Electronic Commerce Outline Computing Laws Internet and WWW

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Electronic Commerce
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Outline

• Computing Laws
• Internet and WWW
• E-commerce and E-business
• Rules of E-business
• Trends
• E-business patterns/models
• E-business advantages/disadvantages and CSFs
• Online industries

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Computing Laws

• Moores Law
• Every 18 months computing power doubles while
  cost is constant
• Metcalfes Law
• Networks increase exponentially with power with
  the addition of each new node or user
• Gilders Law
• Aggregate bandwidth will triple annually

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Ages

• Agrarian
• Land cheapest resource
• Industrial
• Steam power cheapest resource
• Information
• Phase 1 computer cycle cheapest resource
  (transistor)
• Phase 2 network capacity cheapest resource
  (because of Gilders Law)

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Internet and WWW

• Internet
• Public worldwide network of networks, connecting
  many small private networks
• Protocol is TCP/IP
• WWW
• Documents that are linked

Napier, et al., 2001
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Brief History of the Internet

• Originated in the 1960s US DOD developed a
  network of military computers called the ARPANET
  (advanced research projects agency network)
  (Next, researchers at colleges/universities began
  using it to share data)
• 1971 The first email message was sent from one
  computer to another.
• 1980s the military portion became a separate
  network called the MILNET and the NSF began
  overseeing the remaining non-military portions
  (NSFnet)

Napier, et al., 2001 Oz, 2002
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Brief History of the Internet

• Thousands of other government, academic, and
  business computer networks began connecting to
  the NSFnet
• Late 1980s the term Internet had become widely
  used to describe this huge worldwide network of
  networks and TCP/IP becomes the standard network
  protocol
• 1987 Internet has 10,000 hosts
• 1988 Internet has 60,000 hosts 6,000 of the
  hosts are disabled by the first computer virus
  (worm) to hit the Internet
• 1989 Internet has 100,000 hosts

Napier, et al., 2001 Oz, 2002
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Brief History of the Internet

• 1990 Tim Berners-Lee develops HTML and the WWW.
• 1991 NSF lifts ban on commercial traffic
  E-commerce on the Internet begins.
• 1992 Internet has 1,000,000 hosts 50 of them
  use HTML to form the Web sites Jean Armour Polly
  coins the term surfing the Internet.
• 1993 Internet has 10 million hosts Internet2
  project is announced.
• 1998 Internet has 36.8 million hosts 4.2
  million of them are web sites.
• 1999 Retail sales on the Internet are estimated
  at 7.8 billion.

Napier, et al., 2001 Oz, 2002
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Internet Domain Servers
Oz, 2002
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Number Online
September 2000
Napier, et al., 2001
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Oz, 2002
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E-commerce vs. E-business

• E-commerce
• Buying and selling products/services
  electronically
• E-business
• Conducting of business electronically

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Rules of E-Business

• Technology is the cause/driver of business
  strategy
• If any entity in the value chain begins doing
  business electronically, companies up and down
  the value chain must follow suit or risk being
  substituted or excluded from the chains
  transactions.
• Structure and flow of info is powerful and
  cost-effective
• Move from industrial age to information age
• Changes in the business structure branding,
  customer relationships, supplier integration
  creates need for info-centric business designs

Christensen, 2000
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Rules of E-Business

• Inability to overthrow the dominant, outdated
  business design often leads to business failure
• companies must live in a state of perpetual
  transformation, continuously creating fundamental
  change, improvement, and innovation.
• Must anticipate and respond quickly to changing
  customer demands
• Listening to customers through e-commerce allows
  companies to become the cheapest, the most
  familiar or the best
• Speed of service, convenience, personalization,
  price

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Rules of E-Business

• Technology should be used to enhance the entire
  experience surrounding the product
• Amazon.com
• The future business design uses reconfigurable
  e-business models to best meet customers needs
• Business webs link businesses, customers, and
  suppliers and compete with other business webs
  (not individual companies)
• Amazon.com, CarPoint, Travelocity, etc.

