E-Business Notes

E-Business

Introduction

• E-Business (Electronic Business) is the administration of conducting business using the Internet.

• It includes buying and selling goods and services, providing technical or customer support.

• It's often used with e-commerce but includes additional services beyond the sale of goods.

• E-commerce involves the exchange of products and services between businesses, groups, and individuals.

• E-business refers to business conducted with the help of the internet network.

What is E-Business?

• E-Business describes information systems and applications that support and drive business processes, often using web technologies.

• It allows companies to link internal and external processes more efficiently, work closely with suppliers and partners, and better satisfy customer needs, leading to improved business performance.

• It's more than just a web presence, including collaboration tools, mobile and wireless technology, Customer Relationship Management (CRM), and social media.

Three Primary Processes Enhanced in E-Business

1. Production processes: procurement, ordering, replenishment of stock, processing payments, electronic links with suppliers, and production control.

2. Customer-focused processes: promotional and marketing efforts, selling over the Internet, processing customer purchase orders and payments, and customer support.

3. Internal management processes: employee services, training, internal information-sharing, video-conferencing, and recruiting. It enhances information flow between production and sales to improve sales force productivity.

History of E-Business

• In 1997, IBM used its IT solutions to market itself as a leader in conducting business on the Internet through the term "e-business."

• CEO Louis V. Gerstner, Jr. invested $1 billion to market this new brand.

• IBM decided not to trademark "e-business" to encourage industry-wide adoption.

• By 2000, IBM launched a $300 million campaign about its "e-business infrastructure" capabilities to differentiate itself.

Early Use of the Web for Business

• Traditional businesses used the web for catalog sales, customer service information (manuals and drivers), and to create a consistent corporate image.

• Internet-based businesses like eBay and Amazon developed, along with information repositories like eHow.

Early Online Sales

• Businesses started using websites for marketing in the early 1990s, providing basic information about products and services, including contact information.

• Online sales began in 1994 with the ability to encrypt credit card data.

Secured Socket Layer (SSL)

• Developed by Netscape in 1994, SSL allowed websites to encrypt sessions, making credit card transactions safer.

• With an encrypted connection between a company's server and a client computer, credit card numbers could be masked.
  This security led to increased business sales via the web.

Birth of Modern Web Sales

• Developments in server technology, including building websites from product databases, led to the creation of large Internet-only businesses like eBay and Amazon.

• Database-driven sites used web-page templates to display thousands of products on-the-fly.

Payment System Advances

• Early SSL implementations were good, but many people still did not trust them to enter credit card payment information.

• PayPal enabled credit card processing by many small businesses that wouldn't otherwise be eligible for a traditional credit card merchant account.

Dot-Com Bubble of 2001

• Notable denial of service (DoS) attacks on prominent websites caused customer worry that their credit card data might not be safe.

• Online businesses received large capital investments via Initial Public Offerings (IPOs), and saw their stock selling at prices far above the actual value of their companies.

• Many companies had good ideas but poor business plans, and speculation bid up the prices of stocks in Internet companies.

• As online companies began reporting large losses and investors examined online business plans, fearful investors sold their stocks, causing prices to plummet.

• Many companies that lacked solid business plans failed between 2001 and 2002, e.g., eToys.

The Current State of E-Business

• E-business ranges from simple sites providing corporate information to complex sites offering goods and services for sale online.

• Innovative uses include online language tutoring, large commercial information repositories and the Internet for research.

Difference Between E-Commerce and E-Business

• E-commerce is any transaction completed over a computer-mediated network involving the transfer of ownership or rights to use goods and services, according to the U.S. Census Bureau.

• E-business is broader than e-commerce, including transaction-based e-commerce businesses and those who run traditionally but cater to online activities.

• All e-commerce companies are e-businesses, but not vice versa.

• E-commerce includes transactions made on the internet, Intranet, Extranet, World Wide Web, by email and even by fax.

• E-commerce branches into online purchasing and online shopping.

• E-business can work for any business because it involves the whole cycle from production, procurement, distribution, sales, payment, fulfillment, restocking and marketing.

• Business strategy is complicated, involving vertical, lateral, horizontal and downward planning.

