1. Chapter 5 ELECTRONIC COMMERCE (E-COMMERCE)

2. What is e-commerce? A general term for any type of business / commercial transactions that involves the transfer of information across the Internet or using Internet to trade goods/services. Process to undergo to complete e-commerce: ◦ Communicating, Transacting, Interacting, Researching ◦ Organizing, Managing Technologies that can be used for e- commerce: ◦ Internet & WWW, email, common fax machine.

3. E-commerce business activities E- commerce Advertise products Provide product information Contact Order supplies Track shipping Order inventory from supplier Receive & process payment Conduct market research

4. Basic way how e-commerce works Consumer moves through the Internet to the merchant’s website. Then they decide on what they want to purchase. Then move to the online transaction server, where the information are encrypted. Once order has been placed, the information moves through private gateway to a processing network Issuing & acquiring bank complete/deny transaction. (5-7 seconds)

5. Importance of using e-commerce Assist in all the process of business within the supply chain Fundamental benefits; enhanced communication that allows for simplicity, flexibility & new ways of doing business. Other reasons: ◦ Small investment ◦ Better consumer service ◦ Open for business ◦ Lower Cost ◦ Reduce Inventory ◦ A new way of doing business.

6. Importance of using e-commerce Small Investment ◦ Small investment on computer, modem & internet access enabling small business to use it. Better Consumer Service ◦ Email – rapid & reliable way to communicate with the suppliers & customers. Open for Business ◦ No longer tied to business hours, business goes on 24/7.

7. Importance of using e-commerce Lower cost ◦ Orders can be accepted, confirmed, processed & increasingly paid for within an electronic environment (electronic commerce system reduces cost!) Reduce Inventory ◦ Shorter & faster supply chains without need for warehousing inventory. New Way of Doing Business ◦ Sales channel operating around the clock, most dealings are done online. No need for paper & post, queuing up or telephone. After hours activities much faster & efficient!

8. Types of E-commerce 4 types: ◦ B2B – sales made by one business to another ◦ B2C – consumers using the internet to buy product / service ◦ C2B – sector in which the internet makes it possible for many customers buying same thing band together to get volume discount. ◦ C2C – consumers deal with each other.

9. B2C E-commerce Business to customers Ex : amazon.com Effects of B2C growth : online banking, online auctions, health information, travel services & real estate sites. Advantages of B2C: ◦ Shopping can be faster & more convenient ◦ Offerings & prices can change instantaneously ◦ Call centers can be integrated with the Web site ◦ Broadband telecommunications will enhance the buying experience.

10. How shopping can be faster & more convenient? Don’t have to search from stores to stores instead done by the click of the mouse by browsing for the e- tailers website, look for desired item & price then proceed with order & buy! Faster & convenient by accessing sites that can offer price / product comparison. Also used in M-commerce ◦ E-tailer – describe an Internet retailer site that can be divided into pure-play & click-and-mortar retailers. ◦ Pure play – retailers whom don’t have any physical stores. ◦ Click-and-mortar – which has internet presence & one or more physical stores. (has catalogs as well) ◦ M-commerce – ecommerce conducted over wireless device such as cell phone or PDA.

11. How can the offerings & prices change instantaneously? Why change – in response to changes in customer & market demand. Internet can obtain real time information about the changes. Changes on the e-tailers website can also be adjusted immediately.

12. How can call centers be integrated with the website? 2 method: ◦ Interactive chat – user to engage in real time ‘typed’ exchange of information between them & others from the website or coming to the website. ◦ Internet telephony – combination of software & hardware that uses the Internet as the medium of transmission of telephone calls.

13. How can broadband telecommunications enhance the buying experience? When broadband become widely available, the buying experience can also be enhanced by: ◦ Downloading of the digital products will become faster ◦ Inventory limit for the product will not be limited to what the store can stock ◦ Presentation for the product can also be enhanced, making customer able to experience the actual product / service that will be offered.

