Electronic Commerce: Definitions

and Concepts
Electronic commerce (e-commerce, EC)

describes the buying, selling, transferring or

exchanging of products, services or information
via computer networks, including the Internet.

Electronic Commerce:
Definitions and Concepts (cont.)

Pure vs. Partial EC

depends upon the
degree of digitization
(the transformation from
physical to digital) of:
1.

2.
3.

the product (service)

sold;
the process; and for
the delivery agent (or
digital intermediary)

Brick-and-Mortar

organizations are oldeconomy organizations

(corporations) that
perform most of their
business off-line, selling
physical products by
means of physical agents

Electronic Commerce: Definitions and

Concepts (cont.)
Virtual (pure-play)

organizations
conduct their
business activities
solely online

Click-and-mortar

organizations
conduct some EC
activities, but do their
primary business in
the physical world

Advantages of E-commerce
Lower Cost
Economy (no rental of physical store space,insurance and infrastructure

investment)
Higher Margins (cost of processing a conventional ticket is $8 where as
e-ticket is of 1$)
Better Customer Service
Quick Comparison Shopping
Productivity Gains (letting customer find their answer to technical
question IBM)
Teamwork
Growth in Knowledge Markets (research on consumer behavior)
Information Sharing, Convenience and Control
Customization (DELL)

Technical Limitations of EC
A few technical challenges remain for organizations wishing to

conduct EC:

Lack of universally accepted standards for quality, security, and

reliability
Insufficient telecommunications bandwidth
Still-evolving software development tools
Difficulties in integrating the Internet and EC software with some
existing applications and databases
Need for special Web servers in addition to the network servers
(added cost)
Expensive and/or inconvenient Internet accessibility for many
people

Non-Technical Limitations of EC
Legal and economic concerns:

Lack of national and international regulations and standards

Difficulty in measuring benefits of EC and justifying EC
Insufficient number (critical mass) of sellers and buyers exists for
profitable EC operations

Cultural resistance:

Distrust of the new: Many sellers and buyers are waiting for EC to
stabilize before they take part
Customer resistance to the change from a physical to virtual stores
Perception that electronic commerce is expensive and unsecured, so
many do not want even to try it

Classification of EC
business-to-consumer (B2C) : online transactions

are made between businesses and individual

consumers
business-to-business (B2B): businesses make
online transactions with other businesses
consumer-to-business (C2B): e-commerce model
in which individuals use the Internet to sell
products or services to organizations or individuals
seek sellers to bid on products or services they
need

Classification of EC
consumer-to-consumer (C2C): e-commerce model

in which consumers sell directly to other consumers

business-to-employees (B2E): e-commerce model
in which an organization delivers services,
information, or products to its individual employeese
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 to businesses or individual citizens

E-Commerce Business Models

Store-front model
Provides with product information, shopping cart, and online
ordering mechanism
Provides good like books, computer and pizzas
Merchant reaches customer directly
Click And Mortar model

Combination of a web site with a physical store.

Pre-establish brand name
Using web site to promote physical store
User and return defective items simply by going to store.

Service Provider Model

Recovering the cost of processing through advertisement on their
website
Yahoo

Cont..
Built to Order Merchant Model
Offering goods or services and the ability to order customized
versions.
Products are assembled individually and shipped to customer
Subscription Based Access Model

Visitor pays fixed fee per month for unlimited access to the service

Portal Site Model

A portal offers one-stop access to specific content and services
like new, message broad and chat
Allow visitor to personalized the interface and contents
Broker Model

They bring buyers and sellers together and facilitate transaction

between them

Cont..
Virtual Mall Model

A site that hosts many merchant, service provider, brokers and

other businesses
Act as as an intermediary between customers and the
business it hosts by facilitating payment and guaranteeing a
full refund if a merchant does not deliver in time

Virtual Community Model

Website that attracts a group of user with a common interest

who works together on the site
Sharing of information

Free Access Model

Users are given something for free but with advertisement

E-greeting

Electronic Business: Definitions and

Concepts (cont.)
E-Business is any commercial activity conducted over

networks linking electronic devices (typically

computers). Often includes:

Commercial transactions over the Internet, telephone, or fax;

Electronic banking and payment systems;
Trade in digitized goods or services;
Servicing customers and collaborating with business partners;
and
Procurement and inventory control.

