© Prentice Hall 20041 Chapter 1 Overview of Electronic Commerce.

© Prentice Hall 2004© Prentice Hall 2004 11

Chapter 1Chapter 1

Overview of Electronic Overview of Electronic CommerceCommerce


Electronic Commerce: Definitions and

ConceptsThe Internet has emerged as a major, perhaps eventually the major, worldwide distribution channel for goods, services, managerial and professional jobsThis is profoundly changing economics, markets and industry structure, products and services and their flow, consumer segmentation, consumer values, consumer behavior, jobs, and labor marketsThe impact may be even greater on societies and politics, and on the way we see the world and ourselves in it


Electronic Commerce: Definitions and Concepts

(cont.)

E-commerce E-commerce defined from the following perspectives:

Communications: delivery of goods, services, information, or payments over computer networks or any other electronic meansCommercial (trading): provides capability of buying and selling products, services, and information on the Internet and via other online services



(cont.)

Business process: doing business electronically by completing business processes over electronic networks, thereby substituting information for physical business processesService: a tool that addresses the desire of governments, firms, consumers, and management to cut service costs while improving the quality of customer service and increasing the speed of service delivery



(cont.)

Learning: an enabler of online training and education in schools, universities, and other organizations, including businessesCollaborative: the framework for inter- and intraorganizational collaborationCommunity: provides a gathering place for community members to learn, transact, and collaborate



(cont.)

e-business:e-business: a broader definition of a broader definition of EC, which includes:EC, which includes:

buying and selling of goods and buying and selling of goods and servicesservices

servicing customersservicing customers

collaborating with business partnerscollaborating with business partners

conducting electronic transactions conducting electronic transactions within an organizationwithin an organization



(cont.)Pure vs. Partial ECPure vs. Partial EC depends upon the degree of digitization (the transformation from physical to digital) of:1. the product (service)

sold;2. the process; and for3. the delivery agent (or

digital intermediary)

Brick-and-Mortar Brick-and-Mortar organizations organizations areare old-economy old-economy organizations organizations (corporations) that (corporations) that perform most of perform most of their business off-their business off-line, selling physical line, selling physical products by means products by means of physical agentsof physical agents



(cont.)Virtual (pure-play) Virtual (pure-play) organizationsorganizations conduct their conduct their business activities business activities solely onlinesolely online

Click-and-mortar Click-and-mortar organizations organizations conduct some EC conduct some EC activities, but do their activities, but do their primary business in primary business in the physical worldthe physical world

Electronic market Electronic market (e-marketplace) (e-marketplace) online marketplace online marketplace where buyers and where buyers and sellers meet to sellers meet to exchange goods, exchange goods, services, money, or services, money, or informationinformation



(cont.)InterorganizationInterorganizational information al information systems (IOSs) systems (IOSs) allow routine allow routine transaction transaction processing and processing and information flow information flow between two or between two or more organizationsmore organizations

IntraorganizationIntraorganizational information al information systems systems enable enable EC activities to go EC activities to go on on within within individual individual organizationsorganizations


Exhibit 1.1: The Exhibit 1.1: The Dimensions of Electronic Dimensions of Electronic

CommerceCommerce


EC Framework

EC applications are supported by infrastructure and by five support areas:

PeoplePublic policyMarketing and advertisingSupport servicesBusiness partnerships


Exhibit 1.2: A Framework Exhibit 1.2: A Framework for Electronic Commercefor Electronic Commerce


The Interdisciplinary Nature of EC

Major EC disciplines Major EC disciplines Computer scienceComputer science

MarketingMarketing

Consumer behaviorConsumer behavior

FinanceFinance

EconomicsEconomics

Management information systems Management information systems


A Brief History of ECA Brief History of EC

1970s: innovations like 1970s: innovations like electronic funds electronic funds transfer transfer (EFT)—funds routed (EFT)—funds routed electronically from one organization to electronically from one organization to another (limited to large corporations)another (limited to large corporations)electronic data interchange electronic data interchange (EDI)— (EDI)— electronically transfer routine documents electronically transfer routine documents (application enlarged pool of participating (application enlarged pool of participating companies to include manufacturers, companies to include manufacturers, retailers, services)retailers, services)interorganizational system interorganizational system (IOS)—travel (IOS)—travel reservation systems and stock tradingreservation systems and stock trading


A Brief History of EC A Brief History of EC (cont.)(cont.)

