E-Commerce 01


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E-Commerce 01

  1. 1. Chapter 1 Foundation of Electronic Commerce
  2. 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. 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. 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. 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
  6. 6. Electronic Commerce Terms   E-business EC defined from these perspectives • Communications • Business process • Service • Online • Collaborations • Community
  7. 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. 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. 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
  10. 10. Electronic Commerce Terms (cont.)  Internet vs. Non-Internet EC • VANs • LANs • Click and Mortar
  11. 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
  12. 12. Exhibit 1.1: The Dimensions of Electronic Commerce
  13. 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. 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. 15. EC Framework  EC applications are supported by infrastructure and by five support areas: • People • Public policy • Marketing and advertising • Support services • Business partnerships
  16. 16. Exhibit 1.2: A Framework for Electronic Commerce
  17. 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. 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. 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. 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. 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. 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. 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. 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
  25. 25. Figure 1-1 Transactions in Electronic Markets
  26. 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. 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. 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. 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. 30. The Interdisciplinary Nature of EC  Major EC disciplines • Computer science • Marketing • Consumer behavior • Finance • Economics • Management information systems
  31. 31. Electronic Commerce is Interdisciplinary      Marketing Computer sciences Consumer behavior and psychology Finance Economics      Management information systems Accounting and auditing Management Business law and ethics Others
  32. 32. The Driving Forces of Electronic Commerce  The New World of Business • Business pressures • Organizational responses • The role of Information Technology (including electronic commerce)
  33. 33. Exhibit 1.3: Major Business Pressures and the Role of EC
  34. 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. 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. 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
  37. 37. Organizational Responses      Strategic systems Continuous improvement efforts Business process reengineering (BPR) Business Alliances Electronic commerce
  38. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 55. Impact on EC: Everything will be Changed The Analysis-of-Impacts Framework
  56. 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. 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. 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. 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. 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
  61. 61. Figure 1-2 Putting It All Together Prentice Hall, 2002 61
  62. 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. 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. 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. 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