anatomy of e commerce applications notes and e-commerce lecture notes pdf download
Part Two of Two
11/1/2010 EBusiness Introduction
EBusiness vs. Ecommerce
While some use e‐commerce and e‐business interchangeably, they are distinct concepts. Electronic business,
commonly referred to as "e‐Business" or "e‐business", may be defined as the application of information and
communication technologies (ICT) in support of all the activities of business. Commerce constitutes the exchange of
products and services between businesses, groups and individuals and can be seen as one of the essential activities
of any business. Electronic commerce focuses on the use of ICT to enable the external activities and relationships of
the business with individuals, groups and other businesses.
E‐Commerce Is a particular form of e‐Business. Electronic business methods enable companies to link their internal
and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners,
and to better satisfy the needs and expectations of their customers. Compared to e‐Commerce, e‐Business is a more
generic term because it refers not only to information exchanges related to buying and selling but also servicing
customers and collaborating with business partners, distributors and suppliers.
E‐Business encompasses sophisticated business‐to‐business interactions and collaboration activities at a level of
enterprise applications and business processes, enabling business partners to share in‐depth business intelligence,
which leads, in turn, to the management and optimization of inter‐enterprise processes such as supply chain
management. More specifically, e‐Business enables companies to link their internal and external processes more
efficiently and flexibly, work more closely with suppliers and better satisfy the needs and expectations of their
In practice, e‐business is more than just e‐commerce. While e‐business refers to more strategic focus with an
emphasis on the functions that occur when using electronic capabilities, e‐commerce is a subset of an overall e‐
business strategy. E‐commerce seeks to add revenue streams using the World Wide Web or the Internet to build and
enhance relationships with clients and partners and to improve efficiency using the Empty Vessel strategy. Often, e‐
commerce involves the application of knowledge management systems.
E‐business involves business processes spanning the entire value chain: electronic purchasing and supply chain
management, processing orders electronically, handling customer service, and cooperating with business partners.
Special technical standards for e‐business facilitate the exchange of data between companies. E‐business software
solutions allow the integration of intra and inter firm business processes. E‐business can be conducted using the
Web, the Internet, intranets, extranets, or some combination of these.
Basically, electronic commerce (EC) is the process of buying, transferring, or exchanging products, services, and/or
information via computer networks, including the internet. EC can also be benefited from many perspective
including business process, service, learning, collaborative, community. EC is often confused with e‐business.
In e‐commerce, information and communications technology (ICT) is used in inter‐business or inter‐organizational
transactions (transactions between and among firms/organizations) and in business‐to‐consumer transactions
(transactions between firms/organizations and individuals).
In e‐business, on the other hand, ICT is used to enhance one’s business. It includes any process that a business
organization (either a for‐profit, governmental or non‐profit entity) conducts over a computer‐mediated network.
A more comprehensive definition of e‐business is: “The transformation of an organization’s processes to deliver
additional customer value through the application of technologies, philosophies and computing paradigm of the new
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Three primary processes are enhanced in e‐business:
• Production processes, which include procurement, ordering and replenishment of stocks; processing of
payments; electronic links with suppliers; and production control processes, among others;
• Customer‐focused processes, which include promotional and marketing efforts, selling over the Internet,
processing of customers’ purchase orders and payments, and customer support, among others
• Internal management processes, which include employee services, training, internal information‐sharing,
video‐conferencing, and recruiting. Electronic applications enhance information flow between production
and sales forces to improve sales force productivity. Workgroup communications and electronic publishing
of internal business information are likewise made more efficient.
E‐Business goes far beyond e‐commerce or buying and selling over the Internet, and deep into the processes and
cultures of an enterprise. It is the powerful business environment that is created when you connect critical business
systems directly to customers, employees, vendors, and business partners, using Intranets, Extranets, ecommerce
technologies, collaborative applications, and the Web.
E‐business is a more strategic focus with an emphasis on the functions that occur when using electronic capabilities
while E‐commerce is a subset of an overall e‐business strategy. E‐commerce seeks to add revenue streams using the
World Wide Web or the Internet to build and enhance relationships with clients and partners and to improve
efficiency while Electronic business methods enable companies to link their internal and external data processing
systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the
needs and expectations of their customers.
E‐Business is at the enterprise application level and encompasses sophisticated b2b interaction and collaboration
activities. Enterprise Application Systems such as ERP, CRM, SCM form an integral part of e‐Business strategy and
Critical Factors with respect of eBusiness
E‐Business supports business processes along the entire value chain: Electronic purchasing (E‐Procurement), SCM
(Supply Chain Management), Processing orders electronically, Customer Service & Co‐operation with business
One of the objectives of e‐Business is to provide seamless connectivity and integration between business processes
and applications external to an enterprise and the enterprise’s back office applications sucha as billing, orger
processing, accounting, inventory and receivables, and services focused to total supply chain management and
partnership including product development, fulfillment, and distribution. In this respect, e‐Business is much more
To succeed in e‐Business it is crucial to combine technological developments with corporate strategy that redifines a
company’s role in the digital economy while taking into account its various stakeholders. It is imperative to
understand the issues, evaluate the options, and develop technology orientation plans. An e‐Business strategy helps
organizations identify their e‐Business concerns, assess their information needs, analyze to what degree existing
systems serve these objectives, pinpoint specific improvements, determine the development stages of e‐Business
solutions and attain concrete and measurable results. Thus, it is clear that e‐Business solutions are not only about
A classic example is SAP systems integrations for any organization. This itself is taken up as a project and executed
with great attention to detail. A minute logical error in interpretation of the firm’s objectives could result in the
entire system being re‐worked from scratch.
