CKFarn 1 Definitions and Content of Field zElectronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet. yElectronic commerce describes the buying and selling of products, services, and information via computer networks including the Internet. yThe infrastructure for EC is a networked computing environment in business, home, and government. yE-Business describes the broadest definition of EC. It includes customer service and intrabusiness tasks. It is frequently used interchangeably with EC.

CKFarn 2 yA global networked environment is known as the Internet yA counterpart within organizations, is called an intranet yAn extranet extends intranets so that they can be accessed by business partners. Definitions and Content of Field (cont.)

CKFarn 3 Pure Vs. Partial Electronic Commerce yThree dimensions xthe product (service) sold [physical / digital]; xthe process [physical / digital] xthe delivery agent (or intermediary) [physical / digital] yTraditional commerce xall dimensions are physical yPure EC xall dimensions are digital yPartial EC xall other possibilities include a mix of digital and physical dimensions

CKFarn 4 Physical agent Digital agent Digital Product Physical Product Physical process Digital process Virtual process Virtual delivery agent Virtual product Electronic commerce areas The core of electronic commerce The Dimensions of Electronic Commerce Traditional commerce

A Framework for Electronic Commerce 9 Electronic Commerce Applications Stocks Jobs On-line banking Procurement and purchasing Malls On-line marketing and advertising Home shopping Auctions Travel On-line publishing People: Buyers, sellers, intermediaries, services, IS people, and management Public policy, legal, and privacy issues Technical standards for documents, security, and network protocols payment Organizations: Partners, competitors, associations, government services Infrastructure (1) Common business services infrastructure (security smart cards/authentication electronic payment, directories/catalogs) (2) Messaging and information distribution infrastructure (EDI, , Hyper Text Transfer Protocol) (3) Multimedia content and network publishing infrastructure (HTML, JAVA, World Wide Web, VRML) (4) Network infrastructure (Telecom, cable TV wireless, Internet) (VAN, WAN, LAN, Intranet, Extranet) (5) Interfacing infrastructure (The databases, customers, and applications) Management © Prentice Hall, 2000

CKFarn 6 yA market is a network of interactions and relationships where information, products, services, and payments are exchanged. yThe market handles all the necessary transactions. yAn electronic market is a place where shoppers and sellers meet electronically. yIn electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line. Electronic Markets

11 Shopper/PurchaserSeller/Supplier Electronic Market (Transaction Hander) Electronic commerce network (Infrastructure) Product/service information request Purchase request Payment or payment advice Purchase fulfillment request Purchase change request Response to fulfillment request Shipping notice Payment approval Electronic transfer of funds Shopper/Purchaser’s Bank Payment remittance notice Electronic transfer of funds Transaction Handler’s Bank (Automated Clearing House) Seller/Supplier’s Bank Electronic Markets © Prentice Hall, 2000 Response to information request Purchase acknowledgment Shipping notice Purchase/service delivery (if online) Payment acknowledgment

CKFarn 8 yAn interorganizational information system (IOS) involves information flow among two or more organizations. yIts major objective is efficient routine transaction processing, such as transmitting orders, bills, and payments using EDI or extranets. yScope: An IOS is a unified system encompassing two or several business partners. yA typical IOS includes a company and its suppliers and and/or customers. Interorganization Information Systems

CKFarn 9 yBusiness-to-business yBusiness-to-customer yIntra business transactions yOthers Classification of Electronic Commerce Classification of EC by the Nature of the Transactions © Prentice Hall, 2000

CKFarn 10 Benefits to Customers yEnables customers to shop or do other transactions 24 hours a day, all year round from almost any location yProvides customers with more choices yProvides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons yAllows quick delivery of products and services in some cases, especially with digitized products

CKFarn 11 Benefits to Customers (cont.) yCustomers can receive relevant and detailed information in seconds, rather than in days or weeks yMakes it possible to participate in virtual auctions yAllows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences yElectronic commerce facilitates competition, which results in substantial discounts.

CKFarn 12 Benefits to Society yEnables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution yAllows some merchandise to be sold at lower prices benefiting the poor ones yEnables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them yFacilitates delivery of public services at a reduced cost,increases effectiveness, and/or improves quality

CKFarn 13 The Limitations of Electronic Commerce yLack of sufficient system’s security, reliability, standards, and communication protocols yInsufficient telecommunication bandwidth yThe software development tools are still evolving and changing rapidly yDifficulties in integrating the Internet and electronic commerce software with some existing applications and databases zTechnical Limitations of Electronic Commerce

CKFarn 14 Technical Limitations of Electronic Commerce (cont.) yThe need for special Web servers and other infrastructures, in addition to the network servers (additional cost) yPossible problems of interoperability, meaning that some EC software does not fit with some hardware, or is incompatible with some operating systems or other components

CKFarn 15 Non-Technical Limitations yCost and justification (35% of the respondents) xThe 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. Furthermore, to justify the system one needs to deal with some intangible benefits which are difficult to quantify.

CKFarn 16 ySecurity and Privacy (17% of the respondents) xThese issues are especially important in the B2C area, and security concerns are not truly so serious from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive these issues as very important and therefore the EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, fairly secure. yLack of trust and user resistance (4%) xCustomers do not trust an unknown faceless seller, paperless transactions, and electronic money. So switching from a physical to a virtual store may be difficult. Non-Technical Limitations (cont.)

