E-Business Quiz PDF

1.1 INTRODUCTION There are many ways of describing electronic business also commonly referred to as e-business or online/digital market. Table 1 below provides some terminologies used when discussing e-business and digital markets. Table 1: Types of e-Busines...

1.1 INTRODUCTION There are many ways of describing electronic business also commonly referred to as e-business or online/digital market. Table 1 below provides some terminologies used when discussing e-business and digital markets. Table 1: Types of e-Businesses Note that electronic funds transfer (EFT) and electronic data interchange (EDI) provides tools for transferring documents or financial data between organizations. The other terms include variations on whether only the Web, other Internet tools, or any other electronic means are used for business transactions, such as collaboration software, kiosk technologies, and so on. Another form of e-business that is increasingly becoming popular is m- commerce. M-commerce refers to electronic means of conducting business using mobile devices. For our purposes, we will use the term e-business, which is often recognized as the broader term that includes various electronic means of conducting business. There are other ways to categorize the various types of e-business. Some of the most common categorizations are as follows: Business-to-consumer (B2C): This is when interactions are taking place between a consumer and a business. For example, when you buy books on takealot.com or furniture from mrphome.com website, you are conducting a B2C e-commerce transaction. Other examples of B2C include Electronic banking (also known as cyberbanking) which includes various banking activities conducted from home or a business instead of at a physical bank; Online Job Market (eg. www.careers24.com, www.careerjunction.co.za); Travel Services. (e. g www.southafricatravel.com); Real Estate (e.g. www.Property24.com) where the customer can view/review properties, sort and organize properties according to preferences, and can preview the exterior and interior designs of the properties, shortening the search process. Business-to-business (B2B): This is when interactions are taking place between two businesses. For example, when Shoprite sends electronic requests for inventory to its suppliers, it is conducting a B2B e- commerce transaction. Another example or B2B is when small businesses are buying bulk products, for the purpose of reselling, from wholesale online stores such as Alibaba. Consumer-to-consumer (C2C): This is when interactions are taking place between two consumers. For example, when you buy goods from another individual on Gumtree, you are conducting a C2C e- commerce transaction. Another example is that of an “on-demand-digital service” platform that connects clients to cleaners (SweepSouth.com). Checkout AirBnB a great example of C2C in the real estate market. Government-to-constituent or Government-to-Citizen (G2C): This is when interactions are taking place between a government agency and a constituent. Constituents could be citizens, businesses, or even other agencies. For example, when you pay your utility bills (water, electricity, etc) online, you are having a G2C interaction with the government. A good example is the City of Cape Town’s e-services portal commonly known as City Connect (https://www.capetown.gov.za/City-Connect). This is most often referred to today as electronic government or e-government. There is a third way to categorize commercial electronic business, and it refers to the online versus the offline structure of the organization. Here there are three main categories used: Bricks and mortar: This category represents traditional organizations with physical locations. For example, large automobile manufacturers tend to have physical offices and operations. Bricks and clicks: This category represents traditional organizations with physical locations but that also operate an online business. There are many such companies today that have physical stores and online stores; for example, Pick n Pay has Pnp.co.za and Woolworth has Woolworths.co.za and so on. Pure-play (or click only): This category represents organizations with only an online business. For example, Takealot.com and Amazon.com started as online companies only, where you could not go to a physical store to conduct a transaction. Many pure-play companies, like Google, exist in the online world only, although they still have offices for people to work at. 1.2 e-BUSINESS MODELS The various types of e-business previously discussed refer to who participates in the e-business interaction and whether the organization uses offline, online, or both business channels. Another important way to classify e- businesses is with respect to their business model. What Is a Business Model? A business model represents the way the organization functions and creates value. In other words, it is how an organization makes money. A business model often identifies the market that a business is in, the products or services that it offers, and the strategies and major activities it uses to seek competitive advantages in that market. Importantly, a business model should identify an organisation’s key business processes and organizational capabilities that allow it to generate revenues and profits. B2C E-Business Models There are many different business models in the world of e-business, some more popular than others, and many that did not really exist before the increased use of the Internet for business. Table 2 shows a variety of B2C e- business models. The e-business models presented in Table 2 continue to evolve as individuals find new ways to use the Internet and mobile technologies to create new ways of generating revenue. For instance, the availability of