Electronic Commerce Definitions and Concepts Rabu, 08 April 2015 Agung Wahana 1 Tujuan : Mahasiswa mampu mengetahui definisi dan konsep dari E-Commerce Mahasiswa mampu mengetahui Dimensi dari ECommerce Mahasiswa mampu mengetahui Framework ECommerce Mahasiswa mampu mengetahui Klasifikasi dari ECommerce Rabu, 08 April 2015 Agung Wahana 2 Reference William J. Buffan. E-Business and IS Solutions. Addison-Wesley. 2000 Harman, P., Rosen, M., Guttman, M., Developing E-Business Systems & Architectures. Morgan Kaufmann Publishing. 2001 Harrington. Business Process Improvement. McGraw-Hill. Inc., 1991 Turban, et al., Electronic Commerce. Prentice Hall International. 2001 Rabu, 08 April 2015 Agung Wahana 3 Electronic Commerce: Definitions and Concepts (cont.) E-commerce defined from the following perspectives: Communications: delivery of goods, services, information, or payments over computer networks or any other electronic means Commercial (trading): provides capability of buying and selling products, services, and information on the Internet and via other online services Rabu, 08 April 2015 Agung Wahana 4 Electronic Commerce: Definitions and Concepts (cont.) Business process: doing business electronically by completing business processes over electronic networks, thereby substituting information for physical business processes Service: a tool that addresses the desire of governments, firms, consumers, and management to cut service costs while improving the quality of customer service and increasing the speed of service delivery Rabu, 08 April 2015 Agung Wahana 5 Electronic Commerce: Definitions and Concepts (cont.) Learning: an enabler of online training and education in schools, universities, and other organizations, including businesses Collaborative: the framework for inter- and intraorganizational collaboration Community: provides a gathering place for community members to learn, transact, and collaborate Rabu, 08 April 2015 Agung Wahana 6 Electronic Commerce: Definitions and Concepts (cont.) e-business: a broader definition of EC, which includes: buying and selling of goods and services servicing customers collaborating with business partners conducting electronic transactions within an organization Rabu, 08 April 2015 Agung Wahana 7 Electronic Commerce: Definitions and Concepts (cont.) Pure vs. Partial EC depends upon the degree of digitization (the transformation from physical to digital) of: 1. 2. 3. the product (service) sold; the process; and for the delivery agent (or digital intermediary) Rabu, 08 April 2015 Agung Wahana Brick-and-Mortar organizations are oldeconomy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents 8 Electronic Commerce: Definitions and Concepts (cont.) Virtual (pure-play) organizations conduct their business activities solely online Click-and-mortar organizations conduct some EC activities, but do their primary business in the physical world Rabu, 08 April 2015 Agung Wahana Electronic market (e- marketplace) online marketplace where buyers and sellers meet to exchange goods, services, money, or information 9 Electronic Commerce: Definitions and Concepts (cont.) Interorganizational information systems (IOSs) allow routine transaction processing and information flow between two or more organizations Rabu, 08 April 2015 Agung Wahana Intraorganizatio nal information systems enable EC activities to go on within individual organizations 10 Exhibit 1.1: The Dimensions of Electronic Commerce Rabu, 08 April 2015 Agung Wahana 11 The EC Framework, Classification, and Content Two major types of e-commerce: business-to-consumer (B2C) : online transactions are made between businesses and individual consumers business-to-business (B2B): businesses make online transactions with other businesses intrabusiness EC: EC conducted inside an organization (e.g., business-to-employees B2E) Rabu, 08 April 2015 Agung Wahana 12 The EC Framework, Classification, and Content (cont.) Computer environments Internet: global networked environment Intranet: a 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 Rabu, 08 April 2015 Agung Wahana 13 EC Framework EC applications are supported by infrastructure and by five support areas: People Public policy Marketing and advertising Support services Business partnerships Rabu, 08 April 2015 Agung Wahana 14 Exhibit 1.2: A Framework for Electronic Commerce Rabu, 08 April 2015 Agung Wahana 15 Classification of EC by Transactions or Interactions business-to-consumer (B2C) : online transactions are made between businesses and individual consumers business-to-business (B2B): businesses make online transactions with other businesses e-tailing: online retailing, usually B2C Rabu, 08 April 2015 Agung Wahana 16 Classification of EC by Transactions or