Chapter 1: Electric commerce
e
c
o
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eelectronic An introduction to e-Commerce outlining:
r
commerce
The three basic e-Commerce technologies
c strategy
technologies
and
The trading exchanges to which they apply
e
applications
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"The happiest people don't necessarily have the best
of everything; ..............................They just make the
best of everything they have !!"
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Internet Applications and E-Commerce
Lecture No.1
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Definition of e-Commerce
Formulating commercial transactions at a site remote from
the trading partner and then using electronic
communications to execute that transaction.
In Simple Words:
Electronic commerce is an emerging concept that
describes the process of buying and selling or exchanging
of products, services and information via computer
networks including the internet.
The definition includes business to business and business
to consumer transactions.
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E-Commerce – Classification
A common classification of EC is by the nature of
transaction:
Business-to-business (B2B): electronic market
transactions that take place between organizations.
Business-to-consumer (B2C): retailing transactions with
individual shoppers – typical shopper at Amazon.com is
a consumer.
Consumer-to-consumer (C2C): consumer sells directly
to consumers, examples - individuals selling in
classified ads, auction sites allowing individuals to put
up items for auction – e.g. e-bay
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EC Classification
Consumer-to-Business (C2B): individuals who sell
products or services to organizations and those
who seek sellers and conclude a transaction.
Intra-business (organizational) EC: all internal
organizational activities involving exchange of
goods, services or information, selling corporate
products to employees, online training and cost
reduction activities.
Non-business EC: academic institutions, not-for-
profit organizations, religious/social organizations
and government agencies using EC to improve
their operations, customer service and reduce
expenses.
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What is the Web ?
The Web is a protocol that uses the internet as the
communication structure.
The web links documents stored in computers that
communicate on the internet.
Based on Hypertext Transfer Protocol (HTTP) -
native protocol of WWW designed for making web
page requests.
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Basics
Web client- machine that initiates internet request
Web server – machine that services internet
request
Browser - software at the client side to interact
with web data
Intranet – an internal network of computers
confined to a single place
Extranet – when two or more intranets are
connected with each other, they form an Extranet
e.g. VPN (Virtual Private Network)
Internet – a global network of networks.
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Side Effects of http transfers
A record is left of all web transaction
Resides in log files generated at the server
Good news : user data recorded
Bad news: what about user privacy?
Common log file (CLF) format – identity, date,
request, status etc.
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What is a network?
1. A network can be anything from a simple
collection of computers at one location
connected through a connectivity media to
the internet (a global network of networks)
2. Local Area Network (LAN) is a server-based
network confined to a particular area/place
3. Most LANs consist of many clients and a few
servers
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Who and Why should use the Internet?
Every organization needs to consider whether it should have an
Internet presence and, if so, what should be the extent. Key factors
are:
1-How many existing or potential customers are likely to be Internet
users? search costs for the product or service are
reasonably (even moderately) high.
2-what is the information intensity of a company's products and
services? An information-intense product is one that requires
considerable information to describe it completely. e.g. what is
the best way to describe a CD?
Why should Use Internet?
To reduce risks like:
1- Demand Risk e.g. Typewriter Market
2-Innovation Risk i.e. response to customers demand for innovative products
3-Inefficiency Risk i.e. to lower costs by distributing more information electronically
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Internet Presence Grid:
Model for Determining which companies should be using internet?
Prime
Candidate
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E-Commerce technologies
Electronic
Markets
EDI Internet
Commerce
The three e-Commerce technologies are:
Electronic Markets
Electronic Data Interchange - EDI
Internet Commerce
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Electronic markets
The use of ICT’s (information and communications
technology) to present a range of offerings available in
a market segment and hence enable:
the purchaser to compare the prices (and other
attributes);
make a purchase decision.
The usual example of an electronic market is an airline
booking system.
There is the potential for new electronic markets to be
created using Internet technologies.
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Electronic Data Interchange (EDI)
EDI provides a standardised system for coding trade
transactions so that they can be communicated
directly from one computer system to another.
EDI removes the need for printed orders and invoices
and avoids the delays and errors implicit in paper
handling.