location-based services on mobile devices (knowing where you are based on your cell phone’s location) has allowed marketing companies to offer targeted advertising and services that you may need at a specific moment based on where you are. Some of the business models would not exist without the Internet. A good example is infrastructure companies such as PayPal.com or Squareup.com or social media websites like Facebook Instagram. There are even some fairly unique business models in existence today, like the name-your-own-price model of Priceline.com. It is necessary for business models to evolve with today’s rapid changes in technology and the changes in the way individuals interact with one another. For example, as many students know, changes in your online profile on a social networking site result in changes in the types of advertisements you see when surfing the internet. This change in the social media business model has occurred in the last few years. However, while keeping up with technological and social changes is important, the most important factor for success is to start with a proper business model. Back in the early days of e-business, many entrepreneurs jumped on the bandwagon of e-business without proper business models. Not surprisingly, many of them failed. This is one reason behind what is today called the dot-com bust. During the period many individuals and companies lost money in their attempts to take advantage of e-business. Today, there are too many e-business successes to even attempt to summarize them. Some are very innovative, while others simply follow common business models.  Table 2: B2C e-Business Models 1.3 B2E e-BUSINESS MODELS B2C E-Business Enablers Statistics clearly show that B2C e-business continues to increase in value worldwide. What has made this growth possible? A combination of technological and social factors can help explain why B2C e-business has grown so much over the years. Technological Enablers: There are several technological requirements that must be met for consumers to successfully acquire goods or services online. First, there must be an easy-to-navigate website (or app). The graphical user interfaces of today’s browsers and the search tools available on websites are examples of technological improvements that have enabled e-business to grow. In addition, e-business requires that consumers have sufficient network bandwidth to access e-businesses’ websites. Think of how much time it takes sometimes to download images for goods you want to purchase. If it takes too long, you might end up going to a different site. The bandwidth required depends on the images and other features of the site, and the overall bandwidth is a function of the supplier’s (vendor's) network bandwidth (and server processing capability) and the consumer’s Internet access bandwidth. In recent years, the use of broadband, fibre, and 3G/4G networks for Internet access has significantly improved the overall bandwidth availability and therefore the online shopping experience of consumers. However, there are still many rural locations that lack reliable high-speed Internet service. A less visible but just as critical technological requirement is interoperability which refers to the ability of heterogeneous systems to communicate with one another. Interoperability is key to e-business success because, by definition, e- business allows individuals using a wide variety of platforms (PCs, Macs, laptops, tablets, smartphones, etc.) to access businesses that also use a wide variety of platforms (with different operating systems, databases, Web servers, etc.). Critical Mass: Beyond technological factors, one key social factor that has had a huge impact on the growth of e-business is the attainment of a critical mass of users. The impact of critical mass is best understood under the concept of network effects, which we define further below. In e-business, attaining critical mass means that there are sufficient buyers to sustain the business of suppliers and sufficient  suppliers to attract buyers to the Internet. Network effects or network economics can be used to discuss how value is created in a network. A business can get competitive advantages when it owns a resource that is rare or unique. This is considered value in scarcity. In networks, however, there is also something completely opposite, which is value in plenitude (large quantity). In a network (think of a group of people), the value of the network increases every time a new member is added to the network. Let us say for instance your friend has developed a new chatting app (similar to WhatsApp but better). If only two of you use the app, it makes one possible link. Eventually, you might find it limiting to only be able to chat with this one other person. Now if you add a third person who is also using the same app, you each have two potential people to send messages to (or the existence of three links in the network). The addition of the third person adds value to your network. Extend this concept to e-business, and you realize that the more suppliers there are on the Internet, the more interesting it is for you to shop online. For suppliers, the same is true: the more consumers there are shopping online, the more interesting it is to use the Internet to sell their goods or services. Today there are close to one billion hosts (servers) on the Internet and more than 30% of the world population has Internet access. We could say that the Internet and the Web have reached critical mass. B2C E-Business Impacts We've highlighted earlier how e-business has changed industries. For some, these changes have been extremely positive (lower costs), while for others, the changes may be perceived as very negative (loss of profits or even disappearance of some businesses). There are two