IS5600 Seminar 2

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IS5600Seminar 2

• Global Perspectives of Electronic Commerce

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Electronic Commerce means different things to
different people

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The Layoyo Story (www.layoyo.com)

• Founded 1999 as DVDshelf.com
• The largest Internet retailer of Chinese
  Entertainment Products in the world.
• 185,000 different products DVD, VCD, CD, Books,
  Games, Mobile Accessories.
• Partners galore!
• A valuable niche, with no existing major players
  but a potentially huge market.
• Its still here, so not just a dot com bubble
  item.
• Global? Local?

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Electronic Commerce

• the electronic exchange of business information
• a modern business methodology that addresses
  the needs of organizations, merchants, and
  consumers enabling them to cut costs while
  improving the quality of goods and services and
  increasing the speed of service delivery
• the buying and selling of information, products
  and services via computer networks (especially
  the Internet)

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Electronic Commerce

• involves the transmission, in a standard syntax
  (like EDI Electronic Data Interchange), of
  unambiguous information of business or strategic
  significance between computers of independent
  organizations
• The personalization of the web

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Electronic Commerce

• Impact of emerging national and global
  information superhighways on the way goods and
  services are transacted
• e-Business models B2B, B2C, C2C, G2C,
• Legal and Ethical Issues
• Politics and Psychology

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The Marketspace Ecosystem

• A virtual location on the web where transactions
  take place
• A location that is defined and governed by
  information
• Reliable, quality information is of paramount
  importance for effective decision making by all
  stakeholders
• A new ecosystem with new objects and
  relationships, models and dynamics

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What is so Special?

• E-Commerce enables us to do new things in new
  ways
• Buying/Selling/Procuring
• Communicating and Disseminating
• Developing loyalty
• Competing
• Facilitating
• E-Commerce also increases transparency
• For better or worse.

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For example B2C

• Buying new books from www.amazon.com
• Buying 2nd hand books via www.abebooks.com
• Buying Chinese DVDs from www.layoyo.com
• Tracking your packages at www.fedex.com
• Performing G2C transactions at www.esdlife.com
• Reading the newspaper online at www.scmp.com
• Booking your vacation from www.ctrip.com
• Booking a hotel room at www.ichotelsgroup.com
• Financial management at www.hsbc.com.hk

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For Example B2B

• Arranging cargo shipments at www.cargosmart.com
• Performing G2B transactions at www.tradelink.com.h
  k
• Searching for suppliers at www.bizbb.com or
  www.globalsources.com or www.alibaba.com
• Electronic handling of routine financial/ordering
  information between
• paper suppliers and printers
• car manufacturers and parts suppliers
• health care distributors and hospitals
• But think about the issues involved when the
  organizations are not located in the same country

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Marketspace Themes I

• EC is changing the importance of time. 24-hour
  communication continuous buying and selling
• EC is diminishing the importance of geographical
  boundaries anytime, anyplace transactions, but
• legal issues? logistics? finance/payment?
  security/jurisdictions? culture?

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Marketspace Themes II

• EC is changing the character of intermediation
• HK has traditionally built much of its wealth out
  of intermediating trade between China and the
  outside
• Intermediation functions still exist, but they
  look different with disintermediation and
  reintermediation
• How does HK add value these days?

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Marketspace Themes III

• EC is premised on technical and philosophical
  openness
• The Internet is fundamentally open and
  non-proprietary
• Customers can be partners a new open strategic
  approach
• Major implications for Customer Relationship
  Management, political and social transformations,
  censorship, transparency and privacy

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Marketspace Themes IV

• EC acts as a catalyst to many other changes in
  economics, politics and organisational
  structures, including globalisation
• EC produces synergies, with multiple winners and
  win-win scenarios
• But of course there are losers as well

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Dis-, Re- and Inter-mediation

• New entrants can disintermediate existing
  relationships online travel agents, stock
  brokers, etc.
• Established organisations can reintermediate or
  reinvent existing markets, creating new value for
  customers
• Both practices come from the emergence of
  information as a critical strategic resource.

