E Commerce Notes
2010e‐Commerce Notes102Part Two of TwoShrenik KeniaV.I.T.11/1/2010
ContentsE‐Business Introduction . 2E‐Business Strategies . 15Integration of Applications . 24E‐Commerce Infrastructure . 46Vidyalankar Institute of TechnologyPage 1
E Business IntroductionE Business vs. E commerceWhile some use e‐commerce and e‐business interchangeably, they are distinct concepts. Electronic business,commonly referred to as "e‐Business" or "e‐business", may be defined as the application of information andcommunication technologies (ICT) in support of all the activities of business. Commerce constitutes the exchange ofproducts and services between businesses, groups and individuals and can be seen as one of the essential activitiesof any business. Electronic commerce focuses on the use of ICT to enable the external activities and relationships ofthe business with individuals, groups and other businesses.E‐Commerce Is a particular form of e‐Business. Electronic business methods enable companies to link their internaland external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners,and to better satisfy the needs and expectations of their customers. Compared to e‐Commerce, e‐Business is a moregeneric term because it refers not only to information exchanges related to buying and selling but also servicingcustomers and collaborating with business partners, distributors and suppliers.E‐Business encompasses sophisticated business‐to‐business interactions and collaboration activities at a level ofenterprise applications and business processes, enabling business partners to share in‐depth business intelligence,which leads, in turn, to the management and optimization of inter‐enterprise processes such as supply chainmanagement. More specifically, e‐Business enables companies to link their internal and external processes moreefficiently and flexibly, work more closely with suppliers and better satisfy the needs and expectations of theircustomers.In practice, e‐business is more than just e‐commerce. While e‐business refers to more strategic focus with anemphasis on the functions that occur when using electronic capabilities, e‐commerce is a subset of an overall e‐business strategy. E‐commerce seeks to add revenue streams using the World Wide Web or the Internet to build andenhance relationships with clients and partners and to improve efficiency using the Empty Vessel strategy. Often, e‐commerce involves the application of knowledge management systems.E‐business involves business processes spanning the entire value chain: electronic purchasing and supply chainmanagement, processing orders electronically, handling customer service, and cooperating with business partners.Special technical standards for e‐business facilitate the exchange of data between companies. E‐business softwaresolutions allow the integration of intra and inter firm business processes. E‐business can be conducted using theWeb, the Internet, intranets, extranets, or some combination of these.Basically, electronic commerce (EC) is the process of buying, transferring, or exchanging products, services, and/orinformation via computer networks, including the internet. EC can also be benefited from many perspectiveincluding business process, service, learning, collaborative, community. EC is often confused with e‐business.In e‐commerce, information and communications technology (ICT) is used in inter‐business or inter‐organizationaltransactions (transactions between and among firms/organizations) and in business‐to‐consumer transactions(transactions between firms/organizations and individuals).In e‐business, on the other hand, ICT is used to enhance one’s business. It includes any process that a businessorganization (either a for‐profit, governmental or non‐profit entity) conducts over a computer‐mediated network.A more comprehensive definition of e‐business is: “The transformation of an organization’s processes to deliveradditional customer value through the application of technologies, philosophies and computing paradigm of the neweconomy.”Vidyalankar Institute of TechnologyPage 2
Three primary processes are enhanced in e‐business: Production processes, which include procurement, ordering and replenishment of stocks; processing ofpayments; electronic links with suppliers; and production control processes, among others;Customer‐focused processes, which include promotional and marketing efforts, selling over the Internet,processing of customers’ purchase orders and payments, and customer support, among othersInternal management processes, which include employee services, training, internal information‐sharing,video‐conferencing, and recruiting. Electronic applications enhance information flow between productionand sales forces to improve sales force productivity. Workgroup communications and electronic publishingof internal business information are likewise made more efficient.E‐Business goes far beyond e‐commerce or buying and selling over the Internet, and deep into the processes andcultures of an enterprise. It is the powerful business environment that is created when you connect critical