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E‐Business allows for redefinition of value, competitiveness and the very nature of transactions and it affects all
areas of an organization. It is crucial to combine technology and business strategy while taking into account various
An E‐business Strategy helps to
• Identify e‐business concerns
• Assess info needs
• Analyze existing systems
• Improvements required in existing systems
• Determine the stages of development of solutions
• Attain concrete and measurable results.
Characteristics of eBusiness
To emphasize, e‐Business is not simply buying and selling but encompasses the exchange of many kinds of
information, include online commercial transactions. E‐Business is about integrating external company processes
with an organization’s internal business processes; as such, a variety of core business processes could exploit an e‐
These include among others: ‐
• Collaborative Product Development
• Collaborative Planning, Forecasting and Replenishment
• Procurement and Order management
• Operations and Logistics
Collaborative Product Development
This is one of the fastest growing technologies in engineering with some form of solutions being implemented in a
range of industries such as automotive, aerospace, agricultural machinery etc. It contributes towards making
products in a short time span while maintaining quality and reducing cost.
It also aids in maximizing time‐to‐market benefits while maintaining control over product development information.
By integrating design and testing cycles of products with those of suppliers, a firm can shorten the complete cycle of
its products. This clearly, reduces the total cost of the product cycle, & even more importantly, it reduces the time
that is needed to bring products to the marketplace. Collaborative product development solutions offer ERP
integration and SCM.
Collaborative Planning, Forecasting and Replenishment
This is a process in which Manufacturers, Distributors and Retailers work together to plan, forecast and replenish
products. In e‐Business relationships collaboration takes the form of sharing information that impacts inventory
levels and merchandise flow.
Collaboration points: sales forecasts, inventory requirements, manufacturing and logistic lead times, seasonal set
schedules, new/remodel storage plans, promotional plans etc
Goal: To get the partners to work together to improve lower supply cycle times, improve customer service, lower
inventory costs, improve inventory levels and achieve better control of planning activities
Procurement and Order management
Electronic procurement or E‐Procurement can achieve significant savings and other benefits that impact the
customer. To support procurement and order management processes, companies use an integrated electronic
ordering process and other online resources to increase efficiency in purchasing operations.
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Benefits: cost savings, better customer service by controlling the supply base, negotiating effective buying
preferences, and streamlining the overall procurement process.
Operations & Logistics
Logistics is that part of the supply chain process that plans, implements and controls the efficient, effective flow and
storage of goods, services and related information from the point of origin to point of consumption in order to meet
customer requirements. To make this happen, transportation, distribution, warehousing, purchasing & order
management functions must work together. Logistics in the e‐Business era is all about Collaboration ‐ the sharing of
critical and timely data on the movement of goods as they flow from raw material, all the way to the end‐user.
Operations and Logistics processes are based on open communication between networks of trading partners where
integrated processes and technology are essential for high performance logistics operations. These solutions help
manage the logistics process between buyers and suppliers, while eliminating costly discrepancies between purchase
order, sales order and shipping information. By eradications these variances and inconsistencies improvements in
the supply chain may result from the elimination of mixed shipments and shipment discrepancies, and the reduction
of inventory carrying costs for the customer. At the same time this increases customer satisfaction through
improved delivery reliability and improved efficiencies in receiving operations.
Furthermore, there are critical elements to e‐business models as well. They are as follows:
• A shared digital business infrastructure, including digital production and distribution technologies
(broadband/wireless networks, content creation technologies and information management systems), which
will allow business participants to create and utilize network economies of scale and scope.
• A sophisticated model for operations, including integrated value chains‐both supply chains and buy chains.
• An e‐business management model, consisting of business teams and/or partnerships;
• Policy, regulatory and social systems ‐ i.e., business policies consistent with e‐commerce laws, tele‐
working/virtual work, distances learning, incentive schemes, among others.
• Ease of Automated Processing ‐ A payer can now cheaply and easily automate the generation and
processing of multiple payments with minimal effort. Previously, the dependency upon banks to handle
most payments and the lack of a cheap, ubiquitous communications technology made automation of
payment processes expensive and difficult to establish.
• Immediacy of result ‐ Payment immediacy occurs because automation and the ability for the intermediate
systems and providers to process payments in real‐time. With the more manual, paper‐based systems there
was always a time delay due to the requirement for human intervention in the process.
• Openness and accessibility ‐ The availability of cheap computing and communications technology and the
appropriate software enables small enterprises and individuals to access or provide a range of payment
services that were previously only available to large organizations via dedicated networks or the
transactional processing units of banks.
