Slide 1.1

Chapter 1

Introduction to e‐business andIntroduction to e business and e‐commerce

Slide 1.2

Learning outcomesLearning outcomes

• Define the meaning and scope of e‐business• Define the meaning and scope of e‐business and e‐commerce and their different elements

S i th i f d ti f• Summarize the main reasons for adoption of e‐commerce and e‐business and barriers that 

i d imay restrict adoption

• Use resources to define the extent of adoption of the Internet as a communications medium for consumers and businesses

• Outline the business challenges of introducing e‐business and e‐commerce to an organizatione business and e commerce to an organization.

Slide 1.3

Management issuesManagement issues

• How do we explain the scope and implications• How do we explain the scope and implications of e‐business and e‐commerce to staff?

• What is the full range of benefits of introducing e‐business and what are the risks?

• How great will the impact of the Internet be on our business? What are the current andour business? What are the current and predicted adoption levels?

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E business opportunitiesE‐business opportunitiesThere are three characteristics of information whichThere are three characteristics of information which when combined with disruptive technologies can have major impact on marketplace

• Reach:– Over 1 billion users globally– Connect to millions of products

• Richness– Detailed product information on 20 billion + pages indexed by Google. Blogs, videos, feeds…Personalised messages for users– Personalised messages for users

• AffiliationPartnerships are key in the networked economy– Partnerships are key in the networked economy

Slide 1.5

E business opportunitiesE‐business opportunities

• With the increase in availability of information aboutWith the increase in availability of information about products and services there are now great opportunities to acquire new customers onlineopportunities to acquire new customers online, particularly since many consumers and business 

l t ll t t th b hpeople now naturally turn to the web when searching for products and services.

• This enables online suppliers to target their messages to consumers looking for these products in g g pthe search engines through advertising services such as Google and Overture(Yahoo search marketing).as Google and Overture(Yahoo search marketing).

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E business opportunitiesE‐business opportunities• There are also significant opportunities for many businesses to g pp y

build closer relationships with their existing customers and suppliers online to achieve customer retention. 

• Use of online e business services can significantly reduces• Use of online e‐business services can significantly reduces costs. 

• Through high quality online services organization can build lasting relationships with their stakeholders and achieve “soft lock‐in”. This means customer or supplier continue to use a service since they find the service valuable and they have y yinvested a lot of time in learning the service or integrating it with their system and there are some costs in switching.

• e g In Europe the low cost airlines such as Easyjet and Ryanair• e.g. In Europe the low cost airlines such as Easyjet and Ryanairhave succeeded in migrating the majority of their customers to online booking within few years while acquiring more 

tcustomers.

Slide 1.7

The impact of the Internet on businessThe impact of the Internet on business

• Andy Grove, Chairman of Intel, one of the early adopters of e‐commerce, has made a meteorological analogy with the Internet. g gyHe says:

• The Internet a typhoon force a ten times• The Internet a typhoon force, a ten times force, or is it a bit of wind? Or is it a force that fundamentally alters our business? (Grove, 1996)

Slide 1.8

E business risksE‐business risks• The risks of introducing e‐business services varyThe risks of introducing e business services vary from strategic risks to practical risks. 

• One of the main strategic risks is making the wrong g g gdecision about e‐business investments. – Some companies have taken advantage of e‐business,– but others have achieved no return either because the execution of the plan was flawed or simply because planned approaches used for their market wereplanned approaches used for their market were inappropriate.

• There are also many practical risks to manage which y p gif ignored can lead to bad customer experiences and bad news stories which lead to damage the 

t ti f threputation of the company. 

Slide 1.9

Internet risks – what can go wrong with a transactional site?

If the customers experience very bad services they will stop using it and switch to other online options. Examples of poor online customer experience:

W b i h f il b f ik i i i ffi• Web sites that fail because of a spike in visitor traffic after a peak‐hour TV advertising campaign

• Hackers penetrating the security of the system and• Hackers penetrating the security of the system and stealing credit card details.

