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E-Commerce
Amity University
Nishant K Rai
E-Commerce ADL-75
Table of Content 1.0 E-commerce: Foundation
1.1 Definitions and content of EC field
1.2 Advantages and Limitations
1.3 The Driving Forces of EC
1.4 Impact of EC
1.5 EC Strategy
2.0 Launching a Business on the Internet
2.1 Internet Architecture: The Life Cycle Approach 2.2 Overview of the different phases
2.2.1 The Network: Information Transfer 2.3 Hosting a web site
3.0 Success & Failure of E commerce ventures
3.1 Things that can go wrong 3.2 Site visibility
3.3 Evaluation of web sites and usability testing 3.4 Web site content and traffic management 3.5 Web site Optimization
4.0 E-Tailing (Retailing in EC - B2C)
4.1 Overview of Market
4.2 Business Models of Electronic Marketing 4.3 Online Customer Service
4.4 Global versus Regional Marketing 4.5 Internet Shopping
5.0 E-Business Models, E- Marketing & E-Advertising
5.1 E-business
5.2 Various Business Models 5.3 Characteristics
5.4 Models of B2B EC 5.5 E-advertising 5.6 E-marketing
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6.0 Module VI: Electronic Payment Systems6.1 Services and Cash flow 6.2 Electronic Payment Media 6.3 Payment System Models 6.4 Cyber Banking
7.0 Module VII: E-Security
7.1 The Risks in Cyberspace 7.2 Protection and Recovery
7.3 Encryption
8.0 Module VIII: Legal and Ethical Issues
8.1 The Major Threats 8.2 Taxation Issues 8.3 Legal Disputes
8.4 Indian IT Act and Right to Information Act 8.5 Cyber Laws: A Global Perspective
9.0 Module IX: M-Commerce & Global EC
9.1 M-commerce in Indian and global perspective 9.2 Market Place versus Market space
9.3 Virtual Communities 9.4 Global EC
10.0 Module X: The Future
10.1 Beyond e commerce
10.2 Implications of emerging technologies 10.3 Future of EC
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1.0 E-commerce Foundation1.1 Definitions and content of EC field 1.2 Advantages and Limitations 1.3 The Driving Forces of EC 1.4 Impact of EC
1.5 EC Strategy
Two thousand years ago, Roman roads brought trade and commerce to Europe in an unprecedented manner. A thousand years ago, the spice routes linked the cultures of East and West. At the dawn of the second millennium, the Internet, the world‘s largest computer network, the network of networks, is making fundamental changes to the lives of everyone on the planet-changing forever the way business is conducted.
Internet has become an important medium for doing global business based on the state of the art technology. Global business was conducted in a new way: electronically, using networks and the Internet. The availability of Internet has led to the development of E-Commerce (Electronic commerce), in which business transactions take place via telecommunication networks. E-Commerce has two major aspects: economical and technological. The stress of this course will show you how to get started in the complex and exciting world of Electronic Commerce. New standards and new facilities are constantly emerging and their proper understanding is essential for the success of an operation and especially for those who are assigned a duty to select, establish, and maintain the necessary infrastructure.
The history of E-commerce is a history of how Information Technology has transformed business processes. Some authors will track back the history of E-commerce to the invention of the telephone at the end of last century. The Internet was conceived in
1969, when the Advanced Research Projects Agency (a Department of Defense organization) funded research of computer networking. The Internet could end up like EDI (Electronic Data Interchange) without the emergence of the World Wide Web in 1990s. EDI (Electronic Data Interchange) is widely viewed as the beginning of E-commerce if we consider E-Commerce as the networking of business communities and digitalization of business information.
EDI, which expanded from financial transactions to other transaction processing and enlarged the participating companies from financial institutions to manufacturers, retailers, services, and so on. Many other applications followed, ranging from stock trading to travel reservation systems. Such systems were described as telecommunication applications and their strategic value was widely recognized. With the
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commercialization of the Internet in the early 1990s and its rapid growth to millions of potential customers, the term electronic commerce was coined, and EC applications expanded rapidly. One reason for the rapid expansion of the technology was the development of networks, protocols, software, and specifications. The other reason was the increase in competition and other business pressures. From 1995 to 1999 we have witnessed many innovative applications ranging from advertisement to auctions and virtual reality experiences. Almost every medium- and large-sized organization in the United States already has a Web site many are very extensive; for example, in 1999 General Motors Corporation offered 18,000 pages of information that included 98,000 links to its products, services, and dealers.Electronic commerce (EC, or e-commerce) describes the process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, including the Internet. Some people view the term commerce as describing only transactions conducted between business partners. When this dentition of commerce is used, some people find the term electronic commerce to be fairly narrow. Thus, many use the term e-business instead.
E-business refers to a broader definition of EC, not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, conducting e-learning, and conducting electronic transactions within an organization.
Others view e-business as the ―other than buying and selling‖ activities on the Internet, such as collaboration and intrabusiness activities.
In this book we use the broadest meaning of electronic commerce, which is basically equivalent to e-business. The two terms will be used interchangeably throughout the chapter and the remainder of the text.
1.1 Definitions and Content & EC field
Electronic commerce is an emerging model of new selling and merchandising tools in which buyers are able to participate in all phases of a purchase decision, while stepping through those processes electronically rather than in a physical store or by phone (with a physical catalogue). The processes in electronic commerce include enabling a customer to access product information, select items to purchase, purchase items securely, and have the purchase settled financially. It is an emerging concept that describes the process of buying and selling or exchanging of products, services; and information via computer networks including the Internet.
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E-commerce is basically, doing business-as-usual, but across the Internet. You advertise your products or services on your Web site, as you would in any other media like newspapers, TV or brochures. Advertising on your Web site can be done in two ways.PURE VERSUS PARTIAL E-Commerce
Electronic commerce can take several forms depending on the degree of digitization (the transformation from physical to digital) involved.
