Prentice Hall, 2002 1 Chapter 1 Overview of Electronic Commerce

1Prentice Hall, 2002

Chapter 1

Overview of

Electronic Commerce


Learning Objectives

Define electronic commerce (EC) and describe its various categoriesDistinguish between electronic markets and interorganizational systemsDescribe and discuss the content and framework of EC


Learning Objectives (cont.)

Understand the forces that drive the widespread use of ECDescribe the benefits of EC to organizations, consumers, and societyDescribe the limitations of ECDiscuss some major managerial issues regarding EC


Opening Vignette:Qantas Airways

Business-to-business (B2B) E-marketplace memberBusiness-to-customer (B2C): Online booking & wireless communicationsBusiness-to-employee (B2E): Online training & banking


Qantas Airways (cont.)

Business-to-business (B2B)

E-marketplace memberJoined Airnew Co.—links major airlines with suppliers

FuelFuel servicesLight maintenance servicesCatering



Business-to-customer (B2C):

Online bookingWireless communications



Business-to-employee (B2E):

Online trainingOnline banking


Definitions

Business-to-business (B2B)Businesses make online transactions purchases with other business

Business-to-consumer (B2C)Online transactions between businesses and consumers

Business-to-employee (B2E)Information and services made available to employees online


Electronic Commerce Terms

E-businessEC defined from these perspectives

CommunicationsBusiness processServiceOnlineCollaborationsCommunity


Electronic Commerce Terms (cont.)

Pure vs. Partial EC: based on the degree of digitization of

ProductProcessDelivery agent

Traditional commerce: all dimensions are physicalPure EC: all dimensions are digitalPartial EC: all other possibilities include a mix of digital and physical dimensions


Electronic Commerce Terms (cont.)

Internet vs. Non-Internet ECVANsLANsClick and Mortar


Figure 1-1The Dimensions of Electronic Commerce

Source: Choi et al. (1997), p. 18.


A method of doing business by which a company can generate revenue to sustain itself.

Examples:Name your priceFind the best priceDynamic brokeringAffiliate marketing

Business Models


Business Models (cont.)

Group purchasingElectronic tendering systemsOnline auctionsCustomization and personalizationElectronic marketplaces and exchangesSupply chain improversCollaborative commerce



Orbis Corporation



Orbis Corporation


A market is a network of interactions and relationships where information, products, services, and payments are exchanged.

It handles all the necessary transactionsIt is a place where shoppers and sellers meet electronicallySellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line

Electronic Markets

(E-marketplaces or E-marketspaces)


Figure 1-2 Transactions in Electronic Markets


Electronic Exchanges

Electronic exchanges provide dynamic pricing by matching real-time supply and demand

Live auctionsStock exchanges


Interorganizational information system (IOS) involves information flow among two or more organizationsMajor objective is efficient routine transaction processing, such as transmitting orders, bills, and payments using EDI or extranetsScope: Unified system encompassing two or several business partnersTypical IOS includes a company, its suppliers, and and/or customers

Interorganization Information Systems


Figure 1-3 A Framework for Electronic Commerce


MarketingComputer sciencesConsumer behavior and psychologyFinanceEconomics

Management information systemsAccounting and auditingManagementBusiness law and ethicsOthers

Electronic Commerce is Interdisciplinary


The Driving Forces ofElectronic Commerce

The New World of BusinessBusiness pressuresOrganizational responsesThe role of Information Technology (including electronic commerce)


Major Business Pressures

Market andeconomic

pressures

Strong competitionGlobal economyRegional trade agreements (e.g. NAFTA)Extremely low labor cost in some countriesFrequent and significant changes in marketsIncreased power of consumers


Major Business Pressures (cont.)

Societal and environmental pressures

Changing nature of workforceGovernment deregulation of banking and other servicesShrinking government subsidiesIncreased importance of ethical and legal issuesIncreased social responsibility of organizationsRapid political changes


Major Business Pressures (cont.)

Technological pressures

Rapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratio


Organizational Responses

Strategic systemsContinuous improvement effortsBusiness process reengineering (BPR)Business AlliancesElectronic commerce

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 Organization’s

Strategy

External Environment, Social, Economic, Political, etc


Reducing cycle time and time to market

Empowerment of employees and collaborative work

Supply chain improvementsMass customization Change management

IT Support and EC


The Benefits of EC

Benefits to OrganizationsExpands the marketplace to national and international marketsDecreases the cost of creating, processing, distributing, storing and retrieving paper-based information


Benefits of EC (cont.)

Benefits to Organizations (cont.)Allows reduced inventories and overhead by facilitating pull-type supply chain managementThe pull-type processing allows for customization of products and services which provides competitive advantage to its implementers



Benefits to Organizations (cont.)Reduces the time between the outlay of capital and the receipt of products and servicesSupports business processes reengineering (BPR) effortsLowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)



Benefits to consumersEnables consumers to shop or do other transactions 24 hours a day, all year round from almost any locationProvides consumers with more choicesProvides consumers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons



Benefits to consumers (cont.)Allows quick delivery of products and services (in some cases) especially with digitized productsConsumers can receive relevant and detailed information in seconds, rather than in days or weeksMakes it possible to participate in virtual auctions



Benefits to consumers (cont.)Allows consumers to interact with other consumers n electronic communities and exchange ideas as well as compare experiencesFacilitates competition, which results in substantial discounts



Benefits to societyEnables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollutionAllows some merchandise to be sold at lower prices benefiting less affluent people



Benefits to society (cont.)Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to themFacilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality


The Limitations of EC

Technical limitations of electronic commerceLack of sufficient system’s security, reliability, standards, and communication protocolsInsufficient telecommunication bandwidthThe software development tools are still evolving and changing rapidly


The Limitations of EC (cont.)

Technical Limitations of EC (cont.)Difficulties in integrating the Internet and electronic commerce software with some existing applications and databasesThe need for special Web servers and other infrastructures, in addition to the network servers (additional cost)


The Limitations of EC (cont.)

Technical Limitations of EC (cont.)Possible problems of interoperability, meaning that some EC software does not fit with some hardware, or is incompatible with some operating systems or other components


Non-Technical Limitations

Cost and justification The cost of developing an EC in house can be very high, and mistakes due to lack of experience may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issueIn order to justify the system, one needs to deal with some intangible benefits which are difficult to quantify.


Security and Privacy These issues are especially important in the B2C area, but security concerns are not so serious from a technical standpoint Privacy measures are constantly improving too The EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, very secure

Non-Technical Limitations (cont.)



Lack of trust and user resistance Customers do not trust:

Unknown faceless sellersPaperless transactionsElectronic money

Switching from a physical to a virtual store may be difficult


Other limiting factors are:Lack of touch and feel onlineMany unresolved legal issuesRapidly evolving and changing ECLack of support servicesInsufficiently large enough number of sellers and buyersBreakdown of human relationshipsExpensive and/or inconvenient accessibility to the Internet



Putting It All Together

Major concern of today’s companies—how to transform themselves to take part in digital economyExample:Toys, Inc.

Uses intranet for internal communications, collaboration, dissemination of informationNetworked to e-marketspaces and large corporationsCorporate portal for communication and collaboration with business partners

Figure 1-7

Putting It All Together

Prentice Hall, 2002 46


Is it real?How to evaluate the magnitude of the business pressures.What should be my company’s strategy towards EC?

Managerial Issues


Managerial Issues (cont.)

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?

Figure 1-8

Plan of the Book

Prentice Hall, 2002 49

Documents

Prentice Hall, 2002 1 Chapter 1 Overview of Electronic Commerce