Chapter 1 – Introduction to E-commerce

1) What is E-commerce?

It involves the use of internet, WEB and mobile apps and browsers running on mobile devices
to transact business. The internet is a worldwide network of computer networks and the Web is
one of the Internet’s most popular services. More formally, e-commerce can be defined as
digitally enabled transactions include all transactions between and among organizations and
individuals (commercial transactions involve the exchange of value across organizational or
individual boundaries in return for products and services.

2) Difference between e-commerce and e-business

E-commerce is not anything digital that a firm does that is why we will use the term e-business
to refer primarily to the digital enabling of transactions and processes within a firm, involving
information system under the control of the firm. Which means that e-business doesn’t include
an exchange of value across organizational boundaries.

-The internet is a worldwide network of computer networks built on common standards. On the
other hand, the World Wide Web in an information system that runs on the Internet
infrastructure. Also the mobile platform provides the ability to access the Internet from a variety
of mobile devices such as smartphones and tablets via wireless networks or cell phone service.
-Eight features of E-commerce technology: Ubiquity, global reach, universal standards, social
technology, personalization customization, information density, interactivity, and richness
-Information asymmetry refers to any disparity in relevant market information among parties in
a transaction
-In traditional commerce, a marketplace is a physical place you visit in order to transact. E-
commerce is characterized by its ubiquity which means that is available just about everywhere
all the times. It liberates the market from being restricted to a physical space and makes it
possible to shop from your desktop and everywhere using mobile e-commerce. The result is
called a marketspace, a marketplace extended beyond traditional boundaries and removed from
a temporal and geographic location.
-Reach represents the total number of users or customers an e-commerce business can obtain.
-Universal standards are shared by all nations around the world in contrast most traditional
commerce technologies differ from one nation to the next.
-Information richness refers to the complexity and content of a message.
-Interactivity means that technology that allows for two-way communication between merchant
and consumer. Interactivity allows an online merchant to engage a consumer in ways similar to a
face-to-face experience.
-Information density represents the total amount and quality of information available to all
market participants, consumers and merchants alike. A number of business consequences result
from the growth in information density. One of the shifts that e-commerce is bringing about is a
reduction in information asymmetry among market participations. Price transparency refers to
the ease with which consumers can find out the variety of prices in a market while cost
transparency refers to the ability of consumers to discover the actual costs merchants pay for
products.
-E-commerce technologies permit personalization which means that merchants can target their
marketing messages to specific individuals by adjusting the message to a person’s name,
interests, and past purchases. The technology permits customization, changing the delivered
product or service based on a user’s preferences or prior behaviors. These two features allow
firms to precisely identify market segments and adjust their messages accordingly.

 Business – to – Consumer
Online businesses attempt to reach individual consumers, this e-commerce includes
purchases of retail goods, travel, financial, real estate and other type of services and
online content.
 Business to business, in which businesses focus on selling to other businesses, is the
largest form of e-commerce, online business selling to other businesses.
 Consumer to consumer provides a way for consumers to sell to each other with the help
of an online market marker.
 Mobile e-commerce refers to the use of mobile devices to enable online transactions.
Involve the use of cellular and wireless networks to connect smart phones and tablet
computes to the Internet.
  Social e-commerce is an e-commerce that in enabled by social networks and online social
relationships, is often intertwined with m-commerce particularly as more and more social
network users access those networks via mobile devices.
 Local e-commerce is a form of e-commerce that is focused on engaging the consumer
based on his or her current geographic location.
-Disintermediation means the displacement of market middlemen who traditionally are
intermediaries between producers and consumers by a new direct relationship between producers
and consumers.
-Friction-free commerce is a vision of e-commerce in which information is equally distributed,
transaction costs are low, prices can be dynamically adjusted to reflect actual demand,
intermediaries decline and unfair competitive advantages are eliminated.
-First mover represents a firm that is first to market in a particular area and that moves quickly
to gather market share
-Network effect occurs where users receive value from the fact that everyone else uses the same
tool or product
-Web 2.0 is a set of applications and technologies that enable user-generated content
QUESTIONS
1. What does omni-channel mean in terms of e-commerce presence?
2. What is the deep Web?
3. What are some of the unique features of e-commerce technology?
4. What are some of the factors driving the growth of social e-commerce?
5. Why is it likely that the Internet and e-commerce are entering a period of closer regulatory oversight?
6. How does the ubiquity of e-commerce impact consumers?
7. What impact does the increased interactivity provided by e-commerce technologies have on business?
8. What difficulties are presented in trying to measure the number of web pages in existence?
9. Why is the mobile platform not just a hardware phenomenon?
10. What is conversational commerce and how does it relate to m-commerce?
11. Describe the three different stages in the evolution of e-commerce.
12. Define disintermediation and explain the benefits to Internet users of such a phenomenon. How does
disintermediation impact friction-free commerce?
13. What is the difference between a PWA and a regular app?
14. What is driving the growth of social e-commerce?
15. Discuss the ways in which the early years of e-commerce can be considered both a success and a
failure.
16. What are five of the major differences between the early years of e-commerce and today’s e-
commerce?
17. How do the Internet and the Web fit into the development of corporate computing?
18. Why is the term “sharing economy” a misnomer?
19. What are those who take a technical approach to studying e-commerce interested in?
20. What have been some of the surprises that have occurred in the evolution of e-commerce?

