chapter 1 rk

7/29/2019 Chapter 1 RK

1/67

1

Electronic Commerce

Chapter 1Ravi Kalakota


2/67

2

Electronic Commerce Framework


3/67

3

None of these uses would be possible

without each of the building blocks in theinfrastructure:

Common business services, for facilitatingthe buying and selling process

Messaging and information distribution, as

a means of sending and retrievinginformation



4/67

4


Multimedia content and networkpublishing, for creating a product and ameans to communicate about it.

The Information Superhighwaythe veryfoundationfor providing the highwaysystem along which all e-commerce musttravel


5/67

5


The two pillars supporting all e-commerce--applicationsand infrastructure are just as indispensable.

First Pillar

Public policy, to govern such issues as universal access,privacy and information pricing

Second Pillar

Technical standards, to dictate the nature of informationpublishing, user interfaces, and transport in the interest ofcompatibility across the entire network


6/67

6


Any successful e-commerce application willrequire the I-way infrastructure, in the sameway that regular commerce needs theinterstate highway network to carry goods

from point to point. You must travel across thishighway whether you are an organizationpurchasing supplies or a consumer ordering a

movie on demand.


7/67

7


I-way will be a mesh of interconnected data highwaysof many forms: telephone wires, cable TV wires,radio-based wirelesscellular and satellite.

E-commerce are based on vehicular traffic, in ourcase, vehicles transporting information or multimediacontent

The ultimate winner must select the technology forthe I-way that best matches future business needs byusing todays tools


8/67

8


The information and multimedia contentdetermines what type of vehicle is needed.

A breakdown of potential everyday e-

commerce vehicles into their technologicalcomponents shows that they vary widely incomplexity and my even need to traveldifferent routes on the I-way, much the wayan eighteen-wheeler may be restricted fromtraveling roads that cannot accommodate it.


9/67

9


Movies = video + audio

Digital games = music + video + software

Electronic books = text + data + graphics +music + photographs+ video


10/67

10


The electronic documents are oftendigitized, compressed and stored incomputerized libraries or multimedia storagewarehouses called servers, that are linkedby transport networks to each other and tothe software/hardware clients that allowcustomers to access them.


11/67

11

(How exactly the vehicles move from one distribution warehouse to another? Intraditional business, diesel engines, petrol engines powered motors move thetrucks along roadways)

On the I-way, messaging software fulfills this

role, in any numbers of forms: e-mail, EDI orpoint-to-point file transfers.



12/67

12

Electronic Commerce Framework(How can businesses assure customers of safe delivery? How can

customers pay for using the I-way?)

Encryption and authentication methods havebeen developed to ensure security ofcontents while traveling the I-way and attheir destination and numerous electronicpayment schemes are being developed to

handle highly complex transactions with highreliability.


13/67

13


In case of vehicular traffic over the interstate

highway system, public policy issues concernpollution, consumer protection from fraud,environmental impact and taxation.

Similarly, in information traffic, public policyissue deal with the cost of accessinginformation, regulation to protect consumers

from fraud and to protect their right to privacyand the policing of global information traffic todetect information pirating.


14/67

14


Technical pillar of ecommerce rests in technical

standards without which e-commerce would not beadvanced.

Standards are crucial in the world of global e-commerce, to ensure not only seamless andharmonious integration across the transportationnetwork but access of information on any type of

device the consumer chooses laser disc, PCs,portable hand held devices or television + set topboxes and on all types of operating systems.


15/67

15

Electronic Commerce and Media Convergence

Many companies are pooling their resourcesand talents through alliances and mergerswith other companies to make the electronicmarketplace a reality.

Convergence is defined as the melding ofconsumer electronics, television, publishing,

telecommunications and computers for thepurpose of facilitating new forms ofinformation-based commerce.


16/67

16


Multimedia Convergence applies to theconversion of text, voice, data, image,graphics, and full-motion video into digital

content.

Cross-media convergence refers to theintegration of various industries entertainment,

publication, and communication media basedon multimedia content.


17/67

17

These two types of convergence are often closely

related. For instance, in a new era of interactiveTV, the lines between advertisements,entertainment, education, and services oftenbecome blurred.

While watching an Olympic soccer matchbetween Nigeria and Ireland you may develop anurge to know more about Nigeria instead of

running to local bookstore and purchasing abook, you can link to an on-line database andsearch while not missing any part of the match.



