Chapter 1

The Revolution Is Just Beginning

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E-COMMERCE BUSINESS SOCIETY & CHALLENGES

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Learning Objectives

Define e-commerce and describe how it differs from ebusiness Identify the unique features of e-commerce technology and discuss their business significance Describe the major types of e-commerce Understand the visions and forces behind the E-commerce I era Understand the successes and failures of E-commerce I Identify several factors that will define the E-commerce II era Identify the major themes underlying the study of ecommerce Identify the major academic disciplines contributing to ecommerce research
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Amazon.com:Tuned-Up and Profitable

Story of Amazon in many ways mirrors story of ecommerce itself Amazon offers consumers four compelling reasons to shop: selection, convenience, price and service Founded in 1995, went public in 1997 From 1997-2000, revenues increased from $148 million to $2.7 billion but so did losses, to $1.4 billion In 2001-2002, new focus on cost-cutting and achieving profitability leads to first quarterly profits ever in 2002
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E-commerce Developments and Themes-2003

Contrary to expectations, e-commerce is rebounding and the e-commerce revolution is still just beginning More and more people and businesses are using the Internet to conduct commerce The e-commerce channel is deepening as more and more products and services come online Broadband and wireless Internet access are growing E-commerce business models are being refined to achieve higher levels of profitability At societal level, there is continued conflict over copyrights, content regulation, taxation, privacy, and Internet fraud and abuse.
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New Developments in E-commerce

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E-commerce Defined

E-commerce involves digitally enabled commercial transactions between and among organizations and individuals Digitally enabled transactions include all transactions mediated by digital technology Commercial transactions involve the exchange of value across organizational or individual boundaries in return for products or services
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E-commerce vs. E-business

Debate among consultants and academics about meanings and limitations of terms ecommerce and e-business We use the term e-business to refer primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm E-business does not include commercial transactions involving an exchange of value across organizational boundaries
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The Difference between E-commerce and E-business

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Contd..
E-commerce deals with buying ,selling and distribution of information products and services through computer Networks.It ensures minimum inventory control, improved customer service and global reach . E-Business is a much broader term .It involves more than buying and selling of products and / or services .It includes several other areas like SCM,CRM,Knowledge Management ,BI and collaborative technologies .
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Why Study E-Business

E-commerce technology is different and more powerful than any of the other technologies that we have seen in the past century. E-commerce has challenged much traditional business thinking E-commerce has a number of unique features that help explain why we have so much interest in e-commerce

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Stages of E-Business
1.First Phase Transaction Oriented e-Business: It is also called as Dot Com Boom Phase. Dotcom companies focused on having better search ,graphical product display and payment processing capabilities. 2. Second Phase Customer Centric e-Business: It involves the digitization of an organizations internal business processes as well as its external interfaces with customers, suppliers and partners. Growing importance of service based differentiation over price based competition is a significant issue.

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The rise of E-Business : Reasons for using E-Business

Transaction Management Integrates customers and suppliers ,Cost reduced Business Efficiency Production and distribution efficiency can be increased in entire value chain , right from the procurement of goods to customer service. Reshaping customer relationships Reaching new markets and segments

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Key Characteristics of EBusiness

Customer is King. Entry barriers are low online models can be easily replicated E-Business leads to disintermediation . Economies of scale

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Traditional business v/s EBusiness

Traditional Business
Product Centric Limited geographical locations No use of IT Tools Manual

E-Business
Customer centric Global Reach Use of IT Tools Automation

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Organizational Culture for EBusiness

Ensure

commitment of top management Create incentives that support e-business goals Avoid lengthy analysis Flatten the hierarchy Expect occasional sub optimal results. Test everything and test all the time .

