Learning Objectives
• Define e-marketplaces and list their components.
• List the major types of e-marketplaces and describe their features.
• Describe the various types of EC intermediaries and their roles.
• Describe electronic catalogs, shopping carts, and search engines.
• Describe the various types of auctions and list their characteristics.
• Discuss the benefits, limitations, and impacts of auctions.
• Describe bartering and negotiating online.
• Define m-commerce and explain its role as a market mechanism.
• Discuss liquidity, quality, and success factors in e-marketplaces.
• Describe the economic impact of EC.
• Discuss competition in the digital economy.
• Describe the impact of e-marketplaces on organizations.
E-Marketplaces
• Markets (electronic or otherwise) have three main functions:
1. Matching buyers and sellers;
2. Facilitating the exchange of information, goods, services, and payments associated with market transactions; and
3. Providing an institutional infrastructure, such as a legal and regulatory framework, which enables the efficient functioning of the market.
• Electronic marketplaces (e-marketplaces or marketspaces), changed several of the processes used in trading and supply chains
1. Greater information richness
2. Lower information search costs for buyers
3. Diminished information asymmetry between sellers and buyers
4. Greater temporal separation between time of purchase and time of possession
5. Greater temporal proximity between time of purchase and time of possession
6. Ability of buyers and sellers to be in different locations
marketspace
A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronically
• Marketspace components
– Customers
– Sellers
– Products and services
digital products
Goods that can be transformed into digital format and delivered over the Internet
– Infrastructure
• Marketspace components
front end
The portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway
back end
The activities that support online order-taking. It includes fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery
• Marketspace components
intermediary
A third party that operates between sellers and buyers.
– Other business partners
– Support services
Types of E-Marketplaces: From Storefronts to Portals
• Electronic Storefronts
storefront
A single company’s Web site where products or services are sold
• Most common mechanisms are a(n):
– electronic catalog
– search engine
– electronic cart
– e-auction facilities
– payment gateway
e-mall (online mall)
An online shopping center where many online stores are located
• Types of Stores and Malls
– General stores/malls
– Specialized stores/malls
– Regional versus global stores
– Pure online organizations versus click-and-mortar stores
• Types of E-Marketplaces
e-marketplace
An online market, usually B2B, in which buyers and sellers exchange goods or services; the three types of e-marketplaces are private, public, and consortia
1. private e-marketplaces
Online markets owned by a single company; may be either sell-side or buy-side e-marketplaces. 2. sell-side e-marketplace
A private e-marketplace in which a company sells either standard or customized products to qualified companies
3. buy-side e-marketplace
A private e-marketplace in which a company makes purchases from invited suppliers
4. public e-marketplaces
B2B marketplaces, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges
5. information portal
A single point of access through a Web browser to business information inside and/or outside an organization
• Six major types of portals
– Commercial (public) portals
– Corporate portals
– Publishing portals
– Personal portals
– Mobile portals
– Voice portals
mobile portal
A portal accessible via a mobile device
voice portal
A portal accessed by telephone or cell phone
Intermediation in EC
infomediaries
Electronic intermediaries that control information flow in cyberspace, often aggregating information and selling it to others
• Five limitations of direct interaction
– Search costs
– Lack of privacy
– Incomplete information
– Contract risk
– Pricing inefficiencies4
e-distributor
An e-commerce intermediary that connects manufacturers (suppliers) with business buyers by aggregating the catalogs of many suppliers in one place—the intermediary’s Web site
disintermediation
Elimination of intermediaries between sellers and buyers
reintermediation
Establishment of new intermediary roles for traditional intermediaries that have been disintermediated
Electronic Catalogs and Other Market Mechanisms
electronic catalogs
The presentation of product information in an electronic form; the backbone of most e-selling sites
• Classification of electronic catalogs
1. The dynamics of the information presentation
2. The degree of customization
3. Integration with business processes
• Online catalogs
1. Ease of updating
2. Ability to be integrated with the purchasing process
3. Coverage of a wide spectrum of products
4. Interactivity
5. Customization
6. Strong search capabilities
• Two approaches to creating customized catalogs
– Let the customers identify the parts of interest to them from the total catalog
– Let the system automatically identify customer characteristics based on the customer’s transaction records
search engine
