Overview of E-Commerce

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E-Commerce
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Is the process of buying, selling, selling, transferring or exchanging products, services and/or information via computer networks, mostly the Internet or intranets. Refers to a broader definition of EC, not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, conducting e-learning and conducting electronic transactions within an organization.
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E-Business
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EC can take several forms, depending on the degree of digitization of the
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Product (service) sold The process e.g. ordering, payment, fulfilment etc. The delivery method.

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A product may be physical or digital, the process may be physical or digital and the delivery method may be physical or digital. In traditional commerce, all dimensions are physical. In pure EC, all dimensions are digital. All other dimensions are partial EC.

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EC Organizations
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Purely physical organizations are referred to as brick and mortar (old economy organizations), whereas companies that are engaged in only EC are considered virtual or pure-play organizations. Clicks and mortar organizations are those that conduct some EC activities, usually as an additional marketing channel.

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Classification of EC by the Nature of the Transactions and the Relationships Among Partners
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B2B
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B2C
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All participants in B2B EC are either businesses or other organizations. B2C EC includes retail transactions of products or services from businesses to individual shoppers. Also called e-tailing. In B2B2C EC, a business provides some product or service to a client business. The client maintains its own customers who may be its own employees, to whom the product or service is sold. This category includes individuals who use the Internet to sell products or services to organizations and individuals who seek vendors to bid on products or services for them.

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B2B2C
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C2B
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Intra-business EC
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This category includes all internet EC organizational activities that involves the exchange of goods or services or information among various and individuals in that organization. This is a subset of the intra-business category in which an organization delivers services or products to individual employees. in C2C EC consumers transact directly with other consumers. Ebay’s auctions are mostly C2C.

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B2E
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C2C
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Collaborative Commerce
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E-Learning
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When individuals or groups communicate or collaborate online, they may be engaged in C-Commerce e.g. business partners in different locations may design a product together.

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E-Government
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Training or formal education is provided online. E-learning is also used heavily by organizations for training and re-training employees (etraining)
In government EC, a government entity buys or provides goods or services or information from or to businesses (G2B) or to or from individuals (G2C).

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Social Networks
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A social network is a social structure composed of nodes (individuals or organizations) that are tied by one or more specific types of interdependency such as values, visions, ideas, financial exchange, friendship, kinship etc. Participants in a social network congregate on a website where they can create their own homepage fo free and which they can write blogs and wikis, post pictures, videos or music, share ideas and link to other web locations they find interesting.

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Social Network Services
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Social network services e.g. MySpace, Facebook etc. provide a web page for people to build their homepages, which they then host for free and they also provide basic communication and other support tools for conducting different activities in the social network. These activities are referred to as social networking. Social networks are people-oriented.

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Examples of social network services:
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Facebook.com YouTube.com Flickr.com Friendster.com Hi5.com Cyberworld.nate.com Habbo.com MySpace.com
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Business-Oriented Social Networks
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Business-oriented networks are social networks whose primary objective is to facilitate business. An example is linkedin.com, which provides business connections and enables job finding and recruiting. Another example is Yub.com (a huge online shopping mall with about 6 million items).

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Example of a Business Oriented Social Network
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Xing.com is a business network that attracts millions of executives, sales representatives and job seekers from many countries, mostly in Europe. The site offers secure services in 16 languages. Users can visit the site to:
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Establish new business contacts Systematically expand and manage their contacts’ networks Market themselves to employers in a professional context Identify experts and receive advice on any topic Organize meetings and events Control the level of privacy and ensure that their personal data are protected.

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Enterprise Social Networks
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Business-oriented social networks can be public e.g. linkedin.com (owned and managed by an independent company). Enterprise social networks are private, owned by corporations and operated inside them. Carnival Cruise Lines sponsor a social networking site (carnivalconnections.com) to attract cruise fans. Visitors use the site to exchange information, organize groups for trips, and much more.
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The Digital Economy
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The digital economy refers to an economy that is based on digital technologies, including digital communication networks (the Internet, intranets, extranets and VANs), computers, software and other related information technologies. Sometimes referred to as the Internet economy, the new economy or the Web economy.

