e-commerce and e-business

commerce of goods and services and also serving customers, collaboration with business partners, and conducting electronic transactions with an... Types of E-Commerce The nature or tr

SICS 3653: E-COMMERCE

AND E-BUSINESS

Ebenezer Nortey Yebuah

(ETONY)

 Introduction to E-Commerce

• Definition of E-Commerce and E-business

• Major types of E-Commerce (briefly)

 The digital economy

• The new Business environment

 Security and legal issues

• Need for E-Commerce security

• Basic security issues

• Types and treats and attacks

• Security risk management

• Securing E-Commerce communication

 Business models for E-Commerce

 Implementation of E-business systems

Definition of E-Commerce and

• learning: enables online training and educations

• Collaborative: supports inter and intraorganizational collaboration

• Community: provides a meeting place for members to learn and collaborate.

Definition of E-Commerce and

business

business partners commerce)

of goods and services and also

serving customers, collaboration with business partners, and conducting

electronic transactions with an

Definition of E-Commerce and

 The delivery agent

 Brick and mortar organization : zero digitalization i.e pure physical organization.

• Conduct all their business activities on physically

 Virtual organizations : digitalization of 1 i.e (pure play)

• Does all business tractions inline.

 Click and mortar : partial digitalization i.e click and mortar

• Has an online presence, but does basic business processes physically

Types of E-Commerce

 The nature or transaction or interaction is mostly used to class the E-Commerce

• Business-to-business B2B: transactions between business partners

• Business-to-consumer C2C: transactions between business

organizations and individual shoppers

• Consumer-to-business C2B: transaction in which individuals sell products and services to business

• Consumer-to-consumer C2C: transactions between individual

consumers

 Interdisciplinary nature of E-Commerce: computer science,

marketing, consumer behavior, finance, economics, management information systems, accounting, management, business, law, robotics, public administration and engineering

History

 Electronic funds transfer (early 1970s)

“It use was mostly limited to large organizations, financial institutions, and a few hardcore business”

 Electronic Data Interchange ,

“use to transfer routine documents, which expanded electronic transfers from financial institutions to manufacturers, retailers, services industries etc”

 Internet and the world wide web : the

commercialization of the internet, saw the coining of the term E-COMMERCE.

E-Commerce applications quickly multiplied due to the rapid development of new networks, protocols, and EC software, due to increase in competition and other business pressures

 There has been many innovative applications, ranging from online direct sales to E-learning.

Benefits of E-Commerce

 The E-Commerce revolution is as profound as the change that accompanied the industrial revolution (Clinton and Gore 1997)

 E-Commerce enormous potential benefits to

organizations, individuals and society, considering

• The global nature of the technology

• The opportunity to reach millions of people

• Its interactive nature

• The variety of possibilities for its use

• The resourcefulness and rapid growth of its supporting infrastructure (especially the web)

• Customization: pull-type production (build-to-order)

• New business models: tendering (reverse auction), name-your-own-price

model, affiliate marketing, viral marketing etc.

• Vendors’ specialization: EC enables high degree of specialization

• Lower communication cost: EC lowers telecommunications cost.

• Efficient procurement: EC can reduce administrative cost, purchasing prices, and reducing cycle time.

• Improved customer relations: EC enable close customer relations

• Up-to-date company material: EC enables company information to be updated

by the minute

• No city business permits and fees

• etc

Benefits of E-Commerce

 Consumer benefits

• ubiquity: EC allows shopping 24/7/365 from almost any

location

• More products and services: EC gives more choices.

• Cheaper products and services: EC providers price variety for goods and services

• Instant delivery: e.g digitized product

• Information availability: relevant and detailed information

in seconds

• Participate in auctions: virtual auctions

• Electronic communities: consumers can interact with other consumers

• Get it you way: customization and personalization of

products and services

• No sales tax: most online sales are tax free

Benefits of E-Commerce

 Societal benefits

at home

allow lower income earners to shop more

poor to sell, buy and learn new skills

education, and distribution of government

social services can be done at a reduce cost to

a large number of people.

 Technological

• Lack of universally accepted standards for quality,

security, and reliability

• Telecommunication bandwidth is insufficient (mostly for

m-commerce)

• Software development tools are still evolving.

• Difficulties in integrating the internet and EC software applications and databases.

