E-Commerce

Mekanisme Pasar
(Market Mechanisms)
 Learning Objectives

 Define e-marketplaces and their components

 List the major types of e-markets and their features
 Define supply chains and value chains and understand their
roles
 Describe the role of intermediaries in EC
 Describe electronic catalogs, shopping carts, and search
engines
 Describe the various types of auctions and list their
characteristics
 Discuss the benefits, limitations, and impacts of auctions
 Describe bartering and negotiating online
 Describe the impact of e-marketplaces on organizations
 Define m-commerce and explain its role as a market
mechanism
 Electronic Marketplaces

 Markets facilitate  Markets create

exchange of economic value
 Information for
 Goods  Buyers
 Services  Sellers
 Payments  Market intermediaries
 Society at large
 Electronic Marketplaces [2]

Three main functions of markets

 Matching buyers and sellers
 Facilitating the exchange of information,
goods, services, and payments associated
with market transactions
 Providing an institutional infrastructure
 Marketspace Components

Marketspace: a marketplace in which

sellers and buyers exchange goods and
services for money (or for other goods
and services), but do so electronically
 Customers Sellers
 Goods (physical or digital) Infrastructure
 Front-end Back-end
 Intermediaries/business partners
 Support services
 Marketspace Components [2]

 Customers  Sellers
 Web surfers looking for  Hundreds of thousands of
• Bargains storefronts are on the Web
• customized items  Advertising and offering
millions of Web sites
• Collectors’ items
 Sellers can sell
• entertainment etc.
• Direct from their Web site
 Organizations account • E-marketplaces
for over 85 percent of
EC activities
 Marketspace Components [3]

 Products  Infrastructure
 Physical products  Hardware
 Digital products—  Software
goods that can be  Networks
transformed to digital
format and delivered
over the Internet
 Marketspace Components [4]

 Front-end  Back-end activities

business are related to
processes include  Order aggregation and
 Seller’s portal fulfillment
 Electronic catalogs  Inventory management
 shopping cart  Purchasing from suppliers
 Search engine  Payment processing
 Payment gateway  Packaging and delivery
 Marketspace Components [5]

Intermediary
 a third party that operates between sellers
and buyers
Other business partners
 collaborate on the Internet, mostly along the
supply chain
Support services such as
 Certification and trust services
 Knowledge providers
 Types of Electronic Markets

Electronic storefronts
 a single company’s Web site where products
and services are sold
Mechanisms for conducting sales
 Electronic catalogs Payment gateway
 Search engine Shipment court
 Customer services Electronic cart
 E-auction facilities
Electronic malls (e-malls)
 an online shopping center where many stores
are located
 Types of Electronic Markets [2]

 Types of stores and malls

 General stores/malls—  Regional vs. global
large marketspaces that stores
sell all types of products  Pure online
 Public portals organizations vs. click-
 Specialized stores/malls— and-mortar stores
sell only one or a few types
of products
 E-marketplaces
 online market, usually B2B, in which buyers and
sellers negotiate; the three types of e-marketplaces
are private, public, consortia
 E-Marketplaces

Private e-marketplaces
 Online markets owned by a single company:
• Sell-side: company sells either standard or
customized products to qualified companies
• Buy-side marketplaces: company makes purchases
from invited suppliers

Public e-marketplaces
 B2B markets, usually owned and/or managed
by an independent third party, that include many
sellers and many buyers (exchanges)
 Consortia & Information Portals

 Consortia
 E-marketplaces that deal with suppliers and
buyers in a single industry
• Vertical consortia are confined to one industry
• Horizontal allow different industries trade there
 Information portal
 A personalized, single point of access through
a Web browser to business information inside
(and marginally from outside) an organization
• Publishing portals Commercial portals
• Personal portals Corporate portals
• Mobile portals
 Supply Chains

