Electronic Commerce System

By Varsha Kapoor

objectives
Definition E-Commerce Electronic Markets EDI internet commerce Generic trade cycle Electronic market Trade cycles EDI Trade Cycle Internet commerce trade cycle

Definition
E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the Internet, especially the World Wide Web Electronic Commerce is a general concept covering any form of business transactions or information exchange executed any form of business transactions or information exchange executed using information and communication technology, between companies, between companies and their customers, or between companies and public administration. Electronic commerce includes electronic trading of goods, services and electronic material. Formulating commercial transaction at a site remote from the trading partner and then using electronic communication to execute that transaction.

Definition of e-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 of business conducted electronically and designed and designed to enable the accomplishment of a business goal. These process may be partial or complete and may encompass B2B as well as B2C and C2B transactions
By Wigand (1997)

Definition of e-Commerce
Value Chain includes that EC can be applied in transactions between manufacturer and supplier, manufacturer and retailer and / or retailer / service supplier and consumer

E-commerce definition
Business originating from . . .
Business Business Consumers

B2B

C2B

Consumers

B2C

P2P

E-commerce categories
Business originating from . . .
Business Business
Publishers order paper supplies from paper companies Amazon orders from publishers

Consumers

Consumers aggregate to bulk purchase from Amazon

Consumers

Consumers buy thousands of Harry Potter books from Amazon

Consumers resell copies on eBay

Single chain (or converging categories) of e-commerce

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E-commerce definition
E-COMMERCE vs TRADITIONAL COMMERCE Key elements Value Creation Strategy E-commerce Information Sense and respond Simple rules Competitive edge Speed Competitive force Low barriers of entry Power of customers Resource focus Demand side Customer interface Screen-to-face Communication Technology-mediated channels Accessibility 24 x 7 Customer Self-service interaction Consumer behavior Personalization One-to-one marketing Promotion Word of mouth Product Commodity Traditional commerce Product/Service Classical Quality/Cost Power of suppliers Product substitution Supply side Face-to-face Personal Limited time Seller influenced Standardization Mass/one-way marketing Merchandising Perishables, feel & touch

Scope Of E-commerce

The scope of Electronic Commerce

Electronic market: An electronic market is the use of ICT to present a range of products available in a markets segment, so that the purchaser can compare prices of the products and make a purchase decision. Such as Airline booking system, Dell, Rail Reservation System Electronic Data Interchange: EDI provides a standardized system for coding trade transaction so that it Can communicate directly from one computer system to another without the Need for printed order and invoices. Used by organizations that make large number of regular transactions. such as supermarket. Transactions with the suppliers. Internet Commerce: ICT can also be used to advertise and make once off sales of a wide range of goods and services. This type of Commerce is typified by the commercial use of the internet. Such as books purchasing over internet.

The trade cycle

Conducting a commercial transaction involves the following steps:
Pre-Sale:
Search - finding a supplier Negotiate agreeing the terms of trade

Execution:
Order Delivery

Settlement:
Invoice Payment

After-sales, e.g. warrantee and service

Generic trade cycles

The trade cycle varies depending on: The nature of the parties to the transaction The frequency of trade exchanges The nature of the goods or services being exchanged. Three generic trade cycles can be identified: Regular, repeat transactions between commercial trading partners (Repeat trade cycle) Irregular transactions between commercial trading partners where execution and settlement are separated (Credit) Irregular transactions in once-off trading relationships where execution and settlement are combined(commercial or retail) (Cash)

Generic trade cycles

Trade Cycle: Repeat Credit Search Pre-Sale Negotiate Order Execution Deliver Invoice Settlement Payment After Sales After Sale Cash

Electronic markets
The use of information and communications technology to present a range of offerings available in a market segment and hence enable: the purchaser to compare the prices (and other attributes); make a purchase decision. The usual example of an electronic market is an airline booking system, rail reservation system Searching phase of Trade Cycle Increases the Efficiency of the market, it reduces search cost for buyer and buyer shall continue until best buy is searched for. There is the potential for new electronic markets to be created using Internet technologies. Vendors gain competitive advantage by product differentiation and techniques to lock in customers Organizations that are using electronic markets as a way of coordinating information and the supply chain. New information technologies that enable the creation of new electronic marketplaces, use of electronic brokers. Existing industry boundaries disappear and create new cross-industry markets. Companies operating across multiple value chains. More efficient information distribution may lead to decreasing profit possibilities for sellers.

Electronic Markets
Services Required By Airline Reservation System (Irregular Trade Cycle):
Locate available seat (per sale) For journey customer wants to make (pre sale) At a time and price convenient to customer (execution) Deal is executed and payment is made (settlement)

Electronic markets
Emphasis on the search phase of the trade cycle Typically an inter-organisational credit trade cycle
Search Negotiate Order Deliver Invoice Payment After Sales Settlement After Sale Execution
EM

Pre-Sale

Limited applications airline seat bookings and financial sector the operation of the electronic market is not necessarily in the vendor s interests. A public Access Network can be seen as an electronic market and can be used with an index or a search engine to find vendors of requires product or services We ll discuss this in further classes.