A computer program that can access a database of Internet resources, search for specific information or keywords, and report the results
software (intelligent) agent
Software that can perform routine tasks that require intelligence
electronic shopping cart
An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop
auction
A competitive process in which a seller solicits consecutive bids from buyers (forward auctions) or a buyer solicits bids from sellers (backward auctions). Prices are determined dynamically by the bids
Auctions As EC Market Mechanisms
• Limitations of Traditional Off-line Auctions
– The rapid process may give potential buyers little time to make a decision
– Bidders do not have much time to examine the goods
– Bidders must usually be physically present at auctions
– Difficult for sellers to move goods to an auction site
– Commissions are fairly high
electronic auction (e-auction)
Auctions conducted online
dynamic pricing
Prices that change based on supply and demand relationships at any given time
• Types of auctions
– One Buyer, One Seller
– One Seller, Many Potential Buyers
1. forward auction
An auction in which a seller entertains bids from buyers
2. reverse auction (bidding or tendering system)
Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid wins; primarily a B2B or G2B mechanism
Exhibit 2.5 The Reverse Auction Process
“name-your-own-price” model
Auction model in which a would-be buyer specifies the price (and other terms) he or she is willing to pay to any willing and able seller. It is a C2B model that was pioneered by Priceline.com
3. double auction
Auctions in which multiple buyers and their bidding prices are matched with multiple sellers and their asking prices, considering the quantities on both sides
• Limitations of E-Auctions
– Minimal security
– Possibility of fraud
– Limited participation
• Impacts of E-Auctions
– Auctions as a coordination mechanism
– Auctions as a social mechanism to determine a price
– Auctions as a highly visible distribution mechanism
– Auctions as an EC component
Bartering and Negotiating Online
bartering
The exchange of goods or services
e-bartering (electronic bartering)
Bartering conducted online, usually by a bartering exchange
bartering exchange
A marketplace in which an intermediary arranges barter transactions
• Online negotiating—Three factors may facilitate online negotiation:
1. The products and services that are bundled and customized
2. The computer technology that facilitates the negotiation process
3. The software (intelligent) agents that perform searches and comparisons, thereby providing quality customer service and a base from which prices can be negotiated
EC in the Wireless Environment: M-Commerce
mobile computing
Permits real-time access to information, applications, and tools that, until recently, were accessible only from a desktop computer
mobile commerce (m-commerce)
E-commerce conducted via wireless devices
m-business
The broadest definition of m-commerce, in which
e-business is conducted in a wireless environment
Competition in the Digital Economy
Internet ecosystem
The business model of the Internet economy
differentiation
Providing a product or service that is unique
personalization
The ability to tailor a product, service, or Web content to specific user preferences
• Competitive Factors in the Internet Economy
– Lower prices
– Customer service
– Barriers to entry are reduced
– Virtual partnerships multiply
– Market niches abound
• Porter’s Competitive Analysis in an Industry
competitive forces model
Model, devised by Porter, that says that five major forces of competition determine industry structure and how economic value is divided among the industry players in an industry; analysis of these forces helps companies develop their competitive strategy
Exhibit 2.6 Porter’s Competitive Forces Model
Impacts of EC on Business Processes and Organizations
• Improving Direct Marketing
– Product promotion
– New sales channel
– Direct savings
– Reduced cycle time
– Improved customer service
– Brand or corporate image
• Other Impacts on Direct Marketing
– Customization
– Advertising
– Ordering systems
– Market operations
Exhibit 2.7 The Analysis-of-Impacts Framework
Impacts of EC on Business Processes and Organizations
• Redefining Organizations
– New and improved product capabilities
– New business models
– Improving the supply chain
– Impacts on Manufacturing
build-to-order (pull system)
A manufacturing process that starts with an order (usually customized). Once the order is paid for, the vendor starts to fulfill it
– Real-time demand-driven manufacturing
– Virtual manufacturing
– Assembly lines
Exhibit 2.10 Changes in the Supply Chain
Exhibit 2.11 Real-Time Demand-Driven Manufacturing
Impacts of EC on Business Processes and Organizations
• Redefining Organizations
– Impacts on Finance and Accounting
E-markets require special finance and accounting systems. Most notable of these are electronic payment systems
– Impacts on Human Resource Management and Training
• EC is changing how people are recruited, evaluated, promoted, and developed
• EC also is changing the way training and education are offered to employees
• Companies are cutting training costs by 50% or more, and virtual courses and programs are mushrooming
Managerial Issues
What about intermediaries?
