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					Introduction to Electronic
Commerce




                             1
Electronic Commerce (EC)

Is an area of study that is concerned with
 developing methodologies and systems that
 support
  Creation of information sources;
  Effective and efficient interactions among sellers,
    consumers, intermediaries and producers;
  Movement of information across global networks.

The Internet as an infrastructure.

                                                         2
EC Objectives

In general -
  Increasing the speed and efficiency of
   business transactions and processes;
  Improving customer relationships and
   services.



                                            3
The Internet
The Internet is a network of networks;
  Each network is owned or managed by a company or
   a single group;
  The Internet is not owned or managed by a single
   entity.
The Internet is the larges computer network
 (compared to commercial online services, etc.).
The Internet has become a medium of
 information transfer and commercial transactions
 due to
  Developments in distributed computing;
  Openness.
                                                  4
Distributed and Networked
Computing

A distributed computing environment consists of
 multiple sites capable of performing a portion of
 a task or function as a single entity.
  Compare to a mainframe environment where all the
   computing power is concentrated on one machine.
The Internet represents a distributed
 environment where both hosts and clients are
 endowed with computing power.


                                                      5
Hosts and Clients on the
Internet

A client machine establishes a connection to a
 host (server) and initiates a request for service.
A host (server) provides the service.
The distinction between hosts and clients is
 arbitrary:
  Each connected computer can act as a client or a
   server.
The Internet supports peer-to-peer interactions;
  Any computer is a potential provider of content or
   services.

                                                        6
Economic Agents on the
Internet
 Corporations still prevail as content providers.
 Consumers become content providers.
 The distinction between sellers and buyer blurs.
 Development of intermediaries to process individual
  component of a commercial transaction (e.g., marketing,
  payment clearance, etc.).
 Organization of virtual economic agents differs from the
  one of physical agents;
   E.g., no difference between a wholesaler and a retailer.
 A potential for greater market efficiency due to efficient
  monitoring, automated decision support and
  customization, etc.
                                                               7
Open Networks
The Internet is based on open standards;
  TCP/IP protocols.
The openness
  Facilitates interoperability between different
   computing platforms;
  Supports exchange of human-readable messages.
Do not need to invest extensively into
 infrastructure to get connected!
  Compare to EDI systems based on proprietary
   software and machine-to-machine communications
   based on machine-readable forms.
                                                    8
Open Networks (cont’d)
The Internet supports
  Exchange of files of different file formats;
  A number of user activities (supported by means
   of application software),
     e.g., games, trading, etc.
Growing importance of multimedia content.




                                                 9
The Internet as a
Commercial Medium

The main concerns about the Internet as a
 commercial medium are
  The lack of security in TCP/IP has to be addressed;
     Encryption and digital signature technologies to
      provide content-level security;
     Secure communication channel;
         • Use of SSL and other security protocols.
  Performance and reliability of the network;
     Becoming critical due to multimedia and real-time traffic;
     Addressed in IPv6.

                                                                   10
World Wide Web (WWW)
 An evolving system for publishing and accessing
  resources across the Internet.
 Through a web browser users use the Web to retrieve
  and view documents of various type, listen to audio
  streams, view video streams and interact with services.
 The Web provides a hypertext structure among the
  documents that it stores, which reflects the users’
  preferences in information organization.
 The documents contain links – references to other
  documents and resources on the Web.

 The attributes of the Web – HTML, URL, HTTP – will be discussed
  later.
                                                                    11
Electronic Commerce
Activities

On a customer level:
  Searching for product information;
  Ordering products;
  Paying for goods and services;
  Obtaining online technical support and customer
   service.




                                                     12
Electronic Commerce
Activities (cont’d)
On a business level:
  Online marketing
  Order and payment processing;
  Providing online technical support and customer care;
  Tracking orders and shipments, delivery of digital
   goods;
  Electronic mail and messaging;
  Online publishing;
  Online search for documents projects, and peer
   knowledge;
  Managing corporate finance and personnel systems;
  Manufacturing logistics management;
  Supply chain management.                           13
Categories of EC – B2B
 Growth of B2B marketplaces and exchanges;
   Growth in complexity.
 Full range of business automation:
   Customer Relations Management (CRM);
   Supply chain management;
   Negotiation, etc.
 Currently, 98% of medium and large firms
  are connected to the Internet and 41% are
  engaged in EC;
   70% engaged in EC by 2003
      Projected by eMarketer.
                                              14
Categories of EC – B2B
(cont’d)
  Worldwide B2B revenues will grow from
  $185 billion in 2000 to $1.26 trillion in2003.
      eCommerce: B2B Report, eMarketer.
     1400.00
     1200.00
     1000.00
      800.00                                             B2 Revenue,
      600.00                                             worldwide

      400.00
      200.00
        0.00
               1998   1999   2000   2001   2002   2003


                                                                       15
Categories of EC - B2G

More restrictive due to government
 regulations.
At the same time, government agencies
 are strongly encouraged to do their
 procurement electronically.




                                         16
Categories of EC - B2C and
C2C
Is built on mutual distrust.
Has a small volume of transactions.
Requires a ubiquitous low-cost
 infrastructure.
B2C Provides an opportunity for
 personalization and customization through
 employment of business intelligence tools;
  Privacy issues.

                                          17
EC & Transformation of
Business

Transformation occurs through:
  Globalization;
  New products/services approaches;
  Greater speed to market;
  Better customer acquisition and retention
   through customization and personalization;
  Enhanced cost competition.