14. Keys to success in B2C e-commerce Commodity like items works best Attracting & retaining customers Watch the competition Remembering the importance of merchandising Digital products are the best of all Well customers to serve the customers

15. Keys to success in B2C e-commerce Why commodity items works best? ◦ Commodity like item – item that is uniform (will not be different from how it is seen in the internet) ◦ Customers comfortable buying these kind of item because they know it wont be different from what can be obtained in the store. Why digital products have great chance to success ◦ There are commodity like products ◦ Can be mass customized & personalized ◦ Can be delivered at the time of the purchase ◦ The foster disintermediation ◦ Global reach

16. Keys to success in B2C e-commerce Attracting & retaining customers ◦ Attractive website, attracts more customers ◦ The risk of losing customers is great as it only takes a click of the mouse (so the website must be market to make sure yours is chosen) ◦ How to market & promote business? Use Market Mix ◦ Market Mix – set of marketing tools that company uses to pursue its marketing objectives in the target market ◦ Additional techniques to retain customers;  Registering with search engines  Online advertisement  Viral marketing  Affiliate programs  Selling to existing customers

17. Keys to success in B2C e-commerce Attracting & retaining customers Registering with search engines & use key words (meta tags) ◦ Many web surfers uses search engine to find information about product / service ◦ Meta tags – part of website text only visible to browsers & search engines for finding & categorizing websites. Online advertisement ◦ Use new technology such as Flash & DHTML, or banners etc Viral marketing ◦ Some emails goes to spam or junk, so use viral marketing to send product information. ◦ Viral marketing – encourages users of a product / service supplied by B2C company to ask other individuals to join in as well.

18. Keys to success in B2C e-commerce Attracting & retaining customers Affiliate programs ◦ def : Arrangements made between e-commerce sites that direct users from one site to the other & if a sale is made as a result, the originating site receives a commission. ◦ Usually done using online ad combination. ◦ Click-through – a count of the number of people who visit one site, click on an ad & taken to the site of the advertiser. ◦ Software is able to determine the source of visitors.

19. Keys to success in B2C e-commerce Attracting & retaining customers Selling to existing customers ◦ Encourage customers to continue buying from the organization. ◦ In traditional business its called ‘ repeat business’ ◦ Ways: build a customer database & use it for email permission marketing. ◦ Permission marketing – give a merchant permission to send you offers. Remembering the importance of merchandising ◦ To do an effective job in merchandising – must understand its customers base well enough. ◦ To be able to – to select product that will appeal to the customers & that are attractively displayed.

20. Keys to success in B2C e-commerce Attracting & retaining customers Well execution to serve the customers ◦ Execution well – following through & execute necessary business processes to get the right item to the customers in a timely fashion when each time a customer made an order. Watch the competition ◦ Purpose – retain the customers so that they will not go to your competitor. ◦ Solution – be alert to what the competitor is up to, by anticipating what is their next move. ◦ Steps to follow:  Spend time on the web  Use one of the web base shopping comparison.

21. Business to business e-commerce Takes place between organizations. An organization must create a relationship with other organizations to obtain the materials needed. The difference between B2B & B2C businesses. B2C E-commerceB2B E-commerce Establishing relationship with the customers Establishing relationship with the organizations Maintain the customers to return & buy a product from your website, rather than losing them to competitor To gain the other organization’s trust, so that you can count on them to step in & help you out when you needed it

22. Business to business e-commerce Intermediaries – specialist companies tha provide services better than their client companies can themselves. Ex: Fedex Complementor – provide product & services that compliment the offerings of the organizations & there-by extend its value-adding capabilities to its customers. Ex: yahoo

23. Types of corporate purchasing Divided into 3: ◦ Purchasing of direct materials – materials that are used in production in a manufacturing company/ placed on a shelf in a retail environment. ◦ Purchasing of indirect material(MRO) – materials that are necessary for running a modern corporation, but do not relate to the companies primary business. ◦ Purchasing of services – corporate travel, consulting services & hiring of part time workers.

