Chapter 5

Introduction to Information Technology Turban, Rainer and Potter John Wiley & Sons, Inc.Copyright 2005

Chapter 5 2

E-Business and E-Commerce

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Chapter Outline

Overview of E-Business and E-CommerceMajor EC MechanismsBusiness-to-Consumer Applications Online AdvertisingB2B ApplicationsIntrabusiness and Business-to–EmployeesE-Government and Consumer-to-Consumer ECE-Commerce Support ServicesEthical and Legal Issues in E-BusinessFailures and Strategies for Success.

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Learning ObjectivesDescribe electronic commerce, its scope, benefits, limitations, and types.Understand the basics of how online auction and bartering work.Describe the major applications of business-to-consumer commerce, including service industries, and the major issues faced by e-tailers.Discuss the importance and activities of online advertising.Describe business-to-business applications.Describe intrabusiness and B2E e-commerce Describe e-government activities and consumer-to-consumer e-commerceDescribe the e-commerce support services, specifically payments and logistics.Discuss some ethical and legal issues relating to e-commerceDescribe EC failures and strategies for success.

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Electronic commerce (e-commerce, EC). The process of buying, selling, transferring, or exchanging products, services, and/or information via computer networks, including the Internet.E-business. A broader definition of EC, including buying and selling of goods and services, and also servicing customers collaborating e-learning, and conducting electronic transactions within an organization.

5.1 Overview of E-Business and E-Commerce

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Pure versus partial ECElectronic commerce can take several forms depending on the degree of digitization- the 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).In pure EC all dimensions are digital.If there is at least one digital dimension, we consider the situation partial EC.Brick- and-mortar organizations. Organization in which the product, the process, and the delivery agent are all physical.

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Virtual organization. Organization in which the product, the process, and the delivery agent are all digital; also called pure – play organizationClick-and– mortar. Organization in which the product, the process, and the delivery agent may be physical or digital .

Pure vs Partial EC cont…

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Business-to-Business (B2B): E-commerce in which both the sellers and the buyers are business organizations. Collaborative commerce ( c-commerce): E –commerce in which business partners collaborate electronically Business-to-Consumers (B2C): E-commerce in which the seller are organizations and the buyers are individual also known as e-tailing.

Types of E-Commerce Transactions

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Consumer-to-Consumer(C2C).:E-commerce in which an individual sells products or services to other individuals. Customer -to-Business (C2B).:E-commerce in which customers make known a particular need for a product or service, and suppliers complete to provide the product or service to consumers . Intrabusiness( intraorganizational) commerce. E-commerce in which an organization uses EC internally to improve its operations.

Types of E-Commerce Transactioncont…

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Types of E-commerce cont…

B2E( business to employees) EC: A special case of intrabusiness e-commerce in which an organization delivers product or services to its employees.Government–to–Citizens(G2C): E-commerce in which a government provide services to its citizen via EC technologies.Government-to–business (G2B): E-commerce in which a government does business with other governments as well as with businesses.Mobile Commerce (m-commerce): E-commerce conducted in a wireless environment.

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The major business model of EC are summarized in Manager’s Checklist 5.1Business Model. The method by which a company generates revenues to sustain itself .

EC Business Model

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EC applications are supported by an infrastructure that includes hardware, software, and networks, ranging from browsers to multimedia, and also by five support areas.

PeoplePublic Policy Marketing and advertising Support servicesBusiness Partnerships

The Scope of EC

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Benefits of E-commerceBenefits to organization:

The availability of natural and international markets, The decreased cost of processing, distributing, and retrieving information.

Benefit to customer:The access to a vast number of products and services, around the clock.

Benefit to society :The ability to deliver information, services, and product to people in cities, in rural areas and in developing countries.

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Technological Limitations

The lack of universally accepted security standards.Insufficient telecommunication bandwidth.Expensive accessibility

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Nontechnological Limitations

A perception that EC is insecure.Unresolved legal issue.A lack of a critical mass of sellers and buyers.