Chapter 2) E-commerce business strategies

-A business model is a set of planned activities designed to result in a profit in a marketplace
while a business plan is a document that describes a firm’s business model. An e-commerce
business model aims to use and leverage the unique qualities of the Internet, the Web, and the
mobile platform.
-Value proposition defines how’s a company’s product or service fulfills the needs of
customers.
-The eight key elements of a business model are: market opportunity, value proposition, revenue
model, management team, organizational development, market strategy, competitive advantage
-A firm’s revenue model describes how the firm will earn revenue, generate profits, and
produce a superior return on invested capital/ In the advertising revenue model, a company that
offers content, services, and/or products also provides a forum for advertisements and receives
fees from advertisers. In the subscription revenue model, a company that offers content or
services charges a subscription fee for access to some or all of its offerings. Lastly, in a
freemium strategy, the companies give away a certain level of product or service for free, but
then charge a subscription fee for premium levels of production and services.
-In the transaction fee revenue model, a company receives a fee for enabling or executing a
transaction. In the sales revenue model, companies derive revenue by selling goods, content, or
services to customers. In the affiliate revenue model, companies that steer business to an
“affiliate” receive a referral fee or percentage of the revenue from any resulting sale.
-The term “market opportunity” refers to the company’s intended marketspace and the overall
potential financial opportunities available to the firm in that marketspace. It is usually divided
into smaller market niches.
-A firm’s competitive environment refers to the other companies selling similar products and
operating in the same marketspace. It also refers to the presence of substitute products and
potential new entrants into the market, as well as the power of customers.
-Firms achieve a 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.
-An asymmetry exists whenever one participant in a market has more resources—financial
backing, knowledge, information, and/or power—than other participants. Asymmetries lead to
some firms having an edge over others, permitting them to come to market with better products,
faster than competitors, and sometimes at lower cost.
- 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, most first movers often lack the
complementary resources needed to sustain their advantages and often, follower firms reap the
largest rewards.
- An unfair competitive advantage occurs when one firm develops an advantage based on a
factor that other firms cannot purchase. In perfect markets, there are no competitive advantages
or asymmetries because all firms have access to all the factors of production. Companies are said
to leverage their competitive assets when they use their competitive advantages to achieve more
advantage in surrounding markets. Market strategy is the plan you put together that details
exactly how you intend to enter a new market and attract new customers. 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. Typically, work is divided into
functional departments, such as production, shipping, marketing, customer support, and finance.
-The single most important element of a business model is the management team responsible
for making the model work
-Raising capital is one of the most important functions for a founder of a startup business and its
management team. Seed capital typically, an entrepreneur’s personal funds derived from
savings, credit card advances, home equity loans, or from family and friends. Elevator pitch
short two-to-three-minute presentation aimed at convincing investors to invest. Incubators
typically provide a small amount of funding and also an array of services to startup companies.
Angel investors, typically wealthy individuals or a group of individuals who invest their own
money in exchange for an equity share in the stock of a business; often are the first outside
investors in a startup.
-Venture capital investors invest funds they manage for other investors such as investment
banks, pension funds, insurance companies, or other businesses, and usually want to obtain a
larger stake in the business and exercise more control over the operation of the business.
Crowdfunding involves using the Internet to enable individuals to collectively contribute money
to support a project.
-E-trailer are online retail stores, often called e-tailers, come in all sizes, from giant Amazon to
tiny local stores. E-tailers are similar to the typical bricks-and-mortar storefront, except that
customers only have to connect to the Internet or use their smartphone to place an order.
-This sector, however, is extremely competitive. Because barriers to entry (the total cost of
entering a new marketplace) into the e-tail market are low, tens of thousands of small e-tail shops
have sprung up.
-Community providers create an online environment where people with similar interests can
transact (buy and sell goods); share interests, photos, videos; communicate with like-minded
people; receive interest-related information; and even play out fantasies by adopting online
personalities called avatars. Portal offers users powerful search tools as well as an integrated
package of content and services all in one place
-Transaction broker processes transactions for consumers that are normally handled in person,
by phone, or by mail. Market creator builds a digital environment where buyers and sellers can
meet, display products, search for products, and establish a price for products.

-E-distributor is a company that supplies products and services directly to individual businesses
-E-procurement firm creates and sells access to digital markets
-B2B service providers make money through transaction fees, fees based on the number of
workstations using the service, or annual licensing fees. They offer purchasing firms a
sophisticated set of sourcing and supply chain management tools that permit firms to reduce
supply chain costs. Exchange an independent digital marketplace where suppliers and
commercial purchasers can conduct transactions
-Industry consortia are industry-owned vertical marketplaces that serve specific industries, such
as the automobile, aerospace, chemical, floral, or logging industries. In contrast, horizontal
marketplaces sell specific products and services to a wide range of companies. Vertical
marketplaces supply a smaller number of companies with products and services of specific
interest to their industry, while horizontal marketplaces supply companies in different industries
with a particular type of product and service, such as marketing-related, financial, or computing
services. Private industrial network digital network designed to coordinate the flow of
communications among firms engaged in business together.
-Industry structure refers to the nature of the players in an industry and their relative
bargaining power. An industry’s structure is characterized by five forces: rivalry among existing
competitors, the threat of substitute products, barriers to entry into the industry, the bargaining
power of suppliers, and the bargaining power of buyers.
- An industry structural analysis is an effort to understand and describe the nature of
competition in an industry, the nature of substitute products, the barriers to entry, and the relative
strength of consumers and suppliers.
- A value chain is the set of activities performed in an industry or in a firm that transforms raw
inputs into final products and services. Each of these activities adds economic value to the final
product; hence, the term value chain as an interconnected set of value-adding activities.
-A firm value chain is the set of activities a firm engages in to create final products from raw
inputs. Each step in the process of production adds value to the final product. In addition, firms
develop support activities that coordinate the production process and contribute to overall
operational efficiency.
- A value web is a networked business ecosystem that uses e-commerce technology to
coordinate the value chains of business partners within an industry, or at the first level, to
coordinate the value chains of a group of firms.
-A business strategy is a set of plans for achieving superior long-term returns on the capital
invested in a business firm. A business strategy is therefore a plan for making profits in a
competitive environment over the long term. Profit is simply the difference between the price a
firm is able to charge for its products and the cost of producing and distributing goods. Profit
represents economic value.
-Differentiation refers to all the way producers can make their products or services unique and
distinguish them from those of competitors. The opposite of differentiation is commoditization
—a situation where there are no differences among products or services, and the only basis of
choosing is price.
-Adopting a strategy of cost competition means a business has discovered some unique set of
business processes or resources that other firms cannot obtain in the marketplace.
-A scope strategy is a strategy to compete in all markets around the globe, rather than merely in
local, regional, or national markets.
A focus/market niche strategy is a strategy to compete within a narrow market segment or
product segment. This is a specialization strategy with the goal of becoming the premier provider
in a narrow market.
Another generic strategy is customer intimacy, which focuses on developing strong ties with
customers. Strong linkages with customers increase switching costs (the costs of switching from
one product or service to a competing product or service) and thereby enhance a firm’s
competitive advantage.
-Disruptive technologies that underpin a business model disruption, while digital disruption a
business model disruption that is driven by changes in information technology. Sustaining
technologies that enable the incremental improvement of products and services. Disruptors the
entrepreneurs and their business firms that lead to a business model disruption.

Chapter 3) E-commerce Infrastructure

-Internet is an interconnected network of thousands of networks and millions of computers
linking businesses, educational institutions, government agencies and individuals. One the other
hand, Web is one of the Internet’s most popular services, providing access to billions, and
perhaps trillions of web pages.
-Packet switching is a method of slicing digital messages into packets, sending the packets
along different communication paths as they become available, and then reassembling the
packets once they arrive at their destination. Packets are the discrete units into which digital
messages are sliced for transmission over the Internet.

-A router is a special-purpose computer that interconnects the different computer networks that
make up the Internet and routes packets along to their ultimate destination as they travel. To
ensure that packets take the best available path toward their destination, routers use a computer
program called a routing algorithm.
-Protocol is a set of rules and standards for data transfer. Transmission Control protocol/
Internet Protocol (TCP/IP) is a core communication protocol for the Internet. TCP establishes
connections among sending and receiving computers and handles assembly and reassembly of
packets. IP provides the Internet’s addressing scheme and is responsible for delivery of packets.
Network Interface Layer is responsible for placing packets on and receiving them from the
network medium. Internet Layer is responsible for addressing, packaging, and routing messages
on the Internet. Transport Layer is responsible for providing communication with other
protocols within TCP/IP suite. Application layer includes protocols used to provide user
services or exchange data. Border Gateway Protocol (BGP) enables exchange of routing
information among systems on the Internet. IPv4 Internet address is expressed as a 32-bit
number that appears as a series of four separated numbers marked off by period such as
64,49,254,91. IPv6 Internet address where internet address is expressed as a 128-bit number.
-Domain name is an IP address expressed in natural language. Domain Name System (DNS) is
system used for expressing numeric IP addresses in natural language. Uniform Resource
Locator (URL) is the address used by a web browser to identify the location of content on the
Web. Client/Server computing is a model of computing in which client computers are
connected in a network together with one or more servers. The client is a powerful desktop
computer that is part of a network. A server is a networked computer dedicated to common
functions that the client computers on the network need. Cloud computing is a model of
computing in which computer processing, storage, software, and other services are provided as a
shared pool of virtualized resources over the Internet.
-Public cloud is a third-party service provider that own and manage large, scalable data centers
that offer computing, data storage, and high-speed Internet to multiple customers who pay for
only the resources they use.
-Private cloud provides similar options as a public cloud but only to a single tenant.
-Hybrid cloud offers customers both a public cloud and a private cloud
-Edge computing optimizes cloud computing by shifting some of the processing and data
storage load to servers located closer to end users, at the so-called “edge” of the network,
improving response time and saving bandwidth.
-Hyper text Transfer Protocol (HTTP) means the Internet protocol used for transferring web
pages
-Simple Mail Transfer Protocol (SMTP) means the internet protocol used to send mail to a
server
-Post Office Protocol 3 (POP3) is a protocol used by the client to retrieve mail from an Internet
server
-Internet Message Access Protocol (IMAP) is a more current e-mail protocol that allows users
to search, organize, and filter their mail prior to downloading it from the server
-File Transfer Protocol (FTP) is one of the original Internet services. Part of the TCP/IP
protocol that permits users to transfer files from the server to their client computer and vice versa
-Telnet is a network protocol that also runs in TCP/IP’s Application Layer and is used to allow
remote login on another computer.
-Secure Sockets Layer (SSL) was the original protocol enabling secure communications
between a client and server over the Internet. This has been replaced with Transport Layer
Security (TLS) protocol, which is an updated, more secure version of SSL.
-Packet InterNet Groper (Ping) is a utility program that allows you to check the connection
between a client computer and a TCP/IP network. Tracert is a route-tracing utility that allows
you to follow the path of a message you send from your client to a remote computer on the
Internet.
- The Network Technology Substrate layer is composed of telecommunications networks and
protocols. The Transport Services and Representation Standards layer houses the TCP/IP
protocol. The Applications layer contains client applications such as the Web, e-mail, and audio
or video playback. The Middleware Services layer is the glue that ties the applications to the
communications networks and includes such services as security, authentication, addresses, and
storage repositories.