20-11-2009 - ECommerce

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Electronic Commerce (EC)Electronic Commerce (EC)

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Alliance Business Academy Rathnakar 2

Definition

³The buying and selling of products,exchanging of products, services andinformation via computer networks,primarily the Internet´

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Communication perspective: E-Commerce is the delivery of Information, Product/Service

or Payments over telephone lines, computer networks or anyother electronic means.

Service perspective: E-Commerce is a tool that addresses the desire of firms,

consumers, and management to cut service cost whileimproving the quality of goods and increasing the speed of service delivery.

On-line perspective: E-Commerce provide the capability of buying and selling

products and information on the Internet and other onlineservices.

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Brick-and mortar market place.

Click and mortar

Electronic Marketplace ± Market space

Business transaction occurs acrosstelecommunication network where buyers,

sellers and others involved in t

he businesstransaction ± electronic commerce.

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E-Commerce vs. e-Business

Buying and selling, product and services on theInternet

commercialization of Internet ± e-Commerce.

Delivery of information, providing customer service before and after sales, collaborating with business partners and enhancing theproductivity in the organization ± e-Business

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IBM defines electronic Business as ³the transformationof key business processes through the use of Internet

technologies´.³E-business is all about time, cycle, speed, globalization,

enhanced productivity, reaching new customers, andsharing knowledge across institutions for competitive

advantage´Lou Gerstner

former CEO IBM

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E-com activities and Components

E-commerce is doing business electronically by; bringing buyers and sellers

It integrates data, electronic communication and securityservices to facilitate business applications

communicating coordinating with suppliers, financial,consumers, insurance agents, distributor channels andother finding partners.

Uses Computers and telecommunications

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Business process suitability to type of commerce

Well suited for EC:

Sale/Purchase of books and CDs;

On-line delivery of S/W;

Sales/Purchase of Travel services;

Online banking

Online shipment tracking

Sales/purchase of investment and insurance products

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EX: Cisco sells almost all its computer networking equipmentsthrough its website.

When first introduced 1998 Cisco made 72% if its sales on

the web site Avoided handling 500,000 calls per month, saved

$500million in that year alone.

Currently it is 97%on net.

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The Dimensions of Electronic Commerce

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E-Business and the new economy

Electronic linking of individuals and businesses has new economicenvironment; Time and space are much less limiting factors, Information is more important and accessible, Traditional intermediaries are being replaced,

The customers holds increasing amount of power. Large companies are able to conduct their business

electronically using EDI, VPN and VAN Companies conduct business activities on-line for 24x7 No geographical boundary Ease collaboration

In new economy processing information is more powerful andcost-effective than moving physical products.

More importance is for the transfer of information than thetransfer of goods.

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Why Ecommerce ?

The new economy is changing the rules of business; Time is collapsing

Distance has vanished

Information has grater value

Traditional intermediaries are being replaced by ³ infomediaries´

Buyers holds more power than even before.

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Examples Travelocity. COM ± replacing travel agents, and

providing online trading services Truckshop.com ± online load, truck route, freight

matching services. Gathers information fromtruckers, trucking companies, breakers, shippers,and fright forwarders.

Autobytel.com ± free auto shopping ± shoppers canaccess auto specifications, vehicle reviews,manufacturer incentives and dealer invoice priceinformation and also a provision to submit apurchase request.

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Benefits of E-C

ommerce To Organization

To Customers

To Society

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T

o Organization Expand a company¶s marketplace to national and international

market.With minimal capital outlay, company can quickly locatemore customers, the best suppliers.

Enables companies to procure materials and services from other companies, rapidly and at less cost.

Shortens or even eliminates market distribution channels Decreases the cost of creating, processing, distributing, storing and

retrieving information by digitizing the process. Allow lower inventories Lowest telecommunication cost Helps small business to compete with large business Enable very specialized niche market.

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T

oC

ustomers Frequently provides less expensive products and

services. Gives customers more choices than they could

easily locate otherwise Enables customers to shop or make other

transactions 24 hours a day. Delivers relevant and detailed information is

seconds. Enables consumers to get customized products. Makes it possible for people to work and study at

home. Electronic communication.

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T

o Society Enables individuals to work at home and

to do less traveling.

Increase the standard of living

Facilitates delivery of public services.