The E-Business Model

• The e-Business model describes how a company functions, provides a product or service, generates revenue, and adapts to new markets and technologies.

• It has four traditional components: the e-business concept, value proposition, sources of revenue, and the required activities, resources, and capabilities.

• In a successful business, all of its business model components work together in a cooperative and supportive fashion.

1. E-Business Concept

• The e-business concept describes the rationale of the business, its goals and vision, and products or offerings from which it will earn revenue.

• A successful concept is based on a market analysis that identifies customers likely to purchase the product and what they are willing to pay for it.

(i) Goals and Objectives

• The e-Business concept should be based, in part, on goals such as "become a major bank or other commercial enterprise", and "to become a competitor to some of the well-known in each of these industries."

• Objectives are more specific and measurable, such as "capture X% market share", or "have $100 million$ in revenues in five years."

(ii) Corporate Strategies

• Embedded in the e-Business concept are strategies that describe how the business concept is intended to function.

• These strategies can be modified to improve the performance of the business.

• Environmental strategies describe how the company will react to external environmental factors, over which it has no control.

(iii) The E-Business Concept and Market Research

• The selection and refinement of the business concept should be integrally tied into knowledge of the market it serves.

• In performing market research care must be taken to account for the global nature of the Internet for both customers and competitors.

• Truly understand who the market is, who comprises it, and what do they want.

(iv) Price

• Pricing is an important part of the e-business concept and should be established on the basis of market research. Price is often set with an eye on the competition and can have a direct effect on sales.

• Online pricing may include negotiation or auction pricing, where the interaction of sellers and buyers can effect the price. Knowledge of competing prices is also readily available online, and will keep downward pressure on prices.

• If a company has high fixed cost to variable costs, prices should be changed cautiously. If customers are "locked-in", and the product or service is less sensitive to price, then prices may be changed, to a degree, with less risk. But all changes should be checked beforehand with market research and financial analysis.

• One way to survive in this environment is to sell at the minimum price that allows a profit, avoid price changes and continuously upgrade the product. This approach is often used in computer hardware and software sales.

• At the same time the seller should invest in finding how to shorten the development cycle, and put in place a market research program that will quickly identify trends and changes.

Goal and Vision

• The steady development of a product evens out the revenue stream rather than having the "boom or bust" cycle of a single product.

• It also shows that the company is steadily developing and upgrading products for the customers who should begin to buy into the company's vision.

• Price must also provide real value to the customer.

• Comparisons of price and ROI may be used to show that the offering adds more value than a competitor's.

• The price can also be a basis for building long-term customer relations, which can lead to multiple sales.

2. Value Proposition

• The value proposition describes the value that the company will provide to its customers and, sometimes, to others as well.

• With a value proposition the company attempts to offer better value than competitors so that the buyer will benefit most with this product.

• A value proposition may include one or more of the following points:

  • Reduced price

  • Improved service or convenience such as the "1 click" checkout

  • Speed of delivery and assistance

  • Products that lead to increased efficiency and productivity

  • Access to a large and available inventory that presents options for the buyer

Value Delivery Through Integration Of Activities

• Integration of systems inside and outside the organization can provide value for both customers and the organization.

• One of the requirements for e-business is to link front-end with back-end systems in order automate the online operations of the organization.

• Examples of activities that require integrated systems are:

  • Order placement through point-of-sales systems

  • Customization of products based on user requirements

  • Production tracking

  • Customer order fulfillment

External Integration: The Supply Chain

• Operations on the Web can also extend to cooperating firms such as partners in a supply chain, also known as a "Value Web".

• The Value Web may include a wide range of participants as well as the possible use of a digital exchange to procure or sell products.

• Many firms have participated in a supply chain for years using Electronic Data interchange (EDI) technology to buy and sell components and products.

3. Sources of Revenue

• Depending on the business model, several revenue sources may be available to an e-business. Many online businesses will have a three or four of these sources. A mix of revenue sources is often referred to as a revenue model but may be mistakenly called a business model.