Electronic markets
Electronic markets relies on the information provided by the vendors but an electronic market is likely to be more disadvantageous to most of the vendors in market place. Sellers experience most disadvantages in the emarket, as they make competitive advantage more important and have the effect of forcing price drops in accord to supply and demand

Electronic Data Interchange (EDI)

process of using computers to exchange business documents between companies EDI provides a standardised system for coding trade transactions so that they can be communicated directly from one computer system to another EDI removes the need for printed orders and invoices and avoids the delays and errors implicit in paper handling. EDI is used by organisations that make a large number of regular transactions. Examples are the large supermarket chains, ordering components for their production lines, ordering the goods needed to restock their shelves and the vehicle assemblers which use EDI for transactions with their suppliers.

Electronic Data Interchange

EDI Allows: Stock control / Material management system of the customers interface with the stock control / Production systems of the suppliers without the use of paper documents or the need of human intervention Used for Regular repeat transactions It involves a lot many activities to send and retrieve EDI messages EDI is a formal system and it does not really have a place in the search and negotiation phase Used for Just in time manufacture and quick response supply Mass customisation is also proposed through EDI
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Electronic Data Interchange

Search Negotiate Pre-Sale

Order
Deliver Invoice Payment After Sales Settlement After Sale

EDI

Execution

Used for standardised, repeat, inter-organisational transactions Notable users of EDI are vehicle assemblers, component supplier s, and supermarkets (and other multiple retailers), ordering the goods to restock their shelves.
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Electronic Data Interchange (EDI)

Benefits of EDI Speed Data can move directly out of one computer system and into another with little to no delay. Accuracy Errors are reduced because data is not being rekeyed. Error rates from entering data are between .5 3%. On large volumes of transactions, the possibility for the introduction of errors is enormous. Simplicity EDI standards specify how data will be formatted and where it can be found. Security Much less likely to lose information transmitted through EDI than information sent via mail. EDI can be accessed only by authorized users, and then there are audit trails and archives of data. EDI data cannot be easily changed by unauthorized users. It is also not subject to viruses.

Electronic Data Interchange (EDI)

Consequences of the benefits of EDI : Faster buy-sell cycle time Faster cash flow Reduced order lead time Reduced inventories Ability to conduct just-in-time manufacturing Improved trading partner relationships

Internet commerce
Information and communications technologies can also be used to advertise and make once-off sales of a wide range of goods and services. This type of e-Commerce is typified by the commercial use of the Internet. The Internet can, for example, be used for the purchase of books that are then delivered by post or the booking of tickets that can be picked up by the clients when they arrive at the event. It is to be noted that the Internet is not the only technology used for this type of service and this is not the only use of the Internet in e-Commerce.

Internet commerce
Search Negotiate Order Deliver Invoice Payment After Sales Settlement After Sale Execution Pre-Sale

Internet

Used for once-off transactions consumer or inter-organisational transactions. Can apply to Search, Execution / Settlement and / or After Sales. Consumers pay at time of ordering businesses may have credit arrangements with the suppliers.
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Internet commerce
Consumers purchasing over the Internet, Television sales channel GTM teleshopping healthcare and research products Internet commerce is used by organizations to make once-off or infrequent purchase of items such as computer and office supplies Internet commerce gives customers the credit facilities but Is typified by cash trade cycle
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Internet commerce
Internet Trade is not suited to all goods or to all people. Marketing strategy should take care of the 4 P s Product, Price, Promotion and Place

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E-commerce strategies
Mission Objectives

External Analysis
   

Strategy Formulation Corporate Business Unit Functional Operating

Internal (Company) Analysis

Implementation

Control and Monitoring 27

Classical Strategic Planning

Simple rules

Type
How-to rules

Purpose
They spell out key features of how a process is executed - "What makes our process unique?"

Example
Akamai's rules for the customer service process: staff must consist of technical gurus, every question must be answered on the first call or e-mail, and R&D staff must rotate through customer service.

Boundary rules

They focus managers on which opportunities can be pursued and which are outside the pale.

Cisco's early acquisitions rule: companies to be acquired must have no more than 75 employees, 75% of whom are engineers. Intel's rule for allocating manufacturing capacity: allocation is based on a product's gross margin.

Priority rules

They help managers rank the accepted opportunities.

Timing rules

They synchronize managers with the pace of emerging opportunities and other parts of the company.

Nortel's rules for product development: project teams must know when a product has to be delivered to the leading customer to win, and product development time must be less than 18 months.

Exit rules

They help managers decide when to pull out of yesterdays opportunities.

Oticon's rule for pulling the plug on projects in development: if a key team member-manager chooses to leave the project for another within the company, the project is killed.

E-commerce strategies
Position
Strategic Logic
 Establish  Identify

Resources
 Leverage

Simple Rules
 Pursue  Jump

position

resources

opportunities

an attractive
 Establish

Strategic Steps

market  Locate a defensible position  Fortify and defend

 Where

a vision  Build resources  Leverage across markets

 What

into the confusion  Keep moving  Seize opportunities  Finish strong

 How

Strategic Question Source of Advantage Works Best In Duration of Advantage Risk Performance Goal

should we be?

should we be?

should we proceed?

