CHAPTER 1 Overview of Electronic

Commerce
ELECTRONIC COMMERCE:
DEFINITIONS AND CONCEPTS

electronic commerce (EC)

Refers to the process of buying, selling, or exchanging products, services, or information
via computer (using the internet or intranet). Only involves buying and selling
transactions between business partners.

e-business
A broader definition of E.commerce 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.
E-commerce is the subset of E-business.
ELECTRONIC COMMERCE:
DEFINITIONS AND CONCEPTS
MAJOR E.COMMERCE CONCEPTS

Pure Versus Partial E.Commerce

EC can be either pure or partial depending on the nature of its three major
decisions :
a. ordering and payments
b. order fulfillment
c. delivery to customers

There are three possible combinations shown in the diagram in the next page.

Companies utilizing pure E.commerce conduct all of their business online.

Businesses utilizing partial E.commerce conduct a portion of their business
online and a portion of their business off-line.
 CLASSIFICATION OF E.COMMERCE
Activity 1 2 3 4 5 6 7 8

Ordering, P D D D D P P P
Payment

Order P D D P P D P D
fulfillment

Delivery P D P P D D D D
(shipment)

Type of Ec NON PURE PARTIAL EC

EC EC
ELECTRONIC COMMERCE:
DEFINITIONS AND CONCEPTS
E.COMMERCE ORGANISATIONS
brick-and-mortar (old economy) organizations
Old-economy organizations (corporations) that perform their primary
business offline, selling physical products by means of physical agents

virtual (pure-play) organizations

Organizations that conduct their business activities solely online

click-and-mortar (click-and-brick) organizations

Organizations that conduct some e-commerce activities, usually as an
additional marketing channel
 ELECTRONIC COMMERCE:
DEFINITIONS AND CONCEPTS

ELECTRONIC MARKETS AND NETWORKS

electronic market (e-marketplace)

An online marketplace where buyers and sellers meet to exchange goods,
services, money, or information
Eg. Amazon, Flipkart, Ali baba

An online location where buyers and sellers conduct commercial transaction

such as selling goods, services, or information. Any individual can also open a
market selling products or services online.
intranet
An internal corporate or government network that uses
Internet tools, such as Web browsers, and Internet protocols.
A better definition would be : It is a private network, operated
by a large company or organisation which uses internet
technologies but it insulated from the global internet. Eg.
Published webpages about company events, safety policies, etc.,
to eliminate paperwork and speed up workflows.

extranet
A network that uses the Internet to link multiple intranets. It is
able to provide access to people who work for different
organisations. Eg. You can provide access to a supplier for
online ordering or to track and order. You can even use it for
inventory management. It is more secure than public internet
because it is encrypted over a VPN. Another good example is
how hospitals can use this.
 THE ELECTRONIC COMMERCE FIELD:
CLASSIFICATION, CONTENT, AND A
BRIEF HISTORY
CLASSIFICATION OF EC BY THE NATURE OF THE TRANSACTIONS AND THE
RELATIONSHIPS AMONG PARTICIPANTS

business-to-business (B2B)
E-commerce model in which all of the participants are businesses or other organizations.

business-to-consumer (B2C)
E-commerce model in which businesses sell to individual shoppers or direct consumers.

e-tailing
Online retailing, usually B2C.

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.

consumer-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
 THE ELECTRONIC COMMERCE FIELD:
CLASSIFICATION, CONTENT, AND A
BRIEF HISTORY
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

business-to-employees (B2E)
E-commerce model in which an organization delivers services, information, or products
to its individual employees

consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to other consumers

collaborative commerce (c-commerce)

E-commerce model in which individuals or groups communicate or collaborate online

e-government
E-commerce model in which a government entity buys or provides goods, services, or
information from or to businesses or individual citizens
BENEFITS OF EC
Refer to Handout
E-COMMERCE 2.0:
FROM SOCIAL COMMERCE TO VIRTUAL WORLDS
Social computing
refers to a computing system approach that involves social
interactions and behaviors. It is performed with a set of tools that
includes blogs, wikis, social network services, and other social
software tools, and social marketplaces . It is based on creating or
recreating social conventions and social contexts through the use of
software and technology.
Whereas traditional computing systems concentrate on business
processes particularly cost reduction and increases in productivity,
social computing concentrates on improving collaboration and
interaction among people and on user-generated content. In social
computing and commerce, people work together over the Internet,
consult with specialists, and locate goods and services
recommended by their friends.
Eg. Buzzfeed, Wikipedia, Zomato, Trip Advisor
Web 2.0
The term Web 2.0 was coined by OReilly Media in 2004. Web 2.0 is
the second generation of Internet-based services that lets people
generate content, collaborate communicate and share information
online in new ways, such as social networking sites, wikis,
communication tools, and folksonomies. Web 2.0 is a new digital
ecosystem, which can be described through five Cs: creativity,
connectivity, collaboration, convergence, and community.
A folksonomy is a system in which users apply public tags to online
items, typically to aid them in re-finding those items. This can give
rise to a classification system based on those tags and their
frequencies. Eg. Twitter, Online catalogs of library, flickr,
wordpress, instagram, pinterest, stumbleupon
E-COMMERCE 2.0:
FROM SOCIAL COMMERCE TO VIRTUAL WORLDS

social network
A social network is a social entity composed of nodes (which
are generally individuals, groups, or organizations) that are
connected by links such as hobbies, friendship or profession. The
structures are often very complex.
In its simplest form, a social network can be described by an
image of the nodes and links. The network can also be used to
describe Facebooks social graph
E-COMMERCE 2.0:
FROM SOCIAL COMMERCE TO VIRTUAL WORLDS

social networking service (SNS)

A service that builds online communities by providing an online space
for people to build free homepages and that provides basic
communication and support tools for conducting different activities in
the social network

Social networking services (SNSs), such as LinkedIn and Facebook,

provide and host a Web space for people to build their homepages for
free. SNSs also provide basic support tools for conducting different
activities and allow many vendors to provide apps. Social networks are
people oriented.
 social networking

define social networking as the execution of any Web 2.0

activity, such as blogging or having a presence in a social
network. It also includes all activities conducted in social
networks.
E-COMMERCE 2.0:
FROM SOCIAL COMMERCE TO
VIRTUAL WORLDS
Enterprise social networks

Business-oriented social networks can be public, such as

LinkedIn.com. As such, they are owned and managed by an
independent company. Another type of business-oriented social
network is private, owned by corporations and operated inside
them. These are known as enterprise social networks (e.g.,
MyStarbucks Idea). These can be directed toward customers or
company employees.
E-COMMERCE 2.0:
FROM SOCIAL COMMERCE TO
VIRTUAL WORLDS
social commerce
The e-commerce activities conducted in social networks and/or by
using social software (i.e., Web 2.0 tools). Basically using Social
Networks or Media commercially.
Examples
Procter & Gamble sells its Max Factor brand cosmetics through
Facebook.
Starbucks is using extensive promotions on Facebook including
generating ideas from the members via its My Starbucks Idea
website
In 2010, Target used Twitter to promote their fall fashion show in
New York with videos and ads. The show was streamed live on
Facebook
E-COMMERCE 2.0:
FROM SOCIAL COMMERCE TO VIRTUAL WORLDS

VIRTUAL WORLDS AND SECOND LIFE

virtual world
A user-defined world in which people can interact, play, and
do business; the most publicized virtual world is Second Life
How Students Make Money in a Virtual World

THE MAJOR TOOLS OF WEB 2.0

Wikis
RSS feeds
Blogs
Microblogs (e.g.,Twitter)
THE DIGITAL WORLD:
ECONOMY, ENTERPRISES, AND
SOCIETY
digital 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
THE DIGITAL WORLD:
ECONOMY, ENTERPRISES, AND
SOCIETY
Digital Enterprise
The term digital enterprise has several definitions. It usually refers to
an enterprise, such as Amazon.com, Google, Facebook, or Ticketmaster,
which uses computers and information systems to automate most of its
business processes. The digital enterprise is a new business model that
uses IT to gain competitive advantage by increasing employee
productivity, improving efficiency and effectiveness of business
processes, and better interactivity between vendors and customers.

