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Chapter 1: Electric commerce
™ An introduction to e-Commerce outlining:
ƒ The three basic e-Commerce technologies
ƒ The trading exchanges to which they apply
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Definition of e-Commerce
™ ‘Formulating commercial transactions at a site
remote from the trading partner and then using
electronic communications to execute that
transaction.’
™ The definition includes business to business and
business to consumer transactions.
™ Further definitions are given in Chapter 1,
Section 1.2. Many definitions are much broader
covering, for example, the commercial use of
e-mail.
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E-Commerce technologies
Electronic
Markets
EDI
Internet
Commerce
™ The three e-Commerce technologies are:
ƒ Electronic Markets
ƒ Electronic Data Interchange
ƒ Internet Commerce
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Electronic markets
™ The use of information and communications
technology to present a range of offerings available
in a market segment and hence enable:
ƒ the purchaser to compare the prices (and other
attributes);
ƒ make a purchase decision.
™ The usual example of an electronic market is an
airline booking system.
™ There is the potential for new electronic markets to
be created using Internet technologies.
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Electronic Data Interchange (EDI)
™ 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 and the vehicle
assemblers which use EDI for transactions with
their suppliers.
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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.
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The trade cycle
™ Conducting a commercial transaction involves the
following steps:
ƒ Pre-Sale:
• Search - finding a supplier
• Negotiate – agreeing the terms of trade
ƒ Execution:
• Order
• Delivery
ƒ Settlement:
• Invoice
• Payment
ƒ After-sales, e.g. warrantee and service
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Generic trade cycles
™ The trade cycle varies depending on:
ƒ The nature of the parties to the transaction
ƒ The frequency of trade exchanges
ƒ The nature of the goods or services being
exchanged.
™ Three generic trade cycles can be identified:
ƒ Regular, repeat transactions between
commercial trading partners (Repeat)
ƒ Irregular transactions between commercial
trading partners (Credit)
ƒ Irregular transactions in once-off trading
relationships (commercial or retail) (Cash)
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Generic trade cycles
Trade Cycle: Repeat Credit
Search
Cash
Pre-Sale
Negotiate
Order
Deliver
Execution
Invoice
Payment
After Sales
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After Sale
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Electronic markets
™ Emphasis on the search phase of the trade cycle
™ Typically an inter-organisational credit trade cycle
Search
Negotiate
Pre-Sale
EM
Order
Deliver
Execution
Invoice
Payment
After Sales
Settlement
After Sale
™ Limited applications – airline seat bookings and
financial sector – the operation of the electronic
market is not necessarily in the vendor’s interests.
™ See Chapter 7 for further discussion.
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Electronic Data Interchange
™ Used for standardised, repeat, inter-organisational
transactions
Search
Pre-Sale
Negotiate
Order
Deliver
EDI
Execution
Invoice
Payment
After Sales
Settlement
After Sale
™ Notable users of EDI are vehicle assemblers,
component supplier’s, and supermarkets (and other
multiple retailers), ordering the goods to restock
their shelves.
™ See Chapters 8 through 11 for further discussion
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Internet commerce
™ Used for once-off transactions – consumer or interorganisational transactions.
Search
Pre-Sale
Negotiate
Order
Deliver
Internet
Execution
Invoice
Payment
After Sales
Settlement
After Sale
™ 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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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
EDI
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Chapter 2: The value chain
™ The production of goods and services is the result
of the efforts of many organisations – a complex
web of contracts and co-operation known as the
supply chain or the value system.
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The supply chain
™ Manufacturing Inputs:
ƒ Components (e.g. wheels, seats, etc.)
ƒ Sub-assemblies (e.g. engine, gearbox, etc.)
™ Sales and Distribution:
ƒ Wholesale (e.g. import agent)
ƒ Retail (e.g. local main dealer)
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Logistics chains
™ Transport
™ Storage
™ Paperwork (Orders, Invoices, etc)
™ Each supply chain transaction adds cost without
adding intrinsic value.
™ e-Commerce can be applied to the supply chain to
reduce costs or improve service.
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Porter’s value chain model
support activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound Marketing
Logistics
Logistics & Sales
Margin
Service
primary activities
™ Primary Activities:
ƒ Inbound Logistics
ƒ Operations (Production)
ƒ Outbound Logistics
ƒ Marketing and Sales
ƒ Service
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Porter’s value chain model
support activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound Marketing
Logistics
Logistics & Sales
Margin
Service
primary activities
™ Support Activities:
ƒ Procurement
ƒ Technology Development
ƒ Human Resources Management
ƒ Firm Infrastructure
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Linked value chains
Outbound
Logistics
Inbound Operations Outbound
Logistics
Logistics
Inbound
Logistics
™ Inbound Logistics
—from Suppliers
™ Outbound Logistics
—from Customers
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Porter’s value system
(Inter-organisational value chain)
Supplier
Value
Chains
Firm
Value
Chains
Channel
Value
Chains
Buyers
Value
Chains
™ Overall organisational competitive advantage:
ƒ efficiency of the company
ƒ quality of its products
™ plus
ƒ efficiency and quality of suppliers
ƒ efficiency of wholesalers (Channel)
ƒ efficiency of retailers
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Automotive assembly value system
Internal
Supplies
Component
Suppliers
Vehicle
Assembler
Dealer
Network
Consumer
™ Inbound Logistics:
ƒ Large number of suppliers
electronic
ƒ Vast number of components
commerce
™ Process:
“
strategy
ƒ Just-in-time (JIT) manufacture
technologies
™ Outbound Logistics:
and
ƒ Limited number of Main Dealers
applications
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Food supermarkets value system
Regional
Whse
Food
Processors
Supermarket
Consumer
™ Inbound Logistics:
ƒ Large number of suppliers
electronic
ƒ Vast number of products
commerce
™ Process:
“
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ƒ Retail
technologies
™ Outbound Logistics:
and
ƒ Vast number of Consumers
applications
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Insurance value system
Agents
Insurance
Company
Consumer
Insurance
Broker
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Insurance value system
™ Inbound Logistics:
ƒ No significant suppliers
(financial / re-insurance partners)
™ Process:
ƒ Administrative
™ Outbound Logistics:
ƒ Sales through agents
ƒ Sales through brokers
ƒ Direct sales
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e-Commerce in the value chain
™ Electronic Value Chain:
ƒ Reduced time frame
ƒ Changed cost structures
™ Re-engineered Value Chain:
ƒ Just-in-time manufacture
ƒ Quick response supply
ƒ Efficient document processing
™ Competitive advantage
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