CSM 358: E-Commerce

DR. FRIMPONG TWUM

Senior Lecturer
Department of Computer Science
KNUST
 Quick Quiz Questions (QQQ)?

• Is E-Commerce same as
E-Business?
• Is the Internet same as the
Web?
• Is the Web same as the
Browser?
 HOW E-COMMERCE AND E-BUSINESS
FIT TOGETHER

 Ecommerce refers to the buying and selling of

products, services and information via
computer networks, especially the internet.

 E-business, however, is broader than e-

commerce in that e-business is the conduct of
business on the Internet, not just buying and
selling but also collaborating with business
partners and servicing of customers.
 The Distinction:
The distinction between ecommerce and e-business for the
purpose of our discussion is based on the terms business and
commerce.

Commerce is defined as embracing the concept of trade,

exchange of merchandise on a large scale between different
countries. E-commerce therefore means using electronic
medium to achieve commerce.

Business is defined as a commercial enterprise as a going

concern. E-Business can therefore be defined broadly as the
processes involved in the running and operation of an
organization that are electronic or digital in nature. Thus, e-
business is doing business electronically.

E-commerce involve exchange of value (money, etc)

 Topic: Introduction to E-Commerce

Differences between Electronic Commerce

and Traditional Commerce
The major difference is the way information is exchanged
and processed:
•Traditional commerce:
Face-to-Face, telephone lines , or mail systems
Manual processing of traditional business transaction
Human involved in all stages of business transactions

•E-Commerce:
using Internet or other network communication technology
automated processing of business transactions
individual involved in all stages of transactions
pulls together all activities of business transactions,
marketing and advertising as well as service and customer
support
 Topic:Benefits of E-Commerce

Classification of e-commerce by Degree of

Digitization
e-commerce can be classified based on
the degree of digitisation of the product
or service sold, the process of the
transaction and the delivery agent.
Traditional e-Commerce
Pure e-commerce
Partial e-commerce
 Topic:Benefits of E-Commerce

Six strategic business objectives for

going e-commerce
 Customer and Supplier intimacy
 New products, services, and business models
 Survival
 Improved decision making
 Competitive advantage
 Operational excellence
 Topic:Benefits of E-Commerce

Benefits of E- Commerce
Benefits to Organizations:

-Market expansion to national and international markets

-Reduced cost of creating, processing, distributing, storing and retrieving
paper based information
- Reduced inventories.(Just-in –time manufacturing)
- Automated business processing
- Cost-effective document transfer
- Reduced time to complete business transactions, speed-up the delivery time
-Improved customer service.
-Increased productivity
-Reduced transportation Costs
 Topic:Benefits of E-Commerce

Benefits of E- Commerce CTNUE…

Benefits to Consumers:
-Transactions can be done 24 hours a day, all year round and from any
location
- Customer has more choices
- Rapid inter-personal communications and information accesses
- Wider access to assistance and to advice from experts
- Save shopping time and money
- Fast services and delivery
 Topic:Benefits of E-Commerce

Limitations of E- Commerce

Technical Limitations:
-Lack of security, reliability, standards
-Insufficient bandwidth
-Rapid change in software development tools
-Difficult to integrate the Internet and EC s/w with existing
applications and databases
-Venders require special web servers and other infrastructures
-Incompatibility of certain operating systems with certain h/w or s/w.
 Topic:Benefits of E-Commerce

Limitations of E- Commerce

Non-Technical Limitations:
-Cost and justification
-Security and privacy
-Lack of trust and user resistance
-Other factors
 Topic:Benefits of E-Commerce

Forces fueling E- Commerce

•Economic Factors (Business/Market Forces)

•Marketing and Customer Interaction Forces
(Consumer behavior and societal change)
•Technology and Digital Convergence
 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

• Why do some firms do better than others ?

• How do firms achieve their competitive advantage ?

• How can you analysis and identify business strategic advantages ?

