E-commerce case study - Online Music Bussiness.

by singini (student)

ASSIGMENT NAME: business skills for commerce.

STUDENT ID: STU

STUDENT NAME:

STRUCTURE AND BUSINESS AIMS

1.1 aims of jazz music

Jazz music aim is to introduce to a web site to their business model and adopt e-commerce to their business. E-commerce will increase jazz music customer base and sales as customers will be able to buy music at any time of the day. They want to produce mp3 which will be then sold online through their website. This is in spite of its customers showing concern as mp3 has lower quality than the traditional formats. However the benefits of e-commerce are more than the drawbacks. To compete in today’s word jazz music need to adopt to new ways of doing business.

1.2 jazz music structure

Figure 1: current jazz music structure.

Jazz music is a small independent company owned by two partners. It has been in existence for 20 years. Its specialisation is producing music in vinyl and cd which are sold directly on the phone by retailers. The cd and vinyl are produced by outside parties. Recording equipment is hired to record the music. Invoicing and payment is done by manual process using a pc. Jazz music is a private organisation in partnership and therefore the reliability falls on both partners. Its stake holders are the users, artist, government, digital enables, hardware industry, public interest groups, retailers, and collecting societies.

1.2 .1 structure of music industry

The diagram below shows a typical music industry structure, with an explanation of the different entities and explanations of how they relate to each other below it.

Figure 2: the structure of music industry.

Source:

Artists and composers

They are the creators and the ones who possess the talent for music. They perform in concerts and in recording studios. Artists need good songs to perform and sometimes they need composers to create or compose the songs. However an artist can compose their own songs and sing them.

Managers

The representatives of composer, artist and the producer are the mangers. They manage the daily dealing of the above mention people with the recording companies and the publishers. They generally manage the day to day aspects of artist careers.

Production companies

The production companies may be made up of producers, composers, musicians and tour managers. Their main job is to create an image or brand of an artist and then sell it to record companies. Their main job is to develop the career of an artist or musician.

Publishers

The copyrights of a composer are put in hands of publishers who in turn licence the use of these rights to a record company. A publishing royalty is made whenever a cd is sold. This royalty is paid by the record company the MCPS. This is then given to the publishers who take their share and give the rest to the artists. Depending on the deal agreed with the artist/composer, between 15% and 35% maybe taken by the publisher. Further income may also be generated by selling to commercial business or film producers.

Record companies

These exist to facilitate the artist talents. They do this by providing money and organisation backbone to help in recording, manufacture and promotion of an artist’ recorded work. They risk greatly financially when they sign a new artist, as there’s a chance that a particular artist may not succeed.

Distributors

Distributors are mainly responsible making the music available to customers. They make sure that the music is sent to the retail shops for the customers to buy.

IMPACT OF E-COMMERCE

2.1 Impact of development of e-commerce on consumers

Convenience

E-commerce enables customers to compare prices by visiting multiple websites in the comfort of their home without having to go out. The time to shop is not limited to opening hours and hence customers can shop at any time of the day.

Increased choice

Customer are able to buy anywhere in the world thereby they have a bigger range of products to choose from because they are not restricted to buy from store in the local area. The global market is available at a click of a mouse.

Lower prices

Online products are cheaper In comparison to shop fronts as shop owners can afford to price lower because of low running costs. This is because there’s no shop assistant, no physical shop to pay rent and utilities bills.

Greater control over purchases

Easy ordering systems allow customers to customise orders according to their needs and specification. An example is at dell.com where customers, are able to specify the components of their product.

Inconsistent return policies

Customers may become frustrated because there is less customers service especially when returning or exchanging a product, when dealing with electronic retailers.

Security issues

Customers may be unwilling to buy products online due to concerns with security issues relating to fraud and I identity theft.

Lack of social shopping

Online shops lack the social part of shopping which most customers are used to. The interaction with others, the sales staff, and their friends may put off some customers.

Customization

This means that a customer can go an online shop and specify a product or commodities just the way he or she wants. This is true when buying computers online. A customer can chose each part of a computer according to their needs. Through customization the demand for products and services is increased and also provide a competitive advantage. (dr.l.lakshmi, www.articlesbase.com [accessed September 2011]).

