2. Learning Objectives
Define electronic commerce (EC)
and describe its various categories
Distinguish between electronic
markets and interorganizational
systems
Describe and discuss the content
and framework of EC
3. Learning Objectives (cont.)
Understand the forces that drive
the widespread use of EC
Describe the benefits of EC to
organizations, consumers, and
society
Describe the limitations of EC
Discuss some major managerial
issues regarding EC
4. Electronic Commerce:
Definitions and Concepts
The Internet has emerged as a major, perhaps
eventually the major, worldwide distribution
channel for goods, services, managerial and
professional jobs
This is profoundly changing economics, markets
and industry structure, products and services
and their flow, consumer segmentation,
consumer values, consumer behavior, jobs, and
labor markets
The impact may be even greater on societies
and politics, and on the way we see the world
and ourselves in it
5. Electronic Commerce:
Definitions and Concepts (cont.)
e-business: a broader definition
of EC, which includes:
• buying and selling of goods and
services
• servicing customers
• collaborating with business partners
• conducting electronic transactions
within an organization
7. Electronic Commerce:
Definitions and Concepts (cont.)
E-commerce defined from the
following perspectives:
• Communications: delivery of goods,
services, information, or payments over
computer networks or any other electronic
means
• Commercial (trading): provides
capability of buying and selling products,
services, and information on the Internet
and via other online services
8. Electronic Commerce:
Definitions and Concepts (cont.)
Business process: doing business
electronically by completing business
processes over electronic networks, thereby
substituting information for physical business
processes
Service: a tool that addresses the desire of
governments, firms, consumers, and
management to cut service costs while
improving the quality of customer service and
increasing the speed of service delivery
9. Electronic Commerce:
Definitions and Concepts (cont.)
Learning: an enabler of online training and
education in schools, universities, and other
organizations, including businesses
Collaborative: the framework for inter- and
intraorganizational collaboration
Community: provides a gathering place for
community members to learn, transact, and
collaborate
11. Electronic Commerce Terms
(cont.)
Pure vs. Partial EC: based on the degree
of digitization of
• Product
• Process
• Delivery agent
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
13. The EC Framework,
Classification, and Content
Two major types of e-commerce:
• business-to-consumer (B2C) : online
transactions are made between
businesses and individual consumers
• business-to-business (B2B):
businesses make online transactions
with other businesses
intrabusiness EC: EC conducted inside an
organization (e.g., business-to-employees
B2E)
14. The EC Framework,
Classification, and Content (cont.)
Computer environments
• Internet: global networked
environment
• Intranet: a corporate or government
network that uses Internet tools, such
as Web browsers, and Internet protocols
• Extranet: a network that uses the
Internet to link multiple intranets
15. EC Framework
EC applications are supported by
infrastructure and by five support
areas:
• People
• Public policy
• Marketing and advertising
• Support services
• Business partnerships
17. Interorganization Information Systems
• Interorganizational information system
(IOS) involves information flow among
two or more organizations
• Major objective is efficient routine
transaction processing, such as
transmitting orders, bills, and payments
using EDI or extranets
• Scope: Unified system encompassing
two or several business partners
• Typical IOS includes a company, its
suppliers, and and/or customers
18. Classification of EC by
Transactions or Interactions
business-to-consumer (B2C) : online
transactions are made between
businesses and individual consumers
business-to-business (B2B):
businesses make online transactions
with other businesses
e-tailing: online retailing, usually
B2C
19. Classification of EC by
Transactions or Interactions (cont.)
business-to-business-to-consumer
(B2B2C): e-commerce model in which a
business provides some product or service
to a client business that maintains its own
customers
consumer-to-business (C2B):
e-commerce model in which individuals
use the Internet to sell products or
services to organizations or individuals
seek sellers to bid on products or services
they need
20. Classification of EC by
Transactions or Interactions (cont.)
consumer-to-consumer (C2C):
e-commerce model in which consumers
sell directly to other consumers
peer-to-peer (P2P): technology that
enables networked peer computers to
share data and processing with each other
directly; can be used in C2C, B2B, and
B2C e-commerce
21. Classification of EC by
Transactions or Interactions (cont.)
mobile commerce ((m-commerce):
e-commerce transactions and
activities conducted in a wireless
environment
location-based commerce (lcommerce): m-commerce
transactions targeted to individuals
in specific locations, at specific
times
22. Classification of EC by
Transactions or Interactions (cont.)
