E BUSINESS (CUIM 206) LECTURE NOTES

I NT R OD U C T I O N

In the emerging global economy, e-commerce and e-business have increasingly become a
necessary component of business strategy and a strong catalyst for economic
development. The integration of information and communications technology
(ICT) in business has revolutionized relationships within organizations and
those between and among organizations and individuals. Specifically, the use of
ICT in business has enhanced productivity, encouraged greater customer
participation, and enabled mass customization, besides reducing costs.

DEFINITION OF E-BUSINESS

E-Business (electronic business) is, in its simplest form, the conduct of business on the Internet.
It has broader implications because it refers to not only buying and selling but also servicing
customers and collaborating with business partners.

According to IBM (www.ibm.com )it is the transformation of key business processes through the
use of internet technologies. It is therefore, all electronically mediated information
exchanges, both within an organization and with external stakeholders to support a range
of business processes. These include marketing, manufacturing, R&D as well as inbound and
outbound logistics.

E Commerce refers to all electronically mediated information exchanges between an

organization and its stakeholders. Connecting critical business systems and constituencies
directly via the internet, extranets and intranets. Therefore it has to be viewed from both the
supply and demand perspectives(buy side e commerce and sell side e commerce).

PERSPECTIVES UNDERWHICH E-BUSINESS CAN BE DEFINED

 From a communication perspective

Electronic Business is the delivery of goods, services ,information ,or payments over computer networks or by any
other electronic means.

 From a business process perspective.

It is the application of technology toward the automation of business transactions and workflow.

 From a services perspective.

Electronic Business is a tool that addresses the desire of firms, consumers,and management to cut services costs while
improving the quality of customer service and increasing the speed of service delivery.

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
 From an online perspective.

Electronic Business provides the capability of buying and selling products and information over the Internet and other
online services.

 From a collaborative perspective.

E-business is the facilitator of for Inter-and Intra-organisational collaboration.

 From a community perspective.

It provides a gathering place for community members, to learn, transact, and collaborate.

Distinction and relationship between e commerce and e business

There are three perspectives that can be considered in trying to distinguish the two:


There is some degree of overlap between e commerce and e business. This can however be refuted by the
fact that the overlap between buy side and supply side e commerce is significant often with linkages in the
form of intranets ( a private network within a single company using internet standards to enable employees
to share information using e mail and web publishing).

E Business and e commerce are synonymous as the two are broadly equivalent.


E commerce is a subset of e business. This seems more realistic since e commerce does not refer to many of
the transactions within a business such as processing a purchase order that are part of e business. E business
therefore emphasizes full integration and application of technologies to operations.

E-business compared to E-commerce


While some use e-commerce and e-business interchangeably, they are distinct concepts. In e-commerce,
information and communications technology (ICT) is used in inter-business or inter-organizational
transactions (transactions between and among firms/organizations) and in business-to-consumer
transactions (transactions between firms/organizations and individuals).

In e-business, on the other hand, ICT is used to enhance one’s business. It includes any process that a business
organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated
network. A more comprehensive definition of e-business is:


“The transformation of an organization’s processes to deliver additional customer value through the application
of technologies, philosophies and computing paradigm of the new economy.”

Three primary processes are enhanced in e-business:

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 
1. Production processes, which include procurement, ordering and replenishment of stocks; processing of
payments; electronic links with suppliers; and production control processes, among others;


2. Customer-focused processes, which include promotional and marketing efforts, selling over the Internet,
processing of customers’ purchase orders and payments, and customer support, among others; and


3. Internal management processes, which include employee services, training, internal information-
sharing, video-conferencing, and recruiting. Electronic applications enhance information flow between
production and sales forces to improve sales force productivity. Workgroup communications and electronic
publishing of internal business information are likewise made more efficient. [6]


I S T H E I NT E R N E T E C O N O M Y SY N O N Y M O U S WI T H E - C O M M E R C E A ND
E -,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
B U S I NE S S ?

The Internet economy is a broader concept than e-commerce and e-business. It includes e-commerce and e-
business.

The E-Business Framework.

For e-business to work efficiently, there need for certain applications to be available and there
execution depends on the following:

 Right information
 Infrastructure, and

 Support services

Some of the supporting pillars of an E-business application are as follows:

 People
 Public Policy

 Technical standards and protocols

 Business partners

 Support services

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E-C O M M E R C E A PP LI C A T I O N S : I S S U E S A ND P RO SP E C T S

Various applications of e-commerce are continually affecting trends and prospects for business
over the Internet, including e-banking, e-tailing and online publishing/online retailing.

A more developed and mature e-banking environment plays an important role in e-commerce by
encouraging a shift from traditional modes of payment (i.e., cash, checks or any form of paper-
based legal tender) to electronic alternatives (such as e-payment systems), thereby closing the e-
commerce loop.

a) Benefits of e Commerce

• Expanded Geographical Reach

• Expanded Customer Base

• Increase Visibility through Search Engine Marketing

• Provide Customers valuable information about your business

• Available 24/7/365 - Never Close

• Build Customer Loyalty

• Reduction of Marketing and Advertising Costs

• Collection of Customer Data

b) Basic Benefits of e Business eCommerce

 increase sales - this is the first thing that people consider when dealing with e-commerce

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  decreasing costs

 increase profits

 understanding that profits is not the same as sales

 Expands the size of the market from regional to national or national to international

 Contract the market

 reach a narrow market

 target market segmentation allows you to focus on a more

select group of customers

 and therefore have a competitive advantages in satisfying them

ADVANTAG E S AND DISADVANTAG E S OF E - BU SI NE SS

 There a few advantages and disadvantages when it comes to trading on-line these include (the
benefits listed hereunder refer to business to business markets)

Tangible benefits

 Increased sales from new sales leads giving rise to increased revenue from new customers and markets as well
as from existing customers through repeat selling and cross selling.
 Marketing cost reductions from reduced time in customer service, online sales, and reduced printing and
distribution costs of marketing communications.

 Supply chain cost reductions from reduced levels of inventory, increased competition from suppliers and
shorter cycle time in ordering.

 Administrative cost reductions from more efficient routine business processes such as recruitment, invoice
payment etc

Intangible benefits

 Corporate image communication

 Enhance brand

 More rapid, more responsive marketing communications including PR.

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  Faster product development lifecycle enabling faster response to market needs.

 Improved customer service

 Learning for the future

 Meeting customer expectations to have a website.

 Identify new partners, support existing partners better.

 Better management of marketing information and customer information.

 Feedback from customers on products

Advantages

 work from home, saves money of renting office/shop place.

 if trading on-line wont have to employee as many staff and this will also save the business money.

 able to buy from it 24 hours a day

 larger market of potential customers on-line

 elderly people or people with disability’s who are not able to go to the shops can still be customers of yours

E-commerce makes “mass customization” possible. E-commerce applications in this area

include easy-to-use ordering systems that allow customers to choose and order products
according to their personal and unique specifications. For instance, a car manufacturing
company with an e-commerce strategy allowing for online orders can have new cars built within
a few days (instead of the several weeks it currently takes to build a new vehicle) based on
customer’s specifications. This can work more effectively if a company’s manufacturing process
is advanced and integrated into the ordering system.

E-commerce allows “network production.” This refers to the parceling out of the production
process to contractors who are geographically dispersed but who are connected to each other via
computer networks. The benefits of network production include: reduction in costs, more
strategic target marketing, and the facilitation of selling.

Limitations of E-Business

 Security and privacy

Technological concerns deter
 There is lack of universally
Limitations customers from buying.
accepted standards for
quality, security, and  Trust in E-Business and
reliability. in unknown sellers

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  The telecommunication hinders buying.
bandwidth is insufficient.
 National and
 International
government regulations
 Software development tools
sometimes get in the
are still evolving.
way.
 There are difficulties
 It’s difficult to measure
integrating the Internet and
the benefits of
the E-Business software with
effectiveness of online
some existing (especially
advertising.
legacy) applications and
databases.  Some customers like to
feel and touch
 Special web servers in
products .Customers are
addition to the network
resistant to the change
servers are needed (added
from a real to an online
costs).
store.
 Internet accessibility is still
 People do not yet
expensive and /or
sufficiently trust
inconvinient.
paperless, faceless
transactions.

 There is an insufficient
number (critical mass) of
sellers and buyers
needed for profitable E-
Business operations.

Classification of E-Business by nature of Transaction.

Ecommerce can be broken into four main categories: B2B, B2C, C2B, and C2C.

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 B2B (Business-to-Business)
Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling
to retailers. Pricing is based on quantity of order and is often negotiable. Examples include organization sites such
as www.dell.com or business marketplaces such as commerceone.

 B2C (Business-to-Consumer)
Businesses selling to the general public typically through catalogs utilizing shopping cart software. By dollar
volume, B2B takes the prize, however B2C is really what the average Joe has in mind with regards to ecommerce
as a whole.eg organization sites like www.amazon.com or consumer marketplaces such as www.shopsmart.com .

Having a hard time finding a book? Need to purchase a custom, high-end computer system? How about a first
class, all-inclusive trip to a tropical island? With the advent ecommerce, all three things can be purchased literally
in minutes without human interaction. Oh how far we've come!

 C2B (Consumer-to-Business)

C2B models involve interactions originating from the customer. Such businesses fall into the following categories:

Idea collectors

A company can motivate consumers who have innovative ideas to improve existing products or services and buy
the ideas at a reasonable price.
A consumer posts his project with a set budget online and within hours companies review the consumer's
requirements and bid on the project. The consumer reviews the bids and selects the company that will complete
the project. The internet empowers consumers around the world by providing the meeting ground and platform
for such transactions.eg www.ideas.com

Reverse auctions

The process starts with asks or offers from buyers and sellers compete to serve the buyer Consumers are allowed
to submit binding bids by credit card for the purchase of products such as airline tickets eg www.priceline.com

Complaint centres

This allows individuals to post complaints about a business, view other complaints about any given business ,and
interact directly with the business in question. The company presents a business response time and effectiveness
and effectiveness for public display, and makes money by selling aggregated complaint research data. Eg
www.ecomplaints.com

Paid advertising models

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 Companies such as Cybergold and Alladvantage.com sought to pay consumers to view targeted adverts.The
advertisers would get better targeting and consumers would see ads for products they cared for.

