E-Business Management

Session 1 - Introduction

References
E-Commerce An Indian Perspective P.T Joseph, S.J E-Marketing Judy Strauss, Raymond Frost Case studies Video, books, presentations in the class

Introduction: Transitioning to the Web

The Internet has changed the way people communicate, conduct business and manage their daily lives Technologies reviewed Resources used

History of the Internet

Advanced Research Projects Agency of the Department of Defense (ARPA) Implemented the ARPAnet, the grandparent of todays Internet Packet switching Digital data is sent in small packages called packets Packets Contain data, address information, error-control information and sequencing information Transmission Control Protocol (TCP) ensures that messages are properly routed from sender to receiver and that those messages arrived intact

History of the Internet

Internetworking Protocol (IP)
Enabled the intercommunication of interorganization and intra-organization networks

The Internet was initially limited to universities and research institutions Bandwidth
The information carrying capacity of communications lines

History of the World Wide Web

World Wide Web
Locate and view multimedia-based documents on almost any subject Makes information instantly and conveniently accessible worldwide Possible for individuals and small businesses to get worldwide exposure Changing the way business is done

History
Electronic funds transfer (early 1970s)
Its use was mostly limited to large organizations, financial institutions, and a few hardcore business

Electronic Data Interchange,

use to transfer routine documents, which expanded electronic transfers from financial institutions to manufacturers, retailers, services industries etc

Internet and the world wide web: the commercialization of the internet, saw the coining of the term E-COMMERCE.
E-Commerce applications quickly multiplied due to the rapid development of new networks, protocols, and EC software, due to increase in competition and other business pressures

There has been many innovative applications, ranging from online direct sales to E-learning.

Internet and World Wide Web Development

Computer use is increasing in almost every field of endeavor Dramatic decrease in the cost of computing Enhanced multimedia capabilities Increased publishing and learning opportunities Enhanced communication technologies

e-Business and e-Commerce Overview

Successful e-businesses are those that recognize the needs of their target audiences and match those needs with relevant content Seasoned professionals and young entrepreneurs e-Commerce
Involves exchanges among customers, business partners and the vendor

e-Business
Includes operations that are handled within the business itself

e-Business and e-Commerce Overview

Intense competition Businesses must adjust to new technologies and implement new systems Customized production capabilities Finding and keeping key employees 24-by-7 maintenance responsibilities Must be reliable, fast, functional and user friendly Brick-and-mortar businesses Businesses that have only a physical presence Click-and-mortar businesses Businesses that have both an online and an offline presence

e-Business and e-Commerce Overview

Virtual office All communications are conducted via phone, voice mail, fax, e-mail and the emerging capabilities of the Internet Personalization Tailoring Web pages to users individual preferences and letting users bypass irrelevant content Copyright infringement Privacy invasion The sale of personal data to another organization without the consumers knowledge Tracking of Internet activity Unauthorized access to credit-card numbers, medical history and criminal history

Definition of E-Commerce and business

E-Commerce: the process of buying, selling, or exchanging products, services, and information through computer networks. Communication: the delivery of goods, services, information, or payment electronically Commercial: the ability to buy and sell products, services, and information electronically Business process: completing business process electronically i.e. replacing physical process with information Services: tool for improving the quality of customer services, and increasing the speed of service delivery while cutting cost learning: enables online training and educations Collaborative: supports inter and intraorganizational collaboration Community: provides a meeting place for members to learn and collaborate.

Definition of E-Commerce and business

Commerce: transactions between business partners. (electronically=e-commerce)
E-business: the buying and selling of goods and services and also serving customers, collaboration with business partners, and conducting electronic transactions with an organization.

Definition of E-Commerce and business

Various forms of E-Commerce based on the level of digitalization,
Of the products/services The process The delivery agent

Brick and mortar organization: zero digitalization i.e. pure

physical organization. Conduct all their business activities on physically

Virtual organizations : digitalization i.e. (pure play)

Does all business transactions online.