businesssystems directly to customers, employees, vendors, and business partners, using Intranets, Extranets, ecommercetechnologies, collaborative applications, and the Web.E‐business is a more strategic focus with an emphasis on the functions that occur when using electronic capabilitieswhile E‐commerce is a subset of an overall e‐business strategy. E‐commerce seeks to add revenue streams using theWorld Wide Web or the Internet to build and enhance relationships with clients and partners and to improveefficiency while Electronic business methods enable companies to link their internal and external data processingsystems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy theneeds and expectations of their customers.E‐Business is at the enterprise application level and encompasses sophisticated b2b interaction and collaborationactivities. Enterprise Application Systems such as ERP, CRM, SCM form an integral part of e‐Business strategy andfocus.Critical Factors with respect of e BusinessE‐Business supports business processes along the entire value chain: Electronic purchasing (E‐Procurement), SCM(Supply Chain Management), Processing orders electronically, Customer Service & Co‐operation with businesspartners.One of the objectives of e‐Business is to provide seamless connectivity and integration between business processesand applications external to an enterprise and the enterprise’s back office applications sucha as billing, orgerprocessing, accounting, inventory and receivables, and services focused to total supply chain management andpartnership including product development, fulfillment, and distribution. In this respect, e‐Business is much morethan e‐Commerce.To succeed in e‐Business it is crucial to combine technological developments with corporate strategy that redifines acompany’s role in the digital economy while taking into account its various stakeholders. It is imperative tounderstand the issues, evaluate the options, and develop technology orientation plans. An e‐Business strategy helpsorganizations identify their e‐Business concerns, assess their information needs, analyze to what degree existingsystems serve these objectives, pinpoint specific improvements, determine the development stages of e‐Businesssolutions and attain concrete and measurable results. Thus, it is clear that e‐Business solutions are not only abouttechnology.A classic example is SAP systems integrations for any organization. This itself is taken up as a project and executedwith great attention to detail. A minute logical error in interpretation of the firm’s objectives could result in theentire system being re‐worked from scratch.Vidyalankar Institute of TechnologyPage 3
E‐Business allows for redefinition of value, competitiveness and the very nature of transactions and it affects allareas of an organization. It is crucial to combine technology and business strategy while taking into account variousstakeholdersAn E‐business Strategy helps to Identify e‐business concernsAssess info needsAnalyze existing systemsImprovements required in existing systemsDetermine the stages of development of solutionsAttain concrete and measurable results.Characteristics of e BusinessTo emphasize, e‐Business is not simply buying and selling but encompasses the exchange of many kinds ofinformation, include online commercial transactions. E‐Business is about integrating external company processeswith an organization’s internal business processes; as such, a variety of core business processes could exploit an e‐Business infrastructure.These include among others: ‐ Collaborative Product DevelopmentCollaborative Planning, Forecasting and ReplenishmentProcurement and Order managementOperations and LogisticsCollaborative Product DevelopmentThis is one of the fastest growing technologies in engineering with some form of solutions being implemented in arange of industries such as automotive, aerospace, agricultural machinery etc. It contributes towards makingproducts in a short time span while maintaining quality and reducing cost.It also aids in maximizing time‐to‐market benefits while maintaining control over product development information.By integrating design and testing cycles of products with those of suppliers, a firm can shorten the complete cycle ofits products. This clearly, reduces the total cost of the product cycle, & even more importantly, it reduces the timethat is needed to bring products to the marketplace. Collaborative product development solutions offer ERPintegration and SCM.Collaborative Planning, Forecasting and ReplenishmentThis is a process in which Manufacturers, Distributors and Retailers work together to plan, forecast and replenishproducts. In e‐Business relationships collaboration takes the form of sharing information that impacts inventorylevels and merchandise flow.Collaboration points: sales forecasts, inventory requirements, manufacturing and logistic lead times, seasonal setschedules, new/remodel storage plans, promotional plans etcGoal: To get the partners to work together to improve lower supply cycle times, improve customer service, lowerinventory costs, improve inventory levels and achieve better control of planning activitiesProcurement and Order managementElectronic procurement or E‐Procurement can achieve significant savings and other benefits that impact thecustomer. To support procurement and order management processes, companies use an integrated electronicordering process and other online resources to increase efficiency in purchasing operations.Vidyalankar Institute of TechnologyPage 4
