CSI315CSI315CSI315CSI315

E-BusinessE-Business

The growth of online commerce ($B)

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1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5

U S A

W o r l d

Source: Goldman, Sachs & Co. analysis and report

B2B EC Predicted Percent of Revenue for 2003

Industry Percent in 2003

Computing, electronics

39.3%

Motor vehicles 14.7%

Petrochemicals 13.5%

Utilities 25.8%

Paper/office products

5.6%

Shipping/warehousing

17.2%

Food/agriculture 3.0%Source: Forrester Research, Inc. (1998)

B2C EC – A Case Study

• Founded July 1995• Sold $15.7 million in 1996• Sales of $600 million in 1998,

monthly growth of 34 percent• 10 million titles in catalog• Inventories only a few thousand

high-selling titles (rest handled through Ingram)

Amazon Case – results• 42 turns at Amazon versus 2.1 at Barnes &

Noble brick and mortar stores (1996)• Selling 14.2 percent cheaper than brick and

mortar stores• Customer has search capability, information,

customized hot lists, …• Financials – continue to be problematic! Can

anybody make serious money with this business model?

• Puzzle – providing and creating value without CAPTURING VALUE!

B2B EC: Intel – A Case Study

• Products: microprocessors, motherboards, imbedded chips, chipsets and flash memory

• EC site sales went to $1 billion per month in first month in operation in 1998

• Site– Self-service extranet– Procurement and customer support– Reaches several hundred small/midsize

business customers worldwide– Orders entered manually using browsers– Order tracking– Product documentation, structured help

• Target – Companies not connected to Intel via EDI

Intel Case Study - results• 1999 cost savings – eliminated 45,000

faxes per quarter to Taiwan alone• Intermediaries indicate they are not

threatened by Intel’s EC initiatives

Business Models• A mechanism by which a businesses

intends to generate revenue and profits• Business model converts innovation to

economic value for the business. • A plan to make money

– What will we sell (our value offering)– Who will we sell it to (our target markets)– What resources will we need (our input

costs)

E-business modelAn e-business model is an approach to

conducting electronic business through which a company can sustain itself and generate profitable revenue growth. The business model spells out how a company plans to make money online and how it's competitively positioned in an industry.

• Not all firms have been successful in assimilating web technologies

• Requires– Thorough understanding of the technology.– Integration into existing organisational processes– Unfreeze existing structures to introduce complementary

structures to facilitate technology use.– Reinforce actions that value the use of the technology.

E-Business Models

Identify the most basic or atomic elements that shape business models :Each of these elements will lead to a particular model type

1. Service Provider – who and what relationship exists2. Customer – customer characteristics, location,

demographics etc3. A primary relationship – is there already a non-ebusiness

relationship4. An electronic relationship – what type of electronic

relationship is possible5. Suppliers – relationships/power6. Alliance Partners7. Flows of Money – direct, intermediaries, commission,

brokers etc8. Flows of Products – distributors etc9. Flows of Information - intermediaries

E-Business ModelTypesIdentify types of e-business models which “can not be simplified further”

1. Direct to Customer - Amazon2. Full-Service Provider – Virtual Internet3. Whole Enterprise – no bricks – only clicks – Direct Line ?4. Portals, Agents, Auctions, Aggregators & other

Intermediaries5. Shared Infrastructure – shared sites & communications6. Virtual Communities – communities of users - ivillage7. Value Net Integrator – IBM, BT, 8. Content Provider – media, music, movies etc, Yahoo, AOL

B2B & B2C MatrixB2B & B2C MatrixB2B & B2C MatrixB2B & B2C Matrix

Distribution Channel - Distribution Channel - variesvaries

Distribution Channel - Distribution Channel - variesvaries

Business Process Model• A designed succession of actions

to the accomplishment of some result in business e.g. Order fulfillment

• Modeling involves:– Super Processes– Major Processes– Elementary Processes– Business events

Business Events

A happening that activates a business process.

Example e.g. customer places an order,

Customer cancels and order.

Creating A Business Process Model

• Decompose the high level business processes into sub processes

• Identify all major business events• Describe and document the

elementary processes.

Creating Business data Model

• Identify Entities• Name the Entities• Describe the Entities• Identify Relationships• Identify Attributes• Specify the domain• Specify the business rules

Consolidation of Process and Data

Models• System Transactions• Describe the System Transactions• Define the Global System

Architecture

E-Business Systems

• Functional Business Systems• Enterprise Business Systems• E-Commerce Systems

Functional business systems

• serve the most elementary day-to-day activities of an organization

• support the operational level of the business and also supply data for higher-level management decisions.

• often critical to survival of the organization• mostly for predefined, structured tasks• can have strategic consequences (eg airline

reservation system)• most have high volumes of input and output• summarized information from basic systems

used by higher levels of management

Funtional Business Systems

1. Manufacturing and production Systems that supply data to operate,

monitor and control the production process e.g. purchasing, receiving, shipping, robotics, inventory systems

2. Sales and marketingSystems that support the sales and marketing function by facilitating the movement of goods and services from producers to customers e.g sales support , telemarketing, customer credit authorisation

3. Accounting and financeSystems that maintain records concerning the flow of funds in the firm and produce financial statements, such as balance sheets and income statements e.g accounts receivable/payable, general ledger and for finance: cash management, loan management, check processing, payroll

4. Human Resource: Systems that deal with recruitment, placement, performance evaluation, compensation, and career development of the firm’s employees. e.g. personnel record keeping, applicant tracking, Employee Self-Service Personnel System,

Enterprise Business Systems

• A system that can be thought of as a company-wide Information System that tightly integrates all aspects of a business.

• It links all areas of a company with external suppliers and customers into a tightly integrated system with shared data and visibility.

Enterprise Business Systems

• Enterprise Resource Planning (ERP)• Customer Relationship Management

(CRM)• Supply Chain Management (SCM)• Transaction Processing Systems (TPS)• Enterprise Application Integration (EAI)

ERP SystemsERP A cross functional system that intergrates and

automates many internal business processes and IS with the manufacturing, distribution, accounting, finance, human resources functions of a company. ERP gives a company an integrated real-time view of its core business processes

CRM uses IT to create cross-functional system that integrates and automates many of the customer serving processes like sales and marketing. It Creates an IT framework of web-enabled software and databases that integrates the processes e.g.

• Customer Service and Support,• Marketing and Fulfillment• Retention and Loyalty programs• Sales

SCM uses IT to help support the links between some of the company’s key business processing and those of its suppliers, customers, business partners. Helps companies to deliver the right products to the right place in the right time with proper quantity and acceptable cost.

EAI is software used to connect major e-business applications like ERP and CRM. Enables users to model business processes involved in the interaction between business applications. E.g.

When an order is complete, have the order application tell the accounting system send a bill to alert the shipping system to send out the product