E-commerce essentials

1.     What is e-commerce?

2.     How is e-commerce different from traditional commerce?

3.     What are the driving forces behind the widespread use of e-commerce?

4.     What are the key e-commerce questions for management?

 

WHAT IS E-COMMERCE?

1.1  Terminology

·       E-commerce

·       E-business

·       E-markets

·       Internet business

Teleshopping à EFT (70s) à EDI (80s)à e-shopping à e-commerce

 

1.2  Definition

  1. Internet shopping ~300 billion by 2004.
  2. The process of buying, selling, or exchanging products, services, and information via computer networks, including the Internet [pg.5].
  3. Any form of economic activity via electronic connections (Wigand, 1997).
  4. An approach to achieving business goals in which technology for knowledge management for purposes of enabling or facilitating execution of activities in and across value chains as well as supporting decision making that underlies those activities (Holsapple and Singh, 2000).

 

1.3    Perspectives

·       Communications

·       Trading

·       Business process

·       Service

·       Learning

·       Collaboration

·       Community

 

Holsapple and Singh, 2000  

Perspective

What is it?

Questions asked

Answers

Trading 

Using computer-based means to accomplish buying-selling transactions

·       What kind/aspects of buying-selling can be done electronically?

·       What are the enabling technologies?

·       What are the electronic trading behaviors?

·       Trust-based model

·       Online customer characterization

Information Exchange

Providing electronic information transfer and sharing

·       What kind of information is transferred?

·       What is the role of information?

·       Information and competitiveness

·       Information and Power

Activity

Using technologies for all business (trading and non-trading) activities

·       What kind of activities can be conducted electronically?

·       What are the success-factors in conducting e-commerce?

·       Presales, online sales, and after sales activities

·       Quality of web sites

Effects

Understanding various outcomes and benefits of e-commerce

·       What are the reasons of conducting e-commerce?

·       What are the goals of conducting e-commerce?

·       Re-engineering

·       Value creation

Value Chain

Defining the competitive role of e-commerce 

·       What kind of value can be added?

·       What kind of value can be created?

·       New organization forms à virtual

·       Value creation framework

Knowledge Management

Providing and augmenting the knowledge handling abilities of knowledge workers

·       What kind of knowledge can be handled?

·       What is the enabling infrastructure?

·       Knowledge economy

·       Policy

 

1.4Types

1.Four categories

                        Business originating from …

                        Business                      Consumers
 

B2B

Purchasing & Procurement

Supplier Management

Inventory Management

C2B

Demand aggregator

Cause-related advocacy gp.

B2C

Sales

Consumer search

FAQs

Service & support

C2C

Auction

Classified ads

Games

Jobs

 

2. Transaction-based: 14 types

 

1.5 Framework [Turban et al., 2004, Exhibit 1.2]

·       People

·       Public policy

·       Marketing and advertisement

·       Support services

·       Business partners

 

E-COMMERCE vs TRADITIONAL COMMERCE
 

Key elements

E-commerce

Traditional commerce

Technology

Enabler

Facilitator

Competitive edge

Speed

Differentiation

Accessibility

24 x 7

Limited time

Customer interface

Screen-to-face

Face-to-face

Customer interaction

Self-service

Seller influenced

Customization

One-to-one customization

Standardization

Product promotion

Word of mouth

Merchandising & personal selling

Product characteristic

Commodity

Perishables, feel and touch

 

2.1  Benefits & Limitations [Turban et al., 2004, pg.16-20]

            Benefits: Organizations, Consumers, and Society

      Limitations: Technological and nontechnolgoical [Turban et al., 2004, Exhibit 1.5]

DRIVING FORCES [Turban et al., 2004, Exhibit 1.6]

3.1  Economics

  1. Competition
  2. Globalization
  3. Cost reduction
  4. Increasing consumer power (cost transparency)

Cost transparency's problems:

1.     Inability to obtain high margins

2.     Inability to differentiate products and services

3.     Inability to gain customer loyalty through branding

4.     Inability to win back old customers due to perceptions of price unfairness

Solutions:

  1. Price lining/versioning
  2. Dynamic/smart pricing
  3. Quality product/service offerings
  4. Bundling
  5. Innovative thinking

 

3.2  Technological

  1. Innovations
  2. Obsolescence
  3. Information overload
  4. Cost vs Performance
  5. Business use of the Internet promotes the development of World Wide Web

 

3.3    Societal

1.     Changing workforce

2.     Deregulation

3.     Ethical and legal issues

4.     Social responsibilities

5.     Political changes

 

KEY QUESTIONS FOR MANAGEMENT

  1. Business strategy?

How to compete in the digital economy?

  1. Business model?

How to make a profit?

  1. Business plan?

What are the business goals and how to achieve them?

 

4.1 Business strategy

4.1.1. Economics of the digital economy

  • Low variable cost, production cost, transaction cost, and agency cost à eco. of scale
  • Reach (# of customers reached) vs Richness (amount of interactions & services provided) à More customers can be reached without compromising richness

 

How to compete in the digital economy?

  1. How and where information can add value?
  2. Where are the current trade-offs between rich and reachness?
  3. How will these trade-offs be eliminated?
  4. Which information activities can become a stand-alone business?
  5. Will the underlying physical business be benefited from (4)?
  6. What new activities be required?
  7. How should risks and rewards be distributed?
  8. How will the profitability of the current business model be affected?
  9. Which assests could become liabilities?
  10. What new capabilities are need?

 

4.2    Business model?

4.2.1.     Common revenue model [Turban et al., 2004, Exhibit 1.4]

·       Transaction fee model, e.g., eTrade

·       Subscription model, e.g., AOL

·       Advertisement mdoel, e.g., Yahoo

·       Afflilate model, e.g., Amazon’s associate program

·       Sales model, e.g., Walmart.com

 

4.2.2       Common EC model [Turban et al., 2004, pg.14-16]

  1. E-tailing, e.g., Walmart.com
  2. E-Bidding, e.g., GE
  3. Name your price, e.g., priceline.com
  4. Find the best price, e.g., hotwire.com
  5. Affiliate marketing, e.g., Amazon.com’s associate program
  6. Viral marketing, e.g., Amazon’s book review
  7. Group purchasing/demand aggregation, e.g., shop2gether.com
  1. Online auctions, e.g, eBay
  2. Product and service customization, e.g, Dell
  3. E-marketplaces and exchanges (vertical integration), e.g., newview.com
  4. Integrators, e.g,, carpoint.com
  5. Service providers, e.g., paypal.com
  6. Information brokers, e.g., google.com
  7. Bartering, e.g., bigvine.com
  8. Deep discounting, e.g., half.com
  9. Membership, e.g., NYTimes.com

 

4.2.3       Fox, C., “E-Commerce Business Models”, IIR Best Strategy Practices Symposium, Johannesburg, South Africa, November 2000

 

4.3    Business plan? [Turban et al., 2004, Exhibit 1.3]

1.     Mission statement and company

2.     Management team

3.     Market and customer

4.     Indursty and competition

5.     Product and/or service

6.     Marketing and sales plans

7.     Operations

8.     Financial projections and plans

9.     Risk analysis

10.  Technology analysis

11.  Organization structure