• How do information systems contribute to the business strategic advantage ?

Having a general view of the firm, its competitors

and the firms environment
 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

- continue
• Porter’s competitive forces model :

In Porter’s competitive forces model, the strategic position of the firm and its strategies are
determined not only by competition with its traditional direct competitors but also by four forces in the
industry’s environment: new market entrants, substitute products, customers, and suppliers.
 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

- continue
• Porter’s competitive forces model :
1.Traditional competitors

2.New market entrants

3.Substitute products and services

4.Customers

5.Suppliers
 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

- continue
•Porter’s Generic Strategies for dealing
with the market forces:
1.Low-cost leadership

2.Product/Service differentiation

3.Focus on market niche

4.Strengthen customer and supplier intimacy

 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

- continue
•Porter’s model advantages:
1. Identify competitive forces

2. Suggest generic strategies to deal with them

• Porter’s model disadvantages:

1. Not specific about what to do exactly

2. Do not provide a methodology to follow to achieve

competitive advantage
 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

- continue

Industry Value Chain

 Topic:Benefits of E-Commerce

Economic Forces (Business/Market Forces)

- continue
The value web model

The value web is a

networked system that
can synchronize the
value chains of
Customer Relationship
business partners
Supply Chain Management
Systems Management Systems within an industry to
respond rapidly to
Supplier Extranets changes in supply and
Net Marketplaces
demand.
 TopicTypes of E-Commerce

Classification of e-commerce by nature of

transactions
B C G
Business to Consumer (B2C)
Business to Business (B2B) B B2B B2C B2G
Consumer to Consumer (C2C)
Consumer to Business (C2B) C C2B C2C C2G
Business to Government (B2G)
Government to Business(G2B) G2B G2C G2G
G
Government to Citizen(G2C)
Mobile Commerce
Business-to-consumer
E-commerce

On-line Retailer

Sh
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B Order Shipment
B

B
 B2C applications
• Offer directly to the customer an interface of activity
– Typical examples:
• Online book store (e.g. amazon.com)
• Online car purchasing (e.g. automall.com)
• Booking and purchase of airline tickets (e.g. ryanair.com)
• Correspond to retail sale
• Growth of B2C applications thanks to Internet
 B2C applications:
advantages and disadvantages

• Advantages:
– Allow company to extend existing services to customers
– Allow company to increase its customers
– Offer a wider choice and allow cheaper prices
– May give to the company a worldwide visibility
– Online shops are accessible 24h a day
• Disadvantages:
– Low order conversion rates
– High risk (see Cyberphobia)
Direct Business-to-Business
Relationship

Shipment

Seller
Buyer
(Supplier)

Order
 B2B applications
• Realize transactions needed to perform
financial or commercial activities by
companies over the Internet
• Some typical applications:
– E-procurement
– E-Marketplace
• The turnover is much greater than that dealed
with B2C applications
 B2B applications:
advantages and disadvantages

• Advantages:
– Help to automate communications between
companies making them easier and quicker
– Allow to cut prices drastically
– Help in reducing mistakes
• Disadvantages:
– Often need legacy integration
 C2C applications
• Concern the consumers who run negotations
with other consumers sometimes utilizing as
intermediary a company
– Examples:
• Ebay
• Autotrader.com
 C2C applications:
advantages and disadvantages

• Advantages
– Allow consumers to interact directly among them
– Give to the consumers a new way of purchasing
and selling services and goods
• Disadvantages
– Little earning capacity
 Mobile commerce applications
• Concern doing businesses by means of mobile wireless
devices
• Can be both B2B and B2C
• Have a growing importance in the future of e-commerce
applications
• Will introduce completely new forms of electronic
commerce
– E.g. E-tickets
• The development of such applications faces some of the
greatest challenges in the security area to secure the
trust of consumers
 Topic:Benefits of E-Commerce