The degree of digitization can relate to: (1) the product (service) sold, (2) the process, or (3) the delivery agent (or intermediary). Choi et al. (1997) created a framework that explains the possible configurations of these three dimensions.
A product can be physical or digital, the process can be physical or digital, and the delivery agent can be physical or digital. In traditional commerce all three dimensions are physical, and in pure EC all dimensions are digital.
All other combinations include a mix of digital and physical dimensions. If there is at least one digital dimension, we consider the situation electronic commerce but only partial EC. For example, buying a shirt at Wal-Mart Online, or a book from Amazon.com is partial EC, because the merchandise is physically delivered by FedEx. However, buying an e-book from Amazon.com or a software product from Buy.com is pure EC, because the product, its delivery, payment, and transfer agent are all done online.
• The first is by use of a relatively simple Web site consisting of a few pages whereby you tell potential customers who you are, what you do, where you are and how they can contact you ( easiest done by giving them your email address).
• The second way of enabling world-wide customers to buy from you is to provide them with an On-Line Catalogue of your products which they can browse at their leisure without having to go to your place of business.
On-Line Catalogue:
On-Line Catalogue is that catalogue where people access via the Internet. On-Line Catalogue is an integral part of website, enabling customers to...
• Browse through stock list, read about an item or service; • Look at photographs of the products.
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• And drop them into a shopping cart as they go along.• When they have completed their shopping, they go to the • Check-Out.
The next step is to request the order by filling in their details and method of payment on a form which is waiting for them at the Check-Out. The form is already partially completed with a breakdown of the items in their shopping cart, prices inclusive of tax, and shipping & handling charges, if any. If they choose to pay by credit card, the form includes a place for them to fill in their credit card number. And then, with one press of a button, they send the order to you.
Electronic Commerce under different perspectives:
Let‘s see how Electronic Commerce (EC) is defined under each perspective. 1.1.1. Communications Perspective
EC is the delivery of information, products /services, or payments over the telephone lines, computer networks or any other electronic means.
1.1.2. Business Process Perspective
EC is the application of technology toward the automation of business transactions and work flow. 1.1.3. 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.
1.1.4. Online Perspective
EC provides the capability of buying and selling products and information on the internet and other online services.
EC ORGANIZATIONS.
Pure physical organizations (corporations) are referred to as brick-and-mortar (or old-economy) organizations, whereas companies that are engaged only in EC are considered virtual (or pure-play) organizations.
Click-and-mortar (or click-and-brick) organizations are those that conduct some e-commerce activities, yet their primary business is done in the physical world. Gradually, many brick-and-mortar companies are changing to click-and-mortar ones (e.g., Wal-Mart Online).
INTERNET VERSUS NON-INTERNET EC
Most e-commerce is done over the Internet. But EC can also be conducted on private networks, such as value-added networks (VANs, networks that add communication services to existing common
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carriers), on local area networks (LANs), or even on a single computerized machine. For example, buying food from a vending machine and paying with a smart card or a cell phone can be viewed as EC activityElectronic Commerce (e-Commerce) is a general concept covering any form of business transaction or information exchange executed using Information and Communication Technologies (ICTs). E-Commerce takes place between companies, between companies and their customers, or between companies and public administrations. Electronic Commerce includes electronic trading of goods, services and electronic material.
E-Commerce systems include commercial transactions on the Internet but their scope is much wider than this; they can be classified by application type:
Electronic Markets:
The principle function of an electronic market is to facilitate the search for the required product or service. Airline booking systems are an example of an electronic market.
Electronic Data Interchange (EDI):
Electronic Data Interchange (EDI) is the electronic exchange of business documents in a standard, computer process able, universally accepted format between-trading partners. EDI is quite different from sending electronic mail, messages or sharing files through a network. In EDI, the computer application of both the sender and the receiver, referred to as Trading Partners (TPs) have to agree upon the format of the business document which is sent as a data file over electronic messaging services.
The two key aspects of EDI that distinguish it from other forms of electronic communication, such as electronic mail, are:
1. The information transmitted is directly used by the recipient computer without the need for human intervention is rarely mentioned but often assumed that EDI refers to interchange between businesses. It involves two or more organization or parts of organization communicating business information with each other in a common agreed format.
2. The repeated keying of identical information in the traditional paper-based business. Communication creates a number of problems that can be significantly reduced through the usage of EDI. These problems include: ¬
• Increased time • Low accuracy
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• High labour charges• Increased uncertainty.
To take full advantage of EDI‘s benefits, a company must computerize its basic business applications. Trading partners are individual organization that agrees to exchange EDI transactions. EDI cannot be undertaken unilaterally but requires the cooperation and active participation of trading partners. Trading partners normally consists of an organization‘s principal suppliers and wholesale customers. Since large retail stores transact business with a large number of suppliers they were among the early supporters of EDI. In the manufacturing sector, EDI has enabled the concept of Just-In-Time inventory to be implemented. JIT reduces inventory and operating capital requirements.
EDI provides for the efficient transaction of recurrent trade exchanges between commercial organizations. EDI is widely used by, for example, large retail groups and vehicle assemblers when trading with their suppliers.
Internet Commerce
The Internet (and similar network facilities) can be used for advertising goods and services and transacting one-off deals. Internet commerce has application for both business¬to-business and business to consumer transactions.
1.1.5 Types of e-commerce
There are a number of different types of E-Commerce • B2B - Business to Business
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• C2B - Consumer to Business• B2E - Business to Employee • C2C - Consumer to Consumer
B2B - Business to Business
E-commerce has been in use for quite a few years and is more commonly known as EDI (electronic data interchange). In the past EDI was conducted on a direct link of some form between the two businesses where as today the most popular connection is the internet. The two businesses pass information electronically to each other. B2B commerce currently makes up about 94% of all e-commerce transactions.
Typically in the B2B environment, E-Commerce can be used in the following processes: • Procurement; • order fulfillment;
• Managing trading-partner relationships.
B2C - Business to Consumer
Business to Consumer e-commerce is relatively new. This is where the consumer accesses the system of the supplier. It is still a two way function but is usually done solely through the Internet.
