Chapter 1 Overview of Electronic Commerce http web

Learning Objectives l l l l Chapter 1 Define electronic commerce (EC) and describe its various categories Describe and discuss the content and framework of EC Describe the major types of EC transactions Describe some EC business models Describe the role of the digital revolution in EC and the economic impact of EC Discuss the contribution of EC in helping organizations respond to environmental pressures Discuss the benefits of EC to organizations, consumers, and society Describe the limitations of EC Prentice Hall 1

Electronic Commerce: Definitions and Concepts l electronic commerce (EC) The process of buying, selling, transferring, or exchanging products, services, or information via computer networks. Chapter 1 Prentice Hall 2

Electronic Commerce: Definitions and Concepts l e-business E-business is a broader definition of EC that includes not just the buying and selling of goods and services, but also Servicing customers l Collaborating with business partners l Conducting electronic transactions within an organization l Chapter 1 Prentice Hall 3

Electronic Commerce: Definitions and Concepts 1. 1 Chapter 1 Prentice Hall 4

Electronic Commerce: Definitions and Concepts l Traditional commerce: all dimensions are physical l Brick-and-mortar organizations Ø Old-economy organizations (corporations) Ø Perform all business off-line Ø Sell physical products by means of physical agents Chapter 1 Prentice Hall 5

Electronic Commerce: Definitions and Concepts l PURE l Pure EC: all dimensions are digital l l VERSUS PARTIAL EC virtual (pure-play) organizations Organizations that conduct their business activities solely online. (e. Bay, AOL –media services) Partial EC: a mix of digital and physical dimensions Click-and-mortar (click-and-brick) organizations l Conduct EC activities l Do their primary business in the physical world l Examples: GE, IBM, Intel l Chapter 1 Prentice Hall 6

Electronic Commerce: Definitions and Concepts l INTERNET VERSUS NON-INTERNET EC l Non-Internet EC is the use of EC technologies on private (as opposed to public) networks. l intranet An internal corporate or government network that uses Internet tools, such as Web browsers, and Internet protocols. l extranet A network that uses the Internet to link multiple intranets. Chapter 1 Prentice Hall 7

Electronic Commerce: Definitions and Concepts l Interorganizational information systems (IOSs) Communications systems that allow routine transaction processing and information flow between two or more organizations. l intraorganizational information systems Communication systems that enable e-commerce activities to go on within individual organizations. Chapter 1 Prentice Hall 8

Electronic Commerce: Definitions and Concepts l Internet EC is the use of EC technologies on public (as opposed to private) networks. l electronic market (e-marketplace) An online marketplace where buyers and sellers meet to exchange goods, services, money, or information. Chapter 1 Prentice Hall 9

The EC Framework, Classification, and Content l An l EC Framework EC applications supported by infrastructure and 5 support areas People l Public policy l Technical standards and protocols l Business partners l Support services l Chapter 1 Prentice Hall 10

The EC Framework, Classification, and Content Chapter 1 Prentice Hall 11

Thu 22 -9 The EC Framework, Classification, and Content CLASSIFICATION OF EC BY THE NATURE OF THE TRANSACTIONS OR INTERACTIONS l Business-to-business (B 2 B): EC model in which all of the participants are businesses or other organizations l Business-to-consumer (B 2 C): EC model in which businesses sell to individual shoppers l Business-to-business-to-consumer (B 2 B 2 C): 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 l e-tailing Online retailing, usually B 2 C. E-tailors began to fail in 1999 Chapter 1 Prentice Hall 12

The EC Framework, Classification, and Content l l l Chapter 1 consumer-to-business (C 2 B) E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals who seek sellers to bid on products or services they need. consumer-to-consumer (C 2 C) E-commerce model in which consumers sell directly to other consumers. mobile commerce (m-commerce) E-commerce transactions and activities conducted in a wireless environment. Prentice Hall 13

The EC Framework, Classification, and Content location-based commerce (l-commerce) M-commerce transactions targeted to individuals in specific locations, at specific times. l intrabusiness 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. l Chapter 1 Prentice Hall 14

The EC Framework, Classification, and Content l l l Chapter 1 business-to-employees (B 2 E) E-commerce model in which an organization delivers services, information, or products to its individual employees. collaborative commerce (c-commerce) E-commerce model in which individuals or groups communicate or collaborate online. peer-to-peer Technology that enables networked peer computers to share data and processing with each other directly; can be used in C 2 C, B 2 B, and B 2 C ecommerce. Prentice Hall 15

The EC Framework, Classification, and Content e-learning The online delivery of information for purposes of training or education. l e-government E-commerce model in which a government entity buys or provides goods, services, or information from or to businesses or individual citizens. l Chapter 1 Prentice Hall 16

Thu 22 -9 The EC Framework, Classification, and Content exchange A public electronic market with many buyers and sellers. l exchange-to-exchange (E 2 E) E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information. l Chapter 1 Prentice Hall 17

