CS5038 The Electronic Society
Lecture 1: Overview of Electronic Commerce
Lecture Outline
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Definitions
Perspectives
Variations
Business Models
Pressures on businesses
Responses of businesses
The Networked Business
Benefits
Problems
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Time change!
Move to 9am for next week
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E-Commerce Definitions
E-commerce : Any kind of transaction done partly or completely over a network
Business-to-business (B2B) - online transactions (e.g. purchases) with other
businesses
Interorganisational Information System (IOS) – information between
organisations; used for collaborative commerce
Business-to-consumer (B2C) - online transactions between businesses and
consumers
Business-to-employee (B2E) - information and services made available to
employees online
Consumer-to-consumer (C2C) - online transactions between consumers
Peer-to-Peer (P2P) – exchange games, DivX videos, MP3 music
Consumer-to-Business (C2B) – consumers seek sellers (Priceline.com) or sell
services to organisations
Intrabusiness (Organisational) EC – internal to organisation, intranet
Business-to-Employees (B2E) – subset of Intrabusiness
Government-to-Citizens (G2C) – services and information to citizens
Exchange – buyers and sellers; dynamic pricing; matching services
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Exchange-to-Exchange (E2E) – system to connect exchanges
Electronic Commerce Terms
EC defined from these perspectives
 Communications
 E-delivery: Goods, services, information, payments
 Business process
 Automate business transactions and workflow
 Service
 Cut service costs, improve quality and speed
 Online
 Buying, selling and other services on internet
 Collaborations
 Inter- and intraorganisational
 Community
 Gather to learn, transact, communicate
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Variations
Pure vs. Partial EC: based on the degree of digitisation of
 Product
 Process
 Delivery agent
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
Internet vs. Non-Internet EC
 VANs – value added network
 LANs – local area network
 Vending Machine
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 Click and Mortar
Dimensions of
E-Commerce
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Prentice Hall, 2002
Business Models
A method of doing business by which a company
can generate revenue to sustain itself.
 Name your price – priceline.com
 Find the best price – hotwire.com
 Dynamic brokering – getthere.com
 Affiliate marketing – amazon.com
 Electronic tendering systems – gxs.com
 Online auctions – ebay.com
 Customization and personalization – dell.com
 Electronic marketplaces and exchanges – e-steel.com
 Supply chain improvers – productbank.com.au
 Collaborative commerce
Where is the company positioned in the value chain?
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Rappa’s Business Models
http://www.digitalenterprise.org/models/models.html
Brokerage – exchange, trading community, aggregator
Advertising – portals, sponsorship banners
Infomediary
 Recommender - users provide recommendations on products, e.g.
http://www.epinions.com
 Registration - session tracking of users, allows greater targeting of
advertising, e.g. http://www.nytimes.com
Merchant - retail
Manufacturer – eliminate middleman
Affiliate – online referrals for commission
Community – voluntary contributors, regular visitors
Subscription – high value content
 Many companies changed to subscription models in last two years
Utility – pay by byte
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Example: ORBIS Corp.
TRANSFORM
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Prentice Hall, 2002
Major Business Pressures
Market / Economy
Strong competition
Global economy
Regional trade agreements (NAFTA)
Low labor cost in some countries
Frequent changes in markets
Increased power of consumers
Society / Environment
Changing nature of workforce
Deregulation of services
Shrinking subsidies
Ethical and legal issues
Social responsibility of E-bus.
Rapid political changes
Technology
Rapid technological obsolescence
Increase innovations and new technologies
Information overload
Rapid decline in technology cost vs. performance ratio
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Organizational Responses
Strategic systems (e.g. FedEx tracking system) – strategic advantage
Continuous improvement efforts
 Customer Relationship Management (CRM) – maximum value proposition
to customer – online help, product information, tools
 Total Quality Management (TQM) - ongoing refinements in response to
continuous feedback
Business process reengineering (BPR) - major innovations
Business Alliances
 Virtual Corporation - Joint Venture for time-limited mission
 Keiretsu - Long term alliance of manufacturers, suppliers and finance
corporations
Cooperation in E-markets – purchasing consortia
IT Support
Reducing cycle time (=business process time) and time to market
Empowerment of employees and collaborative work
Supply chain improvements: speed and efficiency
Mass customisation
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Intranet/Extranet
Intranet
 Corporate LAN (Local Area Network) or WAN (Wide …)
 Uses Internet technology
 Open, flexible connectivity
 Limited to authorised employees
 Secure behind firewall
Extranet
 Links Intranets in different locations
 Uses Internet technology
 Security required – Virtual Private Network (VPN)
 Information travels through encrypted tunnels
between Intranets
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The
Networked
Business:
Internet,
Intranet,
Extranet
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Benefits of E-Commerce
To Organizations
To Consumers
Expands the marketplace
Decreases the cost (less paper)
Pull-type supply chain management
Customisation = competitive advantage
Less time between outlay of capital and
receipt of products and services
Supports BPR efforts
Open 24 hours a day
More choices
Better prices
Quick delivery
Product information in seconds
Interact with other consumers
Facilitates competition
To Society
Work at home  less traveling  less traffic and pollution
Lower prices benefit less affluent people
Third world and rural areas access products otherwise unavailable
Public services at a reduced cost and improved quality
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Problems With E-Commerce
Technical Problems
 Insufficient telecommunication bandwidth
 Difficult to integrate Internet EC software with some existing
applications and databases
 Additional cost of infrastructure
 Software development tools are still evolving
 Standards (security, reliability, communication) are still evolving
 Interoperability problems
Cost Problems
 Developing EC in house can be expensive and may result in delays.
