Transcript Strategy Formulation

Electronic Commerce
•Outline
•Define electronic commerce and describe its various
categories
•Distinguish between electronic markets and interorganizational systems
•Describe the benefits of electronic commerce to
organizations, consumers, and society
•Describe the limitations of electronic commerce
•Global electronic commerce
•Future of EC
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Definitions and Content of Field
 Electronic Commerce (EC) is where business
transactions take place via telecommunications
networks, especially the Internet.
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Electronic commerce describes the buying and selling of
products, services, and information via computer
networks including the Internet.
The infrastructure for EC is a networked computing
environment in business, home, and government.
E-Business describes the broadest definition of EC. It
includes customer service and intrabusiness tasks. It is
frequently used interchangeably with EC.
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Definitions and Content of Field
(cont.)
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A global networked environment is known
as the Internet
A counterpart within organizations, is
called an intranet
An extranet extends intranets so that they
can be accessed by business partners.
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Virtual product
The Dimensions of Electronic Commerce
Electronic
commerce areas
The core of
electronic commerce
Digital
Product
Virtual process
Digital process
Physical
Product
Traditional
commerce
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Physical process
Physical
agent
Digital
agent
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Virtual delivery agent
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The Electronic Commerce Field
• EC applications are supported by
infrastructures, and their implementation is
dependent on four major areas: people, public
policy, technical standards and protocols, and
other organizations.
• The EC management coordinates the
applications, infrastructures, and pillars. It
also includes Internet marketing and
advertisement.
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Electronic Commerce Applications
• Stocks Jobs • On-line banking
• Procurement and purchasing• Malls • On-line marketing and advertising
• Home shopping • Auctions • Travel • On-line publishing
People:
Buyers, sellers,
intermediaries,
services, IS people,
and management
Public
policy,
legal, and
privacy
issues
Technical standards
for documents,
security, and
network protocols
payment
Organizations:
Partners,
competitors,
associations,
government services
Infrastructure
(1)
Common business
services infrastructure
(security smart
cards/authentication
electronic payment,
directories/catalogs)
(2)
Messaging and
information distribution
infrastructure
(EDI, e-mail, Hyper Text
Transfer Protocol)
(3)
(4)
Multimedia content
Network infrastructure
and network
(Telecom, cable TV
publishing infrastructure
wireless, Internet)
(HTML, JAVA, World
(VAN, WAN, LAN,
Wide Web, VRML)
Intranet, Extranet)
(5)
Interfacing
infrastructure
(The databases,
customers, and
applications)
Management
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A Framework for Electronic Commerce
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Electronic Markets
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A market is a network of interactions and
relationships where information, products,
services, and payments are exchanged.
The market handles all the necessary transactions.
An electronic market is a place where shoppers
and sellers meet electronically.
In electronic markets, sellers and buyers negotiate,
submit bids, agree on an order, and finish the
execution on- or off-line.
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Shopper/Purchaser
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Seller/Supplier
Electronic commerce
network
(Infrastructure)
Product/service information request
Purchase request
Payment or payment advice
Response to information request
Purchase acknowledgment
Shipping notice
Purchase/service delivery (if online)
Payment acknowledgment
Electronic Market
(Transaction Hander)
Response to fulfillment request
Shipping notice
Payment remittance notice
Electronic transfer of funds
Payment approval
Electronic transfer of funds
Shopper/Purchaser’s Bank
Purchase fulfillment request
Purchase change request
Electronic transfer of funds
Transaction Handler’s Bank
(Automated Clearing House)
Seller/Supplier’s Bank
Electronic Markets
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Interorganization Information
Systems
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An interorganizational information system (IOS)
involves information flow among two or more
organizations.
Its major objective is efficient routine transaction
processing, such as transmitting orders, bills, and
payments using EDI or extranets.
Scope: An IOS is a unified system encompassing
two or several business partners.
A typical IOS includes a company and its
suppliers and and/or customers.
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Types of Interorganizational
Systems
Electronic data interchange (EDI)
 Extranets
 Electronic funds transfer (EFT)
 Integrated messaging systems
 Shared databases
 Electronically-supported supply chain
management
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Classification of EC by the Nature of
the Transactions
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Business-to-business
Business-to-customer
Intra business transactions
Business to Business
Others
Interorganizational
System
Business to Customer
Electronic
Commerce
Business to Business
Intraorganizational
Other
Classification of Electronic Commerce
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Electronic Commerce is
Interdisciplinary
 Marketing
 Computer sciences
 Consumer behavior
and psychology
 Finance
 Economic
 Production/Logistic
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 Management
information systems
 Accounting and
auditing
 Management
 Business law and
ethics
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The Benefits of
Electronic Commerce
Benefits to Organisation
 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 “pull” type supply chain management
 The pull type processing allows for customization of
products and services which provides competitive
advantage to its implementers
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Benefits to Organizations (cont.)