• Loss of collateral information ‐ The new technology dispenses with, or alters, collateral information
accompanying transactions. This information has traditionally been part of the transaction, and has been
relied upon by the transacting parties to validate individual payments.
• Collateral information can be defined as information:
• Which is not essential to the meaning and intent of a transaction;
• Which is typically incidental to the nature of the communications channel over which the transaction is
conducted; but nevertheless provides useful contextual information for one or more of the parties to the
• Collateral information can include many things ranging from tone of voice in a telephone call to the business
cards and letterheads and apparent authority of the person with whom you are dealing.
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• Globalizzation ‐ Glob balization, orr the minimization of geographical factors in maaking payments, has bee en an
obvious aspect of the new paayments sysstems. Its afffect is upon areas succh as size o of the paym ments
marketp place, uncerrtainty as to o legal jurissdiction in tthe event o of disputes, location an nd availabilitty of
transacttion trails, an nd the abilitty of a paym ment scheme e to rapidly aadapt to reggulatory regimes impose ed by
one country by moving to another.
• New business mode els ‐ New bussiness models are being developed to exploit the e new payme ent technolo ogies,
in particcular to addrress or take advantage o of the disinttermediation n of custome ers from trad ditional paym ment
providerrs such as baanks. In this context, dissintermediation is where e the techno ology enabless a third parrty to
interven ne between the customer and the banking systtem, effectivvely transferrring the customer’s tru usted
relationsship with the e bank to the e new party.
Eleements of an eBusiiness solu ution
The vision of e‐ ‐Business is that enterp prises will haave access tto broad ran nge of tradiing partnerss to interactt and
collaaborate with h and not o only buy and d sell more efficiently. Also, it is e expected thaat e‐Business will contriibute
towards the agillity of busine ess organizattions and witth that to reaching highe er levels of ccustomization. In this way, an
orgaanization can n maximize ssupply chain efficiency, im mprove customer service e and increase profit margins. Hence e, the
need d to make m mission criticaal processes:
Inve entory, Acco ounting, Man nufacturing and Custom mer Support: These, musst be able to o interact witth each othe er by
beco oming web‐e enabled. This is achieved d by ERP, CR RM and othe er systems b by making usse of distribu uted applicattions
thatt extract dataa and launch h business processes acro oss many or aall of the abo ove processe es.
The key elementts of an e‐Bu usiness solutiion are:
1. Custome er Resource managemen nt(CRM)
2. Enterpriise resource planning (ER RP)
3. Supply C Chain Managgement (SCM M)
4. Knowled dge Management
5. e‐Marke ets
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Customer relationship management (CRM )
CRM systems are “front‐office” systems which help the enterprise deal directly with its customers. CRM (definition)
is the process of creating relationships with customers through reliable service automated processes, personal
information gathering, processing and self‐service through the enterprise in order to create value for customers.
There are 3 categories of user applications under CRMs:
• Customer‐facing applications:
Applications which enable
customers to order products and
• Sales‐force facing applications:
Applications that automate some of
the sales and sales‐force
management functions, and support
dispatch and logistic functions.
• Management‐facing applications:
Applications which gather data from
previous apps and provide
management reports and compute
Return on relationships(RoR) as per
company’s business model
Enterprise Resource Planning (ERP)
ERPs are often called “back‐office” systems. ERP systems are management information systems that integrate and
automate many of the business practices associated with operations or production aspects of a company. ERP
software can aid in control of many business activities such as sales, delivery, production, billing, production,
inventory, shipping, invoicing and accounting.
A typical ERP system is designed around these 4
primary business procedures: ‐
• Production: manufacturing, resource planning
and execution process
• Buying a product: procurement process
• Sales of a product and services: customer
order management process
• Costing, paying bills, and collecting:
financial/management accounting and
Supply Chain Management (SCM)
Supply chain (definition) is a network of facilities and distribution options that perform the functions of procurement
of materials, transformation of these materials into intermediate and finished products, and distribution of these
finished products to customers. SCM deals with the planning and execution issues involved in managing a supply
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Supply chain has 3 main parts
• Supply side: concentrates on
how, where from, and when raw
materials are procured and
supplied to manufacturing.
• Manufacturing side: converts raw
materials to finished products.
• Distribution side: ensures that
finished products reach the final
customers through a network of
distributors, warehouses and
This relates to the identification and analysis of available and required knowledge assets and related processes.
Knowledge assets encompass two things Information and Experience. Knowledge assets comprise of all knowledge
that a business has or needs to have in order to generate profits and add value.
Knowledge management includes the subsequent planning and control of actions to develop both the knowledge
assets and the processes to fulfill organizational objectives. Knowledge is a strong denominator of a business model
and determines business competencies especially when unique to the business and so must be kept in‐house.
E‐Market is an electronic meeting place for multiple buyers and sellers providing many participants with a unified
view of sets of goods and services, enabling them to transact using many different mechanisms. An e‐Market uses
Internet technology to connect multiple buyers and suppliers.
