Week 1: Introduction To E-Business PDF

E-BUSINESS PROF. MAMATA JENAMANI DEPARTMENT OF INDUSTRIAL AND SYSTEMS ENGINEERING IIT KHARAGPUR 1 COURSE OVERVIEW  Objective The Internet has changed the way companies carry out their businesses. The pr...

E-BUSINESS PROF. MAMATA JENAMANI DEPARTMENT OF INDUSTRIAL AND SYSTEMS ENGINEERING IIT KHARAGPUR 1 COURSE OVERVIEW  Objective The Internet has changed the way companies carry out their businesses. The primary objective of this course is to introduce concepts, tools and approaches to electronic business to the post- graduate and the undergraduate students. Further, the subject will help the students to develop skills to manage businesses in the digital world.  Contents Introduction to E-Business Making Functional Areas E-Business Enabled Technologies for E-Business Decision Support in E-Business Contents: Making Functional Areas E-Business Enabled : Introduction to E-Business; Making Functional Areas E-Business Enabled; Technologies for E- Week 1 Business; Decision Support in E-Business Making Functional Areas E-Business Enabled : Value chain and supply chain, inter and intra Week 2 organizational business processes, ERP Week 3 Making Functional Areas E-Business Enabled : E-Procurement Making Functional Areas E-Business Enabled : E-marketing, E-Selling, E-Supply Chain Week 4 Management Contents: Technologies for E-Business Week 5 Technologies for E-Business: Internet and Web based system Week 6 Technologies for E-Business: Security and payment systems Technologies for E-Business: Supply chain integration technologies (EDI, RFID, Sensors, IoT, Week 7 GPS, GIS) Technologies for E-Business: Supply chain integration technologies Week 8 (Web services and cloud)  Contents: Decision Support in E-Business Week 9 Decision Support in E-Business: Web analytics Week 10 Decision Support in E-Business: Customer behavior modeling Week 11 Decision Support in E-Business: Auctions Week 12 Decision Support in E-Business: Recommender systems Week 1: Lecture 1 INTRODUCTION Los Angeles Times 3rd Annual Investment Strategies Conference, May 22, 1999 “… … First of all, let me start with a statement that much as we talk about Internet companies today, in five years' time there won't be any Internet companies. All companies will be Internet companies or they will be dead. … …” Dr Andy Grove Intel Chairman  What is Business (Oxford English Dictionary) 1. a person’s regular occupation or trade. 2. work to be done or matters to be attended to. 3. a person’s concern. 4. commercial activity. 5. a commercial organization. 6. (informal) a difficult or problematic matter. 7. (the business) (informal) an excellent person or thing. 8. actions other than dialogue in a play.  What is Business Business is the social science of managing people to organize and maintain collective productivity toward accomplishing particular creative and productive goals, usually to generate revenue. (http://en.wikipedia.org/wiki/Business) A business (also known as an enterprise, a company, or a firm) is an organizational entity involved in the provision of goods and services to consumers. Every business requires some form of investment and enough customers to whom its output can be sold on a consistent basis in order to make a profit. Businesses can be privately owned, not-for-profit, or state-owned. (http://www.businessdictionary.com/definition/business.html)  What is Business A business is generally an organizational unit that has (that should have) a defined strategy and a manager with sales and profit responsibility. David A. Aaker, Damien McLoughlin, Strategic Market Management: Global Perspectives  What is the purpose of a business To generate revenue By delivering value to the customer And satisfying them  Customer Delivered Value (Kotler) Customer delivered value is the difference between total customer value and total customer cost. Total customer value is the bundle of benefits customers expect from a given product or service. Total customer cost is the bundle of costs the customers expect to incur in evaluating, obtaining, using, and disposing of the product or service.  Customer Satisfaction Satisfaction is a person’s feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his/her expectation Satisfied customers are loyal customers The key to generating high customer loyalty is to deliver high customer value. A company must develop a competitively superior value proposition and superior value-delivery system.  