Introduction to eCommerce Internet and World Wide Web

Introduction to e-Commerce, Internet and World Wide Web Week - 1 1

References • Chapter 1: In the Beginning from Electronic Commerce, from Vision to Fulfillment by Elias M. Awad • Chapter 2: The Internet and the World Wide Web from Electronic Commerce, from Vision to Fulfillment by Elias M. Awad 2

What is e-Commerce • Brings the universal access of the Internet to the core business processes of buying and selling products and services. • E-Commerce assists in – Generating demand for products and services. – Improving order management, financial transactions and logistics. • Successful e-Commerce should result in reduction of transaction costs and streamlining of business processes. 3

Examples of e-Commerce • Credit card authorisation • Online travel reservations • Global wire funds transfer • Point of Sale (POS) transactions • Electronic banking • Fund raising • Auctioneering 4

Different Perspectives • Communications perspective – The ability to deliver products, services, information or payment via a network. • Consumer and business interface perspective – Various exchanges of information and transactions, • Business to business • Business to consumer • Consumer to consumer • Business process perspective – Activities that directly support commerce electronically by means of networked connections. 5

Different Perspectives (Contd. ) • Online perspective – An electronic environment that makes it possible to buy and sell products, services and information on the Internet. • Information structural perspective – Involves various media • • Data Text Web pages Internet multimedia. • Market perspective – Introduction of local outlets into global markets – Projection or regional goods and services globally. 6

What is e-Business • Connects critical business constituencies directly. • Using electronic information to enhance performance and create value by forming new relationships between and among businesses and processes. • Involves creation of business strategies and processes. • Combines resources of traditional information systems with the ubiquitous World Wide Web. 7

E-Business Goals • Reach new markets • Create new products and services • Build customer loyalty • Enrich human capital • Make optimum use of existing and emerging technologies • Achieve market leadership and competitive advantage 8

Changing Traditions • Open business practices • Convenient market search • Physical transactions without physical involvements and interactions – Inquiries – Orders – Payments – Deliveries 9

E-Commerce Drivers • Digital convergence and global standarisation – Systems communicate and interact • Ubiquity – Omnipresence and state awareness • Value addition to job roles and employee tasks – Junior employees handle greater responsibilities • Affordable infrastructure and services – Services and infrastructure also available on lease • Competitive global market environment – Pressure on operating costs and profit margins. • Customised products and services – Handling of customised requests at a mass-market 10 scale

E-Commerce Myths • Setting up a web site is easy – But ensuring its availability and performance is difficult. • E-commerce is cheap when compared to purchasing a mainframe – Cost of e-commerce infrastructure is dependent on the volume of business activity. • E-commerce means end of mass marketing – Businesses still have to advertise their presence on the web. • Everyone is doing it – Successful e-commerce requires a compelling business reason and sound strategic planning. 11

E-Commerce Myths (Contd. ) • E-commerce is lurcative – But businesses must have mature business processes and lifecycle for e-commerce. • E-commerce is revolutionary – Proportionate attention needs to be paid to aspects related to 24/7 warehousing, delivery, customer support, etc. • Online retailing is always the low-cost channel – Minus the maintenance of an outlet and production of paper catalogues, e-commerce requires maintenance of delivery channels, warehouses and supply chains while striving to be competitive. – Recurring expenditures of web site and infrastructure maintenance can be exorbitant. 12

E-Commerce Myths (Contd. ) • All products can be sold online – Some can only be advertised. • Customers can be bought – But will only be loyal if the business maintains quality. • Online firms face less pressure to grow and achieve economies of scale – Because of the speed with which success may be achieved, business scalability may be more critical. 13

E-Commerce Myths (Contd. ) • Size is not important for online firms – Cyber customers are known to have preferred ecommerce with large brand names. • The middleman is out – Online reselling, headhunting, directory services etc. is the emerging trend in e-commerce. 14

Advantages of E-Commerce • Lower relative cost – Proportionate investment allows startup companies to compete with market leaders. • Economic Operations – Administration of e-commerce infrastructure can be relatively more economical than that of a off-line business. • Higher Margin – For the same scale of business, processing overheads reduce considerably. 15

Advantages of E-Commerce (Contd. ) • Better customer service – Responsive and accurate online customer service. • Convenient market search – No need to physically move from store to make price and promotions comparisons. • Productivity gains – Lesser resource allocation – Value added resources • Teamwork – Higher overall interactivity between consumers and businesses. 16

Advantages of E-Commerce (Contd. ) • Knowledge markets – Convenient research environment • Information sharing, convenience and control – 24/7 operations possible with minimum physical interactions. • Contemporary business models – Large scale barter trade – Payments in kind vs. cash • Product customisations – Convenient market research allows development of customisable products or products with wider consumer base. 17

Limitations of E-Commerce • Security – Cyber consumers remain skeptical of revealing financial authorisations on Internet. • System and data integrity – Security against viruses, hackers and attackers. – Major challenges include defense against disruptions and unauthorised changes in data. • E-commerce is not free – Small businesses still have to compete with the reputation of market leaders. 18

