Electronic Commerce System

By Varsha Kapoor

objectives

• Definition • E-Commerce• Electronic Markets• EDI• internet commerce • Generic trade cycle • Electronic market Trade cycles • EDI Trade Cycle• Internet commerce trade cycle

Definition• E-commerce (electronic commerce or EC) is the buying and

selling of goods and services on the Internet, especially the World Wide Web

• Electronic Commerce is a general concept covering any form of business transactions or information exchange executed 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 administration.

• “Electronic commerce includes electronic trading of goods, services and electronic material.”

• Formulating commercial transaction at a site remote from the trading partner and then using electronic communication to execute that transaction.

4

Definition of e-Commerce

• ‘the seamless application of information and communication technology from its point of origin to its end point along the entire value chain of business processes of business conducted electronically and designed and designed to enable the accomplishment of a business goal. These process may be partial or complete and may encompass B2B as well as B2C and C2B transactions

By Wigand (1997)

5

Definition of e-Commerce

• Value Chain includes that EC can be applied in transactions between manufacturer and supplier, manufacturer and retailer and / or retailer / service supplier and consumer

6

E-commerce definition

B2B B2B C2B C2B

B2C B2C P2P P2P

Business Consumers

Business originating from . . .

Busi

ness

Co

nsum

ers

An

d se

lling

to .

. .

7

E-commerce categories

Publishers order paper supplies from paper companies

Amazon orders from publishers

Publishers order paper supplies from paper companies

Amazon orders from publishers

Consumers aggregate to bulk purchase from Amazon

Consumers aggregate to bulk purchase from Amazon

Consumers buy thousands of Harry Potter books from

Amazon

Consumers buy thousands of Harry Potter books from

Amazon

Business Consumers

Business originating from . . .

Busi

ness

Co

nsum

ers

An

d se

lling

to .

. .

Consumers resell copies on eBay

Single chain (or converging categories) of e-commerce

E-commerce definitionE-COMMERCE vs TRADITIONAL COMMERCE Key elements E-commerce Traditional commerce Value Creation Information Product/Service Strategy Sense and respond

Simple rules Classical

Competitive edge Speed Quality/Cost Competitive force Low barriers of entry

Power of customers Power of suppliers Product substitution

Resource focus Demand side Supply side Customer interface Screen-to-face Face-to-face Communication Technology-mediated channels Personal Accessibility 24 x 7 Limited time Customer interaction

Self-service Seller influenced

Consumer behavior Personalization One-to-one marketing

Standardization Mass/one-way marketing

Promotion Word of mouth Merchandising Product Commodity Perishables, feel & touch

Scope Of E-commerce

The scope of Electronic CommerceElectronic market:

An electronic market is the use of ICT to present a range of products available

in a markets segment, so that the purchaser can compare prices of the products

and make a purchase decision. Such as Airline booking system, Dell, Rail

Reservation System

Electronic Data Interchange:• EDI provides a standardized system for coding trade transaction so that it• Can communicate directly from one computer system to another without the • Need for printed order and invoices. • Used by organizations that make large number of regular transactions.• such as supermarket. Transactions with the suppliers.

Internet Commerce:

ICT can also be used to advertise and make once off sales of a wide range of

goods and services. This type of Commerce is typified by the commercial use

of the internet. Such as books purchasing over internet.

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

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 trade cycle)– Irregular transactions between commercial trading partners where

execution and settlement are separated (Credit)– Irregular transactions in once-off trading relationships where

execution and settlement are combined(commercial or retail) (Cash)

Generic trade cycles Repeat Credit Cash Trade Cycle:

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

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, rail reservation system

• Searching phase of Trade Cycle

• Increases the Efficiency of the market, it reduces search cost for buyer and buyer shall continue until “best buy” is searched for.

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

• Vendors gain competitive advantage by product differentiation and techniques to lock in customers

• Organizations that are using electronic markets as a way of coordinating information and the supply chain.

• New information technologies that enable the creation of new electronic marketplaces, use of electronic brokers.

• Existing industry boundaries disappear and create new cross-industry markets. Companies operating across multiple value chains.