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Limitations of E-C

ommerce Technical Limitations

Non-technical Limitations

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T

ech

nical Limitations Lack of universal acceptable standards for quality, security, and

reliability.

Insufficient telecommunication Bandwidth.

Still-evolving software development tools.

Difficulties in integrating the Internet and EC software.

Need for special web servers in addition to the network servers.

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Non-T

ech

nical Limitations Unsolved legal issues

Lack of national and international government regulations andindustry standards

Customer resistance to change

Perception that EC is expensive and unsecured.

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Three pillar s of Electronic Commerce

Electronic Information

Electronic relationship

Electronic transactions

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Frame work of E-

Commerce Electronic Commerce Applications

People, Public Policy, Marketing & Advertisement,Supply Chain

Infrastructure

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A frame work for EC

Electronic Commerce Applications:Direct Marketing, Stocks, Jobs, Online Banking, Procurement,Purchasing, Malls, Super Market Auctions, Travel, Onlinepublishing, Customer Service, Intra-business Transaction, E-Government, E-Learning

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Peoples:

Buyers,

Sellers Intermediaries

Services

IS people

Management

Public Policy:

Taxes

Legal Privacy Issues

Regulation

Technical Standards

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Marketing & Advertising

Market research

Promotions Web content

Supply chain

Logistic

Business partners

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Infrastructure Common Business

Service Infrastructure:

Security & smart cards Authentication

Electronic payment

Directories

C

atalogs

Managing theInfrastructure

DistributionInfrastructure:

EDI

E-mail

HTTP

Chat Room

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Infrastructure Multimedia content &

Network Publishing

Infrastructure: HTML, JAVA,WWW,VRML, XML

Network Infrastructure

Telecom cable,

Internet TV Wireless Internet

VAN

W AN

LAN Intranet

Extranet

Access cell phone

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Infrastructure Interfacing Infrastructure:

Database

Logistics

Customer

Application

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A Fr amework for EC

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E-Business Model

Company Business model shows the wayin which it conduct business in order to

generate revenue.

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E-Business Models

1. Business to Business Commerce ±B2B

2. Business to Commerce ±B2C

3. Consumers to Business ± C2B

4. Consumer to Consumer ± C2C5. Collaborative Commerce ± c-Commerce

6. Intra-business (intra organizational) Commerce

7. Location based Commerce ± L -Commerce

8. Government to Citizen ± G2CG2G, G2B (e-Governance)

9. Mobile Commerce ± m-Commerce

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B2B E-Commerce

B2B applications the buyers, sellers and transactions involvesonly organizations.

Comprises t

he majority of E

CVolume

B2B exchanges are web sites that bring multiple buyers andsellers together in a virtual centralized markets pace.

Broader spectrum ± distributors, sellers, customers and other partners.

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Buy-side market place: companies want to buy items

places a RFQ

on its site or in a bidding market place The sellers in this methods are manufacturer,

distributors or retailers

Also called as reverse auction

Reduces up to 85% of the administrative cost Cycle time reduces up to 50%

Third party buy-side market place

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Group purchasing ± shop2gather.com.

Electronic exchange: e-hub, e-portal

Uses Intranet & Extranet EX:

eSTEEL (Steel and other metals)

Houstonstreet.com ( Energy)

Manheim online ( Auto dealers auction)

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Business to Consumers Consumers going on-line to shop for and purchase products,

arrange financing, shipment, delivery of digital products and getservices after sales

B2C provides high value contents to consumers for subscription.

EX:Wall Street journal, Consumer Report, eDiets.com

B2C & B2B - $2500bln. - $7000bln. By 2004.

10% growth in every month.

E-retailing, e-tailing

Electronic Storefronts ±Virtual Vine-yards

Electronic Malls

Online service Industries

Auctions

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E-tailing

Direct selling to customers through electronic storefronts or (virtual malls) malls, usually designed around the electroniccatalog format.

Provides an interactive channel

Offers wide verity of products and services at lower price

Issues in e-tailing: Channel conflict

Order fulfillment

Viability of online e-tailers

Conflict within click and mortar organization

Lack of funding Incorrect revenue model.

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Electronic Storefront Electronic business that maintain their own

Internet name and web site; may be extension of physical stores or may be new business stated

by entrepreneurs wh

o saw a nich

e on th

e web. Extension of physical store.

Ex. ± Wal-Mart, Fab-mal, B & N. 2 types

General Specialized.

