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Electronic Commerce Uma Lakshmi K
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Page 1: e-commerce

Electronic Commerce

Uma Lakshmi K

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Electronic Commerce

Distributing, buying, selling, marketing and Servicing of products or services over electronic systems such as computer and other networks.

It is an electronic business application aimed at commercial transactions.

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Electronic Commerce

“The seamless application of information and communication technology from its point of origin to its end point along the entire value chain of business processes conducted electronically and designed to enable the accomplishment of a business goal”

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Information Era – Dramatic Roles

1955 – 1974 Electronic Data Processing (EDP)

1975-1994 MIS & Strategic Information Era

1995-2014 Internet

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backdrop of E-CommerceInternet

Late 1800s;Emergence of large business organizations

1950’s; use of computers in Business

1960’s; information exchange on punched cards and magnetic tapes. But only large trading corporations could afford it as the translating formats were specific to companies. Majorly freight and shipping companies

Late 1969’s –ARPANET,US Defence dept control weapon systems and transfer research files 1970’s EDI; the Senior of E-Commerce

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backdrop of E-CommerceInternet

1979; e-mail on USENET by students of Duke and North Carolina University

1989; NSF (National Science Foundation) permitted two commercial e-mail services, MCI-mail and CompuServe

1991 – 1994; privatization of Internet, with the new structure based on four Network Access Points (NAP), each operated by a separate company called Network Access Providers., who sell network access rights directly to large customers and indirectly to small firms through ISPs (Internet Service Providers)

Potential of Internet not realized initially; within 30 years it has become one of the most amazing technologies and social accomplishment of 20th century. Every year apart from information, billions of dollars change hands over internet.

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backdrop of E-CommerceWorld Wide Web

1990; Tim Berner Lee at CERN (Conseil Europeen pour la Recherche Nucleaire), the European Laboratory for Particle Physics in Geneva, Switzerland, proposed HTML to enable exchange of information among high-energy physics community.

1991; WWW publicly available from CERN. 1993; 50 web servers, GUI web browser for X Windows and Macintosh

available.

1993; Marc Andreessen at NCSA (National Centre for Super computing Applications) developed web browser for X Windows called “Mosaic” and 1994 he started his own company later known as “Netscape Communications”.

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1994; World Wide Web Organization was announced by CERN and MIT, which later was known as W3C (World Wide Web Consortium) , to guide technical developments and standards for the evolution of the web.

1994’s Amazon.com ; the pioneer of E-Commerce

1995; Netscape navigator (Mozilla)

2000’s Dot-com burst

E-Commerce now is more of a norm than exception

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E-Commerce – some milestones

1992 – 1 million hosts 1993 – 50 web servers 1993- InterNic created to handle

domain name registration 1996- 12.8 million hosts 2,12,155 hosts 25 million users 90% users are from USA 1997- 1.3 million domain names 2007- 1350 million users

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Dimensions of E-Commerce

Business Technology Society

- E-Commerce has challenged the concept of privacy, intellectual property, national Sovereignty, and governance.

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E-Commerce

Technology mediated exchanges between parties (Individuals & Organizations or within organizations) electronically facilitated.

Digital enabling of transactions and processes in a firm involving Information Systems.

E-Business

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Testimonials from Amazon 1994 - “Jeff Bejos” , Sr.VP at a wall street

investment Bank read that Internet is likely to grow at 2300% per year.

1996- 3 million titles of Books – No “touch and feel” required by customers.

December, 1999 – “Person of the year” on Time Magazine.

$113.00 / share Jan, 2001 - $545 million net loss in the last

quarter itself. 1300 employees laid off. September , 2008 – Top Web billionaire of the

world

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Characteristics of e-commerce

Exchange of Digitized Information between Parties

communication, coordination for the transmission of goods/ services

It is technology enabled (web browsers, ATM interfaces)

Technology mediated transactions more than human contact.

Intra and inter organizational activities that exchange in Business environment.