 C2C (Consumer-to-Consumer)
There are many sites offering free classifieds, auctions, and forums where individuals can buy and sell thanks to
online payment systems like Pay Pal where people can send and receive money online with ease. EBay’s auction
service is a great example of where person-to-person transactions take place everyday since 1995.

Companies using internal networks to offer their employees products and services online--not
necessarily online on the Web--are engaging in B2E (Business-to-Employee) ecommerce.

G2G (Government-to-Government), G2E (Government-to-Employee), G2B (Government-to-

Business), B2G (Business-to-Government), G2C (Government-to-Citizen), C2G (Citizen-to-
Government) are other forms of ecommerce that involve transactions with the government--
from procurement to filing taxes to business registrations to renewing licenses. There are other
categories of ecommerce out there, but they tend to be superfluous.

The basic categories of business models discussed in the table below include:

 Brokerage
 Advertising

 Infomediary

 Merchant

 Manufacturer (Direct)

 Affiliate

 Community

 Subscription

 Utility

Type of
Model: Description:

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Brokerage Brokers are market-makers: they bring buyers and sellers
Model together and facilitate transactions. Brokers play a frequent
role in business-to-business (B2B), business-to-consumer
(B2C), or consumer-to-consumer (C2C) markets. Usually a
broker charges a fee or commission for each transaction it
enables. The formula for fees can vary. Brokerage models
include:

Marketplace Exchange -- offers a full range of services

covering the transaction process, from market assessment
to negotiation and fulfillment. Exchanges operate
independently or are backed by an industry consortium.
[Orbitz, ChemConnect]

Buy/Sell Fulfillment -- takes customer orders to buy or

sell a product or service, including terms like price and
delivery. [Cars Direct, Respond.com]

Demand Collection System -- the patented "name-your-

price" model pioneered by Priceline.com. Prospective
buyer makes a final (binding) bid for a specified good or
service, and the broker arranges fulfillment.
[Priceline.com]

Auction Broker -- conducts auctions for sellers

(individuals or merchants). Broker charges the seller a
listing fee and commission scaled with the value of the
transaction. Auctions vary widely in terms of the offering
and bidding rules. [eBay]

Transaction Broker -- provides a third-party payment

mechanism for buyers and sellers to settle a transaction.
[Pay Pal, Escrow.com]

Distributor -- is a catalog operation that connects a large

number of product manufacturers with volume and retail
buyers. Broker facilitates business transactions between
franchised distributors and their trading partners.

Search Agent -- a software agent or "robot" used to search-

out the price and availability for a good or service specified
by the buyer, or to locate hard to find information.

Virtual Marketplace -- or virtual mall, a hosting service

for online merchants that charges setup, monthly listing,
and/or transaction fees. May also provide automated
transaction and relationship marketing services. [zShops
and Merchant Services at Amazon.com]

Advertising The web advertising model is an extension of the

Model traditional media broadcast model. The broadcaster, in this
case, a web site, provides content (usually, but not
necessarily, for free) and services (like email, IM, blogs)
mixed with advertising messages in the form of banner ads.
The banner ads may be the major or sole source of revenue

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 for the broadcaster. The broadcaster may be a content
creator or a distributor of content created elsewhere. The
advertising model works best when the volume of viewer
traffic is large or highly specialized.

Portal -- usually a search engine that may include varied

content or services. A high volume of user traffic makes
advertising profitable and permits further diversification of
site services. A personalized portal allows customization of
the interface and content to the user. A niche portal
cultivates a well-defined user demographic. [Yahoo!]

Classifieds -- list items for sale or wanted for purchase.

Listing fees are common, but there also may be a
membership fee. [Monster.com, Craigslist]

User Registration -- content-based sites that are free to

access but require users to register and provide
demographic data. Registration allows inter-session
tracking of user surfing habits and thereby generates data
of potential value in targeted advertising campaigns.
[NYTimes]

Query-based Paid Placement -- sells favorable link

positioning (i.e., sponsored links) or advertising keyed to
particular search terms in a user query, such as Overture's
trademark "pay-for-performance" model. [Google,
Overture]

Contextual Advertising / Behavioral Marketing --

freeware developers who bundle aware with their product.
For example, a browser extension that automates
authentication and form fill-ins, also delivers advertising
links or pop-ups as the user surfs the web. Contextual
advertisers can sell targeted advertising based on an
individual user's surfing activity.

Content-Targeted Advertising -- pioneered by Google, it

extends the precision of search advertising to the rest of
the web. Google identifies the meaning of a web page and
then automatically delivers relevant ads when a user visits
that page. [Google]

Intromercials -- animated full-screen ads placed at the

entry of a site before a user reaches the intended content.
[CBS MarketWatch]

Ultramercials -- interactive online ads that require the

user to respond intermittently in order to wade through
the message before reaching the intended content. [Salon
in cooperation with Mercedes-Benz]

Infomediary Data about consumers and their consumption habits are

Model valuable, especially when that information is carefully
analyzed and used to target marketing campaigns.

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 Independently collected data about producers and their
products are useful to consumers when considering a
purchase. Some firms function as infomediaries
(information intermediaries) assisting buyers and/or
sellers understand a given market.

Advertising Networks -- feed banner ads to a network of

member sites, thereby enabling advertisers to deploy large
marketing campaigns. Ad networks collect data about web
users that can be used to analyze marketing effectiveness.
[DoubleClick]

Audience Measurement Services -- online audience

market research agencies. [Nielsen//Netratings]

Incentive Marketing -- customer loyalty program that

provides incentives to customers such as redeemable
points or coupons for making purchases from associated
retailers. Data collected about users is sold for targeted
advertising. [Coolsavings]

Metamediary -- facilitates transactions between buyer and

sellers by providing comprehensive information and
ancillary services, without being involved in the actual
exchange of goods or services between the parties.
[Edmunds]

Merchant Wholesalers and retailers of goods and services. Sales may

Model be made based on list prices or through auction.

Virtual Merchant --or e-tailer, is a retail merchant that

operates solely over the web. [Amazon.com]

Catalog Merchant -- mail-order business with a web-

based catalog. Combines mail, telephone and online
ordering. [Lands' End]

Click and Mortar -- traditional brick-and-mortar retail

establishment with web storefront. [Barnes & Noble]

Bit Vendor -- a merchant that deals strictly in digital

products and services and, in its purest form, conducts
both sales and distribution over the web. [Apple iTunes
Music Store]

Manufacturer The manufacturer or "direct model", it is predicated on the

(Direct) power of the web to allow a manufacturer (i.e., a company
Model that creates a product or service) to reach buyers directly
and thereby compress the distribution channel. The
manufacturer model can be based on efficiency, improved
customer service, and a better understanding of customer
preferences. [Dell Computer]

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 Purchase -- the sale of a product in which the right of
ownership is transferred to the buyer.

Lease -- in exchange for a rental fee, the buyer receives the

right to use the product under a “terms of use” agreement.
The product is returned to the seller upon expiration or
default of the lease agreement. One type of agreement may
include a right of purchase upon expiration of the lease.

License -- the sale of a product that involves only the

transfer of usage rights to the buyer, in accordance with a
“terms of use” agreement. Ownership rights remain with
the manufacturer (e.g., with software licensing).

Brand Integrated Content -- in contrast to the sponsored-

content approach (i.e., the advertising model), brand-
integrated content is created by the manufacturer itself for
the sole basis of product placement.

return
to top

Affiliate In contrast to the generalized portal, which seeks to drive a

Model high volume of traffic to one site, the affiliate model,
provides purchase opportunities wherever people may be
surfing. It does this by offering financial incentives (in the
form of a percentage of revenue) to affiliated partner sites.
The affiliates provide purchase-point click-through to the
merchant. It is a pay-for-performance model -- if an affiliate
does not generate sales, it represents no cost to the
merchant. The affiliate model is inherently well-suited to
the web, which explains its popularity. Variations include,
banner exchange, pay-per-click, and revenue sharing
programs. [Barnes & Noble, Amazon.com]

Banner Exchange -- trades banner placement among a

network of affiliated sites.

Pay-per-click -- site that pays affiliates for a user click-

through.

Revenue Sharing -- offers a percent-of-sale commission

based on a user click-through in which the user
subsequently purchases a product.

Community The viability of the community model is based on user

Model loyalty. Users have a high investment in both time and
emotion. Revenue can be based on the sale of ancillary
products and services or voluntary contributions; or
revenue may be tied to contextual advertising and
subscriptions for premium services. The Internet is
inherently suited to community business models and today
this is one of the more fertile areas of development, as seen

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 in rise of social networking.

Open Source -- software developed collaboratively by a

global community of programmers who share code openly.
Instead of licensing code for a fee, open source relies on
revenue generated from related services like systems
integration, product support, tutorials and user
documentation. [Red Hat]

Open Content -- openly accessible content developed

collaboratively by a global community of contributors who
work voluntarily. [Wikipedia]

Public Broadcasting -- user-supported model used by not-

for-profit radio and television broadcasting extended to the
web. A community of users support the site through
voluntary donations. [The Classical Station (WCPE.org)]

Social Networking Services -- sites that provide

individuals with the ability to connect to other individuals
along a defined common interest (professional, hobby,
romance). Social networking services can provide
opportunities for contextual advertising and subscriptions
for premium services. [Flickr,
Friendster,Facebook,Twitter]

Subscription Users are charged a periodic -- daily, monthly or annual --

Model fee to subscribe to a service. It is not uncommon for sites to
combine free content with "premium" (i.e., subscriber- or
member-only) content. Subscription fees are incurred
irrespective of actual usage rates. Subscription and
advertising models are frequently combined.

Content Services -- provide text, audio, or video content to

users who subscribe for a fee to gain access to the service.
[Listen.com, Netflix]

Person-to-Person Networking Services -- are conduits

for the distribution of user-submitted information, such as
individuals searching for former schoolmates.
[Classmates]

Trust Services -- come in the form of membership

associations that abide by an explicit code of conduct, and
in which members pay a subscription fee. [Truste]

Internet Services Providers -- offer network connectivity

and related services on a monthly subscription. [America
Online]

Utility The utility or "on-demand" model is based on metering

Model usage, or a "pay as you go" approach. Unlike subscriber
services, metered services are based on actual usage rates.

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 Traditionally, metering has been used for essential services
(e.g., electricity water, long-distance telephone services).
Internet service providers (ISPs) in some parts of the world
operate as utilities, charging customers for connection
minutes, as opposed to the subscriber model common in
the U.S.

