E-COMMERCE

learning outcomes
LO1 Define e-commerce and describe its advantages,
disadvantages, and business models.
LO2 Explain the major categories of e-commerce.
LO3 Describe the business-to-consumer e-commerce
cycle.
LO4 Summarize the major models of business-to-
business e-commerce.
LO5 Describe mobile- and voice-based e-commerce.
l e a r n i n g o u t c o m e s (cont’d.)
LO6 Explain two supporting technologies for e-
commerce.
Defining E-Commerce
• E-business
– Activities a company performs for selling and buying
products and services, using computers and
communication technologies
• E-commerce
– Buying and selling goods and services over the
Internet
– Builds on traditional commerce by adding the
flexibility that networks offer and the availability of
the Internet
Defining E-Commerce (cont’d.)
• Business applications that use the Internet:
– Buying and selling products and services
– Collaborating with other companies
– Communicating with business partners
– Gathering business intelligence on customers and
competitors
– Providing customer service
– Making software updates and patches available
– Offering vendor support
– Publishing and disseminating information
The Value Chain and E-Commerce
• Value chain
– Michael Porter
– 1985
– Series of activities designed to meet business needs
by adding value (or cost) in each phase of the
process
• Supporting activities:
– Organizational infrastructure, human resource
management, technological development, and
procurement
Exhibit 8.1 Michael Porter’s Value Chain
The Value Chain and E-Commerce (cont’d.)
• Primary activities:
– Inbound logistics
– Operations
– Outbound logistics
– Marketing and sales
– Service
• The Internet
– Increases the speed and accuracy of communication
between suppliers, distributors, and customers
– Low cost means companies of any size can participate
in value chain integration
E-Commerce versus Traditional Commerce
• Internet and telecommunication technologies
play major role
• No physical store
• Click-and-brick e-commerce
– Mix of traditional and e-commerce
Twitter Helps Businesses to Find Customers
• Twitter can be used by businesses as a promotional tool
and as a way to find sales leads

• Boloco, a burrito restaurant chain, posted a photo of a

coupon on Twitter and invited customers to bring in any
image of the coupon -- a photocopy, a printout, or even
an image on a mobile phone -- to get the discount

• The promotion was a big success, given that 900

customers redeemed the coupon (including by bringing
their mobile phones) as opposed to the usual 350
Advantages and Disadvantages of E-Commerce
• Advantages:
– Better relationships with suppliers, customers,
business partners
– Price transparency
– Round the clock and globe operations
– More information on potential customers
– Increasing customer involvement
– Improving customer service
– Increasing flexibility and ease of shopping
Advantages and Disadvantages of E-Commerce
(cont’d.)
– Increasing the number of customers
– Increasing opportunities for collaboration with
business partners
– Increasing return on investment because inventory
needs are reduced
– Offering personalized services and product
customization
– Reducing administrative and transaction costs
Advantages and Disadvantages of E-Commerce
(cont’d.)
• Disadvantages:
– Bandwidth capacity problems
– Security issues
– Accessibility
– Acceptance
E-Commerce Business Models
• E-commerce companies focus their operations in
different parts of the value chain
• Types:
– Merchant
– Brokerage
– Advertising
– Mixed
– Informediary
– Subscription
Exhibit 8.3 Business-to-Consumer E-Commerce

