E-Business and E-Commerce

Learning Objectives Explain what e-business and e-commerce are and some of their benefits and risks. Describe the purpose of the following common e-business applications: EDI, ERP, EAI, CRM, and SCM. Identify a variety of e-commerce business models and discuss their similarities and differences. Discuss the types of Web sites that can be used to implement e-commerce.

Learning Objectives, cont’d. List several strategies for implementing e-commerce using the Web, including some of the decisions that need to be made, the options available for accepting payments, and the process of designing and developing an effective Web site. Outline some sales and marketing strategies that can be implemented using the Web. Discuss some important security issues that are involved with performing financial transactions over the Internet.

Overview This chapter covers: The difference between e-commerce and e-business E-business and e-commerce applications and models Issues regarding implementation of e-commerce Sales and marketing strategies

What Are E-Business and E-Commerce? E-business describes any business with an online presence. E-commerce describes performing financial transactions over a network. E-commerce has been conducted for decades, but now most e-commerce takes place over the Internet.

Benefits of E-Commerce To organizations: Reduced costs Increased customer satisfaction More effective management tools Potentially higher sales To customers: Convenience Easier comparison shopping Higher degree of selection Potential cost savings

Limitations and Risks of E-Commerce Pressure to be “always open” Customer hesitation to shop online Risk of fraudulent credit card transactions Ease of entry for competitors High rate of failure Expense to the customer of returning merchandise

Electronic Data Interchange (EDI) EDI: the transfer of data between different companies using networks, such as the Internet. Can increase efficiency and lower costs New EDI applications will result from: Validity of digital signatures Increased acceptance of electronic document submission

Enterprise Resource Planning and Enterprise Application Integration Enterprise resource planning: special type of large, integrated system that ties together all types of a business’s activities. Enterprise application integration: when information from an ERP or other type of internal system is exchanged with other applications or organizations.

Customer Relationship Management (CRM) CRM: a company’s customer service system. Goal of CRM system is to build ongoing relationships with customers to increase satisfaction and loyalty, which, in turn, can result in higher sales. Many CRM activities today take place via the Web.

Supply Chain Management (SCM) Supply chain management: oversight of materials, information, and finances as they move from the supplier to the consumer. Value chain management: process of maximizing flow of products, services, and information from raw materials to final consumer through value-added network of suppliers. Just-in-time (JIT) systems are used to eliminate waste, and reduce inventory and facility costs.

E-Commerce Business Models A company’s business model consists of its policies, operations, and technology—in essence, a description of how it generates revenue.

Business to Consumer (B2C) With the B2C model, businesses sell goods or services to the end consumer.

Business to Business (B2B) The B2B business model includes any type of e-commerce transaction between two businesses. Many B2B activities focus on exchanging business information: To facilitate the supply chain To procure goods and services needed for normal business activities

Consumer to Consumer (C2C) The C2C business model consists primarily of consumer auctions. Individuals bid on or sell items.

Business to Government (B2G) B2G organizations sell goods and services to the government. B2G will likely become more prominent as the government sector participates more actively in e-commerce. When consumers make payments to the government online, it is referred to as C2G e-commerce.

Intermediary Hubs Intermediary hub: e-commerce model where a business brings buyers and sellers together. Vertical hubs match buyers and sellers within a particular industry. Horizontal hubs focus on providing the same type of products or services across different industries.

Types of E-Commerce Web Sites Manufacturer and e-tailer Web sites E-malls Brokerage and auction sites Online auctions Financial brokerages Market exchanges

Implementing Web-Based E-Commerce Implementing a Web-based e-commerce system usually involves the five steps listed here.

Step 1: Selecting Appropriate Business Models and Types of Web Sites Identify the current business models and additional models to be used. Then, select the types of Web sites (e-tailer, auction, brokerage, etc.).

Step 2: Selecting the Desired E-Commerce/E-Business Applications Identify the appropriate applications: Online selling EDI ERP SCM CRM

Step 3: Determining How to Handle Electronic Financial Transactions Credit card processing Online checks and online payment transfers Smart cards Digital wallets B2B considerations

Step 4: Designing and Developing an Effective Web Site Web site design: the planning of the site. Web site development: the actual creation, testing, and maintenance of the site. E-commerce sites should be designed carefully to ensure that they are easy to use, quick to load, and secure.

Step 5: Implementing Appropriate Sales and Marketing Strategies Customer service features Taxes Privacy policies and security statements Appropriate domain names and urls Web site promotion Data warehousing and mining

Security Issues Secure financial transactions. Secure sensitive documents and files. Authenticate online business partners.