intrabusiness EC: e-commerce category
that includes all internal organizational
activities that involve the exchange of
goods, services, or information among
various units and individuals in an
organization
business-to-employees (B2E): ecommerce model in which an organization
delivers services, information, or products
to its individual employees
23. Classification of EC by
Transactions or Interactions (cont.)
collaborative commerce (c-commerce):
e-commerce model in which individuals or
groups communicate or collaborate online
e-learning: the online delivery of
information for purposes of training or
education
exchange (electronic): a public electronic
market with many buyers and sellers
24. Classification of EC by
Transactions or Interactions (cont.)
exchange-to-exchange (E2E): ecommerce model in which electronic
exchanges formally connect to one
another the purpose of exchanging
information
e-government: e-commerce model in
which a government entity buys or
provides goods, services, or information to
businesses or individual citizens
26. A Brief History of EC
1970s: innovations like electronic funds
transfer (EFT)—funds routed electronically
from one organization to another (limited to
large corporations)
electronic data interchange (EDI)—
electronically transfer routine documents
(application enlarged pool of participating
companies to include manufacturers,
retailers, services)
interorganizational system (IOS)—travel
reservation systems and stock trading
27. A Brief History of EC (cont.)
1969 U.S. government experiment—the
Internet came into being initially used by
technical audience of government
agencies, academic researchers, and
scientists
1990s the Internet commercialized and
users flocked to participate in the form of
dot-coms, or Internet start-ups
Innovative applications ranging from
online direct sales to e-learning
experiences
28. A Brief History of EC (cont.)
Most medium- and large-sized organizations
have a Web site
Most large U.S. corporations have
comprehensive portals
1999 the emphasis of EC shifted from B2C to
B2B
2001 the emphasis shifted from B2B to B2E,
c-commerce, e-government, e-learning, and
m-commerce
EC will undoubtedly continue to shift and
change
29. A Brief History of EC (cont.)
EC successes
• Virtual EC
companies
eBay
VeriSign
AOL
Checkpoint
• Click-and-mortar
Cisco
General Electric
IBM
Intel
Schwab
EC failures
• 1999, a large number of
EC-dedicated companies
began to fail
• EC’s days are not
numbered!
dot-com failure rate is
declining sharply
EC field is
experiencing
consolidation
most pure EC
companies, are
expanding operations
and generating
increasing sales
(Amazon.com)
30. The Interdisciplinary
Nature of EC
Major EC disciplines
• Computer science
• Marketing
• Consumer behavior
• Finance
• Economics
• Management information systems
32. The Driving Forces of
Electronic Commerce
The New World of Business
• Business pressures
• Organizational responses
• The role of Information Technology
(including electronic commerce)
34. 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
35. Major Business Pressures (cont.)
Societal and
environmental
pressures
Changing nature of
workforce
Government
deregulation of banking
and other services
Shrinking government
subsidies
Increased importance
of ethical and legal
issues
Increased social
responsibility of
organizations
Rapid political changes
36. Major Business Pressures (cont.)
Technological
pressures
Rapid
technological
obsolescence
Increase
innovations and
new technologies
Information
overload
Rapid decline in
technology cost
vs. performance
ratio
38. Organizational Responses
External Environment,
Social, Economic,
Political, etc
The Organization’s
Strategy
Organization
Structure and the
Corporate Culture
Management
and
Business Process
Information
Technology
Individual
and Roles
Framework for Organizational and Societal Impacts of Information Technology
39. IT Support and EC
Reducing cycle time and time to market
Empowerment of employees and
collaborative work
Supply chain improvements
Mass customization
Change management
40. The Benefits of EC
Benefits to Organizations
• Expands the marketplace to national
and international markets
• Decreases the cost of creating,
processing, distributing, storing and
retrieving paper-based information
41. Benefits of EC (cont.)
Benefits to Organizations (cont.)
• 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
42. Benefits of EC (cont.)
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)
43. Benefits of EC (cont.)
Benefits to consumers
• Enables consumers to shop or do
other transactions 24 hours a day, all
year round from almost any location
• Provides consumers with more
choices
• Provides consumers with less
expensive products and services by
allowing them to shop in many places
and conduct quick comparisons
44. Benefits of EC (cont.)
Benefits to consumers (cont.)
