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© Prentice Hall 2004© Prentice Hall 2004 11
Chapter 1Chapter 1
Overview of Electronic Overview of Electronic CommerceCommerce
© Prentice Hall 2004© Prentice Hall 2004 22
Learning ObjectivesLearning Objectives
1.1. Define electronic commerce (EC) Define electronic commerce (EC) and describe its various categories.and describe its various categories.
2.2. Describe and discuss the content Describe and discuss the content and framework of EC.and framework of EC.
3.3. Describe the major types of EC Describe the major types of EC transactions.transactions.
4.4. Describe some EC business models.Describe some EC business models.
© Prentice Hall 2004© Prentice Hall 2004 33
Learning Objectives Learning Objectives (cont.)(cont.)
5.5. Describe the benefits of EC to Describe the benefits of EC to organizations, consumers, and organizations, consumers, and society.society.
6.6. Describe the limitations of EC.Describe the limitations of EC.
7.7. Describe the role of the digital Describe the role of the digital revolution in EC.revolution in EC.
8.8. Describe the contribution of EC to Describe the contribution of EC to organizations responding to organizations responding to environmental pressures.environmental pressures.
© Prentice Hall 2004© Prentice Hall 2004 44
Marks & Spencer—A New Way to Compete
The ProblemThe ProblemUK-based, upscale, global retailer of high-quality, high-priced merchandise faces stiff competition, since economic slowdown that started in 1999Critical success factors
Customer serviceAppropriate store inventory systemEfficient supply chain activities
© Prentice Hall 2004© Prentice Hall 2004 55
Marks & Spencer (cont.)
The SolutionThe SolutionM&S realized that digital era survival M&S realized that digital era survival depends on the use of information depends on the use of information technology in general and technology in general and electronic electronic commerce commerce in particularin particularElectronic commerce (EC, e-Electronic commerce (EC, e-commerce)—commerce)—a process of buying, a process of buying, selling, transferring, or exchanging selling, transferring, or exchanging products, services, and/or information products, services, and/or information via electronic networks and via electronic networks and computerscomputers
© Prentice Hall 2004© Prentice Hall 2004 66
Marks & Spencer (cont.)
M & S initiated several EC initiatives, M & S initiated several EC initiatives, including:including:
SecurityWarehouse managementMerchandise receivingInventory controlSpeeding up the supply of fashion garmentsCollaborative commerce
© Prentice Hall 2004© Prentice Hall 2004 77
Marks & Spencer (cont.)
The ResultsThe ResultsAs of summer 2002, a turnaround is underwayM & S has become a leader and example setter in retailing, resulting in increased profitability and growth
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Marks & Spencer (cont.)
What can we learn…What can we learn…Traditional brick-and-mortar companies Traditional brick-and-mortar companies face increasing pressures in a competitive face increasing pressures in a competitive marketing environmentmarketing environment
A possible response is to introduce a variety A possible response is to introduce a variety of e-commerce initiatives that can improveof e-commerce initiatives that can improve
supply chain operationsupply chain operation
informationinformation
money from raw materials through factories money from raw materials through factories
increase customer serviceincrease customer service
open up markets to more customersopen up markets to more customers
© Prentice Hall 2004© Prentice Hall 2004 99
Electronic Commerce: Definitions and
ConceptsThe Internet has emerged as a major, perhaps eventually the major, worldwide distribution channel for goods, services, managerial and professional jobsThis is profoundly changing economics, markets and industry structure, products and services and their flow, consumer segmentation, consumer values, consumer behavior, jobs, and labor marketsThe impact may be even greater on societies and politics, and on the way we see the world and ourselves in it
© Prentice Hall 2004© Prentice Hall 2004 1010
Electronic Commerce: Definitions and Concepts
(cont.)
E-commerce E-commerce defined from the following perspectives:
Communications: delivery of goods, services, information, or payments over computer networks or any other electronic meansCommercial (trading): provides capability of buying and selling products, services, and information on the Internet and via other online services
© Prentice Hall 2004© Prentice Hall 2004 1111
Electronic Commerce: Definitions and Concepts
(cont.)
Business process: doing business electronically by completing business processes over electronic networks, thereby substituting information for physical business processesService: 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
© Prentice Hall 2004© Prentice Hall 2004 1212
Electronic Commerce: Definitions and Concepts
(cont.)
