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Chapter 1: Electric commerce

An introduction to e-Commerce outlining: The three basic e-Commerce technologies The trading exchanges to which they apply

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Definition of e-Commerce ‘Formulating commercial transactions at a site

remote from the trading partner and then using electronic communications to execute that transaction.’

The definition includes business to business and business to consumer transactions.

Further definitions are given in Chapter 1, Section 1.2. Many definitions are much broader covering, for example, the commercial use of e-mail.

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E-Commerce technologies

The three e-Commerce technologies are: Electronic Markets Electronic Data Interchange Internet Commerce

Electronic Markets

Internet Commerce

EDI

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Electronic markets The use of information and communications

technology to present a range of offerings available in a market segment and hence enable: the purchaser to compare the prices (and other

attributes); make a purchase decision.

The usual example of an electronic market is an airline booking system.

There is the potential for new electronic markets to be created using Internet technologies.

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Electronic Data Interchange (EDI)

EDI provides a standardised system for coding trade transactions so that they can be communicated directly from one computer system to another.

EDI removes the need for printed orders and invoices and avoids the delays and errors implicit in paper handling.

EDI is used by organisations that make a large number of regular transactions. Examples are the large supermarket chains and the vehicle assemblers which use EDI for transactions with their suppliers.

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Internet commerce Information and communications technologies can

also be used to advertise and make once-off sales of a wide range of goods and services.

This type of e-Commerce is typified by the commercial use of the Internet. The Internet can, for example, be used for the purchase of books that are then delivered by post or the booking of tickets that can be picked up by the clients when they arrive at the event.

It is to be noted that the Internet is not the only technology used for this type of service and this is not the only use of the Internet in e-Commerce.

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The trade cycle Conducting a commercial transaction involves the

following steps: Pre-Sale:

• Search - finding a supplier• Negotiate – agreeing the terms of trade

Execution:• Order• Delivery

Settlement:• Invoice• Payment

After-sales, e.g. warrantee and service

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Generic trade cycles The trade cycle varies depending on:

The nature of the parties to the transaction The frequency of trade exchanges The nature of the goods or services being

exchanged.

Three generic trade cycles can be identified: Regular, repeat transactions between

commercial trading partners (Repeat) Irregular transactions between commercial

trading partners (Credit) Irregular transactions in once-off trading

relationships (commercial or retail) (Cash)

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Generic trade cycles Repeat Credit Cash Trade Cycle:

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

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Electronic markets Emphasis on the search phase of the trade cycle Typically an inter-organisational credit trade cycle

Limited applications – airline seat bookings and financial sector – the operation of the electronic market is not necessarily in the vendor’s interests.

See Chapter 7 for further discussion.

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

EM

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Electronic Data Interchange Used for standardised, repeat, inter-organisational

transactions

Notable users of EDI are vehicle assemblers, component supplier’s, and supermarkets (and other multiple retailers), ordering the goods to restock their shelves.

See Chapters 8 through 11 for further discussion

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

EDI

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Internet commerce Used for once-off transactions – consumer or inter-

organisational transactions.

Can apply to Search, Execution / Settlement and / or After Sales.

Consumers pay at time of ordering – businesses may have credit arrangements with the suppliers.

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

Internet

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e-Commerce in perspective e-Commerce is not appropriate to all business

transactions and, within e‑Commerce, there is no one technology that can or should be appropriate to all requirements.

Electronic

Internet Comerce

EDI

Markets

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Chapter 1 – Exercise 1A European Union web site defines e-Commerce as:

‘Electronic Commerce is a general concept covering any form of business transactions or information exchange executed using information and communication technology, between companies, between companies and their customers, or between companies and public administrations.Electronic Commerce includes electronic trading of goods, services and electronic material.’

List technologies and applications that could be covered by this list and decide, in discussion, if they are usefully/appropriately classified as e‑Commerce.

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Chapter 1 – Exercise 2

Earnest Higginbottom started making Potted Beef in Heckmondwike in 1876 and the company has been run on traditional lines ever since.

Recently the business has started to change: Traditional local outlets are being replaced by

supermarkets; Native Yorkshire tykes living as far away as Liverpool and

Los Angeles are ringing in to ask how to get hold of a bit of real potted beef.

Suppliers, such as the maker of the jars, use computerised ordering systems

Suggest where and in what form Higgies’ Potted Beef could implement e-Commerce.

Earnest HigginbottomEarnest HigginbottomGenuine Yorkshire Potted Beef