2.1.2 Impact e-commerce on jazz music as a business

The typical business impact on different aspects jazz music can be as follows:

Employment and Labour Policy

E-commerce makes buying and selling different from the brick and mortar models.it requires technical staff to maintain and build the infrastructure. This may lead to companies employing more technical staff or ask their employees to upgrade their skills so that can work efficiently with the technology. Labour policies may need to be changed to accommodate the needs of e-commerce and the economy (lubbe, 2004).

Organisation

New technology will require new methods of doing things; jazz music will have to make some changes in order to deal with ecommerce. This includes purchasing or installing new equipment, employing technical staff and designing new process to accommodate the switch to e-commerce. (Source www.articlesbase.com accessed on [September 2011]).

Structure

Employment and nature of of work will be transformed at jazz music. Only crucial staff might have to be retained and new departments will have to be formed. For example e-commerce deals with information technology mostly and technical staff will be needed to run and maintain the hardware and software to be used. Most of the purchases will be done online, so telephone operators may have to go. E-commerce enables small business to reach the global market and staffs needs to deal with both the local and international customers as well (Andam, 2003).

Stakeholders

Jazz music has a number of stakeholders which include: artists who create the music, users of the digital content, the government which regulates and maintain the legal environment for other stakeholders, digital enables who will support the distribution of music to customers and Companies like ISPs. Then we have the hardware industry which produces, CD-player, or mp3 players, like Sony, Philips, Nokia, HP, IBM, Ericsson. However there will effects on these stakeholders which include:

The cost and the way payment is made are likely to change.
The joys of owning physical media might be lost
There will Change in ...

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Stakeholders

The cost and the way payment is made are likely to change.
The joys of owning physical media might be lost
There will Change in album orientation.
Intellectual property control will reduce
Some major artists might lose their market share. (University of Pennsylvania (1999) electronic music Distribution: players, stakes, and the public interest .Pdf available at: http://bionicdan.net/emd/ElectronicMusicDistribution.pdf. [accessed November 2011]

Markets

E-commerce leads to high or intensifies competition as the customer is able to get a lot of information on prices and products. This might have an effect on jazz music as it will have to work had to retain its customers as well as new ones in the new environment. Mp3 formats will lead to jazz music products to be shared illegally or pirated. E-commerce brings electronic market where the physical market is less used. Digital product like music can be delivered directly to customers and this effects packaging cost which are reduced and the traditional distributional methods are rarely used. Customers can shop anytime and the availability of products is much larger as well as cheaper. The formation of new markets is done, which include, web based advertising, linked advertising, direct mail, not forgetting that there becomes a bigger emphasis when it comes to relational marketing. (dr.l.lakshmi, www.articlesbase.com [accessed on 9/12/2011]).

Distribution

“E-commerce makes “mass customization” possible. E-commerce applications, in this area include easy-to-use ordering systems that allow customers to choose and order products according to their personal and unique specifications” (Andam, 2003). Mp3 will be mostly bought individually at a cheaper price on the website probably cutting off the distributors and retailers of cd and vinyl’s. Customers will not need to phone in to purchase the music nor will they be limited to shopping during opening times. They will be able to buy any time of the day. E-commerce has led to pure click and brick and click channel systems of distribution. Where by the first one refer to companies who have just launched a website for the first time while the latter is when a company has added an online site to increase or compete very well with other businesses (wikipia.org/wiki/Electronic_commerce). Jazz music will adopt the first scenario. As companies regularly have to update catalogues, to reflect the changes to their inventory and price changes; these may be expensive to print and delivered to customers and distributors. The website will enable this easy and cheaper for jazz music because the update will done electronically.

2.1.3 Risks involved in e-commerce

Adaptation of e-commerce has a number of risks .The following are the likely risks to jazz music:

Fraud

Here customers might use stolen cards for music purchases and they may claim sometimes that they never got the items dispatched or the download when in fact they actually got the music. Criminals may also hack into card processing system and manipulate data or steal customer details.

Theft by hackers

Also known as unauthorised disclosure, hacker might intercept purchase information, or gain access to poorly protected merchant services providers payment system and steal data.so it is important for jazz music to choose wisely when it comes to web hosting services.

