by: m.nadeem akhtar1 using information technology to engage in electronic commerce management...

By: M.Nadeem Akhtar 1

USING INFORMATION TECHNOLOGY TO ENGAGE IN ELECTRONIC

COMMERCE

Management Information Systems.M.Nadeem Akhtar


A financial business transaction that occurs over an electronic network

Sometimes called e-business

Anyone with access to a computer, an Internet connection, and a means to pay for purchased goods or services can participate in e-commerce

E-Commerce

What is electronic commerce (e-commerce)?


E-Commerce Business Models

B-to-C or (B2C) e-commerce.B-to-B or (B2B) e-commerce.C-to-C or (C2C) e-commerce. (P2P) e-commerce.


Electronic Commerce Beyond the

Boundary of the Firm Business-to-customer (B2C) electronic commerce

refers to transactions between a business and the final consumer of the product

Business-to-business (B2B) electronic commerce refers to transactions between businesses in which neither is the final consumer. These may involve relatively few people, generally the information systems groups of the companies are most affected


Anticipated Benefits from Electronic

Commerce There are three main benefits of e-Commerce:1. Improved customer service before, during, and

after the sale2. Improved relationships with suppliers and the

financial community3. Increased economic return on stockholder and

owner investmentsThese benefits contribute to the firm’s financialstability and enable it to better compete in a businessworld that is using more and more computertechnology


Electronic Commerce Constraints In 1996 survey 60% of firms felt following three constraints on

e-commerce High costs (Computer resources were costly but now a days

costs of Computer resources comedown, according Gorden Moor’s Law)

Security concerns (But now a days secure telecommunicating networks are constantly monitoring for unauthorized access.)

Immature or unavailable software(This deficiency was overcome by making common interfaces suitable for

customers and electronic partners. )Each of these constraints is being challenged as IT and IS needs for e-

commerce become increasingly popular and the cost of the required computing resources keeps falling


Scope of Electronic Commerce

The amount of economic impact varies from industry to industry but about 94% of electronic commerce is B2B leaving 6% for B2C

E-commerce is estimated to be growing at between 5% and 15% each year, though may slow down, high growth in e-Commerce will likely continue for the next several years

Table 3.2 gives examples of the extent of the use of e-commerce in certain areas of the economy


The Pathway to Electronic Commerce

Implementing an e-commerce system includes a significant risk of failure

The Strategic business plan embodies/make the commitment to use E-commerce to achieve competitive advantage

The firm first gathers business intelligence to understand the potential role each environmental element will play.

The next step is to establish an IOS by means of Electronic Data Interchange (EDI ) .

The IOS is achieved by following the SLC or engaging in Business Process Redesign.

The Result is network oriented system that employs direct connectivity, value added networks, the internet or some combination.


Selection of E-Commerce Strategy, Methodology &

Technology

Strategic Business

Plan

IOS

EDI

Business Intelligence

SLC

BPR

Direct Connectivity

Value Added Network

The Internet

Enabling Strategy

Enabling Methodology

Enabling

Technology

Competitive Advantage


BUSINESS INTELLIGENCE

Before engaging in e-commerce managers must understand their firm’s relationships with customers, competitors, suppliers, and other external entities

Business Intelligence (BI) is the gathering of information about the environmental elements that interact with your firm


Business Intelligence Basic Tasks

Data

Data

Intelligence

Intelligence

1-Collect Data

2-Evaluate Data

3-Analyze data

4-Store Intelligence

5-DisseminateIntelligence



1-Collect Data.

a) Primary Data : Gathered by Firm. Firm’s marketing researchers conduct customer surveys.

b) Secondary Data: Available in form of commercial database provided by Data base services.

2- Evaluate Data.

All Primary & secondary data evaluated prior to use to ensure its accuracy.

3-Analyze Data.

Data is examined through different angels, looking for patterns , purpose of this step is to transform data into Intelligence



4- Store Intelligence

Printed Data/Intelligence is converted in Soft form through OCR or by Keying, So that can be used easily.

