Lecture notes on E commerce

introduction to e commerce lecture notes ppt, what is e commerce advantages and disadvantages, what is e-commerce and edi what is e commerce and technology pdf free download
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Published Date:26-07-2017
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1.8 Summary 1.9 Review questions 1.0 OBJECTIVES After studying this unit we will be able  To understand the meaning of E-commerce and difference with E-Business  To understand the levels of E-Commerce  To understand the benefits and limitations of E-commerce 1.1 INTRODUCTION TO ELECTRONIC-COMMERCE Today, some considerable time after the so called ‗dot com/Internet revolution‘, electronic commerce (e-commerce) remains a relatively new, emerging and constantly changing area of business management and information technology. There has been and continues to be much publicity and discussion about e-commerce. Library catalogues and shelves are filled with books and articles on the subject. However, there remains a sense of confusion, suspicion and is understanding surrounding the area, which has been exacerbated by the different contexts in which electronic commerce is used, coupled with the myriad related buzzwords and acronyms. This book aims to consolidate the major themes that have arisen from the new area of electronic commerce and to provide an understanding of its application and importance to management. In order to understand electronic commerce it is important to identify the different terms that are used, and to assess their origin and usage. With the advent of the Internet, the term e-commerce began to include:  Electronic trading of physical goods and of intangibles such as information.  All the steps involved in trade, such as on-line marketing, ordering payment and support for delivery.  The electronic provision of services such as after sales support or on-line legal advice.  Electronic support for collaboration between companies such as collaborative on-line design and engineering or virtual business consultancy teams. Some of the definitions of e-commerce often heard and found in publications and the media are: 7 Electronic Commerce (EC) is where business transactions take place via telecommunications networks, especially the Internet. Electronic commerce describes the buying and selling of products, services, and information via computer networks including the Internet. Electronic commerce is about doing business electronically. E-commerce, ecommerce, or electronic commerce is defined as the conduct of a financial transaction by electronic means. The wide range of business activities related to e-commerce brought about a range of other new terms and phrases to describe the Internet phenomenon in other business sectors. Some of these focus on purchasing from on-line stores on the Internet. Since transactions go through the internet and the Web, the terms I-commerce (Internet commerce), icommerce and even Web- commerce have been suggested but are now very rarely used. Other terms that are used for on- line retail selling include e-tailing, virtual-stores or cyber stores. A collection of these virtual stores is sometimes gathered into a ‗virtual mall‘ or ‗cybermall‘. 1.2 INTRODUCTION TO ELECTRONIC-BUISNESS As with e-commerce, e-business (electronic business) also has a number of different definitions and is used in a number of different contexts. One of the first to use the term was IBM, in October 1997, when it launched a campaign built around e-business. Today, major corporations are rethinking their businesses in terms of the Internet and its new culture and capabilities and this is what some see as e-business. E-business is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners. E-business includes customer service (e-service) and intra-business tasks. E-business is the transformation of key business processes through the use of Internet technologies. An e-business is a company that can adapt to constant and continual change. The development of intranet and extranet is part of e-business. E-business is everything to do with back-end systems in an organisation. In practice, e-commerce and e-business are often used interchangeably 8 1.3 DISTINCTION BETWEEN E-COMMERCE AND E-BUISNESS Commerce is defined as embracing the concept of trade,‗exchange of merchandise on a large scale between different countries‘. By association, e-commerce can be seen to include the electronic medium for this exchange. Thus electronic commerce can be broadly defined as the exchange of merchandise (whether tangible or intangible) on a large scale between different countries using an electronic medium – namely the Internet. The implications of this are that e- commerce incorporates a whole socio-economic, telecommunications technology and commercial infrastructure at the macro-environmental level. All these elements interact together to provide the fundamentals of e-commerce. Business, on the other hand, is defined as ‗a commercial enterprise as a going concern‘. E-business can broadly be defined as the processes or areas involved in the running and operation of an