Electronic Commerce Session 1: An Introduction to Electronic Commerce.
Chapter 1 : Foundation of Electronic-Commerce
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Transcript of Chapter 1 : Foundation of Electronic-Commerce
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Chapter 1
Foundation of
Electronic Commerce
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Learning Objectives
Define electronic commerce (EC)and describe its various categories
Distinguish between electronic
markets and interorganizationalsystems
Describe and discuss the content
and framework of EC
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Learning Objectives (cont.)
Understand the forces that drivethe widespread use of EC
Describe the benefits of EC toorganizations, consumers, andsociety
Describe the limitations of EC
Discuss some major managerialissues regarding EC
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Electronic Commerce:
Definitions and Concepts
The Internet has emerged as a major, perhapseventually the major, worldwide distributionchannel for goods, services, managerial andprofessional jobs
This is profoundly changing economics,markets and industry structure, products andservices and their flow, consumersegmentation, consumer values, consumer
behavior, jobs, and labor markets The impact may be even greater on societies
and politics, and on the way we see the worldand ourselves in it
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Electronic Commerce:
Definitions and Concepts (cont.)
e-business:a broader definitionof EC, which includes:
buying and selling of goods andservices
servicing customers
collaborating with business partners
conducting electronic transactionswithin an organization
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Electronic Commerce Terms
E-business
EC defined from these perspectives
Communications Business process
Service
Online Collaborations
Community
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Electronic Commerce:
Definitions and Concepts (cont.)
E-commerce defined from thefollowing perspectives:
Communications: delivery of goods,
services, information, or payments overcomputer networks or any other electronicmeans
Commercial (trading): provides
capability of buying and selling products,services, and information on the Internetand via other online services
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Electronic Commerce:
Definitions and Concepts (cont.)
Business process: doing businesselectronically by completing businessprocesses over electronic networks, therebysubstituting information for physical businessprocesses
Service: a tool that addresses the desire ofgovernments, firms, consumers, andmanagement to cut service costs while
improving the quality of customer service andincreasing the speed of service delivery
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Electronic Commerce:
Definitions and Concepts (cont.)
Learning:an enabler of online training andeducation in schools, universities, and otherorganizations, including businesses
Collaborative:the framework for inter- andintraorganizational collaboration
Community: provides a gathering place forcommunity members to learn, transact, and
collaborate
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Electronic Commerce Terms
(cont.) Internet vs. Non-Internet EC VANs
LANs
Click and Mortar
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Electronic Commerce Terms
(cont.) Pure vs. Partial EC: based on the degree
of digitization of Product
Process
Delivery agent
Traditional commerce: all dimensions arephysical
Pure EC: all dimensions are digital Partial EC: all other possibilities include a
mix of digital and physical dimensions
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Exhibit 1.1: The Dimensions of
Electronic Commerce
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The EC Framework,
Classification, and Content Two major types of e-commerce:
business-to-consumer (B2C) : onlinetransactions are made between
businesses and individual consumers business-to-business (B2B):
businesses make online transactionswith other businesses
intrabusiness EC: EC conducted inside anorganization (e.g., business-to-employeesB2E)
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TheEC Framework,
Classification, and Content (cont.)
Computer environments
Internet: global networkedenvironment
Intranet:a corporate or governmentnetwork that uses Internet tools, suchas Web browsers, and Internet protocols
Extranet: a network that uses theInternet to link multiple intranets
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EC Framework
EC applications are supported byinfrastructure and by five supportareas:
People Public policy
Marketing and advertising
Support services
Business partnerships
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Exhibit 1.2: A Framework for
Electronic Commerce
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Interorganizational information system
(IOS) involves information flow amongtwo or more organizations
Major objective is efficient routine
transaction processing, such astransmitting orders, bills, and paymentsusing EDI or extranets
Scope: Unified system encompassing
two or several business partners
Typical IOS includes a company, itssuppliers, and and/or customers
Interorganization Information Systems
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Classification of EC by
Transactions or Interactions
business-to-consumer (B2C) : onlinetransactions are made betweenbusinesses and individual consumers
business-to-business (B2B):businesses make online transactionswith other businesses
e-tailing:online retailing, usuallyB2C
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Classification of EC by
Transactions or Interactions (cont.)
