1. Elias M. Awad Third Edition ELECTRONIC COMMERCE From Vision to Fulfillment 1-1© 2007 Prentice-Hall, Inc The Dawn of a Maturing Industry

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11. 1-11 © 2007 Prentice-Hall, Inc What Is E-commerce? Communications Perspective - the ability to deliver products, services, information, or payments via networks. Interface View - e-commerce means information and transaction exchanges: –Business-to-Business (B2B) –Business-to-Consumer (B2C) –Consumer-to-Consumer (C2C) –Business-to-Government (B2G) Business Process - e-commerce means activities that support commerce electronically by networked connections. Online Perspective - e-commerce is an electronic environment that allows sellers to buy and sell products, services, and information on the Internet. A Structure - e-commerce deals with various media: data, text, Web pages, Internet telephony, and Internet desktop video. A Market - e-commerce is a worldwide network.

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17. Story of Amazon 1-17 © 2007 Prentice-Hall, Inc

18. Story of Amazon 1-18 © 2007 Prentice-Hall, Inc

19. 1-19 © 2007 Prentice-Hall, Inc The focus of this chapter is on several learning objectives Conceptual understanding of e-commerce, e-business and e-strategy Drivers The rise of specialized Web sites such as blogs Value-chain and supply-chain management and how they relate to e-commerce and e-business Business models of the e-environment A trend toward integrating e-commerce

20. 1-20 © 2007 Prentice-Hall, Inc First Things First Welcome to the new world of electronic commerce (e-commerce or EC) –The industry of the twenty-first century –Do business electronically from virtually anywhere in the world that has a computer. –In 2004 alone, e-commerce generated well over $100 billion in retail business and over $1.5 trillion business-to-business traffic.

21. 1-21 © 2007 Prentice-Hall, Inc First Things First – CONT’D The Internet - an international network of independent computer systems precipitated the revolution. –Security –Privacy –Other problems –Has permeated virtually every phrase of society.

22. 1-22 © 2007 Prentice-Hall, Inc The Good Life in Blogging A blog is a shared online journal where people post entries about their hobbies or personal experiences on the job on vacation, and so forth. (See www.blogger.com)www.blogger.com Blogs are: –Available on the Internet like any other Web page –Automatically indexed by search engines like Yahoo.com and Google.com –There are eight million personal blogs in the United States –Blogging in China is causing the Chinese Communist Party some discomfort Today’s Internet promotes individualism.

23. 1-23 © 2007 Prentice-Hall, Inc The Digital Divide Digital Divide refers to: –The gap between the haves and have nots in computers, Internet access, access to information, and e-commerce –Is slowly leveling off, but not fast enough Digital Divide Network (www.digitaldividenetwork.org) is the Internet’s largest environmentwww.digitaldividenetwork.org –Concerned citizens and activists can build their own online community –Publish blogs, share documents, and announce news and events

24. 1-24 © 2007 Prentice-Hall, Inc E-Learning E-learning: technology-based learning; learning materials are delivered via the Internet to remote learners worldwide. E-learning’s increasing popularity comes from its learner-centricity and self-paced learning environment.

25. 1-25 © 2007 Prentice-Hall, Inc E-Learning - cont’d Traditional classrooms learning and e-learning

26. 1-26 © 2007 Prentice-Hall, Inc Marks of Maturity Characteristics of early 90’s e-commerce: –Slow dial-up modems, 28~56kbps –E-mail was a novelty –Bar codes scanned for fulfillment phase of the e- commerce life cycle –Digital products were a challenge to sell on the Internet, specially music for piracy –Took deep pockets to set up Web sites and the accompanying technical infrastructure –E-commerce activities were primarily national

27. 1-27 © 2007 Prentice-Hall, Inc Marks of Maturity – cont’d Maturation of E-commerce –Broadband connections DSL/ADSL to homes is fulfilling the ultimate mission of e-commerce. –E-mail is now the very connectivity of e-commerce. –Bar code scanning is on the way out, replaced by sophisticated biometric technology. –Legal downloading of music, video, and other digital products via the Web is increasing. –Big businesses, as well as small- and medium-sized firms, can afford to develop a Web presence quickly, reliably, and at an affordable cost. –E-commerce has gone international.

