Electronic Commerce[1]

1Electronic Commerce2Electronic Commerce (EC)Electronic Commerceinvolves making business transactions via telecommunications networks, primarily the Internet. Itis also sometimes referred to ase-business (or e-biz)Evolution of EC:Electronic commerce applicationsbegan in the early 1970s.Electronic data interchange (EDI)extended the types of participating companies.EC applicationsexpanded rapidly with the commercialization of the Internet in the early 1990s.3Electronic Framework4The Field of ECThe field of EC can be divided into two segments:1.Electronic markets,or e-marketplaces -networks of interactions and relationships where information, products, services, and payments are exchanged. B2C, company-centric, and B2B transactions.2.Interorganizational information systems (IOS)-information flow among two or more organizations.Applies to B2B applications only5Benefits of ECSome benefits of EC to organizations are:ECallows vendorsto reach a large number of customers, anywhere around the globe, at a very low operating cost.Companies can procure materials and services from other companies rapidlyand lessexpensively.Marketing distribution channelscan be drastically cutor eliminated.ECdecreases the costof based information by as much as 90%.Customer services and relationships are facilitated by interactive, one-to-onecommunication, at a low cost.6Benefits of EC (cont.)Some benefits of EC to consumers are:EC often provides customers with less expensiveproducts and services by allowing them to shop in many places. ECprovides customers with more choices.ECenables customers to shop 24 hoursa day, year round, from almost any location.Customers can receive relevant and detailed informationand other servicesin seconds.ECenables consumers to get customized products and services.7Benefits of EC (cont.)Some benefits of EC to societyare:ECis a major facilitator of the digital economy.ECenables more individuals to work at home, resulting in less traffic and lower air pollution.ECallows some goods to be sold at lower prices, so less affluent people can buy them, increasing their standard of living.ECenables people in developing countries and rural areas to enjoy products and services previously unavailable.EC facilitates a superior delivery of public services.8Limitations of ECTechnical LimitationsLack of universally accepted standardsInsufficient bandwidthStill-evolving software development toolsDifficulties in integrating the Internet and EC software Non-Technical LimitationsLegal issuesNational and international government regulations Difficulty of measuring EC benefitsCustomer resistanceLack of a critical mass 9Models of ECBusiness-to-Business (B2B)Business-to-Consumers (B2C)Consumer-to-Organizations (C2O)Consumer-to-Consumer (C2C)Intrabusiness (Intraorganizational) CommerceGovernment-to-Citizens (G2C) Collaborative commerce (c-commerce)Mobile Commerce (m-commerce)10Electronic RetailingElectronic retailingis the direct sale (B2C) through electronic storefronts or in electronic malls, usually designed around an electronic catalogformat. In electronic retailing,there are several selling channels: Solo electronic storefrontsElectronic malls(or cybermalls)Shopping portalsMetamalls11B2C e-CommerceBusiness-to-consumer EC can be done in two major ways:1.Companies sell direct to the customer. Such direct marketing has the advantage of personalization and customization. 2.Companies use an intermediary.There are two types of online infomediaries:1.Pure online e-tailers2.”Click-and-mortar” retailers12Disintermediation & ReintermediationDisintermediation Using the Internet, manufacturers can sell directly to customers and provide customer support online.In this sense, the traditional intermediariesmay be eliminated. ReintermediationThe emergence of a new breed of electronic intermediaries. These include;e-malls directory and search-engine servicesmarket makerscomparison-shopping agents13Impact of EC on Distribution StrategyAvoiding channel conflictsCoexistence with the dealersRegionally mixed strategyRestraint of competition by powerful distributorsIn-company channel conflicts14Internet Consumers There are two types of Internet consumers: individuals and organizations. Initially the vast majority of Internet users were mostly 15-to 35-year-old males. Now the female /male ration is equal.Younger and older surfers have joined the party.The largest group of Internet users are married and highly educated. Almost 90% are