Chapter 1

Introduction to e-business and e-commerce

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What is E-commerce and E-business

E-commerce: Buying and selling using internet Shopping on the internet E-commerce is buying and selling using

an electronic medium. It is accepting credit and payments over the net, doing banking transactions using the Internet, selling products or information using the World Wide Web

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E-business: transformation of key business

processes through the use of internet technologies.

Business processes:The group of logical, related, and sequential activities and transactions in which businesses engage

e.g. transferring funds, placing orders, sending invoice , shipping goods to customers etc..

includes both front and back-office applications that form the engine for modern E-commerce.

Figure 1.4 Three definitions of the relationship between e-commerce and e-business

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E-com transaction between organization can be considered from two perspectives.

Buy-side e-com refers to transaction to procure resources needed by an organization from its suppliers.

Sell-side e-com refers to transaction involved with selling products to an organization’s customers

Figure 1.1 The distinction between buy-side and sell-side e-commerce

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Different types of sell-side e-com

1. Transactional e-com site: Enable purchase of product online. Support the business by providing

information for consumer that prefer to purchase offline.

E.g.-retail site, travel site, online banking sites

www.amazon.com, www.thomascook.com, www.hsbc.com

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2. Service oriented relationship building web sites: Provide information to stimulate purchase and

build relationships Products are not typically available for purchase

online Encourage offline sales, generate enquiries

from customers E.g.- Management consultants such as

PricewaterhouseCooper (www.pwcglobal.com) and Accenture (www.accenture.com).

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3. Brand building sites: Support the brand by developing an

online experience of the brand Products are not typically available for

purchase online E.g. Beverage manufacturers, e.g. Tango

(www.tango.com)

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4. Portal or media sites: Provide information or news about a

range of topics Portals refer to gateway of information. Generate revenue by advertising,

commission based sales, sale of customer data

E.g.-Consumer site Yahoo! (www.yahoo.com). Business site: Silicon (www.silicon.com)

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Categories of Electronic Commerce

Five general e-commerce categories Business-to-consumer Business-to-business Business processes Consumer-to-consumer Business-to-government

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Elements of Electronic Commerce

Figure 1.2 Summary and examples of transaction alternatives between businesses, consumers and governmental organizations

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Consumer adoption of digital technologies

Adoption of digital platform enable access to e-com services. E.g.-use a mobile phone, use internet, use digital TV

Figure 1.5 UK rate of adoption of different digital mediaSource: MORI Technology Tracker, January 2006. See www.mori.com/technology/techtracker.shtml for latest details

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Drivers of consumer adoption

Benefits of online services are summarized by ‘six C’s’

1. Content: more detailed, in-depth information of product support the buying process. ”content is the king”

2. Customization: Customization of content like e-mail alerts

3. Community: discuss anything through forums, chat-rooms and blog comments

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Drivers of consumer adoption(cont.)

4. Convenience: able to select , purchase product any time from your desktop. 24*7*365 availability of a service.

5. Choice: web gives a wider choice of product and suppliers than via conventional distribution channels

6. Cost reduction: Internet is low-cost place of purchase as they have lower staff and distribution costs than a retailer that runs a network of high-street stores

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Barriers to consumer adoption

Lack of trust Security problems Lack of skills cost

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Drivers of business internet adoption

Potential for increased revenue arising from increased reach to a larger customer base

Cost reduction achieved through delivering services electronically. Reduction include staff costs, transport costs and cost of material such as paper

Figure 1.6 Attitudes to business benefits of online technologiesSource: DTI (2002)

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Cost/efficiency and competitiveness drivers

Cost/efficiency drivers Increasing speed with which supplies can be

obtained Increasing speed with which goods can be

dispatched Reduced sales and purchasing costs Reduced operating costs.

Competitiveness drivers Customer demand Improving the range and quality of services

offered Avoid losing market share to businesses already

using e-commerce.

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Tangible and intangible benefitsTangible benefits Intangible benefits

Increased sales from new sales leads giving rise to increased revenue from:– new customers, new markets– existing customers (repeat-selling)– existing customers (cross-selling).

Marketing cost reductions from:– reduced time in customer service– online sales– reduced printing and distribution costs of marketing communications.

Supply-chain cost reductions from:– reduced levels of inventory– increased competition from suppliers– shorter cycle time in ordering.

Administrative cost reductions from more efficient routine business processes such as recruitment, invoice payment and holiday authorization.

Corporate image communication Enhancement of brand More rapid, more responsive marketing

communications including PR

Faster product development lifecycle enabling faster response to market needs

Improved customer service Learning for the future Meeting customer expectations to have a

web site Identifying new partners, supporting existing

partners better Better management of marketing information

and customer information Feedback from customers on products

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Barriers to e-business and e-commerce adoption:

Around 40% of a small and medium

enterprises(SMEs) do not have a web site and majority do not use intranets, extranets, online purchasing or e-government services.

Figure 1.8 Adoption of Internet and e-business services across EuropeSource: Eurostat, Community Survey on ICT usage in enterprises, eEurope (2005) Information Society Benchmarking Report, © European Communities 2005, http://europa.eu.int/information_society

Figure 1.9 Barriers to development of online technologiesSource: DTI (2002)

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Question: What are the aspects that need to be managed when developing an e-business strategy?

Answer: the McKinsey 7S framework

Figure 1.10 The McKinsey 7S frameworkSource: Adapted from Waterman et al. (1980)

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Intro to B2B Company Employs 600 people worldwide Turnover £100m Products – composites and speciality polymers

See www.globalcomposites.com Distribution – 90 companies worldwide via joint

ventures and agents Competitors:

Derakan (www.dow.com/derakane) Scott Bader (www.scottbader.com) Owens Corning (www.owenscorning.com)

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Intro to B2C Company Established 1984, 80 staff Products – Kitchenware Distribution

Through retailers and transactional web sites

Competitors Cooking.com (www.cooking.com) Lakeland (www.lakelandlimited.com) Tupperware (www.tupperware.com).

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Activity – Benefits to B2B and B2C Company

See activity 1.5 Give examples of these benefits of an

online presence. Which of these are most important to each: Cost reduction New capability Communication Customer service Control Competitive advantage

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Activity – drivers and barriers to adoption

You are in a team of advisers at a local business link (a local government agency encouraging adoption of e-commerce)

List: Drivers to adoption of sell-side e-

commerce by business and how you can reinforce these by marketing benefits.

Barriers to adoption of sell-side e-commerce by business and how you can reinforce these by stressing benefits.