Major Categories of E-Commerce

Business-to-Consumer E-Commerce
Business-to-Consumer E-Commerce (cont’d.)
• Companies sell directly to consumers
• Examples:
– Amazon.com
– Barnesandnoble.com
– Onsale.com
• Types:
– Pure-play
– Brick and mortar stores with virtual storefronts
Business-to-Business E-Commerce
• Involves electronic transactions between
businesses
• Electronic data interchange (EDI) and electronic
funds transfer (EFT)
• Fastest growing segment of e-commerce
• Uses:
– Purchase orders, invoices, inventory status, shipping
logistics, business contracts, and other operations
• Example:
– Walmart
Consumer-to-Consumer E-Commerce
• Involves business transactions between users
• Online classified ads:
– Craigslist.org
• Online auction sites:
– eBay.com
Consumer-to-Business E-Commerce
• Involves people selling products or services to
businesses
• Example:
– Creating online surveys
• Search for sellers of a product and services
– Priceline.com
Government and Nonbusiness E-Commerce
• E-government applications
• Categories:
– Government-to-citizen (G2C)
– Government-to-business (G2B)
– Government-to-government (G2G)
– Government-to-employee (G2E)
Government and Nonbusiness E-Commerce (cont’d.)
• Nonbusiness organizations:
– Universities
– Nonprofits
– Political and social organizations
Organizational or Intrabusiness E-Commerce
• Involves e-commerce activities that take place
inside an organization
• Can include:
– Exchange of goods, services, or information among
employees
– Conducting training programs and offering human
resource services
• Supporting activities in Porter’s value chain
A B2C E-Commerce Cycle
• Major activities:
– Information sharing
– Ordering
– Payment
– Fulfillment
– Service and support
Exhibit 8.3 Major Activities in B2C E-Commerce
B2B E-Commerce: A Second Look
• B2Bs use these additional technologies
extensively:
– Intranets
– Extranets
– Virtual private networks
– Electronic data interchange (EDI)
– Electronic funds transfer (EFT)
• Lowers production costs and improves accuracy
– By eliminating many labor-intensive tasks
Major Models of B2B E-Commerce
• Three major types of B2B e-commerce models,
based on who controls the marketplace:
– Seller
– Buyer
– Intermediary (third-party)
• Fourth model called trading partner agreements
Seller-Side Marketplace
• Most popular B2B model
• Sellers who cater to specialized markets come
together to create a common marketplace for
buyers
• E-procurement
– Enables employees in an organization to order and
receive supplies and services directly from suppliers
– Can also automate some buying and selling activities
• Major vendors of e-commerce and B2B solutions
include I2 Technologies, IBM, Oracle, and SAP
E-Procurement at Schlumberger
• Schlumberger
– Oil field services provider
• E-procurement system for order processing
– Has reduced the cost per order by streamlining
paperwork
– Replaced a centralized electronic data interchange
(EDI) procurement system
– Easy-to-use interface
Buyer-Side Marketplace
• Buyer, or a group of buyers, opens an electronic
marketplace
– Invites sellers to bid on announced products or
requests for quotation (RFQs)
• Buyers can:
– Manage the procurement process more efficiently
– Lower administrative costs
– Implement uniform pricing
• Large corporations, such as General Electric or
Boeing
Third-Party Exchange Marketplace
• Controlled by a third party
• Marketplace generates revenue from the fees
charged for matching buyers and sellers
• Usually active in vertical or horizontal market
• Offers suppliers a direct channel of
communication to buyers through online
storefronts
Worldbid.com: A Third-Party Exchange Marketplace
• International marketplace
• Designed to help small to mid-sized companies
buy and sell products or services domestically or
internationally
• Provides:
– Trade leads
– Request for proposals for private and government
organizations worldwide
Trading Partner Agreements
• Automate negotiating processes and enforce
contracts between participating businesses
• Business partners can send and receive bids,
contracts, and other information needed when
offering and purchasing products and services
• Enables customers to submit electronic
documents via the Internet that previously
required hard copies with signatures
– Using XML
Mobile and Voice-Based E-Commerce
• Mobile commerce (m-commerce)
– Based on Wireless Application Protocol (WAP)
– Using handheld devices, such as smart phones or
PDAs, to conduct business transactions
• Supporting technologies:
– Wireless wide-area networks and 3G networks
– Short-range wireless communication technologies
• Examples:
– iPhone apps
– Internet Explorer Mobile
– Google mobile
Mobile and Voice-Based E-Commerce (cont’d.)
• Voice-based e-commerce
– Rely on voice recognition and text-to-speech
technologies
– Can conduct business using e-wallets
– Security features
• Call recognition, voice recognition, fixed shipping
address
E-Commerce Supporting Technologies
• Electronic payment systems
• Web marketing
• Search engine optimization
Electronic Payment Systems
• Electronic payment
– Money or scrip that is exchanged only electronically
• Payment cards:
– Credit, debit, charge, and smart cards
• Smart cards
– Credit card sized
– Contain an embedded microprocessor chip storing
important financial and personal information
Electronic Payment Systems (cont’d.)
• Other types of payments:
– E-cash
– E-check
– E-wallets
– PayPal
– Micropayments
Web Marketing
• Uses the Web and its supporting technologies to
promote goods and services
• Terms:
– Ad impression
– Banner ads
– Click
– Cost per thousand (CPM)
– Cost per click (CPC)
– Click-through rate (CTR)
– Cookie
Web Marketing (cont’d.)
– Hit
– Meta tag
– Page view (PV)
– Pop-up ads
– Pop-under ads
– Splash screen
– Spot leasing
Search Engine Optimization
• Method for improving the volume or quality of
traffic to a Web site
• Some companies offer SEO service
– Editing a site’s contents and HTML code to increase
its relevance to specific keywords
• Recommendations for optimizing a Web site:
– Keywords
– Page title
– Inbound links
Summary
• Michael Porter’s value chain, compared e-
commerce with traditional commerce
• Major e-commerce business models
• Main categories of e-commerce
• B2C e-commerce business cycle
• B2B e-commerce business models
• Mobile and voice e-commerce
• Supporting technologies