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E-Business Environment and E-Business Process

2.3.2015

Assist. Prof. Dr. Özge Özgen, Global E-Business and Trade

People are getting connected 2

Source: http://www.adweek.com/socialtimes/one-minute-internet-infographic/148860

People are connecting...

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2005

07/2004

Fixed

broadband

exceeds dial-up

10/2005

1 BILLION

Internet Users 2007

06/2007

IPHONE

Launch

2008

01/2008

Developing

countries have

more than 50%

of the world’s

Internet users

2009 2010

12/2009

First 4G

Network

Launch

02/2010

Mobile

broadband

exceeds fixed

11/2010

2 BILLION

Internet Users

10/2011

50% of

Internet users

have a mobile

broadband

connection

2011 2014

01/2014

50% of all

mobile phones

are smart

phones

2015

3 BILLION

INTERNET

USERS

Overview of Worldwide Internet Usage

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Worldwide internet usage increased more than 700% from

2000 to 2014.

In 2015, world’s internet users exceeded 3 billion.

Asia has the most internet users.

Africa has the greatest growth rate in internet use.

North America has the highest penetration as a percent of the

population.

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Worldwide Internet Usage

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Source: http://www.internetworldstats.com

GLOBAL INTERNET PENETRATION LEVELS (2012)

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Internet Use Varies by Country

The world’s largest online markets are the China (641.6 million

users); U.S. (279.8 million users) and India (243.1 million users).

The top 10 countries account for 70% of all global users.

Some smaller countries, such as Norway, Netherlands and Iceland,

have the highest penetration, over 95% of their populations.

Slovenia1.5 million users Penetration Rate: 72.32%

South Korea 45.3 million Penetration Rate: 91.5%

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Turkey: Internet Usage and Population Statistics

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YEAR Users Population % Pop.

2000 2,000,000 70,140,900 2.9 %

2004 5,500,000 73,556,173 7.5 %

2006 10,220,000 74,709,412 13.9 %

2010 35,000,000 77,804,122 45.0 %

2014 35,358,888 75,837,020 46.62 %

Source: http://www.internetworldstats.com

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Users vs. Non-Users

◦ Net evaders

Don’t think the internet is a

good use of time, don’t think

they are missing out, don’t

need it or want it

◦ Net dropouts

Tried the internet but stopped.

They didn’t want or like it,

found it too expensive, or lived

some technological difficulties

◦ Truly unconnected

Low income and little

education

◦ Intermittent users

They are online but leave it for

extended period

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In the past several years, mobile broadband growth rates

have exceeded even the significant rate of growth of fixed

broadband access, particularly in developing regions.

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Overview of The Different Mobile Technology

Generations

1st Generation

Wireless

Analogue cellular

communication

Poor voice quality

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1980 1990 2000 2010

2nd Generation

Wireless

Digital cellular

communication

Improved speech

quality

Small size data

transfer

SMS – Short

message services

3rd Generation

Wireless

Wireless digital

technology standard

Faster date transfer

rates

4th Generation

Wireless

Offers faster data

transfer rates than

3G

1G 2G 3G 4G

2G, 3G, 4G Deployment

100% of Western

European, North American,

and developed Asia-Pacific

countries operating 3G

networks.

More than 50% of countries

in these regions also

operate 4G networks.

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Developed Economies

Developed countries are highly industrialized, use

technology to increase efficiency, and have a high

GDP per capita.

Western Europe, North America, Japan, Australia & New

Zealand

Developed countries are ideal for the e-business

activities. (WHAT IS IDEAL?)

Infrastructure. Countries can differ by the affordability and

bandwidth of access networks

Content and applications. Some governments require network

operators to filter content or block applications, using political or

legal justifications.

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E-Commerce in China

China, the largest of the BRICS countries in terms of

market size, has great potential for further growth

of online retail, which lies upon the growing internet

and online shopper penetration, as well as

increasing consumption per shopper

E-commerce % of Retail in China 8% (in 2013)

Mobile spending is expected to grow 91 percent in

2014.

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Importance of Information Technology:

India Case

The internet accelerates the process of economic growth through diffusion of new technologies.

Bangalore, India is the center of India’s explosive growth in software and IT. It is known as the "Silicon Valley of India" because of its role as the nation's leading information technology (IT) exporter

Aditi (www.aditi.com) provides email customer support for Real

Media. The customer in America who needs support will have

his problem solved via email by a team of Indians.

