E- Commerce System

Management
 Chapter 1

Introduction to E - Commerce
What is E- Commerce ?
 Definition
 E commerce is the use of electronic
communications and digital information
processing technology in business transactions
to create, transform, and redefine relationships
for value creation between or among
organizations, and between organizations and
individuals.
 E-Business vs. E-commerce
 E-business includes all electronic–based
information exchanges within or between
companies and customers. In contrast e-
commerce involves buying and selling
processes supported by electronic means,
primarily the Internet.
 Cont..
 E-commerce includes e-marketing and
e-purchasing \e-procurement .E-
marketing is the marketing side of e-
commerce. It consists of the companies
efforts to communicate about, promote,
and sell products and services over the
Internet.
 The flip side of e-marketing is e-
purchasing, the buying side of e-
commerce. It consists of companies
purchasing goods and services and
information from online suppliers.
 History of E- commerce
 Early business information exch1ange efforts –

Exchange of information for business purposes

was initiated in the late 1800s and early 1900s.
In 1950s companies began to use computers to
store and process internal transaction records,
invoices, bill of lading, cheques, remittances
advices
In 1960s businesses that engaged in large
volumes of transactions began exchanging
transaction information on punched cards or
magnetic tape.

In 1979 American National Standard Institute

(ANSI) chartered a committee to develop
uniform EDI standards. This committee is
called Accredited Standards Committee
X12(ASC X12)
 Emergence of the Internet –
 In the early 1960s the US department of
defense became very much concerned about
the possible effects of a nuclear attack on its
computing facilities. The defense department
realized the need for powerful computers for
coordination and control. The powerful
computers of that time were all large
mainframe computers.
 In 1969 the defense department researchers
used this network model to connect four
computers

 In 1972 a researcher wrote a program that

could send and receive messages over the
network thus was born the email
 Growth of the internet –
 In 1991 the National Science Foundation eased
its restrictions on Internet commercial activity
and began implementing plans to privatize the
internet. The privatization of the internet was
substantially completed in the 1995 when the
NSF turned over the operation of the main
Internet connections to a group of privately
owned companies.
 The milestones –

 1969 – US department of defense started the

first network among major research centers in
the US
 1971 – A total of 15 major connections or nodes
were established. E mail was introduced.
 1973 – Defense department stated developing
various forms of file transfer
 1984 – Domain Name Server (DNS) was
introduced
 1986 – US national Science Foundation
created internet based telephone lines
 1987 – The number of hosts (computers on the
net) reached 10,000
 1988 – The number of hosts on the net became
over 60,000
 1989 – Over 1, 00,000 hosts on the net were
registered
 1991 – The world Wide Web (WWW) was
created by CERN in Switzerland
 1992 – One million hosts on the net were
found
 1993 – The InterNic was created to handle
domain name registration
 1995 – There were a total of 6.6 million hosts
or computers on the internet
 1996 – An estimated 12.8 million hosts,
212,155 web sites and about 25 million users
if the web, about 90% of the users of
the web are in the United States
 1997 – 1.3 million domain names registered
 2000 – 110 million users and 2 million
Domain names
 The number of World Wide Web users
continues to double in size every 12 to 15
months.
Major Forces that Shape the Digital
Era

 Digitalization and connectivity

 Disintermediation and reintermediation
 Customization and customerization
 Industry convergence
 Digitalization and Connectivity
 Today most appliance and systems operate
with digital information, which converts text,
data, sound, and images into a stream of zeros
and ones that can be combined into bits and
transmits from appliance to appliance.
 bits will not reside in separate appliances
unless connectivity is established. For bits to
flow from one appliance and location to
another, a wired or wireless communications
network is necessary
 These networks are called Intranets,
where they connect people within a
company to one another and to the
company mainframe
 Extranets when they connect a company
with its suppliers and distributors; and
Internet when they connect users to a
large worldwide "information repository."
Connectivity is further enhanced by
wireless communication.
 Disintermediation and
reintermediation
 Dis intermediation - Compaq had its hands
tied because it sold its computers through
retailers, whereas Dell Computer grew faster
by choosing to sell online. Established store-
based retailers-notably bookstores, music
stores, travel agents, stockbrokers, and car
dealers are good examples of
disintermediation
 Re intermediation
 new middlemen sprang up to supply Internet
services to both businesses and consumers.
Reintermediation took place on a grand scale.
New online middlemen appeared such as
mySimon.com, Evenbetter.com, Buy.com,
ShopBest.com,
Customization and Customerization
 Customization means that the company is
able to produce individually differentiated
goods whether ordered in person, on the
phone, or online

 The combination of operational customization

and marketing customization has been called
customerization.
 Industry convergence
 Industry boundaries are blurring at an
incredible rate.
 Film companies such as Kodak are also
chemical companies, but they are moving into
electronics to digitize their image-making
capabilities.
 Disney is not only into cartoons and theme
parks, but it makes major films, licenses
characters, and manage retail stores,
Unique Features of E-Commerce
 1. Ubiquity
 2. Global reach
 3. Universal standards
 4. Reachness
 5. Interactivity
 6. Information density
 7. Personalization/Customization
 Ubiquity