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A framework for e-commerce

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The major mechanisms for buying and selling on the Internet are electronic catalogs. Electronic auctions, and online barteringElectronic Catalogs. Electronic catalogs on CD-ROM and the Internet have gained popularity. Electronic catalogs consist of a product database, directory and search capabilities and a presentation function.Electronic Auctions (E-auction). A market mechanism by which sellers place offers and buyers make sequential bids, and prices are determined dynamically by competitive bidding. Electronic battering. The exchange of goods or services without a monetary transaction.

5.2 Major EC Mechanism

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The dynamic of the information presentation. The degree of customization. The degree of integration with other business process or features.

Electronic catalogs can be classified according to three dimension:

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Types of Electronic Auctions:

Forward auction: An auction that sellers use as a selling channel to many potential buyers; the highest bidder wins the item. Reverse auction:: An auction in which one buyer, usually an organization, seeks to buy a product or a service, and suppliers submit bids; most common model for large purchase.

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Electronic relating (e-tailing): The direct sale of products and services through electronic storefronts or electronic malls, usually designed around an electronic catalog format and/or auctions.Two popular shopping location online are electronic storefronts and electronic malls:

Electronic storefront: The website of a single company, with its own Internet address, at which orders can be placed. Electronic malls (cyber mall): A collection of individual shops under one Internet address.

5.3 Business-to-Consumer Applications

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B2C Applications cont…

Cyberbanking. Various banking activities conducted electronically from home, a business, or on the road instead of at a physical bank location.Virtual bank. A banking institution dedicated solely to internet transactions.

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Phases in Customer Service Life Cycle.

Phase 1: Requirement: Assist the customer to determine needs by providing photographs of a product, video presentation, textual descriptions, articles or reviews, sound bites on a CD, and downloadable demonstration files.Phase 2: Acquisition: Help the customer to acquire a product or service.Phase 3: Ownership: Support the customer on an ongoing basisPhase 4: Retirement: Help the client to dispose of a service or product.

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Issues in E-tailing

Resolving channel conflictResolving conflicts within click–and-mortar organizationsOrganizing order fulfilment and logistics.Determining viability and risk of online e-tailers.Identifying appropriate revenue models

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5.4 Online Advertising Improves traditional forms of advertising in a number of ways:

can be updated any time at minimal cost can reach very large numbers of potential buyers all over the worldsometimes cheaper can be interactive and targeted to specific interest groups and / or to individuals.It makes sense to move advertising to the Internet, where the number of viewers is growing .

Shortcomings: most of which relate to the difficulty in measuring the effectiveness and cost-justification of the ads.

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Banners: Electronic billboards, which typically contain a short text or graphical message to promote a product or a vendor.Keyword banner: Banner advertising that appears when a predetermined word is queried from a search engine.Random banner: Banner advertising that appears randomly.Pop-up ad: An advertisement that is automatically launched by some trigger and appears underneath the active window.

Advertising Method

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Unsolicited Advertising: Spamming is the indiscriminate distribution of electronic ads without permission of the receiver.Permission marketing: Method of marketing that asks consumers to give their permission to voluntarily accept online advertising and e-mail.Viral Marketing: Virtual marketing refer to online ’’word-of-mouth’’ marketing. The main idea is to have people forward message to friends, suggesting that they ‘’check this out’’Interactive Advertising and Marketing: The term interactive points it the ability to an individual, to gather and remember that person’s responses, and to serve that customer based on his or her previous unique responses.

Some Advertising Issues and Approaches

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Making the top of the list of search engine.Online events, promotion and attractions.Online coupons.

Online Promotions: Attracting Visitors to a site.

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In business to business (B2B) applications, the buyers, sellers, and transactions involve only organizationsThe major models are: sell-side marketplaces, buy-side marketplaces, and electronic exchanges.

