CHAPTER 6: E-BUSINESS AND E-COMMERCE

THE BUSINESS PERFORMANCE CYCLE AND IT MODEL

OVERVIEW OF E-BUSINESS AND E-COMMERCE

Possible question: What is the difference between e-business and e-commerce?
Electronic commerce (EC or e-commerce) describes the process of:
1.
2.
3.
4.

Buying,
Selling,
Serving, or
Exchanging

products, services or information via computer networks, including the Internet.

The term commerce is viewed as describing only transactions conducted
between business partners, and therefore is considered narrow.
E-business refers to a broader definition of EC. It's not just the buying and
selling of goods and services, but also
-

Servicing customers
Collaborating with business partners
Conducting e-learning, and
Conducting electronic transactions

within an organization.

Others view e-business as the other than buying and selling activities on the
Internet, such as collaboration and intrabusiness activities.
FORMS OF ELECTRONIC COMMERCE
EC can take several forms, depending on the degree of digitization
(transformation from physical to digital involved).
The degree of digitization can relate to:
1. The product (service) sold,
2. The process, or
3. The delivery agent (or intermediary)
All of these elements can be either physical or digital. In traditional commerce all
three dimensions are physical. Purely physical organizations are referred to as
brick-and-mortar organizations.
In pure EC all dimensions are digital. Purely digital organizations are referred to
as pure-play organizations (virtual organizations).
All other combinations that include a mix of digital and physical dimensions are
considered to be partial EC. Partial EC organizations are referred to as clickand-mortar (click-and-brick) organizations. These organizations conduct
some e-commerce activities, yet their primary business is done in the physical
world.
WHY IS EC USED?
The basic idea of EC is to automate as many business processes as possible. A
process can be:
-

Order initiation,
Order fulfillment,
Procurement of material,
Manufacturing parts (production),
Delivery, or
Providing CRM

EC activities support selling, buying, and providing relationships, as well asthe

internal and external transactions involved.
TYPES OF E-COMMERCE TRANSACTIONS
There are two ways to classify e-commerce transactions. The broad classification
is as follows:
1. Business-to-business (B2B). In B2B transactions, both the sellers and
the buyers are business organizations. The vast majority of EC volume is of
this type.
2. Collaborative commerce (c-commerce). In c-commerce, business
partners collaborate (rather than buy or sell) electronically. Such
collaboration frequently occurs between and among business partners
along the supply chain. It also refers to the use of digital technologies that
enable companies to collaboratively plan, design, develop, manage, and
research products, services, and innovative EC applications. It is also
referred to as e-collaborative. These activities differ from seling and

3.

4.

5.

6.

7.

buying. It implies communication, information sharing, and collaborative

planning planning done electronically, using tools such as groupware and
sepcially designed EC collaboration tools. Major benefits arise from
collaborative relationships, including cost reduction, increased revenues,
and better customer retention. These benefits are the results of fewer
stockouts, less exception processing, reduced inventory throughout the
supply chain, lower materials costs, increased sales volume, and increased
competitive advantage. C-commerce activities are usually conducted
between and among supply chain partners, but they can theoretically be
conducted between and within organizations.
Business-to-consumers (B2C). In B2C, organizations are sellers and
individuals are buyers. B2C is also known as e-tailing or electronic
retailing.
Electronic retailing is the direct sale of the products and services through
electronic storefronts or electronic malls, usually designed around an
electronic catalog fromat and/or auctions. One of the most interesting
properties of e-tailing is the ability to offer customized products and
services to individual cutomers at a reasonable price and fairly fast. Many
sites offer product self-configuration from their B2C portals.
Consumer-to-consumer (C2C). In C2C, both buyer and seller are
individuals. C2C is conducted in several ways on the Internet, where the
best-known C2C activities are auctions. Most auctions are conducted by
intermediaries. Another way of conducting C2C on the interned is through
classified ads. The advantage of online classified ads over traditional ones
is the (inter)national audience that the internet offers. Personal services,
like lawyers, handy helpers, tax preparers, etc. are available on the
Internet as well, which is another form C2C commerce. Some are free,
some for a fee. But this type of C2C is risky because some degree of fraud
or crime could be involved. Finally, we have support services to C2C,
which are used to ensure that the products and services involved in C2C
transactions are of agreed quality, that payment for them is regular and
that no fraud is involved.
Business-to-business-to-consumers (B2B2C). In this case, a business
sells to a business, but delivers the product or service to an individual
customer.
Consumers-to-business (C2B). In C2B, consumers make known a
particular need for a product or service, and suppliers compete to provide
the product or servie to consumers.
Intrabusiness (intraorganizational) commerce. In this case, an
organization uses EC internally to improve its operations. A special case of
this is known as business-to-employees (B2E) EC, in which organization
delivers products or services to its employees. The company disseminates
information to employees over the company intranet, for example, as part
of their employee relationship management. Employees can manage their
benefit backages and take training classes electronically. In addition,
employees can use the corporate intranet to purchase discounted
corporate products and services, insurance, travel packages, and tickets to
events. They can also electronically order supplies and material needed for
their work. In addition to the intranet, companies also disseminate
information via wikis and blogs. There are two additional types of
intraorganizational e-commerce: among and between corporate employees

