Introduction to Electronic Commerce

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					MIS486- Electronic and Mobile Commerce
     Technologies in the New Era
        What is E-Commerce?
             Business Perspective
• Commerce is all about buying and selling.
• Everything has two prices:
                               Sell High

                           $ Markup $
         Buy Low
• In the difference lies all of human commerce
         What is E-Commerce?
• Initial Definition (c.1998): E-Commerce - The
  application of information technologies to enable
  commercial transactions between two parties.

                     The Internet
  Why has E-Commerce become so
• E-Commerce has evolved to mean more than
  just buying and selling.
  –   Info sharing (Web catalogues, ads, communities)
  –   Ordering (e-mail, e-forms)
  –   Payment (traditional, credit cards, EDI, digital cash)
  –   Fulfillment (Web-site, e-mail, fax, phone)
  –   Service & support (Web notes, FAQs, bulletin boards, e-
Why has E-Commerce become so
The Driving Force The Internet Economy
• To reach 50,000,000 users
   – Radio took 38 years
   – Computers took over 16 years
   – TV took 13 years
   – The Internet took 4 years!

• Over 75% of (12.3M)Australian homes now have PCs
Electronic Commerce: The Second
• Electronic commerce (e-commerce)
  – Businesses trading with other businesses and
    internal processes

• Electronic business (e-business)
  – Term used interchangeably with e-commerce

  – The transformation of key business processes
    through the use of Internet technologies
        Categories of Electronic
• Five general e-commerce categories:
  –   Business-to-consumer
  –   Business-to-business
  –   Business processes
  –   Consumer-to-consumer
  –   Business-to-government
• Supply management or procurement
  – Departments are devoted to negotiating purchase
    transactions with suppliers
  Categories of Electronic Commerce
• Transaction
  – An exchange of value
• Business processes
  – The group of logical, related, and sequential
    activities and transactions in which businesses
• Telecommuting or telework
  – Employees log in to company computers through
    the Internet instead of traveling to the office
            E-Business Models
• Storefront – shopping on-line, a business a model
  where buyer and seller interact directly. Eg B2C

• Shopping-cart technology: shopping cart and merchant
  server (database) – is a widely
  recognized example
• Online shopping malls – purchase items from several
  shops from a mall in 1 transaction –
             Auction model
• Place bids in open competition (with or
  without reserve price)
• In 2000, $3.8 billion spent on person-to-
  person auctions
• $52 billion was projected to be spent on B2B
• On eBay, people can buy/sell just about
  anything (
                  Portal model
• Gives visitors the chance to find almost everything
  they are looking for in 1 place
• Search engines are horizontal portals – provide
  broad range of topics
• Vertical portals are more specific – offering a great
  deal of info in a single area of interest.
• Sites:,,,
        Dynamic pricing models
• Customers can name their prices – bargain hunting
• Eg,
• Name-your-price (priceline)
• Comparison pricing model – customers can poll to
  find out the lowest price –
• Demand-sensitive pricing model – customers to
  demand better, faster service at cheaper prices and
  shopping in groups to get group rate
• - 22 mill users in interactive mode for
  browsing/email/chatting and downloading
            Bartering model
• Offering one item in exchange for another
• Other models: rebates, offering free products
  and services (
• Buying, selling, partnering, bartering or
  trading between 2 or more businesses
• Procurement and effective chain
  management can be difficult and costly.
• enables
  transactions on the internet
              Other models
• Online trading and lending – securities,
  stocks (
• Getting a loan online (
• Recruiting on the web eg,
• Online news services (
• Online travel services
              Other models
• Online entertainment
• Online automotive sites
• Energy online – energy commodities
• Selling brainpower – buy patents and
  intellectual property
• Online art dealers (
• E-learning (
            Generic Classification
• Business-to-Business
   – eg. transactions using EDI, VANs, VPN
• Business-to-Customer
   – eg. homebanking, stock-trading, on-line reservations, & purchase
• Business-to-Government
• Citizen-to-Government
• Community (ie. Industry e-commerce)
   – eg. Intranets, supply-side e-commerce, demand-side e-business &
     customer service
The Development and Growth of
     Electronic Commerce
• Electronic funds transfers (EFTs)
  – Also called wire transfers
  – Electronic transmissions of account exchange
    information over private communications networks

• Electronic data interchange (EDI)
  – Transmitting computer-readable data in a
    standard format to another business
 The Development and Growth of
 Electronic Commerce (continued)