Click and mortar: partial digitalization i.e. click and mortar

Has an online presence, but does basic business processes physically

Types of E-Commerce
The nature of transaction or interaction is mostly used to classify the E-Commerce
Business-to-business B2B: transactions between business partners

Business-to-consumer B2C: transactions between business organizations and individual shoppers

Consumer-to-business C2B: transaction in which individuals sell products and services to business Consumer-to-consumer C2C: transactions between individual consumers

Interdisciplinary nature of E-Commerce: computer science, marketing, consumer behavior, finance, economics, management information systems, accounting, management, business, law, robotics, public administration and engineering.

Benefits of E-Commerce
The E-Commerce revolution is as profound as the change that accompanied the industrial revolution (Clinton and Gore 1997) E-Commerce enormous potential benefits to organizations, individuals and society, considering
The global nature of the technology The opportunity to reach millions of people Its interactive nature The variety of possibilities for its use The resourcefulness and rapid growth of its supporting infrastructure (especially the web)

Benefits of E-Commerce
Organizational benefits
Global reach: can easily and quickly locate the best suppliers, more customers and more suitable business partners. i.e. buy cheaper and sell more. Cost reduction: EC decreases the cost of creating, processing, distribution, storing and retrieving paper-based information. Supply chain improvement: supply chain inefficiencies can be minimized e.g.. Inventory and deliver delays Extended hours:24/7/365 Customization: pull-type production (build-to-order) New business models: tendering (reverse auction), name-your-own-price model, affiliate marketing, viral marketing etc. Vendors specialization: EC enables high degree of specialization Lower communication cost: EC lowers telecommunications cost. Efficient procurement: EC can reduce administrative cost, purchasing prices, and reducing cycle time. Improved customer relations: EC enable close customer relations Up-to-date company material: EC enables company information to be updated by the minute No city business permits and fees

Benefits of E-Commerce
Consumer benefits
ubiquity: EC allows shopping 24/7/365 from almost any location. More products and services: EC gives more choices. Cheaper products and services: EC providers price variety for goods and services Instant delivery: e.g. digitized product Information availability: relevant and detailed information in seconds Participate in auctions: virtual auctions Electronic communities: consumers can interact with other consumers Get it your way: customization and personalization of products and services No sales tax: most online sales are tax free

Benefits of E-Commerce
Societal benefits
Telecommuting: more people work and shop at home Higher standard of living: competitive prices allow lower income earners to shop more Hope for the poor: great opportunity for the poor to sell, buy and learn new skills Availability of public services: health care, education, and distribution of government social services can be done at a reduced cost to a large number of people.

Limitations
Technological
Lack of universally accepted standards for quality, security, and reliability Telecommunication bandwidth is insufficient (mostly for mcommerce) Software development tools are still evolving. Difficulties in integrating the internet and EC software applications and databases. Special web servers are needed in addition to the network servers (added cost) Internet accessibility is still expensive and/ or inconvenient Order of fulfillment of large-scale B2C requires special automated warehouses

Limitations
Non-technological
Security and privacy concerns deter some customer from buying Lack of trust in EC and in unknown sellers hinder buying Many legal and public policy issues, including taxations, remain unresolved National and international government regulations sometimes get in the way Difficulty in measuring some benefits in EC. (e.g. advertising,) lack of matured measurement methodology Some customers like to touch and feel the product Adamant to change from physical to virtual store Lack of trust in paperless, faceless transactions Insufficient number (critical mass) of sellers and buyers (some cases) needed to make profit Increasing number of fraud on the net Difficulty to obtain venture capital due to the dot-com disaster

E-Commerce
Transformation of economic activity into digital media
Exchange information, content, agreements, and services among parties that are connected to through the Internet.

Enables new ways of creating, delivering and capturing value to customers.

Superior information Convenience

The Evolution of New Businesses

Infrastructure
Telecommunications, hardware, cable, ISP

Supporting services
AOL, browsers, payment and banking systems, directories, security of systems and transactions.