Benefits: cost savings, better customer service by controlling the supply base, negotiating effective buyingpreferences, and streamlining the overall procurement process.Operations & LogisticsLogistics is that part of the supply chain process that plans, implements and controls the efficient, effective flow andstorage of goods, services and related information from the point of origin to point of consumption in order to meetcustomer requirements. To make this happen, transportation, distribution, warehousing, purchasing & ordermanagement functions must work together. Logistics in the e‐Business era is all about Collaboration ‐ the sharing ofcritical and timely data on the movement of goods as they flow from raw material, all the way to the end‐user.Operations and Logistics processes are based on open communication between networks of trading partners whereintegrated processes and technology are essential for high performance logistics operations. These solutions helpmanage the logistics process between buyers and suppliers, while eliminating costly discrepancies between purchaseorder, sales order and shipping information. By eradications these variances and inconsistencies improvements inthe supply chain may result from the elimination of mixed shipments and shipment discrepancies, and the reductionof inventory carrying costs for the customer. At the same time this increases customer satisfaction throughimproved delivery reliability and improved efficiencies in receiving operations.Furthermore, there are critical elements to e‐business models as well. They are as follows: A shared digital business infrastructure, including digital production and distribution technologies(broadband/wireless networks, content creation technologies and information management systems), whichwill allow business participants to create and utilize network economies of scale and scope.A sophisticated model for operations, including integrated value chains‐both supply chains and buy chains.An e‐business management model, consisting of business teams and/or partnerships;Policy, regulatory and social systems ‐ i.e., business policies consistent with e‐commerce laws, tele‐working/virtual work, distances learning, incentive schemes, among others.Ease of Automated Processing ‐ A payer can now cheaply and easily automate the generation andprocessing of multiple payments with minimal effort. Previously, the dependency upon banks to handlemost payments and the lack of a cheap, ubiquitous communications technology made automation ofpayment processes expensive and difficult to establish.Immediacy of result ‐ Payment immediacy occurs because automation and the ability for the intermediatesystems and providers to process payments in real‐time. With the more manual, paper‐based systems therewas always a time delay due to the requirement for human intervention in the process.Openness and accessibility ‐ The availability of cheap computing and communications technology and theappropriate software enables small enterprises and individuals to access or provide a range of paymentservices that were previously only available to large organizations via dedicated networks or thetransactional processing units of banks.Loss of collateral information ‐ The new technology dispenses with, or alters, collateral informationaccompanying transactions. This information has traditionally been part of the transaction, and has beenrelied upon by the transacting parties to validate individual payments.Collateral information can be defined as information:Which is not essential to the meaning and intent of a transaction;Which is typically incidental to the nature of the communications channel over which the transaction isconducted; but nevertheless provides useful contextual information for one or more of the parties to thetransaction?Collateral information can include many things ranging from tone of voice in a telephone call to the businesscards and letterheads and apparent authority of the person with whom you are dealing.Vidyalankar Institute of TechnologyPage 5
