Lecture 1

The Second Wave of Global

E-Business (Book Chapter 1)

Md. Mahbubul Alam, PhD

Professor
Intended Learning Outcomes (ILOs)
• Electronic commerce and its second wave of growth
• Analysis of business processes in order to undertake electronic commerce
initiatives
• Economic forces that foster the second wave of electronic commerce
• Use value chains and SWOT analysis to identify electronic commerce
opportunities
• Challenges that arise in engaging in electronic commerce on a global scale

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 Second Wave: History • Began to show signs of new life
• Companies observed the growth in sales and
• Rapid growth stage profits
• “Dot-com boom” followed by “dot-com bust” • Became a larger part of the total economy

Mid-1990s 2000 to 2003 to 2009 to

to 2000 early-2003 2008 onwards

• E-commerce hurt less during general economic recession

• Overly gloomy news reports • Introduction of handheld devices like mobile phones and
• Predicting obituaries for electronic tablet computers
commerce • High speed internet with Web 2.0 technologies
• Second wave underway

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Electronic Commerce and Electronic Business

is
h v iew ?
ic ic
Wh realist
e
mor

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 Buy-side Vs. Sell-side e-business
 E-commerce  E-commerce
transactions transactions between
between a a supplier organization
purchasing & its customers.
organizations
& its suppliers.
 Selling products to an
organization’s
 Procurement customers
of resources
from suppliers.

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 Classification of e-Business
1. B2C 2. B2B
i. e-tailer: Amazon, Dell.com, etc. i. Net Marketplace
ii. Community Provider: iVillage, a. E-distributor: Partstore.com
Babycenter.com
b. E-Procurement: Ariba,
iii. Content Provider: WSJ.com, PerfectCommerce
CNN.com, ESPN.com
c. Exchange: OceanConnect
iv. Portal: Google, Yahoo, MSN
d. Industry Consortium: Exostar
v. Transaction Broker: Expedia,
Tripadvisor ii. Private Industrial Network: Walmart,
Procter & Gamble
vi. Market Creator: Amazon.com
3. C2C: eBay,
vii. Service Provider: VisaNow.com,
RockeLawyer 4. Peer-to-Peer: Betfair.com
5. M-Commerce:
6. Business-to-Government (B2G)
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Elements of Electronic Commerce

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Electronic Commerce: Development & Growth
i. Electronic Funds Transfers (EFTs)
 Electronic transmissions of account exchange information (Wire transfers)
 Uses private communications networks

ii. Electronic Data Interchange (EDI)

 Computer-readable data in standard format for business-to-business transmission
 Benefits: Reduces errors, avoids printing and mailing costs, eliminates need to
reenter data
 EDI pioneers (General Electric, Sears, Wal-Mart)

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Electronic Commerce: Development & Growth (cont’d)

• EDI pioneers problem

• High implementation cost
• Expensive computer hardware and software
• Establishing direct network connections to trading partners or subscribing
to value-added network
iii. Value-added network (VAN)
• Independent firm offering EDI connection and transaction-forwarding
services
• Ensure transmitted data security
• Charge fixed monthly fee plus per transaction charge
• Gradually moved EDI traffic to the Internet
• Reduced EDI costs

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 First vs. Second Wave of E-commerce
Characteristics First wave Second wave
Regional scope US phenomenon International
Start-up capital Easy to obtain Companies using internal funds
Internet technologies Slow and inexpensive Broadband connections
used
Internet technologies Bar codes, scanners RFID, smart cards, biometric
integration technologies
Revenue source Simple online advertising Multiple sophisticated Internet
advertising approaches
Digital product sales Fraught with difficulties, e.g. music Fulfilling available technology
industry promise, e.g. mobile commerce,
smart phone, Web 2.0
Business online strategy First mover advantage Not rely on first mover
advantage

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Business & Revenue Models, and Business Processes

• A Set of processes combined to achieve company goal, which is

typically to yield a profit.
 Electronic commerce first wave
 Investors sought Internet-driven business models
 Expectations of rapid sales growth, market dominance
 Saw copying of successful “dot-com” business models
 Electronic commerce second wave
 Instead of copying model, examine business elements
 Streamline, enhance, replace with Internet technology driven
processes