Metered Usage -- measures and bills users based on actual

usage of a service.

Metered Subscriptions -- allows subscribers to purchase

access to content in metered portions (e.g., numbers of
pages viewed). [Slashdot]

The impact of B2B markets on the economy of developing

countries

The impact of B2B markets on the economy of developing countries is evident in the following:

Transaction costs. There are three cost areas that are significantly reduced through the conduct
of B2B e-commerce. First is the reduction of search costs, as buyers need not go through multiple
intermediaries to search for information about suppliers, products and prices as in a traditional
supply chain. In terms of effort, time and money spent, the Internet is a more efficient
information channel than its traditional counterpart. In B2B markets, buyers and sellers are
gathered together into a single online trading community, reducing search costs even further.
Second is the reduction in the costs of processing transactions (e.g. invoices, purchase orders and
payment schemes), as B2B allows for the automation of transaction processes and therefore, the
quick implementation of the same compared to other channels (such as the telephone and fax).
Efficiency in trading processes and transactions is also enhanced through the B2B e-market’s
ability to process sales through online auctions. Third, online processing improves inventory
management and logistics.

Disintermediation. Through B2B e-markets, suppliers are able to interact and transact directly
with buyers, thereby eliminating intermediaries and distributors. However, new forms of
intermediaries are emerging. For instance, e-markets themselves can be considered as
intermediaries because they come between suppliers and customers in the supply chain.

Transparency in pricing.Among the more evident benefits of e-markets is the increase in price
transparency. The gathering of a large number of buyers and sellers in a single e-market reveals
market price information and transaction processing to participants. The Internet allows for the
publication of information on a single purchase or transaction, making the information readily
accessible and available to all members of the e-market. Increased price transparency has the

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 effect of pulling down price differentials in the market. In this context, buyers are provided much
more time to compare prices and make better buying decisions. Moreover, B2B e-markets
expand borders for dynamic and negotiated pricing wherein multiple buyers and sellers
collectively participate in price-setting and two-way auctions. In such environments, prices can
be set through automatic matching of bids and offers. In the emarketplace, the requirements of
both buyers and sellers are thus aggregated to reach competitive prices, which are lower than
those resulting from individual actions.

Economies of scale and network effects. The rapid growth of B2B e-markets creates traditional
supply-side cost-based economies of scale. Furthermore, the bringing together of a significant
number of buyers and sellers provides the demand-side economies of scale or network effects.
Each additional incremental participant in the e-market creates value for all participants in the
demand side. More participants form a critical mass, which is key in attracting more users to an
e-market.

M-COMMERCE

M-commerce (mobile commerce) is the buying and selling of goods and services through
wireless technology-i.e., handheld devices such as cellular telephones and personal digital
assistants (PDAs) using short message service(SMS),mobile e mail as with the Blackberry,Wi fi
and Bluetooth. Japan is seen as a global leader in m-commerce.

As content delivery over wireless devices becomes faster, more secure, and scalable, some
believe that m-commerce will surpass wireline e-commerce as the method of choice for digital
commerce transactions. This may well be true for the Asia-Pacific where there are more mobile
phone users than there are Internet users.

Nature of m commerce

M commerce has five important characteristics:

 Ubiquity it is available on the go, anywhere at any time

 Localisation with m commerce the customers profile includes his or her location in real time.

 Time sensitivity the user is always on.It is possible to target the user at the appropriate time

 Instant connectivity

 Personalisation

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 Because the graphic user interface on cellphones,PDAs and other handheld devices is small and
constrained the user experience is often different to someone using a PC.Users cannot browse
large documents,conduct transactions involving several steps or type in long website URLs.As a
result users will do less browsing and more direct searching for email and information such as
stock prices,weather etc

Industries affected by m-commerce include:

 Financial service--+-+es, including mobile banking (when customers use their handheld devices to access their
accounts and pay their bills), as well as brokerage services (in which stock quotes can be displayed and trading
conducted from the same handheld device);

 Telecommunications, in which service changes, bill payment and account reviews can all be conducted from the
same handheld device;

 Service/retail, as consumers are given the ability to place and pay for orders on-the-fly; and

 Information services, which include the delivery of entertainment, financial news, sports figures and traffic
updates to a single mobile device.

F ORCES FUELING E - COMMERCE .

There are at least three major forces fuelling e-commerce: economic forces, marketing and
customer interaction forces, and technology, particularly multimedia convergence.

Economic forces. One of the most evident benefits of e-commerce is economic efficiency
resulting from the reduction in communications costs, low-cost technological infrastructure
(technology has a tendency to become cheaper with time), speedier and more economic
electronic transactions with suppliers, lower global information sharing and advertising costs,
and cheaper customer service alternatives. Global competition and the proliferation of products
and services worldwide have added unusual pressure on operating costs and profits commerce
addresses these concerns quickly, efficiently and at low cost.

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 Economic integration is either external or internal. External integration refers to the electronic
networking of corporations, suppliers, customers/clients, and independent contractors into one
community communicating in a virtual environment (with the Internet as medium). Internal
integration, on the other hand, is the networking of the various departments within a
corporation, and of business operations and processes. This allows critical business information
to be stored in a digital form that can be retrieved instantly and transmitted electronically.
Internal integration is best exemplified by corporate intranets. Among the companies with
efficient corporate intranets are Procter and Gamble, IBM, Nestle and Intel.

Market forces. Corporations are encouraged to use e-commerce in marketing and promotion to
capture international markets, both big and small. The Internet is likewise used as a medium for
enhanced customer service and support. It is a lot easier for companies to provide their target
consumers with more detailed product and service information using the Internet.

Technology forces. The development of ICT is a key factor in the growth of e-commerce. The
steady increase in computing power and decreasing costs has made navigation on the internet a
widespread reality. For instance, technological advances in digitizing content, compression and
the promotion of open systems technology have paved the way for the convergence of
communication services into one single platform. Convergence has made it possible for digital
devices to communicate with one another i.e. video, film, documents, voice and data. This in turn
has made communication more efficient, faster, easier, and more economical as the need to set
up separate networks for telephone services, television broadcast, cable television, and Internet
access is eliminated. From the standpoint of firms/businesses and consumers, having only one
information provider means lower communications costs.

Moreover, the principle of universal access can be made more achievable with convergence. At
present the high costs of installing landlines in sparsely populated rural areas is a disincentive to
telecommunications companies to install telephones in these areas. Installing landlines in rural
areas can become more attractive to the private sector if revenues from these landlines are not
limited to local and long distance telephone charges, but also include cable TV and Internet
charges. This development will ensure affordable access to information even by those in rural
areas and will spare the government the trouble and cost of installing expensive landlines.

T HE RELEVANCE OF THE I NTERNET TO E-B USINESS

The Internet allows people from all over the world to get connected inexpensively and reliably.
As a technical infrastructure, it is a global collection of networks, connected to share information
using a common set of protocols. Also, as a vast network of people and information, the Internet
is an enabler for e-commerce as it allows businesses to showcase and sell their products and
services online and gives potential customers, prospects, and business partners access to
information about these businesses and their products and services that would lead to purchase.

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 Before the Internet was utilized for commercial purposes, companies used private networks-
such as the EDI or Electronic Data Interchange-to transact business with each other. That was
the early form of e-commerce. However, installing and maintaining private networks was very
expensive. With the Internet, e-commerce spread rapidly because of the lower costs involved and
because the Internet is based on open standards.

T HE IMPORTANCE OF AN INTRANET FOR A BUSINESS ENGAGING IN E-B USINESS

An intranet aids in the management of internal corporate information that may be
interconnected with a company’s e-commerce transactions (or transactions conducted outside
the intranet). Inasmuch as the intranet allows for the instantaneous flow of internal information,
vital information is simultaneously processed and matched with data flowing from external e-
commerce transactions, allowing for the efficient and effective integration of the corporation’s
organizational processes. In this context, corporate functions, decisions and processes involving
e-commerce activities are more coherent and organized.

The proliferation of intranets has caused a shift from a hierarchical command-andcontrol

organization to an information-based organization. This shift has implications for managerial
responsibilities, communication and information flows, and workgroup structures.

add-on products, services, and new systems when they are needed. With network production, a
company can assign tasks within its non-core competencies to factories all over the world that
specialize in such tasks (e.g., the assembly of specific components).

E BUSINESS INFRASTRUCTURE

This relates to the hardware and software architecture necessary to achieve electronic
communication within a business and with its partners. It is a combination of hardware such as
servers, PCs, networks used and the software applications used to deliver the services.

The internet

It is a physical network that links computers across the globe. It consists of servers and
communication links between the computers that are used to hold and transport information
between client PCs and web servers. The internet is therefore a large scale (global) client server
network.

The client server architecture consists of client computers sharing resources such as a database
stored on a more powerful server computers. Client PCs in homes and offices are connected to
the internet via local internet service providers (ISPs) with connections to the national or
international infrastructure or backbones (high speed communication links used to enable
internet communications across a country and internationally).

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 The internet started in the 1960s as the Arpanet research and defense network in the United
States that linked servers used by the military and academic collaborators. It was established as
a network that would be reliable even if some of the links were broken. This was achieved since
data and messages sent between users were broken up into smaller packets and could follow
different routes. Although the internet was subsequently extended worldwide it was initially
used extensively by academic and defense communities. It has only recently catapulted into the
mainstream business and consumer usage.

The World Wide Web (www)

The web is an organisation of files designed around a group of servers on the internet
programmed to handle requests from browser software on users personal computers.

It was invented by Tim Berners Lee of the European Particle Physics Laboratory as a program
called hypertext editor, to help share research easily. It allowed information highlighted in a
document to link with other documents on a computer network with a mouse click. Its advent is
responsible for the massive growth in the business use of the internet. It is the most common
technique for publishing information on the internet. It is accessed through web browsers which
display web pages of embedded graphics and HTML (hypertext markup language) or XML
encoded text.

HTML can be thought of as similar to a word processing format such as Microsoft word
documents. It has been widely adopted as a standard on the internet because:

 It offers hyperlinks (a method of moving between one we site page and another, indicated to a user by an image
or text highlighted by underlining or a different colour).It allows for easier surfing.
 HTML supports a wide range of formatting making documents easy to read on different devices.