organisation that are electronic or digital in nature. These include direct business activities such as marketing, sales and human resource management but also indirect activities such as business process re-engineering and change management, which impact on the improvement in efficiency and integration of business processes and activities. Figure 1.1 illustrates the major differences in e-commerce and e-business, where e-commerce has a broader definition referring more to the macro-environment, e-business relates more to the micro-level of the firm. 9 THE KEY DRIVERS It is important to identify the key drivers of e-commerce to allow a comparison between different countries. It is often claimed that e-commerce is more advanced in the USA than in Europe. These key drivers can be measured by a number of criteria that can highlight the stages of advancement of e-commerce in each of the respective countries. The criteria that can determine the level of advancement of e-commerce are summarized in Table 1.1 and can be categorised as:  Technological factors – The degree of advancement of the telecommunications infrastructure which provides access to the new technology for business and consumers.  Political factors – including the role of government in creating government legislation, initiatives and funding to support the use and development of e-commerce and information technology. 10  Social factors – incorporating the level and advancement in IT education and training which will enable both potential buyers and the workforce to understand and use the new technology.  Economic factors – including the general wealth and commercial health of the nation and the elements that contribute to it. Since a distinction has been made in this book between e-commerce and e-business for consistency, the key drivers of e-business are also identified. These are mainly at the level of the firm and are influenced by the macro-environment and e- commerce, which include:  Organisational culture – attitudes to research and development (R&D); its willingness to innovate and use technology to achieve objectives.  Commercial benefits – in terms of cost savings and improved efficiency that impact on the financial performance of the firm. Skilled and committed workforce – that understands, is willing and able to implement new technologies and processes.  Requirements of customers and suppliers – in terms of product and service demand and supply.  Competition – ensuring the organisation stays ahead of or at least keeps up with competitors and industry leaders. These key drivers for the implementation of e-business can be put into the context of the classic economic equation of supply and demand illustrated in Figure 1.2. 11 1.4 THE IMPACT OF ELECTRONIC-COMMERCE E-commerce and e-business are not solely the Internet, websites or dot com companies. It is about a new business concept that incorporates all previous business management and economic concepts. As such, e-business and e-commerce impact on many areas of business and disciplines of business management studies. For example: Marketing – issues of on-line advertising, marketing strategies and consumer behaviour and cultures. One of the areas in which it impacts particularly is direct marketing. In the past this was mainly door-todoor, home parties (like the Tupperware parties) and mail order using catalogues or leaflets. This moved to telemarketing and TV selling with the advances in telephone and television technology and finally developed into e-marketing spawning ‗eCRM‘ (customer relationship management) data mining and the like by creating new channels for direct sales and promotion. 12 Computer sciences – development of different network and computing technologies and languages to support e-commerce and e-business, for example linking front and back office legacy systems with the ‗webbased‘ technology. Finance and accounting – on-line banking; issues of transaction costs; accounting and auditing implications where ‗intangible‘ assets and human capital must be tangibly valued in an increasingly knowledge based economy. Economics – the impact of e-commerce on local and global economies; understanding the concepts of a digital and knowledge-based economy and how this fits into economic theory. Production and operations management – the impact of on-line processing has led to reduced cycle times. It takes seconds to deliver digitized products and services electronically; similarly the time for processing orders can be reduced by more than 90 per cent from days to minutes. Production systems are integrated with finance marketing and other functional systems as well as with business partners and customers. Production and operations management (manufacturing) – moving from mass production to demand-driven, mass customisation customer pull rather than the manufacturer push of the past. Web-based Enterprise Resource Planning systems (ERP) can also be used to forward orders directly to designers and/or production floor within seconds, thus cutting production cycle times by up to 50 per cent, especially when manufacturing plants, engineers and designers are located in different countries. In sub-assembler companies, where a product is assembled from a number of different components sourced from a number of manufacturers, communication, collaboration and coordination are critical – so electronic bidding can yield cheaper components and having flexible and adaptable procurement systems allows fast changes at a minimum cost so inventories can be minimised and money saved. Management information systems – analysis, design and implementation of e-business systems within an organisation; issues of integration of front-end and back-end systems. 