Transcript FoDEC: Building a Framework for the Framework

Introduction to
E-Commerce
Dr. Panagiotis Kanellis
Arthur Andersen, Business Consulting
Email: [email protected]
Evangelia Kopanaki
National and Kapodistrian University of Athens, Dept of Informatics
Email: [email protected]
1
In the latest of a string of bad news for ONLINE
RETAILERS, Amazon.com reported its biggestever net loss, of $323m, in the fourth quarter
of 1999; for the year as a whole, its net loss
was $720m
-The Economist, February 4 2000
Slide 2
What is E-Commerce?
„The Electronic Support of one or more phases of a
commercial transaction“
OR „electronic buying & selling“
„Electronic Commerce is a way to improve the exchange
of goods, services, information, and knowledge
between organizations through the use of networked
enabled technologies.“
Source: Electronic Commerce: A Firmwide Perspective
San Jose, July 98
Slide 3
Business-to-Consumer
E-Commerce: A Critical Analysis
Slide 4
Business-to-Customer E-Commerce
Involves:
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Electronic Retailing
Home Banking
On-line Banking
On-line advertising and marketing
Stock Brokerage
On-line publishing (electronic books and
newspapers)
Virtual Universities
Video-on-demand
Slide 5
Retailing over the Web: Promises

Attractive new medium

Low cost compared to physical shops
Savings can be passed on to consumers as
discounts

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Convenient for customers and vendors

User friendly

Global Market just a click away
Slide 6
‘Buying a shirt’
Cost per shirt
Producer
Wholesaler
Retailer
Consumer
$52.72
Producer
Wholesaler
Retailer
Consumer
$41.34
Producer
Wholesaler
Retailer
Consumer
$20.45
Source: Wigand, R.T. and Benjamin, R.I. (1999)
Slide 7
Success Stories

Amazon.com online book sales
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Airline tickets (EasyJet)
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virtual shelves hold 2.5m books
disintermediation of travel agents
Music CDs (CDNow)
IT products (Dell and Compaq)
Supermarkets (Tesco and Walmart)
Slide 8
The Transaction Cycle
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Information
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company and product
marketing, public relations, advertising
detailed catalogue with prices
Order
and Payment
Delivery
After sales service
Slide 9
Electronic Catalogues
A Buyer wants:
A Seller wants:
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search capabilities

fast updates
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“shopping basket”
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marketing capabilities

order & payment
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to attract new
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personalization
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special offers
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relevant information on:
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product features
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availability, delivery time
customers

to capture customer
information
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integration with internal
systems
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payment, distribution
Slide 10
Strange Behaviour
Considerable investment in web sites
 Soaring stock prices for Internet firms
BUT
Little evidence of profitability
75% of E-Commerce initiatives fail
Little sign of global e-commerce or e-cash
Failure of electronic malls

Slide 11
‘Can’t judge a book by its cover’
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‘Infinite’ no. of web sites
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overload
many poorly designed and structured
poor quality/out of date information
good sites are costly to develop and maintain
‘Infinite’ no. of users
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but how many are frequent and expert buyers
affluent American male surfers are not buyers
Slide 12
Searching
 Sellers use customer preferences for targeted
marketing
 Customers broadcast desired product requirements
allowing different vendors to offer bids
 Problems of getting customers to the site
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Limitation of Web search engines
Privacy Issues
 Difficulty in locating and comparing stores
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Assumes Web expertise
Issues of trust
Slide 13
Promotion and Advertising
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Revenue opportunity from advertising
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Facilitates joint promotions
But
Web discounts and special offers (fairly
uncommon)

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Has yet to mature
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New medium constrained by size of screen

Need careful design
Slide 14
Product’s Information
 Offers detailed up-to-date information
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on a wide range of products
fast updates
personalization
But
 Poor product coverage
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Customer cannot interact with product
Little product Information
Needs search engine/careful structuring
Slide 15
Online Ordering Remains Rare
 Fast, global, 24-hour service
Potential to provide help with product selection and
ordering, service information, auctions, shopping basket
But
 No help with product selection
 Long load times
 Remains rare in practice
 inappropriate for some industries
 problems with international trading
 lacks personal touch

