Electronic Commerce

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  • Electronic Commerce

    1. 1. Electronic Commerce - Overview – KAIST EC Lecture September 4, 2001 Jae Kyu Lee (jklee@kgsm.kaist.ac.kr) G raduate School of Management Korea Advanced Institute of Science and Technology
    2. 2. Table of Contents <ul><li>The Internet, Intranet and Extranet </li></ul><ul><li>Jargons and Business Models in EC </li></ul><ul><li>Statistics and Forecasts </li></ul><ul><li>Key Happenings in EC </li></ul><ul><ul><li>B2C vs. B2B </li></ul></ul><ul><ul><li>Dilemmas in EC </li></ul></ul><ul><ul><li>EC Strategy in Slow Economy </li></ul></ul><ul><ul><li>Types of Exchanges </li></ul></ul><ul><li>E-Procurement Strategies </li></ul><ul><li>Key Prospects in 2001 </li></ul><ul><li>EC and MIS </li></ul>
    3. 3. 1. The Internet <ul><li>Hypertext and World Wide Web </li></ul><ul><li>Multi-media: text, voice, image and video </li></ul><ul><li>No Charge </li></ul><ul><li>Internet Service Provider (ISP) </li></ul><ul><li>Platform of eCommerce </li></ul>Seller Buyer The Internet
    4. 4. History of the Internet – Worldwide [www.isc.org/ds/host-count-history.html] Host Counts Remarks 1969: 1 . ARPANET 1971: 23 . Universities 1974: 62 1982: 235 1983: 500 . TCP/IP(Transmission Control Protocol 1984: 1,000 /Internet Protocol 1986: 5,000 1987: 20,000 1989. 1. 80,000 . NSFNET .T1(1.5Mbps) 1991. 1. 376,000 . CIX founded(Commercial Internet Exchange) 1992. 1. 727,000 . WWW(World Wide Web) . T3(45Mbps) 1993. 1. 1,313,000 1994. 1. 2,217,000 . Electronic Shopping Emerged 1995. 1. 5,846,000 1996. 1. 14,352,000 . Cyberbank Emerged 1997. 1. 21,819,000 . SET Standard Announced 1998. 1. 29,670,000 . B2B EC and Exchanges 1999. 1. 43,230,000 . SCM and Private Exchanges 2000. 1. 72,398,092 2001. 1. 109,574,429
    5. 5. Number of Servers in Korea Date : 2001, 2, 28 Source : Network Wizards (http://stat.nic.or.kr/host.html)
    6. 6. Security: Intranet and Extranet <ul><li>Extranet = Ex tended Int ranet </li></ul><ul><li>Platform of B2B EC </li></ul>Internet Suppliers Distributors Customers Manufacturer Extranet Intranet Intranet Firewall Firewall
    7. 7. Internet Tools <ul><li>Hypertext(and Hypermedia) and World Wide Web </li></ul><ul><li>E-Mail and File Transfer </li></ul><ul><li>Search </li></ul><ul><li>Bulletin Board </li></ul><ul><li>Internet Phone </li></ul><ul><li>Video on Demand </li></ul><ul><li>Common Gateway Interface and Intranet/Extranet </li></ul><ul><li>Java </li></ul><ul><li>Security </li></ul>
    8. 8. Jargons in E-Commerce <ul><li>Online Advertisement and Sales </li></ul><ul><li>B2C and B2B EC </li></ul><ul><li>E-Marketplaces and Exchanges </li></ul><ul><li>SCM, Logistics and CFAR </li></ul><ul><li>CRM and Web Mining </li></ul><ul><li>E-Procurement and Integration with ERP </li></ul><ul><li>E-Hub and ASP </li></ul><ul><li>XML/EDI and Software Agents </li></ul><ul><li>E-Service: Banking, Stock Trading, Insurance, and </li></ul><ul><ul><ul><ul><ul><li>Travel Agency </li></ul></ul></ul></ul></ul><ul><li>E-Payment </li></ul><ul><li>E-Transformation </li></ul>
    9. 9. Timmers’ e-Business Models <ul><li>Missed e-Transformation </li></ul>Yahoo, Comparison Shopping Verisign Fedex, UPS ANX e-Bay Amazon SCM Exchanges