18/67

18

Convergence requires removing the barriersbetween the telecommunications, broadcasting,computing, movie, electronic games, and publishingindustries to facilitate interoperability.

Convergence of content: translates all types ofinformation contentbooks, business documents,videos, movies, musicinto digital information.Once converted into digital form, that informationcan easily be processed, searched, sorted,

enhanced, converted, compressed, encrypted,replicated, and transmitted, and so on, in ways thatare conveniently matched to todays informationprocessing systems



19/67

19

Convergence of transmission:compresses

and stores digitized information so it can travelthrough existing phone and cable wiring. Newswitching techniques and other technologicalbreakthroughs enable all types of information totravel to the home. Here we see a convergenceof communication equipment that provides thepipelines to transmit voice, data, image, and

video all without rewiring the neighborhood



20/67

20

Convergence of information: accessdevices have the sophistication to functionas both computers and televisions. Otherexamples are the ubiquitous telephone,

with internal fax machine, modem, andvideo monitor, capable of receiving fax, e-mail, and video.



21/67

21

Convergence is also being driven by of certain marketconditions

The widespread availability of increasingly low-cost, high-performance enabling componenttechnologies, including semiconductors, storage

and display devices, communications systems,and operating systems, among others

Entrepreneurs who are feeding on anticipatedend-user demand for new ,applicationsboth

products and servicesthat rely on theaforementioned enabling technologies


22/67

22

Convergence is also being driven by of certainmarket conditions

Aggressive regulatory actions that areintroducing competition in monopolymarkets local and long-distancecommunications, telecommunication andcable equipment, and right-of-way tocustomers curb and that serve to facilitatethe rapid deployment of these new

applications.


23/67

23

THE ANATOMY OF E-COMMERCE APPLICATIONS


24/67

24

1. MULTIMEDIA CONTENT FOR E-COMMERCE APPLICATIONS

Multimedia content can be considered bothfuel and traffic for electronic commerceapplications.

Technical definition of multimedia is the usedigital data-in more than one format, such as

the combination of text, audio, video, andgraphics in a computer file/document



25/67

25



26/67

26

Multimedia mimics the natural way peoplecommunicate. Its purpose is to combinethe interactivity of a user-friendly interfacewith multiple forms of content.

In the popular press, multimedia isassociated with the hardware convergence

taking place the telecommunications,computer, and cable industry as the nextgeneration of digital, interactive home

entertainment nears technical completion




27/67

27



For instance, an electronic book no longertext only, often includes photographs,voice, video clips, animation, and a host of

other things. In other words, every form ofcontent is interrelated to other forms.

THE ANATOMY OF E COMMERCE APPLICATIONS


28/67

28



The success of e-commerce applicationsalso depends on the variety andinnovativeness of multimedia content andpackaging. The advantage goes to the

current providers (or packagers) ofmultimedia content to entertainment,broadcast television productions,

traditional print publications, and softwareand information services.


29/67

29

THE ANATOMY OF E-COMMERCE APPLICATIONS2. Multimedia Storage Servers and Electronic Commerce Applications

Electronic commerce requires robust servers tostore and distribute large amounts of digital contentto consumers.

These multimedia storage servers are large

information warehouses capable of handling variouscontent ranging from books, newspapers,advertisement catalogs, movies, games, and x-rayimages

These servers, deriving their name because theyserve information upon request, must handle large-scale distribution guarantee security and complete

reliability.


30/67

30

THE ANATOMY OF E-COMMERCE APPLICATIONS2.1 ClientServer Architecture in Electronic Commerce


31/67

31


Clients are devices plus software that requestinformation from servers.

The clientserver model, allows the client tointeract with the server through a request-reply

sequence governed by a paradigm known asmessage passing

The server manages application tasks, handlesstorage and security, and provides scalability to

add more clients as needed for serving morecustomersand client devices (from personaldigital assistants to PCs) handle the userinterface

THE ANATOMY OF E COMMERCE APPLICATIONS


32/67

32


---- Internal Processes of Multimedia Servers

The internally processes involved in the storage, retrieval,and management of multimedia data objects are integral toe-commerce applications.

A multimedia server is a hardware and softwarecombination that converts raw data into usable informationand then dishes out this information where and whenusers need it.

It captures, processes, manages, and delivers .txt images,audio, and video. Most multimedia servers provide a coreset of functions to display, create, and manipulatemultimedia documents; to transmit and receive multimediadocuments over computer networks, and to store andretrieve multimedia documents.


