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CS5038 The Electronic Society1. Overview of Electronic Commerce
• Background• Definitions • Perspectives • Variations
• Business Models • Pressures on businesses• Responses of businesses • The Networked Business
• Benefits • Problems
Also look at 2. Retailing (next) and then 3. Customers
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General Business Terminology
• Transactions : Exchange of goods, services, information, money.
• Supply Chain: entire system (directly) concerned with getting products and services from a supplier to a customer.
• Business process tasks: undertaken by business in producing goods and services
• Broker: middleman who helps facilitate transaction
• Tendering: process of bidding to provide a good or service.
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4-slide Microeconomics
• Most firms basically try to maximize profits (in some overall sense)
• Profit = revenue – cost
• Two basic ways to increase profits.
• Within those various strategies.
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4-slide Microeconomics (B)``One man draws out the wire, another straights it, a third cuts
it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations: to put it on is a particular business, to whiten the pins is another ... and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which in some manufactories are all performed by distinct hands, though in others the same man will sometime perform two or three of them.”
Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.
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4-slide Microeconomics (C)
• Theory of the firm • why they exist, why they reach the size they do, why
they are organized a certain way, why they behave in certain ways.
• Transaction costs (internal and external)
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4-slide Microeconomics (D)
• Information economics• Information can have a value
• Broker often makes money by using information that it would be difficult for non-specialists to get.
• Asymmetric information: Sometimes different participants in a market have different amounts of information about each other. • Car dealer vs. customer• Insurance company vs. customer
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E-Commerce Definitions
E-commerce : Any kind of transaction done, partly, or completely, over a (computer and telecommunications) network
`E-commerce’ also refers to the processes used by participants in such transactions.
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E-commerce Definitions
•Intrabusiness (Organisational) – internal to organisation, intranet: e.g.
•Between business units
•From businees to employees
•Between employees
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E-commerce definitions
•Interorganisational Information System (IOS) – information between organisations; used for collaborative commerce
•Often used to improve efficiency of supply-chain
•E.g. when vendor of some product starts to run low in stock IOS can share that information back to the suppplier, who can then ship more stock.
•Electronic Data Interchange (EDI) standards
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E-commerce definitions
Business-to-business (B2B) - online transactions (e.g. purchases) with other businesses
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E-commerce definitions
Business-to-consumer (B2C) - online transactions between businesses and consumers
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E-commerce definitions
Business-to-employee (B2E) - information and services made available to employees online (subset of intrabusiness).
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E-commerce definitions
•Consumer-to-consumer (C2C) - online transactions between consumers
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E-commerce definitions
Consumer-to-Business (C2B) – consumers seek sellers or sell services to organisations.
•E.g. Price comparison websites
•Freelancers http://www.elance.com/ , http://www.guru.com/ , http://www.peopleperhour.com/
•E.g. affiliate schemes, say, a link from a consumer’s web-page to an online retailer, and the consumer gets rewarded either per-click or per-sale.
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E-commerce definitions
Peer-to-Peer (P2P) – direct transactions without middlemen. E.g. consumers exchange games, DivX videos, MP3 music
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E-commerce definitions
Government-to-Citizens (G2C) – government provides services and information to citizens
Example: http://dvlaregistrations.direct.gov.uk/
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E-commerce definitions
Exchange – system to host buyers and sellers; dynamic pricing; matching services
• Examples: •http://www.adpdsi.com/uk/Products/Layered/ADP_Exchange/default.asp
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E-commerce definitions
Exchange-to-Exchange (E2E) – system to connect exchanges
If complicated supply chain, probably need to interact, build-systems to deal with multiple exchanges.
