E-Commerce Essay

Custom Student Mr. Teacher ENG 1001-04 20 April 2017


Q1) E-commerce is unique from other channels of business and it is a whole new revolution in the way how companies operate (Turban, King, Lee & Viehland, (2006). The Internet is unlike any other sales channel. The Internet allows companies to distribute information at the speed of light and at almost zero cost, to reach customers with both reach and range, to introduce new and innovative business models, to reduce costs and generate savings, and many, many more differences. However, the Internet also creates more bargaining power for the customer, creates a more perfect information market to the customer’s benefit, and makes it easier for competitors to invade a company’s marketplace.

So the first, and biggest, difference in e-business planning is the need for the entrepreneur to recognize the different and unique capabilities of the Internet and begin to think differently, and creatively, about the opportunities and problems the Internet presents (Turban, King, Lee & Viehland, (2006). The E-commerce has a global presence. Being on the Web means the business will be visible to an international audience. This introduces complexity for payment options (e.g., show prices in US dollars or local currency?), distribution channels, Web site design, and the logistics of product returns. Web storefronts never close. Being on the Web means the store will be open 24 hours a day, 7 days a week.

The e-business plan must account for this difference in Web hosting and customer service requirements. E-commerce is conducted at Internet speed. This means Web site deployment must be planned in months, or even weeks, not years. First-mover advantage will be lost if companies are unable to move at Internet speed, and business plan readers will know that. The Web allows greater opportunities for personalization of content, one-to-one marketing, and customer self-service. Because the Web allows these and other customer service features, the competitors can make them part of their e-commerce strategy, so the company must too. The Internet intensifies customer relationship management.

Business has always been about “getting close to the customer” but that was in a world without the potential of personalization, one-on-one marketing, data mining, concurrent reach and range, and customer relationship management. The Internet, and the customer-oriented applications that the Internet makes possible, means that every e-business must be totally focused on the customer. This belief is evident throughout this tutorial with requirements for clearly defining the value proposition the business offers to the customer, identify target markets, and a competitor analysis from a customer point-of-view (Turban, King, Lee & Viehland, (2006).

Q2) Data mining has become the top priority of many IS managers. What are the advantages that data mining has promised to deliver? The answer to this question will not be forthcoming until all the potential applications of data mining have been thoroughly explored. At this early stage, the following advantages of data mining are widely acknowledged (Chen & Sakaguchi, 2002):

1. Provide better information to achieve competitive edge. This advantage is the primary motivation for data mining and has been repeatedly mentioned in various articles. Data mining has a powerful analytical ability to generate information, which allows an organization to better understand itself, its customers, and the marketplace it competes in. When used as a marketing tool, data mining often results in sharper competitive edge, an evidence-based selling approach, a customer-oriented marketing plan, shorter selling cycles, and reduced operational costs.

2. Add value to a data warehouse. A data warehouse by itself is just a large repository of unstructured data, and data mining is the process of analyzing the data and transforming it into useful information. Organizations have experienced a payback of 10 to 70 times their data warehouse investment after data mining components are added.

3. Solve research bottleneck. In many social science and business situations, conducting real experiments is almost impossible. Data mining is able to provide these research agendas with a more limited set of working hypotheses for further investigation based on large, unstructured data sets.

4. Increase operating efficiency. Data mining’s ability to quickly organize and analyze a large pool of data has dramatically increased workplace efficiency. It allows users to create complex financial statement in minutes compared with weeks by traditional methods.

5. Provide flexibility in using data. With data mining, users have gained control over the data. Instead of letting the system push the data, users are now able to pull the data they need. Users can let their imagination run and manipulate data in various ways to answer their questions. The new easy interface of data mining tools and the client/server technology has made the information directly accessible by individual users.

6. Reduce operating costs. Modern data mining tools are made of highly sophisticated hardware and software components. They allow these tools to analyze massive data sets efficiently with reduced operating costs. The case of Bank of America has shown that after the bank’s implementation of the state-of-the-art data mining technology, the cost per query has been reduced from $2,430 to merely $24.