Slide 16
Online Settlement
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Advantages of immediate payment and
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availability of terms and conditions
widespread availability of credit cards
possibility of online distribution
But
 Suffers from
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security worries
inappropriate payment systems
Like ordering, still uncommon
Slide 17
After Sales Service
Opportunity to capture customer information
and provide value-added services
 Opportunity for ‘push’ marketing for new
products and upgrades
 FAQs and feedback forms common
But
 User profiling and user groups rare
 Need to address privacy issues

Slide 18
Ease of Use
 An attractive site is likely to gain customers

a poorly designed site will damage a firm’s
reputation and sales
 Need for multiple languages
Navigation problems, navigation guidance
 Need for Information
 Problems of screen limitations, excessive graphics,
inconsistent design
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Trade off: simplicity vs. functionality
Slide 19
Need to Understand Shopping
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As a leisure activity
As a social/family activity
Provides exercise and sensory stimulation
Provides status and authority
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personal service and haggling
Provides opportunity to examine goods
Part of identity construction
Slide 20
Shopping in Greece
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Greece is suburban; people live near shops
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Shopping areas and centres are safe
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Local phone calls are not free
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Perceptions of conventional mail order:
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if goods are not in the shops, they are faulty
Slide 21
Retailing Reconsidered
Instead of a huge open global retail market, the
Web is more likely to emphasise:
 Information provision
 Niche markets
 Private Networks (intranets/extranets)
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wholesale & collaboration
New (information-based) products
Slide 22
Business-to-Business
E-Commerce and the ‘Wired’
Organization
Slide 23
Issues to Address
What are the IOS? Where did they come
from?
 What are the underlying technological
requirements?
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Internet-EDI Vs VAN-EDI
Organisational, Interorganisational,
Managerial issues
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Slide 24
Interorganisational Information
Systems (IOS)
“Information systems that cross organisational
boundaries”
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“A computer-based Information System that facilitates
the exchange of information electronically using
telecommunications between different organisations’
computer systems.”
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“ They include all aspects of using networked computers
for business purposes including office automation,
electronic mail, corporate intranets, extranets, Web and
EDI systems for document exchange and purchasing

Slide 25
Changing Business Environment
Complex
turbulent business environment
Increased Competition, Change and
Uncertainty
 Organisational Responses
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cost reduction
core competency/outsourcing
improved logistics
improved quality & customer service
improved flexibility and speed of response
Slide 26
Changing Technological
Environment
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Improved & standardized ICT
Cheaper, deregulated telecommunications
(Internet, ISDN, Cable TV, wireless)
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Growth in organisational IS
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Changing role of IS
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experience and maturity
more strategic and infrastructural
IS for coordination
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CSCW (Computer Supportive Co-operative Work);
email; Video-conferencing
Slide 27
Electronic Data Interchange (EDI)
“ The electronic interchange of formatted
data between computer applications using
agreed message standards”