 Graphics and animations can be integrated into web pages.

 Interaction is possible through HTML based forms that enable users to supply their personal details for more
information on a product, perform searches, ask questions, make comments etc

The combination of web browsers like Microsoft Internet Explorer and HTML has been
successful in establishing widespread use of the internet. To distinguish the internet from the
web (www) the analogy of television can be used. The internet would be equivalent to the
broadcasting equipment such as masts, transmitters, satellites, studios while the web is
equivalent to the content of different TV programmes.

Internet terms

1. Web browsers are software programmes used to access information on the web. They provide an easy method of
accessing and viewing information stored as web documents on different servers. Examples include Microsoft Internet
Explorer, Mozilla Firefox and Netscape Navigator.
2. Web servers are powerful computers that store and present the web pages accessed by web browsers.

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3. FTP(File Transfer Protocol) refers to programme standards used to upload and download files to and from web servers.

4. Intranet is a private network within an organisation using internet standards to enable the sharing of information using
email and web publishing within the organisation.

5. Extranet is formed by extending the intranet beyond a company to customers, suppliers and collaborators.

6. Firewall is a specialised software application mounted on a server at a point the company is connected to the internet.
Its purpose is to prevent unauthorised access into the company from outsiders.

7. Search engine is a website or a database and the tools to search it e.g. google.com

Networking Standards and terms

HTTP(hypertext transfer protocol) is a standard which defines the way information is transmitted
across the internet between web browsers and web servers. When you click on a link while viewing a
website , the web browser you are using will request information from the server computer hosting
the website using http protocol hence the letters http:// are used to prefix all we addresses.
According to Tim Berners Lee (1999) HTTP rules defines things like which computer speaks first and
how they speak in turn. When two computers agree they can talk, they have to find a common way
to represent their data so that they can share it.

URL(Universal/Uniform Resource Locator)is the technical term for web addresses used to locate a
web page on a web server. URLs are therefore a standard method of addressing a website e g
http://www.cut.ac.zw

Domain name refers to the name of the web server and is usually selected to be the same as the
name of the organisation and the extension will indicate its type. This extension is known as the
global top level domain(gTLD).There are also some country code top level domains(coTLD) e g .zw
for Zimbabwe or .za for South Africa. Common gTLDs are:

 .com representing a commercial organization or business in general.

 .co.zw representing an organisation in Zimbabwe.

 .ac.zw representing a university in Zimbabwe.

 .org for non profit organisations.

 .net for network providers(companies supporting the internet)

 .edu for an educational institution(college or university).

 .gov for a US government agency (non military)

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 .mil for a US government military agency.

Look out for the full list of domain names on www.geocities.com

To establish web presence a company needs to register a domain name unique to it via an internet
service providers(ISP) or from domain name services.

Web Page Standards

Website content (information, graphics and interactive elements) determines the attractiveness of a
website. Technically text information is usually presented in HTML(hypertext markup language).It
ensures that any web page authored according tote definitions in the standard will appear the same
way in any web browser.

XML(extensible markup language) is a standard for transferring structured data and is more versatile
than HTML.

Graphics can be incorporated into web pages using formats like:

 GIF(graphics interchange format) a graphics format and algorithm best used for simple graphics like banner adverts.
 JPEG(joint photographics experts group) a graphics format and algorithm best used for photographs.

Other enhancements include:

 Streaming media(sound and video that can be experienced within a web browser before the whole clip is downloaded)
 Plug ins are add on programs to a web browser providing extra functionality such as animation or reading other
formats like PDF e g Adobe Acrobat and Macromedia Flash.

What makes for a good website

When designing a website 3 elements must be in mind i.e. the purpose, target audience and expected
behaviour.

Purpose relates to the sites reason for existence, its essence and what it aims to accomplish. As such,
it is important to define the stance of the site i.e. is it formal or informal or whether is serious or fun.
This can be shown in the style of the site communicated through the use of colour, images,
typography and layout. What is shown should be in line with the way a product is branded or
positioned.

Target audience. Website designers must understand clearly who will benefit from the site. It is
useful to prepare a short description of the audience and display it prominently. The definition of the
audience must not be too broad or too narrow and the audience must be substantial and reachable.

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 A business audience often requires detailed information while a consumer site is more graphically
intensive.

Expected Behaviour refers to details such as the attention paid to content, frequency of visits,
downloads and printouts e.t.c. This determines whether the website will be static (one way) or
interactive (two way) depending on the amount of activity.

Quality of a website

There are 3 aspects of website quality:

 Information quality relates to the factuality or correctness of information. Users do not need to be inconvenienced
checking and rechecking a site. In formation that is obviously propaganda or unconditional praise leads to increased
cynicism amongst users. Incorrect spellings and poor grammar obviously affect user opinion. The quality of links
matters. Brocken links (links that do not work or lead to a page not found message) and wrong links (links that take you
to a place you did not expect) detract from the quality of information.
 Information structure quality. Information also needs to be organised effectively. This helps individuals understand the
scope of the information provided and help them quickly locate information they care about. Structure quality is
detracted by too many categories, too few categories, not enough information in a category and no logical
arrangements.

 Usability captures the quality of the user’s experience. High usability indicates great navigation and easy access leading
to a satisfying user experience. The top web design problems related to usability are:

Long download times many users are very impatient about long download times and switch away to another page if
the page does not load in a few seconds.

Lay out Users must understand the overall structure of the page at all times and where they are in relation to the
homepage. Providing a site map or a consistent menu visible on all pages alleviates this problem. Users can also make
assumptions about the layout e g they assure that if they click on the site logo in the left hand corner and go to the
home page .If this does not happen they may become confused.

Non standard link colours colours have meaning on line. Typically, darker colours like dark blue are reserved for
unread links and light colours like light brown are reserved for links that have been used before.

Scrolling text and animations a document with a lot of text accessible only if users scroll to the bottom is badly
designed. Each page should have a small chunk of information that can be easily understood. Simplicity is advisable for
visuals. Many users are irritated by flashing, blinking, or noisy things that detract from their main objective.

According to Yahoo website managers a profitable and effective website should have 3 characteristics:

 Magnetic in terms of acquisition of visitors by way of promotions and making it attractive.

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  Sticky in terms of retention or keeping customers on the site once they arrive and encouraging them to
engage in revenue generating activities.

 Elastic or extension referring to persuading customers to return particularly for revenue generating activities.

Managing E Business infrastructure

The management of e business infrastructure is informed by reviewing 2 different perspectives of the
infrastructure i.e.

 Technology infrastructure / hardware (provision of servers, clients, networks, operating systems etc)
 Applications infrastructure (refers to the software provision of the infrastructure. This is the applications software used
to deliver services to employees, customers etc

Managing technology infrastructure

This means that decisions have to be made or issues such as

a. Systems software

The key issue is standardization throughout the organisation. Standardisation leads to reduced numbers of
contacts for support and maintenance

Standardisation can reduce purchase prices through multi/user licenses. These choices occur for the client, server and
network.

Standardized plug ins should also be installed across the organisation.

b. Transport or Network

Such decisions are based on the internal company network and its link to the public internet.
The main management business is whether internal or external network management will be
performed by the company or outsourced to a third party.

Standard hardware e.g. modern card or external modems is also needed to connect clients to the
internet

c. Storage

Storage can be managed internally or externally. This is not an either or choice e.g. intranet and
extranet can be managed internally while internet storage such as the corporate website is
commonly managed externally or at an application service provides.

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Decisions also need to be made involving 3rd party service providers of the technology infrastructure
e.g.

Internet service providers ISP are companies that provide home or business users with a connection
to access the internet and hosting of websites e.g. ecoweb, telone, zim on line.

ISPs provide a link to the worldwide web and also they host websites or provide a link from a
company’s web services to enable other companies and consumers access to a corporate websites.

The primary issue in managing ISPs is to ensure a satisfactory service quality which is determined by

i. speed

ii. Availability

iii. Security

i. The speed of access is determined by the speed of the server and the speed of the network
connection to the server. Often the speed of the server depends on the number of users. Often to
ensure reliability companies can pay ISPs foe services of a dedicated server a server that only
contains contents and application for a single company or using several servers to spread the demand
load i.e. web farms

speed is also governed by the speed of network connection commonly termed band with

Bandwidth indicates the speed at which data is transferred using a particular network media,
measured in bits per second.

ii. Availability refers to the amount of time a website is available to consumers. For a company
offering 24/7 services it should be 100% for e business sites lack of availability has revenue loss
implication.

To ensure the best speed and availability a company should check the service level agreements (SLAs)
when outsourcing web site hosting services. The SLA should define confirmed standards of
availability and performance. It should also include notification to the customer derailing when the
web service becomes unavailable and reasons why and estimates when service will be restored.

iii. Security ensures confidentiality and lowers exposure to risk. Measures to be taken will be
discussed in detail later.

EDI electronic Data Interchange

EDI is the exchange, using digital media of structured business information, particularly for sales
transactions such as purchase orders and invoices between buyers and sellers.

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The benefit of using EDI to streamline business process include-

Rapid fulfillment of orders. Reduced lead times are achieved through reduced times in placing and
receiving orders, reduced times of information in transit and through interaction with other
processes.

Fewer errors in data entry and less time spent by the buyer or supplier on exception handling

Reduced costs resulting from reduced staff time material savings such as paper and forms and
improved inventory control.

E environment

Social Factors

Much of activity online is social in native considering the use of email, social networks such as face
book, music sharing, gaming, and shopping among other activities.

It is useful for e business mangers to understand the different factors that affect how many people
actively use the internet among other factors governing adoption of e business activities are

Cost of access initial costs of the computer are a major expenditure for many households as well as
costs of using an ISP

And the media phone line or cable charges also affect adoption.

Value proposition customers need to perceive a need to be on time. What the internet can offer that
other media cannot.

Ease of use refers to ease of connecting through the ISP and the ease of using the web once
connected.

Security relates to risks of fraud or invasion of privacy etc

Fear of the unknown especially a general fear of technology a domain for the young mostly under 45
years old. Other demographics webographics according to Grossnickle and Raskin 2001 include

Usage location i.e. country/region, home or business use

Access device browse or computer platform

Experience level

Usage type

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 Usage level

Economic and competitive factors

The economic health competitive environment in different countries will determine the e business
potential of each country. The most developed countries and communities tend to have more
developed e business infrastructure in place and the highest levels of e business activity

Political Factors

The political environment is shaped by the interplay of government agencies, public opinion,
consume pressure groups and industry backed organisation that promote best practice amongst
companies. The political environment also drives the establishment of privacy laws and taxation of
international bodies to coordinate he internet such ICAN the Internet Corporation for assigned
Names and Numbers.