7. Ready-to-use. Unlike traditional data analysis methods, data mining hardly requires preprocessing of data prior to analysis. It can use a mixture of numeric, categorical, and date data, and can tolerate missing and noisy data. The results are in the form of ready-to-use business rules with almost no statistical expertise and guesswork needed.  Despite the many advantages, data mining is not without its disadvantages. Organizations will face these problems in their deployment of data mining technology. Understanding them helps IS managers to have a realistic expectation and prepare for potential adverse outcomes (Chen & Sakaguchi, 2002).

1. No definitive answer. Data mining yields useful insights and clues but no definitive answers. The definitive answers need to be achieved through much more rigorous scientific experimentation. Experiences from Wall Street have shown that this technology may not outperform traditional methods. Therefore, users should have a realistic expectation of the results of data mining.
2. High cost. The cost of implementing data mining is very high; thus, it may not be appropriate in some business environments.
3. Complex and lengthy project. Experience from data mining system developers has shown that it takes a long time to get the project right. Developers suggest focusing on incremental development and benefits.
4. Privacy. The detailed data about individuals used in data mining might involve a violation of privacy. This problem worsens when the World Wide Web is involved, because detailed personal information is easily accessible and can fall into wrong hands.
5. High knowledge requirement of user. Despite its increasingly simple interface and automation of the thinking processes, data mining is more suitable for people with statistical, operation research, and management science backgrounds. The ease of use becomes a critical factor for attracting more businesses to invest in this technology.
6. Unmanageable database. Many authors have suggested that organizations must increase the size of their databases tremendously in order to do data mining. However, some are concerned that this will result in unmanageable and unnecessary databases.
7. Wrong information from errors in data. The massive data used in data mining inevitably contains mistakes caused by human errors. Information generated should be used with caution to avoid lawsuits in areas such as hiring. Experts suggest using only relevant information for mining to reduce such risks.
Q3) Rationalizing the supply base means utilizing both the right number of suppliers and the right suppliers. This requires you to categorize your spend and identify current and potential suppliers for each category (Dominick, 2006).

After identifying your categories and suppliers, you have five options for the supply base in each category:

Reduce It – Many think of this as the only rationalization option, but it’s not. This option works best when you already have enough qualified suppliers and are sure that no others can offer a cost, quality, or other advantage (Dominick, 2006). You just consolidate spend with a subset of currently-used suppliers. But don’t assume that you’re already using the best suppliers. With global sourcing, buyers can find top vendors across the planet.

Increase It – Despite common teachings, fewer suppliers isn’t always better. By blindly following the supplier reduction trend, you might award business in one category to a supplier who performs well in another category. This strategy is flawed when the supplier is not as competent in the second category. In many cases, it is better to have two suppliers who can deliver great performance in two categories than one supplier who performs well in one category but poorly in the other. When analyzing your categorized spend, find suppliers who appear across categories. Ask if they are truly the best choice in each category and what the measurable advantages are to using them across categories.

Maintain It – If you’ve done a good job, there is no need to change. Period.

Keep The Size, Change The Mix – Many organizations set “number-of-suppliers goals” and measure success simply by the numbers. But the quality of suppliers is more important than the quantity of suppliers. Even if you have the right number of suppliers, you may need to replace the poor performers with good ones (Dominick, 2006).

Expand Then Reduce – Sometimes, you are under pressure to reduce the supply base. But the suppliers you are currently using are so inadequate that you just can’t imagine depending more heavily on any of them. So, you may have to introduce more suppliers to identify the best ones in the market before you start ousting the poor performers. But you also need to make sure you’re not trading one problem for another. New suppliers must prove themselves, so you add them to the list to allow more choice for a future supplier reduction. There is nothing wrong with this plan. Just communicate it as a two-step approach to good supply base rationalization (Dominick, 2006).

Q4) A smart card resembles a credit card in size and shape, but inside it is completely different. First of all, it has an inside — a normal credit card is a simple piece of plastic. The inside of a smart card usually contains an embedded microprocessor. The microprocessor is under a gold contact pad on one side of the card. Think of the microprocessor as replacing the usual magnetic stripe on a credit card or debit card (How Stuff Works 2006).