33/67

33


---- Internal Processes of Multimedia Servers

To make interactive multimedia a reality a server mustdo the following: handle thousands of simultaneous user,manage the transactions of these users e.g., purchases,specific information requests, customer billing); and

deliver information streams to consumers at affordablecosts.

Let us illustrate the issues by looking at video on-demand. Here, a single 90-minute video consuming over

100 gigabyte of space must be distributed to a largenumber of consumers. For these new requirements,platform choices include high-end symmetricmultiprocessors, clustered architecture, and massiveparallel systems.


34/67

34


---- Video Servers and Electronic Commerce

The electronic commerce applications related todigital video will include telecommuting and videoconferencing, geographical information systemsthat require storage and navigation over maps,

corporate multimedia servers, postproductionstudios, and shopping kiosks

Consumer applications will include video on-

demand and a range of interactive services suchas shopping, video navigation (e.g., interactive TVguides), and directories (e.g., interactiveTelephone yellow pages).


35/67

35


---- Video Servers and Electronic Commerce

Video servers are an important link between the contentproviders (entertainment/media) and transport providers(telcos/wiress/cable operators). One important differencebetween video servers and the current client-server computersystems used extensively for data processing is that video

servers are designed to deliver information to hundreds ofconsumers simultaneously via public telecommunications andcable networks.

Video servers tackle the simultaneous overlapping supply

problem that arises when providing on-demand services tolarge numbers of homes. Numerous households will want towatch film either simultaneously or at overlapping times. Thisproblem can be approached from either the hardware or thesoftware end.


36/67

36


Information Delivery/Transport and E-Commerce Applications

Transport providers areprincipallytelecommunications cable,and wireless industries,computer works including

commercial networks such asCompuServe or AmericaOnline; and public networkssuch as the internet.


37/67

37



Each highway route provider faces a different but no less daunting set ofchallenges:

Telecom-based:These providers, the most visible(and vocal) of all competitors, include long-distance and local telephone service providers.

Cable Based:These providers depend on coaxialcable as transport roads and will, help determinewhich broadband applications and services theviewing public prefers. All leading cable providers

are conducting trials with a variety of hardwareand software, and most are expected use fiberoptic cable and coaxial wire as the deliverymedium


38/67

38



Computer network-based: These providers are oftendial-up linkages of lower bandwidth when compared totelecom and cable highways. Bandwidth is analogous tothe number of lanes on a highway. Examples of online

transport architectures are CompuServe, Prodigy, adAmerica Online, which often tend to serve as both atransport road and content providers.

Wireless: These operators are typically radio-based

cellular, satellite and light-based-infra-red. In fact, someof the most exciting transport architectures are invisible.New wireless-based systems require new ways ofthinking about information delivery


39/67

39



About 65 percent of e-commerce applications aredelivered online via computers equipped withmodems

Information delivery by telephone, calledaudiotext, is a promising medium, generatingabout $590 million in revenue in 1993 despitegovernment regulations

Audiotextis especially popular for delivery, in realtime, of certain types of information such as stockquotes, mortgage rates, sports and lottery results,weather, and news.


40/67

40

THE ANATOMY OF E-COMMERCE APPLICATIONS:

Consumer Access Devices

Interactive TV hasbeen touted as theinformation access

device of the future.

ELECTRONIC COMMERCE CONSUMER


41/67

41

ELECTRONIC COMMERCE CONSUMERAPPLICATIONS

What type of services do consumers reallywant or are willing to pay for?

Do they want applications that bring about

social change, that entertain, that areeducational, or that educate as well asentertain?

What amount is the consumer willing topay for these services?

How should the product be priced so thatfirms are competitive as well as profitable?

ELECTRONIC COMMERCE CONSUMER APPLICATIONS


42/67

42

Most successful marketplaces are expected to be

those that cater to consumers loneliness,boredom, education, and career.

The success of on-line chat services and homeshopping channels

One can add video on-demand (sports, and

gambling), electronic malls, grocery shopping, andlocal news to that list.

Newspaper publishers with on-line services havealready found a successful niche


1.Consumer Applications and Social Interaction


43/67

43


2. What Do Consumers Really Want?

Consumers are generally satisfied with the range of

choices (approximately 50 channels) now available oncable television. The main complaint is not lack of choices,but quality and cost of service.