13 Human resource management – issues of on-line recruiting, home working and ‗intrapreneurs‘ working on a project by project basis replacing permanent employees. Business law and ethics – the different legal and ethical issues that have arisen as a result of a global ‗virtual‘ market. Issues such as copyright laws, privacy of customer information, legality of electronic contracts, etc. 1.5 LEVELS OF ELECTRONIC-COMMERCE Electronic commerce is the process of conducting commercial transactions electronically over the Internet. This process is carried out primarily in five levels, and the main aspect of e- commerce is a merchant selling products or service to the consumers. There are five major segments under the broader category of e-business. However, the following are some popular e- commerce models used by companies engaged in e-commerce:- • Business to business e-commerce (B2B) • Business to consumers e-commerce (B2C) • Consumers to consumers e-commerce (C2C) • Business to employees e-commerce (B2E) and • Consumer to business e-commerce (C2B) Business to Business E-commerce (B2B) Business to Business e-commerce provides small and medium enterprises (SMES) with an excellent opportunity to access new markets, improve customer service and reduce costs. And while hurdles exist, they should be viewed more as speed breakers rather than road barriers. As a medium of information storage and dissemination, the internet has and is emerging a clear winner. Its rate of penetration has far outpaced the growth of other popular media such as newspaper, radio and television. Business to Consumers E-commerce (B2C) B2C is the most popular form of e-commerce, wherein the individuals are directly involved in B2C e-commerce, and businesses use the internet for offering their products or services 24 hours 14 a day through global access. The sites Amazon.com and Rediff are among these. These websites spell goods directly to consumers over the Internet. The two way accessibility feature of the internet enables operating companies to ascertain consumer preferences and buying trends directly. Consumer to Consumer E-commerce (C2C) This form of e-commerce is nothing but the cyber version of the good old auction houses. If anyone wants to sell anything, all one has to do is post a message on the site, giving details of the product and the expected price and wait for an interested customer to turn up and buy it. The buyer gets in touch with the seller through the Internet and the deal is crossed once the amount is finalised. Online message boards and barters are also examples of C2C e-commerce. Consumer-to-Business E-commerce (C2B) E-commerce, by empowering the customer, has been strategically redefining business. An example of C2B model of e-commerce is the site Price line.Com, which allows prospective airline travellers, tourists in need of hotel reservations etc. to visit its websites and indicate their preferred price for travel between any two cities. If an airline is willing to issue a ticket on the customers offered price, the consumer can then travel to the mentioned destination at his terms. Business to Employees E-commerce (B2E) This is concerned more with marketing a corporation's internal processes more efficiently. Customer care and support activities also hold ground. The requirement is that are all self-service with applications on the web that the employees can use themselves. 1.6 THE BENEFITS OF ELECTRONIC-COMMERCE The previous sections have included discussions about what e-commerce is and its impact, but what are the benefits of e-commerce? What does it offer and why do it? The benefits of e- commerce can be seen to affect three major stakeholders: organizations, consumers and society. 15 Benefits of e-commerce to organizations  International marketplace. What used to be a single physical marketplace located in a geographical area has now become a borderless marketplace including national and international markets. By becoming e-commerce enabled, businesses now have access to people all around the world. In effect all e-commerce businesses have become virtual multinational corporations.  Operational cost savings. The cost of creating, processing, distributing, storing and retrieving paper-based information has decreased.  Mass customisation. E-commerce has revolutionised the way consumers buy good and services. The pull-type processing allows for products and services to be customised to the customer‘s requirements. In the past when Ford first started making motor cars, customers could have any colour so long as it was black. Now customers can configure a car according to their specifications within minutes on-line via the www.ford.com website.  