Electronic CommerceChapter 1:

Foundations of Electronic Commerce

Learning Objectives

1. Define electronic commerce (EC) and the content and dimensions of field.

2. The benefits of EC to organizations, consumers, and society.

3. The Limitations of EC.4. Impact of e-commerce

Definition and the contents of field

Electronic commerce (EC)The process of buying, selling, or exchanging products, services, or information via computer networks.These computer network consist of:

Internet : Internet is self regulated network connecting millions of

computer networks around the globe. Intranet

An internal corporate or government network (LAN or WAN) that uses Internet tools, such as Web browsers, and Internet protocols behind the companies firewall.

Extranet A network that uses the Internet to link multiple intranets

Definition and the contents of field

EC can be further defined from these perspectives: Communication perspectives

Delivery of information ,product or service, payment Business process perspectives

Use of technology for automation of business process Service perspectives

Increase the speed of service delivery Online perspectives

Enhanced online capabilities of digital products and services

Dimensions of EC e-business

A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization.

Pure versus Partial EC EC can take several forms depending on the degree

of digitization 1. the product (service) sold2. the delivery method (intermediaries)3. the process (e.g., ordering, payment, fulfillment)

The product can be physical or digital The agent can be physical or digital The process can be physical or digital

The EC field

Framework of EC (figure 1.2) Applications Four Pillars, major areas Supporting Infrastructure

Electronic market Electronic market is the place where shopper

and seller meet to exchange goods, services, money, or information. It is a network based location.

Classification of the EC field by the nature of transactions These are general e-commerce types: Business to Business (or B2B) e-commerce (sometimes

called e-procurement) Business to Consumer (or B2C) e-commerce Consumer-to-consumer (or C2C) e-commerce Non-Business EC: NGOs, universities , schools etc.

activities to improve their operations and reduce costs. Business-to-government (or B2G) e-commerce Intra-business EC: E-commerce category that includes

all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization.

History and Future

Benefits and Limitations

Benefits to Organizations

Expand marketplace to national and international markets. Allows small businesses to have global customer base Provides purchasing opportunities for buyers (businesses

can identify new suppliers and partners) Increases sales: easily and quickly locate more customers

and suppliers decreases cost :Reduced cost through electronic sales

enquires, price quotes and order taking, instead of retrieving paper-based information

highly specialized business : pets.com Improved image , improved service, compressed cycle

Benefits to… Consumers

Business can be transacted 24hrs a seven days a week. More choices :The level of detail of purchase information

is selected by user. Conduct quick comparison Digital products can be delivered instantly Electronic communities share and exchange ideas and

experiences. Society

Work at home: Less traffic, time saving Tax refunds, public retirement and welfare support costs

less when distributed over the Internet Allows products and services to be available in remote

areas, e.g. e-learning

Limitations Technological

The newness and evolution of the current technology. System security , reliability, protocols and standards Digital divide: insufficient bandwidth Rapid change in technology Integration with old system: Difficulty in integrating

current databases and transaction processing systems into e-commerce solutions

Limitations

Non-technological Cost of opening EC in house very high Security and privacy Trust :Transmission of credit card details Cultural and legal obstacles User résistance, Some consumers unwilling to change Laws are unclear Shipping profile: Products with a low value-to-weight ratio that

can not be efficiently packed and shipped are unsuitable Breakdown in human relationship

Well-suited Business Processes to Particular (only) E-commerce

Sale/purchase of books & CDs, Online delivery of software Travel services (Air, Buss, Railway

Tickets, Hotel bookings), Investments and insurance services Stock ExchangeOnline shipment tracking (DHL)

E-commerce + Traditional commerce Well-suited Business Processes for both

Sale/purchase of automobiles and residential real estate (e.g. do research online then buy from a dealer or real estate agent)

Online banking Matching/friendship service

Traditional Business Processes (Not-suited to E-Commerce)

Products can not be efficiently packed and shipped are unsuitable

Sale/purchase of impulse items for immediate use, high fashion jewelry and antiques

Perishable foods, Fresh vegetables or fruits (personal inspection required; prefer to touch, smell or examine closely)

Small denomination purchases and sales (since there is not yet a standard for transferring small amounts of money)

The Driving Forces Of EC

Markets, technology, and societal pressures, force organizations to respond (table 1.2).

Traditional responses (lowering costs by firing employees, closing unprofitable product or service) may not be sufficient due to magnitude of the pressure and the frequent changes.

Therefore organizations frequently must use innovation and reengineering their operations. e.g. improving service standards. New customized products.

The driving forces of EC

Business Process: Organizational Response…

Strategic systems: Strategic information system increase market

intelligence and result in increase market share.Continuous improvement efforts

Improved productivity (e.g. employees) Improved decision making Customer service innovation

Business process re-engineering

Organizational Response….

Business process re-engineering Reducing cycle time and time to market

Inception of idea to its implementation First mover advantage

Empowerment of employees and collaborative work Delegates authority to team who can execute the work

faster and error free Knowledge management

Organizational know how via intranet Customer focus approach

Mass production to Mass customization Business alliance

Joint venture Virtual cooperation

Impact of e-commerce: everything will change…

Improving direct Marketing/Marketing related effects Product promotion :Interactive and information rich

interaction New sales and distribution channels Direct saving :information/product delivery direct to

customers Reduced cycle time : administrative work load can be

reduced save 90% time Customer service: through intelligent agents, detailed

information

everything will change…

Brand or corporate image: quick and trusty Customization: computers and even cars can

customized Advertisement: more effective than mass

advertisements Ordering system: order can given electronically and

quickly routed to fulfill Markets : new markets explored like digital markets.,

market space converted

everything will change…

Transforming organizations Technology and organizational learning

Before getting it right, organization might have to struggle with different experiments

Re–arrange or new offerings according to better customer feedback

Durable impact cannot be achieved overnight Changing nature of work

Reducing work force Outsourcing Workers are more flexible, constant learner, willing to change

Redefining organization New product capabilities

Mass customization Build customer profile

New business models Direct distribution to end user New products like banner ads/ web developers

Impact on manufacturing Just in time manufacturing Computer aided designs Merging productions from different parts of world, due to

EC communication collaboration and coordination.

everything will change…

Impact on finance and marketing Shake the financial systems even governments New payment systems Online valets Electronic cash Money laundering

Human resource management, training education Online Trainings in organizations Free information access Interactive TVs / online education / CBTs

Putting it all together