Unit 7

E-Business

Lessons

1. Component of Electronic Economy

2. E-Business Models

3. Categories of E-Business

4. E-Business Advantages and Disadvantages

OverviewWhatever definitions are used for the electronic revolution taking place in our economy,

we must recognize that these changes take place in a larger economic context. For

example, global competition, interest rates, laws and regulations, social concerns,

industry traditions, and consumer preferences are all part of the broader "environment"

which can affect all business activities. Similarly, electronic and non-electronic

businesses share an infrastructure of available economic resources, including natural

resources, utilities, structures, equipment, telecommunication and other services,

employees, and workforce skills. While keeping this larger economic context in mind, the

emphasis in this lesson is to describe and encourage understanding of the "electronic"

portion of our overall economy.

Lesson 1 – Components of Electronic Economy

Objectives:

At the end of this lesson you will be able to:

Describe the Components of Electronic Economy - the supporting

infrastructure, Electronic Business, E-commerce Transaction and

Computer Mediated Networks

It is useful to think of the electronic economy as having three primary components--

supporting infrastructure, electronic business processes (how business is conducted), and

electronic commerce transactions (buying and selling). In addition, it is important to note

that a common feature of both electronic business processes and electronic commerce

transactions is reliance on the use of computer-mediated networks. It is reliance on the

use of computer networks, and the benefits this can provide, that is the "bottom line"

difference between electronic and other kinds of business.

Supporting infrastructure

E-business infrastructure is the share of total economic infrastructure used to support

electronic business processes and conduct electronic commerce transactions. It includes

hardware, software, telecommunication networks, support services, and human capital

used in electronic business and commerce. Examples of e-business infrastructure are:

Computers, routers, and other hardware

Satellite, wire, and optical communications and network channels

System and applications software

Support services, such as web site development and hosting, consulting, electronic

payment, and certification services.

Human capital, such as programmers.

Electronic Business

Electronic Business, commonly referred to as "eBusiness" or "e-Business", may be

defined as the utilisation of information and communication technologies (ICT) in

support of all the activities of business. Commerce constitutes the exchange of products

and services between businesses, groups and individuals and hence can be seen as one of

the essential activities of any business. Hence, electronic commerce or eCommerce

focuses on the use of ICT to enable the external activities and relationships of the

business with individuals, groups and other businesses.

Louis Gerstner, the former CEO of IBM, in his book, 'Who says Elephants can't dance'

attributes the term "e-Business" to IBM's marketing and Internet teams in 1996.

Electronic business methods enable companies to link their internal and external data

processing systems more efficiently and flexibly, to work more closely with suppliers and

partners, and to better satisfy the needs and expectations of their customers.

In practice, e-business is more than just e-commerce. While e-business refers to more

strategic focus with an emphasis on the functions that occur using electronic capabilities,

e-commerce is a subset of an overall e-business strategy. E-commerce seeks to add

revenue streams using the World Wide Web or the Internet to build and enhance

relationships with clients and partners and to improve efficiency using the Empty Vessel

strategy. Often, e-commerce involves the application of knowledge management systems.

E-business involves business processes spanning the entire value chain: electronic

purchasing and supply chain management, processing orders electronically, handling

customer service, and cooperating with business partners. Special technical standards for

e-business facilitate the exchange of data between companies. E-business software

solutions allow the integration of intra and inter firm business processes. E-business can

be conducted using the Web, the Internet, intranets, extranets, or some combination of

these.

Electronic Commerce Transactions

Electronic commerce (e-commerce) is any transaction completed over a computer-

mediated network that involves the transfer of ownership or rights to use goods or

services. Transactions occur within selected e-business processes (e.g., selling process)

and are "completed" when agreement is reached between the buyer and seller to transfer

the ownership or rights to use goods or services. Completed transactions may have a zero

price (e.g., a free software download).

Supply Chain ManagementLogisticsDistribution planningDemand planning and forecastingWarehouse management

Enterprise ManagementFinance and administrationOperations planning and executionProcurementHuman resourcesProduct developmentInventory management Research and development

Customer ManagementSales channel managementMarketing automationCustomer relationship managementPersonalization

Figure 7-1 E-business activities

Computer-mediated Networks

Computer-mediated networks are electronically linked devices that communicate

interactively over network channels. Generally, both electronic devices will be computer-

enabled, but at a minimum at least one device must be computer-enabled as in the case of

a typical telephone linking with an computer-enabled interactive telephone system.