    10. 10. eTransformation of Traditional Business Bricks & Mortar Pure Clicks Clicks & Mortar Reengineer Traditonal Way of Doing Business <ul><li>Replace Offline Inefficiency </li></ul><ul><li>Supplement the Traditional Channels </li></ul><ul><li>Online and Offline Synergy </li></ul><ul><li>• Online Only </li></ul><ul><li>Disintermediation </li></ul><ul><li>Channel Conflict </li></ul>Traditional Business <ul><li>Focus of eTransformation : </li></ul><ul><li>Boost Online Sales; Reduce Cost; Resolve the Channel Conflict </li></ul>
    11. 11. Comparative Estimates: Worldwide Total eCommerce
    12. 12. Percentage of Online Seeking and Purchasing Frequence [2000] <ul><li>Items purchased online(Respondents # = 645) </li></ul><ul><li> Dichotomy Percentage of responses </li></ul><ul><li>1 Software 14.8 </li></ul><ul><li>2 Books 13.4 </li></ul><ul><li>3 Hardware 12.4 </li></ul><ul><li>4 Music 10.6 </li></ul><ul><li>5 Travel 7.7 </li></ul><ul><li>6 Video 4.0 </li></ul><ul><li>7 Magazines 3.8 </li></ul><ul><li>8 Electronics 3.6 </li></ul><ul><li>9 Apparel 3.5 </li></ul><ul><li>10 Flowers 3.4 </li></ul><ul><li>11 Banking 3.1 </li></ul><ul><li>12 Others 3.1 </li></ul><ul><li>13 Investments 3.0 </li></ul><ul><li>14 Concerts 2.5 </li></ul><ul><li>15 Do not 2.5 </li></ul><ul><li>16 Quotes 2.3 </li></ul><ul><li>17 Recreation 1.3 </li></ul><ul><li>18 Autos 1.1 </li></ul><ul><li>19 Wine 0.6 </li></ul><ul><li>20 Generic 0.6 </li></ul><ul><li>21 Insurance 0.6 </li></ul><ul><li>22 Real estate 0.5 </li></ul><ul><li>23 Jewelry 0.4 </li></ul><ul><li>24 Brand 0.3 </li></ul><ul><li>25 Legal 0.3 </li></ul><ul><li>26 Metals 0.2 </li></ul>Items Seeked for with intent to buy(Respondents # = 645) Dichotomy Percentage of responses 1 Hardware 12.3 2 Software 11.7 3 Books 10.1 4 Music 18.9 5 Travel 8.2 6 Electronics 5.7 7 Video 4.3 8 Apparel 4.0 9 Magazines 3.9 10 Quotes 3.6 11 Banking 3.4 12 Autos 3.2 13 Investments 3.0 14 Flowers 2.7 15 Concerts 2.7 16 Recreation 2.6 17 Real estate 2.4 18 Others 2.1 19 Insurance 1.2 20 Wine 0.9 21 Generic 0.7 22 Brand 0.7 23 Jewelry 0.6 24 Legal 0.6 25 Metals 0.3 26 Do not 0.2 Source: www.gvu.gatech.edu/user_surveys/survey-1998-10/graphs/shopping/q127.htm
    13. 13. Percentage of online Purchasing Frequency <ul><li>Items purchased online (Korea) </li></ul><ul><li> Percentage Distribution of </li></ul><ul><li>E-Commerce Sales </li></ul><ul><li>1 Hardware 30.0 </li></ul><ul><li>2 Electronics 22.2 </li></ul><ul><li>3 Book 5.7 </li></ul><ul><li>4 Household commodities 5.7 </li></ul><ul><li>5 Travel 5.2 </li></ul><ul><li>6 Clothing and clothing accessories 3.4 </li></ul><ul><li>7 Toy 3.1 </li></ul><ul><li>8 Software 3.0 </li></ul><ul><li>9 Cosmetics, perfume 2.5 </li></ul><ul><li>10 Food, drink 2.3 </li></ul><ul><li>11 Music and Video 1.9 </li></ul><ul><li>12 Sports and leisure goods 1.7 </li></ul><ul><li>13 Agricultural products 1.6 </li></ul><ul><li>14 Office equipments 1.4 </li></ul><ul><li>15 Commission and fee 1.2 </li></ul><ul><li>16 Flowers 0.8 </li></ul><ul><li>Others 8.3 </li></ul>Items purchased online (USA) Percentage Distribution of E-Commerce Sales 1 Hardware 37.0 2 Books 13.9 3 Music