• Some of these sources of revenue are:

  • Advertising

  • Affiliation

  • Agent commissions

  • Licensing

  • Sales commissions

  • Sales profits

  • Sponsorship

  • Subscription

  • Syndication

  • Use Fees

• For large public-private or government projects revenue sources might also include:

  • Bonds, usually for large capital expenditures

  • Taxes, primarily income, property and sales taxes

  • Use fees and tolls

• With e-Business startups, investors often track expected revenues and revenue growth and may make changes to increase revenue. more traditional measures such as cash flow and earnings have came back into favor as means of evaluation.

4. Activities, Resources and Capabilities

• The activities, resources and capabilities of a business are sometimes known as its requirements.

• In order to perform the activities required to carry out the mission of the business, certain resources are needed; for example, employees with certain skills, or capabilities, are needed to perform activities correctly and efficiently.

(i) Activities

• Activities are specific business processes or groups of processes such as design, production and sales that implement the business concept.

• The operational business model identifies the costs and outputs of each activity.

• Activities drive the need for resources.

(ii) Resources

• In order to perform activities an organization requires human, tangible, Intangible and supporting resources.

• Human resources, In particular the skills and knowledge of employees are important, as are the programs (e.g. Incentives, training) and institutions that support them.

• Tangible, or physical and financial, resources include facilities, equipment, and cash reserves.

• Intangible resources include intellectual property, business processes that can be patented, brands, customer profiles and personalization data in databases, and customized software.

• Supporting systems include organizational structure, information systems or communications processes that may have little value as stand-alone resources.

  • (i) Capacity: The total resources of the organization represent its capacity. When resources are underutilized, the company has resources that aren't used, or idle capacity.

  • (ii) Resources may also misallocated. Processes may be successively introduced over time that results in an overall inefficiency.

  • (iii) Capacity also represents a constraint to growth. Demand for product or services may exceed capacity and managers may take a variety of steps to temporarily resolve the problem

(iii) Capabilities, Competencies And Competitive Advantage

• In order for the business to be successful, workers with certain skills, or capabilities, must be available.

• When activities, or sets of activities, ate performed extremely well and are, in fact, among the best in the industry, then these are known as competencies.

• Sometimes competencies will allow a firm to lead an industry in providing value to customers, giving it a competitive advantage. For example, a low cost manufacturing process may enable a company to sell products at a very low price and still make a profit a situation that can't be matched by competitors.

Examples of E-Businesses

• Businesses that generate revenue primarily using the Internet are sometimes called e-businesses. E-businesses can vary greatly in terms of how they provide value to and earn income from consumers.

1. Online Retailers

• Online retailers are e-businesses that use the Internet as a means to advertise and sell physical merchandise of one kind or another. Examples of well-known online retailers include Amazon.com Newegg.com and Tigerdirect.com.

• Online retailers have several advantages over traditional brick and mortar retail stores, including the ability to sell goods at any time of the day, to remain open on holidays and to sell goods without incurring the cost of renting retail store space.

2. Online Services

• Some e-businesses generate revenue by providing consumers with useful services rather than selling goods. Examples of online services include eBay, which allows users to sell merchandise via online auctions, PayPal which enables users to send and receive money online and Orbitz and Expedia, which assist users with making travel arrangements.

• Some e-businesses operate by providing content on a subscription basis; for example, Netflix offers online streaming video for a monthly fee.

3. Online Advertising

• Advertising is the primary source of revenue for many e-businesses. Website owners can sign up for services that allow them to post advertisements on their websites and earn income based on how many users view or click on advertisements.

• Websites that primarily deliver information and other content like videos to users often earn income through online advertising. Examples of businesses that earn income through online advertising include Google and Yahoo.

4. Considerations

• Many businesses generate income from a variety of sources, both online and offline. For example, major retailers like Best Buy, Target and Walmart sell goods at physical locations as well as on the Internet.

• Similarly, many websites generate income using a variety of methods. For example, a popular blogger might generate most of his revenue based on advertisements, but he might also earn some income by selling T-shirts or other merchandise.

