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BTT 110 INTRODUCTION TO E-COMMERCE

Learning Objectives
Define electronic commerce (EC) and describe
its various categories
Describe and discuss the content and
framework of EC
Describe the major types of EC transactions
Describe some EC business models
Discuss the benefits of EC to organizations,
consumers, and society

CHAPTER 1
Overview of Electronic Commerce

Learning Objectives cont

Describe the limitations of EC
Describe the role of the digital revolution in EC
and the economic impact of EC
Discuss the contribution of EC in helping
organizations respond to environmental
pressures
Discuss some major managerial issues
regarding EC

What is e-commerce?

Electronic Commerce (e-commerce) can be viewed from several

perspectives.
Communications Perspective - EC is the delivery of information,
products and services, and payments through telephone lines,
computer networks, etc.
Business Process Perspective - EC is the applications of technology
toward the automation of business transactions and workflows.
Service Perspective - EC is a tool that allows firms, consumers and
management the ability to cut service costs, while improving the
quality of goods and increasing the speed of delivery of service.
Online Perspective - EC provides the capability of buying and selling
products and information on the Internet.
Collaborations Perspective - EC is the facilitator for inter- and intraorganizational collaboration
Community Perspective - EC provides a gathering place for community
members, to learn, transact, and collaborate

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Pure Vs. Partial Electronic Commerce

The EC Framework

Three dimensions
the product (service) sold [physical / digital];
the process [physical / digital]
the delivery agent (or intermediary) [physical / digital]
Traditional commerce
all dimensions are physical
Pure EC
all dimensions are digital
Partial EC
all other possibilities include a mix of digital and physical
dimensions

Classification of EC by the Nature of the

Transaction

Business-to-business (B2B): EC model in which all of the participants are

businesses or other organizations
Business-to-consumer (B2C): EC model in which businesses sell to individual
shoppers
Business-to-business-to-consumer (B2B2C): EC model in which a business
provides some product or service to a client business; the client business
maintains its own customers, to whom the product or service is provided
Travel agencies, Independent insurances agencies
Consumer-to-business(C2B): individuals who use the Internet to sell products or
services to organizations and /or seek sellers to bid on products or services they
need
Consumer-to-consumer (C2C): consumers sell directly to other consumers
Mobile commerce (m-commerce)EC transactions and activities conducted in a
wireless environment
Location-commerce(l-commerce) - m-commerce transactions targeted to
individuals in specific locations, at specific times

Classification of EC by the Nature of

the Transaction cont
Business-to-employee (B2E): EC model in which an organization
delivers services, information, or products to its individual
employees
Collaborative commerce (c-commerce): EC model in which
individual or groups communicate or collaborate online
E-government: Government-to-citizens (G2C): EC model in which a
government entity buys or provides good, services, or information
to businesses or individual citizens
Exchange (electronic): a public e-market with many buyers and
sellers
Exchange-to-exchange (E2E): EC model in which electronic
exchanges formally connect to one another for the purpose of
exchanging information

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Brief History of EC
EC applications first
developed in the early
1970s
Electronic funds transfer
(EFT)

Electronic data interchange

(EDI)electronic transfer of
documents:
Purchase orders
Invoices
E-payments between firms
doing business

Brief History of EC cont

Interorganizational systems (IOS)

Limited to:
Large corporations
Financial institutions
A few other daring
businesses

Stock trading
Travel reservation systems

Internet became more commercialized in the

early 1990s

Enlarged pool of
participants to include:

Almost all medium-and large-sized organization in

the world now has a Web site
Most large corporations have comprehensive
portals

Manufacturers
Retailers
Service providers

Business Plans & Business Cases

Business plan
A written document
that identifies the
business goals and
outlines the plan of how
to achieve them

Business case
A written document that
is used by managers to
garner funding for
specific applications or
projects; its major
emphasis is the
justification for a
specific investment

The Content of a Business Plan

Mission statement and company description

The management team
The market and the customers
The industry and competition
The specifics of the products and/or services
Marketing and sales plan
Operations plan
Financial projections and plans
Risk analysis
Technology analysis

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Structure of Business Models

- All business models must specify their revenue
model (the description of how the company or an
EC project will earn revenue)
- Revenue sources are:

Transaction fees
Subscription fees
Advertisement fees
Affiliate fees
Sales
Other models

Typical Business Models in EC (cont.)

