E-Commerce System

• E-commerce
– Involves any business transaction executed
electronically
– Conducting business on-line
– For example, between…
• Companies
• Companies and consumers
• Business and the public sector
• Consumers and the public sector
– Example for placing a purchase order
Purchase Order - Traditional
Purchase Order – E-commerce
 Electronic Commerce
(E-commerce)
• Business-to-business problems
– Inadequate models
– Integrating with existing systems
– Improving relationships with suppliers, customers,
distributors.
• Consumer problems
– Wait for images to download
– Security of credit information
– Figuring out the ordering process
• Currently a small part of all commerce
 Five Stage Model of
E-Commerce
• The stages consumers experience in the
sales life cycle
 Buyer

Electronic
distribution
Traditional
delivery
1. Search and
5. After Identify
sales service

4. Product & 2. Selection

service & negotiation
delivery

3. Purchasing
 Buying Over the Internet

Access
Prepare list of Browse
Log on to supplier’s
items needed supplier’s
internet home
catalog
page

Input sent to Review Fill out

supplier’s response to request Pick
Place order request for for
order entry quotation items
system quotation form
 Perspectives of e-commerce
• Business-to-business (B2B)
A company sells products/services to other
businesses. This accounts for about 80% of all
e-commerce revenues.
• Business-to-consumer (B2C)
A business sells products/services to
individuals.
• Consumer-to-business (C2B)
• Consumer-to-consumer (C2C)
 If a company sells primarily to other
businesses (B2B), it is important to choose
an appropriate e-marketplace. B2C requires
different marketing because the company is
selling to individuals.
For business-to-consumer (B2C)
e-commerce, understand your
business, products, services and
customers.
1. Define who you want to sell to.
2. Decide why a customer would want or
need your company’s product or service.
 When selling to individual consumers,
consider:
• differences in customer lifestyles, wants, needs
and demographics
• convenience (item bought frequently and at a
lower price) versus specialty merchandise (may
require customization of the product)
• selling commodity-like products which are the
same and available from many sources (e.g.
groceries) or digital products which may be sold
over the Internet (e.g. technical support) and
• mass customization which tailors a product/server
to a consumer’s specifications.
 B2C: When marketing to individuals
using the Web, consider:
• registration with search engines (important that
your site appears near the top of a search list)
• online ads (banner ads accepted better than
pop-up ads)
• viral marketing (encourages users to
recommend product/service to others)
• affiliate programs (viewers directed from one site
to another)
• measurement of success e.g. count the number
of visitors to the site that purchase your
product/service.
 B2C Payment Options
• Financial cybermediary e.g. PayPal
• Electronic cheque for transferring funds
between account or banks
• Electronic bill presentment and payment
(EBPP) for sending bills and paying them using
the Internet e.g. CheckFree, Quicken
• Smart card with embedded chip containing
information about how much money available.
• Digital wallet used to securely store
information about financial transactions and
delivery details.
 When selling to other businesses
(B2B e-commerce), consider:
• maintenance, repair and operations (MRO) materials
which are necessary for running a business (e.g. office
supplies). For MRO materials, price, delivery and ease
of ordering are primary considerations.
• direct materials used to produce what the business sells.
Quality, specification and delivery are important.
• demand aggregation which combines purchase requests
from many buyers into one large order
• horizontal e-marketplaces which are primarily for
purchase of MRO materials from buyers and sellers from
many industries and
• vertical e-marketplaces which connect buyers and
sellers within a specific industry.
 B2B - Marketing to another company

• Companies usually find suppliers using an e-

marketplace even though negotiations regarding
price, quality, specifications and delivery time
may take place separate from the e-
marketplace.
• Trust and continuity in the business relationship
are very important.
• The two companies must be able to connect
their IT systems at some level.
 B2B Payment Systems
• Electronic data interchange (EDI) uses
standard invoices, purchase orders, etc. to
transfer information from one company’s
computer to the other company’s computer e.g.
Global eXchange Services
• Financial electronic data interchange
combines payment for many orders and
purchases. Subsequent reconciliation of the
funds may be done by a bank or an automated
clearing house.
 For both B2C and B2B, the
security of financial transactions
is an overriding concern.
 Three ways to ensure security of
financial transactions:
1. Encryption e.g. Public Key Encryption (PKE)
which uses both a public key for all customers
and a private key for an individual customer
2. Secure sockets layer (SSL)
• Creates a secure and private
connection between a Web client
and a Web server computer
• Encrypts the information and
• then sends it over the Internet.
 3. A secure electronic
transaction (SET) ensures a
financial transaction is both
legitimate and secure. SET
encrypts information. Using SET, a
merchant can verify a customer’s
identity and credit card information.
 Key question & concept of e-
commerce
Strategic issues Key concept
What are our intangible assets, and how can e- Strategic balance
commerce help unlock their value? sheet analysis
What opportunities for market-share gain does Competitive
e-commerce create for us, and how does e- opportunity and
commerce threaten our competitive position? threat assessment
What risks does e-commerce introduce into our E-commerce risk
company, and how can we address these risks? evaluation
How can e-commerce transform the stock Enterprise value
market’s assessment of our company’s value? assessment
How can our management team prioritise E-commerce
potential e-commerce projects to guide the portfolio analysis
allocation of capital and people?