28. 1-28 © 2007 Prentice-Hall, Inc E-commerce Is Not E-business E-business - the conduct of business on the Internet, in supply-chain planning, tracking, fulfillment, invoicement, and payment. –Includes buying and selling as well as servicing customers and collaborating with business partners –Electronic information is used to boost performance and create value by forming new relationships between and among businesses and customers. –One example of e-business is SAP (www.sap.com)www.sap.com

29. 1-29 © 2007 Prentice-Hall, Inc E-commerce Versus E-business E-commerce –Selling goods and services on the retail level with anyone, anywhere, via the Internet –Greater efficiency and effective exchange of goods and services –Exchange based upon transaction A block of information exchange between the merchant and its customers via the corporate Web site www.amazon.com E-business –Connecting critical business systems and constituencies directly via the Internet

30. 1-30 © 2007 Prentice-Hall, Inc The Drivers for E-commerce Digital Convergence - digital devices communicating with one another Anytime, anywhere, anyone - e-commerce is available to anyone (24/7) Changes in Organizations - today’s businesses empower frontline workers to do the kind of work once performed by junior management Increasing pressure on operating costs and profit margins - global competition and the proliferation of products and services worldwide have added pressure on operating costs and profit margins Demand for customized products and services - mass customization puts pressure on firms to handle customized requests on a mass-market scale

31. Digital Convergence 1-31 © 2007 Prentice-Hall, Inc

32. 1-32 © 2007 Prentice-Hall, Inc Changes in Organizational Makeup

33. 1-33 © 2007 Prentice-Hall, Inc Myths about E-commerce Setting up a Web site is easy.[not easy to ensure performance] E-commerce means no more mass marketing.[a business must still market its web presence] E-commerce means a new economy.[there is no new economy by something new in economy] E-commerce is revolutionary.[too much for web site building but less on customer support] E-commerce is a commercial fad that crashed in 2000.[internet continues to reshape the business]

34. 1-34 © 2007 Prentice-Hall, Inc Myths about E-commerce All products can be sold online using identical business models.[book vs. furniture] Build it and they will come.[have to promote like other business. Customer switches frequently] The middleman is out.[new intermediaries continue to surface on the web.]

35. 1-35 © 2007 Prentice-Hall, Inc Advantages through E- commerce Lower cost to the E-merchant : OTC transaction fee $1.1 to a penney over the net. Economy: no rental of physical store space, insurance, infrastructure investment Higher margins: cost of processing ticket 8$ to 1$ on web site. More control and flexibility, samve time Better customer service: better and quicker customer service, competitive advantage. Quick comparison shopping: on line shopping assistant helps to compare prices. Kakaku.com

36. 1-36 © 2007 Prentice-Hall, Inc Productivity gains: IBM would save $800million by letting customer find answer online. Teamwork: collaborate by email, interact with suppliers, vendors, business partners and customer are easier than ever before. Growth in knowledge markets: E-commerce help create knowledge market. Information sharing, convenience, and control: Improves information sharing between merchant and customers and promote quick, just in time deliveries. Customization: Easy to recognize, revise or edit. Can be easily differentiated and matched individual needs. Advantages through E- commerce

37. 1-37 © 2007 Prentice-Hall, Inc Issues and Constraints of E-commerce The cost factor Security System and data integrity System scalability E-commerce is not free Fulfillment and customer relations problems Products people resist buying online Cultural, language, and trust issues Corporate vulnerability Lack of a blueprint for handling E-commerce High risk of Internet start-up

38. 1-38 © 2007 Prentice-Hall, Inc Benefits and Limitations of the Internet The Internet is the enabler of the e-commerce Marketing and selling products and services Doing business fast Gathering opinions and trying out new ideas Leveling the playing field Promoting a paper-free environment Providing superior customer service and support resources Efficiency and unequaled cost-effectiveness Supporting managerial functions, spreading ideas, ease of technical support Triggering new business Providing Web services

39. 1-39 © 2007 Prentice-Hall, Inc Limitations of the Internet Security and privacy Fakes and forgeries Cyber terrorism Problems and stress Abuses in the workplace

40. 1-40 © 2007 Prentice-Hall, Inc Role of E-strategy For a successful e-commerce business : –IBM identified the critical success factors (CSFs) A sound strategy that has the full support of top management A clear goal of long-term customer relationships and value Making full use of the Internet and related technologies A scalable and integrated business process and infrastructure

41. 1-41 © 2007 Prentice-Hall, Inc Role of E-strategy – cont’d –Develop a realistic strategy for the business Sustainable business strategy based on unique opportunities to provide value for the firm Requires a clear understanding of the company, the industry and available Internet technologies Strategy should be difficult to duplicate, have high barriers to entry for competitors, and high switching costs to customers Be realistic

42. 1-42 © 2007 Prentice-Hall, Inc Value Chain in E-commerce Value Chain: a way of organizing the activities of a business so that each activity adds value (value- added activity) or productivity to the total operation of the business. A strategic tool for identifying how the critical components of a business tie together to deliver value for the business across the value-chain process.

