UNIT FIVE

INTRODUCTION TO E-COMMERCE
Unit Introduction
Electronic commerce, commonly known as (electronic marketing) e-commerce or eCommerce, consists of
the buying and selling of products or services over electronic systems such as the Internet and other computer
networks. The amount of trade conducted electronically has grown extraordinarily with widespread Internet
usage.
1.1. Framework for E-commerce
Figure 5.1 E- Commerce frameworks

Types of E-commerce
There are five major types of e-commerce. We distinguish different types of e-commerce by the nature of the
market relationship- who is selling to whom
1. B2C (Business - to- Customer). The most common type of e-commerce, in which online businesses
attempt to reach individual consumers.
2. B2B (Business-to-Business) - businesses focus on selling to other businesses, is the largest form of e-
commerce.
3. C2C (Consumer-to Consumer) - provides a way for consumers to sell to each other, with the help of an
online market maker such as the auction site eBay.
4. M-commerce (Mobile commerce) - refers to the use of wireless digital devices to enable transactions on
the Web. They utilize wireless networks to connect cell phones and handheld devices to the Web.
5. P2P (Peer-to-Peer) - technology that enables Internet users to share files and computer resources directly
without having to go through a central Web server. In peer-to-peer’s purest form, no intermediary is
required.
Activity 5.1
1. List and discuss the five types of E-commerce.
1.2. Effect of E-commerce on Business Processes
Electronic commerce can directly or indirectly affect every step in the value chain. The most obvious effect is
on sales and marketing activities. Companies can create electronic catalogs on their web sites to totally
automate sales order entry.
Web sites designed to automate sales and marketing can also improve the efficiency of the operations step of
the value chain
Electronic commerce applications can also significantly improve the quality of post-sales-customer support.
For products that can be digitized, such as books, software, and music, even the inbound and outbound logistics
steps of the value chain can be performed electronically. This yields tremendous cost savings to both the
acquiring and selling organization.
Indeed, the capabilities provided by networking and communication technology is an important part of the
infrastructure supporting globalization
Activity 5.2
1. Explain the effects of e-commerce on business processes.
1.3. E-commerce success factors
Several factors have a role in the success of any e-commerce project. They may include:
1. Providing value to customers. Vendors can achieve this by offering a product or product-line that
attracts potential customers at a competitive price, as in non-electronic commerce.
2. Providing service and performance. Offering a responsive, user-friendly purchasing experience, just
like a flesh-and-blood retailer, may go some way to achieving these goals.
3. Providing an attractive website - The tasteful use of color, graphics, animation, photographs, fonts,
and white-space percentage may aid success in this respect.
4. Providing an incentive for customers to buy and to return - Sales promotions to this end can involve
coupons, special offers, and discounts.
5. Providing personal attention- Personalized web sites, purchase suggestions, and personalized special
offers may go some of the way to substituting for the face-to-face human interaction
6. Providing a sense of community - Chat rooms, discussion boards, soliciting customer input, loyalty
systems and empathy programs can help in this respect.
7. Providing reliability and security - Parallel servers, hardware redundancy, fail-safe technology,
information encryption, and firewalls can enhance this requirement.
8. Providing a 360-degree view of the customer relationship - defined as ensuring that all employees,
suppliers, and partners have a complete view, and the same view, of the customer.
9. Letting customers help themselves - Provision of a self-serve site, easy to use without assistance, can
help in this respect.
10. Engineering an electronic value chain - focuses on a "limited" number of core competencies -- the
opposite of a one-stop shop. (Electronic stores can appear either specialist or generalist if properly
programmed.)
11. Operating on or near the cutting edge of technology - staying there as technology changes (but
remembering that the fundamentals of commerce remain indifferent to technology).
12. Setting up an organization of sufficient alertness - ability to respond quickly to any changes in the
economic, social and physical environment.
Activity 5.3
1. List and discuss any five of the e-commerce success factors.
1.4. E-commerce business models
A business model is a set of planned activities (sometimes referred to as business processes) designed to result
in a profit in a marketplace. The business model is at the center of the business plan.
Eight key ingredients of a business model
1. Value proportion
A value proportion defines how a company’s product or service fulfills the needs of customers. To develop
and /or analyze a value proportion, you need to answer the following key questions: why will customers choose
to do business with your firm instead of another company? What will your firm provide that other firms do not
and cannot?
2. Revenue model
A firm’s revenue model describes how the firm will earn revenues, generate profits, and produce a superior
return on invested capital.
Advertising revenue model - a web site that offers advertisements and receives fees from advertisers
Yahoo.com, for instance, derives its primary revenue from selling advertising such as banner ads
Subscription revenue model - a web site that offers its users content or services charges a subscription fee for
access or all of its offerings. For instance, consumer reports online provides access to its content only to
subscribers, who have a choice of paying monthly subscription fee or annual fee.
Transaction fee revenue model - a company receives a fee for enabling or executing a transaction. E-
Trade.com, an online stockbroker, receives transaction fees each time it executes a stock transaction on behalf
of a customer.
Sales revenue model - companies derive revenue by selling goods, information, or services to customers.
Companies such as Amazon.com, which sells books, music, and other products has sales revenue model.
Affiliate revenue model - sites that steer business to an “affiliate” receive a referral fee or percentage of the
revenue from any resulting sales. For example, MyPoints.com makes money by connecting companies with
potential customers by offering special deals to its members.
3. Market opportunity
The term market opportunity refers to the company’s intended marketplace
4. Competitive Environment
Competitive environment - refers to the other companies operating in the same marketplace selling similar
products. The competitive environment for a company is influenced by several factors: how many competitors
are active, how large their operations are, what the market share of each competitor, how profitable these firms
are, and how they price their products.
5. Competitive Advantage
Competitive advantage - when they can produce a superior product and/or bring the product to market at a
lower price than most, or all, of their competitors’ Products at lowest cost on global basis are truly advantaged.
Firms achieve competitive advantages because they have somehow been able to obtain differential access to the
factors of production that are denied to their competitors, at least in the short term. One rather unique
competitive advantage derives from being first mover. A first mover advantage is a competitive market
advantage for a firm that results from being the first into a marketplace with a serviceable product or service.
6. Market strategy
Everything done to promote your company’s products and services to potential customers is known as
marketing. Marketing strategy is the plan you put together that details exactly how you intend to enter a new
market and attract new customers.
7. Organizational Development
Companies that hope to grow and thrive need to have a plan for organizational development that describes
how the company will organize the work that needs to be accomplished.
8. Management Team
A strong management team gives a model instant credibility to outside investors, immediate market-specific
knowledge, and experience in implementing business plans. A strong management team may not be able to
salvage a weak business model, but they should be able to change the model and redefine the business as it
becomes necessary.
Activity 5.4
1. List and discuss any four of the e-commerce business models.
1.5. Infrastructure for E-commerce
Technology Infrastructure
E-commerce is above all else a technologically driven phenomenon that relies on a host of information
technologies as well as fundamental concepts from science. At the core of the e-commerce are the Internet and
the World Wide Web.
Network – is connection of 2 or more computers to share resources like data/information, hardware and soft
ware
a. Network Interface Cards
The physical connection of workstations to the LAN is achieved through a network interface card (NIC),
which fits into one of the expansion slots in the microcomputer. This device provides the electronic circuitry
needed for inter-node communications. The NIC works with the network control program to send and receive
messages, programs, and files across the network.
b. Local area networks and wide area networks (LAN & WAN)
Local area networks are often confined to a single room in a building, or they may link several buildings
within a close geographic area. The computers connected to a LAN are called nodes.
When networks exceed the geographic limitations of the LAN, they are called wide area networks. Because of
the distances involved and the high cost of telecommunication infrastructure (telephone lines and microwave
channels)

