Course Overview & IntroductionLectures 1,2,3
Overview of
Electronic Commerce & E-Business
Electronic Commerce (EC) is the process of buying, selling, or exchanging products, services, and information via computer networks
E-business is a broader definition of EC that includes not just the buying and selling of goods and services, but also Servicing customers (Value Added
Information) Collaborating with business partners Conducting electronic transactions within
an organization (Intra-Business Activities) Non-Profit Activities (Community Building)
E-Business & E-Commerce defined from these perspectives Communications Business process Service Online Collaborations Community
Quote for Lou Gerstner, IBM’s CEO:“E-Business is all about speed, globalization, enhanced productivity, reaching new customers, and sharing knowledge across institutions for competitive advantage.”
So what is E-Business? Simple definition: Any business
carried out in electronic form. “The complex fusion of business
processes, enterprise applications, and organizational structure to create a high-performance business model.” (Kalakota and Robinson)
Yahoo eBay Amazon Priceline Sears Virtual University of Pakistan ATM machines???
Traditional commerce: all dimensions are physical▪ Brick-and-mortar
organizations▪ Old-economy
organizations (corporations)
▪ Perform all business off-line
▪ Sell physical products by means of physical agents
Pure EC: all dimensions are digital▪ Pure online (virtual)
organizations▪ New-economy organization▪ Sell products or services only
online Partial EC: a mix of digital
and physical dimensions▪ Click-and-mortar organizations▪ Conduct EC activities▪ Do their primary business in
the physical world
Old-economy companies are extending their reach by offering on-line services (catalogs, commodities, and e-services), Office Depot (Office supplies; #2 web retailer,
after Amazon) (www.officedepot.com) & (www.amazon.com)
LL Bean (Catalog sales; Dogs are in at LL Bean) (www.llbean.com)
Barnes and Noble(Booksellers) (www.bn.com)
Boeing Parts Network (24/7 parts for airlines) (www.boeing.com/assocproducts/direct/bd_home.html)
Outreach to customers. Commodities sell well in e-space.
Internet vs. Non-Internet EC Internet EC
▪ Use of Websites to advertise, Buy & Sell▪ Much cheaper and highly accessible
Non-Internet EC▪ VANs—value-added networks▪ LANs—local area networks▪ Single computerized machines
▪ Using a smart card in a vending machine▪ Using a cell phone to make an online
purchase
An EC Framework EC applications supported by
infrastructure and 5 support areas▪ People▪ Public policy▪ Technical standards and protocols▪ Business partners (mutual collaboration)▪ Support services
Business-to-business (B2B) : EC model in which all of the participants are businesses or other organizations
Business-to-consumer (B2C): EC model in which businesses sell to individual shoppers
Business-to-business-to-consumer (B2B2C): EC model in which a business provides some product or service to a client business; the client business maintains its own customers, to whom the product or service is provided
Business-to-Consumer (B2C) Yahoo! (www.yahoo.com) - (aggregator) leading
portal and most visited e-space! E-Trade (www.etrade.com) On-line investing and
banking; moving to click-and-mortar outposts. McAfee (www.mcafee.com) Software
subscription services for virus scanning. Software purchase, delivery and update,
example is: Copernic (www.copernic.com) Digital Content Services; example is: Sony
Music (www.sony.com)
Consumer-to-business(C2B): individuals who use the Internet to sell products or services to organizations and /or seek sellers to bid on products or services they need
Consumer-to-consumer (C2C) : consumers sell directly to other consumers
Consumer-to-Consumer (C2C) Ebay (www.ebay.com) - (facilitator) electronic
auctions with consumers handling transaction and shipping.
Napster (www.napster.com) - (facilitator) peer-to-peer music exchange; courts not happy.
Groove Networks (www.groove.com) (facilitator) secure peer-to-peer collaboration services. Founded by Ray Ozzie, the creator of Lotus Notes.
