Information Brokers or Portals

Information brokers or now commonly known as portal sites provides a form of service, which adds value to the huge amounts of data available on the open networks. They provide value by consolidating and aggregating the large amount of information into organised pool of information for consumption by the Internet users. An example of an information broker or portal site is Yahoo (www.yahoo.com) which basically started as a directory service and subsequently evolved into a portal site.

Sources of revenue for this type of models may be through subscription-based or advertising.

Creating Competitive Opportunities

The Internet is an exciting mechanism to be involved in and people who understand the advantages that the Internet provides will be able to benefit from it. Competitive advantage in an industry can be measured by the company's long-term return on capital relative to its competitors.

Some of the guiding principles in establishing competitive advantage are :-

Understanding The Customer
Competitive advantage in e-commerce begins with understanding the customer. It is both rare and effective for any company to focus all its capital and people on enhancing the customer's experience. Amazon.com has done this very well and has taken online consumer shopping to a new height. Anyone seeking advantage from e-commerce must think along similar lines about how their company might change its processes to serve customers more effectively.


Understand Company's Capabilities
If traditional companies are intending to move into the online environment, they must first understand what their current capabilities are in relation to offering value to their existing customers. It may range from superior customer services to low product pricing and etc. It is important to understand a company's current capabilities and to effectively translate this capabilities to the online environment.



First Mover
The first mover advantage is always important especially in a new area like the Internet. However, it is important to realise that the first mover advantage is limited and if given a short window of opportunity, competitors with access to unlimited resources may wipe out the advantage. Companies thinking of moving unto the e-commerce arena must remember two things-

Always be a first mover as what Amazon.com has successful done; and

Ensure that operational efficiency is there when services are first introduced.


Understanding The Internet
Companies that are able to understand the playing field can effectively take advantage of the environment. Amazon.com has proven this by introducing new businesses processes that are able to harness the strengths of the Internet thereby providing superior customer service, selected the right product which has books to start with and introduced new concepts in the buying process for the benefit of the customers.


Anticipate New Competitors
While it is important to be aware of what competitors are doing, it is important to focus on how customers perceive the relative value of competitors' products and services. A company should not feel compelled to replicate every strategic move of a competitive but rather stick to a predefined plan which has been well thought out. However, it is important to at least anticipate the strategic moves of new competitors to enable further planning to be made.

Value Chain Providers/Integrators

Value chain providers are those that provide specific function to support the value chain such as electronic payments infrastructure e.g. MEPS (Malaysian Electronic Payment System) which provides the necessary infrastructure to allow organisations to conduct SET payment transactions over the Internet.

The best examples are probably in the banking sectors whereby electronic bill payment or electronic settlement services are provided to support organisations conduction trade electronically.

Other key areas emerging now are in logistics e.g. FedEx (www.fedex.com) or UPS (www.ups.com) which provides package shipping support and tracking facilities for organisations using courier services.

Revenue may come from both service fees and percentage of transaction fees.

E-Procurement

E-Procurement is primarily the electronic tendering and procurement of goods and services. The Internet has enabled large companies or even government authorities to implement some form of e-procurement on the Web. An example is the US Department of Defense (www.dod.org) and the Singapore Ministry of Defense (www.mips.mindef.gov.sg) which has set up an E-procurement site to enable various supplies to tender for the provision of different products and services required by these organisation.

E-procurement has enabled organisations to reduce cost in the procurement process through automated tender processing and more cost-effective offers. For the organisations, further benefits of E-procurement are in having a wider choice of suppliers which is expected to lead to lower cost, better quality, improved delivery and reduced cost of procurement (e.g. tender specifications can be downloaded electronically by tenderers instead of being mailed by post). For the suppliers, the benefits are in more tendering opportunities, possibly on a global basis, lower cost of submitting a tender and possibly tendering in parts which may be better suited for smaller enterprises.

E-Auction

Electronic auctions offer an electronic implementation of the bidding mechanism available at traditional auctions. Products displayed may be presented through multimedia presentations and E-auction sites may also offer integration of the bidding process with contracting, payments and delivery.

E-auction operators sources of income are normally through transaction fees and advertising also provide value-added services e.g. guarantee of quality of goods purchased over the E-auction site.

Due to the efficient technology of the Internet and the lower infrastructure cost, small quantities of low value products can also be sold through E-auction. Buyers will benefits from competitive pricing and smaller quantity whilst sellers may benefit from the lower sales overheads and better utilisation of production capacity.

One example of an E-auction site is E-bay (www.ebay.com) which started in 1998 and now has almost 1.1 million visitors a day. It is by far the most successful E-auction site today although many more are coming up. It has recently moved into auctioning art, antiques and collectibles by buying the third-largest auction house in America, Butterfield & Butterfield.