Preceded Web-based Electronic Commerce
 Is appropriate for the exchange of structured
business documents
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orders, invoices, delivery notes
Links suppliers, customers and banks
Slide 28
Components
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Organizations
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(Reliable 3rd-party) networks (VANs)
Software
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e.g. trading partners, suppliers
EDI translator
bridging; message passing; security
store & forward / store & collectbatch
Message standards
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formats; product codes
Slide 29
Paper-based processes...
order
Notify
Manufacturer
Data Entry - order
or
Customer
Notify
Customer
Data Entry - invoice
invoice
Manufacturer
Slide 30
EDI
Supplier
Retailer
CRP, Purchase order,
purchase order change,
Purchase order acknowledgement,
invoices
Payment
authorization
Electronic Transfer of funds
Retailer’s Bank
Supplier’s Bank
Slide 31
Tactical Benefits
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Improved Communication
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Cost savings
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speed; accuracy
stock reduction
decrease co-ordination costs; relatively cheap
transmission
no rekeying; less paper-handling; fewer errors
Improve customer service
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Reduce cycle times
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Increase responsiveness to customers
Slide 32
Strategic Benefits
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Improved trading relationships
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Improved logistics
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vehicle for collaboration
JIT (Just-In-Time Manufacturing)
QR (Quick Response)
ECR (Efficient Consumer Response)
Competitive gains
Slide 33
Internal Problems
Slow growth of international standards
 Proliferation of competing standards
 Problems of integration with the internal
processes/systems
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Incompatibility of different VANs
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Reorganization of processes
Slide 34
Interorganisational Problems
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Impacts trading relationships
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Inequitable sharing of costs and benefits
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Interdependence and domination
hub-and-spoke arrangements
EDI becomes a requirement to trade
“Hubs” gain more than “spokes”
Initiators of the IOS project ( or powerful
organisations) gain more than non-initiators (or
smaller trading partners)
Little chance of sustainable advantage
Slide 35
Coercion through Fordnet
Ford locked their suppliers into a proprietary
network
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expensive, inconvenient, no supplier influence
Produced a coercive trading relationship
whereby Ford tried to extend their computer
systems into suppliers’ premises
 Fordnet chrystalised power imbalance
 This is not sustainable, since Ford changes to
Odenet

Slide 36
Tesco’s use of EDI
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Very competitive market
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price, quality, service & range
‘Hub & spoke’ network with suppliers
 Exclusion of small suppliers, unable to
implement EDI
 Growth by ‘message type’
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supplier’s stock availability; self billing etc.
Considerable efficiency gains
Closer relationship with suppliers
Slide 37
Small Businesses (SMEs) & EDI
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SMEs traditionally lack:
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expertise to set up and use technology
expertise to realize the benefits of integration
the necessary capital for equipment
the market power to set favorable standards
enough willing partners
normally remain the ‘spokes’
Slide 38
The use of the Internet
in B2B E-commerce (1)
 Low cost of installation
Public network: provides ubiquitous access
 Platform independent
 Facilitates inter-organisational transactions that are
not EDI-based
 Enables small suppliers to participate in business
transactions

Problems
 Security and Reliability
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Does not provide VAN’s services
Slide 39
The use of the Internet
in B2B E-commerce (2)
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Internet-based EDI
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VAN providers are now offering Internet-based
services
Suppliers use the Web to access information
provided by their customers - not EDI-based
communication
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XML Vs EDI
Slide 40
TESCO’s Internet-based
information Exchange
 TESCO’s ECR trial: beginning of 1998
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The TESCO’s Internet-based Information Exchange:
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shares electronic point of sale data, as well as stock,
promotions and new product information with suppliers.
Suppliers may also gain access to a directory of stores,
people and news and can give feedback.
TESCO monitors the performance of suppliers.
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TESCO offers interchange links to smaller suppliers
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 After 2 years 60m pounds have already been saved by
improving replenishment through better promotion
Slide 41
SMEs & Internet/Web
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Internet/Web offers
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expanded market coverage/market share
access to information, ideas and R&D
facilitation of collaboration
time & cost efficiency
cheap technology & public open standards
opportunity for creativity
mechanism for implementing EDI
Slide 42
Dangers of the Internet for SMEs
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SMEs still lack:
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the design, marketing and technical skills needed
to implement and operate an effective web site
the management skills required
the credibility of a ‘household name’
Internet only delivers a limited market
Much depends on the industry context
Slide 43
Putting It All Together
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Difficult global socio-political environment
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Business challenges
Strategic Response
IOS & management methodologies
Organisational change
The important issues are not only
technological but also (inter)organisational,
managerial and social

Slide 44
Key Managerial Issues
 How could an organization transform its structure and
processes so as to function more effectively in the economy?
 How does an organization creates and maximizes
value in the e-conomy?
 How should we build and manage the organizational
IT infrastructure for the e-conomy?
Slide 45
Organizational Transformation
Strategy
Structure and
Processes
People
Information
Technology
Slide 46
In Summary
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Reengineer your company
Reexamine your old business model
‘The buyer always wins’
‘Hold your customer’s hand’
Consider outsourcing
‘No web site is an island’
Create an online sense of community
Source: Business Week
Slide 47