business-to-business-to-consumer(B2B2C):e-commerce model in which abusiness provides some product or service
to a client business that maintains its owncustomers
consumer-to-business (C2B):
e-commerce model in which individualsuse the Internet to sell products orservices to organizations or individualsseek sellers to bid on products or services
they need
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Classification of EC by
Transactions or Interactions (cont.) consumer-to-consumer (C2C):
e-commerce model in which consumerssell directly to other consumers
peer-to-peer (P2P):technology thatenables networked peer computers toshare data and processing with each otherdirectly; can be used in C2C, B2B, andB2C e-commerce
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Classification of EC by
Transactions or Interactions (cont.)
mobile commerce ((m-commerce):
e-commerce transactions and
activities conducted in a wirelessenvironment
location-based commerce (l-
commerce):m-commercetransactions targeted to individualsin specific locations, at specifictimes
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Classification of EC by
Transactions or Interactions (cont.) intrabusiness EC:e-commerce category
that includes all internal organizationalactivities that involve the exchange of
goods, services, or information amongvarious units and individuals in anorganization
business-to-employees (B2E):e-
commerce model in which an organizationdelivers services, information, or productsto its individual employees
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Classification of EC by
Transactions or Interactions (cont.)
collaborative commerce (c-commerce):
e-commerce model in which individuals orgroups communicate or collaborate online
e-learning: the online delivery ofinformation for purposes of training oreducation
exchange (electronic): a public electronicmarket with many buyers and sellers
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Classification of EC by
Transactions or Interactions (cont.)
exchange-to-exchange (E2E): e-commerce model in which electronicexchanges formally connect to one
another the purpose of exchanginginformation
e-government: e-commerce model inwhich a government entity buys or
provides goods, services, or information tobusinesses or individual citizens
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Figure 1-1
Transactions in Electronic Markets
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A Brief History of EC
1970s: innovations like electronic fundstransfer(EFT)funds routed electronicallyfrom one organization to another (limited tolarge corporations)
electronic data interchange (EDI)electronically transfer routine documents(application enlarged pool of participatingcompanies to include manufacturers,retailers, services)
interorganizational system (IOS)travelreservation systems and stock trading
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A Brief History of EC (cont.)
1969 U.S. government experimenttheInternet came into being initially used bytechnical audience of government
agencies, academic researchers, andscientists
1990s the Internet commercialized andusers flocked to participate in the form of
dot-coms, or Internet start-ups
Innovative applications ranging fromonline direct sales to e-learning
experiences
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A Brief History of EC (cont.)
Most medium- and large-sized organizationshave a Web site
Most large U.S. corporations havecomprehensive portals
1999 the emphasis of EC shifted from B2C toB2B
2001 the emphasis shifted from B2B to B2E,
c-commerce, e-government, e-learning, and
m-commerce
EC will undoubtedly continue to shift andchange
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A Brief History of EC (cont.)
EC successes
Virtual ECcompanies
eBay
VeriSign
AOL
Checkpoint
Click-and-mortar
Cisco
General Electric IBM
Intel
Schwab
EC failures 1999, a large number of
EC-dedicated companiesbegan to fail
ECs days are notnumbered! dot-com failure rate is
declining sharply EC field is
experiencingconsolidation
most pure ECcompanies, areexpanding operationsand generatingincreasing sales(Amazon.com)
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The Interdisciplinary
Nature of EC
Major EC disciplines
Computer science
Marketing
Consumer behavior
Finance
Economics
Management information systems
El t i C i
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Marketing
Computer sciences
Consumer behaviorand psychology
Finance
Economics
Managementinformationsystems
Accounting andauditing
Management
Business law andethics
Others
Electronic Commerce is
Interdisciplinary
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The Driving Forces of
Electronic Commerce
The New World of Business
Business pressures
Organizational responses The role of Information Technology
(including electronic commerce)
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Exhibit 1.3: Major Business
Pressures and the Role of EC
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Major Business Pressures
Market andeconomic
pressures
Strong competition
Global economy
Regional tradeagreements (e.g.
