e-commerce university of wollongong iact303 – inti 2005 world wide networking
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E-commerceE-commerce
University of WollongongUniversity of Wollongong
IACT303 – INTI 2005 IACT303 – INTI 2005 World Wide NetworkingWorld Wide Networking
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What is E-Commerce About?
• Changing transaction costs• Changing market structures• Changing boundaries of firms• New products, processes and
services• Greater speed
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How?• Through the application of Internet
Technologies
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The Structure of E-Commerce
• TechnologyLawEconomicsSocial Relations
– Write down one example of each of these
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Extract the key terms from these definitions
“E-Commerce is the exchange of information across electronic networks at any stage in the supply chain whether within an organisation , between businesses, between business & consumers, or between public and private sectors whether paid or unpaid” UK Government
“ E-Commerce is the sharing of business information , maintaining business relationships & conducting business transactions by means of telecommunications networks” Zwass (1998)
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Extract the key terms from these definitions
“The transformation of key business processes through the use of internet technologies” IBM’s Definition of E-Business
“E-Commerce is buying & selling activities over digital media”
E-Business – encompasses e-commerce & “includes the front & back-office applications that form the
engine for modern business. Its not just about e-commerce transactions, it’s about redefining old business models with the aid of technology to maximise customer value” R. Kalakota (1999) p4
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Cost savings in e-commerce come from “disintermediation”
Source: Benjamin & Wigand (1995)
Producer Wholesaler Retailer Consumer
Producer Wholesaler Retailer Consumer
Producer Wholesaler Retailer Consumer
Price/Shirt Savings
$52.72
$41.34
$20.45
0%
28%
62%
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Fundamental Shift in the Economics is Under
way• The explosion in connectivity is
causing new patterns of behaviour and business strategy
• In the past, the focus has been on adapting operating processes to IT.
• Now a change in strategic business fundamentals is underway
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Case Study – The Demise of
Encyclopaedia Britannica
• Cost structure designed to support an army of salesman
• Competition form Microsoft EnCarta turned the business on its head
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Information and Organisations
• Information is the glue that holds organisations together
• Information is intrinsic to Physical Value Chain activities
• Information asymmetries characterise many buy-seller relationships
• Information forms the basis for competitive advantage
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Information and Organisations
• Information and the means of delivery determine corporate structures
• When information is carried by “things” it is generally constrained by the physical chain
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Reach and Richness• Reach - the number of people exchanging
information • Richness –
– combination of bandwidth, – the degree to which the network can be
customised and – it’s interactivity
• In general, richness has demanded proximity
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Richness v Reach before WWW
Reach
Richness
Evans and Wurster, 1997
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Reach and Richness• There has traditionally been a trade off
between richness and reach because information activities have been intrinsically tied to physical value chains.
• With the arrival of greater connectivity and the adoption of non-proprietary protocols increasing richness and reach is possible simultaneously.
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Implications for Company Structures
• The trade-off between reach and richness has determined organisational hierarchies
• The elimination of the trade-off means that traditional channels of information and control are no longer necessary
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Deconstruction of the Value Chain
• Newspaper case study.– No longer tied to the print medium.– Possible to deconstruct newspaper
business and selectively offer parts of the business online
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Deconstruction of the Value Chain
• High cost of distribution channels has driven the economics of banking
• Increasing richness has allowed greater richness of information over a distance through telebanking
• Hence, a cheaper distribution channel has appeared.
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Types of E-Commerce
Business to Consumer (B2C) Business to Business (B2B) Business to Government (B2G) Consumer to Consumer (C2C) Consumer to Business (C2B)
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The B2B Transformation
Electronic commerce emerged in the1980s with the use of electronic messaging technologies and EDI
EDI was effective in reducing costs incurred in processing, handling and storage of product improving profitability of business
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The B2B Transformation
EDI was not effective in leveling the playing field for small business
operators. The proprietary nature of EDI systems
meant that suppliers had to invest in several (expensive) pieces of software when doing business with different companies.
ensuring flexibility “Pair-wise” tyranny rules under EDI incremental adoption path was not
possible Integration costs of EDI were high
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The Internet’s Role
The internet has emerged as a low cost, non-proprietary, easy to use medium to conduct business
XML plays a vital role in B2B infrastructure today
Effort is being given to standardising business processes so that they can be captured in “web services” software.