Supply chain
 The flow of materials, information, money, and
services from raw material suppliers through
factories and warehouses to the end
customers
 Includes organizations and processes that
create and deliver the following to the end
customers:
– Products
– Information
– Services
 Supply Chains [2]

A supply chain involves activities that

take place during the entire product
life cycle
It also includes:
 Movement of information and money and
procedures that support the movement of a
product or a service
 The organizations and individuals involved
A Simple Supply Chain
 Supply Chain Components

Upstream supply chain

 includes the activities of suppliers
(manufacturers and/or assemblers) and their
suppliers
Internal supply chain
 includes all in-house processes used in
transforming the inputs received from the
suppliers into the organization’s outputs
Downstream supply chain
 includes all the activities involved in delivering
the product to the final customers
 Types of Supply Chains

Integrated make-to-stock
Continuous replenishment
Build-to-order—model in which a
manufacturer begins assembly of the
customer’s order almost immediately upon
receipt of the order
Channel assembly—model in which
product is assembled as it moves through
the distribution channel
Supply Chains: Integrated &
Build-to-Order
 Value Chain & Value System

Value chain
 the series of activities a company performs to
achieve its goal(s) at various stages of the
production process
 each activity adds value to the company’s
product or service, contributes to profit, and
enhances competitive position in the market
Value system
 a set of value chains in an entire industry,
including the value chains of tiers of suppliers,
distribution channels, and customers
 Supply Chain & Value Chain

Value chain and the supply chain

concepts are interrelated
 Value chain shows the activities performed
by an organization and the values added
by each
 The supply chain shows flows of materials,
money, and information that support the
execution of these activities
 Intermediation in E-Commerce

Intermediaries provide value-added

activities and services to buyers and sellers:
wholesalers, retailers, infomediaries
Roles of intermediaries
 Search costs: databases on customer preferences
 Lack of privacy: anonymity of sellers and buyers
 Incomplete information: gather product information
 Contract risk: protect sellers against non-payment
 Pricing inefficiencies: induce appropriate trades
 E-Distributors on B2B
E-distributor
 an e-commerce intermediary that connects
manufacturers (suppliers) with buyers by
aggregating the catalogs of many suppliers in
one place—the intermediary’s Web site
E-distributors also provide support
services
 Payments
 Deliveries
 Escrow services
 Aggregate buyers’ and or sellers’ orders
 Disintermediation &
Reintermediation

Disintermediation
 elimination of intermediaries between sellers
and buyers
Reintermediation
 establishment of new intermediary roles for
traditional intermediaries that were
disintermediated
 Syndication as an EC Mechanism

Syndication
 the sale of the same good (e.g., digital
content) to many customers, who then
integrate it with other offerings and resell it
or give it away free
 Competition in
the Internet Ecosystem

Competition in the Internet

ecosystem (business model of the
online economy)
 Inclusive with low barriers to entry
 Self-organizing
 Old rules may no longer apply
 Competition is tense
 Lower buyers’ search cost
 Speedy comparisons
 Differentiation and personalization
 Competition in
the Internet Ecosystem [2]

Differentiation
 providing a product or service that is unique
Personalization
 the ability to tailor a product, service, or Web
content to specific user preferences
Lower prices
 Competition in
the Internet Ecosystem [3]

Customer service is an extremely

important competitive factor
Some competitive factors are less
important as a result of EC:
 Size of company is no longer significant
 Geographical location is insignificant
 Language barriers are being removed
 Digital products do not have normal wear and
tear
 Competition in
the Internet Ecosystem [4]

EC supports efficient markets and could

result in almost perfect competition
with these characteristics:
 Many buyers and sellers must be able to enter the
market at no entry cost
 Large buyers or sellers are not able to individually
influence the market
 The products must be homogeneous
 Buyers and sellers must have comprehensive
information about the products and about the market
participants’ demands, supplies, and conditions
 Porter’s Competitive Analysis