People, for instance, are comfortable with the way

televisions and telephones work. If a new system requiresmore steps to do essentially the same things, consumersmay resist it.

Some system developers and their software programmers

assume that consumers are itching to be converted frompassive to interactive television watchers. Certainly, somepeople fit that mold, but most of the public prefers to layback and just watch television and let someone else do thework of figuring out the sequence of televisionprogramming.


44/67

44

ELECTRONIC COMMERCE CONSUMER APPLICATIONS3.Consumer Research and Electronic Commerce

46 percent would be willing to pay for personalized newssummaries on an interactive television service.

39 percent want video phone calls.

63 percent would pay for movies on-demand.

57 percent would pay for television shows on-demand. 78 percent said their greatest worry about interactive TV

is that they will have to pay for something that theypreviously received free of charge.

64 percent are concerned that interactive television willmake it harder for viewers to protect their privacy.

41 percent are concerned that it will be too confusing touse.

ELECTRONIC COMMERCE ORGANIZATION


45/67

45

ELECTRONIC COMMERCE ORGANIZATIONAPPLICATIONS

1. Changing Business Environment Many companies are looking outside their organization

as well as within when shaping their business strategies.

These activities include establishing private electronic

connections to customers, suppliers, even computers, toincrease the efficiency of business communications, tohelp expand market share, and to maintain long-termviability in todays business environment.

Information Superhighway will allow business toexchange information among constantly changing sets ofcustomers, suppliers, and research collaborators ingovernment and academia on a global basis.



46/67

46


1. Changing Business Environment

Inter-networking, whether internally or externallywith customers and business partners, can be auseful tool to facilitate time-based competitive

strategies Internetworking via a public network

infrastructure provides a firm with the pathwaysto conduct e-commerce between trading

partners, support collaboration with partnerswho can supply needed capabilities, and stayclose to the customer.



47/67

47


1. Changing Business Environment



48/67

48


2. Electronic Commerce and the Retail Industry

Consumers are pushing retailers to the wall, demandinglower prices, better quality, a large selection of in-seasonfoods. Retailers are scrambling to fill the order.

They are slashing back-office costs, reducing profitmargins, reducing cycle times, buying more wisely, andmaking huge investments in technology.

They are revamping distribution channels to make surethat warehouse costs are down by reducing their averageinventory levels and coordinating the consumer demandand supply patterns.



49/67

49


2. Electronic Commerce and the Retail Industry

Electronic markets could provide a partialsolution by promising customers moreconvenience and merchants greater

efficiency and interactivity with suppliers torevitalize the troubled retailing sector.



50/67

50


3. Marketing and Electronic Commerce

Electronic commerce is forcing companies to rethink theexisting ways of doing target marketing (isolating andfocusing on a segment of the population), relationshipmarketing (building and sustaining a long-termrelationship with existing and potential customers), andeven event marketing (setting up a virtual booth whereinterested people come and visit).

Interactive marketing is accomplished in electronic

markets via interactive multimedia catalogs that give thesame look and feel as a shopping channel.



51/67

51


3. Marketing and Electronic Commerce

Users find moving images more appealingthan still images and listening moreappealing than reading text on a screen.

Those are two powerful reasons whyevery text-based and still-picture-basedinteractive experiment like videotext has

failed in the past.


52/67

52

ELECTRONIC COMMERCE ORGANIZATION APPLICATIONS

4. Inventory Management and Organizational Applications

In the manufacturing industry, theyre

known as just-in-time (JIT) inventorysystems, in the retail industry as quick

response (QR) programs, and in thetransportation industry as consignmenttracking systems.


53/67

53



4.1 Just-In-Time Manufacturing (JIT)

Just-in-time (JIT) is viewed as an integratedmanagement system consisting of a number of differentmanagement practices dependent on the characteristics

of specific plants The JIT management system, an evolution of the

Japanese approach to manufacturing introduced for theToyota production system, is based on two principleselimination of waste and empowering workers.

The first principle refers to the elimination of all waste(time, materials, labor and equipment) in the productioncycle.


54/67

54

Just-In-Time Manufacturing (JIT)

The following management practices are typicallyassociated with JIT systems: focused factor, reducedset-up times, group technology, total productivemaintenance, multifunction employees, uniformworkloads, total quality control, and quality circles

JIT purchasing focuses on the reduction of inventoriesthroughout the logistical systems of the manufacturingfirms involved and provides a careful audit of theproduction process.