Value chain and Value Delivery Network (Supply Chain) Firm Infrastructure Human Resource Development Support Activities Technology Development Procurement Primary Business Inbound Outbound Marketing Service Processes Operations Logistics Logistics and Sales Order DuPont Milliken Levi’s Sears Customer (Fibers) (Fabric) (Apparel) (Retail) Delivery Procurement Cycle Manufacturing Cycle Replenishment Cycle Customer Order Cycle  The nature of high performance business Customers, employees, suppliers, distributors, stockholders, financial Set strategies to institutions, government … satisfy key stakeholders … Stakeholders Work flows linking Processes interdepartmental by improving critical activities: business processes … Ex. Integrating sales, shipping, installation, and aligning Resources Organization maintenance, support resources and activities organization Labor, material machines, Structures, policies, information, energy … corporate cultures …  What is commerce (Oxford English Dictionary) The activity of buying and selling, especially on a large scale Business Vs. Commerce All businesses involve some commercial activity. Commerce is a subset of business The evolution of the magic term ‘e’ 1990-onwards: E-Commerce and E-Business Systems ERP, Web based systems, Web services, cloud computing, Mobile Computing, RFID, GPS-GIS, Internet of things, Business Analytics, Big data 1980-1990: Strategic and end user support systems End user computing systems, Expert systems, Strategic Information system for competitive advantage 1970-1980: Decision Support Decision Support Systems: Interactive ad hoc support for managerial Decision making 1960-1970: Management Reporting Management Information Systems: Management reports of pre-specified information to support decision making 1950-1960: Data Processing Electronic Data Processing Systems: Transaction Processing, Record Keeping, and Traditional Accounting Practices  ICT for managing value chain: - A historical perspective 1990-onwards: 1980-1990: E-Commerce and 1970-1980: Strategic E-Business Decision and end Systems 1960-1970: Support user Management Systems: support 1950-1960: Information systems Transaction Systems ERP + New enabling processing technologies for supply systems chain integration and inter operability  E-Commerce Buying and selling of goods and services through digital communication network Use of the Internet and the Web May includes electronic payments systems E-Business (coined by Lou Gerstner, CEO of IBM) The term "e-business" was A superset of e-commerce activity  Not limited to buying and selling Includes other business activities such as  Servicing the customer  Collaborating with the business partners or other stakeholder  Supporting internal transactions In general conducting all business activities online.  Defining E-Commerce & E-Business Electronic commerce or e-commerce consists of the buying, selling, marketing, and servicing of products or services over computer networks. The information technology industry might see it as an electronic business application aimed at commercial transactions. Electronic Business, or "e-business", may be defined broadly as any business process that relies on an automated information system. Today, this is mostly done with Web-based technologies. E-business is more than just e-commerce. It involves business processes spanning the entire value chain: – electronic purchasing and supply chain management, – processing orders electronically, – handling customer service, – cooperating with business partners.  Books Management Information Systems: Managing the Digital Firm, Laudon, K.C., and Laudon, J.P., Pearson Scaling for E-Business: Technologies. Models, Performance, and Capacity Planning, Menasce & Almeida, PHI eBusiness & eCommerce – Managing the Digital Value Chain, Meier, Andreas, and Stormer, Henrik, Springer Some reference books, Internet Resources, and Research Papers Week 1: Lecture 2 TYPES OF E-BUSINESS TRANSACTIONS Types of e-Business transactions To Customer/ Business Government From Consumer Customer/ C2C C2B C2G Consumer Business B2C B2B B2G Government G2C G2B G2G  Example: C2C : B2C : – www.ebay.com – Dell.com – Hosted by intermediary – Hosted by intermediary/by – Payment and security the business issues B2B – Metaljunction.com C2B : – Hosted by intermediary/by – Customer reviews the business – Amazon.com – Automation of business – Hosted by processes intermediary/by the business  C2C: The case of e-Bay  B2C: The case of Dell  C2B: The case of Amazon B2B: The case of Metaljunction  Examples: C2G: paying taxes, and applying for benefits G2C: Answering public queries, Asking for suggestion from citizens G2B: Registration, renewal of licenses B2G : Selling product to government buyers G2G : e-payment between government organizations  Integrating Brick and Mortar Business with e- B2B Investors/ Business B2G Government Organizational Website B2B B2B E-procurement Supply chain management Customer Relationship Management B2C B2C E-marketing E-selling and distribution Advantages of Integrating Brick and Mortar Business with e-Business Operations Better availability of service Cost reduction in information processing Better timeliness of service Better access to customer market Initial cost of operations less expensive Operating costs of operations less expensive Better purchasing prices from suppliers Improved product development Improved scheduling Better supplier quality Week 1: Lecture 3 BUSINESS MODELS ON THE WEB  Developed and used by Gartner group Represents the maturity, adoption and social application of specific technologies. https://en.wikipedia.org/wiki/Hype_cycle Dot Com Boom and Bust http://www.kampasresearch.com/Bubbles.html  What is a business model A business model articulates the logic and provides data and other evidence that demonstrates how a business creates and delivers value to customers. It also outlines the architecture of revenues, costs, and profits associated with the business enterprise delivering that value. Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning, 43(2), pp.172-194.  Select technologies and features to be embedded in the product/service Determine benefit to the Design mechanisms to customer from deliver value consuming/using the product/service Identify market Design mechanisms to segments to be capture value targeted Confirm available revenue streams Create value for Customers, Entice payments, and Convert Payments to Profits 43  Business Models on the Web – Brokerage – Advertising – Infomediary – Merchant – Manufacturer (Direct) – Affiliate – Community – Subscription – Utility http://digitalenterprise.org/models/models.html  Brokerage Model Brokers are market-makers who bring buyers and sellers together and facilitate transactions. Exists in Business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. Brokerage models include: Marketplace Exchange -- Orbitz, ChemConnect Buy/Sell Fulfillment -- CarsDirect, Respond.com] Demand Collection System --Priceline.com Auction Broker -- eBay Transaction Broker -- PayPal, Escrow.com Distributor – Catalogue services Search Agent – Price bots and shop bots Virtual Marketplace -- Amazon.com] The eBay Model The PayPal model  Advertising Model The web advertising model is an extension of the traditional media broadcast model. web site, provides content and services mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized. Examples: Portal -- Yahoo! Classifieds -- Monster.com, Craigslist, Match.com Query-based Paid Placement – Google Google’s advertisement model  Infomediary Model Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market. Target marketing campaigns. Comparative Purchasing Advertising Networks -- DoubleClick Audience Measurement Services -- Nielsen/Netratings Week 1: Lecture 4 BUSINESS MODELS ON THE WEB  Merchant Model Wholesalers and retailers of goods and services on the Web Sales may be made based on list prices or through auction. Virtual Merchant -- Amazon.com] Catalog Merchant -- Lands' End Click and Mortar -- Barnes & Noble Bit Vendor -- Apple iTunes Music Store  Manufacturer (Direct) Model Reaching the buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. Ex.: Dell Computer  Affiliate Model The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model -- if an affiliate does not generate sales, it represents no cost to the merchant. Variations include, banner exchange, pay-per-click, and revenue sharing programs. Barnes & Noble, Amazon.com with DoubleClick  Community Model Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. Example: Open Source -- software developed voluntarily by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. [Red Hat] Public Broadcasting -- user contributor model used by not-for-profit radio and television broadcasting extended to the web. The model is based on the creation of a community of users who support the site through voluntary donations. [The Classical Station ] Social Networking Services -- sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby etc.). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. [LinkedIn]  Subscription Model Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to a service. Example: Content Services -- provide text, audio, or video content to users who subscribe for a fee to gain access to the service. [Listen.com, Netflix] Person-to-Person Networking Services -- are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. [Classmates] Trust Services -- come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. [Truste] Internet Services Providers -- offer network connectivity and related services on a monthly subscription. [America Online]  Utility Model The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Metered Usage -- measures and bills users based on actual usage of a service. Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model. Metered Subscriptions -- allows subscribers to purchase access to content in metered portions (e.g., numbers of pages viewed). [Slashdot]  Instruction for developing the case Background and history of the case company Focus of the case (which business functionality you like to focus on) – Procurement, selling, marketing, HR, operations, customer relationship management, supplier management, supply chain management Nature of the underlying information system Business process reengineering due to adoption of E-Business practices Perceived benefits (revenue models etc.) Failure or success stories Your view and analysis Minimum 20 References (research papers, company website, authentic web resources) Maximum 10 PPT, audio, video inclusion if available Week 1: Lecture 5 INNOVATIVE E-BUSINESS MODELS FOR BRICK AND MORTAR FIRMS E-Procurement at Tata Steel  The Organization Tata Steel contributes over 13% of the total steel production in India Total turnover in fiscal year 2002-2003 : 19.6 billion USD Company’s profit in the same year was 2.2 billion USD. Mamata Jenamani, Department of IE&M Tata Steel’s journey to e-Procurement 1999-2000  Auto Bill Payment through IBM  Auto-indenting