E-business

E-BUSINESS AND E-COMMERCE

Learning Objectives •

Describe electronic commerce, its scope, benefits, limitations, and types.

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Describe the major applications of business-to-consumer commerce, including service industries, and major issues faced by e-tailers.

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Describe business-to-business applications.

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Describe emerging EC applications such as intra-business and B2E commerce.

E-Commerce & E-Business E-commerce describes the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, including the Internet. E-business refers to a broader definition of e-commerce, not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, conducting e-learning, and processing electronic transactions.

• Electronic commerce can take several forms depending on the degree of digitization (the transformation from physical to digital). • The degree of digitization relates to: – the product (service) sold – the process – the delivery agent (or intermediary).

Turban et al., 2005

E-Business – Transaction Medium Most e-commerce is done over the Internet. But EC can also be conducted on private networks, such as value-added networks (VANs, networks that add communication services to existing common carriers), on local area networks (LANs) or wide area networks (WANs)

Turban et al., 2005

E-Business – Transaction Types E-commerce transactions can be done between various parties.

• Business-to-business (B2B) • Collaborative commerce (c-commerce) • Business-to-consumers (B2C) • Consumers-to-businesses (C2B)

• Consumer-to-consumer (C2C) • Intra-business (intra-organizational) commerce • Government-to-citizens (G2C) • Mobile commerce (m-commerce) Turban et al., 2005

Reach ❖

Access and connection : ❖

the number of customers a business can connect with;

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the number of products it can offer to those customers.

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Unconstrained by physical limitations - Reach explodes !

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Example : Navigation function (catalogue) separated from physical function (inventory).

Evans and Wurster, 1999

Implications of Reach ❖

Unstable business boundaries;

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Suppliers - bypass retailers and build relationship with end consumer;

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Large suppliers - lose control of navigation and sources of differentiation;

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Must achieve the reach that the buyer values.

Evans and Wurster, 1999

Richness ❖

Two dimensions : ❖

Depth and detail of information that the business can give the customer;

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Depth and detail of information that it collects about the customer

Evans and Wurster, 1999

Richness Rich Customer Information ❖

Opportunity for rich customer information: ❖

Example - browsing behaviour, purchase history & demographics etc.;

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Integrate information from a variety of sources;

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Potential barriers: ❖

Privacy constraints;

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Consumer can search for and organise information.

Evans and Wurster, 1999

Affiliation ❖

Affiliation - whose interests the business represents;

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Navigators - opportunity to affiliate with customers;

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Consumer given greater variety and sophistication:

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Rich information from wide-reaching sources at negligible costs;

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‘Meta Navigators’ - use technologies that compare multiple electronic retailers;

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Supplier industries - greatest difficulty with controlling navigation.

Evans and Wurster, 1999

How is e-business different? ❖

Reduction in physical boundaries and distance;

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Serve larger customer base more efficiently;

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Target specific customer groups;

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The Internet is an interactive marketing medium;

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More detailed information on customer transactions; and

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Improved transaction efficiency.

Kim et al., 2004

Communications Types C5

C1 M

O

Content

M Content

C4

C4

Internet Medium

Content

M M

O C3

M

M

Content

O

C2

O

Many-to-many communications via the Internet medium O - Organisation M - Communicating Message

C - Customers

Contrast with Conventional Marketing

“a many-to-many mediated communications model in which consumers can interact with the medium, firms can provide content to the medium and, in the most radical departure from traditional marketing environments, consumers can provide commercially oriented content to the medium.”

Hoffman & Novak, 1997

What hasn’t changed ❖

‘The myth of lower cost and price’;

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Firms must have viable business models;

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Implications for physical activities in the value chain;

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Internet firms do not always offer lower prices;

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Security and privacy concerns; and

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The Internet only changes the customer interface (Porter, 2001).

Kim et al., 2004

Why should organisations use the Internet?

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Large companies in particular already computers, networks and bandwidth;

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Potential cost savings;

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Network economic effects;

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Many business transactions already conducted at a distance;

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Opportunities for close alliances.

Coltman et al., 2001

Business-To-Consumer – B2C • Electronic retailing (e-tailing) is the direct sale of products through electronic storefronts or electronic malls, usually designed around an electronic catalog format and/or auctions. – Electronic Storefronts. Hundreds of thousands of solo storefronts can be found on the Internet, each with its own Internet name and EC portal, such as Home Depot, The Sharper Image, or Wal-Mart. – Electronic mall, also known as a cybermall or e-mall, is a collection of individual shops under one Internet address.

Turban et al., 2005

E-tailing Issues – B2C The concept of retailing and e-tailing implies the sale of goods and/or services to individual customers. The following are the major issues faced by e-tailers that may be handled and supported by IT tools:

• Resolving channel conflict • Resolving conflicts within click-and-mortar organizations • Organizing order fulfillment and logistics • Determining viability and risk of online e-tailers • Identifying appropriate revenue models

Turban et al., 2005

Key Questions for E-tailers ❖

Does the Internet enable a company to significantly enhance its value proposition to customers?

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Does the Internet suit the nature of the company’s products and appeal?

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Can the company brand attract customers to the web site?

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What value-added services and techniques can be employed to encourage customer ‘lock-in’?

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What is the relationship between online and offline activities?

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Where do we obtain the necessary online marketing and web site capabilities?

Service Industries – B2C Delivery of services (buying an airline ticket or stocks) can be done 100 percent electronically, with considerable cost reduction potential. Therefore, online services is growing very rapidly.

• Electronic banking • International and Multiple-Currency Banking • Online Securities Trading • Online Job Market • Travel Services • Real Estate

Turban et al., 2005