Scope of E-Business

• There is no standard, let alone a best way of doing e-business. Instead the entire world of e-business consists of a variety of rather different types of doing internet-based business. A morphology of e-business differentiates between the following variants of e-business:

1. Business Models

• Internet-enabled business covers n-mass commerce (like procuring high volume commodities or selling standard services like car rental or airplane tickets) and class marketing (like tailored services, customized equipment or telematics solutions).

• Using the advantages of bundling is typical of e-business, especially with respect to free & fee-bundles as well as offering the benefits of communities along with products.

• Furthermore, models of mutual exchange between supplier and customer are quite common, with customers contributing feedback or intermediary services or participating in solutions development processes.

• Additionally, e-business enables high and sophisticated levels of familiar business models, like Application Service Providing or Just in Time-delivery.

• The scope of revenue models is enlarged by the fact that several options of different performance units are offered, like pay per use or pay by time.

2. Digitization of Products:

• The core of e-business is digital products. With digital products almost all business processes can be run via Internet: In other words, communicating, fulfillment, contracting, billing, and joint development is simply done by clicking.

• All other variants of e-business are characterized by a lower degree of digitization.

• A middle degree of digitization is typical of physical products (like facilities or vehicles) that are based on the principle of postponement: Manufacturing is triggered as late as possible, i.e. when the customer transmits his ultimate ("frozen") requirements.

3. Arenas:

• With respect to interacting business partners involved, e-business contains several arenas. The basic distinction is between the business-to-consumer arena (B2C, the core of e-commerce) and the business-to-business arena (B2B).

• B2B contains both e-procurement (doing e-business with suppliers) and e-commerce (doing business with customers that are not consumers).

• These variants differ with respect to business processes (like turnover per transaction), objectives of participants (cost efficiency being the dominant objective in B2B) and level of software- and hardware equipment of partners (higher level with B2B, like speed of data transmission or ERP-integration).

• In addition, a variety of other arenas exists. This holds for consumer-to-consumer interactions enabled by intermediaries, like Napster, affiliate programs or auction sale companies (e.g. eBay).

4. Context:

• E-business can be either embedded in a New Economy context, an old-Economy context or in a hybrid context.

• This distinction (also) refers to business partners: When New Economy-dotcoms do transactions, both hard and soft infrastructure factors warrant a transaction with rather low transaction costs (for identifying partners and contracting).

Relevance of E-Business

• Although e-business can be categorized as a major trend in terms of awareness and investment, it does not in general stand for a mega- or giga-trend.

1. Performance Potential:

• Quite naturally, relevance is determined by the benefits of e-business. Efficiency (Doing things right) on the one hand, is primarily reflected in the percentage of existing business relocated from traditional channels to the Internet.

• This substitution is caused by shorter process cycle times or lower costs.

• Effectiveness ("Doing the right things") on the other hand is primarily measured by additional business generated by the internet.

• In general, efficiency benefits exceed effectiveness benefits. Likewise, B2B-performance is considered to be significantly higher than B2C-performance. The maximum efficiency in B2B is accomplished with mass business, i.e. with low value commodities.

2. Range of Concerned Industries:

• For the information industries (news, media, software) e-business is extremely relevant because almost all business processes are "clickable".

3. Innovativeness:

• Many practitioners and researchers refer to e-business as a business-revolution implying that e-business stands for a genuine innovation.

• Customer focus, speed management, virtualization, empowerment of customers and suppliers by high performance management information systems, supply chain management, outsourcing are merely enhanced by the Internet.

4. Congruence of Facts And Visions:

• When dealing with the benefits of e-business it is difficult to find some sound evidence.

• The objective assessment of relevance Is impeded because of a widespread confusion of actual performance (state of the art), perceived performance (biased personal opinions), predicted performance, possible scenarios and fuzzy visions of future performance.

Challenges Around E-Business

Modeling E-Business Performance Challenges related to e-business have very different connotations:
* High-speed skyrocketing boom.
* Slow and retarded diffusion.
* Roller coaster-ups and downs
* Dramatic recession and decline.

1. Strengthen Success Factors

• A first challenge around e-business is to strengthen success factors in order to exploit the potential of e-business. Here a distinction between efficiency potential and effectiveness potential is helpful.