• Special web servers are needed in addition to the

network servers (added cost)

• Internet accessibility is still expensive and/ or

inconvenient

• Order of fulfillment of large-scale B2C requires special

automated warehouses

 Non-technological

• Security and privacy concerns deter some customer from

buying

• Lack of trust in EC and in unknown sellers hinder buying

• Many legal and public policy issues, including taxations,

remain unresolved

• National and international government regulations sometimes get in the way

• Difficulty in measuring some benefits in EC (e.g advertising,)

lack of matured measurement methodology

• Some customers like to touch and feel the product

• Adamant to change from physical to virtual store

• Lack of trust in paperless, faceless transactions

• Insufficient number (critical mass) of sellers and buyers (some cases) needed to make profit

• Increasing number of fraud on the net

• Difficulty to obtain venture capital due to the dot-com disaster

Digital Economy

 The Digital revolution

• Digital Economy: an economy that is based on digital technologies, including digital communications networks, computers, software, and other related

information technologies.

 Digital networking and communications infrastructures provides the global platform over which people and other organizations interact,

communicate,, collaborate and search for information.

 Choi and whinston says this platform is characterized by

• A vast array of digital products: databases, news & information, books, software ETC, that delivered over a digital infrastructure any time, anywhere in the world

• Consumers and firms conducting financial transaction digitally through digital currencies or financial tokens that are carried via network computers and mobile devices

• Microprocessors and networking capabilities embedded in physical goods such as home appliances and automobiles

Digital Economy

 Digital economy: the convergence of computing and

communications technology on the internet and other networks and the resulting flow of information and technology that is

stimulating e-commerce and vast organizational changes

 This convergence is enabling all types of information (data, audio, video, etc) to be stored, processed, and transmitted over

networks to many destinations worldwide

 The digital economy is creating a digital revolution, evidence by unprecedented economy performance and the longest period of uninterrupted economic expansion in certain parts of the world

 Web-based E-Commerce systems are accelerating the digital

revolution by providing competitive advantage to organizations

The new business environment

societal, legal and technological

factors)

change

and with fewer resources

The new business environment

 Huber (2003) “new business environment created due to accelerated advances in

science”

 This advances creates scientific knowledge

 This scientific knowledge feeds on itself

resulting in more and more technology

 Rapid growth in technology results in a

large variety of more complex systems.

The new business environment

 As a result the business environment is

characterized by

• A more turbulent environment ( more business problems and opportunity)

• Stronger competition

• Frequent decision making by organizations

• Large scope for decisions considerations

(market, competition, political and global)

• More information/knowledge needed for

decisions

Pressure on businesses

• Strong competition

• Global economy

• Regional trade agreement

• Extremely low labour cost in some

Pressure on businesses

 Societal

• Changing nature of workforce

• Government deregulation- more

competition

• Shrinking government subsidies

• Increased importance of ethical and

Pressure on businesses

• Increasing innovations and new

technologies

• Rapid technological obsolescence

• Rapid decline in technology cost versus

performance ratio

Pressure on businesses

 Business as usual no more enough (price

reduction & closure of unprofitable facilities)

 Need for new innovations ( critical response activities )

• Customization

• Creating new products

• Providing superb costumers services

 E-commerce facilitate most of these responses

Organizational responses

 Strategic systems: provides org with

strategic adv

• Increase their market share

• Better negotiation with their suppliers

• Prevent competitors from entering their

territory

e.g FedEx tracking system

 Continuous improvement efforts & BPR:

continuous efforts to improve productivity, quality and customer services

• E.g Dell ERP and Intel’s customer tracking

 Reduction in cycle time & time to market: e.g use of extranet

 Empowerment of employees: the ability to take decision on

costumers (decentralization)

 Supply chain improvement:

• Reduce supply chain delays

• Reduce inventories

• Eliminate inefficiencies

 Knowledge management: the process

creating or capturing knowledge, storing and protecting it, updating, maintaining

Brick & mortar against digital

 Brick & mortar

• Selling in physical stores

• Selling tangible goods

• Internal inventory/production

planning

• Paper catalogs

• Physical marketplace

• Physical & limited auctions

• Broker-based service transactions

• Paper-based billing

• Paper-based tendering

• Push production

• Mass production (standard)

• Physical based commission

marketing

• Word-of-mouth slow

advertisement

• Linear supply chain

• Large amount of capital needed

• Cost>value

 Digital

• Selling online

• Selling digital goods

• Online collaborative inventory forecasting

• Affiliate, viral marketing

• Explosive viral marketing

• Hub-based supply chain

• Less capital needed

• Small fixed cost

• Cost=value

• matching buyers and sellers

• Facilitating exchanges of goods/services and

payments associated with market transactions

• Provide institutional infrastructure

Electronic marketplaces

increased market efficiencies

• by expediting or improving the

Market-space components

 Customers: the hundreds of millions of people surfing the web are

potential buyers of goods/services offered on the net They looking for

• good deals

• Customized items

• Collectors items

• Entertainment etc

 Organizations are the major consumers of EC activities (85%)