B2C can also relate to receiving information such as share prices, insurance quotes, on-line newspapers, or weather forecasts. The supplier may be an existing retail outlet such as a high street store; it has been this type of business that has been successful in using E-Commerce to deliver services to customers. These businesses may have been slow in gearing-up for E-Commerce compared to the innovative dot.com start ups, but they usually have a sound commercial structure as well as in-depth experience of running a business ¬something which many dotcoms lacked, causing many to fail.
Example: A home user wishes to purchase some good quality wine. The user accesses the Internet site http://www.craigs.com.au and follows the links to read a report on the recommended wines. After reading the tasting notes the user follows the links to place an order along with delivery and payment details directly into the merchants‘ inventory system. The wine is then dispatched from the supplier‘s warehouse and in theory is delivered to the consumer without delay.
C2B - Consumer to Business
Consumer to Business is a growing arena where the consumer requests a specific service from the business. Example: Harry is planning a holiday in Darwin. He requires a flight in the first week of December and is only willing to pay Rs. 250. Harry places a submission with in a web based C2B
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facility. Dodgy Brothers Airways accesses the facility and sees Harry‘s submission. Due to it being a slow period, the airline offers Harry a return fare for Rs. 250.B2E - Business to Employee
Business to Employee e-commerce is growing in use. This form of E-commerce is more commonly known as an ‗Intranet‘. An intranet is a web site developed to provide employees of an organisation with information. The intranet is usually access through the organisations network, it can and is often extended to an Entrant which uses the Internet but restricts uses by sign on and password.
C2C - Consumer to Consumer
These sites are usually some form of an auction site. The consumer lists items for sale with a commercial auction site. Other consumers access the site and place bids on the items. The site then provides a connection between the seller and buyer to complete the transaction. The site provider usually charges a transaction cost. In reality this site should be call C2B2C.
B2A is the least developed area of E-Commerce and it relates to the way that public sector organisations, at both a central and local level, are providing their services on-line. Also known as e-Government, it has the potential to increase the domestic and business use of e-Commerce as traditional services are increasingly being delivered over the Internet. The UK government is committed to ensuring this country is at the forefront of Commerce and it is essential that e-Government plays a significant part in achieving this objective.
1.1.6 Scope of E-Commerce
• Selling can be focussed to the global customer • Pre-sales, subcontracts, supply
• Financing and insurance
• Commercial transactions: ordering, delivery, payment • Product service and maintenance
• Co-operative product development • Distributed co-operative working • Use of public and private services
• Business-to-administrations (e.g. customs, etc) • Transport and logistics
• Public procurement
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• Accounting• Dispute resolution EC Business Models
• Government-to-citizens (G2C) and to others: In this case the government provides services to its citizens via EC technologies. Governments can do business with other governments as well as with businesses (G2B).
• Mobile commerce (m-commerce): When e-commerce is done in a wireless environment, such as using cell phones to access the Internet, we call it m-commerce.
Each of the above types of EC is executed in one or more business models, the method by which a company generates revenue to sustain itself. For example, in B2B one can sell from catalogs, or in auctions. The major business models of EC are summarized in Table 1.1.
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1.2 Advantages AND Limitations of E-COMMERCEFew innovations in human history encompass as many potential benefits as EC does. The global nature of the technology, low cost, opportunity to reach hundreds of millions of people (projected within 10 years), interactive nature, variety of possibilities, and resourcefulness and rapid growth of the supporting infrastructures (especially the Web) result in many potential benefits to organizations, individuals, and society. These benefits are just starting to materialize, but they will increase significantly as EC expands. The Benefits of EC
• The new markets could be accessed through the online and extending the service offerings to customers globally.
• Internet shrinks the globe and broaden current geographical parameters to operate globally • Marketing and promotional campaigns can be done globally at the reduced cost.
• Retaining the customer and the customer services could be improved drastically. • Strengthen relationships with customers and suppliers ?
• Streamline business processes and administrative functions • No added sales staff
• A catalogue which is quickly and easily updateable. This means that when prices or stocks are changed, you don‘t have to have hundreds or thousands of obsolete catalogues lying around. You don‘t have to wait for the printer to deliver the catalogue before the new prices can come into effect.
• The facility to advertise daily, weekly or monthly ‗specials‘ and sales, or any special discounts - and they can be changed within minutes, when and if necessary.
• You can also add a marketing message which highlights your strengths, such as the range and quality of your products or services - or anything else you want to tell your customers.
• Electronic Commerce can increase sales and decrease costs.
• Advertising done well on the web can get even a small firm‘s promotional message out to potential customers in every country in the world.
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• Electronic Commerce increases the speed and accuracy with which businesses can exchange information, which reduces costs on both sides of transactions.• E-Commerce provides buyers with a wider range of choices than traditional commerce because buyers can consider many different products and services from a wider variety of sellers.
• Electronic payments of tax refunds, public retirement and welfare support cost less to issue and arrive securely and quickly when transmitted over the Internet.
Benefits to Organizations
• Electronic commerce expands the marketplace to national and international markets. With minimal capital outlay, a company can easily and quickly locate more customers, the best suppliers, and the most suitable business partners worldwide.
• Electronic commerce decreases the cost of creating, processing, distributing, storing, and retrieving paper-based information. For example, by introducing an electronic procurement system, companies can cut the purchasing administrative costs by as much as 85 percent.
• Ability for creating highly specialized businesses. For example, dog toys which can be purchased only in pet shops or department and discount stores in the physical world, are sold now in a specialized www.dogtoys.com
• Electronic commerce allows reduced inventories and overhead by facilitating ―pull‖-type supply chain management. In a pull-type system the process starts from customer orders and uses just-in-time manufacturing.
• Electronic commerce reduces the time between the outlay of capital and the receipt of products and services.
• Electronic commerce initiates business processes reengineering projects. By changing processes, productivity of salespeople, knowledge workers, and administrators can increase by 100 percent or more. • Electronic commerce lowers telecommunications cost-the Internet is much cheaper than VANs. • 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.
