Cpis380 Ch01 Overview Ec

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Chapter 1

Overview of Electronic Commerce


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Learning objectives

Define electronic commerce (EC) and describe its variouscategories.

Describe and discuss the content and framework of EC.

Describe the major types of EC transactions. Describe the digital revolution as a driver for EC.

Describe some EC business models.

Describe the benefits of EC to organizations, consumers,and society.

Describe the limitations of EC.


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Dell using e-commerce for success

Problem/opportunity

Dell1st company to offer PCs via mail order. Design own PCs and allow customers to configure their own customised

system using the build-to-order concept. Taking order using fax and mail and losing money over $100m.

Solutions In 1993, introduce direct marketing online on its Web site Sells to Individual (Business-to-Consumer) Sells to business, government, education, healthcare (Business-to-

Business)

Results Exemplifies the major EC business models

Online direct marketing Online Build-to-order model (eliminates intermediation) e-procurement, collaborative commerce, intrabusiness EC e-CRM (e-customer services)

Today, has over 100 country-oriented Web sites Profits of $50 billion a year.
http://ch01%20dell%20homepage.html/http://ch01%20dell%20homepage.html/


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Past Commerce

BUYER LOOK FOR SELLER

BARGAINING

PAY

SELL

DELIVERY

AFTER SALE ACTIVITIES

CHOOSE PRODUCT

INFORMATION

PHYSICAL AND

INFORMATION


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E-Commerce

BUYER LOOKFOR SELLER

BARGAINING

PAY

SELL

DELIVERY

AFTER SALE ACTIVITIES

CHOOSE PRODUCT

SEARCH ENGINE

SHOPPING BOT

ONLINE CATALOG

TRACKING AGENT

E-HELP

USERS CHOICE

BARGANING STRATEGYPRICE SENSITIVITY

PAYMENT PATTERN

PROBLEM REPORTING

SALES OPPORTUNITIES

DELIVERY NEEDSE-PAYMENT

RECOMMENDATION AGENT

SHOPPING CART

ENCRYPTION

TELEPHONY

SALES PATTERN

PERSONAL DATA

USER SATISFACTION

SEARCH PATTERN

PROMOTION EFFECTIVENESS

INFORMA

TIONTEKNOLOGY

GATHER

EDINFORMATIO

N

INFORMATION

PHYSICAL AND

INFORMATION


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Electronic Commerce:Definitions and Concepts

electronic commerce (EC)

The process of buying, selling, or exchangingproducts, services, or information via computer

networks or any electronic means

Involves transactions that cross firm boundaries

E.g. Dell, Amazon.com, e-Bay

CH01 Examples of EC.ppt
http://ch01%20examples%20of%20ec.ppt/http://ch01%20examples%20of%20ec.ppt/http://ch01%20examples%20of%20ec.ppt/http://ch01%20examples%20of%20ec.ppt/


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EC is defined through these perspectives Communications delivery goods, services,

information, payment

Commercial (trading) buying and selling products,services and information

Business process completing business process

Service cut services cost, improving quality of serviceand increase the speed of delivery

Learning online training and education

Collaborative inter and intra organizational

Community members to learn, transact andcollaborate


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e-businessA broader definition of EC that includes not just thebuying and selling of goods and services, but also

servicing customers, collaborating with business partners, and

conducting electronic transactions within anorganization

E-business is everything to do with back-end systems inan organisation.


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SUPPLIERS CONSUMERS

e-commerce and e-business are often used interchangeably.


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Pure Versus Partial EC

EC takes severalforms depending onthe degree ofdigitization(thetransformation from

physical to digital)(1) theproduct

(service) sold,

(2) theprocessoftransaction

(3) the deliveryagent

Give Examples


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EC organizations brick-and-mortar organizations

Old-economy organizations (corporations) thatperform most of their business off-line, sellingphysical products by means of physical agents

virtual (pure-play) organizations

Organizations that conduct their business activitiessolely online

click-and-mortar (click-and-brick)

organizationsOrganizations that conduct some e-commerceactivities, but do their primary business in thephysical world


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Where EC is conducted At electronic market (e-marketplace)

An online marketplace where buyers and sellers meet toexchange goods, services, money, or informationUses Internet

interorganizational information systems (IOSs)Communications system that allows routine transactionprocessing and information flow between two or moreorganizationsUses extranet

intraorganizational information systems (intrabusiness EC)Communication system that enable e-commerce activities togo on within individual organizationsUses intranet


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13

Internet

Computer

Server

Organization

LegendInternet backbone

A global networked environment is knownas the Internet


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Intranet

Firewall

A counterpart within organizations, is calledan intranet


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Extranet

Firewall

Firewall

An extranet extends intranets so that theycan be accessed by business partners.