24. Purchasing of direct materials The process: searching out reliable sources of supply, negotiating price, quality & delivery performance expectations & monitoring supplier performance. Main way of exchanging information is by using EDI (Electronic Data Interchange) EDI – direct computer to computer transfer of transaction information contained standard business document such as invoices & purchases orders in a standard format.

25. Characteristics of EDI Characteristics: ◦ Computer to computer exchange – information must travel from one company’s computer to another over a telecommunication network. ◦ Standard business documents – restricted to standard business form such as purchase orders, invoices & etc. ◦ Standard format – trading partners have agreed that the trading partners that the digital information exchange is in standard format, so everyone can interpret what is being transmitted. Works in a concept called ‘ hub and spoke’ manner

26. Purchasing of indirect materials (MRO) Involves negotiation with MRO providers for discount prices on a range of items. Traditionally used catalogs, papers etc, but E-commerce has replaced paper catalog with electronic catalog accessible through a web browser.

27. Ways to upgrade solutions XML & Web Services To replace VAN & private network – create a purchase order in a PC web form & transmit all over Internet Why upgrade solution? – need way to interpret the meaning of information in web documents & process it. Can be done using XML ! XML (Extensive Markup Language) – coding language for the web that lets computers interpret the meaning of information in web documents. XML is easier to find the search engines as they know the meaning of the text between XML tags.

28. Ways to upgrade solutions XML & Web Services ebXML & web services are the 2 of several possibilities for B2B e-commerce using XML as a main resource. ebXML – a set of technical specifications for business documents builds around XML, designed to permit enterprises of any size & in any location to conduct business online. Web services – software applications that talk to other software application over the Internet using XML as the key enabling technology.

29. B2B marketplaces Internet services that bring together buyers & sellers. They have potential to bring in large number of buyers & sellers >>> giving buyers more choices & aggregating demand for the sellers. Resulting potential savings for buyers & sellers >>> transaction cost can be reduced. Reverse Auction – process in which buyer posts its interest in buying a certain quantity of items & the sellers compete for the business by submitting lower bids until there is only one seller left. Marketplaces usually make their money by charging transaction fee for their services.

30. Intranets Intranet – is an internal organizational Internet that is guarded against outside access by a special security feature called a firewall (which can be software, hardware or both!) Intranet are used to facilitate communications within an organization & to manage many internal business process. Internal corporate intranet internet firewall

31. Extranet Internet that is restricted to an organization & certain outsiders, such as customers & suppliers. Can be a vehicle for implementing more advanced supply chain management & customer relationship management database (CRM) CRM – uses information about customers to gain insights into their needs & behaviour in order to serve them better. Internal corporate intranet internet firewall employers customers suppliers outsiders

32. E-government Describes the application of e-commerce technologies in governmental agencies. Established to provide better services & information to citizens. Issues that e-gov deals is the digital divide, since access is possible only for those with higher income. Digital divide – fact that different people, cultures & areas of the world or within a nation do not have the same access to information & telecommunications technologies

33. E-commerce payment system The use of EDI for payments is called financial EDI (FEDI) Payments can be made in 3 ways: ◦ Credit cards & smart cards ◦ Financial cybermediaries ◦ Electronic bill presentment & payment

34. E-commerce payment system Credit cards & smart cards ◦ Smart card – plastic card the size of credit card that contains an embedded chip on which digital information can be stored. ◦ When the stored information is related to monetary, then the smart card is called stored value card. Financial cybermediaries ◦ Internet based companies that makes it easy for one person to pay another person via online.Ex: paypall

35. E-commerce payment system Electronic bill presentment & payment (EBPP) ◦ System that sends us our bills over the Internet & gives us an easy way to pay them if the amount is correct. ◦ Available thru most local banks (ex: maybank)