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Chapter 6

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York University
Administrative Studies
ADMS 2511
Cristobal Sanchez- Rodriguez

Chapter 6 Overview of E-Business and E-Commerce Definitions and Concepts - Electronic commerce (EC or e-commerce) describes the process of buying, selling, transferring or exchanging products, services or information via computer networks, including the internet - E- business borader concepts, where in addition to buying and selling of goods and services, e business also refers to servicing customers, collaborating with business partners, and performing electronic transactions within an organization Pure versus Partial EC - electronic commerce can take several forms depending on the degree of digitization involved - Degree of digitization: refers to the extent to which the commerce has been transformed from physical to digital (1) the product or service being sold (2) the process by which the product or service is produced or (3) the delivery agent or intermediary - in other words, the product can be physical or digital, the process can be physical or digital, and the delivery agent can be physical or digital - purely physical organizations are referred to as bricks and mortar organizations - in pure EC all dimensions are digital - companies engaged only in EX are considered virtual (or pure play) organizations - all other combinations that include a mix of digital and physical dimensions are considered partial EC (but not pure EC) - click and mortar organizations are those that conduct some e-commerce activities, yet their primary business is done in the physical world - therefore, clicks and mortar organizations are examples of partial EC - E-commerce is now so well established that people increasingly expect companies to offer e-commerce in some form - example, buying a tshirt from Walmart online or book from Amazon is partial EC because the merchandise is physically delivered by FedEx - but buying an e-book from Amazon.com or a software product online is pure EC because the product as well as its delivery, payment, and transfer are all conducted online Types of e-commerce - Business to consumer (B2C): the sellers are organizations and buyers are individuals - Business to business (B2B): both the sellers and the buyers are business organizations. - Commerce to consumer (C2C): an individual sells products or services to other individuals. Major way that C2C is conducted on the Internet are auctions and classified ads - internet based classified ads have one big advantage over traditional types of classified ads: they offer an international, rather than a local, audience - this wider audience greatly increases both the supply of goods and services and the number of potential buyers - Business to Employee (B2E): an organization uses EC internally to provide information and services to its employees - companies allow employees to manage their benefits and to take training classes electronically - in addition, employees can buy discounted insurance, travel packages and tickets to events on the corporate intranet - they also can order supplies, materials electronically - finally many companies have electronic corporate stores that sell the company’s products to their employees usually at a discount - E-Government: use of internet technology in general and e-commerce in particular to deliver information and public services to citizens (called government to citizen or G2C EC) and business partners and suppliers (called government to business of G2B EC) - also an efficient way of conducting business transactions with citizens and businesses and within the governments themselves - E-government makes government more efficient and effective, especially in the delivery of public services - example of G2C electronic commerce is electronics benefit transfer, in which governments transfer benefits, such as those from the Canada Pension Plan, directly to recipients bank accounts Mobile Commerce (m-commerce): refers to e –commerce that is conducted entirely in a wireless environment - example using cell phones to shop over the internet - each of the above types of EC is executed in one or more business models - a business model is the method by which a company generates revenue to sustain itself Page 175 table 6.1 summarizes the major EC E- Commerce and Search Engines - From google’s perspective, though, one of the biggest changes has been the growing importance of search - google managers point to a huge number of purchases that follow successful web searches as well as abandoned shopping carts that immediately followed a non productive search Major E-Commerce Mechanisms - most widely used, electronic catalogues, electronic auctions, e-storefronts, e-malls and e marketplaces - electronic catalogues consist of a product database, directory and search capabilities and a presentation function - they are the backbone of most e commerce sites - An auction: competitive process in which either a seller solicits conservative bids from buyers or a buyer solicits bids from sellers - electronic auctions generally are determined dynamically by competitive bidding, these increase revenues for sellers by broadening the customer base and shortening the cycle time of the auction - buyers also benefit because they can bargain for lower prices, also they don’t have to travel to an auction at a physical location - internet provides efficient infrastructure for conducting auctions at lower administrative costs and with many more involved sellers and buyers - individual consumers and corporations alike can participate in auctions - there are two major types of auctions: forward and reverse - Forward auctions: sellers use as a channel to many potential buyers - usually, sellers place items at sites for auction, buyers bid continusouslly for them - the highest bidder wins the items - both seller and buyers can be individuals or businesses for example side eBay.ca is a forward auction - Reverse Auction: one buyer, usually an organization, wants to buy a product or a service - the buyer posts request for quotation (RFQ) on its website or on a third part website - the RFQ provides detailed information on the desired purchsse, the suppliers study this and then submit bids electronically, therefore the lowest price bidder in this case wins the auction - this auction is most common for large purchases - Electronic Storefront: is a website on the internet that represents a single store - an electronic mall also known as a cybermall or email is a collection of individual shops under one internet address - electronic storefronts and electronic malls are closely associated with B2C electronic commerce Electronic Marketplace: central, virtual market space on the web where many buyers and many sellers can conduct electronic commerce and electronic business activities - associated with B2B electronic commerce Benefits and Limitations of E-Commerce - E-commerce benefits organizations by making national and international markets more accessible and by lowering the costs of processing, distributing and retrieving information - customers benefit by being able to access a vast number of products and services, around the clock - the major benefit to society is the ability to easily and conveniently deliver information, services, and products to people in cities, rural areas and developing countries - EC limitations: both technological and non technological that have slowed its growth and acceptance - technological limitations include the lack of universally accepted security standards, insufficient telecommunications bandwidth, and expensive accessibility - non technological limitations