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Definition of E-Comme rce:
The use of electronic transmission medium ( telecommunications ) to engage in the exchange including
buying and selling of products and services requiring transportation either physically or digitally from location to
location.
Potential benefits of E- Commerce :
The following are the potential benefits of E-commerce.
1. Internet or web based e-commerce is more affordable than traditional EDI.
2. Internet or web based E-commerce can reach more business partners.
3. More geographically dispersed customer based.
4. lower costs for procurement processing.
5. Cost of purchases can be lowered.
6. reduction in inventories ( storage and handling )
7. lower cycle time.
8. Better customer services
9. lower sales and marketing.
The first three benefits are relative benefits of internet and web based E-commerce over traditional EDI
methods. The cost and installation of EDI system is generally quits high and it has typically only been
beneficial to larger firms that have enough sales volume to justify the costs of developing their own
networks or Subscribing to a value added network (VAN)
A VAN is a service to which a firm can subscribe. Vans provide many services such as data
transmission, EDI translation and storing and forwarding the messages.
Because of software developments that allow web based EDI systems to interface with traditional
EDI systems, businesses of all sizes can now transact with one another. This expands the number of
potential electronic business partners. The internet offers a greater choice of global partners with which it
can conduct E- Commerce.
Procurement costs can be lowered by traditional EDI system by consolidating purchases, developing
relationships with key suppliers, negotiating volume discounts etc.
The cost of items purchased can be lowered due to the ability to seek out and negotiate with a greater
number ofsuppliers.
A reduction in inventory is desirable because of the associated reduction in storage , handling, insurance
and transmission and administrative costs. Internal E-Commerce can help firms to more optimally order the
inventories by electronically linking suppliers and purchasers together.
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The production cycle time is the time it takes a business to build a product beginning with design phase and
ending with the completed product. Internet E-commerce is enabling the reduction of cycle time by allowing
engineers and production teams to electronically share design specifications etc.
Customer service can be enhanced using internet E-Commerce by helping the customer to access
information before, during and after the sale.
Internet allows firms to reach many customers in a very low cost fashion.
E-Business :
The term E- Commerce is restricting however does not firstly encompass the true nature of many types of
information exchange occurring via telecommunication devices. The term E-Business also includes the
exchange of information not directly related to buying and selling of goods. Business are using electronic
mechanisms to distribute information and provide customer support. These activities are not commerce but
they are business activities. Thus the term electronic businesses is a broader way and eventually replace
electronic commerce.
Difference between E-comme rce and EDI:
EDI is a subset of E-commerce. A primary difference between EDI and E-commerce is that E-commerce
encompasses a broader commerce environment than EDI. Traditional EDI systems allow pre established
trading partners to electronically exchange business data. These EDI systems are generally expensive to
implement. E-Commerce allows the market place to exist where buyers and sellers can meet and transact
with each other.
Classification of E-comme rce:
A common classification of E-commerce is by the nature of transaction. The following are the types which
are distinguished
1. Business to business (B2B):
Most of the E-commerce today is of this type. It includes the electronic market transactions between the
organizations.
2. Business to Consumer (B2C):
These are retailing transactions with individual shoppers.
3. Consumer to Consumer (C2C) :
Here consumers sell directly to consumers. Examples are individual selling of residential property, cars
etc. Advertising personal services on the internet and selling knowledge and expertise is another
example.
4. Intra Business E-commerce:
Here we include all internal organizational activities usually performed on intranets, that involve
exchange of goods , services or information. Activities can range from selling a corporate product to
employees to online training and cost reduction activities.
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5. Non-Business E-commerce:
An increased number of non business institutions such as academic institutions, social organization
activities usually performed on intranets that involves exchange of information , goods and services.
Inte rnet and WWW as enable r of E-comme rce:
Internet is a very unique infrastructure. It is a network of networks. The internet came online in 1969. More
and more computer sites were added to this network. The internet is neither owned nor run by anyone.
Every organization that is plugged into the internet is responsible for its own computer. It is more or less
like an anarchy. Among its advantages are no membership fee, no censorship, no govt control. The
prominent disadvantage is that when something goes wrong there is no central control to ask for help.
Services provided by VAN(Value Added Network):
It is the service to which an organization can subscribe itself. Following are the services provided by VAN
1. Data Transmission.
2. EDI Transaction
3. Store and forward managing of translation data.
Impact of E-comme rce on Business Models:
E-commerce if forcing businesses to rethink their traditional business models. E-commerce is about
reengineering outward facing process including industry process reengineering
Thus E-commerce is not just technology , it is the way of conducting business that has potential impact on
every aspect of the organizational value chain.
