E-COMMERCE

DEFINITION OF E-COMMERCE

E-commerce is characterized by several attributes:

•It is About the Exchange of Digitized Information between parties.-This information exchange can represent communication between two parties, coordination of the flows of goods and services, or transmission of the electronic orders.

•It is Technology-Enabled -E-commerce is about technology-enabled transactions.-The use of internet browsers in the World Wide Web is perhaps the best known of these technology-enabled customer interfaces.

DEFINITION OF E-COMMERCE

E-commerce is characterized by several attributes:

• It is Technology-Mediated. -The focus is moving away from the simply technology-

enabled transaction to a technology-mediated relationships.

-The transaction is mediated not so much through human contact but largely by technology.

• It includes Intra and Interorganizational Activities That Support the Exchange

-The scope of e-commerce including all electronically based intra and interorganizational activities that directly

or indirectly support marketplace exchanges..

THE FRAMEWORK FOR THE FIELD OF E-COMMERCE

The core of e-commerce activities is the strategy of the enterprise. Wrapped around this strategy process are four critical infrastructures, there are

• Technology Infrastructure-An infrastructure is defined as “ the foundation of a system” -the technological foundation of the internet enables the running of the e-commerce enterprises. -Understanding technology infrastructure is necessary in formulating a company’s vision and strategy.

• Capital Infrastructure-Senior e-commerce manager must understand the capitalinfrastructure and know how to secure funding for the venture and subsequently value that business.

THE FRAMEWORK FOR THE FIELD OF E-COMMERCE

• Media Infrastructure-Managers who run e-commerce enterprise must learn to manage a staff responsible design interface, stylistic choices, editorial policies, content choicesassociated with this new communication venue.

• Public Policy Infrastructure-All of the decisions related to strategy, technology, capital and media are influenced by the laws and regulation -The public policy infrastructure can affect the growth of the business and other competitors. -Therefore, senior manager must understand both the current laws and how the laws may change to hurt the business

7 unique features of e-commerce and its significance

Ubiquity

It is available just about everywhere, at all times, making it possible

to shop from your desktop.

Global reach

Permitting commercial transactions to across cultural and national

boundaries far more conveniently and cost-effectively.

Universal standard

Shared by all nations around the world.

Information richness

Complexity and content of a message

-Interactive

allows for two way communication between merchant and

consumer and enable the merchant to engage a consumer.

-Information density

The total amount and quality of information available to all

market participants

.

-Personalization and customization

Merchants can target their marketing messages to specific

individuals by adjusting the messages to a person’s name,

interest, and past purchases

5 Categories of E- CommerceBusiness-to-Consumer (B2C)

Business-to- Business (B2B)

Consumer-to-Consumer (C2C)

Peer to Peer (P2P)

Mobile commerce (M- commerce)

a ) Business-to-Consumer (B2C)

online businesses selling to individual consumers

most consumers are likely to encounterexample, Amazon.com is a general

merchandiser that sells consumer products to retail consumers

7 different B2C business models * portals * online retailers * content providers * transaction brokers * market creators * service providers * community providers

b) Business-to-Business (B2B)

online businesses selling to other business

other activity, includes purchasing and procurement, supplier management, inventory management, channel management, sales activity, payment management, and service and support

example, eStell.com is a steel industry exchange that creates an electronic market for steel producers and users

c) Consumer-to-Consumer (C2C)

-Consumers selling to other consumers

-the consumer prepares the product for market, places the product for auction or sale

-relies on the market maker to provide catalog, search engine, and transaction- clearing capabilities so that products can be easily displayed, discovered, and paid for

-example, eBay. com creates a marketspace where consumer can auction or sell goods directly to other consumers

d) Peer-to-Peer ( P2P ) Internet users to share files and

computer resources directly without having to go through a central Web server in e-commerce

no intermediary is required

for instance, Gnutella is a peer-to-peer freeware software application that permits users to directly exchange musical tracks, typically without any charge

e) Mobile Commerce (M-commerce) use of wireless digital devices to enable

transactions on the Web

Mobile consumers can conduct many types of transaction, including stock trade in store price comparisons, banking, travel reservations, and more

M- commerce is used most widely in Japan and Europe especially Finland

example, Wireless mobile devices such as PDAs ( personal digital assistants ) or cell phone can be used to conduct commercial transactions.

THE ROLES AND RESPONSIBILITIES OF A SENIOR E-COMMERCE

MANAGER

1) Cross-Discipline, Integrative Position

2)Responsibilities of the Position

3)Location in the Organization

THE ROLES AND RESPONSIBILITIES OF A SENIOR E-COMMERCE

MANAGER1) Cross-Discipline, Integrative Position

• Firstly, entrepreneurship is the heart of any online business.

• Second, the executive must possess with knowledge in variety disciplines, including marketing, logistics, accounting and finance.

