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• Commerce is a negotiated exchange of valuableobjects or services between at least two partiesand includes all activities that each of the partiesundertakes the complete the transaction.
Traditional commerce
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• In order to understand how technology can aidcommerce we need to understand traditionalcommerce.
• Once we have identified what activities areinvolved in traditional commerce, we can consider how technology can improve them.
• Note that technology does not always improvecommerce. Knowing when technology willNOT help is also useful.
Technology and commerce
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Commerce can be viewed from at least twodifferent perspectives:
1. The buyer’s viewpoint2. The seller’s viewpoint
Both perspectives will illustrate that commerceinvolves a number of distinct activities, calledbusiness processes.
Views of commerce
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From the buyer’s perspective, commerce involvesthe following activities:1. Identify a specific need2. Search for products or services that will satisfy
the specific need3. Select a vendor4. Negotiate a purchase transaction including
delivery logistics, inspection, testing, andacceptance
5. Make payment6. Perform/obtain maintenance if necessary
The Buyer’s perspective
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From the sellers’ perspective, commerce involvesthe following activities:1. Conduct market research to identify customer
needs2. Create a product or service to meet those needs3. Advertise and promote the product or service4. Negotiate a sales transaction including delivery
logistics, inspection, testing, and acceptance5. Ship goods and invoice the customer6. Receive and process customer payments7. Provide after sales support and maintenance
The Seller’s perspective
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Business processes are the activities involved inconducting commerce.
Examples include:• Transferring funds• Placing orders• Sending invoices• Shipping goods to customers
Business processes
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We will define e-commerce as the use of electronicdata transmission to implement or enhance any business activity.
When used appropriately, electronic transmissioncan save both time and money.
E-commerce
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In its broadest definition, eCommerce is digitally enabled commercial transactions between and among organizationsand individuals. Digitally enabled means, for the most part, transactions
that occur over the Internet and World Wide Web(“Web”) Commercial transactions involve the exchange of value
(e.g. money) across organizational or individual boundaries in return for products and services.
.
What is eCommerce?
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E-commerce is changing the way traditionalcommerce is conducted:• Technology can help throughout the process
including promotion, searching, selecting,negotiating, delivery, and support.
• The value chain is being reconfigured.
Impact of e-commerce
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A way of looking at the activities of an industryor organization.• Primary activities
Costs are directly allocated to a product• Support activities
Costs are associated with the overall operationof the organization
Value chain analysis
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Example: Figure 1-12
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E-commerce Categories3
There are five general e-commerce categories: Business to Consumer (or B2C) e-commerce Business to Business (or B2B) e-commerce
(sometimes called e-procurement) Business processes that support buying and
selling activities Consumer-to-consumer (or C2C) e-commerce Business-to-government (or B2G) e-commerce
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B2C e-commerce
Description Businesses sell products or services to
individual customers (consumers) Example
Walmart.com sells merchandise to consumers through its Web site
Web site www.walmart.com
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B2B E-commerce
Description Businesses sell products or services to
other businesses Example
Grainger.com sells industrial supplies to large and small businesses through its Web site
Web site www.grainger.com
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Business Processes that Support Buy/Sell Activities
Description Businesses and other organisations maintain and
use information to identify and evaluate customers, suppliers and employees (and to support buying, selling hiring, planning and other activities). More and more this information is being shared
Example Dell Computer uses secure internet connections to
share current sales and forecasts with suppliers who use it to plan their production, therefore they deliver the right quantities of components at the right time
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C2C e-commerce
Description Participants in an online marketplace can buy
and sell goods with each other Example
Consumers and businesses trade with each other on eBay.com
Web site www.ebay.com
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B2G e-commerce
Description Business sell goods or services to
governments and government agencies Example
Cal-Buy portal for businesses that want to sell online to the State of California
Web site www.pd.dgs.ca.gov/calbuy/default.htm
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E-commerce Categories Example
You are a computer manufacturing company who performs the following activities on the Internet: Sells computers to individuals (B2C) Purchases parts (e.g. hard drives, power supplies
etc.) from a supplier (B2B) Hires staff, manage customer accounts, advertise,
etc. (Business processes) Sells computers to the Government to be used in
schools (B2G) On eBay.com individuals buy and sell this brand of
computers (C2C)
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Components of eCommerce
Major components of eCommerce:
1. B2B – Business to Business. Largest segment with about $700B of all total $12 Trillion in 2001(est)
Types include inter-business exchanges, e-distributors, B2B service providers, matchmakers and infomediaries
2. B2C – Business to Consumer. Much smaller with on $65B in 2001(est).
Buzzwords: Internet pureplay-located only on the web. Clicks and Mortar-both web and physical location.
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Components of eCommerce
Major components of eCommerce (continued):
1. C2C – Consumer to Consumer. Individuals selling to each other through online market maker (eBay.com). Estimated at $5B in 2001.