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Characteristics of e-commerce

Universal Standards shared by all nations.

Information density with technology reducing the cost of Information and raising the quality of information.

Richness of the data: Text, graphic, Audio, and Video

Dynamic (continuous change) Customization and interactivity;

sense and respond – listening to customers in a new way.

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Advantages of E-Commerce Complements traditional business 24 X 7 operations Global reach Relatively less cost of acquiring,

serving, and retaining customers An extended enterprise including

suppliers, retailers, and customers is easy.

Disintermediation:Reduced intermediaries between customer and supplier

Improved customer service(reduced lead time)

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Advantages of E-Commerce A technology based customer interface

with GUI and interactivity which does not need unnecessary follow ups

Interaction controlled by customer.(Any time interaction can be closed)

Easy to observe and track customer/ consumer behavior

Network economics: In Information centric industries gain more mileage.

Financial Institutions can reduce the no. of branches due to increasing online transactions.

Friction free commerce

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Disadvantages of E-commerce Perishable foods, highly expensive

jewellery, antiques may be difficult to inspect from remote location.

With emerging and dynamic technology like E-Commerce, it is difficult to calculate ROI

Micro transactions may include more transaction charges than product price.

Difficulty in integrating online and off-line processes.

Recruitment and retention of technical people.

Cultural and legal obstacles.(cyber laws not sufficient enough and security concerns)

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Disciplines concerned with E-commerce

Computer science

Economics

Finance & Accounting

Marketing

Information System

Sociology

Management science

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E-Commerce I (1995 – 2000) Vs E-Commerce II (2001 onwards) Technology driven

Revenue growth emphasis

Venture capital financing

Ungoverned

Entrepreneurial Disintermediate

Perfect markets Pure online strategy First mover

advantage

Business Driven Earning and profit

emphasis Traditional financing Strong regulation and

governance Large traditional firms Strengthening

intermediation Imperfect with

markets, brands, network effect

Mix of “click and brick”

Strategic follower strategy

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Fact file

Nearly $125 billions of venture capital went into thousands of dot-coms by 1999.

Only 15% of the dot-coms since 1995, survived after 2000

B2C sales growing by 45 – 50% per year.

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Network effect

Goes by Metcalfe’s law which postulates that the value of a network grows by the square of number of participants.

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Challenges for e-Commerce One world, the web world may expect “one price”; entrepreneurs must find ways to show differentiation in product and service.

Nearly 65% of transactions stop at shopping cart level because of customer uncertainties.

Constantly changing prices not realistic.

Security concerns among people Internet yet to reach third world

beyond US and other developing countries.

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Categories of E-Commerce

B C

B

C

C2BB2B

B2C C2C / (P2P)

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B2B Business-to-business (B2B) describes

commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.

The volume of B2B (Business-to-Business) transactions is much higher than the volume of B2C transactions

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B2B B2B Web sites can be sorted into:• Company Web sites, since the target

audience for many company Web sites is other companies and their employees. Company sites can be thought of as round-the-clock mini-trade exhibits. Sometimes a company Web site serves as the entrance to an exclusive extranet available only to customers or registered site users. Some company Web sites sell directly from the site, effectively e-tailing to other businesses.

• Product supply and procurement exchanges, where a company purchasing agent can shop for supplies from vendors, request proposals, and, in some cases, bid to make a purchase at a desired price. Sometimes referred to as e-procurement sites, some serve a range of industries and others focus on a niche market.

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B2B (contd..)

• Specialized or vertical industry portals which provide a "subWeb" of information, product listings, discussion groups, and other features. These vertical portal sites have a broader purpose than the procurement sites (although they may also support buying and selling).

• Brokering sites that act as an intermediary between someone wanting a product or service and potential providers. Equipment leasing is an example.

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• Information sites (sometimes known as infomediary ), which provide information about a particular industry for its companies and their employees. These include specialized search sites and trade and industry standards organization sites.

