Chapter - 4

THE DIGITAL ELECTRONIC

FIRM: COMMERCE
ELECTRONIC
BUSINESS AND
Objectives:
• Explain the challenges before an e-business
management.
• Compare and contrast e-business model with
traditional business organizational model.
• Explain the strength of ERP, SCM and CRM.
• Explain how e-business manager’s role and
responsibilities are changed.
• Describe how manager is knowledge worker in an
e-business.
e-business enterprise(digital firm):
The emergence of internet, business of the organization of
the21th century has undergone structural, cultural and
qualitative changes and a new organizational structure has
emerged which is known as e-business enterprise. This
enables employees, professionals, teams, groups, vendors
and customers to perform business operations through
electronic exchange of data and information anywhere at any
time. The business operations are performed through e-
communication and e-collaboration initiatives. Therefore e-
business has a global market, reach, source and global
competition.
Managing the E-enterprise
Due to internet capabilities and web technology, the
definition of traditional business organization has undergone
a change where scope of the enterprise now includes other
company locations; business partners, customers and
vendors. It has no geographic boundaries as it can extend its
operations where internet works. All this possible due to
internet and web, moving traditional paper driven
organization to information driven internet enabled e-
business enterprise. E-business enterprise is open twenty-
four hours, and being independent, managers, vendors and
customers can transact business anytime from anywhere.
 Cont..
Internet capabilities have given e-business enterprise a cutting edge
to increase the business value. It has opened new channels of
business, as buying and selling can be done on internet. It enables
businesses to reach new markets anywhere across the world due to
the communication capabilities. It has empowered customer and
vendors/ suppliers through secure access to information to act on,
wherever necessary. The costs of business operations have come
down significantly due to the elimination of paper driven processes,
faster communication and effective collaborative working. The effect
of these radical changes is the reduction in administrative and
management overheads, reduction in inventory, faster delivery of
goods ad services to the customers . In e-business enterprise the
traditional people organization based on ‘Command Control’
principle is absent. It is replaced by people organizations that are
empowered by information and knowledge in performing their roles.
 Cont……
They are supported by information system, application packages,
and DSS. It is no longer a functional , product and project or
Matrix organization of people but e-organization where people work
in network environment as a team or work group in virtual mode.
E-business enterprise is more process- driven, technology-enable
and uses its own information and knowledge to perform. It is
lean in number, flat in structure, broad in scope and is a learning
Organization. In e-business enterprise most of the things are
electronic, using digital technologies and working on database,
knowledge bases, directories and document repositories. The
business processes are conducted through enterprise S/W like EPR,
SCM and CRM supported by data warehouse, decision support and
knowledge management system.
 Cont….

today most of the organizations are using internet technology,

N/W, and wireless technology for improving business
performance, measured in term of cost, efficiency
competitiveness and profitability. They are using e-business
and e-commerce solution to reach faraway locations to deliver
products and services. The enterprise solutions like ERP, SCM,
and CRM run on internet and WAN (wide area n/w). The
business processes across the organization and out outside,
run on e-technology platform using digital technology. Hence
today's business firm is also called E-enterprise of digital firm.
The paradigm shift to e-enterprise has brought four
transformation, namely
• Domestic business to global business.
• Industrial manufacturing economy to knowledge-based service
economy.
• Enterprise Resource Management to Enterprise Network
Management.
• Manual document driven business process to paperless,
automated, electronically transacted business process.
These transformations have made the conventional
organizational design obsolete. The basis of the conventional
design is command and control which is now collaborates and
control. This change has affected the organizational structure,
scope of operations, reporting mechanisms, work practices,
workflow and business processes at large.
 Table: comparison between conventional design and E-
organization
Conventional Organization Design E-enterprise
•Top heavy organizational structure •Flat organization structure

•Work & work place location at one place •Separation of work from work place
location

•Manual & document-based work flows • paperless work flows

•High administrative & management overheads •low overheads

•Inflexible, rigid and longer business process cycle •Flexible, agile and responsive
process cycle

• Private business process systems for self use. They •Public business processes and
are barred for usage to customer, vendors and systems for use by customers,
business partners. vendors and business partners.

