ECT 250: Survey of e-commerce technology

Introduction to e-commerce
Introduction to the course
 Instructor for ECT 250-603: Amber Settle
 ECT 250 gives a survey of the key technological elements of e-commerce and provides
insight into e-commerce infrastructures. It also covers some business strategies essential
to e-commerce. The web authoring tool FrontPage will be used.
A quick survey
 Which of the following have you done?
 Used e-mail
 Browsed the Web
 Bought a product on the Web (what?)
 Created a web page using an authoring tool
 Written some HTML
 ECT 250 will NOT teach you HTML.
 If you have taken CSC 200 see me after class.
Electronic commerce
 To many people the term electronic commerce, often shortened to e-commerce, is
equivalent to shopping on the web.
 The term electronic business is sometimes used to capture the broader notion of e-
commerce.
 In this course, we will use e-commerce in its broadest sense. It encompasses both web
shopping and other business conducted electronically.
E-commerce is not new
 Banks have used electronic funds transfers (EFTs), also called wire transfers, for decades.
 Businesses have been engaging in electronic data interchange for years. EDI occurs when
one business transmits computer readable data in a standard format to another business.
Electronic data interchange
 In the 1960s businesses realized that many of the documents they exchanged related to
the shipping of goods and contained the same set of information for each transaction.
 By sending the information electronically in a standard format, the businesses could save
money on printing, mailing, and re-entry of data.
 Electronic transfer of data also introduces fewer errors than manual transfer.
Technology and commerce
 In order to understand how technology can aid commerce we need to understand
traditional commerce.
 Once we have identified what activities are involved in traditional commerce, we can
consider how technology can improve them.
 Note that technology does not always improve commerce. Knowing when technology
will NOT help is also useful.
Origins of commerce
 The origins of traditional commerce predate recorded history.
 Commerce is based on the specialization of skills. Instead of performing all services and
producing all goods independently, people rely on each other for the goods and services
they need.
 Example: My mother trades eggs to one of her neighbors in exchange for repairs to the
fences on her ranch.
Traditional commerce
 Although money has replaced bartering, the basic mechanics of commerce remain the
same: one member of society creates something of value that another member of society
desires.
 Commerce is a negotiated exchange of valuable objects or services between at least two
parties and includes all activities that each of the parties undertakes the complete the
transaction.
Views of commerce
Commerce can be viewed from at least two different perspectives:
1. The buyer’s viewpoint
2. The seller’s viewpoint
Both perspectives will illustrate that commerce involves a number of distinct activities, called
business processes.
The buyer’s perspective
From the buyer’s perspective, commerce involves the following activities:
1. Identify a specific need
2. Search for products or services that will satisfy the specific need
3. Select a vendor
4. Negotiate a purchase transaction including delivery logistics, inspection, testing, and
acceptance
 5. Make payment
6. Perform/obtain maintenance if necessary
The seller’s perspective
From the sellers’ perspective, commerce involves the following activities:
1. Conduct market research to identify customer needs
2. Create a product or service to meet those needs
3. Advertise and promote the product or service
4. Negotiate a sales transaction including delivery logistics, inspection, testing, and
acceptance
5. Ship goods and invoice the customer
6. Receive and process customer payments
7. Provide after sales support and maintenance

Business processes
Business processes are the activities involved in conducting commerce.
Examples include:
 Transferring funds
 Placing orders
 Sending invoices
 Shipping goods to customers
E-commerce
We will define e-commerce as the use of electronic data transmission to implement or enhance
any business activity.
Example (Figure 1-4): A buyer sends an electronic purchase order to a seller. The seller then
sends an electronic invoice back to the buyer.
When used appropriately, electronic transmission can save both time and money.

