Lecture 1 and 2 Chapter 1 Introduction To E-Business and E-Commerce
Lecture 1 and 2 Chapter 1 Introduction To E-Business and E-Commerce
Lecture 1 and 2 Chapter 1 Introduction To E-Business and E-Commerce
Introduction to E-Business
and E-Commerce
Learning Outcomes
Define the meaning and scope of e-business and e-commerce and their
different elements
Summarize the main reasons for adoption of e-commerce and e-
business and barriers that may restrict adoption
Outline the ongoing business challenges of managing e-business and
e-commerce in an organization.
Introduction
• Over 15 years since the creation of the first web site (http://info.cern.ch) by Sir Tim Berners-
Lee in 1991.
• Organizations have now been applying technologies based on the Internet, World Wide Web
and wireless communications to transform their businesses.
• These technologies has offered many opportunities for innovative e-businesses to be created
based on new approaches to business.
Timeline of web sites indicating innovation in business model or marketing
communications approach
For example, current opportunities which many businesses are reviewing the benefits, costs and risks
of implementing include:
the growth in popularity of social networks such as Bebo, Facebook and MySpace, virtual
worlds such as Habbo Hotel and Second Life, and blogs created by many individuals and
businesses;
rich media such as online video and interactive applications into their web sites;
selection of mobile commerce services which exploit the usage of mobile phones and other
portable wireless devices such as laptops around the world.
The Impact of the Electronic Communications on
Traditional Businesses
• The potential of mobile commerce is evident from research by Wireless Intelligence which
found that at the end of 2007, globally there were 3 billion subscriber connections with
penetration rates in developing countries such as India (21%) and China (41%) showing the
potential for future growth;
• Using location-based tracking of goods and inventory as they are manufactured and
transported.
• An organization’s capability to manage technology-enabled change is the essence of
successfully managing e-business.
• The pace of change and the opportunities for new communications approaches make e-
business and e-commerce an exciting area of business to be involved in.
E-Business and E-Commerce
• E-business and e-commerce is an exciting area with many new opportunities and
challenges arise yearly, monthly and even daily.
• For example, Google innovates relentlessly. Its service has developed a long way since
1998 with billions of pages now indexed and other services such as web mail, pay per
click adverts, analytics and social networks all part of its offering.
Electronic Commerce (E-Commerce)
All electronically mediated information exchanges between an organization and
its external stakeholders.
Debate 1.1
E-Business
Marketing tactics:
• Recognising the strategic importance of digital technologies and developing a
planned approach to reach and migrate customers to online services through e-
communications and traditional communications.
• Retention is achieved through improving our customer knowledge (of their
profiles, behaviour, value and loyalty drivers), then delivering integrated, targeted
communications and online services that match their individual needs.
• The platforms and communications tools that form the online channels which e-
marketers use to build and develop relationships with customers including PCs,
PDAs, mobile phones, interactive digital TV and radio.
Digital Marketing
• Techniques like web sites, search engines, e-mail and text messaging.
• In digital media the introduction of new tools and techniques have to be
assessed for their relevance to a particular marketing campaign.
• For example, recent innovations include blogs, feeds, podcasts and social
networks.
• The growth of social networks has been documented by Boyd and Ellison
(2007) who describe social networking sites (SNS) as:
• Web-based services that allow individuals to
(1) construct a public or semi-public profile within a bounded system,
(2) articulate a list of other users with whom they share a connection, and
(3) view and traverse their list of connections and those made by others within
the system.
Digital Marketing
• Digital marketing does not occur in isolation, but is most effective when it is
integrated with other communications channels such as phone, direct mail or
face-to-face.
• The role of the Internet in supporting multi-channel marketing and multi-channel
marketing strategy is another recurring theme in particular explain its role in
supporting different customer communications channels and distribution
channels.
• Online channels should also be used to support the whole buying process or
customer journey from pre-sale to sale to post-sale and further development of
customer relationships.
• Different marketing channels should integrate and support each other in terms
of their proposition development and communications based on their relative
merits for the customer and the company.
Digital Marketing
(i) Web services or interactive applications hosted on the web such as Flickr
(www.flickr.com), Google Maps™ (http://maps.google.com) or blogging services
such as Blogger.com or Typepad (www.typepad.com);
(ii)Supporting participation – many of the applications are based on altruistic
principles of community participation best represented by the most popular
social networks such as Bebo, MySpace and Facebook;
(iii)Encouraging creation of user-generated content – blogs are the best example
of this. Another example is the collaborative encyclopedia Wikipedia
(www.wikipedia.com);
(iv)Enabling rating of content and online services – services such as delicious
(http://del.icio.us) and traceback comments on blogs support this. These
services are useful given the millions of blogs that are available – rating and
tagging (categorizing) content help indicate the relevance and quality of the
content;
(v) Ad funding of neutral sites – web services such as Google Mail/GMail™ and
many blogs are based on contextual advertising such as Google Adsense™ or
Overture/Yahoo! Content Match;
(vi) Data exchange between sites through XML-based data standards. RSS is
based on XML, but has relatively little semantic markup to describe the
content.