Learning: an enabler of online training and education in schools, universities, and other organizations, including businessesCollaborative: the framework for inter- and intraorganizational collaborationCommunity: provides a gathering place for community members to learn, transact, and collaborate
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Electronic Commerce: Definitions and Concepts
(cont.)
e-business:e-business: a broader definition of a broader definition of EC, which includes:EC, which includes:
buying and selling of goods and buying and selling of goods and servicesservices
servicing customersservicing customers
collaborating with business partnerscollaborating with business partners
conducting electronic transactions conducting electronic transactions within an organizationwithin an organization
© Prentice Hall 2004© Prentice Hall 2004 1414
Electronic Commerce: Definitions and Concepts
(cont.)Pure vs. Partial ECPure 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 for3. the delivery agent (or
digital intermediary)
Brick-and-Mortar Brick-and-Mortar organizations organizations areare old-economy old-economy organizations organizations (corporations) that (corporations) that perform most of perform most of their business off-their business off-line, selling physical line, selling physical products by means products by means of physical agentsof physical agents
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Electronic Commerce: Definitions and Concepts
(cont.)Virtual (pure-play) Virtual (pure-play) organizationsorganizations conduct their conduct their business activities business activities solely onlinesolely online
Click-and-mortar Click-and-mortar organizations organizations conduct some EC conduct some EC activities, but do their activities, but do their primary business in primary business in the physical worldthe physical world
Electronic market Electronic market (e-marketplace) (e-marketplace) online marketplace online marketplace where buyers and where buyers and sellers meet to sellers meet to exchange goods, exchange goods, services, money, or services, money, or informationinformation
© Prentice Hall 2004© Prentice Hall 2004 1616
Electronic Commerce: Definitions and Concepts
(cont.)InterorganizationInterorganizational information al information systems (IOSs) systems (IOSs) allow routine allow routine transaction transaction processing and processing and information flow information flow between two or between two or more organizationsmore organizations
IntraorganizationIntraorganizational information al information systems systems enable enable EC activities to go EC activities to go on on within within individual individual organizationsorganizations
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Exhibit 1.1: The Exhibit 1.1: The Dimensions of Electronic Dimensions of Electronic
CommerceCommerce
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The EC Framework, Classification, and
ContentTwo major types of e-commerce:
business-to-consumer (B2C) : : online transactions are made between online transactions are made between businesses and individual consumers businesses and individual consumers business-to-business (B2B):business-to-business (B2B): businesses make online transactions businesses make online transactions with other businesseswith other businesses intrabusiness intrabusiness EC: EC conducted inside EC: EC conducted inside
an organization (e.g., an organization (e.g., business-to-business-to-employeesemployees B2E)B2E)
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The EC Framework, Classification, and
Content (cont.)
Computer environmentsComputer environmentsInternet:Internet: global networked global networked environment environment
Intranet:Intranet: a corporate or a corporate or government network that uses government network that uses Internet tools, such as Web Internet tools, such as Web browsers, and Internet protocols browsers, and Internet protocols
Extranet:Extranet: a network that uses the a network that uses the Internet to link multiple intranetsInternet to link multiple intranets
© Prentice Hall 2004© Prentice Hall 2004 2020
EC Framework
EC applications are supported by infrastructure and by five support areas:
PeoplePublic policyMarketing and advertisingSupport servicesBusiness partnerships
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Exhibit 1.2: A Framework Exhibit 1.2: A Framework for Electronic Commercefor Electronic Commerce
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Classification of EC by Classification of EC by Transactions or Transactions or
InteractionsInteractionsbusiness-to-consumer (B2C) : online : online transactions are made between transactions are made between businesses and individual consumers businesses and individual consumers
business-to-business (B2B): business-to-business (B2B): businesses make online transactions businesses make online transactions with other businesseswith other businesses
e-tailing:e-tailing: online retailing, usually B2Conline retailing, usually B2C
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Classification of EC by Classification of EC by Transactions or Interactions Transactions or Interactions
(cont.)(cont.)business-to-business-to-consumer business-to-business-to-consumer (B2B2C):(B2B2C): e-commerce model in which a e-commerce model in which a business provides some product or service business provides some product or service to a client business that maintains its own to a client business that maintains its own customerscustomers
consumer-to-business (C2B):consumer-to-business (C2B):
e-commerce model in which individuals e-commerce model in which individuals use the Internet to sell products or services use the Internet to sell products or services to organizations or individuals seek sellers to organizations or individuals seek sellers to bid on products or services they needto bid on products or services they need
© Prentice Hall 2004© Prentice Hall 2004 2424
Classification of EC by Classification of EC by Transactions or Interactions Transactions or Interactions
(cont.)(cont.)
