CS5038 The Electronic Society

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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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Business-to-business (B2B) - online transactions (e.g. purchases) with other businesses

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Business-to-consumer (B2C) - online transactions between businesses and consumers

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Business-to-employee (B2E) - information and services made available to employees online (subset of intrabusiness).

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•Consumer-to-consumer (C2C) - online transactions between consumers

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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.

http://www.elance.com/

http://www.guru.com/

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Peer-to-Peer (P2P) – direct transactions without middlemen. E.g. consumers exchange games, DivX videos, MP3 music

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Government-to-Citizens (G2C) – government provides services and information to citizens

Example: http://dvlaregistrations.direct.gov.uk/

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Exchange – system to host buyers and sellers; dynamic pricing; matching services

• Examples: •http://www.adpdsi.com/uk/Products/Layered/ADP_Exchange/default.asp

http://www.adpdsi.com/uk/Products/Layered/ADP_Exchange/default.asp

http://www.adpdsi.com/uk/Products/Layered/ADP_Exchange/default.asp

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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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E-delivery: Goods, services, information, paymentsBusiness process

Automate business transactions and workflow

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Automate business transactions and workflowService

Cut service costs, improve quality and speed

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Cut service costs, improve quality and speedOnline

Buying, selling and other services on internet

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Buying, selling and other services on internetCollaborations

Inter- and intraorganisational

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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


Traditional commerce: all dimensions are physical

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Variations



Pure EC: all dimensions are digital

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Variations



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


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Business Models

Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.com


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Business Models

Name your price – priceline.comFind the best price – hotwire.comDynamic brokering – getthere.comAffiliate marketing – amazon.com


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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


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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


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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


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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


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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


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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?


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Rappa’s Business Modelshttp://www.digitalenterprise.org/models/models.html

http://www.digitalenterprise.org/models/models.html

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Rappa’s Business Models

Brokerage – exchange, trading community, aggregator



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Brokerage – exchange, trading community, aggregatorAdvertising – portals, sponsorship banners



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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.epinions.com/


http://www.nytimes.com/


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Merchant - retail




http://www.nytimes.com/


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Merchant - retailManufacturer – eliminate middleman




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Merchant - retailManufacturer – eliminate middlemanAffiliate – online referrals for commission


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Merchant - retailManufacturer – eliminate middlemanAffiliate – online referrals for commissionCommunity – voluntary contributors, regular visitors


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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


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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


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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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Market / Economy


Technology


Changing nature of workforce(De)regulation of servicesShrinking subsidiesEthical and legal issuesSocial responsibility of E-bus.Rapid political changes

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Market / Economy


Technology

Rapid technological obsolescenceIncrease innovations and new technologiesInformation overloadRapid decline in technology cost vs. performance ratio


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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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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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 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 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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To Organizations







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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To Organizations







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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CS5038 The Electronic Society

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