• Third, the senior manager must expertise in technology sophistication and media knowledge.

• Finally, the manager must understand the role of mass communication and what works in terms of media choices and media integration.

THE ROLES AND RESPONSIBILITIES OF A SENIOR E-COMMERCE

MANAGER2) Responsibilities of the Position

a) Provide a Vision

b) Set Process and Outcome Goals

c) Formulate Strategic Direction and Choices

d) Drive Implementation

e) Accountable for Performance.

THE ROLES AND RESPONSIBILITIES OF A SENIOR E-COMMERCE

MANAGER3) Location in the Organization

).).).).

Corporate Business Unit Stand-Alone

Line Executive Corporate

site managementCross business unit integration site

Reports to general manager of business unit.

Separate business from corporate parent.

Staff Executive Supports

corporate-wide initiatives

Supports and advises Strategical Business Unit(SBU) e-commerce initiatives

__

Key Challenges For Senior Leadership In Today’s Environment

several challenges must be confronted by the

firm’s most senior e-commerce executives

5 major challenges

* understanding customer evolution

* charting changing technology

* balancing irrational exuberance and irrational

doom

* integration of offline and online activities

* identifying the key levers of competitive

advantage

5 Challenges For Senior Leadership

In Today’s Environment a) Understanding customer evolution

* customer behaviour evolves

* firms anticipate the features and functions that matter most to target customer

* firm must invest ahead of the customer

tastes to produce a product or service that

matches the evolution of the market.

b) Charting changing technology

consumer tastes and technology choice need to match to ensure

competitive advantage the evolution of consumer needs, the

technology support and reinforces those needs the senior executive must be well schooled in

basic and emergent technologies new technologies are constantly emerging

c) Balancing irrational exuberance and irrational doom

many pundits who have followed the evolution of technology-intensive innovations argue for normal pattern.

the impact of new technology in the first two the three years is typically overestimated, but the impact over 10 years is severely underestimated

d) Integration of offline and online activities

the increasing pressure on offline firms to integrate their online activities.

particularly true of “customer- facing ” activities such as adverting, branding, retail and online store design, service, warranties, and returns.

the senior executives will be under increasing

pressure to be closely aligned in terms of systems, structure, processes, compensation, and employee welfare with the traditional offline business

e) Identifying the key levers of competitive advantage

the senior leader needs to anticipate changing consumer and technology trends

the executive must realign the resource system of the firm in advance of these trends

likely to evolve as the market evolves the best senior leaders are able to

reallocate their resources and capabilities in anticipation of an evolving competitive landscape.

IMPACT OF EC ON BUSINESS PROCESS AND ORGANIZATION

Bloch et. al. (1996), who approached the impact of EC on organizations from a value-added point of view, divides the impact of e-marketplaces into there major categories:

a) Improving marketing and sales,

b) Transforming organizations,

c) Redefining organizations.

A) IMPROVING MARKETING AND SALES

Traditional direct marketing is done by mail order (catalogs) and telephone (telemarketing).

Bloch et al. (1996), Kioses et. al. (2006), and Singh (2006) describe the following impacts of

e-marketplces on B2C direct marketing:

a) Product promotion

b) New sales channel.

c) Direct savings

d) Reduced cycle time

e) Improving customer service

f) Brand or corporate image

g) Customization

h) Advertising

i) Ordering systems

j) Accessibility

k) Market operations

B) TRANSFORMING ORGANIZATIONS

Two key of this impact are

technology and organizational learning

and

the changing nature of work.

i)Technology and Organizational Learning

• offer them an opportunity to experiment

with new products, services, and business

models, which may lead to strategic and

structural changes

ii) The Changing Nature of Work

• creating new opportunities and new risks and is forcing people to think in new ways about jobs, careers, and salaries.

• The Digital Age company will have to view its core of essential workers as its most valuable asset.

C) REDEFINING ORGANIZATIONS

There are two ways to redefining organizations which is:

a) new and improved product capabilities,

b) new industry order and business models.

i) New and Improved Product Capabilities

E-markets allow for new products to be created and for existing products to be

customized in innovative ways.

-Such changes may redefine organizations’ missions and the manner in which they

operate.

ii) New Industry Order and Business Models

- E-market affects not only individual companies and their products, but also entire industries

(e.g., airlines are moving to electronic ticketing and stocks are moving to online trading)

- The wide availability of information and its direct distribution to consumers will lead to the use of

new business models (e.g., the name-your-own-price model of

Priceline.com).

PORTER’S COMPETITIVE FORCES MODEL (2001)

Competitive Forces Model

-Model devised by Porter that says that five major forces of competition determine industry structure

and

-how economic value is divided among the industry;

-analysis of these forces helps companies develop their competitive strategy.