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Business & Revenue Models, and Business Processes
(cont’d)
• Revenue model
• A Specific collection of business processes
 Identify customers
 Market to those customers
 Generate sales

• Helpful for classifying revenue-generating activities

• Communication and analysis purposes

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Revenue model: Focuses
i. Focus on Specific Business Processes
 Companies think in terms of business processes
o Purchasing raw materials or goods for resale
o Converting materials and labor into finished goods
o Managing transportation and logistics
o Hiring and training employees
o Managing business finances

 Identify processes benefiting from e-commerce technology

o Improve existing business processes, identify new business opportunities,
adapt to change

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Revenue model: Focuses (cont’d)
ii. Role of Merchandising
• Combination of store design, layout, product display knowledge
• Salespeople skills are to identify customer needs and find products or
services meeting needs

iii. Product/Process Suitability to Electronic Commerce

• Some products are good candidate for electronic commerce
• A commodity item, a product or service that is hard to distinguish from the
same products or services, standardized and well known features except
price.
• Shipping profile, collection of attributes affecting how easily that product
can packaged and delivered, i.e., value-to-weight ratio, e.g. DVD

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 Product/Process Suitability to Electronic Commerce

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Electronic Commerce: Advantages
•E-commerce increases sales and decreases costs
• Increases purchasing opportunities
• Identifies new suppliers and business partners
• Efficiently obtains competitive bid information
• Easier to negotiate price and delivery terms
• Increases speed, information exchange accuracy
• Wider range of choices available 24 hours a day and immediate access to
information
• Provides fraud, theft loss protection,
• easier to audit and monitor
• Faster transmission

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Electronic Commerce: Disadvantages
• Poor choices for electronic commerce, e.g. perishable foods, high-
cost items,
• Need for critical mass, e.g. online grocery like Peapod, Tesco,
FreshDirect,
• Predictability of costs and revenues, hard to determine with accuracy
• Technology integration issues, difficulty of integrating existing
databases & transaction-processing software
• Cultural and legal concerns, online anxiety/fear, resistant to change
habit, unfavorable govt. regulations for electronic commerce

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Electronic Commerce: Economic Forces
I. Transaction costs, total of all costs that a buyer and seller incur as they
gather information and negotiate a purchase-and-sale transaction, e.g.
information search cost, acquisition cost, sales commission
II. Markets and Hierarchies, Manufacturing innovations increased
monitoring activities’ efficiency and effectiveness
• SBU (Strategic Business unit), one particular combination of product,
distribution channel, and customer type, e.g. General Elecctric
III. Network economic structures, strategic alliances or partnership
IV. Network effects, value of the network to each participant increases, e.g.
mobile phone coverage,
• Law of diminishing returns
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Identifying Electronic Commerce Opportunities

• Strategic business unit value chains

• Industry value chains
• SWOT analysis

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Value chain for a strategic business unit
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 • Examine where strategic business unit fits
within industry
• Industry value chain refers to value
systems
• Industry value chain identifies opportunities
up and down the product’s life cycle for
increasing the efficiency or quality of the
product.
• Allows identification of new opportunities
• Useful way to think about general business
strategy

Value chain for a strategic business unit

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 SWOT analysis questions
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 Results of Dell’s SWOT analysis

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International Nature of Electronic Commerce
i. Trust
 Mostly rely on brand names
 Anonymity exists in web presence
 Must overcome distrust in Web “strangers”

ii. Culture
 Combination of language and customs
 Personal property concept, privacy
 Online discussion inhospitable to cultural environments
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International Nature of Electronic Commerce (cont’d)
iii. Language
 ‘think globally, act locally’
 May require multiple translation

iv. Government
 Internet censorship

v. Infrastructure
 Freight forwarder, arranges shipping & insurance for transaction
 Customs broker, arranges the payment of tariffs and compliance with customs laws
 Bonded warehouse, secure location where incoming international shipments can be held
until customs requirements are satisfied or until payment arrangements are completed.

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 Parties involved in a
typical international
trade transaction

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Acknowledgement:
Gary Schneider. E-Business. International Edition, Cengage Learning.