Sun 25 -9 Interdisciplinary Nature of EC l l l l l Marketing Computer sciences Consumer behavior and psychology Finance Economics Management information systems Accounting and auditing Management Business law and ethics Others Chapter 1 Prentice Hall 18

Brief History of EC EC applications first developed in the early 1970 s --- Electronic funds transfer (EFT) l Limited to: l l l Electronic data interchange (EDI)—electronic transfer of documents: l l Purchase orders Invoices E-payments between firms doing business Enlarged pool of participants to include: l l Large corporations Financial institutions A few other daring businesses Manufacturers Retailers Service providers Internet became more commercialized in the early 1990 s l l Chapter 1 Stock trading Travel reservation systems Prentice Hall 19

The EC Framework, Classification, and Content l Web 2. 0 The second-generation of Internet-based services that let people generate content, collaborate, and share information online in perceived new ways —such as social networking sites, wikis, and communication tools. Chapter 1 Prentice Hall 20

The Digital Revolution Drives E-Commerce l digital economy An economy that is based on digital technologies, including digital communication networks, computers, software, and other related information technologies; also called the Internet economy, the new economy, or the Web economy. Chapter 1 Prentice Hall 21

The Digital Revolution Drives E-Commerce l The digital revolution accelerates EC mainly by providing competitive advantage to organizations. l The digital revolution enables many innovations ( ) l virtual world A user-defined world in which people can interact, play, and do business. The most publicized virtual world is Second Life. Digital products, financial transactions, Information as commodity Chapter 1 Prentice Hall 22

The Business Environment Drives E-Commerce l THE BUSINESS ENVIRONMENT The Business Environment Impact Model l Business Pressures and Opportunities l l l Organizational Response Strategies l Chapter 1 Market, societal and technological. Agility, CRM, KMS, E-markets, …etc. Prentice Hall 23

The Business Environment Drives E-Commerce Chapter 1 Prentice Hall 24

Sun 25 -9 EC BUSINESS MODELS l l business model A method of doing business by which a company can generate revenue to sustain itself. Revenue sources are l Transaction fees (Stock trade fee) l Subscription fees (AOL monthly fee) l Advertisement fees (Ads on google as banners) l Affiliate fees (Refering customers to other sites) l Sales (Wal-Mart, Amazon) Value proposition is the description of the benefits a company can derive from using EC Search and transaction cost efficiency Lock-in – switching costs Novelty Complementarities – bundling products with services Chapter 1 Prentice Hall 25

Tue 27 -9 (2) EC BUSINESS MODELS l TYPICAL EC BUSINESS MODELS l Online direct marketing (Used in B 2 C and B 2 B, Suitable for digitizable products) l Electronic tendering systems for procurement l l Chapter 1 tendering (bidding) system (reverse auction) Model in which a buyer requests would-be sellers to submit bids; the lowest cost or highest value bidder wins. name-your-own-price model Model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price. Prentice Hall 26

EC BUSINESS MODELS l Find the best price l l l Chapter 1 also known as a search engine model through intermediaries affiliate marketing An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site. viral marketing Word-of-mouth marketing in which customers promote a product or service to friends or others. Prentice Hall 27

EC BUSINESS MODELS l group purchasing Quantity (aggregated) purchasing that enables groups of purchasers to obtain a discount price on the products purchased. SMEs Small-to-medium enterprises. l e-co-ops Another name for online group purchasing organizations. l Chapter 1 Prentice Hall 28

EC BUSINESS MODELS l l Supply chain improvers (Hub instead of linear) Information brokers (infomediaries) Online auctions Product customization and service personalization l l Chapter 1 customization Creation of a product or service according to the buyer’s specifications. personalization The creation of a service or information according to specific customer specifications. Prentice Hall 29

Thu 29 -9 (3) The Digital Enterprise l digital enterprise A new business model that uses IT in a fundamental way to accomplish one or more of three basic objectives: • • • reach and engage customers more effectively, boost employee productivity, and improve operating efficiency. It uses converged communication and computing technology in a way that improves business processes. Chapter 1 Prentice Hall 30

The Digital Enterprise l corporate portal A major gateway through which employees, business partners, and the public can enter a corporate Web site. Chapter 1 Prentice Hall 31

The Benefits of EC l Benefits to Organizations Expands the marketplace to national and international markets l Decreases the cost of creating, processing, distributing, storing and retrieving paperbased information l Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs) l Chapter 1 Prentice Hall 32

Benefits of EC (cont. ) l Benefits to consumers l Enables consumers to shop or do other transactions 24 hours a day, all year round from almost any location l Provides consumers with more choices l Provides consumers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons l Facilitates competition, which results in substantial discounts Chapter 1 Prentice Hall 33

Benefits of EC (cont. ) l l 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 Chapter 1 Prentice Hall 34

Benefits of EC (cont. ) l Benefits to society l 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 l Allows some merchandise to be sold at lower prices, benefiting less affluent people l Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them l Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality Chapter 1 Prentice Hall 35

The Limitations of EC l Technical limitations l l l 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 Chapter 1 Prentice Hall 36