ELECTRONIC BUSINESS

Definition

Electronic business or e-business can be defined as “The transformation of an organization’s processes to deliver additional customer value through the application of technologies, philosophies and computing paradigm of the new economy”.

• It comprises of three primary processes:1. Production processes: which include

procurement, ordering and replenishment of stocks; processing of payments; electronic links with suppliers; and production control processes.

2. Customer-focused processes: which include

promotional and marketing efforts, selling over the Internet, processing of customers’ purchase orders and payments, and customer support, and

Internal management processes: which include • employee services, • training, • internal information-sharing, • video-conferencing, and• recruiting. • Electronic applications enhance information flow

between production and sales forces to improve sales force productivity.

• Workgroup communications and electronic publishing of internal business information are likewise made more efficient.

Managing the E-enterprise:

• Today most of the business organizations are using internet technology, network and wireless technology for improving the business performance measured in terms of cost, efficiency, competitiveness and profitability.

• The business processes across the organization and outside run on E-technology platform using digital technology. Hence, today’s business firm is also called E-enterprise of Digital firm.

The paradigm shift to E-enterprise has brought four transformations, namely

• Domestic business to global business• Industrial manufacturing economy to

knowledge based service economy• Enterprise Resource management to

enterprise network management• Manual document driven business process to

paperless automated electronically transacted business process.

• This paradigm shift has added new challenges for management to tackle.

• It has opened larger market but not without severe competition.

• Market and business risks have increased. But these transformations have made conventional organization design obsolete.

Conventional Organization E-enterprise

Top heavy organization structure Flat organization structure

Work and work place location at one place Separation of work from workplace

Manual and document based work flows Paperless work flows

High administrative and management

overheads

Low overheads

Inflexible, rigid and longer business

process cycles

Flexible agile and responsive process

cycles

Private business process systems for self

use. They are barred from usage by

customers, vendors and business partners

Public business processes and systems for

use by customers, vendors and business

partners

Low usage of technology Use Internet, wireless and network

technologies

Comparison between Conventional Organization and E-enterprise

Organization of Business in an E-enterprise:

• Essentially Internet and networks enable integration of information,

• facilitate communication and• provide access to everybody from anywhere.

And software solutions make them faster and self-reliant as they can analyze data, interpret and use rules and guidelines for decision making.

• These enabling capabilities of technology have given rise to the following business models,

Business Model Description Example

Virtual store Provides information about

product, and sells and

delivers directly to

customer or business

organizations

Amazon.com, rediff.com.

ebay.com

Information store Provided information of

interest and earns revenue

from sharing and

advertising

Yahoo.com, msn.com,

rediff.com

Transaction process Processes bills for payment:

telephone, electricity,

money transfer and banking

transactions, membership

for club registration.

Icici.com, billjunciton.com

Online marketing Provides a marketing

platform where buyers and

sellers can meet to

exchange information,

negotiate and place order

for delivery

Sulekha.com

Content selling News, music, photos,

pictures, greetings are

stored and sold at a

price

Timesofindia.com,

lakecards.com

Online service Offers services to

individuals and

business at large and

generates revenue

Irctc.co.in,

Travelocity.com

Virtual communities Provides platform to

meet people of

common interests.

Software user groups,

professional groups

like doctors, mangers,

user groups

Linux Group

E-learning Provides contents, E-

books, CDs. Lessons,

conducts test and offers

certification

Sifyelearning.com

ENTERPRISE RESOURCE PLANNING (ERP)

• Large companies throughout the world started installing ERP systems in the 1990s as a conceptual framework and catalyst for reengineering their business processes. It serves as a cross-functional enterprise backbone that integrates and automates many internal business processes and information systems within the manufacturing, logistics, distribution, accounting finance and human resource functions in a company.

• It is the technological backbone of e-business, and enterprise wide transactions framework with links into sales order processing, inventory management and control, production and distribution planning and finance. It is a cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company. For example, ERP software for a manufacturing company will typically process the data from and track the status of sales, inventory, shipping and invoicing as well as forecast raw material and human resource requirements.

Benefits & Scope of ERP:• Quality and Efficiency: • ERP creates a framework for integrating and improving a company’s

internal business processes that result in significant improvements in the quality and efficiency of customer service, production and distribution.

• Decreased costs: • Many companies report significant reductions in transaction

processing costs and hardware, software and IT support staff compared to the nonintegrated legacy systems that were replaced by their new ERP systems.

• Decision Support: • ERP provides vital cross-functional information on business

performance quickly to managers to significantly improve their ability to make better decisions in a timely manner across the entire business enterprise.

• Enterprise Agility: Implementing ERP systems breaks down many

former departmental and functional walls of business processes, information systems and information resources. This results in more flexible organizational structures, managerial responsibilities and work roles and therefore a more agile and adaptive organization and workforce that can more easily capitalize on new business opportunities.

• Challenges: Though the benefits of ERP are many, the costs

and risks re also considerable. Notice that hardware and software costs area as mall part of total costs, and that the costs of developing new business processes and preparing employees for the new system make up the bulk of implementing a new ERP system. Converting data from previous legacy systems to the new cross-functional ERP system is another major category of ERP

• Implementation costs. The costs and risks of failure in implementing a new ERP

system are substantial. Most companies have had successful ERP implementations, but a sizable minority of firms experienced spectacular and costly failures that heavily damaged their overall business. Big losses in revenue, profits and market share resulted when core business processes and information systems failed, or did not work properly. In many cases, orders and shipments were lost, inventory changes were not recorded correctly and unreliable inventory levels caused major stock-outs to occur for weeks or months. Therefore companies need to estimate the complexity of planning, development and training before they could actually switch to a new ERP system.

