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Chapter 5

Chapter 5

Information Technology Management
Course Code
ITM 102
Ross Mc Naughton

of 8
Chapter 5: E-Commerce
Business processes + enabling tech. + human resources, integrated into a unique
electronic/digital value chain, enable organization to execute business strategy
Build to order: allows manufacturers to directly solicit orders from customers and
deliver products directly, rather than relying on global network of wholesalers and
distributors/dealers as a way of bringing products to markets
E-business: broader use of Internet tech. to reduce operating costs (ex. extending
electronic supply chain to partners/suppliers)
E-commerce: use of IS, tech., computer networks by individuals/organizations to carry
out transactions (that involve buying/selling goods/services through the Internet) in order
to create/support creation of business value -no need for physical business presence
Transaction Description Example Websites
Online equivalent to retail
store/ other services
Chapters, Barnesandnoble,
Business-to-business (B2B) Electronic exchanges
between companies
Globalsources (worldwide
retail exchange)
Online sales to government
agencies, electronic tax
Doingbusiness (provide
goods/services to Ontario
Electronic tax payment,
purchase of various licences
Netfile (electronically
file/pay taxes)
Online auctions/ similar
Ebay, Craigslist, Kijiji
Physical Product: shipment of item from central distribution point to buyer (end-
consumer/ wholesaler/ another company)
-requires off-line supply chain to handle sales, order processing, delivery
Digital Product: consumers receive item directly over the Internet or other computer
network (iTunes)
-completely IT-enabled supply chain
Back-office elements: handle order fulfillment
Web-integration: tech. interfaces between Web and enterprise’s existing computerized
business systems
Returns: handled by any company that accepts orders and ships goods to customers
(reverse of traditional business model)
Off-loaded: deleted/disabled
-once downloaded, electronic items have immediate value and can’t be off-loaded
(inability to return something once it is downloaded)
E-commerce Business Model: combines a specific type of website with a successful
revenue model that produces profits for website owner
sell good products at good process, delivered on time, that leave you with enough
margin to make reasonable profit to pay for website’s operation
Ways in which companies make money on the Web:
1. Traffic Monetizing/ Advertising Model
Display advertising and get paid for click-throughs from online community to those
advertising products/services
2. Transactional/ Wholesale/ Retail Merchant Model
Selling goods/services online
3. Applet Model (API)
Earning royalties/ access fees/ revenue sharing from selling access to their platform to 3rd
party developers
4. Information/ Data Aggregation Model
Selling aggregate data about online user behaviour/ selling controlled access to users with
their permission through targeted offers (infomediaries)
5. Subscription Model
Getting user to subscribe to your service (monthly/annual basis)
6. Freemium Model
Selling upgrades to premium subscription service by 1st offering a free service with more
limited capacity/ capability
7. Micro-payments Model
Imposing very slight fee for specific transactions that add value beyond initial free
access, which are added up/ billed/ deducted from user account
8. Revenue Share/Royalty Model
Charging a portion of any transaction that you facilitate for others either as brokerage or
re-seller (if you are a middle man)
9. Auction/ Co-operative Model
Using auction/ co-operative model that is derivative of a transactional/ retail site, but with
pricing controlled by the marketplace and the variations in supply/demand
10. Build to Sell Model
Selling your company to a strategic buyer
Having a great e-commerce model will not generate profit if it isn’t associated
with a website that brings in customers/visitors
Website Type Purpose Example Business Model
Portal Gateway to other
Yahoo, MSN Advertising, affiliate
Search Engine Finds websites that
contain word/phrase
Google, Yahoo,
MSN, Dogpile
Browse or search
and buy
Sells goods/services Dell,
iTunes, VRBO manufacturer direct,
Sales support Info on product
before/after sale
Microsoft, Dell,
McAfee, Telus
Information service News, info,
National Post, TSN,
community, affiliate
Auction Facilitates sales
between 3rd parties
eBay, Priceline,
Travel Sells travel tickets/
Travelocity, Orbitz,
brokerage, co-
Special interest or
Info, product sales/
support , contracts
between visitors
Microsoft support
groups, Google
Groups, Lavalife,
merchant, affiliate,
E-Commerce Advantage
Frictionless transactions: ability of consumer to move from thought to action creates new
opportunities for businesses to operate at lower costs by easing the burden of the supply
chain electronically
Impact of e-commerce technologies on business
Universal Standards
-make internet available in the same way, everywhere
-combined with open source software applications/ development tools to increases
accessibility to the marketplace while lowering entry costs/ encouraging innovation
Global Reach
-sellers can easily create global electronic presence to reach any buyer
-global competition is helping create a Perfect Market (highest consumption at lowest
price for most goods)
Higher Information Density
-creation of niche businesses that target small markets that would not be dense enough to
support a small, local retailer
-when aggregated online, businesses produce viable volume of sales to support global
Internet retailer
-specific requests of buyer can be managed easily
-target specific customers for one-on-one attention (way for small businesses to compete)
Ubiquity and accessibility
Ubiquitous Marketplace:
1.5 billion potential customers (Internet users)
82% Canadians have regular access to Internet