Ecommerce Final


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Ecommerce Final

  1. 1. 1© Prentice Hall, 2000 Foundations of Electronic Commerce
  2. 2. 2© Prentice Hall, 2000 Learning Objectives Define electronic commerce and describe its various categories Distinguish between electronic markets and inter- organizational systems Describe the benefits of electronic commerce to organizations, consumers, and society Describe the limitations of electronic commerce Understand the forces that drive the widespread use of electronic commerce Describe and discuss the changes that will be caused by electronic commerce Discuss some major managerial issues regarding electronic commerce
  3. 3. 3© Prentice Hall, 2000 Opening Vignettes: Intel Corp. and Happy Puppy Intel Corporation Business-to-business (B2B) products selling Customer service Purchasing from and dealing with suppliers Happy Puppy Retailing company’s games Marketing others’ games Business-to-consumers (B2C)
  4. 4. 4© Prentice Hall, 2000 Definitions and Content of Field Electronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet. Electronic commerce describes the buying and selling of products, services, and information via computer networks including the Internet. The infrastructure for EC is a networked computing environment in business, home, and government. E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.
  5. 5. 5© Prentice Hall, 2000 A global networked environment is known as the Internet A counterpart within organizations, is called an intranet An extranet extends intranets so that they can be accessed by business partners. Definitions and Content of Field (cont.)
  6. 6. 6© Prentice Hall, 2000 Pure Vs. Partial Electronic Commerce Three dimensions the product (service) sold [physical / digital]; the process [physical / digital] the delivery agent (or intermediary) [physical / digital] Traditional commerce all dimensions are physical Pure EC all dimensions are digital Partial EC all other possibilities include a mix of digital and physical dimensions
  7. 7. 7© Prentice Hall, 2000 Physical agent Digital agentDigital Product Physical Product Physical process Digital process Virtual process Virtual delivery agent Virtualproduct Electronic commerce areas The core of electronic commerce The Dimensions of Electronic Commerce Traditional commerce
  8. 8. 8© Prentice Hall, 2000 Figure 1.2 shows that the EC applications are supported by infrastructures, and their implementation is dependent on four major areas (shown as supporting pillars) people, public policy, technical standards and protocols, and other organizations. The EC management coordinates the applications, infrastructures, and pillars. It also includes Internet marketing and advertisement. The Electronic Commerce Field
  9. 9. A Framework for Electronic Commerce 9 Electronic Commerce Applications • Stocks Jobs • On-line banking • Procurement and purchasing• Malls • On-line marketing and advertising • Home shopping • Auctions • Travel • On-line publishing People: Buyers, sellers, intermediaries, services, IS people, and management Public policy, legal, and privacy issues Technical standards for documents, security, and network protocols payment Organizations: Partners, competitors, associations, government services Infrastructure (1) Common business services infrastructure (security smart cards/authentication electronic payment, directories/catalogs) (2) Messaging and information distribution infrastructure (EDI, e-mail, Hyper Text Transfer Protocol) (3) Multimedia content and network publishing infrastructure (HTML, JAVA, World Wide Web, VRML) (4) Network infrastructure (Telecom, cable TV wireless, Internet) (VAN, WAN, LAN, Intranet, Extranet) (5) Interfacing infrastructure (The databases, customers, and applications) Management © Prentice Hall, 2000
  10. 10. 10© Prentice Hall, 2000 A market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions. An electronic market is a place where shoppers and sellers meet electronically. In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line. Electronic Markets
  11. 11. 11 Shopper/Purchaser Seller/Supplier Electronic Market (Transaction Hander) Electronic commerce network (Infrastructure) Product/service information request Purchase request Payment or payment advice Purchase fulfillment request Purchase change request Response to fulfillment request Shipping notice Payment approval Electronic transfer of funds Electronic transfer of funds Shopper/Purchaser’s Bank Payment remittance notice Electronic transfer of funds Transaction Handler’s Bank (Automated Clearing House) Seller/Supplier’s Bank Electronic Markets © Prentice Hall, 2000 Response to information request Purchase acknowledgment Shipping notice Purchase/service delivery (if online) Payment acknowledgment
  12. 12. 12© Prentice Hall, 2000 An interorganizational information system (IOS) involves information flow among two or more organizations. Its major objective is efficient routine transaction processing, such as transmitting orders, bills, and payments using EDI or extranets. Scope: An IOS is a unified system encompassing two or several business partners. A typical IOS includes a company and its suppliers and and/or customers. Interorganization Information Systems
  13. 13. 13© Prentice Hall, 2000 Electronic data interchange (EDI) Extranets Electronic funds transfer (EFT) Integrated messaging systems Shared databases Electronically-supported supply chain management Types of Interorganizational Systems
  14. 14. 14© Prentice Hall, 2000 Business-to-business Business-to-customer Intra business transactions Others Electronic Commerce Business to Business Business to Customer Intraorganizational Other Interorganizational System Business to Business Classification of Electronic Commerce Classification of EC by the Nature of the Transactions © Prentice Hall, 2000
  15. 15. 15© Prentice Hall, 2000 Marketing Computer sciences Consumer behavior and psychology Finance Economic Production/Logistic Management information systems Accounting and auditing Management Business law and ethics Electronic Commerce is Interdisciplinary
  16. 16. 16© Prentice Hall, 2000 The Benefits of Electronic Commerce Expands the marketplace to national and international markets Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information Allows reduced inventories and overhead by facilitating “pull” type supply chain management The pull type processing allows for customization of products and services which provides competitive advantage to its implementers Benefits to Organizations
  17. 17. 17© Prentice Hall, 2000 Benefits to Organizations (cont.) Reduces the time between the outlay of capital and the receipt of products and services Supports business processes reengineering (BPR) efforts Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)
  18. 18. 18© Prentice Hall, 2000 Benefits to Customers Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location Provides customers with more choices Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons Allows quick delivery of products and services in some cases, especially with digitized products
  19. 19. 19© Prentice Hall, 2000 Benefits to Customers (cont.) Customers can receive relevant and detailed information in seconds, rather than in days or weeks Makes it possible to participate in virtual auctions Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences Electronic commerce facilitates competition, which results in substantial discounts.