Content
Media, portals, exchanges (EBAY)

Old Economy Firms

Brick and Mortar companies need to adopt to the new economy
Create a new Internet company. Create a new subsidiary. Invest in an Internet competitor. Buy the technology from a consultant. Work with other firms to create an exchange. Integrate with suppliers and or customers.

Old Economy Firms

Failure of old economy companies to adopt may result in:
Loss of market share. Inability to meet new economy competitorsprices. Reduced profits and cash flows. Inability to raise new financing. Loss of control in an acquisition by a new economy firm.

Summary
The Internet revolutionized ways of doing business. Entrepreneurs found ways to exploit market failures and earn economic rents. New businesses were created that were not feasible earlier. The new economy poses threats to old economy firms that do not wish to adapt. The transformation is still in process. The evolution continues.

Digital Economy
The Digital revolution Digital Economy: an economy that is based on digital technologies, including digital communications networks, computers, software, and other related information technologies. Digital networking and communications infrastructures provides the global platform over which people and other organizations interact, communicate, collaborate and search for information. Choi and whinston says this platform is characterized by A vast array of digital products: databases, news & information, books, software etc, that delivered over a digital infrastructure any time, anywhere in the world Consumers and firms conducting financial transaction digitally through digital currencies or financial tokens that are carried via network computers and mobile devices Microprocessors and networking capabilities embedded in physical goods such as home appliances and automobiles

Digital Economy
Digital economy: the convergence of computing and communications technology on the internet and other networks and the resulting flow of information and technology that is stimulating e-commerce and vast organizational changes.
This convergence is enabling all types of information (data, audio, video, etc) to be stored, processed, and transmitted over networks to many destinations worldwide The digital economy is creating a digital revolution, evidence by unprecedented economy performance and the longest period of uninterrupted economic expansion in certain parts of the world. Web-based E-Commerce systems are accelerating the digital revolution by providing competitive advantage to organizations

The new business environment

Highly competitive (due to economic, societal, legal and technological factors) Quick and sometimes unpredictable change
The need for more production, faster and with fewer resources

The new business environment

Huber (2003) new business environment created due to accelerated advances in science
This advances creates scientific knowledge This scientific knowledge feeds on itself resulting in more and more technology Rapid growth in technology results in a large variety of more complex systems.

The new business environment

As a result the business environment is characterized by
A more turbulent environment ( more business problems and opportunity) Stronger competition Frequent decision making by organizations Large scope for decisions considerations (market, competition, political and global) More information/knowledge needed for decisions

Pressure on businesses
Market and economic
Strong competition Global economy Regional trade agreement Extremely low labour cost in some regions Frequent and significant changes in markets Increase power of consumers

Pressure on businesses
Societal
Changing nature of workforce Government deregulation- more competition Shrinking government subsidies Increased importance of ethical and legal issues Increased social responsibility of organizations Rapid political changes

Pressure on businesses
Technological
Increasing innovations and new technologies Rapid technological obsolescence Rapid decline in technology cost versus performance ratio

Pressure on businesses
Business as usual no more enough (price reduction & closure of unprofitable facilities)
Need for new innovations (critical response activities)
Customization Creating new products Providing superb costumers services

E-commerce facilitate most of these responses

Organizational responses
Strategic systems: provides org. with strategic adv.
Increase their market share Better negotiation with their suppliers Prevent competitors from entering their territory e.g. FedEx tracking system

Continuous improvement efforts & BPR: continuous efforts to improve productivity, quality and customer services
E.g. Dell ERP and Intels customer tracking

Organizational responses

Customer relationship management: e.g. personalization, sales-force automation

Business alliances: org. enter collaborate for mutual benefit aided mostly by ecommerce.

Electronic markets
Reduction in cycle time & time to market: e.g. use of extranet Empowerment of employees: the ability to take decision on costumers (decentralization) Supply chain improvement: Reduce supply chain delays Reduce inventories Eliminate inefficiencies

Organizational responses
Mass customization: production of large customized items ( in an efficient way)
Intra-business: from sales force to inventory control Knowledge management: the process creating or capturing knowledge, storing and protecting it, updating, maintaining and using it.