5-Disseminate Intelligence. Intelligence Profile of each user is prepared, describing

in a coded form of the intelligence topics that the user wants to monitor.


External Databases

Companies can also use commercial databases that provide environmental information on virtually any subject.

Firms use these databases because it is faster and less expensive than trying to research the information on their own.e.g. Reuters (www.reuters.com) search & analyze new media for subjects concerned to firm. www.thomasregister.com DB provide index of more than 150,000 U.S & Canadian manufacturers, & can get info about products and their suppliers.

Figure 3.1 illustrates the use of external databases and Web searches for business intelligence


Search Engines

A search engine is a special program that provides links to Web sites based on a keyword or group of words supplied by the user

Search engines then look through their database of Web site content to see which Web sites use that word or phrase

Other specialized indexing programs create directories of Web site categories, working on the “backend” of the search engine


E-Commerce Strategy (THE INTER-ORGANIZATIONAL SYSTEM (IOS))

For any problem there are several possible solutions, & this rule of thumb applies to problem of determining the best E-commerce strategy.

The strategy that is most often mentioned is one in which the elements are linked with transmissions of E-Data.

The name given to this strategy is IOS. An IOS is created through linkages with other firms so

they can work together as a coordinated unit This allows them to achieve benefits that each could not

achieve alone Inter organizational systems are fundamental to electronic

commerce


IOS Benefits

The trading partners enter into an IOS venture with the expectation of realizing benefits such as:

1-Comparative Efficiency – Internal efficiency (Improvement in firm’s own operations,

enabling firm to get data, Analyze it and make decisions fast.)

– Inter organizational efficiency(Improvements gained by working with other firms, like enabling firm to offer more products and services, serve more customers, shift certain work to suppliers or customers& gather environmental data more easily.)


2-Bargaining Power The ability of a firm to resolve disagreements with its suppliers &

customers to its own advantage is called bargaining power.

Bargaining power is derived from three basic methods: By offering

– Unique product features(Easier ordering, quicker shipment & faster response time to requests for information. )

– Reduced search-related costs (Firm can reduce shopping costs that its customer incur in searching for supplier, identifying

alternative products & getting lower price.)– Increased switching costs (by providing H/Ware S/ware &

data communication channels so that customer will have to replace them if wants to switch to competitors firm. )


Electronic Data Interchange (EDI)

EDI is considered a subset of IOS, EDI is a means for achieving an IOS .

EDI consists of direct Computer –to- computer data transmissions among multiple firms, Or EDI is essentially electronic forms that can be sent over networks.

It involves transmitting data in a machine-readable, structured format, enabling the data to be received without the need for re-keying

Vendor stock replenishment/ fill up again is a special type of IOS where the supplier can initiate the replenishment process by electronically monitoring the firm’s inventory levels


EDI Standards.

The data that flows along each path b/w firm & its trading partner adhered to a standard format .Two major standards for EDI are the American National Standards Institute standard ASC X12 is used in North America and the EDIFACT international standards are used in Europe.

The standard formats enable the trading partners to exchange data but require a translation process prior to sending and after reciept.The translation is required because the partner’s computer application typically do not handle data in the same format as the standard.

Special software called mapping software performs the translation process.


Mapping s/w translates Data to & from Standard formats

Application Software

Mapping Software

Mappings Software

Application Software

Sending Firm’s Computer

Receiving Firm’s Computer


Extranet

Another way of establishing an IOS is by using a secure form of Internet technology called an extranet

Special type of Internet system where standard web page browsers and web servers are used, with limited number of trusted external entities are allowed access to sensitive firm data and application.

Security and privacy are serious concerns so the extranets are generally secured behind a firewall


Electronic Funds Transfer (EFT) When data representing money is

transmitted over a computer network, it is called electronic funds transfer

EFT is used by firms and individuals who have their payroll checks deposited into their bank accounts or who pay bills using electronic payments

EFT also plays a major role in electronic commerce


Proactive and Reactive Business Partners

When a firm decides to adopt EDI, it can do so in a Proactive or Reactive way.

