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E-Business and E-Commerce

PGP-1, MIS-II, 2008-2010 Batch


By
Dr. Prabin Panigrahi, Faculty, IIMI

Topics and Case to be Discussed in


this Session

E-Business and E-Commerce

Case
Japan Airlines: Impact of E-Ticketing

What to be Discussed?

EC, EB: Scope, benefits, limitations, and types.


Various business models
Applications
Describe how it has changed consumer retailing
and B2B transactions
Payment systems for EC
Evaluate the role of Internet technology
Challenges posed by EB and EC

Internet Technology

Internet Technology- A commodity

Economic Impact? Internet Economics

How it helps to Industry?

How Internet Helps?


Direct communication between trading partners:
Disintermediation removes intermediate layers and
streamlines processes.
Round the clock service: Web sites
Extended distribution channels: Outlets created
for attracting customers who otherwise would not
patronize a firm

How Internet Helps?


Reduced transaction costs: Costs of searching for
buyers declines

Changing Economics of Info: Decreases


Information asymmetry, Increases richness:
Depth, detail, and scope of information,
Increases reach

New Business Models and Value Propositions

What is a business model?

Business Model

Defines an enterprise
Describes how the enterprise delivers a product
or service
Shows how the enterprise creates wealth

Internet Business Models


Virtual storefront: Sells goods or services online
(Amazon.com)
Information broker: Provides information on
products or services (Edmunds.com)
Transaction broker: Provides online transaction
facility (eTrade.com, Expedia.com)
Online marketplace: Provides a trading platform
for individuals and firms (eBay.com)

Internet Business Models


Content provider: Creates revenue by providing
content (WSJ.com, TheStreet.com)
Online service provider: Provides online services,
including search service. (Google.com, Xdrive.com)
Virtual community: Provides an online community
to focused groups (Friendster.com, iVillage.com)
Portal: Provides initial point of entry to Web,
specialized content, services (Yahoo.com, MSN.com)

Internet Business Models

Syndicator: Online content provider that aggregates


information from several sources sold to other
companies

Auction/Reverse Auction: Products, prices, change in


response to demand. Used in online marketplaces

Dynamic pricing: real-time interactions between


buyers and sellers determine worth of items

Banner ad: Graphic display used for advertising,


linked to the advertisers Web site

Auctions and Bartering


The major mechanism for buying and selling on the Internet
is the electronic catalog. There are two common mechanisms
used in its implementation: electronic auctions and
bartering online.

Electronic Auctions (e-Auctions): A market


mechanism by which sellers place offers and buyers
make sequential bids.

Reverse auctions, have one buyer, usually an


organization, that wants to buy a product or a service.
Suppliers are invited to submit bids.

Auctions are used in B2C, B2B, C2B, e-government, and C2C commerce

Auctions and Bartering (Continued)


Electronic bartering, the exchange of goods or
services without a monetary transaction.

Individual-to-individual bartering

Corporate e-bartering (e.g., barterbrokers.com)

Internet Business Models


Key concepts in E-Commerce
: Digital markets and digital goods
Internet business models
Communication and community
Digital content, entertainment, and services

E-Commerce
Describes the process of
Buying,
Selling,
Transferring, or
Exchanging products, services, and/or
information
Via computer networks, including the Internet.

E-Business
Refers to
A broader definition of e-commerce,
Not just the buying and selling of goods and services,
But also
Servicing customers,
Collaborating with business partners,
Conducting e-learning, and
Processing electronic transactions.

E-Commerce

EC can take several forms depending on the degree of


digitization
Degree of digitization: Transformation from physical
to digital
The degree of digitization relates to:
the product (service) sold
the process
the delivery agent (or intermediary).

E-Business EC Organizations

Brick-and-mortar (or old-economy) refer to pure


physical organizations (corporations).

Virtual (or pure-play) organizations are companies


that are engaged only in EC .

Click-and-mortar (or click-and-brick) organizations


are those that conduct some e-commerce activities,
yet their primary business is done in the physical
world.

E-Business Transaction Medium

Most e-commerce is done over the Internet.