•Low use of technology •Use of internet, wireless and

network technologies
Organizations of Business in an E-enterprise:
Internet technology is creating a universal bench or platform
for buying and selling of goods, commodities and services.
Essentially, internet and networks enable integration of
information, facilitate communication, and provide access to
everybody from anywhere. And s/w solution make them faster
and self-reliant as they can analyze data information, interpret
and use rules and guidelines for decision-making. These
enabling capabilities of technology have given rise to four
business models that work together in an e-enterprise
organization. They are:
1. e-business
2. e-commerce
3. e-communication
4. e-collaboration
 e-Business Systems:
• e-business is not synonymous with e-commerce. E-business is
much broader in scope, going beyond transactions to signify
use of the Internet, in combination with other technologies
and forms of electronic communication, to enable any type of
business activity.
 Cont…
• This chapter introduces the fast-changing world of
business applications of information technology, which
increasingly consists of what is popularly called e-business
applications. Remember that e-business, a term originally
coined by Lou Gerstner, CEO of IBM, is the use of the
Internet and other networks and information technologies
to support e-commerce, enterprise communications and
collaboration, and Web-enabled business processes, both
within a networked enterprise and with its customers and
business partners. E-business includes e-commerce, which
involves the buying, selling, marketing and servicing of
products, services, and information over the Internet and
other networks
 E-business
The scope of e-business is limited to executing the core
business processes of an organization. These processes may
have external interface like suppliers, customers, contractors,
consultants and so on. The core business processes of an
organization are procurement, manufacturing, selling,
distribution, delivery and accounting. These core processes are
best run by application packages like Enterprise Resource
Planning (ERP). If the definition of enterprise is made wider,
including customer, suppliers, and distributors, application
package like supply chain management (SCM) is best suited for
the planning and execution of the entire business process. Also
use internet enabled system and other technologies to handle
these processes more effectively.
Backend Support System :
• Transaction processing, workflow, work group and process control
applications are the backend support systems to main ERP & SCM
enterprise management systems.
For example: when supplier sends goods, it is received in the
warehouse. This event is processed e-way using e-business
systems suite. The receipt documents and packages are read by
bar coding system. Then receipt processing is done to confirm the
validity of dispatch by the supplier, confirmation of quality,
acknowledging the receipt, updating the inventory, communication
of receipt to manufacturing, updating the purchase order, effecting
material accounts and supplier account, creating a liability in
payables and posting it in to cash flow projections.
 Cont…..
In this event processing, workflow system is used where
quality of goods is checked, confirmed and certified in stages
by the three agencies in the organization, this event is
processed by a work group, which includes receiver at the
warehouse, QA inspector and warehouse manager, playing
their respective roles in the receipt processing, as specified in
the workgroup application. Having accepted the goods,
automated and process controlled the goods movement,
warehouse system takes over, and reads the receipt record to
move the goods physically to an assigned bin on the rack.
 E-business use……..
E-business systems use internet, intranet , extranet capabilities to process
an event in a seamless manner covering all technical, commercial,
business aspects and implications of an event. They perform internal
business operations and Interface with external agencies.
E-business system scope manages cross-functional application system as
a single business process:
It integrates cross functions seamlessly, automates the tasks and updates
the information in real time. The ERP/SCM and now CRM are a family of
s/w solution packages dedicated to the core management of functions of
the business. They are supported by front-end and back-end systems and
applications designed for transaction processing, workflow management,
work group processing and automated process control. E-business system
use client/server architecture and run on internet platform. E-business
systems lay the foundation for other enterprise application, namely e-
commerce, e-communication and e-collaboration.
Cross-Functional Enterprise Applications
• Many companies today are using information technology
to develop integrated cross-functional enterprise systems
that cross the boundaries of traditional business
functions in order to reengineer and improve vital
business processes all across the enterprise. These
organizations view cross-functional enterprise systems as
a strategic way to use IT to share information resources
and improve the efficiency and effectiveness of business
processes, and develop strategic relationships with
customers, suppliers, and business partners.
 This enterprise application architecture presents an overview
of the major cross-functional enterprise applications and their
interrelationships.

