ecommerce final

1© Prentice Hall, 2000

Foundations of Electronic Commerce


Learning Objectives

Define electronic commerce and describe its various categories

Distinguish between electronic markets and inter-organizational systems

Describe the benefits of electronic commerce to organizations, consumers, and society

Describe the limitations of electronic commerce Understand the forces that drive the widespread use of

electronic commerce Describe and discuss the changes that will be caused by

electronic commerce Discuss some major managerial issues regarding

electronic commerce


Opening Vignettes:Intel Corp. and Happy Puppy

Intel Corporation Business-to-business (B2B) products selling Customer service Purchasing from and dealing with suppliers

Happy Puppy Retailing company’s games Marketing others’ games Business-to-consumers (B2C)


Definitions and Content of Field

Electronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet. Electronic commerce describes the buying and selling of

products, services, and information via computer networks including the Internet.

The infrastructure for EC is a networked computing environment in business, home, and government.

E-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.


A global networked environment is known as the Internet

A counterpart within organizations, is called an intranet

An extranet extends intranets so that they can be accessed by business partners.

Definitions and Content of Field (cont.)


Pure Vs. Partial Electronic Commerce

Three dimensionsthe product (service) sold [physical / digital];the process [physical / digital] the delivery agent (or intermediary) [physical / digital]

Traditional commerceall dimensions are physical

Pure ECall dimensions are digital

Partial ECall other possibilities include a mix of digital and physical

dimensions


Ph

ysic

al

agen

t

Dig

ital

ag

ent

Digital Product

Physical Product Physical process

Digital process

Virtual process

Virtual delivery agent

Virtual product

Electronic commerce areas

The core of electronic commerce

The Dimensions of Electronic Commerce

Traditional commerce


Figure 1.2 shows that the EC applications are supported by infrastructures, and their implementation is dependent on four major areas (shown as supporting pillars) people, public policy, technical standards and protocols, and other organizations.

The EC management coordinates the applications, infrastructures, and pillars. It also includes Internet marketing and advertisement.

The Electronic Commerce Field

A Framework for Electronic Commerce 9

Electronic Commerce Applications

• Stocks Jobs • On-line banking

• Procurement and purchasing• Malls • On-line marketing and advertising

• Home shopping • Auctions • Travel • On-line publishing

People:

Buyers, sellers,

intermediaries,

services, IS people,

and management

Public

policy,

legal, and

privacy

issues

Technical standards

for documents,

security, and

network protocols

payment

Organizations:

Partners,

competitors,

associations,

government services

Infrastructure

(1)

Common business

services infrastructure

(security smart

cards/authentication

electronic payment,

directories/catalogs)

(2)

Messaging and

information distribution

infrastructure

(EDI, e-mail, Hyper Text

Transfer Protocol)

(3)

Multimedia content

and network

publishing infrastructure

(HTML, JAVA, World

Wide Web, VRML)

(4)

Network infrastructure

(Telecom, cable TV

wireless, Internet)

(VAN, WAN, LAN,

Intranet, Extranet)

(5)

Interfacing

infrastructure

(The databases,

customers, and

applications)

Management© Prentice Hall, 2000


A market is a network of interactions and relationships where information, products, services, and payments are exchanged.

The market handles all the necessary transactions.

An electronic market is a place where shoppers and sellers meet electronically.

In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.

Electronic Markets

11

Shopper/Purchaser Seller/Supplier

Electronic Market

(Transaction Hander)

Electronic commerce

network

(Infrastructure)

Product/service information request

Purchase request

Payment or payment advicePurchase fulfillment request

Purchase change request

Response to fulfillment request

Shipping notice

Payment approval

Electronic transfer of funds Electronic transfer of funds

Shopper/Purchaser’s Bank

Payment remittance notice

Electronic transfer of funds

Transaction Handler’s Bank

(Automated Clearing House)

Seller/Supplier’s Bank

Electronic Markets© Prentice Hall, 2000

Response to information request

Purchase acknowledgment

Shipping notice

Purchase/service delivery (if online)

Payment acknowledgment


An interorganizational information system (IOS) involves information flow among two or more organizations.

Its major objective is efficient routine transaction processing, such as transmitting orders, bills, and payments using EDI or extranets.

Scope: An IOS is a unified system encompassing two or several business partners.

A typical IOS includes a company and its suppliers and and/or customers.