Microsoft .Net is an example of this
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Defining a message schema for information exchange
between partners• SOAP- Simple Object Access Protocol • SOAP is a communication protocol for
accessing Web Services.• SOAP is written in XML and enables
applications to exchange information over HTTP.
• SOAP overcomes the problem of firewalls blocking messages by using HTTP.
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In summary,• SOAP is platform independent enabling
applications on different platforms to exchange information.
• SOAP will become a W3C endorsed standard• SOAP is also at the heart of Microsoft’s .NET
Web Services• For more information see:http://www.w3schools.com/soap/soap_intro.asp
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Components of a well-functioning commercial web
site• As far as the consumer is concerned the tech-talk is well and good but does the website achieve the following?
• A well-organized collection of products and/or services
• A convenient way for a customer to select products• Convenient order forms• Convenient and secure ways of payment• A way of keeping information about orders• Customer support and feedback
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Implications for Competitive Advantage• Deconstruction of the Value Chain
represents a threat for established businesses and an opportunity for others
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Channel Extending Intermediaries
supplier customer
CEIsupplier
supplier
supplier
customer
customer
customer
Search for opportunities to add value: e.g. high customer search costs, switching costs, low customer satisfaction
Wield new power by consolidating traditional buyers & customers. Become the first-line interface with consumers.
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Implications for Competitive Advantage1. Existing value chains will fragment
into multiple businesses each of which will have it’s own source of competitive advantage.
a. Why should this occur?
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Implications for Competitive Advantage2. Some new businesses will benefit
from network economics of scale that can give rise to monopolies
a. How does this come about?
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Implications for Competitive Advantage3. As value chains fragment and
reconfigure, new opportunities will arise for purely physical businesses
a. What examples can you think of that support this?
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Implications for Competitive Advantage4. When a company focuses on different
activities the value proposition underlying its brand identity will change.
a. What does this mean?
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Implications for Competitive Advantage5. Customers switching costs will drop
and companies will have to develop new ways of generating customer loyalty
a. Why have switching costs dropped?
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Implications for Competitive Advantage8. Incumbents could easily become
victims of their obsolete physical infrastructure and their own psychology.
a. Can you think of any examples?
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What Will Happen to Your Business
• Newspapers• Banking• Football Club• Hospital• General Practitioner• Supermarket
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“The music industry will be out in five years – kaboom, gone.”
Tim WhiteEditor, Billboard Magazine
Wired, Feb. 2003
Will it?
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Further readings• Kalakota R., Robinson M (2000), e-
Business, Roadmap for Success, Addison-Wesley
• Lawrence et al., 2002, Technology of Internet Business, John Wiley & Sons Australia
• Laudon & Laudon (2002), Management Information Systems, Prentice Hall
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Further readings• Evans, Philip B. and Wurster, Thomas S. 1997,
‘Strategy and the new economics of information’, Harvard Business Review, Sept-Oct 1997 75(5) p. 70-80
• Glushko, R. et al. (1999) ‘ An XML Framework for agent based E-commerce’ in Communication of the ACM, Vol. 42, Issue 3.
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Go to…
Barua, A. et al. (2001) ‘Measuring the Internet
Economy’, Centre of Electronic Commerce
Research, University of Texas. Available from
http://crec.mccombs.utexas.edu/works/articles/internet_economy.pdf
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Measuring the Internet Economy
1. Identify the four layers that the authors propose for the Internet economy.
2. If you are currently employed, what layer are you
employed at? If you are not employed, what layer of the Internet layer would you like to work at and why?
3. Where in the Internet Economy “food chain” does
Malaysia and Indonesia exist? 4. What are the key findings of the paper?
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Answers
1. Identify the four layers that the authors propose for the Internet economy.
Internet Infrastructure Level; The Internet applications layer; the internet intermediary layer; the internet commerce layer
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Answers
2. If you are currently employed, what layer are you employed at? If you are not employed, what layer of the Internet layer would you like to work at and why?
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Answers
3. Where in the Internet Economy “food chain” does Singapore exist?
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Answers
4. What are the key findings of the paper?• Internet economy is much bigger than originally thought.
(101 billion• IE is growing at an astounding rate• IE rivals century old industries such as (energy, cars and
telecommunications)• IE has had a major impact on jobs and responsibilities• Infrastructure and applications players make up over half
of the IE.• Internet intermediaries are critical to IE growth
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