OVERVIEW OF ELECTRONIC COMMERCE

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Challenges
Business in the information age must compete in a challenging market place; It is rapidly changing Complex Global Hyper competitive Customer focused Companies must rapidly react to problem and opportunities arise from this modern business environment.
Combination of social, legal, economic and political factors that effect the business activities.
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 Business environment in the Information age place many pressures on companies.

Organizations may respond reactively to a pressure already in existence or proactively to an anticipated pressure. Companies responses are typically facilitated by Information technology.

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Wal-Mart uses Collaborative Forecasting And Replenishment (CFAR) Worlds largest retailer (More than $110 billion sales) Stiff competition drove Montgomery Ward to file for bankruptcy Wal-Marts innovative IT systems to deal with todays business pressure
Organization need to integrate their internal systems
All functional areas are integrated

Collaboration with suppliers and customers

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 Reason for integration; Difficulty with the demand forecast Inventory forecast Delivery schedule Excess inventory, out-of-stock products, lost opportunity can be minimized.

Retailers and suppliers are committed to the forecast, it become a plan that enables much lower fluctuations and inventories.
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Why customers leave the stores ?

Electronic Commerce: Definitions and Concepts

Electronic Commerce (Ec)
The process of buying, selling, or exchanging products, services, or information via computer networks EC is defined through these perspectives
PRADEEPA.M Communications Commercial (trading) Business process Service Learning Collaborative Community

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 Communication perspective:
E-Commerce is the delivery of Information, Product/Service or Payments over telephone lines, computer networks or any other electronic means.

Service perspective:
E-Commerce is a tool that addresses the desire of firms, consumers, and management to cut service cost while improving the quality of goods and increasing the speed of service delivery.

On-line perspective:
E-Commerce provide the capability of buying and selling products and information on the Internet and other online services.

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Electronic Commerce: Definitions and Concepts

e-business
A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization

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Why Electronic Commerce?

Reduce the transaction cost, by improving the flow of information and increasing the coordination of actions By reducing the cost of searching for potential buyers and sellers Increased no. of potential market participants EC can change the attractiveness of vertical integration for many firms. Use of networked economic structure
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Electronic Commerce: Definitions and Concepts

Pure Versus Partial EC
EC takes several forms depending on the degree of digitization (the transformation from physical to digital)
(1) the product (service) sold, (2) the process, (3) the delivery agent (or intermediary)

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1.1 The Dimensions of Electronic Commerce

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Electronic Commerce: Definitions and Concepts EC organizations

brick-and-mortar organizations Old-economy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents virtual (pure-play) organizations Organizations that conduct their business activities solely online click-and-mortar (click-and-brick) organizations Organizations that conduct some e-commerce activities, but do their primary business in the physical world PRADEEPA.M IMS.Ku-2010-11

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Electronic Commerce: Definitions and Concepts

Where EC is conducted
electronic market (e-marketplace) An online marketplace where buyers and sellers meet to exchange goods, services, money, or information

inter-organizational information systems (IOSs) Communications system that allows routine transaction processing and information flow between two or more organizations intra-organizational information systems Communication systems that enable e-commerce activities to go on within individual organizations 13 PRADEEPA.M IMS.Ku-2010-11

The EC Framework, Classification, and Content

Networked computing is the infrastructure for EC, and it is rapidly emerging as the standard computing environment for business, home, and government applications
Networked computing connects multiple computers and other electronic devices located in several different locations by telecommunications networks, including wireless ones Allows users to access information stored in several different physical locations and to communicate and collaborate with people separated by great geographic distances

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The EC Framework
intranet
An internal corporate or government network that uses Internet tools, such as Web browsers, and Internet protocols

extranet
A network that uses the Internet to link multiple intranets

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The EC Framework, Classification, and Content

An EC Frameworksupports five policymaking support areas(PPPMS)
People Public policy Marketing and advertisement Support services Business partnerships

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1.2 A Framework for Electronic Commerce

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EC Classification
Classification by nature of the transactions or interactions
business-to-business (B2B) E-commerce model in which all of the participants are businesses or other organizations business-to-consumer (B2C) E-commerce model in which businesses sell to individual shoppers
e-tailing Online retailing

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EC Classification
business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides some product or service to a client business that maintains its own customers