EBusiness Roles and their challenges
• There are two main roles in the E‐business scenario:
o The Buyer: Buyers are organizations that purchase goods and services directly from Suppliers.
o The Supplier: Suppliers are organizations that market and sell goods or services directly to buyers or
indirectly through diverse sales channels including Web‐based procurement systems and electronic
• Suppliers typically provide buyers with web‐based services necessary for completing e‐Business transactions.
• Buyers (customers) can thus review product information, receive customer service, ordering services and
customization support facilities an can submit or modify orders.
• An additional role is that of Market Makers that are third party organizations that run e‐markets.
• Each role has distinct business and technical challenges, but they all coalesce around a common point.
• For buyers as well as for suppliers, the primary challenge is the ability to reach a critical mass of trading
partners and transaction volume to sustain their business.
• For suppliers especially, the following challenges exist:
o Managing multiple selling channels, based on various technologies, protocols, data formats, and
standard business processes.
o Having the ability to take multiple types of orders once the customer has decided to conduct e‐
Business –enabled order management through the various selling channels.
o Having the ability to differentiate and customize products and services from other suppliers, and
offering them through the various selling channels.
o Having the ability to adapt and grow the e‐Business without incurring drastic technology changes,
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o And sweeping changes in the business process, or radical new investments.
• To meet the needs of buyers and suppliers, e‐Business strategy and solutions must be built on the following
o Empowering suppliers & buyers:
o Enabling suppliers of all sizes:
• Identify/measure quantifiable business objectives: companies must accurately measure the impact an e‐
Business initiative has on their business processes and decide whether this initiative is worth pursuing and
has sustainable long‐term effects
• Ensure organizational/operational flexibility: Enterprises must reposition themselves in their mission,
structure and execution to prosper in a substantially more dynamic environment.
• Rethink entire company supply chains: companies must rethink their entire supply chains in order to
optimize performance and value as they seek to better integrate with suppliers and customers, share
information, inter‐link processes, and outsource manufacturing logistics systems and maintenance activities.
• Transform the company to a process‐centric form: Companies must be conceptualized as a set of business
processes with more emphasis on maximizing the efficiency of processes rather than departmental or
• Define Business processes: companies must create models of existing processes and interactions
determining the relevant events, time frames, resources and costs associated with business processes,
hence making them well‐defined and measurable
• Understand Security requirements: the breadth of access and interaction requirements of a e‐Business
solution requires the ability to provide controlled and focused access by all the users.
• Align business organizations with a flexible IT architecture: in response to demands for end to end e‐
Business solutions, companies are expanding their applications to include enhanced integration capabilities.
This includes integration of business processes at varied levels from applications and data across(and within)
• Establish ubiquity within standards: None of the many integration technologies available from various IT
vendors has achieved complete coverage. These do work within organizations but not across global
enterprises and between separate enterprises. Attempts are made to establish open standards for
• A number of business and tech. driven requirements are compelling forces that enable successful
development & deployment of integrated end‐to‐end e‐Business applications. Some of these are:
o Efficient business process management technology
o Efficient b2b communication
o Efficient enterprise application integration technology
Other categorizations view the problem differently.
A more basic approach to viewing e‐Business requirements is as follows: ‐
• Trust ‐ The biggest requirement for running a successful e‐business is trust. In this age of Facebook and
MySpace, online merchants may think that privacy of a customer's information isn't important, but the
opposite is true.
o Thus, businesses must be trustworthy to operate online. Consumers will not simply give their
financial information to just anyone, so a site will lose business if consumers do not feel comfortable
that it is a reliable, upstanding company.
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o Companies must have comprehensive privacy policies and stick with them. Another good idea is to
get digital certificates and TRUSTe seals, which are awarded by third‐party organizations after they
research the legitimacy of an online website.
o Such awards put consumers' minds at ease. Finally, even if an e‐business does all this, it must also be
trustworthy in the sense of fulfilling its promises: be up front with consumers about pricing and
think about when dealing with the Internet and e‐business.
You should fully understand how your website fits into privacy law requirements.
If your website collects personal information, you should develop a proper and legally
still need to develop and post a policy.
Online profiling may require the consent of the individual depending on the circumstances.
Keep in mind that people do look for privacy policies so, without a policy, you may lose
can serve a marketing function as well, allowing you to attract and retain customers who
otherwise might not be as inclined to deal with you.
Do not create a policy and then fail to follow it precisely. This is an invitation for disaster,
including not only possible legal problems, but also injury to your reputation and goodwill.
o It is important to not just let the policy sit once it has been posted. It should be revisited regularly to
determine whether or not it is still accurate and to evaluate whether or not it should be revised to
assist you in your business goals and objectives.
• Strategy ‐ E‐commerce merchants must also have a strategy to succeed in the online marketplace. Many
people start websites because they think it is a quick and easy way to make cash, but in fact it takes a much
greater investment than most people expect.
• Therefore, before launching a site, businesses must have strategies to handle issues large and small:
o How consumers will place orders,
o How deliveries will be made,
o How customer service issues will be handled?
o More broadly, how much do owners expect to earn over a certain period, how will consumers find
the site, and how will success be judged.
o Online merchants without strategies will soon be overwhelmed by such issues.