• Many B2B sites may seem to fall into more than one of these groups. Models for B2B sites are still evolving.

• Another type of B2B enterprise is software for building B2B Web sites, including site building tools and templates, database, and methodologies as well as transaction software.

B2B Commerce

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B2B

• Business-to-business (B2B) e-commerce is significantly different from business-to-consumer (B2C) e-commerce. While B2C merchants sell on a first-come, first-served basis, most B2B commerce is done through negotiated contracts that allow the seller to anticipate and plan for how much the buyer will purchase. In some cases B2B is not so much a matter of generating revenue as it is a matter of making connections with business partners.

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B2B Commerce Supplier management Procurement Inventory Management Sales and marketing activitiesIndustry sponsored marketplaces (ISMs) & consortia-led exchangesCovisint, an e-marketplace backed by the major auto makers

General Motors, Ford Motor Co., and DaimlerChrysler, was first announced in February 2000

Worldwide Retail Exchange (WWRE), was formed in early 2000 by a group of retailers including the Gap, Target, Walgreen, Best Buy, and Albertson's, among others.

GNX was also formed in early 2000. Its founding companies included Sears, Roebuck & Co., Carre-four, and Oracle.

Transora is a consortia-led exchange serving packaged goods manufacturers and the retail industry. It began with 57 original investors, including companies such as Coca-Cola and Procter & Gamble

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B2C Business-to-consumer (B2C,

sometimes also called Business-to-Customer) describes activities of businesses serving end consumers with products and/or services.

B2C stands for "business-to-consumer" and applies to any business or organization that sells its products or services to consumers over the Internet for its own use.

Ex: Amazon.comShopping.Sify.com

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B2C Commerce• Using the latest internet application

technology, individual sites can be created within minutes of the retailer selecting a template and supplying graphics such as logos. Typically, retailers will pay only a modest monthly rental charge – and retailers require no specialist hardware or software, other than internet access.

• These days, a web site should be a standard part of the promotional and advertising mix for every business, along with other tools such as Yellow Pages, newspaper advertising and signage.

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B2CAdvantages of B2C e-commerce

B2C e-commerce has the following advantages:• Shopping can be faster and more convenient. • Offerings and prices can change instantaneously. • Call centers can be integrated with the website. • Broadband telecommunications will enhance the

buying experience.

Challenges faced by B2C e-commerce• The two main challenges faced by B2C e-commerce

are building traffic and sustaining customer loyalty. Due to the winner-take-all nature of the B2C structure, many smaller firms find it difficult to enter a market and remain competitive.

• In addition, online shoppers are very price-sensitive and are easily lured away, so acquiring and keeping new customers is difficult.

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B2C• B2C (Business to Consumer): Refers to a business

communicating with or selling to an individual rather than a company. B2C e-commerce jumped from $11.2 billion in 1998 to $31.2 billion in 1999,

• Doing business online no longer requires a huge investment by retailers, thanks to developments in template-based online stores which are based on packaged applications that are delivered over the internet.

• As nearly all online stores will require the same functions: catalogues, order baskets, payment processing, content management and member management, it makes sense for those components to be created once and shared by all stores, with each store effectively ‘renting’ its own copy of the applications.

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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.

• A student wants to fly from London to New York, but has only £200 ($320) in the bank to pay for this round trip. They put up an ad in an Internet C2B site, seeking airlines that are willing to offer the transatlantic round trip for £200 or less. The beauty of the Internet is that it brings together a large number of customers to create a marketplace that a number of airlines (that will have to otherwise fly with empty seats) will be interested in.

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C2B

Many analysts state that C2B and C2C e-commerce will thrive in the near future. It is a challenging task, however, to construct these e-commerce systems because of their diverse nature.

Ex: ebay.com

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C2C

• C2C applications are any transactions between and amongst consumers (QUT School of International Business, 2003, p. xv). They are often described as Peer-to-Peer (P2P)

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C2C

A variation in C2C is P2P, “Gnutella” is a software application

that permits consumer to share music with one another directly without the intervention of third party.

