E-Business for E-Business for Small Small

EnterprisesEnterprisesAssociate Professor Mohini Singh PhDAssociate Professor Mohini Singh PhD

Director, Community and Industry LiaisonDirector, Community and Industry LiaisonSchool of Business Information TechnologySchool of Business Information Technology

RMIT UniversityRMIT University

This PresentationThis Presentation DefinitionsDefinitions Technologies for e-businessTechnologies for e-business An understanding of the e-business An understanding of the e-business

framework and environmentframework and environment E-business modelsE-business models E-business trendsE-business trends E-business issues – payment methods, E-business issues – payment methods,

securitysecurity Benefits and limitationsBenefits and limitations E-business set up issuesE-business set up issues Critical success factors for e-SMEsCritical success factors for e-SMEs

E-CommerceE-Commerce

electronic commerce (EC)electronic commerce (EC) The process of buying, selling, or The process of buying, selling, or

exchanging products, services, or exchanging products, services, or information via computer networksinformation via computer networks

The use of the Internet and the Web to The use of the Internet and the Web to transact businesstransact business

Digitally enabled commercial transactions Digitally enabled commercial transactions between and among organisations and between and among organisations and individuals.individuals.

E-BusinessE-Business

e-businesse-business A broader definition of EC that includes A broader definition of EC that includes

not just the buying and selling of goods not just the buying and selling of goods and services, but also servicing customers, and services, but also servicing customers, collaborating with business partners, and collaborating with business partners, and conducting electronic transactions within conducting electronic transactions within an organizationan organization

All electronically mediated information All electronically mediated information exchanges, both within the organisation exchanges, both within the organisation and with external stakeholders supporting and with external stakeholders supporting the whole range of business processes.the whole range of business processes.

Technologies for E-Technologies for E-BusinessBusiness

Internet - a global network of networked computersInternet - a global network of networked computers World Wide Web - a body of software and a set of protocols World Wide Web - a body of software and a set of protocols

that link sites, files and e-mail addresses that link sites, files and e-mail addresses IntranetIntranet

an intra-organisational network based on the Internet an intra-organisational network based on the Internet technology. technology. An internal corporate or government An internal corporate or government network that uses Internet tools, such as Web browsers, network that uses Internet tools, such as Web browsers, and Internet protocolsand Internet protocols

enables communication within the organisationenables communication within the organisation ExtranetExtranet

an extension of an organisation’s intranet to trusted an extension of an organisation’s intranet to trusted partners to share information and conduct business in a partners to share information and conduct business in a secured environmentsecured environment

a network that uses the Internet to link multiple a network that uses the Internet to link multiple intranetsintranets

The E-Business Framework The E-Business Framework

Networked computing is the infrastructure Networked computing is the infrastructure for EC, and it is rapidly emerging as the for EC, and it is rapidly emerging as the standard computing environment for standard computing environment for business, home, and government applicationsbusiness, home, and government applications Networked computing Networked computing connects multiple connects multiple

computers and other electronic devices located in computers and other electronic devices located in several different locations by telecommunications several different locations by telecommunications networks, including networks, including wireless wireless onesones

Allows users to access information stored in Allows users to access information stored in several different physical locations and to several different physical locations and to communicate and collaborate with people communicate and collaborate with people separated by great geographic distancesseparated by great geographic distances

A Framework for Electronic A Framework for Electronic CommerceCommerce

E-Business OrganizationsE-Business Organizations

brick-and-mortar organizationsbrick-and-mortar organizations Old-economy organizations (corporations) that Old-economy organizations (corporations) that

perform most of their business off-line, selling perform most of their business off-line, selling physical products by means of physical agentsphysical products by means of physical agents

virtual (pure-play) organizationsvirtual (pure-play) organizations Organizations that conduct their business activities Organizations that conduct their business activities

solely onlinesolely online click-and-mortar (click-and-brick) click-and-mortar (click-and-brick)

organizationsorganizations Organizations that conduct some e-commerce Organizations that conduct some e-commerce

activities, but do their primary business in the activities, but do their primary business in the physical worldphysical world

