Overview of

Electronic Commerce

1
 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

2
 Electronic Commerce Terms
E-business
EC defined from these perspectives
Communications
Business process
Service
Online
Collaborations
Community

3
Electronic Commerce Terms (cont.)
Pure vs. Partial EC: based on the degree of
digitization of
Product
Process
Delivery agent
Traditional commerce: all dimensions are
physical
Pure EC: all dimensions are digital
Partial EC: all other possibilities include a mix of
digital and physical dimensions

4
Electronic Commerce Terms (cont.)
Internet vs. Non-Internet EC
VANs
LANs
Click and Mortar

5
 Figure 1-1
The Dimensions of Electronic Commerce

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

6
 Business Models

A method of doing business by which a

company can generate revenue to sustain
itself.
Examples:
Name your price
Find the best price
Dynamic brokering
Affiliate marketing

7
 Business Models (cont.)

Group purchasing
Electronic tendering systems
Online auctions
Customization and personalization
Electronic marketplaces and exchanges
Supply chain improvers
Collaborative commerce

8
 Business Models (cont.)

Orbis Corporation

9
 Business Models (cont.)

Orbis
Corporation

10
 Electronic Markets
(E-marketplaces or E-marketspaces)

A market is a network of interactions and

relationships where information, products,
services, and payments are exchanged.
It handles all the necessary transactions
It is a place where shoppers and sellers
meet electronically
Sellers and buyers negotiate, submit
bids, agree on an order, and finish the
execution on- or off-line

11
 Figure 1-2
Transactions in Electronic Markets

12
 Electronic Exchanges

Electronic exchanges provide dynamic pricing

by matching real-time supply and demand
Live auctions
Stock exchanges

13
Interorganization Information Systems

Interorganizational information system (IOS)

involves information flow among two or more
organizations
Major objective is efficient routine transaction
processing, such as transmitting orders, bills, and
payments using EDI or extranets
Scope: Unified system encompassing two or
several business partners
Typical IOS includes a company, its suppliers,
and and/or customers

14
Figure 1-3 A Framework for Electronic
Commerce

15
 Electronic Commerce is
Interdisciplinary

Marketing Management
Computer sciences information systems
Consumer behavior and Accounting and
psychology auditing
Finance Management
Economics Business law and ethics
Others

16
 The Driving Forces of
Electronic Commerce

The New World of Business

Business pressures
Organizational responses
The role of Information Technology (including
electronic commerce)

17
 Major Business Pressures
 Strong competition
 Global economy
 Regional trade
agreements (e.g.
Market and NAFTA)
 Extremely low labor
economic pressures cost in some countries
 Frequent and significant
changes in markets
 Increased power of
consumers

18
 Major Business Pressures (cont.)
 Changing nature of
workforce
 Government deregulation of
banking and other services
Societal and  Shrinking government
environmental subsidies
pressures  Increased importance of
ethical and legal issues
 Increased social
responsibility of
organizations
 Rapid political changes

19
Major Business Pressures (cont.)

 Rapid technological
obsolescence
 Increase innovations
Technological and new technologies
pressures  Information overload
 Rapid decline in
technology cost vs.
performance ratio

20
Organizational Responses

Strategic systems
Continuous improvement efforts
Business process reengineering
(BPR)
Business Alliances
Electronic commerce

21
 Organizational Responses
External Environment,
Social, Economic,
Political, etc Organization
Structure and the
Corporate Culture

Management
The Organization’s Information
and
Strategy Technology
Business Process

Individual
and Roles

Framework for Organizational and Societal Impacts of Information Technology

 IT Support and EC

Reducing cycle time and time to

market
Empowerment of employees and
collaborative work
Supply chain improvements
Mass customization
Change management

23
 The Benefits of EC

Benefits to Organizations
Expands the marketplace to national and
international markets
Decreases the cost of creating, processing,
distributing, storing and retrieving paper-
based information

24
 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 and services which
provides competitive advantage to its
implementers

25
 Benefits of EC (cont.)

Benefits to Organizations (cont.)

Reduces the time between the outlay of
capital and the receipt of products and
services
Supports business processes reengineering
(BPR) efforts
Lowers telecommunications cost - the
Internet is much cheaper than value added
networks (VANs)

26
 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 less expensive
products and services by allowing them to
shop in many places and conduct quick
comparisons

27
 Benefits of EC (cont.)

Benefits to consumers (cont.)

Allows quick delivery of products and services (in
some cases) especially with digitized products
Consumers can receive relevant and detailed
information in seconds, rather than in days or
weeks
Makes it possible to participate in virtual auctions

28
 Benefits of EC (cont.)

Benefits to consumers (cont.)

Allows consumers to interact with other
consumers n electronic communities and
exchange ideas as well as compare
experiences
Facilitates competition, which results in
substantial discounts

29
 Benefits of EC (cont.)

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

30
 Benefits of EC (cont.)

Benefits to society (cont.)

Enables people in Third World countries and rural
areas to enjoy products and services which
otherwise are not available to them
Facilitates delivery of public services at a reduced
cost, increases effectiveness, and/or improves
quality

31
 The Limitations of EC

Technical limitations of electronic commerce

Lack of sufficient system’s security, reliability,
standards, and communication protocols
Insufficient telecommunication bandwidth
The software development tools are still evolving
and changing rapidly

32
 The Limitations of EC (cont.)

Technical Limitations of EC (cont.)

Difficulties in integrating the Internet and
electronic commerce software with some
existing applications and databases
The need for special Web servers and other
infrastructures, in addition to the network
servers (additional cost)

33
 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

34
 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 issue
In order to justify the system, one needs to deal
with some intangible benefits which are difficult to
quantify.

35
Non-Technical Limitations (cont.)

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

36
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 virtual store may
be difficult

37
Non-Technical Limitations (cont.)

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 of
sellers and buyers
Breakdown of human relationships
Expensive and/or inconvenient accessibility
to the Internet

38
 Putting It All Together

Major concern of today’s companies—how to

transform themselves to take part 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 and collaboration
with business partners
39
Figure 1-7
Putting It All
Together

Prentice Hall, 2002 40

 Managerial Issues

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

41
 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?

42
Figure 1-8
Plan of the
Book

Prentice Hall, 2002 43