consumer-to-consumer (C2C):consumer-to-consumer (C2C):
e-commerce model in which e-commerce model in which consumers sell directly to other consumers sell directly to other consumersconsumers
peer-to-peer (P2P):peer-to-peer (P2P): technology that technology that enables networked peer computers to enables networked peer computers to share data and processing with each share data and processing with each other directly; can be used in C2C, other directly; can be used in C2C, B2B, and B2C e-commerceB2B, and B2C e-commerce
© Prentice Hall 2004© Prentice Hall 2004 2525
Classification of EC by Classification of EC by Transactions or Interactions Transactions or Interactions
(cont.)(cont.)
mobile commerce ((m-commerce):mobile commerce ((m-commerce):
e-commerce transactions and e-commerce transactions and activities conducted in a wireless activities conducted in a wireless environmentenvironment
location-based commerce (l-location-based commerce (l-commerce):commerce): m-commerce m-commerce transactions targeted to individuals transactions targeted to individuals in specific locations, at specific timesin specific locations, at specific times
© Prentice Hall 2004© Prentice Hall 2004 2626
Classification of EC by Classification of EC by Transactions or Interactions Transactions or Interactions
(cont.)(cont.)intrabusiness EC:intrabusiness EC: e-commerce category e-commerce category that includes all internal organizational that includes all internal organizational activities that involve the exchange of activities that involve the exchange of goods, services, or information among goods, services, or information among various units and individuals in an various units and individuals in an organizationorganization
business-to-employees (B2E):business-to-employees (B2E): e-e-commerce model in which an organization commerce model in which an organization delivers services, information, or products delivers services, information, or products to its individual employeesto its individual employees
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Classification of EC by Classification of EC by Transactions or Interactions Transactions or Interactions
(cont.)(cont.)collaborative commerce (c-commerce):collaborative commerce (c-commerce):
e-commerce model in which individuals e-commerce model in which individuals or groups communicate or collaborate or groups communicate or collaborate onlineonline
e-learning:e-learning: t the online delivery of he online delivery of information for purposes of training or information for purposes of training or educationeducation
exchange (electronic):exchange (electronic): a a public electronic public electronic market with many buyers and sellersmarket with many buyers and sellers
© Prentice Hall 2004© Prentice Hall 2004 2828
Classification of EC by Classification of EC by Transactions or Interactions Transactions or Interactions
(cont.)(cont.)
exchange-to-exchange (E2E):exchange-to-exchange (E2E): e- e-commerce model in which electronic commerce model in which electronic exchanges formally connect to one exchanges formally connect to one another the purpose of exchanging another the purpose of exchanging informationinformation
e-government:e-government: e-commerce model in e-commerce model in which a government entity buys or which a government entity buys or provides goods, services, or information provides goods, services, or information to businesses or individual citizensto businesses or individual citizens
© Prentice Hall 2004© Prentice Hall 2004 2929
The Interdisciplinary Nature of EC
Major EC disciplines Major EC disciplines Computer scienceComputer science
MarketingMarketing
Consumer behaviorConsumer behavior
FinanceFinance
EconomicsEconomics
Management information systems Management information systems
© Prentice Hall 2004© Prentice Hall 2004 3030
A Brief History of ECA Brief History of EC
1970s: innovations like 1970s: innovations like electronic funds electronic funds transfer transfer (EFT)—funds routed (EFT)—funds routed electronically from one organization to electronically from one organization to another (limited to large corporations)another (limited to large corporations)electronic data interchange electronic data interchange (EDI)— (EDI)— electronically transfer routine documents electronically transfer routine documents (application enlarged pool of participating (application enlarged pool of participating companies to include manufacturers, companies to include manufacturers, retailers, services)retailers, services)interorganizational system interorganizational system (IOS)—travel (IOS)—travel reservation systems and stock tradingreservation systems and stock trading
© Prentice Hall 2004© Prentice Hall 2004 3131
A Brief History of EC A Brief History of EC (cont.)(cont.)
