Chapter 1: Basics and Definitions PDF

CHAPTER 1 BASICS AND DEFINITIONS  LEARNING OBJECTIVES In this chapter you will learn, how the term “E-Commerce” has been defined, how the Internet has enabled this type of business, what are the advantages as well as the disadvantages of digital business, which technical...

CHAPTER 1 BASICS AND DEFINITIONS  LEARNING OBJECTIVES In this chapter you will learn, how the term “E-Commerce” has been defined, how the Internet has enabled this type of business, what are the advantages as well as the disadvantages of digital business, which technical and economical challenges have to be mastered when doing business electronically. typical categories of making business digitally 1.1. THE TERM E COMMERCE THE TERM “E-COMMERCE” THE WIKIPEDIA CONTENT Of course, we looked up the term “E-Commerce” and other related terms in the popular encyclopaedia Wikipedia. The outcome of our research as of October 25, 2015, is documented in the subsequent lines. E-COMMERCE “Electronic commerce, commonly written as E-Commerce, is the trading in products or services using computer networks, such as the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction’s life cycle, although it may also use other technologies such as E-Mail.  E-COMMERCE BUSINESSES MAY EMPLOY SOME OR ALL OF THE FOLLOWING: Online shopping websites for retail sales direct to consumers, Providing or participating in online marketplaces, which process third-party business- to-consumer or consumer-to-consumer sales, Business-to-business buying and selling, Gathering and using demographic data through Web contacts and social media, Business-to-business electronic data interchange, Marketing to prospective and established customers by E-Mail or fax (for example, with newsletters), Engaging in pretail for launching new products and services. PRETAIL Pretail (also referred to as pre-retail, or pre- commerce) is a sub-category of E-Commerce and online retail for introducing new products, services, and brands to market by pre- launching online, sometimes as reservations in limited quantity before release, realization, or commercial availability. Pretail includes pre-sale commerce, pre-order retailers, incubation marketplaces, and crowdfunding communities.” (Wikipedia 2015) E-Business “Electronic business, or E-Business, is the application of information and communication technologies (ICT) in support of all the activities of business. Commerce constitutes the exchange of products and services between businesses, groups and individuals and can be seen as one of the essential activities of any business. Electronic commerce focuses on the use of ICT to enable the external activities and relationships of the business with individuals, groups and other businesses or E-Business refers to business with help of Internet i.e. doing business with the help of Internet network. The term was coined by IBM’s marketing and Internet team in 1996.” (Wikipedia 2015) Digital economy Digital economy refers to an economy that is (substantially) based on computing technologies. The digital economy is also sometimes called the Internet Economy, the New Economy, or Web Economy. 1.1.2 THE PRELIMINARY DEFINITION HOWEVER, THIS DEFINITION RISES SOME QUESTIONS: What does “comprehensive” mean? Does it mean the total process? Is everything digitalized? What about transportation and delivery of real goods? Obviously here are some limits for digitalization, though sooner or later 3-D-printing may change a lot… Why should businesses be run electronically? Is enablement a value in itself? Or do we digitalize businesses because we can reduce costs, accelerate processes and increase profit? 11 1.1.3 THE FINAL DEFINITION TO COME TO A FINAL DEFINITION OF E- COMMERCE LET US START WITH SOME CONSTITUENT ATTRIBUTES OF E-COMMERCE: Digitalization of business: о This means a comprehensive usage of ICT (Information & Communication Technology) not only within a business organization (as it has been done during the last decades by traditional (internal) information systems), but now through a more and more seamless linking and cooperation of information and communication systems of all involved business partners. TO COME TO A FINAL DEFINITION OF E- COMMERCE LET US START WITH SOME CONSTITUENT ATTRIBUTES OF E-COMMERCE: Focus on business processes: о We support business processes, of course, as we did it for the last decades, but now the total processes, running through several organizations and crossing their boundaries, are supported. о We increase the speed of business processes. Additional potentials can be realized with the coupling of processes between different organizations. о We increase the economic efficiency of business processes, again through coupling of business processes at the boundaries of the business partners. TO COME TO A FINAL DEFINITION OF E- COMMERCE LET US START WITH SOME CONSTITUENT ATTRIBUTES OF E-COMMERCE: Usage of a global network: о Internet plays a dominant role and has become a universal technical infrastructure. Thus it builds a global virtual place where every organization and person being interested in making business can come together without geographical and time restrictions. о Global networks allow the exchange of information without any restrictions in time and independently from any geographical distances. TO COME TO A FINAL DEFINITION OF E- COMMERCE LET US START WITH SOME CONSTITUENT ATTRIBUTES OF E-COMMERCE: New potentials and opportunities for cooperation: о More or less independent persons and/or organizations work together. о Business actors can come together whenever they want it or whenever there is a need. These considerations lead to our final definition (Turban et al 2015, p. 7): E-Commerce is the exchange of goods and services between (usually) independent organizations and/or persons supported by a comprehensive usage of powerful ICT systems and a globally standardized network infrastructure. 