Microsoft’s business partner

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Challenges for Emerging Markets

Differences in emerging economies include:

Fewer computer users

Limited credit card use

Lack of secure online payment methods

Unexpected power failures

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E-Commerce Payment and Trust Issues

E-commerce in emerging markets is often hampered by

limited use of credit cards and lack of trust in safely

conducting online transactions.

60 percent of Malaysian consumers say their preferred

payment method is cash

This preference was even stronger in the Philippines (74%),

Thailand (68%) and Vietnam (61%).

4-18

Source: Nielsen Report, 2014

http://www.nielsen.com/my/en/press-room/2014/preferred-payment-methods.html

DISCUSSION TOPICS

Why are social network sites interested in collecting

user information?

What types of privacy invasion are described in the

case?

Which is the most privacy-invading, and why?

Is e-commerce any different than traditional

markets with respect to privacy?

Don’t merchants always want to know their

customer?

How do you protect your privacy on the Web?

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What is “right to be forgotten”?

By removing any information, photos, or videos that

people request to be expunged from search

engines, since the European Court of Justice ruled

that search engines are indeed responsible for the

content they point to.

https://forget.me/

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Main Security Risks

Confidential details or passwords accessed on user’s

computer

Forexample through malware

Transaction or credit card details stolen in transit

Forexample through “packet sniffing” software

Customer’s credit card details stolen through

hacking

Customer’s details accessed by company staff

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What types of information collected online?

Contact information

Profile information

Access platform usage

Behavioral information

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E-Commerce Payment and Trust Issues, cont.

4-23

In addition to credit card usage, e-marketers working

in emerging economies should understand attitudes

toward online purchasing.

Why many consumers in Malaysia prefer cash over credit

cards?

cyber-safety concerns,

more than half of Malaysian respondents (55%) say they are

either hesitant or would not shop online and use their payment

card details on either a smartphone or tablet device although

their personal information is protected

Technological Readiness

E-business and e-commerce experts must deal with

daunting issues of basic technology:

Limited access to and use of computers and telephones

High internet connection costs

Slow internet connections speeds

Unpredictable power supplies

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Computers & Telephones

Computer access is unevenly distributed throughout

the world.

Computer ownership data for selected countries.

Ownership ranges from 90% in Kuwait to 5% in Bangladesh

and Uganda.

Telephones (and connectivity) can be scarce and

expensive.

Many consumers in countries with emerging economies

access the internet from free-standing shops rather than

homes.

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The Voice Market

Fixed telephony is on the decline in all regions of the world

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Africa and Asia and the Pacific are the regions with the

strongest mobile-cellular growth, and the lowest penetration

rates, which will reach 69 per cent and 89 per cent,

respectively, by end 2014

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The Number of Internet Cafes is 27,500 in Turkey (HaberTürk,

2012) (First internet cafe in Turkey is opened in 1995)

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Internet Connection Costs 4-29

Wireless Internet Access 4-30

Challenges of wireless connection:

Modification of Web site content for small screens

Text entry using tiny keypads

Content development

Pricing and secure payments

Language Choices and Adaptation

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Internet Freedom Index

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Five-Year Declines in Russia and Turkey

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Customers

Access to digital platforms

Level of use of digital platforms

Behavior, characteristics and profiles

Service expectations

Suppliers and Intermediaries

Level of technology adoption

Integration and connectedness

Competitors

Strategic intentions and planning

Performance, resources and capabilities

Supplier and intermediary relationships

Micro-Environment 34

CUSTOMER BEHAVIOR ANALYSIS

Demand Analysis

Digital Consumer behavior

ONLINE CONSUMER BEHAVIOR 35

Technology Acceptance Model

2 Determinants:

Perceived usefulness (PU) and perceived ease of use

(PEOU)

PU is defined as

“the prospective user’s subjective probability that using a

specific application system will increase his or her job

performance within an organizational context,”

PEOU refers to

“the degree to which the prospective user expects the

target system to be free of effort”

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Who are they?

What are they buying?

What are their characteristics?

How about their behaviors?

LET’S DESCRIBE ONLINE CONSUMERS 37

Social and Cultural Contexts

One of the most important social trends is that

consumers trust each other more than they trust

advertising or companies online.

Social/cultural trends have a huge effect on online

exchanges.

Sophisticated consumers.

Information overload overwhelms consumers.