E- Business ModelsE- Business Models

business-to-business (B2B)business-to-business (B2B) E-business model in which all of the E-business model in which all of the

participants are businesses or other participants are businesses or other organizationsorganizations

business-to-consumer (B2C)business-to-consumer (B2C) E-business model in which businesses E-business model in which businesses

sell to individual shopperssell to individual shoppers business to employee (B2E)business to employee (B2E)

E-business model delivering services, E-business model delivering services, information or products to its employees information or products to its employees

Business Models cont…Business Models cont… Electronic distributorElectronic distributor

Electronic intermediary responsible for order fulfillment Electronic intermediary responsible for order fulfillment (eg Amazon, eToy, etc)(eg Amazon, eToy, etc)

Electronic brokersElectronic brokers Introduce suppliers who deal with items that customers Introduce suppliers who deal with items that customers

are looking for (eg are looking for (eg www.choicemall.comwww.choicemall.com, BestBook-, BestBook-Buys.com)Buys.com)

E- StoreE- Store An electronic distributor whose dealing items are handled An electronic distributor whose dealing items are handled

by a single storeby a single store E-MallE-Mall

An electronic distributor or broker whose dealing items An electronic distributor or broker whose dealing items are handled by more than a single electronic storeare handled by more than a single electronic store

Generalised E-Malls/Stores - deal with various categories Generalised E-Malls/Stores - deal with various categories of items where supply items are very wideof items where supply items are very wide

Specialised E-Malls/Stores - focus on only special types of Specialised E-Malls/Stores - focus on only special types of items (eg pharmaceutical or computer products)items (eg pharmaceutical or computer products)

How E-Business is How E-Business is conductedconducted

electronic market (e-marketplace)electronic market (e-marketplace) An online marketplace where buyers and sellers An online marketplace where buyers and sellers

meet to exchange goods, services, money, or meet to exchange goods, services, money, or informationinformation

interorganisational information systems interorganisational information systems (IOSs)(IOSs) Communications system that allows routine Communications system that allows routine

transaction processing and information flow transaction processing and information flow between two or more organizationsbetween two or more organizations

intraorganisational information systemsintraorganisational information systems Communication systems that enable e-business Communication systems that enable e-business

activities to go on within individual organizationsactivities to go on within individual organizations

The Future of ECThe Future of EC

Overall, the growth of the field will Overall, the growth of the field will continue to be strong into the continue to be strong into the foreseeable futureforeseeable future

Despite the failures of individual Despite the failures of individual companies and initiatives, the total companies and initiatives, the total volume of EC is growing by 15 to volume of EC is growing by 15 to 25% every year25% every year

E-Business TrendsE-Business Trends One-Tenth of the World’s Population is Shopping One-Tenth of the World’s Population is Shopping

OnlineOnline 627 million people have done it627 million people have done it

Europe and North America display the highest Europe and North America display the highest incidence of online shoppersincidence of online shoppers

The world’s biggest online shoppers are in Germany, The world’s biggest online shoppers are in Germany, Austria and the UK with at least 95 percent of Austria and the UK with at least 95 percent of Internet users having purchased onlineInternet users having purchased online

B2C clearly show an upward trendB2C clearly show an upward trend While there is growth in nearly all global markets, While there is growth in nearly all global markets,

lesser developed markets are maturing faster than lesser developed markets are maturing faster than many of their more developed counterpartsmany of their more developed counterparts

Source: Global consumer attitudes towards online shopping (www.acnielsen.com)

What sells well in B2C?What sells well in B2C? ACNielsen surveyed a total of 21,261 consumers ACNielsen surveyed a total of 21,261 consumers

over the Internet in 38 markets covering 17 over the Internet in 38 markets covering 17 products between April 11 – May 10, 2005.products between April 11 – May 10, 2005.

Across the globe, the most popular items Across the globe, the most popular items purchased on the Internet are purchased on the Internet are Books (34%),Books (34%), Videos / DVDs / Games (22%),Videos / DVDs / Games (22%), Airline Tickets / Reservations (21%) and Airline Tickets / Reservations (21%) and Clothing / Accessories / Shoes (20%).Clothing / Accessories / Shoes (20%).

