topic 1: e-commerce framework, business models and environment

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Module: Competing in the Network Economy

TOPIC 1: E-COMMERCE FRAMEWORK, BUSINESS MODELS AND ENVIRONMENT

1.1 Define electronic commerce (EC) and describe its various categories.

1.2 The EC framework, classification and content

1.3 The digital revolution as a driver for EC.

1.4 The business environment as a driver for EC. EC contribution to organisations responding to environmental pressures.

1.5 EC business models.

1.6 Benefits of EC to organisations, consumers, and society.

1.7 Limitations of EC.

1.8 Networks for EC.

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1.1: Taking Photographs

1. Buy film in a store

2. Load your camera

3. Take pictures

4. Take roll of film to store for processing

5. Pickup the film when ready

6. Select specific photos for enlargement

7. Mail to family and friends

The Old Economy The New Economy1st Gen. Digital Photography

– Old economy except 6 and 7 were replaced by using a scanner and emailing

2nd Gen.Digital Photography– Use a Digital Camera, no

film, no processing.

3rd Gen.Digital Photography– Your Digital Camera is

now your mobile phone, in your binoculars or a palmtop computer.

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Charles Schwab

Covisint

PayPal

Wal-Mart

AribaCommerceOne

Singapore

Cisco

MicrosoftOracle

AmazoneBay

GoogleYahoo

Dell

NTT DoCoMoNokia

1.1: The Brave New World

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Chemdex

Prodigy

KmartPathfinder

Beyond.com

HomeGrocer

People’s Express

Drkoop.com

ZapMail

CONFIRM

Railroads

Osborne

Ashton-Tate

Visicalc

Ambra

1.1: Or Jurassic Park?

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1.1: Competing with IT: Strategy and Structure

• Competing via strategy– Product leadership (Charles Schwab)

– Operational excellence (Federal Express)

– Customer intimacy (Home Depot)

• Competing via structure

– Alliances (Star Alliance)

– Value added partnerships (Amazon.com)

– Networked organisation (Cisco)

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1.1: Competing via Structure: the Role of EC

The Internet dramatically reduces transaction costs, facilitating the

creation and utilisation of electronic markets and value networks.

• Wal-Mart provides suppliers with access to its internal databases.

• Dell Computer virtually-integrates its entire value chain

• Airline reservation systems facilitate the coordination of schedules and code-sharing arrangements.

• GM, Ford and DaimlerChrysler are creating an electronic market in the automobile industry (Covisint).

• Control no longer requires ownership.

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1.1: Electronic Commerce: Definitions and Concepts

1. Electronic Commerce (EC)– The process of online buying, selling, or exchanging

products, services, or information via computer networks within firms, between firms, between firms and their customers, and between consumers.

EC

E-Business

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2. E-Business– A broader definition of EC.

– Automating all business processes and integrating them with E-Commerce (previous slide) applications to create one seamless, digital enterprise in order • to service customers, • to collaborate with business partners, • to conduct electronic transactions within an organisation

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3. Pure Versus Partial EC– EC takes several forms depending on the degree of

digitisation (the transformation from physical to digital).

– Companies utilising pure EC conduct all of their business online.

– Businesses utilising partial EC conduct a portion of their business online and a portion of their business off-line

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Exhibit 1.1 The Dimensions of Electronic Commerce

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4. EC organisations– Brick-and-mortar organisations

• Old-economy organisations (corporations) that perform most of their business off-line, selling physical products by means of physical agents

– Virtual (pure-play) organisations• Organisations that conduct their business activities

solely online– Click-and-mortar (click-and-brick) organisations

• Organisations that conduct some e-commerce activities, but do their primary business in the physical world


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5. Where EC is conducted– Electronic market (e-marketplace)

• An online marketplace where buyers and sellers meet to exchange goods, services, money, or information

– Interorganisational information systems (IOSs)• Communications system that allows routine transaction

processing and information flow between two or more organisations

– Intraorganisational information systems• Communication systems that enable e-commerce

activities to go on within individual organisations


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• Most EC is done over the Internet. But EC can also be conducted on private networks, such as – Value-added networks (VANs, networks that add

communication services to existing common carriers), – Local area networks (LANs) or– Wide area networks (WANs)

• Intranet– An internal corporate or government network that uses

Internet tools, such as Web browsers, and Internet protocols

• Extranet– A network that uses the Internet to link multiple intranets

1.1: Electronic Commerce: Transmission Medium

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Exhibit 1.2 A Framework for Electronic Commerce

• An EC Framework: supports five policymaking support areas

– People

– Public policy

– Marketing & advertisement

– Support services

– Business partnerships

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• To execute these applications, companies need the right framework: information, infrastructure, and support services – People: Sellers, buyers, intermediaries, information systems

specialists and other employees, and any other participants.

– Public policy: Legal and other policy and regulating issues, such as privacy protection and taxation.

– Marketing and advertising: Like any other business, EC usually requires the support of marketing and advertising.

– Support services: Many services are needed to support EC. They range from payments to order delivery and content creation.

– Business partnerships: Joint ventures, e-marketplaces, and partnerships are some of frequently occurring relationships in e-business

1.2: The EC Framework, Classification and Content

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• Classification by nature of the transactions or interactions– Business-to-Business (B2B)

• E-commerce model in which all of the participants are businesses or other organisations

– Business-to-Consumer (B2C)• E-commerce model in which businesses sell to individual

shoppers

– e-tailing• Online retailing, usually B2C


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– Business-to-Business-to-Consumer (B2B2C)• E-commerce model in which a business provides some

product or service to a client business that maintains its own customers

– Consumer-to-Business (C2B)• E-commerce model in which individuals use the Internet

to sell products or services to organisations or individuals seek sellers to bid on products or services they need

– Consumer-to-Consumer (C2C)• E-commerce model in which consumers sell directly to

other consumers


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– Peer-to-Peer• Technology that enables networked peer computers to

share data and processing with each other directly; can be used in C2C, B2B, and B2C e-commerce

– Mobile commerce (M-Commerce)• E-commerce transactions and activities conducted in a

wireless environment

– Location-based commerce (L-Commerce)• M-Commerce transactions targeted to individuals in

specific locations, at specific times


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– Intrabusiness EC• E-commerce category that includes all internal

organisational activities that involve the exchange of goods, services, or information among various units and individuals in an organisation.

– Business-to-Employees (B2E)• E-commerce model in which an organisation 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


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– E-Learning• The online delivery of information for purposes of

training or education– Exchange (electronic)

• A public electronic market with many buyers and sellers– Exchange-to-exchange (E2E)

• E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information

– E-Government• E-commerce model in which a government entity buys or

provides goods, services, or information to businesses or individual citizens


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• In 2004, total online shopping and B2B transactions in the USA was between $3 to $7 trillion

• By 2008:– Number of Internet users worldwide should reach 750

million – 50 percent of Internet users will shop – EC growth will come from:

• B2C• B2B • e-government• e-learning• B2E• c-commerce

1.2: The Future of EC

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• The major driver of EC is the digital revolution (1-23)

• A digital economy is an economy 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.

• The characteristics of the digital economy includes– A wide variety of digitised products

– Consumers and firms conducting financial transactions digitally

– Microprocessors and network capabilities embedded in physical goods.

1.3: The Digital Revolution Drives EC

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topic 1: e-commerce framework, business models and environment

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