Case Studies of E-Commerce Models - EMall

E-Mall
This business model is very much like the physical mall and in its most basic form it is a collection of e-shops, usually enhanced by a common umbrella for example of well-known brand. It might be supported by a common infrastructure e.g. payment infrastructure which may enable consumers to pay for goods purchased at each particular E-shop or on a global basis i.e. when exiting the E-mall.

An example of an E-mall is 1 Internet Plaza (www.1internetplaza.com) which enables entry to individual E-shop. When the E-mall specialises on a certain market segment such malls become more of an industry marketplace, like Industry.Net (www.industry.net) which can add value by virtual community features (FAQ, discussion forums, closed user groups and etc). The E-mall operator may not be interested in the individual E-shops that is being hosted but may seek benefits from sales of supporting technologies and services.

Benefits for the customers are similar to E-shops with additional convenience of easy access to other e-shops and ease of use through a common user interface. When a brand name is used to host the E-mall, this should lead to more trust, and therefore increased readiness to buy.

Benefits for the E-mall members are lower cost due to joint marketing, hosting services and access to advanced technology provided by the E-mall operator and possibly additional traffic generated from other E-shops on the mall or from the attraction of the host brand.

Possible form of revenues for the E-mall operators could be from monthly hosting fees (which may include set-up cost), advertising fees, and possibly a fee on transactions (if the mall operator provides the payment infrastructure.)

When the E-mall first came out, it attempted to emulate the concept of the physical mall. This concept failed due to the fact that distance, which may be a barrier in the physical world, does not exist in the cyberworld where other E-shops are just a click away. This added with the increased user sophistication and demand to handle a variety of seller-buyer user interfaces provided by the many different forms of E-shops have caused many of the firsts E-malls to fail. An example in Malaysia would be Planet Asia, which was the first e-mall, which had a variety of E-shops, selling products from flowers to books. It failed after a year of extensive marketing and investment but more likely due to other factors e.g. trust, security and payment mechanism.

Case Studies of E-Commerce Models - E-Shop

There are different variations of electronic commerce business models existing today. Examples of all of these can be found on the Internet today. Some of these are still experimental while others are in fully commercial operation.

• E-Shop
  This is the simplest form of electronic commerce where traditional sales activities are transferred to the Web. This is primarily the marketing of a company or a shop. This is done to promote the company and its goods or services. Added is the possibility to order and to pay, often combined with traditional marketing channels. Benefits to the company are such as increased demand for its products, lower cost of promotion and sales and globalisation. Benefits for the customers may be lower prices, wider choices, better information and convenience of selecting, buying and delivery, including 24-hour delivery.

  An example of an E-shop is Virtual Vineyard, a specialty web store (www.virtualvineyard.com) which started with selling fine wine and later moving into selling gourmet food.

Business-to-Consumer Electronic Commerce

The most popular form of implementation Equivalent to retail shops May have speciality shops as well as malls Business to consumer electronic commerce is fast rising and is expected to overtake business-to-business electronic commerce by 2005 Provides a level playing field for technopreneurs

The Business-to-consumer electronic commerce business model is probably the most popular form of implementation as it typically requires a lower level of investment compared to the business-to-business electronic commerce model.

This type of model is equivalent to the traditional retail shops selling products and services to consumers. There may be specialty shops as well as the electronic equivalent of the traditional malls.

The Business-to-Consumer electronic commerce is fast rising and is expected to overtake the business-to-business electronic commerce implementation in the form of revenue generated by 2005. This is due to the enormous potential provided to technopreneurs, which provides them a level playing field with the larger organisation. A typical example is Amazon.com, which have over the last four years become the No 1 bookstore in the world surpassing traditional giants such as Barnes and Nobel.

Consumer-to-Consumer Electronic Commerce

Typically a model where consumers sells to consumer Similar to classified ads Provide mechanism for flexible pricing of products and services Ebay is the most prominent consumer-to-consumer business model implementation

The Consumer-to-consumer business model is where consumer sells products or services to other consumers. This implementation is similar to the traditional implementation of classified ads.

Consumer-to-consumer business model means the end of fixed pricing because the model is based on a willing buyer willing seller basis. Consumers determine the products and services to be sold with a recommended pricing for purchase by other consumers.

The most prominent consumer-to-consumer implementation is probably Ebay, which has over 1 million consumers trading daily.

Consumer-to-Business Electronic Commerce

New Business Model developed through the strength of Internet Precursor could be classified ads Buyer-led pricing Priceline.com Auto-By-Tel.com

The Consumer-to-Business electronic commerce model is a typical business model that has emerged strongly due to the technological advantages of the Internet and the World Wide Web. This form of electronic commerce will allow consumers to sell or determine the price of goods for purchase to businesses.