S I I d


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Summary : Internet, Intranet, andExtranet

Network Typical Type ofType Users Access Information

Internet Any individual

with dial-upaccess or LAN

Unlimited,

public; norestrictions

General, publicand

advertisement

Intranet AuthorizedemployeesONLY

Private andrestricted Specific, corporate

and proprietary

ExtranetAuthorizedgroups fromcollaboratingcompanies

Private andoutsideauthorizedpartners

Shared inauthorizedcollaborating group


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The EC Framework,Classification, and Content

An ECFrameworksupports five policymakingsupport areas

People

Public policy

Marketing and advertisement

Support services

Business partnerships


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Exhibit 1.2 A Framework forElectronic Commerce

EC Cl ifi ti b t f th


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EC Classification by nature of thetransactions or interactions

Main types business-to-business (B2B)

E-commerce model in which all of the participants arebusinesses or other organizations

E.g. Dell, Wal-Mart

business-to-consumer (B2C)

E-commerce model in which businesses sell toindividual shoppers

Also known as e-tailing (online retailing)

E.g. Amazon.com, shopsmart.com


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EC Classification by nature of thetransactions or interactions (contd)

consumer-to-business (C2B) E-commerce model in which individuals use the Internet to sell

products or services to organizations or individuals seek sellers tobid on products or services they need

Consumers use an online agent to look for a product or service

that suits their needs. E.g: Priceline

consumer-to-consumer (C2C)

E-commerce model in which consumers sell directly to otherconsumers

Uses agents between consumers with goods and services to sell.

E.g. eBay, Bizrate.com


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peer-to-peer (P2P) Technology that enables networked peer computers to share data

and processing with each other directly; can be used in C2C, B2B,and B2C e-commerce

Online agents assist in P2P transactions.

P2P businesses transact exchanges of information (such as filesor dollar amounts) between PCs or hand-held computing devices.

E.g. BitTorrent, PayPal

mobile commerce (m-commerce) E-commerce transactions and activities conducted in a wireless

environment

E.g. Use mobile phone to do their banking or order books fromAmazon.com or social networking through Mobile facebook.


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Other types intrabusiness EC E-commerce category that includes all internal organizational

activities that involve the exchange of goods, services, orinformation among various units and individuals in an organization

Also business-to-employee E.g. University portals

e-government E-commerce model in which a government entity buys or provides

goods, services, or information to businesses or individual citizens

e-learning The online delivery of information for purposes of training or

education

EC Classification by nature of the


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collaborative commerce (c-commerce) E-commerce model in which individuals or groups in different

locations communicate or collaborate online

Using hub

exchange (electronic)A public electronic market with many buyers and sellers

Used in B2B


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social computing

An approach aimed at making the human-computer interface morenaturalTo make socially produced information available to allSupported by Web 2.0 tools

Web 2.0

The second-generation of Internet-based services that let peoplecollaborate and share information online in new ways, such associal networking sites, wikis, communication tools, andfolksonomies (tagging)

social networkA category of Internet applications that help connect friends,

business partners, or individuals with specific interests byproviding free services such as photo presentations,e-mail, blogging, and so on using a variety of tools

Virtual worldA user-defined world, 3D computer-based simulated environment, in

which people can interact, play and do business.

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EC Business Models

business model A method of doing business by which a company can generate

revenue (income) to sustain itself.

Where the company is positioned in the value chain, i.e. by whatactivities the company adds value to the product or service it

supplies

E.g.

Wal-Mart buys products, sells it, and generate a profit.

A TV station provides free broadcasting to its viewer. The station

survival depends on a complex model involving advertiser andcontent providers.

There are several different EC business model depending on thecompany, industry and so on.

EC B i M d l


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EC Business ModelsThe Structure of Business Models A description of the customersto be served and the

companys relationships with these customers (customersvalue proposition) A description of allproductsand servicesthe business will

offer and the market in which they will be sold A description of the business processrequired to make

and deliver the products and services A list of the resourcesrequired and the identification of

which ones are available, which will be developed in-house, and which will need to be acquired

A description of the organization supply chain, includingsuppliersand other business partners

A list of competitors A description of the revenues expected (revenue model),

anticipated costs, sources of financing, and estimated

profitability (financial viability)

EC B i M d l


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EC Business ModelsValue proposition

value propositionThe benefits including the intangible and non-quantitative ones, that a

company can derive from using EC.Defines how a companys product or service fulfills the needs of customers Why should the customer buy from you?

How do e-business create value? Some of the examples:

Search and transaction cost efficiency Faster and more informed decision making, wider product and serviceselection, greater economies of scale, For example, demand and supplyfor buyer and seller

Complementarities Bundling goods and services compare offer separately. For example

with product delivery

Lock-in High switching cost that ties customer to particular suppliers

Novelty Innovative ways for structuring transactions, connecting partners and

fostering new market. For example, personalization and customization

EC B i M d l


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EC Business ModelsRevenue Models Revenue model

Description of how the company or an EC project will earnrevenue, generate profit.How will you earn money?