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Smart Card Enabled M-Commerce

• The Octopus Card can be used for
• transport, parking, shopping, building access,
  discounts,
• Benefits for consumers, providers/operators
• Reduced cash handling, improved cash flow
• Convenience and cleanliness
• Buy 10 get 1 free offers
• Swipe now for a x discount off your next trip or
  a cup of coffee
• Disadvantages?
• What else could Octopus be used for?
• Global opportunities?

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Consumer Loyalty Drives Competitive Advantage

• Creating a compelling online experience for
  cyber consumers is the key to attaining
  competitive advantage on the Internet
• Jeff Bezos (Amazon CEO)
• This should be as true for B2C as for B2B, G2C
  and any other form of EC.
• Also true whether customers are locally or
  globally located.

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Contributing Factors to eLoyalty? (US)

• Information content
• Safety/security
• FAQ/Answers to questions
• Visual appeal
• Download time
• Ease of Use / Navigation
• Payment options
• Reputation

More important
Less important
Devaraj et al., 2003
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Contributing Factors? (HK)

• Security
• Security
• Security
• Privacy
• Privacy
• Privacy

? ? ?
Or something more sophisticated?
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Personalization

• Do all customers want the same interface?
• Do they all respond to the same stimuli?
• Are they all equally goal or process oriented?
• Can we use the same tactic to get their loyalty?
• Personalization is recognised as a major
  opportunity - yet also a major headache.

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Personalization

• Studies of culture tell us that stereotyping is
  dangerous.
• Some people like a simple interface, easy to use,
  quick to find what they want.
• Others appreciate a more challenging, or fun,
  interface.
• Hedonism (enjoyment/entertainment value) is a big
  turn on for some people

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Hedonism

• But are you turned on
• by colourful graphics, and visually arousing
  displays of information?
• or by distracting icons and flashing lights?
• or by a very simple interface that loads fast and
  gets what you want asap?
• Also, is it safe to assume that all people in one
  cultural group will share similar characteristics?

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Hong Kong?

• What is happening here?
• What is not happening here and why not?
• CityU has many EC/EB courses who for and why?
• Is it more than chasing the 'global' trend?
• Examples of successes and failures?
• Why did Adm_at_rt fail?
• Did they assume (like many other people) that US
  global?

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Hong Kong - An International Business Capital
Source www.investhk.gov.hk
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BUSINESS / REVENUE MODELS (1)adapted from
Michael Rappa (2000) http//digitalenterprise.org/
models/

• Auctions Market makers bring buyers and
  sellers together
• Advertising Extends traditional broadcast
  model (free content)
• Infomediary Collects and sells data about
  users or products
• Merchant Online retailers (e-tailers)

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BUSINESS / REVENUE MODELS (2)

• Community Loyal users provide
• funds and/or content
• Subscription Users pay for access
• Utility Metered usage or
• pay-as-you-go approach
• Manufacturer Web compresses distribution
  channel customers can tailor their goods
  before delivery

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BUSINESS / REVENUE MODELS (3)

• Financial Intermediaries
• Government Services
• Aggregators
• E-Ticketing
• Trading Intermediaries Market Spaces

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Strategic Impacts - EC

• Information is a source of revenue
• Must be able to provide immediate response to
  requests for information
• Quality and speed of information is critical
• Extensive information is available from the
  government and commercial sources (including
  competitors)
• Web-literate (web-liberated?) consumers have
  access to all makes and models of a product line

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What Governments Fear Most

• Taxes can be avoided with impunity on the web
• Where do you pay them?
• At the point of transaction?
• Where is it?
• At the point of receipt of goods?
• What if the goods are digital?
• What if the payment comes from a third party?