• For sustainable competitive performance both potentials must be exploited. If e-business is run as a discounting business (lower cost than traditional business), a major part of the entire potential remains idle.

• Additionally, only hybrid competitive strategies (cost leadership - efficiency and differentiation - effectiveness) can establish a competitive position to be successfully defended.

2. Establish Barriers to Failure

• Telling from experience, the likelihood that an e-business fails to reach the break even point is rather high.

• A short list of important failure barriers comprises:

  • (i) Competency based diversification: A strategy focused on one product or service is not robust as for changing demands, competitor behaviors and customer choice with regard to preferred channels.

  • (ii) Slack resources: Financial slack for hard times can be generated by not entirely reinvesting IPO-revenues into growth activities.

  • (iii) Risk sharing: Appropriate contracting provides an entrepreneurial involvement of partners, i.e. to handle risks by putting them on several shoulders.

3. Diminish Barriers to Success

• What keeps e-business from becoming an excellently profitable business and keeps the performance on the mere existence-level?

• The major cause are deficits in infrastructure that have a restricting and retarding impact, in other words act as barriers to success.

4. Fight Failure Factors

• What can endanger the existence of e-business in general or of specific businesses in partial?

Implementation of E-Business

• Any state of the art-report can merely explain present or future states. This kind of inquiry does not explain why changes and transitions occur and how changes can be managed.

• A major challenge to the dynamic modeling of e-business relevance is the fact that in the community of e-business practitioners and academics rather different mental paradigms of such life cycle patterns exist.

• The performance of e-business is not only a matter of technical feasibility, also a matter of behavior.

• A more realistic view differentiates between diffusion on the one hand and two challenging stages of implementation, i.e. confusion and erosion, on the other hand.

• In dynamic performance analysis there is a major demand for step-by-step-models of e-business implementation.

E-Business Models

(2) Revenue Model

• Define how the firm will earn revenue generates profits and produce a superior return on invested capital

  • Major types

  • Advertising revenue models: CNN.com

  • Subscription revenue models: MATCH.com

  • Transaction fee revenue model: EBay, E-Trade, Hotwire

  • Sales revenue model: Amazon, LLbean, Gap.com

  • Affiliate revenue model: E-pinions, Banner Exchange, Edmunds à sends traffic to another website

(3) Market Opportunity

• Refers to a company's intended market space and the overall potential financial opportunities available to the firm in that market space

(4) Competitive Environment

• Refers to the other competition selling similar products and operating in the same market space

• Influenced by

  • How many competitors are active?

  • How large operations are

  • The market share for each competitor

  • How profitable these firms are

  • How they price their product

(5) Competitive Advantage

• Achieved when a firm can produce a superior product and/or bring a product to market, at a lower price than most, or all, of their competitors.

• Types of competitive advantage:

  • First mover advantage

  • Unfair competitive advantage

  • First Mover advantages

(6) Market Strategy

Plan that details how a company intends to enter a new market and attract strategy

(7) Organizational Development

Describes how the company will organize the work that needs to be accomplished

(8) Management Team

Employees of the company responsible for making the business model work-management team gives Instant credibility to outside investors.

BUSINESS MODELS OF E-COMMERCE

A. BUSINESS-TO-BUSINESS (B2B)
B. BUSINESS TO CONSUMER(B2C)
C. CONSUMER-TO-BUSINESS (C2B)
D. CONSUMER-TO-CONSUMER (C2C)
E. BUSINESS-TO-GOVERNMENT [B2G]
F. GOVERNMENT-TO-BUSINESS (G2B)
G. GOVERNMENT-TO-GOVERNMENT (G2G)
H. GOVERNMENT-TO-CITIZEN (G2C)
I. CONSUMER TO GOVERNMENT (C2G)
J. BUSINESS-TO-PEAR NETWORKS (B2P)
K. CONSUMER-TO-GOVERNMENT (C2G)
L. CONSUMER-TO-PEER NETWORKS (C2P)
M. GOVERNMENT-TO-PEER NETWORK (G2P)
N. PEER-TO-PEER NETWORK (P2P)
O. PEER NETWORK-TO-CONSUMER (P2C)
P. PEER NETWORK-TO-GOVERNMENT (P2G)
Q. PEER NETWORK-TO-BUSINESS (P2B)

A. BUSINESS TO BUSINESS(B TO B)

B2B (business-to-business) is the major and valuable model of ecommerce, B2B (business-to-business) e-commerce is conducted between two separate businesses and has been in effect for many ears. E-commerce plays an important role in enhancing and transforming relationships between and among business. B2B (business-to-business)is also known as e-biz, is the exchange of products, Services, or information between businesses rather than between businesses and consumers.