Rivalry among existing

competitors

Threat of substitute

products or services

Buyersa)Bargaining

power of channels

b) Bargaining power of end

users

Barriers to entry

Bargaining of

suppliers

1) Threat of substitute products or services

Positive impact: the internet can expand the size of the market.

Negative impact: The proliferation of Internet approaches creates

new substitution threats.

2) Bargaining power of buyers

Positive impact: Eliminates powerful channels or improving bargaining power over traditional channels.

Negative impact: a) Shifts bargaining power to end consumers.

b) Reduces switching costs.

3) Barriers to entry

Negative impact:

a) Internet applications are difficult to keep proprietary from new entrants.

b) A flood of new entrants has come into many industries.

c) Reduces barriers to entry

4) Rivalry among existing competitors

Negative impact:a) Migrates competition to price

b) Widens the geographic market, increasing the number of competitors.

c) Lowers variable cost relative to fixed cost, increasing pressures for price discounting.

d) Reduces differences among competitors as offerings are difficult to keep proprietary.

5) Bargaining power of suppliers

Negative impact:a) Procurement using the Internet tends to raise bargaining

power over suppliers

b) The Internet provides a channel for suppliers to reach end users, reducing the intervening companies.

c) Internet procurement and digital markets tend to give all companies equal access to suppliers, and gravitate procurements to standardized products that reduce

differentiation.

d) Reduces barriers to entry and the proliferation of competitors downstream shifts power to suppliers.

BENEFITS AND LIMITATIONS OF

E-COMMERCE

BenefitsBenefits to Organizations

 Global reach

Locating customers and/or suppliers worldwide, at reasonable cost and fast.

Cost reductionLower cost of information processing, storage, distribution.

Supply chain improvementsReduce delays, inventories, and cost.

Customization /PersonalizationMake it to consumer’s wish, fast and at reasonable cost.

Sellers specialization (niche market)Seller can specialize in a narrow field (e.g. dog toys), yet make

money.

Lower communication costThe internet is cheaper than VAN private lines.

Fewer permits and less taxMay need fewer permits and be able to avoid sales tax.

Business always openOpen 24/7/365; no overtime or other cost.

Up-to-date company materialAll distributed material is up-to-date.

Efficient procurementSaves time and reduces cost by enabling e-procurement.

Lower inventoriesUsing customization inventories can be minimized.

Rapid time-to-market and increased speedExpedite processes; higher speed and productivity.

Benefits to Consumers 

UbiquityCan shop anytime from any place.

More product/servicesLarge selection to choose from (vendor, products, styles).

Customized products/servicesCan customize many product and/or services.

Cheaper products/ servicesCan compare and shop for lower prices.

Instant deliveryDigitized products can be downloaded immediately upon

payment.

Information availabilityEasy finding what you need, with details, demos, etc.

Convenient auction participationDo auctions anytime and from any place.

Enable telecommutingCan work or study at home.

Electronic socialization Can socialize online in communities yet be at home.

Find unique itemsUsing online auctions, collectible items can be found.

Benefits to Society 

Increased Standard of LivingCan buy more and cheaper goods/services.

Close the digital divideAllow people in developing countries and rural areas to accept

more services and purchasing what they really like.

More public servicesMake education, health, etc., available for more people. Rural

area can share benefits; more services for the poor.

Enable telecommutingFacilitate work at home; less traffic, pollution.

Limitations

A) Technological Limitations

1) Lack of universal standards for quality, security, and reliability.

2) The telecommunications bandwidth is insufficient, especially for m-commerce.

3) Software development tools are still evolving.

4) Special Web servers are needed in addition to the network servers, which add to the cost of EC.

5) Internet accessibility is still expensive and/or inconvenient.

6) It is difficult to integrate Internet and EC software with some existing (especially legacy)

applications and databases.

7) Other fulfillment of large-scale B2C requires special automated warehouses.

B) Nontechnological Limitations

1) Security and privacy concerns deter customers from buying.

2) Lack of trust in EC and in unknown sellers hinders buying.

3) People do not yet sufficiently trust paperless, faceless transactions.

4) Many legal and public policy issues, including taxation, have no yet been resolved or are not clear.

5) National and international government regulations sometimes get in the way.

6) It is difficult to measurement some of the benefits of EC, such as online advertising. Mature measurement methodologies are not yet available.

7) Some customers like to feel and touch products.

8) Online fraud is increasing.

9) It is difficult to obtain venture capital due to the failure of many dot.coms.

10) In many cases, the number of sellers and buyers that are needed for profitable EC

operations is insufficient.

Conclusion

• E-commerce is generating thousands of new jobs for young managers in all fields from

marketing to a management, entrepreneurial studies, and information systems.

• E-commerce and Internet technologies have important social consequences which mean E-

commerce has challenged our concepts of privacy, intellectual property, and even ideas about national sovereignty and governance.