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

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Introduction to e-Commerce, Internet and World Wide Web

Week - 1

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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

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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.

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Examples of e-Commerce

• Credit card authorisation

• Online travel reservations

• Global wire funds transfer

• Point of Sale (POS) transactions

• Electronic banking

• Fund raising

• Auctioneering

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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.

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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.

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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.

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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

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Changing Traditions

• Open business practices

• Convenient market search

• Physical transactions without physical

involvements and interactions– Inquiries– Orders– Payments– Deliveries

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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 scale

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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.

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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.

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• 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.

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• Size is not important for online firms– Cyber customers are known to have preferred e-

commerce with large brand names.

• The middleman is out– Online reselling, headhunting, directory services

etc. is the emerging trend in e-commerce.

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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.

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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 store to

make price and promotions comparisons.

• Productivity gains– Lesser resource allocation– Value added resources

• Teamwork– Higher overall interactivity between consumers and

businesses.

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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.

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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.

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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.

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• 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 e-

literate executives.

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• High-risk of Internet Startup– Most Internet startups fail because of,

• Lack of sound business strategy,• Disproportionate investment of time and resources,• Inappropriate merchandise.

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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.

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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 value-added (output) of one activity contributes to the input of another activity.

• Activities of an organisation can be divided into– Primary activities– Support activities

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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.

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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.

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• 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.

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• 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.

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• 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

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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.

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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.

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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.

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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 e-commerce applications,– Business to consumer (B2C)

• Performed on the Internet

– Business to business (B2B)• Performed on the Internet and Extranet

– Business within business• Performed on the Intranet.

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E-Commerce Transaction LifecycleBusiness to Consumer (B2C)

Business to Business (B2B)

Business within Business

Communications

Internet (e.g., orders via e-mails, online form fill ins)

ExtranetIntranet (Internal procurement and processing)

Access Unrestricted

Restricted to company staff and business partners

Restricted to company staff

SecurityMinimal except verification

Firewalls, authentication

Firewalls

PaymentCredit cards or electronic cash

Predefined credit agreement

Within business charges

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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 B2B framework.• Transforms the way companies deal with

suppliers, partners and customers to improve efficiency and profitability.

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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.

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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.

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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

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Internet

RouterRouter

ComputerWorkstationLaptop

INTERNET

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Fault Resilience in Internet

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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

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Hierarchical Structure of Internet

User User User User User User User User

Local Nets Local Nets

Regional ISPs Regional ISPs Regional ISPs

Regional Nets Regional Nets Regional Nets

NAP NAP NAP

High Speed Backbone Networks

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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.

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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.

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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, ftp, file.• Resource, i.e., name of server and the file on the server.

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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.

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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.

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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.

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Internet Limitations• Security and privacy

– Viruses, sniffing, DoS 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.

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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.

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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.

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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.

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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.

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

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