Introduction to Internet Business

1.4 Differentiating between E-business Categories

1.4.1 Overview

Electronic business is a super-set of business cases, which have been digitized and work now on the Internet. An e-business category is defined by the business case and not by the technology used to implement it. Over time more and more types of business will be converted to a digital form, even though it may seem impossible today. Technology is moving fast to make things possible tomorrow, which seemed impossible today.

1.4.2 Categories

The following categories have been selected, because of their proven success on the Internet. Many other categories exist and in order to make one of these categories successful it needs to interact with the other categories. Commerce, for example, without marketing and communication does not make a lot of sense. These categories need to work together, both offline and online. The Internet offers huge possibilities to integrate the categories and automate the interaction between the processes.

E-Auctioning

Auctioning on the Internet has become a new dimension. In traditional auctions a number of people turned up at the auction house and some people were allowed to bid over the phone. Getting to the auction house or bidding over the phone did involve costs, which may be higher than the value of the goods. Either auctions were restricted to a location or to a very exclusive circle of people.

The Internet makes auctions more democratic allowing everyone with an Internet connection to bid for any good offered. Everyone is able to go to the auction web site with a click, no matter where the server is located physically. The Internet also speeds up the bidding process. In the real world it can take quite a while until a final bid has been made. On the Internet most live bids are over in a few seconds. During the live bid an auctioneer registers the bids and hands over the goods to the highest bidder.

Besides the live bid, the larger sites offer bidding for everyone. The auction sites offer the possibility to present goods on a web page, which belong to individuals and that they want to sell. These private auctions are not live, the bidders place their price onto the web page and the auctioneer waits until a certain value has been reached or a time limit has been passed and then hands out the goods to the lucky one. Suddenly everyone does not only become a bidder, but also has the possibility to organize an auction. eBay, QXL and Ricardo offer the possibility for everyone to become either a bidder or auctioneer, or both at the same time for two different products. The web site becomes an infrastructure for exchanging goods based on the auction model, which works basically by setting the prices by demand.

The whole Internet is transforming the fixed price structures to a more dynamic pricing. Auction web sites are only the beginning. In a few years time, individual prices based on customer demand will be on every web site offering goods, information or services.

E-Banking

Electronic banking is one of the most successful online businesses. E-banking allows customers to access their accounts and execute orders through a simple-to-use web site. There is no special software to install other than a web browser and many banks do not charge for this service. Some banks even lower costs for online transactions versus real life banking transactions. Electronic banking saves individuals and companies time and money.

Online banking puts the power of banking into the hands of the customer and allows the customers to self-service themselves with all their banking needs, just as customers have become used to getting money from an automated teller machine (ATM) instead of walking up to the cash desk in the bank. With this online service, customers can view their account details, review their accounts histories, transfer funds, order checks, pay bills, re-order checks and get in touch with the customer care department of the bank. The only transaction that currently can't be done is the withdrawals of cash, but banks are working on resolving this problem.

To get started the virtual banking customer needs a computer or embedded device connected to the Internet and a browser. Depending on the security strategy by the online bank, you may need to install a plug-in or enable Java to increase the level of security in your browser. The plug-in or Java applet are used to increase the level of encryption to make sure nobody can intercept your banking transactions. Even more sophisticated systems use smart card technology to allow secure access for their customers. Another option to make banking more secure is used in addition to the ID and login; a list of transaction numbers (TAN), which are one-time passwords that can be used for a single transaction.

Many people use PC banking software such as Quicken, which are personal financial management software packages, which are not the same as electronic banking. The major difference is that with PC banking, software is loaded onto your computer and all your transactions are handled through a third party vendor, adding security issues to the e-banking service.

Electronic banking is an online service that allows customers to perform the same banking functions as in Quicken except that they can access their accounts directly over the Internet.

E-Commerce

If we look back, commerce in the pre-Internet age was very restricted compared to the possibilities the information technologies and the infostructure (information infrastructure) offers. The major limiting factors were time and space. Even if shops were open twenty-four hours a day, only a limited amount of customers can come to the location of the shop. The shop can also offer only a limited selection of goods, as space is limited on the premises of the shop.

A shop on the Internet is unlimited in space and time. There are no limits in the amount of products a shop can offer. Amazon.com offers more than 4.7 million books. Imagine a bookshop, which has 4.7 million books in stock. The comparison may not seem fair, as Amazon does not stock the books, but orders them on demand. But Amazon.com does offer information on every single book.

Online retailers (sometimes also called e-tailers) offer either more products than traditional retailers do or more service for the same products. On the Internet books, compact disks and tickets are outselling their traditional counterparts, as these products are bought because of their content and not because of their design. The look and feel of a flight ticket is not important, the price and the service are what really matters. New technologies make the Internet also attractive for goods that are bought on an emotional basis, because of their design and not their content.

