E-commerce: business.

technology. society.
E-commerce
business. technology. society.

seventh edition

Kenneth C. Laudon
Carol Guercio Traver
 Chapter 1: The Revolution Is Just
Beginning
Chapter 1:
INTRODUCTION TO E-
COMMERCE
1.1 E-Commerce: The revolution is just beginning

Copyright © 2007 Pearson Education, Inc.

 E-Commerce: The Revolution Is
Just Beginning
 Since the emergence of the World Wide Web, the act of
purchasing products or services over the Internet called
online shopping has been growing.

 Online shopping is a form of electronic commerce whereby

consumers directly buy goods or services from a seller over
the Internet without the services of intermediaries. This
process is called business-to-consumer (B2C).

 Customers or online shoppers can buy a huge variety of

items from online stores, and just about anything can be
purchased from companies that provide their products
online.
 Cont.
 Books, clothes, groceries, electronic products, household
appliances, toys, software, cosmetics, tickets and
insurance are just some of the hundreds of products
customers can buy from an online store.
 The mobile platform based on smartphones and tablet
computers has finally arrived, making true mobile e-
commerce a reality.
 Social networks enabling social ecommerce by providing
search, advertising, and payment services to vendors and
customers
 Why Study E-commerce?
◼ E-commerce technology is different, more powerful than
previous technologies.
◼ E-commerce bring fundamental changes to commerce.
◼ It’s a sector who is currently in growth.
◼ E-commerce business operates on the internet platform and
today with the internet’s power, you could get far more
customers than you could by running an actual shop.
◼ E-commerce business reduces destination barriers. With the
internet, distance never becomes an issue because the
consumer can buy anything that he wants with the click of a
mouse.
What is e-Business ?
What is e-Commerce ?
 What is E-Commerce?
◼ The use of the internet, the Web or mobile
apps to transact business
◼ Digitally enabled commercial transactions
between and among organizations and
individuals
◼ Involves commercial transactions done over
internet
◼ Use electronic transmission medium that
caters for buying and selling of products and
services
 What is E-Commerce?
◼ Thus, those activities which
essentially involve monetary
transactions are termed as “e-
commerce”
◼ Usually requires the use of website
◼ Involves the mandatory use of
internet
◼ Restricted to buying and selling of
products and services
E-commerce transaction activities
 What is E-Business?
◼ The digital enabling of transactions and processes within a
firm, involving information systems under the control of the
firm
◼ Does not include commercial transactions
◼ E-business applications turn into e-commerce precisely when
exchange of value occurs
◼ Conduct of business processes on the internet
◼ Also includes the exchange of information directly related to
buying and selling of products
◼ Includes activities like procurement of raw materials or goods,
customer education, looking for suppliers, .etc.
 What is E-Business?
◼ Involves the use of CRM, ERP that connect different business
processes
◼ Can involve the use of internet, intranet or extranet
◼ Covers internal processes such as production, inventory
management, product development, risk management,
finance, .etc.
◼ Is a broader concept, that involves market surveying, supply
chain, logistic management and using data mining
◼ Includes all kinds of pre-sale and post-sale effort
 Unique Features of E-commerce
Technology
1. Ubiquity
2. Global reach
3. Universal standards
4. Information richness
5. Interactivity
6. Information density
7. Personalization/customization
8. Social technology
 Unique Features of E-commerce
Technology
1. Ubiquity – available just about everywhere, at all
times: at work, at home and elsewhere via mobile
devices, anytime.
2. Global reach – the technology reaches across
national boundaries, around the Earth.
3. Universal standards – there is one set of
technology standards, namely internet standards.
4. Information richness – is the complexity and
content of a message : video, audio and text
messages are possible.
 Unique Features of E-commerce
Technology
5. Interactivity – technology that allows for two-way
communication between merchant and consumer
6. Information density – the total amount and quality
of information available to all market participants.
7. Personalization/customization – the targeting of
marketing message to a person’s name, interests,
and past purchases
8. Social technology – user content generation and
social networks.
 Types of E-commerce
Table 1.3 MAJOR TYPES OF E-COMMERCE
TYPES OF E-COMMERCE EXAMPLE
B2C – Business-to-Consumer Amazon is a general merchandiser that sells consumer
product to retail consumers.

B2B – Business-to-Business Go2Paper.com is an independent third-party

marketplace that serves the paper industry.
C2C – Consumer-to-Consumer On a large number of Web auction sites such as eBay,
and listing sites such as Craigslist, consumers can
auction or sell goods directly to other consumers.
P2P – Peer-to-Peer BitTorrent is a software application that permits
consumers to share videos and other high-bandwidth
content with one another directly, without the
intervention of a market maker as in C2C e-commerce.
M-Commerce – Mobile Commerce Wireless mobile devices such as smartphones can be
used to conduct commercial transactions.
 Types of E-commerce
Table 1.3 MAJOR TYPES OF E-COMMERCE
TYPES OF E-COMMERCE EXAMPLE
C2B – Consumer-to-Business Consumer-to-business (C2B) is a business model where
an end user or consumer makes a product or service
that an organization uses to complete a business
process or gain competitive advantage.
B2G – Business-to-Government Professional affairs conducted between companies and
regional, municipal or federal governing bodies.
Business to government typically encompasses the
determination and evaluation of government agency
needs, the creation and submission of proposals and
the completion of the contracted work.

Mobile, Local and Social E-Commerce can be looked at as

subsets of these types of e-commerce
Cont.