Brick & mortar against digital

Brick & mortar Selling in physical stores Selling tangible goods Internal inventory/production planning Paper catalogs Physical marketplace Physical & limited auctions Broker-based service transactions Paper-based billing Paper-based tendering Push production Mass production (standard) Physical based commission marketing Word-of-mouth slow advertisement Linear supply chain Large amount of capital needed Cost>value Digital Selling online Selling digital goods Online collaborative inventory forecasting Smart e-catalogs Electronic market-space Online auctions everywhere, anytime Electronic Info-mediaries, value added services Electronic billings Pull production Mass customization Affiliate, viral marketing Explosive viral marketing Hub-based supply chain Less capital needed Small fixed cost Cost=value

Electronic marketplaces
Electronic marketplace: a space in which sellers and buyers exchange goods and services for money (or for other goods and services) electronically.
Functions of markets:
matching buyers and sellers Facilitating exchanges of goods/services and payments associated with market transactions Provide institutional infrastructure

Electronic marketplaces
Together with IT, EC has greatly increased market efficiencies
by expediting or improving the functions of market And lowering transaction and distribution cost Leading to a well-organized friction-free markets

Market-space components
Customers: the hundreds of millions of people surfing the web are potential buyers of goods/services offered on the net. They looking for good deals Customized items Collectors items Entertainment etc Organizations are the major consumers of EC activities. (85%)
Sellers: millions of storefronts on the Web offering a huge variety of products. ( sells can be done directly from sellers site or from E-marketplaces)

Products: both physical and digital products (what are the advantages of a digital product?)
Infrastructure: hardware, software, networks etc.

Market-space components
Front end: the portion of an e-sellers business processes through which customers interact, e.g. sellers portal, e-catalogs, shopping cart, search engine and payment gateway
Back end: activities that support online order-taking. E.g. order aggregation and fulfillment, inventory management, purchasing from suppliers, payment processing, packaging and delivery Intermediaries: create and manage online markets. Match buyers and sellers, provide some infrastructure services to and help buyers/sellers to institute and complete transaction. (mostly operate as computerized systems)

Other business partners: includes business collaboration mostly along supply chain.
Support services: ranging from certification to trust services

Types of electronic markets

There are various types of marketplaces
B2C
Electronic storefronts Electronic malls

B2B
Private e-marketplace
Sell-side Buy-side

Public e-marketplaces consortia

Types of electronic markets

B2C
Electronic storefronts: single companys Web site where product/services are sold (electronic store)
A storefront has various mechanism for conducting sale
Electronic catalogs (presentation of product information in an electronic form) A search engine ( a program that can access a database of Internet resources, search for specific information/keywords, and report the result) An electronic shopping cart: order processing technology that allow shoppers to accumulate items they wish to buy while they continue to shop E-auction facilities A payment gateway etc.

Electronic malls: an online shopping center where many stores are located

Types of electronic markets

B2B
Private E-Marketplace: owned by a single company
Sell-side E-Marketplace: a private e-market in which a company sells either standard or customized to qualified companies Buy-side: a private e-market in which a company buys from invited suppliers

Public E-Marketplace: e-market usually owned by an independent 3rd party with many buyers and many sellers (exchanges) Consortia: usually owned by a small group of major sellers or buyers usually in the same industry

E-Commerce framework
E-Commerce applications Direct marketing, online Banking, E-government, E-purchasing, job search, M-commerce, auctions, consumer services, etc PILLARS
People Buyers, sellers, Intermediaries, IS people, and management Public policy Taxes, legal, privacy issues, Regulations and Tech. standards Marketing & Adv. Marketg research, promotions, & web content
Business Partnerships Joint ventures, Exchanges, E-marketplace & consortia

Support services
Logistics, payt, Content, & security systems dev.