Interactions (cont.) business-to-business-to-consumer (B2B2C): ecommerce model in which a business provides some product or service to a client business that maintains its own customers 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 Rabu, 08 April 2015 Agung Wahana 17 Classification of EC by Transactions or Interactions (cont.) consumer-to-consumer (C2C): e-commerce model in which consumers sell directly to other consumers peer-to-peer (P2P): technology that enables networked peer computers to share data and processing with each other directly; can be used in C2C, B2B, and B2C e-commerce Rabu, 08 April 2015 Agung Wahana 18 Classification of EC by Transactions or Interactions (cont.) mobile commerce ((m-commerce): e-commerce transactions and activities conducted in a wireless environment location-based commerce (l-commerce): mcommerce transactions targeted to individuals in specific locations, at specific times Rabu, 08 April 2015 Agung Wahana 19 Classification of EC by Transactions or Interactions (cont.) intrabusiness 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 business-to-employees (B2E): e-commerce model in which an organization delivers services, information, or products to its individual employees Rabu, 08 April 2015 Agung Wahana 20 Classification of EC by Transactions or Interactions (cont.) 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 exchange (electronic): a public electronic market with many buyers and sellers Rabu, 08 April 2015 Agung Wahana 21 Classification of EC by Transactions or Interactions (cont.) exchange-to-exchange (E2E): e-commerce model in which electronic exchanges formally connect to one another the purpose of exchanging information e-government: e-commerce model in which a government entity buys or provides goods, services, or information to businesses or individual citizens Rabu, 08 April 2015 Agung Wahana 22 The Interdisciplinary Nature of EC Major EC disciplines Computer science Marketing Consumer behavior Finance Economics Management information systems Rabu, 08 April 2015 Agung Wahana 23 A Brief History of EC EC successes Virtual EC companies eBay VeriSign AOL Checkpoint Click-and-mortar Cisco General Electric IBM Intel Schwab Rabu, 08 April 2015 Agung Wahana EC failures 1999, a large number of EC- dedicated companies began to fail EC’s days are not numbered! dot-com failure rate is declining sharply EC field is experiencing consolidation most pure EC companies, are expanding operations and generating increasing sales (Amazon.com) 24 The Success Story of Campusfood.Com Provide interactive menus to college students, using the power of the Internet to replace and/or facilitate the traditional telephone ordering of meals Built the company’s customer base expanding to other universities attracting students generating a list of restaurants from which students could order food for delivery Rabu, 08 April 2015 Agung Wahana 25 The Success Story of Campusfood.Com (cont.) Now some of these activities are outsourced to a marketing firm, enabling the addition of dozens of schools nationwide Financed through private investors, friends, and family members, the site was built on an investment of less than $1 million Campusfood.com’s revenue is generated through transaction fees—the site takes a 5 % commission on each order from the sellers Rabu, 08 April 2015 Agung Wahana 26 The Success Story of Campusfood.Com (cont.) At campusfood.com you can: Navigate through a list of local restaurants, their hours of operation, addresses, phone numbers, etc. Browse an interactive menu Bypass “busy” telephone signals to place an order online Access special foods, promotions, and restaurant giveaways Arrange electronic payment of your order Rabu, 08 April 2015 Agung Wahana 27 The Future of EC 2004—total online shopping and B2B transactions in the US between $3 to $7 trillion by 2008: number of Internet users worldwide should reach 750 million 50 percent of Internet users will shop EC growth will come from: B2C B2B e-government e-learning B2E c-commerce Rabu, 08 April 2015 Agung Wahana 28 E-commerce Business Models Business models—a method of doing business by which a company can generate revenue to sustain itself Examples: Name your price Find the best price Dynamic brokering Affiliate marketing Rabu, 08 April 2015 Agung Wahana 29 E-commerce Business Plans and 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 Rabu, 08 April 2015 Agung Wahana 30 Structure of Business Models Business model: A method of doing business by which a company can generate revenue to sustain itself Rabu, 08 April 2015 Agung Wahana 31 Structure of Business Models (cont.) Value proposition: The benefits a company can derive from using EC search and transaction cost efficiency complementarities lock-in novelty aggregation and interfirm collaboration Rabu, 08 April 2015 Agung Wahana 32 Exhibit 1.4: Common Revenue Models Rabu, 08 April 2015 Agung Wahana 33 Typical Business Models in EC 1. 