E-Business and E-Commerce

Recap
Starbucks short case
• Symptom → Problem identification through strategic analysis →
See if problem is caused due to information processing issues →
explore if IT can be a solution (CSFs, Value Chain, …)
• E-Commerce applications at Starbucks → how and why?
• Long tail effect
• Social media applications at Starbucks → how and why?
• Collective intelligence / Crowdsourcing
• Business Experiments
Recap
• Commerce – buying and selling

• E(lectronic) Commerce – buying and selling facilitated by

technology

• E-Business vs E-Commerce
Recap
• Buy-side vs Sell-side EC

• GMV – what and why?

• Pure vs Partial EC

• Brick-and-mortar vs Virtual vs Click-and-mortar

McFarlan’s Strategic Grid
Why strategic grid?
• IT impacts firms in different ways

• Before selecting management tools and approaches, management

needs a clear and systematic understanding of:
• Current and future relevance of IT
• Impact of its IT

• The strategic grid can help management gain this understanding

• Visualizes relationships between IT strategy and business strategy (depending
on the role of IT in the firm)
Strategic Grid
• Provides framework for analyzing internal IT management practices
appropriate to the organizational role of IT

• Framework identifies four different IT environments → each

environment requires a different IT management framework

• Also called the positioning and scaling framework

• Indicates positioning (importance) of IT in a business
• Scale of management challenges involved
Using the strategic grid
1. Visualize IT systems in terms of the strategic grid

2. Identify the quadrant in which your company / BU is located (senior

and IT management)

3. Set up staffing, organization, and planning activities accordingly

Uses of the Grid
1. Illustrate how different firms (or parts of firms) are affected in
different ways by IT
2. Can facilitate a dialog among business and IT professionals
regarding
a. Position of the company as a whole
b. Position of a firm’s business units or IT applications
3. Originally used to assist with IT planning efforts
4. Recently, use was extended to shape IT governance and spending
decisions at the board level
Mismatch #1
• Management’s goals for IT in the organization have not been put into
action through appropriate IT policies and plans

• Example
• Management wishes to use IT strategically in the future
• But, all the applications under development in the future portfolio indicate
that the organization is only in the support quadrant in the grid
Mismatch #2
• A particular grid position is characteristic of the industry as a whole
• However, a particular firm finds itself positioned in a different cell
• Management decision:
• Should the firm stay in the current grid cell OR move into another cell?
• Does the firm want to be leader or a follower with regard to use of IT vis-à-vis
its competitors
• Example: Walmart began positioning itself in strategic grid very early
• Initially, most competitors paid little attention
• After a decade, competitors desperately tried to play catch-up
• IT was now seen as a strategic force in the retail industry
Mismatch #3
• Differences in perceptions of present/future positioning of IT among
various firm managers (typically, business v/s IT)

• Resolving the differences

1. Have the managers respond to grid questionnaire
2. Understand & clarify perceptions and misconceptions
3. Attempt to build consensus among executives on the current and future
role of IT

Thus, the grid may help bring various stakeholders on the same page
 SUPPORT FACTORY TURNAROUND STRATEGIC

Reactive Resource Directional Strategic

PLANNING
(Application)

ORGANIZATION Back office Department Function Complex

CONTROL Project Budget Programme Mixed

TECHNOLOGY Ad hoc Conventional Rethink Architectural

Types of IS/IT Investments
1. Mandatory
2. Traditional
3. Strategic
4. Infrastructure Investment
5. System Renewals
6. Maintain and Enhance Projects
7. R&D Projects
8. Niche Projects
E-Commerce Framework
 E-COMMERCE APPLICATIONS
Direct marketing, Search jobs, Online banking, E-government, E-purchasing, B2B Exchanges, C-
Commerce, Social Commerce, E-Learning, M-Commerce, Auctions, Travel, Online Publishing,
Consumer Services, Collaboration 2.0

PUBLIC POLICY SUPPORT BUSINESS

PEOPLE MARKETING
Taxes, Legal, SERVICES PARTNERSHIP
Buyers, Sellers, Market research,
Privacy Issues, Order fulfilment, Affiliates, JVs,
Intermediaries, IS promotions, web
Compliance, Logistics, Exchanges, E-
People, content, targeted
Technical Payments, Marketplaces,
Management marketing
Standards Security Systems Consortia

INFRASTRUCTURE
• Common business services (security, e-payments, catalogs, hardware, peripherals, …)
• Messaging and information distribution (EDI, email, chat, Web 2.0, …)
• Multimedia content and network publishing (HTML, Java, XML, …)
• Network (Telecom, Internet, WAN / LAN, …)
• Interfaces (With databases, business partners, applications, Web Services, ERP)

MANAGEMENT
Components of E-Commerce Framework
• E-commerce applications – need the right information, infrastructure
and support services

• Support areas

• Infrastructure – hardware, software, and networks

• Management – need for planning, organizing, motivating,

strategizing, and restructuring of processes
Five support areas
• People – Sellers, buyers, intermediaries, IS/IT specialists, …

• Public Policy – legal, regulatory, privacy, taxation, tech standards, compliance