Should we auction?
Should we barter?
What m-commerce opportunities are available?
How do we compete in the digital economy?
What organizational changes will be needed?
Summary
E-marketplaces and their components.
The role of intermediaries.
The major types of e-marketplaces.
Electronic catalogs, search engines, and shopping carts.
Types of auctions and their characteristics.
The benefits and limitations of auctions.
Bartering and negotiating.
The role of m-commerce.
Competition in the digital economy.
The impact of e-markets on organizations.
Monday, November 12, 2007
Chapter 1-Introduction
Learning Objectives
• Define electronic commerce (EC) and describe its various categories.
• Describe and discuss the content and framework of EC.
• Describe the major types of EC transactions.
• Describe the digital revolution as a driver of EC.
• Describe the business environment as a driver of EC.
• Describe some EC business models.
• Describe the benefits of EC to organizations, consumers, and society.
• Describe the limitations of EC.
• Describe the contribution of EC to organizations responding to environmental pressures.
Electronic Commerce: Definitions and Concepts
electronic commerce (EC)
The process of buying, selling, or exchanging products, services, or information via computer networks
• EC is defined through these perspectives
– Communications
– Commercial (trading)
– Business process
– Service
– Learning
– Collaborative
– Community
e-business
A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization
• Pure Versus Partial EC
– EC takes several forms depending on the degree of digitization (the transformation from physical to digital)
(1) the product (service) sold,
(2) the process,
(3) the delivery agent (or intermediary)
• EC organizations
brick-and-mortar organizations
Old-economy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents
virtual (pure-play) organizations
Organizations that conduct their business activities solely online
click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce activities, but do their primary business in the physical world
• Where EC is conducted
electronic market (e-marketplace)
An online marketplace where buyers and sellers meet to exchange goods, services, money, or information
interorganizational information systems (IOSs)
Communications system that allows routine transaction processing and information flow between two or more organizations
intraorganizational information systems
Communication systems that enable e-commerce activities to go on within individual organizations
The EC Framework, Classification, and Content
• Networked computing is the infrastructure for EC, and it is rapidly emerging as the standard computing environment for business, home, and government applications
– Networked computing connects multiple computers and other electronic devices located in several different locations by telecommunications networks, including wireless ones
– Allows users to access information stored in several different physical locations and to communicate and collaborate with people separated by great geographic distances
intranet
An internal corporate or government network that uses Internet tools, such as Web browsers, and Internet protocols
extranet
A network that uses the Internet to link multiple intranets
The EC Framework, Classification, and Content
• An EC Framework—supports five policymaking support areas
– People
– Public policy
– Marketing and advertisement
– Support services
– Business partnerships
EC Classification
• Classification by nature of the transactions or interactions
1. business-to-business (B2B)
E-commerce model in which all of the participants are businesses or other organizations
2. business-to-consumer (B2C)
E-commerce model in which businesses sell to individual shoppers
3. e-tailing
Online retailing, usually B2C
4. business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides some product or service to a client business that maintains its own customers
5. consumer-to-business (C2B)
E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals seek sellers to bid on products or services they need
6. consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to other consumers
7. peer-to-peer
Technology that enables networked peer computers to share data and processing with each other directly; can be used in C2C, B2B, and B2C e-commerce
8. mobile commerce (m-commerce)
E-commerce transactions and activities conducted in a wireless environment
9. location-based commerce (l-commerce)
M-commerce transactions targeted to individuals in specific locations, at specific times
10. intrabusiness EC
E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization
11. business-to-employees (B2E)
