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- Chapter 1
Foundations of Electronic
Commerce
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© Prentice Hall, 2000
- Learning Objectives
Define electronic commerce and describe its various
categories
Distinguish between electronic markets and inter-
organizational systems
Describe the benefits of electronic commerce to
organizations, consumers, and society
Describe the limitations of electronic commerce
Understand the forces that drive the widespread use
of electronic commerce
Describe and discuss the changes that will be
caused by electronic commerce
Discuss some major managerial issues regarding
electronic commerce 2
© Prentice Hall, 2000
- Opening Vignettes:
Intel Corp. and Happy Puppy
Intel Corporation
Business-to-business (B2B) products selling
Customer service
Purchasing from and dealing with suppliers
Happy Puppy
Retailing company’s games
Marketing others’ games
Business-to-consumers (B2C)
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© Prentice Hall, 2000
- Definitions and Content of Field
Electronic Commerce (EC) is where business
transactions take place via telecommunications
networks, especially the Internet.
Electronic commerce describes the buying and selling
of products, services, and information via computer
networks including the Internet.
The infrastructure for EC is a networked computing
environment in business, home, and government.
E-Business describes the broadest definition of EC. It
includes customer service and intrabusiness tasks. It
is frequently used interchangeably with EC. 4
© Prentice Hall, 2000
- Definitions and Content of Field (cont.)
A global networked environment is known
as the Internet
A counterpart within organizations, is
called an intranet
An extranet extends intranets so that they
can be accessed by business partners.
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- Pure Vs. Partial Electronic
Commerce
Three dimensions
the product (service) sold [physical / digital];
the process [physical / digital]
the delivery agent (or intermediary) [physical / digital]
Traditional commerce
all dimensions are physical
Pure EC
all dimensions are digital
Partial EC
all other possibilities include a mix of digital and physical
dimensions
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© Prentice Hall, 2000
- The Dimensions of Electronic
Commerce
The core of
electronic commerce
Electronic
commerce areas
Virtual product
Digital
Virtual process
Product
Digital process
Physical
Product Physical process
Virtual delivery agent
Physical
Digital
Traditional
agent
agent
commerce
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© Prentice Hall, 2000
- The Electronic Commerce Field
Figure 1.2 shows that the EC applications are
supported by infrastructures, and their
implementation is dependent on four major areas
(shown as supporting pillars) people, public
policy, technical standards and protocols, and
other organizations.
The EC management coordinates the
applications, infrastructures, and pillars. It also
includes Internet marketing and advertisement.
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© Prentice Hall, 2000
- Electronic Commerce Applications
• Stocks Jobs • On-line banking
• Procurement and purchasing• Malls • On-line marketing and advertising
• Home shopping • Auctions • Travel • On-line publishing
Public
People: Technical standards Organizations:
policy,
Buyers, sellers, for documents, Partners,
legal, and
intermediaries, security, and competitors,
privacy
services, IS people, network protocols associations,
issues
and management payment government services
Infrastructure
(1) (2) (3) (4) (5)
Common business Messaging and Multimedia content Network infrastructure Interfacing
services infrastructure information distribution and network (Telecom, cable TV infrastructure
(security smart infrastructure publishing infrastructure wireless, Internet) (The databases,
cards/authentication (EDI, e-mail, Hyper Text (HTML, JAVA, World (VAN, WAN, LAN, customers, and
electronic payment, Transfer Protocol) Wide Web, VRML) Intranet, Extranet) applications)
directories/catalogs)
Management
A Framework for Electronic Commerce
© Prentice Hall, 2000 9
- Electronic Markets
A market is a network of interactions and
relationships where information, products,
services, and payments are exchanged.
The market handles all the necessary
transactions.
An electronic market is a place where shoppers
and sellers meet electronically.
In electronic markets, sellers and buyers
negotiate, submit bids, agree on an order, and
finish the execution on- or off-line.
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© Prentice Hall, 2000
- Shopper/Purchaser Seller/Supplier
Electronic commerce
network
(Infrastructure)
Product/service information request
Purchase request Purchase fulfillment request
Payment or payment advice Purchase change request
Electronic Market
(Transaction Hander)
Response to information request Response to fulfillment request
Purchase acknowledgment Shipping notice
Shipping notice
Purchase/service delivery (if online)
Payment remittance notice
Payment acknowledgment
Electronic transfer of funds
Payment approval
Electronic transfer of funds Electronic transfer of funds
Shopper/Purchaser’s Bank Seller/Supplier’s Bank
Transaction Handler’s Bank
(Automated Clearing House)
Electronic Markets
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© Prentice Hall, 2000
- Interorganization Information Systems
An interorganizational information system (IOS)
involves information flow among two or more
organizations.
Its major objective is efficient routine transaction
processing, such as transmitting orders, bills, and
payments using EDI or extranets.
Scope: An IOS is a unified system
encompassing two or several business partners.
A typical IOS includes a company and its
suppliers and and/or customers.
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© Prentice Hall, 2000
- Types of Interorganizational Systems
Electronic data interchange (EDI)
Extranets
Electronic funds transfer (EFT)
Integrated messaging systems
Shared databases
Electronically-supported supply chain
management
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© Prentice Hall, 2000
- Classification of EC by the Nature
of the Transactions
Business-to-business
Business-to-customer
Intra business transactions
Others
Interorganizational
Business to Business
System
Business to Customer
Electronic
Business to Business
Commerce
Intraorganizational
Other
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Classification Prentice Hall, 2000 Commerce
© of Electronic
© Prentice Hall, 2000
- Electronic Commerce is
Interdisciplinary
Marketing Management
information systems
Computer sciences
Accounting and
Consumer behavior
auditing
and psychology
Management
Finance
Business law and
Economic
ethics
Production/Logistic
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© Prentice Hall, 2000
- The Benefits of
Electronic Commerce
Benefits to Organizations
Expands the marketplace to national and
international markets
Decreases the cost of creating, processing,
distributing, storing and retrieving paper-based
information
Allows reduced inventories and overhead by
facilitating “pull” type supply chain management
The pull type processing allows for customization
of products and services which provides
competitive advantage to its implementers
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© Prentice Hall, 2000
- Benefits to Organizations (cont.)
Reduces the time between the outlay of capital
and the receipt of products and services
Supports business processes reengineering
(BPR) efforts
Lowers telecommunications cost - the Internet is
much cheaper than value added networks
(VANs)
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- Benefits to Customers
Enables customers to shop or do other
transactions 24 hours a day, all year round from
almost any location
Provides customers with more choices
Provides customers with less expensive products
and services by allowing them to shop in many
places and conduct quick comparisons
Allows quick delivery of products and services in
some cases, especially with digitized products
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© Prentice Hall, 2000
- Benefits to Customers (cont.)
Customers can receive relevant and detailed
information in seconds, rather than in days or
weeks
Makes it possible to participate in virtual auctions
Allows customers to interact with other customers
in electronic communities and exchange ideas as
well as compare experiences
Electronic commerce facilitates competition,
which results in substantial discounts.
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© Prentice Hall, 2000
- Benefits to Society
Enables more individuals to work at home, and to
do less traveling for shopping, resulting in less
traffic on the roads, and lower air pollution
Allows some merchandise to be sold at lower
prices benefiting the poor ones
Enables people in Third World countries and rural
areas to enjoy products and services which
otherwise are not available to them
Facilitates delivery of public services at a
reduced cost,increases effectiveness, and/or
improves quality
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© Prentice Hall, 2000
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