1. MBA 61062: ELECTRONIC COMMERCE
Chapter 1 Introduction to E-Commerce S. Sabraz Nawaz Senior Lecturer in MIT
MBA 61062:
ELECTRONIC COMMERCE

2. E-Commerce by S. Sabraz Nawaz
Learning Objectives
Define electronic commerce (EC) and describe its various categories.
Describe and discuss the content and framework of EC.
Describe the major types of EC transactions.
Understand the elements of the digital world.
Describe the drivers of EC as they relate to business pressures and organizational responses.
Describe some EC business models.
Describe the benefits and limitations of EC to organizations, consumers, and society.
E-Commerce by S. Sabraz Nawaz

3. E-Commerce by S. Sabraz Nawaz
Welcome Activity
Visit Amazon.com, register if you are not a member and buy a Nike loafer.
Visit any online training site and buy a training.
E-Commerce by S. Sabraz Nawaz

4. Electronic Commerce: Definitions and Concepts
electronic commerce (EC)
The process of buying, selling, or exchanging products, services, or information via Internet and intranet
e-business
A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, delivering e-learning, and conducting electronic transactions within an organization
E-Commerce by S. Sabraz Nawaz

5. Definitions and Concepts: Pure Versus Partial EC
EC can be either pure or partial depending on the nature of its three major activities:
Ordering and payments
Order fulfillment
Delivery to customers.
Each activity can be physical or digital. Thus, there are eight possible combinations
E-Commerce by S. Sabraz Nawaz

6. Definitions and Concepts: Pure Versus Partial EC
E-Commerce by S. Sabraz Nawaz

7. Definitions and Concepts: Pure Versus Partial EC
If there is at least one digital dimension, we consider the situation EC, but only partial EC.
Purchasing a computer from Dell’s website or a book from Amazon.com is partial EC, because the merchandise is physically delivered.
Buying an e-book from Amazon.com or a software product from Buy.com is pure EC, because ordering, processing, and delivery to the buyer are all digital.
E-Commerce by S. Sabraz Nawaz

8. Electronic Commerce: EC Organizations
brick-and-mortar (old economy) organizations
Old-economy organizations (corporations) are purely physical; perform their primary business off-line, selling physical products by means of physical agents
virtual (pure-play) organizations
Organizations that conduct their business activities solely online
click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce activities, usually as an additional marketing channel
E-Commerce by S. Sabraz Nawaz

9. Electronic Commerce: Definitions and Concepts
electronic market (e-marketplace)
An online marketplace where buyers and sellers meet to exchange goods, services, money, or information
Any individual can also open a market selling products or services online. Electronic markets are connected to sellers and buyers via the Internet or to its counterpart within organizations, an intranet .
E-Commerce by S. Sabraz Nawaz

10. Electronic Commerce: Definitions and Concepts
Interorganizational information systems (IOSs)
Communications systems that allow routine transaction processing and information flow between two or more organizations
Intraorganizational information systems
Communication systems that enable e-commerce activities to go on within individual organizations
Review Questions:
Define EC and e-business
Distinguish between pure and partial EC
Define click-and-mortar and pure play organizations
Define electronic markets, IOSs, and intraorganizational information systems
E-Commerce by S. Sabraz Nawaz

11. The Electronic Commerce Field: Classification, Content, and History
intranet
An internal corporate or government network that uses Internet tools, such as Web browsers, and Internet protocols
extranet
A network that uses the Internet to link multiple intranets
Some people still use a stand-alone computer but majority of people use compters connected to Internet. Or intranet or extranet.
E-Commerce by S. Sabraz Nawaz

12. The Electronic Commerce Field: Classification, Content, and History
AN EC FRAMEWORK
The EC field is a diverse one involving many activities, organizational units, and technologies.
People: Sellers
E-Commerce by S. Sabraz Nawaz

13. E-Commerce by S. Sabraz Nawaz
AN EC FRAMEWORK
Five support areas for EC applications
People: Sellers, buyers, intermediaries, information system and technology specialists, other employees, and any other participants.
Public policy: Legal and other policy and regulatory issues, such as privacy protection and taxation, which are determined by governments.
Marketing and advertisement: Like any other business, EC usually requires the support of marketing and advertising. This is especially important in B2C online transactions.
Support services: Many services are needed to support EC. These range from content creation to payments to order delivery.
Business partnerships: Joint ventures, exchanges, and business partnerships of various types are common in EC
E-Commerce by S. Sabraz Nawaz

14. E-Commerce by S. Sabraz Nawaz

15. The Electronic Commerce Field: Classification, Content, and History
EC is classified by the nature and direction of transactions and interactions
business-to-business (B2B)
E-commerce model in which all of the participants are businesses or other organizations
business-to-consumer (B2C)
E-commerce model in which businesses sell to individual shoppers
e-tailing
Online retailing, usually B2C
Common classification of EC is by nature of transaction or relationship among the participants.
E-Commerce by S. Sabraz Nawaz