1969 U.S. government experiment—the 1969 U.S. government experiment—the Internet came into being initially used by Internet came into being initially used by technical audience of government technical audience of government agencies, academic researchers, and agencies, academic researchers, and scientistsscientists
1990s the Internet commercialized and 1990s the Internet commercialized and users flocked to participate in the form of users flocked to participate in the form of dot-comsdot-coms, or , or Internet start-upsInternet start-ups
Innovative applications ranging from online Innovative applications ranging from online direct sales to e-learning experiencesdirect sales to e-learning experiences
© Prentice Hall 2004© Prentice Hall 2004 3232
A Brief History of EC A Brief History of EC (cont.)(cont.)
Most medium- and large-sized organizations Most medium- and large-sized organizations have a Web sitehave a Web siteMost large U.S. corporations have Most large U.S. corporations have comprehensive portals comprehensive portals 1999 the emphasis of EC shifted from B2C to 1999 the emphasis of EC shifted from B2C to B2BB2B2001 the emphasis shifted from B2B to B2E,2001 the emphasis shifted from B2B to B2E,c-commerce, e-government, e-learning, and c-commerce, e-government, e-learning, and m-commercem-commerce
EC will undoubtedly continue to shift and EC will undoubtedly continue to shift and changechange
© Prentice Hall 2004© Prentice Hall 2004 3333
A Brief History of EC A Brief History of EC (cont.)(cont.)
EC successesEC successesVirtual EC companies
eBayVeriSignAOLCheckpoint
Click-and-mortarCiscoGeneral ElectricIBMIntelSchwab
EC failuresEC failures1999, a large number of EC-dedicated companies began to failEC’s days are not numbered!
dot-com failure rate is declining sharplyEC field is experiencing consolidation most pure EC companies, are expanding operations and generating increasing sales (Amazon.com)
© Prentice Hall 2004© Prentice Hall 2004 3434
The Success Story of Campusfood.Com
Provide interactive menus to college Provide interactive menus to college students, using the power of the students, using the power of the Internet to replace and/or facilitate the Internet to replace and/or facilitate the traditional telephone ordering of mealstraditional telephone ordering of meals
Built the company’s customer baseBuilt the company’s customer baseexpanding to other universitiesexpanding to other universities
attracting studentsattracting students
generating a list of restaurants from which generating a list of restaurants from which students could order food for deliverystudents could order food for delivery
© Prentice Hall 2004© Prentice Hall 2004 3535
The Success Story of Campusfood.Com (cont.)
Now some of these activities are Now some of these activities are outsourced to a marketing firm, enabling outsourced to a marketing firm, enabling the addition of dozens of schools the addition of dozens of schools nationwidenationwideFinanced through private investors, Financed through private investors, friends, and family members, the site was friends, and family members, the site was built on an investment of less than $1 built on an investment of less than $1 millionmillionCampusfood.com’s revenue is generated Campusfood.com’s revenue is generated through through transaction feestransaction fees—the site takes a —the site takes a 5 % commission on each order from the 5 % commission on each order from the sellerssellers
© Prentice Hall 2004© Prentice Hall 2004 3636
The Success Story of Campusfood.Com (cont.)At At campusfood.comcampusfood.com you can: you can:
Navigate through a list of local Navigate through a list of local restaurants, their hours of operation, restaurants, their hours of operation, addresses, phone numbers, etc.addresses, phone numbers, etc.Browse an interactive menuBrowse an interactive menuBypass “busy” telephone signals to place Bypass “busy” telephone signals to place an order onlinean order onlineAccess special foods, promotions, and Access special foods, promotions, and restaurant giveaways restaurant giveaways Arrange electronic payment of your order Arrange electronic payment of your order
© Prentice Hall 2004© Prentice Hall 2004 3737
The Future of ECThe Future of EC
2004—total online shopping and B2B 2004—total online shopping and B2B transactions in the US between $3 to $7 transactions in the US between $3 to $7 trillion by 2008:trillion by 2008:
number of Internet users worldwide should number of Internet users worldwide should reach 750 million reach 750 million 50 percent of Internet users will shop 50 percent of Internet users will shop EC growth will come from:EC growth will come from:
B2CB2CB2B B2B e-governmente-governmente-learninge-learningB2EB2Ec-commercec-commerce
© Prentice Hall 2004© Prentice Hall 2004 3838
E-commerce Business Models
Business models—a method of Business models—a method of doing business by which a doing business by which a company can generate revenue company can generate revenue to sustain itselfto sustain itself
ExamplesExamples::Name your priceName your price
Find the best priceFind the best price
Dynamic brokeringDynamic brokering
Affiliate marketingAffiliate marketing
© Prentice Hall 2004© Prentice Hall 2004 3939
E-commerce Business Plans and
CasesBusiness plan: a written document that identifies the business goals and outlines the plan of how to achieve them Business case: a written document that is used by managers to garner funding for specific applications or projects; its major emphasis is the justification for a specific investment
© Prentice Hall 2004© Prentice Hall 2004 4040
Structure of Business Models
Business model:Business model: A method of A method of doing business by which a doing business by which a company can generate company can generate revenue to sustain itself revenue to sustain itself
© Prentice Hall 2004© Prentice Hall 2004 4141
Structure of Business Models (cont.)
