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ICE-M1151: E-Commerce System

Dr. Md. Hasnat Kabir

References

Electronic Commerce, from Vision

to Fulfillment by Elias M. Awad

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What is e-Commerce

• Selling goods and services on the retail level

with anyone, anytime and anywhere via

Internet.

• Brings the universal access of the Internet to

the core business processes.

• E-Commerce assists in

– Generating demand for products and services.

– Improving order management, financial transactions

and logistics.

• Successful e-Commerce should result in reduction of

transaction costs and streamlining of business

processes.

There are several ways of looking at e-

commerce:

• 1 .From communication perspective: it is the

ability to deliver products, services, information

or payments via networks like the internet.

• 2. From an interface view: e-commerce means

information & transaction exchanges. e.g. B2B

(business - to business), B2C (business to

consumer), C2C (Consumer – to consumer)

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• 3 .As a business process: e-commerce means

activities that support commerce electronically

by networked connections. eg- business

processes like manufacturing, inventory &

business – to – business processes like supply

chain management are managed by the same

networks as business-to-consumer processes.

• 4 .From an online perspective: e-commerce is

an electronic environment that allows sellers to

buy and sell products, services and information

on the internet. The product may be like cars or

services like news and consulting.

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• 5. As a structure: e-commerce deals with

various media: data, text, Web pages, Internet

telephony, and Internet desktop video.

• 6 .As a market: e-commerce is a worldwide

network. A local store can open a Web

storefront and find the world at its doorstep-

customers, suppliers, competitors and payment

services of course, and advertising presence is

essential.

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Examples of e-Commerce

• Credit card authorisation

• Online travel reservations

• Global wire funds transfer

• Point of Sale (POS) transactions

• Electronic banking

• Fund raising

• Auctioneering

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What is e-Business

• Conduct of business on the internet, in supply-

chain planning, tracking, fulfillment, invoicing

and payment.

• It include buying and selling as well as serving

customers and collaborating with business

partners.

• Create value by forming new relationships

between and among businesses and

processes.

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E-Business Goals

• Reach new markets

• Create new products and services

• Build customer loyalty

• Enrich human capital

• Make optimum use of existing and emerging

technologies

• Achieve market leadership and competitive

advantage

• E-commerce is not e-business.

• Why??

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• E-COMMERCE HAS BROKEN THE

TRADITIIONAL WAY OF DOING BUSINESS:

• 1 . Companies share information with

competitors

• 2 . Suppliers share information with buyers

• 3 . Corporate procurement is no longer

determined solely on price

• 4 . Financial transaction occur with the

involvement of banks.

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E-Commerce Myths • 1. Setting up a web site is easy

– But ensuring its availability and performance is difficult.

• 2. E-commerce means no more mass marketing

– Businesses still have to advertise their presence on the web.

• 3. E-commerce means a new economy – There is no “New” economy, but there is something new in the real economy.

• 4. E-commerce is revolutionary – Proportionate attention needs to be paid to aspects

related to 24/7 warehousing, delivery, customer support, etc.

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E-Commerce Myths (Contd.)

• 5. E-commerce is a commercial fad that crashed in

2000.

• 6. All products can be sold online

– Some can only be advertised.

• 7. Build it and they will come – Web sites have to be

promoted just like any other business.

• 8.The middleman is out

– Online reselling, headhunting, directory services

etc. is the emerging trend in e-commerce.

• 9. Size is not important for online firms

– Cyber customers are known to have preferred e-

commerce with large brand names.

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Advantages of E-Commerce

• Lower relative cost

– Proportionate investment allows startup companies to compete with market leaders.

• Economic Operations

– Administration of e-commerce infrastructure can be relatively more economical than that of a off-line business.

• Higher Margin

– For the same scale of business, processing overheads reduce considerably.

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Advantages of E-Commerce (Contd.)

• Better customer service

– Responsive and accurate online customer service.

