Presentation on theme: "CS5038 The Electronic Society"— Presentation transcript:
1 CS5038 The Electronic Society 1. Overview of Electronic CommerceBackgroundDefinitionsPerspectivesVariationsBusiness ModelsPressures on businessesResponses of businessesThe Networked BusinessBenefitsProblemsAlso look at 2. Retailing (next) and then 3. Customers
2 General Business Terminology Transactions : Exchange of goods, services, information, money.Supply Chain: entire system (directly) concerned with getting products and services from a supplier to a customer.Business process: tasks undertaken by business in producing goods and servicesBroker: middleman who helps facilitate transactionTendering: process of bidding to provide a good or service.
3 Firms and ProfitsMost firms basically try to maximize profits (in some overall sense)Revenue = inflow of money or other capitalCost = outflow of money or capitalProfit = revenue – costTwo basic ways to increase profits.Various strategies to achieve this.
4 Specialization``One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations: to put it on is a particular business, to whiten the pins is another ... and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which in some manufactories are all performed by distinct hands, though in others the same man will sometime perform two or three of them.”Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
5 Transaction Costs Firms have internal and external trans. costs This picture is taken from , Creative Commons License, Source/Author: Achim Grochowski.
6 The Value of Information Information can have a valueKnow-how, intellectual property, …Customer data…Broker often makes money by using information that it would be difficult or expensive for others to get.Asymmetric information: Sometimes different participants in a market have different amounts of information about each other.Car dealer vs. customerInsurance company vs. customer (buyer has more)
7 E-Commerce Definitions E-commerce : Any kind of transaction done, partly, or completely, over a (computer and telecommunications) networkThe term `E-commerce’ also refers to the processes used by participants in such transactions.QuantasBusiness-to-business (B2B)E-marketplace memberJoined Airnew Co.—links major airlines with suppliersFuelFuel servicesLight maintenance servicesCateringBusiness-to-customer (B2C):Online bookingWireless communications – arrival departures on mobileBusiness-to-employee (B2E):Online trainingOnline bankingIOS EDI/Internet
8 Intrabusiness (organisational) e-Commerce Internal to organisation, intranet: e.g.Between business unitsFrom businees to employeesBetween employees
9 Interorganisational Information System (IOS) Used to share information between organisations. Used for collaborative commerce.Often used to improve efficiency of supply-chainE.g. when vendor of some product starts to run low in stock IOS can share that information back to the suppplier, who can then ship more stock.Electronic Data Interchange (EDI) standards
10 E-commerce TypesBusiness-to-business (B2B): online transactions (e.g. purchases) with other businesses.Business-to-consumer (B2C): online transactions between businesses and consumers.Business-to-employee (B2E): information and services made available to employees online (subset of intrabusiness).Consumer-to-consumer (C2C): online transactions between consumers
11 E-commerce TypesConsumer-to-Business (C2B): consumers seek sellers or sell services to organisations.Price comparison websitesSites for freelancers: , ,Affiliate schemes: say, a link from a consumer’s web-page to an online retailer, and the consumer gets rewarded either per-click or per-sale.
12 E-commerce TypesPeer-to-Peer (P2P) – direct transactions without middlemen. E.g. consumers exchange games, DivX videos, MP3 musicGovernment-to-Citizens (G2C) – government provides services and information to citizensExample:
13 E-commerce TypesExchange: a system to host buyers and sellers. Often has: dynamic pricing, matching of services.Examples:Exchange-to-Exchange (E2E) – system to connect exchangesIf complicated supply chain, probably need to interact, build-systems to deal with multiple exchanges.
14 Electronic Commerce Process Terms EC defined from these perspectives:CommunicationsE-delivery: Goods, services, information, paymentsBusiness processAutomate business transactions and workflowServiceCut service costs, improve quality and speedOnlineBuying, selling and other services on internetCollaborationsInter- and intraorganisationalCommunityGather to learn, transact, communicate
15 Variations Pure vs. Partial EC: based on the degree of digitisation of ProductProcessDelivery agentTraditional commerce: all dimensions are physicalPure EC: all dimensions are digitalPartial EC: all other possibilities include a mix of digital and physical dimensions
17 Variations (2) Internet vs. Non-Internet EC: VANs – value added network (hosted service that acts as intermediary between business partners)LANs – local area networkVending MachineClick and Mortar
18 Business ModelsA method of doing business by which a company can generate revenue to sustain itself.Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.comCustomization and personalization – dell.comElectronic marketplaces and exchanges – e-steel.comSupply chain improversCollaborative commerceWhere is the company positioned in the value chain?
