Traditional Commerce and Electronic Commerce

1. Traditional Commerce and Electronic Commerce To many people, the term electronic commerce means shopping on the part of the Internet called the World Wide Web. Although consumer shopping on the Web was running about $130 billion per year in 2002 and is expected to exceed $500 billion by 2004, electronic commerce is much broader and encompasses many more business activities than just Web shopping.

2. Traditional Commerce and Electronic Commerce Electronic commerce refers to business activities conducted using electronic data transmission via the Internet and the World Wide Web. The three main elements of e-commerce are: Business-to-consumer Business-to-business The transactions and business processes that support selling and purchasing activities on the Web Other categories include: consumer-to-consumer and consumer-to-government.

3. A global networked environment is known as the Internet A counterpart within organizations, is called an intranet An extranet extends intranets so that they can be accessed by business partners. Definitions and Content of Field (cont.)

4. Pure Vs. Partial Electronic Commerce Three dimensions the product (service) sold [physical / digital]; the process [physical / digital] the delivery agent (or intermediary) [physical / digital] Traditional commerce all dimensions are physical Pure EC all dimensions are digital Partial EC all other possibilities include a mix of digital and physical dimensions

5. The Dimensions of Electronic Commerce

6. Electronic Commerce Electronic Funds Transfers (EFTs) have been used by banks for many years. Electronic Data Interchange (EDI) occurs when one business transmits computer-readable data in a standard format to another business.

7. Electronic Commerce Businesses who engage in EDI with each other are called trading partners. The standard formats used in EDI contain the same information that businesses have always included in their standard paper invoices, purchase orders, and shipping documents. Firms, such as General Electric and Wal-Mart, have been pioneers in using EDI to improve their purchasing process.

8. Value Added Network (VAN) A value added network is an independent firm that offers connection and EDI transaction forwarding services to buyers and sellers engaged in EDI. VANs are responsible for ensuring the security of transmitted data. VANs charge a fixed monthly fee plus a per-transaction charge to subscribers.

9. Activities as Business Processes Business processes refer to the group of logical, related, and sequential activities and transactions in which businesses engage, including: Transferring funds Placing orders Sending invoices Shipping goods to customers

11. A market is a network of interactions and relationships where information, products, services, and payments are exchanged. The market handles all the necessary transactions. An electronic market is a place where shoppers and sellers meet electronically. In electronic markets, sellers and buyers negotiate, submit bids, agree on an order, and finish the execution on- or off-line.

13. An interorganizational information system (IOS) involves information flow among two or more organizations. Its major objective is efficient routine transaction processing, such as transmitting orders, bills, and payments using EDI or extranets. Scope: An IOS is a unified system encompassing two or several business partners. A typical IOS includes a company and its suppliers and and/or customers.

14. Electronic data interchange (EDI) Extranets Electronic funds transfer (EFT) Integrated messaging systems Shared databases Electronically-supported supply chain management

15. Advantages of Electronic Commerce Electronic commerce can increase sales and decrease costs. Web advertising reaches a large amount of potential customers throughout the world. The Web creates virtual communities for specific products or services.

16. Advantages of Electronic Commerce A business can reduce its costs by using electronic commerce in its sales support and order-taking processes. Electronic commerce increases sale opportunities for the seller. Electronic commerce increases purchasing opportunities for the buyer.

17. The Benefits ofElectronic Commerce Expands the marketplace to national and international markets Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information Allows reduced inventories and overhead by facilitating �pull� type supply chain management The pull type processing allows for customization of products and services which provides competitive advantage to its implementers

18. Benefits to Organizations (cont.) Reduces the time between the outlay of capital and the receipt of products and services Supports business processes reengineering (BPR) efforts Lowers telecommunications cost - the Internet is much cheaper than value added networks (VANs)

19. Benefits to Customers Enables customers to shop or do other transactions 24 hours a day, all year round from almost any location Provides customers with more choices Provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons Allows quick delivery of products and services in some cases, especially with digitized products

20. Benefits to Customers (cont.) Customers can receive relevant and detailed information in seconds, rather than in days or weeks Makes it possible to participate in virtual auctions Allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences Electronic commerce facilitates competition, which results in substantial discounts.

21. Benefits to Society Enables more individuals to work at home, and to do less traveling for shopping, resulting in less traffic on the roads, and lower air pollution Allows some merchandise to be sold at lower prices benefiting the poor ones Enables people in Third World countries and rural areas to enjoy products and services which otherwise are not available to them Facilitates delivery of public services at a reduced cost,increases effectiveness, and/or improves quality

22. Disadvantages of Electronic Commerce Some business processes are difficult to be implemented through electronic commerce. Return-on-investment is difficult to apply to electronic commerce. Businesses face cultural and legal obstacles to conducting electronic commerce.

23. Technical Limitations of Electronic Commerce (cont.) The need for special Web servers and other infrastructures, in addition to the network servers (additional cost) Possible problems of interoperability, meaning that some EC software does not fit with some hardware, or is incompatible with some operating systems or other components

24. Non-Technical Limitations Cost and justification (35% of the respondents) The cost of developing an EC in house can be very high, and mistakes due to lack of experience, may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system one needs to deal with some intangible benefits which are difficult to quantify.

25. Security and Privacy (17% of the respondents) These issues are especially important in the B2C area, and security concerns are not truly so serious from a technical standpoint. Privacy measures are constantly improving too. Yet, the customers perceive these issues as very important and therefore the EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, fairly secure. Lack of trust and user resistance (4%) Customers do not trust an unknown faceless seller, paperless transactions, and electronic money. So switching from a physical to a virtual store may be difficult.

26. Other limiting factors are: Lack of touch and feel online Many unresolved legal issues Rapidly evolving and changing EC Lack of support services Insufficiently large enough number of sellers and buyers Breakdown of human relationships Expensive and/or inconvenient accessibility to the Internet

27. The Driving Forces of Electronic Commerce Business pressures Organizational responses The role of Information Technology (including electronic commerce)

28. Major Business Pressures

31. Everything Will Be Changed Product promotion New sales channels Direct savings Time-to-market (reduced cycle time) Customer service Brand or corporate image

32. Transforming Organizations Work will change Technology learning Organizational learning

33. Impacts on Manufacturing Pull processing, mass customization, shorter cycle time, integration (ERP), electronic bidding and procurement Impacts on Finance and Accounting Electronic payment systems, electronic cash, automating back office, home banking, electronic stock trading Human Resource Management Electronic recruiting, training, distance learning