2. P2P – Peer to Peer. Allows iNet users to share files and resources directly without having to go thru a central web server. Napster is the most prevalent example.
3. M-Commerce – Mobile commerce. Use of wireless digital devices (Palm Pilots, cell phones) to conduct transactions. Just emerging but expected to grow rapidly.
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Unique Features of eCommerce Technology
The features the set eCommerce Technology apart from others used in traditional commerce are:
1. Ubiquity – internet/web technology is available everywhere: at work, home and elsewhere via mobile devices.
Marketplace extended beyond traditional boundaries
Customer convenience increased, costs reduced.
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Unique Features of eCommerce Technology(continued)
2. Global Reach – the technology reaches across national boundaries, around the earth.
Commerce enabled across cultural and national boundaries seamlessly.
Potential customer reach extended.
Reduces barriers to markets.
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Unique Features of eCommerce Technology(continued)
3. Universal standards – there is one set of technology standards, namely internet standards.
Promotes technology adoption
Reduces costs of adoption
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Unique Features of eCommerce Technology(continued)
4. Richness – Video, Audio, graphical and text messages are possible.
Integration to a more powerful marketing message and customer experience
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Unique Features of eCommerce Technology(continued)
5. Interactivity – the technology allows active user involvement.
Consumers engage in dynamic dialog
Experience adjusted to the individual based on responses.
Customer becomes co-participant in the process of delivering goods to the market.
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Unique Features of eCommerce Technology(continued)
6. Information Density - the technology reduces information costs and increase quantity and quality.
Information processing, storage and communication costs drop dramatically.
Accuracy and timeliness improve greatly.
Information becomes plentiful, cheap and accurate.
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Unique Features of eCommerce Technology(continued)
7. Personalization/Customization – the technology reaches allows personalized messages to be delivered to individuals as well as groups.
Commerce enabled across cultural and national boundaries seamlessly.
Potential customer reach extended.
Reduces barriers to markets.
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Fundamental Business Goals
The fundamental goal of a business is to earn a profit. Performing business processes in the most efficient way possible furthers this goal.
Firms are increasingly interested in eCommerce because it can help increase profits.
All the advantages of eCommerce can be summarized in one statement:
eCommerce can Increase Sales and Decrease Costs.
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Examples of eCommerceEnabling Business Goals
Increase Revenues
A company is able, through publishing its catalogs online, to reach more customers for the same costs as printing and mailing its catalogs. (LL Bean)
Decrease Costs
The same company can provide more timely product information by updating its catalog online, than by mailing its catalog four times a year.
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Business processes that are well-suited for electroniccommerce:
• Sale/purchase of new books and CDs • Online delivery of software• Advertising and promotion of travel services• Online tracking of shipments
The business processes that are especially well-suited
to eCommerce include Commodity items.
A Commodity is a product or service that hasbecome so standardized and well-known that buyerscannot detect a difference in the offerings of varioussellers and decide to buy based on price.
Well-suited for eCommerce
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Business processes that are well-suited to traditionalcommerce:
Sale/purchase of high fashion clothing Sale/purchase of perishable food products Small-denomination transactions Sale of expensive jewelry and antiques
Exceptions?
In general, products that buyers prefer to touch, smell,or otherwise closely examine are difficult to sell usingeCommerce.
Best for Traditional Commerce
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Would eCommerce or traditional commerce workbest for the following activities?
• Sale/purchase of rare books• Browsing through new books• Sale/purchase of shoes• Sale/purchase of collectibles (trading cards,
plates, etc.)
Questionable cases
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Some business processes can be handled well usinga combination of electronic and traditional methods:
Sale/purchase of automobiles Online banking Roommate-matching services Sale/purchase of investment/insurance products
Consumers can research products online and make finaltransactions in person.
In any business problem it is good practice to weigh theadvantages and disadvantages of a particular approach.Evaluating the application of eCommerce technology is noDifferent.
Combinations of both
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For the seller: Increases sales/decreases cost. Makes promotion easier for smaller firms. Can be used to reach narrow market segments.
For the buyer: Makes it easier to obtain competitive bids Provides a wider range of choices Provides an easy way to customize the level of
detail in the information obtained Allows anonymity and less pressure to buy.
Advantages of eCommerce
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In general:
Increases the speed and accuracy with whichbusinesses can exchange information.
Electronic payments (tax refunds, paychecks, etc.) cost less to issue and are more secure.
Can make products and services available inremote areas.
Enables people to work from home, providingscheduling flexibility.
Advantages of eCommerce II
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Some business processes are not suited to eCommerce, even with improvements intechnology.
Many products and services require a criticalmass of potential buyers (e.g. online grocers).
Costs and returns on eCommerce can be difficult to quantify and estimate.
Cultural impediments: People are reluctant tochange in order to integrate new technology.
The legal environment is unclear and full of conflicting laws; regulation has not kept up.
Disadvantages of eCommerce