• Problems with fulfilment of goods ordered online g(missing ordered or are delayed)

• Annoying customers with emails without their i ipermission

• Email customer service enquiries from the website don’t reach the right person and are ignoreddon t reach the right person and are ignored.

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Activity 1 1Activity 1.1

• Examine the growth of the Internet use by consumers in your country and the neighbouring countries

• www itu int/ITU D/ict/statistics• www.itu.int/ITU‐D/ict/statistics

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What is E commerce and E businessWhat is E‐commerce and E‐business

• Electronic commerce (e‐commerce) is oftenElectronic commerce (e commerce) is often thought simply to refer to buying and selling using the Internet

• But e‐commerce involves much more than electronically mediated financial transactions b dbetween organizations and customers.

• Many commentators refer to e‐commerce as all l t i ll di t d t ti b telectronically mediated transactions between an organization and any third party it deals with. By this definition non‐financial transactions such asthis definition, non‐financial transactions such as customer requests for further information would also be considered to be part of e‐commerce."p

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What is E commerce and E businessWhat is E‐commerce and E‐business

• When evaluating the strategic impact of e‐• When evaluating the strategic impact of e‐commerce on an organization, it is useful to identify opportunities for buy side and sell sideidentify opportunities for buy‐side and sell‐side e‐commerce transactions 

B id f i• Buy‐side e‐commerce refers to transactions to procure resources needed by an organization f lfrom its suppliers.

• Sell‐side e‐commerce refers to transactions involved with selling products to an organization’s customers.g

Slide 1.13

The distinction between buy side and sell side e commerceFigure 1.1 The distinction between buy-side and sell-side e-commerce

Slide 1.14

Types of sell side E commerceTypes of sell‐side E‐commerce1. Transactional e‐commerce site. These enable purchase1. Transactional e commerce site. These enable purchase 

of products online. These include retail sites, travel sites and online banking services.

d l h b ld b2. Services oriented relationship building web site. Provides information to stimulate purchase and build relationships Products are not typically available forrelationships Products are not typically available for purchase online. 

3. Brand building site. Provide an experience to support the brand. Products are not typically available for online purchase. 

4 Portal or media site Provide information or news4. Portal or media site. Provide information or news about a range of topics. Portal refers to a gateway of information. This is information both on the site and links through other sites. 

Slide 1.15

Supply Chain managementSupply Chain management 

• When distinguishing between buy‐side and sell‐side e‐commerce we are looking at the different aspects of managing organization’s supply chain. 

• Supply Chain Management (SCM) is the coordination of all supply activities of ancoordination of all supply activities of an organization from its suppliers and delivery of products to its customers Chapter 6products to its customers. Chapter 6

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Summary and examples of transaction alternatives between businessesFigure 1.2 Summary and examples of transaction alternatives between businesses, consumers and governmental organizations

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What is E businessWhat is E‐business• the original definition by IBM which was one of the firstthe original definition by IBM which was one of the first suppliers to use the term in 1997 to promote its services:" b ( ’b ’ ) h f f k• "e‐business (e’biz’nis) – the transformation of key business processes through the use of Internet technologies“.technologies .

• The key business processes are the organizational processes or units in the centre of Figure 1.1. They include research and development, marketing, manufacturing and inbound and outbound logistics. The buy‐side e‐commerce transactions with suppliers andbuy side e commerce transactions with suppliers and the sell‐side e‐commerce transactions with customers can also be considered to be key business processes.

Slide 1.18

What is E businessWhat is E‐business

the term E‐business is used in two main waysthe term E‐business is used in two main ways within organizations. 

• The first is as a concept which can be applied to• The first is as a concept which can be applied to strategy and operations. For example, ‘our organization needs an improved e businessorganization needs an improved e‐business strategy (or E‐business technology)’. 

• Secondly E business is used as an adjective to• Secondly E‐business is used as an adjective to describe businesses that mainly operate online, i e they have no physical presence on the highi.e. they have no physical presence on the high‐streets and seek to minimize customer‐service and support through enabling ‘web self‐service’support through enabling  web self‐service .

