CH1

Definition and Scope of E-commerce

It is about the exchange of digitized information between parties

It is technology-enabled

It is technology-mediated

It includes intra-and interorganizational activities that support the exchange

Four Categories of E-commerce

B2B (Business-to-Business)
Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on
quantity of order and is often negotiable.
B2C (Business-to-Consumer)
Businesses selling to the general public typically through catalogs utilizing shopping cart software. By dollar volume, B2B takes the prize, however
B2C is really what the average Joe has in mind with regards to ecommerce as a whole.
C2B (Consumer-to-Business)
A consumer posts his project with a set budget online and within hours companies review the consumer's requirements and bid on the project. The
consumer reviews the bids and selects the company that will complete the project. Elance empowers consumers around the world by providing the
meeting ground and platform for such transactions.
P2P (Peer-to-Peer)
There are many sites offering free classifieds, auctions, and forums where individuals can buy and sell thanks to online payment systems like PayPal
where people can send and receive money online with ease. eBays auction service is a great example of where person-to-person transactions take
place every day since 1995.

Classical Framework for Strategic Management

Company Mission
The mission of a company is the unique purpose that sets it apart from other companies of its type and identifies the scope of its operations. In short, the mission
describes the companys product, market, and technological areas of emphasis in a way that reflects the values and priorities of the strategic decision makers.
Internal Analysis
The company analyzes the quantity and quality of the companys financial, human, and physical resources. It also assesses the strengths and weaknesses of
the companys management and organizational structure. Finally, it contrasts the companys past successes and traditional concerns with the companys current
capabilities in an attempt to identify the companys future capabilities.
External Environment
A firms external environment consists of all the conditions and forces that affect its strategic options and define its competitive situation. The strategic
management model shows the external environment as three interactive segments: the remote, industry, and operating environments.
Control and Monitoring
Strategic control is concerned with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making
necessary adjustments. In contrast to postaction control, strategic control seeks to guide action in behalf of the generic and grand strategies as they are taking
place and when the end results are still several years away. The rapid, accelerating change of the global marketplace of the last 10 years has made continuous
improvement another aspect of strategic control in many organizations. Continuous improvement provides a way for managers to provide a form of strategic
control that allows their organization to respond more proactively and timely to rapid developments in hundreds of areas that influence a businesss success.
Exhibit 1-6 describes how Yahoos e-commerce strategy was significantly undermined by its managements failure to see fundamental shifts in its industry.

Strategy Making in Rapidly Changing Environment

Media
Infrastructure

Technology
Infrastructure

E-commerce
Strategy

Capital
Infrastructure

Public
Policy

Technology infrastructure: This is both an enabler and driver of change. The hardware backbone of computers; routers, servers, fiber optics, cables,
modems, etc. provide half of the technology equation. The other half includes the software and communication standards including the core protocols
for the www.
Capital Infrastructure: Deals with getting the money to launch new businesses and finding the right people to build the business plan and seek
funding sources.

Media infrastructure: The e-commerce managers must make choices about the types of media employed (e.g., print, audio, video), the nature of the
media and editorial policy (including style, content, look and feel).
Public Policy Infrastructure: All the decisions related to strategy, technology, capital and media are influenced by laws and regulation, i.e., public
policy decisions. It not only affects specific business but also direct and indirect competitors.
The Framework for the Field of e-commerce
There are six interrelated, sequential parts to this strategy, market opportunity analysis, business models, customer interface, market
communications and branding, implementation, and metrics.

