E-Commerce: Overview of Electronic Commerce

Module 01
Overview of Electronic Commerce

Electronic Commerce (EC): The process of buying, selling, or exchanging products, services, or information via computer networks.

•         EC is defined through these perspectives

–        Communications

–        Commercial (trading)

–        Business process

–        Service

–        Learning

–        Collaborative

–        Community.

E-business: A broader definition of EC 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.

The Dimensions of Electronic Commerce:

EC organizations:

1.      Brick-and-mortar organizations: Old-economy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents.

2.      Virtual (pure-play) organizations: Organizations that conduct their business activities solely online.

3.      Click-and-mortar (click-and-brick) organizations: Organizations that conduct some e-commerce activities, but do their primary business in the physical world.

•         Where EC is conducted:

1.      Electronic market (e-marketplace): An online marketplace where buyers and sellers meet to exchange goods, services, money, or information.

2.      Inter-organizational information systems (IOSs): Communications system that allows routine transaction processing and information flow between two or more organizations.

3.      Intra-organizational information systems: Communication systems that enable e-commerce activities to go on within individual organizations.

The EC Frameworks

1.      Intranet: An internal corporate or government network that uses      Internet tools, such as Web browsers, and Internet           protocols.

2.      Extranet: A network that uses the Internet to link multiple     intranets.

An EC Framework—supports five policymaking support areas

–        People

–        Public policy

–        Marketing and advertisement

–        Support services

–        Business partnerships.

Fig. a Framework for Electronic Commerce:

EC Classifications: Classification by nature of the transactions or interactions

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

2.      Business-to-Consumer (B2C): E-commerce model in which businesses sell to individual shoppers.

3.      Consumer-to-Business (C2B): E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals seek sellers to bid on products or services they need

4.      Consumer-to-Consumer (C2C): E-commerce model in which consumers sell directly to other consumers.

5.      Peer-to-Peer: Technology that enables networked peer computers to share data and processing with each other directly; can be used in C2C, B2B, and B2C e-commerce

6.      Mobile Commerce (m-commerce): E-commerce transactions and activities conducted in a wireless environment.

7.      Location-Based Commerce (l-commerce): M-commerce transactions targeted to individuals in specific locations, at specific times

8.      Intra-business 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.

9.      Business-to-Employees (B2E): E-commerce model in which an organization delivers services, information, or products to its individual employees

10. Collaborative Commerce (c-commerce): E-commerce model in which individuals or groups communicate or collaborate online.
11. E-learning: The online delivery of information for purposes of training or education.
12. exchange (electronic): A public electronic market with many buyers and sellers
13. Exchange-to-exchange (E2E): E-commerce model in which electronic exchanges formally connect to one another for the purpose of exchanging information.
14. E-government: E-commerce model in which a government entity buys or provides goods, services, or information to businesses or individual citizens.

The Future of EC:

•          Overall, the growth of the field will continue to be strong into the foreseeable future

•          Despite the failures of individual companies and initiatives, the total volume of EC is growing by 15 to 25% every year.

Digital Evolution Drives EC:

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.

The digital revolution accelerates EC by providing competitive advantage to organizations and enabling innovations.

Business Environment Drives EC:

Economic, legal, societal, and technological factors have created a highly competitive business environment in which customers are becoming more powerful.

The environment–response–support model: Companies must not only take traditional actions such as lowering costs and closing unprofitable facilities, but also introduce innovative actions such as customizing, creating new products, or providing superb customer service.

Fig: Major Business Pressures and the Role of EC:

•         Categories of business pressures:

–        market (economic)

–        societal

–        Technological.

•         Organizational response strategies:

–        Strategic systems

–        Agile systems

–        Continuous improvement efforts and business process restructuring

–        Customer relationship management

–        Business alliances

–        Electronic markets.

EC Business Models:

Business model: A method of doing business by which a company can generate revenue to sustain itself.

Business models are a subset of a business plan or a business case.

The Structure of Business Models:

–        A description of the customers to be served and the company’s relationships with these customers (customers’ value proposition)

–        A description of all products and services the business will offer

–        A description of the business process required to make and deliver the products and services.

–        A list of the resources required and the identification of which ones are available, which will be developed in-house, and which will need to be acquired

–        A description of the organization supply chain, including suppliers and other business partners

–        A description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability).

•         Revenue Models

Revenue model: Description of how the company or an EC project will earn revenue.

Major revenue models:

–        Sales

–        Transaction fees

–        Subscription fees

–        Advertising fees

–        Affiliate fees

–        Other revenue sources.

Fig. Common Revenue Models

•         Typical EC Business Models

–        Online direct marketing

–        Electronic tendering systems

Tendering (reverse auction): Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins.

Name-your’s-own-price model: Model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price.

–        Find the best price

Affiliate marketing: An arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site.

Viral marketing: Word-of-mouth marketing in which customers promote a product or service to friends or other people?

Group purchasing: Quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased.

                        SMEs: Small-to-medium enterprises

                        E-co-ops: Another name for online group purchasing organizations

–        Bartering

–        Deep discounting

–        Value-chain integrators

–        Value-chain service providers

–        Supply chain improvers

Benefits of EC:

Benefits to Organizations:

•         Global Reach

•         Cost Reduction

•         Supply Chain Improvements

•         Extended Hours

•         Customization

•         New Business Models

•         Vendors’ Specialization

•         Rapid Time-to-Market

•         Lower Communication Costs

•         Efficient Procurement

•         Improved Customer Relations

•         Up-to-Date Company Material

•         No City Business Permits and Fees

•         Other Benefits

Benefits to Consumers:

•          Ubiquity

•          More Products and Services

•          Customized Products and Services

•          Cheaper Products and Services

•          Instant Delivery

•          Information Availability

•          Participation in Auctions

•          Electronic Communities

•          No Sales Tax

Benefits to Society:

•          Telecommuting

•          Higher Standard of Living

•          Homeland Security

•          Hope for the Poor

•          Availability of Public Services

Networks for EC:

Corporate Portal: A major gateway through which employees, business partners, and the public can enter a corporate Website.

Fig. The Networked Organization: