Chapter 1

Overview of Electronic Commerce

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.

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Learning Objectives

5. Describe the business environment as a driver of

EC.
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.

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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
Or
the use of the Internet, the Web, and mobile apps and
browsers running on mobile devices to transact
business. More formally, digitally enabled commercial
transactions between and among organizations and
individuals.

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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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E-Business VS Ecommerce

The Difference Between E-commerce And E-

business:
• E-commerce is not “anything digital” that a firm does.
• e-business refers primarily to the digital enabling of transactions and
processes within a firm, involving information systems under the control
of the firm.

• For the most part, e-business does not include commercial transactions
involving an exchange of value across organizational boundaries.

• It is true, however, that a firm’s e-business infrastructure provides support

for online e-commerce exchanges; the same infrastructure and skill sets
are involved in both e-business and e-commerce.
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UNIQUE FEATURES OF E-COMMERCE
TECHNOLOGY

• UBIQUITY:
- it is available just about everywhere, at all times. It liberates the market
from being restricted to a physical space and makes it possible to shop
from every where.

- From a consumer point of view, ubiquity reduces transaction costs.

• GLOBAL REACH :
- E-commerce permits commercial transactions to cross cultural, regional,
and national boundaries far more conveniently and cost-effectively than
is true in traditional commerce.

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UNIQUE FEATURES OF E-COMMERCE
TECHNOLOGY

• UNIVERSAL STANDARDS
❑ standards that are shared by all nations around the world.
❑ The universal technical standards of e-commerce greatly lower market entry
costs— the cost merchants must pay just to bring their goods to market.
❑ For consumers, universal standards reduce search costs—the effort required to
find suitable products.

• RICHNESS
❑ Information richness refers to the complexity and content of a message.
❑ Traditional markets and retail stores have great richness.

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UNIQUE FEATURES OF E-COMMERCE
TECHNOLOGY

• Interactivity:
❑ meaning they enable two-way communication between merchant and consumer
and among consumers.
❑ Comment features, community forums, and social networks with social sharing
functionality all enable consumers to actively interact with merchants and other
users.

 information density
• EC increase information density—the total amount and quality of information
available to all market participants.

• The results:
• information asymmetry.
• Price and Cost transparency
• price discrimination
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 UNIQUE FEATURES OF E-COMMERCE
TECHNOLOGY

 Personalization And Customization:

 E-commerce permit personalization: merchants can target their marketing
messages to specific individuals by adjusting the message to a person’s name,
interests, and past purchases.
 It also permits customization—changing the delivered product or service based
on a user’s preferences or prior behavior.

 Social Technology:
 e-commerce is allowing users to create and share content with a worldwide
community.
 Using these forms of communication, users are able to create new social
networks and strengthen existing ones.

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11
Electronic Commerce:
Definitions and Concepts

• Pure Versus Partial EC

– EC takes several forms depending on the degree of
digitization (the transformation from physical to digital)
(1) the product (service) sold,
(2) the process,
(3) the delivery agent (or intermediary)

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Exhibit 1.1 The Dimensions of
Electronic Commerce

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Electronic Commerce:
Definitions and Concepts

• EC organizations
brick-and-mortar 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
click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce
activities, but do their primary business in the
physical world
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Electronic Commerce:
Definitions and Concepts

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

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The EC Framework,
Classification, and Content

• Networked computing is the infrastructure for EC, and it is

rapidly emerging as the standard computing environment
for business, home, and government applications

– Networked computing connects multiple computers and other

electronic devices located in several different locations by
telecommunications networks, including wireless ones
– Allows users to access information stored in several different
physical locations and to communicate and collaborate with
people separated by great geographic distances

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The EC Framework,
Classification, and Content

• An EC Framework—supports five policymaking

support areas
– People
– Public policy
– Marketing and advertisement
– Support services
– Business partnerships

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Exhibit 1.2 A Framework for
Electronic Commerce

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EC Classification

• Classification by nature of the transactions or

interactions
business-to-business (B2B)
E-commerce model in which all of the participants are
businesses or other organizations

business-to-consumer (B2C)
E-commerce model in which businesses sell to
individual shoppers

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EC Classification

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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EC Classification

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

consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to
other consumers

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EC Classification

peer-to-peer
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

mobile commerce (m-commerce)

E-commerce transactions and activities conducted in a
wireless environment

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EC Classification

location-based commerce (l-commerce):

M-commerce transactions targeted to individuals in
specific locations, at specific times

Social e-commerce:
• e-commerce that is enabled by social networks and online
social relationships.
• Social e-commerce is often intertwined with m-commerce,
particularly as more and more social network users access
those networks via mobile devices.

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EC Classification

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

business-to-employees (B2E)
E-commerce model in which an organization delivers
services, information, or products to its individual
employees

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EC Classification

collaborative commerce (c-commerce)

E-commerce model in which individuals or groups
communicate or collaborate online
e-learning
The online delivery of information for purposes of
training or education

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EC Classification

exchange (electronic)
A public electronic market with many buyers and sellers

exchange-to-exchange (E2E)
E-commerce model in which electronic exchanges
formally connect to one another for the purpose of
exchanging information

e-government
E-commerce model in which a government entity buys
or provides goods, services, or information to
businesses or individual citizens
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EC Business Models

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

• Business models are a subset of a business plan

or a business case

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EC Business Models

• The Structure of Business Models

– A description of the customers to be served and the
company’s relationships with these customers
(customers’ value proposition)
– A description of all products and services the business
will offer
– A description of the business process required to make
and deliver the products and services

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EC Business Models

• The Structure of Business Models

– A list of the resources required and the identification of
which ones are available, which will be developed in-
house, and which will need to be acquired
– A description of the organization supply chain, including
suppliers and other business partners
– A description of the revenues expected (revenue
model), anticipated costs, sources of financing, and
estimated profitability.(Financial viability)

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EC Business Models

• Revenue Models • Major revenue models

revenue model – Sales
Description of how the – Transaction fees
company or an EC project – Subscription fees
will earn revenue – Advertising fees
– Affiliate fees
– Other revenue sources

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Exhibit 1.6 Common Revenue Models

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EC Business Models

• Typical EC Business Models

– Online direct marketing
– Electronic tendering systems
– tendering (reverse auction)
Model in which a buyer requests would-be 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

• Typical EC Business Models

❑Find the best price
A customer specifies a need and then an intermediate
company, such as Hotwire.com.
❑ affiliate marketing
An arrangement whereby a marketing partner (a
business, an organization, or even an individual) refers
consumers to the selling company’s Web site
❑ viral marketing
Word-of-mouth marketing in which customers promote
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a product or service toPrentice
friends Hall
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EC Business Models

• Typical EC Business Models

group purchasing
Quantity purchasing that enables groups of purchasers
to obtain a discount price on the products purchased

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EC Business Models

• Typical EC Business Models

– Online auctions
– Product and service customization
customization
Creation of a product or service according to the
buyer’s specifications
– Information brokers
– Bartering
– Deep discounting

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Benefits of EC

Benefits to Organizations
• Global Reach • Lower Communication
• Cost Reduction Costs
• Supply Chain • Efficient Procurement
Improvements • Improved Customer
• Extended Hours Relations
• Customization
• New Business Models

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Benefits of EC

Benefits to Consumers
• It exists everywhere. • Instant Delivery
• More Products and • Information Availability
Services • Participation in Auctions
• Customized Products • Electronic Communities
and Services • No Sales Tax
• Cheaper Products and
Services

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Benefits of EC

• Benefits to Society
– Telecommuting
– Higher Standard of Living
– Hope for the Poor
– Availability of Public Services

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Exhibit 1.7 Limitations of EC

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