• Convenient market search

– No need to physically move from store to store to

make price and promotions comparisons.

• Productivity gains

– Lesser resource allocation

– Value added resources

• Teamwork

– Higher overall interactivity between consumers and

businesses.

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Advantages of E-Commerce (Contd.)

• Knowledge markets

– Convenient research environment

• Information sharing, convenience and control

– 24/7 operations possible with minimum physical interactions.

• Contemporary business models

– Large scale barter trade

– Payments in kind vs. cash

• Product customizations

– Convenient market research allows development of customizable products or products with wider consumer base.

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Limitations of E-Commerce

• Security

– Spamming, spying, file corruption, and misuse.

Cyber consumers need secure transaction and site

protection.

• System and data integrity

– Security against viruses, hackers and attackers.

– Major challenges include defense against

disruptions and unauthorized changes in data.

• E-commerce is not free

– Small businesses still have to compete with the

reputation of market leaders.

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Limitations of E-Commerce (Contd.)

• Consumer search is neither cost effective nor

efficient

– Consumers may need quality guarantees and

assistance in search, adding to the eventual cost of

the product or service.

• Fulfillment problems

– Business may grow rapidly and the infrastructure

may not be able scale with the growth.

• Customer relations problems

– E-business requires customer loyalty to survive.

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Limitations of E-Commerce (Contd.)

• Products people wont buy online

– For some products people like to “road-test” the product before making a purchase.

• Corporate vulnerability

– Corporations do web-farming to extract business intelligence from online marketing information of their competitors.

• Lack of blueprint for handling e-commerce

– Traditional corporate structures and procedures inhibit progress in e-commerce.

– Most corporations have significant shortage of e-literate executives.

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Limitations of E-Commerce (Contd.)

• High-risk of Internet Startup

– Most Internet startups fail because of,

• Lack of sound business strategy,

• Disproportionate investment of time and resources,

• Inappropriate merchandise.

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Value Chains in E-Commerce • Organization of activities of a business so that

each activity adds value to the total operation of the business.

• Competitive advantage is achieved when an organization links activities in its value chain more cost effectively and efficiently than its competitors.

• Activities should be linked such that value-added (output) of one activity contributes to the input of another activity.

• Activities of an organization can be divided into

– Primary activities: Activities that support primary activities and each other by providing purchased inputs, technology, human resources and other firm functions.

– Support activities: Activities involved in the physical creation of a product or service and its sale, transfer to the buyer and after sale assistance.

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• Primary Activities of value chain:

• 1. Inbound logistics: these are procurement

activities – vendor selection, comparative

shopping, negotiating supply contracts and just-

in-time arrival of goods.

• 2. Operations: This is the actual conversion of

raw materials received into finished products. In

includes machining, packaging, assembly,

equipment maintenance, testing, printing and

facility operations.

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• 3. Outbound logistics: This activity represents

the actual storing, distributing and shipping of

the final product.

• 4. Marketing and sales: It deals with the

ultimate customer. It includes advertising,

product promotion, sales management,

identifying the product’s customer base, and

distribution channels.

• 5. Service: it focuses on after-sales service to

the customer. It includes testing, maintenance,

repairs, warranty work, and replacement parts. 23

• Support Activities of value chain:

• 1. Corporate infrastructure: This activity is the

backbone of the business unit. It includes

general management, accounting, finance,

planning, legal services, and quality

management.

• 2. Human resources: This is the unique activity

of matching the right people to the job. It

involves recruitment, relation, career path

development, compensation, training and

development. 24

• Technology development: This activity adds

value in the way it improves the product and the

business process in the primary activities.

• Procurement: This activity focuses on the

purchasing function and how well it ensures the

availability of quality raw material for

production.

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• Figure: A generic e-commerce model

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E-Commerce Integration

• Trend in e-commerce: Integration of the entire lifecycle – From the time the consumer purchases on the website

to the time the product is actually received.