white. Most users have a high household income and are working in;educational institutionsthe computer industry, orprofessional jobs.15Organizational BuyersThe number of organizational buyerson the Internet is much smaller than individual buyers.However, their transaction volumes are far larger and the terms of negotiations/purchaseare more complex. Variables that are specific to organization buyers include; an organization’s purchasing guidelines and constraintsthe relationship among various buyersthe possibility of group decision makingthe organizational structureinterpersonal variables of the organizational buyer /seller16B2B ModelsSell-side modelOne company sells to manyelectronically.(one-to-many)Buy-side modelAnorganization (usually large) buys from many vendors.(many-to-one)ExchangesMarketplaces in which many buyers and sellers meet.(many-to-many)17B2B Model TypesSell-side modelSell-side marketplace Forward auctionsBuy-sidemodelReverse auctionsBuyer’s Internal Marketplace Group PurchasingExchangesVertical Distributors Vertical ExchangesHorizontal DistributorsFunctional Exchanges18Cyberbanking Cyberbanking(electronic banking)The Security First Network Bank (SFNB) was the first virtual bankInternational and Multiple-Currency BankingBill-Paying OnlineAutomatic payment of mortgagesPaying bills from online banking account, etc. Personal FinanceBill paying and electronic check writingTracking bank accounts, expenditures, and credit cardsBudget management and organization, etc. 19Online Stock TradingIn 2001, about 30 million peoplein the US alone were using computers to trade stocks, bonds, and other financial instruments. Investment informationavailable online includes;Stock screening/evaluationFinancial news Free advice from investment gurus20Other EC Services Job Market OnlineParticipants include: (1) Job seekers (2) Job offerers (3) Recruitment firms (4) Newsgroups.Travel and TourismReal EstateNon-Internet Applicationse.g. Smart cards21B2B AuctionsCorporations use auctions mainly as a B2B tool, but an increasing number use them also as a direct marketing channel. The Major Benefits of such auctions are;Generating revenue.As a new sales channel, auctions support existing online sales. Increasing page views.Auctions give sites “stickiness.” Acquiring and retaining members.All bidding transactions result in additional registered members, which increases the value of companies.22C2C EC Activities Classifiedsclassifieds2000.comPersonal servicesThese range from tutoring and astrology to the “oldest profession on earth.” Peer-to-peer (P2P) and barteringElectronic bartering= the exchangeof goods and/or services without a monetary transaction.23Other EC ActivitiesIntrabusiness and Business to Employees (B2E) Buying, selling and collaborative EC can be conducted within the company, usually using the Intranet and corporate portal. E-governmentGovernment-to-citizens (G2C) •Electronic benefits transfer (EBT)-governments transfer Social Security, pensions, and other benefits directly to recipients’ bank accounts or smart cards. Government-to-business (G2B)Government-to-government (G2G)24EC FailuresThe major wave of EC failures started in 2000, as secondary funding that was needed by Internet-based EC began to dry up. Here are some examples;PointCast,a pioneer in the personalized Web-casting, folded in 1998 due to an incorrect business model.An Internet mall, operated by Open Market, was closed in 1996 due to an insufficient number of buyers.E-toys,a virtual toy retailer that impacted the entire toy industry folded in 2001 due to inability to generate profit.Advertising company Advertexpress.com, in the U.K., failed due to lack of second-round funding.25Managerial IssuesAlliances.It is not a bad idea to join an alliance of companies to explore e-Commerce.Managing resistance to change.Integration of e-Commerce into the business environment.Lack of qualified personnel and outsourcing. Choosing the company’s strategy toward e-Commerce26Managerial Issues (cont.)Implementation plan.Because of the complexity and multifaceted nature of EC, it makes sense to prepare an implementation plan. Responding to e-mail.Some companies are flooded by e-mail queries, requests, or complaints. Justifying EC by conducting a cost-benefit analysis.Privacy.In electronic payment systems, it may be necessary to protect the identity of buyers. Order fulfillment.Taking orders in EC may be easier than fulfilling them. The impacts.The impacts of EC may be dramatic.