• Marketing and advertising – especially critical in B2C online transactions

• Support services – Content creation, payments, order delivery, …

• Business partnerships – JVs, exchanges, … → occur throughout the supply chain

Types of EC Transactions
Categories of
E-commerce
transactions
Categories of E-commerce transactions
Business-to-business (B2B)
• Transactions between and among organizations.
• 85% of EC volume
• Example – Dell’s wholesale transactions
• Dell buys most parts through e-commerce and sells to businesses (B2B) as
well as individuals (B2C)

Business-to-consumer (B2C)
• Retail transactions of products / services from businesses to individual
shoppers
• Example – Amazon
• Also called e-tailing since sellers are usually retailers
Categories of E-commerce transactions
Consumer-to-business (C2B)
• People use Internet to sell products or services to individuals and
organizations
• Alternatively used to bid on products or services
• Example – priceline.com

Intrabusiness
• EC transactions among various organizational departments and individuals in
one company
Categories of E-commerce transactions
Business-to-employees (B2E)
• Delivery of services, information, or products from organizations to their
employees

Consumer-to-consumer (C2C)
• Individual consumers sell to or buy from other consumers
• Example – individuals selling computers, musical instruments, or personal
services online
• Examples – Ebay sales and auctions, Craigslist
Categories of E-commerce transactions
Collaborative commerce (C-commerce)
• Online activities and communications done by parties working to attain the
same goal
• Example – business partners designing a product together

E-Government
• A government agency buying or providing goods, services, or information
from or to
• Businesses (G2B)
• Individual citizens (G2C)
• Other government agencies (G2G)
EC Activities and Mechanisms
Key EC activities
• Presence and Discovery – find information, compare & analyze

• Trading – buy, sell & exchange

• Communicate, Collaborate & Learn

• Entertainment

• Improve Performance

• Other Activities – recruit, customer service

Key EC mechanisms
• Electronic markets
• Storefronts, malls & portals
• E-catalogs, search engines, shopping carts, directories, E-maps
• E-auctions
• Web 2.0 tools, social network services
• Augmented reality, Crowdsourcing
• Payment, order processing, security & support
EC Features
Features of E-Commerce

• Ubiquity • Personalization & Customization

• Global reach • Information density

• Universal standards • Interactivity

• Social technology • Richness

Features of E-Commerce
• Ubiquity – Virtual marketspace (marketplace extended beyond traditional
boundaries and removed from a specific temporal / geographical location)

• Global Reach – Transactions cross cultural & national boundaries

• Universal Standards – Built on Internet technology standards (reduces

market entry costs for merchants and search costs for consumers)

• Interactive – Supports video, audio and text messages

Features of E-Commerce
• Personalization / customization – Technology adapts to suit your
requirements and accordingly modifies its content

• Social technology – Promotes user content generation and social

networking

• Information density – Amount and quality of information available to

all market participants (allows for greater price and cost transparency)
EC Benefits
Some EC benefits
• Reduction in transaction costs – reduction in time and effort needed
for searching for the right information (impact of ubiquity)

• Disintermediation – Removal of intermediaries (middlemen / agents)

for purchasing tickets for airlines, hotels and railways

• Mass customization - Dell

Some EC benefits
• Reduction in information asymmetry
• One party in the transaction has more information (that is relevant for the
transaction) than the other party

• Price transparency – ease with which consumers can find out the
variety of prices in a market

• Cost transparency – ability of consumers to discover the actual costs

merchants pay for products
Some EC benefits
• Price discrimination – selling same (or nearly same) goods to
different targeted groups at different prices

• Dynamic pricing – price of a product varies depending on demand

characteristics of the customer or the supply situation of the supplier
Benefits of E-commerce for Organizations
• Global reach • Lower communication costs
• Cost reduction • Efficient procurement
• Facilitate problem solving • Improved customer service and
• Supply chain improvements relationship
• Business always open • Help SMEs to compete
• Customization / personalization • Lower inventories
• Ability to innovate, use new • Lower cost of distributing
business models digitizable product
• Provide competitive advantage
Benefits of E-commerce for Consumers
• Availability • Social interaction and
• Ubiquity engagement
• Self-configuration • Comfortable shopping
• Find bargains
• Real-time delivery
• Enable telecommuting
• Find unique items
Benefits of E-commerce for Society
• Enable telecommuting
• More and better public services
• Increased standard of living
• Close the digital divide
Promotion of entrepreneurship
• EC helps in the creation of opportunities to start a business in
unconventional ways

• New business models allow entrepreneurs to open businesses with

little money and experience, and grow them rapidly
Limitations of EC
Technological limitations of EC
• Need for universal standards for quality, security & reliability
• Insufficient telecommunications bandwidth
• Software development tools are still evolving
• Difficult to integrate EC software with legacy applications
• Special web servers needed → increases cost of EC
• Expensive and / or inconvenient Internet accessibility
• Large-scale B2C requires special automated warehouses for order
fulfilment
Non-technological limitations of EC
• Security & privacy concerns deter customers from buying
• Lack of trust in sellers, computers & paperless faceless transactions
• Resistance to change
• Many legal & public policy issues are not resolved
• National & international government regulations may become
impediments
• Difficult to measure some of the costs and benefits of EC
• Not enough customers
• Lack of collaboration along the supply chain