eCommerce Lecture Series
Lecture 2
E-Commerce & E-Business Concepts and Components
Keeran Jamil
Learning objectives
Understand and be able to define e-Commerce Understand barriers and drivers to going On-line Understand types of e-Commerce Understand and be able to define e-Business Understand the difference between eCommerce and e-Buisness
Definitions
You are asked to distinguish between ecommerce and e-business at a job interview. Write down your definitions. Use examples to illustrate your points.
E-Commerce Defined
Electronic-Commerce The buying and selling of information, products, and services via computer networks and distributed media, usually the World Wide Web.
E-commerce Defined (II)
All electronically mediated information exchanges between an organization and its external stakeholders
Examples:
Buying books online (transactional) Selecting a car online (informational) Interacting with brand online (relationship building / experiential, e.g. www.tango.com) Asking a customer service query, e.g. www.easyJet.com
5
The distinction between buy-side and sell-side e-commerce
The distinction between buy-side and sell-side e-commerce
6
Activity drivers and barriers to adoption
You are in a team of advisers at a local Business Link (a local government agency encouraging adoption of e-commerce) List:
Drivers to adoption of sell-side e-commerce by business and how you can reinforce these by marketing benefits Barriers to adoption of sell-side e-commerce by business and how you can reinforce these by stressing benefits
7
Business Drivers to Going Online
Driver
1 Reduced costs 2 Increase reach to new markets 3 Customer demand
Marketing approach
Give real examples Give examples of SME Data on those researching and buying online
4 Competitive threats
Ditto
Business Barriers to Going Online
Barrier
1 Security
2 No need 3 Costs 4 Skills
Marketing approach
Reassurance
Illustrate with data of businesses researching and buying online Illustrate low cost options Summarise skills alternatives
9
Drivers for e-commerce
Figure 1.6 Attitudes to benefits of online technologies
Source: DTI (2002) 10
Barriers to e-commerce
Figure 1.7 Barriers to development of online technologies
Source: DTI (2002) 11
Types of e-Commerce
Business-to-Consumer
E-commerce between organizations and individual consumers
Business-to-business (e-Business)
E-commerce between businesses Accounts for a much larger portion of ecommerce than business-to-consumer.
Business-to-administration
Consumer-to-administration 12
e-Business Definition
Electronic-Business: The conduct of transactions by means of electronic communications networks (e.g., via the Internet and/or possibly private networks) end-to-end.
13
e-Commerce vs. e-Business
Compared with e-Commerce, e-Business is a more generic term; it refers not only to information exchanges related to buying and selling but also to servicing customers and collaborating with business partners, distributors and suppliers. e-Business encompasses sophisticated business-to-business interactions and collaboration activities at a level of enterprise applications and business processes.
14
e-Commerce vs. e-Business
(continued)
e-Business processes are integrated end-to-end across the company, with key partners, suppliers and customers & can respond with flexibility and speed to customer demands and market opportunities.
Companies link their internal and external processes more efficiently & flexibly, work more closely with suppliers to satisfy the needs & expectations of their customers.
Internal or back-office processes include distribution, manufacturing and accounting while external or front-office processes include these processes that connect an organization to its customers and suppliers.
15
Importance of World Wide Web for e-Business
WWW is the fastest growing activity on the Internet
companies advertising their presence companies searching for information and products companies buying and selling intellectual property, physical goods, and professional services
16
Characteristics of e-Business
e-Business is about integrating external company processes with an organizations internal business processes:
Collaborative product development. Collaborative planning, forecasting and replenishment. Procurement and order management. Operations and logistics.
17
Ingredients of an e-Business Solution
Customers
CRM
Web selling
Finance/ Accounting/Auditing Management Control
Stakeholders
Knowledge Management Order Fulfillment (ERP)
Ordering
Purchasing
Production
Delivery
Supply Chain E-Markets, Auctions, Intermediaries
Distributors Suppliers Partners 18
eCRM
Customer Relationship Management (CRM) systems: front-office systems that help the enterprise deal directly with their customers. CRM integrates & automates customer-serving processes within a company (personal information gathering & processing, and self-service throughout the supplying company in order to create value for the customer).
19
E-CRM a definition
E-CRM is: Applying Internet and other digital technology (web, e-mail, wireless, iTV, databases) acquire and retain customers (through a multi-channel buying process and customer lifecycle) by improving customer knowledge, targeting, service delivery and satisfaction
to
20
Why CRM is a Customer and Competitive Necessity
It typically costs 5-10 times as much to acquire a new customer as it does to retain an existing one. Some companies can boost profits by almost 100% by retaining just 5% more of their customers. Harvard Business Review (Reicheld & Sasser) A recent McKinsey study showed that the average new customer spends $24.50 at a given web site in the first 3 months as a shopper. The average repeat customer spends $52.50 every 3 months. Most companies lose 50% of their customers in 5 years (Harvard University) On average only 15% of a sites customers consider themselves loyal to it. The loyalty rating among people who had experienced a problem was only 6%. Customers who had not experienced problems indicated a customer loyalty rating of 19%. The loyalty rating among customers who had experienced problems but were satisfied with the way they were handled: 21%. (Digital Idea) 70% of repeat purchases are made out of indifference to the seller, NOT loyalty. (eLoyalty) The web customer is only 1 click away from your competition. 21
CRM Strategies
Customer Acquisition
Gain the greatest number of new Best customers as early in their lifespan as possible. Retain and expand your business and relationships with your customers through up-selling, cross-selling and servicing. Offer programs to ensure that your customers happily buy what you offer only from you. Enable loyal customers to become a volunteer sales force.