Source: Global consumer attitudes towards online shopping (www.acnielsen.com)

What sells well: Regional What sells well: Regional variationvariation

Books top the list of items purchased by the Books top the list of items purchased by the Chinese (56%) and South Koreans (50%)Chinese (56%) and South Koreans (50%)

Over half of South Korea’s online shoppers have Over half of South Korea’s online shoppers have purchased Clothing / Accessories / Shoes online. purchased Clothing / Accessories / Shoes online.

Airline Tickets/Reservations are purchased by Airline Tickets/Reservations are purchased by Malaysia (55%), New Zealand (40%), Singapore Malaysia (55%), New Zealand (40%), Singapore (36%) and Australia (35%) Ireland (58%), (36%) and Australia (35%) Ireland (58%), Norway (45%), Finland (31%), and Spain (26%). Norway (45%), Finland (31%), and Spain (26%).

In the UK, Videos /DVDs/ Games generate the In the UK, Videos /DVDs/ Games generate the biggest online market (34%), followed by Books biggest online market (34%), followed by Books (30%)(30%)

Source: Global consumer attitudes towards online shopping (www.acnielsen.com)

What sells well: Regional What sells well: Regional variationvariation

Tours/Hotel Reservations are commonly Tours/Hotel Reservations are commonly purchased online in Finland (30%) and Spain purchased online in Finland (30%) and Spain (27%). (27%).

In Japan, Groceries (26%) are the second In Japan, Groceries (26%) are the second most popular item purchased online after most popular item purchased online after BooksBooks

In Latin America, Electronic Equipment In Latin America, Electronic Equipment (30%) such as cameras, etc. are a favourite (30%) such as cameras, etc. are a favourite online purchase item similar to Booksonline purchase item similar to Books

For most of these online purchases, credit For most of these online purchases, credit card (59%) or bank transfer (23%) was used card (59%) or bank transfer (23%) was used to make the payment.to make the payment.

Characteristics of high-Characteristics of high-volume productsvolume products

high brand recognitionhigh brand recognition recognized guarantees recognized guarantees digitized formats digitized formats relatively inexpensive itemsrelatively inexpensive items frequently purchased items frequently purchased items standard and well known standard and well known

commodities commodities unopenable packaged items.unopenable packaged items.

How do Online Customers Pay for How do Online Customers Pay for their Purchases?their Purchases?

PayPal: The Money’s in the PayPal: The Money’s in the E-mailE-mail

One of e-commerce’s major success stories:One of e-commerce’s major success stories: Went public in 2002; acquired by eBay October 2002 Went public in 2002; acquired by eBay October 2002

for $1.5 billionfor $1.5 billion An example of a “peer-to-peer” payment systemAn example of a “peer-to-peer” payment system Fills a niche that credit card companies Fills a niche that credit card companies

avoided – individuals and small merchantsavoided – individuals and small merchants Piggybacks on existing credit card and Piggybacks on existing credit card and

checking payment systemschecking payment systems Weakness: suffers from relatively high levels of Weakness: suffers from relatively high levels of

fraudfraud Competitors include Western Union Competitors include Western Union

(MoneyZap), AOL (AOLQuickcash) and Citibank (MoneyZap), AOL (AOLQuickcash) and Citibank (C2it)(C2it)

Data is from the April 2006 comScore report titled "The State of Online Banking." The analysis is based on comScore's panel of over two million online consumers and a survey of 2, 214 US consumers conducted March 22-27, 2005.