1969 U.S. government experiment—the 1969 U.S. government experiment—the Internet came into being initially used by Internet came into being initially used by technical audience of government technical audience of government agencies, academic researchers, and agencies, academic researchers, and scientistsscientists

1990s the Internet commercialized and 1990s the Internet commercialized and users flocked to participate in the form of users flocked to participate in the form of dot-comsdot-coms, or , or Internet start-upsInternet start-ups

Innovative applications ranging from online Innovative applications ranging from online direct sales to e-learning experiencesdirect sales to e-learning experiences



Most medium- and large-sized organizations Most medium- and large-sized organizations have a Web sitehave a Web siteMost large U.S. corporations have Most large U.S. corporations have comprehensive portals comprehensive portals 1999 the emphasis of EC shifted from B2C to 1999 the emphasis of EC shifted from B2C to B2BB2B2001 the emphasis shifted from B2B to B2E,2001 the emphasis shifted from B2B to B2E,c-commerce, e-government, e-learning, and c-commerce, e-government, e-learning, and m-commercem-commerce

EC will undoubtedly continue to shift and EC will undoubtedly continue to shift and changechange



EC successesEC successesVirtual EC companies

eBayVeriSignAOLCheckpoint

Click-and-mortarCiscoGeneral ElectricIBMIntelSchwab

EC failuresEC failures1999, a large number of EC-dedicated companies began to failEC’s days are not numbered!

dot-com failure rate is declining sharplyEC field is experiencing consolidation most pure EC companies, are expanding operations and generating increasing sales (Amazon.com)


The Success Story of Campusfood.Com

Provide interactive menus to college Provide interactive menus to college students, using the power of the students, using the power of the Internet to replace and/or facilitate the Internet to replace and/or facilitate the traditional telephone ordering of mealstraditional telephone ordering of meals

Built the company’s customer baseBuilt the company’s customer baseexpanding to other universitiesexpanding to other universities

attracting studentsattracting students

generating a list of restaurants from which generating a list of restaurants from which students could order food for deliverystudents could order food for delivery


The Success Story of Campusfood.Com (cont.)

Now some of these activities are Now some of these activities are outsourced to a marketing firm, enabling outsourced to a marketing firm, enabling the addition of dozens of schools the addition of dozens of schools nationwidenationwideFinanced through private investors, Financed through private investors, friends, and family members, the site was friends, and family members, the site was built on an investment of less than $1 built on an investment of less than $1 millionmillionCampusfood.com’s revenue is generated Campusfood.com’s revenue is generated through through transaction feestransaction fees—the site takes a —the site takes a 5 % commission on each order from the 5 % commission on each order from the sellerssellers


The Success Story of Campusfood.Com (cont.)At At campusfood.comcampusfood.com you can: you can:

Navigate through a list of local Navigate through a list of local restaurants, their hours of operation, restaurants, their hours of operation, addresses, phone numbers, etc.addresses, phone numbers, etc.Browse an interactive menuBrowse an interactive menuBypass “busy” telephone signals to place Bypass “busy” telephone signals to place an order onlinean order onlineAccess special foods, promotions, and Access special foods, promotions, and restaurant giveaways restaurant giveaways Arrange electronic payment of your order Arrange electronic payment of your order


Benefits of ECBenefits of EC

Global reachGlobal reachCost reductionCost reductionSupply chain Supply chain improvementsimprovementsExtended hours: Extended hours: 24/7/36524/7/365CustomizationCustomizationNew business modelsNew business modelsVendors’ Vendors’ specializationspecialization

Rapid time-to-marketRapid time-to-marketLower communication Lower communication costscostsEfficient procurementEfficient procurementImproved customer Improved customer relationsrelationsUp-to-date company Up-to-date company materialmaterialNo city business No city business permits and feespermits and feesOther benefitsOther benefits

Benefits to organizationsBenefits to organizations


Benefits of EC Benefits of EC (cont.)(cont.)

UbiquityUbiquityMore products More products and servicesand servicesCheaper products Cheaper products and servicesand servicesInstant deliveryInstant deliveryInformation Information availabilityavailability

Participation in Participation in auctionsauctionsElectronic Electronic communitiescommunities “ “Get it your way” Get it your way” No sales taxNo sales tax

Benefits to consumers


Benefits of EC Benefits of EC (cont.)(cont.)

Benefits to Benefits to societysociety

TelecommutingTelecommuting

Higher standard Higher standard of livingof living

Hope for the poorHope for the poor

Availability of Availability of public servicespublic services


Limitations of ECLimitations of EC


Barriers of ECBarriers of EC

Security Security

Trust and riskTrust and risk

Lack of qualified Lack of qualified personnelpersonnel

Lack of business Lack of business modelsmodels

Culture Culture

User User authentication authentication and lack of public and lack of public key infrastructurekey infrastructure

Organization Organization

Fraud Fraud

Slow navigation Slow navigation on the Interneton the Internet

Legal issues Legal issues


The Digital RevolutionThe Digital Revolution

Digital economy:Digital economy: An economy that An economy that is based on digital technologies, is based on digital technologies, including digital communication including digital communication networks, computers, software, and networks, computers, software, and other related information other related information technologies; also called the technologies; also called the Internet economy, Internet economy, the the new new economy, economy, or the or the Web economyWeb economy


The Digital Revolution The Digital Revolution (cont.)(cont.)