Porter’s competitive forces model applied

to an industry views 5 major forces of
competition that determine the industry’s
structural attractiveness
These forces, in combination, determine
how the economic value created in an
industry is divided among the players in
the industry
Such an industry analysis helps
companies develop their competitive
strategy
Porter’s Competitive Forces Model
 Liquidity

Liquidity
 The need for a critical mass of buyers and
sellers
• The fixed cost of deploying EC can be very high
• Without a large number of buyers, sellers will not
make money
Early liquidity
 Achieving a critical mass of buyers and sellers
as fast as possible, before the market-maker’s
cash disappears
 Quality Uncertainty & Assurance

Quality uncertainty
 The uncertainty of online buyers about the
quality of products that they have never seen,
especially from an unknown vendor
• Provide free samples
• Return if not satisfied
– Microproduct—a small digital product costing a few cents
• Insurance, escrow, and other services
 E-Market Success Factors
 Contributors to e-market success
 Product
characteristics
 Type
 Price
 Availability of standards
and product information
 Industry
characteristics
 Brokers currently
necessary
 Intelligent systems may
replace brokers
 Seller
characteristics
 Consumers find sellers
with the lowest prices
 Low-volume, higher-
profit-margin transactions
 Consumer
characteristics
 Impulse buyers
 Patient buyers
 Analytical buyers
 Electronic Catalogs

Electronic catalogs
 The presentation of product information in an
electronic form; the backbone of most e-selling
sites
Evolution of electronic catalogs
 Merchants—advertise and promote
 Customers—source of information and price comparisons
 Consist of product database, directory and search capability
and presentation function
 Replication of text that appears in paper catalogs
 More dynamic, customized, and integrated
 Classifications of E-catalogs

Dynamics of information presentation

 Static or dynamic
Degree of customization
 Ready-made or customized
E-catalogs allow integration of:
 Order taking and fulfillment
 Electronic payment
 Intranet workflow
 Inventory and accounting system
 Suppliers’ extranet
 Relationship to paper catalogs
 Customized Catalogs

Assembled specifically for:

 A company
 An individual shopper
Customization systems can:
 Create branded, value-added capabilities
 Allows user to compose order
 May include individualized prices, products, and
display formats
 Automatically identify the characteristics of
customers based on the transaction records
 Search Engines

Search engine
 A computer program that can access a
database of Internet resources, search for
specific information or keywords, and report
the results
Software (intelligent) agent
 Software that can perform routine tasks that
require intelligence
 Search Engines, Intelligent Agents
and Shopping Carts

E-commerce users use both search

engines and intelligent agents
 Search engines find products or services
 Software agents conduct other tasks
(comparisons)
Electronic shopping cart
 An order-processing technology that allows
customers to accumulate items they wish to buy
while they continue to shop
 Auctions

Auction
 A market mechanism by which a seller places
an offer to sell a product and buyers make
bids sequentially and competitively until a
final price is reached
Auctions deal with products and
services for which conventional
marketing channels are ineffective or
inefficient
 Limitations of Traditional Auctions

Traditional auctions are generally a rapid

process
It may be difficult for sellers to move
goods to the auction site
Commissions are fairly high
 Electronic Auctions

Electronic auctions (e-auctions)

 Auctions conducted online
 Host sites on the Internet serve as brokers
offering:
• Services for sellers to post their goods for sale
• Allowing buyers to bid on those items
 Many sites have certain etiquette rules that
must be adhered to in order to conduct fair
business
 E-auctions [2]

Major online auctions offer:

 Consumer products
 Electronic parts
 Artwork
 Vacation packages
 Airline tickets
 Collectibles
 Excess supplies and inventories being
auctioned off by B2B marketers
 Dynamic Pricing

Dynamic pricing
 Prices that change based on supply and
demand relationships at any given time
The four major categories of dynamic
pricing are based on the number of
buyers and sellers involved:
 One buyer, one seller
 One seller, many potential buyers
 One buyer, many potential sellers
 Many sellers, many buyers
Types of Dynamic Pricing
 Dynamic Pricing [2]