Online Frauds Online Frauds Phishing Phishing

A high tech scam that uses email, pop-up messages, or Web pages to trick a A high tech scam that uses email, pop-up messages, or Web pages to trick a user into disclosing sensitive information such as credit card numbers, bank user into disclosing sensitive information such as credit card numbers, bank account numbers and passwordsaccount numbers and passwords

Denial of serviceDenial of service An attack on a web site in which an attacker uses specialised software to An attack on a web site in which an attacker uses specialised software to

send a flood of data packets to the target computer with the aim of send a flood of data packets to the target computer with the aim of overloading its resourcesoverloading its resources

Melware (Malicious software)Melware (Malicious software) VirusesViruses

A software code that inserts itself into a host computerA software code that inserts itself into a host computer

wormsworms A software program that runs independently consuming the resources of the host in A software program that runs independently consuming the resources of the host in

order to maintain itselforder to maintain itself trojan horsestrojan horses

A program that appears to have a useful function but contains a hidden function that A program that appears to have a useful function but contains a hidden function that presents a security riskpresents a security risk

Social EngineeringSocial EngineeringA type of nontechnical attack that uses social pressures to trick computer A type of nontechnical attack that uses social pressures to trick computer

users into compromising computer networks to which individuals have users into compromising computer networks to which individuals have accessaccess

……

Fraud Prevention Fraud Prevention Client side Client side

Access controlAccess control username-password modelusername-password model pre-defined secret cognitive questionspre-defined secret cognitive questions

Biometrics Biometrics Scramble padsScramble pads

System side System side Digital Certificates Digital Certificates SSLSSL Session timeoutsSession timeouts Fraud detection systems Fraud detection systems

……..

Organisational Benefits of E-Organisational Benefits of E-BusinessBusiness

Global ReachGlobal Reach Cost ReductionCost Reduction Supply Chain Supply Chain

ImprovementsImprovements Extended HoursExtended Hours CustomizationCustomization New Business New Business

ModelsModels Rapid Time-to-Rapid Time-to-

MarketMarket

Lower Lower Communication CostsCommunication Costs

Efficient Efficient ProcurementProcurement

Improved Customer Improved Customer RelationsRelations

Up-to-Date Company Up-to-Date Company MaterialMaterial

No City Business No City Business Permits and FeesPermits and Fees

Other BenefitsOther Benefits

Benefits of ECBenefits of EC

UbiquityUbiquity More Products and More Products and

ServicesServices Customised Customised

Products and Products and ServicesServices

Cheaper Products Cheaper Products and Servicesand Services

Information Information AvailabilityAvailability

Participation in Participation in AuctionsAuctions

Electronic Electronic CommunitiesCommunities

No Sales TaxNo Sales Tax

Benefits to Consumers

Benefits of ECBenefits of EC

Benefits to SocietyBenefits to Society TelecommutingTelecommuting Higher Standard of LivingHigher Standard of Living Hope for the PoorHope for the Poor Information or technocentric societyInformation or technocentric society Availability of Public ServicesAvailability of Public Services

E-Business Setup E-Business Setup

business modelbusiness model A method of doing business by which a A method of doing business by which a

company can generate revenue to company can generate revenue to sustain itselfsustain itself

Business models are a subset of a Business models are a subset of a business plan or a business casebusiness plan or a business case

Structure of Business Structure of Business ModelsModels

A description of the A description of the customers customers to be served to be served and the company’s relationships with these and the company’s relationships with these customers (customers (customers’ value propositioncustomers’ value proposition))

A description of all A description of all products products and and services services the the business will offerbusiness will offer

A description of the A description of the business process business process required to make and deliver the products required to make and deliver the products and servicesand services

A list of the A list of the resources resources required and the required and the identification of which ones are available, identification of which ones are available, which will be developed in-house, and which which will be developed in-house, and which will need to be acquiredwill need to be acquired

Structure of Business Models Structure of Business Models cont…cont…

A description of the organization A description of the organization supply chainsupply chain, including , including suppliers suppliers and other and other business partnersbusiness partners

A description of the revenues A description of the revenues expected (expected (revenue modelrevenue model), ), anticipated costs, sources of anticipated costs, sources of financing, and estimated profitability financing, and estimated profitability ((financial viabilityfinancial viability))

E-Business Structure IssuesE-Business Structure Issues

Revenue ModelsRevenue Models

revenue modelrevenue model

Description of how Description of how the company or an the company or an EC project will EC project will earn revenueearn revenue