and Video 6.9 4 Software 6.5 5 Clothing and clothing accessories 6.5 6 Office equipments 5.1 7 Electronics 3.4 8 Toy, hobby goods and games 3.3 9 Commission and fee 3.0 10 Drug, health aids 2.2 11 Food, beer and wine 2.0 12 Furniture 2.0 others 8.2 [Source : Korea National Statistics Office , 1/4 2001 eCommerce Statistics Survey, http://www. nso .go. kr /report/data/suec0105. htm ] [ Source: U.S. Census Bureau, 1999 Annual Retail Trade Survey, http://www.census.gov/eos/www/ebusiness614.htm ]
    14. 14. Worldwide E Commerce Growth by Region [Source: Forrester Research,Inc] http://www.forrester.com/ER/Press/ForrFind/0,1768,0,00.html
    15. 15. Worldwide E Commerce Growth by Region [Source: Forrester Research,Inc] - http://www.forrester.com/ER/Press/ForrFind/0,1768,0,00.html
    16. 16. Worldwide eComemrce Market  From B2C To B2B *2000~2003 : Forecasts ($Billion) Source: IDC
    17. 17. Comparative Estimates: Worldwide B2C eCommerce
    18. 18. Comparative Estimates of B2B (eMarketer, April 20, 2001: Note different past record)
    19. 19. B2B eCommerce by Region
    20. 20. eCommerce Penetration to Business and Customer Markets2004 [Source: Forrester Research,Inc] - http://www.forrester.com/
    21. 21. Key Happenings in eCommerce <ul><li>B2C e-Malls and e-Stores -> B2B Exchanges </li></ul><ul><li>Shakeout of E-Marketplaces </li></ul><ul><ul><li>Dilemma in EC </li></ul></ul><ul><ul><li>The Survivors will Scale Up </li></ul></ul><ul><li>E-Procurement Strategies </li></ul><ul><li>E-Transformation </li></ul>
    22. 22. B2B EC as an Evolution of B2C EC  In the early stage of seller-centric marketplace, the architectures of B2C and B2B are basically the same. B2B EC Business Customer Business Customer Business Suppliers Consumer Consumer Supplier’s Products Catalog Customer’s Order Information B2C EC Supplier’s Electronic Mall
    23. 23. Difference of B2B from B2C <ul><li>Confirm the Inventory Availability at Pre-Order Stage </li></ul><ul><li>Assurance of Delivery Time in Advance </li></ul><ul><li>Buyer businesses have to store the order information in their </li></ul><ul><li>own control </li></ul><ul><ul><li>Integrate multiple e-Marketplaces </li></ul></ul><ul><ul><li>Integrate with back-end information system (e.g. ERP) </li></ul></ul><ul><li>Issues </li></ul><ul><li>What should be the B2B architecture? </li></ul><ul><li>Who should provide the solution? </li></ul>
    24. 24. Architecture of B2B eMarketplace: Commerce One Case
    25. 25. Point-to-Point and e-Hub Point to Point (Small Numbers; Frequent) E-Hub Collaboration
    26. 26. Vertical & Horizontal e-Marketplaces
    27. 27. B2B EC Forecast by Industry (Forrester Research, BW, Aug 18, 1999: Billion) Industry determines the Potential Benefits 1330.8 842.7 499.0 251.1 109.3 43.1 Total 61.6 32.7 15.4 6.8 2.9 1.2 Shipping & warehousing 65.2 31.1 14.3 6.4 2.9 1.3 Paper & office supplies 169.5 110.6 62.9 32.2 15.4 7.1 Utilities 178.3 96.8 48.0 22.6 10.3 4.7 Petrochemicals 212.9 114.3 53.2 22.7 9.3 3.7 Motor Vehicles $395.3 $319.1 $229.1 $121.4 $50.4 $19.7 Computing & electronics 2003 2002 2001 2000 1999 1998 Industry
    28. 28. EC by Industry : All other Sales : e-Commerce Sales Source: Forrester Research 2003 Sales By Industries 39.3%
