Chapter 1

Overview of Electronic Commerce

2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.

Learning Objectives
1. Define electronic commerce (EC) and describe its various categories. 2. Describe and discuss the content and framework of EC. 3. Describe the major types of EC transactions. 4. Describe the digital revolution as a driver of EC. 5. Describe the business environment as a driver of EC.
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Learning Objectives
6. Describe some EC business models. 7. Describe the benefits of EC to organizations, consumers, and society. 8. Describe the limitations of EC. 9. Describe the contribution of EC to organizations responding to environmental pressures. 10. Describe online social and business networks.
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Electronic Commerce: Definitions and Concepts

electronic commerce (EC) The process of buying, selling, or exchanging products, services, or information via computer networks

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Electronic Commerce: Definitions and Concepts

EC can be defined from these perspectives:
Business process Service Learning Collaboration Community

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Electronic Commerce: Definitions and Concepts

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

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Electronic Commerce: Definitions and Concepts

Pure versus Partial EC
EC can take several forms depending on the degree of digitization
1. the product (service) sold 2. the process (e.g., ordering, payment, fulfillment) 3. the delivery method

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Electronic Commerce: Definitions and Concepts

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Electronic Commerce: Definitions and Concepts

brick-and-mortar (old economy) organizations Old-economy organizations (corporations) that perform their primary business off-line, selling physical products by means of physical agents virtual (pure-play) organizations Organizations that conduct their business activities solely online
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Electronic Commerce: Definitions and Concepts

click-and-mortar (click-and-brick) organizations Organizations that conduct some ecommerce activities, usually as an additional marketing channel

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Electronic Commerce: Definitions and Concepts

Internet versus Non-Internet EC
Most EC is done over the Internet, but EC also can be conducted on private networks, such as value-added networks, local area networks, or on a single computerized machine Non-Internet EC includes the use of mobile handwriting-recognition computers used by field reps to write their notes in the field
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Electronic Commerce: Definitions and Concepts

electronic market (e-marketplace) An online marketplace where buyers and sellers meet to exchange goods, services, money, or information

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Electronic Commerce: Definitions and Concepts

interorganizational information systems (IOSs) Communications systems that allow routine transaction processing and information flow between two or more organizations intraorganizational information systems Communication systems that enable ecommerce activities to go on within individual organizations
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The EC Framework, Classification, and Content

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

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The EC Framework, Classification, and Content

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The EC Framework, Classification, and Content

EC applications are supported by infrastructure and by these five support areas:
People Public policy Marketing and advertisement Support services Business partnerships
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The EC Framework, Classification, and Content

Classification of EC by the Nature of the Transactions or Interactions
business-to-business (B2B) E-commerce model in which all of the participants are businesses or other organizations

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The EC Framework, Classification, and Content

business-to-consumer (B2C) E-commerce model in which businesses sell to individual shoppers
e-tailing Online retailing, usually B2C

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

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The EC Framework, Classification, and Content

consumer-to-business (C2B) E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals who seek sellers to bid on products or services they need mobile commerce (m-commerce) E-commerce transactions and activities conducted in a wireless environment
location-based commerce (l-commerce) M-commerce transactions targeted to individuals in specific locations, at specific times

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The EC Framework, Classification, and Content

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

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The EC Framework, Classification, and Content

business-to-employees (B2E) E-commerce model in which an organization delivers services, information, or products to its individual employees collaborative commerce (c-commerce) E-commerce model in which individuals or groups communicate or collaborate online consumer-to-consumer (C2C) E-commerce model in which consumers sell directly to other consumers
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The EC Framework, Classification, and Content

peer-to-peer (P2P) 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 e-learning The online delivery of information for purposes of training or education e-government E-commerce model in which a government entity buys or provides goods, services, or information from or to businesses or individual citizens

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The EC Framework, Classification, and Content

exchange-to-exchange (E2E) E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information
exchange A public electronic market with many buyers and sellers
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The EC Framework, Classification, and Content

Nonbusiness EC
An increased number of nonbusiness institutions, such as academic institutions, nonprofit organizations, religious organizations, social organizations, and government agencies, are using EC to reduce their expenses or to improve their general operations and customer service.