One buyer, one seller uses

 Negotiation
 Bargaining
 Bartering
Price will be determined by:
 Each party’s bargaining power
 Supply and demand in the item’s market
 Possibly business environment factors
 Dynamic Pricing [3]

One seller, many potential buyers

 Forward auction
• An auction in which a seller entertains bids from
buyers
 English auction
• An auction in buyers bid on an item in sequence
and the price increases with time
 Yankee auction
• An auction of multiple identical items in which
bidders can bid for any number of the items offered,
and the highest bid wins
 Dynamic Pricing [4]

 Dutch auction
• Auction of multiple identical items, with prices
starting at a very high level and declining as the
auction time passes
 Free-fall (declining price) auction
• A variation of the Dutch auction in which only one
item is auctioned at a time; the price starts at a
very high level and declines at fixed time intervals,
the winning bid is the lowest one when the time
expires
English Auction, Ascending Price
 Dynamic Pricing [5]

One buyer, many potential sellers

 Reverse auction (bidding, or tendering
system)
• auction in which the buyer places an item for
bid (tender) on a request for quote (RFQ)
system
• potential suppliers bid on the job, with price
reducing sequentially
• the lowest bid wins
• primarily a B2B or G2B mechanism
The Reverse Auction Process
 Dynamic Pricing [6]

One buyer, many potential sellers [2]

 ”Name-your-own-price” model
 Consumer-to-business (C2B) model
Many sellers, many buyers
 Double Auction
• Buyers and their bidding prices and sellers and
their asking prices are matched, considering the
quantities on both sides
 Limitations of E-auctions

Possibility of fraud
 defective goods or receive goods/services
without paying
Limited participation
 invitation only or Open to dealers only
Lack of security
 C2C auctions sometimes not done in an
unencrypted environment
Limited software
 only a few “complete”or “off-the-shelf” market-
enabling solutions
 Impacts of Auctions

Coordination mechanism
Social mechanism to determine a price
Highly visible distribution mechanism
A component in e-commerce
 Bartering Online

Bartering
 An exchange of goods and services
• Bartering exchanges
– Give your offer to intermediary
– Intermediary asses value of your product or service
in ”points”
– Use “points” to buy what you need
• Bartering sites must be financially secure
• Alternative to bartering is to auction surplus and
then use the money collected to buy items needed
 Bartering Online [2]

E-bartering
 bartering conducted online, usually by a
bartering exchange
Bartering exchange
 a marketplace in which an intermediary
arranges barter transactions
 Online Negotiating

Online negotiation
 Electronic negotiation
 Usually done by software (intelligent) agents that
perform searches and comparisons
 Improves bundling and customization of products and
services
Dynamic prices can be determined by
negotiation
Negotiated prices result from interactions
and bargaining among sellers and buyers
 Expensive items like cars and real estate
 Deal with nonpricing terms like payment method and
credit
 Online Negotiating [2]

Three factors that facilitate

negotiated prices
 Intelligent agents that perform searches and
comparisons
 Computer technology that facilitates
negotiation process
 Products and services that are bundled and
customized
 Web 2.0 Mechanisms and Tools

Weblogging (blogging)
 Technology for personal publishing on the
Internet
Blog
 A personal Web site that is open to the public
to read and to interact with
 Often dedicated to specific topics or issues
Wikilog (wikiblog or wiki)
 A blog that allows everyone to participate as a
peer; anyone can add, delete, or change
content
 Web 2.0 Mechanisms
and Tools [2]
Podcast
 A media file that is distributed over the
Internet using syndication feeds for playback
on mobile devices and personal computers
 As with the term radio, it can mean both the
content and the method of syndication
Mashup
 A Web site that combines content data from
more than one source to create a new user
experience
 Mobile Commerce (M-commerce)

