ch1 ec 2008

8/2/2019 CH1 EC 2008

1/73

CHAPTER1VERVIEW OF ELECTRONIC COMMERCE__________________________

8/2/2019 CH1 EC 2008

2/73

Challenges

Business in the information age must compete in a challenging marketplace;

It is rapidly changing

Complex

Global

Hyper competitive

Customer focused

PRADEEPA.M IMS.Ku-2010-11 2

Companies must rapidly react to problem and opportunities arise

from this modern business environment.

Combination of social, legal, economic and political factors that effect the

business activities.

8/2/2019 CH1 EC 2008

3/73

Business environment in the Information age place manypressures on companies.

Organizations may respond reactivelyto a pressure already in

existence or proactivelyto an anticipated pressure.

Companies responses are typically facilitated byInformation

technology.


8/2/2019 CH1 EC 2008

4/73

Wal-Mart uses Collaborative Forecasting And Replenishment

(CFAR)

Worlds largest retailer (More than $110 billion sales) Stiff competition drove Montgomery Ward to file for

bankruptcy

Wal-Marts innovative IT systems to deal with todays

business pressure

Organization need to integrate their internal systems

All functional areas are integrated

Collaboration with suppliers and customers


8/2/2019 CH1 EC 2008

5/73

Reason for integration;

Difficulty with the demand forecast

Inventory forecast

Delivery schedule

Excess inventory, out-of-stock products, lost opportunity can

be minimized.

Why customers leave the stores ?

Retailers and suppliers are committed to the forecast, it

become a plan that enables much lower fluctuations and

inventories.


8/2/2019 CH1 EC 2008

6/73

Electronic Commerce:Definitions and Concepts

Electronic Commerce (Ec)The process of buying, selling, or exchanging products, services, or

information via computer networks


EC is defined through these perspectives

Communications

Commercial (trading)

Business process

Service

Learning

Collaborative

Community

8/2/2019 CH1 EC 2008

7/73


Communication perspective:

E-Commerce is the delivery of Information, Product/Service or Payments

over telephone lines, computer networks or any other electronic means.

Service perspective:

E-Commerce is a tool that addresses the desire of firms, consumers, and

management to cut service cost while improving the quality of goods and

increasing the speed of service delivery.

On-line perspective:

E-Commerce provide the capability of buying and selling products andinformation on the Internet and other online services.

8/2/2019 CH1 EC 2008

8/73

8/2/2019 CH1 EC 2008

9/73

Why Electronic Commerce?

Reduce the transaction cost, by improving the

flow of information and increasing the

coordination of actions

By reducing the cost of searching for potential

buyers and sellers

Increased no. of potential market participants

EC can change the attractiveness of vertical

integration for many firms.

Use of networked economic structurePRADEEPA.M IMS.Ku-2010-11 9

8/2/2019 CH1 EC 2008

10/73

Electronic Commerce:

Definitions and Concepts

Pure Versus Partial EC

EC takes several forms depending on the degree of

digitization(the transformation from physical to

digital)(1) theproduct(service) sold,

(2) theprocess,

(3) the delivery agent(or intermediary)


8/2/2019 CH1 EC 2008

11/73

8/2/2019 CH1 EC 2008

12/73

Electronic Commerce:

Definitions and Concepts

EC organizationsbrick-and-mortar organizations

Old-economy organizations (corporations) thatperform most of their business off-line, selling

physical products by means of physical agentsvirtual (pure-play) organizations

Organizations that conduct their businessactivities solely online

click-and-mortar (click-and-brick) organizations

Organizations that conduct some e-commerceactivities, but do their primary business in the

physical worldPRADEEPA.M IMS.Ku-2010-11 12

8/2/2019 CH1 EC 2008

13/73

Electronic Commerce: Definitions and Concepts

Where EC is conductedelectronic market (e-marketplace)

An online marketplace where buyers and sellers meetto exchange goods, services, money, or information

inter-organizational information systems (IOSs)