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For Example

• I am in Hong Kong, and use a Canadian
  intermediary to buy a book from an Egyptian
  bookshop, with the payment verified by a bank
  located in France, using my Hong Kong issued
  credit card, and delivery organised through the
  Israeli office of Federal Express (which is
  governed by US law).
• Where is the transaction taking place?
• Which tax law applies?

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The problem of domain names

• .com is a poweful indicator of who you are (so is
  .biz but so far there are not very many)
• .org tells me that the firm is not-for-profit
• .hk/.info tells me something else
• did you ever see ".us"?
• identical trademarks can exist in different
  countries jurisdictions, as trademarks are
  jurisdictionally specific.
• www.checkpoint.com.hk ? www.checkpoint.com

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is a legal problem

• Commerce, and e-commerce, are global phenomena.
• Law is mostly a local phenomenon.
• There is international law, but it is hard to
  enforce and many countries ignore rulings from
  international courts.
• No (cyber)law no consumer confidence not much
  EC.

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what if

• You perform an action on the web that is legal in
  the country where the transaction takes place,
  but illegal in the country where you are
  accessing the web?
• For example,
• living in a country that prohibits users to
  access/possess certain types of information/goods
  (pornography, drugs, guns,) but accessing/
  ordering that information/item from a country
  where it is legal and avoid tax, authorisation,
  licensing requirements, etc.

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Hong Kong

• does not prohibit downloads of pornographic
  material for personal use
• but you cannot set up a server in Hong Kong and
  make such 'restricted' materials available here
  (whether to local or overseas consumers)
• but you probably can distribute such material (by
  email) among your friends if there is no
  commercial intention

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Privacy Consumer Protection

• Many techniques are now available to facilitate
  learning about your customers with data-mining
  technology
• And then, to create databases that can be used to
  spam email millions of people with sales
  initiatives
• Privacy has become a very sensitive area
• Microsoft Passport is a very worrying technology
  in terms of privacy implications

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EU Law

• Prohibits transfer (trans-border data flow) of
  personal consumer data to countries/
  jurisdictions that do not share EU privacy
  regulations
• EU ? HK is OK, but not EU ? China
• How about EU ? HK ? CN Hong Kong may play a
  valuable intermediary role, but are there legal
  concerns? What might happen?
• HSBC/ABN/xxx account data for processing in
  Guangdong?

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EC Case Studies

• Admart
• eBabyAsia
• Li Fung
• Advanced Book Exchange

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Adm_at_rt

• Famous disaster, but why? HKBillions lost
• Business/revenue model problems?
• Was HK not yet ready?
• Was the competition too tough?
• Unethical practices?
• Too many input channels?
• Web, Fax, Counter, Phone
• Poor logistics integration?

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eBabyAsia

• Very successful from 2000-2003, but then
  collapsed during SARS
• Targetted the high-end market for baby goods in
  SE Asia (bricks clicks)
• Website in 5 languages
• JP, KE, EN, T-Ch, S-Ch
• Handled their own logistics
• Carefully nurtured corporate culture
• Was the niche too small?

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Li Fung (www.lifung.com)

• 100 year old trading firm
• 6000 suppliers, 300 (large) buyers
• Extranet access for all customers
• 65 offices globally all integrated with IT
• Value? Global sourcing/manufacturing SCM
• Sourcing, design, shipment, warehousing, Letters
  of Credit
• Helps suppliers with marketing and buyers with
  procurement
• get the quality they desire at the price they
  can afford
• But the web service StudioDirect (SME buyers)
  failed (dot com casualty)

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Advanced Book Exchange (www.abebooks.com)

• Aggregator of second hand bookshops worldwide
• Vast choice of bookshops, local and remote
• Vast choice of books and prices
• Book search and tracing service
• Revenue model?
• commission on sales

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Lessons for Global EC

• The world should be the market
• Creating a compelling experience is essential
• unless you are lucky enough to have a monopoly
• There are many business/revenue models, but which
  one is going to work?