E-commerce model in which an organization delivers services, information, or products to its individual employees
12. collaborative commerce (c-commerce)
E-commerce model in which individuals or groups communicate or collaborate online
13. e-learning
The online delivery of information for purposes of training or education
14. exchange (electronic)
A public electronic market with many buyers and sellers
15. exchange-to-exchange (E2E)
E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information
16. e-government
E-commerce model in which a government entity buys or provides goods, services, or information to businesses or individual citizens
The Future of EC
• Overall, the growth of the field will continue to be strong into the foreseeable future
• Despite the failures of individual companies and initiatives, the total volume of EC is growing by 15 to 25% every year
Digital Evolution Drives EC
digital economy
An economy that is based on digital technologies, including digital communication networks, computers, software, and other related information technologies; also called the Internet economy, the new economy, or the Web
• The digital revolution accelerates EC by providing competitive advantage to organizations and enabling innovations
Business Environment Drives EC
• Economic, legal, societal, and technological factors have created a highly competitive business environment in which customers are becoming more powerful
• The environment–response–support model
Companies must not only take traditional actions such as lowering costs and closing unprofitable facilities, but also introduce innovative actions such as customizing, creating new products, or providing superb customer service
• Categories of business pressures
– market (economic)
– societal
– technological
• Organizational response strategies
– Strategic systems
– Agile systems
– Continuous improvement efforts and business process restructuring
– Customer relationship management
– Business alliances
– Electronic markets
– Reductions in Cycle Time and Time-to-Market
cycle time reduction
Shortening the time it takes for a business to complete a productive activity from its beginning to end
– Empowerment of Employees
EC allows the decentralization of decision making and authority via empowerment and distributed systems, but simultaneously supports a centralized control
– Supply Chain Improvements
EC can help reduce supply chain delays, reduce inventories, and eliminate other inefficiencies
– Mass Customization: Make-to-Order in Large Quantities
mass customization
Production of large quantities of customized items
– Intrabusiness: From Sales Force Automation to Inventory Control
knowledge Management (KM)
The process of creating or capturing knowledge, storing and protecting it, updating and maintaining it, and using it
EC Business Models
business model
A method of doing business by which a company can generate revenue to sustain itself
• The Structure of Business Models
– A description of the customers to be served and the company’s relationships with these customers (customers’ value proposition)
– A description of all products and services the business will offer
– A description of the business process required to make and deliver the products and services
• The Structure of Business Models
– A list of the resources required and the identification of which ones are available, which will be developed in-house, and which will need to be acquired
– A description of the organization supply chain, including suppliers and other business partners
– A description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability)
• Revenue Models
Description of how the company or an EC project will earn revenue
• Major revenue models
– Sales
– Transaction fees
– Subscription fees
– Advertising fees
– Affiliate fees
– Other revenue sources
• Value proposition
The benefits a company can derive from using EC
• How do e-marketplaces create value? (Amit and Zott 2001)
– Search and transaction cost efficiency
– Complementarities
– Lock-in
– Novelty
EC Business Models
• Typical EC Business Models
– Online direct marketing
– Electronic tendering systems
tendering (reverse auction)
Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins
name-your-own-price model
Model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price
Typical EC Business Models
– Find the best price
1. affiliate marketing
An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site
2. viral marketing
Word-of-mouth marketing in which customers promote a product or service to friends or other people
3. group purchasing
Quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased
4. SMEs
Small-to-medium enterprises
e-co-ops
Another name for online group purchasing organizations
• Typical EC Business Models
– Online auctions