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Service provided by store fronts;

Travel services

Stocks and bonds tracking Electronic banking (cyber banking)

Insurance

Job matching. Newsgroups

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Electronic Mall A collection of individual shops offering many products and services

under one Internet address. Cybermall, e-mal. One-stop shopping Ex:

Choice mall Women.com Network Web store Amazon.com Yahoo! Shopping Choicemall.COM

Sh

opping2000.com Rocksworld.com Shopping.yahoo.com Eshop.msn.com

Includes 1000¶s of products and vendors.

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Online Service Industries

Physical product delivery ± 40%

Services can be provided online ± 100%: C

yber banking ± virtual banking,h

ome banking and onlinebanking.

International and multiple currency banking

Electronic bill payments

Online security trading ± schwab.com ± for bidding

Online job market

Travel

Real estate

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Auction

Auction is a market mechanism by which sellers place offers and buyers makesequential bids.

Forward auctioning ± a seller auctions items tomany potential buyers.

Reverse auctioning ± suppliers are invited tosubmit a bid. E-Bay. COM

Bartering ± exchange of goods withoutmomentary transaction Barterbroker.com

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C2C E-Commerce An individual sells product or services to

other individuals electronically.

Classified Classifieds2000.com

Personal services Astrology, medical advice

Peer-to-peer (p2p) and file exchange Individuals can exchange on-line digital

products- music, games.

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Collaborative commerce

Communication, Information sharing, collaboration.

Retailer-suppliers

Vendors managed Inventory

Product design Collaborative manufacturing

Collaborative processing: Planning & scheduling

Design New product information

Order management

Sourcing and procurement

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E-Government

G2G

G2C

G2B

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M-commerce

Mobile devices

Remote Accessing

L-Commerce

Delivers information about goods andservices based on where you are located

Uses GPS, GIS

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Intra-business E-Com.

B2E

Business to its employees (B2E)

E-commerce between and among unitswithin the business.

E-learning.

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E-business Value chain

EC Uses many activities ± manager has todecide where and how to it in their business

Break the business processes in to value addingactivities ±to meet the org. goals and generateprofit.

Analyze the business activities as a sequence of

activities that crate value for the firm.

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In a larger firm managers organize their work around the activities of strategic

Business Units or Business Units Combination of products

Distribution channels

Customer care etc.

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Strategic Business Value chains: Michael Porter¶s value chain

A value chain is a way of organizing the activities thateach strategic business unit undertake to design,produce, promote, market, deliver and support theproducts or services it sells.

A company¶s value chain consists of all the primary and

supporting activities, called value activities, performed tocreate and distribute its goods and services.

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Primary activities ± produce, sell, andsupport its products.

Support activities ± purchasing, humanresources, technology and other functionwhich supports primary activities.

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Design Deliver Provide after salesservice andsupport

Manufacture

product or create service

Purchase

materials andsupplies Design

Marketand sell

Identifycustomers

Finance andadministration

Humanresources

Technologydevelopment

Primary activities

Support activities

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Primary activities of each business unit:

Identify customers

New customers and new way of serving existing customers

Design Research, engineering

Purchase materials and supplies

Procurement, vendor selection, vendor qualification,negotiating long term supply contract, Q A

Manufacture product or create service

Finished product, fabrication, finished product, assembling,testing

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Market and sell

Promotion, managing salespersons, pricing,identifying and monitoring sales and distributionchannel

Deliver

Ship the final product, warehousing, handlingmaterials, fright, selecting shippers and monitoringtimeliness of delivery

Provide after sales service and support

Relationship with customers, repairing, fulfillment,replacement of parts.

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Support activities:

Finance and administration

Paying bills, borrowing funds, reporting to govt.

regulators, and ensuring compliances with relevant laws.

Human resource

Recruiting, hiring, training, compensation and

providing benefits

Technology development

Improve the quality of product or service, andimprove the business process in every primary

activities

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Most EC initiatives add value by either reducing transaction cost, creating some

type of network effect, or combining both.

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SWOT analysis; evaluating business

unit opportunities Identify the strengths and weaknesses.

Review the environment in which the

business unit operates and identify theopportunities presented by thatenvironment and the threats posed by the

environment.