Group purchasing - getting many small buyers together
to by in large quantities
Online auctions
Product and service customization
Customization is the creation of a product or service according
to the buyers specifications

Electronic marketplaces and exchanges

Vertical marketplace is a marketplace that concentrates on one
industry; also called vertical portals or vortals

Supply chain improvers

Typical Business Models in EC

Online, direct marketing
Electronic tendering systems

Reverse auction is a tendering system sellers are invited to

bid on the fulfillment of an order to produce a product or
provide a service; the lowest bid wins

Name your own price

Find the best price
Affiliate marketing - an arrangement whereby a
marketing partner (business, organization or individual)
refers consumers to the selling companys Web site
Viral marketing - word-or-mouth marketing in which
customers promote a product or service to friends or
other people by using the Internet

The Benefits of EC
Benefits to Organizations
Expands the marketplace to national and international markets
Decreases the cost of creating, processing, distributing, storing
and retrieving paper-based information
Allows reduced inventories and overhead by facilitating pulltype supply chain management
The pull-type processing allows for customization of products
and services which provides competitive advantage to its
implementers
Reduces the time between the outlay of capital and the receipt
of products and services
Supports business processes reengineering (BPR) efforts
Lowers telecommunications cost - the Internet is much cheaper
than value added networks (VANs)

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Benefits of EC (cont.)
Benefits to consumers
Enables consumers to shop or do other transactions 24 hours a
day, all year round from almost any location
Provides consumers with more choices
Provides consumers with less expensive products and services
by allowing them to shop in many places and conduct quick
comparisons
Allows quick delivery of products and services (in some cases)
especially with digitized products
Consumers can receive relevant and detailed information in
seconds, rather than in days or weeks
Makes it possible to participate in virtual auctions
Allows consumers to interact with other consumers in electronic
communities and exchange ideas as well as compare
experiences
Facilitates competition, which results in substantial discounts

The Limitations of EC
Technical limitations
There is a lack of universally accepted standards for
quality, security, and reliability
The telecommunications bandwidth is insufficient
Software development tools are still evolving
There are difficulties in integrating the Internet and EC
software with some existing (especially legacy)
applications and databases.
Special Web servers in addition to the network servers
are needed (added cost).
Internet accessibility is still expensive and/or
inconvenient

Benefits of EC (cont.)
Benefits to society
Enables more individuals to work at home, and to do
less traveling for shopping, resulting in less traffic on
the roads, and lower air pollution
Allows some merchandise to be sold at lower prices,
benefiting less affluent people
Enables people in Third World countries and rural
areas to enjoy products and services which otherwise
are not available to them
Facilitates delivery of public services at a reduced
cost, increases effectiveness, and/or improves quality
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The Digital Revolution and

the Economic Impact of EC
In the Digital Revolution the economy is based on
digital technologies including:
Digital communication networks

Digital networking and communication infrastructures provide

a global platform where people and organizations:
i. Interact
ii. Communicate
iii. Collaborate
iv. Search for information

Computers
Software
Other related information technologies

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The Digital Revolution and

the Economic Impact of EC cont

Contributions of EC to Organizations
The New World of Business

The term digital economy also refers to the

convergence of computing and communication
technologies on the Internet and other networks
and the resulting flow of information and
technology that is stimulating e-commerce and
vast organizational changes.
It enables all types of information (data, audio,
video, etc.) to be stored, processed, and
transmitted over networks to many destinations
worldwide

Business pressures
Organizational responses

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Contributions of EC to Organizations cont

Contributions of EC to Organizations cont

Organizational responses
Strategic systems
Provide organizations with strategic advantages, enabling them to:
i. Increase their market share
ii. Better negotiate with their suppliers
iii. Prevent competitors from entering into their territory
Continuous improvement efforts (TQM)
Many companies continuously conduct programs to improve
productivity, quality and customer service
Business process reengineering (BPR)
Radical change that cause by strong business pressures
Business alliances
Alliances with other companies, even competitors, can be
beneficial
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Contributions of EC to Organizations
cont

Contributions of EC to Organizations
cont

Empowerment of employees and collaborative work

Employees given the authority to act and make decisions on their own
improves
Productivity
Customer relationship management (CRM)

Empowered sales people and customer service employees:

Make customers happy quickly
Help increase customer loyalty

Supply chain improvements

Help reduce supply chain delays, inventories and eliminate other
inefficiencies

Mass customizationproduction of large quantities of customized

items

Electronic markets
Optimize trading efficiency
Enable their members to compete globally
Require the collaboration of the different companies and
competitors
Reduction in cycle time and time to market
shortening the time it takes for a business to complete a
productive activity from its beginning to end

Business problem is how to efficiently provide customization

EC is an ideal facilitator of mass customization by enabling electronic
ordering to reach the production facility in minutes

Managerial Issues
Is it real?
How to evaluate the magnitude of the business
pressures.
Why is the B2B area so attractive?
There are so many EC failureshow can one avoid them?
What should be my companys strategy toward EC?
How do we transform our organization into a digital one?

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