Major revenue models Sales: amazon, gap, jcpenny sales of goods, information,

services Transaction: e-Bay, e-trade - fees (commission) for enabling

/executing transaction Subscription: WSJ.com fees from subscriber to access

content or services

Advertising: Yahoo fees from advertiser for theiradvertisement Affiliate: MyPoint business referrals Fee based on the value of a service provided

Allow people to play games for a fee or watch a sport competition orconcert in real time for a fee (e.g. espn.go.com)

Licencing fee (can be annual fee or per usage fee, eg. Datadirect-technolo ies.com


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Revenue Models

or pertransaction

EC B i M d l


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EC Business ModelsTypical EC Models

Online direct marketing Sales may be from manufacturer to customer (e.g. Godiva) or

from retailer to consumer (e.g. Wal-Mart)

Also called e-tailing, Eliminate intermediaries

Electronic tendering systems

Tendering/bidding (reverse auction)

Model in which a buyer requests would-be sellers to submit bids(offers); the lowest bidder wins (e.g. General Electric Corp)

name-your-own-price model

Model in which a buyer sets the price he or she is willing to payand invites sellers to supply the good or service at that price (e.g.Priceline.com)

EC B i M d l
http://www.priceline.com/http://www.e-tendering.com/http://www.dell.com/


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EC Business ModelsTypical Models

Find the best price Customer specifies her need and then an intermediate company

matches the customers need against a database, locates thelowest price and submit to customer (e.g. eloan.com, find bestinterest rates for loans)

Also known as Search engine model

Affiliate marketing An arrangement whereby a marketing partner (a business, anorganization, or even an individual) refers consumers to the sellingcompanys Web site.

Place a banner or logo. If customer make purchase, then theaffiliated partner receive a commission. Of the purchase price

E.g. Amazon.com viral marketing

Word-of-mouth marketing in which customers promote a productor service to friends or other people

EC B siness Models
http://www.hotwire.com/


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Group purchasing

Quantity purchasing that enables groups of purchasers to obtain a discountprice on the products purchased.

Online purchasing is also called e-co-ops.

Online auctions Online shopper makes bids for products and services and the highest

bidder get the item (e.g. eBay, Amazon.com, Yahoo!). Product and service customization Creation of a product or service according to the buyers specifications (e.g.

jaguar, dell.com, nike.com).

Also known a s built-to-order

Electronic marketplaces and exchanges

E.g. GNX for retail industry, Chemconnect for chemical industry)

Information brokers

Provide privacy, trust, matching, content (e.g. Google.com)

EC Business Models
http://www.jaguarusa.com/us/en/xj/build_your_xj/build_your_xj.htmhttp://www.ebay.com/http://www.mybizpurchasinggroup.com/


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Bartering

Exchange surpluses (products) that they do not need for thosethey need (e.g. Web-barter.com) Deep discounting

Very high discount of retail price up to 50% of retail price (e.g.Half.com)

Membership Only member get discount

Value-chain integrators More complete package for customer (e.g. Carpoint.com car

buying, financing, insurance)

Value-chain service providers

Provide a supply chain function such as logistic (e.g. UPS.com) orpayment (e.g. PayPal) Social networks and communities

MySpace, Facebook
http://www.egreetings.com/http://www.half.com/


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Benefits of EC

Benefits to Organizations

Global Reach. Expands the marketplace to national and internationalmarkets.

Cost reduction. Decreases the cost of creating, processing, distributing,storing and retrieving paper-based information.

Supply chain improvement. Reduced inventories and overhead, and

delivery delays. Extended Hours (24/7).

Customization. Inexpensive build-to-order products and services.

Vendors specialisation. Sell products that are not feasible in physical world

Lower Communication Costs. Internet line cheaper than phone lines.

Improved Customer Relations. Through Customer RelationshipManagement.

Up-to-Date Company Material. Correct up to the minute.


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Benefits of EC

Benefits to Customers

Ubiquity (found everywhere). Transactions 24/7 and transactionsfrom almost any location.

Provides customers with more choices of products and services.From different vendors.

Customized products and services.

Cheaper products and services for customers. Allows quick delivery of products and services in some cases,

especially with digitized products.

Information availability. Locate relevant and detail productinformation in seconds (from e-catalog).

Allows customers to interact with other customers in electroniccommunities and exchange ideas as well as compareexperiences.


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Benefits of EC

Benefits to Society Telecommuting. Enables more individuals to work at home,

and to do less traveling for shopping, resulting in less trafficon the roads, and lower air pollution.

Allows some products to be sold at lower prices benefiting theless affluent (rich) ones and increase their standard of living

Enables people in Third World countries and rural areas toenjoy products and services which otherwise are not availableto them. Include education.

Delivery of public services. E.g. access to education andhealth care.


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Limitations of EC

Technical Limitations


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Limitations of EC

Non-Technical Limitations

Documents

Cpis380 Ch01 Overview Ec