To achieve JIT savings, many large corporations haveinstalled private communications networks. The I-waymakes this practice more affordable and easily availableto a number of small firms.


55/67

55



4.2 Quick Response Retailing

Quick response (QR) is a version of JITpurchasing tailored for retailing.

Most often, keeping a store filled withmerchandise is a task most shoppersnever consider until the product they wantis out of stock

To reduce the risk of being out of stock,retailer is implementing QR systems.

4 2 Quick Response Retailing


56/67

56

4.2 Quick Response Retailing QR provides for a flexible response to product ordering

and lowers costly inventory levels.

QR retailing focuses on market responsiveness whilemaintaining low levels of stocks. It creates a closed loop encompassing the retailer,

vendor & consumer chain, and as consumers makepurchases, the vendor automatically orders new

deliveries from the retailer through its computer network.

The bar-coded articles are logged by the cash registersat the point of sale; the inventory system of the storethen determines the needed supply and the system

transmits an order message to the retailer.

The availability of accurate information with respect tothe current sales enables sophisticated marketingcapable of responding to consumers preferences.

Q i k R R ili


57/67

57

Quick Response Retailing


58/67

58

Quick Response Retailing

One of the famous examples of QR systems wasimplemented in the 1980s By WALMART.

Wal-Mart invested half a billion dollars in computer and

satellite communications networks, bar-code systems,scanners, and other QR equipment linking each point-ofsale terminal to distribution centers and headquarters inBentonville, Arkansas.

Many believe that it was this system that enabled Wal-

Mart to manage the explosive retail sales growth thatcatapulted the company to number one position in theU.S. retail business.


59/67

59


4.2 Supply Chain Management

Supply chain management (SCM) is alsocalled extending, which means

integrating the internal and external

partners on the supply and process chainsto get raw materials to the manufacturerand finished products to the consumer

Supply chain management (SCM)


60/67

60

Supply chain management (SCM)Supply chain management includes the following functions

Supplier management: The goal is toreduce the number of suppliers and getthem to become partners in business in a

win/win relationship. The benefits are seenin reduced purchase order (PO)processing costs; increased numbers of

POs processed by fewer employees, andreduced order processing cycle times


61/67

61


Inventory management: The goal is to shortenthe order-ship-bill cycle. When a majority ofpartners are electronically linked, informationfaxed or mailed in the past can now be sent

instantly.

Documents can be tracked to ensure they werereceived, thus improving auditing capabilities.The inventory management solution shouldenable the reduction of inventory levels, Improveinventory turns, and eliminate but-of-stockoccurrences

S (SC )


62/67

62


Distribution management. The goal is tomove documents related to shipping (billsof lading, purchase orders, advanced ship

notices, and manifest claims). Paperworkthat typically took days to cycle in the pastcan now be sent in moments and contain

more accurate data, thus allowingimproved resources planning.

S l h i (SCM)


63/67

63


Channel management. The goal is to quicklydisseminate information about changingoperational conditions to trading partners. Inother words, technical, product, and pricing

information that once required repeatedtelephone calls and countless labor hours toprovide can now be posted to electronic bulletinboards, thus allowing instant access. Thuselectronically linking production with their

international distributor and reseller networkseliminates thousands of labor hours per week inthe process

S l h i t (SCM)


64/67

64


Payment management. The goal is to linkthe company and the suppliers anddistributors so that payments can be sent

and received electronically. This processincreases the speed at which companiescan compute invoices, reducing clerical

errors and lowering transaction fees andcosts while increasing the number ofinvoices processed (productivity

S l h i t (SCM)


65/67

65


Financial management. The goal is toenable global companies to manage theirmoney in various foreign exchange

accounts. Companies must work withfinancial institutions to boost their ability todeal on a global basis. They need toassess their risk and exposure in global

financial markets and deal with globalinformation as opposed to local marketinformation

S l h i t (SCM)


66/67

66


Sales force productivity. The goal is to improve thecommunication and / flow of information among thesales, customer, and production functions. Linking thesales force with regional and corporate officesestablishes greater access to market intelligence andcompetitor information that can be funneled into bettercustomer service and service quality. Companies needto collect market intelligence quickly and analyze it morethoroughly. They also need to help their customers(relationship management) introduce their products tomarket faster, giving them a competitive edge


67/67

End of Chapter 1