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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 to Customers
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Enables customers to shop or do other
transactions 24 hours a day, all year round from
almost any location
Provides customers with more choices
Provides customers 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
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Benefits to Customers (cont.)
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Customers can receive relevant and detailed
information in seconds, rather than in days or
weeks
Makes it possible to participate in virtual auctions
Allows customers to interact with other customers
in electronic communities and exchange ideas as
well as compare experiences
Electronic commerce facilitates competition, which
results in substantial discounts.
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Benefits to Society
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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 the poor ones
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 Limitations of
Electronic Commerce
 Technical Limitations of Electronic Commerce
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Lack of sufficient system’s security, reliability,
standards, and communication protocols
Insufficient telecommunication bandwidth
The software development tools are still evolving
and changing rapidly
Difficulties in integrating the Internet and electronic
commerce software with some existing applications
and databases
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Technical Limitations of Electronic
Commerce (cont.)
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The need for special Web servers and other
infrastructures, in addition to the network servers
(additional cost)
Possible problems of interoperability, meaning
that some EC software does not fit with some
hardware, or is incompatible with some operating
systems or other components
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Non-Technical Limitations
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Cost and justification (35% of the
respondents)
 The
cost of developing an EC in house can be
very high, and mistakes due to lack of experience,
may result in delays. There are many
opportunities for outsourcing, but where and how
to do it is not a simple issue. Furthermore, to
justify the system one needs to deal with some
intangible benefits which are difficult to quantify.
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Non-Technical Limitations (cont.)
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Security and Privacy (17% of the respondents)
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These issues are especially important in the B2C area, and
security concerns are not truly so serious from a technical
standpoint. Privacy measures are constantly improving too.
Yet, the customers perceive these issues as very important and
therefore the EC industry has a very long and difficult task of
convincing customers that online transactions and privacy are,
in fact, fairly secure.
Lack of trust and user resistance (4%)
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Customers do not trust an unknown faceless seller, paperless
transactions, and electronic money. So switching from a
physical to a virtual store may be difficult.
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Non-Technical Limitations (cont.)
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Other limiting factors are:
 Lack
of touch and feel online
 Many unresolved legal issues
 Rapidly evolving and changing EC
 Lack of support services
 Insufficiently large enough number of sellers and
buyers
 Breakdown of human relationships
 Expensive and/or inconvenient accessibility to the
Internet
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Global Electronic Commerce
 While geographical market boundaries may be
falling, global interest-based communities will
spring up
 Mainly in support of business-to-business financial
and other repetitive, standard transactions, e.g.
EFT & EDI
 The emergence of the Internet and the extranets
resulted in an inexpensive and flexible
infrastructure that can greatly facilitate global trade
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Barriers to Global Electronic Commerce
 Legal Issues
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Uncoordinated actions must be avoided and an
international policy of cooperation should be encouraged
 Market Access Issues
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Companies starting e-commerce need to evaluate
bandwidth needs by analyzing the data required, time
constraints, access demands, and user technology
limitations
 Financial Issues
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Customs and taxation
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electronic payment systems
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Barriers to Global Electronic
Commerce (cont.)
 Other Issues
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Identification of buyers and sellers
Trust
Security ( for example, viruses)
Cultural diversity
International agreements (multi-lateral agreements)
Role of government
Purchasing in local currencies
Language and translation
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The Future of Electronic Commerce
 Internet Usage— increase exponentially; access via
cellphones!
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Opportunities for Buying— increase rapidly
Purchasing Incentives— increase buyers’ advantages
Increased Security and Trust— significant improvement
Efficient Information Handing— accessible from
anywhere
Innovative Organizations— restructured and reengineered
Virtual Communities— spreading rapidly
Payment Systems— ability to use e-cash cards and make
micropayments is getting close to reality
Business-to-Business— continues to grow rapidly
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The Future of Electronic Commerce
(cont.)
 Technology Trends
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Clients
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Servers
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Windows NT
Networks
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thin client and embedded client
xDSL and wireless communication
EC software and services
availability of all types of EC software
 companies support auctions and multiple types of certifications
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EC knowledge
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the quantity and quality
of EC knowledge is increasing rapidly
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References
 Chapter 1 & chapter 18 from:
 Turban, E. et al, Electronic Commerce: A
Managerial Perspective, Prentice Hall, 2002.
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