for fast and medium moving items  Electronic routing and approval  Decision Support System for Stores 2000-2001  Beginning of ERP(SAP) implementation  Strategic analysis of e-procurement solution options  Parallel development of e-Procurement solutions  Lotus Notes for e-Mail communication with suppliers  Supply Chain, MRO home page launched in the intranet Mamata Jenamani, Department of IE&M Tata Steel’s journey to e-Procurement 2001-2002 Implementation of SAP-MM module (i.e. stabilization completed) Implementation of e- Procurement in MRO(P) Linkage of e-Procurement with SAP Reverse Auction Import orders to TLL thru e route Use of intranet for receiving customer complaints 2002-2003 On line “ Code of Conduct” through e-Procurement site Supplier Satisfaction Survey through e-Procurement site Online bidding for price discovery Adoption of e-Procurement solution (s) by the suppliers 3000 2500 2500 2350 2350 2450 2322 2322 No of Vendors 2000 1383 1500 1383 1000 544 575 665 450 454 515 500 426 0 Jan' 02 M ay' 02 Jun' 02 July' 02 Aug' 02 Sept ' 02 Oct '02 Nov '02 Dec'02 Jan' 03 M onth ePartners Total Vendors using site Different e-Procurement solutions Metaljunction.com – an e-market for steel industry sponsored by a consortium of SAIL and Tata Steel An internal e-Bidding solution E-negotiation solution Online Stock Information System for VMI suppliers  Partner Bank Sellers Information about buyers The Internet Leased line/Dialup Connection Dedicated Metaljunction.com Connection Buyers The Internet Fax/Telephone TATA SAIL STEEL Information Flow Inventory and Finance Flow Credit Flow Mamata Jenamani, Department of IE&M  Purchase Requirement (PR) On SAP Purchase Department Request for Quotation from PR Suppliers prepare Quotations On e-Procurement Suppliers System Opening of Quotations Transfer Quotations to SAP Tabulation by SAP Order Placement/ Delivery On SAP Goods Receipt Notes Payment Information Mamata Jenamani, Department of IE&M Portfolio for e-Procurement solution Reverse Auction Partnership with High suppliers E-negotiation Buy Volume Business Metaljunction.com Process (When there is a need for Low Outsourcing Scanning the entire market) Low High Critical to cost or quality Benefits from the e-Procurement Solutions Mamata Jenamani, Department of IE&M Actual Reduction in Order lead time Average Order Lead Time 100 80 60 40 20 0 97- 98- 99- 00- 01- 02- 03- 98 99 00 01 02 03 04 Mamata Jenamani, Department of IE&M  Savings in sourcing Strategic Sourcing Saving (Rs Crore) 400 350 300 250 200 150 100 50 0 1999-00 2000-01 2001-02 2002-03 2003-04 Actual Target Cumulative Inventory reduction in last three years Inventory (Rs. Crore) 150 100 50 0 2002-03 2003-04 2004-05 Actual Target ITC’s eChoupal Initiative  The Beginning This initiative was implemented by ITC Limited’s International Business Division (IBD) under the leadership of Chief Executive S. Sivakumar. It began with the aim of deploying technology to re-engineer procurement of soybeans and its derivatives such that it serves as a highly profitable distribution and marketing channel. Management Principles adopted i. Focusing on Re-engineering, Not Reconstructing ii. Addressing the Whole, Not Just a Part Mamata Jenamani, Department of IE&M  The eChoupal model ITC supplied a computer kit to each village with the following components: – A PC with a Windows/Intel platform, multimedia kit, and connectivity interface – Connection lines, either telephone (with bit rate between 28.8 and 36 kbps) or, more commonly, VSAT – A power supply consisting of UPS and solar-powered battery backup – A dot-matrix printer The total setup cost to ITC was Rs. 170,000 ($3,762) per choupal. Another Rs. 100,000 ($2,213) was spent on people, travel, communication, software, and training. Farmers were able to access the World Wide Web through a site dedicated specifically to them-www.soyachoupal.com The company believed it would be able to recover the cost and make a profit within three years of the initial eChoupal rollout.  www.soyachoupal.com This website was updated by the ITC Bhopal office. The data uplink (that provided the source information for the site), however, took place in Bangalore, home of ITC Infotech India Ltd. The site contained much useful information that was previously unavailable to farmers in Madhya Pradesh. The site opened up by welcoming farmers into the “community” of the eChoupal. On the left side of the screen, there were nine links to the areas of key information that comprised the eChoupal: Weather, Best Practices, Crop Information, Market Information, FAQs, News, Feedback, and information about ITC. The feature set had been developed progressively with full involvement of the farmers using the system  Scope and Coverage of the Portal i. Weather information ii. Farming practices iii. Market information -Provides market information under the following heads:  Domestic market prices  International market prices - of selected competing countries  Global trends – commentary by the expert panel iv. Agri inputs - This section gives details of India’s best Agri input manufacturers/ vendors. v. Alerts -The purpose of this is to provide the farmers with region specific alerts vi. Soil and Water Testing -This section will explain to the farmers the significance of soil/water testing and also ways to collect samples. The test results can be viewed online in this section. vii. News -The purpose is to provide the farmers with information on the latest happenings in the agri industry.  