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Benefits to Consumers• Electronic commerce enables customers to shop or do other transactions 24 hours a day, all year round, from almost any location.
• Electronic commerce provides customers with more choices; they can select. Electronic commerce frequently 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. • Electronic commerce makes it possible to participate in virtual auctions.
• Electronic commerce 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. Benefits to Society
• Electronic commerce enables more individuals to work at home and to do less travelling for shopping, resulting in less traffic on the roads and lower air pollution.
• Electronic commerce allows some merchandise to be sold at lower prices, so less affluent people can buy more and increase their standard of living.
• Electronic commerce enables people in Third World countries and rural areas to enjoy products and services that otherwise are not available to them.
• Electronic commerce 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.
The Limitations of EC
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Technical Limitations of EC• There is a lack of system security, reliability, standards, and some communication protocols. • Insufficient telecommunication bandwidth.
• The software development tools are still evolving and changing rapidly.
• It is difficult to integrate the Internet and EC software with some existing applications and databases.
Vendors may need special Web servers and other infrastructures, in addition to the network servers. • Some EC software might not fit some hardware, or may be incompatible with some operating systems or other components.
Non-technical Limitations
Of the many non-technical limitations that slow the spread of EC, the following are the major ones. • Cost and justification: The cost of developing 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 must deal with some intangible benefits (such as improved customer service and the value of advertisement), which are difficult to quantify.
• Security and privacy: These issues are especially important in the B2C area, especially security issues which are perceived to be more serious than they really are when appropriate encryption is used. Privacy measures are constantly improved. Yet, the customers perceive these issues as very important, and, the EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, very secure.
• Lack of trust and user resistance: Customers do not trust an unknown faceless seller (sometimes they do not trust even known ones), paperless transactions, and electronic money. So switching from physical to virtual stores may be difficult.
• Other limiting factor:. Lack of touch and feel online. Some customers like to touch items such as clothes and like to know exactly what they are buying.
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• Many legal issues are as yet unresolved, and government regulations and standards are not refined enough for many circumstances.• Electronic commerce, as a discipline, is still evolving and changing rapidly. Many people are looking for a stable area before they enter into it.
• There are not enough support services. For example, copyright clearance centres for EC transactions do not exist, and high-quality evaluators, or qualified EC tax experts, are rare.
• In most applications there are not yet enough sellers and buyers for profitable EC operations. • Electronic commerce could result in a breakdown of human relationships.
• Accessibility to the Internet is still expensive and/or inconvenient for many potential customers. (With Web TV, cell telephone access, kiosks, and constant media attention, the critical mass will eventually develop.) Despite these limitations, rapid progress in EC is taking place. For example, the number of people in the United States who buy and sell stocks electronically increased from 300,000 at the beginning of 1996 to about 10 million in fall 1999. As experience accumulates and technology improves, the ratio of EC benefits to costs will increase, resulting in a greater rate of EC adoption. The potential benefits may not be convincing enough reasons to start EC activities
Disadvantages of E-Commerce
• Some business processes such as perishable foods and high-cost, unique items such as custom-designed jewelry might be impossible to inspect adequately from a remote location.
• Costs, which are a function of technology, can change dramatically even during short-lived electronic commerce implementation projects because the technologies are changing so rapidly.
• Many firms have trouble recruiting and retaining employees with the technological, design and business process skills needed to create an effective electronic commerce presence.
• Firms facing difficulty of integrating existing databases and transaction-processing software designed for traditional commerce into the software that enables electronic commerce.
• Companies that offer software design and consulting services to tie existing systems into new online business systems can be expensive.
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• Consumers are fearful of sending their credit card numbers over the Internet and having online merchants. Consumers are simply resistant to change and are uncomfortable viewing merchandise on a computer screen rather than in person.1.3 DRIVING FORCES OF E-COMMERCE
E-Commerce is becoming popular, it is worthwhile to examine today‘s business environment so let us understand the pressures it creates on organizations and the responses used by organizations.
Environmental factors that create Business Pressures:
Market, economical, societal and technological factors are creating a highly competitive business environment in which consumers are the focal point. These factors change quickly, sometimes in an unpredictable manner and therefore companies need to react frequently not only in the traditional actions such as lowering cost and closing unprofitable facilities but also innovative activities such as customizing products, creating new products or providing superb customer service.
Economic Forces
One of the most evident benefits of e-commerce is economic efficiency resulting from the reduction in communications costs, low-cost technological infrastructure, speedier and more economic electronic transactions with suppliers, lower global information sharing and advertising costs, and cheaper customer service alternatives.
Categories of Economic Forces
• Lower marketing costs: marketing on the Internet maybe cheaper and can reach a wider crowd than the normal marketing medium.
• Lower sales costs: increase in the customer volume do not need an increase in staff as the sales function is housed in the computer and has virtually unlimited accessibility
• Lower ordering processing cost: online ordering can be automated with checks to ensure that orders are correct before accepting, thus reducing errors and the cost of correcting them.
• New sales opportunities: the website is accessible all the time and reaches the global audience which is not possible with traditional storefront.
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Economic integration is either external or internal. External integration refers to the electronic networking of corporations, suppliers, customers/clients, and independent contractors into one community communicating in a virtual environment (with the Internet as medium). Internal integration, on the other hand, is the networking of the various departments within a corporation, and of business operations and processes. This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically. Internal integration is best exemplified by corporate intranets. Among the companies with efficient corporate intranets are Procter and Gamble, IBM, Nestle and Intel. EG. SESAMi.NET: Linking Asian Markets through B2B Hubs SESAMi.NET is Asia‘s largest B2B e-hub, a virtual exchange integrating and connecting businesses (small, medium or large) to trading partners, e-marketplaces and internal enterprise systems for the purpose of sourcing out supplies, buying and selling goods and services online in real time. The e-hub serves as the centre for management of content and the processing of business transactions with support services such as financial clearance and information services.It is strategically and dynamically linked to the Global Trading Web (GTW), the world‘s largest network of trading communities on the Internet. Because of this very important link, SESAMi reaches an extensive network of regional, vertical and industry-specific interoperable B2B e-markets across the globe.