Interaction in government can also be enhanced be e government the use of internet technologies to
provide good services to citizens.

Internet governance is such that it is difficult for a single country to have complete control over
internet activities as such cyberspace has different layers of jurisdiction according to Dyson *1998

i. Physical space comprising each individual country where its own laws e.g privacy taxation or
trading laws hold.

ii. ISPs make the connection between the physical and the virtual world

iii. Domain name of control and community

iv. Agencies such as TRUSTe (truste.org)

Ethical & Legal Issues

i. Privacy and Trust

The privacy of consumers on the internet covers three related issues

a) collecting and holding personal information

Since it is difficult to identify the end user in order to target them appropriately, often it is necessary to invade
the user’s privacy by planting cookies (small text files stored on an end users computer to enable websites to
identify them) or electronic tags on the end users computer. Cookies have a bad reputation since it is believed

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 that they could be used to capture credit card information and other personal information. In most cases
customers would be unaware that their privacy is being invaded.

b) Disclosing personal information to third parties

Customers may be quite happy to give personal information to a company that they have formed a
relationship with. They are likely to be less than happy if this company sells the information to another
company and they are subsequently bombarded with promotional material. The other risk is of hackers
accessing information held about a customer on servers within a company.

c) Sending unsolicited e mails to consumers

Spamming is the sending of unsolicited mail or messages to large numbers of internet users. It is intrusive and
irritating to most net users. For ethical reasons, e marketers can adopt an opt in / opt out principle. Opt in is
when a customer proactively agrees to receive further information. Opt out is when a customer declines the
offer to receive further information.

Legal Factors

Some of the main e business related loyal issues on which companies seek specific legal advice are:

 Domain name registrations and trade marking of internet brands.

 Advertising standards. Most countries have specific laws to avoid misrepresentation to the consumer
and uncompetitive practices.

 Defamation and libel. Information published on a site critical of another company’s people or
products could represent libel.

 Copyright and intellectual property rights. Permission must be sought for information or images
sourced elsewhere in the same way as for any other media.

 Data Protection and privacy law. A website must protect data held on consumers according to the
local law.

 Taxation on e business. The global nature of e business raises questions as to where revenue is
taxable as well as the appropriate tax jurisdiction. Current international tax treaties are such that the
right to tax is divided between the country where the enterprise derives its revenue and that from
where it is resident.

Technological Factors

The availability of technology infrastructure and the general awareness of a population determines
the levels of adoption of innovations.

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 E SUPLLY CHAIN MANAGEMENT

Supply chain management is the coordination of all supply activities by an organisation from its
suppliers and partners to its customers. The supply chain therefore consists of two sides:

 The upstream supply chain(transactions between an organisation and its suppliers or intermediaries)
 The downstream supply chain(transactions between an organisation and its customers and intermediaries)

Due to interlinkages within an organisation the setup develops into more of a supply chain network which links between an
organisation and all its partners with multiple supply chains. Logistics is a concept closely related to supply chain
management. It is the time related positioning of resources or the strategic management of the supply chain. It relates to
inbound logistics resources entering an organisation from suppliers and outbound logistics resources supplied by an
organisation to its customers and intermediaries.

Look up value chain concept and analysis Michael Porter

Development in supply chain management

To understand how e business can enhance supply chain and logistics management it is important to consider the historical
context of management approaches to supply chain management. The following stages can be identified.

1960/70s Physical distribution Management PDM

This focused on the physical movement of goods by treating stock management, warehousing, order processing and
delivery as related rather than separate activities.

Although information systems were developed to manage these processes they were often paper based and not integrated
across different functions. However some leading companies had started using EDI at this time

1970/1980 logistics Management Materials requirements Planning MICP and Just in Time JIT

The JIT philosophy aims to make the process of raw materials production and distribution as efficient and flexible as
possible in terms of response supply and customer service. Minimum order quantities and stock levels were sought by
the customer and therefore manufacturers had to introduce flexible manufacturing process and systems that
interfaced directly with the customer who would call an order directly against a prearranged schedule with a guarantee
between that it would be delivered on time.

MRP systems were important in maintaining resources at an optimal level. For JIT and MRP emphasis was on lean
production and lean supply where supply chains efficiency is aimed at eliminating waste and minimise inventory and
work in progress.

1980s/90s Supply Chain Management and Efficient Customer ECR

This involved closer integration the supplier, customer and intermediaries. Supply chain management aimed at maximising
the efficiency and effectiveness of the total supply chain for the benefit of all the players and to maximum the

29
 opportunity for customer purchase by ensuring adequate stock level at all stages of the process. Integrated systems
such as SAP Enterprise Resource Planning(ERP) system have helped manage the entire supply chain. ERP system include
modules which are deployed throughout the business and interface with customers .Technology has enabled the
introduction of faster, more responsive and flexible ordering, manufacturing and distribution systems , which has
diminished even the need for warehouses to be located near to markets that they serve.

The ECR concept was developed for the food retailing business in the US but has been applied to
other products and other countries. It aimed at timely, accurate, and paperless information flow by
revising of processes supported by information to ensure smooth continual flow of products matched
to consumption. To do so other areas such as retail space ,promotions and new product development
were prioritised.

1990s/00s Technological Inter face Management

According to Hammil and Gregory(1997), the challenge facing suppliers, intermediaries and
customers in the supply chain will shift from a focus on physically distributing goods to a process of
collection collation , interpretation and dissemination of vast amounts of information. Enterprise
Resource planning systems are continuously being updated to support direct data interfacing with
suppliers and customers to support EDI. With increasing out sourcing of core activities companies are
rapidly becoming virtual organisations which use ICT to allow operations without clearly defined
boundaries between different functions. It provides customised services by outsourcing production
and other functions to third parties.

Effect of information systems on SCM

The adoption of ICT to SCM has led to changes including:

1. Increased efficiency of individual processes. The cycle time needed to complete a process as well as the resources
needed to execute it has been reduced.
2. Reduced complexity of the supply chain .Disintermediation has resulted in a simpler supply chain with a reduced cost
of channel distribution.

3. Improved data integration between elements of the supply chain. A company can now share information with its
suppliers on the demand for its products to optimise the supply process. An associated benefit has been the reduction
in cost of paper processing.

4. Reduced cost through outsourcing. A company can outsource or use virtual integration to transfer assets and costs
such as inventory holding costs to third party companies. Technology also enables formation of value networks and in
changing suppliers on the basis of cost and quality. Costs are lowered through price competition and reduced spending
on manufacturing and holding capacity.

5. Innovation. It is possible to offer new products or new ways of ordering and servicing products to customers e.g. a B2B
company may use e commerce to enable its customers to specify the mixture of chemical compounds and additives

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 used to formulate their plastics and refer to a history of previous formulations. This results in better customer
responsiveness.

There is also need to look at how e commerce can deliver to customers at the other end of the supply
chain by:

 Increased convenience through 24/7 ordering.

 Increased choice of suppliers leading to lower costs.

 Faster lead times and lower costs through reduced inventory holding.

 The facility to tailor products to customer specifications.

 Increased information about products and transactions such as technical data sheets and order histories.

There are two alternative viewpoints on the impact of e commerce on supply chains. One holds that electronic
networks may lock in customers to a particular supplier because of the overheads and risks associated with moving to
another supplier.

The other view is that electronic marketplaces are characterised by ephemeral relationships. Steinfield et al (1996)
suggest that it is easier to form an electronically mediated relationship and is as easy to break it. They however stress
the importance of personal relationships which may be strengthened further by electronic contact.

E PROCUREMENT

It is the electronic integration and management of all procurement activities including purchase request, authorisation,
ordering, delivery and payment between a purchaser and a supplier. E procurement should be aimed at improving
performance for each of the 5 rights of purchase ,which are sourcing items:

 At the right price

 Delivered at the right place

 Of the right quality

 Of the right quantity

 From the right source

E procurement is not very new .There have been many attempts to automate the process of
procurement for the buyer using electronic procurement systems(EPS), workflow systems and links
with suppliers through EDI.

E procurement has resulted in reduced cycle time from search for goods to payment by up to 4 days
for low value items. Amongst other benefits of are:

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 reduced purchasing cycle time and cost
 enhanced budgetary control(achieved through rules to limit spending and improved reporting facilities)

 elimination of administrative errors(correcting errors is traditionally a major part of a buyers workload)

 increasing buyers productivity(enabling them to concentrate on strategic purchasing issues)

 lowering prices through product standardisation and consolidation of buys.

 Improving information management(better access to process from alternative suppliers and summaries of spending)

 Improving the payment process.

Implementing e procurement

Different types of systems cover different parts of the procurement cycle. These include:

 Stock control system relates to mainly production related procurement. The system highlights when reordering is
required, when the number in stock falls below reorder thresholds.
 CD/Web based catalogue .Paper catalogues have been replaced by electronic ones that make it quicker to find
suppliers.

 E mail or database workflow systems integrate the entry of the order by the originator, approval by the manager and
placement by the buyer. The order is routed from one person to the next and will wait in the inbox for actioning.

 Order entry on website. The buyer often has the opportunity to order directly on the suppliers website but this will
involve rekeying and there is no integration with systems for requisitioning or accounting.

 Accounting systems. Networked accounting systems enable staff in the buying department to enter an order which can
then be used by accounting staff to make payments when the invoice arrives.

 Integrated e procurement or ERP systems. This aims to integrate all processes from requisition of order, approval to
payment for the goods.

Companies face a difficult choice in achieving full cycle e procurement. They have the option of trying
to link different systems or purchasing a single new system that integrates the facilities of the
previous systems. Purchasing a new system may be the simplest option technically, but it may be
more expensive than trying to integrate existing systems. It also requires retraining in the system as
well as linking to the supplier systems for one to fully benefit from its implementation.

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 E MARKETING

According to Chaffey et al (2000) e marketing is the application of the internet and related digital
technologies to achieve marketing objectives. E marketing therefore entails all marketing activities in
an electronic or online platform. The primary purpose of the internet in e marketing is promotional.
Issues involved include customer acquisition, viral marketing, advertising and search engine
optimisation amongst others.