specific terms used to refer to two impacts of e-business: channel compression and channel expansion. Channel Compression (Disintermediation): Channel compression is an impact on the downstream portion of the supply chain. The supply chain consists of several distributors and retailers upstream and downstream of the focal company/business. In the distribution channel, the distributors and retailers are called intermediaries. Channel compression refers to situations when the distribution chain is shortened by eliminating some or all of these intermediaries between the focal business (product producer) and the end consumer. For this reason, channel compression is also called disintermediation. This change in the distribution structure has led to some major restructuring in several industries, including the music, publishing, and travel industries. When organizations have to decide whether or not to eliminate members of their distribution channel, they are often faced with channel conflict, or when to eliminate distributors and when to work with them. For example, if the Dell (laptop & PC manufacturer) company decides to offer products through Dell retailers but also to sell directly online, how can it price products so that its resellers can make a profit but its consumers still feel they are getting the best prices when they buy directly online? Channel Expansion: While channel compression has resulted in fewer organizations involved in the supply chain for some industries, channel expansion offers the reverse impact. Channel expansion is the addition of intermediaries in an industry whose purpose is to aggregate and provide information or brokering functionalities. In other words, intermediaries facilitate bringing buyers and sellers together or bringing relevant information to buyers and sellers. Think of the role of Travelstart.co.za or Kayak.com. They do not offer their own flights but pulls information from different vendors (airlines) as well as other search engines (like Expedia.com or Priceline.com). These intermediaries can make money by receiving fees from vendors or by allowing advertisements on their sites. The larger the volume of users, the better they can sell advertisement placement (selling advertisements on their websites based on the number of viewers). An overall important effect of these intermediaries is to reduce search costs and the information asymmetries that existed before the Internet and e-business. Design for B2C E-Business There are many important design features that can make e-business websites more or less successful. For example, the security of the website is an important requirement for trusting the Web merchant and its privacy practices as a requirement for being willing to share information with the website. In fact, many researchers have identified trust as one key determinant of individuals’ intentions to buy from online merchants. Ease of use of the system in terms of navigating, checking out, and accessing information are important design features as well. The overall look of the website is also a factor in online buying decisions. Sites that are overloaded with information can be distracting for some users, while sites that have features and graphics that are too simplistic may look unprofessional. There are also non-technological features for website success, such as return policies, shipping policies, and communication tools. Research also suggests that websites that offer customer reviews see increased site traffic and overall conversion rate. The conversion rate is the rate at which consumers who are browsing the website end up buying from the website. Other features that are found to annoy customers on websites include pop-up ads, the need for extra software to view a site, dead links, confusing navigation, the need to log in to view content, slow-loading pages, and out-of-date content, to name a few. 1.4 B2B e-BUSINESS MODELS So far we have mostly discussed B2C e-business, mainly because you are more familiar with this type of e- business but also because many of the basic principles also apply to B2B e-business. However, there is a significant difference between B2C and B2B e-business beyond the type of players involved, and that is the size of the market involved. B2B e-business represents a significantly larger market than B2C. There are several other differences between B2B and B2C. Of course, B2B involves two or more organizations as opposed to individual consumers. In B2B, these organizations typically know their trading partners fairly well, and as a result, B2B is often relationship-based, except for marketplaces that we will describe later. B2B involves the sharing of electronic documents, funds, and/or information between organizations. There are many ways to implement this, which are summarized in Table 3. First, B2B e-business includes supply chain management (SCM). In fact, when organizations share knowledge electronically across the supply chain to facilitate inventory control, reduce time delays in billing, and improve customer handling, they are conducting B2B e-business. Two other models of B2B e-business need further explanation: electronic data interchange and e-marketplaces. Electronic data interchange (EDI) is the electronic exchange of information between two or more organizations using a standard format. The types of information exchanged are defined within the standards that are used and usually include business documents like bills, purchase orders, payment slips, invoices, and so on. EDI has been in existence for a very long time, allowing trading partners to lower transaction costs and improve profits through faster billing cycles, reduced errors, and improved customer responsiveness. Figure 1 shows a simplified sample set of EDI transactions. An important