• Trading partners
  – Businesses that engage in EDI with each other

• Value-added network (VAN)
  – Independent firm that offers connection and
    transaction-forwarding services to buyers and
    sellers engaged in EDI
    Why has E-Commerce become so
The Canadian Statistics

•   Over 75% of (12.3M)Canadian homes now have PCs
•   Over 55% (6.7M) of those are Internet connected, up 51% over 2002
•   64% regularly go online from home or work (2003), 5% gain over 2002
    (but note that it is slowing down: 19% growth in 2000, 24% growth in
•   12% buy regularly over web, 38% have bought (2002)
•   38% download music
•   58% bank from home via the web
•   64% of wired households use boardband (highpeed, non dial-up)
                    The Internet Economy
                      Business Growth

           Companies connecting

                                         297,000 sma busine ssse
                    100                       (30% of total)

                     80                                    77, 000 medium businesses
                                                                  (50% of tota l)
          (thousands) 60

                     20                                       6,000 large businesses
                                                                  (100% of total)

                           1996   1998              2000

                      The Internet Economy
                        Global Forecast
                          1998 – 111M users                  $3.2T
       $3,000             2000 – 320M users
                          2005 – 720M users
              1998     1999   2000      2001   2002     2003
                $80    $170    $390     $970   $2,000   $3,200
Source: Forrester
     E-Commerce & E-Business
• E-Business is defined as the process of using
  electronic technology to do business

• E-Commerce can be defined as a subset of
  E-Business, and is the subset of E-Business
  that focuses on commerce
Business Models, Revenue Models,
     and Business Processes

• Business model
  – A set of processes that combine to yield a profit
• Revenue model
  – A specific collection of business processes used
     • Identify customers
     • Market to those customers
     • Generate sales to those customers
        The Emergence of E-Business
 Suppliers             So Where’s                       Partners
                    the E-Commerce?
             Procurement                    Chain
             Management                   Management
  Agents                 Resource Knowledge         Government
  Partners               Planning Management
                 Selling                   Customer
                 Chain                   Relationship
               Management                Management
Customers                                              Customers
             The Sea of “E-”
• “E-” or “e-” has been added to the almost
• E-mail
• E-procurement          Recently we have started
• E-care                 to see the same with
• E-government           “M-” or “m-”.
• E-learning
• others …
• M-Commerce is E-Commerce over wireless
  communications and typically to smaller
  handheld devices
• August, 2000 – DataMonitor predicted that
  the market for wireless E-Commerce
  solutions in the U.S. would grow 1000% by
  year 2005
• $1.2 billion US annually
     The Benefits of E-Commerce
•   Opens new markets
•   Shortens business cycles
•   Reduces processing/paperwork
•   Extends reach beyond physical outlets
•   Permits customized products/service
       Limitations of E-Commerce
•   Customer authentication
•   Web-site navigation
•   Web differentiation
•   Integration of Internet with other customer
    service channels (telephone, counter, kiosk,
             Language Issues
• To do business effectively in other cultures a
  business must adapt to those cultures
• Researchers have found that customers are
  more likely to buy products and services from
  Web sites in their own language
• Localization
  – Translation that considers multiple elements of the
    local environment
                Culture Issues
• An important element of business trust is
  anticipating how the other party to a
  transaction will act in specific circumstances
• Culture:
   – Combination of language and customs
   – Varies across national boundaries
   – Varies across regions within nations
            What Is E-Commerce?
                  Technology Perspective

                  Browsers     Servers               HTML
URL TCP/IP                                 HTTP                  SQL
Java         Cookies              Applets      e-Payment         SSL

       CGI              FTP              Servlets         JSPs

SMTP               MIME      Authentication         XML
            POP                                            DW/DM

 Wireless     Smart Cards       Encryption          Pervasive
             What is E-Commerce?
                  Technology Perspective
                              The Hardware
             Laptop                 The Software

Cell-Phone                            Web        Data and
                                    Application Transaction
Desktop                              Servers      Servers

          PDA                  The Skill Sets
                                     The Methods
• Commerce
  – Negotiated exchange of goods or services
• Electronic commerce
  – Application of new technologies to conduct
    business more effectively
• First wave of electronic commerce
  – Ended in 2000
• Second wave of electronic commerce
  – New approaches to integrating Internet
    technologies into business processes
          Summary (continued)
• Using electronic commerce, businesses have:
   – Created new products and services
   – Improved promotion, marketing, and delivery of
     existing offerings
• The global nature of electronic commerce
  leads to many opportunities and few
• To conduct electronic commerce across
  international borders, you must understand
  the trust, cultural, language, and legal issues