17 1.1.4 E-COMMERCE WITH THE “5-C-MODEL” SELECTING VISUAL AIDS Enhancing your presentation 5C MODEL Another approach to define and explain, what E-Commerce is, comes from the so-called 5-C-model (Zwass 2014). It defines E- Commerce by five activity domains whose denominations start with the letter “C”: COMMERCE In the electronic marketplaces there is a matching of customers and suppliers, an establishing of the transaction terms, and the facilitation of exchange transactions. With the broad move to the Web-enabled enterprise systems with relatively uniform capabilities as compared to the legacy systems, a universal supply-chain linkage has been created. COLLABORATION The Web is a vast nexus, or network, of relationships among firms and individuals. More or less formal collaborations are created or emerge on the Web to bring together individuals engaged in knowledge work in a manner that limits the constraints of space, time, national boundaries, and organizational affiliation. COMMUNICATION As an interactive medium, the Web has given rise to a multiplicity of media products. The rapidly growing M-Commerce (see below) enables connectivity in context, with location- sensitive products and advertising. In the communications domain, the Web also serves as a distribution channel for digital products. CONNECTION Common software development platforms, many of them in the open-source domain, enable a wide spectrum of firms to avail themselves of the benefits of the already developed software, which is, moreover, compatible with that of their trading and collaborating partners. The Internet, as a network of networks that is easy to join and out of which it is relatively easy to carve out virtual private networks, is the universal telecommunications network, now widely expanding in the mobile domain. COMPUTATION Internet infrastructure enables large-scale sharing of computational and storage resources, thus leading to the implementation of the decades- old idea of utility computing. 1.1.5. ADDITIONAL TERMS M-Commerce (Mobile Commerce) M-Commerce (Mohapatra 2013, pp. 81–82) is commonly understood as the usage of mobile devices for business purposes, especially mobile phones and PDA’s (Personal Digital Assistants). Main features of M-Commerce are: Location independence of (mobile) customers, High availability of services through well established mobile phone networks, Increasing computing power of mobile devices, Interactivity of mobile devices (voice and data transfer), Security (when using mobile phone networks), Localization of customers through cell structure, Accessibility of customers, Potential of personalized services/offers. E-Procurement (Electronic Procurement) In general, E-Procurement (Chakravarty 2014, p. 115) is the automation of an organization’s procurement processes using Web-based applications. It enables widely dispersed customers and suppliers to interact and execute purchase transactions. Each step in the procurement process is captured electronically, and all transaction data is routed automatically, reducing time and cost of procurement. Properly deployed, E- Procurement can deliver tremendous value to enterprises in different ways. E-Procurement (Electronic Procurement) Every sales process at the same time is a procurement process or a buying process – from the point of view of the (potential) customer. Sales processes are driven by the supplier. Procurement processes are driven by the customer. However the exchange of goods or services has to be managed. Thus we will consider E-Procurement as a specific view onto E-Commerce. E-Government (Electronic Government) “E-Government (short for electronic government, also known as e-gov, Internet government, digital government, online government, or connected government) consists of the digital interactions between citizens and their government (C2G), between governments and government agencies (G2G), between government and citizens (G2C), between government and employees (G2E), and between government and businesses/commerce (G2B). E-Administration (Electronic Administration) “E-administration refers to those mechanisms which convert the paper processes in a traditional office into electronic processes, with the goal to create a paperless office. Its objective is to get total transparency and accountability within any organization.” (Wikipedia 2015) E-Democracy (Electronic Democracy) “E-Democracy incorporates 21st- century information and communications technology to promote democracy. That means a form of government in which all adult citizens are presumed to be eligible to participate equally in the proposal, development, and creation of laws.” (Wikipedia 2015) 1.1.6 ROLE OF THE INTERNET ROLE OF THE INTERNET IN E COMMERCE The emergence of E-Commerce also significantly lowered barriers to entry in the selling of many types of goods; many small home-based proprietors are able to use the Internet to sell goods. Established suppliers had to close their shops and to change their business model to an E-Commerce model to stay profitable and in the business (e.g. travel agencies). Often, small suppliers use online auction sites such as eBay or sell via large corporate websites, to ensure that they are seen and visited by potential customers. 