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Electronic Commerce Terms
EC defined from these perspectivesCommunications
E-delivery: Goods, services, information, payments
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Electronic Commerce Terms
EC defined from these perspectivesCommunications
E-delivery: Goods, services, information, paymentsBusiness process
Automate business transactions and workflow
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Electronic Commerce Terms
EC defined from these perspectivesCommunications
E-delivery: Goods, services, information, paymentsBusiness process
Automate business transactions and workflowService
Cut service costs, improve quality and speed
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Electronic Commerce Terms
EC defined from these perspectivesCommunications
E-delivery: Goods, services, information, paymentsBusiness process
Automate business transactions and workflowService
Cut service costs, improve quality and speedOnline
Buying, selling and other services on internet
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Electronic Commerce Terms
EC defined from these perspectivesCommunications
E-delivery: Goods, services, information, paymentsBusiness process
Automate business transactions and workflowService
Cut service costs, improve quality and speedOnline
Buying, selling and other services on internetCollaborations
Inter- and intraorganisational
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Electronic Commerce Terms
EC defined from these perspectivesCommunications
E-delivery: Goods, services, information, paymentsBusiness process
Automate business transactions and workflowService
Cut service costs, improve quality and speedOnline
Buying, selling and other services on internetCollaborations
Inter- and intraorganisationalCommunity
Gather to learn, transact, communicate
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Variations
Pure vs. Partial EC: based on the degree of digitisation of
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Variations
Pure vs. Partial EC: based on the degree of digitisation ofProduct
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Variations
Pure vs. Partial EC: based on the degree of digitisation ofProductProcess
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Variations
Pure vs. Partial EC: based on the degree of digitisation ofProductProcess Delivery agent
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Variations
Pure vs. Partial EC: based on the degree of digitisation ofProductProcess Delivery agent
Traditional commerce: all dimensions are physical
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Variations
Pure vs. Partial EC: based on the degree of digitisation ofProductProcess Delivery agent
Traditional commerce: all dimensions are physical
Pure EC: all dimensions are digital
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Variations
Pure vs. Partial EC: based on the degree of digitisation ofProductProcess 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
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Variations (2)
Internet vs. Non-Internet ECVANs – value added network (hosted service that
acts as intermediary between businees partners)
LANs – local area network
Vending Machine
Click and Mortar
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Dimensions of E-Commerce
Prentice Hall, 2002
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Business ModelsA method of doing business by which a company
can generate revenue to sustain itself.
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Business Models
Name your price – priceline.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.comCustomization and personalization – dell.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.comCustomization and personalization – dell.comElectronic marketplaces and exchanges – e-steel.com
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.comCustomization and personalization – dell.comElectronic marketplaces and exchanges – e-steel.comSupply chain improvers – productbank.com.au
A method of doing business by which a company can generate revenue to sustain itself.
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Business Models
Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.comElectronic tendering systems – gxs.comOnline auctions – ebay.comCustomization and personalization – dell.comElectronic marketplaces and exchanges – e-steel.comSupply chain improvers Collaborative commerce
Where is the company positioned in the value chain?
A method of doing business by which a company can generate revenue to sustain itself.
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Rappa’s Business Modelshttp://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregator
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship banners
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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 - retailManufacturer – eliminate middleman
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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 - retailManufacturer – eliminate middlemanAffiliate – online referrals for commission
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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 - retailManufacturer – eliminate middlemanAffiliate – online referrals for commissionCommunity – voluntary contributors, regular visitors
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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 - retailManufacturer – eliminate middlemanAffiliate – online referrals for commissionCommunity – voluntary contributors, regular visitorsSubscription – high value content
Many companies changed to subscription models in last two years
http://www.digitalenterprise.org/models/models.html
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Rappa’s Business Models
Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship bannersInfomediary
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 - retailManufacturer – eliminate middlemanAffiliate – online referrals for commissionCommunity – voluntary contributors, regular visitorsSubscription – high value content
Many companies changed to subscription models in last two yearsUtility – pay by byte
http://www.digitalenterprise.org/models/models.html
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Example: ORBIS Corp.