 Unique,

valuable position with tightly integrated activity system changing, wellstructured markets

 Unique,

valuable, inimitable resources changing, wellstructured markets

 Key

processes and unique simple rules changing, ambiguous markets

 Slowly

 Moderately

 Rapidly

 Sustained  It

 Sustained  Company

 Unpredictable  Managers

will be too difficult to alter position as conditions change

will be too slow to build new resources as conditions change dominance

will be too tentative in executing on promising opportunities

 Profitability

 Long-term

 Growth

E-commerce strategies
E-commerce strategy formulation process

Framing the Market Opportun ity

Business Model

Customer Interface

Market Communication Implementation and Branding

Metrics

e-Commerce in perspective
e-Commerce is not appropriate to all business transactions and, within e-Commerce, there is no one technology that can or should be appropriate to all requirements.
Electronic Markets

EDI

Internet Comerce

Advantages of E Commerce
1. Distances do not matter in carrying out trade. Information is available anytime a customer wants. 2. 24*7 availability 365 days a year 3. Cost of setting up an e-Commerce is very less and it can be integrated directly into the existing infrastructure with little overheads. 4. More flexibility in web site to add or delete or update a product and its information in catalogue on a web site than the manual catalogue Updation 5. Gives exposure to previously untapped market segments 6. Error reduction as orders do not have to be re-keyed into order entry system and increased efficiencies through the automation of business processes 7. Wider choice with no time wastage 8. Buying / selling from any place provided with internet connection 9. Can avail of services like financial, legal medical advice from appropriate portals 10. Knowledge base 11. Availability of anonymous friendly advice on item one may like to buy or sell

Disadvantages of E Commerce
1. Unable to touch and feel the merchandise. This is ,ore of psychological barrier and with experience in trading online it can be reduced 2. Online stores do not exist for a long time because of lack of setting up of the online store 3. Hackers intercept the money transactions and cause problem both for consumer and companies 4. Selected consumer (young highly educated man) . Women and elderly people are unable to reach it. 5. Internet Access is not widely available in India 6. Payment by credit cards requires faith in system security 7. Denial of services.

E-commerce challenges Understanding customer evolution

Invest ahead of customer needs Charting changing technology Match technology choices to consumer tastes Weathering the storm Reassure stakeholders with clear vision, sensible business model, and profitable venture Integrating offline & online activities Align offline & online business activities, esp. advertising, branding, retail & online store design, service, warranties, returns (customer-facing activities) Identifying key levers of competitive advantage Reallocate resources as competitive advantage levers evolve Expanding globally Deal with complex internationalization issues

Top 50 Global web sites in India

As per Best Indian web sites . Com top 20 indian web sites.xlsx

2010 Web Globalization Report Card. Top 25 web sites

Google Facebook Cisco Systems Philips Samsung Wikipedia 3M NIVEA Symantec Lenovo Xbox Autodesk Gmail Microsoft Nokia Intel Caterpillar Panasonic HP Deloitte Touche Tohmatsu LG Volvo Group Hotels.com SAP Kodak

E-commerce In India (Hindrances)

No of Computers per person is too small Limited Access to internet in spite of the computer availability Credit card is very uncommon in India. Not very comfortable with. Buying from online catalogue does not have a direct impact to generate desire and trigger the consequent purchase. Bargaining Is not possible Though the cost of setting up a cyber business is relatively less as compared to ordinary business a large amount of money needs to be spend on advertising and marketing thereby inflating the prerequisite cost. Only 12% of Indian surfers are involved in Net Shopping

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A European Union web site defines e-Commerce as:

Chapter 1 Exercise 1

Electronic Commerce is a general concept covering any form of business transactions or information exchange executed using information and communication technology, between companies, between companies and their customers, or between companies and public administrations. Electronic Commerce includes electronic trading of goods, services and electronic material. List technologies and applications that could be covered by this list and decide, in discussion, if they are usefully/appropriately classified as e-Commerce.
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Chapter 1 Exercise 2
Earnest Higginbottom Genuine Yorkshire Potted Beef Earnest Higginbottom started making Potted Beef in Heckmondwike in 1876 and the company has been run on traditional lines ever since. Recently the business has started to change: Traditional local outlets are being replaced by supermarkets; Native Yorkshire tykes living as far away as Liverpool and Los Angeles are ringing in to ask how to get hold of a bit of real potted beef. Suppliers, such as the maker of the jars, use computerised ordering systems Suggest where and in what form Higgies Potted Beef could implement e-Commerce.
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Execises
Ensure you are familiar with the concepts of EDI and electronic markets Determine three industries you think are appropriate for electronic markets. Don t forget to explain your answer. Use the internet to investigate EDI systems, you should look for industries that use EDI and message standards etc. review the advantages of EDI given. Compare this to trading using paper and fax machines. Which of the advantages of EDI are diminished of the fax machine is used? Why?
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