Thus new business models are necessary that integrate E-commerce initiatives with overall business goals.
Overall Business & E-comme rce goal congruence:
E-commerce strategies need to be formulated so that they help a business to achieve its overall business
goals. The relationship between the organizations corporate mission and goals and its web based Ecommerce
plan as shown below
Business and Comme rce Goal Congruence
Environmental Changes may cause a business to rethink or adjust its mission and goals, such as entrance of
new competitions into market place. The environmental changes may be business trends.
Environmental
changes
Corporate Mission Environmental
Changes
Information system &
Technology Mission
Web Based E-commerce
Web Based E-commerce
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Once the corporate mission and goals are set then information system and technology group’s mission can
be set to help accomplish that mission. Ultimately a web based E-commerce plan can be setup.
Impact of E-comme rce on Value Chain:
The traditional value chain typically depicts the information system data as flowing sequentially through the
processes with inputs and outputs to the supplier at the back-end stage and to the customer at the front-end
stage. Firms engaging in e-commerce may share information with their customers and suppliers at many
stages of the value chain.
Traditional Value Chain
the above figure shows a traditional value chain which is no longer rich enough to encompass relationships
underlying flow of information between a firm, its customer and suppliers.
Custome r oriented Value Chain
The above figure shows a new view of the value chain with the customer set at the center of focus to a firms
information system that links all phases of its processes together. The customer oriented value chain enables
the customer to access the firms(suppliers) information system at virtually every phase in order to access the
assess the progress of the order. The internet is enabling companies to fully integrate their supply chains
and this integration has a dramatic influence on the structure of participating companies to fully integrate
their supply chains.
Supplier
Inventory
Procurement
& inbound
Production Outbound
Logistics
Customer
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The ICDT ( information, communication, distribution, transaction )Business strategy Model.
This is the model developed by Albert Angehrn called the information, communication, Distribution
,transaction (ICDT). It is used as the basis for discussing the internet starategy of business while thw
internet strategy of business may be the primary or over riding strategy of the business .
Angehrn’s model is based on four virtualspaces
1. Virtual Information Space:
This space is where a firm displays information about their organization about their products or services.
This space is the easiest space for the business to enter and it is a typically first step taken towards the
virtual markwet space.
For example E-commerce major concerns are
(i) the information that it displays is accurate and current.
(ii) The information that it displays is only viewed by authorized users.
(iii) Customers can easily find the site and negotiate through it once they have reached the site.
(iv) The site accessible without long unit times.
2. Virtual Distribution Space:
This space is used to deliver the product or services required or purchased by the consumer. For virtual
delivery to occur , the products being delivered must be digital ( software ) or the service performed
digitally (ex – online broker). Online news services and software companies have been quick to market
and deliver their products electronically.
For e-Commerce major concerns are
(i) delivery of products and services to legitimate customers only.
(ii) Reliable delivery of product and services.
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3. Virtual Transaction Space:
this space is used to initiate and execute the sales order which are nothing but transactions. Apart from those
companies engage in virtual distribution space, most companies have been reluctant to enter this space. The
major concern contributing to this reluctant is data security.
The major concerns of E-commerce are
(i) security over data.
(ii) Accuracy and integrity of processing data methods.
(iii) Privacy concerns by customers.
4. Virtual Communication Space:
this space is used to enable relationships building, negotiations and exchange of ideas such as char room,
virtual communities , forums etc. E-commerce is effected if such a community is a service for which its
members pay.
Three Pillars of E- Comme rce :
It is another electronic business model that builds on traditional market place.
It is called as three pillars of E-commerce model which is designed by peter finger. At the foundation of the
model is the existing market space. Three electronic pillars support open market processes. They are
electronic information, electronic relationship and electronic transaction .thus this model builds on existing
market space and utilizes electronic mechanism as an enabler ofsupporting open market processes.
The first pillar i.e. E-information is similar to angrehms virtual information space. Constructing on
electronic information pillar is easy. Most of the word processing software packages will easily convert
documents into a web readable format. The challenge is to construct a good, sold pillar where the web page
does not freeze up or links do not lead a visitor to a dead end.