The Roles and Responsibilities of a Senior e-commerce Manager

Key Challenges for Senior Leadership in Todays Environment
Corporate
Business Unit
Line Executive

Corporate site

Report to general
management
manager of
business unit

Cross-businessunit integration
site
Staff Executive

Supports

Support and
corporate wide
advises strategic
initiatives
business unit ecommerce
initiatives

Stand Alone
Separate business
from corporate
parent

CH2
Basic Technology of the Internet
and e-Commerce Businesses
Early network
Internets beginnings can be traced back to memos written in 1962 by MITs
Joseph Carl Robnett Licklider outlining the galactic networking concept
Great advances were made in network technology in 1960s. LAN technology was limited by geographical distance. To allow computer and networks separated
by larger geographical distance to
communicate ARPA (Advanced Research Projects Agency) developed a Wide Area
Network (WAN) called the ARPANET
What Is the Internet?
Internet Protocol (IP):
Software that sets the rules for data transfer over a network (from a
network to another network)
Transmission Control Protocol (TCP):
Software that ensures the safe and reliable transfer of the data
Reliable refers to: (1) complete arrival of data to destination, (2)
ensuring data segments are ordered, (3) ensuring that the contents have not changed.
The internet is a collection of wires, protocols and hardware that allows the
electronic transmission of data over TCP/IP
Any data can be transferred over the net, e.g., email, faxes ,video ,voice &
web pages.
How the internet works?
Characteristics that allow shared access of data in a network:
1. Unique identification of each computer on the network
Internet is a network of millions of computers and thousands of networks
intertwined together. Thus it was important that each computer can be uniquely
identified by assigning a specific Internet Protocol (IP) address.

e.g., 198.108.95.145
2. Human-friendly addressing
Domain Name System (DNS) gave each computer on the network an address
comprising of an easily recognizable letters and words instead of an IP address which
is difficult to memorize.
e.g., www.philanthropy.com
3. Packet Switching
To remedy delays associated with unequally sized data transfers, instead of
transferring files in their entirety, whole files are broken up into data packets before
being transferred over the network. Each packet may take a different path on the
packet switched network.
4. Routing
Routers are dedicated, special-purpose computers which serve as an intermediary between networks. They route packets efficiently through networks.
Routers are building blocks of the internet. On the Internet, routers must use the
Internet protocol (IP). On other networks, different routing protocol might be used
5. Reliability and Transmission control Protocol
IP software handles packet deliveries and TCP handles safe and reliable delivery
of packets. See above the meaning of reliable transmission.
6. Standardization
Without the TCP/IP standardization, there would have been many negativetradeoffs, such as inflexibility and increased functional and switching costs. That
isconverting between different sets of protocols would make the Internet cost more. In
general standardization leads to two advantages: (1) more competition and hence
How are Web Sites Created?
A Web page can be made by adding text-based codes called Hyper Text Markup
Language (HTML) to a text file. There are four approaches to creating Web
pages:
-Text editor
-Document conversion
-Web authoring tools
-High-end Web authoring tools
What Web pages are made of?
The entire Web is built upon three concepts:
web pages (documents seen on
the browser),
links (connecting one web page to another), and
servers (storing and transmitting the information to the browsers for display)
Contents of the Web
Links
Internal Anchor Links:
Internal anchors are used to connect with other locations within the
same document.
Page Links:
Page links allow users to link to other web pages.
Mail-to Links:
Mail links are used to let users send feedback and questions directly to
them.
Forms
Forms are basically web pages where the user can enter information on the
fields provided on the page. Forms are useful in getting highly structured feedback.
Images
IV
The most supported image formats on the Web are Graphic Image Format
(GIF) and Joint Picture Encoding Group (JPEG).
Multimedia
Web supports multimedia file type such as images, audio and video.
Doing business on the Internet
E-commerce is playing an increasingly important role in the lives of consumers.
There are six components of running an e-commerce store
1. Placement
2. Store size
3. Presentation
4. Payment
5. security
6. Fulfilment
CH3
Market Opportunity Analysis
An application of forecasting techniques to the market factors that may influence the demand for a product identified as a market
opportunity.
Is to help guide the process of better understanding of the most important market segments, how fast the opportunity is growing, what are
the key sustainable differentiations and why are there important.