Limitations of E-Commerce (Contd. ) • Consumer search is neither cost effective nor efficient – Consumers may need quality guarantees and assistance in search, adding to the eventual cost of the product or service. • Fulfillment problems – Business may grow rapidly and the infrastructure may not be able scale with the growth. • Customer relations problems – E-business requires customer loyalty to survive. 19

Limitations of E-Commerce (Contd. ) • Products people wont buy online – For some products people like to “road-test” the product before making a purchase. • Corporate vulnerability – Corporations do web-farming to extract business intelligence from online marketing information of their competitors. • Lack of blueprint for handling e-commerce – Traditional corporate structures and procedures inhibit progress in e-commerce. – Most corporations have significant shortage of eliterate executives. 20

Limitations of E-Commerce (Contd. ) • High-risk of Internet Startup – Most Internet startups fail because of, • Lack of sound business strategy, • Disproportionate investment of time and resources, • Inappropriate merchandise. 21

Critical Success Factors in E-Commerce • A sound strategy that has complete support of the top management. • A clear goal of long-term customer relationships and value. • Making full use of Internet and related technologies. • A scalable and integrated business process and infrastructure. 22

Value Chains in E-Commerce • A value chain is an organisation of activities of a business so that each activity adds value to the total operation of the business. • Competitive advantage is achieved when an organisation links activities in its value chain more cost effectively and efficiently than its competitors. • Activities should be linked such that valueadded (output) of one activity contributes to the input of another activity. • Activities of an organisation can be divided into – Primary activities – Support activities 23

Primary Activities of a Business • Inbound Logistics – Procurement activities that represent the supply side of the business. • • Vendor selection Comparative shopping Negotiation of supply contracts JIT arrival of goods – Business must be able to expeditiously exchange data with its suppliers regardless of the electronic format or technology. 24

Primary Activities of a Business (Contd. ) • Operations – Conversion of received raw materials into the merchandise. • • Fabrication Assembling Testing Packaging – Provides added value for the marketing function. – Data should be shared at maximum networking speeds between internal and external partners involved in the operations. 25

Primary Activities of a Business (Contd. ) • Outbound Logistics – Storage, distribution and shipping of the merchandise. – Involves • Warehousing • Materials handling • Shipping and timely delivery to the retailer or customer – This activity adds value to marketing and sales. 26

Primary Activities of a Business (Contd. ) • Marketing and Sales – Activity dealing with the customers – Includes • • • Advertising Product promotion Sales management Identifying product’s customer base Identifying distribution channels – Output of this activity can trigger increased production, more advertising etc. 27

Primary Activities of a Business (Contd. ) • Service – Activity focusing on after-sales service to the customer. – Includes • • • Testing Maintenance Repairs Warranty work Replacement parts – Output of this activity results in • Satisfied customer base • Improved image of the product and business • Potential for increased production and sales 28

Support Activities of a Business • Corporate Infrastructure – Backbone activity of a business unit. – Includes • • General management Accounting and finance Planning Legal services – Often pictured in • An organisation chart. • A communication network. • Authority structure – Each position holder must have an added value to the organisation. 29

Support Activities of a Business (Contd. ) • Human Resources – Unique activity of matching the right people to the job. – Involves • Recruitment and retention • Training and career path development • Compensation and benefits administration – Output of this activity affects virtually every other activity in the company. 30

Support Activities of a Business (Contd. ) • Technology Development – Focuses on improving the product and business processes in the primary activities. – Output of this activity contributes to the product quality, integrity and reliability. – Effective technology development eases pressures on the sales, service and customer relation teams. • Procurement – Focuses on the purchasing function. – Should ensure the availability of quality raw material for production. 31

E-Commerce Integration • Trend in e-commerce: Integration of the entire lifecycle – From the time the consumer purchases on the website to the time the product is actually received. • The lifecycle focuses around three major ecommerce applications, – Business to consumer (B 2 C) • Performed on the Internet – Business to business (B 2 B) • Performed on the Internet and Extranet – Business within business • Performed on the Intranet. 32

E-Commerce Transaction Lifecycle Business to Consumer (B 2 C) Business to Business (B 2 B) Business within Business Internet (e. g. , orders via e. Communications mails, online form fill ins) Extranet Intranet (Internal procurement and processing) Access Unrestricted Restricted to company staff and business partners Restricted to company staff Security Minimal except verification Firewalls, authentication Firewalls Payment Credit cards or electronic cash Predefined credit Within business 33 agreement charges

Supply Chain Management • Integrating the networking and communication infrastructure between businesses and suppliers to ensure – having the right product, – in the right place, – at the right time, – at the right price, – in the right condition. • An integral part of the B 2 B framework. • Transforms the way companies deal with suppliers, partners and customers to improve efficiency and profitability. 34