Kiosk establishment guidelines Kiosk Establishment i. Mapping of Internet supportive telephone exchanges ii. Selection of agri-active village iii. Identification of a progressive farmer with leadership skills in the selected village (“Prathinidhi”) in whose premises/ supervision the Kiosk shall be established Kiosk infrastructure i. PC, UPS, Dot matrix printer, Telephone & Internet connectivity ii. Earthing facilities Prathinidhi Training Prathinidhi and a group of 10-15 farmers in the village are trained in PC operation and Portal use through trained computer operators The Old Supply Chain Market Pucca Yard Exporter Adatiya & Processors Farmer Kuccha Adatiya Mamata Jenamani, Department of IE&M Current Procurement system Transport Display Auction Transport to bagging And And payment to mandi The processor inspection weighing Mamata Jenamani, Department of IE&M  Problems of the Existing Mandi System i. The lack of professional competition combined with the communal stranglehold on rural trading ii. Agents forward loans to the farmers during sowing season farmers obliged to sell their produce to these agentsdeductions done by the agents for loan amount and interest. iii. Dependent on the agents for information regarding prices manipulate prices and information iv. No resources to analyze or exploit price trendssale not optimal price for the crop. v. Weights used for the weighing process are tampered with Mamata Jenamani, Department of IE&M vi. Crops are displayed in open air courtyards  subject to being negatively affected by the weather vii. Inspection process is unscientific and often arbitrary  favor the buyer  no incentive to farmers to invest in better seed or farming practices that lead to higher quality—even though quality matters to Processors. viii. The multiple points of handling in the supply-chain require the produce to be bagged, which takes four to five times longer to be unloaded at the processing plant than unbagged produce. ix. Traders generally do not have the capacity to store and manage different qualities and grades of produce, inhibiting efforts to produce better crop grades.  The e-Supply Chain Market Yard Pucca Adatiya Exporter & Farmer Processor Kuccha Adatiya Web- based Info-Procurement System Procurement System after implementation of e-Choupal Inspection Weighing Inbound And And Hub pricing logistics logistics grading payment Benefit-Cost analysis of the Current and Proposed system A. Existing Supply Chain B. Proposed e-Supply Chain  Farmer’s Gains i. Significant savings in transaction costs and higher price realization-2.5% higher or $6 per tonne. ii. The new setup offers a more consistent and efficient information system to the farmers daily access to prices at several nearby mandismake the critical decision of when and where to sell his crop. iii. The transaction at the hub will also be much faster than at the mandi, usually taking no more than two or three hours. iv. Electronic weighing scales are accurate and not susceptible to sleight of hand like the manual weighing system at the mandi. v. No need to bag produce avoids the associated loss of produce by intentional spillage. vi. Recognition as not just simply agricultural producers, but integral business partners in the supply process. vii. Farmers also can make use of the information available to them through the portal to improve yields. viii. Seed, fertilizer, and consumer products offered them through e-portal cost substantially less than through other local sources such as village traders. ix. Net result has been that while the area under soy cultivation has increased, the total procurement made at the mandis has decreased  Processor’s benefits i. The Processor no longer needs to go through layers of intermediaries  reduction in transaction costs. ii. The current system  unprofessional and corrupt business environment  agri- sector seems unattractive to the private sector. This has greatly limited the ability of these companies to rationalize this sector. iii. Able to directly interact with the farmer which was not possible in the present mandi system. The fact that the farmer is treated as a business partner goes a long way in winning over his trust and respect. iv. Direct procurement from the farmer  high product quality and lesser losses in handling and transportation. v. Enables the Processor to influence the farmer to introduce newer better farming techniques, better agricultural inputs etc. which is beneficial to all the parties concerned.  References http://www.nethistory.info/History%20of%20the%20Internet/dotcom.html http://www.thebubblebubble.com/dot-com-bubble/ https://flatworldbusiness.wordpress.com/flat-education/previously/web-1-0-vs-web-2-0-vs-web-3-0-a-bird-eye-on-the-definition/dotcom-bubble/ Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning, 43(2), pp.172-194. 101