But EC can also be conducted on private
networks, such as
-- value-added networks (VANs,
networks that add communication services to
existing common carriers),
-- on local area networks (LANs) or
-- wide area networks (WANs)

Categories of Electronic Commerce


Business-to-customer (B2C): Retailing of products and
services directly to individual customers (Wal-Mart.com)
Business-to-business (B2B): Sales of goods and services to
other businesses (Grainger.com, Ariba.com)
Consumer-to-consumer (C2C): Individuals using the Web for
private sales or exchange (eBay.com )

Consumers-to-businesses (C2B): Consumers make known a


particular need for a product or service, and suppliers compete
to provide it.

Categories of Electronic Commerce

Consumer-to-consumer (C2C): Individuals sell products


or services to other individuals.

Intrabusiness (intraorganizational) commerce: An


organization uses EC internally to improve its operations.
A special case is known as B2E (business to its employees)

Government-to-citizens (G2C): A government provides


services to its citizens via EC technologies.

Mobile commerce (m-commerce): When e-commerce is


done in a wireless environment.

M-Commerce
M-Commerce services and applications
Content and location-based services
Banking and financial services
Wireless advertising
Games and entertainment
Accessing information from the wireless Web
M-Commerce challenges: Digital payment systems for
m-commerce

Business-To-Consumer
Advantages of E-commerce:
Customer-centered retailing: Closer and more
personalized relationship with customers is
possible
Web sites: Provide a corporate-centered portal for
the consumer to quickly find information on
products, services, prices, orders

Business-To-Consumer
Advantages of E-Commerce: (Continued)
Disintermediation: The elimination of
organizations or business process layers
responsible for certain intermediary steps in a
value chain, reducing costs to the consumer
Reintermediation: The shifting of the intermediary
role in a value chain to a new source, adding
additional value to the consumer

The Benefits of Disintermediation to the Consumer

Figure 4-2

Interactive Marketing and Personalization

Clickstream tracking tools:


Collect data on customer activities at Web sites
and store them in a log

Web Site Visitor Tracking

Figure 4-3

Web Personalization

Create unique personalized Web pages for each


customer
Increased closeness to customer increases value
to the customer, while reducing costs of
interacting with the customer

Web Site Personalization

Figure 4-4

Collaborative filtering

Compares information gathered about a specific


users behavior at a Web site to data about other
customers with similar interests to predict what
the user would like to see next. The software then
makes recommendations to users based on their
assumed interests.

Customer self-service:
The use of Web sites to provide customers with
access to information and answers to questions
Replacing human call center operators and clerks
UPS.com: Customer tracking of packages
Orbitz.com: Customer self-help for organizing and
managing a trip
Dell.com: My Order Status facility

Business-to-Business Electronic Commerce: New


Efficiencies and Relationships
Electronic Data Interchange (EDI): Enables the
computer-to-computer exchange between two
organizations of standard transactions. Currently
80% of B2B e-commerce uses this system.
EDI is being replaced by more powerful Webbased alternatives.

Net Marketplaces

Four different types of Net Marketplaces:


Distributors: B2B online catalogs provide buyers
with access to thousands of parts and other goods
(Grainger.com)
Procurement platforms: Platforms for purchasing
goods and materials and also sourcing, negotiating
with suppliers, paying for goods, and making
delivery arrangements (Ariba.com)

Net Marketplaces

Four different types of Net Marketplaces: (Continued)


Independent exchanges: Third-party Net marketplace
that is primarily transaction-oriented and that
connects many buyers and suppliers for spot
purchasing (Freemarkets.com, GEPolymerland.com)
Industry consortia: Industry-owned Net
marketplaces used primarily for long-term sourcing
of direct inputs to production (ChemConnect.com)

Electronic Data Interchange (EDI)

Figure 4-5

Private Industrial Networks


The largest Web-based form of B2B commerce
Private B2B extranets that focus on continuous
business process coordination between a small group
of companies for collaboration and supply chain
management. Wal-Mart uses its own private network
to coordinate more than 15,000 suppliers to its stores.

A Private Industrial Network

Figure 4-6

A Net Marketplace

Figure 4-7

Electronic Commerce Payment Systems


Credit cards

The most common form of payment. $50 Limited customer liability.

Digital wallets

Electronic storage of I.D. and digital cash. Not widely used.

Accumulated balance

Used for micro payments. Similar to monthly telephone bills.