Customer disputes

Sometimes there are issues with a service, promotion or deals being not as described on the site. A customer may also be billed before the goods are shipped and they may also be a misunderstanding about cancellations of orders or return and refund for downloads. (https://www.unibulmerchantservices.com/ecommerce-risk-management-guide, accessed [October 2011]).

Customer experience

This determines whether a customer buys or comes back to buy more or forget about the web site altogether. One of the draw back in e-commerce is that a website might fail because of a high rise of visitor traffic after a new advertising campaign, and potential customers might be denied access. Jazz music e-mails may also be annoying to customers and customers may feel their privacy breached as a result. Some e-mail queries maybe unable to reach the required people to solve them or they may be ignored all together and this may put off customers. (Chaffey, 2009).

2.2 Global impact of e-commerce

The global implications are as follows:

Global reach

Customers are now able to buy goods from manufactures all over the world on their sofa. There is no need to go to another country to purchase a product anymore. One has just have to order on website, pay shipping if necessary and it will be delivered to the door step. This was not easy before e-commerce. People had to travel where the product was to buy and hence incurring travels expenses and accommodation.

Reduction in cost of doing business

Small firms have reduced cost by utilising modern ICT systems to reduce transaction costs. This has enabled them to do more business across geographical boundaries.

Better marketing techniques

E-commerce has enabled better marketing technics which ensures target markets are reached without wasting resources and time. All economic and political barriers have been crossed by these effective marketing techniques.

Difficult to ensure delivery of goods

On global stage, shipped products may be intercepted and hence customers may not get the products they bought. Warranty might also be an issue when transporting goods internationally, especially if individuals are involved other than companies.

Widening Digital Divide

‘’The term Digital divide means a lack of equal access to computer technologies and the internet in particular, creating a gap between those who have and those who have not. One dimension of the digital gap follows demographics of gender, race and social class. Another dimension follows the economic gap between wealthy and poor countries’’ (Lubbe, 2004). Some people may not have access to a computer or the internet, and there left out when technology comes to play. Or it may be the case that someone does not have the required training to use e-commerce. This is true in developing countries where there’s poverty and people cannot even afford the basic stuff to survive.

A Threat of Information Warfare

These days there’s a real treat from hackers and viruses. Virus can attack information systems and destroy data or steel it. This data then may be used for criminal activities. There are instances of criminals operating in other countries, attacking business systems remotely and stealing trade secrets. Customers may lose money through fraud or identity theft. Information may also be altered and systems may be shut effecting services like banking to the general public. This has become a concern to many countries as of now and they are developing defensive mechanism to defend various systems from potential attacks. (Lubbe, 2004).

Tax, Trade and Regulatory Policies

Tax bases may be eroded because taxes are levied at a place of consumption. These taxes are set by individual governments and countries and may be undermined by e-commerce. Generally the generation of money is supposed to come from physical assets and activities. Which is not the same in e-commerce. The buying and selling is across wide area, in different countries and jurisdictions. This makes tax planning a challenge.

‘’A Few European countries suggest implementation of a tax called “bit tax”

(i.e., a tax on the “bits” of information zooming around computer networks). These

Countries support such a tax, partly because Europe (with high rates of VAT) stands

to lose the most from untaxed electronic sales. In America, which does not have a

Federal sales tax, the idea has not found much favour and the present US administration rejects the idea of any new taxes on the Internet. The basic problem with a ‘bit tax’ is that it is indiscriminate: it taxes not just online transactions, but all digital communications. In addition, the question of valuation would be difficult to determine’’ (Lubbe, 2004)

2.3 Cost of e-commerce

Some of the costs for jazz music to implement e-commerce may be as follows:

Cost of technology

E-commerce needs a high speed connection to the internet and getting such may be expensive. The other cost will come from purchasing extra computers and software. Payment systems will be needed to handle the transaction which will be borrowed at a price. The most expensive being using an online bank. ( Addul, R. feasibility study-commerce [www.robabdul.com] [accessed October, 2011])

Cost of technological development

The right expertise will required to design an e-commerce solution up to its implementation. However jazz music will have to obtain hosting services. These are sometime expensive to get. ( Addul, R. feasibility study-commerce [www.robabdul.com] [accessed October, 2011])

Cost in training employees

Employees need to be trained in the new system. The company will have to train its employees by either doing it in house by hiring someone to train them, or enrol them on a course. All this will cost money.