Revenue model:Revenue model: description of description of how the company or an EC how the company or an EC project will earn revenueproject will earn revenue
SalesSalesTransaction fees Transaction fees Subscription feesSubscription feesAdvertising Advertising Affiliate feesAffiliate feesOther revenue sourcesOther revenue sources
© Prentice Hall 2004© Prentice Hall 2004 4242
Structure of Business Models (cont.)
Value proposition:Value proposition: The benefits a The benefits a company can derive from using ECcompany can derive from using EC
search and transaction cost efficiencycomplementaritieslock-innoveltyaggregation and interfirm collaboration
© Prentice Hall 2004© Prentice Hall 2004 4343
Exhibit 1.4: Common Exhibit 1.4: Common Revenue ModelsRevenue Models
© Prentice Hall 2004© Prentice Hall 2004 4444
Typical Business Modelsin EC
1. Online direct marketing2. Electronic tendering systems
tendering (reverse auction): model in which a buyer requests would-be sellers to submit bids, and the lowest bidder wins
3. Name your own price: a model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price
© Prentice Hall 2004© Prentice Hall 2004 4545
Typical Business Models in EC (cont.)
4.4. Affiliate marketing: an arrangement Affiliate marketing: an arrangement whereby a marketing partner (a whereby a marketing partner (a business, an organization, or even an business, an organization, or even an individual) refers consumers to the individual) refers consumers to the selling company’s Web siteselling company’s Web site
5.5. Viral marketing:Viral marketing: word-of-mouth word-of-mouth marketing in which customers marketing in which customers promote a product or service to promote a product or service to friends or other peoplefriends or other people
© Prentice Hall 2004© Prentice Hall 2004 4646
Typical Business Models in EC (cont.)
6.6. Group purchasing: quantity Group purchasing: quantity purchasing that enables groups purchasing that enables groups of purchasers to obtain a of purchasers to obtain a discount price on the products discount price on the products purchasedpurchased
7.7. SMEs:SMEs: s small to medium mall to medium enterprisesenterprises
8.8. Online auctionsOnline auctions
© Prentice Hall 2004© Prentice Hall 2004 4747
Typical Business Models in EC (cont.)
8.8. Product and service customizationProduct and service customizationcustomization:customization: creation of a creation of a product or service according to product or service according to the buyer’s specificationsthe buyer’s specifications
8. Electronic marketplaces and exchanges
9. Value-chain integrators10. Value-chain service providers
© Prentice Hall 2004© Prentice Hall 2004 4848
Typical Business Models in EC (cont.)
12. Information brokers13. Bartering 14. Deep discounting15. Membership16. Supply chain improvers
Business models can be independent or they can be combined amongst themselves or with traditional business models
© Prentice Hall 2004© Prentice Hall 2004 4949
Example of Example of Supply Chain ImproverSupply Chain Improver
Orbis Group changes a linear physical supply chain to an electronic hub
Traditional process in the B2B advertising field
© Prentice Hall 2004© Prentice Hall 2004 5050
Example of Example of Supply Chain Improver Supply Chain Improver
(cont.)(cont.)
ProductBank ProductBank simplifies this simplifies this lengthy process lengthy process changing the changing the linear flow of linear flow of products and products and information to information to a digitized huba digitized hub
© Prentice Hall 2004© Prentice Hall 2004 5151
Benefits of ECBenefits of EC
Global reachGlobal reachCost reductionCost reductionSupply chain Supply chain improvementsimprovementsExtended hours: Extended hours: 24/7/36524/7/365CustomizationCustomizationNew business modelsNew business modelsVendors’ Vendors’ specializationspecialization
Rapid time-to-marketRapid time-to-marketLower communication Lower communication costscostsEfficient procurementEfficient procurementImproved customer Improved customer relationsrelationsUp-to-date company Up-to-date company materialmaterialNo city business No city business permits and feespermits and feesOther benefitsOther benefits
Benefits to organizationsBenefits to organizations
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Benefits of EC Benefits of EC (cont.)(cont.)