2. 3. Online direct marketing Electronic tendering systems tendering (reverse auction): model in which a buyer requests would-be sellers to submit bids, and the lowest bidder wins Name your own price: a 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 Rabu, 08 April 2015 Agung Wahana 34 Typical Business Models in EC (cont.) 4. Affiliate marketing: an arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site 5. Viral marketing: word-of-mouth marketing in which customers promote a product or service to friends or other people Rabu, 08 April 2015 Agung Wahana 35 Typical Business Models in EC (cont.) 6. 7. 8. Group purchasing: quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased SMEs: small to medium enterprises Online auctions Rabu, 08 April 2015 Agung Wahana 36 Typical Business Models in EC (cont.) Product and service customization customization: creation of a product or service according to the buyer’s specifications 8. Electronic marketplaces and exchanges 9. Value-chain integrators 10. Value-chain service providers 8. Rabu, 08 April 2015 Agung Wahana 37 Typical Business Models in EC (cont.) 12. Information brokers 13. Bartering 14. Deep discounting 15. Membership 16. Supply chain improvers Business models can be independent or they can be combined amongst themselves or with traditional business models Rabu, 08 April 2015 Agung Wahana 38 Example of Supply Chain Improver Orbis Group changes a linear physical supply chain to an electronic hub Traditional process in the B2B advertising field Rabu, 08 April 2015 Agung Wahana 39 Example of Supply Chain Improver (cont.) ProductBank simplifies this lengthy process changing the linear flow of products and information to a digitized hub Rabu, 08 April 2015 Agung Wahana 40 Benefits of EC Benefits to organizations Global reach Cost reduction Supply chain improvements Extended hours: 24/7/365 Customization New business models Vendors’ specialization Rapid time-to-market Lower communication Rabu, 08 April 2015 Agung Wahana costs Efficient procurement Improved customer relations Up-to-date company material No city business permits and fees Other benefits 41 Benefits of EC (cont.) Benefits to consumers Ubiquity More products and services Cheaper products and services Instant delivery Information availability Rabu, 08 April 2015 Agung Wahana Participation in auctions Electronic communities “Get it your way” No sales tax 42 Benefits of EC (cont.) Benefits to society Telecommuting Higher standard of living Hope for the poor Availability of public services Rabu, 08 April 2015 Agung Wahana 43 Limitations of EC Rabu, 08 April 2015 Agung Wahana 44 Barriers of EC Security User authentication and Trust and risk lack of public key infrastructure Organization Fraud Slow navigation on the Internet Legal issues Lack of qualified personnel Lack of business models Culture Rabu, 08 April 2015 Agung Wahana 45 The Digital Revolution 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 economy Rabu, 08 April 2015 Agung Wahana 46 The Digital Revolution (cont.) A global platform over which people and organizations interact, communicate, collaborate, and search for information Includes the following characteristics: A vast array of digitizable products Consumers and firms conducting financial transactions digitally Microprocessors and networking capabilities embedded in physical goods Rabu, 08 April 2015 Agung Wahana 47 New Business Environment Customers are becoming more powerful Created due to advances in science occurring at an accelerated rate Results in more and more technology Rapid growth in technology results in a large variety of more complex systems Rabu, 08 April 2015 Agung Wahana 48 New Business Environment (cont.) Characteristics in the business environment A more turbulent environment with more business problems and opportunities Stronger competition Need for organizations to make decisions more frequently A larger scope for decisions because more factors More information and/or knowledge needed for making decisions Rabu, 08 April 2015 Agung Wahana 49 Summary 1. 2. 3. 4. Definition of EC and description of its various categories. The content and framework of EC. The major types of EC transactions. The major business models. Rabu, 08 April 2015 Agung Wahana 50 Summary (cont.) 5. 6. 7. 8. Benefits to organizations, consumers, and society. Limitations of EC. The role of the digital revolution. The role of EC in combating pressures in the business environment. Rabu, 08 April 2015 Agung Wahana 51 The End Discuss ? Rabu, 08 April 2015 Agung Wahana 52