Chapter 1 The overview of EC

1
Chapter 1 The overview of E-C

• Acknowledgement this part of content is adopted
  from the Book Electronic Commerce a managerial
  perspective by Efrain Turban et al

2
1.1 Definition of Electronic Commerce

• 1.3.1 The definition given by scholars and
  experts
• 1. The definition given by foreign experts and
  scholars
• Kalakota and Whinston (1997) define EC from these
  perspectives
• From a communications perspective, EC is the
  delivery of information, products/services, or
  payments over telephone lines, computer networks,
  or any other electronic means.
• From a business process perspective, EC is the
  application of technology toward the automation
  of business transactions and work flow.
• From a service perspective, EC is a tool that
  addresses the desire of firms, consumers, and
  management to cut service costs while improving
  the quality of goods and increasing the speed of
  service delivery.
• From an online perspective, EC provides the
  capability of buying and selling products and
  information on the Internet and other online
  services.

3

• Lou Gerstner, IBM's CEO
• E-business is all about cycle time, speed,
  globalization, enhanced productivity, reaching
  new customers and sharing knowledge across
  institutions for competitive advantage .
• Some define E-C as The use of electronic
  transmission mediums (telecommunications) to
  engage in the exchange, including buying and
  selling, of products and services requiring
  transportation, either physically or digitally,
  from location to location.

4

• 2 . Domestic scholars definitions
• Pro. Li qi defines EC from the perspective
  of productive force. there should be two
  definitions. The broader definition is that
  electronic commerce is the use of electronic
  tools in commercial activities .These electronic
  tools range from telegram, telephone of early
  times to NII, GII and INTERNET of modern times.
  The commercial activities here refer to all
  lawful activities of demand and consumption
  except for typical production process.
• The narrower definition is that
  electronic commerce is the whole process in which
  people ,who master information technology and
  business regulations and rules, systematically
  use electronic tools and efficiently and
  low-costly engage in all kinds of activities
  centering on the exchange of commodities and
  services in a highly technically and economically
  advanced society. The first definition can be
  simplified as commercial electronic application,
  the second can be shortened as electronic
  commercial system.

5
3. pure versus partial EC
6

• 4. Differences between E-C and E-B
• The term electronic commerce is
  restricting and does not fully encompass the true
  nature of the many types of information exchanges
  occurring via telecommunication devices.
• The term electronic business also
  includes the exchange of information not directly
  related lo the actual buying and selling of
  goods.
• Thus. The term electronic business
  is broader and may eventually replace the term
  electronic commerce.

7

• 5. what makes electronic commerce different from
  the EDI systems
• EDI is a subset of electronic
  commerce. A primary difference between the two is
  that electronic commerce encompasses a broader
  commerce environment than EDI. Traditional EDI
  systems allow pre-established trading partners to
  electronically exchange business data. The vast
  majority of traditional EDI systems arc centered
  around the purchasing function. These EDI systems
  are generally costly to implement. The high entry
  cost precluded many small and mid-sized
  businesses from engaging in EDI. Electronic
  commerce allows a marketplace to exist where
  buyers and sellers can "meet" and transact with
  one another. Chapter four more clearly traces the
  evolution of traditional EDI to electronic
  commerce.

8
1.2 E-C Framework

• EC is more than just having a Web site.
  There are a dozens of applications of EC such as
  home banking , shopping in online stores and
  malls , buying stocks , finding a job, conducting
  an auction , and collaborating electronically on
  research and development projects. To execute
  these application , it is necessary to have
  supporting information and organization
  infrastructure and systems. The EC applications
  are supported by infrastructures, and its
  implementation is dependent on four major areas
  people , policy, technical standards and
  protocols, and other organizations.( see figure
  on the next page)

9
Source Turban et al.1999.
10
1.3 CLASSIFICATION OF EC APPLICATIONS

• Applications of EC are divided into 3 categories
• 1. Buying and selling goods services. These are
  usually referred to as electronic markets.
• 2. Facilitating inter and intra-organization flow
  of information, communication and
  collaboration. These are sometimes referred to as
  inter-organizational systems.
• 3. Providing customer service.