E-business overview
Consumer to consumer

Extranet

Business to consumer

Customer
Customer

Business
Business

Business to business
Business supplier

Intranet

Bank
Bank

Business supplier
or
orpartner
partner

Intranet benefits
Improved Communications

Keeps every employee informed and up to date

Gives everyone (if they have permission) access to projects status,
team discussions, project collaboration tools, video conferencing,
etc.

Document Access

Provides easy access to documents employees need to perform

their jobs.

Employee Training and Retention

Provides employees easy access to online training material, skill

assessments, and other human resources content. This improves
job satisfaction and employee retention.

Knowledge Retention

Prevents knowledge loss which could occur as a result of

employees being unavailable for a while or leaving the company.
New employees can get up to speed much easier.

Extranet benefits
Sales Support Material

Provides business partners and customers online access to the latest sales
support material from product manuals and data sheets to price lists and
comparison charts.

Order Status Information

Provides customers direct yet controlled access to the status of their orders,
freeing up the customer service staff to work on other issues.

Employee Directories

Keeps partners informed as to the current staff assignments and contact

information.

Inventory Status

Gives business partners direct access to check inventory levels, back order
status, and shipping information.

Knowledge Base Information

Provides easy access to frequently asked questions and customer support

material. The information stored in this dynamic, knowledge base application
could be made available to all partners/customers.

Toshibas Extranet Keeps Dealers on

Time
The Problem
dealers needed parts quickly
The Solution

created a Web-based ordering entry system using an

extranet

The Results
reduces the cost per order
reduces the networking cost of the Electronic Imaging
Division (EID)
increases customer satisfaction

Intel Corporation Embracing the Web

The Problem

slow, expensive, and frequently not up to date

distribution and communication process

The Solution

established an e-business program using an extranet

The Results

enhances competitive advantage by giving Intels

customers better tools for managing transactions
brings substantial tangible savings

E-Business example
Bank
Bank
payment
payment

clearance

order

Distributor
Distributor
inventory
inventory

deliver

Credit card

Amazon.com
Amazon.com
sales
sales
Information
Informationsystems
systems
coordination
coordination
contents
contents

Shipping
Shipping
deliver

transport
transport
tracking
tracking

ret
urn
s
sale

order
sales
critics

Affiliate
Affiliate
sales
sales

Author
Author
marketing
marketing

Customer
Customer
buy
buy
content
content

The Benefits of
Electronic Business

Benefits to Customers
Expands the marketplace to national and international

markets
Decreases the cost of creating, processing, distributing,
storing and retrieving paper-based information
Allows reduced inventories and overhead by facilitating pull
type supply chain management
The pull type processing allows for customization of products
and services which provides competitive advantage to its
implementers Reduces the time between the outlay of capital
and the receipt of products and services
Supports business processes reengineering (BPR) efforts
Lowers telecommunications cost - the Internet is much
cheaper than value-added networks (VANs)

Benefits to Customers
Enables customers to shop or do other transactions 24 hours a

day, all year round from almost any location

Provides customers with more choices
Provides customers with less expensive products and services by
allowing them to shop in many places and conduct quick
comparisons
Allows quick delivery of products and services in some cases,
especially with digitized products
Customers can receive relevant and detailed information in
seconds, rather than in days or weeks
Makes it possible to participate in virtual auctions
Allows customers to interact with other customers in electronic
communities and exchange ideas as well as compare experiences

Benefits to Society
Enables more individuals to work at home, and to

do less traveling for shopping, resulting in less

traffic on the roads, and lower air pollution
Allows some merchandise to be sold at lower
prices benefiting the poor ones
Enables people in Third World countries and rural
areas to enjoy products and services which
otherwise are not available to them
Facilitates delivery of public services at a reduced
cost, increases effectiveness, and/or improves
quality

Trends Driving e-Business

Customer
Faster Service
Self Service
More product choice
Product Knowledge
E-service

Integrated sales and service

Increases process visibility
Convenient service delivery

Organizational
Outsource
Virtual distribution
Technology

New wireless web application