corporate portal
A major gateway through which employees, business partners, and the
public can enter a corporate website.
 THE DIGITAL REVOLUTION AND SOCIETY
The final, and perhaps most important, element of the digital world is people and the
way they work and live. Clearly, the digital revolution has changed almost any activity
one can think of work, play, shopping, entertainment, travel, medical care, education,
and much more. Just think about your digital phone, camera, TV, car, home, and almost
anything else. It is only natural that people are utilizing technology and EC at an
increasing rate.
Examples of how this is taking place :
Google has developed cars that drive themselves automatically in traffic (autonomous
vehicles). The cars are being tested in several states, including California, and were
approved in the state of Nevada as of summer 2012. In May 2012 these cars were tested in
California without people in them.
Billionaire Jack Ma, the founder of Alibaba.com is determined to transform China to a
better country with an improved environment. Alibabas sales now exceed those of eBay
and Amazon combined.
Over 500 million active users download songs, games and videos at Apples iTune store.
(A selection of over 30 mil- lion). The store also serves 350 million mobile devices. Total
revenue is esti- mated to reach $9 billion in 2014. The store is considered the most
popular music store in the world.
THE CHANGING BUSINESS
ENVIRONMENT,
ORGANIZATIONS RESPONSE, AND EC
SUPPORT

THE CHANGING BUSINESS ENVIRONMENT

PERFORMANCE, BUSINESS PRESSURES, AND
ORGANIZATIONAL RESPONSES AND EC SUPPORT
The Business Environment and Performance Impact Model
Business Pressures
Organizational Response Strategies
The support of EC
The Major Capabilities of E-Commerce

(Refer to notes for more)

 Economic
factors
Societal
Factors

Legal Competitive business

factors environment

Globalisation
trend

Technological
factors
THE CHANGING BUSINESS
ENVIRONMENT,
ORGANIZATIONS RESPONSE, AND EC
SUPPORT
Most people, sports teams and organisations are trying to
improve their performance. The reasons why they do it is
different.
Example :
As a challenge
For Survival
For improved quality of life
Profitability
Reputation
To check how successful you are, organization measure
performance and they compare this to few metrics and to the
organizations missions, objectives and plans.
THE CHANGING BUSINESS
ENVIRONMENT,
ORGANIZATIONS RESPONSE, AND EC
SUPPORT

However, IN BUSINESS, performance also depends not just on what

you do but also on what others are doing (your competitors) and
what is happening in the business or physical environment.
MISSION STATEMENT

Steve Jobs' mission statement for Apple in 1980 was:

To make a contribution to the world by making tools for the
mind that advance humankind.
GOALS
Profitability
Increasing annual sales by 10 percent by reaching a target of at least three new major
accounts each month.

Customer Service
Reduce response time to customer complaints by 36 hours by employing 5 more employees.

Retention
To develop and implement a training program that details new-hire activities for the first 90
days on the job with the goal of reducing retrenchment by 10 percent.

Efficiency
Implement a new shipping procedure that improves delivery time from five to two days.
Growth
Open three units within a five-year period in the Middle East
COMPONENTS OF THE MODEL

Business
Pressures Organizational
Responses
 Global competition
Regional Trade Agreements
Labor costs
Market Increased power of consumers
(economic) Political and government
Interventions in the market
Changing nature and Global economy and markets
composition of workforce
is changing
Government deruglation
Compliance with
regulations Societal
Shrinking government
subsidies
Rapid political
changes Increasing innovation and
technology
rapid technological
Technological obsolescence
increase in information
overload
Reducing cost of technology vs
labor

BUSINESS PRESSURES
ORGANIZATIONAL RESPONSES
Organizations needs to ask themselves
A. How can they operate in this environment?
B. How can they deal with threats and opportunities?
They can use traditional strategies to do the same. Example globalization.
However, some of these may not work they need to be modified or
supplement.
Example of this is China in todays market. How would they deal with
possibility of declining business from the US economy.
Critical response activities can take place in some or in all organizational
processes from payroll to merger.
A response activity can be due to a specific pressure already in existence or it
can be done to protect the organization from a future pressure.
Read a report on Kraft sharing a bid to take over Unilever
SUPPORT OF EC
Many response activities can be greatly facilitated by
Ecommerce. This could fuel growth of Ecommerce.