The Consumer-to-Business electronic commerce model in its most basic form would be the classifieds ads whereby sellers determine the products and the price to be sold to prospective buyers.

Typically buyer-led pricing mechanism can also fall under consumer-to-business electronic commerce. Some examples of these type of implementation are Priceline and Auto-by-Tel.

Business-to-Business Electronic Commerce

Internet is used to transmit EDI documents in three basic ways : - Company-to-Company - Hub and Spokes - EDI Service Bureau Business-to-business electronic commerce emphasis on: - Security - Payment

The Internet is being used to transmit EDI documents in three basic ways :-

• Company-to-Company
  This is where large EDI-enabled trading partners transmit EDI documents prepared using traditional EDI translation software over the Internet. Software such as Premenos Templar are used to achieve this.

• Hubs and Spokes
  A large company will set-up an EDI server at its location, which trading partners can access over the Web with proprietary software which allows both EDI via e-mail as well as using Web-based forms.

  An example of this would be Boeing (www.boeing.com) where its customers can order any of 410,000 different Boeing parts over the Web.

• EDI Service Bureau
  Client-members use a Web browser to transmit EDI documents to other client-members. Bigger service bureaus may integrate their existing VANS (used by larger companies) with their Web-only system (used by smaller companies. An example of this is GE TradeWeb (www.getradeweb.com)

In a typical business-to-business electronic commerce environment, security is important to ensure authentication of the buyer or seller, non-repudiation of the transaction and encryption.

In the areas of payment, businesses don't use credit cards for payment unless it is for small business-to-business electronic commerce e.g. Grainger Inc (www.grainger.com). Traditional business-to-business infrastructure will still be in effect. However, pilot systems are being conducted in areas like electronic cheques to cater for payment for business-to-business.

Business-to-Business Model

Primarily electronic commerce between businesses First form of business-to-business was Electronic Data Interchange EDI defined as 'a way to electronically exchange business documents' Internet-based EDI

Business-to-business electronic commerce is primarily the conduct of commerce between businesses via the electronic medium. It is expected that the most significant growth of electronic commerce will be in business-to-business sales and according to Forrestor Research of Cambridge, one of the leading research companies in the US, business-to-business sales are expected to reach US$7 billion by the year 2000. This is based on the expectation that at least 60% of current privately held electronic data interchange (EDI) business services will shift over to use of Internet technologies in the next four years.

EDI is one of the first form of business-to-business electronic commerce established in the commercial environment and is defined as 'a way to electronically exchange business documents, such as purchase orders and invoices, between companies'

EDI relies on a standard messaging structure to maintain the supply chain between a company and its trading partners. Each industry has a different standard set of rules administered by the American National Standards Institute's (ANSI) committee. EDI typically runs on a Value Added Network, which is primarily a proprietary network. In a typical EDI scenario, Company A which trades with Company B typically will sent a purchase order through an EDI standard message which will be receive and acknowledged by Company B through a EDI acknowledgement standard message. One of the fundamental disadvantages of EDI are its costly set-up due to its proprietary and complex nature making it accessible only to large companies.

The Internet has lower the barriers to business-to-business e-commerce in both the cost and complexity of the system. However, internet commerce will not replace the traditional EDI systems because companies have invested millions in the establishment of the infrastructure. Rather it will most likely give rise to hybrid Internet-EDI solutions.

One of this hybrid solution proposed by the XML/EDI Group is to extend EDI's functionality by connecting it on the Internet with the emerging Extensible Markup Language (XML) standard.

XML is a derivative of the Structured Generalised Markup Language (SGML) and is midway between SGML and HTML in complexity. XML adds to HTML the ability to create one own markup tags, and to specify how those markup tags should be handled by the XML-parsing browser. Also, a person can use XML to structure documents in a way that can be interpreted by the XML reader software.

For instance, a person could use XML to define section headings, paragraphs, and footnotes within their document and an XML-capable browser reading that document could appropriately format the elements, and automatically construct a table of contents based on them. Another example is where a purchase order in XML, defining and using , , and tags to indicate what to buy. Then, when the document is sent to the supplier, their software could automatically extract these tagged elements and feed them into their order entry system for automatic processing.

Electronic Commerce Business Models

On a broad level, electronic commerce is divided into four distinct categories:

Business-to-Business

Consumer-to-Business

Consumer-to-Consumer

Business-to-Consumer

Business-to-business electronic commerce would be companies that uses a network for ordering from its suppliers, receiving invoices and making payments. This category has been well established for several years, particularly using Electronic Data Interchange (EDI) over private or value-added networks.

The Consumer-to-Business electronic commerce model is a typical business model that has emerged strongly due to the technological advantages of the Internet and the World Wide Web. This model is typically known also as buyer-led pricing in which the buyer determines the price of a good or service to prompt sellers to meet the price.

