Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce L E C T U R E 2 INTRODUCTION TO EBUSINESS

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce The first step came from the development of the Electronic Data Interchange (EDI). EDI is a set of standards developed in the 1960’s to exchange business information and do electronic transactions.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce The next major step occurred in 1992 when the Mosaic web-browser was made available, it was the first ‘point and click’ browser. The development of DSL was another key moment in the development to of e-commerce. –DSL allowed quicker access and a persistent connection to the Internet

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Origins of commerce The origins of traditional commerce predate recorded history. Commerce is based on the specialization of skills. Instead of performing all services and producing all goods independently, people rely on each other for the goods and services they need. Example: Mr. ABC trades eggs to one of his neighbors in exchange for repairs to the fences on his farm.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Traditional commerce Although money has replaced bartering, the basic mechanics of commerce remain the same: –one member of society creates something of value that another member of society desires. Commerce is a negotiated exchange of valuable objects or services between at least two parties and includes all activities that each of the parties undertakes the complete the transaction.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Views of commerce Commerce can be viewed from at least two different perspectives: 1. The buyer’s viewpoint 2. The seller’s viewpoint Both perspectives will illustrate that commerce involves a number of distinct activities, called business processes.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce The buyer’s perspective From the buyer’s perspective, commerce involves the following activities: 1.Identify a specific need 2.Search for products or services that will satisfy the specific need 3.Select a vendor 4.Negotiate a purchase transaction including delivery logistics, inspection, testing, and acceptance 5.Make payment 6.Perform/obtain maintenance if necessary

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce The seller’s perspective From the sellers’ perspective, commerce involves the following activities: 1.Conduct market research to identify customer needs 2.Create a product or service to meet those needs 3.Advertise and promote the product or service 4.Negotiate a sales transaction including delivery logistics, inspection, testing, and acceptance 5.Ship goods and invoice the customer 6.Receive and process customer payments 7.Provide after sales support and maintenance

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Business processes Business processes are the activities involved in conducting commerce. Examples include: Transferring funds Placing orders Sending invoices Shipping goods to customers

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce E-Commerce E-commerce (electronic commerce) is the buying and selling of goods and services on the Internet, especially the World Wide Web.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce E-Commerce is a business transaction (buying or selling) on a secure link over the Internet. It only entails (involve) your company and the ultimate buyer (your customer). Not much else is done in a typical e-commerce transaction. You are simply using the Web and it's resources to effectively conduct and execute a business transaction.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Impact of e-commerce E-commerce is changing the way traditional commerce is conducted: Technology can help throughout the process including –promotion, –searching, –selecting, –negotiating, –delivery, and –support. The value chain is being reconfigured.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Value chain analysis A way of looking at the activities of an industry or organization. Primary activities –Costs are directly allocated to a product Support activities –Costs are associated with the overall operation of the organization

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Appropriateness It is important to identify which business processes can be streamlined using e-commerce technologies. It is equally important to realize that some processes make effective use of traditional commerce and can’t be improved upon using technology. Technology is not a universal remedy. –Using it when it is not necessary or helpful can be a costly mistake.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Well-suited for e-commerce Business processes that are well-suited for electronic commerce: –Sale/purchase of new books and CDs –Online delivery of software –Advertising and promotion of travel services –Online tracking of shipments The business processes that are especially well-suited to e-commerce include commodity items, that is, a product or service that has become standardized.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Best for traditional commerce Business processes that are well-suited to traditional commerce: –Sale/purchase of high fashion clothing (Any possible exceptions?) –Sale/purchase of perishable food products –Small-denomination transactions (Future?)Sale of –expensive jewelry and antiques In general, products that buyers prefer to touch, smell, or otherwise closely examine are difficult to sell using e-commerce.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Combinations of both Some business processes can be handled well using a combination of electronic and traditional methods: –Sale/purchase of automobiles –Online banking –Roommate-matching services –Sale/purchase of investment/insurance products In this course we will discuss the issue of evaluating the advantages and disadvantages of e-commerce.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Advantages of e-commerce For the seller: –Increases sales/decreases cost –Makes promotion easier for smaller firms –Can be used to reach narrow market segments

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce For the buyer: –Makes it easier to obtain competitive bids –Provides a wider range of choices –Provides an easy way to customize the level of detail in the information obtained

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce In general: –Increases the speed and accuracy with which businesses can exchange information –Electronic payments (tax refunds, paychecks, etc.) cost less to issue and are more secure –Can make products and services available in remote areas –Enables people to work from home, providing scheduling flexibility

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Disadvantages of e-commerce Some business processes are not suited to e- commerce, even with improvements in technology Many products and services require a critical mass of potential buyers (e.g. online grocers) Costs and returns on e-commerce can be difficult to quantify and estimate

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Cultural impediments: People are reluctant to change in order to integrate new technology The legal environment is uncertain: Courts and legislators are trying to catch up

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce E-Business E-business (electronic business) is the conducting of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Electronic business transactions involving money are "eCommerce" activities. However, there is much more to eBusiness than selling products: what about ; –marketing, –procurement and –customer education?