Running costs

E-commerce systems need to be maintained constantly for improved performance. Jazz music will have to maintain the computers and printers in their office. This will be by finding an IT support company as opposed to hiring someone full time. This is bearing in mind that the system will normally break down once in while. (Addul, R. feasibility study-commerce [www.robabdul.com] [accessed October, 2011])

3.0 ECOMMERCE SOLUTION

3.1 Business Objectives

Before any business is launched the owner need to or must have some aims and a clear Idea of what he or she wants to accomplish. For example he would say ‘’I want to be the biggest retailer on online’’ and then he would work towards this. So objectives are the listed targets to achieve success or aims in an e-commerce. It could also be a mission statement of what the business will stand for, in return this will be the basis stakeholders can measure themselves, be in productivity or performance. For a business, objectives ensure that the business does not lose its track on its aims and goals to achieve. On adopting e-commerce jazz music should have the following objectives in mind.

To cut cost by 20% by reducing printing of marketing materials and referring customers to the website instead.
Jazz music should build a national web presence online and increase overall sales by 25% within 90 days of launching the site.
Jazz music should have a reasonable customers list within 30 days.
Jazz music has to increase online sales by 40% in 60 days.
Jazz music should communicate its music products, services, prices to new customers within 35 days.

3.1.2 Market research

This refers to any activities done to get the information of customers or markets. This may include finding out marketing opportunities, problems or potential. This is important because the business need to know who might buy their products or services. Its helps to know the size, the competition the business might face. Through this the organisation is able to make decisions on topics such as pricing, promotion and distribution. The market research instruments will be:

customer surveys,
questionnaires,
focus group discussion,
Customer feedback.

(http://en.wikipedia.org/wiki/Market_research#Market_research_for_business.2Fplanning, [accessed October 3011]).

3.1.3 Target Markets

Macaulay and Dennis, 2006 says there’s a sizable and distinctive customer base in the UK. Six million adults (which is almost ten per cent of the UK population) will buy the music (1991, RSGB). UK market for jazz comprises a diverse audience profile across the range of socioeconomic divisions (ABC1C2DE). http://www.nwjazzworks.org/reports/32MarketingAndTheJazzMusician.pdf [accessed November 2011]

3.1.4 Market Potential

This refers to the ability of a product to sell. As jazz music has been selling very well using traditional commerce routes, then it is likely that the product might sell very well online. But jazz music need to advertise and let the existing customers know of the new venture.

3.2 Music downloads industry evaluation

The most common business model is when a customer runs propriety software on a pc and the software interfaces with a server and the server enables the download of music. The pricing schemes are pay per download or unlimited downloads by subscribing to monthly plan or yearly. An example is the apple iTunes which uses the pay per down load feature while a company like real networks uses subscriptions. Some company may include streaming as a free service and only charge for songs downloading. An example of such a company is spotify which incorporates advertisement in between streams to pay for the free service. But they are some system where the customer has to go to the seller website and buy songs or albums on the site as opposed to the previous mentioned case. Pay per download is when a customer is charged for each download, be in a song or whole album. The subscription route requires a customer to pay for a specified time during which they can have unlimited downloads of music. A survey done by ipsos-reid (2000) showed that users of file sharing software prefer to pay per download other to subscribe to service to download songs. (University of California Downloadable Music: How will it transform the Recording Industry? pdf available at: http://faculty.haas.berkeley.edu/meghan/299/Project_example_Music.pdf [accessed 04/11/11].

3.3 financial implications of the of proposed e-commerce solution

The financial implications will vary, but the cost will come from implementing the infrastructure itself. More computers will be needed and the software. As of now one pc exists, and this is not enough. They may also be a need for technical staff depending on the type of solution adopted. In some cases licences may be needed to be purchased for software and hardware. Money may also be needed for advertisement to let existing and potential customers know of the e-commerce launch.

3.4 Design solution

Below is a proposed jazz music structure after implementation of the design solution.

