1 EBS 2053 Chapter 1: Introduction (EC) Prepared by: Puan Asleena Helmi (Date: 22/06/01)

2 Learning Objectives i)Highlight the major applications of EC, both business-to-business and business-to-consumer ii)Describe EC, its dimensions, benefits, limitations and process iii)Identify the EC infrastructure and support services

3 History of EC EC applications began in the early 1970’s with innovations such as electronic transfer of funds (EFT). However applications were limited to large corporations. The introduction of electronic data interchange (EDI) added various kinds of transaction processes and encouraged participation from financial institutions to manufacturers, retailers, services and other forms of businesses. The commercialization of the Internet and the introduction of the Web in the early 1990’s have expanded EC rapidly. E.g: In 1999, General Motors ( offered more than Web pages of information, which included more than 100,000 links to its products,services and related topics.

4 Definitions of EC: Electronic commerce has different definitions: i)From business process perspective, EC is the application of technology toward the automation of business transactions & workflows ii)From communications perspective, EC is the delivery of information, products/services or payments via telephone lines, computer networks or any other means. iii)From an online perspective, EC provides the capability of buying and selling products and information on the Internet and other online services iv)From a service perspective, EC is a tool that addresses the desire of firms, consumers and management to cut service costs while improving the quality of goods and increasing the speed of service delivery.

5 Classification of types of EC A widely used classification scheme of EC transaction types distinguishes four patterns of EC. a)Business-to-business b)Business-to-consumers c)Business-to-government d)Consumers-to-consumers. The direction of relationships can however vary. Example: business -to-consumers can become consumers-to-business as well. The Internet-based EC is therefore not restricted to a few selected partners but to anyone present on the Internet.

6 EC Transaction Types Goods Services Products Information Entertainment Education Transportation Services Community services Employment Goods Services Information Trade Services Education Property right Employment Classifieds Houses Services Education Taxation Rights Consumer Sells Business Sells Government Sells Consumer Buys Business Buys Government Buys Figure 1 summarizes types of transaction involved in each situation

7 EC Infrastructure There are various types of infrastructures that assist EC applications: a)Common Business Services Infrastructure (E.g: security smart cards/ authentication, electronic payments, directories/catalogs) b) Messaging & Information Distribution (E.g: EDI, , Hypertext Transfer Protocol, Chat Rooms) c) Multimedia Content and Network Publishing (E.g: Hypertext Markup Language, Java, WWW,VRML)

8 Continuation….slide 7 d) Network Infrastructure (E.g: Telecom, Cable TV, wireless, Internet, Intranet, Extranet, cell phones) e) Interfacing Infrastructure (E.g: Databases, logistics, customers and applications)

9 Intermediaries/ Electronic brokers Intermediaries are economic agents that stand between the parties of a contract (or transaction) namely buyers and sellers and perform necessary functions to the fulfillment of the contract. Example: In the financial sector, banks, insurance companies and venture capital firms are intermediaries. Many opportunities exist for intermediaries who process and add value to information along the transactional chain.

10 Electronic Marketplaces (EM) The concept was developed by the Inter- organizational Information Systems (IOS) during the eighties An electronic marketplace is an inter-organizational information system that allows participating buyers & sellers to exchange information about their product prices and offerings (Bakos 1991) The EM has to be run by an operator which can be autonomous, a group of market participants, a single supplier of a service provider.

11 Key Questions for Management EC has opened various opportunities but it demands new management approaches. Companies must rethink their strategy, products and business process in order to develop a cohesive management approach. To respond to the new opportunities and emerging threats, management must anticipate technological and consumer behavioral changes.

12 Continuation….slide 11 What are the options & priorities? What is driving the changes in the business? How quickly will it happen ? Who are the key competitors -intra-industry or new entrants? How to incorporate the changes into current business? How to design new organization structures? Competitive Pressure External Threat Re-engineering Efficiency & Performance

13 Key Factors to Success Whatever the approach, an organization must go through the following steps to succeed: a)Develop a robust EC strategy, driven by business problems at hand, the corporate objectives & the core competencies (things that the company is good at) and b)Integrate the technology into high value- added areas such as distribution, sales and marketing and customer management.

14 Benefits of EC: i)Expands company’s marketplace to national and international markets. ii)Allows companies to reach a large number of customers around the globe at a very low cost iii)Shortens or even eliminates marketing distribution channels, making products cheaper& vendor profits higher. iv)Help small businesses compete against large companies v)Gives customers more choices vi)Makes it possible for people to work and study at home vii)Delivers relevant & detailed information in seconds, rather than days or weeks.

15 Limitations of EC i)There is lack of universally accepted standards for quality, security and reliability. ii)The telecommunications bandwidth is insufficient. iii)Software development tools are still developing iv)Internet accessibility is still expensive and/or inconvenient. v)Many legal issues are unresolved such as taxes. vi)Difficulty in measuring benefits of EC, such as Web advertising. There is lack of methodology for justifying EC. vii)Customers are resistant to the change from real to a virtual store.