E-Business for Small Enterprises

1. E-Business for Small Enterprises Associate Professor Mohini Singh PhD Director, Community and Industry Liaison School of Business Information Technology RMIT University

2. This Presentation • Definitions • Technologies for e-business • An understanding of the e-business framework and environment • E-business models • E-business trends • E-business issues – payment methods, security • Benefits and limitations • E-business set up issues • Critical success factors for e-SMEs

3. E-Commerce • electronic commerce (EC) • The process of buying, selling, or exchanging products, services, or information via computer networks • The use of the Internet and the Web to transact business • Digitally enabled commercial transactions between and among organisations and individuals.

4. E-Business • e-business • A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization • All electronically mediated information exchanges, both within the organisation and with external stakeholders supporting the whole range of business processes.

5. Technologies for E-Business • Internet - a global network of networked computers • World Wide Web - a body of software and a set of protocols that link sites, files and e-mail addresses • Intranet • an intra-organisational network based on the Internet technology. An internal corporate or government network that uses Internet tools, such as Web browsers, and Internet protocols • enables communication within the organisation • Extranet • an extension of an organisation’s intranet to trusted partners to share information and conduct business in a secured environment • a network that uses the Internet to link multiple intranets

6. The E-Business Framework • Networked computing is the infrastructure for EC, and it is rapidly emerging as the standard computing environment for business, home, and government applications • Networked computing connects multiple computers and other electronic devices located in several different locations by telecommunications networks, including wireless ones • Allows users to access information stored in several different physical locations and to communicate and collaborate with people separated by great geographic distances

7. A Framework for Electronic Commerce

8. E-Business Organizations • brick-and-mortar organizations • Old-economy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents • virtual (pure-play) organizations • Organizations that conduct their business activities solely online • click-and-mortar (click-and-brick) organizations • Organizations that conduct some e-commerce activities, but do their primary business in the physical world

9. E- Business Models • business-to-business (B2B) • E-business model in which all of the participants are businesses or other organizations • business-to-consumer (B2C) • E-business model in which businesses sell to individual shoppers • business to employee (B2E) • E-business model delivering services, information or products to its employees

10. Business Models cont… • Electronic distributor • Electronic intermediary responsible for order fulfillment (eg Amazon, eToy, etc) • Electronic brokers • Introduce suppliers who deal with items that customers are looking for (eg www.choicemall.com, BestBook-Buys.com) • E- Store • An electronic distributor whose dealing items are handled by a single store • E-Mall • An electronic distributor or broker whose dealing items are handled by more than a single electronic store • Generalised E-Malls/Stores - deal with various categories of items where supply items are very wide • Specialised E-Malls/Stores - focus on only special types of items (eg pharmaceutical or computer products)

11. How E-Business is conducted • electronic market (e-marketplace) • An online marketplace where buyers and sellers meet to exchange goods, services, money, or information • interorganisational information systems (IOSs) • Communications system that allows routine transaction processing and information flow between two or more organizations • intraorganisational information systems • Communication systems that enable e-business activities to go on within individual organizations

12. The Future of EC • Overall, the growth of the field will continue to be strong into the foreseeable future • Despite the failures of individual companies and initiatives, the total volume of EC is growing by 15 to 25% every year

13. E-Business Trends • One-Tenth of the World’s Population is Shopping Online • 627 million people have done it • Europe and North America display the highest incidence of online shoppers • The world’s biggest online shoppers are in Germany, Austria and the UK with at least 95 percent of Internet users having purchased online • B2C clearly show an upward trend • While there is growth in nearly all global markets, lesser developed markets are maturing faster than many of their more developed counterparts Source: Global consumer attitudes towards online shopping (www.acnielsen.com)

14. What sells well in B2C? • ACNielsen surveyed a total of 21,261 consumers over the Internet in 38 markets covering 17 products between April 11 – May 10, 2005. • Across the globe, the most popular items purchased on the Internet are • Books (34%), • Videos / DVDs / Games (22%), • Airline Tickets / Reservations (21%) and • Clothing / Accessories / Shoes (20%). Source: Global consumer attitudes towards online shopping (www.acnielsen.com)

15. What sells well: Regional variation • Books top the list of items purchased by the Chinese (56%) and South Koreans (50%) • Over half of South Korea’s online shoppers have purchased Clothing / Accessories / Shoes online. • Airline Tickets/Reservations are purchased by Malaysia (55%), New Zealand (40%), Singapore (36%) and Australia (35%) Ireland (58%), Norway (45%), Finland (31%), and Spain (26%). • In the UK, Videos /DVDs/ Games generate the biggest online market (34%), followed by Books (30%) Source: Global consumer attitudes towards online shopping (www.acnielsen.com)

16. What sells well: Regional variation • Tours/Hotel Reservations are commonly purchased online in Finland (30%) and Spain (27%). • In Japan, Groceries (26%) are the second most popular item purchased online after Books • In Latin America, Electronic Equipment (30%) such as cameras, etc. are a favourite online purchase item similar to Books • For most of these online purchases, credit card (59%) or bank transfer (23%) was used to make the payment.