16. The Electronic Commerce Field: Classification, Content, and History
business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides some product or service to a client business that maintains its own customers
consumer-to-business (C2B)
E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals who seek sellers to bid on products or services they need
E-Commerce by S. Sabraz Nawaz

17. The Electronic Commerce Field: Classification, Content, and History
intrabusiness EC
E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization
business-to-employees (B2E)
E-commerce model in which an organization delivers services, information, or products to its individual employees
E-Commerce by S. Sabraz Nawaz

18. The Electronic Commerce Field: Classification, Content, and History
consumer-to-consumer(C2C)
E-commerce model in which consumers sell directly to other consumers
collaborative commerce (c-commerce)
E-commerce model in which individuals or groups communicate or collaborate online
E-Commerce by S. Sabraz Nawaz

19. The Electronic Commerce Field: Classification, Content, and History
e-learning
The online delivery of information for purposes of training or education
e-government
E-commerce model in which a government entity buys or provides goods, services, or information from or to businesses or individual citizens
E-Commerce by S. Sabraz Nawaz

20. E-Commerce by S. Sabraz Nawaz
Activity
Visit emeraldinsight.com and search for any article on e-Commerce and download.
E-Commerce by S. Sabraz Nawaz

21. E-Commerce by S. Sabraz Nawaz
Some points on History
EC was first developed in 1970 with the introduction of EFT
Then came EDI; a technology used to transfer routine documents
Later expanded from financial transaction to other types of transactions to manufacturers, retailers and other businesses
More new EC applications followed; ranging from travel reservation system to stock trading.
In 1969, US government began Internet as experiment.
In 1990 WWW was introduced – major milestone in EC
In 1995 many Internet applications appeared – from direct online sales to e-learning
In 1999, the emphasis of EC shifted from B2C to B2B
2001 from B2B to B2E, c-commerce, e-government, e-learning, and m-commerce.
In 2005, social networks started to receive quite a bit of attention, as did m- commerce and wireless applications
EFT: Funds could be routed electronically from one organization to another but limited to large corporations and financial institutions.
In 1999 many .com failed because lack of finance, lack of marketing experience, not enough stock, distribution problem etc.
E-Commerce by S. Sabraz Nawaz

22. The Digital World: Economy, Enterprises, and Society
digital economy
The digital economy , also known as the Internet economy, is an economy based on online transactions, mostly e-commerce.
It includes digital wireline or wireless communication networks (e.g., the Internet, intranets, extranets, and VANs), computers, software, and other related information technologies.
Characters:
A vast array of digitizable products
Consumers and companies conduct financial transactions through digital currencies
Microprocessors and networking capabilities are embedded in physical goods
Information is transformed into a commodity
Works and productions are organized in new and innovative ways.
E-Commerce by S. Sabraz Nawaz

23. The Digital World: Economy, Enterprises, and Society
digital economy
It also refers to the convergence of computing and communication technologies on the Internet and other networks and the resulting flow of information and technology that is stimulating EC and vast organizational changes.
This convergence enables all types of information (data, audio, video, etc.) to be stored, processed, and transmitted over networks to many destinations worldwide.
E-Commerce by S. Sabraz Nawaz

24. Major characteristics of digital economy:
Many digitizable products – books, databases, magazines, information, electronic games, and software – are delivered over a digital infrastructure anytime, anywhere in the world, interconnected by a global grid. We are moving from analog to digital, even the media is going digital (TV as of February 2009).
Information is transformed into a commodity.
Financial transactions are now digitized and chips are embedded in many products (e.g., cameras, cars). Knowledge is codified.
Work and business processes are organized in new and innovative ways.
Disruptive innovation is occurring in many industries.
E-Commerce by S. Sabraz Nawaz

25. Major characteristics of digital economy:
E-Commerce by S. Sabraz Nawaz

26. The Digital World: Economy, Enterprises, and Society
digital enterprise
A new business model that uses IT in a fundamental way to accomplish one or more of three basic objectives:
reach and engage customers more effectively
boost employee productivity
improve operating efficiency
It uses converged communication and computing technology in a way that improves business processes
E.g.: Dell, Amazon and Google use computers and information systems to automate most of its business processes.
All internal communications done by intranet
All business partners are connected by Internet or extranet or value added network
Many such companies employ a corporate portal; a gateway for customers, employees and partners
Major concern for many companies is how to transform themselves as digital enterprise so that they can take part in the digital economy.
E-Commerce by S. Sabraz Nawaz

27. E-Commerce by S. Sabraz Nawaz
Digital Enterprise: How a company uses the Internet, Intranet and Extranet
E-Commerce by S. Sabraz Nawaz

28. The Digital World: Economy, Enterprises, and Society
corporate portal
A major gateway through which employees, business partners, and the public can enter a corporate Web site
E-Commerce by S. Sabraz Nawaz