    29. 29. Dilemmas in EC <ul><li>Level of Using Exchanges [InternetWeek, Feb 14, 2001] </li></ul><ul><ul><li>of joining companies which have not used the exchanges at all </li></ul></ul><ul><li>Out of 850 exchanges studied in July 2000, only of exchanges went out of business during last year </li></ul><ul><li>[Example] </li></ul><ul><li>In Chemical Industry: </li></ul><ul><li>Exist exchanges; About will survive. </li></ul><ul><li>Shakeout Inevitable </li></ul><ul><li>Will EC be demolished? </li></ul><ul><li>Lesson of Automobile Industry </li></ul>80% 4% 30 3
    30. 30. Anatomy of B2B Black Monday (InternetWeek, April 11, 2001) <ul><li>Poor performance report of key B2B Players: sales, profit, stock price </li></ul><ul><li>IT Spending Tightens (% of increasing e-Biz spending; Survey on 300 companies) </li></ul><ul><ul><li>Jan 2001: 77%  March 2001: 48% </li></ul></ul><ul><ul><li>May reduce budget on e-MP, extranet, CRM budgets </li></ul></ul><ul><li>Exchanges Floundering </li></ul><ul><ul><li>Public exchanges floundering ; Shift to private exchanges </li></ul></ul><ul><ul><li>Ariba: </li></ul></ul><ul><ul><li>- Reduced revenue projection($90 Mil in 2Q, 2001; 50% of expectation); </li></ul></ul><ul><ul><li>- Layoff 700; </li></ul></ul><ul><ul><li>- Call off merger with Agile Software </li></ul></ul><ul><ul><li> (Collaboration with suppliers for product design); </li></ul></ul><ul><ul><li>- Virtually write off public e-MP, and shift to sourcing and procurement </li></ul></ul>
    31. 31. Anatomy of B2B Black Monday (II) <ul><li>Exchanges Foundering (conti.) </li></ul><ul><ul><li>CommeceOne: Revenue $170 Mil; Loss $20 Mil </li></ul></ul><ul><ul><li>Stock price crashes: Web Methods, Vertical Net, Ventro </li></ul></ul><ul><li>Users want solutions, not roadmaps </li></ul><ul><ul><li>B2B vendors cannot tell what they have to offer </li></ul></ul><ul><ul><li>Experience the integration difficult </li></ul></ul><ul><ul><li>Solution and architecture selection critical </li></ul></ul><ul><li>Long time to reap benefit of private exchange and </li></ul><ul><li>procurement systems. But they will be promising </li></ul><ul><li>after 12 months (BW, April 12, 2000) </li></ul>
    32. 32. EC Strategy in Slow Economy <ul><li>Shift the e-Business Priority </li></ul><ul><li>[AMR Research on 100 large corporations, March 2, 2001] </li></ul><ul><ul><li>: Controlling Cost </li></ul></ul><ul><ul><li>: Customer Relations </li></ul></ul><ul><ul><li>: Boosting Revenue and Market Share </li></ul></ul><ul><li>of 250 IT and e-Biz executives plan to increase the spending on e-Biz this year. (April 2001) </li></ul><ul><li>Strategic focus on e-Biz shifts </li></ul><ul><li>from Boosting Revenue to Cost Control , and </li></ul><ul><li>from Joining the Market Makers to e-Transformation . </li></ul>38% 25% 20% 49%
    33. 33. Dynamics in Three Types of Exchanges (InternetWeek, March 13, 2001) <ul><li>Three Types of Exchanges </li></ul><ul><ul><li>Independent Exchange </li></ul></ul><ul><ul><li>Industry Consortia </li></ul></ul><ul><ul><li>Private Exchanges </li></ul></ul><ul><li>Independent Exchange </li></ul><ul><li>Spot market </li></ul><ul><li>Not worked well </li></ul><ul><li>Changing biz model to Supply Chain Enabler or </li></ul><ul><li>software plays </li></ul><ul><li>Be careful to partner with them </li></ul>