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EC Classification
consumer-to-business (C2B)
E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals seek sellers to bid on products or services they need

consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to other consumers

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EC Classification
peer-to-peer
Technology that enables networked peer computers to share data and processing with each other directly; can be used in C2C, B2B, and B2C ecommerce

mobile commerce (m-commerce)

E-commerce transactions and activities conducted in a wireless environment
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EC Classification
location-based commerce (l-commerce)
M-commerce transactions targeted to individuals in specific locations, at specific times

intra-business EC
E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization
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EC Classification
business-to-employees (B2E)
E-commerce model in which an organization delivers services, information, or products to its individual employees

collaborative commerce (c-commerce)

E-commerce model in which individuals or groups communicate or collaborate online

e-learning
The online delivery of information for purposes of training or education
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EC Classification
exchange (electronic)
A public electronic market with many buyers and sellers

exchange-to-exchange (E2E)
E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information

e-government
E-commerce model in which a government entity buys or provides goods, services, or information to PRADEEPA.M IMS.Ku-2010-11 24 businesses or individual citizens

The Future of EC
Overall, the growth of the field will continue to be strong into the foreseeable future Despite the failures of individual companies and initiatives, the total volume of EC is growing by 15 to 25% every year

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Digital Evolution Drives EC

digital economy
An economy that is based on digital technologies, including digital communication networks, computers, software, and other related information technologies; also called the Internet economy, the new economy, or the Web

The digital revolution accelerates EC by providing competitive advantage to organizations and enabling innovations
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Business Environment Drives EC

Economic, legal, societal, and technological factors have created a highly competitive business environment in which customers are becoming more powerful

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Business Environment Drives EC

The environmentresponsesupport model
Companies must not only take traditional actions such as lowering costs and closing unprofitable facilities, but also introduce innovative actions such as customizing, creating new products, or providing superb customer service

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1.4 Major Business Pressures and the Role of EC

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Business Environment Drives EC

Categories of business pressures
market (economic) societal technological

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Business Environment Drives EC

Organizational response strategies
Strategic systems Agile systems Continuous improvement efforts and business process restructuring Customer relationship management Business alliances Electronic markets
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Business Environment Drives EC

Reductions in Cycle Time and Time-to-Market cycle time reduction
Shortening the time it takes for a business to complete a productive activity from its beginning to end

Empowerment of Employees
EC allows the decentralization of decision making and authority via empowerment and distributed systems, but simultaneously supports a centralized control

Supply Chain Improvements

EC can help reduce supply chain delays, reduce inventories, and eliminate other inefficiencies
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Business Environment Drives EC

Mass Customization: Make-to-Order in Large Quantities mass customization Production of large quantities of customized items Intrabusiness: From Sales Force Automation to Inventory Control knowledge Management (KM) The process of creating or capturing knowledge, storing and protecting it, updating and PRADEEPA.M IMS.Ku-2010-11 33 maintaining it, and using it

Benefits of EC
Benefits to Organizations
Global Reach Cost Reduction Supply Chain Improvements Extended Hours Customization New Business Models Vendors Specialization Rapid Time-to-Market
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Lower Communication Costs Efficient Procurement Improved Customer Relations Up-to-Date Company Material Other Benefits

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Benefits of EC
Benefits to Consumers
Ubiquity More Products and Services Customized Products and Services Cheaper Products and Services
Instant Delivery Information Availability Participation in Auctions Electronic Communities No Sales Tax

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Benefits of EC
Benefits to Society
Telecommuting Higher Standard of Living Homeland Security Hope for the Poor Availability of Public Services

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1.7 Limitations of EC

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EC Business Models
business model
A method of doing business by which a company can generate revenue to sustain itself. The model also spells out where the company is positioned in the value chain.
that is by what activities the company adds value to the product or service it supplies.

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 In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.

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EC Business Models
The Structure of Business Models
It is a description of;
the customers to be served and the companys relationships with these customers (customers value proposition) all products and services the business will offer.

the business process required to make and deliver the

products and services
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EC Business Models
Revenue Models revenue model Description of how the company or an EC project will earn revenue Major revenue models
Sales Transaction fees Subscription fees Advertising fees Affiliate fees Other revenue sources

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EC Business Models
Value proposition
The benefits a company can derive from using EC

How do e-marketplaces create value?