11
1.4 ELECTRONIC MARKETS

• A market is a network of interactions and
  relationships where information, products,
  services, and payments are exchanged. When the
  marketplace is electronic, the business center is
  not a physical building but rather a
  network-based location where business
  interactions occur (Figure on the next page) As
  can be seen in the figure, the electronic market
  is the place where shoppers and sellers meet. The
  market handles all the necessary transactions,
  including the transfer of money between banks.
• In electronic markets, the principal
  participants--transaction handlers, buyers,
  brokers, and sellers, are not only at different
  locations but seldom even know one another. The
  means of interconnection varies among parties and
  can change from event to event, even between the
  same parties.

12
(No Transcript)
13
1.5 Classification of the EC Field by the Nature
of the Transactions

• Business-to- business (B2B). Most of EC today is
  of this type. It includes the IOS transactions
  and electronic market transactions between
  organizations.
• Business-to-consumer (B2C). these are retailing
  transactions with individual shoppers. The
  typical shopper at Amazon. com is a consumer ,or
  customer.
• Consumer-to-consumer (C2C). In this category
  consumer sells directly to consumers. Examples
  are individuals selling in classified ads
  (e.g.,www.classified 2000 .com ) and selling
  residential property ,cars, and so on
  .Advertising personal services on the Internet
  and selling the knowledge and expertise is
  another example of C2C . several auction sites
  allow individuals to put items up for auctions
  Finally , many individuals are using intranets
  and other organizational internal networks to
  advertise items for sale or services.
• Consumer-to-business (C2B).this category includes
  individuals who sell products or services to
  organizations , as well as individuals who seek
  sellers , interact with them , and conclude a
  transaction .

14

• Non-business EC . An increased number of
  non-business institutions such as academic
  institutions , not-for-profit organizations,
  religious organizations, social organizations,
  and government agencies are using various types
  of EC to reduce their expenses (e.g., improve
  purchasing ) or to improve their operations and
  customer service.
• Intra-business (organizational) EC. In this
  category we include all internal organizational
  activities, usually performed on intranets, that
  involve exchange of goods services ,or
  information . Activities can range from selling
  corporate products to employees to online
  training and cost-reduction activities .

15
1.6 INTERDISCIPLINARY NATURE OF EC

• Marketing. Many issues of marketing offline are
  relevant to online EC--for example, cost benefits
  of advertisements and advertisement strategies.
  Other issues are unique to EC, ranging from
  online marketing strategy to interactive
  kiosks.
• Computer sciences. Many of the issues listed in
  the infrastructure box of Figure 1.2, such as
  languages, multimedia, and networks, fall into
  the discipline of computer sciences. Intelligent
  agents play a major role in EC as well.
• Consumer behavior and psychology. Consumer
  behavior is the key to the success of B2C trade,
  but so is the behavior of the sellers. The
  relationship between cultures and consumer
  attitude in electronic market is an example of a
  research issue in the field.

16

• Finance. The financial markets and banks are one
  of the major participants in EC. Also, financing
  arrangements are part of many online
  transactions. Issues such as using the Internet
  as a substitute for a stock exchange and
  fraud in online stock transactions are a sample
  of the many topics of the field.
• Economics. Electronic commerce is influenced by
  economic forces and has a major impact on
  world and country economies. Also, theories of
  micro and macronomics need to be considered in
  EC planning, as well as the economic impacts
  of EC on firms.
  
• Management information systems (MIS).
• The information systems department is
  usually responsible for the deployment of EC.
  This discipline covers issues ranging from
  systems analysis to system integration, not to
  mention planning, implementation, security, and
  payment systems, among others.

17

• Accounting and auditing. The back-office
  operations of electronic transactions are similar
  to other transactions in some respects, but
  different in others. For example, auditing
  electronic transactions presents a challenge
  for the accounting profession so does the
  development of methodologies for cost-benefit
  justification.
• Management. Electronic commerce efforts need to
  be managed properly, and because of the
  interdisciplinary nature of EC, its management
  may require new approaches and theories.
• Business law and ethics.
• Legal and ethical issues are extremely
  important in EC, especially in a global market.
  A large number of legislative bills are
  pending, and many ethical issues are interrelated
  with legal ones, such as privacy and intellectual
  property

18

• Others. Several other disciplines are involved in
  various aspects of EC to a less extent-for
  example, linguistics (translation in
  international trades), robotics and sensory
  systems, operations research/management science,
  statistics, and public policy and administration.
  Also, EC is of interest to engineering, health
  care, communication, and entertainment
  publishing.

