Chapter 1

Overview of Electronic Commerce

2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.
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.
5. Describe the business environment as a
driver of EC.

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Learning Objectives

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.
10. Describe online social and business
networks.

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Electronic Commerce:
Definitions and Concepts
zelectronic commerce (EC)
The process of buying, selling, or
exchanging products, services, or
information via computer networks

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Electronic Commerce:
Definitions and Concepts
zEC can be defined from these
perspectives:
zBusiness process
zService
zLearning
zCollaboration
zCommunity

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Electronic Commerce:
Definitions and Concepts
ze-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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Electronic Commerce:
Definitions and Concepts
z Pure versus Partial EC
z EC can take several forms depending on
the degree of digitization
1. the product (service) sold
2. the process (e.g., ordering, payment,
fulfillment)
3. the delivery method

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Electronic Commerce:
Definitions and Concepts

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Electronic Commerce:
Definitions and Concepts
zbrick-and-mortar (old economy)
organizations
Old-economy organizations
(corporations) that perform their primary
business off-line, selling physical
products by means of physical agents
zvirtual (pure-play) organizations
Organizations that conduct their
business activities solely online

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Electronic Commerce:
Definitions and Concepts
zclick-and-mortar (click-and-brick)
organizations
Organizations that conduct some e-
commerce activities, usually as an
additional marketing channel

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Electronic Commerce:
Definitions and Concepts
zInternet versus Non-Internet EC
zMost EC is done over the Internet, but EC
also can be conducted on private networks,
such as value-added networks, local area
networks, or on a single computerized
machine
zNon-Internet EC includes the use of mobile
handwriting-recognition computers used by
field reps to write their notes in the field

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Electronic Commerce:
Definitions and Concepts
zelectronic market (e-marketplace)
An online marketplace where buyers and
sellers meet to exchange goods,
services, money, or information

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Electronic Commerce:
Definitions and Concepts
z interorganizational information systems
(IOSs)
Communications systems that allow routine
transaction processing and information flow
between two or more organizations
z intraorganizational information systems
Communication systems that enable e-
commerce activities to go on within individual
organizations

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The EC Framework,
Classification, and Content
zintranet
An internal corporate or government
network that uses Internet tools, such as
Web browsers, and Internet protocols
zextranet
A network that uses the Internet to link
multiple intranets

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The EC Framework,
Classification, and Content

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The EC Framework,
Classification, and Content
zEC applications are supported by
infrastructure and by these five support
areas:
zPeople
zPublic policy
zMarketing and advertisement
zSupport services
zBusiness partnerships

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The EC Framework,
Classification, and Content
zClassification of EC by the Nature of
the Transactions or Interactions
zbusiness-to-business (B2B)
E-commerce model in which all of the
participants are businesses or other
organizations

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The EC Framework,
Classification, and Content
z business-to-consumer (B2C)
E-commerce model in which businesses sell to
individual shoppers
z e-tailing
Online retailing, usually B2C
z 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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The EC Framework,
Classification, and Content
zconsumer-to-business (C2B)
E-commerce model in which individuals
use the Internet to sell products or
services to organizations or individuals
who seek sellers to bid on products or
services they need
zmobile commerce (m-commerce)
E-commerce transactions and activities
conducted in a wireless environment

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The EC Framework,
Classification, and Content
z location-based commerce (l-commerce)
M-commerce transactions targeted to individuals
in specific locations, at specific times
z 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

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The EC Framework,
Classification, and Content
z business-to-employees (B2E)
E-commerce model in which an organization
delivers services, information, or products to
its individual employees
z collaborative commerce (c-commerce)
E-commerce model in which individuals or
groups communicate or collaborate online
z consumer-to-consumer (C2C)
E-commerce model in which consumers sell
directly to other consumers

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The EC Framework,
Classification, and Content
z peer-to-peer (P2P)
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
z e-learning
The online delivery of information for purposes of
training or education
z e-government
E-commerce model in which a government entity buys
or provides goods, services, or information from or to
businesses or individual citizens

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The EC Framework,
Classification, and Content
zexchange
A public electronic market with many
buyers and sellers
zexchange-to-exchange (E2E)
E-commerce model in which electronic
exchanges formally connect to one
another for the purpose of exchanging
information

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The EC Framework,
Classification, and Content
zThe Interdisciplinary Nature of EC
zThe Google Revolution
zEC Failures
zEC Successes