• Suitability ‐ Finally, merchants must decide if their products are suitable for the web. Requirements for
successful e‐businesses concern the goods and services themselves:
o Can they be delivered quickly and cheaply?
o Do they appeal to people outside a small geographic area?
o Will going online save money?
o Will the benefits outweigh the costs?
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• Technological Requirements:
o Achieving Real ‐ Time Flexibility: In theory, digital things are easier to change than physical things. It
is faster to edit a memo using a word processor than a typewriter (and you don’t get ink on your
o But when programming is required to change content or access policies, maintaining a complex Web
site can range from onerous to impossible. Market factors change in real time, and so must the logic
and content of an e‐Business site.
o To achieve this vision, the next generation of e‐Business systems must provide a framework for
automated information exchange between all the stakeholders in a business.
o These new frameworks are designed for flexibility so companies can change content and business
logic in real‐time to meet changing business needs and market conditions.
o This adaptability comes from a set of core services, common to all applications, which enable rapid
deployment of new applications and new information and which work together to create a
compelling, unified e‐Business environment.
o An e‐Business framework must include packaged, ready‐to‐deploy services for:
o An Architecture For e‐Business ‐ As e‐Business moves beyond simple transactions to encompass all
the complex processes through which a company provides value, information systems must
orchestrate the function of enterprise applications and information resources for total information
flow. And they must empower business people with the tools to manage content publishing,
delivery, and access, so that business results don’t depend on the IT department’s programming
o Three ‐ Tier Object ‐ Centered Design ‐ To achieve true, real‐time e‐Commerce, next‐generation e‐
Business systems must be built around a 3‐tier application paradigm with a clear abstraction and
true separation of user interface presentation, business logic, and content. Separation and
abstraction of these layers is achieved through the use of business objects, particularly in the middle
o When separating presentation, application, and Data Logic three things must be considered:
• User Interface ‐ The user interface must support a variety of interface mechanisms,
including Web browsers for users, business managers, designers and desktop applications
• Business Logic ‐ The middle tier must not only implement and execute business logic, it must
also provide the framework of services that enable e‐Business, including security services,
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transaction services, and caching, pooling, and other load balancing services to improve
overall system performance.
• Content ‐ The content layer includes corporate databases, document stores and other
o All Objects Are Not Created Equal ‐ The overall architecture of an e‐Business system is important, but
proper abstractions achieved through object technology are the foundation of a flexible e‐Business
system. Correct separation of presentation, business logic, security functions, and content determines
the flexibility of the system and the pace and effectiveness of e‐Business processes. To deliver truly
dynamic, real‐time communication, these relationships must be established on a per‐transaction basis,
as each page is assembled for delivery to a user e‐Business processes lend themselves to this kind of
o Bringing Order To Content Management ‐ As companies move more of their business processes onto
the Web in search of greater sales or efficiency, Web sites are growing in size and complexity. Static Web
sites often consist of hundreds or even thousands of Web pages, and tens of thousands of lines of code.
Multi‐media sites are becoming the standard, with everything from sophisticated graphics and
animation to audio and video. Enterprise Web sites must integrate multiple applications from the back‐
office to the supply and sales chain, while maintaining security and the integrity of business information.
As sites become larger and more complex, traditional Web publishing systems, with their hard‐coded
Web page content, become unmanageable. Content creators swamp programmers with requests for
new Web pages, the approval process bogs down, and users no longer have access to current content.
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o Dynamic Web Environment ‐ The graphical layouts used in next‐generation e‐Business systems are more
“intelligent” and manageable than the templates used in traditional Web publishing. While both control
placement of graphic elements, style, etc., templates access content through business logic hard‐coded
into the body of the page. Pages with different content, however similar, require different source files.
Layouts, on the other hand, are a next‐generation approach that does not embed business logic in the
presentation objects. A layout controls only style and placement of elements on the page. The logic that
determines content is separate from the layout, and can be changed and maintained independently.
o Content Management Tools ‐ Content Management tools must enable content to grow and change at
o Team Content Development ‐ Publishing content to the Web and extending the functionality of a site
takes a whole team: developers to build site structure and implement business rules, designers to create
page layouts and define a consistent look and feel, and business managers to define business rules and
o Collaboration Across The Extended Enterprise ‐ Publishing and managing Web content typically involves
an approval process and some administrative work.
o Centralized Rules ‐ Based Content Management: Anyone should be able to manage site content simply
by defining a few document characteristics when a document is published. With characteristics such as a
document’s type (for example, “data sheet”), format, and activation/expiration dates in place, links to
the document can be automatically populated throughout the site, and document visibility and
“document migration” can be automated.
o Customized Content Delivery
o Pervasive Personalization
o Knowledge‐Based Personalization ‐ Effective personalization depends on the ability to customize a
user’s experience based on a rich, centrally stored user profile: in essence, a knowledge base that
consists of user information and expertise on how to apply that information. This kind of knowledge
base cannot be bolted onto a brochure ware Web site. The ability to gather and apply user‐related
knowledge must be integrated into the e‐Business system from day one, so that information can be
contributed, shared, and leveraged by all the applications in the system.