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Dubit C2C site for a youth audience (www dubit co uk)Figure 1.3 Dubit C2C site for a youth audience (www.dubit.co.uk)

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Three definitions of the relationship between e commerce and e businessFigure 1.4 Three definitions of the relationship between e-commerce and e-business

Slide 1.21

UK rate of adoption of different digital mediaFigure 1.5 UK rate of adoption of different digital mediaSource: MORI Technology Tracker, January 2006. See www.mori.com/technology/techtracker.shtml for latest details

Slide 1.22

Drivers of consumer Internet adoptionDrivers of consumer Internet adoption

• Content: This means more detailed, in‐depth Co te t: s ea s o e deta ed, deptinformation to support the buying process for transactional or relationship‐building sitesC t i ti li ti th h b• Customization: personalization through web pages or email alerts

• Community: You can discuss anything throughCommunity: You can discuss anything through forums, chat rooms, and blog comments.

• Convenience: service is available all time  from your desktop

• Choice: Web gives  a wider choice of products and suppliers than via traditional distribution channelssuppliers than via traditional distribution channels.

• Cost reduction: on‐line traders  have lower cost‐basebase

Slide 1.23

Barriers to consumer adoptionBarriers to consumer adoption

• No perceived benefitNo perceived benefit

• Lack of trust

• Security problems

• Lack of skills 

• Cost

Slide 1.24

Activity – drivers and barriers to adoption

• You are in a team of advisers at a local businessYou are in a team of advisers at a local business link (a local government agency encouraging adoption of e‐commerce)adoption of e‐commerce)

• List:– Drivers to adoption of sell‐side e‐commerce by business and how you can reinforce these by 

k ti b fitmarketing benefits.

– Barriers to adoption of sell‐side e‐commerce by b i d h i f th bbusiness and how you can reinforce these by stressing benefits.

Slide 1.25

Cost/efficiency and competitiveness drivers

• Cost/efficiency driversCost/efficiency drivers

– Increasing speed with which supplies can be obtained

– Increasing speed with which goods can be dispatchedIncreasing speed with which goods can be dispatched

– Reduced sales and purchasing costs

– Reduced operating costs– Reduced operating costs.

• Competitiveness drivers

C stomer demand– Customer demand

– Improving the range and quality of services offered

A id l i k t h t b i l d i– Avoid losing market share to businesses already using e‐commerce.

Slide 1.26

Tangible and intangible benefitsTangible and intangible benefitsTangible benefits Intangible benefitsTangible benefits Intangible benefits

� Increased sales from new sales leads giving rise to increased revenue from:– new customers, new markets

i i ( lli )

� Corporate image communication� Enhancement of brand� More rapid, more responsive marketing                               

i i i l di PR– existing customers (repeat‐selling)– existing customers (cross‐selling).

� Marketing cost reductions from:– reduced time in customer service

li l

communications including PR� Faster product development lifecycle enabling 

faster response to market needs� Improved customer service� L i f h f– online sales

– reduced printing and distribution costs of   marketing communications.

� Supply‐chain cost reductions from:d d l l f i t

� Learning for the future� Meeting customer expectations to have a web 

site� Identifying new partners, supporting existing 

t b tt– reduced levels of inventory– increased competition from suppliers– shorter cycle time in ordering.

� Administrative cost reductions from more efficient ti b i h it t

partners better� Better management of marketing information 

and customer information� Feedback from customers on products

routine business processes such as recruitment, invoice payment and holiday authorization.