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Seven Unique Features of E-commerce Technology and Their Significance

Is ubiquitous (available everywhere, all the time) Offers global reach (across cultural/national boundaries) Operates according to universal standards (lowers market entry for merchants and search costs for consumers) Provides information richness (more powerful selling environment) Is interactive (can simulate face-to-face experience, but on global scale) Increases information density (amount and quality of information available to all market participants) Permits personalization/customization
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Seven Unique Features of E-commerce Technology

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Types of E-commerce
Classified by nature of market relationship Business-to-Consumer (B2C) Business-to-Business (B2B) Consumer-to-Consumer (C2C) Classified by type of technology used Peer-to-Peer (P2P) Mobile commerce (M-commerce)
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Major Types of E-commerce

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Business-to-Consumer (B2C) E-commerce

It deals with B2C transactions ,selling their products and services directly to individual . Many types of business models within this category including online retailers, content providers, portals, transaction brokers, service providers, market creators and community providers

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Problems with B2C Model

Lack of security of online payments. Scope for fraud Lack of privacy Difficulty in access. Examples : Amazon.com, Indiatimes.com

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Business-to-Business (B2B) E-commerce

Involves businesses focusing on selling to other businesses,B2B websites offer streamline operations between organization and their business partners. Largest form of e-commerce Two primary business models within B2B: Net marketplaces (includes e-distributors, eprocurement companies, exchanges and industry consortia) Private industrial networks (includes single firm networks and industry-wide networks)

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Benefits of B2B Marketplaces

Efficient management of inventory Quick response to customer demand Reduction in the cost of paperwork Efficient and fast product launch Control over fraudulent purchases Examples : comauction.com,bigequip.com

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Consumer-to-Consumer (C2C) E-commerce

Provides a way for consumers to sell to each other, with the help of an online market maker eBay most well-known example Estimated that size of C2C commerce will reach $15 billion by 2004 It enables sale and purchase of products and services between individual customers. Examples : sale of automobiles, furnitures ,real estate ebay.com
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Peer-to-Peer (P2P) E-commerce

Uses peer-to-peer technology, which enables Internet users to share files and computer resources without having to go through a central Web server Napster most well-known example until put out of business for copyright infringement Today, Kazaa is the leading P2P software network, although also under attack for copyright infringement
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M-commerce

Use of wireless digital devices such as cell phones and handheld devices to enable transactions on the Web Most widely used in Japan and Europe (especially Finland) Expected to grow rapidly in U.S. over the next five years.

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Business to Employee Model(B2E)

It uses an intranet available with in the company in order to communicate to the employees about various products and/or services . B2E websites serve as communication channels that enable dissemination of organizational information of all employees who are located worldwide.

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Government to Citizen Model(G2C)

It provides platform for govt. to connect with citizens in order to provide benefits to citizens and to improve public services. eSeva is an example implemented in A.P. E-citizen is another example implemented in Singapore for e-governance. G2G is another model which provides eadministration.It aims at cutting costs and improving govt. processes by interconnecting government departments.
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Growth of the Internet

The Internet is a worldwide network of computer networks built on common standards Internet was first created in 1960s Today is worlds largest network, connecting over 500 million computers worldwide Services include the Web, e-mail, file transfers, etc. Can measure growth of Internet by looking at number of Internet hosts with domain names: In January 2003, there were 170 million Internet hosts with domain names, up from 70 million in 2000 Growing at about 50% a year
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The Growth of the Internet, Measured by Number of Internet Hosts with Domain Names

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Growth of the Web

Web is the most popular service on the Internet Developed in early 1990s Provides access to Web pages -- documents created with HTML Can include text, graphics, animations, music, videos Web content in form of Web pages has grown exponentially, from over 2 billion pages in 2000 to over 6 billion pages in 2003
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The Growth of Web Content

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Origins and Growth of E-commerce

Precursors to e-commerce include Baxter Healthcare (in 1970s, used telephonebased modems to reorder supplies; in 1980s, became a PC-based remote order entry system) Electronic Data Interchange (EDI) standards developed in 1980s; permitted firms to exchange commercial documents and conduct digital commercial transactions across private networks French Minitel (1980s videotext system; still in use today) None of these precursor system had functionality of Internet
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The Growth of B2C E-commerce

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The Growth of B2B E-commerce

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Technology and E-commerce in Perspective

First, the Internet and Web are just two of a long list of technologies, such as automobiles and radio, that have followed a similar historical path: Creation of business models designed to leverage the technology and explosive early growth, followed by retrenchment and then a long-term successful exploitation of the technology by larger established firms Second, although e-commerce has grown explosively, eventually its growth will cap as it confronts its own fundamental limitations.