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Other Miscellaneous commerce• G2G (Government-to-Government),

G2E (Government-to-Employee), G2B (Government-to-Business), B2G (Business-to-Government), G2C (Government-to-Citizen), C2G (Citizen-to-Government) are other forms of ecommerce that involve transactions with the government--from procurement to filing taxes to business registrations to renewing licenses.

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C2C• Ebay.com is an online auctioning site that facilitates

the trade of privately owned items between individuals (May, 2000, p.109). The website claims that through Ebay, “practically anyone can trade practically anything� (Ebay, 1995-2004). The company began in September 1995 when Pierre Omidyar decided to establish the first online marketplace (Ebay, 1995-2004). Since that time, the company has continued to grow both in size and popularity. Ebay is now considered one of the most successful C2C eBusinesses ever.

• Other examples of Consumer-to-Consumer applications are service and employment websites such as

• Monster.com, • Seek.com.au and• CareerOne.com.au. These websites provide a

valuable service to consumers looking for jobs. Employers can advertise on these websites and potential employees can contact their organization for an interview.

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Internet and evolution of Corporate ComputingComputing Technology Business Application

Mainframes ( 1950 – 1975) Transaction AutomationPayroll and Accounts Receivables

Mini computers (1970 – 80) Business Function AutomationMarketing, HR, Design

Personal Computer (1980 – present)

Desktop automationWord , spreadsheets, DBMS

LAN , client/server computing (1980 – present)

Workgroup AutomationDocument sharingProject ManagementE-mail, messaging

Enterprise wide computing (1990 – present)

Enterprise AutomationERP, HRPIntegrated Finance, manufacturing

Internet and WWW (1995 – present)

Industrial system AutomationSCM, CRM,Channel management system

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Protocol A network protocol is a set of rules for

communication between computers. protocols govern format, timing, sequencing and error control.

At the sender system, this software prepares data for transmission, and sets the transmission in motion and at the receiving end takes the data off the wire and prepares it for the computer.

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Protocol architecture If the protocol does not come as a

single module, but as a structured set of modules, it is refereed to as protocol architecture / protocol stack

OSI protocol stack (7 layers) Open System Interconnection theoretical in nature

TCP/IP protocol stack ( 5 layers) Transmission Control Protocol/ internet

ProtocolMore realistic

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OSI protocol stack (7 layers)

Transport

Network

Presentation

Session

Data link

Physical

Application

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TCP/IP Protocol Architecture

Transport layer (TCP)

Network layer (IP)

Application layer

Data link

Physical

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Protocol stack

Application layer: user interface Presentation layer: removes all file and character

formats. Encryption (decryption) and compression (decompression)of data

Session layer: dialog control (half-duplex or full duplex), synchronization with checkpoints in the data

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Transport layer: service point addressing (ports), segmentation and reassembly, connection control, error control, flow controlNetwork layer: routing of packets from source system to destination system between diff. networks. (same network- no role)Data link layer: framing data, adds physical addresses of systems in frame’s header.Physical layer: transmission media

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Headers and trailersExcept for application layer and physical layer,

everywhere headers are added to data by each layer.

Data link: H2—at the beg. of frame with physical address of

source & destinationT2..signifies end of frame

Network: H3—IP address Transport : H4– port address Session layer: Presentation:

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Protocols inApplication + presentation +

session SMTP FTP TELNET DNS SNMP NFS and RPC TFTP

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IP addressing

A 32 bit number used to identify the host systems on the internet, which makes routing easy.

It is a unique identification on internet. Has two parts: net-id and host-id No two physical networks on the

internet have same net-id. No two systems on a physical network

have same host-id. Ex: 128.11.2.21

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Backbone controlling organizations AT & T Sprint ANS Advanced Networking Services Uunet BBN planet