CS5038 The Electronic Society Lecture 2: Overview of Electronic Commerce Lecture Outline Definitions Perspectives Variations Business Models Pressures on businesses Responses of businesses The Networked Business Benefits Problems

E-Commerce Definitions E-commerce : Any kind of transaction done partly or completely over a network Business-to-business (B2B) - online transactions (e.g. purchases) with other businesses Interorganisational Information System (IOS) – information between organisations; used for collaborative commerce Business-to-consumer (B2C) - online transactions between businesses and consumers Business-to-employee (B2E) - information and services made available to employees online Consumer-to-consumer (C2C) - online transactions between consumers Peer-to-Peer (P2P) – exchange games, DivX videos, MP3 music Consumer-to-Business (C2B) – consumers seek sellers (Priceline.com) or sell services to organisations Intrabusiness (Organisational) EC – internal to organisation, intranet Business-to-Employees (B2E) – subset of Intrabusiness Government-to-Citizens (G2C) – services and information to citizens Exchange – buyers and sellers; dynamic pricing; matching services Exchange-to-Exchange (E2E) – system to connect exchanges Quantas Business-to-business (B2B) E-marketplace member Joined Airnew Co.—links major airlines with suppliers Fuel Fuel services Light maintenance services Catering Business-to-customer (B2C): Online booking Wireless communications – arrival departures on mobile Business-to-employee (B2E): Online training Online banking IOS EDI/Internet

Electronic Commerce Terms EC defined from these perspectives Communications E-delivery: Goods, services, information, payments Business process Automate business transactions and workflow Service Cut service costs, improve quality and speed Online Buying, selling and other services on internet Collaborations Inter- and intraorganisational Community Gather to learn, transact, communicate

Variations Pure vs. Partial EC: based on the degree of digitisation of Product Process Delivery agent Traditional commerce: all dimensions are physical Pure EC: all dimensions are digital Partial EC: all other possibilities include a mix of digital and physical dimensions Internet vs. Non-Internet EC VANs – value added network LANs – local area network Vending Machine Click and Mortar

Dimensions of E-Commerce Prentice Hall, 2002

Business Models A method of doing business by which a company can generate revenue to sustain itself. Name your price – priceline.com Find the best price – hotwire.com Dynamic brokering – getthere.com Affiliate marketing – amazon.com Electronic tendering systems – gxs.com Online auctions – ebay.com Customization and personalization – dell.com Electronic marketplaces and exchanges – e-steel.com Supply chain improvers – productbank.com.au Collaborative commerce Where is the company positioned in the value chain?

Rappa’s Business Models http://www.digitalenterprise.org/models/models.html Brokerage – exchange, trading community, aggregator Advertising – portals, sponsorship banners Infomediary Recommender - users provide recommendations on products, e.g. http://www.epinions.com Registration - session tracking of users, allows greater targeting of advertising, e.g. http://www.nytimes.com Merchant - retail Manufacturer – eliminate middleman Affiliate – online referrals for commission Community – voluntary contributors, regular visitors Subscription – high value content Many companies changed to subscription models in last two years Utility – pay by byte

Example: ORBIS Corp. TRANSFORM Prentice Hall, 2002 Top is old way Bottom: Orbis is facilitator for new way Prentice Hall, 2002

Major Business Pressures Market / Economy Society / Environment Strong competition Global economy Regional trade agreements (NAFTA) Low labor cost in some countries Frequent changes in markets Increased power of consumers Changing nature of workforce Deregulation of services Shrinking subsidies Ethical and legal issues Social responsibility of E-bus. Rapid political changes Technology Rapid technological obsolescence Increase innovations and new technologies Information overload Rapid decline in technology cost vs. performance ratio

Organizational Responses Strategic systems (e.g. FedEx tracking system) – strategic advantage Continuous improvement efforts Customer Relationship Management (CRM) – maximum value proposition to customer – online help, product information, tools Total Quality Management (TQM) - ongoing refinements in response to continuous feedback Business process reengineering (BPR) - major innovations Business Alliances Virtual Corporation - Joint Venture for time-limited mission Keiretsu - Long term alliance of manufacturers, suppliers and finance corporations Cooperation in E-markets – purchasing consortia Continuous improvement efforts Dell – electronic orders move immediately to JIT assembly BPR = major innovations IT Support Reducing cycle time and time to market Business process time = cycle time (product to customer) Idea to market Empowerment of employees and collaborative work Decentralised decision making, employees access info to make quick decisions IT Support Reducing cycle time (=business process time) and time to market Empowerment of employees and collaborative work Supply chain improvements: speed and efficiency Mass customisation

Intranet/Extranet Intranet Extranet Corporate LAN (Local Area Network) or WAN (Wide …) Uses Internet technology Open, flexible connectivity Limited to authorised employees Secure behind firewall Extranet Links Intranets in different locations Security required – Virtual Private Network (VPN) Information travels through encrypted tunnels between Intranets Quiz 6

The Networked Business: Internet, Intranet, Extranet

Benefits of E-Commerce To Organizations To Consumers Expands the marketplace Decreases the cost (less paper) Pull-type supply chain management Customisation = competitive advantage Less time between outlay of capital and receipt of products and services Supports BPR efforts Open 24 hours a day More choices Better prices Quick delivery Product information in seconds Interact with other consumers Facilitates competition Pull-type - Reduced inventories and overhead 3rd world – learn professions, get degree, communities get uncensored news To Society Work at home  less traveling  less traffic and pollution Lower prices benefit less affluent people Third world and rural areas access products otherwise unavailable Public services at a reduced cost and improved quality

Problems With E-Commerce Technical Problems Insufficient telecommunication bandwidth Difficult to integrate Internet EC software with some existing applications and databases Additional cost of infrastructure Software development tools are still evolving Standards (security, reliability, communication) are still evolving Interoperability problems Cost Problems Developing 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 are more serious… These problems relatively easy to overcome

Problems With E-Commerce (contd.) Security and Privacy B2C - Hard to convince customers that online transactions are secure Customers do not trust: Unknown sellers, Paperless transactions, Electronic money Other limiting factors Switching from a physical to a virtual store may be difficult Lack of touch and feel online Channel conflict Unresolved legal issues Rapidly evolving and changing EC Lack of support services Insufficiently large number of sellers and buyers Expensive and/or inconvenient accessibility to the Internet Quiz 1 here

Quiz 2 here Summary Definitions – B2C, B2B, B2E Perspectives – communications, business process, services Variations – Pure v. partial Business Models and Rappa’s models Pressures on businesses – market, technology, society Responses of businesses – BPR, alliances, IT support The Networked Business - Internet, Intranet, Extranet Benefits – organisations, consumers, society Problems – technical and non-technical Quiz 2 here