1

CS5038 The Electronic SocietyLecture 1: Overview of Electronic CommerceLecture Outline

• Definitions • Perspectives • Variations• Business Models • Pressures on businesses• Responses of businesses • The Networked Business• Benefits • Problems

2

Time change!

Move to 9am for next week

3

E-Commerce DefinitionsE-commerce : Any kind of transaction done partly or completely over a networkBusiness-to-business (B2B) - online transactions (e.g. purchases) with other

businessesInterorganisational Information System (IOS) – information between

organisations; used for collaborative commerceBusiness-to-consumer (B2C) - online transactions between businesses and

consumersBusiness-to-employee (B2E) - information and services made available to

employees onlineConsumer-to-consumer (C2C) - online transactions between consumersPeer-to-Peer (P2P) – exchange games, DivX videos, MP3 musicConsumer-to-Business (C2B) – consumers seek sellers (Priceline.com) or sell

services to organisationsIntrabusiness (Organisational) EC – internal to organisation, intranetBusiness-to-Employees (B2E) – subset of Intrabusiness Government-to-Citizens (G2C) – services and information to citizensExchange – buyers and sellers; dynamic pricing; matching servicesExchange-to-Exchange (E2E) – system to connect exchanges

4

Electronic Commerce Terms

EC defined from these perspectivesCommunications

E-delivery: Goods, services, information, paymentsBusiness process

Automate business transactions and workflowService

Cut service costs, improve quality and speedOnline

Buying, selling and other services on internetCollaborations

Inter- and intraorganisationalCommunity

Gather to learn, transact, communicate

5

Variations

Pure vs. Partial EC: based on the degree of digitisation ofProductProcess Delivery agent

Traditional commerce: all dimensions are physical

Pure EC: all dimensions are digital

Partial EC: all other possibilities include a mix of digital and physical dimensions

Internet vs. Non-Internet ECVANs – value added networkLANs – local area networkVending MachineClick and Mortar

6

Dimensions of E-Commerce

Prentice Hall, 2002

7

Business Models

Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.comCustomization and personalization – dell.comElectronic marketplaces and exchanges – e-steel.comSupply chain improvers – productbank.com.auCollaborative commerce

Where is the company positioned in the value chain?

A method of doing business by which a company can generate revenue to sustain itself.

8

Rappa’s Business Models

Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary

Recommender - users provide recommendations on products, e.g. http://www.epinions.com

Registration - session tracking of users, allows greater targeting of advertising, e.g. http://www.nytimes.com

Merchant - retailManufacturer – eliminate middlemanAffiliate – online referrals for commissionCommunity – voluntary contributors, regular visitorsSubscription – high value content

Many companies changed to subscription models in last two yearsUtility – pay by byte

http://www.digitalenterprise.org/models/models.html

9

Example: ORBIS Corp.

Prentice Hall, 2002

TRANSFORM

10

Major Business Pressures

Market / Economy

Strong competitionGlobal economyRegional trade agreements (NAFTA)Low labor cost in some countriesFrequent changes in marketsIncreased power of consumers

Technology

Rapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratio

Society / Environment

Changing nature of workforceDeregulation of servicesShrinking subsidiesEthical and legal issuesSocial responsibility of E-bus.Rapid political changes

11

Organizational ResponsesStrategic systems (e.g. FedEx tracking system) – strategic advantageContinuous improvement efforts Customer Relationship Management (CRM) – maximum value proposition to

customer – online help, product information, tools Total Quality Management (TQM) - ongoing refinements in response to

continuous feedbackBusiness process reengineering (BPR) - major innovationsBusiness Alliances Virtual Corporation - Joint Venture for time-limited mission Keiretsu - Long term alliance of manufacturers, suppliers and finance

corporationsCooperation in E-markets – purchasing consortia

IT SupportReducing cycle time (=business process time) and time to market

Empowerment of employees and collaborative work

Supply chain improvements: speed and efficiency

Mass customisation

12

Intranet/ExtranetIntranet

Corporate LAN (Local Area Network) or WAN (Wide …) Uses Internet technology

Open, flexible connectivity Limited to authorised employees

Secure behind firewall

Extranet Links Intranets in different locations Uses Internet technology Security required – Virtual Private Network (VPN)

Information travels through encrypted tunnels between Intranets

13

The Networked Business: Internet, Intranet, Extranet

14

Benefits of E-Commerce

To Organizations

Expands the marketplace

Decreases the cost (less paper)

Pull-type supply chain management

Customisation = competitive advantage

Less time between outlay of capital and receipt of products and services

Supports BPR efforts

To Society

Work at home less traveling less traffic and pollution

Lower prices benefit less affluent people

Third world and rural areas access products otherwise unavailable

Public services at a reduced cost and improved quality

To Consumers

Open 24 hours a day

More choices

Better prices

Quick delivery

Product information in seconds

Interact with other consumers

Facilitates competition

15

Problems With E-Commerce

Technical Problems Insufficient telecommunication bandwidth Difficult to integrate Internet EC software with some existing

applications and databases Additional cost of infrastructure Software development tools are still evolving Standards (security, reliability, communication) are still evolving Interoperability problems

Cost Problems Developing EC in house can be expensive and may result in delays. Difficult to justify - intangible benefits are difficult to quantify.