B2C e-commerce involves businesses selling to

consumers and is the type of e-commerce that
most consumers are likely to encounter.
B2B e-commerce involves businesses selling to
other businesses and is the largest form of e-
commerce.

C2C e-commerce is a means for consumers to

sell to each other.
Cont.
M-commerce involves the use of wireless devices to
enable online transactions.

Social e-commerce is e-commerce that is enabled

by social networks and online social relationship.

Local e-commerce is a form of e-commerce that is

focused on engaging the consumer based on his or
her current geographic location.
 Growth of the Internet, Web, and
Mobile Platform

◼ Internet - worldwide network of computer networks built

on common standards
❖ Created in late 1960s
❖ Services include the Web, e-mail, file transfers, etc.
❖ Can measure growth by looking at number of Internet
hosts with domain names
◼ World Wide Web (the Web) - provides easy access to
Web pages
❖ Most popular Internet service
❖ Developed in early 1990s
❖ HTML documents that may include text, graphics,
animations, music, videos
◼ Mobile platform - provides the ability to access the
Internet from a variety of highly mobile devices such as
smartphones, tablets, and other ultra-lightweight laptop
computers
 Web 2.0
◼ Many of the unique features of e-commerce technology
and the Internet come together in a set of applications and
social media technologies referred to as Web 2.0.
◼ Technologies that allow users to:
❖ Create and share content, preferences, bookmarks, and
online personas
❖ Participate in virtual lives
❖ Build online communities
▪ E.g.: Twitter, YouTube, Instagram, Wikipedia,
Tumblr, Uber
 History of E-Commerce
◼ Background
E-commerce actually began in the 1970s when larger
corporations started creating private networks to share
information with business partners and suppliers.
◼ This process, called Electronic Data Interchange (EDI),
transmitted standardized data that streamlined the procurement
process between businesses, so that paperwork and human
intervention were nearly eliminated.
◼ EDI is still in place, and is so effective at reducing costs and
improving efficiency that an estimated 95% of Fortune 1,000
companies use it.
 E-commerce: A Brief History

◼ 1995-2000: Innovation (invention)

❖ Key concepts developed
❖ Dot-coms era
❖ Selling retail goods, usually simple goods (not enough
bandwidth for more complex products)
❖ Allow static simple ads
❖ Not powerful search engine
 E-commerce: A Brief History
◼ 2001-2006: Consolidation
❖ Emphasis on business-driven approach
❖ Sellingnot just retail products, but also offer more
complex services (travel & financial service)
❖ Broadband network introduced, lower prices of
personal computers, so, user can access internet at
work or home
❖ Online marketing using search engine advertising,
rich media and video ads, ad networks and auction
market
❖ Web policy expanded from websites, email, and search
engine
 E-commerce: A Brief History

◼ 2007-Present: Reinvention
❖ Extension of technologies (mobile)
❖ Since the introduction of iPhone, e-commerce has been
transformed
❖ Rapid growth of online social network
❖ Adoption of consumer mobile devices such as
smartphone and tablet
❖ Include local goods and services
❖ “social, mobile, local” era
❖ The emergence of Web 2.0 applications
 E-Commerce advantages
◼ Overcome Geographical Limitations
◼ E-commerce websites can run all the time
❖ Merchants view
◼ increases the number of orders they receive
❖ Customer view
◼ more convenient (always open -24/7)
◼ Reduction of costs (e.g. set-up cost, running cost, logistics and transactions cost…) will
bring higher margins
◼ Easiness of buying and selling
◼ Ease of selection of products with no physical fatigue
◼ Better customer service (easily track customer behaviour)
◼ Ease of price comparison during shopping
◼ Don’t need to train sales people
◼ Ability to reach new markets
◼ Increased purchasing opportunities
◼ More efficient (electronic payments, telecommuting, etc.)
 E-Commerce Disadvantages
◼ E-Commerce Disadvantages
❖ Incompatibility for certain industries
❖ Limitations of the medium
❖ Costs!!!
❖ Skills required
❖ Cultural and legal issues
The growth of internet
The growth of e-Commerce
E-Commerce Concept
 Exercise
◼ Describe e-commerce and e-business
◼ List and define 8 unique features of e-commerce
◼ Describe different types of e-commerce
❖ B2B
❖ B2C
❖ C2C
❖ M-commerce
◼ Find at least 3 definitions
❖ Social e-commerce ◼ Diagrams/pictures
❖ Local e-commerce ◼ Related videos
◼ Example of company/websites
❖ B2G
E-commerce Business Models
◼ Business model
Set of planned activities designed to
result in a profit in a marketplace

◼ Business plan
A document that describes a firm’s
business model

◼ E-commerce business model

A business model that aims to use and
leverage the unique qualities of the
internet and the World Wide Web
 Revenue Model
◼ How will you earn money?
Describe how the firm will earn revenue, produce profits, and
produce a superior return on invested capital.

◼ Major types:
❖ Advertising revenue model

❖ Subscription revenue model

❖ Transaction fee revenue model

❖ Sales revenue model

❖ Affiliate revenue model

 Revenue Model
◼ Major types:
❖ Advertising revenue model – a company provides a forum
for advertisements and receives fees from advertisers.
❖ Subscription revenue model – a company offers its users
content or services and charges a subscription fee for
access to some or all of its offerings.
❖ Transaction fee revenue model – a company receives a
fee for enabling or executing a transaction.
 Revenue Model
◼ Major types:
❖ Sales revenue model – a company derives revenue by
selling goods, information, or services.
❖ Affiliate revenue model – a company steers business to an
affiliate and receives a referral fee or percentage of the
revenue from any resulting sales.