• More efficient information distribution may lead to decreasing profit possibilities for sellers.

Electronic Markets• Services Required By Airline Reservation System

(Irregular Trade Cycle):– Locate available seat (per sale)– For journey customer wants to make (pre sale)– At a time and price convenient to customer

(execution)– Deal is executed and payment is made (settlement)

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.

• A public Access Network can be seen as an electronic market and can be used with an index or a search engine to find vendors of requires product or services

• We’ll discuss this in further classes.

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

EM

Electronic markets

• Electronic markets relies on the information provided by the vendors but an electronic market is likely to be more disadvantageous to most of the vendors in market place.

• Sellers experience most disadvantages in the e-market, as they make competitive advantage more important and have the effect of forcing price drops in accord to supply and demand

Electronic Data Interchange (EDI)

• process of using computers to exchange business documents between companies

• 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, ordering components for their production lines, ordering the goods needed to restock their shelves and the vehicle assemblers which use EDI for transactions with their suppliers.

19

Electronic Data Interchange• EDI Allows:• Stock control / Material management system of

the customers interface with the stock control / Production systems of the suppliers without the use of paper documents or the need of human intervention

• Used for Regular repeat transactions• It involves a lot many activities to send and retrieve

EDI messages • EDI is a formal system and it does not really have a

place in the search and negotiation phase • Used for Just in time manufacture and quick

response supply• Mass customisation is also proposed through EDI

20

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.

Search

Negotiate

Order

Deliver

Invoice

Payment

After Sales

Pre-Sale

Execution

Settlement

After Sale

EDI

Electronic Data Interchange (EDI)Benefits of EDI

• Speed – Data can move directly out of one computer system and into another with little to no delay.

• Accuracy – Errors are reduced because data is not being re-keyed. Error rates from entering data are between .5 – 3%. On large volumes of transactions, the possibility for the introduction of errors is enormous.

• Simplicity – EDI standards specify how data will be formatted and where it can be found.

• Security – Much less likely to lose information transmitted through EDI than information sent via mail. EDI can be accessed only by authorized users, and then there are audit trails and archives of data. EDI data cannot be easily changed by unauthorized users. It is also not subject to viruses.

Electronic Data Interchange (EDI)

Consequences of the benefits of EDI :

• Faster buy-sell cycle time • Faster cash flow • Reduced order lead time • Reduced inventories • Ability to conduct just-in-time manufacturing • Improved trading partner relationships

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.

24

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

25

Internet commerce

• Consumers purchasing over the Internet, Television sales channel

• GTM teleshopping healthcare and research products

• Internet commerce is used by organizations to make once-off or infrequent purchase of items such as computer and office supplies

• Internet commerce gives customers the credit facilities but Is typified by “cash” trade cycle

26

Internet commerce

• Internet Trade is not suited to all goods or to all people. Marketing strategy should take care of the 4 P’s Product, Price, Promotion and Place

27

E-commerce strategies

ImplementationImplementation

Internal (Company)

Analysis

Internal (Company)

Analysis

External Analysis

External Analysis

Control and

Monitoring

Control and

Monitoring

Strategy Formulation

Strategy Formulation

Corporate Business Unit Functional Operating

ObjectivesObjectives

MissionMission

Classical Strategic Planning

Type Purpose Example

How-to rules They spell out key features of how a process is executed - "What makes our process unique?"

Akamai's rules for the customer service process: staff must consist of technical gurus, every question must be answered on the first call or e-mail, and R&D staff must rotate through customer service.

Boundary rules They focus managers on which opportunities can be pursued and which are outside the pale.

Cisco's early acquisitions rule: companies to be acquired must have no more than 75 employees, 75% of whom are engineers.

Priority rules They help managers rank theaccepted opportunities.

Intel's rule for allocating manufacturing capacity: allocation is based on a product's gross margin.

Timing rules They synchronize managers with the pace of emerging opportunities and other parts of the company.

Nortel's rules for product development: project teams must know when a product has to be delivered to the leading customer to win, and product development time must be less than 18 months.

Exit rules They help managers decide when to pull out of yesterday’s opportunities.