Smart cards are much more popular in Europe than in the United States. In Europe, the health insurance and banking industries use smart cards extensively. Every German citizen has a smart card for health insurance. Even though smart cards have been around in their modern form for at least a decade, they are just starting to take off in the United States (How Stuff Works 2006).

Magnetic stripe technology remains in wide use in the United States. However, the data on the stripe can easily be read, written, deleted or changed with off-the-shelf equipment. Therefore, the stripe is really not the best place to store sensitive information. To protect the consumer, businesses in the U.S. have invested in extensive online mainframe-based computer networks for verification and processing. In Europe, such an infrastructure did not develop — instead, the card carries the intelligence.

The microprocessor on the smart card is there for security (How Stuff Works 2006). The host computer and card reader actually “talk” to the microprocessor. The microprocessor enforces access to the data on the card. If the host computer read and wrote the smart card’s random access memory (RAM), it would be no different than a diskette.  Smarts cards may have up to 8 kilobytes of RAM, 346 kilobytes of ROM, 256 kilobytes of programmable ROM, and a 16-bit microprocessor. The smart card uses a serial interface and receives its power from external sources like a card reader. The processor uses a limited instruction set for applications such as cryptography.

The most common smart card applications are (How Stuff Works 2006):
• Credit cards
• Electronic cash
• Computer security systems
• Wireless communication
• Loyalty systems (like frequent flyer points)
• Banking
• Satellite TV
• Government identification

Smart cards can be used with a smart-card reader attachment to a personal computer to authenticate a user. Web browsers also can use smart card technology to supplement Secure Sockets Layer (SSL) for improved security of Internet transactions. Visa’s Smart Card FAQ shows how online purchases work using a smart card and a PC equipped with a smart-card reader. Smart-card readers can also be found in mobile phones and vending machines (How Stuff Works 2006).

Q5) To build or not to build a website for E-Commerce is a question which was relevant a few years before. In the competitive world of today when competition is intense and companies are fighting for whatever presence they can acquire, E-commerce is becoming a necessity. The businesses are becoming global and so the question is not whether a company should build a website or not but the question these days is what should be the intensity of operations via E-commerce.

Q6) The key to building a successful business is to maintain long-lasting relationships with business contacts and customers. One way to achieve this is to use your customer database as part of your marketing strategy (Parish, 1998).

Setting up a database involves capturing, centrally storing, organizing and analyzing customer information. Such systems have scheduling and call-back features that help you keep up with appointments and phone calls. Another feature programs your computer to answer the phone and pull up customer records.

The biggest advantage an electronic database has over physical filing is the ability to sort information. With the archaic system of manual filing, you can search for data based on the way it’s arranged–usually by a person’s last name. But with an electronic database, regardless of how the information is entered, it can be sorted any number of ways–by city, payment due date, type of company–whatever you want (Parish, 1998). There are many applications for your database. Here are at least six to get you started:
• Send routine mailings or promotional pieces (e.g., coupons or discounts) every three months.
• Send gifts and thank-you notes to your best customers.
• Determine when regular customers are due to re-order and call them up in advance. This minimizes the chance of losing those orders.
• Send newsletters or announcements to keep customers informed of new products/services.
• Send personal notes thanking customers for their valued service over the years.
• Send personal notes expressing concern to customers who are ordering less.

The idea is to build an ongoing rapport with customers/clients. Maintaining a thorough databasemanagement program ensures good customer relations, which in turn promotes repeat sales (Parish, 1998).  Q7 As we enter the new millennium, fundamental changes are happening to trade and the way it is organized. There is a growing shift toward an electronically connected world in which ideas, information, and services are replacing the traditional reliance on physical goods production as the primary generator of wealth and employment. In this new economy, market dynamics will dictate a business model that provides for the integration of different partners in a value chain. Using a variety of technologies from information technology (IT), this model can enable highly coordinated trading communities, each with the ability to operate like a “virtual enterprise.” (Dan, 2001).

The emerging e-business Web economy requires an agile enterprise that can work more directly with suppliers and customers and respond more rapidly and intelligently to change. Technologies such as the Internet are beginning to transform traditional business models. Business pressures–margin erosion, channel proliferation, rising customer expectations, time-based competition, and faster product commoditization–are placing increased emphasis on how organizations operate and interoperate with other enterprises (Dan, 2001).