INFRASTRUCTURAL SUPPORT
Common business Serv. Infrastructure (security, smart cards/ Authentication Electronic payment Etc)

Massaging & info dist. Infrastructure (EDI, e-mail, Hypertext, Chat rooms)

Multimedia & network Publishing Infrastructure (html, java, xml, Vrml etc.)

Network infrastructure (telecom, cable tv Wireless, Internet) cell phones

Interfacing Infrastructure (with database, Business partners Applications)

The need for E-Commerce security

There is need for E-Commerce security due to the increasing cyber attacks and cyber crimes. A recent survey of security practitioners yielded the following results,
Organizations continue to have cyber attacks from both in and outside of the organization The cyber attacks varied, e.g. computer virus, Net abuse ( unauthorized users of the internet) by employees, denial of services The financial losses from cyber attacks can be substantial Takes more than one type of technology to defend against cyber attacks.

Basic security issues

EC security involves more than just preventing and responding to cyber attacks and intrusion. e.g. a user connects to a Web server at a market site to obtain some product literature (Loshin 1998).
To get the literature, he is asked to fill out a Web form providing some demographic and other personal information.

What are the security concerns that can/will arise in a situation like that?

Basic security issues

From the users perspective,
How can he know, that, the Web server is own and operated by legitimate company? How does he know that the Web page and form do not contain some malicious or dangerous codes or content? How does he know that the Web server will not distribute the information to some third party?

Basic security issues

From the companys perspective,
How does the company know that the user will not attempt to break into the Web server or alter the pages and content at the site? How does the company know that the user will not try to disrupt the server so that it isnt available to others?

Basic security issues

From both parties perspective,
How does the parties know that the network connection is free from eavesdropping by a third party listening on the line? How do they both know that the information sent back and forth between the server has not been altered

Basic security issues

With transactions that involves E-payments, additional types of security must be confronted. Authentication: the process by which one entity verifies that another entity is who they claim to be. Authorization: the process that ensures that a person has the right to access certain information Auditing: the process of collecting information about attempts to access particular resources, use particular privileges, or perform other security actions Confidentiality (privacy): keeping a private or sensitive information from being disclosed to unauthorized individual, entities, or processes. Integrity: the ability to protect data from being altered or destroyed in an unauthorized or accidental manner. Availability: the ability of a person or a program to gain access to the pages, data, or services provided by the site when they need it. Nonrepudiation: the ability to limit parties from refuting that a legitimate transaction took place usually by the means of a signature

Types of threats and attacks

There are two types of attacks:
Technical and non-technical.
Technical attacks: an attack perpetrated using software and systems knowledge or expertise

Non-technical attacks: an attack that uses deceit to trick people into revealing sensitive information or performing actions that compromise the security of a network.
(social engineering): an attack that uses social pressures to trick computer users into compromising computer networks to which those individuals have access. There are two types: Human based: based on traditional mode of communication. ( in person or over the phone) Computer based: technical ploys used to get individuals to provide sensitive information

Types of threats and attacks

Social engineering cont. The key to successful social engineering rest with the victims. combating it also rest with the victims. Certain positions are more vulnerable than others, ( employees who deals with both confidential information and the public. E.g. secretaries, and executive assistants, database and network administrators, computer operators and call-center operators.

How to deal with it: multi-prong approach should be used to combat it. ( Damle 2002)
Education and training: all staff ( mostly those in vulnerable positions) must be educated about the risk, techniques used by hackers and how to combat it. Policies and procedures: for securing confidential information and measures needed to respond to and report any social engineering breaches. Penetration and testing: on regularly bases by outside expect playing the role of hackers. Staff must be debriefed after penetration test and any weaknesses corrected.

Types of threats and attacks

Technical attacks: experts usually use methodical approach. Many software tools are easily and readily available over the internet that enables a hacker to expose a systems vulnerabilities.
In 1999, Mitre corporation (cve.mitre.org) and 15 other security-related organizations started to count all publicly known CVEs ( common (security) vulnerabilities and exposures. CVEs: publicly known computer security risks, which are collected, listed, and shared by a board of securityrelated organizations.