NAFTA)Extremely low laborcost in somecountries
Frequent and
significant changesin markets
Increased power ofconsumers
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Major Business Pressures (cont.)
Societal andenvironmentalpressures
Changing nature ofworkforce
Governmentderegulation of bankingand other services
Shrinking governmentsubsidies
Increased importanceof ethical and legal
issues
Increased socialresponsibility oforganizations
Rapid political changes
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Major Business Pressures (cont.)
Technologicalpressures
Rapidtechnologicalobsolescence
Increase
innovations andnew technologies
Informationoverload
Rapid decline intechnology costvs. performanceratio
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Organizational Responses
Strategic systems Continuous improvement efforts
Business process reengineering
(BPR) Business Alliances
Electronic commerce
Organizational Responses
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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 Organizations
Strategy
External Environment,
Social, Economic,Political, etc
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Reducing cycle time and time to marketEmpowerment of employees andcollaborative work
Supply chain improvementsMass customizationChange management
IT Support and EC
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The Benefits of EC
Benefits to Organizations
Expands the marketplace to nationaland international markets
Decreases the cost of creating,processing, distributing, storing and
retrieving paper-based information
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Benefits of EC (cont.)
Benefits to Organizations (cont.) Allows reduced inventories and
overhead by facilitating pull-type
supply chain management The pull-type processing allows for
customization of products andservices which provides competitive
advantage to its implementers
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Benefits of EC (cont.)
Benefits to Organizations (cont.) Reduces the time between the outlay
of capital and the receipt of productsand services
Supports business processesreengineering (BPR) efforts
Lowers telecommunications cost - theInternet is much cheaper than valueadded networks (VANs)
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Benefits of EC (cont.)
Benefits to consumers Enables consumers to shop or do
other transactions 24 hours a day, all
year round from almost any location Provides consumers with more
choices
Provides consumers with lessexpensive products and services byallowing them to shop in many placesand conduct quick comparisons
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Benefits of EC (cont.)
Benefits to consumers (cont.)
Allows quick delivery of products andservices (in some cases) especially with
digitized products Consumers can receive relevant and
detailed information in seconds, ratherthan in days or weeks
Makes it possible to participate invirtual auctions
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Benefits of EC (cont.)
Benefits to consumers (cont.)
Allows consumers to interact with otherconsumers n electronic communitiesand exchange ideas as well as compareexperiences
Facilitates competition, which results in
substantial discounts
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Benefits of EC (cont.)
Benefits to society
Enables more individuals to work athome, and to do less traveling for
shopping, resulting in less traffic on theroads, and lower air pollution
Allows some merchandise to be sold atlower prices benefiting less affluent
people
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Benefits of EC (cont.)
Benefits to society (cont.)
Enables people in Third World countriesand rural areas to enjoy products and
services which otherwise are notavailable to them
Facilitates delivery of public services ata reduced cost, increases effectiveness,and/or improves quality
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The Limitations of EC
Technical limitations of electroniccommerce
Lack of sufficient systems security,
reliability, standards, and communicationprotocols
Insufficient telecommunication
bandwidth The software development tools are still
evolving and changing rapidly
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The Limitations of EC (cont.)
Technical Limitations of EC(cont.)
Difficulties in integrating the Internet
and electronic commerce software withsome existing applications anddatabases
The need for special Web servers andother infrastructures, in addition to thenetwork servers (additional cost)
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The Limitations of EC (cont.)
Technical Limitations of EC(cont.)
