Chapter 1 The overview of E-C

1. Chapter 1 The overview of E-C Acknowledgement: this part of content is adopted from the Book Electronic Commerce: a managerial perspective by Efrain Turban et al

2. 1.1 Definition of Electronic Commerce 1.3.1 The definition given by scholars and experts 1. The definition given by foreign experts and scholars Kalakota and Whinston (1997) define EC from these perspectives: • From acommunications perspective, EC is the delivery of information, products/services, or payments over telephone lines, computer networks, or any other electronic means. • From a business process perspective, EC is the application of technology toward the automation of business transactions and work flow. • From a service perspective, EC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery. • From an online perspective, EC provides the capability of buying and selling products and information on the Internet and other online services.

3. Lou Gerstner, IBM's CEO E-business is all about cycle time, speed, globalization, enhanced productivity, reaching new customers and sharing knowledge across institutions for competitive advantage . • Some define E-C as “The use of electronic transmission mediums (telecommunications) to engage in the exchange, including buying and selling, of products and services requiring transportation, either physically or digitally, from location to location. ”

4. 2 . Domestic scholars’ definitions Pro. Li qi defines EC from the perspective of productive force. there should be two definitions. The broader definition is that electronic commerce is the use of electronic tools in commercial activities .These electronic tools range from telegram, telephone of early times to NII, GII and INTERNET of modern times. The commercial activities here refer to all lawful activities of demand and consumption except for typical production process. The narrower definition is that electronic commerce is the whole process in which people ,who master information technology and business regulations and rules, systematically use electronic tools and efficiently and low-costly engage in all kinds of activities centering on the exchange of commodities and services in a highly technically and economically advanced society. The first definition can be simplified as commercial electronic application, the second can be shortened as electronic commercial system.

5. 3. pure versus partial EC

6. 4. Differences between E-C and E-B The term electronic commerce is restricting and does not fully encompass the true nature of the many types of information exchanges occurring via telecommunication devices. The term electronic business also includes the exchange of information not directly related lo the actual buying and selling of goods. Thus. The term electronic business is broader and may eventually replace the term electronic commerce.

7. 5. what makes electronic commerce different from the EDI systems EDI is a subset of electronic commerce. A primary difference between the two is that electronic commerce encompasses a broader commerce environment than EDI. Traditional EDI systems allow pre-established trading partners to electronically exchange business data. The vast majority of traditional EDI systems arc centered around the purchasing function. These EDI systems are generally costly to implement. The high entry cost precluded many small and mid-sized businesses from engaging in EDI. Electronic commerce allows a marketplace to exist where buyers and sellers can "meet" and transact with one another. Chapter four more clearly traces the evolution of traditional EDI to electronic commerce.

8. 1.2 E-C Framework EC is more than just having a Web site. There are a dozens of applications of EC such as home banking , shopping in online stores and malls , buying stocks , finding a job, conducting an auction , and collaborating electronically on research and development projects. To execute these application , it is necessary to have supporting information and organization infrastructure and systems. The EC applications are supported by infrastructures, and its implementation is dependent on four major areas: people , policy, technical standards and protocols, and other organizations.( see figure on the next page)

9. E-C applications People: Buyers; Sellers; Is people; Management; service: Intermediary Public policy Taxes; Legal, Privacy issues, Free speech, Domain names. Technical standards For Documents, Security, Network protocols, payments Organizations: Partners, Competitors, Associations, government services Infrastructure management E-C applications includes : Stocks Jobs Online Banking Malls Online Marketing & advertising After-sale service Online publishing; Travel; Auctions; procurement & purchasing; customer service . etc Infrastructures includes: 1 Common Business Services Infrastructure (security smart cards/authentcatin, electronic payment, directories/ catalogs); 2 Messaging & Information distribution infrastructures (EDI,e-mail, HTTP); 3 Multimedia Content &Network Publishing Infrastructure ( HTML, Java, WWW, VRML) 4 Network infrastructure (Telecom, Cable TV, Wireless, Internet, VAN, WAN, LAN , Intranet, Extranet) 5 Interfacing infrastructure ( To database, customers, and application ) Source : Turban et al.1999.