EDI is used by organisations that make a large
number of regular transactions. Examples are the
large supermarket chains and the vehicle assemblers
which use EDI for transactions with their suppliers.
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Internet commerce
Information and communications technologies can
also be used to advertise and make once-off sales
of a wide range of goods and services.
This type of e-Commerce is typified by the
commercial use of the Internet. The Internet can,
e.g. be used for the purchase of books that are then
delivered by post or the booking of tickets that can
be picked up by the clients when they arrive at the
event.
It is to be noted that the Internet is not the only
technology used for this type of service and this is
not the only use of the Internet in e-Commerce.
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The trade cycle
Conducting a commercial transaction involves the
following steps:
Pre-Sale:
• Search - finding a supplier
• Negotiate – agreeing the terms of trade
Execution:
• Order
• Delivery
Settlement:
• Invoice
• Payment
After-sales, e.g. warrantee and service
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Generic trade cycles
The trade cycle varies depending on:
The nature of the parties to the transaction
The frequency of trade exchanges
The nature of the goods or services being
exchanged.
Three generic trade cycles can be identified:
Regular, repeat transactions between commercial
trading partners (Repeat)
Irregular transactions between commercial trading
partners (Credit)
Irregular transactions in once-off trading
relationships (commercial or retail) (Cash)
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Generic trade cycles
Trade Cycle: Repeat Credit Cash
Search
Pre-Sale
Negotiate
Order
Execution
Deliver
Invoice
Settlement
Payment
After Sales After Sale
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Electronic markets
Emphasis on the search phase of the trade cycle
Typically an inter-organisational credit trade cycle
Search
Pre-Sale
Negotiate
EM
Order
Execution
Deliver
Invoice
Settlement
Payment
After Sales After Sale
Limited applications – airline seat bookings and financial
sector – the operation of the electronic market is not
necessarily in the vendor’s interests.
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Electronic Data Interchange
Used for standardised, repeat, inter-organisational
transactions
Search
Pre-Sale
Negotiate
Order
Execution
Deliver EDI
Invoice
Settlement
Payment
After Sales After Sale
Notable users of EDI are vehicle assemblers,
component supplier’s, and supermarkets (and other
multiple retailers), ordering the goods to restock their
shelves.
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Internet commerce
Used for once-off transactions – consumer or inter-
organisational transactions.
Search
Pre-Sale
Negotiate
Order
Execution
Deliver Internet
Invoice
Settlement
Payment
After Sales After Sale
Can apply to Search, Execution / Settlement and / or
After Sales.
Consumers pay at time of ordering – businesses may
have credit arrangements with the suppliers.
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e-Commerce in perspective
e-Commerce is not appropriate to all business
transactions and, within e-Commerce, there is no
one technology that can or should be appropriate to
all requirements.
Electronic Markets
EDI Internet
Comerce
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Amazon.com has relatively few employees and no retail
outlets; and yet, it has a higher market capitalization than
Barnes & Noble, which has more than one thousand retail
outlets. Nonetheless, Barnes & Noble is fighting back by
creating its own Web-based business. In this way, the
Internet may spawn hybrid business strategies–those.
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Amazon.com, Inc. is a US-based multinational electronic
commerce company. Headquartered in Seattle, Washington, it is
America's largest online retailer, with nearly three times the
Internet sales revenue of the runner up, Staples, Inc., as of
January 2010.[3]
Jeff Bezos founded Amazon.com, Inc. in 1994 and launched it
online in 1995. The company was originally named Cadabra, Inc.
The name Amazon.com was chosen because the Amazon River
is the largest river in the world, and so the name suggests large
size.
Revenue US$ 24.509 billion (2009)
Employees 31,200 (2010) [2]
2 "Company Profile for Amazon.com Inc (AMZN)". http://phx.corporate-
ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle&ID=1485834&highlight=. Retrieved 2010-11-02.
3 "amazon.com". amazon.com. 2009-09-09. http://www.amazon.com. Retrieved 2010-08-29.
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Thanks to Allah
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Suggested Books
E-commerce – Strategy, Technologies and
Applications by David Whiteley
Electronic Commerce (4th edition) by Gary P.
Schneider
Electronic commerce – A Managerial Perspective
by Turban et al.
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