Customer acquisition process

The attraction of customers online entails various issues including:

 Cost benefit analysis

The customer acquisition process requires a comparison of the incremental benefit of attracting a customer with the
incremental benefit of doing so.The benefit is measured in terms of the lifetime value of a customer i.e. the discounted
cashflows (potential revenues less the cost of attracting and retaining the customer) that are expected to arise from a
customer over his or her lifetime.

 Consumer profitability analysis

Profits arising from each individual customer are determined by comparing the revenue from the individual to the sum
of acquisition and retention costs to date. Customers who contribute the most to company profitability should be
rewarded with preferential treatment while those high maintenance customers should be fired.

 Building a customer database

There are three approaches to building a database:

 Defense

This programme is designed to retain the company’s loyal customers. These individuals are rewarded and
offered special access not offered to others.

 Tough defense

This is designed to entice customers of he competition to switch. This could prove expensive especially if
the competition retaliates and must therefore be managed carefully.

 Easy offense

This is designed to capture the ‘’low hanging fruit’’ i.e. consumers who are known to be price switchers
are persuaded by using price promotions such as coupons or sales.

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 Once a database is in place the company can encourage customers to buy more or in other categories e.g.
Amazon .com entered the marketplace selling books but once they had established a database they tried
to do this by up selling and cross selling.

Up selling means trying to sell more to existing customers e.g. if a customer enquired about a book, he or
she is presented with a list of other books by the same author or of potential interest.

Cross selling involves selling other products to existing customers e.g. selling book customers music CDs
and DVDs.

 The budget for customer acquisition

In setting the budget, the following two factors have to be considered:

o Diminishing returns

The budget is appropriate if it is at a point where increasing it by a dollar leads to less than a
dollar in profits. After a point increasing the budget does lead to more customers but the cost of
getting outweighs their value.

o Competition

One has to monitor and keep pace with what the competition is doing to acquire customers.
However, setting the budget at the same level as competition may be unwise because it can lead
to escalating acquisition costs.

VIRAL MARKETING

Viral marketing proposes that messages can be rapidly disseminated from consumer to consumer,
like the spread of a virus, leading to large scale market acceptance. It is based on the idea of word of
mouth advertising. With the advent of the internet and e mail, marketers have to view markets as
networks of consumers rather than an amorphous mass and use this knowledge to enhance the
spread of their message.

Types of viral marketing

There are three types of viral marketing:

 Incidental contagion
 Contagion due to transaction consummation

 Consumers as professional recruiters.

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 Incidental contagion

In this case the consumer is not made aware of his or her role in the message dissemination process. Consumers sign
on to a service while using the service, unwittingly increase the awareness of the product. Consumers do not perform
any special promotional tasks and do receive any reward.

 Contagion due to transaction consummation

In this case a firm makes an attractive product available for free provided that all interested parties register for the
service. In other words, a service is available to a particular individual only if others sign up giving the user an incentive
persuade others to sign up as well e.g. PayPal which allows users to make small payments to one another online, paid
$10 to its early users to sign up and a few more dollars for each new member they referred. As a result PayPal reached
3 million users in the first 9 months. Once it reached a critical mass PayPal reduced its payments to $5.

 Consumers as Professional Recruiters

In this case consumers are encouraged to contact others and inform them about the product. This can be done in two
ways. No incentive might be provided to the consumer. The “tell a friend” icon might appear right next to a product
display or news story. Alternatively, the marketer sets up an explicit incentive structure to reward consumers who bring
in the most traffic.

When to use viral marketing

From a strategic perspective viral marketing is called for when you care about the quantity rather than the quality of
traffic frequenting you site i.e. building up a crowd. Viral campaigns also work well for markets that are homogeneous
rather than heterogeneous. Viral marketing works best for products or services that have one or more of the following
characteristic:

 Uniqueness.

It works very well for products that are market creators or are nothing like what is available on the market
and represent a new way of thinking e.g. Hotmail at its launch was in an era of paid for e mail.It being a
free e mail service represented a new way of thinking about customer acquisition.

 Exciting product concept

Viral marketing works when individuals are excited about a product and its value proposition. As such,
viral marketing is great for products that are entertaining, colourful and exhilarating to use.

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  Simple product concept

The product has to be as simple as possible for a consumer to explain to his or her friends. A concept as
simple as “free e mail”, as in the case of Hotmail, was naturally easy to disseminate.

 Low cost trial

In trying a product, the total cost of adopting a product should be low. The total cost can be broken down
into several components i.e. switching costs, transaction costs and the cost of the product. Switching
costs refer to the cost of moving from an old product under use to a new product. The price of a product
entails the products value. Viral marketing works best for products that are free or inexpensive e.g. digital
products, free communication technologies e.t.c.

Transaction costs involve actual payment to make the move and hassles involved e.g. filling up forms. For
a successful viral market campaign the actual sign up or registration process must be seamless.

Negative aspects of viral marketing

1. Brand control is reduced by viral marketing. One has no control over the audiences contacted in the process
and how the message may be modified leading to variability in how your brand is perceived.
2. Uncharted growth. Viral marketing can lead to unanticipated growth paths which may lead to abrupt changes
in strategic direction like being led to unplanned for markets.

3. Lack of measurement. Results of viral marketing are difficult to track and measure. In many cases it may not
be possible to tell if people who adopted your service did so because of your viral marketing technique.

4. Spam Threats. Poorly done viral marketing can lead to large scale spam(unsolicited e mail) especially in the
case of paid for viral marketing where people who want to earn money go about sending as many messages as
possible which might not be as well received.

How to manage the viral marketing process

Though viral marketing offers an organic customer led growth path, continuous managerial oversight is required. This
can be done:

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 Carefully picking the initial recipients of the message. Viral pioneers must be popular (have access to a
large social network), influential and representative of the target market. It is also important to identify
and pick people who play a bridging role in bringing together two social networks. It is not advisable to
pick such individuals out of convenience e.g. friends of employees rather than by any strategic
consideration.
 Carefully picking the message. The message should be designed such that it communicates the value
proposition clearly and simply, so that it is easy for consumers to pass the message on.

 Putting control mechanisms in place. This will measure the impact of the viral marketing campaign. A
simple way of doing this is to ask new customers how they heard about your service. One must constantly
monitor how consumers are spreading the message.

As with any other form of promotion, viral marketing works for products that offer general value to
customers. If a product is bad viral marketing can sink it fast.

Search Engine Optimisation

Search engines like google.com and directories like www.yahoo.com are designed to help consumers navigate
the millions of pages on the web. Search engine optimisation is therefore, trying to get the best out of these
resources. Search engines use software programmes called spiders or crawlers to search the web and create a
large database or index of what is available online.

Search engines can either be:

 Paid listing search engines which only includes listings from companies who have paid to be included
e.g. Go To.com.
 Reward based search engines which reward customers for using the engine by entering them into a
contest e.g. iwon.com.

 Community based directories which have links contributed by members e.g. zeal.com.

 Meta search engine which searches across multiple search engines e.g. metacrawler or vivismo.com.

 Global search engines. Which focus on a global market.

 Natural language querry which allows users to ask questions using full form English instead of key
words e.g. AskJeeves.com

People often use search engines to locate information on the internet. In searching for information individuals
are presented with hundreds of selections but will not read through all selections but the top few entries. To
get more traffic it is advisable to design a website so that it shows up in the top five of any listing. Search
engines rank web pages using:

 Key words in the title.

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  Key words near the top.

 Frequency of keywords.

 Link popularity.

There is a penalty for search keyword spamming (i.e. if you try to include every popular keyword with the
hope that you will show up near the top in many searches, there is a penalty you may end up at the end of
the list.)

To attain and maintain a position at the top end of a listing the following strategies can be followed.

1. Change the Meta tags on the page. All web pages are written using HTML which has a set of
commands known as tags that determine how the page looks. A Meta tag does not affect how
the page looks but rather it is a secret instruction of visiting search engines on where to put the
page in the index.
2. Change the page title.

3. Link reciprocally .i.e. site A and site B agree that they will place a link to the others site on their
page. This way a wider audience is exposed to both pages.

4. Purchase multiple domain names i.e. be available on .com, .net, co.zw e.t.c.

5. Have multiple home pages.

6. Pay for position approach. This entails paying the search engine to place you in the top five.

Internet advertising

It is essentially advertising done within the space of a web page. It is in the form of banner adverts
and sponsorship.

a) Banners are small rectangles that appear on the top, bottom and sides of the in a website. They come in many sizes
ranging from small buttons to skyscrapers which occupy a large portion of the screen. The are 3 banner advertisement
variations :

 Interstitials appear when the user transitions from one website to another. An interstitial occupies an entire
screen and can either be automatically timed out or the user may be asked to initiate closure.

 Pop up adverts appear abruptly when a consumer first visits a site or at any other point during the browsing
experience.

 Pop unders open up in a new window that is visible only when the user closes the current window.

These variations of the banner catch the user by surprise but are likely to annoy customers.

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b) Site sponsorships involve advertisers signing long term agreements to have the logo displayed at all times son a given
website. As with banners consumers can click on the logo to visit the sponsor’s site.

 Affiliate or associate programmes

This concept was pioneered by Amazon.com boss Jeff Bezos, who described it as a micro franchising strategy
e.g. a small site that specialises in Zimbabwean stone sculpture signs up for Amazon.com associates
programme. As part of the agreement the site posts a small Amazon .com banner and encourages visitors to
purchase books on Zimbabwean stone sculpture from Amazon.com. The site receives 15% of the sales.
Associate programmes benefit both the advertiser and the associate. The advertiser gets traffic from the site
and the associate gets a commission every time a customer they refer buys something. Associate programmes
are also a great branding tool as they provide more exposure at basically no charge while enjoying the benefits
of associating with big names.

Associate programmes are a decentralised traffic generation tool. Instead of going to one large portal site such
as Yahoo to generate traffic this method uses thousands of small sites. This spreads out the cost of traffic
generation and reduces the risk to the advertiser.

Personalisation

It is targeting taken to the extreme. It envisions creating a unique marketing mix for each individual.
Rather than having one online storefront, one could have a million storefronts for one million visitors
e.g. one of the tabs on Amazon .com is titled “your store” and contains information that is
personalised to each returning customer. It has information based on past purchases, favourite areas
e.t.c.