19 Rappa’s Business Models Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediaryRecommender - users provide recommendations on products, e.g.Registration - session tracking of users, allows greater targeting of advertising, e.g.Merchant - retailManufacturer – eliminate middlemanAffiliate – online referrals for commissionCommunity – voluntary contributors, regular visitorsSubscription – high value contentMany companies changed to subscription models in last two yearsUtility – pay by byte
20 Example: ORBIS Corp. TRANSFORM Prentice Hall, 2002 Top is old way Bottom: Orbis is facilitator for new wayPrentice Hall, 2002
21 Major Business Pressures Market / EconomySociety / EnvironmentStrong competitionGlobal economyRegional trade agreements (NAFTA)Low labor cost in some countriesFrequent changes in marketsIncreased power of consumersChanging nature of workforce(De)regulation of servicesShrinking subsidiesEthical and legal issuesSocial responsibility of E-bus.Rapid political changesTechnologyRapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratio
22 Organizational Responses Strategic systems (e.g. FedEx tracking system) – strategic advantageContinuous improvement effortsCustomer Relationship Management (CRM) – maximum value proposition to customer – online help, product information, toolsTotal Quality Management (TQM) - ongoing refinements in response to continuous feedbackBusiness process reengineering (BPR) - major innovationsBusiness AlliancesVirtual Corporation: legal and taxation status allows multiple businesses to work together under one umbrella. Often temporary.Keiretsu - Long term alliance of manufacturers, suppliers and finance corporationsCooperation in E-markets – purchasing consortiaContinuous improvement effortsDell – electronic orders move immediately to JIT assemblyBPR = major innovationsIT SupportReducing cycle time and time to marketBusiness process time = cycle time (product to customer)Idea to marketEmpowerment of employees and collaborative workDecentralised decision making, employees access info to make quick decisions
23 IT Support Various possible benefits: Reducing cycle time (=business process time) and time to marketImproved opportunities for collaborative workImprovements to supply-chain: speed and efficiencyMass customization
24 Technology: Intranet Intranet (Internal) corporate network LAN (Local Area Network)WAN (Wide …)Uses Internet technologyOpen, flexible connectivityLimited to authorised employeesSecure behind firewallMuch on the following slides on Portals and Intranet Architecture come from a lecture by Paul Chan:Quiz 6
26 Technology: Extranet Extranet: Links intranets in different locations, from approved partners, vendors, suppliers, etc.Uses Internet technologySecurity required – Virtual Private Network (VPN)Information travels through encrypted tunnels between IntranetsQuiz 6
27 The Networked Business: Internet, Intranet, Extranet
28 Enterprise (Corporate) Portals Corporate (enterprise) portal—a gateway for entering a corporate Web site, enabling communication, collaboration, and access to company informationProvide single-point access to specific enterprise information and applications available on:InternetIntranetsExtranetsCompanies may have separate portals for outsiders and for insiders
31 Interoperability & Protocols Need technological protocols to facilitate e-commerce.Currently include:TCP/IP: The Internet Protocol Suite. The standard computer networking protocol stack for exchanging packets of data across an unreliable network.HTTP: web-browser makes requests, possibly for resources (web-pages etc.), and web-server responds.SSL (and TLS): cryptographic protocols for sending encrypted messages over internet.HTTPS: a secure version of HTTP. Basically, HTTP combined with SSL.Pull-type - Reduced inventories and overhead3rd world – learn professions, get degree, communities get uncensored news
33 Benefits of E-Commerce To OrganizationsTo ConsumersExpands the marketplaceDecreases the cost (less paper)Pull-type supply chain managementCustomisation = competitive advantageLess time between outlay of capital and receipt of products and servicesSupports BPR effortsOpen 24 hours a dayMore choicesBetter pricesQuick deliveryProduct information in secondsInteract with other consumersFacilitates competitionPull-type - Reduced inventories and overhead3rd world – learn professions, get degree, communities get uncensored newsTo SocietyWork at home less traveling less traffic and pollutionLower prices benefit less affluent peopleThird world and rural areas access products otherwise unavailablePublic services at a reduced cost and improved quality
34 Problems With E-Commerce (A) Technical ProblemsInsufficient telecommunication bandwidthDifficult to integrate Internet EC software with some existing applications and databasesAdditional cost of infrastructureSoftware development tools are still evolvingStandards (security, reliability, communication) are still evolvingInteroperability problems.Cost ProblemsDeveloping EC in house can be expensive and may result in delays.Difficult to justify - intangible benefits are difficult to quantify.E.g. customer relationship management (CRM).Non-technical problems can be more serious…These problems relatively easy to overcome
35 Problems With E-Commerce (B) Other limiting factorsSwitch from physical to virtual store may be difficult, expensiveLack of touch and feel onlineChannel conflictUnresolved legal issuesRapidly evolving and changing ECLack of support servicesInsufficiently large number of sellers and buyersExpensive and/or inconvenient accessibility to the Internet.Security, Privacy and TrustB2C - Hard to convince customers that online transactions are secureCustomers do not trust:Unknown sellers, Paperless transactions, Electronic moneyQuiz 1 here
36 Legal Issues: TaxIn USA, one driving force behind early e-store success was lower taxBecause of a tax loophole, sales tax (VAT) was not charged on e-commerce salesAutomatically gave price advantage to e-commerce sites!
37 Legal Issues: Intl E-Commerce In theory, e-commerce means sites can sell globallyIn practice, difficult because of different tax rules, regulations, customs, etcMore common to set up subsidiaries in different countries, as Amazon has doneLack of global legal/regulatory framework hinders ecommerce
38 Social Problems With E-Commerce What if,Information aggregated by companies about consumers is used to the advantage of companies, but not the consumersThere is not fair competitionIt enables cartels to formPrices for consumers go upThe company claims to be operating in a different jurisdiction, and does not submit to regulation or lawAvoids tax (even whilst professing not to be `doing evil’)Does not re-invest in country in which revenue is generated?Quiz 1 here
39 Quiz 2 here Summary Definitions – B2C, B2B, B2E Perspectives – communications, business process, servicesVariations – Pure v. partialBusiness Models and Rappa’s modelsPressures on businesses – market, technology, societyResponses of businesses – BPR, alliances, IT supportThe Networked Business - Internet, Intranet, ExtranetBenefits – organisations, consumers, societyProblems – technical and non-technicalQuiz 2 here