UbiquityUbiquityMore products More products and servicesand servicesCheaper products Cheaper products and servicesand servicesInstant deliveryInstant deliveryInformation Information availabilityavailability
Participation in Participation in auctionsauctionsElectronic Electronic communitiescommunities “ “Get it your way” Get it your way” No sales taxNo sales tax
Benefits to consumers
© Prentice Hall 2004© Prentice Hall 2004 5353
Benefits of EC Benefits of EC (cont.)(cont.)
Benefits to Benefits to societysociety
TelecommutingTelecommuting
Higher standard Higher standard of livingof living
Hope for the poorHope for the poor
Availability of Availability of public servicespublic services
© Prentice Hall 2004© Prentice Hall 2004 5454
Limitations of ECLimitations of EC
© Prentice Hall 2004© Prentice Hall 2004 5555
Barriers of ECBarriers of EC
Security Security
Trust and riskTrust and risk
Lack of qualified Lack of qualified personnelpersonnel
Lack of business Lack of business modelsmodels
Culture Culture
User User authentication authentication and lack of public and lack of public key infrastructurekey infrastructure
Organization Organization
Fraud Fraud
Slow navigation Slow navigation on the Interneton the Internet
Legal issues Legal issues
© Prentice Hall 2004© Prentice Hall 2004 5656
The Digital RevolutionThe Digital Revolution
Digital economy:Digital economy: An economy that An economy that is based on digital technologies, is based on digital technologies, including digital communication including digital communication networks, computers, software, and networks, computers, software, and other related information other related information technologies; also called the technologies; also called the Internet economy, Internet economy, the the new new economy, economy, or the or the Web economyWeb economy
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The Digital Revolution The Digital Revolution (cont.)(cont.)
A global platform over which people and A global platform over which people and organizations interact, communicate, organizations interact, communicate, collaborate, and search for information collaborate, and search for information
Includes the following characteristics:Includes the following characteristics:A vast array of digitizable productsA vast array of digitizable products
Consumers and firms conducting financial Consumers and firms conducting financial transactions digitallytransactions digitally
Microprocessors and networking capabilities Microprocessors and networking capabilities embedded in physical goodsembedded in physical goods
© Prentice Hall 2004© Prentice Hall 2004 5858
New Business New Business EnvironmentEnvironment
Customers are becoming more powerfulCreated due to advances in science occurring at an accelerated rateResults in more and more technologyRapid growth in technology results Rapid growth in technology results in a large variety of more complex in a large variety of more complex systems systems
© Prentice Hall 2004© Prentice Hall 2004 5959
New Business New Business Environment Environment (cont.)(cont.)
Characteristics in the business Characteristics in the business environment environment
A more turbulent environment with more A more turbulent environment with more business problems and opportunitiesbusiness problems and opportunities
Stronger competitionStronger competition
Need for organizations to make decisions Need for organizations to make decisions more frequently more frequently
A larger scope for decisions because more A larger scope for decisions because more factors factors
More information and/or knowledge needed More information and/or knowledge needed for making decisionsfor making decisions
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Environment-Response-Environment-Response-Support ModelSupport Model
Critical response activitiestraditional actions such as lowering cost and closing unprofitable facilitiesintroduce innovative actions such as customizing or creating new products or providing superb customer service
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Exhibit 1.6: Major Business Exhibit 1.6: Major Business Pressures and the Role of ECPressures and the Role of EC
© Prentice Hall 2004© Prentice Hall 2004 6262
Major Business PressuresMajor Business Pressures
Market andMarket andeconomiceconomicpressurespressures
Strong competitionStrong competition Global economyGlobal economy Regional trade Regional trade
agreements (e.g. agreements (e.g. NAFTA)NAFTA)
Extremely low Extremely low labor cost in some labor cost in some countriescountries
Frequent and Frequent and significant changes significant changes in marketsin markets
Increased power of Increased power of consumersconsumers
© Prentice Hall 2004© Prentice Hall 2004 6363
MajorMajorBusiness Pressures Business Pressures (cont.)(cont.)