The Internet is changing the traditional sales model, which is tactical in nature. The companies used to produce a deliverable, either a product, service or piece of information and then employ the 4P's of marketing (price, product, promotion and placement) as the foundation of their efforts to sell it. Inter-net commerce, on the other hand, is far more strategic. While most companies view their products purely in terms of the demand conversion stage, Internet commerce will force them to increasingly view the entire sales cycle (market development, demand creation, fulfillment, customer support and customer retention) as their product. In the tactical model, these above mentioned phases in the sales cycle are just extras that aid in pre- and post-sales. In a strategic model, however, they are building blocks of the entire sales message.

Many people think that e-commerce is the same as e-business, but as de-fined here it is only a subset. This may be true for many end customers who only deal with companies when buying goods. E-commerce was one of the first business types to become digitally available, but the Internet offers more than just buying and selling products and services.

E-Directories

Directories have always played an important role in finding a particular service or product. Telephone directories, the so-called white pages for private telephone numbers and the yellow pages for businesses have been essential in locating a person or business. In addition to the directories in book form, the telephone companies allowed people to call in to ask for information.

These two functionalities have been merged on the Internet. The database is located in a single place, providing a centralized functionality, but offering it to anyone at any time, making it a decentralized solution.

The Internet offers the possibility to replicate the phone directories without many hassles, but it can do more than just search for a name and receive a phone number. On the Internet, for example, it is possible to enter a phone number and get the name. Moreover new directories are necessary to locate the web pages of people and businesses and their e-mail addresses.

The Internet makes the retrieval easier and more difficult at the same time. Easier, because the means of searching are more powerful. But finding a particular piece of information has become more difficult as the amount of information has increased dramatically with the introduction of the Internet.

E-Engineering

Engineering has also changed dramatically over the last few years. Just a few years ago, engineers working on a draft needed to be all in the same office to work effectively. If a design needed to be sent out to another location, large prints needed to be made, which were sent via postal service to the other location. There the design was refined, checked or processed. All these processes involved a lot of manual work, making them slow and error-prone.

The Internet changed the speed of design. It enabled electronic collaboration to a much higher degree than was possible ever before. The location of the engineers does not play a role anymore. Everyone with an Internet connection is able to take part in the development. New tools for concurrent development have been developed to support the possibilities of the Internet.

Through the Internet is has also become possible to develop continuous engineering by letting engineers participate from all over the world. Open source development is done that way very efficiently. Anybody is able to take part and can donate a piece of code whenever there has been some time to program it. This will vary for every person involved.

E-Franchising

In the past big traditional franchising companies like McDonald's and Benetton have made their money by vending their products and brands to resellers who sell exclusively the products of the franchising company. These resellers are called franchising partners. By offering a set of products and brands the franchising company guarantees a certain success for the retailer, as people tend to like buying these products, as the brands are well-known. The advantage of the franchising companies is that they do not need to invest in shop personnel, for example. The franchising partner is responsible for the employees and the financial success of the single outlet.

Electronic franchising works very similarly. It has become actually much easier on the Internet. Moving digital products, processes and brands is extremely easy. The affiliation programs of the large booksellers on the Internet are one example. They are not truly franchisers, as the large booksellers have their own store. But they allow franchising partners to exclusively distribute their products on the partners' web sites. The advantage of this system is that there is no distribution costs involved. It is possible to link to the original products without letting the customers know. Quelle, for example, is selling books on its web site. Books are not part of their core product set, but through a co-operation with Libri, they are able to offer more than 1.5 million books on their web site.

E-Gambling

Although there are moral issues about gambling, it is one of the most profitable businesses on the Internet. In the real-world gambling is restricted by many laws, making it difficult to access the casinos. The owners of the games often need to pay high taxes to the state, which make it also difficult to create competition. Per state only a certain amount of casinos are allowed.

On the Internet this has changed dramatically. Gambling is still not legal in some states and the taxes are still high in these states, but the business has moved to places where gambling is legal and only low taxes need to be paid. Most gambling web sites have moved to the Caribbean or South America, where no laws on gambling have been implemented.

The companies who operate the gambling web sites are able to operate the full program of games, without any restrictions. As the owners have their companies in countries where gambling is legal, they are able to operate without fearing the intervention of the state. But other than real-world casinos, which are restricted to the geographical location, online casinos are able to attract gamblers from all over the world with a mouse click. Companies such as 123Gambling and CasinoPlace attract hundreds of thousands of gamblers every day.

E-Learning

The constant change on the Internet requires also a change of learning. In the industrial age, the subjects and the content taught did not change a lot. Changes to the curriculum did occur over the years, but compared to the Information age change was extremely slow. Having a job for forty years, working in a steel plant, for example, is not possible anymore. Fluctuation between jobs is much higher, which requires a readjustment of the job focus. New technologies appear in Internet time, which require learning new technologies, paradigms and processes all the time. Long-life learning has become a necessity, as teachers need the same time to learn a new subject just as long as the pupils need to. As knowledge becomes a major income factor, it is often not possible to wait and learn a thing in a school.

Computer-based training (CBT) has been introduced a few years ago, making it possible to learn via computer. Software is used to explain the subject and then tests the pupil. Although this is an effective way of learning some subjects, there is nobody you could ask, in case of a misunderstanding.