35 1.2. BUSINESS MODELS RELATED TO E-COMMERCE 1.2.1 INTERNET BASED BUSINESS  ACCESS PROVIDER The access provider ensures (technical) access to the Internet. We should have in mind, that somebody has to pay the access provider so that we can get access to the Internet. Who pays? We or somebody else? In many (most?) areas of the world it is a totally privatized business, though sometimes in the political arena the access to the Internet is declared as a modern human right. Obviously there is a similarity to telephone network(s). However, it (normally) works in this privatized form.  SEARCH ENGINE Search engines are the most used software in the Internet. They are the starting step for many Internet- based activities, not only but, of course, also if somebody is looking for a business opportunity. Again we must ask: Who pays? The one, who wants to find something or someone? Or the one, who wants to be found? A traditional and similar business model is given by the so-called “yellow pages”, where firms are listed and grouped according to branches and locations.  ONLINE SHOPS An online shop is a website, where you can buy products or services, e.g. books or office supplies. Traditional and similar business models are direct mail selling (no shop facility, offering of goods via a printed catalogue, ordering by letters or telephone calls) and factory outlets (producer has own shop facility, does not sell his products via merchants).  CONTENT PROVIDER Content providers offer content, a completely digital good, e.g. information, news, documents, music. A specific variant of a content provider is the information broker, who is a trader of information. Again the following question has to be put: Who pays? The one, who wants to have access to an information? The one, who wants to provide an information? Traditional business models in this area are newspaper publishers, magazine publishers, radio and television broadcasting services or publishing companies.  PORTAL A portal is a website, which provides a set of services to the user so that he/she sometimes thinks that he/she is using a single but very complex software system. Portals are often used in big organizations to control the access of employees to the different ICT systems; each employee gets a specific menu of “his”/“her” applications. Also content providers use portals, though in the narrow sense that they only deliver content and no application systems.  ONLINE MARKETPLACE / ELECTRONIC MALL An online marketplace is a website, where suppliers and potential customers can come together like on a real marketplace in a small town. An E-Mall is a set of online shops, which can be found on one website. Examples of traditional and similar business models are shopping centers, omnibus orders (One person is customer of the shop and buys for a group of people), marketplaces and buying associations.  VIRTUAL COMMUNITY A virtual community is a platform for communication and exchange of experience. It is similar to a virtual club or association. We always should ask: Who is the owner? Who is the person or organization behind the platform? Who pays? The members or the visitors? The community operator?  INFORMATION BROKER An information broker collects, aggregates and provides information, e.g. information with respect to products, prices, availabilities or market data, economical data, technical information. Here we have to ask: Can we trust the information? Is it neutral or just a product placement? Who pays? The visitor? Some providers? Financed through advertisements? Traditional and similar business models are magazines running tests of computers, cars, consumer goods, restaurants.  TRANSACTION BROKER A transaction broker is a person or an organization to execute sales transactions. Sometimes those brokers are used to hide the real customer to the supplier. A transaction broker is an agent who is an expert in a specific area and can take over parts of a business. A similar traditional business model is the free salesman.  ONLINE SERVICE PROVIDER An online service provider provides services, which can be run electronically, e.g. application software services or ICT infrastructure services like storage or backup services. If this organization uses so-called cloud technologies it is called a cloud service provider (ten Hompel et al 2015; Marks & Lozano 2010). 1.2.2 ADVANTAGE AND DISADVANTAGE 49 50 1.2.3 BUSINESS NET TYPE  BUSINESS WEB AGORA Objective: To run a marketplace for goods and values. Attributes: Market information available, negotiation processes established, dynamic pricing through negotiations between market participants. Role of the customer: Market participant. Benefits: Negotiable products and services. Examples: eBay, auctions.yahoo.  