Therefore, it is a path of various links (departments) in the chain to work together for a common objective – profitability and customer satisfaction.

• The lifecycle focuses around three major e-commerce applications,

– Business to consumer (B2C) • Performed on the Internet

– Business to business (B2B) • Performed on the Internet and Extranet

– Business within business • Performed on the Intranet.

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• Figure: Key elements of Internet, extranet and

intranet e-commerce 29

• Different types of e-commerce

• Business-to-business (B2B)

• Business-to-Consumer (B2C)

• Business-to-government (B2G)

• Consumer-to-consumer (C2C)

• Government to consumer (G2C)

• Government-to-business (G2B)

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http://www.slideshare.net/siddhesh130995/e-commerce-

31086645?next_slideshow=1

What is B2B e-commerce? • B2B e-commerce is simply defined as e-commerce

between companies. About 80% of e-commerce is of

this type.

• Examples: Intel selling microprocessor to Dell

• Heinz selling ketchup to Mc-Donalds

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What is B2C e-commerce? • Business-to-consumer e-commerce, or commerce

between companies and consumers, involves customers

gathering information; purchasing physical goods or

receiving products over an electronic network.

• Example: Dell selling me a laptop

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What is B2G ecommerce? • Business-to-government e-commerce or B2G is

generally defined as commerce between companies and

the public sector. It refers to the use of the Internet for

public procurement, licensing procedures, and other

government related operations

• Example: Business pay taxes, file reports, or sell goods

and services to Govt. agencies.

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What is C2C ecommerce?

• Consumer-to-consumer e-commerce or C2C is simply

commerce between private individuals or consumers.

• Example: Mary buying an iPod from Tom on eBay

I selling a car to my neighbor.

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G2C E-commerce • This Model is also a part of e-governance.

• The objective of this model is to provide good and

effective services to each citizen. The Government

provides the following facilities to the citizens through

website.

• Information of all government departments, Different

welfare schemes, Different application forms to be used by

the citizens.

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G2B E-commerce

• Government-to-business (G2B) is a business model

that refers to government providing services or

information to business organization.

• Government uses B2G model website to approach

business organizations. Such websites support

auctions, tenders and application submission

functionalities.

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Supply Chain Management

• Integrating the networking and communication infrastructure between businesses and suppliers to ensure

– having the right product,

– in the right place,

– at the right time,

– at the right price,

– in the right condition.

• An integral part of the B2B framework.

• Transforms the way companies deal with suppliers, partners and customers to improve efficiency and profitability.

Beginnings of the Internet

• The internet is the infrastructure that links

thousands of networks together.

• No one knows exactly how many computers are

connected to the Internet.

• It is a information super highway that makes the

information stored on thousands of computers

worldwide for people everywhere.

• Transmit messages among servers using

satellites, fiber-optic, cables, microwaves and

other technologies.

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Internet

INTERNET

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Information Transfer on the Internet

• Information to be transmitted over the Internet is segmented into packet.

• Each packet is transmitted independently of the others even if they belong to the same message.

• Packetisation of information to be communicated provided efficiency and flexibility.

• Packets were communicated from the source to the destination using a protocol.

• A protocol is a set of rules used by computers in communicating messages across a network

Making of WWW

• The WWW is a virtual space where the

information transmits electronically across the

world through the computer network using the

hypertext.

• Hypertext: it is the text that contains keywords

to connect to other documents.

• Such keywords, called links, are selected by the

designer of the Web site.

• Hypertext for the Web can be generated with a

language called HyperText Markup Language.

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World Wide Web

• Technically, it is a cluster of software, protocols, and standards.

• It is an organization of files designed around a group of Internet servers programmed to handle requests from browser software on user terminals.

• Now web documents can link to other media on the Internet, such as images, video, audio and animated graphics.

– Browsers can invoke handler software for each different type of media.