 Sellers: millions of storefronts on the Web offering a huge variety of products ( sells can be done directly from sellers site or from E-

Market-space components

 Front end: the portion of an e-seller’s business processes through which customers interact, e.g seller’s portal, e-catalogs,

shopping cart, search engine and payment gateway

 Back end: activities that support online order-taking E.g order aggregation and fulfillment, inventory management, purchasing from suppliers, payment processing, packaging and delivery

 Intermediaries: create and manage online markets Match buyers and sellers, provide some infrastructure services to and help

buyers/sellers to institute and complete transaction (mostly

operate as computerized systems)

 Other business partners: includes business collaboration mostly along supply chain

 Support services: ranging from certification to trust services

Types of electronic markets

 There are various types of marketplaces

Types of electronic markets

 B2C

• Electronic storefronts: single company’s Web site where

product/services are sold (electronic store)

 A storefront has various mechanism for conducting sale

• Electronic catalogs (presentation of product information in an electronic form)

• A search engine ( a program that can access a database of Internet resources, search for specific information/keywords, and report the result)

• An electronic shopping cart: order processing technology that

allow shoppers to accumulate items they wish to buy while they continue to shop)

• E-auction facilities

• A payment gateway etc.

• Electronic malls: an online shopping center where many

stores are located

Types of electronic markets

 B2B

• Private E-Marketplace: owned by a single company

 Sell-side E-Marketplace: a private e-market in which a company sells either standard or customized to qualified companies

 Buy-side: a private e-market in which a company buys from invited suppliers

• Public E-Marketplace: e-market usually owned by am

independent 3rd party with many buyers and many

sellers (exchanges)

• Consortia: usually owned by a small group of major sellers or buyers usually in the same industry

Auctions

 Auctions: a market mechanism by which a seller places an offer to sell a product and buyers make bids sequentially and competitively until a final price is reached.

 Limitations to offline auctions:

• Short time for each item (little time to make decision to bid or not)

• Sellers don’t get the right price (or buyers pay more)

• Little time to examine product

• Physical presences limits the potential bidders

• Difficulty in moving goods to auction sites

• Pay of rents or auction sites, advertisement and

payment of auctioneers and employees add to cost

 Electronic auctions (e-auctions): auctions conducted online.

• Dynamic pricing: change in price due to

demand and supply relationships at any given time

 Dynamic pricing has several forms (bargaining and negotiations)

 There are 4 major forms of dynamic pricing depending on how many buyers or sellers there are,

• One buyer, one seller

• One seller, many potential buyers

• One buyer, many potential sellers

• Many buyers, many sellers

 One seller, one buyer: negotiations, bargaining and bartering usually used (Prices mostly determined by each party’s bargaining power as well as demand and supply

in the market and possibly the business environment)

 One seller, many buyers: (forward auction) a seller entertains bids from buyers.

• English and Yankee auctions: prices increase as auctions progress

• Dutch and free fall: prices go down as auctions progress

 Assignment (what is English, Yankee, Dutch and free fall auctions) to be submitted before mid-day 29 th

Feb 2008

 One buyer, many sellers:

• Reverse auctions: a buyer places an item for bidding (tendering) on a request for quote (RFQ) system, potential sellers bid for the item with price reducing sequentially until no more

reductions and the lowest bidder wins (mostly B2B G2B mechanism)

• Name-your-own-price model: a buyer specifies the price ( and other terms) they willing to buy to able suppliers (mostly C2B model started by priceline.com)

 Many sellers, many buyers: (double auction) multiple buyers and their bids are much with their multiple sellers and their asking prices, considering the quantities.

Benefit to sellers

 Increase revenues from

broadening customer base

and shortening cycle time.

 Chance to bargain instead

of a buying at a fixed price.

 Optimal price setting

determined by the market

 Can liquidate large

 Anonymity, with help of a

3 rd party, buyers can be anonymous

 Convenience, can bid from anywhere with any

connected gadget No need

to travel to the auction site

Benefits to e-auctioneers

 Higher repeat purchase

 High stickiness to the web site

 Expansion of the auction business.

Types of E-Auction Fraud

 Bid shielding: having fake

(phantom/ghost) bidders bid at very high prices and then later pull out at the last

minute

 Shilling: placing fake bids on auction items

to artificially jack up the bidding price

 Fake photos and misleading descriptions

 Improper grading techniques

 Selling reproductions