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Rules of E-Business

• The goal of new business designs is for companies
  to create flexible outsourcing alliances
• Individual companies cannot do everything well
• Dont forget about the application infrastructure
  it is critical for success
• Failure is a mgmt problem, not a technology
  problem
• Need strong leadership to align business
  strategies, processes, and applications
• Leader must understand the products/service
  delivery channels

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Customer-Oriented Trends

• Faster service
• Self-service
• ATMs, Travelocity
• More product choices (personalization)
• Amazon.com, Wal-Mart
• Integrated solutions
• Microsoft Office Suite, Wal-Mart, Toys R Us
• Privacy

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E-Service Trends

• Integrated sales and service (customization and
  integration)
• Consistent and reliable customer service
• Flexible fulfillment and convenient service
  delivery
• Increased process visibility
• Order status (package tracking), product pricing,
  product availability

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Organizational Trends

• Outsourcing
• An external provider performs a business process
  in order to improve overall business performance
  in a particular area
• Contract manufacturing
• Focus on what the company does best and contract
  out other manufacturing
• Virtual distribution (intermediaries)
• Aggregate buyers and sellers by using Web
  technology

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Employee Trends

• Hiring the best and brightest
• Keeping talented employees

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Enterprise Technology Trends

• Integrated enterprise applications
• Multichannel integration
• Store, phone, Web, wireless, etc.
• Middleware
• To create multichannel integration
• Legacy Appls
• Significant value in legacy but integration can
  be daunting

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General Technology Trends

• Wireless web applications
• Handheld computing and info appliances
• Mobility
• Infrastructure convergence
• Phone, cable, wireless, computer data networks
• Application service providers
• Hosts and manages business applications on behalf
  of a client

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E-Business Design

• Diagnosis difficult to gain perspective on
  where you really are
• Reversing the Value Chain what do customers
  value
• Narrow focus discipline of market leaders
• Operational Excellence risk of being blindsided
  by a disruptive technology
• Product Leadership risk of innovating for
  innovations sake and how do you incorporate
  innovations developed elsewhere
• Cost Intimacy risk of listening to what
  customers want today and not preparing to deliver

Treacy and Wiersema, 1995
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E-Business Structural Patterns
Begins as a Channel, But Extends to Total
Transformation of Business
e-Channel
e-Portal (B2C)
Pure E
Click and Brick
e-Market-Makers (B2B)

• Basic efficiency,
• effectiveness enhancements
• as the selling become
• e-enabled
• Selling goods/services
• Payment/settlement
• enhancements

• Traditional business
• transferred to the Net
• Rise of new intermediaries
• New forms of supply chain
• integration
• Consolidation/transformation
• of intermediary industry

• Customer expects E
• everything
• Fundamental redesign of
• business
• New structures to allow market
• making, trading, and virtual
• warehousing

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E-Channel Pattern
Transaction Enhancement
Consumer
Manufacturer
E-Channel Compression
Consumer
X
Manufacturer
E-Channel Expansion
Consumer
Manufacturer
E-Channel Innovation
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Click-and-Brick Pattern

• Brick Mortar
• Localized inventory
• In-store shopping
• experience
• Immediacy (try, buy,
• take home)
• Service (returns,
• repairs, exchanges)

• Click
• Infomediation
• Speed
• Direct, one-to-one
• experience
• Personalized content
• Automation
• (assistants, alerts)

Click Brick
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E-Portal Pattern

• Intermediary/middleman offering an aggregated set
  of services for a specific well-defined group
• Superportals AOL, Yahoo!, Amazon.com
• Auction portals eBay, Amazon.com, Yahoo!
  Auctions
• Megatransaction portals Travelocity

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E-Market Maker Pattern

• Exchanges
• Buyers and suppliers negotiate prices
• Virtual distributors
• Takes control of AR but not physical inventory
• Lead generation
• Derive revenue from ads, commissions, or fees for
  leads to suppliers
• Catalog aggregators
• Helps normalize info coming from diverse sources
• Auctions
• Reverse auctions

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E-Business Advantages

• Sellers
• Increased sales opportunities
• Decreased transaction costs
• Operate 24-7
• Reach narrow market segments that may be widely
  distributed geographically
• Access to global markets
• Increased speed and accuracy of info exchange
• Bring multiple buyers and sellers together

• Buyers
• Wider product availability
• Customized/personalized info and buying options
• Shop 24-7
• Easy comparison shopping and one-stop shopping
• Access to global markets
• Quick delivery of digital products and of info
• Participate in auctions, reverse auctions,
  knowledge exchanges

Napier, et al., 2001
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E-Business Disadvantages

• Sellers
• Rapidly changing technology
• Insufficient telecommunications
  capacity/bandwidth
• Difficulty integrating existing systems with
  e-business software
• Problems maintaining system security and
  reliability
• Global market issues language, political
  environment, currency conversions
• Conflicted legal environment
• Shortage of skilled technical employees

• Buyers
• Concern over transaction security and privacy
• Lack of trust when dealing with unfamiliar
  sellers
• Desire to touch and feel products before purchase
• Resistance to unfamiliar buying processes,
  paperless transactions, and electronic money

Napier, et al., 2001
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E-Business Models