Consumer-to-consumer electronic commerce primarily refers to the sale and purchase of goods and services between consumers e.g. classified ads and auction sites.

Business-to-Consumer electronic commerce model primarily refers to electronic retailing in which businesses sells goods and services to consumers through the World Wide Web. This has predominantly been the model that was pushed during the first phase electronic commerce.

As stated earlier, the Internet has predominantly caused new business models to emerge that can only come about due to the advantages of the Internet and the World Wide Web. In the next few sections, we will examine these Internet business models in detail.

Success Criteria of Business Models

First phase of electronic commerce involves improving existing business processes Second phase of electronic commerce involves developing new business models Successful business models involves : - Clearly defined customer, product and processes - Access to technology to support processes - Integration of internet-based information to other information - Product or service fulfillment

When electronic commerce was popularised in the mid-1990's, the emphasis was "doing business on the Internet" and the first wave of electronic commerce focused on importing existing business practices into the digital environment.

Now a second wave of electronic commerce is in progress where new business models, developed for the digital environment are emerging. These models move beyond merely doing business on the Internet, but rather they are "changing the conduct of business of the Internet".

A successful business model involving the use of Internet technologies must meet four requirements :-

• Clearly identify the customers, the business activities, the product/service, and the financial transaction

• Provide accessibility to internet technologies which will handle all aspects of the sale transaction

• Integrate Internet-based information with other information required by the customer and the business

• Ensure fulfillment of the product/service

Electronic Commerce Business Models - Overview

Objectives

At the end of this module, you will be able to

• Understand the various Electronic Commerce Business Models in existence today

• Review the websites of different business models

• Understand the concept behind these different business models

• Understand the role of Commerce Service Providers

  
  

Definition of Business Model

Description of the product, service and information flow Identifies potential benefits and sources of revenue from the various activities Work in conjunction with marketing strategy

A business model could be defined as a description of the product, services as well as the processes than flows between the various components. It primarily describes the potential benefits as well as the revenue sources from the business. However, a business model does not provide an understanding of how it will achieve a company's mission. This is primarily done through the marketing strategy of a company.

Electronic commerce can be used in all phases of a commerce transaction from marketing to product ordering to payment to product/service fulfillment. The diagram above shows a typical commerce transaction where buyers identify the need of a product or service and find the approriate seller who will then provide the required product or service. The product or service information will be determined and required at this stage for the buyer or seller to make informed decisions. Upon selection of the appropriate seller, negotiations on the terms or financial transactions will be performed upon which the fulfillment of the product or service will be made by the seller. Depending on the product or service, support may be required to be provided by the seller.

Defining Your Market

Market Analysis Considerations include:- Customer's Profile Competitor's Analysis Geographical Location Local Culture and Community PowerPoint Presentation When performing the market analysis for a new internet venture, several considerations must be addressed which are :- Customer's Profile The customers profile is primarily the identification of the target audience as previously stated and will be the basis of development of the new internet business. Example, if the new internet business involves targetting the kids segment, then market analysis must be performed to ensure that the kids sector is adequate large enough or properly developed to sustain the new business. Go To Top Competitor's Analysis In the Internet arena, competitors may not come from within the same geographical location but also from overseas competitors due to the global reach of the Internet. It would not be a surprise to find new competitors emerging on a daily basis which will be involved in the same marketplace as your new business. It is important to ensure that prior to establishment of the new business that the profile of the existing competitors are analysed and respective strengths and weaknesses identified. Areas such as their operating mechanism, their specific marketplace, their product or business models must be properly studied and analysed to increase the chance of success. Go To Top Geographical Location Although the Internet has no geographical boundary, the target boundary of the internet venture must be identified. This is especially so if the new internet venture is involved in hardgoods and where logistics pertinent to delivery of products is involved. Certain internet ventures may be localised to particular geographical location or culture, so it is important to understand the particular location where the business will be conducted. Go To Top Local culture and community As stated above, apart from location, local culture and community are important considerations when setting up the new internet venture. As an example, car websites may be a lucrative business in US but in our South East Asian region, the process of buying a car is very much a family affair where entire families are involved in the process of purchasing the car