VARIOUS TRANSACTION BASED B2B MODELS

VARIOUS IMPLEMENTATION BASED B2B MODELS

Buyer Business

Some characteristics of organizational buying/selling behaviour in detail: For consumer brands the buyer is an individual. In B2B there are usually committees of people in an organization and each of the members may have different attitudes towards any brand.
THE ADVANTAGES OF THE B2B MODEL ARE:
Its efficient for manufactoring

DISADVANTAGES OF B2B MODEL
Limited Market: Businesses selling to other businesses face a much smaller buying pool than businesses selling to consumers. The total number of prospective buyers may top out in the low thousands, rather than the potential millions of customers for consumer products.

B2B E-COMMERCE

As per an estimate B2B E-commerce is expected to reach $12 trillion$ in worldwide sales by $2020$.

(i) Lack of appreciation of B2B E-commerce as a strategic issue for Business

B2B E-commerce adoption is a strategic issue which impacts multiple stakeholders in an organization and has far reaching impact on the entire business. Despite this, it is often organizational goal; which then adversely impacts the investments and priorities.

. STRATEGIC CHALLENGES

(ii) Lack of support from top management and other stake holders

2. OPERATIONAL CHALLENGES

(I) Lack of effective change management processes

(II) Organizational IT maturity

3. HUMAN RESOURCE CHALLENGES

(i) Managing Stakeholder Motivation, Involvement and Participation

(ii) Politics & Culture

The culture and the intra-organizational politics play a big role in initiatives like B2B commerce adoption.

4. KNOWLEDGE AND RESOURCE CHALLENGES

(i) Failure to retain knowledge

(Iii) Lack of Infrastructure and resources

5. SUPPLY CHAIN CHALLENGES

(i) Supply chain management

6 Interoperability and Integration Problems

B2B businesses have multiple systems in place (some are old legacy systems) and lack of interoperability is a common reason for delayed adoption of B2B E-commerce systems.

B. BUSINESS TO CONSUMER [B2C]

Business to Consumer [B2C] e-commerce consists of the sale of products or services from a business to the general public. Products can be anything from clothing to flowers and the products can also be intangible products such as online banking, stock trading, and airline reservations.

TYPES OF Business Model

1. Portal

2. E-TAILOR STOREFRONT

3.Consults content provider

. Consults the vendor to get after service support or returns the product if not satisfied with the delivered product.

Transaction broker

It assists buyers, sellers or both during transaction and acts as an agent for larger markets.

5. COMMUNITY PROVIDER

Communities utilize electronic tools such as forums, chat rooms, e-mail lists, message boards and other interactive internet mechanisms, which are usually tailored to the particular community.

E-Commerce Sales Worldwide, 2012-2018

(Sales Numbers in USD Trillions)

Advantages of B2C

Speed, ability to become operations quickly.

.Disadvantages B2C

Catalog Inflexibility: The catalog needs to regenerate every time when there is some new information or items to add in.

RELATION BETWEEN B2B AND B2C

C. CONSUMER-TO-BUSINESS (C2B)

Consumer-to-business (C2B) is an electronic commerce business model in which companies pay. This Consumers (individuals) offer products and services to is in Blogs

D. CONSUMER-TO-CONSUMER (C2C)

Consumer-to-consumer (the electronically facilitated transactions between consumers through some third party example is the online auction, in which a consumer posts an
item for sale and other consumers bid to purchase it; the third party generally charges a flat fee or commission.

Conclusion

To fully realize the projected benefits of e-commerce, it is essential to diligently perform the necessary tasks and activities, ensuring that all aspects of the online business operations are well-executed and aligned with strategic goals.