Mobile computing permits real-time

access to information, applications,
and tools that, until recently, were
accessible only from a desktop
computer
Mobile commerce (m-commerce)
 e-commerce conducted via wireless devices
M-business
 the broadest definition of m-commerce, in
which e-business is conducted in a wireless
environment
 The Promise of M-Commerce

 Mobility  Mobile applications

significantly are expected to
changes the change the way
manner in which we:
people and  Live
customers:  Play
 Interact  Do business
 Communicate
 Collaborate
 The Promise of M-Commerce [2]

 The PC-based Internet culture may change

to one based on mobile devices
 M-commerce creates new business models
for EC, notably location-based applications
 Many large corporations with huge
marketing presence are transforming their
businesses to include m-commerce-based
products and services
 Microsoft AT&T
 Intel AOL-Time-Warner
 Sony
 Impacts of E-Markets on Business
Processes & Organizations

Impacts of e-markets on B2C direct marketing:

 Product promotion  Brand or corporate
 New sales channel image
 Direct savings  Customization
 Reduced cycle time  Advertising
 Customer service  Ordering systems
 Market operations
Analysis-of-Impacts Framework
 Transforming Organizations

Technology and organizational learning

 To survive, companies will have to learn and
adapt quickly to the new technologies
 Corporate change must be planned and
managed
 New technologies will require new organizational
structures and approaches
 Transforming Organizations [2]

The changing nature of work

 Driven by increased competition in the global
marketplace, firms are Reducing the number
of employees and Outsourcing whatever work
they can to countries where wages are
significantly less
 The upheaval brought on by these changes
creates new opportunities and new risks;
forces us to think new ways of about jobs,
careers, and salaries
 Transforming Organizations [3]

 Digital-Age workers will have to be very

flexible—truly secure jobs will be few, many
will work from home
 Digital-Age companies will have to prize its
core of essential workers as its most valuable
asset—empowering them and providing them
with means to expand their knowledge and skill
base
 Redefining Organizations

New and improved product capabilities

 E-markets allow for new products to be created
and/or for existing products to be customized in
innovative ways
 Customer profiles and data on customer
preferences—source of information for
improving products or designing new ones
 Mass customization enables manufacturers to
create specific products for each customer,
based on the customer’s exact needs
 Redefining Organizations [2]

New business models

 E-markets affect individual companies,
products, entire industries
Improving the supply chain
Changes in the Supply Chain [1]
Changes in the Supply Chain [2]
 Redefining Organizations [3]

Impacts on Manufacturing
 Manufacturing systems changing from mass
production lines to demand-driven, just-in-time
manufacturing
 Virtual manufacturing enables global manufacturing
plants to run as though they were one in location
 Build-to-Order—the biggest change in
manufacturing will be the move to build-to-order
systems
• Manufacturing or assembly will start only after an order is
received
• Will change not only the production planning and control, but
also the entire supply chain
 Redefining Organizations [4]

Impacts on finance and accounting

 E-markets require special finance and
accounting systems—most are electronic
payment systems complicated by legal issues
and international standards
 Executing an electronic order triggers back-
office transactions
 These activities must be efficient, synchronized,
and fast so the electronic trade will not be
slowed down
 Redefining Organizations [5]

Impact on human resource

management and training
 EC is changing how people are recruited,
evaluated, promoted, and developed
 EC also is changing the way training and
education are offered to employees
• Online distance learning and virtual courses are
exploding
• Companies are cutting training costs by 50 percent or
more
 New e-learning systems offer two-way video, on-
the-fly interaction, application sharing
 Summary

A marketspace or e-marketplace is a virtual

market that doesn’s suffer from limitations
of space, time or borders
Types of B2C e-markets are storefronts and
e-malls
Types of B2B e-markets are private and
public e-marketplaces, which can be vertical
(by industry) or horizontal
Auctions can be divided into forward and
reverse auction
 Exercise

How are mashups helpful to users?

List and explain some of the benefits to
sellers or buyers of auctions!