A global platform over which people and A global platform over which people and organizations interact, communicate, organizations interact, communicate, collaborate, and search for information collaborate, and search for information

Includes the following characteristics:Includes the following characteristics:A vast array of digitizable productsA vast array of digitizable products

Consumers and firms conducting financial Consumers and firms conducting financial transactions digitallytransactions digitally

Microprocessors and networking capabilities Microprocessors and networking capabilities embedded in physical goodsembedded in physical goods


New Business New Business EnvironmentEnvironment

Customers are becoming more powerfulCreated due to advances in science occurring at an accelerated rateResults in more and more technologyRapid growth in technology results Rapid growth in technology results in a large variety of more complex in a large variety of more complex systems systems


New Business New Business Environment Environment (cont.)(cont.)

Characteristics in the business Characteristics in the business environment environment

A more turbulent environment with more A more turbulent environment with more business problems and opportunitiesbusiness problems and opportunities

Stronger competitionStronger competition

Need for organizations to make decisions Need for organizations to make decisions more frequently more frequently

A larger scope for decisions because more A larger scope for decisions because more factors factors

More information and/or knowledge needed More information and/or knowledge needed for making decisionsfor making decisions


Environment-Response-Environment-Response-Support ModelSupport Model

Critical response activitiestraditional actions such as lowering cost and closing unprofitable facilitiesintroduce innovative actions such as customizing or creating new products or providing superb customer service


Exhibit 1.6: Major Business Exhibit 1.6: Major Business Pressures and the Role of ECPressures and the Role of EC


Major Business PressuresMajor Business Pressures

Market andMarket andeconomiceconomicpressurespressures

Strong competitionStrong competition Global economyGlobal economy Regional trade Regional trade

agreements (e.g. agreements (e.g. NAFTA)NAFTA)

Extremely low Extremely low labor cost in some labor cost in some countriescountries

Frequent and Frequent and significant changes significant changes in marketsin markets

Increased power of Increased power of consumersconsumers


MajorMajorBusiness Pressures Business Pressures (cont.)(cont.)

Societal andSocietal andenvironmentalenvironmental

pressurespressures

Changing nature of Changing nature of workforceworkforce

Government Government deregulation of banking deregulation of banking and other servicesand other services

Shrinking government Shrinking government subsidiessubsidies

Increased importance of Increased importance of ethical and legal issuesethical and legal issues

Increased social Increased social responsibility of responsibility of organizationsorganizations

Rapid political changesRapid political changes


MajorMajorBusiness Pressures Business Pressures (cont.)(cont.)

TechnologicalTechnological

pressurespressures

Rapid technological Rapid technological obsolescenceobsolescence

Increase Increase innovations and innovations and new technologiesnew technologies

Information Information overloadoverload

Rapid decline in Rapid decline in technology cost vs. technology cost vs. performance ratioperformance ratio


Organizational ResponsesOrganizational Responses

Strategic systemsStrategic systemsContinuous improvement efforts and Continuous improvement efforts and business process reengineering—business process reengineering—including including business process business process reengineering reengineering (BPR)(BPR)Customer relationship management Customer relationship management (CRM)—divided into the following areas(CRM)—divided into the following areas

Operational CRM Operational CRM Analytical CRM Analytical CRM Collaborative CRM Collaborative CRM


Organizational Responses Organizational Responses (cont.)(cont.)

Business alliances Business alliances

Electronic marketsElectronic markets

Reductions in cycle time and Reductions in cycle time and time-to-markettime-to-market

Cycle time reduction:Cycle time reduction: Shortening the Shortening the time it takes for a business to time it takes for a business to complete a productive activity from complete a productive activity from its beginning to endits beginning to end



Empowerment of employeesEmpowerment of employees

Supply chain improvements Supply chain improvements

Mass customization: make-to-Mass customization: make-to-order in large quantities in an order in large quantities in an efficient manner efficient manner

Mass customization:Mass customization: Production of Production of large quantities of customized itemslarge quantities of customized items



Intrabusiness: from sales force Intrabusiness: from sales force automation to inventory automation to inventory

Knowledge management Knowledge management Knowledge management (KM):Knowledge management (KM): The The process of creating or capturing process of creating or capturing knowledge, storing and protecting it, knowledge, storing and protecting it, updating and maintaining it, and updating and maintaining it, and using itusing it

© Prentice Hall 20041 Chapter 1 Overview of Electronic Commerce.

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