Mobile commerce (m-commerce)—EC transactions and activities conducted in a wireless environment
Location-commerce—(l-commerce) m-commerce transactions targeted to individuals in specific locations, at specific times
Intrabusiness (organizational) EC: EC 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-employee (B2E): EC model in which an organization delivers services, information, or products to its individual employees
Collaborative commerce (c-commerce): EC model in which individual or groups communicate or collaborate online
E-government: Government-to-citizens (G2C): EC model in which a government entity buys or provides good, services, or information to businesses or individual citizens
Marketing Computer sciences Consumer behavior
and psychology Finance Economics
Management information systems
Accounting and auditing
Management Business law and
ethics Others
Some major shifts from 70s till now
EC applications first developed in the early 1970s
Electronic funds transfer (EFT)
Limited to: Large corporations Financial institutions A few other daring
businesses
Electronic data interchange (EDI)—electronic transfer of documents: Purchase orders Invoices E-payments between
firms doing business
Enlarged pool of participants to include: Manufacturers Retailers Service providers
Interorganizational systems (IOS) Stock trading Travel reservation systems
Internet became more commercialized in the early 1990s Almost all medium-and large-
sized organization in the world now has a Web site
Most large corporations have comprehensive portals
EC Successes Pure online▪ eBay▪ VeriSign▪ AOL▪ Checkpoint
Click-and-mortar▪ GE▪ IBM▪ Intel▪ Schwab
EC Failures E-tailors began to fail
in 1999 This does not mean
that EC’s days are numbered
Large EC companies like Amazon.com are expanding but success or failure is not certain
Benefits to Organizations Expands the marketplace to national
and international markets Decreases the cost of creating,
processing, distributing, storing and retrieving paper-based information
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
Supports business processes reengineering (BPR) efforts
Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)
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
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 Allows consumers to interact with other
consumers in electronic communities and exchange ideas as well as compare experiences
Facilitates competition, which results in substantial discounts
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
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
Technical limitations There is a lack of universally accepted
standards for quality, security, and reliability The telecommunications bandwidth is
insufficient Software development tools are still evolving There are difficulties in integrating the Internet
and EC software with some existing (especially legacy) applications and databases.
Special Web servers in addition to the network servers are needed (added cost).
Internet accessibility is still expensive and/or inconvenient
An Introduction
In the Digital Revolution the economy is based on digital technologies including: Digital communication networks Computers Software Other related information
technologies Also called:
Internet economy New economy Web economy
Digital networking and communication infrastructures provide a global platform where people and organizations: Interact Communicate Collaborate Search for information
The global platform includes these characteristics A vast array of digitizable products Consumers and firms conduct financial
transactions digitally Microprocessors and networking capabilities
embedded in physical goods
The term digital economy also refers to the convergence of computing and communication technologies on the Internet and other networks and the resulting flow of information and technology that is stimulating e-commerce and vast organizational changes
This convergence enables all types of information (data, audio, video, etc.) to be stored, processed, and transmitted over networks to many destinations worldwide
Web-based EC systems are accelerating the digital revolution by providing competitive advantage to organizations
Types of Pressures and EC as a solution
The term business environment refers to the social, economic, legal, technological, and political actions that affect business activities
Business pressures are divided into the following categories: Market (economic) Societal Technological
Strategic Planning and Systems Provide organizations with
strategic advantages, enabling them to:▪ Increase their market share▪ Better negotiate with their suppliers▪ Prevent competitors from entering into their
territory
Continuous improvement efforts Many companies continuously conduct
programs to improve:▪ Productivity▪ Quality▪ Customer service
Business process reengineering (BPR) Strong business pressures may require
a radical change Such an effort is referred to as business
process reengineering (BPR)
Business alliances Alliances with other companies, even
competitors, can be beneficial Virtual corporation—electronically supported
temporary joint venture▪ Special organization for a specific time-limited
mission Electronic markets
Optimize trading efficiency Enable their members to compete globally Require the collaboration of the different
companies and competitors
Reduction in cycle time and time to market Cycle time reduction—shortening the
time it takes for a business to complete a productive activity from its beginning to end
Extremely important for increasing productivity and competitiveness
Extranet-based applications expedite steps in the process of product or service development, testing, and implementation
Empowerment of employees and collaborative work Employees given the authority to act
and make decisions on their own improves ▪ Productivity ▪ Customer relationship management (CRM)
Empowered sales people and customer service employees:▪ Make customers happy quickly▪ Help increase customer loyalty
Supply chain improvementsHelp reduce supply chain delays, inventories and eliminate other inefficiencies
Mass customization—production of large quantities of customized items Business problem is how to efficiently
provide customization EC is an ideal facilitator of mass
customization by enabling electronic ordering to reach the production facility in minutes
The first step is to put in the right connective networks
The vast majority of EC is done on computers connected to: Internet Intranet--An internal 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
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