E.g. customer relationship management (CRM)

Non-technical problems are more serious…

16

Problems With E-Commerce (contd.)Security and Privacy

B2C - Hard to convince customers that online transactions are secure

Customers do not trust: Unknown sellers, Paperless transactions, Electronic money

Other limiting factors Switching from a physical to a virtual store may be difficult Lack of touch and feel online Channel conflict Unresolved legal issues Rapidly evolving and changing EC Lack of support services Insufficiently large number of sellers and buyers Expensive and/or inconvenient accessibility to the Internet

17

SummaryDefinitions – B2C, B2B, B2E

Perspectives – communications, business process, services

Variations – Pure v. partial

Business Models and Rappa’s models

Pressures on businesses – market, technology, society

Responses of businesses – BPR, alliances, IT support

The Networked Business - Internet, Intranet, Extranet

Benefits – organisations, consumers, society

Problems – technical and non-technical

18

Quiz 1

19

CS5038 The Electronic SocietyLecture 1.5: The Digital EconomyLecture Outline

• The digital economy • Competition in E-markets • Intermediation • Winners and losers • Impact on business process and organisation

20

Digital Economyaka Internet economy, new economy, Web economy

Definition: Economy based largely on digital technologies

E-Marketplace = MarketspaceMarketplace: 3 main objectives

Match buyers and sellersFacilitate transactions

exchange of information, goods, services, paymentsProvide institutional infrastructure

Legal contracts, dispute resolution, enforcement

Marketspace benefits Increased efficienciesDecreased cost of executing business functions

21

Digital ProductsInformation and entertainment products

Paper-based products: books, newspapers, magazines Product information: catalogs, training manuals Graphics: photographs, maps, calendars Video: movies, TV programs Software: programs, games, development tools

Symbols, tokens, icons Tickets and reservations: airline, concert Financial instruments: checks, credit cards, electronic currencies

Processes and services Government services: forms, benefits, licenses E-messaging: letters, faxes Business processes: ordering, inventorying Auctions: bidding, bartering Cybercafés, virtual communities

22

Competition in MarketspacesCompetition in the Internet ecosystem

Inclusive with low barriers to entrySelf-organizing rather than hierarchical

Competition is intenseLower buyers’ search costSpeedy comparisonsDifferentiation and personalization

Perfect CompetitionMany buyers and sellers (no entry cost)Large players cannot control marketNo product differentiationComprehensive information between buyers and sellers

23

Prentice Hall, 2002

Porter’s Five Forces

24

IntermediationRoles and value of intermediaries in e-markets(limitations of dealing directly)

Search costs: brokers with access to customer preferences can predict demand for products

Lack of privacy: anonymity of buyer and/or sellerGather product information from many sourcesContracting risk - Broker can:

Record reputations Act as policeman Provide insurance

Pricing inefficiencies Pricing mechanisms for imbalance of buy/sell orders

25

Winners and Losers in ECWinners in EC Infrastructure providers

Internet access (ISP) Software and hardware Security & payment systems

Diversified portal providers Proprietary network owners Midsize manufacturers A few large resellers

economies of scale e.g. FedEx, UPS

Advertising companies Conventional retailers online Online only companies

eBay, Amazon E-market makers

Losers in EC Wholesalers (particularly small ones)

no need for local distributors Brokers

travel, real estate, stock, insurance Salespeople Nondifferentiated manufacturers

Neither low cost nor innovative

must adapt to change

26

Impact on Business Processesand Organisations

Improving direct marketingProduct promotionNew sales channelsDirect savingsReduced cycle timeCustomer serviceCorporate image

E.g. amazonCustomisation

Transforming organizationsOrganization learningChanging nature of work

Redefining organizationsNew product capabilitiesNew business models

Impact on manufacturingVirtual manufacturingBuild-to-order

Impact on finance & accountingImpact on human resources

Online distance learning

27

SummaryThe digital economy – marketspaces

Competition in marketspaces - intense

Intermediation – role and value

Winners and losers – must adapt to change

Impact on business process and organisation

Quiz 2