Cross-function
supplier

SCMSCM Procurement
KB Dis
Empl
S/ trib Part
oyee ERP
DS uti ner
s
S on
CRCRM

Customer
 Enterprise Application Integration
(EAI)
• Enterprise application integration (EAI) software is
being used by many companies to connect their
major e-business applications. EAI software enables
users to model the business processes involved in
the interactions that should occur between
business applications. EAI also provides middleware
that performs data conversion and coordination,
application communication and messaging services,
and access to the application interfaces involved
Enterprise application integration software interconnects
front-office and back-office applications .
EIA

Front Office
Back Office
Customer Service Enterprise Application Integration
Distribution
Field-Service
Manufacturing
Product
Scheduling
Configuration
Finance
Sales Order Entry
 How EAI works:
• 1 An order comes in via the call center, mail, e-mail, the Web,
or fax.
• 2 Customer information captured in the order process is sent
to a “new customer” process, which distributes the new
customer information to multiple applications and databases.
• 3 Once the order is validated (customer, credit, items),
relevant details are sent to order fulfillment—which may pick
the requested items from inventory, schedule them for
manufacture, or simply forward them.
• 4 Fulfillment returns status and shipment info to the order-
entry system...
• 5 ...and to the call center, which needs to know about
outstanding orders.
 E-business and ERP:

ERP is the technological backbone of e-business, an enterprise

wide transaction framework with links into sales order
processing, inventory management and control, production and
distribution planning, and finance .

The current e-business system scope is built through ERP,

dedicated to manufacturing resource management for effective
use of capacity and enhancing productivity. SCM is dedicated to
logistics and distribution management and CRM is dedicated to
customer satisfaction.
 Use of IT in e-business
IT, the backbone of e-business, enables more precise target
marketing towards intended audience. Organizations use websites
and portals to store and share information, use n/w to
communications, co-ordinate, and collaboration amongst structured
teams and virtual teams. Most of the processes are automated and
they use internet, intranet and Extranet for communication and e-
business application packages to run the functional systems in an
integrated manner.