Impact of e-commerce
E-commerce is changing the way traditional commerce is conducted:
 Technology can help throughout the process including promotion, searching, selecting,
negotiating, delivery, and support.
  The value chain is being reconfigured.
Value chain analysis
A way of looking at the activities of an industry or organization.
 Primary activities
Costs are directly allocated to a product
 Support activities
Costs are associated with the overall operation of the organization
Example: Figure 1-12

Origin of the name

An organization is a “chain” of activities, each providing a value:
 R&D develops the products
 Sales promotes the products
 Production manufactures the products
 Final inspection assures quality
 Logistics delivers the products
 Technical support maintains the products
Reconfiguring the value chain
1. Vertical
 Forward integration: Gaining ownership or increased control over distributors or
retailers.
Example: United Airlines buys Priceline
 Backward integration: Gaining ownership or increased control over suppliers.
Example: Amazon buys RCA records
2. Horizontal: Seeking increased control over competitors.
Example: Amazon buys BestBooksBuys.com
Appropriateness
It is important to identify which business processes can be streamlined using e-commerce
technologies.
It is equally important to realize that some processes make effective use of traditional commerce
and can’t be improved upon using technology.
Technology is not a panacea. Using it when it is not necessary or helpful can be a costly mistake.
Well-suited for e-commerce
Business processes that are well-suited for electronic commerce:
 Sale/purchase of new books and CDs
  Online delivery of software
 Advertising and promotion of travel services
 Online tracking of shipments
The business processes that are especially well-suited to e-commerce include commodity items,
that is, a product or service that has become standardized.
Best for traditional commerce
Business processes that are well-suited to traditional commerce:
 Sale/purchase of high fashion clothing (Any possible exceptions?)
 Sale/purchase of perishable food products
 Small-denomination transactions (Future?)
 Sale of expensive jewelry and antiques
In general, products that buyers prefer to touch, smell, or otherwise closely examine are difficult
to sell using e-commerce.
Questionable cases
Would e-commerce or traditional commerce work best for the following activities?
 Sale/purchase of rare books
 Browsing through new books
 Sale/purchase of shoes
 Sale/purchase of collectibles (trading cards, plates, etc.)
Combinations of both
Some business processes can be handled well using a combination of electronic and traditional
methods:
 Sale/purchase of automobiles
 Online banking
 Roommate-matching services
 Sale/purchase of investment/insurance products
In this course we will discuss the issue of evaluating the advantages and disadvantages of e-
commerce. Let’s consider a few examples now.

Advantages of e-commerce
For the seller:
 Increases sales/decreases cost
 Makes promotion easier for smaller firms
 Can be used to reach narrow market segments
For the buyer:
 Makes it easier to obtain competitive bids
 Provides a wider range of choices
 Provides an easy way to customize the level of detail in the information obtained
Advantages of e-commerce II
In general:
 Increases the speed and accuracy with which businesses can exchange information
 Electronic payments (tax refunds, paychecks, etc.) cost less to issue and are more secure
 Can make products and services available in remote areas
 Enables people to work from home, providing scheduling flexibility
Disadvantages of e-commerce
 Some business processes are not suited to e-commerce, even with improvements in
technology
 Many products and services require a critical mass of potential buyers (e.g. online
grocers)
 Costs and returns on e-commerce can be difficult to quantify and estimate
 Cultural impediments: People are reluctant to change in order to integrate new
technology
 The legal environment is uncertain: Courts and legislators are trying to catch up

SWOT ANALYSIS
What is SWOT Analysis?
 Acronym for Strengths, Weaknesses,
Opportunities, and Threats.

 Technique is credited to Stanford

University in the 1960s and 1970s.

 Planning tool used to understand

Strengths, Weaknesses, Opportunities, &
Threats involved in a project / business.

 Used as framework for organizing and

using data and information gained from
 situation analysis of internal and external environment.

 Technique that enables a group / individual to move from everyday problems / traditional
strategies to a fresh perspective.