 E-commerce is ubiquitous, meaning that it is

available just about everywhere at all times. It
liberates the market from being restricted to a
physical space and makes it possible to shop
from your desktop.
 Global reach

 E-commerce technology permits commercial

transactions to cross cultural and national
boundaries far more conveniently and
effectively as compared to traditional
commerce.
 Universal standards

 The technical standards for conducting e-

commerce are universal standards. The
standards are shared by all nations around the
world.
 Reachness

 During the traditional market it was not

possible to reach up to the different places of
the market but e-commerce enables the
businessman to reach out even to the last
customer living at the end of the world at any
time with the development of the web.
 Interactivity

 E-commerce makes it possible for two-way

communication between businessman and
customers which was not possible in
traditional market.
 Information density

 E-commerce technologies reduce information

collection, storage, processing and
communication costs. At the same time
increase greatly the currency, accuracy and
timeliness of information –making information
more useful and important than ever.
 Personalization/Customization

 E-commerce technologies permit

personalization. Merchants can target their
marketing messages to specific individuals by
adjusting the message to a person's name,
interests and past purchases.
 Advantages of E-Commerce
 Being able to conduct business 24 x 7 x 365
 Access the global marketplace
 Speed
 Market space
 Opportunity to reduce costs
 Computer platform-independent
 Efficient applications development environment
 Allowing customer self service and 'customer
outsourcing'
 Stepping beyond borders to a global view
 Being able to conduct business 24 x 7 x 365: E-
commerce systems can operate all day every day.
Your physical storefront does not need to be open
in order for customers and suppliers to be doing
business with you electronically.
 Access the global marketplace: The Internet
spans the world, and it is possible to do business
with any business or person who is connected to the
Internet. Simple local businesses such as specialist
record stores are able to market and sell their
offerings internationally using e-commerce
 Speed: Electronic communications allow messages
to traverse the world almost instantaneously. There
is no need to wait weeks for a catalogue to arrive by
post: that communications delay is not a part of the
Internet / e-commerce world.
 Market space: The market in which web-based
businesses operate is the global market. It may not
be evident to them, but many businesses are already
facing international competition from web-enabled
businesses.
 Opportunity to reduce costs: The Internet makes
it very easy to 'shop around' for products and
services that may be cheaper or more effective than
we might otherwise settle for. It is sometimes
possible to, through some online research, identify
original manufacturers for some goods - thereby
bypassing wholesalers and achieving a cheaper
price.
 Computer platform-independent: 'Many, if not
most, computers have the ability to communicate
via the Internet independent of operating systems
and hardware. Customers are not limited by
existing hardware systems' (Gascoyne &
Ozcubukcu, 1997:87).
 Efficient applications development environment: -
'In many respects, applications can be more
efficiently developed and distributed because the can
be built without regard to the customer's or the
business partner's technology platform


 Allowing customer self service and 'customer

outsourcing': People can interact with businesses at
any hour of the day that it is convenient to them, and
because these interactions are initiated by customers

 Stepping beyond borders to a global view: Using

aspects of e-commerce technology can mean your
business can source and use products and services
provided by other businesses in other countries.
 E-commerce disadvantages
 Time for delivery of physical products
 Physical product, supplier & delivery
uncertainty
 Perishable goods
 Limited and selected sensory information
 Returning goods
 Privacy, security, payment, identity, contract
 Defined services & the unexpected
 Personal service.
 Size and number of transactions
 Time for delivery of physical products: It is
possible to visit a local music store and walk out with
a compact disc, or a bookstore and leave with a book.
E-commerce is often used to buy goods that are not
available locally from businesses all over the world,
meaning that physical goods need to be delivered,
which takes time and costs money

 Physical product, supplier & delivery uncertainty:

When you walk out of a shop with an item, it's yours.
You have it; you know what it is, where it is and how
it looks. In some respects e-commerce purchases are
made on trust
 Perishable goods: goods bought and sold via the
Internet tend to be durable and non-perishable: they
need to survive the trip from the supplier to the
purchasing business or consumer. Thus perishable
goods are hard to sell through the net

 Limited and selected sensory information: The

Internet is an effective tool for visual and auditory
information: seeing pictures, hearing sounds and
reading text. However it does not allow full scope
for our senses: we can see pictures of the flowers,
but not smell their fragrance; we can see pictures of
a hammer, but not feel its weight or balance.
 Returning goods: Returning goods online can
be an area of difficulty. Will the goods get
back to their source? Who pays for the return
postage? Will the refund be paid? How long
will it take? Contrast this with the offline
experience of returning goods to a shop

 Privacy, security, payment, identity,

contract: Many issues arise - privacy of
information, security of that information and
payment details, whether or not payment
details (eg credit card details) will be misused
 Defined services & the unexpected: E-commerce is
an effective means for managing the transaction of
known and established services, that is, things that are
everyday. It is not suitable for dealing with the new
or unexpected

 Personal service: Although some human interaction

can be facilitated via the web, e-commerce can not
provide the richness of interaction provided by
personal service.

 Size and number of transactions: E-commerce is

most often conducted using credit card facilities for
payments, and as a result very small and very large
transactions tend not to be conducted online.