1. Ch. 13 E-Business Rev: May, 2015 Prof. Euiho Suh POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: http://posmit.postech.ac.kr) Dept. of Industrial & Management Engineering POSTECH

2. Contents 1Overview 2E-Business vs. E-Commerce 3Benefits of E-Commerce 4E-Commerce Categories 5Impacts of E-commerce 6Business Applications 7Online Shopping 8Interesting Facts and Statistics 9Summary and Conclusion

3. 3 Overview (1/2) ■Definition of E-Commerce –E-Commerce or Electronic commerce is a process of buying, selling, transferring, or exchanging products, services, and/or information via electronic networks and computers

4. 4 Overview (2/2) ■Brief History of E-Commerce 1970s  E-commerce meant the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), allowing businesses to send commercial documents like purchase orders or invoices electronically. 1980s  The growth and acceptance of credit cards  Automated teller machines (ATM)  Telephone banking  Airline reservation system 1990s  The Internet commercialized and users flocked to participate in the form of dot-coms, or Internet start-ups  Innovative applications ranging from online direct sales to e-learning experiences 2000s  Many European and American business companies offered their services through the World Wide Web.  Since then, People began to associate a word “e-commerce”

5. 5 E-Business vs. E-Commerce We use the term e-business to refer primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm. E-business E-commerce include commercial transactions involving an exchange of value across organizational boundaries. E-commerce

6. E-commerce vs. E-business E-commerce – the buying and selling of goods and services over the Internet E-business – the conducting of business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners Most people use these terms interchangeably, which is usually OK

7. 7 Benefits of E-Commerce ■Benefits to organizations –Global reach –Cost reduction –Supply chain improvements –Extended hours: 24/7/365 –Customization –Improved customer relations ■Benefits to consumers –More products and services –Cheaper products and services –Instant delivery –Information availability –Participation in auctions

8. 8 E-Commerce Categories (1/6) ■B2B E-commerce –B2B e-commerce is simply defined as ecommerce between companies. –About 80% of e-commerce is of this type. –Example Intel selling microprocessor to Dell Heinz selling ketchup to McDonalds

9. 9 E-Commerce Categories (2/6) ■B2C E-commerce –Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods or receiving products over an electronic network. –Example Dell selling me a laptop

10. 10 E-Commerce Categories (3/6) ■B2G E-commerce –Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. –It refers to the use of the Internet for public procurement, licensing procedures, and other government-related operations –Example Business pay taxes, file reports, or sell goods and services to Govt. agencies.

11. 11 E-Commerce Categories (4/6) ■C2C E-commerce –Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers. –Example) Mary buying an iPod from Tom on eBay Me selling a car to my neighbor

12. 12 E-Commerce Categories (5/6) ■G2C E-commerce –This Model is also a part of e-governance. –The objective of this model is to provide good and effective services to each citizen. –The Government provides the following facilities to the citizens through website. Information of all government departments Different welfare schemes Different application forms to be used by the citizens

13. 13 E-Commerce Categories (6/6) ■G2B E-commerce –Government-to-business (G2B) is a business model that refers to government providing services or information to business organisation. –Government uses B2G model website to approach business organizations. Such websites support auctions, tenders and application submission functionalities.

14. 14 Impacts of E-commerce (1/4) ■Economic Efficiency –Reduces cost of carrying out transactions –But, substitutes costs of building and maintaining the system –Can you point to examples of e-business increasing efficiency?? ■Network Effects –Email is more valuable if more people are using it –Growth can be explosive 2 nodes, 1 connection 3 nodes 3 connections 4 nodes, 6 connections How many connections with: 5 nodes? 6 nodes? 7 nodes?

15. 15 Impacts of E-commerce (2/4) ■Operational Efficiency –Extension of Electronic Data Interchange (EDI) –Supply chain management Raw materials Parts Assembly, manufacturing, packaging Distribution Retail Customer –How is this different for intangible goods? ■Effects of Operational Efficiency –Disintermediation Cutting out some of the steps in the supply chain There’s also “reintermediation” (new middlemen) Payment processing; product delivery; trust providers; etc. –Lowering communication costs May also lower inventories with “just in time” deliveries –Enterprise resource planning (ERP) systems

16. 16 Impacts of E-commerce (3/4) ■Disintermediation Are there dangers to cutting out these links?

17. 17 Impacts of E-commerce (4/4) ■Changing Market Structure –Created “day trading” –Travel industry –Created MP3 enabled music players What other impacts have e-business technologies had on the music industry? ■Other Organizational Impacts –Channel conflict Retailers challenged by manufacturers –New markets –New products –New competition

18. 18 Business Applications ■Business Applications –Email –Instant messaging –Online shopping and order tracking –Online banking –Shopping cart software –Teleconferencing –Electronic tickets

19. 19 Online Shopping (1/2) ■Definition –Online shopping is the process of buying goods and services from merchants who sell on the Internet ■Online Consumers –Online consumers are evenly split between men and women and tend to be better educated, younger, and more affluent than the general population ■Advantages –24-hour access –Ability to comparison shop –The in-home privacy –Variety ■Favourite websites for shopping include those featuring: –Event tickets –Online periodicals subscription –Flowers and gifts –Consumer electronics –Travel

20. 20 Online Shopping (2/2) ■How do you buy something

21. 21 Interesting Facts and Statistics ■PayPal –Every 1.2 seconds, a Canadian makes a purchase with their PayPal account –Almost 20 per cent of Canadians make three or more online purchases per month (comScore 2009) –Ninety per cent of Canadians do their online shopping exclusively from home and only one percent of Canadians shop online exclusively from work (comScore 2009) –Experts predict that online sales will reach US$328 billion by 2010

22. 22 Summary and Conclusion ■Summary –The Internet has lead to the birth and evolution E-commerce. –E-commerce has now become a key component of many organizations in the daily running of their business. ■Conclusion –As the Internet and in turn E-commerce has developed, and continues to evolve and grow, it is vital that any organization, in any particular industry, must base its strategic planning around such a rapidly growing medium.