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