    34. 34. Dynamics in Three Types of Exchanges (II) (InternetWeek, March 13, 2001) <ul><li>Industry Consortia </li></ul><ul><ul><li>None are likely to grow into huge spot markets or become a font of cost-saving reverse auctions </li></ul></ul><ul><ul><li>Benefit: Created industry standards </li></ul></ul><ul><ul><li>Wait-and-see if the consortia supply chain ASP services offer enough value to win widespread use </li></ul></ul><ul><li>Private Exchange </li></ul><ul><ul><li>Not a new supply chain </li></ul></ul><ul><ul><li>Attend to the companies need </li></ul></ul><ul><ul><li>Apply to the companies most crucial business problems </li></ul></ul><ul><ul><li>Between 2 – 3 partners </li></ul></ul><ul><ul><li>Started mostly in 2001 </li></ul></ul>
    35. 35. E-Procurement Strategies <ul><li>Spot Purchase : Seek Minimun Prices </li></ul><ul><ul><li>Non-strategic MRO(Maintenance, Repair, and Operations) </li></ul></ul><ul><ul><li>Purchase at Public Exchange </li></ul></ul><ul><li>Contract Purchasing : Minimize Inventory along the </li></ul><ul><li>Key Supply Chains </li></ul><ul><ul><li>Direct Material </li></ul></ul><ul><ul><li>of online B2B Transaction </li></ul></ul><ul><ul><li>of offline B2B Transaction </li></ul></ul><ul><ul><li>Supply Chain Management 와 Private Exchange </li></ul></ul><ul><li>Desktop Purchasing: Internalized eStores, </li></ul><ul><li>Eliminate the Approval Process for low end items </li></ul><ul><ul><li>Microsoft, Cisco, Etc. </li></ul></ul><ul><li>Reduce the Procurement Department and Outsource </li></ul>85% 95%
    36. 36. Key Prospects in 2001 (AMP Research, Feb 13, 2001) <ul><li>A third of companies over $ 1 Bil will implement Private </li></ul><ul><li>Trading eXchanges by 2005 ; </li></ul><ul><li>Consortia Trading eXchanges on shaky ground this year </li></ul><ul><li>By 2002, 40% of ASP and 60% of broader ASP market will </li></ul><ul><li>fail or be acquired. </li></ul><ul><li>Enterprise Application Integration (EAI) top priority in 2001, </li></ul><ul><li>to make it easier for customers to unify channels, process, </li></ul><ul><li>and data. </li></ul><ul><li>SCM market is expected to reach $7.8 Bil in 2001 with </li></ul><ul><li>Inventory Management, Order Fulfillment, and SC Planning . </li></ul><ul><li>Retailers focus on B2B synchronization, collaboration, and </li></ul><ul><li>enterprise integration and optimization. </li></ul>
    37. 37. Key Prospects in 2001(II) <ul><li>Enterprise Commerce Management (ECM) system emerging. </li></ul><ul><ul><li>Vertical business process collaboration </li></ul></ul><ul><ul><li>External content integration with inside </li></ul></ul><ul><li>Product Lifecycle Management (PLT) grow rapidly: </li></ul><ul><ul><li>Reduce time-to-market of new products </li></ul></ul><ul><ul><li>PLT application license revenue grow more than 50% </li></ul></ul><ul><ul><li>This means the Collaborative Commerce </li></ul></ul><ul><li>Out of 850 exchanges in July 2000, only 35(4%) went out of business or merged </li></ul><ul><ul><li>More shake out expected </li></ul></ul><ul><li>80% of exchange participants not used at all (InternetWeek, Feb 14, 2001) </li></ul>