Figure 3: proposed jazz music structure

3.4.1 Domain name

Since domain names are sometimes not available, a typical domain name needs to provide identity of a company. In this case jazzmusic.com would be appropriate if available. Turnkey solutions would be used to provide the hosting of the website. The 1&1 my website company is suitable for this website. They appear to be cheaper than other sites.

3.4.2 Website plan

3.4.3 Technology

Hardware

The typical e-commerce solution would comprise of, web clients, webserver software, commerce software, connectivity tools and lastly but not least back-end systems. (Korper, 2001). For this solution jazz music will get a hosting account where by all the maintenance and server administration will done by the hosting company. But a work-group will be set up for jazz music to make information management easier. Below is the hardware required for e-commerce.

Server

Server is where the webserver software and the commerce server software reside. It manages all information on the network. It facilitates the connections between web clients, Back-end system. It also acts as storage when a file server is installed there. Jazz music will acquire hosting services from web hosting company to provide webserver software and the e-commerce software.

Router

This may be software based or hardware. it enables two or more networks to communicate.one of the most important function is load balancing and packet management. For this solution we recommend the Cisco RV120W which provides secure connectivity for small office, High-speed 802.11n wireless and high-performance VPN support, for separate virtual networks and wireless guest access.

Source. http://www.cisco.com/en/US/products/ps10852/index.html [accessed 31/10/2011].

Work stations

For work stations, a cheap but reliable solution would be needed. Only one pc exists and this is not enough if jazz music interns to go e-commerce. at least three pcs or more may be needed. OptiPlex 390 Desktop from dell will be good for this business as dell says this pc is built for a budget conscious business. And because jazz music is just launching its e-commerce for the first time, this is suitable. According to dell this pc delivers a sable cycle of up to 20 months. The specifications include; Second generation Intel® Core™ processor family and Dell Data Protection solution, Long lifecycle, managed transitions and platform stability, ENERGY STAR 5.0 compliant and is EPEAT Gold Registered. Source http://www.dell.com/uk/business/p/desktops-n-workstation. [Accessed October 2011]

Printers

Every business at least needs one printer, preferably a laser printer. For this purpose the HP LaserJet P2035n Printer would do well indeed. HP describes this printer as Ideal for businesses that want a fast, affordable black-and-white laser printer to share high-quality printing for a wide variety of office documents.

Source. http://www8.hp.com/uk/en/products/printers/product-detail.html?oid=3662038. [Accessed November 2011]

Connectivity

For the wiring and Ethernet connections the use of 10-base T RJ-45 and an 8 port hub will be implemented. This will be connected to an Ethernet. The computer will connect to this using Network interface card. TCP/IP protocol will be configured on these computers as well as IPX/SPX protocol to enable the employees to file and printer share.one router will provide the internet connection using DSL, from an internet access provider.

Software

For this solution, Windows XP® Professional with Service Pack 2 (SP2).is recommended. In addition the computer will need browsers to access the internet. There are a lot of free browsers which are free and readily available. There’s internet explorer, Firefox and safari just mention a few. A good network requires security from outside intrusion and virus attacks. A good firewall can protect the network from unwanted traffic from entering the network. Some of this software is free like a vasts and some come at a cost like Norton internet security.

http://support.microsoft.com/kb/314865. [Accessed November 2011]

Back-end systems

In client-server model architecture, the pcs, customer, and the employees are the front –end and these give access to the back-end which is e-business applications. Business applications manly reside on a server and an intranet or internet provides the connection between the two. (Chaffey. 2009). Back-end systems can be developed in house which will require time and the right expertise, so jazz music being new to e-commerce will outsource or get a hosting company where these application are included in the package. For this solution 1&1 web hosting is recommended.

3.4.4 Maintenance

An e-commerce system needs to be maintained in order for it to run smoothly. As the system is running, bugs or errors might occur in the software as well in the webserver hardware and they need to be fixed as soon as possible for system to continue making money for the business. A faulty system might prevent customers from buying or ordering from the site and this might put off some customers and they may not come back. (Chaffey, 2009). Customer needs, competition will change therefore the system may also need to updated often to meet these new changes.