• B2B (business-to-business) and EDI
• The relationship between two or more companies
• Can be applied to simple relationships between a
  single buyer and a single seller, as well as to
  complex distribution and fulfillment systems that
  link hundreds of suppliers and manufacturers
• Click-and-Mortar
• A traditional businesses online presence that is
  used to enhance its brick-and-mortar operations

Deitel, et al., 2001 Oz, 2002
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E-Business Models

• B2C sells products/services directly to
  consumers
• Amazon.com, Autobytel.com, Pets.com
• B2B sells products/services to other businesses
  or brings multiple buyers and sellers together in
  a central marketplace
• VerticalNet, HoustonStreet.com, CATEX
• B2G businesses selling to local, state, and
  federal agencies
• eFederal, iGov.com
• C2C consumers sell directly to other consumers
• eBay, InfoRocket, American Boat Listing
• C2B consumers name own price, which businesses
  accept or decline
• Priceline.com, ReverseAuction.com

Napier, et al., 2001 Oz, 2002
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B2B

• Intranet
• Allows employees to view and use internal Web
  sites that are not accessible to the outside
  world
• Extranet
• Two or more Intranets connected via the Internet,
  where participating companies can view each
  others data and complete business transactions
  such as purchasing

Napier, et al., 2001
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B2B

• Storefronts
• Provide businesses with purchase, order
  fulfillment, and other value-added services
• Staples, Office Depot
• Vertical markets
• Provide a trading community for a specific
  industry
• MediSpeciality.com, HotelResource.com,
  NetPossibilities
• Aggregators
• Provide a single marketspace for business
  purchasing from multiple suppliers
• Chemdex, MetalSite, VIPAR

Napier, et al., 2001 Oz, 2002
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B2B

• Trading hubs
• Provide a marketspace for multiple vertical
  markets
• VerticalNet
• Post and browse markets
• Provide a marketspace where participants post buy
  and sell opportunities
• CATEX, CreditTrade, TechEx

Napier, et al., 2001
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B2B

• Auction markets
• Provide a marketspace for buyers and sellers to
  enter competitive bids on contracts
• e-Steel, HoustonStreet.com, Altra, FreeMarkets
• Fully automated exchanges
• Provide a marketspace for the automatic matching
  of standardized buy and sell contracts
• PaperExchange.com

Napier, et al., 2001
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E-Business Models

• Internet-only Establishments
• Convenience of home shopping and often reduced
  costs for the consumer
• Face the challenges of name recognition and
  customer satisfaction
• Storefront
• Combines transaction processing, security, online
  payment and info storage to enable merchants to
  sell their products online
• Buyer and seller interact directly
• Uses shopping cart technology, online shopping
  malls

Deitel, et al., 2001
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E-Business Models

• Auction
• Forum through which Internet users can assume the
  role of either the seller or the bidder
• Portal
• Give visitors the chance to find almost
  everything they are looking for in one place
• Dynamic-Pricing
• Methods that may not be possible without the
  Internet
• Name-your-price comparison-pricing
  demand-sensitive pricing bartering rebates
  free products/services

Deitel, et al., 2001 Napier, et al., 2001
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Dimensions of Ecommerce
Web Server

• Cyber
• Low Friction
• Dynamic
• Logistics is not a
• core competency

Networks

• Physical
• High Friction
• Capital Intensive
• Logistics is a
• core competency

Office Factory
Warehouse
Legacy Transaction System
Distribution
Poirier and Bauer, 2000
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E-Commerce CSFs

• Add value to products/service
• Convenience, info value, disintermediation,
  reintermediation, price, choice
• Focus on a niche and then expand
• Maintain flexibility
• Segment geographically
• Get the technology right
• Manage critical perceptions
• Presence, brand, trust
• Provide exceptional service
• Create effective connectedness
• Understand Internet culture

Huff, et al., 2000
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Online Industries

• Retailer
• Communicate easily with suppliers, shipping
  companies and customers
• Bill customers and accept payment
• Compusa.com, Victoriasecret.com
• Medical
• Case studies, medical journal articles, doctors
  answering questions
• Webmd.com, Sickbay.com

Deitel, et al., 2001
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Online Industries

• Travel
• Internet helps the commercial airline industry to
  fill more seats and reduce costs
• Travelocity.com, Cheaptickets.com
• Transportation and Shipping
• Track shipments as they pass checkpoints en route
  to their final destination
• Ups.com, Fedex.com
• Keep trucks fully loaded and ensure timely
  delivery
• Trucking.net, Gf-x.com

Deitel, et al., 2001
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Online Industries

