The Dawn of a Maturing

Industry
ELECTRONIC COMMERCE
From Vision to Fulfillment

Third Edition

Elias M. Awad
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 The focus of this chapter is
on several learning
objectives
• Conceptual understanding of e-commerce, e-business and
e-strategy

• Advantages and Issues in E-Commerce

• Value-chain and supply-chain management and how they

relate to e-commerce and e-business

• Business models of the e-environment

• A trend toward integrating e-commerce

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 What Is E-commerce?
• Communications Perspective : the ability to deliver
products, services, information, or payments via
networks.

• Interface View : E-commerce means information and

transaction exchanges between:
– Business-to-Business (B2B)
– Business-to-Consumer (B2C)
– Consumer-to-Consumer (C2C)
– Business-to-Government (B2G)

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 What Is E-commerce?
• Business Process : E-commerce means activities that
support commerce electronically by networked connections.

• Online Perspective : E-commerce is an electronic

environment that allows sellers to buy and sell products,
services, and information on the Internet.

• A Structure : E-commerce deals with various media: data,

text, Web pages, Internet telephony, and Internet desktop
video.

• A Market : E-commerce is a worldwide networked Market.

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E-business
• Sometimes used interchangeably to refer to e-
commerce which is not true.
• Encompasses e-commerce and extends to all
internet-based interactions and processes aimed at
improving business operations and efficiency.
– selling direct to consumers, manufacturers and
suppliers;
– monitoring and exchanging information;
– auctioning surplus inventory;
– collaborative product design.

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E-commerce Is Not E-
business
• E-business - the conduct of business on the
Internet, in supply-chain planning, tracking,
fulfillment, invoicement, and payment.

– Includes buying and selling as well as servicing

customers and collaborating with business
partners
– Electronic information is used to boost
performance and create value by forming new
relationships between and among businesses
and customers.
– One example of e-business is SAP (
www.sap.com)
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E-commerce Versus E-
business
• E-commerce
– Selling goods and services on the retail level with anyone,
anywhere, via the Internet
– Greater efficiency and effective exchange of goods and
services
– Exchange based upon transaction
• A block of information exchange between the
merchant and its customers via the corporate Web
site
• www.amazon.com

• E-business
– Connecting critical business systems and constituencies
directly via the Internet
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 The Drivers for E-
• commerce
Digital Convergence - digital devices communicating with one
another
• Anytime, anywhere, anyone - e-commerce is available to anyone
(24/7)
• Changes in Organizations - today’s businesses empower frontline
workers to do the kind of work once performed by junior
management
• Increasing pressure on operating costs and profit margins -
global competition and the proliferation of products and services
worldwide have added pressure on operating costs and profit
margins
• Demand for customized products and services - mass
customization puts pressure on firms to handle customized
requests on a mass-market scale

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Myths about E-
commerce
• Setting up a Web site is easy.
• E-commerce means no more mass marketing.
• E-commerce means a new economy.
• E-commerce is revolutionary.
• E-commerce is a commercial fad that crashed in
2000.
• All products can be sold online using identical
business models.
• Build it and they will come.
• The middleman is out.
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Advantages through E-
commerce
• Lower cost
– Cost effective
– Reduces logistics problem
– Give small company equal exposer as the big companies
– Lower transaction processing charge
• Economy
– No rental of physical storage space, insurance or
infrastructural investment
– Only need a good idea, unique product and well designed
storefront
• Higher margins
– Businesses gain more control and flexibility when manual
transaction is done electronically
– Low transaction processing charge
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Advantages through E-
commerce
• Better customer service
– Web based customer service make user happy
– Let user serve him/herself save time and money

• Quick comparison shopping

– E commerce allows comparison shopping using automated
shopping assistant program called shopbot
– shopbots finds best deals from web storefronts

• Productivity gains
– Weaving the web tech. throughout the organization means improved
productivity
• Teamwork
– Supports user collaboration in exchanging information and work on
solution
– More interaction mean better overall result.
– improved communication with its suppliers, vendors and business
partners 1-11
Advantages through E-
commerce
• Information sharing, convenience, and control
– Improves information sharing between merchants and
customer and promote quick, just-in-time deliveries
– Open 24x7, no traffic jam, do not have to carry shopping
bags
– Business can give more control to his customer managing his
account
• Customization
– Digital products are highly customizable
– Easy to recognize, reverse or edit
– With the information about the customer products can be
customized and matched to individual needs

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Issues and Constraints of E-
commerce
• The cost factor
• Security
• System and data integrity
• System scalability
• E-commerce is not free
• Fulfillment and customer relations problems
• Products people resist buying online
• Cultural, language, and trust issues
• Corporate vulnerability
• Lack of a blueprint for handling E-commerce
• High risk of Internet start-up

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Limitations of the
Internet
• Security and privacy
• Fakes and forgeries
• Cyber terrorism
• Problems and stress
• Abuses in the workplace

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Value Chain in E-
commerce
• Value Chain: A way of organizing the activities of a
business so that each activity adds value (value-
added activity) or productivity to the total operation of
the business.
• A strategic tool for identifying how the critical
components of a business tie together to deliver value
for the business across the value-chain process.
• Makes B2C interface operational

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Value Chain

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Value Chain Activities

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Value Chain Primary
Activities
• Inbound logistics
– Procurement Activities: vendor selection, comparative
shopping, negotiating supply contract
– Represents supply side of the business

• Operations
– Conversion of raw material into finished product
– Machining, packaging, assembly, equipment maintenance,
testing etc.
– Provides added value for the marketing function.
– Operational activities are the point in the value chain where
value is added

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Value Chain Primary
Activities
• Outbound logistics
– Storing, distributing and shipping the final product.
– Involves warehousing, material handling, shipping and timely
delivery to the retailer
– Output of this activity is ties in directly to marketing and sales

• Marketing and sales

– Deals with ultimate customers
– Includes advertising, product promotion, sales management,
identifying customer base and distribution channel
– Output of this activity triggers
• increased production,
• more advertising

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Value Chain Primary
Activities
• Service
– Focus is on after sales service
– Includes testing, maintenance, repair, warranty works and
replacement parts
– Output of this activity means
• satisfied customer,
• improved image of the product and the business and
• potential for increased production

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Value Chain Support
Activities
• Corporate infrastructure
– General management, accounting, finance, planning and legal
service, quality management

• Human resources
– Activity to matching right people to the job
– Involves recruitment, retention, career path development,
compensation, training and development etc.

• Technology development
– Improves the products and business processes
– Output: product quality, integrity and reliability

• Procurement
– Purchasing, ensuring availability of quality raw materials

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E-commerce Value
Chain
• The E-commerce Value Chain means identifying:

– The competitive forces within the company’s

e-commerce environment
– The business model it will use
– Identifying the value activities that help the
e-commerce value chain do its homework

• E-commerce views information technology as part

of a company’s value chain

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Supply-Chain Management

• Integrating the networking and communication

infrastructure between businesses and suppliers

• Having the right product in the right place, at the right time,
at the right price, and in the right condition

• Delivery of customer and economic value through

integrated management of the flow of physical goods and
related information

• Designed to improve organizational processes by

optimizing the flow of goods, information, and services
between buyers and suppliers in the value chain

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