(E2E) and e-commerce between and among units within the business.
Intraorganizational e-commerce can be conducted between and among
corporate employees as well (E2E). Many large organizations allow
employees to post classified ads on the company intranet, through which
employees can buy and sell products and services from and to each other.
The service is especially popular in universities, where it was conducted
even before the commercialization of the Internet.
Large corporations frequently consist of independent units, or strategic
business units (SBUs), which sell or buy materials, products, and
services to or from each other. Transactions of this type can be easily
automated and performed over the intranet. An SBU can be either a seller
or a buyer. An example is company-owned dealerships, which buy goods
from the main company. This type of EC helps improve the internal supply
chain operations.
8. Government-to-citizens (G2C) and to others. In this case, a
government entity provides services to its citizens via EC technologies.
9. Government-to-government (G2G) government units engage in EC
with other government units
10.Government-to-business (G2B) government units engage in EC with
businesses.
The narrow classification, however, divides e-commerce transactions to only to
types:
1. B2C transactions
2. B2B transactions
This narrow classification will be important later in this script.
EC BUSINESS MODELS
1.
Affiliate marketing. Vendors ask partners to place logos (or banners) on
partner's site. If customers click on the logo, go to vendor's site, and buy; then
vendor pays commissions to partners.
2.
Bartering online. Intermediary administers online exchange of surplus
products and/or company receives points for its contribution, and the points
can be used to purchase other needed items.
3.
Deep discounters. Company offers deep price discounts. Appeals to
customers who consider only price in their purchasing decision.
4.

E-Classifieds. Presentation of items for sale at fixed prices.

5.
Electronic marketplaces and exchanges. Transactions are conducted
efficiently (more information to buyers and sellers, less transaction cost) in virtual
marketplaces (private or public).
6.
Electronic tendering system. Businesses conduct online tendering,
requesting quotes from suppliers. Used in B2B with a reverse auction mechanism.
7.
Find-the-best-price. Customers specify a need; an intermediary compares
providers and shows the lowest price. Customers must accept the offer in a short
time or may lose the deal.