17. Characteristics of high-volume products • high brand recognition • recognized guarantees • digitized formats • relatively inexpensive items • frequently purchased items • standard and well known commodities • unopenable packaged items.

18. How do Online Customers Pay for their Purchases?

20. PayPal: The Money’s in the E-mail • One of e-commerce’s major success stories: • Went public in 2002; acquired by eBay October 2002 for $1.5 billion • An example of a “peer-to-peer” payment system • Fills a niche that credit card companies avoided – individuals and small merchants • Piggybacks on existing credit card and checking payment systems • Weakness: suffers from relatively high levels of fraud • Competitors include Western Union (MoneyZap), AOL (AOLQuickcash) and Citibank (C2it)

21. Data is from the April 2006 comScore report titled "The State of Online Banking." The analysis is based on comScore's panel of over two million online consumers and a survey of 2, 214 US consumers conducted March 22-27, 2005.

22. Online Frauds • Phishing • A high tech scam that uses email, pop-up messages, or Web pages to trick a user into disclosing sensitive information such as credit card numbers, bank account numbers and passwords • Denial of service • An attack on a web site in which an attacker uses specialised software to send a flood of data packets to the target computer with the aim of overloading its resources • Melware (Malicious software) • Viruses • A software code that inserts itself into a host computer • worms • A software program that runs independently consuming the resources of the host in order to maintain itself • trojan horses • A program that appears to have a useful function but contains a hidden function that presents a security risk • Social Engineering A type of nontechnical attack that uses social pressures to trick computer users into compromising computer networks to which individuals have access • …

23. Fraud Prevention • Client side • Access control • username-password model • pre-defined secret cognitive questions • Biometrics • Scramble pads • System side • Digital Certificates • SSL • Session timeouts • Fraud detection systems • ….

24. Global Reach Cost Reduction Supply Chain Improvements Extended Hours Customization New Business Models Rapid Time-to-Market Lower Communication Costs Efficient Procurement Improved Customer Relations Up-to-Date Company Material No City Business Permits and Fees Other Benefits Organisational Benefits of E-Business

25. Ubiquity More Products and Services Customised Products and Services Cheaper Products and Services Information Availability Participation in Auctions Electronic Communities No Sales Tax Benefits of EC Benefits to Consumers

26. Benefits of EC • Benefits to Society • Telecommuting • Higher Standard of Living • Hope for the Poor • Information or technocentric society • Availability of Public Services

27. E-Business Setup • business model • A method of doing business by which a company can generate revenue to sustain itself • Business models are a subset of a business plan or a business case

28. Structure of Business Models • A description of the customers to be served and the company’s relationships with these customers (customers’ value proposition) • A description of all products and services the business will offer • A description of the business process required to make and deliver the products and services • A list of the resources required and the identification of which ones are available, which will be developed in-house, and which will need to be acquired

29. Structure of Business Models cont… • A description of the organization supply chain, including suppliers and other business partners • A description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability)

30. Revenue Models revenue model Description of how the company or an EC project will earn revenue Major revenue models Sales Transaction fees Subscription fees Advertising fees Affiliate fees Other revenue sources E-Business Structure Issues

31. Business Models • Value proposition • The benefits a company can derive from using E-Business • How do e-marketplaces create value? • Search and transaction cost efficiency • Complementarities • Lock-in • Novelty

32. Limitations of EC

33. Other E-Business Challenges • Infrastructure • Integration of front-end and back-end systems, business process re-engineering • Incorporation of secure transaction systems, e-payments, automated responses – eCRM, web page design issues • E-supply chain management/cyber chain management

34. Organisational • Senior management buy-in • Sociotechnical - employee acceptance, new skills, new job designs • Raising the awareness of e-business

35. E-Business Applications • The digital revolution continues to accelerate, provides competitive advantage to organizations and enables innovations • Electronic business applications have been extended to: • E-government services to citizens • Government to government dealings • E-learning • E-management • E-research • Mobile and pervasive applications • …

36. Critical Success Factors for fast growth of e-SME’s • All SME’s • Content – attention grabbing and compelling Internet presentation of a product/s • Convenience – usability of a web • Control – defined processes for the control of deliveries, responding to customer queries and web site updating • Interaction – relationship building with customers

37. CFCs relevant to particular industries • Community • Relationship building with like minded individuals and organisations by enabling information exchange and tailored services • Price sensitivity • Sensitive to Internet price competition

38. CFCs relevant to individual companies • Brand image – use of online and offline branding techniques • Commitment – motivation to use the Internet and to innovate • Partnership – use of partnerships to leverage Internet presence and expand business • Process improvement – change and automate business processes • Integration – link IT systems to support partnership and process improvement

39. References • Taylor M. and Murphy, A., 2004, ‘SMEs and e-business’, Journal of Small Business and Enterprise Development, Vol 11 No 3pp 280 – 289 • Turban, E, King, D., Viehland, D. and Lee, J., 2006, Electronic Commerce A Managerial Perspective 2006, Pearson Prentice Hall, USA • Singh, M., Lecture notes • Singh, M., conference presentations