CKFarn 17 yOther limiting factors are: xLack of touch and feel online xMany unresolved legal issues xRapidly evolving and changing EC xLack of support services xInsufficiently large enough number of sellers and buyers xBreakdown of human relationships xExpensive and/or inconvenient accessibility to the Internet Non-Technical Limitations (cont.)

CKFarn 18 The Driving Forces of Electronic Commerce yBusiness pressures yOrganizational responses yThe role of Information Technology (including electronic commerce) zThe New World of Business

CKFarn 19 Major Business Pressures Market and economic pressures Strong competition Global economy Regional trade agreements (e.g. NAFTA) Extremely low labor cost in some countries Frequent and significant changes in markets Increased power of consumers Societal and environmental pressures Changing nature of workforce Government deregulation of banking and other services Shrinking government budgets subsides Increased importance of ethical and legal issues Increased social responsibility of organizations Rapid political changes Technological pressures Rapid technological obsolescence Increase innovations and new technologies Information overload Rapid decline in technology cost Vs. performance ratio

CKFarn 20 Organizational Responses Framework for Organizational and Societal Impacts of Information Technology Management and Business Process Organization Structure and the Corporate Culture Individual and Roles Information Technology The Organization’s Strategy External Environment, Social, Economic, Political, etc

CKFarn 21 yReducing cycle time and time to market yEmpowerment of employees and collaborative work yKnowledge management yCustomer-focused approach yBusiness alliances — virtual corporation Business Process Reengineering

CKFarn 22 zTransforming Organizations yWork will change xTechnology learning xOrganizational learning zRedefining Organization yNew product capabilities yNew business models Other Changes in the Workplace

CKFarn 23 zImpacts on Manufacturing yPull processing, mass customization, shorter cycle time, integration (ERP), electronic bidding and procurement zImpacts on Finance and Accounting yElectronic payment systems, electronic cash, automating back office, home banking, electronic stock trading zHuman Resource Management yElectronic recruiting, training, distance learning Other Changes in the Workplace (cont.)

CKFarn 24 Overview of Electronic Marketing Structure zBusiness-oriented Electronic Marketing (B2B) yNeeds more precise record keeping, trackability, accountability, and formal contracts, usually with high volume of transactions and large amount payments zConsumer-oriented Electronic Marketing (B2C) yMostly online; on the Internet yGrowing offline too, mainly by using smart cards, although it is still experimental

CKFarn 25 Advantages of Electronic Marketing yDirect marketing yCustomization yOnline customer service yElectronic shopping malls: xIntermediaries (e.g. Internet Mall) xStores (e.g. Amazon, J.C.Penney Online) yElectronic intermediaries yGlobal marketing zCustomers can order from cyberstores 24 hours a day, 7 days a week from any place in the world

CKFarn 26 zWhat sells on the Internet? Forecast of the B2C Electronic Markets (cont.) yItems with high brand recognition yGoods that can be transformed to digitized goods like books, music, and video yItems with security guarantee given by highly reliable or known vendors yRelatively cheap items yRepetitively purchased items such as groceries yCommodities with standard specification yItems whose operating procedures can be more effectively demonstrated by a video yPackaged items which are well known to customers and which cannot be opened even when customers physically visit the store

CKFarn 27 Active Electronic Intermediaries zPure electronic mall yCompany’s retailing business exists only on the Internet yElectronic distributors xtake full responsibility of fulfilling orders and collecting payments yElectronic brokers xassist the search process of finding the appropriate products and their vendors zPartial electronic mall yElectronic mall as one of existing distribution channels

CKFarn 28 zGeneralized Electronic Intermediaries Active Electronic Intermediaries (cont.) yExamples : Choice Mall, and iMall yProvide a directory, keyword search engine, message encryption, optional Web site hosting service and a common platform of electronic payments yNecessary factors to make shopping successful xScreening quality and reliability for assurance customers need a reliable screening capability of quality and reliability of brands and companies e-brokers should create a trusted third party xCompeting electronic channels several electronic channels help in finding the items needed e-brokers should provide some differentiated attraction

CKFarn 29 zSpecialized Electronic Distributors Active Electronic Intermediaries (cont.) yCyber Bookstores xAmazon, Barnes and Noble yCyber CD Stores xColumbia House, Music Boulevard, CD Universe, and CDNow yDigitized Products and Services Stores xSoftware, games, CDs, and videos yCyber Flower Stores x1-800-FLOWERS

CKFarn 30 Reactive Electronic Department Store zThe J.C. Penney Case yThe Internet-based revenue amounts to only 1 to 2% of $30.5 billion total sales of 1997 (3.5% in 1999) yUpdating prices and adding new items to the electronic catalogs is convenient and inexpensive yOvercoming the limitations of paper catalogs without incurring extra distribution cost

CKFarn 31 Aiding Comparison Shopping zSearch hypertext files by agents zSearch in a web-based database both by human and software agents within an e-mall zComparable item retrieval and tabular comparison zComparisons over multiple malls zComparisons as a multiple criteria decision making

CKFarn 32 The Impact of EC on Traditional Retailing System zDisintermediation and Re-intermediation (Fig 2.5) yDisintermediation — the removal of organizations or business process layers responsible for certain intermediary steps in a given value chain xeliminating the traditional intermediaries, such as wholesalers, distributors, and retailers, to reduce the cost yRe-intermediation — the shifting or transfer of the intermediary functions, rather than the complete elimination xintermediation such as electronic shopping malls, directory and search engine service, and comparison aids using agents creates the role of re-intermediation