ADDIS ABABA UNIVERSITY, SCHOOL OF COMMERCE

MARKETING MANAGEMENT PROGRAM UNIT

COURSE OUTLINE
•Course title: E-commerce
•Course code: MKTM531
•CREDIT HOUR: 2

•LEARNING OBJECTIVES
•To gain an understanding of the theories and concepts underlying e-
commerce
•To apply e-commerce theory and concepts to what e-marketers are doing
in "the real world"
•To improve familiarity with current challenges and issues in e-commerce
•To understand the basic concepts of digital marketing

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• COURSE DESCRIPTION
• Electronic commerce may be thought of as a revolution in progress. If
organizations are going to take advantage of the new Internet
technologies, they must first address them as an integral part of their
strategic perspective. Businesses are recognizing the Internet's role in the
decision process that organizations go through in analyzing and
purchasing goods and services.

• CHAPTER ONE
• INTRODUCTION TO E-COMMERCE
• 1.1 The internet and WWW
• 1.2 The Difference between E-commerce and E-business
• 1.3 History of E-commerce
• 1.4 Unique Feature of E-commerce
• 1.5 Benefit of Electronic commerce
• 1.6 Limitations of Electronic commerce

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• CHAPTER TWO
• BUSINESS MODEL FOR E-COMMERCE
• 2.1 Key Elements of a business model
• 2.2 E-business Model based on Relationship of Transaction
Parties
• 2.3 E-business Model Based on the Relationship of
Transaction Types

• CHAPTER THREE
• E-COMMERCE PAYMENT SYSTEMS
• 3.1 Payment Systems
• 3.2 E-commerce Digital Payment Systems in the B2C Arena
• 3.3 B2B payment systems
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• CHAPTER FOUR
• E-COMMERCE MARKETING CONCEPTS
• 4.1 Consumers Online: the internet audience and consumer
behavior
• 4.2 B2B and B2C E-commerce Marketing and Branding Strategies
• 4.3 Online Market Research
• CHAPTER FIVE
• RETAILING ON THE WEB
• 5.1 The Retail Sector
• 5.2 Analyzing the viability of Online Firms
• 5.3 Online Purchase and Retailing Business Models
• 5.4 Problems with E-Retailing
• CHAPTER SIX
• ETHICAL, SOCIAL, AND POLITICAL ISSUES IN E-COMMERCE

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• CHAPTER SEVEN
• DIGITAL MARKETING
• 7.1. Introduction to digital marketing
• 7.2. Search engine advertising
• 7.3. Email marketing
• 7.4. Analytics
• Teaching Methodologies
• Lectures, group assignments and in-class
presentation. However, the course instructor may
use other supplementary methods for effective
delivery of the course as needed.

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• EVALUATION:-
• Continuous assessment __________________60%
• Case analysis ---30%
• Article review ---30%
• Final summative exam ____________________40%
•   References:
•  E. W. T. Ngai and F. K. T. Wat, "A literature review and classification of
electronic commerce research", Information & Management, (2002).
• Anindya Datta, Kaushik Dutta, Helen Thomas and Debra VanderMeer,
"World Wide Wait: A Study of Internet Scalability and Cache-Based
Approaches to Alleviate It", Management Science, Vol. 49, Issue 10,
October 2003,
• Scott Jordan, "Implications of Internet architecture on net neutrality",
ACM Transactions on Internet Technology, Vol. 9, No. 2, May 2009,
• Turban, E., King, D., McKay, J., Marshall, P., Lee, J., & Viehland, D. (2010).
• Electronic commerce: A managerial perspective 2010. Upper Saddle River,
NJ: Pearson Prentice Hall. ISBN 9780136100362

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E-Commerce
MKTM531
ECTS 5
CHAPTER ONE

Introduction to ecommerce

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Chapter objectives
In this CHAPTER, you will learn about:
• The description of the relationship among the Internet, an
intranet and an extranet
• What is electronic marketing?
• The basic elements of electronic marketing
• Differences between electronic marketing and traditional
marketing
• Differences between e-commerce and e-business
• Pure and partial e-commerce
• Advantages and disadvantages of using electronic marketing

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The Internet and WWW

The beginning of E-COMMERCE

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The Internet and WWW

• The Internet is a large system of interconnected

computer networks that spans the globe.
• The Internet supports e-mail, online newspapers
and publications, discussion group, game, and free
software.
• The World Wide Web includes an easy-to-use
standard interface for Internet resources accesses.
Origins of the Internet
• In the early 1960s, the U.S. Department of Defense
started research on networking computers.
• Its researchers developed a multiple channels
network.
• In 1969, the Defense Department used this
network model to connect four mainframe
computers at different locations.
New Uses for the Internet
• In 1972, a researcher wrote a program that could
send and receive messages over the network.
• E-mail was born and became widely used.
• The network software include:
• File Transfer Protocol (FTP)
• User’s News Network (Usenet)
Commercial Use of the Internet
• Companies used PC to construct their networks in
1980s.
• National Science Foundation (NSF) funded the
network services in 1980s.
• In 1989, NSF permitted two commercial e-mail
services.
• As the 1990s began, the Internet started to serve
the global resource accesses.
Growth of the Internet
• In 1991, the NSF further eased its restriction on
Internet commercial activity.
• The privatization of the Internet was substantially
completed in 1995.
• The new structure of the Internet was based on
four network access points (NAPs).
• Internet service providers (ISPs) sell Internet access
rights directly to customers.
Growth of the Internet
The Internet hierarchy
BACKBONE

NAPs

REGIONAL NETWORKS

LOCAL ISPs

Users
Organizations
The Internet
The Intranets
– An intranet is a corporate LAN and/or Wide Area Network (WAN)
that is secured behind company’s firewalls and it uses Internet
technologies.