Market Forces
Corporations are encouraged to use e-commerce in marketing and promotion to capture international markets, both big and small. The Internet is likewise used as a medium for enhanced customer service and support. It is a lot easier for companies to provide their target consumers with more detailed product and service information using the Internet.
Strong competition between organizations, extremely low labor cost in some countries, frequent and significant changes in markets and increased power of consumers are the reasons to create market forces. Technology Forces
The development of information and communications technology (ICT) is a key factor in the growth of ecommerce. For instance, technological advances in digitizing content, compression and the promotion of open systems technology have paved the way for the convergence of communication services into one single platform. This in turn has made communication more efficient, faster, easier, and more economical as the need to set up separate networks for telephone services, television broadcast, cable television, and
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Internet access is eliminated. From the standpoint of firms/ businesses and consumers, having only one information provider means lower communications costs.Moreover, the principle of universal access can be made more achievable with convergence. At present the high costs of installing landlines in sparsely populated rural areas is incentive to telecommunications companies to install telephones in these areas. Installing landlines in rural areas can become more attractive to the private sector if revenues from these landlines are not limited to local and long distance telephone charges, but also include cable TV and Internet charges. This development will ensure affordable access to information even by those in rural areas and will spare the government the trouble and cost of installing expensive landlines
Societal and environmental forces
To understand the role of E-commerce in today‘s organizations, it becomes necessary to review the factors that create societal and environmental forces.
• Changing nature of workforce • Government deregulations • Shrinking government subsidies
• Increased importance of ethical and legal issues • Increased social responsibility of organizations • Rapid political changes
1.4 Impact of EC
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.
Organizations‘ major responses are divided into five categories: strategic systems for competitive advantage, continuous improvement efforts, business process reengineering (BPR), business alliances and EC. These several responses can be interrelated and E-commerce can also facilitate the other categories. The four categories are described below.
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Strategic systems provide organizations with strategic advantages, thus enabling them to increase their market share, better negotiate with their suppliers, or preventcompetitors from entering into their territory. There is a variety of EC supported strategic systems. An example is FedEx‘s overnight delivery system and the company‘s ability to track the status of every individual package anywhere in the system. Most of FedEx‘s competitors have already mimicked the system. So FedEx moved the system to the Internet. However, the competitors quickly followed and now FedEx is introducing new activities.
Continuous Improvement Efforts
In order to improve the company‘s productivity and quality, many companies continuously conduct innovative programs. The efforts taken by companies for continuous improvement are
• Improved productivity • Improved decision making • Managing Information • Change in management
• Customer service Innovation and • Creativity.
For example, Dell Computer takes its orders electronically and improved moves them via Enterprise Resources Planning software (from SAP Corp.) into the just-in-time assembly operation. Intel is taking its products‘ consumption in 11 of its largest customers, using its extranets, almost in real time, and determining production schedules and deliveries accordingly.
Business Process Reengineering (BPR)
Business Process Reengineering refers to a major innovation in the organization‘s structure and the way it conducts business. Information technology and especially EC play a major role in BPR. Electronic Commerce provides flexibility in manufacturing, permits faster delivery to customers and supports rapid and paperless transactions among suppliers, manufacturers and retailers.
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• Reducing cycle time and time to market: Reducing the business process time (cycle time) is extremely important for increasing productivity and competitiveness. Similarly, reducing the time from the inception of an idea until its implementation— time to market—is important because those who can be first on the market with a product, or who can provide customers with a service faster than competitors, enjoy a distinct competitive advantage.• Empowerment of employees and collaborative work: Empowerment is related to the concept of self-directed teams. Management delegates authority to teams who can execute the work faster and with fewer delays. Information Technology allows the decentralization of decision making and authority but simultaneously supports a centralized control. For example, the Internet and the intranets enable empowered employees to access data, information and knowledge they need for making quick decisions. • Knowledge management: Employees can access organizational know-how via their company‘s intranet. Some knowledge bases are open to the public for a fee over the Internet, generating income. • Customer-focused approach: Companies are becoming increasingly customer oriented. This can be done in part by changing manufacturing processes from mass production to mass customization. In mass production, a company produces a large quantity of identical items. In mass customization, items are produced in a large quantity but are customized to fit the desires of each customer. Electronic commerce is an ideal facilitator of mass customization.
Business alliances
Many companies realize that alliances with other companies, even competitors can be beneficial. There are several types of alliances, such as sharing resources, establishing permanent supplier-company relationships and creating joint research efforts. One of the most interesting types is the temporary joint venture, in which companies form a special organization for a specific, limited-time mission.
THE SCOPE OF EC.
The field of e-commerce is broad, and we use Figure 1.1 to describe it. As can be seen in the figure, there are many of EC applications (top of the figure),
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To execute these applications, companies need the right information, infrastructure, and support services. Figure 1.1 shows that the EC applications are supported by infrastructure and by five support areas (shown as supporting pillars):
● People: Sellers, buyers, intermediaries, information systems specialists and other employees, and any other participants.
● Public policy: Legal and other policy and regulating issues, such as privacy protection and taxation, that are determined by the government.
● Marketing and advertising: Like any other business, EC usually requires the support of marketing and advertising. This is especially important in B2C online transactions where the buyers and sellers usually do not know each other.
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● Support services: Many services are needed to support EC. These range from payments to order delivery and content creation.● Business partnerships: Joint ventures, e-marketplaces, and business partnerships of various sorts are common in EC. These occur frequently throughout the supply chain (i.e., the interactions between a company and its suppliers, customers, and other partners).
The supporting infrastructure includes hardware, software, and networks, ranging from browsers to multimedia.
All of these EC components require good management practices. This means that companies need to plan, organize, motivate, devise strategy, and reengineer processes as needed.