Communications system that allows routinetransaction processing and information flow betweentwo or more organizations

intra-organizational information systems

Communication systems that enable e-commerce

activities to go on within individual organizationsPRADEEPA.M IMS.Ku-2010-11 13

8/2/2019 CH1 EC 2008

14/73

The EC Framework,

Classification, and Content

Networked computing is the infrastructure for EC, and it is

rapidly emerging as the standard computing environment

for business, home, and government applications

Networked computing connects multiple computers and other

electronic devices located in several different locations by

telecommunications networks, including wirelessones

Allows users to access information stored in several different

physical locations and to communicate and collaborate with people

separated by great geographic distances


8/2/2019 CH1 EC 2008

15/73

The EC Framework

intranet

An internal corporate or government network

that uses Internet tools, such as Web

browsers, and Internet protocols

extranet

A network that uses the Internet to link multipleintranets


8/2/2019 CH1 EC 2008

16/73

The EC Framework,

Classification, and Content

An ECFrameworksupports five policymaking

support areas(PPPMS)

People

Public policy

Marketing and advertisement

Support services

Business partnerships


8/2/2019 CH1 EC 2008

17/73

1.2 A Framework for Electronic Commerce


8/2/2019 CH1 EC 2008

18/73

EC Classification

Classification by nature of the transactions or

interactions

business-to-business (B2B)

E-commerce model in which all of the participants arebusinesses or other organizations

business-to-consumer (B2C)

E-commerce model in which businesses sell to individual

shopperse-tailing

Online retailing


8/2/2019 CH1 EC 2008

19/73

EC Classification

business-to-business-to-consumer (B2B2C)

E-commerce model in which a business provides

some product or service to a client business that

maintains its own customers


8/2/2019 CH1 EC 2008

20/73

EC Classification

consumer-to-business (C2B)

E-commerce model in which individuals use the

Internet to sell products or services to

organizations or individuals seek sellers to bid onproducts or services they need

consumer-to-consumer (C2C)

E-commerce model in which consumers selldirectly to other consumers


8/2/2019 CH1 EC 2008

21/73

EC Classification

peer-to-peer

Technology that enables networked peer

computers to share data and processing with each

other directly; can be used in C2C, B2B, and B2C e-commerce

mobile commerce (m-commerce)E-commerce transactions and activities conducted

in a wireless environment


8/2/2019 CH1 EC 2008

22/73

EC Classification

location-based commerce (l-commerce)

M-commerce transactions targeted to individuals

in specific locations, at specific times

intra-business EC

E-commerce category that includes all internal

organizational activities that involve the exchangeof goods, services, or information among various

units and individuals in an organization


8/2/2019 CH1 EC 2008

23/73

EC Classification

business-to-employees (B2E)

E-commerce model in which an organizationdelivers services, information, or products to its

individual employeescollaborative commerce (c-commerce)

E-commerce model in which individuals or groupscommunicate or collaborate online

e-learning

The online delivery of information for purposes oftraining or education


8/2/2019 CH1 EC 2008

24/73

EC Classification

exchange (electronic)A public electronic market with many buyers andsellers

exchange-to-exchange (E2E)E-commerce model in which electronic exchangesformally connect to one another for the purpose of

exchanging information

e-governmentE-commerce model in which a government entity buys

or provides goods, services, or information tobusinesses or individual citizensPRADEEPA.M IMS.Ku-2010-11 24
http://exchange%20%28electronic%29.ppt/http://exchange%20%28electronic%29.ppt/