Personalisation differs from customisation or 1:1(one to one) marketing in that it includes both
company led and customer led approaches to targeting a segment of size one. Personalisation
reduces transactional burden on the side of the consumer who does not have to search through
many untargeted alternatives and can focus on a few that are sited to their taste. It also builds loyalty
since users who have personalised site content return more than those who don’t.

When to adopt personalisation

 Dispersion in customer lifetime value and needs

Personalisation only makes sense if customers differ in their value to the organisation and if they have
dramatically different needs.

 Customer sensitivity

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 This refers to whether customers care if the personalisation is offered or not. Where levels of customer
involvement are low the value of personalisation is low.

 Process amenability

This refers to whether technology for personalisation exists and how extensive or expensive it is to implement.
It also entails whether the organisation has the level of detail regarding customer needs and if the marketing
personnel can analyse such information.

 Competitive environment

This refers to how competitive forces in the market enhance or detract from the advantage the company has
from implementing personalisation i.e. how competitors react and how much competitive edge
personalisation gives.

 Organisational readiness

This refers to the company’s culture and resources and how much they can cope with the change.

Permission marketing

It envisions every customer shaping the targeting behaviour of marketers. Consumers empower a
marketer to send them promotional messages in certain interest categories.Permission marketing
therefore entails:

 Co creation(marketers and customers are partners in creating a marketing mix)

 Consumer control( a firm cannot send a message to a consumer who has not given it permission)

Permission marketing uses mostly e mail though SMS and other formats are increasingly being
adopted.

Types of permission marketing

a) Opt out

This refers to a situation when a marketer sends an unsollicited e mail and then provides an individual an option of not
recieving future messages.

b) Opt in

It requires the consumer to tell the marketer explicitly that it has the permission to send messages.Opt in can
either be :

 Directly between the advertiser and the consumer (direct relationship maintenance).

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  Between the consumer and the web portal or site which then alerts its partners(permission partnership)

 Between a consumer an infomediary and advertisers(ad market)

 A permission pool where firms pool together information sent by consumers then send promotional material.

c) Double or confirmed opt in

To avoid instances when consumers receive unwanted e mails or messages as in the case of someone signing in on
someone else’s behalf, double opt in asks the marketers to send a confirmation email to individuals who opted in.
When an individual confirms, the cycle is complete and the organization can be doubly sure that it has the right
person on its list.

Permission marketing best practices

 Explain in plain language and in plain view the intended use of the e mail address.
 Avoid using a ‘must fill’ field for the e mail address so that it does not appear like you are confiscating e mail address.

 Always send a confirmation auto reply following registration. This reiterates the intent of the programme and gives the
registrant a last chance to opt out.

 Ask only critical targeting questions minimising the online collection of basic demographic data.

Problems with permission marketing

 Consumers are often asked for their permission when they initially register and then never asked to revisit their
preferences.
 Permission is given once and thereafter they are repeatedly targeted with marketing messages resulting in them
becoming less engaged and more irritated.

 Opt in programmes often encompass broad categories which may mean the bulk of messages would be of no use to
the consumer.

 It places demands on consumers who have to work to get relevant adverts mainly by filling out surveys about
themselves. It may therefore fail to attract consumers with limited.

Steps in creating permission marketing programme

 Explicit permission seeking process must be free from deceptive tactics and the customers right to be left alone must
be honoured.

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 Verification processs must avoid consumers signing in friends or associates indiscriminately, placing an undue
transactional burden on them.

 Recognition of relationship must be a two way, mutually beneficial relationship.

 Access to personal information must benefit the firm while empowering and reassuring the consumer.

 Communication control. The consumer must be able to control the nature and volume of messages being sent to them.

 Frictionless exit ability. A consumer should be able to effortlessly exit from a permission marketing relationship.
Frustrated consumers stop attending to the messages leading to low response rates.

Pricing and distributing digital products

A digital product is anything that can be digitised or presented in digital form e.g.

a. Information based services like research services.

b. Literature i.e. books, magazines, newspapers.

c. Auditory information like music or lectures.

d. Movies

e. Images i.e. photographs, art, advertisements e.t.c

f. Financial assets e.g. stocks and bonds

g. Communication e.g. phone ,fax

h. Other information e.g. recipes, directions, maps e.t.c.

Pricing strategies for digital products include zero pricing, bundling, differential pricing, subscription
and site licensing

1) Zero pricing entails not charging for the product e.g. readers pay $1 for a hard copy of the Herald but can access it for
free on www.herald.co.zw. There is also free software which can be in the form of freeware (copyrighted
software given away for free by the author) OR shareware (delivered free of charge though the owner might require a
small fee and does not allow one to pass it on for free) OR public domain (when a program is not copyrighted and can
be used without restriction.

Why zero pricing?

 When the primary revenue stream is from advertising the company expects greater profits when it achieves higher
levels of customer traffic or activity.To attract traffic they offer the product for free.

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 To generate and encourage trial especially for products that have complicated quality attributes that cannot be
determined without using the product.

 Some digital products are offered for free in exchange for personal information which is more valuable as it can be
used to target consumers in other fields or can be sold to other marketers.

 A way to gain market acceptance especially with software often written by hobbyists for personal growth and
satisfaction.

2) Bundling

This refers to offering a combination of products instead of selling products individually e.g. Microsoft Office is a bundle
of Word, Excel, PowerPoint, Outlook, Access and other programs. Bundling can either be mixed bundling (which gives
some room for choice) or pure bundling (take it or leave it basis).Bundling is useful when:

 Consumer preferences are diverse.

 There is a synergy between the components e.g. individuals can copy and paste documents between
Microsoft Office programmes.

 Even if a large proportion of the population is indifferent about most of the bundles, components it can be
profitable if the total number of components is high e.g. DSTV’s premium bouquet has several channels which
most viewers don’t watch but is still profitable.

 When there is a high degree of variability in the component prices. By presenting consumers with a bundle,
the company can hide the price increases of some components by decreasing the prices of others.

 When complementary bundles are provided, the company may be in a position to impose a surcharge for
making the bundle available.

Differential pricing

The basis of this strategy is to charge different customers different prices. In economic terms it is
price discrimination. It can be in the form of:

 Providing discounts on the basis of purchase history to reward loyal customers or to entice first time buyers.
 Identity based or personalised pricing (charging each individual a different price) on the basis of the offer given or
income levels. It however can cause controversy and negative publicity if customers find out they are charged much
higher prices.

Subscription

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 This is when a buyer promises to buy access to content over a specific period of time e.g. internet
access over a year or pay TV over a year. On the internet, subscription pricing can be:

 All content available to paid subscribers only e.g. www.emeraldinsight.com

 Some content is free while premium content is available to subscribers only e.g. www.espn.com

 All content is free upon registration e.g. www.newyorktimes.com

 All content is free and no registration is required e.g. www.cnn.com

 Users are rewarded for browsing e.g. www.cbs.sportsline.com

Subscription reduces the seller’s demand uncertainty over time. A paid up subscription means assured demand for the
period. Many publishers offer price discounts for this reduced uncertainty. It also reduces administrative costs of
tracking transactions. Subscriptions can increase consumer usage, leading to higher advertising and sponsorship rates.

Site licensing

This pricing practice is often used with institutional buyers. Typically a large company or university
pays a flat fee so that everyone in the institution or some subset of individuals can use a software
programme or gain access to an online database e.g. a journal site like Emerald Insight is subscribed
by universities. Licensing has the following benefits for the software seller:

 It places the burden of enforcing the license and checking for software piracy on the consumer.
 It is a simple pricing model and is easy to enforce.

 It encourages new users to try a software package thus stimulating more usage.

 It reduces maintenance costs by standardizing the programme features.

Distribution of digital products

1. Digital products can be distributed as either product or service

Digital products like software can be delivered in a box or can be a service downloadable from the internet as with
antivirus products. The important distinction is that consumers do not pay for the product that comes on a CD but
pay a recurring service fee.

Customers benefit with just in time functionality. If a new feature is designed, the customer has immediate access.
They also enjoy a seamless upgrade process which can be done remotely ‘while you sleep’. Customers get to

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 spread out costs over time thus improving levels of access. From a company’s perspective, moving to a service
distribution system is advantageous since costs associated with the upgrade process are reduced if not eliminated.
The company no longer pays to produce CD’s and manuals and by using bundling strategies can create a more
profitable pricing structure. The challenge for the company is on changing mindsets regarding appreciating a
service instead of a tangible product, once off payments and seamless upgrades

2. Versioning

This involves creating a menu of products and charging different prices for each version. Digital products can be
versioned as:

 No banner ads

Some users simply hate banner ads and are prepared to pay fora version without advertisements.

 Delay

This is designed for those information products with a value tied to timelines e.g. get stock price quotes in
real time at a higher price or thirty minutes later at a reduced price OR an online version of a paper or
magazine appearing after some delay to allow sales of the print version.

 User interface i.e. charging more for a sophisticated user interface.

 Image resolution e.g. a small low quality image might be available for free while a small fee is charged for
a better resolution image.

 Features .A stripped down version is available for a low price but if the user wants to upgrade to the next
level he or she is charged a very high price.

 Speed of access i.e. consumers get low access for free or a high access speed for a small fee.

Versioning can face problems in the case of:

 A higher version can be easily changed into a lower priced version leading to public outrage or public
relations problems.
 Arbitrage e.g. a user who has obtained the high end product for a high price can easily make multiple
copies and sell them to others. Alternatively a low end user can make the product available to high end
users.

CUSTOMER RELATIONSHIP MANAGEMENT(CRM)

CRM is an approach to building and sustaining long term business with customers. The application of
technology to achieve CRM is a key element of e business. A study by Riechfield and Schefter(2000)
shows that acquiring online customers is so expensive(20 to 30 % higher than for traditional
businesses) that start up companies may remain unprofitable for at least 2 or 3 years. The research

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 also shows that by retaining 5% more customers online, companies can boost their profits by 25% to
95%.They say “if you can keep customers loyal, their profitability accelerates faster than in traditional
businesses. It costs you less and less to service them”. CRM, therefore consists of three phases:

 Customer acquisition
 Customer retention

 Customer extension

1) Customer acquisition

This entails techniques used to gain qualified leads that result in sales from new customers. Customer
acquisition starts with properly qualifying a customer profile that details a customer’s product
interests, demographic or role in the buying process. Essentially, marketing communications both
online and offline can be used in attracting customers. Offline techniques include print adverts, public
relations and word of mouth. Online techniques include search engine optimization, link building,
viral marketing and banner advertising.

