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2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.

Chapter 1

Overview of Electronic Commerce

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Learning Objectives

1. Define electronic commerce (EC) anddescribe its various categories.

2. Describe and discuss the content and

framework of EC.3. Describe the major types of EC transactions.

4. Describe the digital revolution as a driver of

EC.5. Describe the business environment as a

driver of EC.

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Learning Objectives

6. Describe some EC business models.

7. Describe the benefits of EC to organizations,consumers, and society.

8. Describe the limitations of EC.

9. Describe the contribution of EC toorganizations responding to environmental

pressures.10. Describe online social and business

networks.

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Electronic Commerce:Definitions and Concepts

Electronic Commerce (EC)

The process of buying, selling, orexchanging products, services, orinformation via computer networks

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EC can be defined from these perspectives:

Business process- Electronically conducted

Service- tool that cuts cost, improve quality and increasespeed of service delivery

Learning- Enabler of online training and education

Collaboration- Framework of inter and intra-organizational

collaborationCommunity- A gathering place

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e-business

A broader definition of EC that includes not just the buying andselling of goods and services, but also servicing customers,collaborating with business partners, conducting e-learning and

conducting electronic transactions within an organization

->Use of Internet and other Information technologies to supportcommerce and improve business performance

-> Complement of EC

-> EC only considers transactions between bus.-partners

-> EC makes the concept fairly narrow

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Electronic Commerce: Definitions and Concepts

PPurchasing E-bookfrom amazon.com

Purchasing acomputer from dell

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brick-and-mortar (old economy) organizationsOld-economy organizations (corporations) that perform theirprimary business off-line, selling physical products by means ofphysical agents,

Traditional, Almas

virtual (pure-play) organizationsOrganizations that conduct their business activities solely online

All digitized, e-book, software sellers.

click-and-mortar (click-and-brick) organizationsOrganizations that conduct some e-commerce activities, usuallyas an additional marketing channel,

Partially digitized, Dell

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electronic market (e-marketplace)An online marketplace where buyers and sellers meet toexchange goods, services, money, or information

Supplemented by- interorganizational information systems (IOSs)

Communications systems that allow routine transaction processing andinformation flow between two or more organizations

intraorganizational information systemsCommunication systems that enable e-commerce activities to go onwithin individual organizations

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The EC Framework,Classification, and Content

intranetAn internal corporate or government network that usesInternet tools, such as Web browsers, and Internet

protocolsextranet

A network that uses the Internet to link multipleintranets

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EC applications are supported byinfrastructure and by these five support areas:

People

Public policy

Marketing and advertisement

Support services

Business partnerships

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Classification of EC by the Nature of theTransactions or Interactions business-to-business (B2B)

E-commerce model in which all of the participants are businessesor other organizations

business-to-consumer (B2C)E-commerce model in which businesses sell to individual shoppers, e-tailing-Online retailing, usually B2C

business-to-business-to-consumer (B2B2C)E-commerce model in which a business provides some product orservice to a client business that maintains its own customers

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consumer-to-business (C2B)E-commerce model in which individuals use theInternet to sell products or services to organizations orindividuals who seek sellers to bid on products or

services they needmobile commerce (m-commerce)

E-commerce transactions and activities conducted in awireless environment

location-based commerce (l-commerce)M-commerce transactions targeted to individuals inspecific locations, at specific times

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business-to-employees (B2E)

E-commerce model in which an organization deliversservices, information, or products to its individualemployees, sales people

collaborative commerce (c-commerce)

E-commerce model in which individuals or groups communicateor collaborate online, marks & spencer with its suppliers, boeing

consumer-to-consumer (C2C)E-commerce model in which consumers sell directly to otherconsumers, personal properties sale

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e-learning

The online delivery of information for purposes oftraining or education

e-governmentE-commerce model in which a government entity buysor provides goods, services, or information from or tobusinesses or individual citizens

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The Interdisciplinary Nature of ECCS, Marketing, Consumer Behavior, Finance, HRM,

MIS, Accounting, Management, Economics, Businesslaw

EC Failures eToys, Xpeditor, Webvan,

Boo

62%Fin.skills, 50%Little Mrkt. Knowldg.

EC Successes wal-mart, Intel, General

Electric, e-trade

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Digital Revolution Drives EC

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Business Environment Drives EC

The Business Environment

The business environment impact model

Business pressures

Organizational response strategies

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Organizational response strategies:

-> Increase ability to adapt to changes and flexibility

-> Improve business process, introduce e-procurement

-> Improve CRM-> create join venture, partnerships, e-collaboration for

win-win situation

->Detect quality problems early and minimize them

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EC Business Models

business modelA method of doing business by which a company can generaterevenue to sustain itself

Wal-Mart buys merchandise, sells it and generates a profit.