8/2/2019 CH1 EC 2008

25/73

8/2/2019 CH1 EC 2008

26/73

Digital Evolution Drives EC

digital economy

An economy that is based on digital

technologies, including digital

communication networks, computers, software,and other related information technologies; also

called the Internet economy, the new economy,

or the Web

The digital revolution accelerates EC by

providing competitive advantage to

organizations and enabling innovationsPRADEEPA.M IMS.Ku-2010-11 26

8/2/2019 CH1 EC 2008

27/73

Business Environment Drives EC

Economic, legal, societal, and technological

factors have created a highly competitive

business environmentin which customers are

becoming more powerful


8/2/2019 CH1 EC 2008

28/73


The environmentresponsesupport model

Companies must not only take traditional actions

such as lowering costs and closing unprofitable

facilities, but also introduce innovative actionssuch as customizing, creating new products, or

providing superb customer service


8/2/2019 CH1 EC 2008

29/73

1.4 Major Business Pressures and the Role of EC


8/2/2019 CH1 EC 2008

30/73

8/2/2019 CH1 EC 2008

31/73


Organizational response strategies

Strategic systems

Agile systems

Continuous improvement efforts and business

process restructuring

Customer relationship management

Business alliances

Electronic markets


8/2/2019 CH1 EC 2008

32/73


Reductions in Cycle Time and Time-to-Market

cycle time reduction

Shortening the time it takes for a business to complete a

productive activity from its beginning to end Empowerment of Employees

EC allows the decentralization of decision making and

authority via empowerment and distributed systems, butsimultaneously supports a centralized control

Supply Chain Improvements

EC can help reduce supply chain delays, reduce

inventories, and eliminate other inefficiencies


8/2/2019 CH1 EC 2008

33/73


Mass Customization: Make-to-Order in Large

Quantities

mass customization

Production of large quantities of customizeditems

Intrabusiness: From Sales Force Automation to

Inventory Control

knowledge Management (KM)

The process of creating or capturing knowledge,

storing and protecting it, updating and

maintaining it, and using itPRADEEPA.M IMS.Ku-2010-11 33

8/2/2019 CH1 EC 2008

34/73

Benefits of EC

Global Reach

Cost Reduction

Supply ChainImprovements

Extended Hours

Customization

New Business Models

Vendors Specialization

Rapid Time-to-Market

Lower Communication

Costs

Efficient Procurement

Improved Customer

Relations

Up-to-Date Company

Material Other Benefits


Benefits to Organizations

8/2/2019 CH1 EC 2008

35/73

Benefits of EC

Ubiquity

More Products and

Services Customized Products and

Services

Cheaper Products and

Services

Instant Delivery

Information Availability

Participation in Auctions Electronic Communities

No Sales Tax


Benefits to Consumers

8/2/2019 CH1 EC 2008

36/73

Benefits of EC

Benefits to Society

Telecommuting

Higher Standard of Living

Homeland Security

Hope for the Poor

Availability of Public Services


8/2/2019 CH1 EC 2008

37/73

8/2/2019 CH1 EC 2008

38/73

EC Business Models

business model

A method of doing business by which a company can

generate revenue to sustain itself.

The model also spells out where the company ispositioned in the value chain.

that is by what activities the company adds value to the

product or service it supplies.


8/2/2019 CH1 EC 2008

39/73

In the most basic sense, a business model is

the method of doing business by which a

company can sustain itself -- that is, generate

revenue.

The business model spells-out how a company

makes money by specifying where it is

positioned in the value chain.


8/2/2019 CH1 EC 2008

40/73

EC Business Models

The Structure of Business Models

It is a description of;

the customers to be served and the companys

relationships with these customers (customers value

proposition)

allproducts and services the business will offer.

the business process required to make and deliver the

products and services


8/2/2019 CH1 EC 2008

41/73

EC Business Models

Revenue Models

revenue model

Description of how the

company or an EC projectwill earn revenue

Major revenue models

Sales

Transaction fees

Subscription fees

Advertising fees

Affiliate fees

Other revenue sources


8/2/2019 CH1 EC 2008

42/73

EC Business Models

Value proposition

The benefits a company can derive from using EC

How do e-marketplaces create value?