Unique Market Opportunity for Online Firms

Is a greater depth knowledge to the measure of true motivating power online firms
Factors to Consider:
1. Competition Across Industry Boundaries Rather than Within Industry Boundaries
2. Competition Between Alliances of Companies Rather than Between Individual Companies
3. Competitive Developments and Response at Unprecedented Speed
4. Unique Ways to Bring Value to Consumers and Change Behaviour
5. Industry Value Chains and Value Systems Rapidly Reconfigured
Value chains

In discrete, It is the collections of an individual and organizational activities that work together to deliver customer benefits via product or
service.

An interconnection of process and activities within and among the firms that creates benefits for intermediaries and end customer.

Value system

Generic Value Types

A. Trapped Value
Eliminating unnecessary activities for the benefits of reducing costs.
Forms of trapped value:
1.) Creating more Efficient Markets
2.) Creating More Efficient Value Systems
3.) Enabling Ease of Process
4.) Disrupting Current Pricing Power
B.

New-to-the-World Value
It is an enhancement of the existing offering benefits or be the basis by creating a new offering.
Ways How Companies can Create New Value:
1.) Customize Offerings
2.) Radically Extend Reach and Access
3.) Build Community
4.) Enable Collaboration
5.) Introduce New-to-the-World Functionality or Experience

CH4
WHAT IS A BUSINESS MODEL?
The e-Business model, like any business model, describes how a company functions; how it provides a product or service, how it generates revenue, and how it
will create and adapt to new markets and technologies. It has four traditional components as shown in the figure, The e-Business Model. These are the ebusiness concept, value proposition, sources of revenue, and the required activities, resources, and capabilities. In a successful business, all of its business
model components work together in a cooperative and supportive fashion.
THE FOUR COMPONENTS OF AN ONLINE BUSINESS MODEL
To arrive at an online business model, senior management must define the models four components:

A value proposition or value cluster for targeted customers

An online offering, which could be product, service, information, or all three

A unique ,defendable resource system; and

A revenue model.
VALUE PROPOSITIONS AND VALUE CLUSTERS
Construction of a value propositions requires management to specify the Target segment, focal customer benefits, and the key resources the business
has that can help it deliver the benefit package in a significantly better way than its competitors.
When customization is applied, the firm can serve multiple groups of customers with different value propositions.

Choice of Segments

A careful market opportunity analysis should reveal segments in which a particular form can be competitive. While a number of classical frameworks
address the segment choice decision, most reduce the analysis to the attractiveness of the market. Market attractiveness is a function of many
variables, but the key decision variables are frequently reduced to the following:
o

Market size and growth rates. The overall dollar size of the market and percentage growth rates of the market should be significant.

Unmet or insufficiently met customer needs. Customers are either not being served or not being served well by existing players.

Weak or nonexistent competitors. Obviously, it is best to enter markets where the competition is not evident.

THE ONLINE OFFERING

The next step after value proposition is to decide on the online product, service or information offering; but in this stage we are not designing how the web
site will look like but we are providing a broad description of the actual product or service that will be provided online.
The senior management team must complete 3 sequential tasks:
1.
2.
3.

Identify the scope of offering.

Identify the customer decision process.
Map the offering to the customer decision process.
Scope of Offering:
The scope refers to the number of categories of products & services that a firm offers; it can be anything from a firm focusing on one product category
to a firm focusing on large number of categories.
There are 2specific types of scope that can be focused on:

Category specific dominance: Refers to companies that focus exclusively on one product category

Cross category dominance: Refers to the extension of product offering from a single category to additional product categories

Identify the Customer Decision Process:

The second step in the construction of online offering is articulating the customer decision process for the various product categories.
This process can be divided into 3stages: pre purchase, purchase & post purchase.

Map Products and Services onto the Customer Decision Process

The idea is that the website should walk the consumer through the entire purchase-decision cycle and encourage the consumer to continually revisit
the cycle. This decision cycle should be repeated for each of the product categories on the site.

THE RESOURCE SYSTEM

It shows how a company must select and then align its resources (either alone or with partners) to deliver the benefits of the value proposition or cluster.