Enables reduced inventories and overheads by facilitating ‗pull‘-type supply chain management – this is based on collecting the customer order and then delivering through JIT (just-in-time) manufacturing. This is particularly beneficial for companies in the high technology sector, where stocks of components held could quickly become obsolete within months. For example, companies like Motorola (mobile phones), and Dell (computers) gather customer orders for a product, transmit them electronically to the manufacturing plant where they are manufactured according to the customer‘s specifications (like colour and features) and then sent to the customer within a few days.  Lower telecommunications cost. The Internet is much cheaper than value added networks (VANs) which were based on leasing telephone lines for the sole use of the organisation and its authorised partners. It is also cheaper to send a fax or e-mail via the Internet than direct dialling.  Digitisation of products and processes. Particularly in the case of software and music/video products, which can be downloaded or e-mailed directly to customers via the Internet in digital or electronic format. 16  No more 24-hour-time constraints. Businesses can be contacted by or contact customers or suppliers at any time. Benefits of e-commerce to consumers 24/7 access. Enables customers to shop or conduct other transactions 24 hours a day, all year round from almost any location. For example, checking balances, making payments, obtaining travel and other information. In one case a pop star set up web cameras in every room in his house, so that he could check the status of his home by logging onto the Internet when he was away from home on tour. More choices. Customers not only have a whole range of products that they can choose from and customise, but also an international selection of suppliers. Price comparisons. Customers can ‗shop‘ around the world and conduct comparisons either directly by visiting different sites, or by visiting a single site where prices are aggregated from a number of providers and compared (for example www.moneyextra.co.uk for financial products and services). Improved delivery processes. This can range from the immediate delivery of digitised or electronic goods such as software or audio-visual files by downloading via the Internet, to the on-line tracking of the progress of packages being delivered by mail or courier. An environment of competition where substantial discounts can be found or value added, as different retailers vie for customers. It also allows many individual customers to aggregate their orders together into a single order presented to wholesalers or manufacturers and obtain a more competitive price (aggregate buying), for example www.letsbuyit.com. Benefits of e-commerce to society Enables more flexible working practices, which enhances the quality of life for a whole host of people in society, enabling them to work from home. Not only is this more convenient and provides happier and less stressful working environments, it also potentially reduces environmental pollution as fewer people have to travel to work regularly. Connects people. 17 Enables people in developing countries and rural areas to enjoy and access products, services, information and other people which otherwise would not be so easily available to them. Facilitates delivery of public services. For example, health services available over the Internet (on-line consultation with doctors or nurses), filing taxes over the Internet through the Inland Revenue website. 1.7 LIMITATIONS OF ELECTRONIC-COMMERCE There was much hype surrounding the Internet and e-commerce over the last few years of the twentieth century. Much of it promoted the Internet and e-commerce as the panacea for all ills, which raises the question, are there any limitations of e-commerce and the Internet? Isaac Newton‘s 3rd Law of Motion, ‗For every action there is an equal and opposite reaction‘ suggests that for all the benefits there are limitations to e-commerce. These again will be dealt with according to the three major stakeholders – organizations, consumers and society. Limitations of e-commerce to organizations Lack of sufficient system security, reliability, standards and communication protocols. There are numerous reports of websites and databases being hacked into, and security holes in software. For example, Microsoft has over the years issued many security notices and ‗patches‘ for their software. Several banking and other business websites, including Barclays Bank, Powergen and even the Consumers‘ Association in the UK, have experienced breaches in security where ‗a technical oversight‘ or ‗a fault in its systems‘ led to confidential client information becoming available to all. Rapidly evolving and changing technology, so there is always a feeling of trying to ‗catch up‘ and not be left behind. Under pressure to innovate and develop business models to exploit the new opportunities which sometimes leads to strategies detrimental to the organisation. The ease with which business models can be copied and emulated over the Internet increase that pressure and curtail longer- term competitive advantage. 