Module 1 - E-Commerce

8/3/2019 Module 1 - E-Commerce

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E-Commerce


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e-service

Internet based applications that communicate with each other fulfilling requestsEmbedded software which links non PC devices to services

Open View - A network management product used by 67% of ISPs,

Online banking ServiceOnline Reservation ServiceWeb hosting and designing servicesTelecommunication ServicesNet trading servicesE-Markets

e-businessDigital enablement of transactions/ processeswithina firm involving info systems under thecontrol of the firm (no transactions outside firm)Complete methodology of doing business onthe net: relationship bet Business & customer,Mgt.practices, enhance organisationalcompetitivenessCovers entire spectrum of activities :

EDI, Electronic Pyt. Sys.,EFT, eCRM, SCMCulture of an enterprisee-commerce

Digitally enabled commercial transactionsFront-end of e-businessBuying and selling of goods, services & Info on-linewith PC/Tel/ wireless through internet (B 2 B and B 2 C)Use of paper less info. tech. to cut costs, improve

quality, respond faster.Ability to promote, market and sell on WWW.

Ordering, invoicing, paying electronically


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7 Unique Features of E-Com TechnologyE-Com Technology

Dimension

Business Significance

Ubiquity: Internet/ web tech is availableeverywhere at all times: home, work viamobile devices

Market space has no boundaries,

shopping takes place anywhere,convenience, reduced costs

Global Reach: All pervading around the

globe

Across cultural and national

boundaries, global customersUniversal Standards: One singleInternational standard i.e. Internetstandard

One set of technical media standardacross the globe

Interactivity: Interaction with the user Consumer engaged in dialogue and is

co-participant in the business processRichness: video, audio and textmessages

Integrated marketing messages

Info Density: Technology reduces infocosts and raises quality

Info becomes plentiful, cheap andaccurate. Price transparency

Personalisation/ Customisation: techallows personalized messages

Marketing messages based onindividual characteristics


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E- Com: Perspectives

E-Com

ServiceCut service costs while

improving quality of goodsand increasing speed

of delivery

OnlineProvides capability of

buying and sellingproducts, info on the Internet

and other online services

Business ProcessApplication of technology

towards automation ofbusiness transactions

CommunicationDelivery of info/product/servicePayments over wire or wireless


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E-com can takemany formsdepending on the

degree of digitisationof

Product(service)sold

Process

DeliveryAgent(intermediary)


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Pure Vs Partial E-Com

Eight cubes each of which has three dimensions-Product, Process , Delivery

In traditional commerce, all dimensions are physical

(lower left cube) In pure E-Com, all dimensions are digital (upper right

cube): online purchase of music, s/w, info All other cubes include a mix of physical and digital

dimensions: buying a book from Amazon delivered by

FedEx There should be at least one digital dimension to

consider it as E-Com. Buying a drink from a vendingmachine using a smart card is E-Com


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1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Interaction becamea feature of the Web sites

Transactions happening

Online

Web businesstransformationAdvanced personalizationIndustry specific application

engines

Evolution of e-commerceEnabler :

Ist generation e-

com

No back-endinfrastructure and

database

Driver :

2nd generation

e-com back-end

system integration

Businesses setuptheir

presenceon the Web


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1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Interaction becamea feature of the Web sites

Transactions happening

Online

Web businesstransformationAdvanced personalizationIndustry specific application

engines

Evolution of e-commerce

Businesses setuptheir

presenceon the Web

E- Com IExplosiveboom andsudden bust

E- Com II

Sobering re-assessment.Realistic


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E-Com I

Technology driven

Revenue growthemphasis

Venture capitalfinancing

Ungoverned

Entrepreneurial

Disintermediation

Perfect markets

Pure online strategies

First moveradvantages

E-Com II

Business- driven

Earnings and profits emphasis

Traditional financing

Stronger regulation and

governance Large traditional firms

Strengthening intermediaries

Imperfect mkts, brands & networkeffects

Mixed clicks & bricks strategies

Strategic follower strengthsOnly 10% of dotcom formed in 1995 survived for 5 yrs.Friction-free commerce not achieved: info transparency, demand related dynamicpricing, disintermediation, fair competition