Oticon's rule for pulling the plug on projects in development: if a key team member-manager chooses to leave the project for another within the company, the project is killed.

Simple rules

E-commerce strategies Position Resources Simple Rules

Strategic Logic Establish position Leverage resources Pursue opportunities

Strategic Steps

Identify an attractive market

Locate a defensible position

Fortify and defend

Establish a vision Build resources Leverage across markets

Jump into the confusion Keep moving Seize opportunities Finish strong

Strategic Question Where should we be? What should we be? How should we proceed?

Source of Advantage Unique, valuable position

with tightly integrated activity system

Unique, valuable, inimitable resources

Key processes and unique simple rules

Works Best In Slowly changing, well-

structured markets Moderately changing, well-

structured markets Rapidly changing,

ambiguous markets

Duration of Advantage Sustained Sustained Unpredictable

Risk It will be too difficult to

alter position as conditions change

Company will be too slow to build new resources as conditions change

Managers will be too tentative in executing on promising opportunities

Performance Goal Profitability Long-term dominance Growth

E-commerce strategies

Framing the

Market Opportun

ity

Framing the

Market Opportun

ity

Business Model

Business Model

Customer Interface

Customer Interface

MarketCommunication

and Branding

MarketCommunication

and Branding Implementation

Implementation Metrics Metrics

E-commerce strategy formulation process

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

Advantages of E Commerce1. Distances do not matter in carrying out trade. Information is available anytime a

customer wants.2. 24*7 availability 365 days a year3. Cost of setting up an e-Commerce is very less and it can be integrated directly

into the existing infrastructure with little overheads.4. More flexibility in web site to add or delete or update a product and its

information in catalogue on a web site than the manual catalogue Updation5. Gives exposure to previously untapped market segments6. Error reduction as orders do not have to be re-keyed into order entry system and

increased efficiencies through the automation of business processes7. Wider choice with no time wastage8. Buying / selling from any place provided with internet connection9. Can avail of services like financial, legal medical advice from appropriate

portals10. Knowledge base11. Availability of anonymous friendly advice on item one may like to buy or sell

Disadvantages of E Commerce

1. Unable to touch and feel the merchandise. This is ,ore of psychological barrier and with experience in trading online it can be reduced

2. Online stores do not exist for a long time because of lack of setting up of the online store

3. Hackers intercept the money transactions and cause problem both for consumer and companies

4. Selected consumer (young highly educated man) . Women and elderly people are unable to reach it.

5. Internet Access is not widely available in India6. Payment by credit cards requires faith in system security7. Denial of services.

E-commerce challengesUnderstanding customer evolution

– Invest ahead of customer needsCharting changing technology

– Match technology choices to consumer tastesWeathering the storm

– Reassure stakeholders with clear vision, sensible business model, and profitable venture

Integrating offline & online activities– Align offline & online business activities, esp. advertising,

branding, retail & online store design, service, warranties, returns (customer-facing activities)

Identifying key levers of competitive advantage– Reallocate resources as competitive advantage levers evolve

Expanding globally– Deal with complex internationalization issues

Top 50 Global web sites in India

As per Best Indian web sites . Com top 20 indian web sites.xlsx

2010 Web Globalization Report Card. Top 25 web sites

• Google• Facebook• Cisco Systems• Philips• Samsung• Wikipedia• 3M• NIVEA• Symantec• Lenovo• Xbox• Autodesk• Gmail

• Microsoft• Nokia• Intel• Caterpillar• Panasonic• HP• Deloitte Touche Tohmatsu• LG• Volvo Group• Hotels.com• SAP• Kodak

37

E-co m m erce In In d ia (H in d ran ces)

• No of Computers per person is too small • Limited Access to internet in spite of the computer availability• Credit card is very uncommon in India. Not very comfortable with.• Buying from online catalogue does not have a direct impact to

generate desire and trigger the consequent purchase.• Bargaining Is not possible• Though the cost of setting up a cyber business is relatively less as

compared to ordinary business a large amount of money needs to be spend on advertising and marketing thereby inflating the pre-requisite cost.

• Only 12% of Indian surfers are involved in Net Shopping