1.5 Ecommerce Strategy
Build a business, not a website.
EC philosophy is: ―Build a business, not a website‖. An Ecommerce website is a business first and foremost; the website is merely the commerce delivery channel. An effective ecommerce site begins by understanding and defining the business strategy, goals and metrics for the site, and then crafting a website that is tailored to meet those site objectives.
Start with the 5 Ps: Proper Preparation Prevents Poor Performance
You wouldn‘t build a house without an architect and a blueprint, and you shouldn‘t build a website without a digital equivalent. If you want your digital ‗house‘ to crumble, the surest way to ensure failure online and waste untold time and money is to skip proper planning and jump blindly into implementation.
Avoid
Weak or inconsistent branding Cart abandonment
Bad User Experience and usability Poor navigation
Slow performance
Slow or limited site search
Inability to make changes quickly Poor Performance with search engines
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What will you gain through proper strategy and planning? A successful ecommerce business that delivers real economic value, including:Attracting New Customers: By planning and implementing a search-engine friendly architecture from the start, your ecommerce site gains relevant and targeted traffic
Increasing Sales: By streamlining the sales process and improving the shopping experience we increase the conversion rate and the average ticket price
Increasing Customer Loyalty and Retention: An enhanced, usable, and pleasing ecommerce experience generates greater user satisfaction and trust which translates into returning customers Providing Superior Customer Service and Communications: Help your customers to communicate, engage and ultimately identify themselves with your business through ecommerce tools, user communities, online support, and by providing them with comprehensive and timely product information
Reducing Operating Costs and Increasing Efficiency: Reduce your customer acquisition, customer service and fulfillment costs by leveraging the website for client communications and process automation
Promoting Your Brand and Enhancing Your Brand Image: We ensure you display a consistent corporate identity online with a professional style guide. Moreover, our ecommerce Marketing solutions promote your products to the right audience, resulting in enhanced Brand Recognition and demand
Preparing for Future Needs: With proper planning and a scalable architecture, your ecommerce site can accommodate additional requirements, features and functionality in the future
Measure your Success
How will you know if your ecommerce site is successful at meeting your business needs? The key success metrics for ecommerce sites include:
Traffic: The number of visitors that are coming to your site
Stickiness: The amount of time users spend on the site and the number of pages they view Conversion: The percent of visitors who become customers and the size of the average sales ticket
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Customer Retention: The number of customers who return to your site and the frequency of their purchasesImplement our Holistic Methodology
A thorough understanding of your business goals alone is not enough to ensure a flawless execution that delivers results. While it takes only one mediocre designer or developer to ruin a website, it takes a highly skilled and professionally managed team to produce a successful ecommerce site, including:
A Project Manager
An Ecommerce Business Analyst (to conduct the research, plan strategy, find out what your competitors are doing that may be worth mimicking, and find the ―opportunities‖ that those competitors are not taking advantage of)
A Search Engine Optimization Specialist (to ensure search-engine friendliness is incorporated into the site architecture)
An Information Architect A User-Experience Specialist
An Art Director (to create the design style guide and give directions to the designers) A Developer (for site development and technical specifications)
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CASE STUDYE-COMMERCE PROVIDES DECISION SUPPORT TO HI-LIFE ORPORATION
THE PROBLEM
Hi-Life Corporation owns and operates 720 convenience retail stores in Taiwan, where the company sells over 3,000 different products. A major problem is keeping a proper level of inventory of each product in each store. Overstocking is expensive due to storage costs and tying up money to buy and maintain the inventory. Under stocking reduces sales and could result in unhappy customers who may go to a competitor.
To calculate the appropriate level of inventory, it is necessary to know exactly how many units of each product are in stock at specific times. This is known as stock count. Periodic stock count is needed since the actual amount in stock frequently differs from the theoretical one (inventory _ previous inventory _ sales _ arrivals). The difference is due to ―shrinkage‖ (e.g., theft, misplaced items, spoilage, etc.). Until 2002, stock count at Hi-Life was done manually. Using data collection sheets, where the products‘ names were preprinted, employees counted the quantity of each product and recorded it on the data collection sheets. Then, the data were painstakingly keyed into each store‘s PC. The process took over 21 person hours, in each store, each week. This process was expensive and frequently was delayed, causing problems along the entire supply chain due to delays in count and errors. Suppliers, employees, and customers were unhappy.
THE SOLUTION
The first phase of improvement was introduced in spring 2002. Management introduced a pocket PC (a handheld device) from Hewlett-Packard that runs on Microft Windows (Chinese version). The pocket PC, called Jornada, enables employees to enter the inventory tallies directly on the forms on the screen by hand, using Chinese characters for additional notes. Jornada has a synchronized cradle called Activesync. Once the pocket PC is placed in its cradle, inventory information can be relayed instantly to Hi-Life‘s headquarters.
In the second phase of improvement, in 2003, a compact bar code scanner was added on in the pocket PC‘s expansion slot. Employees now can scan the products‘ bar codes and then enter the quantity found on the shelf. This new feature expedites data entry and minimizes errors in product identification. The up-to-the second information enables headquarters to compute appropriate inventory levels, shipment schedules, and purchasing strategies, using decision support system formulas, all in minutes. The stores use the Internet (with a secured VPN) to upload data to the intranet at headquarters.
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THE RESULTS
The results have been astonishing. Inventory taking has been reduced to less than four hours per store. Errors are down by more than 90 percent, order placing is simple and quick, and administrative aperwork has been eliminated.
Furthermore, quicker and more precise inventory counts have resulted in lower inventory levels and in shorter response times for changes in demand. Actually, the entire product-management process became more efficient, including purchasing, stocking, selling, shelf-price audit and price checks, re-ticketing, discontinuance, and customer inquiries. The employees like the new electronic commerce-based system too. It is very user friendly, both to learn and to operate, and the battery provides at least 24 hours of power, so charging can be done after hours. Finally, Hi-Life‘s employees now have more time to plan, manage, and chat with customers. More important, faster and better decisions are enabled at headquarters, contributing to greater competitiveness and profitability for Hi-Life.
