Chapter 1: Electronic Commerce – An Overview

1. Chapter 1: Electronic Commerce – An Overview IT357 Electronic Commerce

2. Electronic Commerce – An Overview • What is EC? • EC Terminologies • Impact of EC • Types of EC • The EC bandwagon -why should businesses get on it? IT 357 - Chapter 1

3. What is EC? • Electronic commerce, commonly known as e-commerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. Source: http://en.wikipedia.org/wiki/E-commerce • E-commerce sales are defined as sales of goods and services over the Internet, an extranet, Electronic Data Interchange (EDI), or other online systems. Payment may or may not be made online. This definition corresponds to business-to-consumer e-commerce. Source: http://home.earthlink.net/~lindberg_b/GECGrwth.htm IT 357 - Chapter 1

4. Setting the context to EC • Between 1991 and 1994 the traffic over NSFNET, the original Internet backbone network, operated by the U. S. National Science Foundation; grew at an annual rate of 100 percent measured in number of bits/packets. Source: Merit Network, Inc., Ann Arbor, Michigan IT 357 - Chapter 1

5. Cont’d: Setting the context to EC • 1997 - the year of the internet • 50 million web sites created • Netscape’s web site records 120 million hits in a single day • potential audience size on world’s most popular virtual meeting ground • Size does not matter on the web • Amazon’s 1.2 billion in turnover equals that of 235 Barnes and Noble stores each with 5 million in sales • Investment: Amazon’s 56 million compared to BN’s 472 million. IT 357 - Chapter 1

6. Cont’d: Setting the context to EC • UK E-commerce growth rates • A great indication of the growth of E-commerce sales is the IMRG (Interactive Media in Retail Group) data which shows phenomenal year-on-year increases. • Projected spending of online shoppers in the 10-week run-up to Christmas 2006 • An average of £4 million spent every hour • Equivalent to £7 billion in total sales • 40% more than the £5 billion spent online during the same period in 2005, • More than double the £3.3 billion recorded in 2004. • The IMRG index used to track the growth of consumer E-commerce in the UK has increased from 100 when it was baselined in April 2000 to a projected 3500 at the end of 2006. Source: http://www.davechaffey.com/E-business/C1-Introduction/E-commerce-growth-rates-UK IT 357 - Chapter 1

7. Cont’d: Setting the context to EC • The U.S. Census Bureau reports that retail e-commerce sales (B-to-C) in the United States reached $114 billion in 2006, up from $88 billion in 2005. Source: http://home.earthlink.net/~lindberg_b/GECGrwth.htm IT 357 - Chapter 1

8. Driving forces to EC • Customers demand value and high quality, low cost, rapid services • Management being forced to “do more with less” • Technology creating an open arena • Competition where outsourcing and fee for service force governments to assume a competitive posture • Federal government policies such as the “Framework for global electronic Commerce” IT 357 - Chapter 1

9. 2. EC Terminologies • e-Business • Transformation of key business processes through the use of internet technologies. Source: IBM • Characteristics of e-Business • An e-business is a company that can adapt to constant and continual change – manages transitions smoothly. • It is about business not technology • It is not about re-inventing your business • It is about streamlining your current business processes to improve operating efficiencies, which in turn will: • Strengthen the value provided to customers • Give the business an advantage over the competitor IT 357 - Chapter 1

10. Cont’d: EC Terminologies • e-Enterprise • A business that does more than ….. • Just launch a web site • Automate customer service • Start a stand alone internet business Source: Andersen Consulting • Characteristics of e-Enterprise • Define and implement a meaningful and distinctive internet presence • Re-architect the overall delivery model to align withbusiness strategy • Reposition the customer value proposition • Venture beyond initial success to bigger newer markets • Instead of acquiring new skills these enterprises will transform the capabilities of the organization to be relevant in the e-economy. • Ensures presence is felt in the global market culturally, socially and economically • Re-evaluate the entire business model rather than open a stand alone internet business IT 357 - Chapter 1

11. Cont’d: EC Terminologies • e-Commerce • “Using the internet to market and sell products and services” • "EC is the symbiotic integration of communications, data management and security capabilities to allow business applications within different organizations to automatically exchange information related to sale of goods and services.“ • EC may include: • Electronic presentation of goods and services • On-line order taking and bill presentation • Automated customer account enquiries • On-line payment and transaction handling IT 357 - Chapter 1