IT in Marketing System : IT helps to reach customers directly and is

in a position to understand customer behavior and customer’s
demographic/ psychographic profile; it then helps to segment
market by customer for advertising, promotion and contact.
THE EFFECT OF THE INTERNET ON BUSINESS MODELS
IT in Manufacturing system :
IT helps to automate a number of management processes
relating to resource, capacity, engineering & design,
maintenance and support. The application of IT is so strong
that is termed as Computer Integrated Manufacturing (CIM)
or Computer Aided Manufacturing(CAM).
IT in Accounting and Finance system: In this system IT
application is very strong. E-business applications in this area
are capable of accounting every business entity such as
material, men, machines, cash, customer, vendor and so on.
All processes, which deal with transaction, computing,
accounting and analysis are automated using system
intelligence and knowledge driven intelligent systems.
THE EFFECT OF THE INTERNET ON BUSINESS MODELS
THE EFFECT OF THE INTERNET ON BUSINESS MODELS
THE EFFECT OF THE INTERNET ON BUSINESS MODELS
How Intranets Support Electronic Business
How Intranets Support Electronic Business
Summary of e-business
An integrated e-business system is capable of forecasting
resources requirement, managing resources, budgeting
capital, sales, manpower and measuring financial
performance.
E-commerce:
E-commerce is a second big application next to digital firms or ERP.
It essentially deals with buying and selling of goods. With the
advent of internet and web technology, e- commerce today covers
an entire commercial scope online including design and developing,
marketing, selling, delivering, servicing and paying for goods.
The entire model successfully works on web platform and uses
internet technology. E-commerce process has two participants
namely buyer and seller, like in the traditional business model. And
unique and typical to e-commerce, there is one more participant
known as “Merchant Server”. Merchant server in e-commerce
secures payment to seller by authorization and authentication of
commercial transaction.
 Introduction to e-Commerce
• E-commerce is changing the shape of
competition, the speed of action, and the
streamlining of interactions, products, and
payments from customers to companies and
from companies to suppliers.
 cont…
• For most companies today, electronic commerce is more than just buying
and selling products online. Instead, it encompasses the entire online
process of developing, marketing, selling, delivering, servicing, and paying
for products and services transacted on inter-networked, global
marketplaces of customers, with the support of a worldwide network of
business partners. In fact, many consider the term “e-commerce” to be
somewhat antiquated. Given that many young businesspeople have grown
up in a world in which online commerce has always been available, it may
soon be time to eliminate the distinction between e-commerce and e-
business and accept that it is all just “business as usual.” Until then, we
will retain the term “e-commerce” because it allows for a clearer picture
of the differences between online and more traditional business
transactions
 Cont…
• e-commerce systems rely on the resources of
the Internet and many other information
technologies to support every step of this
process. We will also see that most
companies, large and small, are engaged in
some form of e-commerce activities.
Therefore, developing an e-commerce
capability has become a competitive necessity
for most businesses in today’s marketplace
 The Scope of e-Commerce
• The range of business processes involved in the marketing, buying, selling,
and servicing of products and services in companies that engage in e-
commerce. Companies involved in e-commerce as either buyers or sellers
rely on Internet-based technologies and e-commerce applications and
services to accomplish marketing, discovery, transaction processing, and
product and customer service processes. For example, e-commerce can
include interactive marketing, ordering, payment, and customer support
processes at e-commerce catalog and auction sites on the World Wide
Web. However, e-commerce also includes e-business processes such as
extranet access of inventory databases by customers and suppliers
(transaction processing), intranet access of customer relationship
management systems by sales and customer service (service and support),
and customer collaboration in product development via e-mail exchanges
and Internet newsgroups (marketing/discovery).
 Advantages of e-commerce:
• The advantages of e-commerce allow a business of
virtually any size that is located virtually anywhere on
the planet to conduct business with just about anyone,
anywhere. Imagine a small olive oil manufacturer in a
remote village in Italy selling its wares to major
department stores and specialty food shops in New
York, London, Tokyo, and other large metropolitan
markets. The power of e-commerce allows geophysical
barriers to disappear, making all consumers and
businesses on earth potential customers and suppliers.
 e-Commerce Technologies
• Which technologies are necessary for e-commerce?
• The short answer is that most information technologies and
Internet technologies involved in e-commerce systems. A
more specific, which gives an example of the technology
resources required by many e-commerce systems. The
hardware, software, data, and network components used by
Free Markets to provide business-to-business (B2B) online
auction e-commerce services.
E-commerce process model can be viewed in four ways and
categories:

• B2C: Business Organization to Customer

• B2B: Business Organization to Business
• C2B: Customer to Business Organization
• C2C: Customer to Customer
• Business-to-Customer (B2C):
– Electronic retailing directly to individual customers
• Business-to-Business (B2B):
– Electronic sales among businesses

• Customer to Business Organization(C2B):

– Customer initiates actions after logging on to seller’s
website or server.

• Consumer-to-Consumer (C2C):
– Consumers selling electronically to other consumers
• Mobile Commerce (M-Commerce):
– use of handheld wireless devices for purchasing goods and services
– Used in B2B and B2C e-commerce transactions
 B2C model
In B2C model, a business organization uses website or portals
to offer information about a product, through multimedia
clippings, catalogues, product configuration guidelines,
customer histories so on. A new customer interacts with the
site and uses interactive order processing system for order
placement. On placement of order, secured payment systems
come in to operation to authorize and authenticate payment to
seller. The delivery system then takes over to execute the
delivery to customer.
Eg: messaging and information downloading is a big application,
news bulletin, announcing information to customer by bank
etc.
 B2B model
In B2B model, buyer and seller are business organizations. They
exchange technical & commercial information through
websites and portals. Then model works along similar lines to
B2C. More advanced B2B model uses extranet and conducts
business transactions based on the information status
displayed on the buyer’s application server. Auto component
industry sues this model for supplying pars and components
to auto manufactures based on the inventory levels and
production programme.
 C2B model :
In this model, customer initiate actions after logging on to
seller’s website or to server. On the server of the selling
organization, e-commerce applications are present for the use
of the customer.
The entire internet banking process works on C2B model
where accounting holders of the bank transact a number of
requirements such as seeking account balance, payment,
money transfer and so no.
Eg: bill payments, electronic mail, video conferencing etc
 C2C model
In this model, customer participates in the process of selling
and buying through the auction website. In this model,
website is used for personal advertising of products or
services. E-newspaper website is an example of advertising
and selling of goods to the consumer.
Eg: P2P e-mail, sending e-greetings, ordering and sending gifts
are C2C model applications.(can done by buyer/seller,
teacher/student, sister/brother, manager/officer etc)
In all models, e-business and communication processes
are executed through electronic documents. Table shows
an example:

