Transcript Introduction to Electronic Commerce and Trade

Introduction to Electronic
Commerce and Trade
What is commerce?
…activities that seek to create arm’slength transactions between firms and
individuals and involve the exchange of
money, goods, or obligations.
What is E-Commerce?
 “an interactive concept, designed to draw
together a wide range of business support
services, which includes inter-organisational
e-mail, directories, trading support systems
for commodities, products, customised
products, and custom-built goods and
services: different types of support and
reporting systems, including management,
logistical and statistical reporting/information
systems.” Clarke
A Simplified Approach
Electronic commerce
“is the communication of any object of
commercial interchange by electronic
means” Gardner
“is the integration of e-mail, electronic funds
transfer, EDI and similar techniques into a
comprehensive electronic-based system of
business functions” Nath et al
Electronic Trade and Commerce
Electronic Business
Electronic commerce
Dimensions: Mass, retail and consumer markets
Systems: Extra organisational systems
Electronic
Business
Electronic Trade
Dimensions: Business to business
Systems: Inter organisational systems
Electronic trading systems
E-Commerce History and Scope
 History
 Began in the early 1970s (long before the Internet was open
to commercial use)
 Limited to large businesses initially
 Electronic Fund Transfer (EFT) and Electronic Data
Interchange (EDI)
 Scope Today Includes
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advertising
home banking
shopping in electronic stores and malls
buying stocks
finding a job
conducting an auction
collaborating electronically with business partners around
the globe
 providing customer service
Advantages of Electronic
Commerce
Global reach
Reduced administration costs
Improved customer service
Greater product choice
Flexibility of product / physical location
Ease of use
Increased marketing capability
Develop new relationships
E-Commerce Framework
Electronic Commerce Activities
Electronic Data Interchange (EDI)
Electronic Funds Transfer (EFT)
Electronic payments (E-cash - Credit
cards)
Automatic Teller Machine (ATM)
Video conferencing and E-mail
Sales/Marketing
Loan and insurance facilities
Travel reservations
Electronic Commerce Platforms
Television / Set top boxes
Computer Networks
Microcomputers
PDAs
ISPs
EC Benefits to Organizations
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Increased customer base:
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Reduced cost:
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Reach a large number of customers at little cost
Procure material and services from other companies at less cost
Allow lower inventories by facilitating “pull”-type supply chain
management
Shorten marketing distribution channels and reduce marketing costs
Decrease the cost of creating, processing, distributing, storing, and
retrieving paper-based information
Lower telecommunications costs because the Internet is much cheaper
than value-added networks (VANs)
Reduced cycle time:
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Broaden markets
Find niche markets (e.g. www.dogtoys.com)
Procure material and services from other companies rapidly
Reduce the time between the outlay of capital and the receipt of products
and services
Helps small businesses compete against large companies
EC Benefits to Customers
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Choice
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Consumers can select from many vendors and many more products than
they could locate otherwise
Consumers can get customized products, from PCs to cars, at
competitive or bargain prices
Consumers can find unique products and collectors’ items through
virtual auctions that might otherwise require them to travel long distances to
a particular auction place at a specific time
Convenience
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Consumers can conduct online quick comparisons to find less expensive
products and services
Customers can shop or make other transactions 24 hours a day, year
round, from almost any location
Product information immediately available 24 hours a day, year round,
from almost any location
Consumers can interact with other consumers in electronic communities
and can exchange ideas as well as compare experiences
EC Benefits to Society
 Convenience
 Enables more individuals to work at home and to do less
traveling
 Access
 Allows some merchandise to be sold at lower prices - less
affluent people can buy more and increase their standard of
living
 Enables people in less developed countries and rural areas
to enjoy products and services that otherwise are not
available to them
 Facilitates delivery of public services, such as government
entitlements, reducing the cost of distribution and fraud, and
increasing the quality of the social services, police work,
health care and education
Technical Limitations of EC
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A few technical challenges remain for organizations
wishing to conduct EC:
 Lack of universally accepted standards for quality, security,
and reliability
 Insufficient telecommunications bandwidth
 Still-evolving software development tools
 Difficulties in integrating the Internet and EC software with
some existing (especially legacy) applications and
databases
 Need for special Web servers in addition to the network
servers (added cost)
 Expensive and/or inconvenient Internet accessibility for
many people
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All of these will diminish over time
Non-Technical Limitations of EC
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Legal and economic concerns:
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Many legal issues are yet unresolved
Lack of national and international regulations and standards
Difficulty in measuring benefits of EC and justifying EC
Insufficient number (critical mass) of sellers and buyers
exists for profitable EC operations
Cultural resistance:
 Distrust of the new: Many sellers and buyers are waiting for
EC to stabilize before they take part
 Customer resistance to the change from a physical to virtual
stores
 Perception that electronic commerce is expensive and
unsecured, so many do not want even to try it
Internet Population
Source: www.etforecasts.com
Internet Population
Current Global internet population
165 - 170 million users - 1999
1.17 billion users – 2005
US online population 80 million – 1999
US online population 230 million – 2005
Trend is moving to world wide population.
 it is projected that by 2005 the US will only
represent 15% of internet users
Worldwide e-Commerce Growth (2004)
23%
1%
North America
Asia/Pacific
51%
Europe
Latin America
25%
$6.8 Trillion
Forrester Research Inc.