Typically, the interactive link involves minimal human intervention though someone

activates the electronic devices, accesses the network, and may even assist with the

process or transaction. For example, many e-commerce businesses are providing

shoppers with the on-line capability of "chatting" with customer support representatives

or even speaking with them through the use of internet telephony software. Examples of

devices and networks are:

Linked electronic devices such as computers, personal digital assistants, webTV,

Internet-enabled cellular phones, and telephones linked with interactive telephone

systems.

Networks such as the Internet, intranets, extranets, Electronic Data Interchange

(EDI) networks, and telecommunication networks. Networks may be either open

or closed.

Lesson 2 – E-Business Model

Objectives:

At the end of this lesson you will be able to:

Describe the E-business Model and the component of an e-business model

E-business Model

When organizations go online, they have to decide which e-business models best suit

their goals. A business model is defined as the organization of product, service and

information flows, and the source of revenues and benefits for suppliers and customers.

The concept of e-business model is the same but used in the online presence. The

following is a list of the currently most adopted e-business models:

E-shops

Online shopping is the process consumers go through to purchase products or services

over the Internet. An online shop, es-hop, e-store, internet shop, webshop, webstore,

online store, or virtual store evokes the physical analogy of buying products or services at

a bricks-and-mortar retailer or in a shopping mall.

The metaphor of an online catalog is also used, by analogy with mail order catalogs. All

types of stores have retail web sites, including those that do and do not also have physical

storefronts and paper catalogs.

Online shopping is a type of electronic commerce used for business-to-business (B2B)

and business-to-consumer (B2C) transactions.

E-procurement

E-procurement (electronic procurement, sometimes also known as supplier exchange)

is the business-to-business (B2B) or business-to-consumer (B2C) purchase and sale

of supplies and services through the Internet as well as other information and

networking systems, such as Electronic Data Interchange and Enterprise Resource

Planning. Typically, e-procurement Web sites allow qualified and registered users to

look for buyers or sellers of goods and services. Depending on the approach, buyers

or sellers may specify costs or invite bids. Transactions can be initiated and

completed. Ongoing purchases may qualify customers for volume discounts or

special offers. E-procurement software may make it possible to automate some

buying and selling. Companies participating expect to be able to control parts

inventories more effectively, reduce purchasing agent overhead, and improve

manufacturing cycles. E-procurement is expected to be integrated with the trend

toward computerized supply chain management.

E-procurement is done with a software application that includes features for supplier

management and complex auctions. eBay's tools for its sellers have similar features.

There are six main types of e-procurement:

1. Web-based ERP (Electronic Resource Planning): Creating and approving

purchasing requisitions, placing purchase orders and receiving goods and

services by using a software system based on Internet technology.

2. e-MRO (Maintenance, Repair and Operating): The same as web-based

ERP except that the goods and services ordered are non-product related MRO

supplies.

3. e-sourcing: Identifying new suppliers for a specific category of purchasing

requirements using Internet technology.

4. e-tendering: Sending requests for information and prices to suppliers and

receiving the responses of suppliers using Internet technology.

5. e-reverse auctioning: Using Internet technology to buy goods and services

from a number of known or unknown suppliers.

6. e-informing: Gathering and distributing purchasing information both from

and to internal and external parties using Internet technology.

The e-procurement value chain consists of Indent Management, eTendering,

eAuctioning, Vendor Management, Catalogue Management, and Contract

Management. Indent Management is the workflow involved in the preparation of

tenders. This part of the value chain is optional, with individual procuring

departments defining their indenting process. In works procurement, administrative

approval and technical sanction are obtained in electronic format. In goods

procurement, indent generation activity is done online. The end result of the stage is

taken as inputs for issuing the NIT.

E-auctions

A reverse auction (also called procurement auction, e-auction, sourcing event, e-

sourcing or eRA) is a tool used in industrial business-to-business procurement. It is a

type of auction in which the role of the buyer and seller are reversed, with the primary

objective to drive purchase prices downward. In an ordinary auction (also known as a

forward auction), buyers compete to obtain a good or service. In a reverse auction,

sellers compete to obtain business.

Virtual Communities

A virtual community, e-community or online community is a group of people that

primarily interact via communication media such as letters, telephone, email or

Usenet rather than face to face, for social, professional, educational or other purposes.

If the mechanism is a computer network, it is called an online community. Virtual and

online communities have also become a supplemental form of communication

between people who know each other primarily in real life. Many means are used in

social software separately or in combination, including text-based chatrooms and

forums that use voice, video text or avatars. Significant socio-technical change may

have resulted from the proliferation of such Internet-based social networks.

Collaboration Platforms

An emerging category of computer software, collaboration platforms are unified

electronic platforms that support synchronous and asynchronous communication

through a variety of devices and channels.