Globalizzation ‐ Globbalization, orr the minimization of geographical factors in maaking payments, has beeen anobvious aspect of the new paayments sysstems. Its afffect is upon areas succh as size ofo the paymmentsmarketpplace, uncerrtainty as too legal jurissdiction in thetevent ofo disputes, location annd availabilitty oftransacttion trails, annd the abilitty of a paymment schemee to rapidly adaptato reggulatory regimes imposeed byone country by moving to another.els ‐ New bussiness models are being developed to exploit thee new paymeent technoloogies,New business modein particcular to addrress or take advantage ofo the disinttermediationn of customeers from tradditional paymmentproviderrs such as baanks. In this context, dissintermediation is wheree the technoology enabless a third parrty tointervenne between the customer and the banking systtem, effectivvely transferrring the customer’s truustedrelationsship with thee bank to thee new party.Eleements of an e Busiiness soluutionThe vision of e‐‐Business is that enterpprises will haave access tot broad rannge of tradiing partnerss to interactt andcollaaborate withh and not onlyobuy andd sell more efficiently. Also, it is expectedethaat e‐Business will contriibutetowards the agillity of busineess organizattions and witth that to reaching higheer levels of ccustomization. In this way, anorgaanization cann maximize supplyschain efficiency, immprove customer servicee and increase profit margins. Hencee, theneedd to make missionmcriticaal processes:Inveentory, Accoounting, Mannufacturing and Custommer Support: These, musst be able too interact witth each otheer bybecooming web‐eenabled. This is achievedd by ERP, CRRM and otheer systems byb making usse of distribuuted applicattionsthatt extract dataa and launchh business processes acrooss many or alla of the aboove processees.The key elementts of an e‐Buusiness solutiion are:1.2.3.4.5.Customeer Resource managemennt(CRM)Enterpriise resource planning (ERRP)Supply ChainCManaggement (SCMM)Knowleddge Managemente‐Markeetsyalankar Insstitute of TechnologyVidyPaage 6
Customer relationship management (CRM )CRM systems are “front‐office” systems which help the enterprise deal directly with its customers. CRM (definition)is the process of creating relationships with customers through reliable service automated processes, personalinformation gathering, processing and self‐service through the enterprise in order to create value for customers.There are 3 categories of user applications under CRMs: blecustomers to order products andservicesSales‐force facing applications:Applications that automate some ofthesalesandsales‐forcemanagement functions, and supportdispatch and logistic functions.Management‐facing applications:Applications which gather data frompreviousappsandprovidemanagement reports and computeReturn on relationships(RoR) as percompany’s business modelEnterprise Resource Planning (ERP)ERPs are often called “back‐office” systems. ERP systems are management information systems that integrate andautomate many of the business practices associated with operations or production aspects of a company. ERPsoftware can aid in control of many business activities such as sales, delivery, production, billing, production,inventory, shipping, invoicing and accounting.A typical ERP system is designed around these 4primary business procedures: ‐ Production: manufacturing, resource planningand execution processBuying a product: procurement processSales of a product and services: customerorder management processCosting, paying bills, and ing process.Supply Chain Management (SCM)Supply chain (definition) is a network of facilities and distribution options that perform the functions of procurementof materials, transformation of these materials into intermediate and finished products, and distribution of thesefinished products to customers. SCM deals with the planning and execution issues involved in managing a supplychain.Vidyalankar Institute of TechnologyPage 7
Supply chain has 3 main parts Supply side: concentrates onhow, where from, and when rawmaterials are procured andsupplied to manufacturing.Manufacturing side: converts rawmaterials to finished products.Distribution side: ensures thatfinished products reach the finalcustomers through a network ofdistributors, warehouses andretailers.Knowledge ManagementThis relates to the identification and analysis of available and required knowledge assets and related processes.Knowledge assets encompass two things Information and Experience. Knowledge assets comprise of all knowledgethat a business has or needs to have in order to generate profits and add value.Knowledge management includes the subsequent planning and control of actions to develop both the knowledgeassets and the processes to fulfill organizational objectives. Knowledge is a strong denominator of a business modeland determines business competencies especially when unique to the business and so must be kept in‐house.E MarketsE‐Market is an electronic meeting place for multiple buyers and sellers providing many participants with a unifiedview of sets of goods and services, enabling them to transact using many different mechanisms. An e‐Market usesInternet technology to connect multiple buyers and suppliers.E Business Roles and their challenges There are two main roles in the E‐business scenario:o The Buyer: Buyers are organizations that purchase goods and services directly from Suppliers.o The Supplier: Suppliers are organizations that market and sell goods or services directly to buyers orindirectly through diverse sales channels including Web‐based procurement systems and electronicmarketplaces.Suppliers typically provide buyers with web‐based services necessary for