o User profiles are the crown jewels of an e‐Business strategy. The quality of profiles determines the
degree to which the user experience can be personalized. Profiles can and should be built through both
explicit and implicit mechanisms.
o Inclusive Security
o Scalability To Compete ‐ As more and more processes are adapted to e‐Business, a Web site may grow
to support thousands of users, millions of documents and millions of transactions each day. An e‐
Business system must have the power to perform fast and reliably, as a business grows, while delivering
the dynamic, personalized content necessary to achieve business goals.
o Enterprise Integration and Transaction Monitors ‐ Any business process can be “Web‐ified” with a CGI
interface or a few server pages. But isolated, e‐Business is about providing new value by doing business
in a fundamentally new way. Integration is the goal and the heart of e‐Business: integrating and exposing
applications and content in a personalized way to speed, scale and improve business processes and to
engage, involve, and build lasting relationships with customers and business partners.
o Transaction management guarantees that users have a consistent view of business information. For
example, the e‐Business system should prevent the customer from completing an order based on one
price, then being charged based on the new price. Transaction management also prevents inaccurate
results based on system failures (e.g., the system goes down and loses an order but continues to process
the billing using already‐transmitted credit card information). Robust system logs can help coordinate
updates across multiple data sources from multiple vendors or roll back changes in case of system
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o Delegated System Management ‐ e‐Business systems are distributed by their very nature, coordinating
information sharing among applications, business functions and departments, and partners up and down
the supply chain. Bringing business processes to the Web increases the complexity of the e‐Business site,
and growing and changing numbers of users and applications increase the complexity of managing a site.
No centralized IT department could effectively maintain current accounts or access privileges for all
users, inside and outside the company. Most Web sites today are not sophisticated enough to reach this
roadblock, but as businesses open and extend their processes via the Web, system manageability will
become an increasingly serious issue.
o Time to Market –Time to market must be minimal as delays may result in losing the benefit of e‐
Impacts of eBusiness
• Improved operational efficiency and productivity: by eliminating operational waste and automation of
inefficient business practices, organizations can realize productivity gains
• Reduction in operating costs and costs of goods and services: by connecting directly with suppliers and
distributors, organizations can realize more efficient processes that result in reduced units of cost for
products or services and lower prices to customers while achieving economies of scale.
• Improved competitive position: global reach, rapid growth, efficient reduction of product time to market
and optimization of product distribution channels all contribute to superior competitive position.
• Penetration into new markets through new channels: with e‐Business location is of no consequence when it
comes to reaching customers.
• Improved communication, information and knowledge sharing: alignment of key supply chain partners with
an organization’s internal strategies helps exploit their expertise and knowledge, hence creating opportunity
to secure long‐term business by embedding their process and procedures in those of their customers’ supply
• Harmonization and standardization of process
• Improved internal information access
• Improved relationships with suppliers and improved customer service
Inhibitors of e‐Business
• Management/Strategy issues
o e‐business strategy
o Organizational changes required by e‐business
o Management attitudes and organizational inflexibility
• Cost/financing issues
o Costs of implementation
o Calculating the Return on Investment (ROI)
• Security and Trust Issues
• Legal Issues
o Few companies are familiar with the rules and regulations that apply to an online environment.
This leads to Uncertainty.
o Different strokes for different folks
• Technological Concerns
o Integration Issues
• Arguments against Investment
o Uncertainty & Fear
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What is an EBusiness Strategy?
• E‐Business has triggered new business models, strategies and tactics that are made possible by the internet
and other related technologies.
• In order to compete in the marketplace, it is essential for organizations to establish strategies for the
development of an e‐business.
• E‐Business strategy can be viewed via two different viewpoints, which are explained below.
• One view defines strategy as plans and objectives adopted to achieve higher‐level goals.
• In that sense, a strategy is developed to achieve a goal like implementing organizational change, or a large
software package such as an ERP‐system.
• Strategy may also relate to plans concerning the long‐term position of the firm in its business environment
to achieve its organizational goals.
• Based on the above, we arrive at a common definition for an e‐Business Strategy.
• An e‐Business strategy is the set of plans and objectives by which applications of internal and external
electronically mediated communication contribute to the corporate strategy.
• Strategic planning comprises a distinct class of decisions (a plan is a set of decisions made for the future) and
objectives, and has to be positioned next to tactical planning (structuring the resources of the firm) and
operational planning (maximizing the profitability of the current operations).
• Strategy is concerned with changes in the competitive environment that may trigger strategic changes for
the individual firm and so affect its roles and functions in the market.
• Reassessment of strategy may occur due to:
o New Products
o Changing customer preferences
Flowers: Roses / Carnations ‐ Orchids
A few years back when people went to the florist, they generally picked up Roses or
Carnations etc. Now, they prefer Orchids. This is an example of changing customer
preferences. A global notion is that a customer does not realize the utility of feel the need
for a product until it is offered to him / her.
o Changing demand patterns
o New competitors
• The frequency, dynamics and predictability of the above changes dictate the intensity of the strategic
planning activity of the firm.