3.4.5 Sources and distribution

The current distribution channels for jazz music are through retailers, by phone and at concerts. The distributors handle the logics of delivering to retailers and then the retailers sell these in their shops. By moving to e-commerce jazz music will have the opportunity of using the internet as a distribution channel. Customer just has to go to the website and chose the music they want and download or order a cd or vinyl. (University of California Downloadable Music: How will it transform the Recording Industry? Pdf available at: http://faculty.haas.berkeley.edu/meghan/299/Project_example_Music.pdf [accessed November 2011].

3.4.6 Security

a) Proxy server and firewalls

The network needs to be protected from the outside network; this may be by the use of firewalls and proxy servers. A proxy server is part of a gateway that separates the private network from the public network and file wall protects the whole network from intrusion from the internet. The other uses of a proxy server are security, administration, and caching service. However only a firewall is required on this work-group network.

b) Prevention of hacking

Hackers are still trying to gain access into networks in order to damage them. Therefore it is important that the network or computers are protected from them. Below is one of the ways hackers can compromise security.

c) Port entrance

There are a lot of free programs online which can scan available ports on a network in order for a hacker to gain access and find weakness in a system setup. To counter this, all ports will be disabled and only those required for the network to run, will be opened. The enabled ports will then protected by the use of firewall. (Korper, 2001)

d) Password cracking

Hackers can also crack passwords using readily available programs. To remedy for this users will be required to use strong passwords. A strong password should contain at least eight or more characters that consist of alphanumeric elements.

e) E-mail spoofing

This is when an e-mail is sent with the intention of tricking the recipient to give out security information. Here signatures will be used to deal with this problem, so that only known senders can be able to send e-mails

f) Virus intrusion

Viruses are programs which are installed in systems in order to cause damage to the system. They are transferred through e-mails, storage media, cd-rom or through internet browsers. As a remedy antivirus software will be installed on all computers.

g) Secure socket layer

This is common method of transferring data between buyer and seller and it was developed by Netscape (Korper. 2001). The data is transferred between a web browser and merchant webserver software. However this does not provide verification of identity of the two parties involved. Secure socket layer uses public key/private key from R.S.A. which also includes digital certificates. This will be used throughout in the company

h) Authentication methods

This refers to the granting of access levels according to information on the network. (korper. 2001).This insures that all activities are logged so that if there are breaches in security, it is easy to identify the culprit. It also enables the network administrator to know who or when and what files are being accessed. This is mainly done through the issue of log in names and passwords. Every employee will be given log details to access computers.

3.4.7 Payment systems

Payment systems engineer the monetary exchange transactions of goods and services. (Korper. 2001). These come in different categories according to their functionality. The most common used are smart cards, credit cards, micro payments, digital checks and electronic billing. For the time being the use of debit card and credit card will be implemented and after sometime, the other methods may be introduced.

3.4.8 Legislation

Jazz music is bound by a number of legislation since the company will keep data about customers. For example the data protection act 1998 covers the keeping of data of living people and provides guidelines of how the data must be used or handled. The other legislation is the computer misuse act 1990 which deals with unauthorised access to computers and information. The consumer credit act deals with credit between consumers and lenders (http://en.wikipedia.org/wiki/Consumer_Credit_Act_1974). For example it says that consumers have the right to pay off a loan before the end of the agreement by paying off the outstanding sum and giving notice to the lender. In addition there’s trading standards, freedom of information act and copyright legislation.

3.5 DESIGN EVALUATION

The design meets the set requirements for e-commerce. however design has been tailored for ease of implementation and set up. For example, instead of getting a website developer to design the website from scratch, we have decided to use turn-key solutions instead. This approach may have the disadvantage of limiting customisation of the website but still it’s a cheaper way of quickly launching a website. An onsite server would be best for the design but this might cost more as well as the server will have to be bought and jazz music will have to employ someone to maintain and manage the server as well. The turn-key option includes all this in a package and hence it is probably the best for jazz music to adopt. The design has also talked about printers and has suggested two more computers to be bought. Jazz music has no printer at the moment and for e-commerce to work, printer may have to be purchased. One pc exits and it has been doing its job but it may not be enough in implementing the solution and hence the purchase of two more is adequate. For the security and back-end system, jazz music will have to buy trust services where by facilities like payment systems, secure transactions, servers’ maintenance and communication are included in the bundle.

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