completing e‐Business transactions.Buyers (customers) can thus review product information, receive customer service, ordering services andcustomization support facilities an can submit or modify orders.An additional role is that of Market Makers that are third party organizations that run e‐markets.Each role has distinct business and technical challenges, but they all coalesce around a common point.For buyers as well as for suppliers, the primary challenge is the ability to reach a critical mass of tradingpartners and transaction volume to sustain their business.For suppliers especially, the following challenges exist:o Managing multiple selling channels, based on various technologies, protocols, data formats, andstandard business processes.o Having the ability to take multiple types of orders once the customer has decided to conduct e‐Business –enabled order management through the various selling channels.o Having the ability to differentiate and customize products and services from other suppliers, andoffering them through the various selling channels.o Having the ability to adapt and grow the e‐Business without incurring drastic technology changes,organizational restructuring.Vidyalankar Institute of TechnologyPage 8
o And sweeping changes in the business process, or radical new investments.To meet the needs of buyers and suppliers, e‐Business strategy and solutions must be built on the followingbasic principles:o Empowering suppliers & buyers: Different channels.o Enabling suppliers of all sizes:E Business Requirements Identify/measure quantifiable business objectives: companies must accurately measure the impact an e‐Business initiative has on their business processes and decide whether this initiative is worth pursuing andhas sustainable long‐term effectsEnsure organizational/operational flexibility: Enterprises must reposition themselves in their mission,structure and execution to prosper in a substantially more dynamic environment.Rethink entire company supply chains: companies must rethink their entire supply chains in order tooptimize performance and value as they seek to better integrate with suppliers and customers, shareinformation, inter‐link processes, and outsource manufacturing logistics systems and maintenance activities.Transform the company to a process‐centric form: Companies must be conceptualized as a set of businessprocesses with more emphasis on maximizing the efficiency of processes rather than departmental orfunctional units.Define Business processes: companies must create models of existing processes and interactionsdetermining the relevant events, time frames, resources and costs associated with business processes,hence making them well‐defined and measurableUnderstand Security requirements: the breadth of access and interaction requirements of a e‐Businesssolution requires the ability to provide controlled and focused access by all the users.Align business organizations with a flexible IT architecture: in response to demands for end to end e‐Business solutions, companies are expanding their applications to include enhanced integration capabilities.This includes integration of business processes at varied levels from applications and data across(and within)organizations.Establish ubiquity within standards: None of the many integration technologies available from various ITvendors has achieved complete coverage. These do work within organizations but not across globalenterprises and between separate enterprises. Attempts are made to establish open standards forinteroperability.A number of business and tech. driven requirements are compelling forces that enable successfuldevelopment & deployment of integrated end‐to‐end e‐Business applications. Some of these are:o Efficient business process management technologyo Efficient b2b communicationo Efficient enterprise application integration technologyoOther categorizations view the problem differently.A more basic approach to viewing e‐Business requirements is as follows: ‐ Trust ‐ The biggest requirement for running a successful e‐business is trust. In this age of Facebook andMySpace, online merchants may think that privacy of a customer's information isn't important, but theopposite is true.o Thus, businesses must be trustworthy to operate online. Consumers will not simply give theirfinancial information to just anyone, so a site will lose business if consumers do not feel comfortablethat it is a reliable, upstanding company.Vidyalankar Institute of TechnologyPage 9