Collaboration platforms offer a set of software components and software services that

enable individuals to find each other and the information they need and to be able to

communicate and work together to achieve common business goals. The core

elements of a collaboration platform are messaging (email, calendaring and

scheduling, and contacts), team collaboration (file synchronization, ideas and notes in

a wiki, task management, full-text search), and real-time collaboration and

communication (e.g., presence, instant messaging, Web conferencing, application /

desktop sharing, voice, audio and video conferencing), and Social Computing tools

(e.g., blog, wiki, tagging, RSS, shared bookmarks).

Actually, the Collaboration platforms could be proprietary or open source or free

software, and tend to be used in a wider information and communication

environments, representing the collaboration platform one module or package more to

be integrate in a bigger platform.

Value-chain Service Providers

The virtual value chain, created by John Sviokla and Jeffrey Rayport, is a business

model describing the dissemination of value-generating information services

throughout an Extended Enterprise. This value chain begins with the content supplied

by the provider, which is then distributed and supported by the information

infrastructure; thereupon the context provider supplies actual customer interaction. It

supports the physical value chain of procurement, manufacturing, distribution and

sales of traditional companies.

To illustrate the distinction between the two value chains consider the following:

“when consumers use answering machines to leave a message, they are using an

object that is both made and sold in the physical world, however when they buy

electronic answering services from the phone company they are using the

marketspace—a virtual realm where products and services are digital information and

are delivered through information-based channels.” (Rayport et al. 1996) There are

many businesses that employ both value chains including banks which provide

services to customers in the physical world at their branch offices and virtually

online. The value chain is separated into two separate chains because both the

marketplace (physical) and the marketspace (virtual) need to be managed in different

ways to be effective and efficient (Samuelson 1981). Nonetheless, the linkage

between the two is critical for effective supply chain management.

Information Brokerage

An information broker is a person or business that researches information for clients.

Common uses for information brokers include market research and patent searches,

but can include practically any type of information research.

Relevant components of an e-business model

An e-business model must have:

1. A shared digital business infrastructure, including digital production and

distribution technologies (broadband/wireless networks, content creation

technoloties and information management systems), which will allow business

participants to create and utilize network economie.

2. A sophisticated model for operations including integrated value chains – both

supply chains and buy chains.

3. An e-business management model consisting of business team or partnerships.

4. Policy, regulatory and social systems – i.e. business policies consistent with e-

commerce laws, tele-working, virtual-work, distance learning, incentive schemes.

Lesson 3 – Categories of E-Business

Objectives:

At the end of this lesson you will be able to:

Describe and list down the E-business categories

Roughly dividing the world into providers/producers and consumers/clients one can

classify e-businesses into the following categories:

Business-to-Business (B2B)

Business-to-business (B2B) is a term commonly used to describe electronic

commerce transactions between businesses, as opposed to those between businesses

and other groups, such as business and individual consumers (B2C) or business and

government (B2G).

B2B is also commonly used as an adjective to describe any activity, be it B2B

marketing, sales, or e-commerce, that occurs between businesses and other businesses

rather than between businesses and consumers. Similar to B2B, B2G is often meant to

refer to B2G Marketing.

Business-to-Consumer (B2C)

Business-to-consumer (B2C, sometimes also called Business-to-Customer) describes

activities of E-businesses serving end consumers with products and/or services. It is

often associated with electronic commerce but also encompasses financial institutions

and other types of businesses. B2C relationships are often established and cultivated

through some form of Internet marketing.

Business-to-Employee (B2E)

Business-to-employee (B2E) electronic commerce uses an intrabusiness network

which allows companies to provide products and/or services to their employees.

Typically, companies use B2E networks to automate employee-related corporate

processes.

Examples of B2E applications include:

Online insurance policy management

Corporate announcement dissemination

Online supply requests

Special employee offers

Employee benefits reporting

Management

special discounts to employees

Business-to-Government (B2G)

Business to Government (B2G) is a derivative of B2B marketing and referred to as a

market definition of "Public Sector Marketing" which encompasses marketing

products and services to the U.S. Government through Integrated Marketing

Communications techniques such as strategic public relations, branding, marcom,

advertising, web-based communications to Uncle Sam.

Government-to-Business (G2B)

Government-to-Business (abbreviated G2B) is the online non-commercial interaction

between local and central government and the commercial business sector, rather than

private individuals (G2C). For example http://www.dti.gov.uk is a government web

site where businesses can get information and advice on e-business 'best practice'.

