QM 351-Chapter 1 The Digital Firm: Electronic Commerce and Electronic Business Prepared by Dr Kamel ROUIBAH / Dept. QM & IS Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١
Objectives Explain how the basic concepts o ecommerce History of ecommerce Introduce students to different internet business models Describes different categories of e-commerce Describe benefits and limitations of ecommerce Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢
What is information system? An information System (IS) is An organizational solution, and ORGANIZATIONS TECHNOLOGY Management solution Based upon technology INFORMATION SYSTEMS MANAGEMENT Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣
Components of information system Customers ENVIRONMENT Suppliers ORGANIZATION INFORMATION SYSTEM INPUT PROCESS OUTPUT FEEDBACK Regulatory Agencies Stockholders مساهمين ministries) (e.g. Competitors Different IS may be used: SCM, CRM, ERP, e-commerce Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤
Data and information What id data? What is information? Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٥
1.1. EC Definitions and concepts E-commerce refers to buying and selling goods, services, and information via computer networks (Internet) EC defined from these perspectives Communications Business process (e.g. fulfillment, payment, security) Service (e.g. e-banking, online job) Collaborations (company, suppliers, banks, certificate authorities e.g. VerySign, logistic partners) Community (people involved in achieving the transactions) Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٦
EC Definitions (cont.) E-business is a broader definition of EC that includes not just the buying and selling of goods and services, But also includes Servicing customers Collaborating with business partners Conducting electronic transactions within an organization Ecommerce and e-business definitions are not the same Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٧
The Dimensions of Electronic Commerce Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٨
Types of internet business models Brick-and-mortar organizations Traditional commerce: all dimensions are physical Click-and-mortar Business model where the web site is an extension of a traditional bricks-and-mortar business A mix of digital and physical dimensions Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٩
Types of internet business models (cont ) Pure-play Are models that are based purely on the Internet All dimensions are digital Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٠
EC Definitions & Concepts (cont.) Ecommerce could be done over Internet or via other means Non-Internet EC VANs value-added networks, networks that add communication services (security, storage, backup) e.g. transfer of salaries from KOC to banks LANs local area networks Using a smart card to buy a drink in a vending machine Using a cell phone to make an online purchase m-commerce Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١١
Electronic Markets vs. Inter-organizational Systems E-markets Buyers and sellers meet to exchange Goods Services Money Information Interorganizational Information Systems (IOS) Between two or more organizations Routine transaction processing تحصيل (e.g. Information flow (مخالفات المرور ( Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٢
1.2 Framework for E-commerce Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٣
Framework for E-commerce EC applications are supported by infrastructure and 5 support areas Applications Support areas Infrastructure Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٤
Classification of EC by the Nature of the Transaction Business-to-Business (B2B) Electronic sales of goods and services among businesses EC model in which all of the participants are businesses or other organizations Business-to-consumer (B2C) Electronic retailing of product and services directly to individual consumers Business-to-business-to-consumer (B2B2C) EC model in which a business provides some product or service to a client business Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٥
Classification of EC by the Nature of the Transaction (cont ) Consumer-to-business(C2B) Individuals who use the Internet to sell products or services to organizations and /or seek sellers to bid on products or services they need Consumer to-consumer (C2C) Consumer selling goods and services electronically to other consumers Individuals use Web for private sales or Exchange or Auctions M-Commerce (see more in More in Chapter 8) EC transactions and activities conducted in a wireless environment (e.g. handheld devices, Camera Mobile Phone, cell phones) Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٦
Classification of EC by the Nature of the Transaction (cont ) Location-commerce (l-commerce) M-commerce transactions targeted to individuals in specific locations, at specific times Intra-business (organizational) EC EC category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization Business-to-employee (B2E) EC model in which an organization delivers services, information, or products to its individual employees Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٧
Classification of EC by the Nature of the Transaction (cont ) Collaborative commerce (c-commerce): EC model in which individual or groups (even companies) communicate or collaborate online (e.g. to design a new product) E-government, Government-to-citizens (G2C) or to others EC model in which a government entity buys or provides good, services, or information to businesses or individual citizen Exchange (electronic) A public e-market with many buyers and sellers, connect those in the steel market Exchange-to-exchange (E2E): EC model in which electronic exchanges formally connect to one another for the purpose of exchanging information Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٨
Brief History of EC EC applications Electronic funds transfer (EFT) was first developed in the early 1970s But it was limited to: Few large corporations Financial institutions banks Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ١٩
Brief History of EC (cont.) Electronic data interchange (EDI) electronic transfer of documents: Purchase orders Invoices E-payments between firms doing business Enlarged pool of participants to include: Manufacturers automotive sector Retailers Service providers Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٠
Brief History of EC (cont.) EC Successes Pure online ebay VeriSign AOL Click-and-mortar General Electric IBM Intel EC Failures Mnet in Kuwait (2005 to 2007) E-tailors began to fail in 1999 Boo.com Sweden (see you assignment) Large EC companies like Amazon.com are expanding but success or failure is not certain Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢١
1.3. Ecommerce Business Plans, Cases, and Models Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٢
Business Plans & Business Cases Business plan A written document that identifies the business goals and outlines the plan of how to achieve them Business case A written document that is used by managers to gather funding for specific applications or projects. Its major emphasis is the justification for a specific investment how the ecommerce project will add value to the company and how it contributes to achieve its objectives Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٣