– Product and service customization
customization
Creation of a product or service according to the buyer’s specifications
– Electronic marketplaces and exchanges
– Information brokers
– Typical EC Business Models
– Bartering
– Deep discounting
– Value-chain integrators
– Value-chain service providers
– Supply chain improvers
Benefits of EC
Benefits to Organizations
• Global Reach
• Cost Reduction
• Supply Chain Improvements
• Extended Hours
• Customization
• New Business Models
• Vendors’ Specialization
• Rapid Time-to-Market
• Lower Communication Costs
• Efficient Procurement
• Improved Customer Relations
• Up-to-Date Company Material
• No City Business Permits and Fees
• Other Benefits
Benefits to Consumers
• Ubiquity
• More Products and Services
• Customized Products and Services
• Cheaper Products and Services
• Instant Delivery
• Information Availability
• Participation in Auctions
• Electronic Communities
• No Sales Tax
• Benefits to Society
• Telecommuting
• Higher Standard of Living
• Homeland Security
• Hope for the Poor
• Availability of Public Services
1994 a young financial analyst and fund manager named Jeff Bezos became enthralled with the rapid growth of internet. HE made a study about what are the top 20 most products that can easily be sold on the Internet. Five years later AMAZON.COM the company he formed to sell books on the Internet had annual sales of over 600 million.
E commerce-shopping on the part of the Internet called the world wide web
EFT – Electronic Fund transfer also called wire transfer; which are electronic transmission of account exchange information over private communications network
Electronic data Interchange (EDI) – occurs when one business transmit computer-readable data in a standard format to another business
Trading Partners – Business that engage in EDI with each other
Value added networks (VAN) is an independent firm that offers connection and EDI transaction forwarding services to buyers and sellers engaged in EDI.
Commodity – a commodity item is a product or service that has become standardized and well known; office supplies, computer, airline transportation are en example.
Virtual Community – is a gathering of people who shares a common interest, but instead of this gathering occurring in the physical world, it takes place on the Internet example: CISCO
DISADVANTAGES OF ELECTRONIC COMMERCE
Perishable foods, high-cost items such as jewelry may be impossible to adequately inspect from remote location, regardless of the technologies that are diverse in the future.
Internet – is a large system of interconnected computer networks that spans the globe
USE OF INTERNET
Communicate
Participate in games and simulation
Join discussion groups
Obtain free computer software
Entertainment
File Transfer and download
World Wide Web – or simply the Web, is the subset of the computers on the Internet that are connected top each other in a specific way that makes those computers and their contents easily assessable to each other.
1960 US Department of Defense
1969 the researchers connected computers at the University of California at Los Angeles, SRI International, University of California at Sta. Barbara and the University of Utah.
File Transfer Protocol (FTP) – enabled users to transfer files between computers and Telnet lets users log on to their computer accounts from remote sites.
Mailing List – is an e-mail address that takes any messages it receives and forwards it to any user who has subscribes to the list.
1980 – The defense Department network and other academic networks that had teams up with and funded from National Science Foundation (NSF)
Network Access Provider (NAP)- sells internet access rights directly to large customers and indirectly to smaller firms through other companies called Internet Service Provider (ISP)
Ted Nelson described a similar system in which text on one page links to text on the other page. Nelson called it as Hypertext
Douglas Englebart who invented the computer mouse created the first experimental hypertext system on one large computers in the 1960s
1989 Tim Berners-Lee and Robert Calliau were working on CERN; Internet
Hypertext Server – ia a computer that stores files written in hypertext markup language and lets other computers connect to it and read those files.
Hypertext Markup Language (HTML) – is a language that includes a set of codes (or tags) attached to text
Web Browser – is a software interface that lets users read (or browse) HTML documents and move from one HTML document to another
Standard Generalized Markup Language (SGML) – which organizations have used for many years to manage large documents filing system
Graphical User Interface (GUI) – is a way of representing program control functions and output to users.