The second pillar i.e. E-Relationships is the central pillar and is similar to angrehms virtual communication
space. The E-relationship pillar is anout building a site that has the feeling of being a port of entry into an
E-community. In order to attract users again and again to a site it must be innovative, it must provide
information and interaction not otherwise available.
In order to build good customer relationships E-commerce websites need to de designed to give potential
customers the feeling of community and interaction which they expect.
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The third pillar is the E-transaction pillar. This pillar is similar to angrehms Virtual Transaction Space and
also encompass angrehms Virtual distribution space. The two impediments to construct this pillar are the
ability to engage in meaningful and sufficient negotiation process and security of transaction data.
Market forces influencing the I-Way:
Demands and Requirements of market participants.
The failure and success of any product or service is a factor of market forces. To become a reality, Ecommerce
needs a network infrastructure to transport the content also known as the electronic interactive or
multimedia I-Way. The I-Way has become the leading word.
The principle drawback of existing communication infrastructure lies in its inabilities to provide integrated
voice, data and video services. Thus a business user requiring voice , data and video conferencing services
often had to use three separate networks such as voice network, data network and video conferencing
network. This understanding is important because e-commerce applications are dependent on the
underlying I-way.
Until recently the market place was fragmented into communication , entertainment and information
sectors. the following two points worth considering are
1. The boundaries among communication are not absolute.
Ex: Video is a part of Information, entertainment and communication.
2. The boundaries among equipment are absolute.
Ex: Today technology exists to allow television sets and pcs to interact or exchange any sort of data.
The emerging compatibility results in the flexibility needed to take advantage of new services. The
expectations of I-way are on demand publishing, real time video conferencing, telemarketing, tele
medicine, tele communication etc.
The cable industry wants to expand services from tv programming or paper view services such that the
consumer can pay bills, shop or check stock prices.
Definination of I-Way:
I – Way is defined as universal affordable access to high performance network capable of carrying billions
of bits per second in the context of e-commerce.
Components of I-Way:
The major components of I-way are
1.Consumer access equipments.
2. Ramps
3. Global Information Distribution Network.
1. Consumer Access Equipment :
It is often ignored component of I-way but represent critical category. The absence of slow progress
in which holding of up other segments of I-way. This segment of I-way includes hardware and software
vendors who provide physical devices such as computer software platforms such as browsers and operating
system.
2. Ramps:
they simplify the leakages to schools and home to the communication backbone. This component is
often called as last mile because they provide links. The providers of access ramps can be differentiated into
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four categories viz. telecom based , cable tv based, wireless based & computer based. Online information
services. The backbone access provides links and uses e-commerce application providers.
3.Global Information Distribution Networks:
The development of new communication technologies and continued employment of fiber optic
facilities has resulted in higher transmission speeds at significantly low cost. The end result is a seamless
web called the I-way of communication network, computer digital libraries and compute electronics that
will put vast amount of information at users finger tips. The two major technologies under pinning high
speed global information distribution networks are
a) long distance networks
b) satellite networks.
a) Long distance network:
Long distance connectivity is available through cable ( coaxial ) or (fiber) owned by long distance
interchange carriers (Ixc)
Submarine cables provide an attractive economic advantage for selected rules, where growth advantage
for selected rules, where growth is in demand and communication capacity is high. The Ixc’s also play a
significant role in the local access market by teaming with firms in the wireless and cable tv business.
Ixc’s are exploring alternative arrangements that would lower the cost of using the local network.
Uniform speed efficiency, levels of technology and cost of telecom services are necessary for both voice
and data services.
Fibre optics have emerged as technology of choice because it is capable of providing higher bandwidth
than satellite also it is immuned to electro magnetic interference. Long distance network infrastructure is
now been deployed under seas to carry international traffic.
b) Satellite network:
Satellite networks have advantages over terrestrial network and they are accessible from any point on
the globe. Satellite networks can provide broadband digital services including voice, data and video to
many points without the cost of wide installation. Wide range of services include broadcast radio, video
and overseas telephone links.
Thus communication satellites are the crucial part of the global communication and infrastructure.
Main Questions.
1. Define E-commerce and its applications.
2. list & explain the potential benefits of E-commerce.
3. Discuss the impact of E-commerce on customer oriented value chain.
4. Discuss the Angrehn’s ICDT business model.
5. Explain 3 pillars of E-commerce.
6. Discuss the impact of E-commerce on business models.
7. Discuss the market forces influencing the I-way.
8. Write a short note on globalInformation Distribution network