Prentice Hall, 2002
TRANSFORM
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Major Business Pressures
Market / Economy
Strong competitionGlobal economyRegional trade agreements (NAFTA)Low labor cost in some countriesFrequent changes in marketsIncreased power of consumers
Technology
Society / Environment
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Major Business Pressures
Market / Economy
Strong competitionGlobal economyRegional trade agreements (NAFTA)Low labor cost in some countriesFrequent changes in marketsIncreased power of consumers
Technology
Society / Environment
Changing nature of workforce(De)regulation of servicesShrinking subsidiesEthical and legal issuesSocial responsibility of E-bus.Rapid political changes
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Major Business Pressures
Market / Economy
Strong competitionGlobal economyRegional trade agreements (NAFTA)Low labor cost in some countriesFrequent changes in marketsIncreased power of consumers
Technology
Rapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratio
Society / Environment
Changing nature of workforce(De)regulation of servicesShrinking subsidiesEthical and legal issuesSocial responsibility of E-bus.Rapid political changes
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Organizational Responses
Strategic systems (e.g. FedEx tracking system) – strategic advantage
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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
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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
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Organizational ResponsesStrategic 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
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Organizational ResponsesStrategic 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 customization
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Technology: IntranetIntranet
(Internal) corporate network LAN (Local Area Network)
WAN (Wide …) Uses Internet technology
Open, flexible connectivity Limited to authorised employees
Secure behind firewall
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Architecture of an Intranet
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Technology: ExtranetExtranet
Links Intranets in different locations, from approved partners, vendors, suppliers, etc.
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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Enterprise (Corporate) Portals
Corporate (enterprise) portal—a gateway for entering a corporate Web site, enabling communication, collaboration, and access to company informationProvide single-point access to specific enterprise
information and applications available on: Internet Intranets Extranets
Companies may have separate portals for outsiders and for insiders
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Corporate Portal as a Gateway to Information
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Corporate Portal Framework
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Interoperability & Protocols
• Need technological protocols to facilitate-commerce. • Currently include:• TCP/IP: The Internet Protocol Suite. The standard
computer networking protocol stack for exchanging packets of data across an unreliable network.
• HTTP: web-brower makes requests, possibly for resources (web-pages etc.), and web-server responds.
• SSL (and TLS): cryptographic protols for sending encrypted messages over internet.
• HTTPS: a secure version of HTTP. Basically, HTTP combined with SSL.
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Interoperability & Protocols
• XML: Extensible Markup Language. Standard machine-readable format. Basis for other technologies including RSS, SOAP, … and modern versions of Office, OpenOffice, iWork.
• SOAP: Simple Object Access Protocol. Standard for exchanging structured information (XML) across network.
• JavaScript: a programming language (not Java).
• AJAX: Asynchronous JavaScript and XML. Group of technologies used for interactve web applications. Execution on both the client and server sides. • HTML and CSS for presentation of static components. JavaScript executes on client for
dynamic components and interactivity. HTTP or HTTPS used to send to or request data (possibly XML) from server, or for server to execute some program (possibly JavaScript).
•
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Benefits of E-Commerce
To Organizations
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
To Society
To Consumers
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Benefits of E-Commerce
To Organizations
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
To Society
To Consumers
Open 24 hours a day
More choices
Better prices
Quick delivery
Product information in seconds
Interact with other consumers
Facilitates competition
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Benefits of E-Commerce
To Organizations
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
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
To Consumers
Open 24 hours a day
More choices
Better prices
Quick delivery
Product information in seconds
Interact with other consumers
Facilitates competition
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Problems With E-Commerce (A)
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
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Problems With E-Commerce (B)
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 (C)Security and Privacy
B2C - Hard to convince customers that online transactions are secure
Customers do not trust: Unknown sellers, Paperless transactions, Electronic money
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Problems With E-Commerce (D)Other limiting factors
Switching from a physical to a virtual store may be difficult and expensive
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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Problems With E-Commerce (E)What if:
•Information aggregated by companies about consumers is used to the advantage of companies, but not the consumers
•There is not fair competition
•It enables cartels to form
•Prices for consumers go up
•The company claims to be operating in a different jurisdiction, and does not submit to regulation or law
•Avoids tax
•http://en.wikipedia.org/wiki/Double_Irish_Arrangement
•Does not re-invest in country in which revenue is generated?
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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
Acknowledgements• The market hierearchy picture is taken from
http://en.wikipedia.org/wiki/File:Market-Hierarchy-Model.png (Creative Commons License, Source/Author: Achim Grochowski)
• Slides on Portals and Intranet Architecture come from a lecture by Paul Chan
http://www.icua.us/student/aec/3aec71.ppt
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