Stored value

Used for micro payments. Pre-payment of funds, debited on use.

Smart Cards

I.D. and credit information stored on a chip attached to a card. Used in Europe.

Digital cash

Electronic currency that can be transferred over the Web.

Peer-to-Peer payment

Interpersonal transfer of funds such as PayPal.

Digital checking

Electronic checks with digital signatures, used most often in B2B commerce.

Electronic billing presentment


and payment

Used by consumers to pay bills online, provided by many banks.

Benefits of Intranets

Connectivity: Accessible from most computing


platforms
Can be tied to internal corporate systems and
core transaction databases
Platforms for interactive applications
Scalable to larger or smaller computing platforms

Benefits of Intranets (Continued)

Easy to use, universal standard Web interface


Low start-up costs
Richer, more responsive information environment
than corporate manuals
Reduced information distribution costs

Functional Applications of Intranets

Figure 4-8

Business Process Integration


The Internet and collaborative commerce:
Collaborative commerce: When firms use the
Internet to cooperate closely in the development,
production, and distribution of products and
services
GE Plastics maintains an Intranet where its
customers (selected fabricators) can find
information on product design and new
developments.

Collaborative Commerce

Figure 4-9

Service Industries B2C


Delivery of services (buying an airline ticket or stocks) can
be done 100 percent electronically, with considerable cost
reduction potential. Therefore, online services is growing
very rapidly.

Electronic banking, also known as cyberbanking includes


various banking activities conducted from home or a business
instead of at a physical bank

International and Multiple-Currency Banking. International


banking and the ability to handle trading in multiple currencies,
transfers of electronic funds and electronic letters of credit are
critical for international trade.

Online Securities Trading can be placed from anywhere, any


time. Investors can find a considerable amount of information
regarding a specific company or in a mutual fund.

Online Job Market. The Internet offers a perfect environment


for job seekers and for companies searching for employees.

Travel Services. The Internet is an ideal place to plan,


explore, and arrange almost any trip.

Real Estate. Real estate transactions are an ideal area for ecommerce. The customer can view many properties, sort and
organize properties according to preferences and can preview
the exterior and interior designs of the properties, shortening
the search process.

Online Advertising
Advertisement is an attempt to disseminate information in order
to influence a buyerseller transaction. Unlike traditional
advertising on TV or newspapers which is impersonal, one-way
mass communications, Internet advertising is media-rich,
dynamic, and interactive. The most common advertising
methods online are banners, pop-ups, and e-mails.

Banners are electronic billboards and is the most commonly used form of advertising on the
Internet
Keyword banners appear when a predetermined word is queried from a search engine.
Random banners appear randomly
Pop-Up, Pop-Under, and Similar Ads.
A pop-up ad appears in front of the current browser window.
A pop-under ad appears underneath the active window.
E-Mail Advertising.
Electronic Catalogs and Brochures.
Other Forms of Internet Advertising.

Business-To-Business B2B
In B2B applications, the buyers, sellers, and transactions involve
only organizations. It covers a broad spectrum of applications that
enable an enterprise to form electronic relationships with its
distributors, resellers, suppliers, customers, and other partners.

Sell-Side Marketplaces: organizations attempt to sell their products or


services to other organizations electronically, from their own private emarketplace. This model is similar to the B2C model in which the buyer is
expected to come to the sellers site and place an order.

Buy-Side Marketplaces: organizations attempt to buy needed products or


services from other organizations electronically, usually from their own private
e-marketplace. One buy-side model is a reverse auction. Here, a company that
wants to buy items places a request for quotation (RFQ) on its Web site, or in a
third-party bidding marketplace.

Business-To-Business B2B (Continued)

E-procurement. Purchasing by using electronic support is referred


to as e-procurement. In addition to reverse auctions e-procurement
uses other mechanism. Two popular ones are group purchasing and
desktop purchasing.

Group purchasing the requirements of many buyers are aggregated


so that they total a large volume, and thus merit more seller
attention. Once buyers orders are aggregated, they can be placed
on a reverse auction, and a volume discount can be negotiated.