Types of threats and attacks

The two very well known technical attacks that have affected the lives of millions are:
1. DDoS ( Distributed Denial of Service) attack: an attack in which the attacker gains illegal administrative access to as many computers on the Internet as possible and uses these multiple computers to send a flood of data packets to the users computer.
DoS (Denial-of-Services) attack: an attack on the web site in which an attacker uses specialized software to send a flood of data packets to the targeted computer with the aim of overloading its resources. DDoS software are loaded on machines known as Zombies

2.

Malware (malicious codes): they are mostly classified by the way they are propagated. They all have the potential to damage.
Malware takes a variety of forms and their names are mostly from the real world pathogens they look-like,

Types of threats and attacks

Viruses: a piece of software code that inserts itself into a host, including the operating system, to propagate. It requires the running of the host program to activate it. Cant run independently
Viruses have two components: Propagation mechanism by which it spreads A payload refers to the what it does once it is executed Some viruses simply spread and infect, others do substantial damage ( e.g. deleting files or corrupting the hardware)

Worms: a program that can run independently, will consume the resources of its host from within in order to maintain itself, and can propagate a complete working version of itself onto another machine.
Major difference between a worm and a viruses: a worm can propagate between systems (mostly through a network) whiles viruses propagate locally.

Macro viruses or macro worms: executes when the application object that contains the macro is open or a particular procedure is executed.

Trojan horse: a program that appears to have a useful function but that contains a hidden function that presents a security risk. - There are various forms of Trojan horse, but the one of interest is the one that makes it possible
for someone else to gain access and control a persons computer other than the net. - This types of Trojans have two parts: server and clients. The serve is the program that runs on the computer under attack, and the client is used by the person perpetrating the attack.

Managing Security
Some basic mistakes in managing security risk, includes
Undervalued information. Few organizations have a clear understanding of the value of specific information asset Reactive security management. Most companies focus on security after an incident Narrowly defined security boundaries. Most organization are just interested in securing their internal network and dont try to understand the security issues of their supply chain partners Dated security management processes. Some organizations hardly update or change their security practices or update the security knowledge and skill of their employees Lack of communication about security responsibility. Security is often view as an IT problem and not a company problem.

Business models in E-Commerce

Business model: a method of doing business by which a company can generate revenue to sustain itself.
Structure of business models: structure of business models varies greatly based on the company, and the industry environment.
Weill and Vitale (2001) 8 atomic business model
Direct marketing, Intermediary, Content provider, Full service provider, Shared infrastructure, Value net integrator, Virtual community and Consolidator of services (for large organizations)

Seven Unique Feature of ECommerce Technology

Ubiquity
Alters industry structure by creating new marketing channels and expanding size of overall market Creates new efficiencies in industry operations and lowers cost of firms sales operations Enables new differentiation strategies

Global Reach
Changes industry structure by lowering barriers to entry, but greatly expands market at the same time Lowers cost of industry and firm operations through production and sales efficiencies Enables competition on global scale

Seven Unique Features of ECommerce Technology

Universal Standards
Changes industry structure by lowering barriers to entry and intensifying competition within an industry Lowers costs of industry and firm operations by lowering computing and communications costs Enables broad-scope strategies

Richness
Alters industry structure by reducing strength of powerful distribution channels Change industry and firm operations costs by lessening reliance on sales force Enhances post-sale support strategies

Seven Unique Features of ECommerce Technology

Interactivity
Alters industry structure by reducing threat of substitutes through enhanced customization Reduces industry and firm costs by lessening reliance on sales force Enable differentiation strategies

Personalization/Customization
Alters industry structure by reducing threats of substitutes, raising barriers to entry Reduces value chain costs in industry and firm by lessening reliance on sales forces

Seven Unique Features of ECommerce Technology

Information Density
Changes industry structure by weakening powerful sales channels, shifting bargaining power to consumer Reduces industry and firm operations costs by lowering costs of obtaining, processing, and distributing information about suppliers and consumers