Perfect Mkt: Mkt in which there are no competitive advantages or asymmetries becauseall firms have equal access to all factors pf production


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Future of E-Commerce

1. Technology of E-Com Internet, web and wireless-will continue to propagate thru all commercial activity

2. E-Com prices will rise to cover the real cost of doing

business on the web and give reasonable returns toinvestors3. E-Com margins and profits will rise to levels more

typical of all retailers4. The cast of players will change radically. In the B2C

and B2B marketspaces, traditional, well-endowed,experienced Fortune 500 companies will play agrowing and dominant role

5. Pure online companies will decline and successful E-com firms will adopt mixed clicks and bricksstrategies


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Benefits of EC to Organizations

Expands a companys marketplace to nationaland international markets

Allows a vendor to reach a large number ofcustomers, anywhere around the globe, at avery low cost

Enable companies to procure material andservices from other companies, rapidly and atless cost

Shortens or even eliminates(?) marketing

distribution channels; marketing productscheaper and vendors' profits are higher

Decrease the cost of creating, processing,distributing, storing, and retrieving paper-based information


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Benefits of EC to Organisations-2

Reduces the time between the outlay ofcapital and the receipt of products andservices

Lowers telecommunications costs becausethe Internet is much cheaper than value-

added networks (VANs)Allows lower inventories by facilitating pull-

type supply chain management, which startsfrom customer orders and uses just-in-time

production and delivery processingHelps small businesses compete against large

companies

Enables very specialized markets (e.g.www.dogtoys.com)
http://www.dogtoys.com/http://www.dogtoys.com/


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Benefits of EC to ConsumersFrequently provides less expensive products and

services by allowing consumers to shop in manyplaces and conduct online quick comparisons

Gives consumers more choices - they can selectfrom many vendors and many more productsthan they could locate otherwise

Enables customers to shop or make other

transactions 24 hours a day, year round, fromalmost any location

Delivers relevant and detailed information inseconds, rather than in days or weeks


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Benefits of EC to Consumers-2Enables consumers to get customized

products, from PCs to cars, at competitive orbargain prices

Makes possible virtual auctions, in whichconsumers can find unique products andcollectors items that might otherwise requirethem to travel long distances to a particularauction place at a specific time

Allows consumers to interact with otherconsumers in electronic communities and toexchange ideas as well as compare

experiences


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Benefits of EC to Society

Enables more individuals to work at home and todo less traveling, resulting in less traffic on theroads and lower air pollution

Allows some merchandise to be sold at lowerprices, so less affluent people can buy more andincrease their standard of living

Enables people in less developed countries andrural areas to enjoy products and services thatotherwise are not available to them

Facilitates delivery of public services, such asgovernment entitlements, reducing the cost ofdistribution and fraud, and increasing the quality ofthe social services, police work, health care andeducation


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Technical Limitations of EC

Lack of universally accepted standards for quality,security, and reliability

Insufficient telecommunications bandwidth

Still-evolving software development tools

Difficulties in integrating the Internet and ECsoftware with some existing (especially legacy)applications and databases

There is a need for special Web servers in addition

to the network servers (added cost) Internet accessibility is still expensive and/or

inconvenient for many people


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Non-technical Limitations of E-Com

Many legal issues are yet unresolved

Lack of national and international

regulations and standards

Difficulty in measuring benefits of EC,such as web ads

Lack of major methodologies for justifyingEC


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Distrust of the new: many sellers and buyers arewaiting EC to stabilise before they take part

Customer resistance to change from physical tovirtual stores

Perception that EC is expensive and unsecured,so many dont want to try it

Insufficient no. (critical mass) of sellers andbuyers which are needed for profitable EC