• So, e‐Business strategy (revised) is:
o The set of plans and objectives by which applications of internal and external electronically mediated
communication contribute to the corporate strategy.
• E‐Business strategy may be implemented for:
o Tactical purposes: Mail ‐ EDI ‐XML‐FDI
o Achieving corporate strategy objectives
• E‐Business is strategic in nature.
o The idea is to create a preferably sustainable & competitive position for the company.
This is achieved by integration of the Internet and related technologies in its primary
• E‐Business must not only support corporate strategy objectives but also functional strategies (SCM,
• Supply Chain Management Strategy
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o Based on value chain analysis for decomposing an organization into its individual activities and
determining value added at each stage.
o Gauge efficiency in use of resources at each stage.
• Marketing Strategy
o Is a concerned pattern of actions taken in the market environment to create value for the firm by
improving its economic performance.
o Focused on capturing market share or improving profitability via brand‐building etc.
o Operates on CURRENT AS WELL AS FUTURE projections of customer demand.
• Information Systems Strategy
o How to leverage information systems in an organization to support the objectives of an organization
in the long run.
• E‐Business strategy is based on corporate objectives.
Strategic positioning means that a firm is doing things differently from its competitors in a way that delivers a unique
value to its customers. There are 6 fundamental principles a firm must follow to establish and maintain a distinctive
1. Start with the right goal: superior long term ROI.
2. Strategy must enable it to deliver a value proposition different from competitors.
3. Strategy must be reflected in a distinctive value chain.
4. Accept tradeoffs for a robust strategy.
5. Strategy must define how all elements of what a firm does fit together.
6. Strategy must involve continuity of direction.
Levels of eBusiness Strategies
Strategies will exist at different levels of an organization. Strategic levels of management are concerned with
integrating and coordinating the activities of an organization so that the behavior is optimized and its overall
direction is consistent with its mission. Ultimately e‐Business is about communication, within business units and
between units of the enterprise as well as organizations.
1) Supply Chain or Industry Value Chain level
• E‐Business requires a view of the role, added value, and position of the firm in the supply chain.
• Important issues that need to be addressed at this level are:
i. Who are the firm’s direct customers?
ii. What is the firm’s value proposal to the customers?
iii. Who are the suppliers?
iv. How does the firm add value to the suppliers?
v. What is the current performance of the Supply Chain in terms of revenue and profitability,
inventory levels etc?
vi. More importantly, what are the required performance levels?
vii. What are the current problems in the chain?
• This sort of analysis give insight into in upstream (supplier side) and downstream (customer side)
data and information flows.
2) The Line of Business or (Strategic) Business Unit level
• Understanding the position in the value chain is a starting point for further analysis of how Internet‐
related technologies could contribute to the competitive strategy of a business.
• This is the level where competitive strategy in a particular market for a particular product is
developed (Strategic Positioning).
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• There are four generic strategies for achieving a profitable business:
i. Differentiation: This strategy refers to all the ways producers can make their product unique
and distinguish them from those of their competitors.
ii. Cost: Adopting a strategy for cost competition means that the company primarily competes
with low cost; customers are interested in buying a product as inexpensively as possible.
Success in such a market implies that the company has discovered a unique business model
which makes it possible to deliver the product or service at the lowest possible cost.
iii. Scope: A scope strategy is a strategy to compete in markets worldwide, rather than merely
in local or regional markets.
iv. Focus: A focus strategy is a strategy to compete within a narrow market segment or product
3) The Corporate or Enterprise level
• This level comprises a collection of (strategic) business units.
• This level addresses the problem of synergy through a firm‐wide, available IT infrastructure.
• Common e‐Business applications throughout the organization are needed for two basic reasons.
• From efficiency point of view, having different applications for the same functionality in different
areas of business is needlessly costly.
• From an effectiveness point of view, there is the need for cross Line of Business communication and
share‐ability of data.
• The emphasis in the business plans is on the customer, not the final product.
• These all become subjects of an enterprise‐wide e‐Business policy.
The changing competitive Agenda: Business & Technology Drivers
• Shift in economies from supply driven to demand driven
o Causes a shift in intent of service and quality programs, the impetus for product development & the
structure of the organization itself
o One to One marketing
o Mass Customization
o Interactive Nature
o Virtual Nature
Strategic Planning Process
• The strategic planning process has the following steps:
• The strategic planning process starts with the establishment of the organization’s mission statement.
o The mission statement is a basic description of detailing the fundamental purpose of the
organizations existence and encompasses strategy development, including determination of the
organization’s vision and objectives.
o It is developed at the highest level of the organizations management, and provides a general sense
of direction for all decision making within the firm.
• Strategic Analysis
o This involves situation analysis, internal resource assessment, and evaluation of stakeholder’s
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o It will include
Industry or market research
Analysis of Marketplace Structure
Relationships with trading partners and suppliers
Customer Marketing Research
o Information is derived from the analysis of both internal and external factors.
o Internal Factors:
o External Factors:
Legal and regulatory forces
o Any realistic new plan will have to reflect the reality of both the external world and the internal
dynamics of the corporation.