19
1.7 Benefits of EC

• 1.7.1 Benefits to Organizations
• 1. Electronic commerce decreases the cost
  of creating, processing, distributing, storing,
  and retrieving paper-based information.
• EC Enhances ability for creating highly
  specialized businesses.
• Electronic commerce allows reduced inventories
  and overhead by facilitating pull-type supply
  chain management.
• Electronic commerce reduces the time between the
  outlay of capital and the receipt of products
  and services.
• Electronic commerce initiates business processes
  reengineering projects.
• Electronic commerce lowers telecommunications
  cost.
• Other benefits include
  improved image, improved customer service,
  newfound business partners, simplified processes,
  compressed cycle and delivery time, increased
  productivity, eliminating paper, expediting
  access to information , reduced transportation
  costs, and increased flexibility.

20

• 1.7.2 Benefits to Consumers
• E-commerce enables customers to shop or do other
  transactions 24 hours a day, all year round,
  from almost any location.
• E-commerce provides customers with more choices
  they can select from many vendors and from
  more products.
• E-commerce provides customers with less expensive
  products and services by allowing them to shop
  in many places and conduct quick comparisons.
• In some cases, especially with digitized
  products, EC allows quick delivery.
• Customers can receive relevant and detailed
  information in seconds, rather than days or
  weeks.
• E- commerce makes it possible to participate in
  virtual auctions.
• E-commerce allows customers to interact with
  other customers in E- communities and exchange
  ideas as well as compare experiences.
• E-commerce facilitates competition, which results
  in substantial discounts.

21

• 1.7.3 Benefits to Society
• EC enables people in Third World countries and
  rural areas to enjoy products and services that
  otherwise are not available to them. This
  includes opportunities to learn professions and
  earn college degrees.
• EC facilitates delivery of public services, such
  as health care, education, and distribution of
  government social services at a reduced cost
  and/or improved quality. Health-care services,
  for example, can reach patients in rural areas.
• EC enables people in Third World countries and
  rural areas to enjoy products and services that
  otherwise are not available to them. This
  includes opportunities to learn professions and
  earn college degrees.
• EC facilitates delivery of public services, such
  as health care, education, and distribution of
  government social services at a reduced cost
  and/or improved quality. Health-care services,
  for example, can reach patients in rural areas

22
1.8 Limitations of EC

• 1.8.1 Technical Limitations of EC
• Lack of system security, reliability, standards,
  and some communication protocols
• Insufficient telecommunication bandwidth .
• The software development tools still evolving and
  changing rapidly.
• Difficult to integrate the Internet and EC
  software with some existing applications and
  databases .
• Vendors needing special Web servers and other
  infrastructures, in addition to the network
  servers .
• Some EC software might not fit with some
  hardware, or may be incompatible with some
  operating systems or other components.

23

• 1.8.2 Non-technical Limitations
• Cost and justification
• Security and privacy
• Lack of trust and user resistance
• Lack of touch and feel online
• Many legal issues unresolved yet
• Insufficient support services
• EC, as a discipline, still evolving and changing
  rapidly

24
1.9 The Driving Forces of Electronic Commerce

• 1.9.1 Today's business environment, the pressures
  it creates on organizations
• Market, economical, societal, and
  technological factors are creating a highly
  competitive business environment in which
  customers are the focal point. Furthermore, these
  factors can change quickly, sometimes in an
  unpredictable manner Therefore, companies need to
  react frequently and quickly to both the problems
  and the opportunities resulting from this new
  business environment Because the pace of change
  and the degree of uncertainty in tomorrow's
  competitive environment are expected to
  accelerate, organizations will be operating under
  increasing pressures to produce more and faster,
  using fewer resources .

25

• 1.9.2 Responses used by organizations
• 1. traditional actions such as lowering cost
  and closing unprofitable facilities,
• 2. innovative activities such as customizing
  products, creating new products, or providing
  superb customer service.
• 3. the combination of above mentioned two .
• They can be performed in some or all of
  the processes of the organization, from the daily
  routine processing of payroll and order entry to
  strategic activities such as the acquisition of a
  company. And also occur in what is known as the
  extended supply chain, namely in the process of
  interaction among a company and its suppliers,
  customers, and other partners, such as in the
  cases of Intel and Wal-Mart. A response can be a
  reaction to a pressure already in existence, or
  it can be an initiative that will defend an
  organization against future pressures. It can
  also be an activity that exploits an opportunity
  created by changing conditions. Many response
  activities can be greatly facilitated by EC. In
  some cases EC is the only solution to these
  business pressure.

26
Major business pressures and responses
Source Turban et al (1999)
27

• ..To be continued