• Automotive
• Research and purchase new and used cars
• Dealers can search online databases for cars
• The Internet improves communication between
  departments responsible for automobile production
  and therefore improves the way cars are
  manufactured
• Form partnerships with competitors
• Autobytel.com, Autoparts.com

Deitel, et al., 2001
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Online Industries

• Energy
• The Web offers a standard way for energy
  businesses to communicate, therefore reducing
  operating costs
• EnronOnline.com, Altranet.com
• Career Services
• Job seekers Monster.com
• Employers HotJobs.com, CareerPath.com
• Career JobsOnline.com, HotJobs.com,
  Monster.com, HeadHunter.net
• Contracting Guru.com

Deitel, et al., 2001
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Online Industries

• Art Dealers
• The Internet can showcase work and reach a global
  audience
• Art.com, Guild.com
• Grocery Stores
• Considered to be a time saver can create an
  electronic shopping list delivery to home
• Peapod.com, Homegrocer.com

Deitel, et al., 2001
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Online Industries

• Real Estate
• Brokers can post listings
• Consumers can buy, sell, and mortgage property
• Use digital signatures
• Homes.com, Apartments.com
• Legal Services
• Legal representation, lawyers administering
  services, law students improving studies
• Cybersettle.com, Lexis.com, Nexis.com

Deitel, et al., 2001
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Online Industries

• Government
• Interact with local and national politicians
• Email, newsgroups, and discussion boards are
  effective means of communicating about political
  issues
• US government offers documentation, news and
  reports on the Web
• Whitehouse.gov, FBI.com, Gsa.gov

Deitel, et al., 2001
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Online Industries

• Insurance
• Inform potential customers about the insurance
  options that exist for individuals and businesses
• Prudential.com, Getmet.com
• Children
• Sesamestreet.com, Educationplanet.com
• Event Tickets
• TicketWeb.com, Pollstar.com, TicketCity.com
• Genealogy
• Trace lineage
• Genealogy.com, Ancestry.com

Deitel, et al., 2001
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Online Industries

• Banking
• Access account info, pay bills and write checks
  online
• Wellsfargo.com, Directbanking.com,
  Claritybank.com
• Loans
• Fill out documents quickly and return loan
  approvals within minutes
• Eloan.com, Ditech.com
• Trading
• Etrade.com, Ameritrade.com

Deitel, et al., 2001
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Online Industries

• Education
• Elementary, high school, college and adult
  students
• Gen.com, Ecollege.com, Tutor.com,
  Varsitybooks.com
• Publishing
• Digital creation and distribution of electronic
  content, including printed materials, music,
  video and software
• Pearson.com, Atrandom.com, Fictionworks.com,
  ESPN.com, Usnews.com

Deitel, et al., 2001
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Online Industries

• Entertainment
• MP3 MP3.com, Napster.com
• Independent artist Farmclub.com
• Interactive Web TV Mtv.com, CNN.com, Webtv.com
• Web Radio Spinner.com, Real.com, Npr.com
• Sports Espn.com, Nfl.com, Nba.com,
  Sportingnews.com
• Comedy Laugh.com, Comcentral.com
• Games Mplayer.com, Flipside.com
• Hollywood iFilm.com, Inside.com

Deitel, et al., 2001
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References

• Christensen, C. (2000). The Innovators Dilemna,
  Harvard Business School Press, Boston, MA.
• Deitel, H.M., Deitel, P.J. and Steinbuhler, K.
  (2001). e-Business and e-Commerce for Managers,
  Prentice Hall, Upper Saddle River, New Jersey.
• Huff, S.L., Wade, M., Parent, M., Schneberger, S.
  and Newson, P. (2000). Cases in Electronic
  Commerce, Irwin McGraw-Hill Co., Inc.
• Kalakota, R., Robinson, M. and Tapscott, D.
  (2001). E-Business Roadmap for Success 2.0,
  Addison Wesley Longman, Inc.

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References

• Napier, H.A., Judd, P.J., Rivers, O.N. and
  Wagner, S.W. (2001). Creating a Winning
  E-Business, Course Technology, Thomson Learning,
  Inc.
• Oz, E. (2002). Foundations of e-Commerce,
  Pearson Education, Inc., Upper Saddle River, New
  Jersey.
• Poirier, C. C. and Bauer, M. J. (2000). E-Supply
  Chain Using the Internet to Revolutionize Your
  Business, Berrett-Koehler Publishers, Inc.
• Treacy, M. and Wiersema, F. (1995). The
  Discipline of Market Leaders Choose Your
  Customers, Narrow Your Focus, Dominate Your
  Market, Perseus Books, Cambridge, Massachusetts.