Customer Retention
Customer Loyalty
Customer Evangelism
Cost Reduction
Reduce costs related to marketing, sales, customer service and support.
Improve Productivity Enhance your e-business strategies.
22
Customer Value & CRM
What do we mean by customer value? Measures for assessing customer values
Repeat purchase or visits Share of customer spend Up-selling, cross selling New customer referral rate Life time value
23
A summary of an effective process of online relationship building
A summary of an effective process of online relationship building
24
ERP
Enterprise Resource Planning systems (ERP): management information systems that integrate & automate many of the business practices associated with the operations or production aspects of a company. An ERP system includes:
Production: manufacturing resource planning and execution process Buying a product: procurement process Sales of products and services: customer order management process. Costing, paying bills and collecting: financial/management accounting and reporting process.
25
Characteristics of an ERP System
Includes business management software that enables finance and human resources in a completely integrated fashion Enables high levels of integration across business functions and units Provides for widespread sharing of data from a single information repository Drives extensive business transformation and change management efforts Requires high levels of implementation effort and support
26
ERP Implementation Benefits
Streamlines or eliminates inefficient manual processes
Eliminates disparate stand-alone systems
Provides integrated, enterprise-wide common tools, processes and systems
Establishes a backbone structure that can be leveraged to handle all operational processes Integrates and increases control of budgeting, planning and financial management processes
27
ERP Implementation Benefits (continued)
Provides enterprise-wide reporting and decision support Presents opportunity for re-engineering with industry best practices and templates
Presents opportunity to lever vendors future investment in enhanced functionality
Incorporates new functionality and technology provides a springboard to e-Business
28
The Value Chain
Distinction between what we do and how From function to processes Traditional value chain: manufacturing
Problematic for services, insurance, banking etc.
Alternative models suggested Major objective:
Identify critical processes, information exchange with suppliers and customers Effectiveness of information flows through processes
29
Value Chain Analysis
1. 2. 3. 4. Defining the strategic business unit, Identifying critical activities, Defining products, and Determining the value of an activity.
30
The Industry Value Chain or the Value System
Basic raw material
Manufacturing
Assembly
Wholesale
Retail
Consumer
31
SCM
Supply Chain Management (SCM): A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials; transformation of these material into intermediate and finished products & distribution of these finished products to customers. A supply chain essentially has three main parts, the supply, manufacturing and distribution.
32
Supply Chain
Demand
Basic raw material
Manufacturing
Assembly
Wholesale
Retail
Consumer
Supply
Four types of info flows: Transaction: orders, bills Customer demand Supplier information Knowledge flows
33
Back to e-Business
e-Business applications have two sides:
Buy side: organizations that use e-Business facilities for their buying needs, e.g., spot purchasing and/or enterprise-wide procurement. Sell side: businesses that sell their products via the transaction mechanisms offered in e-Business applications.
Manage multiple selling channels. Ability to take multiple types of orders from customers. Ability to differentiate and customise products and services from other suppliers. Ability to adapt and grow the e-Business without dramatic technology changes, organizational restructurings, business processes or radical new investments. Empower suppliers and buyers & enable suppliers of all sizes!
34
e-Business Requirements
Identify/measure quantifiable business objectives Ensure organizational/operational flexibility Re-think entire company supply chains Transform the company to a process-centric one Define business processes Understand security requirements Align business organizations with a flexible IT architecture Establish ubiquity within standards
Efficient process management Efficient enterprise integration technology
35
Advantages of e-Business
Improved operational efficiency and productivity. Reduction in operating costs and costs of goods and services. Improved competitive position. Penetration into new markets through new channels. Improved communications, information and knowledge sharing. Harmonisation and standardisation of processes. Improved internal information access. Improved relationships with suppliers and improved customer service.
36
Inhibitors of e-Business
Management/Strategy Issues
Lack of a clearly defined e-Business strategy Organisational changes required by e-Business Management attitudes and organizational inflexibility
Cost/Financing
Costs of implementation of e-Business Calculating the Return on Investment (ROI)
Insufficient security & trust Legal issues Technology Concerns
Limited interoperability as most existing applications depend on proprietary solutions which do not interoperate.
37
Recap which is correct?
Three definitions of the relationship between e-commerce and e-business
38