In fact in some case EC is the only solution. The reason for this is
related to the capabilities to Ecommerce.

Eg. The cost of physical outlets in a few countries has been

anticipated as a great cost factor that could even lead to
irrecoverable losses for the company. Instead, they can use
Ecommerce and delivery products across the globe.
ELECTRONIC COMMERCE
BUSINESS MODELS
business model
A method of doing business by which a company can generate
revenue to sustain itself and create value.

Eg. By attaining organizational objectives such as attracting

enough customers to buy the organisations products or services
THE STRUCTURE AND PROPERTIES OF BUSINESS MODELS

A comprehensive business model (for a proposal company) may

include some or all the following components :
A description of the customers to be served (incl. how can they be
reached and supported) and their value proposition.
A description of all products and services the business plans to deliver
and what the differentiating aspects of the products are.
The companys growth strategy
Description of business process and distribution infrastructure
List of resources required cost and availability
Description of the supply chains including suppliers and other
business partners
Value chain structure
List of major competitors and market share in relevant markets
Competitive advantage
Description of revenues expected, source of funding and financial
viability
anticipated organizational changes and resistance to change
Market strategies and strengths and weaknesses of a company.
ELECTRONIC COMMERCE
BUSINESS MODELS
WE will be focusing on two of the models elements :
Revenue Models
A revenue model specifies how the organization, or the EC project, will generate
revenue. For example, the revenue model for Net-a-Porter shows revenue from online
sales of luxury dresses. The major revenue models are:
A company uses its revenue model to describe how it will generate revenue and its
business model to describe the process it will use to do so.

value proposition
A value proposition refers to the benefits, including the intangible ones that a
company hopes to derive from using its business model.
REVENUE MODEL
Focuses on how the organization or E.commerce project will
generate revenue.
Eg. Jovani or Net a Porter or Pernias Pop Up Shop

Major Revenue models are

How it will describe

generate the process Revenue
revenue? it will use Model
to do so
INNOVATIVE REVENUE MODELS FOR
INDIVIDUALS
Sales Eg. Starbucks, Net-a-Porter, M&Ms, Godiva
Transaction Fees Eg. Broker (volume of sales) or buying tickets
online (per transaction)
Subscription Fees (Eg. Wifi or online magazine subscription)
Advertising Fees (Eg. Adsense)
Affiliate Fees (Eg. Amazon has a program)
Licensing Fees (Eg. Creative commons or Freepik or Miscrosoft
NT)
Other revenue sources
- Game or Live TV for a charge Eg. ESPN or Hotstar
- Buy Low sell high (buy on craigslist and sell on ebay)
VALUE PROPOSITION MODEL
A value proposition refers to the benefits including the intangible ones
that a company hopes to derive from using its business model.

In B2C EC, customers value proposition defines how a companys

product or service fulfills the needs of customers. In other words, it
describes the total benefits to the customer.
ELECTRONIC COMMERCE
BUSINESS MODELS
TYPICAL EC BUSINESS MODELS
1. Online direct marketing (Eg. Dell or Barneys online)
2. Tendering (bidding) system
Model in which a buyer requests would-be sellers to submit bids; the
lowest bidder wins.
3. Electronic marketplaces and exchanges (Online Trading)
4. Viral marketing (Eg. ALS)
5. Group purchasing (Eg. Groupon)

Video Links : https://www.youtube.com/watch?v=_xgPtqT0XBY (Group

Purchasing)
https://www.youtube.com/watch?v=zIEIvi2MuEk (viral Campaign)