Multitasking speeds up normal processes and lowers

attention to each task.

Multiscreening

Social and Cultural Contexts, cont.

Home and work boundaries are dissolving.

Consumers seek convenience and have high

expectations regarding customer service.

Consumers cannot do without internet access:

“online oxygen.”

Self-service is required.

Privacy and data security are paramount.

Online crime worries consumers.

Nature Of Online Competitive Markets

Bargaining power of buyers

B2C high bargaining power of buyers

B2B Switching costs?

Bargaining power of suppliers

Threats of substitute products and services

Barriers to entry

Rivalry

In-sector / Out-of-sector

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Online Intermediaries

Portals

Virtual resellers

www.amazon.com

Financial intermediaries

Forums, evaluators etc.

www.tripadvisor.com

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Publishing as Prentice Hall

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Portals

Horizontal portal

www.yahoo.com, www.msn.com

Vertical portal

http://www.oliveoilmarket.eu/

Media portal

www.bbc.co.uk

Social network portal

Facebook, twitter etc.

Marketplace

www.alibaba.com

Educational portal

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Business Models

A business model is a method for long-term survival

and a value proposition for partners, customers, and

revenue.

E-business models include the use of information

technology to achieve long-term goals.

Firm selects one or more models as strategies to

accomplish enterprise goals.

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Selecting a Business Model 2-44

A firm will select one or more business models as

strategies to accomplish enterprise goals.

Components of business model selections:

Customer value Scope

Price Revenue sources

Connected activities Implementation

Capabilities Sustainability

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Level of Commitment to E-Business 2-46

Pure

Play

Enterprise

Business Process

Activity

Pure Dot-Com

(Amazon)

Click and Mortar

(eSchwab, most retailers)

Customer

Relationship

Management

Brochureware

E-Mail

Level of

busin

ess

Im

pact

Business Transformation

(competit ive advantage,

industry redefinition)

Effectiveness

(customer

retention)

Efficiency

(cost

reduction)

Both online and offline

(Dell and most retailers)

e-mail, blog

Pure dot-com

(Amazon, MySpace)

Activity-Level Models

1. Order processing

2. Online purchasing

3. E-mail

4. Online advertising and public relations (PR)

5. Online sales promotions

6. Dynamic pricing strategies online

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Business Process-Level Models

1. Customer relationship management (CRM)

2. Knowledge management (KM)

3. Supply chain management (SCM)

4. Community building online

5. Database marketing

6. Enterprise resource planning (ERP)

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Enterprise-Level Models

1. E-commerce, direct selling on internet

1. Having e-store besides brick and mortar store(s)

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Pure Play Models

Pure plays are businesses that began on the

internet.

They represent the top level of the E-Business pyramid.

Pure plays face significant challenges.

They must compete as new brands.

They may need to take customers away from

established businesses.

Some pure plays have redefined industries:

EBay, Yahoo!, MySpace, Amazon.

2-50

CLASSIFICATION OF EC BY THE NATURE OF THE

TRANSACTIONS AND THE RELATIONSHIPS

AMONG PARTICIPANTS

business-to-business (B2B)

E-commerce model in which all of the participants are

businesses or other organizations.

business-to-consumer (B2C)

E-commerce model in which businesses sell to individual

shoppers.

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E-tailing

Online retailing, usually B2C.

consumer-to-business (C2B)

E-commerce model in which individuals use the Internet to

sell products or services to organizations or individuals who

seek sellers to bid on products or services they need.

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intrabusiness EC

E-commerce category that includes all internal organizational

activities that involve the exchange of goods, services, or

information among various units and individuals in an

organization.

business-to-employees (B2E)

E-commerce model in which an organization delivers services,

information, or products to its individual employees.

consumer-to-consumer (C2C)

E-commerce model in which consumers sell directly to other

consumers.

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collaborative commerce (c-commerce)

E-commerce model in which individuals or groups

communicate or collaborate online.

e-learning

The online delivery of information for purposes of

training or education.

e-government

E-commerce model in which a government entity buys or

provides goods, services, or information from or to

businesses or individual citizens.

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business model

A method of doing business by which a company can generate

revenue to sustain itself.

value proposition

The benefits a company can derive from using EC.

THE STRUCTURE AND PROPERTIES OF BUSINESS MODELS

Revenue Models

Sales

Transaction Fees

Subscription Fees

Advertising Fees

Affiliate Fees

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