Societal andSocietal andenvironmentalenvironmental
pressurespressures
Changing nature of Changing nature of workforceworkforce
Government Government deregulation of banking deregulation of banking and other servicesand other services
Shrinking government Shrinking government subsidiessubsidies
Increased importance of Increased importance of ethical and legal issuesethical and legal issues
Increased social Increased social responsibility of responsibility of organizationsorganizations
Rapid political changesRapid political changes
© Prentice Hall 2004© Prentice Hall 2004 6464
MajorMajorBusiness Pressures Business Pressures (cont.)(cont.)
TechnologicalTechnological
pressurespressures
Rapid technological Rapid technological obsolescenceobsolescence
Increase Increase innovations and innovations and new technologiesnew technologies
Information Information overloadoverload
Rapid decline in Rapid decline in technology cost vs. technology cost vs. performance ratioperformance ratio
© Prentice Hall 2004© Prentice Hall 2004 6565
Organizational ResponsesOrganizational Responses
Strategic systemsStrategic systemsContinuous improvement efforts and Continuous improvement efforts and business process reengineering—business process reengineering—including including business process business process reengineering reengineering (BPR)(BPR)Customer relationship management Customer relationship management (CRM)—divided into the following areas(CRM)—divided into the following areas
Operational CRM Operational CRM Analytical CRM Analytical CRM Collaborative CRM Collaborative CRM
© Prentice Hall 2004© Prentice Hall 2004 6666
Organizational Responses Organizational Responses (cont.)(cont.)
Business alliances Business alliances
Electronic marketsElectronic markets
Reductions in cycle time and Reductions in cycle time and time-to-markettime-to-market
Cycle time reduction:Cycle time reduction: Shortening the Shortening the time it takes for a business to time it takes for a business to complete a productive activity from complete a productive activity from its beginning to endits beginning to end
© Prentice Hall 2004© Prentice Hall 2004 6767
Organizational Responses Organizational Responses (cont.)(cont.)
Empowerment of employeesEmpowerment of employees
Supply chain improvements Supply chain improvements
Mass customization: make-to-Mass customization: make-to-order in large quantities in an order in large quantities in an efficient manner efficient manner
Mass customization:Mass customization: Production of Production of large quantities of customized itemslarge quantities of customized items
© Prentice Hall 2004© Prentice Hall 2004 6868
Organizational Responses Organizational Responses (cont.)(cont.)
Intrabusiness: from sales force Intrabusiness: from sales force automation to inventory automation to inventory
Knowledge management Knowledge management Knowledge management (KM):Knowledge management (KM): The The process of creating or capturing process of creating or capturing knowledge, storing and protecting it, knowledge, storing and protecting it, updating and maintaining it, and updating and maintaining it, and using itusing it
© Prentice Hall 2004© Prentice Hall 2004 6969
Putting It All TogetherPutting It All Together
Task facing each organization is how to put together the components that will enable the organization to transform itself to the digital economy and gain competitive advantage by using ECMany employ corporate portals
A major gateway through which employees, business partners, and the public can enter a corporate Web site
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Exhibit 1.8: Exhibit 1.8: The Networked The Networked OrganizationOrganization
© Prentice Hall 2004© Prentice Hall 2004 7171
Managerial IssuesManagerial Issues
1.1. Is it real? Is it real?
2.2. How should we evaluate the How should we evaluate the magnitude of the business magnitude of the business pressures? pressures?
3.3. Why is B2B e-commerce so Why is B2B e-commerce so attractive? attractive?
4.4. There are so many EC failures—There are so many EC failures—how can one avoid them?how can one avoid them?
© Prentice Hall 2004© Prentice Hall 2004 7272
Managerial Issues Managerial Issues (cont.)(cont.)
5.5. What should be my company’s What should be my company’s strategy toward EC?strategy toward EC?
6.6. How do we transform our How do we transform our organization into a digital one? organization into a digital one?
7.7. What are the top challenges of What are the top challenges of EC? EC?
© Prentice Hall 2004© Prentice Hall 2004 7373
SummarySummary
1. Definition of EC and description of its various categories.
2. The content and framework of EC.
3. The major types of EC transactions.
4. The major business models.
© Prentice Hall 2004© Prentice Hall 2004 7474
Summary Summary (cont.)(cont.)
5. Benefits to organizations, consumers, and society.
6. Limitations of EC.7. The role of the digital revolution.8. The role of EC in combating
pressures in the business environment.