CHAPTER 6. E-BUSINESS AND E-COMMERCE.
Advantages of e-commerce:
Increases organization’s reach
Removes many barriers.
Provides companies with opportunities for companies to expand worldwide at low cost.
Definitions and concepts
Electronic commerce (EC/e-commerce): process of buying, selling, transferring/exchanging
products, services, or information via computer networks (incl. Internet).
E-Business: e-commerce+ servicing customers+ collaborating with business partners_
performing electronic transactions w/ organizations.
Pure vs. partial e-commerce
Based on degree of digitization: product/service sold process of production, delivery agent or
Purely physical organizations/ bricks-and-mortar organizations- everything is physical
Virtual/pure-play organizations: purely digital
Clicks-and-mortar organizations- ecommerce activities but business is primarily performed
in the physical world.(partial EC)
TYPES OF E-COMMERCE
Business-to-consumer (B2C): sellers-organizations, Buyers- individuals.
Business-to-business (B2B): sellers+ buyers- organizations.
Consumer-to-consumer (C2C): sellers+buyers- individuals. Eg. EBay
Internet marketing- opens a wider market for the seller- international, and local.
Business-to-employee(B2E): Organization to employee- services like benefits, training
classes, purchase of discounted insurance, travel packages, tickets to events, corporate
products on company’s website
E-government: deliver information and public services to citizens and business partners
and suppliers. - Efficient way of conducting transactions, delivery of public services.
Mobile commerce (m-commerce): EC conducted entirely in wireless environment.
Business model: method by which company generates revenue to survive.
Online direct marketing, Electronic tendering system, name-your-own-price, find-the-best-price,
affiliate marketing, viral marketing, group purchasing(e-coops), on-line auctions, product
customization, electronic marketplaces and exchanges, bartering-on-line, deep discounters,
Face book advertising: “advertisers distract users, users ignore advertisers; advertisers distract
better, users ignore better”
MAJOR E-COMMERCE MECHANISMS Catalogues: product database, directory and search capabilities, and a presentation function.
Auctions: competitive process where seller solicits consecutive bids from buyers or buyer
solicits bids from sellers.
Forward auctions: seller places item for auction- buyers continuously bid- highest bidder
wins. Eg. EBay
Reverse auctions: buyer post request for quotation (RFQ)-provide details, buyer bids-
lowest bidder wins.
Electronic storefront- website representing a single store.
Electronic mall- cybermall/e-mall- collection of individual stores.
Electronic market- central virtual market space on web where buyers and sellers conduct e-
commerce and e-business activities.
BENEFITS AND LIMITATIONS OF E-COMMERCE
Markets are more accessible Technological limitations-lack of
universally accepted security standards
Low cost of processing, distributing, and , insufficient telecommunications
retrieving information bandwidth Expensive accessibility
Vast number of products and services Non-technological limitations-
anytime, anywhere perceptions that EC is insecure
Easy and convenient delivery of Unresolved legal issues, lack of critical
information, services and products mass of sellers and buyers
BUSINESS-TO-CONSUMER (B2C) ELECTRONIC COMMERCE
Larger Smaller, more complex- because larger
no. Of buyers, smaller no. of sellers
making transaction per day. Needs to be
efficient, timely in regard to purchase,
payments, delivery. And management of
Electronic storefronts and malls
Electronic retailing (e-tailing): direct sale of products and services through electronic
storefronts or e-malls, usually designed around an electronic catalogue format and/or auctions.
E-storefronts: website that represents a single store with unique internet address/ uniform
resource locator (URL).Eg. Future shop, sears, chapters.
E-malls/ cybermall- collection of individual shops under a single internet address- one stop
shopping place-includes thousands of vendors.
In most e-malls- customers get transferred from the mall to a participating storefront- thus
making it known as referral malls.
On-line service industries Buying an airline ticket or purchasing stocks. Insurance- delivered on e-commerce and reduces
• Provide information
• Perform value-added services like consulting.
Online services can provide information, and is fully automated so intermediaries involved in
information will be eliminated- this is called Disintermediation.
Web benefits for service providers-
• When number of participants is enormous
• Information to be exchanged is complex.
Electronic banking: conducting banking activities from anywhere at any time – paying bills to
applying for loan.
• To customers-saves time and is convenient.
• To banks- inexpensive, attract remote customers; provide added on-line services-> virtual
International banking- ability to handle trading in multiple currencies, transfers of electronic
funds and electronic letters of credit. Important support- trade card inc.- provides customers to
make digital payments anywhere on the globe.
On-line securities trading
Use computers to trade stocks, bonds, and other financial instruments.
Cheaper service compared to full service or discount broker
Access to vast amount of information online.
Eg. Bloomberg.com, bmoinvestorline.com
The on-line job market
Environment for job seekers to search and reply on-line to employment ads, place
resumes on sites and use recruiting firms like monster and work polis.
Companies can search for hard-to-find employees, govt agencies and companies advertise
positions, accept resumes, take applications and offer jobs over the internet.
Plan, explore, and arrange trips anywhere at any time.
Purchase airline tickets, reserve hotel rooms, and rent cars. All major airline vacation services, large conventional travel agencies, car rental agencies,
hotels and tour companies.
Set price online and let the website search for suitable vendor.
Disadvantage: quick access means any mistakes caused and posted online can be detrimental to
Issues in e-tailing
Channel conflict: regular distributors may not like the company’s method of direct selling
to customers on-line. Conflict may arise from pricing of products and services and
resource allocation. Conflict from logistics provided by off-line activities to on-line
activities. This may increase expenses and reduce synergy between the two--> solution:
Order fulfillment: online orders need to be fulfilled- activities involved- quickly locate
products, pack, arrange for speedy delivery, collect money from customers, in advance/
bill, handle returns. Problem: large amount of small packages. Delivery: includes product
+ instructions for assembly. Problem: late deliveries, wrong item, high delivery costs,
Taking orders-easy, delivering orders- difficult.
Advertising: disseminating information in an attempt to influence a buyer-seller transaction.
Traditional advertising eg. TV or newspaper Direct-response marketing / telemarketing
eg.direct mail or telephon