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1. Electronic Commerce
Chapter 1:
Foundations of
Electronic Commerce

2. Learning Objectives
1. Define electronic commerce (EC) and
the content and dimensions of field.
2. The benefits of EC to organizations,
consumers, and society.
3. The Limitations of EC.
4. Impact of e-commerce

3. Definition and the contents of field
 Electronic commerce (EC)
The process of buying, selling, or exchanging products,
services, or information via computer networks.
These computer network consist of:
 Internet :
 Internet is self regulated network connecting millions of
computer networks around the globe.
 Intranet
 An internal corporate or government network (LAN or WAN) that
uses Internet tools, such as Web browsers, and Internet
protocols behind the companies firewall.
 Extranet
 A network that uses the Internet to link multiple intranets

4. Definition and the contents of field
 EC can be further defined from these
perspectives:
 Communication perspectives
 Delivery of information ,product or service, payment
 Business process perspectives
 Use of technology for automation of business process
 Service perspectives
 Increase the speed of service delivery
 Online perspectives
 Enhanced online capabilities of digital products and
services

5. Dimensions of EC
 e-business
A broader definition of EC that includes not just the
buying and selling of goods and services, but also
servicing customers, collaborating with business
partners, and conducting electronic transactions within
an organization.
 Pure versus Partial EC
 EC can take several forms depending on the degree
of digitization
1. the product (service) sold
2. the delivery method (intermediaries)
3. the process (e.g., ordering, payment, fulfillment)
 The product can be physical or digital
 The agent can be physical or digital
 The process can be physical or digital

7. The EC field
Framework of EC (figure 1.2)
 Applications
 Four Pillars, major areas
 Supporting Infrastructure
Electronic market
 Electronic market is the place where shopper
and seller meet to exchange goods, services,
money, or information. It is a network based
location.

9. Classification of the EC field by the nature
of transactions
 These are general e-commerce types:
 Business to Business (or B2B) e-commerce (sometimes
called e-procurement)
 Business to Consumer (or B2C) e-commerce
 Consumer-to-consumer (or C2C) e-commerce
 Non-Business EC: NGOs, universities , schools etc.
activities to improve their operations and reduce costs.
 Business-to-government (or B2G) e-commerce
 Intra-business EC: E-commerce category that includes
all internal organizational activities that involve the
exchange of goods, services, or information among
various units and individuals in an organization.

10. History and Future

11. Benefits and Limitations
 Benefits to
 Organizations
 Expand marketplace to national and international markets.
 Allows small businesses to have global customer base
 Provides purchasing opportunities for buyers (businesses
can identify new suppliers and partners)
 Increases sales: easily and quickly locate more customers
and suppliers
 decreases cost :Reduced cost through electronic sales
enquires, price quotes and order taking, instead of
retrieving paper-based information
 highly specialized business : pets.com
 Improved image , improved service, compressed cycle

12. Benefits to…
 Consumers
 Business can be transacted 24hrs a seven days a week.
 More choices :The level of detail of purchase information
is selected by user.
 Conduct quick comparison
 Digital products can be delivered instantly
 Electronic communities share and exchange ideas and
experiences.
 Society
 Work at home: Less traffic, time saving
 Tax refunds, public retirement and welfare support costs
less when distributed over the Internet
 Allows products and services to be available in remote
areas, e.g. e-learning

13. Limitations
 Technological
 The newness and evolution of the current technology.
 System security , reliability, protocols and standards
 Digital divide: insufficient bandwidth
 Rapid change in technology
 Integration with old system: Difficulty in integrating
current databases and transaction processing
systems into e-commerce solutions

14. Limitations
 Non-technological
 Cost of opening EC in house very high
 Security and privacy
 Trust :Transmission of credit card details
 Cultural and legal obstacles
 User résistance, Some consumers unwilling to change
 Laws are unclear
 Shipping profile: Products with a low value-to-weight ratio that
can not be efficiently packed and shipped are unsuitable
 Breakdown in human relationship

15. Well-suited Business Processes to
Particular (only) E-commerce
Sale/purchase of books & CDs,
Online delivery of software
Travel services (Air, Buss, Railway
Tickets, Hotel bookings),
 Investments and insurance services
Stock Exchange
Online shipment tracking (DHL)

16. E-commerce + Traditional commerce
Well-suited Business Processes for both
Sale/purchase of automobiles and
residential real estate (e.g. do research
online then buy from a dealer or real
estate agent)
Online banking
Matching/friendship service

17. Traditional Business Processes
(Not-suited to E-Commerce)
 Products can not be efficiently packed and
shipped are unsuitable
 Sale/purchase of impulse items for immediate
use, high fashion jewelry and antiques
 Perishable foods, Fresh vegetables or fruits
(personal inspection required; prefer to touch,
smell or examine closely)
 Small denomination purchases and sales (since
there is not yet a standard for transferring small
amounts of money)

18. The Driving Forces Of EC
 Markets, technology, and societal pressures,
force organizations to respond (table 1.2).
 Traditional responses (lowering costs by firing
employees, closing unprofitable product or
service) may not be sufficient due to magnitude
of the pressure and the frequent changes.
 Therefore organizations frequently must use
innovation and reengineering their operations.
e.g. improving service standards. New
customized products.

19. The driving forces of EC

20. Business Process:
Organizational Response…
Strategic systems:
 Strategic information system increase market
intelligence and result in increase market share.
Continuous improvement efforts
 Improved productivity (e.g. employees)
 Improved decision making
 Customer service innovation
Business process re-engineering

21. Organizational Response….
 Business process re-engineering
 Reducing cycle time and time to market
 Inception of idea to its implementation
 First mover advantage
 Empowerment of employees and collaborative work
 Delegates authority to team who can execute the work
faster and error free
 Knowledge management
 Organizational know how via intranet
 Customer focus approach
 Mass production to Mass customization
 Business alliance
 Joint venture
 Virtual cooperation

22. Impact of e-commerce:
everything will change…
 Improving direct Marketing/Marketing related
effects
 Product promotion :Interactive and information rich
interaction
 New sales and distribution channels
 Direct saving :information/product delivery direct to
customers
 Reduced cycle time : administrative work load can be
reduced save 90% time
 Customer service: through intelligent agents, detailed
information

23. everything will change…
 Brand or corporate image: quick and trusty
 Customization: computers and even cars can
customized
 Advertisement: more effective than mass
advertisements
 Ordering system: order can given electronically and
quickly routed to fulfill
 Markets : new markets explored like digital markets.,
market space converted

24. everything will change…
 Transforming organizations
 Technology and organizational learning
 Before getting it right, organization might have to struggle
with different experiments
 Re–arrange or new offerings according to better customer
feedback
 Durable impact cannot be achieved overnight
 Changing nature of work
 Reducing work force
 Outsourcing
 Workers are more flexible, constant learner, willing to change

25.  Redefining organization
 New product capabilities
 Mass customization
 Build customer profile
 New business models
 Direct distribution to end user
 New products like banner ads/ web developers
 Impact on manufacturing
 Just in time manufacturing
 Computer aided designs
 Merging productions from different parts of world, due to
EC communication collaboration and coordination.

26. everything will change…
 Impact on finance and marketing
 Shake the financial systems even governments
 New payment systems
 Online valets
 Electronic cash
 Money laundering
 Human resource management, training education
 Online Trainings in organizations
 Free information access
 Interactive TVs / online education / CBTs

27. Putting it all together