2) Customer retention

It aims to retain customers of the organization (repeat customers) and to keep customers using
online channels (repeat visits).To retain customers it is important to analyse drivers of satisfaction
amongst e customers since satisfaction drives loyalty and loyalty drives profitability. Such a
relationship can be illustrated as bellow.

LOYALTY Evangelist

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 Zone of
affection

Zone of indifference

Zone of affection
Zone of
defection

Terrorist SATISFACTION

Marketers should then drive customers up the curve towards the zone of affection. It is worth noting
that the majority of customers are not in that zone and to achieve retention marketers must
understand why customers defect or are indifferent. Drivers of loyalty include order fulfillment,
product performance and post sale service and support.

Customer retention can also be achieved by:

 Personalization (the delivery of individualized content through web pages or email).

 Mass customization (delivering customized content to groups of users through web pages or e mail.

 Online community (customer interaction delivered via email groups, web based discussion forums or chat rooms)

Most importantly retention is assured by excelling in e commerce service quality. This can be
assessed by the following dimensions of the service quality model (SERVQUAL)

1. Tangibles (this dimension is influenced by the ease of use and visual appeal based on the structural and graphic design
of the site).such issues as the quality of the content, download speeds, updates, coupons and incentives are tangibles
expected by customers.
2. Reliability (refers to the availability of the website i.e. how easy it is to connect to he website as a user)

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3. Responsiveness (refers to the feedback customers get as well as the time it takes for a page request to be delivered to
the user’s browser as a page impression.)

4. Assurance (refers to the quality of response and level of privacy and security of customer information).

5. Empathy (can be achieved online by way of personalized facilities on a website as well as the response to customer
feedback by way of interactive tools).

Customer Extension

Customer extension aims at increasing the lifetime value of the customer to a company by
encouraging cross sales and other forms of repeat purchases. It is essentially the deepening of
relationship with customers through increased interaction and product transaction.

CRM Applications

The aim of CRM is to provide an interface between the customer and the employee that replaces or
facilitates direct interaction. The ultimate aim of CRM systems is to enable contact regardless of the
communications channel that the customer wants to use. Integration of such a system is essential to
give visibility of the customer information to everyone in the organization and to provide excellent
customer support.

E BUSINESS IMPLEMENTATION

Change Management

It is the process of dealing with process, technical; staff and culture change within an organization.
The following aspects have to be considered in managing a change process:

 Schedule (what are the suitable stages for introducing change?)

 Budget (how much will it cost?)

 Resources needed(types of resources needed, sources of resources and subsequent responsibilities)

 Organizational structures (do we need to revise the organizational structure?)

 Managing the human impact of e business change(what is the best way to introduce large scale e business change to
employees)

 Technologies to support e business change (the role of knowledge management ,groupware and intranets explored)

 Risk management (implications of e business led change)

Perspectives on e business change

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 The following levers of change need to be assessed to maximize the benefits of e business:

 Market and business models

 Business processes

 Organizational structure and culture

 Technology infrastructure

To achieve these different aspects of change a series of success factors is required including:

 Management buy in and ownership

 Effective project management

 Attraction and retention of the right staff to achieve change

 Employee ownership of change.

Scale of change

The extent and scale of changes varies in intentions, involvement and risks involved. Three
approaches can be identified:

a) Business Process Re engineering(BPR)

It is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in
critical, contemporary measures of performance such as cost, quality, service and speed. It has the highest risk of
failure.

b) Business Process Improvement(BPI)

It involves optimizing existing processes typically coupled with enhancements in information technology.

c) Business Process Automation(BPA)

It involves automating existing manual ways of working through information technology.

Planning change

The project of implementing e business changes requires project management skills. As a result the
following aspects:

a) Estimation (identifying the activities involved in the project i.e. work breakdown structure (WBS)).
b) Resource allocation.

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 c) Scheduling or planning (the amount of time for each task can be determined by the availability and skills of the
people assigned to the tasks. It can be monitored by comparing effort time (expected time for completion of a
task) and elapsed time (actual time taken).

d) Monitoring and controlling ( this ensures that the project is working according to plan and taking corrective action
in case of deviations)

Managing the human dimension of change

Adoption of any e business change depends on whether the change has any positive influences and
whether the people involved buy into it. It is therefore essential to obtain both management and staff
commitment. To management commitment is key to any change can be influenced :

 The degree to which the leaders can break from previous ways of working.
 The significance and comprehensiveness of change.

 The extent to which the head of the organization is actively involved with the change process.

It is the job of the manager in charge of e business to lobby top management to adopt to the
changes. In trying to achieve staff commitment change is never smooth. The change involved in
introducing a new system needs to be managed such that staff motivation and productivity are not
affected. If the rationale behind the change is not explained then all the classic symptoms of
resistance will be apparent. The transition in adoption of technologies may involve the following
stages:

 Shock
 Denial

 Emotional turmoil(fear, anger, guilt, grief)

 Acceptance(letting go)

 New ideas and strategies

 Search for meaning

 Integration

In some cases, outright hostility to change on the form of sabotage to the system is not uncommon
and in some instances users can project blame onto the system and will exaggerate claims of major
faults. A major problem is avoidance of the system whereby workers work around the system to
continue with their previous ways of working.

Lewin and Schein suggested a model for achieving organizational change involving three stages:

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a) Unfreeze the present situation by creating a climate of change by education, training and motivation of future
participants.
b) Quickly move from the present situation by quickly developing and implementing the new system.

c) Refreeze by making the system an accepted part of the way the organization works.

To achieve the unfreeze stages; different staff can be identified for different roles by the project manager:

 System sponsors. (Senior managers or board members who have bought into the e business initiative. They will try to
fire up staff with their enthusiasm and stress why the system is important to the business and its workers).
 System owners.(managers in the organization of key processes such as the procurement manager or the marketing
manager who will use the e business system to achieve benefits in their area).

 System users.(staff in different areas of the business who are actively involved in making the process happen e.g. a
buyer or a brand manager)

Three special types of system users should be influenced. These are:

a) Stakeholders.(these are staff who are respected by co workers and who can act as a source of enthusiasm for
the system)
b) Legitimisers. (They protect the norms and values of the system. They are experienced in their job and are
regarded as experts by fellow workers. They may be initially resistant to change and therefore need to be
influenced early)

c) Opinion leaders (these are people whom others watch to see whether they accept new ideas and change.
They usually have little formal power but are regarded as good ideas people who are receptive to change and
also need to be involved early in the project)

Knowledge management

Knowledge is the application of experience to problem solving. It entails the techniques and tools of
disseminating knowledge within an organization. Knowledge is either explicit (readily expressed and
recorded within information systems) or tacit (intuitive and not recorded but part of the human
mind).Knowledge management looks to turn tacit knowledge into explicit knowledge.objectives for
knowledge management include:

 Improving profit or growing revenue.

 Retaining key talent or expertise

 Increasing customer retention or satisfaction

 Defending market share against new entrants

 Gaining faster time to market new products

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 Penetrating new marketing segments

 Developing new products or services

According to Sveiby(2000), based on an analysis of 40 companies implementing knowledge

management, there are 3 general types of knowledge management initiatives.

a) External structure initiative i.e. to gain knowledge from customers or offer customers additional knowledge.
b) Internal structure initiative i.e. such as building a knowledge sharing culture, creating new revenues from existing
knowledge then storing and spreading it.

c) Competence initiatives such as creating careers based on knowledge management and creating a microenvironment
for knowledge transfer and learning.

In implementing knowledge management, it is important to incentivize sharing of knowledge

amongst staff. Saunders (2000) suggests an approach termed connection in knowledge management.
This involves:

 Connection to the explicit knowledge via an intranet with a portal with search tools and a directory of information.
 Connection of people to people with specialized knowledge through an expertise locator (a type of phone directory
with people in different expertise categories also accessed via search tools)

 Connection to communities of practices which can help sharing and learning between people

 Connection of knowledge and people with processes, products and services.

Alternative tools for managing knowledge include:

o Intranets and document databases or knowledge bases as Lotus Notes or Domino.

o Communications techniques such as chat, discussion groups and video conferencing.

o Electronic document management systems such as Interleaf Publish.

o Expert systems

In summary, the stages for achieving knowledge management are:

a) Capturing knowledge
b) Interpreting knowledge

c) Deploying knowledge through intranets or knowledge portals.

d) Staff training

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e) Measurement of the impact of knowledge management programmes.

Risk Management

It entails evaluating potential risks, developing strategies to reduce risks and learning about future
risks. The process involves:

a) Identifying risks including their probabilities and impacts.

b) Identifying possible solutions to these risks.

c) Implementing solutions targeting the highest impact and most likely risk areas.

d) Monitoring the risks to learn for future risk assessment.

Organisational risk exposure factors include:

 Growth risks such as pressures for performance, rate of expansion and inexperience of key employees.
 Culture risks i.e. rewards for entrepreneurial risk taking. Executive resistance to bad news and lack of action and levels
of internal competition.

 Information management risks like transaction complexity and velocity, gaps in diagnostic performance measures (poor
reporting capabilities) and the degree of decentralized decision making.

Security design

Security concerns are a major barrier to e business adoption. It is therefore important for security to
ensure safety of funds from fraud as well as ensuring privacy. Security risks from a customer or
merchant perspective include:

 Transaction or credit card details stolen in transit.

 Customer credit card details stolen from merchant’s server

 Merchant or customer are not who they claim to be.

Principles of secure systems

Generally a transaction involving transfer of funds involves players such as:

 The purchaser(consumers buying the goods)

 The merchant(the retailers)

 The certification authority( a body that issues digital certificates that confirm the identity of purchases and merchants)

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 Banks

 Electronic token issues(a virtual bank issues digital currency)

The basic requirements for security systems from these different parties include:

a) Authentication (confirming if the parties to the transaction are who they claim to be)
b) Privacy and confidentiality

c) Integrity (checks that the message sent is complete and that it is not corrupted)

d) Non repudiability (ensures sender cannot deny sending message)

e) Availability (how threats to continuity and performance of the system be eliminated)

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