18 Facing increased competition from both national and international competitors often leads to price wars and subsequent unsustainable losses for the organisation. Problems with compatibility of older and ‘newer’ technology. There are problems where older business systems cannot communicate with webbased and Internet infrastructures, leading to some organisations running almost two independent systems where data cannot be shared. This often leads to having to invest in new systems or an infrastructure, which bridges the different systems. In both cases this is both financially costly as well as disruptive to the efficient running of organisations. Limitations of e-commerce to consumers Computing equipment is needed for individuals to participate in the new ‗digital‘ economy, which means an initial capital cost to customers. A basic technical knowledge is required of both computing equipment and navigation of the Internet and the World Wide Web. Cost of access to the Internet, whether dial-up or broadband tariffs. Cost of computing equipment. Not just the initial cost of buying equipment but making sure that the technology is updated regularly to be compatible with the changing requirement of the Internet, websites and applications. Lack of security and privacy of personal data. There is no real control of data that is collected over the Web or Internet. Data protection laws are not universal and so websites hosted in different countries may or may not have laws which protect privacy of personal data. Physical contact and relationships are replaced by electronic processes. Customers are unable to touch and feel goods being sold on-line or gauge voices and reactions of human beings. 19 A lack of trust because they are interacting with faceless computers. Limitations of e-commerce to society Breakdown in human interaction. As people become more used to interacting electronically there could be an erosion of personal and social skills which might eventually be detrimental to the world we live in where people are more comfortable interacting with a screen than face to face. Social division. There is a potential danger that there will be an increase in the social divide between technical haves and have-nots – so people who do not have technical skills become unable to secure better-paid jobs and could form an underclass with potentially dangerous implications for social stability. Reliance on telecommunications infrastructure, power and IT skills, which in developing countries nullifies the benefits when power, advanced telecommunications infrastructures and IT skills are unavailable or scarce or underdeveloped. Wasted resources. As new technology dates quickly how do you dispose of all the old computers, keyboards, monitors, speakers and other hardware or software? Facilitates Just-In-Time manufacturing. This could potentially cripple an economy in times of crisis as stocks are kept to a minimum and delivery patterns are based on pre-set levels of stock which last for days rather than weeks 1.8 SUMMARY Thus, e-commerce is still commerce and still about human beings. Customers are still customers and merchants want people at their end. They send confidential, personal and financial information only by e-mail or can cash on the phone or might just prefer to visit in person. E- commerce is just only a new way of doing business or an additional method of doing business. It is a new generation technology, a new method of doing business with new generation 20 technology. Still, there are many drawbacks which fail to benefit the users of technology to a great extent. E-commerce is to be viewed as business but not as a technology issue. It must be business driven but not IT driven and initiatives must be integrated thoroughly into the existing commerce structure and strategy. 1.9 KEYWORDS Electronic Commerce, E- Business, Levels of E-Commerce, Benefits of E-Commerce, Limitations of E- Commerce. 1.10 LIMITATIONS OF ELECTRONIC-COMMERCE 1. What is e-commerce? Discuss various characteristics of e-commerce. 2. Discuss various limitations of e-commerce. 3. ―E-commerce is the new way to do business. Justify the statement. 4. What is scope of e-commerce in country like India? 5. Discuss various types of e-commerce models. 6. What is future of e-commerce in India? 1.11 REFERENCES/SUGGESTED READINGS  Kalakota, Ravi and Whinston, Andrew B. ―Electronic Commerce – A Manager‘s Guide‖, Pearson Education, Inc.  Rich, Jason R. ―Starting an E-Commerce Business‖. IDG Books, Delhi, 2000.  Samantha Shurety. ―E-business with Net Commerce‖, Addison Wesley, Singapore, 2001.  Turban et al. ―Electronic Commerce: A Managerial Perspective‖, Pearson Education, Inc. 21 UNIT 2: STRATEGIES IN E-COMMERCE Structure 2.1 Brand creation on the web 2.2 Web auction strategies 2.3 The legal environment in e-commerce 2.4 Web site content 2.5 Summary 2.6 Keywords 2.7 Review questions 2.8 References 2.0 Objectives After studying this unit we will be able  To understand brand creation on the web and web auction strategies.  