Sources: Compiled from hp.com/jornada jornada, and from microsoft.com/asia/mobile (May 2002).
LESSONS LEARNED FROM THIS CASE
The output of an information system is only as good as the inputted data. When data are inaccurate and/or delayed, the decisions that use the data are not the best, as in Hi-Life‘s old system, which resulted in high inventories and low customer satisfaction. The solution described in this case was provided by an electronic-commerce system that expedited and improved the flow of information to the corporate headquarters. Electronic commerce (EC), which is the subject of this chapter, describes the process of buying, selling, transmitting, or exchanging products, services, and information via computerized networks, primarily by the Internet (see Turban et al., 2004). This case illustrates an intrabusiness application, involving employees, and it is referred to business-to employees (B2E) e-commerce. There are several other types of EC, and they all are the subject of this chapter. We also provide here an overview of the EC field and comment on its relationship to other information systems.
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2.0 Launching a Business on the Internet
2.1 Internet Architecture: The Life Cycle Approach 2.2 Overview of the different phases
2.3 The Network: Information Transfer 2.4 Hosting a web site
2.1 Internet Architecture: The Life Cycle Approach
A worldwide system of interconnected computer networks. The origins of the Internet can be traced to the creation of ARPANET (Advanced Research Projects Agency Network) as a network of computers under the auspices of the U.S.
Department of Defense in 1969. Today, the Internet connects millions of computers around the world in a nonhierarchical manner unprecedented in the history of communications. The Internet is a product of the convergence of media, computers, and telecommunications. It is not merely a technological development but the product of social and political processes, involving both the academic world and the government (the Department of Defense). From its origins in a nonindustrial, non- corporate environment and in a purely scientific culture, it has quickly diffused into the world of commerce.
The Internet is a combination of several media technologies and an electronic version of newspapers, magazines, books, catalogs, bulletin boards, and much more. This versatility gives the Internet its power.
Technological features
The Internet 'Ls technological success depends on its principal communication tools, the Transmission Control Protocol (TCP) and the Internet Protocol (IP). They are referred to frequently as TCP/IP. A protocol is an agreed-upon set of conventions that defines the rules of communication. TCP breaks down and reassembles packets, whereas IP is responsible for ensuring that the packets are sent to the right destination.
Data travels across the Internet through several levels of networks until it reaches its destination. E-mail messages arrive at the mail server (similar to the local post office) from a remote personal computer connected by a modem, or a node on a local-area network. From the server, the messages pass through a router, a special purpose computer ensuring that each message is sent to
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its correct destination. A message may pass through several networks to reach its destination. Each network has its own router that determines how best to move the message closer to its destination, taking into account the traffic on the network. A message passes from one network to the next, until it arrives at the destination network, from where it can be sent to the recipient, who has a mailbox on that network.TCP/IP
TCP/IP is a set of protocols developed to allow cooperating computers to share resources across the networks. The TCP/IP establishes the standards and rules by which messages are sent through the networks. The most important traditional TCP/IP services are file transfer, remote login, and mail transfer.
The file transfer protocol (FTP) allows a user on any computer to get files from another computer, or to send files to another computer. Security is handled by requiring the user to specify a user name and password for the other computer.
The network terminal protocol (TELNET) allows a user to log in on any other computer on the network. The user starts a remote session by specifying a computer to connect to. From that time until the end of the session, anything the user types is sent to the other computer. Mail transfer allows a user to send messages to users on other computers.
Originally, people tended to use only one or two specific computers. They would maintain ―mail files‖ on those machines. The computer mail system is simply a way for a user to add a message to another user's mail file.
Other services have also become important: resource sharing, diskless workstations, computer conferencing, transaction processing, security, multimedia access, and directory services.
TCP is responsible for breaking up the message into datagrams, reassembling the datagrams at the other end, resending anything that gets lost, and putting things back in the right order. IP is responsible for routing individual datagrams. The datagrams are individually identified by a unique sequence number to facilitate reassembly in the correct order. The whole process of transmission is done through the use of routers. Routing is the process by which two communication stations find and use the optimum path across any network of any complexity. Routers must support fragmentation, the ability to subdivide received information into smaller units where this is required to match the underlying network technology. Routers operate by
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recognizing that a particular network number relates to a specific area within the interconnected networks. They keep track of the numbers throughout the entire process.Domain Name System
The addressing system on the Internet generates IP addresses, which are usually indicated by numbers such as 128.201.86.290. Since such numbers are difficult to remember, a user-friendly system has been created known as the Domain Name System (DNS). This system provides the mnemonic equivalent of a numeric IP address and further ensures that every site on the Internet has a unique address. For example, an Internet address might appear as crito.uci.edu. If this address is accessed through a Web browser, it is referred to as a URL (Uniform Resource Locator), and the full URL will appear as http://www.crito.uci.edu.
The Domain Name System divides the Internet into a series of component networks called domains that enable e-mail (and other files) to be sent across the entire Internet. Each site attached to the Internet belongs to one of the domains.
Universities, for example, belong to the ―edu‖ domain. Other domains are gov (government), com (commercial organizations), mil (military), net (network service providers), and org (nonprofit organizations).
World Wide Web
The World Wide Web (WWW) is based on technology called hypertext. The Web may be thought of as a very large subset of the Internet, consisting of hypertext and hypermedia documents. A hypertext document is a document that has a reference (or link) to another hypertext document, which may be on the same computer or in a different computer that may be located anywhere in the world. Hypermedia is a similar concept except that it provides links to graphic, sound, and video files in addition to text files.
In order for the Web to work, every client must be able to display every document from any server. This is accomplished by imposing a set of standards known as a protocol to govern the way that data are transmitted across the Web.
