E-COMMERCE Recent Topics in IT

Outline What is E-commerce History of E-commerce Categories of E-commerce E-commerce marketing strategies Setting up for E-marketing Benefits of E-commerce Strategy Formulation

Commerce Need a Product or service to sell Place from which to sell the products Figure out a way to get people to come to your place. A way to accept orders. A way to accept money. A way to deliver the product or service, often known as fulfillment. A way to accept returns. Customer service Technical support department to assist customers with products.

E-Commerce E-Commerce consists of the buying and selling of products or services over electronic systems such as the Internet and other computer network, consists of: Buyers - these are people with money who want to purchase a good or service. Sellers - these are the people who offer goods and services to buyers. Producers - these are the people who create the products and services that sellers offer to buyers.

History of E-Commerce Late 1970s and early 1980s Electronic Data Interchange (EDI) for e-commerce to transmit data from one business to another within companies. 1990: Tim Berners-Lee writes the first web browser, using NeXT computer. 1994: Pizza Hut offers pizza ordering on its web site. The first online bank opens. Attempts to offer flower delivery and magazine subscriptions online. 1995:Jeff Bezons launches amazon.com and the first commercial free 24 hour e-Bay is founded. 1998: Electronic postal stamps can be purchased from the web. 2008: E-commerce sales projected to reach $204 billion, an increase of 17 percent over 2007.

E-Commerce (cont.) Distributing, buying, selling and marketing products and services over electronic systems E-business for commercial transactions Involves supply chain management, e-marketing, online marketing, EDI Uses electronic technology such as: - Internet - Extranet/Intranet - Protocols

E-Commerce (cont.) The Internet is the perfect vehicle for e-commerce because of its open standards and structure. No other methodology or technology has proven to work as well as the Internet for distributing information and bringing people together. It’s cheap and relatively easy to use it as a medium for connecting customers, suppliers, and employees of a firm. No other mechanism has been created that allow organizations to reach out to anyone and everyone like the Internet.

Major Business Pressures and Role of E-Commerce

Key Drivers of E-commerce Technological – degree of advancement of telecommunications infrastructure Political – role of government, creating legislation, funding and support Social – IT skills, education and training of users Economic – general wealth and commercial health of the nation

Examples Selling physical goods using websites flowers, shoes, electronic items, etc. Reserving a hotel room or transportation ticket over the Internet A manufacturing plant orders electronic components from another plant within the company using the company’s intranet.

Digitally enabled commercial transactions Data networks Intense competition Globalization Information age Technologies Automation Low cost high quality products/services DIGITAL

E-Commerce View

E-Business Business that uses the WWW to fulfill it’s business process Four basic business processes: - information dissemination - data capture - promotions and marketing - transacting with stakeholders Business objectives interact with web based applications

E-Business Organizational Responses Strategic systems - Provide organizations with strategic advantages, enabling them to: Increase their market share Better negotiate with their suppliers Prevent competitors from entering into their territory Continuous improvement efforts - Many companies continuously conduct programs to improve: Productivity Quality Customer service Business process reengineering (BPR) - Strong business pressures may require a radical change - Such an effort is referred to as business process reengineering (BPR)

E-Business Organizational Responses Business alliances - Alliances with other companies, even competitors, can be beneficial - Virtual corporation—electronically supported temporary joint venture Special organization for a specific Time-limited mission Electronic markets - Optimize trading efficiency - Enable their members to compete globally - Require the collaboration of the different companies and competitors

E-Business Organizational Responses Reduction in cycle time and time to market - Cycle time reduction—shortening the time it takes for a business to complete a productive activity from its beginning to end - Extremely important for increasing productivity and competitiveness - Extranet-based applications expedite steps in the process of product or service development, testing, and implementation

Transaction costs Cost of providing some good or service through the market Effects of e-commerce and the internet that impacts the business model Searching for an obtaining information Participating in a market Policing and enforcing transactions Bargaining and decision costs Actual cost of buying or selling the product

Key Success Factors of E-Commerce Mission Goals Internal (Company) Analysis External Analysis Strategy Formulation Corporate Business-unit Functional Operating Implementation Control and Monitoring

Difference Between E-Commerce and E-Business

How E-Commerce Sites Work E-business involves business processes spanning the entire value chain: electronic purchasing and supply chain management, processing orders electronically, handling customer service, and co-operating with business partners. Special Technical Standards (EDI) for e-business facilitate the exchange of data between companies. E-business software solutions allow the integration of intra (WITH IN) and inter (B/W) firm business processes. E-business can be conducted using the Web, the Internet, intranets, extranets, or some combination of these.