Electronic Commerce as a Strategy
Tool
E-commerce should be more than a way
of sending documents electronically
Process re-engineering of the organisation
may be required
Rethink the way that you do business
New Possibilities
 A Connemara based salmon fish farm managed
to sell £50,000 worth of stock in the first three
months selling on the web
 Marlborough offers clients remote access to
videoed interviews of potential employees,
which allows filtering of suitable candidates at an
early stage thus saving time and money
 In the world’s developed economies, tangible
good account for 20% of GDP, down from 50%
after WWII
Electronic Commerce Focus
Business to Business
physical business transactions outnumber
consumer sales by ten to one
Consumer to Business
Forrester Research estimates that by
2003, consumers will spend $108 billion
buying goods online, while businesses will
spend $1.3 trillion
Business to Business V’s Business to
Consumer
$1,400
$1,331
$1,200
$1,000
Billions
$800
Business to Business
Business to consumer
$600
$400
$200
$43
$108
$8
$0
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'03
Industry sector
Business to Business (B2B)
$400
$350
$300
$250
Computing,
electronics
Motor Vehicles
Billions $200
$150
$100
$50
$0
Petrechemicals
Utilities
Other
'99
'03
Fortune 500 Firms (Survey in 1999)
Nearly all have web sites
Less than 10% have transaction-based
web sites
70% of these were setup for reasons
relating to public relations, customer
service and technical support
Internet Retailing
 5% of unique visitors to sites ultimately become
customers
 1.6% of visits result in purchases
 Portal sites directly drive less than 30% of on-line
retailing revenues
 Computer goods, entertainment, travel and discount
brokerage sales account for more then 80% of the online
market
 Two-thirds of shoppers who put items in a virtual
shopping cart abandon the process before checking out
Business-to-Consumer EC
(continued)
 Personalization – ability to customize
product, service, advertisement, or customer
service
 B2C EC enables personalization at low cost
 Internet enables marketing research
 Questionnaires
 Usually involve some inducement
 Direct behavior observation
 Cookies or site tracking services
Business-to-Consumer EC
(continued)
 Use of intelligent agents
 Help customers determine what to buy
 Search for and compare vendor prices
 Collect information and develop customer profiles
 Online advertising
 Banners
 Keyword banners
 Random banners
 Direct email
 Pop-up windows
Business-to-Business EC
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Composes the majority of EC volume
Enables organizations to form electronic
relationships
 Covers all activities along the supply chain
 Business Models:
 Sell-Side Marketplace
 Organizations sell products to other organizations
electronically.
 Buy-Side Marketplace
 Buyers post needs; sellers submit bids
 Electronic Exchanges
 Electronic marketplaces link many buyers and many
sellers
Business-to-Business EC (continued)
 Collaborative Commerce – nonbuying/selling activities between
businesses
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Planning and scheduling
Design
New product information
Product content management
Order management
Sourcing and procurement
New business models
E -procurement
Supply chain automation
Customer service
Intentions Value Network
E- procurement
Large companies have been purchasing
materials using EDI and VANs for some
time
These tended to be expensive to operate
and difficult to use. They also required an
existing relationship to be in place
between the parties.
Internet-based E-Procurement
The internet allows virtually everything
that a company needs to be purchased
online
Predefined relations are not required
Hewlett-Packard announced plans to
sell everything from desks to paper clips
over the web.
Supply Chain Automation
 The Holy Grail of business to business
electronic commerce
 This type of system would link internal ERP
systems, like SAP / Oracle, with external
marketplaces
 Allows employees to source products in the
marketplace and have the ERP deal with
ordering delivery payment and so forth.
Customer Service
Most companies lose half their customers
every five years. Cost of acquiring a new
customer is 4-6 times as much as
retaining one
If a company can reduce that by 10-15%, it has
the potential to improve profitability by 50%
Creating a closer relationship with
customers through ubiquitous contact
Intentions Value Network
Use provider alliances to integrate a broad
array of services into a customised
intention solution
Bundling different/related products and
services within the same industry to create
solutions
Intentions Value Network
Shift the mind set from seller and product
driven to a buyer/service driven business
model
The focus is not on individual products or
services but on the integration of a wide
variety of information, products and
services to satisfy the specific intentions or
needs of a community of buyers
Intentions Value Network
An Integrator oversees a network of
approved suppliers providing products and
services
The critical role of the Integrator is to
understand the customer’s values, needs,
behaviour and preferences related to the
overall intention
Business Models (Rappa,2000)
 Brokerage
 Advertising
 Infomediary
 Merchant
 Manufacturer
 Affiliate
 Community
 Subscription
 Utility
Timmers (1999)
Pitfalls for Electronic Commerce
 Content
 Convenience
 Confidence
 Security
 Cost
 Legal uncertainty
 Lack of qualified staff
 Acceptance of service
by
suppliers/customers
 Lack of industry
standards
 Technical problems
Trust
Trust is central to any commercial
transaction, and it foundation is identity
authentication
Trust requires trading partners to be
confident their communications proceed
privately, unaltered, and cannot be later
refuted
Security
 Privacy
The message only viewed by the intended recipient
 Authentication
Vital to ensure users can be recognised and verified
(passwords)
 Integrity
Ensure message is not tampered with during the
transmit
 Scalability
Can the system continue to give the same level of
security with increased users
Legal Issues
Business transactions/contracts
Jurisdiction
Domain Name Issues
Linking/Framing Issues
Content Liability
Online Disclaimers
Intellectual Property
E-commerce Security
Encryption
Digital Signatures
Conclusions
Altered business models
New business models
If this is a new economic revolution, those
who do not conform will not survive
A lot of money could be spent gambling
Readings
 “Business Models on the Web” – Rappa
(2000) http://digitalenterprise.com/models/models_text.htm
“The e-Business ®Evolution” – Amor
(1999) – Chapter 4 (Avoiding Legal
Issues)