1993 a group of students led by Marc Andreessen at the University of Illinois wrote MOSAIC
1994 Marc Andreessen and University of Illinois teams joined with James Clark of Silicon Graphics to found Netscape Communication
Microsoft – Internet Explorer
Transaction cost – are the total of all costs that a buyer and seller incur as they gather information and negotiate a purchase-sale transaction.
Vertical Integration – The practice of the existing firm replacing one of its supplier markets with it own hierarchical structure for creating the supplied products
Strategic business unit or business unit – is one particular combination of product, distribution channel, and customer type
Value chain – is the way of organizing activities that each strategic business unit undertakes to design, produce, promote, market, deliver and support products or services it sells.
• Define electronic commerce (EC) and describe its various categories.
• Describe and discuss the content and framework of EC.
• Describe the major types of EC transactions.
• Describe the digital revolution as a driver of EC.
• Describe the business environment as a driver of EC.
• Describe some EC business models.
• Describe the benefits of EC to organizations, consumers, and society.
• Describe the limitations of EC.
• Describe the contribution of EC to organizations responding to environmental pressures.
Electronic Commerce: Definitions and Concepts
electronic commerce (EC)
The process of buying, selling, or exchanging products, services, or information via computer networks
• EC is defined through these perspectives
– Communications
– Commercial (trading)
– Business process
– Service
– Learning
– Collaborative
– Community
e-business
A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization
• Pure Versus Partial EC
– EC takes several forms depending on the degree of digitization (the transformation from physical to digital)
(1) the product (service) sold,
(2) the process,
(3) the delivery agent (or intermediary)
• EC organizations
brick-and-mortar organizations
Old-economy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents
virtual (pure-play) organizations
Organizations that conduct their business activities solely online
click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce activities, but do their primary business in the physical world
• Where EC is conducted
electronic market (e-marketplace)
An online marketplace where buyers and sellers meet to exchange goods, services, money, or information
interorganizational information systems (IOSs)
Communications system that allows routine transaction processing and information flow between two or more organizations
intraorganizational information systems
Communication systems that enable e-commerce activities to go on within individual organizations
The EC Framework, Classification, and Content
• Networked computing is the infrastructure for EC, and it is rapidly emerging as the standard computing environment for business, home, and government applications
– Networked computing connects multiple computers and other electronic devices located in several different locations by telecommunications networks, including wireless ones
– Allows users to access information stored in several different physical locations and to communicate and collaborate with people separated by great geographic distances
intranet
An internal corporate or government network that uses Internet tools, such as Web browsers, and Internet protocols
extranet
A network that uses the Internet to link multiple intranets
The EC Framework, Classification, and Content
• An EC Framework—supports five policymaking support areas
– People
– Public policy
– Marketing and advertisement
– Support services
– Business partnerships
EC Classification
• Classification by nature of the transactions or interactions
1. business-to-business (B2B)
E-commerce model in which all of the participants are businesses or other organizations
2. business-to-consumer (B2C)
E-commerce model in which businesses sell to individual shoppers
3. e-tailing
Online retailing, usually B2C
4. business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides some product or service to a client business that maintains its own customers
5. consumer-to-business (C2B)
E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals seek sellers to bid on products or services they need
6. consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to other consumers
7. peer-to-peer
Technology that enables networked peer computers to share data and processing with each other directly; can be used in C2C, B2B, and B2C e-commerce
8. mobile commerce (m-commerce)
E-commerce transactions and activities conducted in a wireless environment
9. location-based commerce (l-commerce)
M-commerce transactions targeted to individuals in specific locations, at specific times
10. intrabusiness EC
E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization
11. business-to-employees (B2E)
E-commerce model in which an organization delivers services, information, or products to its individual employees
12. collaborative commerce (c-commerce)
E-commerce model in which individuals or groups communicate or collaborate online
13. e-learning
The online delivery of information for purposes of training or education
14. exchange (electronic)
A public electronic market with many buyers and sellers
15. exchange-to-exchange (E2E)
E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information
16. e-government
E-commerce model in which a government entity buys or provides goods, services, or information to businesses or individual citizens
