Electronic Commerce

Chapter 1:
Foundations of
Electronic Commerce
Learning Objectives

1. Define electronic commerce (EC) and

the content and dimensions of field.
2. The benefits of EC to organizations,
consumers, and society.
3. The Limitations of EC.
4. Impact of e-commerce
Definition and the contents of field
Electronic commerce (EC)
The process of buying, selling, or exchanging products,
services, or information via computer networks.
These computer network consist of:
Internet :
Internet is self regulated network connecting millions of
computer networks around the globe.
Intranet
An internal corporate or government network (LAN or WAN) that
uses Internet tools, such as Web browsers, and Internet
protocols behind the companies firewall.
Extranet
A network that uses the Internet to link multiple intranets
Definition and the contents of field
ECcan be further defined from these
perspectives:
Communication perspectives
Delivery of information ,product or service, payment
Business process perspectives
Use of technology for automation of business process
Service perspectives
Increase the speed of service delivery
Online perspectives
Enhanced online capabilities of digital products and
services
Dimensions of EC
e-business
A broader definition of EC that includes not just the
buying and selling of goods and services, but also
servicing customers, collaborating with business
partners, and conducting electronic transactions within
an organization.
Pure versus Partial EC
EC can take several forms depending on the degree
of digitization
1. the product (service) sold
2. the delivery method (intermediaries)
3. the process (e.g., ordering, payment, fulfillment)
The product can be physical or digital
The agent can be physical or digital
The process can be physical or digital
The EC field
Framework of EC (figure 1.2)
Applications

FourPillars, major areas

Supporting Infrastructure

Electronic market
Electronic market is the place where shopper
and seller meet to exchange goods, services,
money, or information. It is a network based
location.
Classification of the EC field by the nature
of transactions
These are general e-commerce types:
Business to Business (or B2B) e-commerce (sometimes
called e-procurement)
Business to Consumer (or B2C) e-commerce
Consumer-to-consumer (or C2C) e-commerce
Non-Business EC: NGOs, universities , schools etc.
activities to improve their operations and reduce costs.
Business-to-government (or B2G) e-commerce
Intra-business EC: E-commerce category that includes
all internal organizational activities that involve the
exchange of goods, services, or information among
various units and individuals in an organization.
History and Future
Benefits and Limitations
Benefits to
Organizations
Expand marketplace to national and international markets.
Allows small businesses to have global customer base

Provides purchasing opportunities for buyers (businesses

can identify new suppliers and partners)
Increases sales: easily and quickly locate more customers

and suppliers
decreases cost :Reduced cost through electronic sales
enquires, price quotes and order taking, instead of
retrieving paper-based information
highly specialized business : pets.com

Improved image , improved service, compressed cycle

Benefits to
Consumers
Business can be transacted 24hrs a seven days a week.
More choices :The level of detail of purchase information
is selected by user.
Conduct quick comparison
Digital products can be delivered instantly
Electronic communities share and exchange ideas and
experiences.
Society
Work at home: Less traffic, time saving
Tax refunds, public retirement and welfare support costs
less when distributed over the Internet
Allows products and services to be available in remote
areas, e.g. e-learning
 Limitations
Technological
The newness and evolution of the current technology.
System security , reliability, protocols and standards
Digital divide: insufficient bandwidth
Rapid change in technology
Integration with old system: Difficulty in integrating
current databases and transaction processing
systems into e-commerce solutions
Limitations
Non-technological
Cost of opening EC in house very high
Security and privacy
Trust :Transmission of credit card details
Cultural and legal obstacles
User rsistance, Some consumers unwilling to change
Laws are unclear
Shipping profile: Products with a low value-to-weight ratio that
can not be efficiently packed and shipped are unsuitable
Breakdown in human relationship
Well-suited Business Processes to
Particular (only) E-commerce

Sale/purchase of books & CDs,

Online delivery of software
Travel services (Air, Buss, Railway
Tickets, Hotel bookings),
Investments and insurance services
Stock Exchange
Online shipment tracking (DHL)
E-commerce + Traditional commerce
Well-suited Business Processes for both

Sale/purchase of automobiles and

residential real estate (e.g. do research
online then buy from a dealer or real
estate agent)
Online banking
Matching/friendship service
Traditional Business Processes
(Not-suited to E-Commerce)
Products can not be efficiently packed and
shipped are unsuitable
Sale/purchase of impulse items for immediate
use, high fashion jewelry and antiques
Perishable foods, Fresh vegetables or fruits
(personal inspection required; prefer to touch,
smell or examine closely)
Small denomination purchases and sales (since
there is not yet a standard for transferring small
amounts of money)
The driving forces of EC
Markets, technology, and societal pressures,
force organizations to respond (table 1.2).
Traditional responses (lowering costs by firing
employees, closing unprofitable product or
service) may not be sufficient due to magnitude
of the pressure and the frequent changes.
Therefore organizations frequently must use
innovation and reengineering their operations.
e.g. improving service standards. New
customized products.
The driving forces of EC
Business Process:
Organizational Response

Strategic systems:
Strategic information system increase market
intelligence and result in increase market share.
Continuous improvement efforts
Improved productivity (e.g. employees)
Improved decision making

Customer service innovation

Business process re-engineering

Organizational Response.

Business process re-engineering

Reducing cycle time and time to market
Inception of idea to its implementation
First mover advantage

Empowerment of employees and collaborative work

Delegates authority to team who can execute the work
faster and error free
Knowledge management
Organizational know how via intranet
Customer focus approach
Mass production to Mass customization
Business alliance
Joint venture
Virtual cooperation
Impact of e-commerce:
everything will change
Improving direct Marketing/Marketing related effects
Product promotion :Interactive and information rich interaction
New sales and distribution channels (ebay)
Direct saving :information delivery direct to customers
Reduced cycle time : administrative work load can be reduced
save 90% time
Customer service: through intelligent agents, detailed information
Brand or corporate image: quick and trusty
Customization: computers and even cars customized
Advertisement: more effective than mass advertisements
Ordering system: order can given electronically and quickly
routed to fulfill
Markets : new markets explored like digital markets., market
space converted
everything will change
Transforming organizations
Technology and organizational learning
Before getting it right, organization might have to struggle with
different experiments
Rearrange or new offerings according to customer feedback
Durable impact cannot be achieved overnight
Changing nature of work
Reducing work force
Outsourcing
Worker should be more flexible, constant learner, willing to change
Redefining organization
New product capabilities
Mass customization
Build customer profile
New business models
Direct distribution to end user
New products like banner ads/ web developers
everything will change

Impact on manufacturing
Just in time manufacturing
Computer aided designs
Merging productions from different parts of world, due to EC
communication collaboration and coordination
Impact on finance and marketing
Shake the financial systems even governments
New payment systems
Online valets
Electronic cash
Money laundering
Human resource management, training education
Online Trainings in organizations
Free information access
Interactive TVs / online education / CBTs
Putting it all together
Managerial Issues