• An attempt by Google to facilitate this which illustrates the principle of
structured information exchange and searching is Google Base™
(http://base.google.com).
• This allows users to upload data about particular services such as training
courses in a standardized format based on XML. New classes of content can
also be defined and mashups created;
(vii)Use of rich media or creation of rich Internet applications (RIA) which provide
for a more immersive, interactive experience. These may be integrated into web
browsers or may be separate applications like that downloaded for Second Life
(www.secondlife.com);
(viii)Rapid application development using interactive technology approaches
known as Ajax (Asynchronous JavaScript and XML). The best-known Ajax
implementation is Google Maps which is responsive since it does not require
refreshes to display maps.
Web 3.0 Concept
• The value chain is a related concept that describes the different value-
adding activities that connect a company’s supply side with its demand side.
Figure 1.7
Business or Consumer Models of E-Commerce Transactions
• E-commerce transactions between an organization and its stakeholders primarily
with consumers (business-to-consumer–B2C) or other businesses (business-to-
business – B2B).
• Companies such as BP or Dell Computer will have products that appeal to both
consumers and businesses, so will have different parts of their site to appeal
audiences.
• For example eBay Business (http://business.ebay.com/) or the B2C service may need
to be sustained through advertising provided through B2B transactions.
• Google’s revenue is largely based on its B2B AdWords (http://adwords.google.com/)
advertising service and advertising based revenue is also important to sites such as
YouTube, MySpace and Facebook.
• Two additional types of transaction, consumers directly with other consumers (C2C)
and consumer trading with companies (C2B).
• The C2C and C2B are less widely used (e.g. Economist, 2000), but they do highlight
significant differences between Internet-based commerce and earlier forms of
commerce.
• Consumer-to-consumer interactions (also known as peer-to-peer).
Business or Consumer Models of E-Commerce Transactions
E-Government
• E-business has introduced new opportunities for small and large organizations to
compete in the global marketplace.
• The biggest change introduced by electronic communications is transmitting and
transforming information can be used for competitive advantage.
• The Internet provides significant opportunities for many businesses to build closer relationships
with their existing customers and suppliers online to help achieve customer retention.
• Encouraging use of online, e-business services by customers and suppliers can significantly reduce
costs while providing a new, convenient channel for purchase and customer service.
• Through providing high-quality online services, organizations can build lasting relationships
with their stakeholders.
E-Business Opportunities
‘Online, your customers are only a mouse click away from your competitors’,
• This is a simplification, and encouraging use of online services can help achieve
‘soft lock-in’.
• A customer or supplier continues to use a service since they find the service
valuable and they have also invested a lot of time in learning the service or
integrating it with their systems and there are some costs in switching.
• The ideal is that the service meets the needs of its users so well and delivers
value such that they are satisfied and do not consider switching.
Disruptive Internet Technologies
New Internet-based communications approaches which change the way in which
information about products is exchanged, which impact the basis for competition
in a marketplace.
There are three characteristics of information which, when combined with
disruptive Internet technologies, can have a major impact on a marketplace.
These characteristics of information are reach, richness and affiliation:
The current levels of adoption of the Internet for different activities amongst
customers and competitors in our market sector and in other sectors.
Drivers of business Internet adoption
• Customer demand
• Improving the range and quality of services offered
• Avoiding losing market share to businesses already using e-commerce.
• Others invested without achieving the hoped-for returns, either the execution
of the plan flawed, or the planned approach for market was inappropriate.
• The Internet is a ten times force? Or is it a force that alters our business?
• The customer experience of a service is very bad, they will stop using it, and
switch to other online options.
• Web sites that fail because of a spike in visitor traffic after a peak-hour TV
advertising campaign.
• Hackers penetrating the security system and stealing credit card details.
• E-mail customer-service enquiries from the web site don’t reach the right
person and are ignored.
In sell-side e-commerce, managers need to assess how to adopt new services such as web,
mobile and interactive TV and specific services such as blogs, social networks and feeds.
Typical benefits of online services are summarized by the ‘Six Cs’, show different types of
customer value:
• Content – In the mid-1990s it was often said that ‘content is king’. Well, relevant rich content
is still king. This means more detailed, in-depth information to support the buying process for
transactional or relationship-building sites or branded experiences to encourage product
usage for FMCG brands.