STRENGTHS
 Characteristics of the business or a team that give it an advantage over others in the
industry.
 Positive tangible and intangible attributes, internal to an organization.
 Beneficial aspects of the organization or the capabilities of an organization, which
includes human competencies, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty.
 Examples - Abundant financial resources, Well-known brand name, Economies of scale,
Lower costs [raw materials or processes], Superior management talent, Better marketing
skills, Good distribution skills, Committed employees.
OPPORTUNITIES
 Chances to make greater profits in the environment - External attractive factors that
represent the reason for an organization to exist & develop.
 Arise when an organization can take benefit of conditions in its environment to plan and
execute strategies that enable it to become more profitable.
 Organization should be careful and recognize the opportunities and grasp them whenever
they arise. Opportunities may arise from market, competition, industry/government and
technology.
 Examples - Rapid market growth, Rival firms are complacent, Changing customer
needs/tastes, New uses for product discovered, Economic boom, Government
deregulation, Sales decline for a substitute product.
WEAKNESSES
 Characteristics that place the firm at a disadvantage relative to others.
 Detract the organization from its ability to attain the core goal and influence its growth.
 Weaknesses are the factors which do not meet the standards we feel they should meet.
However, weaknesses are controllable. They must be minimized and eliminated.
 Examples - Limited financial resources, Weak spending on R & D, Very narrow product
line, Limited distribution, Higher costs, Out-of-date products / technology, Weak market
image, Poor marketing skills, Limited management skills, Under-trained employees.
THREATS
 External elements in the environment that could cause trouble for the business - External
factors, beyond an organization’s control, which could place the organization’s mission
or operation at risk.
  Arise when conditions in external environment jeopardize the reliability and profitability
of the organization’s business.
 Compound the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at stake.
 Examples - Entry of foreign competitors, Introduction of new substitute products,
Product life cycle in decline, Changing customer needs/tastes, Rival firms adopt new
strategies, Increased government regulation, Economic downturn.
Aim of SWOT Analysis?
 To help decision makers share and compare ideas.
 To bring a clearer common purpose and understanding of factors for success.
 To organize the important factors linked to success and failure in the business world.
 To analyze issues that have led to failure in the past.
 To provide linearity to the decision making process allowing complex ideas to be
presented systematically.
*TAKE EXCELLENT NOTES
Who needs SWOT Analysis?
1. Management
 When supervisor has issues with work output
 Assigned to a new job
 New financial year – fresh targets
 Job holder seeks to improve performance on the job
2. Business Unit
 When the team has not met its targets
 Customer service can be better
 Launching a new business unit to pursue a new business
 New team leader is appointed
3. Company
 When revenue, cost & expense targets are not being achieved
 Market share is declining
 Industry conditions are unfavorable
 Launching a new business venture
SWOT Analysis is also required for / during… (Highest to Lowest)
1. Effectiveness in Market
2. Product Launch
3. Decision Making
4. Personal Development Planning
5. Competitor Evaluation
6. Product Evaluation
7. Strategic Planning
 8. Brainstorming Meetings
9. Goods & Services Evaluation
How to conduct SWOT Analysis?
1. Analyze Internal & External Environment
2. Perform SWOT Analysis
3. Prepare Action Plans & Document
1. Analyse Internal & External Environment
 1. Analyse Internal & External Environment
2. Perform SWOT Analysis
3. Prepare Action Plans
2. Perform SWOT Analysis & Document
 1. Establish the objectives - Purpose of conducting a SWOT may be wide / narrow,
general / specific.
2. Select contributors - Expert opinion may be required for SWOT
3. Allocate research & information gathering tasks - Background preparation can be
carried out in two stages – Exploratory and Detailed. Information on Strengths &
Weaknesses should focus on the internal factors & information on Opportunities &
Threats should focus on the external factors.
4. Create a workshop environment - Encourage an atmosphere conducive to the free flow
of information.
5. List Strengths, Weaknesses, Opportunities, & Threats
6. Evaluate listed ideas against Objectives - With the lists compiled, sort and group facts
and ideas in relation to the objectives.
7. Carry your findings forward - Make sure that the SWOT analysis is used in subsequent
planning. Revisit your findings at suitable time intervals.
3. Prepare Action Plan
Once the SWOT analysis has been completed, mark each point with:
 Things that MUST be addressed immediately
 Things that can be handled now
 Things that should be researched further
 Things that should be planned for the future