To understand the legal environment in e-commerce 2.1 BRAND CREATION ON THE WEB  Branding is about consumer‘s perception of the offering – how it performs, how it looks, how it makes one feel, and what messages it sends  Market communications represent customers‘ interaction with the brand and, more generally, mass-marketing approaches o In the offline world, market communications tend to be one-way, from the firm to the customer o In the online world, market communications become much more interactive (two-way). 22 A Simple Conceptual Model of Brand Equity  Brand equity is ―a set of assets (and liabilities) linked to a brand‘s name and symbol that add to the value provided by a product or service to a firm and/or it‘s customers‖  A brand has three components: i. Core product/service ii. ―Wrap-around‖ iii. Marketing communications  Consumer responses can take two broad forms: i. Brand awareness (depth, breadth) ii. Brand associations (strength, valence, uniqueness)  Consumer benefits may include the increased confidence in the purchase decision, loyalty to the brand, and satisfaction with the experience  Firm benefits translate into top-line revenue growth, increased margins, and lower marketing costs. Types of Brands i. Traditional Brands - The product / service with which the brand is associated was established offline in the bricks-and-mortar world. Examples: Gap,UPS, Dell,J.Crew,McDonald‘s,Office Depot,Ragu,Coca-Cola Disney. ii. Online Brands - The product / service with which the brand is associated established in the online world. Examples: Amazon, Yahoo,ZDNet,AOL,Priceline,CDNow,Excite,ETrade 23 Need of Brand Creation in the Web  A known and respected brand name can present to potential customers a powerful stmt of quality value and other qualities.  Branded products are easier to advertise and promote bcoz each product carries the reputation of the brand name.  A firm‘s online branding choices depend upon its communications objectives o Brand creation. The objective may be to build a new-to-the-world brand name o Sales leads. The company may decide that the Internet will be used to facilitate the sales-lead process o Store traffic. The principal objective for some sites may be to increase store traffic o Product trial. A fourth objective may be trial usage of the product o Product sales. The company can also measure the success of a campaign based upon the actual increase in product or service sales o Brand reinforcement. Finally, it is possible that the communications effort is focused on reinforcing a brand image that is already widely accepted in the marketplace. Elements of Branding  The key elements of a brand are 1. Differentiation - the company clearly distinguish its pdt from all others in the market. 2. Relevance - degree to which the product offers utility to a potential customer. 3. Perceived value. - It is a key element in creating a brand that has value. 24 Types of Branding  Emotional Branding. - Companies use emotional appeals in their advertising and promotion efforts to . establish and maintain brands - This approach work well on television, radio etc.. - Emotional appeals are difficult to convey on the web.  Rational Branding. - is used to maintain brands on the web. - does not rely on broad emotional appeal. - relies on the cognitive appeal of the specific help offered. eg: Web mail service like yahoo mail give users a valuable service- an email and a storage space for messages. Brand Leveraging Strategies  One method to build brands on the web for well established site is to extend their dominant positions to other parts and services .This strategy is called brand leveraging. eg yahoo -here it is a search engine first, then it acquire other web business amazon- from books to stronger CD, videos. 2.2 WEB AUCTION STRATEGIES Auction Basics  Online auctions provide a business opportunity that is perfect for the Web.  An auction site can charge both buyers and sellers to participate, and it can sell advertising on its page. 25  Web auctions can provide a general auction site that has sections devoted to specific interests. Types of Auctions  There are 6 auction types i. English Auctions ii. Dutch Auctions iii. First-price sealed-bid iv. Second-price sealed-bid v. Double Auctions(Open outery) vi. Double Auctions(sealed-bid) i. English Auctions  Bidders publicly announce their successively higher bids until no higher bid is offered  Minimum price can be used to set the price at which the auction will begin  Reserve price is the minimum price the seller will accept  Yankee auctions allow the bidder to choose the quantity of multiple items offered at the auction. ii. Dutch Auctions  Form of open auction in which bidding starts at a high price and drops until a bidder accepts the price.  Usually the seller offers a number of similar items for sale.  Good for moving large numbers of commodity items quickly. iii. Sealed-Bid Auctions  Bidders submit their bids independently and are usually prohibited from sharing information with each other  First-price sealed-bid 26

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