Interorganization Information Systems


Electronic data interchange (EDI) Extranets Electronic funds transfer (EFT) Integrated messaging systems Shared databases Electronically-supported supply chain

management

Types of Interorganizational Systems


Business-to-business Business-to-customer Intra business transactions Others

ElectronicCommerce

Business to Business

Business to Customer

Intraorganizational

Other

InterorganizationalSystem

Business to Business

Classification of Electronic Commerce

Classification of EC by the Nature of the Transactions

© Prentice Hall, 2000


MarketingComputer sciencesConsumer behavior

and psychologyFinanceEconomicProduction/Logistic

Management information systems

Accounting and auditing

ManagementBusiness law and

ethics

Electronic Commerce is Interdisciplinary


The Benefits ofElectronic Commerce

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

Benefits to Organizations


Benefits to Organizations (cont.)

Reduces the time between the outlay of capital and the receipt of products and services

Supports business processes reengineering (BPR) efforts

Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)


Benefits to Customers

Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location

Provides customers with more choices Provides customers 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


Benefits to Customers (cont.)

Customers can receive relevant and detailed information in seconds, rather than in days or weeks

Makes it possible to participate in virtual auctions Allows customers to interact with other

customers in electronic communities and exchange ideas as well as compare experiences

Electronic commerce 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 the poor ones

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


The Limitations ofElectronic Commerce

Lack of sufficient system’s security, reliability, standards, and communication protocols

Insufficient telecommunication bandwidth The software development tools are still evolving

and changing rapidly Difficulties in integrating the Internet and electronic

commerce software with some existing applications and databases

Technical Limitations of Electronic Commerce


Technical Limitations of Electronic Commerce (cont.)

The need for special Web servers and other infrastructures, in addition to the network servers (additional cost)

Possible problems of interoperability, meaning that some EC software does not fit with some hardware, or is incompatible with some operating systems or other components


Non-Technical Limitations

Cost and justification (35% of the respondents)The cost of developing an EC in house can be

very high, and mistakes due to lack of experience, may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system one needs to deal with some intangible benefits which are difficult to quantify.


Security and Privacy (17% of the respondents)These issues are especially important in the B2C area,

and security concerns are not truly so serious from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive these issues as very important and therefore the EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, fairly secure.

Lack of trust and user resistance (4%)Customers do not trust an unknown faceless seller,

paperless transactions, and electronic money. So switching from a physical to a virtual store may be difficult.

Non-Technical Limitations (cont.)


Other limiting factors are:Lack of touch and feel onlineMany unresolved legal issuesRapidly evolving and changing ECLack of support servicesInsufficiently large enough number of sellers and

buyersBreakdown of human relationshipsExpensive and/or inconvenient accessibility to the

Internet

Non-Technical Limitations (cont.)


The Driving Forces of Electronic Commerce

Business pressures Organizational responses The role of Information

Technology (including electronic commerce)

The New World of Business


Major Business Pressures

Market and

economic pressures

Strong competition

Global economy

Regional trade agreements (e.g. NAFTA)

Extremely low labor cost in some countries

Frequent and significant changes in markets

Increased power of consumers

Societal and

environmental pressures

Changing nature of workforce

Government deregulation of banking and other services

Shrinking government budgets subsides

Increased importance of ethical and legal issues

Increased social responsibility of organizations

Rapid political changes

Technological pressures Rapid technological obsolescence

Increase innovations and new technologies

Information overload

Rapid decline in technology cost Vs. performance ratio


Organizational Responses

Framework for Organizational and Societal Impacts of Information Technology

Management

and

Business Process

Organization

Structure and the

Corporate Culture

Individual

and Roles

Information

Technology

The Organization’s

Strategy

External Environment, Social, Economic, Political, etc


Reducing cycle time and time to market Empowerment of employees and collaborative work Knowledge management Customer-focused approach Business alliances — virtual corporation

Business Process Reengineering


Everything Will Be Changed

Product promotion

New sales channels

Direct savings

Time-to-market (reduced cycle time)

Customer service

Brand or corporate image

Improving Direct Marketing


Transforming Organizations Work will change

Technology learningOrganizational learning

Redefining Organization New product capabilities New business models

Other Changes in the Workplace


Impacts on Manufacturing Pull processing, mass customization, shorter cycle

time, integration (ERP), electronic bidding and procurement

Impacts on Finance and Accounting Electronic payment systems, electronic cash,

automating back office, home banking, electronic stock trading

Human Resource Management Electronic recruiting, training, distance learning

Other Changes in the Workplace (cont.)


Is it real? How to evaluate the magnitude of the

business pressures? What should be my company’s strategy

towards EC? What is the best way to learn about EC?

Management Issues

ecommerce final

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