New Business Model The new ecommerce project should target one type of new business models The new business model can substitute or complement a traditional business model (click & mortar or pure play) Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٤
Definition of Business Model Is a method of doing business by which a company can generate revenue to sustain itself, how it delivers products or services (e.g. in stores)? And how the enterprise creates wealth (benefits) or generates revenue? Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٥
Structure of Business Models Revenue model is a description of how a company or EC project will earn revenue Revenue sources are: Sales Transaction fees Subscription fees Advertisement fees Other models (affiliate fees), receive commission for referring customers to other web sites Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٦
Examples of Internet Business Models Virtual Storefronts Sell physical product on-line Information Brokers Provide product pricing and availability information to individuals and business Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٧
Examples of Internet Business Models/ Transaction Broker & Content Provider Transaction Broker Saves users money and time by processing online sales transactions, and provide information about rates and terms Content Provider Creates revenue by providing digital content such as digital news, music, photos, video, storage over the web Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٨
Examples of Internet Business Models/ Online Marketplace Provide a digital environment where buyers and sellers can meet Search for products and display products Establish an environment where multiple buyers can purchase from multiple sellers, e.g. ebay There are two types: auctions and reverse auctions Online auction: buyers submit the highest bid Reverse auction: is the case when a consumers submit a bid (sets price) to multiple sellers to buy goods or services at a buyerspecific price Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٢٩
Examples of Internet Business Models On-line Service Provider Provide online services for individuals and business Virtual Community Provide online meeting place where people with similar interests can communicate and find useful information Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٠
Affiliate marketing Is an arrangement whereby a marketing partner (business, organization or individual) refers consumers to the selling company s Web site Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣١
Viral marketing Is word-or-mouth marketing in which customers promote a product or service to friends or other people by using the Internet Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٢
More Internet business models (cont ) Group purchasing Is getting many small buyers together to buy in large quantities Electronic tendering systems Is a tendering system where sellers are invited to bid on the fulfillment of an order to produce a product or provide a service; the lowest bid wins Electronic marketplaces and exchanges Vertical marketplace is a marketplace that concentrates on one industry; also called vertical portals or vortals Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٣
1.4. Benefits & limitation of ecommerce Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٤
Benefits of EC for organizations Decrease search cost, offers significant cost savings Time and money spent to locate suitable product Decreases the cost of creating, processing, distributing, storing and retrieving paper-based information Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٥
تكاليف بعض العمليات البنكية (لماذا تدفع ١ دك) ($) نوع العملية تكلفة 2.5 1 0.4.24 0.1 عملية في احدى الفروع البنكية استخدام التليفون ا لة السحب الا لي (ATM) استخدام الهاتف النقال استخدام الانترنت Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٦
Benefits of EC for organizations (cont ) Reach high audience, and expand the marketplace Expands the marketplace to national and international markets Increase information richness, and promote interactivity Information that a business supplies to a customer and information the business collects about the customer Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٧
The Economic Effects of EC Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٨
Reach vs. Richness Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٣٩
Benefits to society Increase telecommuting Allows some merchandise to be sold at lower prices Benefits for people in less developed countries and rural areas Facilitates delivery of public services at a reduced cost, increases effectiveness, and/or improves quality Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٠
Benefits of EC to consumers Enables consumers to shop or do other transactions 24 hours a day, all year round from almost any location Provides consumers with more choices and with less expensive products and services by allowing them to shop in many places and conduct quick comparisons (what software?) Etc. Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤١
The Limitations of EC: Class discussion What are these limitation? Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٢
The Digital Revolution and the Economic Impact of EC In the Digital Revolution the economy is based on digital technologies including: Digital communication networks Computers Software Other related information technologies Also called: Internet economy New economy Web economy Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٣
The Digital Revolution and the Economic Impact of EC (cont ) Digital networking and communication infrastructures provide a global platform where people and organizations: Interact Communicate Collaborate Search for information The global platform includes these characteristics A vast array of digitizable products Consumers and firms conduct financial transactions digitally Microprocessors and networking capabilities embedded in physical goods Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٤
The Digital Revolution and the Economic Impact of EC (cont ) The term digital economy also refers to the convergence of computing and communication technologies on the Internet and other networks and the resulting flow of information and technology that is stimulate e-commerce This convergence enables all types of information (data, audio, video, etc.) to be stored, processed, and transmitted over networks to many destinations worldwide Web-based EC systems are accelerating the digital revolution by providing competitive advantage to organizations (see QM 240) Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٥
Class discussion: What is more efficient? What is the best advertisement: e- advertisement over most well known web site Google, Face book or paper based advertisement? Or Face-2-Face? Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٦
End chapter 1 Dr K. ROUIBAH Chapter 1 (351) / dept QM & IS ٤٧