Desktop purchasing. In this variation of e-procurement, suppliers


catalogs are aggregated into an internal master catalog on the
buyers server, so that the companys purchasing agents can shop
more conveniently. Desktop purchasing is most suitable for
maintenance, replacement, and operations (MRO) indirect items,
such as office supplies.

Business-To-Business B2B (Continued)

Electronic Exchanges are E-marketplaces in which there are many


sellers and many buyers.

Vertical distributors for direct materials: These are B2B


marketplaces where direct materials (materials that are inputs to
manufacturing) are traded in an environment of long-term relationship,
known as systematic sourcing.

Vertical exchanges for indirect materials: Here indirect materials in


one industry are purchased on an as-needed basis (called spot
sourcing). Buyers and sellers may not know each other. In such vertical
exchanges, prices are continually changing, based on the matching of
supply and demand.

Horizontal distributors: These are many-to-many e-marketplaces


for indirect (MRO) materials, such as office supplies, used by any
industry. Prices are fixed or negotiated in this systematic sourcing-type
exchange.

Functional exchanges: Here, needed services such as temporary


help or extra space are traded on an as-needed basis (spot sourcing).
Prices are dynamic, and they vary depending on supply and demand.

Business-To-Employees B2E
Companies are finding many ways to do business electronically
with their own employees. They disseminate information to
employees over the intranet, they allow employees to manage
their fringe benefits and take training classes electronically. Also,
many companies have electronic corporate stores that sell a
companys products to its employees, usually at a discount.
Some other uses:

Sales force automation is a technique of using software to automate the


business tasks of sales, including order processing, contact management,
information sharing, inventory control, order tracking, customer management
and sales forecast analysis.

E-Commerce Between strategic business units (SBUs)

E-Commerce Between and Among Employees

Government-To-Consumer G2C
E-government is the use of Internet technology in
general and e-commerce in particular to deliver
information and public services to citizens, business
partners and suppliers, and those working in the
public sector.

It can be divided into three major categories:

government-to-citizens (G2C)

government-to-business (G2B)

government-to-government (G2G)

Consumer-To-Consumer C2C
Customer-to-customer (C2C) e-commerce refers to ecommerce in which both the buyer and the seller are
individuals (not businesses). C2C is conducted in several
ways on the Internet, where the best-known C2C activities
are auctions.

C2C Auctions.

Classified Ads.

Personal Services.

Support Services to C2C.

E-Commerce Support Services


B2B and B2C applications require payments and order fulfillment.
Portals require content, etc.

These services include:

e-infrastructure (mostly technology consultants, system


developers and integrators, hosting, security, and networks)

e-process (mainly payments and logistics)

e-markets (mostly marketing and advertising)

e-communities (different audiences and business partners)

e-services (CRM, PRM, and directory services)

e-content (supplied by content providers)

E-Commerce Support Services


Electronic Payments are an integral part of doing
business, whether in the traditional way or online.
Unfortunately, in most cases traditional payment
systems are not effective for EC, especially for B2B.

Electronic checks (e-checks) are similar to


regular checks. They are used mostly in B2B
Electronic credit cards make it possible to
charge online payments to one's credit card
account.
Purchasing cards, the B2B equivalent of
electronic credit cards.

E-Commerce Support Services

Electronic cash (e-cash) appears in three major forms:


stored-value cards, smart cards, and person-to-person
payments.

Electronic Bill Presentment and Payments allow customers


to pay their recurring monthly bills, such as telephone, utilities,
credit cards, etc. online.

E-wallets are mechanisms that provide security measures to


EC purchasing. The wallet stores the financial information of
the buyer, including credit card number, shipping information,
and more.

Virtual credit cards are a service that allow you to shop with
an ID number and a password instead of with a credit card
number.

E-Commerce Support Services

The Structure of E-Commerce

Management Opportunities:

The Internet provides firms with extraordinary


opportunities to develop new products and
services, new distribution channels, new
avenues for marketing and sales, and even
entirely new business models.

Management Challenges
Finding a successful Internet business model
Organizational change challenges
Trust, Security, and Privacy

Solution Guidelines
Determining how Internet technology can
provide value for the business
Managing business process changes
Safeguarding security and privacy

Newcomers to the EC game

Bloggers

Friendster, Craigslist, MySpace,


and similar social networking sites

Pandora

Neopets