A TV station provides free broadcasting to its viewers. Survivaldepends on advertisers and content providers.

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EC Business Models

Six elements of a business model includedescriptions of:1. Customersto be served and the companys relationships

with these customers including customers value proposition2. All productsand servicesthe business will offer

3. The business processrequired to make and deliver theproducts and services

4. The resourcesrequired and the identification of which onesare available, which will be developed in house, and whichwill need to be acquired

5. The organizations supply chain, including suppliersand

other business partners6. The revenues expected (revenue model), anticipated costs,

sources of financing, and estimated profitability (financialviability)

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EC Business Models

revenue model

Description of how the company or anEC project will earn revenue

value proposition

The benefits a company can derive fromusing EC. The value proposition defineshow a companys product or service

fulfills the needs of customers.

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Revenue Models

The major revenue models are:

Sales Wal-Mart, Amazon

Transaction fees - Commission

Subscription fees- AOL

Advertising fees - Google

Affiliate fees- Reference

Other revenuesources

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EC Business Models

Online direct marketing

Electronic tendering systems.

Name your own price

Find the best price Affiliate marketing

Viral marketing

Group purchasing

Online auctions

Product and servicecustomization

Bartering

Information brokers(informediaries)

Deep discounting

Membership

Value-chain integrators

Value-chain service providers

Supply chain improvers

Social networks,

communities, and blogging Direct sale by manufacturers

Negotiation

Electronic marketplaces andexchanges

Typical EC Business Models

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EC Business Models

tendering (bidding) systemModel in which a buyer requests would-be sellers to submit bids; thelowest bidder wins (reverse auction)

name-your-own-price modelModel in which a buyer sets the price he or she is willing to pay andinvites sellers to supply the good or service at that price,priceline.com

Find the best price modelhotwire.com, eloan.com

affiliate marketingAn arrangement whereby a marketing partner (a business, anorganization, or even an individual) refers consumers to the sellingcompanys Web site

viral marketingWord-of-mouth marketing in which customers promote a product orservice to friends or other people

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EC Business Models

group purchasingQuantity (aggregated) purchasing that enablesgroups of purchasers to obtain a discount

price on the products purchasedOnline auction

eBay highest bidders win

customizationCreation of a product or service according tothe buyers specifications, Dell, Nike, De Beers

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EC Business Models

Information brokersbizrate.com

exchangeschemconnect.com

Bartering- tradeaway.com

Deep Discounting- half.com

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EC Business Models

Value chain integrators-completepackage forcustomers,carpoint.com

Value chain service providers

specialized in supply chainfunctions, ups.com(logistics),

paypal.com(payment)Negotiation- ioffer.com

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Benefits of EC

Benefits to Organizations

Global reach, cost reduction, supply chain

improvements, business always open, low

communication cost, improved customer serviceand relationship

Consumers

Ubiquity, more product/services, no sales tax,

customized products/services,Information availability

SocietyEnable telecommuting, more public services, close

the digital divide

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Limitations of EC

Technological->Lack of universal standards for quality, security and

reliability

--> Bandwidth insufficiency specially for m-commerce

Difficult to integrate internet and EC software Software development tools are still evolving

Internet accessibility is still expensive and/or inconvenient

Nontechnological

Security and privacy concern Lack of trust in EC

Feel and touch products

Insufficient no. of buyers and sellers

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Social and Business Networks

social networks

Web sites that connect people with specified interests byproviding free services such as photo presentation, e-mail,blogging, etc.

Facebook.com, YouTube.com, Friendster.com, MySpace.com

Business-oriented networks are social networks whose primaryobjective is to facilitate business

YUB.comnetwork shoppers looking for discounts and bargain

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The Digital Enterprise

digital enterprise

A new business model that uses IT in a fundamental way toaccomplish one or more of three basic objectives: reach andengage customers more effectively, boost employee productivity,

and improve operating efficiency. It uses convergedcommunication and computing technology in a way that improvesbusiness processes

Exhibit-1.11

corporate portalA major gateway through which employees, business partners,

and the public can enter a corporate Web site

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The Digital Enterprise

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Managerial Issues

1. Is it real?

2. Why is B2B e-commerce so attractive?

3. There are so many EC failureshowcan one avoid them?

4. How do we transform our organizationinto a digital one?

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Managerial Issues

5. How should we evaluate the magnitudeof business pressures andtechnological advancement?

6. How can we exploit social/businessnetworking?

7. What should be my companys strategy

toward EC?

8. What are the top challenges of EC?

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