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This platform displays the following characteristics:
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A vast array of digitizable products (databases, news, and information, books, magazines, TV and Radio programming, movies, e-games, music) delivered over a digital infrastructure anytime, anywhere in the world. Consumers and firms conduct financial transactions digitally through digital currencies that are carried via networked computers and mobile devices. Microprocessors and networking capabilities are embedded in physical goods such as home appliances and vehicles. Knowledge is codified. Work and production are organized in new and innovative ways.

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Major characteristics of the digital economy
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Globalization
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Digital system
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Global communication and collab0oration; global e-markets and competition.

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Speed
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Analog systems are being converted to digital ones.
A move to real-time transactions.

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Information overload and intelligent search
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While the amount of information generated is accelerating, intelligent search tools can help users find what they want.
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Business models and processes
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Innovation
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New and improved business models and processes provide opportunities to new companies and industries. Digital and Internet-based innovations continue at a rapid pace. More patents are being generated than ever before. The fast pace of innovation creates a high level of obsolescence. Opportunities abound in almost all aspects of life and operations. Markets are moving online. Music, books, videos, pictures etc. are digitized for fast and inexpensive distribution.

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Obsolescence
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Opportunities
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Markets
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Digitization
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Fraud
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Criminals employ a large range of innovative schemes on the Internet. Cybercons are everywhere. Conventional wars are changing to cyberwars. Organizations are moving to digital enterprises.
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Wars
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Organizations
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The Digital Enterprise
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The term digital enterprise refers to firms (e.g. Google, Amazon.com, Dell, Ticketmaster etc.) that use computers and information systems to automate most of its business processes. The digital enterprise is a new business model that uses IT in a fundamental way to accomplish one or more of these basic objectives:
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Reach and engage customers more effectively Boost employee productivity Improve operational efficiency
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The Digital Society
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The most important element of the digital world is people and they way they live and interact. The digital society has changed contemporary life with regard to almost any activity we can think of (work, play, shopping, entertainment, travel, medical care education etc.)

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The Drivers of EC
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EC initiatives play an increasing role in supporting strategies that help companies to compete and flourish, especially companies that want to introduce changes rather than respond to them. What makes EC suitable for such a role is a set of capabilities and developments (P.T.O):
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Provide efficient and effective business transactions Provide global reach for selling, buying, or finding business partners. Conduct business anytime, from anywhere in a convenient way. Disseminate information rapidly, frequently, in real time. Compare prices.

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Customize products and personalize services. Use rich media in advertisement, entertainment and social networking. Receive expert advice quickly. Collaborate in different ways (internally and externally). Share information and knowledge.

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Major Contributions to the Growth of EC
Efficient Transactions Global reach Anywhere, anytime convenience

Fast dissemination of information

EC Growth

Easy to find product/vendor information

Productivity booster Price comparison for customers

Personalization, customization

Rich media, entertainment, social networking

Knowledge, advice, collaboration

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Performance, Business Pressures and Organizational Responses
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The model shown below illustrates how the business environment creates pressures, problems and opportunities that drive what organizations are doing in their business processes. Other drivers are the organization’s mission, goals, strategy and plans.
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The Business Environment and the Performance Model
Mission Goals Strategy Plans

Our Company Business processes Core Competencies Critical response activities (solutions)

Business Environment

Problems Pressures Opportunities
Solutions

Actual measurable performance

EC and It support Infrastructure and Applications

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Business processes include competencies, activities, and responses to environmental pressures (critical response activities or solutions). The business processes and activities result in measurable performance which provides solutions to problems/opportunities, as well as feedback as to the attainment of the mission, strategy, goals and plans.

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EC Business Models
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A business model is a method of doing business by which a company can generate revenue to sustain itself. Business models are a subset of a business plan.

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The Structure and properties of Business Models
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A comprehensive business model is composed of the following elements:
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A description of the customers to be served and the company’s relationship with these customers, including what constitutes value from the customers’ perspective. A description of all products and services the business will offer and the markets in which they will be sold. A description of the business process required to make and deliver the products and services including distribution and marketing strategies. A list of the resources required and identification of which ones are available, which will be developed in-house, and which will need to be acquired.