                                                18
Phases of E-Commerce

Incremental Approach:
  improve existing process for greater efficiency and
   effectiveness (E.g.. Banks)
Strategic Transformation:
  Go beyond improvement ( think radical/new way of
   doing)
Globalization:
  The last stage in EC.
  Host of issues need to be addressed (legal, etc.)

                                                         19
Business Models-
Characteristics and Examples
 Business Model
   Description/architecture of business activities;
   Identifies potential benefits (revenues) from various
    activities;
   Must work hand-in-hand with marketing strategy.
 Examples
   Retailing of goods and services;
   Supply chain management, requisitions, etc.;
   ASP (Application Service Provider);
   Banking/financial services, and more.

                                                            20
Electronic Commerce
Business Models




                      21
Introduction

EC can either
  compliment traditional business;
  represent a whole new way of doing
   business.
Issue is what an appropriate model and
 marketing strategy are.



                                          22
Primary Models

E-Shop
 Traditional web marketing
 Low cost passed to consumer
 24 hr availability
 See www.hotwired.com/e-business/tutorials
  for excellent tutorial on setting up an e-shop




                                                   23
Primary Models (cont’d)

E-Procurement:
  Attracts large number of suppliers;
  Automated tender processing;
  Lower cost for both parties;
  Major corporations/public entities
   involvement.




                                         24
Primary Models (cont’d)

E-Auction
  Electronic bidding with contacting, payment
   and delivery;
  Buyers benefit from competitive costs and
   lower lot size;
  Buyers benefit through reduced stock
   requirement and lower sales overhead.



                                                 25
Primary Models (cont’d)

E- Mall
  Collection of e-shops;
  Enhanced under a common umbrella (brand
   name);
  Benefits through common user interface and
   “spill over” from neighbors.




                                            26
Primary Models (cont’d)

3rd Party Market Place
  Contracting out of web marketing to a 3rd
   party;
  Allows for common marketing front and end
   transaction support for multiple businesses.
Virtual Communities
  A growing trend;
  Allows members to add their profiles to the
   web company.

                                                  27
Primary Models (cont’d)

Value chain Providers/Integrators
  Support part of the value chain. E.g.
   electronic payments ( banks);
  Add value by integrating several steps of
   value chain.
Collaboration Platform
  Provide environment/specialist tools for
   collaboration;
  E.g. collaborative design.

                                               28
Primary Models (cont’d)

Information Brokers
  Information search (Google);
  Derive revenue through use (LEXIS) or
   advertising(Yahoo).
ASP
  Application Service Provider;
  Leasing of computing power and use of sophisticated
   software;
  A client does not need to purchase the software, but
   sends the data to an ASP for processing;
  A dynamic and evolving area.
                                                     29
Primary Models (cont’d)

Banking/Financial services
  Account management tools;
  Simplified bill payment system;
  Automated customer service;
  Availability of quotes and charts representing
   stock market information;
  Visualization and decision support tools for
   investment.

                                                30
Technology Success
Factors

Aligned infrastructure
Integrated business systems (ERP)
Security
Performance
Reliability



                                     31
Current Issues Electronic
Commerce




                            32
Contents and Quality
Quality of the product
  Diversity of producers;
  More trust involved then in physical world.
Difficulty in digitizing certain services.
Difficulty in software representation of goods
 and services.
Digital goods: production, quality, marketing,
 sales and delivery.
Copyright protection.
Brand name, alternative business – pricing and
 the customer’s willingness to take the risk.
                                                  33
Copyrights

Increasing amount of information and
 entertainment resources shared over the
 network.
  Include copyrighted materials.
Legal and emotional response;
  Recall the Napster case;
  Inadequacy of current copyright legislation.
Copyright and the freedom of speech.
Difficulties in imposing copyright control in
 cyberspace.
                                                  34
Advertising and Consumer
Information
Growth in Internet advertising and marketing.
Stress on behavioral and cultural characteristics
 of the Internet users.
  Interactive advertising.
Push or pull advertising
  A push advertising actively seeks out audiences and
   sends unwanted messages.
  A pull advertising passively receives consumers who
   are in search of product/service information.
  Reinvention of marketing – design of new strategies
   targeting the environment.
  Personalization and privacy considerations.
                                                     35
Internet Intermediaries
The Internet has a potential for turning a
 producer into a retailer;
  Cutting out an intermediary.
An intermediary provides value-adding services;
  Product evaluation and comparison, product
   aggregation, etc.
An intermediary may have superior knowledge
 and infrastructure for marketing, logistics, order
 and payment processing, providing technical
 support and customer care.
The need for brokers and intermediaries will
 remain in EC domain.                             36
Internet Transactions

Transaction security and privacy.
  Advanced security mechanisms for the Internet are
   available.
  Addressed later in the course.
Overcoming consumers concerns about sending
 sensitive information over the Internet;
  Issue of credit cards functionally geared towards
   online shopping;
     Citibank, etc.
  Including links to security and privacy policy
   statements of the company.
                                                       37
Online Taxation and
Regulation
   Taxation for online sales.
   Income taxes for worldwide online activities.
   Anonymity and criminal activities.
   Global framework for stopping online crime.
   Copyright regulation – its scope and enforcement.
   Money policies and digital currency regulation.
   Consumer protection in online transactions.
   Consumer privacy measures.
   Policies in telecommunications and ISPs.
   Anti-competitive behavior in software and digital product.
   Compliance with regional laws and policies.

 Goal: to have a uniform and secure global commercial
  environment.                                                   38

				
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posted:8/6/2012
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