Search and transaction cost efficiency Complementarities Lock-in Novelty

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1.6 Common Revenue Models

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EC Business Models
Typical EC Business Models
Online direct marketing Electronic tendering systems tendering (reverse auction) Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins name-your-own-price model Model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price
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EC Business Models
Typical EC Business Models
Find the best price affiliate marketing An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling companys Web site viral marketing Word-of-mouth marketing in which customers promote a product or service to friends or other people PRADEEPA.M IMS.Ku-2010-11

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EC Business Models
Typical EC Business Models
group purchasing Quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased SMEs
Small-to-medium enterprises

e-co-ops Another name for online group purchasing organizations

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EC Business Models
Typical EC Business Models
Bartering Deep discounting Value-chain integrators Value-chain service providers Supply chain improvers

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 The basic categories of business models

Brokerage Advertising Informediary Merchant Manufacturer (Direct) Affiliate Community Subscription Utility

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Brokerage Model Brokers are market-makers: Bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in;
business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C) markets.

Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary.
Ex. www.indiatimes.com
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 Brokerage models include

Market Place exchange Buy/sell fulfillment Demand collection system

Auction broker
Transaction broker Distributor

Search agent
Virtual market place
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 Advertising model:
The web advertising model is an extension of the traditional media broadcast model. The broadcaster provides content and services (like email, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere.
The advertising model works best when the volume of viewer traffic is large or highly specialized.
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 Advertising modes:
Portals Classified User registration Query based paid placement Contextual advertising/Behavioral marketing Content targeted advertising Intromercials Ultramercials

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Infomediary model
Data about consumers and their consumption habits are valuable, especially when that information is carefully analyzed and used to target marketing campaigns.

Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market.

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 Infomediary models:
Advertising networks Audience measurement services Interactive marketing metamediary

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Merchant models
Wholesalers and retailers of goods and services.

Sales may be made based on list prices or through

auction.
Virtual merchant
Catalog merchant

Click and mortar

Bit vendor
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Manufacturer (Direct) model

The manufacturer or "direct model", it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences.
Dell computers
Purchase License Brand integrated content

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Affiliate model
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchasepoint click-through to the merchant.
It is a pay-for-performance model -- if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently wellsuited to the web, which explains its popularity.
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 Banner exchange Pay-per-click Revenue sharing

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Community model
The viability of the community model is based on user loyalty.

Users have a high investment in both time and emotion.

Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.
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Open source Open content Public broadcasting Social networking services

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Subscription model
Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to a service. It is not uncommon for sites to combine free content with

"premium" (i.e., subscriber- or member-only) content.

Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined.

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Content services Person-to-person networking services Trust services Internet service provider

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Utility model
The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model common in the U.S. Metered usage
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Metered subscription

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Networks for EC
corporate portal
A major gateway through which employees, business partners, and the public can enter a corporate Web site

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1.8 The Networked Organization

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B2B Electronic Exchanges: An Overview public e-marketplaces (public exchanges)

Trading venues open to all interested parties (sellers and buyers); usually run by third parties

exchange
A many-to-many e-marketplace. Also known as emarketplaces, e-markets, or trading exchanges

market maker
The third-party that operates an exchange (and in many cases, also owns the exchange)
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Exhibit 6.1 Trading Communities

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B2B Electronic Exchanges: An Overview

Classification Of Exchanges
vertical exchange An exchange whose members are in one industry or industry segment horizontal exchange An exchange that handles materials used by companies in different industries

Dynamic Pricing
dynamic pricing A rapid movement of prices over time, and possibly across customers, as a result of supply and demand

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B2B Electronic Exchanges: An Overview

Functions of Exchanges
1. Matching buyers and sellers 2. Facilitating transactions 3. Maintaining exchange policies and infrastructure

Ownership of Exchanges
An industry giant A neutral entrepreneur The consortium (or co-op)

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B2B Electronic Exchanges: An Overview

Revenue Models
Transaction fees Fee for service Membership fees Advertising fees Other revenue sources

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B2B Electronic Exchanges: An Overview

Governance and Organization
Membership Site Access and Security Services Provided by Exchanges

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B2B Portals
B2B portals
Information portals for businesses

vortals
B2B portals that focus on a single industry or industry segment; vertical portals

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Third-Party (Trading) Exchanges Third-party exchanges are characterized by two contradicting properties:
They are neutral, because they do not favor either sellers or buyers and They do not have a built-in constituency of sellers or buyers, they sometimes have a problem attracting enough buyers and sellers to attain financial viability
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