Information on paper Information on e-document

Product Information brochure Product catalogue document

database

Order on paper Electronic Order

Conformation letter e-mail

Payment cheque Electronic cash, credit card, e-

cheque
 ELECTRONIC COMMERCE PAYMENT SYSTEMS
tal Credit Card Secure services for credit card payments
easy to use, cash less environment

tal Wallet Software that stores credit card info, address etc
g : Amazon .com’s 1-Click shopping

mulated Balance Payment System Accumulates micropayments as a debit balance:

Q Pass

al Cash (e-cash) A stored value digital account enabling instant paymen

g. e-Coin , Mondex smart cards

r-to-Peer Payment Digital currency for vendors who do not h

pre-arranged paymentoptions; eg:PayPal

tal Chequing Electronic cheque with digital signature:e

CHEXpedite
ctronic Billing Supports electronic paymen of monthly b
eg. epost.ca
ELECTRONIC COMMERCE PAYMENT SYSTEMS
 e-Commerce Success Factors
• On the Internet, the barriers of time, distance,
and form are broken down, and businesses are
able to transact the sale of goods and services
24 hours a day, 7 days a week, 365 days a year
with consumers all over the world. In certain
cases, it is even possible to convert a physical
good (CDs, packaged software, a newspaper)
to a virtual good (MP3 audio, downloadable
software, information in HTML format).
e-Commerce Success Factors
Selection and Value: Attractive product selections, competitive prices, satisfaction
guarantees, and customer support after the sale.
Performance and Service: Fast and easy navigation, shopping, and purchasing, and
prompt shipping and delivery.
Look and Feel: Attractive Web storefront, Web site shopping areas, multimedia
product catalog pages, and shopping features.
Advertising and Incentives: Targeted Web page advertising and e-mail promotions,
discounts, and special offers, including advertising at affiliate sites.
Personal Attention. Personal Web pages, personalized product recommendations,
Web advertising and e-mail notices, and interactive support for all customers.
Community Relationships. Virtual communities of customers, suppliers, company
representatives, and others via newsgroups, chat rooms, and links to related sites
Security and Reliability. Security of customer information and Web site transactions,
trustworthy product information, and reliable order fulfillment.
Great Customer Communication. Easy-to-find contact information, online order
status, product support specialists.
MANAGE MENT CHALLENGES & OPPORTUNITIES
MANAGEMENT CHALLENGES & OPPORTUNITIES

Current status of E-Business in Canada:

• Internet use per capita – higher than US
• E-commerce use per capita or per business – lower
than US
• E-commerce sales
– up 27% in 2002 (down from 46% in 2001)
– .6% of total revenue
– 7 firms stopped using e-commerce in 2002 for
every 10 that started
• What are the barriers?
 MANAGEMENT CHALLENGES & OPPORTUNITIES

Barriers Reported (Cdn E-Business Roundtable):

• Products not suited to e-commerce (56%)
• Prefer current business model (36%)
– E.G. ‘channel conflicts’
• Security concerns (14%)
• High costs (12%)
– HBC - $40M / yr to upgrade web site
• Lack of skills (10%)
• Customers not ready to purchase online (9.6%)
MANAGEMENT CHALLENGES & OPPORTUNITIES

Roundtable Recommendations
– Put all government services online
• Canada already leads the world in e-government
• portal at http://www.gc.ca/
– Offer financial incentives to businesses
– Expand the e-business talent pool
– Build Canada’s e-business leadership profile
internationally
 STATUS OF CANADIAN E-
COMMERCE
Opportunities for Canadian Leadership:
1. Network Infrastructure
2. Multimedia North
3. Global Customer Care Centres
4. Remote Service Provider
5. Web Tools Developer