43. 1-43 © 2007 Prentice-Hall, Inc Value Chain in E-commerce - cont’d Organizations are open systems –They do not consist of isolated sets of functions –They are a chain of value-creating activities that assure competitive advantages by delivering value to the customer Depicts the series of interdependent activities of a business A business evaluates its value to find opportunities for improving the value activities

44. 1-44 © 2007 Prentice-Hall, Inc Value Chain in E-commerce - cont’d Value activities: The physically and technologically distinct activities a firm performs, including primary and support activities. Support activities: Activities that support primary activities and each other by prodiding purchase inputs, technology, human resources and other firm functions. Primary activities: activities involved in physical creation of a product or service and its sale, transfer to buyer, and after sales assistance. Competitive advantage is achieved when an organization links the activities in its value chain more cheaply and effectively than its competitors.

45. 1-45 © 2007 Prentice-Hall, Inc Competitive Advantage

46. 1-46 © 2007 Prentice-Hall, Inc Value Chain for American Airlines

47. 1-47 Inbound logistics: procurement activities-vendor selection, comparative shopping, negotiating supply contract, and just in time arrival of goods Operations: conversion fo raw materials into finished products. Machining, packaging, assembly etc. Outbound logistics: storing, distributing, and shipping, and timely delivery etc. Marketing and sales: ad, promotion, sales management, distribution channels etc. Service: after sales service to customer. © 2007 Prentice-Hall, Inc Value Chain Primary Activities

48. 1-48 © 2007 Prentice-Hall, Inc Value Chain Support Activities Corporate infrastructure Human resources Technology development Procurement

49. 1-49 © 2007 Prentice-Hall, Inc Analyzing Value Chain Activities What type of activity is being performed? Does it add value? Does it ensure the quality of other activities? How does the activity add value to the customer? Could the same activity be reconfigured or performed in a different way? What inputs are used? Is the expected output being produced? Is the activity vital? Could it be outsourced, deleted completely, or combined with another activity? How does information flow into and out of the activity? Is the activity a source of competitive advantage? Does the activity fit the overall goals of the organization?

50. 1-50 © 2007 Prentice-Hall, Inc E-commerce Value Chain The E-commerce Value Chain means identifying: –The competitive forces within the company’s e-commerce environment –The business model it will use –Identifying the value activities that help the e-commerce value chain do its homework E-commerce views information technology as part of a company’s value chain

51. 1-51 © 2007 Prentice-Hall, Inc Roles for E-commerce Reducing costs Improving product quality and integrity Promoting a loyal customer base Creating a quick and efficient way of selling products and services Incorporate information technology and telecommunications to improve overall productivity Web sites are used to provide and collect information between the e- merchant and the customer –Competitive pricing information –Invoicing facilitates online payment flows –Customized products or orders can be shipped and delivered by independent shippers directly to the customer

52. 1-52 © 2007 Prentice-Hall, Inc Trend in E-commerce Integrate the entire transaction life cycle, from the time the consumer purchases the product on the Web site to the time the product is actually received

53. 1-53 © 2007 Prentice-Hall, Inc A Generic E-commerce Model

54. 1-54 © 2007 Prentice-Hall, Inc Key Elements of Internet, Extranet, and Intranet E-commerce

55. 1-55 © 2007 Prentice-Hall, Inc Path to Successful E-commerce The path to success is integration of the various links (departments) in the chain to work together for a common objective - profitability and customer satisfaction. –Supplier links with manufacturing –Manufacturing adds value by the finished products –Finished products are then made available to sales –Finished products –Sales add value by advertising and selling the products to the customer –Today, ERP software integrates information about finished products, costs, sales figures, accounting and human resources

56. 1-56 © 2007 Prentice-Hall, Inc An Integrated Approach to E-commerce

57. 1-57 © 2007 Prentice-Hall, Inc E-commerce Application Business-to-Consumer (Internet) Business-to-Business (Internet and Extranet) Supply-Chain Management Business-within-Business (Intranet) Business-to-Government (B2G)