Strategic Issues

The E-Commerce Strategist must consider the following issues when developing its Internet Business Strategic Plan :- Market Definition Market Analysis Market Share Development E-Commerce Framework Previous Market Definition Market Definition Addreses the conceptualisation of a defined market for e-commerce through:- specification of a unique selling proposition definition of market Important for next stage of planning The first consideration involves the definition of the marketplace. Primarily it involves the definition of the specific marketplace that the new internet business will be involved in, the unique selling proposition to be offered and the different target audience. This stage is probably the most important stage as it will set the framework for the planning of the business plan Go To Top Market Definition Market Analysis Customer's Profiling Unique Selling Proposition Product Business Models Competitive Opportunity Value add Meeting Customer's Needs The various issues to be considered includes :- Market Analysis This primarily involves the identification of the target audience and the profiling of the customer. Proper identification would ensure that the internet web presence that is eventually built would suit the requirements of the target market Unique Selling Proposition This primarily involves the definition of a specific offering to the market. The offering could be in the form of a unique product or a specific business model. Competitive Opportunity This primarily looks into the value added facilities provided by electronic commerce and what needs to be established to meet customer's expectations. Go To Top Market Analysis Market Analysis Defines the analysis of thr e-commerce marketplace and identifies factors to success as well as defining the risk involved This strategic issue primarily involves the analysis of the marketplace as well as the competition that exist within the marketplace. Critical success factors must also be established as well as the risk factors to enable proper strategies to be defined to ensure success. It should be noted that different marketplace would see the identification of different critical success factors as well as risk factors. Go To Top Market Analysis Critical Success Factors Examination of marketplace Identification of successs factors Risk Analysis Identification of Risk Risk Aversion Strategies Issues to be considered under this phase are :- Identification of the marketplace as well as analysis of the competition within the marketplace. Analysis of the competitors would include identification of its strengths and weaknesses. Definition of the critical success factors prevalent to the specific marketplace Identification of the different risk in the internet business as well as establishment of the necessary risk aversion strategies Go To Top Market Share Development Market Share Development Defines the concepts of :- Brand awareness Customer Attraction Customer Retention Market share development primarily looks at the Establishment of brand awareness Identification of customer attraction strategies Identification of customer retention strategies Go To Top Market Share Development Web Branding Strategies Value Creation Implementation Web Marketing Strategies Customer Acquisition Web Sales Strategies Online Selling Customer Retention Issues to be considered under market share development includes :- Value creation and implementation of a brand awareness campaign to gain market share for the new internet venture Development of the proper strategies to acquire new customers as well as; Development of the proper strategies to retain customers. Proper implementation of the above strategies would be the difference between failure and success of the internet venture. With over 1.5 billion web pages available today, any new internet venture would have difficulties gaining market share and retaining new customers. Most of the internet surfers today would most likely access a limited number of the top sites only and any new internet venture must ensure that its website would be placed among the top websites in the particular marketplace. Go To Top E-Commerce Framework E-Commerce Framework Defines the development of :- An Efficient e-commerce technical and operational infrastructure E-Commerce Team Financial Considerations The E-commerce Framework development involves the development of :- An efficient e-commerce technical and operational infrastructure An efficient and effective e-commerce implementation and operational team A financial framework Go To Top E-Commerce Framework Technical Architecture Security Electronic Payment System E-Commerce Technologies E-Commerce Teaam Roles & Responsibilities Financial Considerations Issues to be considered are :- Technical Infrastructure The technical infrastructure to be built must consider :- Security to ensure prevention of fraud Electronic payment system and; Proper software and hardware configuration Poor definition of the technical infrastructure may cause the failure of the internet venture even before it has achieve its full potential and may also cause huge losses as what had happen to sites like e-Bay when its server crashed due to excessive demand of its services. Developing a proper technical framework is difficult and will incur huge expenses through excessive spending of hardware if the process is not thought over properly. Proper amount of time must be allocated to ensure the financial viability of the new internet venture. E-commerce Team An efficient e-commerce team must be established to ensure that the new internet venture is kept at optimal performance. The right mixture of technology and management experience in the e-commerce team must be established prior to the start of the e-commerce venture Financial Considerations In order to ensure financial viability of the project, several financial considerations must be taken into account which includes hosting cost, advertisement, technical infrastructure set-up cost and etc.

New Rules of the Networked Economy

1. Space	6. Value
2. Time	7. Efficiency
3. Matter	8. Transactions
4. Growth	9. Impulse
5. Markets	10. People

Electronic Commerce systems, with is efficiency and operational effectiveness have revolutionalised the way commerce is conducted. Businesses are now faced with increasing complex operation and rules on which to operate. The Internet and Electronic Commerce have created a number of new rules which a company must aware of in order to remain competitive.

Rule No 1 : Space
Due to the networked nature of the Internet, distance has vanished. Businesses have the opportunity for globalisation of their products but at the same time is also exposed to worldwide competition. Companies must now addresses these issues when moving into the electronic commerce environment.

Companies which previously have market share in their local domain now faces new competition from electronic commerce businesses established not only within their local domain but also from other domains/countries as well. An example of this is Amazon.com (www.amazon.com) which have over the last 4 years established themselves as the largest bookstore in the world providing competition to not only traditional brick and mortar stores in the US e.g. Barnes and Noble which have also enjoyed a big market share in the US but also bookstores around the world.

