Operational Infrastructure for E-Commerce

• The challenges for organisations involved in EC

• Today’s business models - the relationship between communication, information and operational infrastructures

• The components of an operational infrastructure

• The management issues

The challenges for organisations

• In the last 5 years businesses moved to different degrees through an evolutionary process of:– Brochureware– E-commerce– E-business– E-enterprise

The four phases in e-commerce

1 2 3 4 5 6 7 8

years 1995-2002

Bu

sin

ess

imp

act

Brochureware

e-commerce

e-business

e-enterprise

Today’s business model

• An operational infrastructure– provides the foundation for the delivery of

products and services to customers, and creates the environment for a company to meet its strategic goals.

• Its relationship with communication and information infrastructures

feedback

A business in the digital economy

Relationship between communications, information and

operational infrastructure

Communicationsinfrastructure

Informationinfrastructure

Operational infrastructure

Supply-chain managementProcurementPayment infrastructureDelivery channels and logisticsLegal framework for global distributionMarketing

Customers Products andservices

Businessstrategies

The components of an operational infrastructure

• Supply-chain management

• Procurement

• Payment infrastructure

• Delivery channels and logistics

• Legal framework for global distribution

• Marketing

Supply chain

• A supply chain connects manufacturing plants, distribution centres, warehouses, retail outlets etc. with information, regulation and procedures.

• SC management before and after EC

Electronic supply chain management

• The models used for supply mechanism:– Stocking products in house

– Outsourcing the warehouse

– Drop shipping

– Using fulfilment intermediaries.

• The contribution of ICTs in this

Benefits of electronic supply chain management

• Just-in-time delivery

• Speed

• Efficiency

• Cost saving

Procurement• This is the process of the purchase of non-

strategic goods and services.

• Electronic procurement can be done by using standard on-line activities or with the help of a marketplace.

• Can be achieved at three strategic levels– Transactions

– Strategic sourcing

– Market transparency

Benefits of e-procurement

• Lower cost

• Better co-ordination

• Optimised purchasing

Payment infrastructure

• Credit and debit cards are frequently used for payment in EC

• Security is implemented by the use of two protocols: – secure sockets layer (SSL) and – secure electronic transaction (SET).

SET

• Visa and Mastercard (the originators of SET), later joined by JCB and American Express established SETCo

• SETCo tests the software used for payment, ensures retailers’ compliance to its standard, and holds the SET cryptographic master key

• The company then provides a certificate to all its users

3. Customer application sends encrypted order and payment

information

4. Merchant keeps order 1. Customer application sends information & request for products to merchant decrypts it

9. Merchant responds to customer and processes order 8. Gateway sends ‘all clear’ sign

to merchant 2. Merchant responds with authentication info

5. Merchant sends encrypted payment info to payment

6. Payment info is sent to issuer gatewayfor authorisation

7. Authorisation is sent back to the payment gateway

Secure Electronic Transaction (SET)

Customer(SET certified)

Merchant(SET certified)

Paymentgateway(SET certified)

Financialnetwork(SET certified)

SET vs. SSL

• Both use digital certificates and encryption.

• SET is more secure than SSL because it gives the merchant only the order information.

• The payment information is sent to a payment gateway for authorisation before money changes hands.

Some other methods used in electronic payment

• Electronic cheque

• Electronic cash

• First Virtual payment system

• Electronic bill payment service providers

• Clearing services run by banks provide an infrastructure for transfer of funds between banks.

Payment infrastructure in B2B

• The B2B sector uses a payment gateway service provider by major technology companies.

• It also has partnership with PKI service providers

• And it it uses bank clearing services provided by banks.

Distribution channels & logistics

• Logistics provides an infrastructure for a distribution system which is capable of supplying goods fast and without complication.

• It also enables a company to track the progress of delivery and respond to customer queries quickly.

Ways to improve logistics

Review the following– The amount of stock holding by a company– The number of intermediaries used– Supply chain activities performed by one

company– New service development in supply chain.

The legal framework for E-commerce

• Protection of trade marks• Protection of domain name• Clarification of tax laws• Customers’ rights to full and correct information.• Contract for an electronic sale • Reliability of financial services

• A framework for consumers to avoid unsolicited emails (spam)

• Copyright of material published on a website • Discriminatory behaviour in electronic publishing • The concept of libellous activities• Protection for consumers during on-line sales.

Regulations introduced/proposed

Distance Selling Directive Tax laws for transactions between EU and

non-EU countries Use of digital signature Escrow agencies for the interception of

encrypted messages

Regulatory priorities for EC

• Some agreement is reached internationally

• The law is balanced, enforceable, clear and uniform

• There is a legal infrastructure that encourages rather than dampens the growth of e-commerce.

Marketing

Marketing activities– Market research– Promotional activities such as advertising and

publicity – Brand establishment– Building relationships with customers – Assessment of customer behaviour.

Market Research

• Benefits– Large sample

– Anonymity of sample

– User’s discretion in participation

– Interactivity

– Speed

– Cost saving for

• Problems:– Dependence on

technology

– Security

– Privacy

Advertising

Methods used in e-advertising:– Banner on websites– Emails - random or targeted– Viral marketing - using users’ contacts to

advertise– Partnership with other companies– Splash display

Techniques used in advertising

• The pull technique of advertising make its features available to consumers but waits for them to access;

• The push technique forces a user to view the information presented

Branding

• Branding is the establishment of a company identity by creating:– Communities of interest– Familiarity– Attraction– A relationship of trust and loyalty.

• Brand loyalty is volatile and depends on its relevance and differentiation.

• Physical companies entering EC can use:– the purposeful– Darwinian or – mixed approach

Building customer relationship

• Relationship building is the establishment of an interactive dialogue between customers, market specialists and business leaders.

• It involves an iterative cycle of learning about customers, differentiating between them and customising marketing strategies accordingly.

Interactions

Interactions

Building customer relationship

Learning aboutcustomers

1. Knowledgeacquisition

2. Customerdifferentiation

Customisation ofmarketing

1. Products/services2. Communication3. Channels4. Price

Customising relationships

• Relationship with customers can be customised at four levels: – products and services, – communications techniques, – distribution channels – prices.

• A well established knowledgebase on customers helps to achieve this.

Building electronic communities

• Electronic communities are a valuable technique for building a relationship with customers.

• Chat rooms. bulletin boards, newsgroups etc. help to build user communities

• They also help to create a relationship of trust, familiarity and a shared lifestyle.

Assessment of customer behaviour

The pattern of customer behaviour can be understood by monitoring the processes of:– Acknowledging the need and starting a search– Decision making– Purchasing– Returning to the website

The management issues

• Management of IT

• Development and implementation of business systems

• Risk management and recovery procedures

• Resource management

• Business process re-engineering

Questions

What problems could managers face in building each of the processes involved in an operational infrastructure?

Case studies

• Wedgewood

• Schlumberger

• Hanson Construction

• Urbia.co.uk