8.
Group purchasing (e-co-ops). Small buyers aggregate several demands to
get a large volume; then the buying group conducts tendering or negotiates a low
price.
9.
Information brokers and matching services. Brokers proivde services
related to EC information, such as trust, content, matching buyers and sellers,
evaluating vendors and products.
10.
Membership. Only members can use the services provided, including
access to certain information, conducting trades, etc.
11.
Name-your-own-price. Customers decide how much they are willing to pay.
An intermediary tries to match a provider.
12.
Online auctions. Companies or individuals run auctions of various types on
the Internet. Fast and inexpensive way to sell or liquidate items.
13.
Online direct marketing. Manufacturers or retailers sell directly online to
customers. Very efficient for digital products and services. Can allow for product
or service customization.
14.
Product customization. Customers use the Internet to self-configure
products or services. Sellers then price them and fulfill them quickly (build-toorder).
15.
Supply-chain improvers. Organizations restructure supply chains to hubs or
other configurations. Increases collaboration, reduces delays, and smoothes
supply chain flows.
16.
Value-chain integrators. Integrators aggregate information and package it
for customers, vendors, or others in the supply chain.
17.
Value-chain service providers. Service provider offers specialized services
in supply chain operations such as providing logistics or payment services.
18.
Viral marketing. Receivers of e-mail send the received or related
information about your product to their friends (word-of-mouth). (Be on the watch
for viruses).
SOCIAL COMMERCE
In today's world of Web 2.0. setting up a shop, phisical or online, and waiting for
customers to arrive may no longer be enough.
Instead, compaies must be proactive in finding ways to engage customers, build
relationships, and create communities.
The creation of the trend, known as social commerce on the Internet today, is
brought about by merging of Web 2.0. technologies, e-business opporutnities and
online communities.
What differentiaties social commerce from an ordinary e-business site is the
social elements involved. Social commerce is concerned with the creation of
places where people can collaborate online, solicit advice from trusted
individuals, and avail themselves of goods and services.
SCOPE OF E-COMMERCE

Scope or field of e-commerce can be described using the example of a greek

styled building. It consists of three different, but mutually dependant parts:
1.
Foundation of the building represents the infrastrucutre of e-commerce,
which includes hardware, software and networks, ranging from browser to
multimedia.
2.
The 5 pillars of the building represent the five support areas of ecommerce, which include:
a.
People (buyers, sellers, intermediaries, information system spcialists, other
employees and any external participants.
b.
Public policy (determined by the government and by international
agreements, include for example legal policy and regulating issues such as
privacy protection and taxation)
c.

Marketing and Advertising

d.
Support services (ranging from payments to order fulfillment and content
creation)
e.
Business partnerships (joint ventures, e-marketplaces, and business
partnerships, they occur especially throughout the supply chain).
3.
The top (the roof) of the building represents electronic commerce
applications.
BENEFITS OF ELECTRONIC COMMERCE
The benefits provided by e-commerce can be divided into three broad categories:
benefits to organisations, benefits to customers and benefits to society.
Benefits of e-commerce to organisations are (SHEELA ED) TOTAL NUMBER: 8
Shortens or even eliminates marketing distribution channels, making
products cheaper and vendors' profits higher
-

Helps some small busineses compete against large companies

Enables companies to procure material and services from other countries

rapidly and at lower cost
Expands a company's selling and buying opportunities to national and
international markets
Lowers telecommunication costs because the Internet is much cheaper
than value-added networks (VANs)
Allows lower inventories by facilitating pull-type supply chain
management. This allows product customization and reduces inventory costs.
-

Enables a very spcialized niche market

Decreases the cost of creating, processing, distributing, storing, and

retrieving digitizable products and services
Benefits of e-commerce to customers are (GAMMER EF) total number: 8

Gives customers more choices in selecting products and vendors

Allows customers to interact in electronic communities and to exchange

ideas and compare experiences
-

Makes it possible for people to work and study at home

Makes possible elctronic auctions that benefit buyers and sellers

Enables customers to get customized products or services, from PCs to

cars, at competitive prices
-

Retrieves relevant and detailed information in seconds

Frequently provides less expensive products and services by allowing

consumers to conduct quick online searches and comparisons
Enables customers to shop or make other transactions 24 hours a day,
from almost any location
Benefits of e-commerce to society are (FAEE) total number: 4
Facilitates delivery of public services, such as government entitlements,
reducing the cost of distribution and chance of fraud, and increasing the quality
of social services, police work, healthcare and education
Allows some merchandise to be sold at lower prices, thereby increasing
people's standard of living
Enables individuals to work at home and to do less traveling, resulting in
less road traffic, less energy use, and less air pollution
Enables people in developing countries and rural areas to enjoy products
and servcies that otherwise are not available. This includes opportunities to learn
professions and even earn college degrees, or to receive better medical care
LIMITATIONS OF E-COMMERCE
Limitations of e-commerce can be divided into two categories: technological and
nontechnological limiations.
Technological limitations to e-commerce are (ELDIN'S) total number: 6
Expensive and/or inconvenient Internet accessibility for many would-be
users.
-