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Rule No 2 : Time
The World Wide Web and electronic commerce systems are instantaneous in nature thereby requiring companies to provide instant interactivity in provision of service or information. These factors have accelerated change be it in operation or service to ensure fast response.

It is important for companies to learn from and adapt to the marketplace in real time to cater for this increase in interactivity. A perfect example would be Dell Computers (www.dell.com) which have revolutionalised PC sales by offering machines built directly from buyer's request.

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Rule No 3 : Matter
The convergence of technology and information within the World Wide Web and electronic commerce systems have ensure that processing of information is much more powerful and cost-effective than moving physical products. Electronic commerce systems have created a new economy in sales and services of information based products.

As an example, Yahoo's (an information based web site) market value went from US$400 million to US$5 billion in 2 years due to intangibles.

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Rule No 4 : Growth
The Internet grows as a rate of 10% per month and growth for electronic companies is accelerated by the growth of the Internet. The concept of virtual marketing to these potential customers can greatly increase the adoption of a product or service.

In this networked economy, 'first-mover' advantages are greater than ever. As an example, Hotmail (www.hotmail.com) which is predominant the first website offering free e-mail signed 2 million subscribers in 2 years and continues to signup 100000 new accounts every day. Hotmail was eventually purchase by Microsoft for US$400 million.

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Rule No 5 : Markets
In this new networked economy, the buyers are gaining new power and the seller new opportunities. Businesses that offer unique services or lower costs will prosper.

As an example, Auto-by-tel (www.autobytel.com) provides on-line shopping for cars. The website provides the ability to personalise a consumers shopping experience. Another attractive feature is it's personalise car service which provide value added information on when to service cars based on the car models and service reminders.

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New Business Models
Due to its unique mechanism, electronic commerce systems allow for new business models, based on the wide availability of information and its direct distribution to end-customers.

An example of this would be so-called infomediaries or information brokers which repackages information e.g. Dealernet (www.dealernet.com), a site which offers comparison between types of cars, with pictures, product specification and third-party reviews.

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Rule No 6 : Value
In the new network economy, the value of a company rises with the market share. Many companies give away their products to establish market share and then sell linked services later on.

As an example, Realnetworks (www.realnetworks.com) gave away streaming media players on the Web to create a "standard". The value of the company is now very high and the market is beginning to use the software as a standard for streaming video and music.

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Rule No 7 : Efficiency
One of the most widespread beliefs about the new Network Economy is that "friction-free" contact between buyers and sellers will eliminate the need for middleman. However, this is far from the truth as an extraordinary new type of business "infomediary" has replaced intermediaries.

Infomediaries are entities that turn data into usable information via a community-based buying environment or powerful technology-based buying aids. Due to the enormous amount of information existing in the World Wide Web and the increasing value of these informations, infomediaries play an important part in the efficiency of electronic commerce systems by providing repackaged information in accordance to the needs of the consumer.

An example of this would be AOL (www.aol.com) which packages information into reusable portions for its community of AOL users.

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Rule No 8 : Transactions
In electronic commerce, one-to-one marketing will take precedence as customers demand customisation of products and suppliers ensure new product capabilities to cater for the increasing sophisticated demand of its customers. Customer services will become increasingly efficient and sophisticated through the integration of video conferencing in web sales and web support.

An example of this would be Staples (www.staples.com), an office supplier website which sells paper clips on a one-on-one basis.

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Rule No 9 : Impulse
The buying experience in an electronic commerce economy is different from the real world. The consumers of an electronic commerce environment are so-called 'impulse' buyers who may discover a product they desire and just hit the "buy" button. The downsides of these consumers are also that they are just a click away from the competitors. Electronic commerce websites need to ensure the "stickiness" of their sites to attract the potential consumers.

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Rule No 10 : People
The new economy will be dependent on brainpower which is the prime factor driving the new economy. Large value in an electronic commerce economy would come from an idea combining with the necessary technology as well as an effective model. New forms of expertise will be required in the new economy to ensure its success and existing personnel need to be re-skilled in the ways of the new economy to ensure its sustainability.

Business Advantages of Electronic Commerce

Many companies are adopting electronic commerce as part of their business strategies due to the tremendous opportunities offered by this new medium of delivery. Although, business may not make a profit immediately through electronic commerce, there are other business values to be obtained through the adoption of electronic commerce which will provide a catalyst of growth for these businesses in future. The business values which can be derived are :-

Product Promotion
Product promotion can be enhanced through a direct, information-rich and multimedia interactive content infrastructure provided by the World Wide Web. The advantages of electronic commerce is the availability of product information anytime, anywhere, provided the customer has the right infrastructure (i.e. PC, modem, online service) to access this information.