Search and transaction cost efficiency

Complementarities

Lock-in

Novelty


8/2/2019 CH1 EC 2008

43/73

1.6 Common Revenue Models


8/2/2019 CH1 EC 2008

44/73

EC Business Models

Typical EC Business Models Online direct marketing

Electronic tendering systems

tendering (reverse auction)

Model in which a buyer requests would-be sellers to

submit bids; the lowest bidder wins

name-your-own-price model

Model in which a buyer sets the price he or she is

willing to pay and invites sellers to supply the good

or service at that price


8/2/2019 CH1 EC 2008

45/73

EC Business Models

Typical EC Business Models Find the best price

affiliate marketing

An arrangement whereby a marketing partner (abusiness, an organization, or even an individual)

refers consumers to the selling companys Web

site

viral marketing

Word-of-mouth marketing in which customers

promote a product or service to friends or other

peoplePRADEEPA.M IMS.Ku-2010-11 45

8/2/2019 CH1 EC 2008

46/73

EC Business Models

Typical EC Business Modelsgroup purchasing

Quantity purchasing that enables groups of

purchasers to obtain a discount price on the

products purchased

SMEs

Small-to-medium enterprises

e-co-ops

Another name for online group purchasing

organizations


8/2/2019 CH1 EC 2008

47/73

EC Business Models

Typical EC Business Models

Bartering

Deep discounting

Value-chain integrators

Value-chain service providers

Supply chain improvers


8/2/2019 CH1 EC 2008

48/73

The basic categories of business models Brokerage

Advertising

Informediary

Merchant Manufacturer (Direct)

Affiliate

Community

Subscription

Utility


Brokerage Model

8/2/2019 CH1 EC 2008

49/73

Brokerage Model

Brokers are market-makers:

Bring buyers and sellers together and facilitatetransactions.

Brokers play a frequent role in;

business-to-business (B2B), business-to-consumer (B2C),

consumer-to-consumer (C2C) markets.

Usually a broker charges a fee or commission foreach transaction it enables. The formula for fees canvary. Ex. www.indiatimes.com


8/2/2019 CH1 EC 2008

50/73

Brokerage models include


Market Place exchange

Buy/sell fulfillment

Demand collection system

Auction broker

Transaction broker

DistributorSearch agent

Virtual market place

Advertising model

8/2/2019 CH1 EC 2008

51/73

Advertising model:

The web advertising model is an extension of thetraditional media broadcast model.

The broadcaster provides content and services(like email, blogs) mixed with advertisingmessages in the form of banner ads.

The banner ads may be the major or sole sourceof revenue for the broadcaster.

The broadcaster may be a content creator or adistributor of content created elsewhere. The advertising model works best when the volume of

viewer traffic is large or highly specialized.


8/2/2019 CH1 EC 2008

52/73

Advertising modes:

Portals

Classified

User registration

Query based paid placement

Contextual advertising/Behavioral marketing Content targeted advertising

Intromercials

Ultramercials


8/2/2019 CH1 EC 2008

53/73

Infomediary model

Data about consumers and their consumptionhabits are valuable, especially when thatinformation is carefully analyzed and used totarget marketing campaigns.

Some firms function as infomediaries(information intermediaries) assisting buyersand/or sellers understand a given market.


8/2/2019 CH1 EC 2008

54/73

Infomediary models:

Advertising networks

Audience measurement services

Interactive marketing metamediary


8/2/2019 CH1 EC 2008

55/73

Merchant models

Wholesalers and retailers of goods and services.

Sales may be made based on list prices or through

auction.

Virtual merchant

Catalog merchant

Click and mortar

Bit vendor


8/2/2019 CH1 EC 2008

56/73

Manufacturer (Direct) model

The manufacturer or "direct model", it is predicated on the

power of the web to allow a manufacturer (i.e., a company that

creates a product or service) to reach buyers directly and

thereby compress the distribution channel.

The manufacturer model can be based on efficiency, improvedcustomer service, and a better understanding of customer

preferences.

Dell computers

Purchase License

Brand integrated content


8/2/2019 CH1 EC 2008

57/73

Affiliate model

In contrast to the generalized portal, which seeks to drive a high

volume of traffic to one site, the affiliate model, provides purchase

opportunities wherever people may be surfing.