58. 1-58 © 2007 Prentice-Hall, Inc Business-to-Consumer (Internet) The consumer’s use of a merchant’s Web storefront or Web site Modeled on the traditional shopping experience Shopping cart is used to hold goods until the customer is ready to check out –Online order form supported by the appropriate software Checkout is order and payment processing

59. 1-59 © 2007 Prentice-Hall, Inc Business-to-Business (Internet and Extranet) Business-to-Business e-commerce is industrial marketing among the processes it handles are fulfillment and procurement Companies can conveniently and quickly check their suppliers’ inventories or make instant purchases Competing online should also force prices for materials and supplies to drop dramatically B2B often use an extranet: a shared intranet vendors, contractors, suppliers, and key customers

60. 1-60 © 2007 Prentice-Hall, Inc Supply-Chain Management Integrating the networking and communication infrastructure between businesses and suppliers Having the right product in the right place, at the right time, at the right price, and in the right condition Delivery of customer and economic value through integrated management of the flow of physical goods and related information Designed to improve organizational processes by optimizing the flow of goods, information, and services between buyers and suppliers in the value chain

61. 1-61 © 2007 Prentice-Hall, Inc Supply-Chain Management – cont’d SCM is: –Collaboration among business partners –Coordination of logistics for timely delivery of goods or products –Cooperation among businesses and suppliers to make sure orders and inquiries are filled correctly –Connectivity through networking infrastructure to ensure speed and good response time at all times

62. 1-62 © 2007 Prentice-Hall, Inc Business-within-Business (Intranet) Strictly a “within company” type of information exchange –Restricted to internal employees and customers –Firewalls to keep out non employees E-mail replaces paper for the communication of messages, order acknowledgement and approvals, and other forms of correspondence The intranet becomes a facilitator for the exchange of information and services among the departments or divisions of a company Different departments with different PCs or local area networks can interact on an intranet

63. 1-63 © 2007 Prentice-Hall, Inc Benefits of an Intranet Low development and maintenance costs Environmentally friendly because it is company- specific Availability and sharing of information Timely, current information Quick and easy dissemination of information

64. 1-64 © 2007 Prentice-Hall, Inc Business-to-Government (B2G) The government market is strikingly similar to B2B. Huge potential for savings in $1.8 trillion federal and $1 trillion state and local expenditures Changing the status quo in government is not so easy –Changes to employee tasks and job restructuring often create resistance –Tax savings potential is not easily recognized –Committing to technology means constant need for upgrades and additional costs

65. 1-65 © 2007 Prentice-Hall, Inc E-commerce Business Models Storefront Model Click-and-Mortar Model Built to Order Merchant Model Service Provider Model Subscription-based Access Model Prepaid Access Model Broker Model Advertiser Model Portal Site Model Free Access Model Virtual Mall Model Virtual Community Model Infomediary Model

66. 1-66 © 2007 Prentice-Hall, Inc Storefront Model Storefront model enables merchants to sell products on the Web What people hear most about e-business Transaction processing, security, online payment, information storage E-commerce allows companies to conduct business 24- by-7, all day everyday, worldwide An e-commerce storefront should include: Online catalog of products Order processing Secure payment Timely order fulfillment

67. 1-67 © 2007 Prentice-Hall, Inc Managerial Implications It is people and managerial talent that matter There is a new focus on building a productive organizational culture, managing change and results, building intellectual capital, creating future leaders, managing organizational learning, and pushing growth and innovation The real asset is information and how it is used to create value for the customer The top challenge in managing e-business is understanding the consumer

68. 1-68 © 2007 Prentice-Hall, Inc Chapter Summary Electronic commerce (EC) is the ability to deliver products, services, information, or payments via networks such as the Internet and the World Wide Web. Electronic business connects critical business systems directly to key constituents The rise of specialized Web sites and Web logs (blogs) generated opportunities to read and write on a vast array of topics Several drivers promote EC: digital convergence Advantages of EC

69. 1-69 © 2007 Prentice-Hall, Inc Chapter Summary (continued) Limitations of EC A value chain is a way of organizing the activities of a business so that each activity provides added value or productivity to the total operation of the business. The transaction life cycle includes three major e-commerce applications: Business-to-Consumer (B2C), Business-to- Business (B2B), and Business-within-Business. An intranet wires the company for information exchange. Success in the E-commerce field depends on attracting and keeping qualified technical people and managerial talent. There are several types of specialized Web sites on the Internet. Each site is based on a business model as a way of doing business to sustain a business - generated revenue.