Content or product can also be customised based on customer profile or input (due to the interactive nature of the World Wide Web) to suit the preference of the customers e.g. an electronic supermarket could provide different graphical user interfaces for kids, teenagers or housewives with a look appealing to each of these segments. The advertisements appearing on these pages could also be customised to appeal to the different customers. This is in line with trends in marketing such as one-to-one marketing which try and target each consumer with a specific message, according to his needs and desires.

An example is Peapod (www.peapod.com) which sells and delivers grocery to consumers. Consumers are provided with the opportunity to customise their buying experience as well as storing their personal shopping list for future use.

In an increasing competitive world where products are increasingly harder to differentiate and an abundance of traditional media messages and customers having too little time, electronic commerce offers an opportunity for new promotion strategies, thereby enhancing the branding of products.

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Time to Market
Due to the instantaneous nature of the World Wide Web, electronic commerce allows a reduction in production time of information based products. This ability to distribute information as soon as it is produced is important to certain markets especially in the print and financial markets.

In the financial markets, banks and stockbrokers have now the ability to provide its customers with instantaneous information on their account upon request. This has streamline their operation and increased their efficiency in customer service.

In the information based industry e.g. magazines and print, customers now have accesses to up-to-date information via the World Wide Web.

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Customer Service
Through web agents built into a system or a databank, electronic commerce can enhance customer service through the provision of a highly interactive environment which allows customers to obtain additional product information, download software or software patches, answers queries through auto-responders and etc. Basically, the ability to provide on-line answers to problems, through resolution guides, archives of commonly encountered problems for 24 hours a day, 365 days a year builds customer confidence and retention. Monitoring how customers use this support information also provides insight on improvement areas in current products.

A good example of excellent customer service provided by electronic commerce would the website of Federal Express (www.fedex.com) which primarily allows a customer to track the location and status of specific overnight packages.

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Branding
The popularity of the World Wide Web has ensure that corporations established a website as part of their corporate image. This is especially so for consumer products e.g. soft-drink industry which relies heavily on branding of their products to ensure market share. Electronic commerce systems will become one of the components of a brand or corporate image, especially while targeting technology-friendly customer segments.

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Reduced Pricing
The digital transmission and reusing of information on an infrastructure such as the Internet would greatly reduced the cost of personnel, phone, postage and printing especially in the service industries where the cost of customer service usually exceeds the product costs. Checking order status, getting a user statement or a bill are examples of activities which can be delivered much more cheaply using electronic commerce. This reduction in cost may eventually be transferred to customers through reduction in prices of products and services.

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New Sales Channel
Due to its interactive nature and its direct reach to customers, electronic commerce systems represent a new sales channel for existing products. This is particularly so for two kinds of products: -

- physical products which can be advertised and/or ordered on-line, such as computer hardware or books;
- Products which can additionally be delivered over the electronic commerce medium such as information or software.

Examples of the first type are the electronic catalogs such as Virtual Vineyard which sells wine, food and gifts products. These so-called electronic catalogs provide information on products, support on-line ordering and payment, and sometimes online customer service.

Electronic commerce provides significant value to markets where information is of value add to the product being purchased e.g. in the wine industry, information on the winery, the type and quality of the wine or the food that it goes well with are of significant value to customers.

In the case of information products, the electronic commerce medium actually becomes the delivery medium. As such, information products can be delivered digitally. One example of this would be www.beyond.com which sells software online and can be downloaded and used immediately after payment or www.tunes.com which sells music which can be downloaded.

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New Business Models
Due to its unique mechanism, electronic commerce systems allow for new business models, based on the wide availability of information and its direct distribution to end-customers.

An example of this would be so-called infomediaries or information brokers which repackages information e.g. Dealernet (www.dealernet.com), a site which offers comparison between types of cars, with pictures, product specification and third-party reviews.

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New Product Capabilities
Electronic commerce processes allow for new products to be created or existing products to be customised in accordance to the customer's requirements. An example of this would be Dell Computers (www.dell.com) which allows a consumer to customise the personal computer that they wish to purchase.

Other examples of new products or services which uses the strengths of electronic commerce are Switchboard, an address lookup system that has the ability to search more than ninety million names within the US. Using Switchboard, a user can locate individuals or businesses simply by typing the name into the Web page.

Framework of Electronic Commerce

Technical Standards And Network Protocols	Electronic Commerce Applications (Online shopping, Internet Banking)	Policies, Privacy And Legal Issues
	Business Services (Security, Authentication, Electronic Payment)
	Messaging and Information Distribution Infrastructure (email, HTTP)
	Content and Publishing Infrastructure (Java, HTML)
	Transmission Infrastructure (Internet, Wireless, TV)

The above framework for Electronic commerce defines the different components that need to be in place to ensure the success of electronic commerce. These components may represent different market opportunities that would enable new players to step in, creating a whole new set of market dynamics. By understanding the different industries and market supporting electronic commerce, effective business strategies can be developed.