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(Cont)
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A description of the organization’s supply chain, including suppliers and other business partners. A list of the major competitors, their market share and strengths/weaknesses. The competitive advantage offered by the business model. The anticipated organizational changes and any resistance to change. A description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability).
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Typical EC Models
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Outlined are five common EC models:
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Online direct marketing
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Electronic tendering systems
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Selling of products and services online. This model is efficient for digitizable products and services. This is a model in which a buyer request would-be sellers to submit bids; the lowest bidder wins. E-tendering systems are gaining popularity.

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Electronic marketplaces and exchanges
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From 1996, hundreds e-marketplaces have introduced new efficiencies to the trading process. If they are well managed, emarketplaces can provide significant benefits to both sellers and buyers.
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Viral marketing
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An organization can increase brand awareness and generate sales by inducing people to send influential messages to other people or to recruit friends to join certain programs. It is web-based word-of-mouth advertising and it is popular in social networks.

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Social networking and Web 2.0 tools
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Many companies are deriving commercial benefits from social networking and Web 2.0 tools.
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The Benefits and Impacts of EC
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EC provides benefits to organizations, individuals and society. These benefits are summarized in the following slides.

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EC Benefits to Organizations
Benefit
Global reach Cost reduction Facilitate problem solving Supply chain improvements Business always open Customization/personalization Seller’s specialization (niche market) Ability to innovate, use new business models Lower communication costs Efficient procurement Improved customer service Fewer permits and less tax Up to date company material Help SMEs to compete Lower inventories Lower cost of distributing digitizable product Produce competitive advantage

Description
Locating customers and/or suppliers worldwide, at reasonable cost and fast. Lower cost of information processing, storage, distribution Solve complex problems that have remained unsolved. Reduce delays, inventories and cost. Open 24/7/365; no overtime or other costs. Make to the customer’s specification, fast and at reasonable cost. Sellers can specialise in a narrow field, yet make money. Facilitate innovation and enable unique business models The Internet is cheaper that VAN private lines Saves time and reduce costs by enabling e-procurement. Direct interaction with customers, better CRM. May need fewer permits and be able to avoid sales tax. All distributed materials up to date. EC may help small companies to compete against large ones by using special business models. Using customization inventories can be minimized Delivery online can be 90% cheaper Innovative business models.

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EC benefits to Customers
Benefit
Ubiquity More products/services Customized products/services Cheaper products/services

Description
Can shop anytime from any place Large selection to choose from Can customize many products/services Can compare and shop for lowest prices

Instant delivery
Information availability Convenient auction participation No sales tax Enable telecommuting Electronic socialization Find unique items

Digitized products can be downloaded immediately upon payment.
Easy finding what you need with details, demos etc. Do auctions any time from any place. Sometimes. Can work or study from home. Can socialise online in communities and yet be home. Using online auctions, collectible items can be found. 36

EC Benefits to Society
Benefit Enable telecommuting More public services Description Facilitate work at home; less traffic, pollution. Make education, health, etc., available for more people. Rural areas can share benefits; more services for the poor. Facilitates domestic security.

Improved security

Increased standard of living
Close the digital divide

Can buy more and cheaper goods.
Allow people from developing countries and rural areas to accept more services and purchase what they really like.

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Limitation of E-Commerce
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These can be divided into technological and non-technological limitations (P.T.O):

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Technological Limitation of EC
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Lack of universal standards for quality, security and reliability. The telecommunications bandwidth is insufficient especially for m-commerce, videos and graphics. Software development tools are still evolving. Special web servers are needed in addition to the network servers, which add to the cost of EC.

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(Cont)
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It is difficult to integrate Internet and EC software with existing legacy applications and databases. Internet accessibility is still expensive. Order fulfilment of large-scale B2C requires special automated warehouses.

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Non-Technological Limitations of EC
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Security and privacy concerns deter customers from buying. Lack of trust in EC and in unknown sellers hinders buying. People do not yet sufficiently trust paperless, faceless transactions. Many legal and public policy issues, including taxation have not yet been resolved or are not clear. National and international government regulations sometimes become a barrier.
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It is difficult to measure some benefits of EC, e.g. online advertising. Some customers like to feel and touch products. In many cases, the number of buyers and sellers that are needed for profitable EC operations is insufficient. Online fraud is increasing. Difficult to get venture capital due to the failure of many dot.coms.
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The End!

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