E-commerce defined

Electronic commerce (e-commerce) is often thought simply to refer to buying and selling using the Internet; people immediately think of consumer retail purchases from companies such as Amazon. But e-commerce involves much more than electronically mediated finan­cial transactions between organizations and customers. E-commerce should be considered as all electronically mediated transactions between an organization and any third party it deals with. By this definition, non-financial transactions such as customer requests for fur­ther information would also be considered to be part of e-commerce. Kalakota and Whinston (1997) refer to a range of different perspectives for e-commerce:

• A communications perspective – the delivery of information, products or services or payment by electronic means.
• A business process perspective – the application of technology towards the automation of business transactions and workflows.
• A service perspective – enabling cost cutting at the same time as increasing the speed and quality of service delivery.
• An online perspective – the buying and selling of products and information online.

The UK government also used a broad definition when explaining the scope of e-commerce to industry:

E-commerce is the exchange of information across electronic networks, at any stage in the supply chain, whether within an organization, between businesses, between busi­nesses and consumers, or between the public and private sector, whether paid or unpaid. (Cabinet Office, 1999)

These definitions show that electronic commerce is not solely restricted to the actual buying and selling of products, but also includes pre-sale and post-sale activities across the supply chain.

E-commerce is facilitated by a range of digital technologies that enable electronic communi­cations. These technologies include Internet communications through web sites and e-mail as well as other digital media such as wireless or mobile and media for delivering digital television such as cable and satellite. We will explain the characteristics of these technologies and some of the challenges in managing them in Chapter 3.

When evaluating the strategic impact of e-commerce on an organization, it is useful to identify opportunities for buy-side and sell-side e-commerce transactions as depicted in Figure 1.2, since systems with different functionalities will need to be created in an organization to accommodate transactions with buyers and with suppliers. Buy-side e-commerce refers to transactions to procure resources needed by an organization from its suppliers. In Chapter 6, Case Study 6.1 reviews how Shell has developed an e-business capability that enables buy-side e-commerce for its customers. Sell-side e-commerce refers to transactions involved with selling products to an organization’s customers. So e-commerce transactions between organi­zations can be considered from two perspectives: sell-side from the perspective of the selling organization and buy-side from the perspective of the buying organization.

Activity 1.3 . Understanding e-commerce and e-business

Purpose

To encourage discussion of what is understood by ‘e-commerce’ and ‘e-business’ and their significance to managers.

Activity

Read the extract below and then answer the questions which follow. Although this is now a dated example, it is still useful as a historic document showing the different aspects of e-business that a business must address. In one of his last AGM speeches for General Electric (Welch, 2001), Jack Welch made these comments about GE’s adoption of e-business.

Like the Amazons of the world, we started out with what we call ‘e-Sell’, primarily distributing our products on the Internet. Moving our traditional customers to the Web for much more efficient transactions has been very successful. And in 2000 we sold $8 billion in goods and services online, a number that’ll grow to $20 billion this year, making this year-old institution one of the biggest, if not the biggest, e-Business company in the world.

On what we call the ‘e-Buy’ side, we followed the same path, adopting many of the dot.com ideas on auctions, having a global network of Six Sigma suppliers. The concept of reverse auctions was right in the GE sweet spot and we wasted no time in spreading the new technology across our businesses. We now run global auctions daily-$6 billion worth last year, $12 billion this year, generating over $600 million in savings for the company in 2001.

But the biggest breakthrough of all was what we call ‘e-Make’ and that didn’t come from the dot.coms. They had little infrastructure and few processes. e-Make came from learning what the Internet could do for internal processes and seeing the enormous advantage Digitization can give a big old company that actually makes things, particularly one with Six Sigma methodology already deeply entrenched in its veins. By digitizing our processes from customer service to travel and living, we’ll take over a billion dollars of cost out of our operations this year alone.

Last year I told you I believed e-Business was neither ‘old economy’ nor ‘new economy’, but simply new technology. I’m more sure of that today. If we needed confirmation that this technology was made for us, we got it. GE was named last year ‘e-Business of the Year’ by InternetWeek magazine and awarded the same title last week by WORTH magazine.

Digitization is, in fact, a game changer for GE. And, with competition cutting back because of the economy, this is the time for GE to widen the digital gap, to further improve our competitive position. We will do that by increasing our spending on information technology by 10% to 15% this year despite the weak economy.

Note: the Six Sigma concept of process quality improvement is described in more detail at www.isixsigma.com, and reverse auctions are explored in Chapters 2 and 7.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).