The Transmission Infrastructure deals primarily with the bandwidth requirements as well as the different forms of high-speed network transport whether it is land-based telephone, air-based wireless, modem-based PC or satellite based. Research is continually conducted in these areas to essentially increase the availability of bandwidth as well as connectivity to different medium of delivery e.g. cable TV, handphones and etc). The increase bandwidth as well as easy accessibility to information via different medium will increase the potential of electronic commerce. One significant advancement in this area is the development of new transport protocols e.g. ADSL (Asymmetic Digital Subscriber Line) which enables the transmission of over 2 Mb of data over common copper telephone lines.

In areas of content and publishing, currently the most prevalent architecture that enables network publishing is the World Wide Web which allows small business and individuals to develop content in the form of Hypertext Markup Language (HTML) and publish it on a Web server. Significant improvement has also been made in the areas of content management with the development of Java which allows the publishing of information over various computing platform. New development e.g. Jini would eventually allow information to be distributed over intelligent devices.

Messaging and information distribution deals with the process of carrying content which have been developed and stored in web servers across a network. Messaging provide ways for communication unstructured (e.g. fax, email) as well as structured data which consist of automated interchange of standardised and approved messages between computer applications via telecommunications lines. Examples of structured document messaging are purchase orders, shipping notices and invoices.

For the purpose of electronic commerce, existing messaging mechanism must be extended to incorporate reliable, unalterable message delivery that is not subject to repudiation, to be able to acknowledge and give proof of delivery when required. The challenge in the development of messaging software is to make it work across a variety of communication devices (PC, set-top boxes and wireless devices), interfaces (characters, graphics and virtual reality) and networks (satellite, cable, fiber optics and wireless).

Business services infrastructure deals with the different methods for facilitating online buying and selling processes. To ensure the success of electronic commerce, online payment services need to ensure encryption (making contents unreadable except to the recipient) and authentication (making sure the customers are who they say they are). In addition to generic payment services, electronic commerce will need to accommodate other desirable payment-related services such as currency exchange, cash management and etc. Development of secure transactions and secure online payment instruments (such as digital cash and electronic cheques) is currently one of the most active areas of electronic commerce. Security issues e.g. firewalls and etc continues to be develop to ensure security of online transactions.

Electronic commerce applications are emerging and new applications which takes advantages of the World Wide Web are being developed and implemented. These applications ranges from Internet banking which provides customers with the ability to better manage their funds to online stock trading, electronic travel agents and online shopping.

Policies and issues as well as technical standards are the two supporting pillars for all electronic commerce applications and infrastructure.

Policies, privacy and legal issues related to areas such as access, copyright, regulations to protect consumers from fraud, protection of consumer's rights to privacy and the policing of global information traffic to detect information privacy or pornography. Other policy matters could relate to international taxation due to globalisation, intellectual properties and etc.

Technical standards are important in the World Wide Web and for electronic commerce as a whole as it ensures the compatibility of information access across many networks. As an example, one of the standards being established is in the areas of financial messaging where the Open Financial Exchange (OFX), a standard established by Microsoft, Intuit and Checkfree is developed to enable the transfer of financial information across many disparate networks. In future, with an OFX compatible browser, customers are able to access many different banking host to enable bank-to-bank transfer as long as these banks subscribe to the OFX standards.

What is Electronic Commerce?

Definition Online Perspective "a way of executing business transactions such as ordering, invoicing and paying using electronic media" Business Process Perspective "application of technology towards the automation of business processes and workflow"

Broadly, electronic commerce can be defined as "any form of business transactions where interaction is done electronically rather than physically"

It is the application of technology to improve productivity in business processes, decrease cost, increase communication efficiency and to generate increasing business values.

Due to the ever-increasing supply capabilities, ever-increasing global competition and customer expectations, electronic commerce is a means of enabling and supporting such changes on a global basis. It provides the means and ability for companies to be more efficient and flexible in the internal operation and to work tightly with its suppliers to be more responsive to the needs and expectations of its customers.

Electronic Commerce as defined by the High Performance Computing and Communications Program, an initiative conducted by the Office of Science and Technology Policy, US is as follows :-

"Electronic Commerce integrates communications, data management, and security services, to allow business applications within different organisations to automatically interchange information. Communication services transfer the information from the originator to the recipient. Data management services define the interchange format of the information. Security services authenticate the source of information, verify the integrity of the information received by the recipient, prevent disclosure of the information to unauthorised users, and verify that the information was received by the intended recipient. Electronic commerce applies and integrates these infrastructure services to support business and commercial applications including financial transactions such as electronic bidding, ordering and payments, and exchange of digital product specifications and design data.