characteristic of EDI is that organizations must use standardized formats for the documents they are exchanging. In fact, every organization has its own internal systems to handle purchase orders, invoices, and other business documents; therefore, each organization stores and handles data in different formats. An EDI transaction starts with the conversion of the documents and data from the format used by the internal system of the organization to an EDI format. This is called the outbound transformation. The EDI documents are then sent to the partner organization, where the company’s systems must perform an inbound transformation, which involves the system converting the EDI documents into the format used by the internal systems of that organization. The most-used standardized formats for EDI are ANSI X.12 and EDIFACT. EDI used to be limited to one-to-one communications between two trading partners. Today, it has evolved into a multi-partner environment, allowing transmission of documents across a variety of information systems, even if they are incompatible in terms of hardware and software since EDI documents themselves have to be in a very strict format.  Table 3: B2B e-Business Models Finally, B2B can also be conducted in marketplaces, also known as exchanges. An exchange allows vendors or sellers to meet electronically. When a limited number of buyers or sellers are allowed to use a marketplace, we refer to this as a consortia marketplace or even a private market. When a large number of buyers and sellers exist, it is considered a neutral auction. Sometimes many buyers bid on a seller’s products (a seller-oriented or forward auction), or sometimes many sellers offer their products to a single buyer (a buyer-oriented or reverse auction). Over the years, many B2B marketplaces have come and gone, although some have succeeded. For example, Buyerzone.com allows small businesses to buy and sell products to one another. However, marketplaces are difficult to sustain because they need to have a sufficient number of buyers and sellers to ensure the growth of the marketplace.  Figure 1: Electronic Data Interchange Example 1.5 m-COMMERCE Today, many individuals use sophisticated Internet-enabled mobile technologies, such as cellular phones, smartphones, and tablets in their daily work and personal lives. This has enabled another form of e-business known as mobile business (m-business), which is when individuals conduct commercial transactions and interactions using handheld mobile devices and wireless communication networks. With mobile devices, users have access to critical information anywhere and anytime, which allows them to seize business opportunities (such as enjoying the sale of the day on Woot! [http://www.woot.com]). While mobile businesses have become well established, some elements are still emerging in importance. For example, as discussed earlier, location-based services (LBS) make it possible to provide targeted advertisements to users, such as discounts based on their current location. Therefore, as the user walks in front of a certain restaurant at mealtime, a coupon appears on the user’s mobile device. For the most part of Africa, people are also using mobile phones (and mobile money) as a medium for transactions via initiatives such as m-Pesa. Below is a video explaining the broad usage and appeal of m-Pesa as a medium of transaction in East African countries. In the context of m-commerce, mobile money has provided an alternative to traditional payment system that have often relied on bank issued cards (e.g credit card). The incorporation of mobile money in the e-commerce ecosystem has to a great extent increased its accessibility to low income people (who could have otherwise not qualified for a bank issued card). Click here to watch the vid on m-Pesa 1.6 G2C or e-GOVERNMENT Another category of e-business we'll discuss is G2C (Government-to-Constituent) or e-government, which was introduced at the beginning of the chapter. E-government involves using information technologies to enable and improve the efficiency with which government services are provided to citizens, employees, businesses, and agencies. It can occur at various levels of government, such as municipalities, counties, districts, states, provinces, or countries. It has become popular not only for obtaining information from government agencies but also for conducting transactions such as paying taxes, renewing licenses, or downloading government forms. One example of G2C is the City of Cape Town's 'City Connec't e-services website which offers online services that residents can use to access account information, submit applications and transact with the City of Cape Town. The current list of services on offer through City of Cape Town's e-services platform includes: Municipal accounts for viewing municipal account invoices, paying accounts and capturing meter readings e-Billing for receiving account invoices electronically Careers for applying for vacancies at the City of Cape Town Service Requests for reporting service or infrastructure problems Pet Registration to register your pet on the City of Cape Town's database Motor Vehicle Licence Renewal to renew your vehicle licence. Increasingly governments are extending their e-government initiatives to include platforms for citizen feedback via blogs, Twitter, or social networking sites. The future of e-government is also likely to include some form of Internet voting, where citizens will be able to cast their votes electronically via the Internet. In fact, some countries and states have already started to allow citizens to vote via the Internet. 1.7 REFERENCES This content has been adapted from Chapter 13 of Information Systems for Business: An Experiential Approach by France Bélanger, Craig Van Slyke, Robert E. Crossler