Business requirements. Facilities such as EDI have successfully provided electronic document interchange between companies and their suppliers for a number of years. However, the high cost of EDI and its dependency on specialized deployment skills have always proved a barrier to adoption by all but the largest enterprises. Although EDI will continue to evolve, utilizing pervasive networks such as the Internet to reduce costs, complementary technologies are emerging that are able to provide some of the key capabilities necessary to enable dynamic business process integration. The basis of these technologies is the formulation of:

• A “common language” that can be employed by existing or potential trading partners to specify how they will interact
• An “electronic contract” that employs this common language in order to define and enforce the interaction protocols with which they will do business

Business-to-business interchanges based on EDI have long been defined by informal textual documents called TPAs (Dan, 2001). These TPAs are contracts that define both the legal terms and conditions and the technical specifications that both partners must implement to put the electronic trading relationship into effect. They are given to each partner’s programmers to implement the technical specifications and are therefore subject to misinterpretation, resulting in implementation errors that must be corrected before electronic exchanges can begin. In contrast, an electronic TPA can be used to automatically generate (using suitable tools) the necessary customization information in each partner’s system, thus assuring that the systems are compatibly and correctly set up for electronic business (Dan, 2001).

Q8) Perhaps the best known Ecommerce business is Amazon, which started life as an online bookshop 10 years ago. In contrast with Walmart its business model was to dispense with actual shops and concentrate on supplying a fast service at low prices over the web. And these are the major differences between the two (Fasoranti 2000).

Amazon is now worth more than many businesses that have taken years to develop. It is also one of the world’s best known brand names, which has allowed it to diversify into other online products. This diversity might have been achieved to some extent by Walmart but compared to Amazon it is minimal (Fasoranti 2000).

Q9 Ecommerce is more than an online shopping site. It is using an electronic network to simplify and speed up business. Most consumer Ecommerce sites concentrate on the selling. As such they are just another type of shop front. In fact, much of the rally exciting action in Ecommerce is happening away from the public gaze in established businesses. The Internet allows business to adopt new processes that are faster and cheaper than the old ones. Success is all about keeping ahead of the competition: if there is a cheaper and better way of doing something, you’ve got to find it first.

Ecommerce isn’t about reinventing your business. It’s about streamlining your current business processes to improve operating efficiencies, which in turn will strengthen the value you provide to your customers. This value that cannot be generated by any other means, and it will give you a serious advantage over your competition. One should look at all the processes which lie behind offering a competitive product and ensure that you use the best technology to do it even better. These processes can include ordering, supplier payment systems, stock control, customer billing, customer relations, channel management, employee communications, personnel systems, recruitment and more (Fasoranti 2000).

Q10) Socially speaking global acceptance of E-commerce involves the same barriers which are faced by any new technology or innovative process. The reluctance to accept and to improve their skills on part of people in order to be efficient users of technology is considered the biggest challenge and barrier these days. People need to know that the introduction of processes is for their own welfare and can ease many things in their lives while escalating their standard of living.

Chen, Lei-da, Sakaguchi, Toru, (2002) Data Mining Methods, Applications, and Tools. Information Systems Management, 10580530, Winter2000, Vol. 17, Issue 1
Dan, A., (2001) Business-To-Business Integration with Tpaml and A Business-To-Business Protocol Framework. IBM Systems Journal, 00188670, 2001, Vol. 40, Issue 1
Dominick, Charles (2006) Supply Base Rationalization: Not 1, But 5 Options. PurchTips – Edition #92. January 24, 2006
Fasoranti, Del, (2000) Online Advantage. Cabinet Maker, 00079278, 02/11/2000, Issue 5174
How Stuff Works Website (Last Visited May 13, 2006): http://electronics.howstuffworks.com/question332.htm
Parish, Diedra-Ann, (1998) Database Marketing. Black Enterprise, 00064165, Jun98, Vol. 28, Issue 11
Turban, Efraim, King, Dave, Lee, Jae Kyu, Viehland, Dennis (2006) Electronic Commerce: A Managerial Perspective 2006, 4/E Publisher: Prentice Hall. Copyright: 2006

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