BUSINESS WEB AGGREGATOR Objective: To run a digital super market. Attributes: Presentation of a great variety of products, fixed prices and no negotiation between supplier and customer, simple fulfilment from the customer’s point of view. Role of the customer: Customer. Benefits: Convenient selection and fulfilment from the customer’s point of view. Examples: etrade, amazon.  BUSINESS WEB INTEGRATOR Objective: To establish an optimized value creation chain. Attributes: Systematic supplier selection, process optimization for the total value chain, product integration along the value chain. Role of the customer: Value driver. Benefits: Creation and delivery of customer- specific products. Examples: Cisco, Dell.  BUSINESS WEB ALLIANCE Objective: To establish a self-organizing value creation space. Attributes: Innovation in products and processes, trust building between different actors, abstinence of hierarchical supervision. Role of the customer: Contributor. Benefits: Creative and collaborative solutions. Examples: Linux, music.download.  BUSINESS WEB DISTRIBUTOR Objective: Exchange of information, goods and services. Attributes: Net optimization, unlimited usage, logistics processes. Role of the customer: Recipient. Benefits: In-time delivery. Examples: UPS, AT&T, Telekom. 1.2.4 WEB WEB Web 2.0 (Chen & Vargo 2014) describes World Wide Web sites that emphasize user- generated content, usability, and interoperability. Although Web 2.0 suggests a new version of the World Wide Web, it does not refer to an update of ana technical specification, but rather to cumulative changes in the way Web pages are made and used. CHARACTERISTIC APPLICATION TYPES OF WEB 2.0 ARE BLOGS A blog (a truncation of the expression weblog) is a discussion or informational site published on the World Wide Web and consisting of discrete entries (“posts”) typically displayed in reverse chronological order (the most recent post appears first). We normally see “multi-author blogs” (MABs) with posts written by large numbers of authors and professionally edited. SOCIAL NETWORKING SERVICES A social networking service (also social networking site or SNS) is a platform to build social networks or social relations among people who share similar interests, activities, backgrounds or real-life connections. ONLINE COMMUNITY An online community is a virtual community whose members interact with each other primarily via the Internet. Those who wish to be a part of an online community usually have to become a member via a specific site and necessarily need an Internet connection. An online community can act as an information system where members can post, comment on discussions, give advice or collaborate. FORUMS / BULLETIN BOARDS An Internet forum, or message board, is an online discussion site where people can hold conversations in the form of posted messages. They differ from chat rooms in that messages are often longer than one line of text, and are at least temporarily archived. Also, depending on the access level of a user or the forum set-up, a posted message might need to be approved by a moderator before it becomes visible. CONTENT AGGREGATOR An aggregator is a website or computer software that aggregates a specific type of information from multiple online sources. 1.3. TECHNICAL AND ECONOMIC CHALLENGES  TECHNICAL CHALLENGES ICT systems have to work properly not only within the boundaries of the own organization but also in combination with ICT systems of other organizations. Interfaces between the involved systems have to be defined and documented properly. But: How heterogeneous are the involved ICT systems allowed to be? Is our IT infrastructure fit for E-Commerce? How do we have to change or extend our application systems for E-Commerce?  TECHNICAL CHALLENGES In the digital business ICT systems are mission critical assets. How do we have to protect an ICT system so that it is not possible to destroy it, damage it or manipulate it? Are our ICT systems secure? Are unauthorized persons able to get access to our systems? Are payment procedures secure enough? Can we protect the personal data of involved people, especially customer data?  ECONOMIC CHALLENGES E-Commerce is not only a matter of technology. It is primarily, because it is commerce, a matter of management and organization. The following questions have to be answered: Are our business processes standardized enough – at least harmonized among the participants? Who is allowed to participate? Are all participants trustworthy? Who makes the decision which person or organization is allowed to participate? How much E-Commerce do we need to keep competitive? How do we have to change our business model?  ECONOMIC CHALLENGES What is going to happen after opening a new (electronic) sales channel? Will traditional sales channels suffer from it? How can we measure the success of our E- Commerce activities? Will costs be compensated through revenues? Will we make profit?  ECONOMIC CHALLENGES How do we have to develop our relationship with customers, suppliers and other business partners to be able to realize the advantages of E-Commerce for our organization and avoid the disadvantages? How do we have to develop and change our business relationships? How do we have to redesign our business processes? How do the roles of our employees change? Are our employees qualified for these new roles? REFERENCE