The Future of EC
• Overall, the growth of the field will continue to be strong into the foreseeable future
• Despite the failures of individual companies and initiatives, the total volume of EC is growing by 15 to 25% every year
Digital Evolution Drives EC
digital economy
An economy that is based on digital technologies, including digital communication networks, computers, software, and other related information technologies; also called the Internet economy, the new economy, or the Web
• The digital revolution accelerates EC by providing competitive advantage to organizations and enabling innovations
Business Environment Drives EC
• Economic, legal, societal, and technological factors have created a highly competitive business environment in which customers are becoming more powerful
• The environment–response–support model
Companies must not only take traditional actions such as lowering costs and closing unprofitable facilities, but also introduce innovative actions such as customizing, creating new products, or providing superb customer service
• Categories of business pressures
– market (economic)
– societal
– technological
• Organizational response strategies
– Strategic systems
– Agile systems
– Continuous improvement efforts and business process restructuring
– Customer relationship management
– Business alliances
– Electronic markets
– Reductions in Cycle Time and Time-to-Market
cycle time reduction
Shortening the time it takes for a business to complete a productive activity from its beginning to end
– Empowerment of Employees
EC allows the decentralization of decision making and authority via empowerment and distributed systems, but simultaneously supports a centralized control
– Supply Chain Improvements
EC can help reduce supply chain delays, reduce inventories, and eliminate other inefficiencies
– Mass Customization: Make-to-Order in Large Quantities
mass customization
Production of large quantities of customized items
– Intrabusiness: From Sales Force Automation to Inventory Control
knowledge Management (KM)
The process of creating or capturing knowledge, storing and protecting it, updating and maintaining it, and using it
EC Business Models
business model
A method of doing business by which a company can generate revenue to sustain itself
• The Structure of Business Models
– A description of the customers to be served and the company’s relationships with these customers (customers’ value proposition)
– A description of all products and services the business will offer
– A description of the business process required to make and deliver the products and services
• The Structure of Business Models
– A list of the resources required and the identification of which ones are available, which will be developed in-house, and which will need to be acquired
– A description of the organization supply chain, including suppliers and other business partners
– A description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability)
• Revenue Models
Description of how the company or an EC project will earn revenue
• Major revenue models
– Sales
– Transaction fees
– Subscription fees
– Advertising fees
– Affiliate fees
– Other revenue sources
• Value proposition
The benefits a company can derive from using EC
• How do e-marketplaces create value? (Amit and Zott 2001)
– Search and transaction cost efficiency
– Complementarities
– Lock-in
– Novelty
EC Business Models
• Typical EC Business Models
– Online direct marketing
– Electronic tendering systems
tendering (reverse auction)
Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins
name-your-own-price model
Model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price
Typical EC Business Models
– Find the best price
1. affiliate marketing
An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site
2. viral marketing
Word-of-mouth marketing in which customers promote a product or service to friends or other people
3. group purchasing
Quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased
4. SMEs
Small-to-medium enterprises
e-co-ops
Another name for online group purchasing organizations
• Typical EC Business Models
– Online auctions
– Product and service customization
customization
Creation of a product or service according to the buyer’s specifications
– Electronic marketplaces and exchanges
– Information brokers
– Typical EC Business Models
– Bartering
– Deep discounting
– Value-chain integrators
– Value-chain service providers
– Supply chain improvers
Benefits of EC
Benefits to Organizations
• Global Reach
• Cost Reduction
• Supply Chain Improvements
• Extended Hours
• Customization
• New Business Models
• Vendors’ Specialization
• Rapid Time-to-Market
• Lower Communication Costs
• Efficient Procurement
• Improved Customer Relations
• Up-to-Date Company Material
• No City Business Permits and Fees
• Other Benefits
Benefits to Consumers
• Ubiquity
• More Products and Services
• Customized Products and Services
• Cheaper Products and Services
• Instant Delivery
• Information Availability
• Participation in Auctions
• Electronic Communities
• No Sales Tax
• Benefits to Society
• Telecommuting
• Higher Standard of Living
• Homeland Security
• Hope for the Poor
• Availability of Public Services
SUMMARY - Chapter 1
1994 a young financial analyst and fund manager named Jeff Bezos became enthralled with the rapid growth of internet. HE made a study about what are the top 20 most products that can easily be sold on the Internet. Five years later AMAZON.COM the company he formed to sell books on the Internet had annual sales of over 600 million.