It does this by offering financial incentives (in the form of a percentage

of revenue) to affiliated partner sites. The affiliates provide purchase-

point click-through to the merchant.

It is a pay-for-performance model -- if an affiliate does not generate sales,

it represents no cost to the merchant. The affiliate model is inherently well-

suited to the web, which explains its popularity.


8/2/2019 CH1 EC 2008

58/73

Banner exchange

Pay-per-click

Revenue sharing


Community model

8/2/2019 CH1 EC 2008

59/73

Community model The viability of the community model is based on user

loyalty.

Users have a high investment in both time and emotion.

Revenue can be based on the sale of ancillary products and

services or voluntary contributions; or revenue may be tied

to contextual advertising and subscriptions for premium

services. The Internet is inherently suited to community

business models and today this is one of the more fertile

areas of development, as seen in rise of social networking.


8/2/2019 CH1 EC 2008

60/73

Open source

Open content

Public broadcasting

Social networking services


8/2/2019 CH1 EC 2008

61/73

Subscription model

Users are charged a periodic -- daily, monthly or annual -- fee

to subscribe to a service.

It is not uncommon for sites to combine free content with

"premium" (i.e., subscriber- or member-only) content.

Subscription fees are incurred irrespective of actual usage

rates.

Subscription and advertising models are frequently combined.


8/2/2019 CH1 EC 2008

62/73

Content services

Person-to-person networking services

Trust services

Internet service provider


8/2/2019 CH1 EC 2008

63/73

Utility model The utility or "on-demand" model is based on metering usage,

or a "pay as you go" approach.

Unlike subscriber services, metered services are based on

actual usage rates.

Traditionally, metering has been used for essential services

(e.g., electricity water, long-distance telephone services).

Internet service providers (ISPs) in some parts of the world

operate as utilities, charging customers for connection minutes,

as opposed to the subscriber model common in the U.S.

Metered usage

Metered subscriptionPRADEEPA.M IMS.Ku-2010-11 63

8/2/2019 CH1 EC 2008

64/73

Networks for EC

corporate portal

A major gateway through which employees,

business partners, and the public can enter a

corporate Web site


1.8 The Networked Organization

8/2/2019 CH1 EC 2008

65/73


B2B Electronic E changes

8/2/2019 CH1 EC 2008

66/73

B2B Electronic Exchanges:

An Overview

public e-marketplaces (public exchanges)

Trading venues open to all interested parties (sellers and

buyers); usually run by third parties

exchange

A many-to-many e-marketplace. Also known as e-

marketplaces, e-markets, or trading exchanges

market makerThe third-party that operates an exchange (and in many

cases, also owns the exchange)


8/2/2019 CH1 EC 2008

67/73

Exhibit 6.1 Trading Communities


8/2/2019 CH1 EC 2008

68/73


8/2/2019 CH1 EC 2008

69/73


An Overview

Functions of Exchanges

1. Matching buyers and sellers

2. Facilitating transactions

3. Maintaining exchange policies and infrastructure

Ownership of Exchanges

An industry giant

A neutral entrepreneur

The consortium (or co-op)



8/2/2019 CH1 EC 2008

70/73


An Overview

Revenue Models

Transaction fees

Fee for service

Membership fees

Advertising fees

Other revenue sources



8/2/2019 CH1 EC 2008

71/73


An Overview

Governance and Organization

Membership

Site Access and Security

Services Provided by Exchanges


8/2/2019 CH1 EC 2008

72/73

B2B Portals

B2B portals

Information portals for businesses

vortals

B2B portals that focus on a single industry or industry

segment; vertical portals


8/2/2019 CH1 EC 2008

73/73

Third-Party (Trading) Exchanges

Third-party exchanges are characterized by

two contradicting properties:

They are neutral, because they do not favoreither sellers or buyers and

They do not have a built-in constituency of

sellers or buyers, they sometimes have a

problem attracting enough buyers and sellers toattain financial viability

ch1 ec 2008

Documents