Specifying a Resource System:

o

Step One: Identify core Benefits in the Value Cluster :

The core benefits are identified in the construction of a value proposition or cluster.
o

Step Two: Identify Resources That relate to Each Benefit:

To link the resources that are required to deliver a particular customer benefit. We are not concerned about whether the company has the
resource; we are simply concerned about the link between the resource and the benefit

Step Three: Identify to What Degree the Firm Can Deliver Each Benefit:
This gives a close internal look at the company (i.e. we ask ourselves: does this company contain all the necessary resources or must the
company outsource or partner with others to gain missing resources?

Step Four: Identify Partners Who Can Complete Resources:

To identify key players who can complete the resources system

For Example:

Criteria to Assess the Quality of a Resource System:

A number of criteria can be used to assess the quality of the resource system.
1.

Uniqueness of the system:

Refers to the extent to which the organization has resources that differ from those of its competitors.

2.

Links Between Resources and Benefits:

Does each resource support the delivery of a customer benefit? Is the support strong or weak?

3.

Links Among Resources in the system:

How well do the resources complement and support one another? Are there tight linkages among the resources? Are they consistent with
the overall value cluster? Are the specific resources mutually reinforcing? Are they complementary? Are they consistent with the various
benefits?

4.

Links Between Virtual-World and Physical-World Business Systems:

Does the online resource system support or conflict with the offline system.

5.

Sustainable Advantage:
Is the resource system difficult to replicate? Possessing a unique but easily copied resource system will deliver only a fleeting advantage to
a firm. Sustained high profits will come only from a sustainable competitive advantage.

REVENUE MODELS:
The most frequently mentioned sources of revenue:

Advertising:
A particular site can earn advertising revenues through the selling of ads (banner or interstitial), site sponsorships, event underwriting, or other forms
of communication.

Product, service, or information sales:

Refers to income that is generated from the sale of goods on the site, this can include through retail sites pay-per-use information.

Transaction:
Refers to accrues from charging a fee or taking a portion of the transaction sum for facilitating a customer-seller transaction

Subscription:
Refers to a subscriber fees for magazine, news paper, or other information/service business.

License fee:
Are fees generated from the licensing of content.

ONLINE BUSINESS MODEL

Metamarket Switchboard Model

It brings together buyers and sellers based upon the activities that customers engage in to meet particular goals.
Traditional and Reverse Auction Model

They bring together a large number of buyers and sellers.

In traditional model, the buyer with the highest bid buys the item. In reverse model, the supplier with the lowest bid delivers the goods to the
buyer.
Freshest-Information Model

Quickly and efficiently deliver information to users.

Highest-Quality Model

High quality, premium-priced products, services or information.

Across all consumer markets and categories, there is room for a high-quality offering.
Widest-Assortment Model

Breadth and depth of product assortment, within and across product categories.
Lowest-Price Model

Offers the customer the lowest prices available online.

Most-Personalized Model
Able to provide a highly personalized, truly unique, one-of-a-kind experience.
CH5

CONTEXT- The look and feel of a screen-to face customer interface

Dimensions of Context

FUNCTION- refers to the sites usability

The following design and performance elements are critical to function:

AESTHETICS- Aesthetics of a website are created by visual choices such as colors, graphics, photographs and fonts.
The following 2 aesthetic features are the most critical to websites:
Classification of Context

Aesthetically Dominant- High on form or aesthetics but low on function.

Functionally Dominant- Focus on displaying textual information and limit the visual design to the bare minimum required to keep the site
operational.

Integrated- Applies to websites that balance form and function, creating an interface that is both attractive and easy to use

CONTENT - All the digital subject matter text, video, audio, graphics - that present information about the companys products and services.
Dimensions to Content- There are four key dimensions to content, each carrying choices about how to convey the sites content:

Classifications of Content

Offering Dominant
o
Superstore- One-stop shop where the customer can find a wide range of goods in multiple product categories.
o

Category Killer- Exclusively provides products and services by specific product or by a customer-needs category.

