IMS 6485: Introduction to eCommerce 1 Dr. Lawrence West, MIS Dept., University of Central Florida Topics A Model of Commerce Definitions Technologies Characteristics of eCommerce History Social Issues Amazon.Com Implications for MIS Professionals

IMS 6485: Introduction to eCommerce 2 Dr. Lawrence West, MIS Dept., University of Central Florida Some Goals What are the elements of commerce How is commerce conducted in the absence of eCommerce technologies? What are eCommerce technologies? What is eCommerce? Why do participants in eCommerce participate (and why do non-participants choose not to)? –Much more on this later

IMS 6485: Introduction to eCommerce 3 Dr. Lawrence West, MIS Dept., University of Central Florida The Elements of Commerce

IMS 6485: Introduction to eCommerce 4 Dr. Lawrence West, MIS Dept., University of Central Florida The Elements of Commerce (cont.) For each item we identify we need to know: –The participants in the activity –Who has the 'decision rights' in the activity and exactly what decisions they are able to make –Who incurs costs from participating and the nature of the costs they incur. Distinguish between: Purchase price costs Capital investments Transaction costs Risk

IMS 6485: Introduction to eCommerce 5 Dr. Lawrence West, MIS Dept., University of Central Florida The Elements of Commerce (cont.) We need to identify (cont.) –Who realizes the benefits from participating in the activity and the nature of the benefit –What physical, technical, social, and legal infrastructures are needed to enable the activity –How the activity was accomplished prior to computer technologies and prior to eCommerce technologies (if it could be accomplished at all)

IMS 6485: Introduction to eCommerce 6 Dr. Lawrence West, MIS Dept., University of Central Florida A Preliminary Model of Commerce

IMS 6485: Introduction to eCommerce 7 Dr. Lawrence West, MIS Dept., University of Central Florida Inter-Firm Flows

IMS 6485: Introduction to eCommerce 8 Dr. Lawrence West, MIS Dept., University of Central Florida Market Intermediation

IMS 6485: Introduction to eCommerce 9 Dr. Lawrence West, MIS Dept., University of Central Florida Services

IMS 6485: Introduction to eCommerce 10 Dr. Lawrence West, MIS Dept., University of Central Florida Government Where does government fit into this model?

IMS 6485: Introduction to eCommerce 11 Dr. Lawrence West, MIS Dept., University of Central Florida Elements of eCommerce Revisited The elements from Slides 2—10 give us a multidimensional framework for what happens in commerce This course will explore most of the elements of this framework to see how eCommerce affects them –Who wins –Who loses See the last two slides for what this means to us personally

IMS 6485: Introduction to eCommerce 12 Dr. Lawrence West, MIS Dept., University of Central Florida Some Definitions From Book –E-Business: "The digital enablement of transactions and processes within a firm, involving information systems under the control of the firm" –E-Commerce: "The use of the Internet and the Web to transact business. More formally, digitally enabled commercial transactions between and among organizations and individuals" West's eCommerce Definition: "Facilitating or accomplishing a business activity using computerized data communication across the organizational boundary"

IMS 6485: Introduction to eCommerce 13 Dr. Lawrence West, MIS Dept., University of Central Florida What Technologies Enable eCommerce? Compare 1958 with 2008 Economists use a concept called comparative statics to compare the impact of a change on a firm, industry, or economy –Technological innovation is a change So what are the new technologies that enable eCommerce? What are the dual purpose technologies? What has been the nature of their impact?

IMS 6485: Introduction to eCommerce 14 Dr. Lawrence West, MIS Dept., University of Central Florida Types of eCommerce From the book –Business to Consumer (B2C) –Business to Business (B2B) –Consumer to Consumer (C2C) –Peer to Peer (P2P) –Mobile Commerce (M-Commerce) Left out –Government to Constituent (G2C) –Government to Government (G2G) –Government to Business (G2B or B2G)

IMS 6485: Introduction to eCommerce 15 Dr. Lawrence West, MIS Dept., University of Central Florida eCommerce Features What is the impact of these features on commerce? –Ubiquity –Global Reach –Universal Standards –Richness (can this be overdone?) –Interactivity –Information Density –Personalization & Customization –Social Technology

IMS 6485: Introduction to eCommerce 16 Dr. Lawrence West, MIS Dept., University of Central Florida History & Visions (pp. 30—43) Why were so many so willing to invest (blindly) in the early years of eCommerce? –Was it stupidity or a calculated gamble? Potential industry restructuring –First mover advantage –Disintermediation –Friction-free commerce –Switching costs –Network effect

IMS 6485: Introduction to eCommerce 17 Dr. Lawrence West, MIS Dept., University of Central Florida Lessons from the Shakeout Dominance of B2B eCommerce Only 10% of dot-coms since 1995 survived to 2005 Sales still growing (8% of total retail sales estimated for 2008) Web supplementing other channels Price dispersion persists despite pervasive price information Brands (and trust) are important

IMS 6485: Introduction to eCommerce 18 Dr. Lawrence West, MIS Dept., University of Central Florida Trends In eCommerce & Internet Usage ( Data) US online consumer sales expanded by 23% 25% to reach $172 $225 billion B2B commerce expanded by 30% 17% to more than $1.5 $3.6 trillion Individuals online in US reached million (of 300 million total) Of the million US households (63% 65%) million were online –42 65 million (38% 54%) had some sort of broadband access Lauden & Traver, pp % $255 billion 13% $3.8 trillion % 72 62%

IMS 6485: Introduction to eCommerce 19 Dr. Lawrence West, MIS Dept., University of Central Florida Some Social Issues Economists also discuss the concept of taste, consumer preferences –Why do some cowboys ride horses while others prefer jeeps? –Have there been changes in acceptance of eCommerce? –Would you buy a puppy over the Internet? What are network externalities and why are they important? –See the French Minitel case on Wikipedia What are the changes in banking, credit cards, and shipping as enablers of eCommerce?

IMS 6485: Introduction to eCommerce 20 Dr. Lawrence West, MIS Dept., University of Central Florida Amazon.Com How do all of these issues apply to Amazon.com? –Founded in 1995 (in a garage) –Initial niche market—later expanded tremendously –$1.4 billion loss on revenues of $2.7 billion in 2000 –Profitable in 2003 $35 million jumping to $588 million in 2004.

IMS 6485: Introduction to eCommerce 21 Dr. Lawrence West, MIS Dept., University of Central Florida Implications for MIS Professionals eCommerce is commerce—business fundamentals apply The technologies enable and constrain actions in all of the other organizational areas –Operations– Human Resources –Marketing– Accounting –Finance– Regulatory Compliance All of this, the technology and the business, must be understood to realize the value of eCommerce investments

IMS 6485: Introduction to eCommerce 22 Dr. Lawrence West, MIS Dept., University of Central Florida Implications for MIS Professionals (cont.) We must be the experts on the technologies We should be in a position to understand the relationships between technologies and the business –If we fail in this we are the plumbers, skilled workers who can piece together parts to make things work –If we succeed in this we are the architects, designers of organizational processes to create value