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The EC Framework,
Classification, and Content
zThe Future of EC
zWeb 2.0
The second-generation of Internet-based
services that let people collaborate and
share information online in perceived new
wayssuch as social networking sites,
wikis, communication tools, and
folksonomies

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The EC Framework,
Classification, and Content

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The EC Framework,
Classification, and Content

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Digital Revolution Drives EC

zdigital economy
An economy that is based on digital
technologies, including digital
communication networks, computers,
software, and other related information
technologies; also called the Internet
economy, the new economy, or the Web
economy

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Digital Revolution Drives EC

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Business Environment Drives EC

zThe Business Environment

zThe business environment impact model
zBusiness pressures
zOrganizational response strategies

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Business Environment Drives EC

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Business Environment Drives EC

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

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EC Business Models
z Six elements of a business model include
descriptions of:
1. Customers to be served and the companys relationships
with these customers including customers value proposition
2. All products and services the business will offer
3. The business process required to make and deliver the
products and services
4. The resources required and the identification of which ones
are available, which will be developed in house, and which
will need to be acquired
5. The organizations supply chain, including suppliers and
other business partners
6. The revenues expected (revenue model), anticipated costs,
sources of financing, and estimated profitability (financial
viability)

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EC Business Models
zrevenue model
Description of how the company or an
EC project will earn revenue
zvalue proposition
The benefits a company can derive from
using EC

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EC Business Models
zThe major revenue models are:
zSales
zTransaction fees
zSubscription fees
zAdvertising fees
zAffiliate fees
zOther revenue sources

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EC Business Models

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EC Business Models
z Functions of a Business Model
z Articulate a customer value proposition
z Identify a market segment
z Define the ventures specific value chain structure
z Estimate the cost structure and profit potential
z Describe the ventures positioning within the value
network linking suppliers and customers
z Formulate the ventures competitive strategy

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EC Business Models
Typical EC Business Models
z Online direct marketing
z Electronic tendering systems.
z Name your own price
z Find the best price
z Affiliate marketing
z Viral marketing
z Group purchasing
z Online auctions
z Product and service
customization
z Electronic marketplaces and
exchanges
z Information brokers
(informediaries)
z Bartering
z Deep discounting
z Membership
z Value-chain integrators
z Value-chain service providers
z Supply chain improvers
z Social networks,
communities, and blogging
z Direct sale by manufacturers
z Negotiation
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EC Business Models
ztendering (bidding) system
Model in which a buyer requests would-
be sellers to submit bids; the lowest
bidder wins
zname-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
zaffiliate marketing
An arrangement whereby a marketing
partner (a business, an organization, or
even an individual) refers consumers to
the selling companys Web site
zviral marketing
Word-of-mouth marketing in which
customers promote a product or service
to friends or other people

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EC Business Models
zSMEs
Small-to-medium enterprises
zgroup purchasing
Quantity (aggregated) purchasing that
enables groups of purchasers to obtain a
discount price on the products
purchased

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EC Business Models
ze-co-ops
Another name for online group
purchasing organizations
zcustomization
Creation of a product or service
according to the buyers specifications

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Benefits and Limitations of EC

zBenefits to
zOrganizations
zConsumers
zSociety
zLimitations
zTechnological
zNontechnological

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Social and Business Networks
zsocial networks
Web sites that connect people with
specified interests by providing free
services such as photo presentation, e-
mail, blogging, etc.
zBusiness-oriented networks are social
networks whose primary objective is to
facilitate business

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The Digital Enterprise
z digital enterprise
A new business model that uses IT in a
fundamental way to accomplish one or more of
three basic objectives: reach and engage
customers more effectively, boost employee
productivity, and improve operating efficiency.
It uses converged communication and
computing technology in a way that improves
business processes

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The Digital Enterprise
zcorporate portal
A major gateway through which
employees, business partners, and the
public can enter a corporate Web site

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The Digital Enterprise

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Managerial Issues

1. Is it real?
2. Why is B2B e-commerce so attractive?
3. There are so many EC failureshow
can one avoid them?
4. How do we transform our organization
into a digital one?

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Managerial Issues

5. How should we evaluate the magnitude

of business pressures and
technological advancement?
6. How can we exploit social/business
networking?
7. What should be my companys strategy
toward EC?
8. What are the top challenges of EC?

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