• Strategic Choice
o It is based on the strategic analysis and consists of four parts:
Generation of strategic options
Highlighting possible courses of action
Evaluation of strategic options on their relative merits
Selection of strategy
o Strategic choice results in Strategic Planning, which is concerned with the organizing and detailing of
all the strategies that will be undertaken throughout the organization.
o Planning includes strategy specification and resource allocation.
o It commences with corporate‐level planning that determines the overall direction for the
o This drives Division (or Strategic Business Unit) level planning which deals with groups of related
products offered by the organization.
o These plans in turn become the starting point for operating (or functional) level planning, which
involves more local plans within specific departments of the organization.
o This relates to the actual tasks that must be executed in order to realize a plan and translates
strategy into action.
o It includes monitoring, adjustment, control as well as feedback.
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• In the 1980s the concept of alignment between business and IT was developed.
• According to this concept it is not only feasible to design and build a technically sophisticated infrastructure
for e‐Business, but also to formulate business strategies that complement and support this infrastructure.
• One of the major issues regarding an enterprises investment in IT is whether this is in harmony with its
• This state of harmony is referred to as alignment.
• Alignment is complex, multifaceted and almost never completely achieved. It is about continuing to move in
the right direction and better aligned than the competitors.
• Any e‐Business strategy should articulate an enterprise’s intention to use information technology based on
• When formulating the IT strategy, the enterprise must consider:
o Business objectives and the competitive environment
o Current and future technologies and the costs, risks, and benefits they can bring to the business.
o The capability of the IT organization and technology to deliver current and future levels of service to
o Cost of current IT, and whether this provides sufficient value to the business.
o Lessons learned from past failures and successes.
Consequences of eBusiness
• As e‐Business is an information technology‐enabled organizational phenomenon with economic
consequences, economic theories appear to be particularly useful for analyzing the business effects.
• Strategy is about finding the right (external) fit between organization and environment. Different schools of
thought have approached this problem from different angles.
• When analyzing the business effects of an e‐Business, we will consider the following approaches:
o The Theory of Competitive Strategy
o The resource‐base view
o The theory of transaction costs
• Theory of Competitive Strategy
o The structural attractiveness of a firm is determined by five underlying forces of competition:
The bargaining power of the customers
The bargaining power of the suppliers
The barriers to entry for new competitors
The threat of new substitute products or services
The competition among existing firms in the industry
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o In combination, these forces determine how the economic value created by any product, service
technology or way of competing is divided between companies in an industry.
o The bargaining power of customers for a firm could, for instance, depend on the degree of product
differentiation, and the size of demand and supply. Switching costs are also very important: they
answer the question of how much will it cost the customer to change to another supplier.
o The bargaining power of suppliers is dependent on a variety of factors, such as relative size, number
of suppliers, that can deliver a critical resource, and so on. The Internet causes another specific
threat from the perspective of IT suppliers; they may bypass their customers and directly approach
o The barriers to entry for new competitors depend on how difficult it is to join the industry. Economic
and technological thresholds may prevent outside potential competitors to come in . Economies of
scale, necessary capital, and specialized expertise are important factors in this respect.
o The threat of substitute products depends on the question of whether other products can deliver
added value for consumers instead of current products in the absence of switching costs. e.g. – The
Internet is a serious threat to the Post Office.
o The level of competition among existing firms in the industry will depend on various factors like type
of market, existing competitive behavior, and so on.
• The Resource‐Based View
o According to this theory of economic development, innovation is the source of value creation.
o Several sources of innovation (hence, value creation) are identified:
The introduction of new goods or new production methods,
The creation of new markets,
The discovery of new supply sources,
And the reorganization of industries.
o The resource‐based view (RBV), which builds on the theory of economic development’s perspective
on value creation, regards a firm as a collection of resources and capabilities.
o The RBV looks at available resources first to see how a position in the business environment can be
acquired with them.
o According to this view, a firm can build a strategic position by picking the right resources and
building competencies that are unique and difficult to imitate.
o Resources are considered the raw material for building competencies.
o The RBV states that marshalling and uniquely combing a set of complementary and specialized
resources and capabilities may lead to value creation.
o A firm’s resources and competencies are valuable if, and only if, they reduce a firm’s costs or
improve its revenues.
o Core competencies of an organization encompass knowledge bases, skill sets, and service activities
that can create a continuing competitive advantage.
• Transaction Cost Economics
o Transaction Cost Economics attempt to explain firms’ choices between internalizing and buying
goods and services from the market.
o According to transaction cost theory, exchanges with external firms entail a variety of co‐ordination
costs associated with various aspects of inter‐firm transactions.
o The central question addressed by transaction cost economics is why firms internalize transactions
that might otherwise be conducted in markets. Thus, two key issues concerning firms are:
Which activities should a firm manage within its boundaries, and which activities should it
In which way should a firm manage its relationship with its customers, suppliers and other
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