  20. 20. 20© Prentice Hall, 2000 Benefits to Society Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution Allows some merchandise to be sold at lower prices benefiting the poor ones Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them Facilitates delivery of public services at a reduced cost,increases effectiveness, and/or improves quality
  21. 21. 21© Prentice Hall, 2000 The Limitations of Electronic Commerce Lack of sufficient system’s security, reliability, standards, and communication protocols Insufficient telecommunication bandwidth The software development tools are still evolving and changing rapidly Difficulties in integrating the Internet and electronic commerce software with some existing applications and databases Technical Limitations of Electronic Commerce
  22. 22. 22© Prentice Hall, 2000 Technical Limitations of Electronic Commerce (cont.) The need for special Web servers and other infrastructures, in addition to the network servers (additional cost) Possible problems of interoperability, meaning that some EC software does not fit with some hardware, or is incompatible with some operating systems or other components
  23. 23. 23© Prentice Hall, 2000 Non-Technical Limitations Cost and justification (35% of the respondents) The cost of developing an EC in house can be very high, and mistakes due to lack of experience, may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system one needs to deal with some intangible benefits which are difficult to quantify.
  24. 24. 24© Prentice Hall, 2000 Security and Privacy (17% of the respondents) These issues are especially important in the B2C area, and security concerns are not truly so serious from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive these issues as very important and therefore the EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, fairly secure. Lack of trust and user resistance (4%) Customers do not trust an unknown faceless seller, paperless transactions, and electronic money. So switching from a physical to a virtual store may be difficult. Non-Technical Limitations (cont.)
  25. 25. 25© Prentice Hall, 2000 Other limiting factors are: Lack of touch and feel online Many unresolved legal issues Rapidly evolving and changing EC Lack of support services Insufficiently large enough number of sellers and buyers Breakdown of human relationships Expensive and/or inconvenient accessibility to the Internet Non-Technical Limitations (cont.)
  26. 26. 26© Prentice Hall, 2000 The Driving Forces of Electronic Commerce Business pressures Organizational responses The role of Information Technology (including electronic commerce) The New World of Business
  27. 27. 27© Prentice Hall, 2000 Major Business Pressures Market and economic pressures Strong competition Global economy Regional trade agreements (e.g. NAFTA) Extremely low labor cost in some countries Frequent and significant changes in markets Increased power of consumers Societal and environmental pressures Changing nature of workforce Government deregulation of banking and other services Shrinking government budgets subsides Increased importance of ethical and legal issues Increased social responsibility of organizations Rapid political changes Technological pressures Rapid technological obsolescence Increase innovations and new technologies Information overload Rapid decline in technology cost Vs. performance ratio
  28. 28. 28© Prentice Hall, 2000 Organizational Responses Framework for Organizational and Societal Impacts of Information Technology Management and Business Process Organization Structure and the Corporate Culture Individual and Roles Information Technology The Organization’s Strategy External Environment, Social, Economic, Political, etc
  29. 29. 29© Prentice Hall, 2000 Reducing cycle time and time to market Empowerment of employees and collaborative work Knowledge management Customer-focused approach Business alliances — virtual corporation Business Process Reengineering
  30. 30. 30© Prentice Hall, 2000 Everything Will Be Changed Product promotion New sales channels Direct savings Time-to-market (reduced cycle time) Customer service Brand or corporate image Improving Direct Marketing
  31. 31. 31© Prentice Hall, 2000 Transforming Organizations Work will change Technology learning Organizational learning Redefining Organization New product capabilities New business models Other Changes in the Workplace
  32. 32. 32© Prentice Hall, 2000 Impacts on Manufacturing Pull processing, mass customization, shorter cycle time, integration (ERP), electronic bidding and procurement Impacts on Finance and Accounting Electronic payment systems, electronic cash, automating back office, home banking, electronic stock trading Human Resource Management Electronic recruiting, training, distance learning Other Changes in the Workplace (cont.)
  33. 33. 33© Prentice Hall, 2000 Is it real? How to evaluate the magnitude of the business pressures? What should be my company’s strategy towards EC? What is the best way to learn about EC? Management Issues