Possible problems of interoperability,
meaning that some EC software doesnot fit with some hardware, or isincompatible with some operatingsystems or other components
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Non-Technical Limitations
Cost and justification The cost of developing an EC in house can
be very high, and mistakes due to lack ofexperience may result in delays.
There are many opportunities foroutsourcing, but where and how to do it isnot a simple issue
In order to justify the system, one needsto deal with some intangible benefits whichare difficult to quantify.
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Security and Privacy These issues are especially important in
the B2C area, but security concerns arenot so serious from a technical
standpoint Privacy measures are constantly
improving too
The EC industry has a very long anddifficult task of convincing customersthat online transactions and privacy are,in fact, very secure
Non-Technical Limitations (cont.)
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Non-Technical Limitations (cont.)
Lack of trust and user resistance
Customers do not trust:
Unknown faceless sellers
Paperless transactions Electronic money
Switching from a physical to a virtualstore may be difficult
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Other limiting factors are: Lack of touch and feel online
Many unresolved legal issues
Rapidly evolving and changing EC
Lack of support services
Insufficiently large enough number ofsellers and buyers
Breakdown of human relationships
Expensive and/or inconvenient accessibilityto the Internet
Non-Technical Limitations (cont.)
Impact on EC: Everything will be Changed
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Impact on EC: Everything will be ChangedThe Analysis-of-Impacts Framework
I t T di P
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Impacts on Trading Processes
and Intermediaries (cont.)
Winners in EC
Internet access
providers Diversified portal
service providers
EC software
companies Proprietary
network owners
Others
Losers in EC
Wholesalers
(particularlysmall ones)
Brokers
Salespeople
Nondifferentiatedmanufacturers
I t B i P
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Impact on Business Processes
and Organizations
Improving direct marketing
Product promotion
New sales channels
Direct savings
Reduced cycle time
Customer service Brand or corporate image
Impact on Business Processes
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Impact on Business Processes
and Organizations (cont.)
Other marketing-related impacts
Customization
Advertising
Ordering systems
Markets
Transforming organizations
Technology and organization learning
Changing nature of work
Impact on Business Processes
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Impact on Business Processes
and Organizations (cont.)
Redefining organizations New product capabilities
New business models
Impacts on manufacturing Build-to-order
Impact on finance and accounting
Human resource management,training, and education
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Putting It All Together
Major concern of todays companieshow to transform themselves to takepart in digital economy
Example:Toys, Inc. Uses intranet for internal communications,
collaboration, dissemination of information
Networked to e-marketspaces and large
corporations
Corporate portal for communication andcollaboration with business partners
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Figure 1-2
Putting It AllTogether
Prentice Hall, 2002 61
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Is it real?
How to evaluate the magnitude of thebusiness pressures.
What should be my companys strategytowards EC?
Why is the B2B area so attractive?
What is the best way to learn about EC?
What ethical issues exist?
How can failures be avoided?
Managerial Issues
Electronic Commerce:
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Electronic Commerce:
Definitions and Concepts (cont.)
Pure vs. Partial ECdepends upon thedegree of digitization(the transformation
from physical todigital) of:
1. theproduct(service)sold;
2. theprocess; and for
3. the delivery agent(ordigital intermediary)
Brick-and-Mortarorganizations areold-economyorganizations
(corporations) thatperform most of theirbusiness off-line,selling physical
products by means ofphysical agents
Electronic Commerce:
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Electronic Commerce:
Definitions and Concepts (cont.)
Virtual (pure-play)organizationsconduct their businessactivities solely online
Click-and-mortarorganizationsconduct some ECactivities, but do their
primary business inthe physical world
Electronic market(e-marketplace)online marketplacewhere buyers and
sellers meet toexchange goods,services, money, orinformation
Electronic Commerce:
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Electronic Commerce:
Definitions and Concepts (cont.) Interorganizational
informationsystems (IOSs)allow routine
transactionprocessing andinformation flowbetween two or moreorganizations
Intraorganizational informationsystems enable
EC activities to goon within individualorganizations