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The EC Framework, Classification, and Content

The Interdisciplinary Nature of EC
The Google Revolution EC Failures EC Successes

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The EC Framework, Classification, and Content

The Future of EC
Web 2.0 The second-generation of Internet-based services that let people collaborate and share information online in perceived new wayssuch as social networking sites, wikis, communication tools, and folksonomies

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The EC Framework, Classification, and Content

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The EC Framework, Classification, and Content

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Digital Revolution 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 economy
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Digital Revolution Drives EC

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Business Environment Drives EC

The Business Environment
The business environment impact model Business pressures Organizational response strategies

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Business Environment Drives EC

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Business Environment Drives EC

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EC Business Models
business model A method of doing business by which a company can generate revenue to sustain itself

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EC Business Models
Six elements of a business model include descriptions of:
1. Customers to be served and the companys relationships with these customers including customers value proposition 2. All products and services the business will offer 3. The business process required to make and deliver the products and services 4. The resources required and the identification of which ones are available, which will be developed in house, and which will need to be acquired 5. The organizations supply chain, including suppliers and other business partners 6. The revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability)

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EC Business Models
revenue model Description of how the company or an EC project will earn revenue value proposition The benefits a company can derive from using EC

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EC Business Models
The major revenue models are:
Sales Transaction fees Subscription fees Advertising fees Affiliate fees Other revenue sources

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EC Business Models

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EC Business Models
Functions of a Business Model
Articulate a customer value proposition Identify a market segment Define the ventures specific value chain structure Estimate the cost structure and profit potential Describe the ventures positioning within the value network linking suppliers and customers Formulate the ventures competitive strategy

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EC Business Models
Typical EC Business Models
Online direct marketing Electronic tendering systems. Name your own price Find the best price Affiliate marketing Viral marketing Group purchasing Online auctions Product and service customization Electronic marketplaces and exchanges Information brokers (informediaries) Bartering Deep discounting Membership Value-chain integrators Value-chain service providers Supply chain improvers Social networks, communities, and blogging Direct sale by manufacturers Negotiation
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EC Business Models
tendering (bidding) system Model in which a buyer requests wouldbe 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
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EC Business Models
affiliate marketing An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling companys Web site viral marketing Word-of-mouth marketing in which customers promote a product or service to friends or other people
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EC Business Models
SMEs Small-to-medium enterprises group purchasing Quantity (aggregated) purchasing that enables groups of purchasers to obtain a discount price on the products purchased

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EC Business Models
e-co-ops Another name for online group purchasing organizations customization Creation of a product or service according to the buyers specifications

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Benefits and Limitations of EC

Benefits to
Organizations Consumers Society

Limitations
Technological Nontechnological

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Social and Business Networks

social networks Web sites that connect people with specified interests by providing free services such as photo presentation, email, blogging, etc. Business-oriented networks are social networks whose primary objective is to facilitate business
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The Digital Enterprise

digital enterprise A new business model that uses IT in a fundamental way to accomplish one or more of three basic objectives: reach and engage customers more effectively, boost employee productivity, and improve operating efficiency. It uses converged communication and computing technology in a way that improves business processes

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The Digital Enterprise

corporate portal A major gateway through which employees, business partners, and the public can enter a corporate Web site

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The Digital Enterprise

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Managerial Issues
1. Is it real? 2. Why is B2B e-commerce so attractive? 3. There are so many EC failureshow can one avoid them? 4. How do we transform our organization into a digital one?

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Managerial Issues
5. How should we evaluate the magnitude of business pressures and technological advancement? 6. How can we exploit social/business networking? 7. What should be my companys strategy toward EC? 8. What are the top challenges of EC?
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