Major revenue Major revenue modelsmodels SalesSales Transaction feesTransaction fees Subscription feesSubscription fees Advertising feesAdvertising fees Affiliate feesAffiliate fees Other revenue Other revenue

sourcessources

Business ModelsBusiness Models

Value propositionValue proposition The benefits a company can derive from The benefits a company can derive from

using E-Businessusing E-Business How do e-marketplaces create How do e-marketplaces create

value?value? Search and transaction cost efficiencySearch and transaction cost efficiency ComplementaritiesComplementarities Lock-inLock-in Novelty Novelty

Limitations of ECLimitations of EC

Other E-Business Other E-Business ChallengesChallenges

InfrastructureInfrastructure Integration of front-end and back-end Integration of front-end and back-end

systems, business process re-systems, business process re-engineeringengineering

Incorporation of secure transaction Incorporation of secure transaction systems, e-payments, automated systems, e-payments, automated responses – eCRM, web page design responses – eCRM, web page design issuesissues

E-supply chain management/cyber E-supply chain management/cyber chain managementchain management

OrganisationalOrganisational Senior management buy-inSenior management buy-in Sociotechnical - employee acceptance, Sociotechnical - employee acceptance,

new skills, new job designsnew skills, new job designs Raising the awareness of e-businessRaising the awareness of e-business

E-Business ApplicationsE-Business Applications The digital revolution continues to accelerate, The digital revolution continues to accelerate,

provides competitive advantage to provides competitive advantage to organizations and enables innovationsorganizations and enables innovations

Electronic business applications have been Electronic business applications have been extended to:extended to:

E-government services to citizensE-government services to citizens Government to government dealingsGovernment to government dealings

E-learningE-learning E-managementE-management E-researchE-research Mobile and pervasive applicationsMobile and pervasive applications ……

Critical Success Factors for Critical Success Factors for fast growth of e-SME’sfast growth of e-SME’s

All SME’sAll SME’s Content – attention grabbing and Content – attention grabbing and

compelling Internet presentation of a compelling Internet presentation of a product/sproduct/s

Convenience – usability of a webConvenience – usability of a web Control – defined processes for the Control – defined processes for the

control of deliveries, responding to control of deliveries, responding to customer queries and web site updatingcustomer queries and web site updating

Interaction – relationship building with Interaction – relationship building with customerscustomers

CFCs relevant to particular CFCs relevant to particular industriesindustries

CommunityCommunity Relationship building with like minded Relationship building with like minded

individuals and organisations by individuals and organisations by enabling information exchange and enabling information exchange and tailored servicestailored services

Price sensitivityPrice sensitivity Sensitive to Internet price competitionSensitive to Internet price competition

CFCs relevant to individual CFCs relevant to individual companiescompanies

Brand image – use of online and offline Brand image – use of online and offline branding techniquesbranding techniques

Commitment – motivation to use the Commitment – motivation to use the Internet and to innovateInternet and to innovate

Partnership – use of partnerships to Partnership – use of partnerships to leverage Internet presence and expand leverage Internet presence and expand businessbusiness

Process improvement – change and Process improvement – change and automate business processesautomate business processes

Integration – link IT systems to support Integration – link IT systems to support partnership and process improvementpartnership and process improvement

ReferencesReferences

Taylor M. and Murphy, A., 2004, ‘SMEs Taylor M. and Murphy, A., 2004, ‘SMEs and e-business’, and e-business’, Journal of Small Business Journal of Small Business and Enterprise Developmentand Enterprise Development, Vol 11 No , Vol 11 No 3pp 280 – 2893pp 280 – 289

Turban, E, King, D., Viehland, D. and Lee, Turban, E, King, D., Viehland, D. and Lee, J., 2006, Electronic Commerce A J., 2006, Electronic Commerce A Managerial Perspective 2006, Pearson Managerial Perspective 2006, Pearson Prentice Hall, USAPrentice Hall, USA

Singh, M., Lecture notesSingh, M., Lecture notes Singh, M., conference presentationsSingh, M., conference presentations