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce E-business goes far beyond ecommerce or buying and selling over the Internet, and deep into the processes and cultures of an enterprise. It is the powerful business environment that is created when you connect critical business systems directly to customers, employees, vendors, and business partners, using Intranets, Extranets, ecommerce technologies, collaborative applications, and the Web.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Here just a partial list of your main features and benefits: –Sharply reduced costs of doing business. –Better service to all your customers. –Increased visibility among your competition. –Better TTM (Timing to Market). –Official B2B designation. –More options to your buying customers.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce –You can deal more effectively with your suppliers. –Better marketing advantage than your competition. Plus much much more.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Benefits to Customers Some benefits that consumers may expect to receive are: 1.Increased choice of vendors and products. 2.Convenience from shopping at home or office. 3.Greater amounts of information that can be accessed on demand. 4.More competitive prices and increased price comparison capabilities.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce 5.Greater customization in the delivery of services(e.g many online news services allow their customers to “design” the look of their daily newspaper).

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce SPEED of change Some simple facts will explain this progression. –The number of internet devices in 1984 was 1,000 - one thousand –The number of internet devices in 1992 was 1,000,000 - one million –The number of internet devices in 2008 was 1,000,000,000 - one billion

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce It took the –Telephone 38 years –Television 13 years –Internet 4 years –iPod 3 years –Face book 2 years to reach 50 million users

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce It is predicted that that revenues, up until 2006, will grow 40% to 50% yearly. Expectations of higher prices as well as larger profits for e-commerce business are also present. Also, we will see a larger presence by experienced traditional companies, such as Wal-Mart, on the Internet. It is believed companies in general will take this mixed strategy of having stores online and offline in order to be successful.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Internet ad revenue hit a record-breaking high of $37 billion in 2012, according to a recent study by the Interactive Advertising Bureau. In 2012, B2C ecommerce sales grew 21.1% to top $1 trillion for the first time, according to new global estimates by eMarketer. This year, sales will grow 18.3% to $1.298 trillion worldwide, eMarketer estimates.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce It can be seen that there will be a large growth in Business-to-Consumer (B2C) e-commerce, which is online businesses selling to individuals.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Today the largest electronic commerce is Business-to- Business (B2B). –Businesses involved in B2B sell their goods to other businesses. –In 2001, this form of e-commerce had around $700 billion in transactions. Other varieties growing today include Consumer-to- Consumer (C2C) where consumers sell to each other, for example through auction sites.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Types of E-Commerce Business Consumers Business Consumers B2BB2C C2BC2C

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Business to Business(B2B)/ Inter-organizational E-Commerce In this case both the buyers and sellers are business organizations. B2B Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable. E.g. one company sells raw material and another manufacturing company buys raw material for manufacturing products etc.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Business to Consumer(B2C)/Intra-organizational E-Commerce It is called business to customer delivery. In this case the seller is a business organization whereas the buyer is a consumer. B2C Businesses selling to the general public typically through catalogs utilizing shopping cart software.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce B2C is really what the average person has in mind with regards to ecommerce as a whole. –Having a hard time finding a book? Need to purchase a custom, high-end computer system? How about a first class, all-inclusive trip to a tropical island? With the advent ecommerce, all three things can be purchased literally in minutes without human interaction. Typically electronic stores are setup on the internet to sell goods to the consumer. e.g.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Consumer to Consumer(C2C)/ Intermediaries and E-Commerce This refers to situation where both the sellers and buyers are consumers. C2C (Consumer-to-Consumer) There are many sites offering free auctions, and forums where individuals can buy and sell thanks to online payment systems like PayPal where people can send and receive money online with ease. eBay's auction service is a great example of where person-to-person transactions take place everyday since 1995.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce An online auction sites provides an effective means for supporting C2C ecommerce. e.g. ebay.com, pakiauction.com Intermediaries (or electronic brokers) are economic agents that stand between the parties of a contract (or transaction), namely buyers and sellers, and perform functions necessary to the fulfillment of a contract. Most firms in the financial service sector including banks and insurance companies are intermediaries.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce E.g. a customer can order flowers through online intermediaries that divert the order to regular stores for delivery. The flowers are shipped directly to the buyer’s home.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Consumer to Business(C2B) This is a new form of ecommerce in which a consumer specifies the requirements to business, which provides a product that meet that requirements. e.g. C2B a consumer posts his project with a set budget online and within hours companies review the consumer's requirements and bid on the project. The consumer reviews the bids and selects the company that will complete the project.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce This empowers consumers around the world by providing the meeting ground and platform for such transactions.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce e-Business solutions ERP, CRM, Database Intranet Internal Users Suppliers, public Mobile Users Customers Internet / WWW Web EDI

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce Participants involved in an online transaction 1.Customer: –A customer is person who Initiates an electronic transaction to buy a product or service 2.Merchant Web front office owner who offers goods and services to customers using the electronic commerce infrastructure.

Office Management Tool-IIInstitute of Management Sciences Muhammad Shahzad Ali Lecture 2: Introduction to E-Business & E-Commerce 3.Card issuer / Customers Bank Like Citibank and Standard chartered bank; –Merchant bank : holds the merchant’s account 4.Acquirer: An acquirer is trusted third party 5.Payment Gateways: link between an online store front and the merchant bank 6.Cash cash in electronic terms is referred to as electronic cash