Supply Chain Management (Contd. ) • Supply chain management employs powerful tools that allow companies to exchange information in an effort to – reduce cycle times, – have expeditious fulfillment of orders, – minimize excess inventory, – improve customer service. • Important strategic advantages of supply-chain systems, – Better collaboration with business partners, – Lower operational costs, – Reduced cycle times. 35

Supply Chain Management (Contd. ) • Supply chain management also now focusing on end-customers. – Integration between sales-force automation applications and between consumers and business customers means all partners can configure and order online whatever they want. • Direct integration of businesses transforms the roles of wholesale suppliers. – Financiers and logisticians, – Outsource sellers, – Post-sales support providers. 36

Internet • Communications perspective – Interconnected heterogeneous networks operating a unified protocol that masks the underlying technological dissimilarities. – Internet appears as a single network to its users. • Information and management perspective – Information and Multimedia Superhighway. • • Data via the World Wide Web Data via non-Web-based applications. Internet phone calls Internet movies 37

Internet INTERNET 38

Fault Resilience in Internet 39

Information Transfer on the Internet • Information to be transmitted over the Internet is segmented into packet. • Each packet is transmitted independently of the others even if they belong to the same message. • Packetisation of information to be communicated provided efficiency and resilience. • Packets were communicated from the source to the destination using a protocol. • A protocol is a set of rules used by computers in communicating messages across a network 40

Hierarchical Structure of Internet High Speed Backbone Networks NAP NAP Regional Nets Regional ISPs Local Nets User User 41

Internet Service Providers (ISPs) • Companies that link users to the Internet. • Retail ISPs – Linking consumers and businesses to the Internet. – Monitoring and maintaining customer web sites. – Network management and system integration. – Provision of free services • News bulletins and weather updates. • Search engines • Freeware and shareware software. • Wholesale ISPs – ISP of ISPs. • Competitive industry. 42

World Wide Web • An organisation of files designed around a group of servers on the Internet that are programmed to handle requests from browser software on user terminals. • Originally web documents were text documents with links within documents linking to other documents or sections of other documents. • Now web documents can link to other media on the Internet, such as images, video, audio and animated graphics. – Browsers can invoke handler software for each different type of media. 43

Web Protocols • HTTP – Hyper-Text Transfer Protocol – Allows transfer of requests for web pages from clients and the retrieved web pages from servers to clients for display. • URL – Uniform Resource Locator – A name that represents the address of a specific web site. – URL is divided into two parts • Protocol, e. g. , http, file. • Resource, i. e. , name of server and the file on the server. 44

Web Protocols (Contd. ) • SSL – Secure Sockets Layer – A protocol for transmitting information in a secure manner over the Internet. • S-HTTP – Secure HTTP – An extension of HTTP that provides various security features such as client server authentication. – Also allows web clients and servers to specify privacy capabilities. 45

Internet: Enabler of E-Commerce • Marketing and selling products and services – Convenient entry into global competition. – Require effective planning for successful business operations. • Expeditious business – Speed compresses business processes and promotes growth of customer base. • Surveys and experiments • Level playing field – Enables smaller organisations to compete with larger organisations. 46

Internet: Enabler of E-Commerce • Resource conservation and cost effective operations. • Can provide a superior customer service and support resource. • Support for management functions through formal (e. g. , e-mail) and ad hoc mechanisms (e. g. , chat services and mailing lists). • Triggering new business activities – E. g. , selling used books to university and college students. 47

Internet Limitations • Security and privacy – Viruses, sniffing, Do. S attacks etc. • Fakes and forgeries – Authentication and authorisation. • Stressful operations – Businesses unable to scale with expeditious growth. – Customers require road test before commiting to a purchase. – Shipping regulations. 48

Searching Mechanisms • Search engines – A web site or a database with tools to generate that database and search its contents. • Web robots – Collection parts of search engines that roam web sites, retrieve messages and sort, index and then download them one by one. • Spiders – A software tool that prowls the Web looking for new sites where specific information is likely to reside. 49

Searching Mechanisms • Portal – A location on the Web that acts as a launching point for searching and retrieving information. – An all-purpose homebase for web users. • Bookmark – A facility on web browsers that allows users to save URL address (web addresses) for future access. 50

Internet Terminologies • Browser – A software program installed on a user terminal allowing users to access and view information stored on the Web. – Represents the client side of the Web. • Server – A computer with an installed operating system to store information or applications required by the client programs. • Telnet – An Internet service that allows a visitor to access remote computer locally. 51

Internet Terminologies (Contd. ) • FTP – File Transfer Protocol – A common mechanism of communicating files between computers connected to the Internet. • Malicious software – Any software that causes damage by spreading itself to other computers via e-mail, infected floppies or other network connections. – Categories • • Trojan horse: Appear to perform legitimate tasks. Zombies: Operate on behalf of masters to attack sites. Viruses: Perform destructive tasks. Worms: Reproduce, blocking Internet resources. 52