Non-technical Limitations of E-Com


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E-Com Myths E-Com Realities

Online transactions and E-Com willnever take off as the selling

process on the Net does not allownegotiations to be conducted

With security/ encryption systemsin place, online negotiations can be

confidential. A firm can alsoconduct negotiations offline andcarry out all activities related toorder processing online

E-Com will result in

disintermediation. This willeventually result in backlash fromintermediaries/ channel partners

E-Com new channel will be

complimentary to existing channel.Online activities can be startedeven with existing legacy systems

ERP should be implemented before

E-Com

Internal networking is necessary,but full-fledged ERP system not aprerequisite

IT infrastructure has to be in placebefore implementing E-Com

While last-mile connectivity andbandwidth are progressivelyimproving, Internet can be

leveraged with existing facilities


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5 Primary Revenue ModelsRevenue

ModelExample Revenue Source

Advertising Yahoo.com, rediffmail.com Fees from advertisers inexchange for ads

Subscription epaper.timesofindia.comCosumerReports .org

WSJ.com, ForresterResearch.com

Fees from subscribers inexchange for access tocontent / services

Transactionfee

Bazee.com/ e-bay

Indiamart.com

Fees(commission) forenabling /executingtransaction

Sales Amazon.com Sale of goods/ info/services

Affiliate MyPoints.com Fees for business referrals


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Total execution time and success rate For logging into an account Searching for an item Adding it to shopping cart proceeding to check out

Success rates : ratio of completely successfultransactions to attempted transactions. Each page onthe web is given 12 secs as a limit for successfultransaction

Sites selected based on publicly available MS% pubd byWSJ. Internet retail sites from 10 largest US metroareas.

E-Com Transaction Perf Index


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Metaljunction.com

Coaljunction.com

Indiamart.com

Amazon.com Ebay.com

Priceline.com

Major Types of

E-Com


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Types of E-commerce

Classified by nature of marketrelationship

Business-to-Consumer (B2C) Business-to-Business (B2B)

Consumer-to-Consumer (C2C)

Classified by type of technology used

Peer-to-Peer (P2P)

Mobile commerce (M-commerce)


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Major Types of E-commerce


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Business-to-Consumer (B2C)

E-commerce Involves online businesses attempting to reach individual

consumers

Many types of business models within this categoryincluding online retailers, content providers, portals,transaction brokers, service providers, market creatorsand community providers

Most visible segment Value low, Volume high

Extensive back-office setup required

Huge expenses in hardware and software


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Limitations on the growth of B2C

Inadequate home penetration of PC

Expensive technology

Complex s/w interface. Not as easy to use as TV ortelephone

Sophisticated skill set required to operate internet and e-com capabilities

Persistent cultural attraction of physical markets andtraditional shopping experience

Global inequality in access to telephone, PC, cell phone Most advanced search engines list only 6 mio websites

out of a total of 70 mio.


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Major B2C and B2B Business Models

B2C B2B

Portals

E-Tailer

Content

ProviderTransactionBroker

Market Creator

ServiceProvider

CommunityProvider

B2B Hub

E-Distributor

B2B ServiceProvider

Matchmaker

Infomediary


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Major (B2C) Business Models

Portal: Yahoo.com, MSN.com offers powerful search tools

plus an integrated package of content andservices- news, e-mail, shopping, music

downloads typically utilizes a combined

subscription/advertising revenues/transaction feemodel

Yahoo.com, MSN.com- horizontal portals,marketspace to include all users of the internet

Vortals- focused around a particular subject matteror market segment


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E-tailer online version of traditional retailer from giant to

tiny local stores with a website includes

virtual merchants (online retail store only). Amazon.com,iBaby.com clicks and bricks e-tailers (online distribution channel for

a company that also has physical stores). Walmart.com,J C penney, Barnes & Noble

catalog merchants (online version of direct mail catalog).

