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Introduction
E-business
Overview
This lecture introduces the concept of e-business, differentiating it from traditional business and commerce. It explores the evolution of business information systems from basic transaction processing to sophisticated, interconnected systems driven by the internet. The core idea is that e-business leverages Information and Communication Technology (ICT) as a strategic tool to enhance business processes, deliver customer value, and achieve profitability. The lecture also defines key terms like business, commerce, e-commerce, and e-business, and outlines the foundational concepts of value chains and stakeholder management in the digital age.
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Chapters
- In today's world, interacting with companies without their online presence (websites) is nearly impossible.
- Historically, businesses thrived without the internet, but ICT intervention became a primary strategy for modern businesses.
- A prediction from 1999 suggested that within five years, all companies would either be internet companies or cease to exist, highlighting the transformative power of the internet.
Understanding the shift towards online presence emphasizes why e-business is not just an option but a necessity for survival and competitiveness in the current market.
The speaker uses the analogy of needing a company's website to find information or products, contrasting it with the past where this was not the case.
- Business is defined broadly as commercial activity aimed at organizing and maintaining productivity to achieve goals, typically to generate revenue.
- Businesses can be privately owned, non-profit, or state-owned, each with different operational models but a common goal of sustainability.
- The core purpose of any business is to deliver value to customers and satisfy them, which in turn leads to profit.
- Customer-delivered value is the difference between the total benefits a customer receives and the total costs incurred, encompassing product, service, and associated costs.
A clear understanding of what constitutes a business and the fundamental concept of customer value is crucial before exploring how electronic means enhance these aspects.
The example of buying a washing machine illustrates customer-delivered value: the benefits (clean clothes, convenience) minus the cost (money paid, effort to use/dispose).
- Customer satisfaction is a feeling of pleasure or disappointment based on comparing perceived performance against expectations.
- High customer loyalty is achieved by delivering high customer value and ensuring satisfaction.
- A company's value chain, comprising primary activities (inbound logistics, operations, outbound logistics, marketing & sales, service) and supporting activities (procurement, technology development, HR, infrastructure), outlines how value is created and delivered.
- A firm cannot deliver value in isolation; it depends on a network of suppliers, distributors, and ultimately, end customers.
This section explains the mechanisms through which businesses create and deliver value, setting the stage for understanding how ICT can optimize these processes.
Porter's value chain model is presented as the framework for understanding a company's internal activities that contribute to value creation.
- Business transactions involve the flow of information, material, and money, often leading to delays through various cycles (order, replenishment, manufacturing, procurement).
- ICT serves as a strategy to reduce these delays and improve critical business processes.
- High-performing businesses aim to satisfy key stakeholders (customers, employees, suppliers, etc.) by optimizing processes and aligning resources.
- Information systems, especially when internet-enabled, are key to connecting stakeholders and improving business processes, forming the basis of e-business.
This highlights how technology and a stakeholder-centric approach are integrated to create efficient and effective business operations.
The example of Levis jeans illustrates the extended value delivery network, showing how customer orders flow back through retailers and manufacturers to suppliers, and how ICT can streamline this flow.
- Information systems have evolved significantly since the 1950s, starting with automating basic transactions (e.g., payroll systems).
- Subsequent developments included Management Information Systems (MIS) for summarizing data for managers, and Decision Support Systems (DSS) for automating decision-making.
- Expert systems and strategic information systems emerged, incorporating AI and providing competitive advantages.
- Since the 1990s, with the commercialization of the internet, focus shifted to interoperability, web-based systems, cloud computing, mobile computing, and the Internet of Things (IoT).
Understanding this historical progression reveals the increasing sophistication of technology in business and how it paved the way for modern e-business solutions.
The progression from automating simple payroll transactions to using AI in expert systems demonstrates the increasing complexity and strategic value of information systems.
- Commerce, defined as buying and selling on a large scale, is a subset of business.
- E-commerce specifically refers to the buying and selling of goods and services over digital networks like the internet, including electronic payment systems.
- E-business is a broader concept that encompasses e-commerce and extends to other online business activities such as servicing customers, collaborating with partners, and supporting internal transactions.
- E-business involves automating business processes using information systems, often leveraging web-based technologies, and spans the entire value chain, including supply chain management.
Clearly distinguishing between e-commerce and e-business is essential for understanding the full scope and strategic implications of conducting business online.
The speaker notes that e-business, a term coined by IBM's CEO Lou Gerstner, is more encompassing than e-commerce, including activities beyond just buying and selling.
Key takeaways
- The internet has fundamentally transformed business, making online presence a necessity for all companies.
- Businesses exist to deliver value to customers and achieve satisfaction, which are prerequisites for profitability.
- Customer value is a complex calculation involving perceived benefits versus total costs.
- A company's value chain and its network of stakeholders are critical for delivering products and services effectively.
- Information and Communication Technology (ICT) has evolved from simple automation to strategic tools for competitive advantage.
- E-business is a comprehensive approach to conducting business online, encompassing all processes, not just transactions.
- Understanding the historical evolution of information systems provides context for the development of modern e-business strategies.
Key terms
E-businessBusinessCommerceE-commerceICT (Information and Communication Technology)Customer-Delivered ValueCustomer SatisfactionValue ChainStakeholdersInformation SystemsTransaction Processing SystemsManagement Information Systems (MIS)Decision Support Systems (DSS)Expert SystemsEnterprise Resource Planning (ERP)
Test your understanding
- How has the internet changed the fundamental requirements for a business to operate and succeed?
- What is the relationship between delivering customer value, achieving customer satisfaction, and generating business profit?
- Explain how a company's value chain and its network of suppliers and distributors are interconnected in delivering a product to the end customer.
- Describe the evolution of business information systems from the 1950s to the present day, highlighting key technological advancements.
- What is the primary difference between e-commerce and e-business, and why is this distinction important?