– Although intranets are developed using the same IP protocol as the

Internet, they operate as private networks with limited access.

– Only employees who are issued passwords and access codes are
able to use them. So, intranets are limited to information pertinent
to the company and contain exclusive and often proprietary and
sensitive information.
– Firewalls protect intranets from unauthorized outside access.

© Prentice Hall, 2000 18

The Intranet

ERP
Servers
Clients

Legacy
systems
Public/External Intranet E-mail
Internet Users servers

Web
Firewalls
servers

Databases

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The Extranet
– An extranet implies an “extended intranet”, which
uses IP protocol networks (like the Internet) to link
intranets in different locations.
– Extranet is a network that links business partners to
one another over the Internet by tying together their
corporate intranets
– Extranet transmissions are conducted over the Internet
to save money.
– Connecting two or more Intranets forms an extranet.
– Goal is to foster collaboration between organizations
© Prentice Hall, 2000 20
 The Extranet

Extranet

Suppliers VPN : Intranet

Virtual Firewall
Private Networks

Distributors VPN Tunneling Internet

Intranet
VPN
Customers Firewall

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The Extranets

• Extranet enables companies to share some

of their data with business partners or
clients, perhaps by establishing a shared
database, and connecting intranets using IP
and Firewall.
Major differences between
Extranet, Intranet and Internet

• The major difference between each of

these networks is the control of access to
information and how it is shared.
 Summary : Internet, Intranet, and Extranet

Network Typical Type of

Type Users Access Information
Internet Any individual Unlimited, General, public
with dial-up public; no and advertisement
access or LAN restrictions
Intranet Authorized Private and Specific,
employees restricted corporate and
ONLY proprietary
Extranet Authorized Private and Shared in
groups from outside authorized
collaborating authorized collaborating
companies partners group
© Prentice Hall, 2000 24
So what is ecommerce?
Definitions of E-commerce
There is no generally accepted definition of E-
marketing.

The overview presented in this session covers

international institutions, national ministries
researchers, and a computer magazine.

The selection represents institutions and

individuals who are quite influential in the areas of
politics, research, and public opinion, respectively.
Definitions of E-commerce

Broadly speaking, e-commerce includes any

form of selling-buying activities conducted
via electronic connections.
Definitions of E-commerce
For the purpose of this class a broad definition of e-
commerce will be used.

Electronic marketing denotes the seamless

application of information and communication
technology from its point of origin to its end
point along the entire value chain of business
processes conducted VIA the INTERNET,
INTRANET & EXTRANET and designed to
enable the accomplishment of a business goal.
Perspectives in defining
e-commerce
Communication Perspective:
• EC is the delivery of goods, services, information, or
payments over computer networks or by any other
electronic means.

Business Process Perspective:

• EC is the application of technology toward the
automation of business transactions and work flow

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Perspectives….
Service Perspective:
• EC is a tool that addresses the desire of firms,
consumers, and management to cut service costs
while improving the quality of goods and
increasing the speed of service delivery.

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Perspectives…
Online Perspective:
• EC provides the capability of buying and selling
products and information on the internet and other
online services

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Forms of E-commerce

• The degree of digitization of the following three

dimensions determine the form of e-commerce
• the product (service) sold [physical / digital];
• the process [physical / digital]
• the delivery agent (or intermediary) [physical / digital]
• Traditional marketing
• all dimensions are physical
• Pure EC
• all dimensions are digital
• Partial EC
• all other possibilities include a mix of digital and physical
dimensions
Terms in e-commerce
• E-tailer: an Internet retail site
• Electronic market (e-marketplace): online
marketplace where buyers and sellers meet to
exchange goods, services, money, or information
• Pure vs. Partial E-Commerce: degree of digitization
of the product (service) sold; the process; the
delivery agent (or digital intermediary)

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Terms…
• Virtual (pure-play) organizations: Internet retailers
such as [Link] that have no physical stores.
Conduct business activities solely online.
• Clicks-and-mortar retailers (bricks-and-clicks):
Conduct some EC activities, but do primary
business in the physical world. An example is
Nordstrom, which has both an Internet presence
and many physical stores.