LandsEnd.com online malls (online version of mall). Fashionmall.com

(transaction fees) Manufacturers selling directly over the Web. Dell.com

Entry barrier for new entrant very high. Highmortality. eToys.com



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Content Provider (all forms of Intellectual Property)

information and entertainment companies thatprovide digital content over the Web. News, music,photos, videos

revenue model: MP3.com- subscription/ adv. fee,WSJ,HBR charge for content downloads.Successful content providers own their content.

Transaction Broker (financial, travel. Job placementservices): Schwab.com, E-Trade.com.monster.com

Processes and actually carries out online salestransactions. Retail stock transactions

typically utilizes a transactions fee revenue model


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Market Creator: Priceline.com, e-bay.com(no inventory, no production costs)

uses Internet technology to create markets that bringbuyers and sellers together

typically utilizes a transaction fee revenue model

Service Provider

offers services online.Consulting service-Whatsitworthtoyou.com. Netgrocer.com, Xdrive.com5GB @ $10 a month

Community Provider (About.com, ParentSoup.com) provides an online community of like-minded

individuals for networking and information sharing

revenue is generated by referral fee, advertising, and

subscription


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(B2B)E-Com

Involves businesses focusing on sellingto other businesses

Largest form of e-commerce ($800

billion in 2002) Two primary business models within

B2B: Net marketplaces (includes e-distributors,

e-procurement companies, exchanges andindustry consortia)

Private industrial networks (includes singlefirm networks and industry-wide networks)


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B 2 B Least visible but highest value

Limited number of customersExamples :

Intel sells chips only to computer manufacturesworth $1 million per month

Samsung monitors only to distributors in India

HP/ IBM Notebooks only through dealers


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Major (B2B) Business Models

B2B Hub: indiamart.com

also known as marketplace/exchange

They pull together many businesses

electronic marketplace where suppliers and

commercial purchasers can conduct transactions may be a general (horizontal marketplace) or

specialized (vertical marketplace- DirectAg.comfor agr farmers)

E-distributor supplies products directly to individual businesses

They are set up by one company seeking to servemany customers. Grainger.com


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Major (B2B) Business Models B2B Service Provider

sells business services to other firms; accounting,financial, HR mgt, printing. Also ASPs . Transactionfees. Salesforce.com

Matchmaker

links businesses together (similar to transaction brokerin B2C)

iShip.com, free website to compare rates of variousshippers- FedEx, Airborne, US Postal Service-.

iShip.com is paid a fee to proceed with the shipment charges transaction or usage fees

Infomediary

gather information about consumers and sells it toother businesses


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Business Models in Other Emerging

Areas of E-Commerce


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C2C E-commerce

Provides a way for consumers to sell to each other,with the help of an online market maker

connect consumers with other consumers most successful has been the market creator

business model

eBay most well-known example

Estimated that size of C2C commerce reached $20billion by 2005


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Peer-to-Peer (P2P) E-com Uses peer-to-peer technology, which enables Internet

users to share files and computer resources withouthaving to go through a central Web server

enable consumers to share file and services via

the Web without common servers a challenge to find a revenue model that works

Napster most well-known example until put out ofbusiness for copyright infringement

Today, Kazaa (and Morpheus) is the leading P2Psoftware network, although also under attack forcopyright infringement


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M-commerce

Use of wireless digital devices such ascell phones and handheld devices toenable transactions on the Web

Most widely used in Japan and Europe(especially Finland)

Expected to grow rapidly in the next fiveyears.


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Value Chains


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Whats a Value Chain

Value Chains have to do withIntegration Internally to a Co. we talk about

integrating the supply chainfunction across the enterprise

Collaboration Externally we talk aboutcollaborating with both vendorsand customers

SynchronisationComprehensively we talk aboutsynchronising the supply chainfunctions

Trying to reach infinity of optimising all of the supply chain

functions across trading partners and customers to maximise

efficiency and value for the customer

E C bl T f ti


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E-Com enables Transformation

Prod.