include the perceptions that EC is insecure has unresolved legal issues and lacks a critical mass of seller and buyers Business to Consumer (B2C) Electronic Commerce - complexity of B2C since it involves a large number of buyers making million of diverse transactions per day with a relatively small number of sellers - for example Amazon, online retailer offers thousands of products to its customers, therefore must handle their purchases as well as their returns, mutiply this by millions and get an idea of how complex B2C EC can be - two basic mechanisms for customers to access companies on the web: electronic storefronts and electronic malls - complexity of B2C EC creates two major challenges for sellers: channel conflict and order fulfillment Electronic Storefronts and Malls - Electronic Retailing (E-tailing) is the direct sale of products and services through electronic storefronts or electronic malls usually designed around an electronic catalogue format and/or auctions - e-commerce enables you to buy from home and to do so 24 hours a day, seven days a week - however, EC offers a wider variety of products and services, including the most unique items, often at lower prices - also within seconds, shoppers can access very detailed information on products - they also easily locate and compare products and prices - finally buyers can find hundreds of thousands of sellers Electronic Storefronts: website that represents a single store - each one has its own internet address, or uniform resource locator (URL) at which buyers can place orders - some electronic storefronts are extensions of physical stores such as Futureshop, chapters, Canadian tire etc - others are new businesses started by entrepreneurs who saw a niche on the web example such as Tiger direct.ca etc Electronic Malls: also known as cyber mall or e mall, collection of individual shops under a single internet address - basic idea of an electronic mall is the same as that of a regular shopping mall – to provide a one stop shopping place that offers many products and services - two types of cubermalls - first type known as referral malls: can not buy anything, instead are transferred from the mall to a participating storefront - second type you can actually make a purchase, at this type of mall you might shop from several stores but you make only one purchase transaction at the end Online Service Industries - services such as buying an airline ticket or purchasing stocks or insurance can be delivered entirely through e commerce often with considerable cost reduction - one of the most pressing EC issues relating to online services (as well as in marketing tangible products) is disintermediation - intermediaries, also known as middle men have two functions: (1) they provide information (2) they perform value added services such as consulting - first function can be fully automated and will most likely be assumed by markeplaces and portals that provide information for free When this occurs, the intermediaries who perform only (or mainly) this function, are likely to be eliminated, this process is called disintermediation - in contrast, performing value added services requires expertise - intermediaries who provide value added services not only are likely to survive, but they may actually prosper - the web helps these employees in two situations (1) when the number of participants is enormous as with job searches and (2) when the information that must be exchanged is complex - leading online service industries: real estate, banking, trading of securities (stocks, bonds), job matching and travel services Cyberbanking - electronic banking: involves conducting various banking activities from home, at a place of business or on the road instead of a physical bank location - capabilities from paying bills to applying for a loan - saves time and is convenient for customers - for banks, offers inexpensive alternative to branch banking - also enables banks, to attract remote customer - also seeing virtual banks, that are dedicated only to internet transactions Online Securities Trading - many Canadians use computers to trade stocks, bonds, and other financial instruments - do so since it is cheaper than a full service or discount broker, on the web investors can find a considerable amount of information, regarding specific companies or mutual funds in which to invest - well known companies that offer online trading are E-Trade Canada, RBC direct investing etc The Online Job Market - thousands of companies and government agencies advertise available positions, accept resumes and take applications via the internet - job seekers use the online job market to reply to online employment ads, to place resumes on various sites and to use recruiting firms Travel Services - internet ideal place to plan, explore and arrange almost any trip economically - online travel services allow you to purchase airline tickets, reserve hotel rooms and rent cars - for example Expedia.ca - also Priceline.com allows you to set a price that you are willing to pay for an airline ticket or hotel accommodation and then attempts to find a vendor that will match your price - interesting problem that e-commerce can cause are ‘mistake fares’ in the airline industry – where airlines can post the wrong fare by mistake Issues in E-Tailing - Channel conflict and order fulfillment - clicks and mortar companies may face a conflict with their regular distributors when they sell directly to customers online - Channel conflict: can alienate the distributors - channel conflict has forced some companies (for example FORD) to avoid direct online sales, an alternative approach for Ford allows customers to configure a car online but requires them to pick up the car from the dealer where they can arrange financing, warranties and service - channel conflict can arise in areas such as pricing of products and services and resource allocation for example how much to spend on advertising - another potential source of conflict involves logistics services provided by the offline activities to the online activities - for example, how should a company handle returns of items bought online? - some companies have completely separated the ‘clicks’ from the ‘mortar’ or ‘bricks’ - however this approach can increase expenses and reduce the synergy between the two organizational channels - as a result many companies are integrating their online and offline channels a process known as multichanelling - second major issue is order fulfillment which can also be a source of problems for e-tailers - any time a company sells directly to customers, it is involved in various order fulfillment activities, it must perform the following activities: quickly find the products to be shipped, pack them, arrange for the packages to be delivered, collect the money from every customer, either in advance or by individual bill and handle the return of unwanted or defective products - very efficient to accomplish these activities both effectively and efficiently in B2C because a company has to ship small packages to many customers and do it quickly - for e-tailers, taking orders over the internet is the easy part of B2C e-commerce - delivering orders to customers doors is the hard part - order fulfillment is less complicated in B2B, since these transactions are much larger but they are fewer in number Online Advertising - advertising, practice of disseminating information in an attempt to influence a buyer seller transaction - internet advertising redefine the advertising process making it media rich, dynamic and interactive - improves traditional forms of advertising in a number of ways - first, internet ads can
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