How E-Commerce Sites Work Create value largely through gathering, synthesizing and distribution of information Formulate strategies that make management of the enterprise and technology convergent Compete in real time rather than in “cycle time” Operate in a world characterized by low barriers to entry, near-zero variable costs of operation and shifting competition Organize resources around the demand side rather than supply side Manage better relationships with customers through technology

Consumer Decision Process Disposal Loyalty Satisfaction Purchase Decision Evaluation of Alternatives Information Search Problem - Recognition PRE-PURCHASE PURCHASE POST-PURCHASE

Consumer Decision Process — Flower Example Flowers Disposal Loyalty Satisfaction Purchase Decision Evaluation of Alternatives Information Search Problem - Recognition Pre-Purchase Purchase Post-Purchase Need recognition, potentially triggered by a holiday, anniversary or everyday events Search for ideas and offerings, including: Available on-line and off-line stores Gift ideas and recommendations Advice on selection style and match Evaluation of alternatives along a number of dimensions, such as price, appeal, availability, etc. Purchase decision Message selection (medium and content) Post-sales support Order tracking Customer service Education on flowers and decoration Post sales perks

Traditional vs. New Business Models Traditional New Business Production Mass Personalized Manufactures push Customer Pull Distribution Middleman Direct Communications Closed Open Finance Slow Fast Difficult Easier Markets Local Global Mass Niche Assets Physical Virtual

Business Models in E-commerce Method of doing business Well-planned model gives a competitive advantage Impacts on sustainability and growth Three areas: - value stream - revenue stream - logistical stream

Value Stream Create long-term sustainability Benefit for business stakeholders Can be achieved in four ways: - creation/participation in an e-marketplace - creation/participation of virtual communities - additional value offers - exploitation of offers

Creation/participation in an e-marketplace Reduce transaction costs directly/indirectly Economics of e-market similar to traditional market Can be setup by supplier/buyer or run independently Buyer value: - reduced costs - improved service - convenience Supplier value: - differentiation - reduced lead time

Creation/participation of virtual communities Bringing together members of a community Larger communities mean larger sources Improves customer service

Additional value offers Value is added by improving product mix Through association or partnership Can be achieved with minimum costs Can be integrated into the host sites

Exploitation of offers E-commerce/Internet economy founded on information Value can be added by using this information Target customers demographically Can bridge the uncertainty gap Can post Request for Proposal (RFP’s)

Revenue Stream Short-term realization of value proposition Direct: - cost reduction - free offerings of service/products - pricing strategies Indirect: - internet advertising - selling customer information - joining affiliate programs

Logistical stream Examines organization restructure to deliver value added and revenue streams Issues such as: - organizational culture - pre/post restructuring - implementing information - communication and training - reward systems for motivation

Different types of E-Commerce Business (organization) Customer (individual) Business (organization) B2B (e.g TPN) B2C (e.g Amazon) Customer (individual) C2B (e.g Priceline) C2C (e.g eBay)

Type of E-Commerce Business to Business (B2B) refers to the full spectrum of e-commerce that can occur between two organizations. This includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management &service and support. Pricing is based on quantity of order and is often negotiable. Examples: FreeMarkets, Dell and General Electric Business to Consumer (B2C) refers to exchanges between business and consumers, activities tracked are consumer search, frequently asked questions and service and support. Examples: Amazon, Yahoo and Charles Schwab & Co

Type of E-Commerce Peer to Peer (C2C) exchanges involve transactions between and among consumers. These can include third party involvement offering free classifieds, auctions and forums where individuals can buy and sell thanks to online payment systems since 1995. Examples: Owners.com, Craiglist, Monster,ebay Consumer to Business (C2B) involves when consumers band together to present themselves as a buyer in group. The consumer reviews the bids and selects the company that will complete transactions. Example: www.planetfeedback.com

Component of E-Commerce e-CRM e-marketing e-services e-marketplace e-auction e-SCM e-ERP

The 7’ C of E-Commerce E-COMMERCE Context Content Commerce Community Site’s layout and design Content Text, pictures, sound and video that web pages contain Commerce Site’s capabilities to enable commercial transactions Community The ways sites enable user-to-user communication E-COMMERCE Connection Degree site is linked to other sites Customization Site’s ability to self-tailor to different users or to allow users to personalize the site Communication The ways sites enable site-to-user communication or two-way communication

Metrics Metrics: If it moves, measure it! Measures of performance; may be quantitative or qualitative Security and privacy On-time order fulfillment Return policy Navigability Response times Site availability Download times Timeliness

Benefits and Challenges of E-commerce Persistent connection with customers New value for customers Access to new customers Scalability Cannibalization Channel conflict Customer confusion Investor confusion

Benefits of E-commerce To consumers: 24/7 access, more choices, price comparisons, improved delivery, competition To organizations: International marketplace (global reach), cost savings, customization, reduced inventories, digitization of products/services To society: flexible working practices, connects people, delivery of public services

Limitations of E-commerce To organizations: lack of security, reliability, standards, changing technology, pressure to innovate, competition, old vs. new technology To consumers: equipment costs, access costs, knowledge, lack of privacy for personal data, relationship replacement To society: less human interaction, social division, reliance on technology, wasted resources, JIT manufacturing

Benefits to Consumers Convenience Buying is easy and private Provides greater product access and selection Provides access to comparative information Buying is interactive and immediate

Benefits to Organizations Powerful tool for building customer relationships Can reduce costs Can increase speed and efficiency Offers greater flexibility in offers and programs Is a truly global medium

Benefits to Society More individuals can work from home Benefits less affluent people Third world countries gain access Facilitates delivery of public services

Questions and Answers….