The IOS sponsor typically takes a proactive approach (Take initiative), stimulating interest in the IOS and encouraging participation in the network

The participants, on the other hand, typically respond in a reactive manner—accepting or rejecting the sponsor’s offer to adopt IOS.


Adoption Influences Prem Kumar and Rama Murthy studied the four factors

that can influence the decision to adopt an IOS. They identified four factors that determine whether the firm will be proactive or reactive:

– 1. Competitive pressure

– 2. Exercised power

– 3. Internal need

– 4. Top management support The second two are internal factors while the first two

are environmental


Adoption Influences

1. Competitive pressure

When the firm is in a poor position in relation to its competitors or when industry or trade association provide strong pressure, the firm will adopt EDI in reactive way.


Adoption Influences

2. Exercised power

When a firm can exert power over other members of the IOS it will be Proactive in adopting EDI.Some firms are so powerful that they can demand that their trading partners either use EDI or take their business elsewhere.


Adoption Influences

3- Internal need.

When the firm sees that the participation in the IOS is a way to improve its own operations ,it will approach EDI in a Proactive Manner.


Adoption Influences

4-Top management support.

Regardless of whether the firm acts in Proactive or reactive manner, top management support always influence the decision.


Indirect IOS Benefits The indirect benefits of participating in an

IOS include:– increased ability to compete.– improved relationships with trading partners– and improved customer service

Figure 3.4 shows this relationship between direct and indirect benefits


E-Commerce Technology.

Technology Choices.

There are three main technology choices.

1. Direct Connectivity

2. Value Added Network (VAN)

3. The Internet.


1-Direct Connectivity

The firm can establish data communication links with its trading partners using circuits provided by AT & T,GTE, MCI and Sprint.

The circuits take the form of dial up or private lines and can use a variety of such circuitry as fiber optics and microwave transmission.

This is a traditional way to build business networks, it provides trading partners with most direct control over network.


2-Value Added Networks (VAN)

VAN is provided by a vendor who not only furnishes the circuits but also provides many of the services that are necessary to use the circuits for EDI.

For example VAN vendor can provide the mapping software, maintain log files and assist in trading partner training.A prominent service is security of Data that travel over the network.

Leading VAN providers are Advantis, GEIS & Sterling Commerce.


3-Internet

Makes available a global communication network that not only links the trading partners but can also include consumers.

Much of the boom in E-Commerce is expected to come from firms that will promote –and in some cases deliver –their products via Internet.


EVOLUTION OF THE INTERNET

Understanding the Internet's evolution can help forecast future opportunities

ARPANET makes it possible for military personnel and civilian researchers to exchange information relating to military matters. It forms a major portion of what has come to be known today known as the Internet

In 1989, Tim Berners-Lee, working at CERN (Particle Physics Lab), came up with a way for physicists to communicate using hypertext electronically linked documents.

This system quickly evolved into what is now known as the World Wide Web


CYBERSPACE AND THE INFORMATION SUPERHIGHWAY

The term cyberspace is from William Gibson’s 1984 book Neuromancer to describe a society that had become a slave to its technology

The information superhighway describes a system that gives everyone access to the wealth of information that exists in our modern society

The two main organizations in leadership roles in establishing Internet and Web standards are The Internet Society and the IETF (Internet Engineering Task Force)

Web standards come from the World Wide Web Consortium (W3C)


BUSINESS APPLICATIONS OF THE INTERNET

The Internet can be used for any business application that involves data communication, including both communication inside the firm and with the environment

Unlike proprietary networks, the Internet can be used with any computer platform without any special effort to access the network

The Internet also makes it possible to transmit a wider variety of media that can be handled over most conventional networks


Marketing Research and Retailing

Applications

By taking advantage of this new source of customer information, industrial marketers have gained new inroads to their markets

The Web business application with which the general public is most familiar is retailing (sale of goods in small quantities to public ) – most large retail chains now have an established Web presence

by: m.nadeem akhtar1 using information technology to engage in electronic commerce management...

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