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Terms…
• Brick-and-Mortar organizations: old-economy
corporations that perform most of their business
off-line, selling physical products by means of
physical agents

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Electronic commerce vs.
Electronic Business
• Electronic commercce is the use of electronic
transmission mediums (telecommunications) to
engage in the exchange, including buying and
selling, of products and services requiring
transportation, either physically or digitally, from
location to location.
 Electronic commerce vs.
Electronic Business
• The term electronic marketing is restricting.
• It does not fully encompass the true nature of the many
types of digital information exchanges.
• E-Business describes the broadest definition of EC. It
includes customer service and intrabusiness tasks. It is
frequently used interchangeably with EC.
 Electronic commerce vs.
Electronic Business
• Electronic business involves more than just selling and buying; it
includes all kinds of presale and postsale efforts.
• Then it encompasses new approaches to :
• market research,
• advertising,
• product purchasing and distribution,
• customer support,
• recruiting,
• public relations,
• business operations,
• product management,
• knowledge distribution,
• financial transactions.
 Traditional vs Electronic commerce
transactions
• Example of Traditional marketing transactions :
• The purchaser
• generates a request,
• gains approval,
• selects an appropriate supplier,
• determines availability, and issues a purchase order

• The seller must

• verify credit and sales history,
• check inventory,
• schedule shipping,
• notify the warehouse, and
• issue an invoice
 Traditional vs Electronic commerce
transactions
• Example of Electronic marketing transactions :
• The purchaser
• Select products from a web site,
• Request approvals and forward orders to purchasing via electronic
processes,

• The seller can

• add orders to database,
• check warehouse inventory and customer status,
• arrange delivery,
• handle communications all via electronic commerce.
History of e-commerce
The history of e-commerce can be divided into
• e-commerce I (1995-2000)
 Is a period of explosive growth in e-commerce
beginning in 1995 and ending in 2000.
 The early years are known for widespread use of the
web to advertise products and later years known stock
market valuations for [Link] companies began to
collapse

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History…
 Thousands of [Link] companies were formed,
backed by over $125 billion in financial capital
 The assumptions for many professional was
 Every individual in the world could access information at
cheap price
 The internet should remain self-governed

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History…
 Infinite set of suppliers compete against one another and
where customers have access to all relevant market
information worldwide
disintermediation- the disappearance of intermediaries which
raises costs.
 Friction-free commerce- unfair competitive advantages would
be eliminated

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History…
• e-commerce II 2001-2006
It is a period of crash in stock market values for E-
commerce
The crash was due to
 Large amount of information technology capital expenditure
were funneled to withstand the risk of Y2K
 Excess capacity in high speed fiber optic networks were made
and that causes price war which killed small firms, for they can
not pay their debt

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Unique Feature of E-commerce
• Ubiquity: internet/web technology is available
everywhere at work, at home, and elsewhere via
mobile devices anytime. As a result it
 reduces transaction costs: cost of participating in the market.
 Reduces cognitive energy: mental effort required to complete
task.

• Global Reach: permits commercial transactions to

cross cultural and national boundaries

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Feature…
• Universal Standards: technical standards of the
internet and conducting e-commerce are shared by
all nations around the world.
• Richness: the complexity and content of a
message. Traditional markets have greater richness
than e-commerce.
• Interactivity: technology that allows two-way
communication between merchant and consumer.

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Feature…
• Information Density: the total amount and quality
of information available to all market participants,
consumers, and merchants alike.
 e-commerce technologies reduce information collection,
storage, processing, and communication costs
 At the same time, these technologies increase greatly the
currency, accuracy, and timeliness of information- making
information more useful and important than ever. Due to
these technologies prices and costs become more transparent

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Benefits of Electronic commercce
Benefits to organizations
 Expands market to national and international markets
 decrease the cost of creating, processing, distributing, storing,
and retrieving paper-based information
 supply chain inefficiencies can be minimized with electronic
commerce
 Pull type processing allows for inexpensive customization of
products and services and provides a competitive advantage for
companies who implement this strategy. [Link]

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Benefits…
 Electronic marketing allows for many innovative business models
that provide strategic advantages and/or increase profits.
 EC allows for high degree specialization that is not economically
feasible in the physical world. [Link]
 It reduces the time between the outlay of capital and the receipt
of products and services
 EC lowers telecommunications costs
 EC enables companies to interact more closely with customers,
even if through intermediaries.

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Benefits…
Benefits to Society
 More individuals work at home and do less traveling for
work or shopping
 Lower prices allow less affluent people to improve their
standard of living
 Public services can be delivered at lower cost

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Limitations of Electronic commerce
Technical Limitation
 system security, reliability, standards, and some
communication protocols are still evolving
 telecommunication bandwidths are insufficient
 Software development tools are still evolving and changing
rapidly
 Some EC software might not fit with some hardware or it may
be incompatible with certain operating systems or components

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Limitations…
Non-Technical Limitation
 The cost of developing EC in-house can be very high and
mistakes made due to lack of experience may result in delays.
 Security and privacy are important in the B2C area
 Customers do not trust an unknown, faceless, seller, paperless
transactions, and electronic money.
 Some customers like to touch items such as cloths, so they
know exactly what they are buying
 Legal issues are not yet refined
 Many people are looking for EC to stabilize before they enter
into it
 EC does not have enough support service

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Limitations…
 There could be a breakdown in human relationships
 Internet access is still expensive and/or inconvenient for many
potential customers.

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End of chapter one

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