a. Servers
LAN nodes often share common resources such as programs, data, and printers, which are managed through
special-purpose computers called servers. When the server receives requests for resources, the requests are
placed in a queue and processed in sequence.
b. Electronic Data Interchange
To coordinate sales and production operations and to maintain an uninterrupted flow of raw materials, many
organizations enter into a trading partner agreement with their suppliers and customers. A general definition of
EDI is: The intercompany exchange of computer process able business information in standard format.
c. Internet technologies
The internet is a large network comprised of over 100,000 interconnected smaller networks located around the
world.
d. World Wide Web
The World Wide Web (Web) is an Internet facility that links user sites locally and around the world. The
fundamental format for the Web is a text document called a Web page that has embedded HTML (Hypertext
Markup Language) codes that provide the formatting for the page as well as hypertext links to other pages. Web
pages are maintained at Web sites, which are computer servers that support HTTP (Hypertext Transfer
Protocol)
 e. Internet addresses
The Internet uses three types of addresses for communications: (1) e-mail address, (2) Web site (URL) address,
and (3) the addresses of individual computers attached to a network (IP address).
Activity 5.5
1. Distinguish between LAN and WAN.
2. Explain briefly Internet technologies.
1.6. Procedures for Internet shopping
Shopping on web site occurs in the following easy steps:
Step 1: Select products
Select the product and quantity that you want to purchase from the desired websites. Evaluate the demo versions
of the products of your interest before purchasing.
Step 2: Confirmation
A confirmation page is presented to you with the total value of your order after you have selected the products
you wish to purchase. You are required to enter your name, email address and postal address to proceed.
Step 3: Credit card details
This step takes you to credit card processor's site, where your credit card details (the name, number and expiry
date on the credit card) are requested. This is done through a secure connection with encryption. The transaction
is approved subject to the verification of your credit card number and other details.
Step 4: Email receipt and installation codes
After the transaction is approved, you are automatically sent an email by Customer Service with all the product
installation codes. You also receive an email which is an electronic receipt of the order.
Step 5: Product delivery
 Software products: Installation of software products is a very simple process.
 Books purchased from web site and install them on your computer. You are required to remain connected
to the internet for the download to occur.
 Premier memberships: Activation of premier memberships is also a simple process. The email sent to you
in Step 4 contains the instructions for activation of your premier membership.