29. Digital Vs Brick-and-Mortar Company
E-Commerce by S. Sabraz Nawaz

30. The Digital World: Economy, Enterprises, and Society
Digital society
The most important element of digital world is people and the way they live and interact
Digital society has changed contemporary life with regard to almost any activity; work, shopping, entertainment, travel, medical care, education, and much more. Digital TV, camera, car etc.
Another good example is how politicians interact with public
E-Commerce by S. Sabraz Nawaz

31. Electronic Commerce Drivers and the Changing Business Environment
EC is driven by many economic, legal, societal, and technological factors that have created a highly competitive business environment in which customers are becoming more powerful
These environmental factors can change quickly, vigorously, and sometimes in an unpredictable manner
Companies need to react quickly to both the problems and the opportunities resulting from this new business environment
Political changes
Financial Crisis
E-Commerce by S. Sabraz Nawaz

32. E-Commerce by S. Sabraz Nawaz
Major Drivers of EC
EC initiatives play an increasing role in supporting innovations and strategies that help companies to compete and flourish, especially companies that want to introduce changes rather than respond to them.
The essentials of the capabilities that drive EC are the ability to:
Provide efficient and effective business transaction
Provide global reach for selling, buying or finding business partners
Conduct business anytime, anywhere in a convenient way
Disseminate information rapidly; frequently in real-time
Compare prices
Customize products and personalize services
Use rich media in advertisement and social networking
Receive experts’ and other users’ advice quickly
Collaborate in different ways both internally and externally
Increase productivity, e.g. by having smart applications
Easily and quickly find information about both vendors, products and competitors
E-Commerce by S. Sabraz Nawaz

33. Major Contributions to the Growth of EC
E-Commerce by S. Sabraz Nawaz

34. E-Commerce by S. Sabraz Nawaz
Activity
Build your own Jaguar car.
E-Commerce by S. Sabraz Nawaz

35. Electronic Commerce Drivers and the Changing Business Environment
Since EC technology is improving over time and decreasing in cost, its comparative advantage is increasing, contributing to its growth. The EC growth is related to changing business environment
People, organizations, etc. are trying to improve their performance; for some it is a challenges; for other it is a requirement for survival, for some it is the key to improved life, profitability or reputation
The Business Environment and Performance Model
E-Commerce by S. Sabraz Nawaz

36. Major Business Pressures
E-Commerce by S. Sabraz Nawaz

37. Innovative Organizational Responses
Cycle Time: The period required to complete one cycle of an operation; or to complete a function, job, or task from start to finish.
E-Commerce by S. Sabraz Nawaz

38. WHAT BUSINESS PRESSURES DO YOU SEE IN YOUR BUSINESS ENVIRONMENT?
E-Commerce by S. Sabraz Nawaz

39. Electronic Commerce Business Models
A business model is a method of doing business by which a company can generate revenue to sustain itself; it spells out where the company is positioned in the value chain
E-Commerce by S. Sabraz Nawaz

40. E-Commerce by S. Sabraz Nawaz
Remember this?
E-Commerce by S. Sabraz Nawaz

41. Electronic Commerce Business Models
THE STRUCTURE AND PROPERTIES OF BUSINESS MODELS
Revenue Models
Sales
Transaction fees
Subscription fees
Advertising fees
Affiliate fees
Other revenue sources
Other revenue sources:
companies allow people to play games for a fee or to watch a live match in real time for fee.
Licensing fee such as MS Office cloud
Innovative revenue for individuals:
Buy low and sell high eg. A person who bought pizza.com domain for $20 in 1994 sold it for $2.6 in 2008
E-Commerce by S. Sabraz Nawaz

42. E-Commerce by S. Sabraz Nawaz
Common Revenue Models
E-Commerce by S. Sabraz Nawaz

43. Electronic Commerce Business Models
TYPICAL EC BUSINESS MODELS
Online direct marketing
Electronic tendering systems
tendering (bidding) system
Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins
Electronic marketplaces and exchanges
Viral marketing
Social networking and Web 2.0 tools
E-Commerce by S. Sabraz Nawaz

44. E-Commerce by S. Sabraz Nawaz
Activity
Visit Dell.com and buy a PC.
E-Commerce by S. Sabraz Nawaz

45. The Benefits, Limitations, and Impacts of Electronic Commerce
THE BENEFITS AND IMPACTS OF EC
A few innovations in human history encompasses benefits as EC does
The global nature of the technology, the opportunity to reach hundreds of millions of people, its interactive nature, resourcefulness and rapid growth, etc. have resulted in many benefits to organizations, individual customers, and society
E-Commerce by S. Sabraz Nawaz

46. Benefits of E-Commerce
E-Commerce by S. Sabraz Nawaz

47. Benefits of E-Commerce
E-Commerce by S. Sabraz Nawaz

48. Limitations of E-Commerce
E-Commerce by S. Sabraz Nawaz

49. End of Chapter 01 with Case Study
E-Commerce by S. Sabraz Nawaz