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Attitudes to business benefits of online technologiesFigure 1.6 Attitudes to business benefits of online technologiesSource: DTI (2002)

Slide 1.28

North West Supplies Ltd site (www northwestsupplies co uk)Figure 1.7 North West Supplies Ltd site (www.northwestsupplies.co.uk)Source: Opportunity Wales

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Adoption of Internet and e business services across EuropeFigure 1.8 Adoption of Internet and e-business services across EuropeSource: Eurostat, Community Survey on ICT usage in enterprises, eEurope (2005) Information Society Benchmarking Report, © European Communities 2005, http://europa.eu.int/information_society

Slide 1.30

Barriers to development of online technologiesFigure 1.9 Barriers to development of online technologiesSource: DTI (2002)

Slide 1.31

Intro to B2B CompanyIntro to B2B Company

• Employs 600 people worldwideEmploys 600 people worldwide

• Turnover £100m

• Products – composites and speciality polymersProducts  composites and speciality polymers– See www.globalcomposites.com

• Distribution – 90 companies worldwide via joint venturesDistribution  90 companies worldwide via joint ventures and agents

• Competitors:p– Derakan (www.dow.com/derakane)

– Scott Bader (www.scottbader.com) 

– Owens Corning (www.owenscorning.com) 

Slide 1.32

Intro to B2C CompanyIntro to B2C Company

• Established 1984 80 staff• Established 1984, 80 staff

• Products – Kitchenware 

• Distribution

– Through retailers and transactional web sites– Through retailers and transactional web sites

• Competitors

– Cooking.com (www.cooking.com)

– Lakeland (www.lakelandlimited.com)( )

– Tupperware (www.tupperware.com). 

Slide 1.33

Activity – Benefits to B2B and B2C Company

• See activity 1 5See activity 1.5• Give examples of these benefits of an online presence Which of these are most importantpresence. Which of these are most important to each:– Cost reductionCost reduction– New capability– CommunicationCommunication– Customer service– ControlControl– Competitive advantage

Slide 1.34

The McKinsey 7S frameworkFigure 1.10 The McKinsey 7S frameworkSource: Adapted from Waterman et al. (1980)

Slide 1.35

Element of 7S model Application to digital marketing team Key issues from practice and literature

Strategy The significance of digital marketing in  Gaining appropriate budgets and demonstrating / delivering influencing and supporting organisations' strategy

value and ROI from budgets. Annual planning approach.Techniques for using digital marketing to impact organisationstrategyTechniques for aligning digital strategy with organisational and marketing strategymarketing strategy

Structure The modification of organizational structure to support digital marketing. Integration of team with other management, marketing 

(corporate communications, brand marketing, direct marketing) d IT t ffand IT staff

Use of cross‐functional teams and steering groupsInsourcing vs. outsourcing

The development of specific processes,  Campaign planning approach‐integrationSystems procedures or information systems to support 

digital marketingManaging/sharing customer informationManaging content qualityUnified reporting of digital marketing effectivenessIn‐house vs. external best‐of‐breed vs. external integrated technology solutionstechnology solutions

Staff The breakdown of staff in terms of their background and characteristics such as IT vs. Marketing, use of contractors/consultants, age d

Insourcing vs. outsourcingAchieving senior management buy‐in/involvement with digital marketingSt ff it t d t ti Vi t l kiand sex. Staff recruitment and retention. Virtual workingStaff development and training

Slide 1.36

StyleIncludes both the way in which key managers behave in achieving the organizations' goals and the cultural style

Relates to role of digital marketing team in influencing strategy –it is it dynamic and influential or conservative andorganizations  goals and the cultural style 

of the organization as a whole.it is it dynamic and influential or conservative and looking for a voice

SkillsDistinctive capabilities of key staff, but can be interpreted as specific skill‐sets of

Staff skills in specific areas: supplier selection, project management, Content management, specific e‐marketing approaches (SEO PPC affiliate marketing e‐can be interpreted as specific skill sets of 

team members.marketing approaches (SEO,PPC, affiliate marketing, email marketing, online advertising)

Superordinate goalsThe guiding concepts of the digital marketing organisation which are also part of shared values and culture The

Improving the perception of the importance and effectiveness of the digital marketing team amongst senior managers and staff it works with (marketingpart of shared values and culture. The 

internal and external perception of these goals may vary

senior managers and staff it works with (marketing generalists and IT)