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Dell¶s SWOT analysis

Opportunities

Consumer desire for one-stop shopping

Consumers know whatthey want to by

Internet could be apowerful marketing tool

Strengths

Sell directly to

consumer s

Keep costs below

competitor s costs

Weaknesses

No strong relationshipswith computer retailers

Threats

Competitors havestronger brand names

Competitors have strongrelationships with computer retailer

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Dell decided to offer customizedcomputers built to order and sold over the

phone, and eventually over the Internet. Dell¶s strategy capitalized on its strengths

and avoided relying on a deals network.

Brand and quality threats posed byCompaq and IBM were lessened

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ICTD

Internet strategy of business

Primary or overriding strategy of the firm

Angehern¶s model

Four virtual spaces

Virtual Information space

Virtual Communication space

Virtual Transaction space

Virtual Distribution space

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Virtual Information space:

Display information about their org., product, or services

First step taken towards entering the virtual marketplace.

Global repository

Web readable document format

Navigation

www

Major concerns are;

Information that is displayed is accurate and current

Easy and faster information accessibility and navigation

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Virtual Communication space:

Building a site that has a feeling of being a

port of entry into a community Space is used to enable relationship building,

negotiation, and exchange of ideas;

forums,

chat rooms,

virtual communities.

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Virtual Tr ansaction space:

Used to initiate business transactions, such as sales order, MoU, EFT, Bidding etc.

Ability to engage in meaningful and sufficientnegotiation process and security of transactions.

Concerns are:

Security over data Accuracy and integrity of processing methods

Reliability of vendors

Reputability of trading partner

Privacy concerns by customers.

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Virtual Distribution space:

Space used to deliver the product or services

requested or purchased by the consumer Product and services are in digital form

Ex. On-line news service, software products

E-commerce major concerns; Delivery of product and services only to legitimate,

approved customers

Reliable delivery or product and services

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Market Research Advertising and

Customer Service

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Consumers and their behavior

Finding actual and Potential customers

Internet Research Institute ± emarketer.com

Shopping habits keep changing as a resultof innovative marketing strategies

Market segmentation

Market research ± learning about thecustomers.

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Market Research

The key for e-tailing is to understand theconsumer decision making process on the

web. Consumers behavior model

Factors that stimulate a consumer to think aboutbuying

Two types of factors influencing are Individual factors

Environmental factors

I di id l Ch t i ti

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Individual Char acteristics

Age, Gender, ethnicity,education, lifestyle,psychological Knowledge,

values, Personality

Environmental char acteristics

Social, family andcommunities

Stimuli

Marketing Others

Price Economical

Promotion Technology

Product Political

Quality Culture

Buyer¶s Decisions

Buy or not

What to buy

Where, when

How much to spend

Repeat purchase

Decision

MakingProcess

Vendor Controlled System

Logistic Technical Customer

Support Support Service

Permanent web design F AQ

Delivery Intelligent E-Mail

Agents Call Centers

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Asking customers what they want? Internet provides easy, fast and relatively inexpensive

ways for vendors to find out what customers want in

directly interacting with them

Tracking Customers activities onthe web Learning about the customers by observing their behavior

on the Internet. Site tracking services ± using cookies Nettracker collects data from client provides periodic

reports-demographic server logs and information's Intelligent agents

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E-Com intelligent agents Computer programs that conduct routine tasks,

search and retrieve information, support decisionmaking, and act as domain experts.

Sense the environment and act autonomouslywithout human intervention

A search

engine wh

ich

is usually a software agentthat automatically contact other network resourceson the Internet

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Intelligent agents use expert or knowledge basedcapabilities to do search and match.

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Search and Filter agents: Intelligent agents can help customers determine

what to buy to specify a specific need. This is achieved by looking for specific product

information and critically evaluating it.

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Product and vendor finding agents: Comparison agents for the comparison of price.

Bargainfinder from Accenture ± for CD Kasbah.com form MIT

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Profiling customers using Intelligentagents:

Collects information about customers for creating profile

Product brokering

Collaborative filtering process

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Online Advertising

Internet advertising ± media rich, dynamicand interactive.

Can be updated at any time with minimal cost They can reach a very large no. of potential

buyers all over the world

Online advertisement is cheaper

Ads can be interactive and targeted to specificinterested groups or individuals

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Advertising Methods:

Banners

Keyword banners Random banners

E-mail advertising

spamming

Internet advertising

Permission marketing

Viral marketing

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Electronic catalogs

Customized catalogs

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Documents

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