Thus data travel from client to server and back through a protocol known as the HyperText Transfer Protocol (http). In order to access the documents that are transmitted through this protocol, a special program known as a browser is required, which browses the Web. See also
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World Wide Web.Commerce on the Internet
Commerce on the Internet is known by a few other names, such as e-business, Etailing (electronic retailing), and e-commerce. The strengths of e-business depend on the strengths of the Internet. Internet commerce is divided into two major segments, companies that have started their businesses on the Internet, and others that have existed previously and are now transitioning into the Internet world. Some products and services, such as books, compact disks (CDs), computer software, and airline tickets, seem to be particularly suited for online business.
World Wide Web : A major service on the Internet. To understand exactly how the Web relates to the Internet, see Web vs. Internet. The World Wide Web is made up of "Web servers" that store and disseminate "Web pages," which are "rich" documents that contain text, graphics, animations and videos to anyone with an Internet connection.
The heart of the Web technology is the hyperlink, which connects each document to each other by its "URL" address, whether locally or in another country.
"Click here" caused the Web to explode in the mid-1990s, turning the Internet into the largest shopping mall and information source in the world. It also enabled the concept of a "global server" that provides a source for all applications and data.
The Browser
Web pages are accessed by the user via a Web browser application such as Internet Explorer, Netscape, Safari, Opera and Firefox. The browser renders the pages on screen, executes embedded scripts and automatically invokes additional software as needed. For example, animations and special effects are provided by browser plug-ins, and audio and video are played by media player software that either comes with the operating system or from a third party.
HTML Is the Format
A Web page is a text document embedded with HTML tags that define how the text is rendered on screen. Web pages can be created with any text editor or word processor. They are also created in HTML authoring programs that provide a graphical interface for designing the layout. Authoring programs generate the HTML tags behind the scenes, but the tags can be edited if required. Many applications export documents directly to HTML, thus basic Web pages can be
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created in numerous ways without HTML coding. The ease of page creation helped fuel the Web's growth. A collection of Web pages makes up a Web site. Very large organizations deploy their Web sites on in-house servers or on their own servers co-located in a third party facility that provides power and Internet access. Small to medium sites are generally hosted by Internet service providers (ISPs). Millions of people have developed their own mini Web sites as ISPs typically host a small number of personal Web pages at no extra cost to individual customers. The public Web spawned the private "intranet," an inhouse Web site for employees. Protected via a firewall that lets employees access the Internet, the firewall restricts uninvited users from coming in and viewing internal information.There is no difference in intranet and Web architectures. It has only to do with who has access. HTTP Can Deliver Anything HTML pages are transmitted to the user via the HTTP protocol. A Web server stores HTML pages for a Web site, but it can also be a storehouse for any kind of file delivered to a client application via HTTP. For example, the Windows version of this Encyclopedia is available as an HTTP application. The text and images are hosted on The Computer Language Company's Web server and delivered to the Windows client in the user's PC. The Windows client is an HTTP-enabled version of the popular interface first introduced in 1996 for stand-alone PCs and client/server LANs.
Where It Came From - Where It's Going
The World Wide Web was developed at the European Organization for Nuclear Research (CERN) in Geneva from a proposal by Tim Berners-Lee in 1989. It was created to share research information on nuclear physics. In 1991, the first command line browser was introduced. By the start of 1993, there were 50 Web servers, and the Voila X Window browser provided the first graphical capability. In that same year,
CERN introduced its Macintosh browser, and the National Center for Supercomputing Applications (NCSA) in Chicago introduced the X Window version of Mosaic. Mosaic was developed by Marc Andreessen, who later became world famous as a principal at Netscape. By 1994, there were approximately 500 Web sites, and, by the start of 1995, nearly 10,000. By the turn of the century, there were more than 30 million registered domain names. Many believe the Web signified the real beginning of the information age. However, those people who still use
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analog dial-up modems consider it the "World Wide Wait."Everyone has some interest in the Web. ISPs, cable and telephone companies want to give you connectivity. Webmasters want more visitors. IT managers want more security. The publishing industry wants to preserve its copyrights. Hardware and software vendors want to make every product Web accessible. Nothing in the computer/communications field ever came onto the scene with such intensity. Even with the dot-com crash of 2000/2001, the future of the Web is going to be very exciting. Stay tuned! See Web 2.0, Internet, HTTP, HTML, World Wide Wait and Wild Wooly Web.
2.2 Overview of Different Phases :What is a Network?
A ―network‖ has been defined as any set of interlinking lines resembling a net, a network of roads || an interconnected system, a network of alliances.'' This definition suits our purpose well: a computer network is simply a system of interconnected computers. How they're connected is irrelevant, and as we'll soon see, there are a number of ways to do this.
Components of a Network:
The components given below are mainly used in Network Security. 1. Concentrator 2. Hub 3. Repeater 4. Bridges 5. Modem 6. Routers 7. Cables
NETWORK INFRASTRUCTURE REQUIREMENTS
The network infrastructure is the underlying foundation of the system. It forms the services that create the operating makeup of your network. In a Communications Services deployment, determining your network infrastructure from the project goals ensures that you will have an architecture that can scale and grow.
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The Existing Network
We need to understand our existing network infrastructure to determine how well it can meet the needs of our deployment goals. By examining our existing infrastructure, we identify if we need to upgrade existing network components or purchase new network components. We should build up a complete map of the existing network by covering these areas:
1. Physical communication links, such as cable length, grade, and so forth
2. Communication links, such as analog, ISDN, VPN, T3, and so forth, and available bandwidth and latency between sites
3. Server information, including: • Host names
• IP addresses
• Domain Name System (DNS) server for domain membership 4. Locations of devices on your network, including:
• Hubs • Switches • Modems
• Routers and bridges • Proxy servers
5. Number of users at each site, including mobile users
After completing this inventory, you need to review that information in conjunction with your project goals to determine what changes are required so that you can successfully deliver the deployment.
Network Infrastructure Components
The following common network infrastructure components have a direct impact upon the success of your deployment:
• Routers and switches • Firewalls
• Load balancers
• Storage Area Network (SAN) • DNS