Government-to-Government (G2G)

Government-to-Government (abbreviated G2G) is the online non-commercial

interaction between Government organisations, departments, and authorities and other

Government organisations, departments, and authorities. It's use is common in the

UK, along with G2C, the online non-commercial interaction of local and central

Government and private individuals, and G2B the online non-commercial interaction

of local and central Government and the commercial business sector.

G2G systems generally come in one of two types:

Internal facing - joining up a single Governments departments, agencies,

organisations and authorities - examples include the integration aspect of the

Government Gateway, and the UK NHS Connecting for Health Data SPINE.

External facing - joining up multiple Governments IS systems - an example would

include the integration aspect of the Schengen Information System (SIS), developed

to meet the requirements of the Schengen Agreement.

Government-to-Citizen (G2C)

Government-to-Citizen (abbreviated G2C) is the online non-commercial interaction

between local and central Government and private individuals, rather than the

commercial business sector G2B. For example Government sectors become visibly

open to the public domain via a Web Portal. Thus making public services and

information accessible to all. One such web portal is Government Gateway

Consumer-to-Consumer (C2C)

Consumer-to-consumer (or C2C) electronic commerce involves the electronically-

facilitated transactions between consumers through some third party. A common

example is the online auction, in which a consumer posts an item for sale and other

consumers bid to purchase it; the third party generally charges a flat fee or

commission. The sites are only intermediaries, just there to match consumers. They

do not have to check quality of the products being offered.

Consumer-to-Business (C2B)

Consumer-to-business (C2B) is an electronic commerce business model in which

consumers (individuals) offer products and services to companies and the companies

pay them. This business model is a complete reversal of traditional business model

where companies offer goods and services to consumers (business-to-consumer =

B2C).

This kind of economic relationship is qualified as an inverted business model. The

advent of the C2B scheme is due to major changes:

Connecting a large group of people to a bidirectional network has made this

sort of commercial relationship possible. The large traditional media outlets

are one direction relationship whereas the internet is bidirectional one.

Decreased cost of technology : Individuals now have access to technologies

that were once only available to large companies ( digital printing and

acquisition technology, high performance computer, powerful software)

Lesson 4 – E-Business Advantages and Disadvantages

Objectives:

At the end of this lesson you will be able to:

Describe the advantages and disadvantages of E-business.

Sellers are finding tremendous advantages in doing business online. They can broaden

the scope of sales and operations from local to worldwide, improve internal efficiency

and productivity, enhance customer service, and increase communication with both

suppliers and customers. At the same time, buyers are enjoying greater access to markets.

However, there are some disadvantages to doing business online for both buyers and

sellers. Table 7-1 and 7-2 illustrate some of the e-business advantages and disadvantages

for both buyers and sellers.

Table 7-1 E-Business advantages

Advantages for E-Business Sellers Advantages for E-Business Buyers

Increased sales opportunities Wider product availability

Decreased transactions costs Customized and personalized information

and buying options

Ability to operate 24 hours a day, 7 days a

week from one virtual marketspace.

Ability to shop 24 hours a day, 7 days a

week.

Ability to reach narrow market segments Easy comparison shopping and one-stop

that may be widely distributed

geographically.

shopping for business buyers.

Access to global markets Access to global markets

Increased speed and accuracy of

information exchange

Quick delivery of digital products; quicker

delivery of information.

Multiple buyers and sellers located together

in one virtual marketplace

Option to participate in auctions and

reverse auctions

Ability to maintain strong customer

relationship by direct interaction with

individual customers

Ability to create a one-on-one relationship

with seller

Table 7-2 E-Business disadvantages

Disadvantages for E-Business Sellers Disadvantages for E-Business Buyers

Rapidly changing technology Concern over transaction security and

privacy

Insufficient telecommunications capacity

or bandwidth in some areas

Lack of trust for unfamiliar sellers

Difficult integrating existing systems with

e-business software

Inability to touch and feel products before

purchase

Problems maintaining system security and

reliability

Resistance to unfamiliar buying processes,

paperless transactions, and electronic

money

Global market issues including language,

political environment and currency

conversions.

Complicated legal environment

Increased instances of failure to pay for

merchandise or fraud.

Lack of return policies that are easy to

understand

References:

1. Chaudhury, A. & Kuilboer, J-P (2002). E-business and e-commerce Infrastructure – Technologies Supporting the e-Business Initiative). New York: McGraw-Hill Higher Education.

2. H.Albert Napier, Philip J. Judd, Ollie N. Rivers, and Andrew Adams (2003). E-Business Technologies. Canada: Thomson Course Technology.