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Chapter 9

COMM 226 Chapter Notes - Chapter 9: Web 2.0, Physical Capital, Human Capital

Course Code
COMM 226
Marc- Andre Leger

of 4
E-commerce: The buying and selling of goods and services over public and
private computer networks. There are many varieties:
Merchant companies
Business-to-business (B2B)
Business-to-consumer (B2C)
Business-to-government (B2G)
Nonmerchant Companies
B2C: Concerns sales between a supplier and a retail customer. A typical
information system for B2C provides a web-based application or web storefront
by which customers enter and manage their orders.
B2B: Refers to sales between companies. (Raw materials suppliers to
manufacturers to distributors etc…)
B2G: refers to sales between governmental organizations. (almost like B2B)
E-commerce auctions: Match buyers and sellers by using an e-commerce
version of a standard auction. This e-commerce applications enables the auction
company to offer goods for sale and to support competitive bidding process.
Clearinghouses provides goods and services at a stated price and arrange for
the delivery of the goods, but they never take title. (Amazon)
Electronic exchanges: Other example of clearinghouses businesses that match
buyers and sellers; the business process is similar to that of a stock exchange.
Sellers offer goods at a given price through the electronic exchange, and buyers
make offers to purchase over the same exchange. Price matches result in
transactions from which the exchange takes a commission. (Priceline.com)
+ Ecommerce does lead to better market efficiency
Disintermediation: The removal of intermediaries between parties. (Middle men
such as wholesalers, distributors or retailers were replaced with the internet)
This results in higher revenues for manufacturers and lower consumer prices.
Price elasticity: Measures how much demand rises or falls with changes in
price. Using auction as an example, a company can learn not only what the top
price for an item is but also the second, third, and other prices of the losing bids.
Issues with E-commerce:
Channel conflict
Price conflict
Logistic expense
Customer service expense
(when a customer learns about or tries a product or service in the high cost
bricks-and-mortar retail store while completing the sales transaction at low-cost
internet sales channel of another retailer)
(Different provinces have different taxes and so the government has trouble
finding how to tax e-commerce accordingly)
Social Network: Is a structure of individuals and organizations that are related to
each other in some way. Social networking is the process by which individuals
use relationships to communicate with others in a social network.
Business literature defines three types of capital: Physical, human and social
Physical capital: is the investment of resources for future profit. This traditional
definition refers to investments in physical resources, such as factories,
Human capital: is the investment in human knowledge and skills for future profit.
Taking this class for example is human capital.
Social capital: Is the investment in social relations with the expectation of returns
in the marketplace. When you attend a business function for the purpose of
meeting people and reinforcing relationships, you are investing in your social
capital. Social capitals adds values in four ways:
Social credentials
Personal reinforcement
+ According to Henk Flap, the value of social capital is determined by the number
of relationships in a social network, by the strength of those relationships, and by
the resources controlled by those related.
Using social networks expands your network of “friends” which give you a bigger
chance in enlarging your contacts. This can be added to you business value.
How has networking been enabled by technology? Besides the ubiquity of
computers, and the relative low cost, three other considerations are:
Improved search capabilities
Important to social networking because the enable us to quickly sort through
large amounts of data and find the specific people or relationship that we are
Reduction in the trade off of richness and reach
The ability to keep track of many more people and enhance personalization.
3 network effects
As a network grows, the benefit or utility that each person adds tends to
increase. This can accelerate the speed at which networks grow and how useful
they become.
Web 2.0: was first popularized in 2005 by Tim O’Reiley to refer to the integration
and interaction of products and services, such as smartphones, user-created
content, social networking, location and context-based services, and dynamic
marketplaces, and not as specific technology.
Software as a service (SAAS): Instead of software license fees, the Web 2.0
business model relies on advertising or other revenue that results as users
employ the software.
User-generated content (UGC): Refers to website content that is tribute by users.
On some sites, users can provide customer support to one another or even
participate in the creation of product specifications, designs, and complete
products in a process called crowdsourcing. (kickstarter.com) Crowdsourcing
combines social networking, viral marketing, and open-source design, saving
considerable cost while cultivating customers.
* Web 2.0 user interfaces are organic, whereas office programs share a common
user interface. Further, Web 2.0 encourages mashups, which result when the
output from two or more websites is combined in to a single user experience.
(Google’s My Maps)