• Customization – In this case mass customization of content, whether received as web site
pages such as ‘Amazon recommends’ or e-mail alerts, and commonly known as
‘personalization’.
• Community – The Internet liberates consumers to discuss anything they wish through forums,
chat-rooms and blog comments.
• Convenience – This is the ability to select, purchase and in some cases use products from your
desktop at any time: the classic 24 × 7 × 365 availability of a service. Online usage of products
is, of course, restricted to digital products such as music or other data services. Amazon has
advertised offline using creative showing a Christmas shopper battling against a gale-swept
street clutching several bags to reinforce the convenience message.
• Choice – The web gives a wider choice of products and suppliers than via conventional distri-
bution channels. The success of online intermediaries such as Kelkoo (www.kelkoo.com)
and Screentrade (www.screentrade.com) is evidence of this. Similarly, Tesco.com provides
Tesco with a platform to give consumers a wider choice of products (financial, travel, white
goods) with more detailed information than are physically available in-store.
• Cost reduction – The Internet is widely perceived as a relatively low-cost place of purchase.
Often customers expect to get a good deal online as they realize that online traders have a
lower cost-base as they have lower staff and distribution costs than a retailer that runs a
network of high-street stores. A simple price differential is a key approach to encouraging
usage of online services. In the late 1990s, low-cost airline easyJet encouraged the limited
change behaviour required from phone booking to online booking by offering a £2.50
discount on online flight bookings.
• Note that the 7 Cs of Rayport and Jaworski (2003) provide a similar framework of Context,
Content, Community, Customization, Communication, Connection and Commerce.
Barriers to Consumer Internet Adoption
Consumer barriers to adoption of the Internet included:
• No perceived benefit
• Lack of trust
• Security problems
• Lack of skills
• Cost.
This lack of demand for Internet services from this group needs to be taken into
account when forecasting future demand.
Summary
Extranet
A service provided through Internet and web technology delivered by extending an
intranet beyond a company to customers, suppliers and collaborators.
Intranet
A private network within a single company using Internet standards to enable employees
to access and share information using web publishing technology.
The Internet
‘The Internet’ refers to the physical network that links computers across the globe. It
consists of the infrastructure of network servers and communication links between them
that are used to hold and transport information between the client PCs and web servers.
Value network The links between an organization and its strategic and non- strategic
partners that form its external value chain.
Value chain
A model for analysis of how supply chain activities can add value to products and services
delivered to the customer.
Information and communication technology (ICT or IT)
The software applications, computer hardware and networks used to create e-business
systems.
Virtual worlds
An electronic environment which simulates interactions between online characters known
as avatars. Also known as Massively Multiplayer Online Roleplaying Games (MMORPG).
Rich media
Digital assets such as ads are not static images, but provide animation, audio or interactivity
as a game or form to be completed.
Wireless communications
Electronic transactions and communications conducted using mobile devices such as
laptops, personal digital assistants (PDAs) and mobile phones (and fixed access platforms)
with different forms of wireless connection.
Social network
A site that facilitates peer-to-peer communication within a group or between individuals
through providing facilities to develop user-generated content (UGC) and to exchange messages
and comments between different users.
Blog
Personal online diary, journal or news source compiled by one person, an internal team or
external guest authors. Postings are usually in different categories. Typically comments can be
added to each blog posting to help create interactivity and feedback.
Podcasts
Individuals and organizations post online media (audio and video) which can be viewed in
the appropriate players (including the iPod which first sparked the growth in this technique).
The latest podcast updates can be automatically delivered by really simple syndication.
Social network
A site that facilitates peer- to-peer communication within a group or between individuals
through providing facilities to develop user- generated content (UGC) and to exchange
messages and comments between different users.
Customer-centric marketing
An approach to marketing based on detailed knowledge of customer behaviour within
the target audience which seeks to fulfil the individual needs and wants of customers.
Soft lock-in
Customers or suppliers continue to use online services because of the switching costs.
Mashups
Web sites, pages or widgets that combine the content or functionality of one web site or
data source with another to create something offering a different type of value to web
users from the separate types of content or functionality.
Widget
A badge or button incorporated into a site or social network space by its owner, with
content or services typically served from another site making widgets effectively a
mini-software application or web service. Content can be updated in real time since the
widget interacts with the server each time it loads.
Brochureware
Brochureware describes a web site in which a company has migrated its existing paper-based
promotional literature on to the Internet without recognizing the differences required by
this medium.
E-government
The application of e-commerce technologies to government and public
services for citizens and businesses.
Web 2.0 concept
A collection of web services that facilitate interaction of web users with sites to create
user- generated content and encourage behaviours such as community or social network
participation, mashups, content rating, use of widgets and tagging.
Stage models
Used to review how advanced a company is in its use of information and
communications technology (ICT) to support different processes.