12. Cont’d: EC Terminologies • Objectives of e-Commerce • Primary aim is to increase the speed and efficiencies of business transactions and processes and improve customer services • To empower participants to venture into unexplored areas of competitiveness, job creation and economic growth • To make the businesses/government simpler and more efficient • To decrease production cycles and enable business with distant partners the same way it is done for neighbouring ones • To empower small businesses- i.e. to realize a "size doesn’t matter" environment where Davids can take on Goliaths • To create new services and businesses • To expand the horizons of its partners – to provide a global market in the place of a regional one IT 357 - Chapter 1

13. Cont’d: EC Terminologies • Web Commerce • Internet based commerce or web based commerce can be considered important sub disciplines of E-Commerce which is any purchase or selling through an electronic communications medium • E marketplace • An E- commerce environment encompasses an E- marketplace, which is a digital environment or locale where a marketer presents promotional messages and where a potential buyer can purchase his products or services or request for more information. IT 357 - Chapter 1

14. 3. Impact of EC • Step 1: Enterprise starts with process virtualization • Step 2: Opening up to an extended enterprise. • Step 3: Specialization and sharing of infrastructure among competitors to create collaboration at the industry level – resulting in emergence of E-Industry • Step 4: Transformation of the E-Industry to the E-Economy where collaboration begins to occur in multiple industries • characterized by • focus on customer intentions • Emergence of hybrid markets • cross industry collaborations Source: Andersen Consulting IT 357 - Chapter 1

15. Cont’d: Impact of EC Circles of Impact of EC IT 357 - Chapter 1

16. 4. Types of EC • Business-to-business (B2B) • A company buying and selling to other companies through electronic means • Forrester forecasts 1 trillion by 2003 • Has been in existence since 1980’s in the form of EDI • Example: • Cisco’s B2B web site can be used to purchase and configure routers priced at six figures. www.cisco.com www.geis.com IT 357 - Chapter 1

17. Cont’d: Types of EC • Business-to-Consumer (B2C) • Refers to a company selling its products or services to the consumers using the Internet • Provides consumers with catalogue ordering through a virtual shop. • Example: • Might rely solely on a virtual shop www.amazon.com • Or compliment a traditional shop front using the Barnes and Noble method www.bn.com IT 357 - Chapter 1

18. Cont’d: Types of EC • Consumer to Business (C2B) • The consumers seek businesses/ products or services • Normally done through a portal set up by an intermediary • Could be considered as the future of all B2C’s • The features: • Dynamic pricing • Competition driven pricing • Consumer driven pricing • Example www.ebay.com www.c2b.com IT 357 - Chapter 1

19. Cont’d: Types of EC • Government to Business (G2B) • online interaction between Government and commercial business sector • Example: • businesses can get information and advice on e-business 'best practice' www.dti.gov.uk • Government to Citizen (G2C) • online non-commercial interaction between Government and private individuals • Example: www.iras.gov.sg www.gateway.gov.uk/ Source: http://en.wikipedia.org/wiki/Government-to-citizen IT 357 - Chapter 1

20. 5. The EC bandwagon - why should businesses get on it? • Benefits • Enhance customer service through increased access, shorter cycle times • Lowers overall cost of performance by reducing labour and supplies, product development cycles, and replenishment cycles • Enables easy and quick information sharing with business partners • Enhances strategic position by focusing on mission critical activities IT 357 - Chapter 1

21. Cont’d: The EC bandwagon - why should businesses get on it? • Advantages of B2C • Advantages of B2B • Immediate return on investment through reduced cycle times and channel costs • New revenue sources • Preferred vendor status possible IT 357 - Chapter 1

22. Cont’d: The EC bandwagon - why should businesses get on it? • Benefits in three (3) areas IT 357 - Chapter 1

23. Cont’d: The EC bandwagon - why should businesses get on it? • Others benefits: • Improved productivity • Elimination of human errors • Streamlining of business processes • New business opportunities • Wide scale information dissemination • Better quality goods and service IT 357 - Chapter 1