Electronic Commerce:

• The buying and selling, marketing and servicing, and delivery and payment of products, services, and information over the internet, intranets, extranets, and other networks, between an internetworked enterprise and its prospects, customers, suppliers, and other business partners.

E-Commerce Application:

• Business to consumer (B2C) or B to C• Business to Business (B2B) or B to B• Consumer to Consumer (C2C) or C to C• Consumer to Business (C2B) or C to B

Business to Consumer E-Commerce (B 2 C):

• B 2 C is the retailing of products and services directly to individual customers. Electronic commerce on the internet between business and consumers is accelerating the impact of information technology on consumer behavior and business processes and markets. Businesses find ways to keep customers coming back to their store through their retail websites. The success of these websites is due to Performance and services, Personalization, Socialization, Look and feel, Incentives, Security and reliability. Example: wallmart.com, amazon.com

Advantages• Customer-centered retailing: Closer and more personalized relationship with customers

is possible • Web sites: Provide a corporate-centered portal for the consumer to

quickly find information on products, services, prices, orders • Disintermediation: The elimination of organizations or business process layers

responsible for certain intermediary steps in a value chain, reducing costs to the consumer

• Reintermediation: The shifting of the intermediary role in a value chain to a

new source, adding additional value to the consumer

Business to Business E-commerce (B 2 B):

• Business to Business E-commerce is the Wholesales side of the commercial process. B2B customers are other companies while B2C customers are individuals. A company wants to build and sell a product to other businesses. The interrelationship with other business needed to build and sell a product make up a network of business relationships that is called the supply chain.

Consumer to Consumer (C2C):

• Consumer-to-consumer (C2C) electronic commerce involves the electronically-facilitated transactions between consumers through some third party. A common example is the online auction, in which a consumer posts an item for sale and other consumers bid to purchase it; the third party generally charges a flat fee or commission. The sites are only intermediaries, just there to match consumers. They do not have to check quality of the products being offered.

Consumer to Business (C2B)

• Consumer-to-business (C2B) is an electronic commerce business model in which consumers (individuals) offer products and services to companies and the companies pay them. This business model is a complete reversal of traditional business model where companies offer goods and services to consumers. There are only a few kinds of companies whose trading models could be considered as C2B.

• Online Advertising sites like Google Adsense, affiliation platforms like Commission Junction and affiliation programs like Amazon are the best examples of C2B schemes. Individuals can display advertising banners, contextual text ads or any other promotional items on their personal websites. Individuals are directly commissioned to provide an advertising/selling service to companies. Blogs have paved the way for news C2B and C2C applications by giving the opportunity and tools to anyone to express themselves easily and to communicate inexpensively.

Enterprise Collaboration System

• The goal of Enterprise Collaboration System is to enable us to work together more easily and effectively by helping us to:

• Communicate: Sharing information with each other

• Coordinate: Coordinating our individual work efforts and use of resources with each other

• Collaborate: Working together cooperatively on joint projects and assignments

Groupware for Enterprise Collaboration System:

• Experts define Groupware as collaboration software, that is, software that helps teams and workgroups work together in a variety of ways, to accomplish joint projects and group assignments. For example: Lotus Notes, Novell GroupWise, Microsoft Exchange, Netscape Communicator, and Microsoft soft Project.

SUPPLY CHAIN MANAGEMENT (SCM):

Fundamentally, supply chain management helps a company to get the right products to the right place, at the right time, in proper quantity at an acceptable cost. The goal of SCM is to efficiently,

• Forecast demand• Control inventory• Enhance relationships with customers, suppliers,

distributors, and others• Receive feedback on the status of every link in the

supply chain

Meaning of Supply Chain:• The interrelationships with suppliers, customers,

distributors, and other businesses that are needed to design, build, and sell a product make up the network of business entities, relationships and processes is called a supply chain. Each supply chain process should add value to the products or services a company produces therefore, it is frequently called a value chain. Many companies today are using internet technologies to create inter-enterprise e-business systems for supply chain management that helps a company streamline its traditional supply chain processes.

Roles and Activities of SCM in Business

Electronic Data Interchange (EDI):

• EDI involves the electronic exchange of business transaction documents over the Internet and other networks between supply chain trading partners (organisations and their customers and suppliers). Data representing a variety of business transaction documents (such as purchase orders, invoices, requests for quotations, and shipping notices) are automatically exchanged between computers using standard document message formats.

• EDI software is used to convert a company’s own document formats into standardised EDI formats as specified by various industry and international protocols. Formatted transaction data are transmitted over network links directly between computers without paper documents or human intervention. Thus EDI streamlines processes, saves time and increases accuracy. It is an example of complete automation of an e-commerce supply chain process.

• Key Benefits: Include,– Faster, more accurate order processing– Reductions in inventory levels– Quicker times to market– Lower transaction and materials costs– Strategic relationships with supplier

• Challenges: Include,– Lack of demand planning knowledge, tools,

and guidelines– Inaccurate data provided by other information

systems– Lack of collaboration among marketing,

production, and inventory management– SCM tools are immature, incomplete, and

hard to implement