Impact of E- Commerce

Improving Direct Marketing

-Product Promotion
-New Sales Channels
-Direct Savings
-Reduced Cycle Time
-Customer Service
-Brand or Corporate Image
 Topic:Benefits of E-Commerce

Impact of E- Commerce

Transforming Organizations
-Technology and Organizational Learning
-Changing Nature of Work

Transforming
-New Product Capabilities
-New Business Models
 Topic:Benefits of E-Commerce

Impact of E- Commerce

Impact on Manufacturing
-Manufacturing systems are changing from mass production to
demand-driven
- Just –In-time Manufacturing
-Web-based systems
-Flexible sytems
 Topic:Benefits of E-Commerce

Impact of E- Commerce

Impact on finance and Accounting:

-On-line payments systems
-Security involved in electronic payment systems

Impact on HRM, Training and Education

 Topic:Benefits of E-Commerce

E-commerce Applications

-Supply Chain Management

-Video-on-demand
-Procurement and purchasing
-On-line Marketing and Advertising
-Home Shopping
 Topic:Benefits of E-Commerce

Common Business Services infrastructure

The common business infrastructure for electronic
commerce consists of four main elements:

–Security
–Authentication
–Encryption
–Electronic Payments
 Security
• Major concern for doing business on the Internet.
• Businesses feel vulnerable to attack.
• Encryption is used to help secure data.
• HTTPS (HTTP with SSL) is used to encrypt data to
ensure its integrity and safety.
– Secure Sockets Layer (SSL) is a standard for secure
interactions use on the Web. SSL, uses a combination of
private key encryption (using a one-time session key) and
digital signatures to enhance the security of transmission.
• Concerns remain for e-commerce transactions since
there are numerous examples of data and privacy
issues.
 Authentication

• Authentication is the security process of verifying

that a user is who he or she says they are.
• Passwords are the most common type of
authentication.
– It is important that users understand strong passwords.
• Digital signatures are now gaining popularity for
authenticating transmitted information.
 Authentication: Digital Signatures
• Digital signatures take the place of ordinary
signatures in online transactions to prove
that the sender of a message is who he or
she claims to be.
• When received, the digital signature is
compared with a known copy of the
sender’s digital signature.
• Digital signatures are also sent in encrypted
form to ensure they have not been forged.
 Encryption

• Encryption systems translate data into a secret code

(many types of encryption used).
• Encryption systems include 4 main components:
– Plaintext: the unencrypted message
– An encryption algorithm: that works like the locking
mechanism to a safe
– A key that works like the safe’s combination
– Ciphertext is produced from the plaintext message by the
encryption function.
– Decryption is the same process in reverse (like a
modulation/demodulation), but it doesn’t always use the same
key or algorithm. Plaintext results from decryption.
 Encryption Techniques

• The two main encryption techniques now in

use (see figure 7.5):
– Symmetric encryption in which both sender
and receiver use the same key.
– Asymmetric or public key encryption, which
uses two separate keys, called public and
private keys.
 Symmetric Encryption

• Symmetric or private key encryption, uses the

same algorithm and key to both encrypt and
decrypt a message.
• Historically, this is the most common encryption
technique.
• Since the key must be distributed, however, it is
vulnerable to interception. This is an important
weakness of symmetric key encryption.
• DES uses symmetric encryption.
 Asymmetric or Public Key Encryption

• A second popular technique is asymmetric or public

key encryption (PKE).
• PKE is called asymmetric since it uses two different
“one way” keys:
– a public key used to encrypt messages, and
– a private key used to decrypt them.
• PKE greatly reduces the key management problem
since the private key is never distributed.
• PGP (pretty good privacy) is a popular form of PKE
available as shareware.
 Electronic Payments
• A number of payment methods are used by
businesses to make and receive payments on the
Internet.
• These methods are basically the equivalent of off-line
payment methods.
• Here are a few of the most popular types:
– Virtual Terminals.
– Transaction Processors.
– Internet Checking.
– Electronic Funds Transfer (EFT).