Electronic learning sometimes also called Internet-based training (IBT) offers a new dimension in digital learning. Instead of receiving an executable file, which is used to explain and test a subject, the material is presented online. Tests are executed in real-time together with other participants and the pupils are able to exchange ideas and questions. In addition an online teacher can be offered, which is a real teacher, who may explain topics to anyone attending a course, no matter where the people are located. This can all happen in real-time. Instead of waiting for the next hour, the students can connect to the learning network, whenever they want, making the learning experience more individual, allowing people to learn at their own pace.

An Internet-based training can also be offered to students, before the complete course is available. For hot topics the course can be developed at the same time as the students start to learn.

E-Mailing

Many people do not think about e-mail when talking about digital business. But communication is the basis of all business. The Internet breaks into the traditional communication markets. Postal services and telecommunications companies are losing market share to the electronic communication, especially e-mail. E-mail combines the strengths of phone calls and letters. The advantage of a phone call is its immediacy and the letter has the advantage that everything is in written form. The Internet enables instant communication in written form, either by e-mail or online chat.

More and more businesses are talking digitally to each other. Other than a phone call, e-mails can contain more than just the text. It is possible to attach files, which may, for example, contain formatted documents, presentations, images or sounds. Information can be shared much more easily.

E-mail does also change the way people communicate. Instead of writing down every aspect in a single letter, thoughts may be spread over multiple e-mails. The advantage is that a thought may evolve through instant response, but it also means that you expect instant response to every e-mail that has been sent out, just as everyone expects a response from you.

E-Marketing

Traditional marketing was focusing on target groups and creating a positive image for that particular group. Communication in advertising was one way only. The marketing team could not get immediate results on the customer reaction. In the pre-information society this was fine, as there was time to do surveys and publish the results, which influenced the company strategy and the products.

In the information society everything has started to flow. Products, strategies, prices, everything depends on the customers' needs. Everything becomes much more customer centric. The demands of the customer directly affects product design, marketing strategies, and the product pricing. As marketing traditionally has direct ties to the customer, the information flowing back from the customer in real-time needs to be passed on to the appropriate department within the company to react in real-time to the ever faster changing demands of the customers.

The Internet allows companies to react to individual customer demands. All customers can be treated in their preferred way. One-to-one marketing has become the standard way of dealing with customers over the Internet. One-to-many marketing does not work anymore in Internet time.

E-Operational Resources Management

Besides the goods that are needed for production, companies need to buy operational resources. These are the non-production goods and services that are required and managed on a daily basis to run the day-to-day business. The areas for operational resources include capital equipment (such as computer equipment), maintenance, repair and operating (MRO) supplies (such as office supplies) and travel and entertainment (T&E) (such as travel services).

The process of acquiring the operational resources involves many organizations and departments within the company, which deal with many different suppliers. The suppliers are providing services, goods and information. Although the operating resources do account for a large amount of company spending, the buying process is often not well organized and managed. In many cases a paper-based process is used for ordering new pencils and phone lines. Due to its decentralized approach in many companies, every department is able to handle the operational resources on an individual basis, which results in higher prices than through a central buying organization. Once a central buying organization has been put in place, the paper-based process needs to be digitized in order to automate, control and leverage it. As long as the process is not digitized, the company is not able to control the spending and the suppliers involved in the process.

Operational Resources Management (ORM) allows companies to manage operational resources more strategically, by using the Internet and its connectivity to provide a communication infrastructure, where buyers and suppliers can work together on a direct basis without losing control over the spending. Actually the company gets more control over the spending through the electronic management system. Introducing ORM does not require additional hardware or software to be installed, as many systems run on standard web browsers, which can be run on any computer platform. Through the use of electronic communication the cost per transaction can be lowered significantly and the process can be strongly automated.

E-Supply

Numerous independent companies and customers form a supply chain. Manufacturers, logistics companies, senders, receivers and retailers all work together to co-ordinate the order generation and order taking. The offer fulfill-ment and the distribution of the products, service, or information are organized through the supply chain management. By digitizing the products, the processes and the communication, the Internet has a great potential in linking and managing these organizations. Although EDI was able to link up the companies, it never really took off, as small and medium sized companies could not afford an EDI link to each partner they worked with.

The Internet reduced significantly the cost for starting up the digital business-to-business communication. Through the use of open standards, such as XML and Java, supply chain partners are able to share and exchange information more easily and with lower costs involved. The supply management process may even be contracted to a third party instead of developing one's own applications and investing in separate systems. In this intermediated market, sophisticated logistics management and automated supply-chain management are available almost universally.

E-Trading

Before the Internet, buying and selling stocks was restricted to people with access to financial networks, in order to buy and sell the stocks at the right moment. Others could only get the stock quotes in the newspaper, which was fine, if you did not want to make money fast with the stock market.

The Internet has changed the way stocks are traded. E-trading, often also called E-brokering offers the real-time stock prices to every desk throughout the world. People are able to react in real-time to changes in the stock market. Everyone with an Internet bank account is able to buy and sell stock. This enables anyone to participate in the stock market and earn money by investing. Although the stock market is more risky than ever through the computer based trading, it also offers access for people who did not even know what a stock option was a few years ago.