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Potential Limitations on the Growth of B2C E-commerce

Expensive technology Although currently a limitation, may become less so as prices of entrylevel PCs fall Complex software interface Integration with television may reduce this limitation Sophisticated skill set This limitation may recede as PC operating system evolves, becomes more simple Persistent cultural attraction of physical markets and traditional shopping experiences unlikely to change Persistent global inequality limiting access to telephones and computers unlikely to change
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Limitations on the Growth of B2C E-commerce

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E-commerce I and E-commerce II

E-commerce I: A period of explosive growth and extraordinary innovation; key concepts developed and explored Begins in 1995, ends in March 2000 when stock market valuations for dot.com companies begin to collapse Thousands of dot.com companies formed, backed by over $125 billion in financial capital E-commerce II: Characterized by a reassessment of e-commerce companies and their value Begins in January 2001; ongoing
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The Visions and Forces Behind E-commerce 1: 1995-2000

For computer scientists: A vindication of the vision of a universal communications and computing environment Belief that Internet should not be controlled by government, and remain free for all For economists: Vision of a perfect Bertrand market and frictionfree commerce, characterized by low transaction costs, low search costs, price transparency, low menu costs, dynamic pricing, disintermediation, and elimination of unfair competitive advantages
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The Visions and Forces Behind Ecommerce I: 1995-2000 (contd)

For entrepreneurs, their financial backers and marketing professionals, e-commerce represented an extraordinary opportunity to return far above normal returns on investment based on: Worldwide access to consumers New marketing communications technologies that were universal, inexpensive and powerful Ability to segment market First mover advantages by building in switching costs Network effects
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Insight on Business: A Short History of Dot.Com IPOs

Between 1998-2000, over $120 billion invested by venture capitalists in over 12,450 dot.com start-up ventures Over 1,260 of these firms went public in initial public offerings (IPOs) During E-commerce I heyday (1998-2000), shares often tripled or quadrupled in value on 1st day of trading By 2003, many of these firms either are trading at much lower values or have shut down Second wave of dot.com investment is focusing on acquisition of Web companies
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E-commerce II: 2001-2007

Crash in stock market values for e-commerce companies throughout 2000 marks end of Ecommerce I period Reasons for crash:

Run-up in technology stocks due to enormous information technology capital expenditure of firms rebuilding their internal business systems to withstand Y2K Telecommunications industry had built excess capacity in high-speed fiber optic networks 1999 Christmas season provided less sales growth that anticipated and demonstrated e-commerce was not easy (eToys.com) Valuations of dot.com and technology companies had risen so high supporters were questioning whether earnings could justify the prices of the shares.
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E-commerce Today: Successes and Failures

E-commerce I a stunning technological success E-commerce I a mixed success from a business perspective Many visions developed during E-commerce I not fulfilled Economists visions of friction-free commerce of extreme market efficiency not entirely realized Entrepreneurs and venture capitalists visions have not materialized exactly as predicted either

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E-commerce I and E-commerce II Compared

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Predictions for the Future

Technology of e-commerce will continue to propagate through all commercial activity E-commerce prices will rise to cover the real cost of doing business on Web and pay investors reasonable rate of return E-commerce margins and profits will rise to levels more typical of all retailers In B2C and B2B, traditional Fortune 500 companies will play growing and dominant role Number of successful pure online companies will decline and most successful e-commerce firms will adopt mixed clicks and bricks strategies Growth of regulatory activity worldwide
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Top 25 Shopping Web Sites for Week Ending November 10, 2002

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Understanding E-commerce: Organizing Themes

Technology: Development and mastery of digital computing and communications technology Business: New technologies present businesses and entrepreneurs with new ways of organizing production and transacting business Society: Intellectual property, individual privacy and public policy
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The Internet and the Evolution of Corporate Computing

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