Specialty Store- Focuses on exceptional quality and exclusivity while selling single or multiple categories of products.

Information Dominant- Organize and house vast archives of information and provide tools to the customer to explore areas of interest and
find answers to specific questions.

Service Dominant- Create markets where buyers and sellers congregate to conclude transactions.

COMMUNITY- Interaction among users whether it is one-to-one interaction or one-to-many. It does not refer to site-to-user interaction.

Classifications of Community- determined by amount of interactivity between and among users.

Nonexistent- Sites that have no community offer NO WAY for users to interact with another.

Limited- Sites that offer features such as reading and posting information, stories or opinions, offer mostly non-interactive community
features and rarely allow users form bonds with other users.

Strong- Sites that offer interactive community functions such as chat rooms and message boards.

Dimensions of Community- The cohesion of a site can come about through several different methods:

CUSTOMIZATION- A websites ability to present individualizes content for each user.

Dimensions of Customization- Customization of a site can occur in many different ways:

Classifications of Customization- determined by amount of interactivity between and among users.

Generic- Websites of newspapers or government agencies:

Have very little incentive to customize

Moderately Customized- Most e-Commerce websites:

Customized to some extent, often to make easier for customers to shop but not so customized that the website varies wildly with
each user

Highly Customized- Portals like Yahoo:

Websites that make extreme efforts to give each user an individualized experience by allowing users to choose their own look and
content

COMMUNICATION- The dialogue between the organization and the user.

Unidirectional-One way from the organization to the user
Interactive- The organization exchanges information with the user
Dimensions of Communication- Communication between a site and its users can occur in many different ways:

Classifications of Communication- Classified by the kind of site-to-user communication they engage in, and by whether users can respond and in
what way.

One-to-many, Nonresponding User- Websites that send broadcast communications to defined audiences, usually through e-mail
newsletters and webcast events.

One-to-many, Responding User- Websites that send messages to registered users and invites them to submit comments and responses.

One-to-One, Nonresponding User- Sites that send personalized messages to address users specific interest or needs.

One-to-One, Responding User- Sites that send personalized messages such as reminders but in this case, the users can respond either
by submitting information via e-mail or through live interaction.
CONNECTION- The degree to which a website links to other sites.
KINDS OF CONNECTIONS

Outside Links- Links that take the user completely OUT of the original site and onto another one.

Framed Links- Links that open in the same browser window but the new website is literally framed in some way by the original site.

Pop-up Windows- Links that open up the new site in another window while the original site stays in the background.

Outsourced Contents- Content that comes from outside suppliers. The source is usually clearly displayed, often with a link to the suppliers
website, but the user does not need to leave the original site in order to view the content.
Classifications of Connection- based on the type of connections featured and whether the pathway of connection generally leads users off the
website or keeps them on the original site.

Destination Sites - Provide self-generated content almost exclusively, with very few links to other sites.
Hubs Sites - Feature a combination of self-generated content and selective links to related websites
Portal Sites- Consists almost exclusively of outsourced information and links to other sites, with very little or no self-generated content.

COMMERCE- The features of the customer interface that support a websites ability to perform financial transactions.
COMMERCE FEATURES

Registration- Allows the site to store information about users and user preferences

Shopping Cart, One-Click Shopping-Facilitates online shopping by making it more user-friendly

Security, Credit-Card Approval- Enables online transactions by allowing users to securely share credit-card information

Orders Through Affiliates- Sites must be able to track orders that come from and go to affiliates

Configuration Technology- Users can test product compatibility, and price trade-offs and product substitutions online.

Order Tracking, Delivery Options- Once orders are placed on the site, users can choose how they would like their products delivered and
track those orders from the site to their front door.
Classifications of Commerce

Low- Websites that have the ability to process transactions but with a few or with none of the commerce features.

Medium- Websites that have the ability to process transactions but is not their main purpose.

High- Websites that is fully equipped with all or almost all of the commerce features.