E commerce-shopping on the part of the Internet called the world wide web
EFT – Electronic Fund transfer also called wire transfer; which are electronic transmission of account exchange information over private communications network
Electronic data Interchange (EDI) – occurs when one business transmit computer-readable data in a standard format to another business
Trading Partners – Business that engage in EDI with each other
Value added networks (VAN) is an independent firm that offers connection and EDI transaction forwarding services to buyers and sellers engaged in EDI.
Commodity – a commodity item is a product or service that has become standardized and well known; office supplies, computer, airline transportation are en example.
Virtual Community – is a gathering of people who shares a common interest, but instead of this gathering occurring in the physical world, it takes place on the Internet example: CISCO
DISADVANTAGES OF ELECTRONIC COMMERCE
Perishable foods, high-cost items such as jewelry may be impossible to adequately inspect from remote location, regardless of the technologies that are diverse in the future.
Internet – is a large system of interconnected computer networks that spans the globe
USE OF INTERNET
Communicate
Participate in games and simulation
Join discussion groups
Obtain free computer software
Entertainment
File Transfer and download
World Wide Web – or simply the Web, is the subset of the computers on the Internet that are connected top each other in a specific way that makes those computers and their contents easily assessable to each other.
1960 US Department of Defense
1969 the researchers connected computers at the University of California at Los Angeles, SRI International, University of California at Sta. Barbara and the University of Utah.
File Transfer Protocol (FTP) – enabled users to transfer files between computers and Telnet lets users log on to their computer accounts from remote sites.
Mailing List – is an e-mail address that takes any messages it receives and forwards it to any user who has subscribes to the list.
1980 – The defense Department network and other academic networks that had teams up with and funded from National Science Foundation (NSF)
Network Access Provider (NAP)- sells internet access rights directly to large customers and indirectly to smaller firms through other companies called Internet Service Provider (ISP)
Ted Nelson described a similar system in which text on one page links to text on the other page. Nelson called it as Hypertext
Douglas Englebart who invented the computer mouse created the first experimental hypertext system on one large computers in the 1960s
1989 Tim Berners-Lee and Robert Calliau were working on CERN; Internet
Hypertext Server – ia a computer that stores files written in hypertext markup language and lets other computers connect to it and read those files.
Hypertext Markup Language (HTML) – is a language that includes a set of codes (or tags) attached to text
Web Browser – is a software interface that lets users read (or browse) HTML documents and move from one HTML document to another
Standard Generalized Markup Language (SGML) – which organizations have used for many years to manage large documents filing system
Graphical User Interface (GUI) – is a way of representing program control functions and output to users.
1993 a group of students led by Marc Andreessen at the University of Illinois wrote MOSAIC
1994 Marc Andreessen and University of Illinois teams joined with James Clark of Silicon Graphics to found Netscape Communication
Microsoft – Internet Explorer
Transaction cost – are the total of all costs that a buyer and seller incur as they gather information and negotiate a purchase-sale transaction.
Vertical Integration – The practice of the existing firm replacing one of its supplier markets with it own hierarchical structure for creating the supplied products
Strategic business unit or business unit – is one particular combination of product, distribution channel, and customer type
Value chain – is the way of organizing activities that each strategic business unit undertakes to design, produce, promote, market, deliver and support products or services it sells.
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