10. 1.3 CLASSIFICATION OF EC APPLICATIONS Applications of EC are divided into 3 categories • 1. Buying and selling goods & services. These are usually referred to as electronic markets. • 2. Facilitating inter and intra-organization flow of information, communication and collaboration. These are sometimes referred to as inter-organizational systems. • 3. Providing customer service.

11. 1.4 ELECTRONIC MARKETS • A market is a network of interactions and relationships where information, products, services, and payments are exchanged. When the marketplace is electronic, the business center is not a physical building but rather a network-based location where business interactions occur (Figure on the next page) As can be seen in the figure, the electronic market is the place where shoppers and sellers meet. The market handles all the necessary transactions, including the transfer of money between banks. • In electronic markets, the principal participants--transaction handlers, buyers, brokers, and sellers, are not only at different locations but seldom even know one another. The means of interconnection varies among parties and can change from event to event, even between the same parties.

13. 1.5 Classification of the EC Field by the Nature of the Transactions • Business-to- business (B2B). Most of EC today is of this type. It includes the IOS transactions and electronic market transactions between organizations. • Business-to-consumer (B2C). these are retailing transactions with individual shoppers. The typical shopper at Amazon. com is a consumer ,or customer. • Consumer-to-consumer (C2C). In this category consumer sells directly to consumers. Examples are individuals selling in classified ads (e.g.,www.classified 2000 .com ) and selling residential property ,cars, and so on .Advertising personal services on the Internet and selling the knowledge and expertise is another example of C2C . several auction sites allow individuals to put items up for auctions Finally , many individuals are using intranets and other organizational internal networks to advertise items for sale or services. • Consumer-to-business (C2B).this category includes individuals who sell products or services to organizations , as well as individuals who seek sellers , interact with them , and conclude a transaction .

14. Non-business EC . An increased number of non-business institutions such as academic institutions , not-for-profit organizations, religious organizations, social organizations, and government agencies are using various types of EC to reduce their expenses (e.g., improve purchasing ) or to improve their operations and customer service. • Intra-business (organizational) EC. In this category we include all internal organizational activities, usually performed on intranets, that involve exchange of goods services ,or information . Activities can range from selling corporate products to employees to online training and cost-reduction activities .

15. 1.6 INTERDISCIPLINARY NATURE OF EC • Marketing. Many issues of marketing offline are relevant to online EC--for example, cost benefits of advertisements and advertisement strategies. Other issues are unique to EC, ranging from online marketing strategy to interactive kiosks. • Computer sciences. Many of the issues listed in the infrastructure box of Figure 1.2, such as languages, multimedia, and networks, fall into the discipline of computer sciences. Intelligent agents play a major role in EC as well. • Consumer behavior and psychology. Consumer behavior is the key to the success of B2C trade, but so is the behavior of the sellers. The relationship between cultures and consumer attitude in electronic market is an example of a research issue in the field.

16. Finance. The financial markets and banks are one of the major participants in EC. Also, financing arrangements are part of many online transactions. Issues such as using the Internet as a substitute for a stock exchange and fraud in online stock transactions are a sample of the many topics of the field. • Economics. Electronic commerce is influenced by economic forces and has a major impact on world and country economies. Also, theories of micro and macronomics need to be considered in EC planning, as well as the economic impacts of EC on firms. • Management information systems (MIS). The information systems department is usually responsible for the deployment of EC. This discipline covers issues ranging from systems analysis to system integration, not to mention planning, implementation, security, and payment systems, among others.

17. Accounting and auditing. The back-office operations of electronic transactions are similar to other transactions in some respects, but different in others. For example, auditing electronic transactions presents a challenge for the accounting profession; so does the development of methodologies for cost-benefit justification. • Management. Electronic commerce efforts need to be managed properly, and because of the interdisciplinary nature of EC, its management may require new approaches and theories. • Business law and ethics. Legal and ethical issues are extremely important in EC, especially in a global market. A large number of legislative bills are pending, and many ethical issues are interrelated with legal ones, such as privacy and intellectual property

18. Others. Several other disciplines are involved in various aspects of EC to a less extent-for example, linguistics (translation in international trades), robotics and sensory systems, operations research/management science, statistics, and public policy and administration. Also, EC is of interest to engineering, health care, communication, and entertainment publishing.