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Hierarchical Structure of Internet

User User User User User User User User

Local Nets Local Nets

Regional ISPs Regional ISPs Regional ISPs

Regional Nets Regional Nets Regional Nets

Network Access Point NAP NAP

High Speed Backbone Networks

Web Search Elements

• Browser

• A browser is a piece of software that allows to

navigate the Web. Example: Chrome, Internet

Explorer, Netscape, Opera etc.

• Technically, a browser is a Web client program

that uses Hypertext Transfer Protocol (HTTP) to

make requests to Web server throughout the

Internet on behalf of the browser user.

• There are two types of browsers:

• 1. Text-only mode such as Lynx.

• 2. Graphic mode. 44

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Search Engine

• Search engines

– A web site or a database with tools to generate that

database and search its contents. Example:

Google.com, Yahoo.com

There are other definitions:

– A software program that collects and indexed

Internet resources and provides a keyword.

– A Web-based system for searching the information

available on the Web.

– An automated system that relies on a software

agent

• Two other components of a Web search

engine.

• Web robots

– Collection parts of search engines that roam web

sites, retrieve messages and sort, index and then

download them one by one.

• Spiders

– A software tool that prowls the Web looking for new

sites where specific information is likely to reside.

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Internet Service Providers (ISPs) • Companies that link users to the Internet.

• ISP offers a variety of services:

1. Linking consumers and businesses to the Internet.

2. Monitoring and maintaining customer web sites.

3. Providing network management and system integration

4. Providing backbone access services for other ISPs

5. Offering payment systems for online purchases

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Web Fundamental • HTTP

– Hyper-Text Transfer Protocol

– Allows transfer of requests for web pages from

clients and the retrieved web pages from servers to

clients for display.

• URL

– Uniform Resource Locator

– A name that represents the address of a specific

web site.

– URL is divided into two parts

• Protocol, e.g., http, ftp, file.

• Resource, i.e., name of server and the file on the server.

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Web Security Protocols

• There are two main security protocols.

• Secure Sockets Layer (SSL)

– A protocol for transmitting information in a secure

manner over the Internet.

• S-HTTP

– Secure HTTP

– An extension of HTTP that provides various security

features such as client server authentication.

– Also allows web clients and servers to specify

privacy capabilities.

Definition of Network

• What is a network?

• A network is a connection between at least two

computers for the purpose of sharing

resources.

• All networks are based on the concept of

sharing.

• Types of networks:

• Two types of networks:

• 1. Peer-to-peer network

• 2. Client/server network

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Peer-to-peer network

• Computers in peer-to-peer networks are linked

together as equals, with no centralized server

or control.

• Any computer can share its resources with any

other computer on the same network in any

way and whenever it chooses to do so.

• A peer-to-peer setup connects fewer than 10

computers.

• Increasing number – becomes impractical –

worse the performance.

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• Figure 3.2

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• Table 3.1

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Client/server networks

• A server is simply a special-purpose computer

and software designed for one function – to

address a client’s request.

• A client is any computer or workstation

connected to the server within a network.

• Main advantage of client/server network is

centralized control over network resource.

• All programs or applications reside on the

server.

• - is a multiuser environment. 54

• Figure 3.3

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• Table 3.2

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Packets and Protocols

• Packets: a sequence of bits that carries

identifying information for transmitting the data

as well as the data itself.

• A single packet contains a header to keep track

of the actual data it carries.

• Size 100 – 2000 bytes.

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• Protocols: Protocols are pieces of software that

run on every node or computer and allow every

pair of computers to communicate directly.

• A rule that governs how communication should

be conducted between two parties, two

computers or a source and a destination.

•

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Design considerations

• Consider several factors:

• Location – where will the network be installed?

• Capacity – What is the optimum traffic capacity of

the network?

• Distance limitation – What is the distance of the

farthest PC to the server?

• Cost – What is the estimated cost of the proposed

network installation?

• Potential growth - How easily and how well can

the network be expanded?

• Security – How secure is the proposed network? 59