Benefits & Pitfalls of SWOT Analysis

Benefits of SWOT Analysis
Knowing the Competion – Reviews a company's competitors & benchmarks against them to
configure strategies that will put the company in a competitive advantage.
Decision Making Tool – Provides well-rounded information that prompt well-informed
decisions.
Forecasting - Provides a variety of information critical to forecasted variables. Threats, for e.g.,
can impact a business's forecast. By understanding the company's advantages & disadvantages,
forecasts will be more accurate.
Besides the broad benefits, here are few more benefits of conducting SWOT Analysis:
 Helps in setting of objectives for strategic planning
 Provides a framework for identifying & analyzing strengths, weaknesses, opportunities &
threats
 Provides an impetus to analyze a situation & develop suitable strategies and tactics
 Basis for assessing core capabilities & competencies
 Evidence for, and cultural key to, change
 Provides a stimulus to participation in a group experience
Pitfalls of SWOT Analysis
 Can be very subjective. Two people rarely come up with the same final version of a
SWOT. Use it as a guide and not as a prescription.
 May cause organizations to view circumstances as very simple due to which certain key
strategic contact may be overlooked.
 Categorizing aspects as strengths, weaknesses, opportunities & threats might be very
subjective as there is great degree of uncertainty in market.
 To be effective, SWOT needs to be conducted regularly. The pace of change makes it
difficult to anticipate developments.
 The data used in the analysis may be based on assumptions that subsequently prove to be
unfounded [good and bad].
 It lacks detailed structure, so key elements may get missed.

Brainstorming & Prioritization in SWOT Analysis

Brainstorming → Prioritization
 Output from Brainstorming exercise is Prioritized

Begin brainstorming by asking the following
questions:
 What opportunities exist in our
external environment?
 What threats to the institution exist
in our external environment?
 What are the strengths of our
institution?
 What are the weaknesses of our
institution?
Tips & Exercise
Tips
Do’s
✓ Be analytical and specific.
At the end of the Brainstorming exercise:
 Reduce the list of strengths &
weaknesses to no more than five
distinctive competencies and
debilitating weaknesses
o Strengths that are distinctive
competencies
o Weaknesses that are
debilitating
 Reduce threats and opportunities to
the five most critically important of
each.
✓ Be open to change
Don’ts

✓ Record all thoughts and ideas. х Try to disguise weaknesses.

✓ Be selective in the final evaluation. х Merely list errors and mistakes.

✓ Choose the right people for the exercise.
✓ Choose a suitable SWOT leader or
facilitator.
✓ Think out of the box
х Lose sight of external influences and
trends.
х Allow the SWOT to become a blame-
laying exercise.
х Ignore the outcomes at later stages of the
planning process.

 When conducting a SWOT analysis, designate a leader or group facilitator.

 Introduce the SWOT method and its purpose in your organization to gain acceptance.
 Be willing to breakaway from traditional methods.
 While doing a SWOT analysis for your job, invite someone to brainstorm with you.
 Discuss and record the results. Prepare a written summary of the SWOT analysis to give
to participants.

Points to Ponder
 Keep your SWOT short and simple, but remember to include important details. For
example, if you think your communication skills is your strength, include specific details,
such as verbal / written communication.
 When you finish your SWOT analysis, prioritize the results by listing them in order of
the most significant factors that affect you / your business to the least.
 Get multiple perspectives on you / your business for your SWOT analysis. Ask for input
from your employees, colleagues, friends, suppliers, customers and partners.
 Apply your SWOT analysis to a specific issue, such as a goal you would like to achieve
or a problem you need to solve. You can then conduct separate SWOT analyses on
individual issues and combine them.