    38. 38. EC and MIS <ul><li>EC for the Implementation of SIS </li></ul><ul><ul><li>Online Sales, Customization, eProcurement, Complement Traditional Stores (K-Mart Case) </li></ul></ul><ul><li>CRM and Collaborative Commerce </li></ul><ul><li>EC for the Implementation of BPR </li></ul><ul><li>Integration with ERP </li></ul><ul><li>Competing Solutions and System Integrations </li></ul>
    39. 39. EC and DSS, DW, DM, CFAR <ul><li>Decision Support Systems(DSS) </li></ul><ul><li>Data Warehouse : Transaction Record History </li></ul><ul><li>Data Mining : Extract Usable Knowledge from the Data Warehouse </li></ul><ul><ul><li>Statistics, Neural Computing, and Inductive Learning </li></ul></ul><ul><ul><li>Web Mining </li></ul></ul><ul><li>Toward the Database Marketing and </li></ul><ul><li>Customer Relationship Management </li></ul><ul><li>Evolve to Collaborative Forecasting and Replenishment (CFAR) </li></ul><ul><ul><li>One of Collaborative Commerce </li></ul></ul>
    40. 40. Collaborative Forecasting and Replenishment(CFAR) Wal-Mart Operational System ERP RetailLink Sales data about W-L Products Inventory Plan Planner Forecast Review and Comments Manufacturing Plan Planner Warner-Lambert ( Mfr) EDI Internet WWW Data warehouse (Retailer)
    41. 41. Collect Accout Receivable: Ford’s Old Method Reception Copy of PO Procurement Department Warehouse Purchase Order Delivery Suppliers Accounting Dep’t Bill
    42. 42. Collect Account Receivable: Ford’s New Method <ul><li>Copy of Purchase Order, Reception, and Payment Request Eliminated </li></ul><ul><li>Automatic Match of Documents </li></ul><ul><li>Reduced 75% of Personnel for A/C Receivable </li></ul><ul><li>Role of Intranet and Extranet </li></ul>Warehouse Extranet Intranet Procurement Department 구매요청서 A/C Dep’t Database Pay Suppliers
    43. 43. EC and ERP <ul><li>ERP(Enterprise Resource Planning) </li></ul><ul><ul><li>Initial Tools: Focused on the Integrated Internal Information Management </li></ul></ul><ul><ul><li>Extended ERP: Extended to include B2B EC functions and integrate with ERP </li></ul></ul><ul><ul><ul><li>SAP’s mySAP.com </li></ul></ul></ul><ul><li>E-Marketplace’s Integration with ERP </li></ul><ul><li>How to Outsource and Integrate Systems </li></ul>
    44. 44. Expansion of Solutions and Battlefields Morgan Stanley (2000) C A C B C Scalability B A C C C+ Consulting Resources C+ C+ A SCM C C+ A C+ Workflow C B A B Procurement Window B B Auctioning C B C B A Integration D C C B A Network platform C B C B B+ Content Management B SAP C Oracle A i2 C-One Fulfillment Expertise Ariba
    45. 45. An Integrated Architecture Suppliers Customers Business Intelligence Electronic Commerce Supply Chain Management Customer Relationship Management Enterprise Resource planning Application Framework for e-business <ul><li>Web Selling , e-Procurement , EC Hosting , </li></ul><ul><li> Internet Billing, </li></ul>Employees Web-based Sales Online Order Taking Forecast Production Plan Production Customer Service Purchase Dirstribution

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