DesignMgmt

SCM CRMERP

S

U

P

P

LI

E

R

S

C

U

S

T

OM

E

R

S

Back Office

Applications

Front Office

Applications

Collaboration

Business Intelligence

Knowledge Management

E-commerce


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E-Commerce and Industry Structure

E-Com changes the relative strength of the 5 competitive forces


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How the Internet and the Web ChangeBusiness: Basic Business Concepts

Industry Structure

the nature of players in an industry andtheir relative bargaining power

by changing the basis of competition among rivals

the barriers to entry

the threat of new substitute products

the strength of suppliers

the bargaining power of buyers


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Industry Value Chains

set of activities performed in an industry bysuppliers, manufacturers, transporters,distributors, and retailers that transform raw inputsinto final products and services

reducing the cost of information and othertransactional costs

Firm Value Chains set of activities performed within an individual firm

to create final products from raw inputs

increasing operational efficiency


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E-Com and Industry Value Chains-Six generic players

Dell


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E-Com and Firm Value Chains


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Business Strategy

set of plans for achieving superior long-term returns on the capital invested in a

firm offers unique ways

differentiate products

obtain cost advantages

compete globally

compete in a narrow market or productsegment


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Breaking down the aspects of your business into

four general Value Chain areas

Attract-- in which you get and keep customer

interest, and includes advertising and marketingInteract -- in which you turn interest into

orders, and includes sales and catalogsAct -- in which you manage orders, and

includes order capture, payment, and fulfillmentReact -- in which you service customers, and

includes technical support, customer service,and order tracking.


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Value Chain Integration

Connecting Business Processes (tasks) andBusiness Component (plans)

Suppliers demand-generating process,integrates seamlessly with consumers need-generating process

Inventories of rm and finished goods minimised

Payment process dovetail with billing process Cash flow is managed to minimise total cost of

handling funds


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Business Objects Componentised view of business plans,

operations

Business Objects consist of people, places,things, concepts, processes, events that

comprise every business Approaches for identifying, engineering and

implementing business processes:

UML Unified Modelling Language

OOAD Object Oriented Analysis andDesign

OOBE Object Oriented BusinessEngineering

OOBR Object Oriented Business Process


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Business Process

Processes may be defined based on three dimensions(Davenport & Short 1990):

.Entities: Processes take place between organizationalentities. They could be Interorganizational (e.g. EDI),Interfunctional or Interpersonal

. Objects: Processes result in manipulation of objects.

These objects could be Physical or Informational.

.Activities: Processes could involve two types ofactivities: Managerial (e.g. develop a budget) andOperational (e.g. fill a customer order).

"a set of logically related tasks performed to achieve a defined businessoutcome." A process is "a structured, measured set of activities designed toproduce a specified output for a particular customer or market. It implies a

strong emphasis on how work is done within an organization"


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Info is data imbued withmeaning, relevance

,purpose

Accurately determining

Info need

Presenting the Info

Set of concepts,

methods,processes to

improve B decisions

Using Info frommultiple

sources,applying

experience

,assumptions to

develop accurate

understanding

Integration of coreinfo, detect significant

events

Exploration and

analysis of unrelated

info

High quality info

derived from highquality data sourceFoundation of InfoData are raw facts

that are out of context,

have no meaning and

difficult to understand

Orgn. K is rational

interpretation of info

that leads to B

Intelligence

K is intellectual

capital


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Business Intelligence

Gain insight and intelligence from corporate data

Accelerate decision making process

Reduce expenses Generate new/additional business opportunities

Produce a healthier bottom line

Achieve a high customer satisfaction Attain a stronger competitive position in the

market place

How Business Intelligence works?


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How Business Intelligence works?

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Module 1 - E-Commerce

Documents