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Outline Four E-Commerce Revenue Models

Outline Four E-Commerce Revenue Models

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Published by Kenneth Mutugi

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Published by: Kenneth Mutugi on May 04, 2012
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05/04/2012

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Question One. With help of suitable examples, distinguish between E-Commerce and E-Business.
E -business and e-commerce are terms that are sometimes used interchangeably, and sometimes they areused to differentiate one vendor's product from another. In both cases, the e stands for "electronicnetworks" and describes the application of electronic network technology; including Internet and electronicdata interchange (EDI), to improve and change business processes. E-commerce implies businesstransactions over the internet where the parties involved are either selling or buying. The transactionsconducted in e-commerce basically involve the transfer or handing over ownership and rights to productsor services.Technically, e-commerce is only a part of e-business because, by definition, e-business refers to all onlinebusiness transactions including selling directly to consumers (e-commerce), dealing with manufacturersand suppliers, and conducting interactions with partners. Information exchange via centralized database isalso done in e-
commerce. Business functions are only limited to the companies’ technologic
al resources.E-commerce principally involves money exchanges in the transactions. In e-business, as it is broader, it isnot limited to monetary transactions. All aspects in business are included like marketing, product design,and supply management.E-business is more about making great products, brainstorming and giving quality service, planning aboutproduct exposure and executing it. Well, of course, e-commerce is an integral part of the e-businessprocess but in strict terms, it is the activity of selling and buying.E-commerce covers outward-facing processes that touch customers, suppliers and external partners,including sales, marketing, order taking, delivery, customer service, purchasing of raw materials andsupplies for production and procurement of indirect operating expense items, such as office supplies.It involves new business models and the potential to gain new revenue or lose some existing revenue tonew competitors. It is ambitious but relatively easy to implement because it involves only three types of integration; which are vertical integration of front-end Web site applications to existing transactionsystems, cross-business integration of a company with Web sites of customers, suppliers or intermediariessuch as Web-based marketplaces and integration of technology with modestly redesigned processes fororder handling, purchasing or customer service.E-business includes e-commerce but also covers internal processes such as production, inventorymanagement, product development, risk management, finance, knowledge management and humanresources. E-business strategy is more complex, more focused on internal processes and aimed at costsavings and improvements in efficiency, productivity and cost savings.An e-business strategy is also more difficult to execute, with four directions of integration: vertically,between Web front-systems and back-end systems; laterally, between a company and its customers,
 
Page | 2business partners, suppliers or intermediaries; horizontally, among e-commerce, enterprise resourceplanning (ERP), customer relationship management (CRM), knowledge management and supply-chainmanagement systems; and downward through the enterprise, for integration of new technologies withradically redesigned business processes. But e-business has a higher payoff in the form of more efficientprocesses, lower costs and potentially greater profits.E-commerce and e-business both address these processes, as well as a technology infrastructure of databases, application servers, security tools, systems management and legacy systems. And both involvethe creation of new value chains between a company and its customers and suppliers, as well as within thecompany itself.In e-commerce, information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/organizations) and in business-to-consumer transactions (transactions between firms/organizations and individuals).In e-business, on the other hand, ICT is u
sed to enhance one’s business. It includes
any process that abusiness organization (either a for-profit, governmental or non-profit entity) conducts over a computer-mediated network.
 
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Question Two. Outline three cases where E-Commerce it not a recommended option, giving reasonsfor each case.
1.
 
Perishable goods.E-commerce is not suitable for perishable commodities like food items such as fruits and vegetables. Thisis because these products have a smell, taste or touch component. People prefer to shop in the conventionalway than to use e-commerce for purchasing these products. The consumer of the product would want toselect the appropriate food items as well as physically see the product before purchase. So e-commerce isnot suitable for such business sectors. The time period required for delivering physical products can also bequite significant in case of e-commerce.2.
 
Government documents.
You can’t sell any government documents or personal documents such as identification card, passport, and
car license online. Applications for most of these government documents can be initiated online; however,the process cannot be fully online. The reason is to avoid issuing those documents to the wrong people andalso to avoid instances of people getting more that one related document.3.
 
Illegal items.One would want to avoid items that are illegal to sell over the Web. These include obvious things such asillegal drugs and explosives that are forbidden almost everywhere. Some states allow you to sell alcoholicbeverages over the Web, while in other states doing so is a felony. The laws on gun and ammunition salesalso vary from state to state, in addition to a variety of federal rules on these items. A few states alsoprohibit the sale of certain animals and food products. So when dealing with such items that are going toprovoke the legal authorities, then you will not do it online.4.
 
Replica market.This involves selling items that have been copied from the original without the express permission from theowners of the items. Such includes sale of pirated copies of computer software or games, bootlegs(recording of an audio and/or video performance that was not officially released by the artist or under otherlegal authority). This also includes distribution of stolen copyrights.

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