 Difficult to justify - intangible benefits are difficult to quantify.
 E.g. customer relationship management (CRM)
Non-technical problems are more serious…
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Problems With E-Commerce (contd.)
Security and Privacy
 B2C - Hard to convince customers that online transactions are
secure
 Customers do not trust:
 Unknown sellers, Paperless transactions, Electronic money
Other limiting factors
 Switching from a physical to a virtual store may be difficult
 Lack of touch and feel online
 Channel conflict
 Unresolved legal issues
 Rapidly evolving and changing EC
 Lack of support services
 Insufficiently large number of sellers and buyers
 Expensive and/or inconvenient accessibility to the Internet
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Summary
Definitions – B2C, B2B, B2E
Perspectives – communications, business process, services
Variations – Pure v. partial
Business Models and Rappa’s models
Pressures on businesses – market, technology, society
Responses of businesses – BPR, alliances, IT support
The Networked Business - Internet, Intranet, Extranet
Benefits – organisations, consumers, society
Problems – technical and non-technical
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Quiz 1
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CS5038 The Electronic Society
Lecture 1.5: The Digital Economy
Lecture Outline
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The digital economy
Competition in E-markets
Intermediation
Winners and losers
Impact on business process and organisation
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Digital Economy
aka Internet economy, new economy, Web economy
Definition: Economy based largely on digital technologies
E-Marketplace = Marketspace
Marketplace: 3 main objectives
 Match buyers and sellers
 Facilitate transactions
 exchange of information, goods, services, payments
 Provide institutional infrastructure
 Legal contracts, dispute resolution, enforcement
Marketspace benefits
 Increased efficiencies
 Decreased cost of executing business functions
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Digital Products
Information and entertainment products
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Paper-based products: books, newspapers, magazines
Product information: catalogs, training manuals
Graphics: photographs, maps, calendars
Video: movies, TV programs
Software: programs, games, development tools
Symbols, tokens, icons
 Tickets and reservations: airline, concert
 Financial instruments: checks, credit cards, electronic currencies
Processes and services
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Government services: forms, benefits, licenses
E-messaging: letters, faxes
Business processes: ordering, inventorying
Auctions: bidding, bartering
Cybercafés, virtual communities
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Competition in Marketspaces
Competition in the Internet ecosystem
 Inclusive with low barriers to entry
 Self-organizing rather than hierarchical
Competition is intense
 Lower buyers’ search cost
 Speedy comparisons
 Differentiation and personalization
Perfect Competition
 Many buyers and sellers (no entry cost)
 Large players cannot control market
 No product differentiation
 Comprehensive information between buyers and sellers
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Porter’s Five
Forces
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Prentice Hall, 2002
Intermediation
Roles and value of intermediaries in e-markets
(limitations of dealing directly)
Search costs: brokers with access to customer
preferences can predict demand for products
Lack of privacy: anonymity of buyer and/or seller
Gather product information from many sources
Contracting risk - Broker can:
 Record reputations
 Act as policeman
 Provide insurance
Pricing inefficiencies
 Pricing mechanisms for imbalance of buy/sell orders
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Winners and Losers in EC
Winners in EC
 Infrastructure providers
 Internet access (ISP)
 Software and hardware
 Security & payment systems
 Diversified portal providers
 Proprietary network owners
 Midsize manufacturers
 A few large resellers
 economies of scale e.g.
FedEx, UPS
 Advertising companies
 Conventional retailers online
 Online only companies
 eBay, Amazon
 E-market makers
Losers in EC
 Wholesalers (particularly small ones)
 no need for local distributors
 Brokers
 travel, real estate, stock, insurance
 Salespeople
 Nondifferentiated manufacturers
 Neither low cost nor innovative
must adapt to change
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Impact on Business Processes
and Organisations
Improving direct marketing
 Product promotion
 New sales channels
 Direct savings
 Reduced cycle time
 Customer service
 Corporate image
 E.g. amazon
 Customisation
Transforming organizations
 Organization learning
 Changing nature of work
Redefining organizations
 New product capabilities
 New business models
Impact on manufacturing
 Virtual manufacturing
 Build-to-order
Impact on finance & accounting
Impact on human resources
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 Online distance learning
Summary
The digital economy – marketspaces
Competition in marketspaces - intense
Intermediation – role and value
Winners and losers – must adapt to change
Impact on business process and organisation
Quiz 2
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