o Companies must have comprehensive privacy policies and stick with them. Another good idea is to get digital certificates and TRUSTe seals, which are awarded by third‐party organizations after theyresearch the legitimacy of an online website.o Such awards put consumers' minds at ease. Finally, even if an e‐business does all this, it must also betrustworthy in the sense of fulfilling its promises: be up front with consumers about pricing anddelivery times.Privacy policy ‐ In addition to the way privacy laws apply in the "real" world, there are some special things tothink about when dealing with the Internet and e‐business. You should fully understand how your website fits into privacy law requirements. If your website collects personal information, you should develop a proper and legallycompliant privacy policy and post it in a readily visible location on your website. If you use cookies or similar means to track visitors, depending on how you do that, you maystill need to develop and post a policy. Online profiling may require the consent of the individual depending on the circumstances. Keep in mind that people do look for privacy policies so, without a policy, you may loseprospective customers. A properly drafted privacy policy or statement will not only minimize your legal exposure, itcan serve a marketing function as well, allowing you to attract and retain customers whootherwise might not be as inclined to deal with you. Do not create a policy and then fail to follow it precisely. This is an invitation for disaster,including not only possible legal problems, but also injury to your reputation and goodwill.o It is important to not just let the policy sit once it has been posted. It should be revisited regularly todetermine whether or not it is still accurate and to evaluate whether or not it should be revised toassist you in your business goals and objectives.Strategy ‐ E‐commerce merchants must also have a strategy to succeed in the online marketplace. Manypeople start websites because they think it is a quick and easy way to make cash, but in fact it takes a muchgreater investment than most people expect.Therefore, before launching a site, businesses must have strategies to handle issues large and small:o How consumers will place orders,o How deliveries will be made,o How customer service issues will be handled?o More broadly, how much do owners expect to earn over a certain period, how will consumers findthe site, and how will success be judged.o Online merchants without strategies will soon be overwhelmed by such issues.Suitability ‐ Finally, merchants must decide if their products are suitable for the web. Requirements forsuccessful e‐businesses concern the goods and services themselves:o Can they be delivered quickly and cheaply?o Do they appeal to people outside a small geographic area?o Will going online save money?o Will the benefits outweigh the costs?Vidyalankar Institute of TechnologyPage 10
Technological Requirements:o Achieving Real ‐ Time Flexibility: In theory, digital things are easier to change than physical things. Itis faster to edit a memo using a word processor than a typewriter (and you don’t get ink on yourfingers).o But when programming is required to change content or access policies, maintaining a complex Website can range from onerous to impossible. Market factors change in real time, and so must the logicand content of an e‐Business site.o To achieve this vision, the next generation of e‐Business systems must provide a framework forautomated information exchange between all the stakeholders in a business.o These new frameworks are designed for flexibility so companies can change content and businesslogic in real‐time to meet changing business needs and market conditions.o This adaptability comes from a set of core services, common to all applications, which enable rapiddeployment of new applications and new information and which work together to create acompelling, unified e‐Business environment.o An e‐Business framework must include
In practice, e‐business is more than just e‐commerce. While e‐business refers to more strategic focus with an emphasis on the functions that occur when using electronic capabilities, e‐commerce is a subset of an overall e‐ business strategy. E‐commerce seeks to add revenue stre
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Introduction to e-commerce 1 LEARNING OBJECTIVES c To understand the complexity of e-commerce and its many facets. c To explore how e-business and e-commerce fit together. c To identify the impact of e-commerce. c To recognise the benefits and limitations of e-commerce. c To use classification frameworks for analysing e-commerce.
1.3 Various applications of E-commerce 1.4 Features of E-commerce Technology 1.5 Types of e-commerce 1.6 Impact of e-commerce 1.7 Summary 1.8 Self-Assessment Test 1.9 Suggested Readings 1.1 Introduction E-commerce is buying and selling goods and services over the Internet or doing business online. Commerce is part of e-business as specified in .
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M-commerce is the next revolutionary way of doing business after e-commerce, which is set to change the landscape of businesses. The term m-commerce came into existence in 1997 when it was first used by Kevin Duffey at the launch of the Global Mobile Commerce Forum organised in the UK, to mean "the delivery of electronic
E-COMMERCE SHIFTS INTO HIGHER GEAR E-commerce is big business and getting bigger every day. Growth estimates from eMarketer report that business-to-consumer (B2C) e-commerce sales worldwide will reach 1.5 trillion in 2014, increasing nearly 20% over 2013. But not all e-commerce categories are created equal. The most popular e-commerce .