• Allows quick delivery of products and
services (in some cases) especially with
digitized products
• Consumers can receive relevant and
detailed information in seconds, rather
than in days or weeks
• Makes it possible to participate in virtual
auctions
45. Benefits of EC (cont.)
Benefits to consumers (cont.)
• Allows consumers to interact with other
consumers n electronic communities
and exchange ideas as well as compare
experiences
• Facilitates competition, which results in
substantial discounts
46. Benefits of EC (cont.)
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 less affluent
people
47. Benefits of EC (cont.)
Benefits to society (cont.)
• 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
48. The Limitations of EC
Technical 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
49. The Limitations of EC (cont.)
Technical Limitations of EC
(cont.)
• Difficulties in integrating the Internet
and electronic commerce software with
some existing applications and
databases
• The need for special Web servers and
other infrastructures, in addition to the
network servers (additional cost)
50. The Limitations of EC (cont.)
Technical Limitations of EC
(cont.)
• 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
51. Non-Technical Limitations
Cost and justification
• 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
• In order to justify the system, one needs
to deal with some intangible benefits which
are difficult to quantify.
52. Non-Technical Limitations (cont.)
Security and Privacy
• These issues are especially important in
the B2C area, but security concerns are
not so serious from a technical
standpoint
• Privacy measures are constantly
improving too
• The EC industry has a very long and
difficult task of convincing customers
that online transactions and privacy are,
in fact, very secure
53. Non-Technical Limitations (cont.)
Lack of trust and user resistance
• Customers do not trust:
Unknown faceless sellers
Paperless transactions
Electronic money
• Switching from a physical to a virtual
store may be difficult
54. Non-Technical Limitations (cont.)
• 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
55. Impact on EC: Everything will be Changed
The Analysis-of-Impacts Framework
56. Impacts on Trading Processes
and Intermediaries (cont.)
Winners in EC
• Internet access
providers
• Diversified portal
service providers
• EC software
companies
• Proprietary
network owners
• Others
Losers in EC
• Wholesalers
(particularly
small ones)
• Brokers
• Salespeople
• Nondifferentiated
manufacturers
57. Impact on Business Processes
and Organizations
Improving direct marketing
• Product promotion
• New sales channels
• Direct savings
• Reduced cycle time
• Customer service
• Brand or corporate image
58. Impact on Business Processes
and Organizations (cont.)
Other marketing-related impacts
• Customization
• Advertising
• Ordering systems
• Markets
Transforming organizations
• Technology and organization learning
• Changing nature of work
59. Impact on Business Processes
and Organizations (cont.)
Redefining organizations
• New product capabilities
• New business models
Impacts on manufacturing
• Build-to-order
Impact on finance and accounting
Human resource management,
training, and education
60. Putting It All Together
Major concern of today’s companies—
how to transform themselves to take
part in digital economy
Example:Toys, Inc.
• Uses intranet for internal communications,
collaboration, dissemination of information
• Networked to e-marketspaces and large
corporations
• Corporate portal for communication and
collaboration with business partners
62. Managerial Issues
Is it real?
How to evaluate the magnitude of the
business pressures.
What should be my company’s strategy
towards EC?
Why is the B2B area so attractive?
What is the best way to learn about EC?
What ethical issues exist?
How can failures be avoided?
63. Electronic Commerce:
Definitions and Concepts (cont.)
Pure vs. Partial EC
depends upon the
degree of digitization
(the transformation
from physical to
digital) of:
1. the product (service)
sold;
2. the process; and for
3. the delivery agent (or
digital intermediary)
Brick-and-Mortar
organizations are
old-economy
organizations
(corporations) that
perform most of their
business off-line,
selling physical
products by means of
physical agents
64. Electronic Commerce:
Definitions and Concepts (cont.)
Virtual (pure-play)
organizations
conduct their business
activities solely online
Click-and-mortar
organizations
conduct some EC
activities, but do their
primary business in
the physical world
Electronic market
(e-marketplace)
online marketplace
where buyers and
sellers meet to
exchange goods,
services, money, or
information
65. Electronic Commerce:
Definitions and Concepts (cont.)
Interorganizational
information
systems (IOSs)
allow routine
transaction
processing and
information flow
between two or more
organizations
Intraorganizatio
nal information
systems enable
EC activities to go
on within individual
organizations
