mason, S. (2012). Electronic Signatures in Law (3rd ed.). Cambridge, UK: Cambridge University Press.
Winn, J. (2002). Emerging Issues in Electronic Contracting, Technical Standards and Law Reform.