Lack of universally accepted standards for quality, security and reliability

Difficulties in integrating the Internet and EC applications and software

with some existing (especially legacy) applications and databases
-

Insufficient telecommunications bandwidth

Still-evolving software development tools

Nontechnological limitations of e-commerce are: (CLLAMPS) total number: 7

Customer resistance to changing from a real to a virtual store. Many pople

do not yet sufficiently trust paperless faceless transactions.
Lack of national and international government regulations and industry
standards
-

Lack of mature methodologies for measuring benefits of and justifying EC

An insufficient number (critical mass) of sellers and buyers exists for many
EC products and services
-

Many sellers and buyers waiting for EC to stabilize before they take part

Perception that EC is expensive and unsecured

Some unresolved legal issues

E-COMMERCE WIKI BLOG RELATIONSHIP

Blogs give the users of a Social Network the freedom to express their thoughts in
a free form basis and help in generation and discussion of topics.
A Wiki is a set of co-related pages on a particular subject and allow users to share
content. Wikis replace the complex document management systems and are very
easy to create and maintain
Both are very usefull if a e-business site wishes to become a social commerce
site, meaning that they want to engage with customers, maintaing the
established realtionships and create online communities.
TYPES OF EC MECHANISMS
There are 4 major types of EC mechanisms for buying and selling on the Internet:
1.
Electronic markets a virual marketplace in which sellers and buyers meet
and conduct different types of transactions. The functions of e-market are the
same as those of a physical marketplace, however thanks to the tehcnology
involved, these markets are more efficient, providing more updated information
about both buyers and sellers
2.
Electronic catalogs they consist of a product database, directory and
search capabilities, and a presentation function. They are the backbone of most
e-commerce sites. For merchants, they advertise and promote products and
services. For customers, they provide information on products and services.
3.
Electronic auctions an auction is a competitive process in which either a
seller collects bids from buyers or a buyer collects bids from sellers. The primary
characteristic of auctions, whether offline or online, is that the prices are
determined dynamically by competitive bidding. For merchants, e-auctions
broaden the customer base and shorten the cycle time of the auction, thereby
generally increasing revenue. For customers, it gives them a chance to bargain
for lower prices and the convenience of not having to travel to an auction site to
attend the auction. They can also find rare and collector's items online.
Auctions are used in B2C, B2B, C2B, C2C and e-government commerce, and they
are becoming popular in many countries.

4.
Online (electronic) bartering the electronically supported exchange of
goods or services without a monetary transaction. Electronic bartering is done
through means of individual-to-individual bartering ads that appear in some
newsgroups, bulletin boards, and chat rooms.

TYPES OF AUCTIONS
There are several types of electronic auctions, each with its motives and
procedures. We will divide them into two major types: forward auctions and
reverse auctions
Forward auctions are auctions that sellers use as a selling channel to many
potential buyers. Usually, items are placed at a special site for auction, and
buyers will bid continuously for the items. The highest bidder wins the items.
Sellers and buyers can be either individuals or businesses.
There are two types of forward auctions: one is to liquidate existing inventory;
the other one is to increase marketing outreach and efficiency. Customers in the
first type seek the lowest price on widely available goods or servcies; customers
in the second type seek access to unique products or servcies.
Reverse auctions in r.a. there is one buyer, ususally an organization, that wants
to buy a product or a service. Here, a company that wants to buy items places a
request for quote (RFQ) on its Web iste or in a third-party bidding marketplace.
Once RFQs are posted, sellers (usually preapproved suppliers) submit bids
electronically. Such auctions attract large pools of willing sellers, who can be
manufacturers, distributors, or retailers. Suppliers are invited to submit bids.
The reverse auction is the most common auction model for large purchases, in
terms of either quanities or price. Everything else being equal, the lowest-price
bidder wins the auction.