19. 1.7 Benefits of EC 1.7.1 Benefits to Organizations 1. Electronic commerce decreases the cost of creating, processing, distributing, storing, and retrieving paper-based information. • EC Enhances ability for creating highly specialized businesses. • Electronic commerce allows reduced inventories and overhead by facilitating ‘pull’-type supply chain management. • Electronic commerce reduces the time between the outlay of capital and the receipt of products and services. • Electronic commerce initiates business processes reengineering projects. • Electronic commerce lowers telecommunications cost. Other benefits include improved image, improved customer service, newfound business partners, simplified processes, compressed cycle and delivery time, increased productivity, eliminating paper, expediting access to information , reduced transportation costs, and increased flexibility.

20. 1.7.2 Benefits to Consumers • E-commerce enables customers to shop or do other transactions 24 hours a day, all year round, from almost any location. • E-commerce provides customers with more choices; they can select from many vendors and from more products. • E-commerce provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons. • In some cases, especially with digitized products, EC allows quick delivery. • Customers can receive relevant and detailed information in seconds, rather than days or weeks. • E- commerce makes it possible to participate in virtual auctions. • E-commerce allows customers to interact with other customers in E- communities and exchange ideas as well as compare experiences. • E-commerce facilitates competition, which results in substantial discounts.

21. 1.7.3 Benefits to Society • EC enables people in Third World countries and rural areas to enjoy products and services that otherwise are not available to them. This includes opportunities to learn professions and earn college degrees. • EC facilitates delivery of public services, such as health care, education, and distribution of government social services at a reduced cost and/or improved quality. Health-care services, for example, can reach patients in rural areas. • EC enables people in Third World countries and rural areas to enjoy products and services that otherwise are not available to them. This includes opportunities to learn professions and earn college degrees. • EC facilitates delivery of public services, such as health care, education, and distribution of government social services at a reduced cost and/or improved quality. Health-care services, for example, can reach patients in rural areas

22. 1.8 Limitations of EC 1.8.1 Technical Limitations of EC • Lack of system security, reliability, standards, and some communication protocols • Insufficient telecommunication bandwidth . • The software development tools still evolving and changing rapidly. • Difficult to integrate the Internet and EC software with some existing applications and databases . • Vendors needing special Web servers and other infrastructures, in addition to the network servers . • Some EC software might not fit with some hardware, or may be incompatible with some operating systems or other components.

23. 1.8.2 Non-technical Limitations • Cost and justification • Security and privacy • Lack of trust and user resistance • Lack of touch and feel online • Many legal issues unresolved yet • Insufficient support services • EC, as a discipline, still evolving and changing rapidly

24. 1.9 The Driving Forces of Electronic Commerce 1.9.1 Today's business environment, the pressures it creates on organizations Market, economical, societal, and technological factors are creating a highly competitive business environment in which customers are the focal point. Furthermore, these factors can change quickly, sometimes in an unpredictable manner Therefore, companies need to react frequently and quickly to both the problems and the opportunities resulting from this new business environment Because the pace of change and the degree of uncertainty in tomorrow's competitive environment are expected to accelerate, organizations will be operating under increasing pressures to produce more and faster, using fewer resources .

25. 1.9.2 Responses used by organizations 1. traditional actions such as lowering cost and closing unprofitable facilities, 2. innovative activities such as customizing products, creating new products, or providing superb customer service. 3. the combination of above mentioned two . They can be performed in some or all of the processes of the organization, from the daily routine processing of payroll and order entry to strategic activities such as the acquisition of a company. And also occur in what is known as the extended supply chain, namely in the process of interaction among a company and its suppliers, customers, and other partners, such as in the cases of Intel and Wal-Mart. A response can be a reaction to a pressure already in existence, or it can be an initiative that will defend an organization against future pressures. It can also be an activity that exploits an opportunity created by changing conditions. Many response activities can be greatly facilitated by EC. In some cases EC is the only solution to these business pressure.

26. Major business pressures and responses Source : Turban et al (1999)

27. ……..To be continued