5.5 B2B Applications

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Sell-side marketplace. B2B model in which organizations sell to other organizations from their own private e-marketplace and/or from a third-party siteBuy-side marketplace. B2B model in which organizations buy needed products or service from other organizations electronically often through a reverse auction.E-procurement. Purchasing by using electronic support.

Major B2B Models

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Sell-Side Marketplaces

The key mechanisms in the sell–side model are: Electronic catalogs that can be customized for each large buyer and Forward auctions.

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Group Purchasing: The aggregation of purchasing orders from many buyers so that a volume discount can be obtained.Desktop Purchasing: E-procurement method in which supplier’s catalogs are aggregated into an internal master catalog on the buyer’s server for use by the company’s purchasing agents.

Buy-Side Marketplaces

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Public exchanges (exchanges): E-marketplace in which there are many sellers and many buyers, and entry is open to all; Frequently owned and operated by a third party. Four basic types:

Vertical distributors for direct materialsVertical exchanges for indirect materials.Horizontal distributorsFunctional exchanges

Four Types of Electronic Exchanges

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Intrabusiness. E- commerce within an organization (between an organization and its employees or among business units) .

Business to its Employees (B2E) commerceE-commerce between and among units within the business E-commerce between and among corporate Employees.

5.6 Intrabusiness and Business-to-Employees

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E-government. The use of e-commerce to deliver information and public services to citizens, business partners and suppliers of government entities, and those working in public sector.E-government application can be divided into three major categories; government-to-citizens (G2C), government–to–business (G2B), and government-to–government (G2G).

5.7 E-Government and Consumer-to-Consumer EC

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E-commerce in which both the buyer and the seller are individuals (not businesses).

C2C auctionsClassified Ads.Personal Services.Support services to C2C

Customer-to-Consumer(C2C)

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5.8 E-commerce support services

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Electronic ChecksElectronic Credit CardsPurchasing CardsElectronic CashElectronic Bill Presentment and PaymentsPaying Bills at ATMs.

Electronic Payments

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Person- to-Person Payment. A form of e-cash that enables the transfer of funds between two individuals, or between an individual and a business, without the use of a credit card.Stored-value money card. A form of e-cash on which a fixed amount of prepaid money is stored, the amount is reduced each time the card is used.Smart card. A form of e-cards, that contains a microprocessor (chip) that enables the card to store a considerable amount of information and to conduct processing .

Three forms of electronic cash

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Authentication. The buyer, the seller, and the paying institution must be assured of the identity of the parties with whom they are dealing.integrity. It is necessary to ensure that data and information transmitted in EC, are not accidentally or maliciously altered or destroyed during transmission.Nonrepudiation. Merchants need protection against the customer’s unjustified denial of placing an order. On the other hand , customers need protection against merchant’s unjustified denial of payment made. (such denials, of both types, are called repudiation) Privacy. Many customers want their identify to be secured.Safety. Customers want to be sure that it is safe to provide a credit card number on the Internet.

Security in Electronic Payment

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E-wallets (digital wallets). Mechanisms that combine security measure and convenience in EC purchasing. Virtual credit card. A payment mechanism that allows a buyer to shop with an ID number and a password instead of with a credit card number.

Security Protection

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Privacy Loss of Jobs One of the most interesting EC issues relating to loss of jobs is that of intermediation . Intermediaries provide two types of services. (1) matching and providing information and (2) value-added services such as consulting.Disintermediation: Elimination of intermediaries in EC.Reintermediation: Occurs where intermediaries such as brokers, who provide value-added services and expertise, cannot be entirely eliminated from EC.

5.9 Ethical issues in e-business

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Fraud on the internetDomain namesTaxes and other fees.copyright

Legal Issues Specific to E-Commerce

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Tips for Safe Electronic ShoppingLook for reliable brand names at sites like Wal-Mart online, and Amazon.com. Before purchasing,

make sure that the site is authentic by entering the site directly and not from an unverified link

Search any unfamiliar selling site for the company’s address and phone and fax numbers. Call up and quiz the employee about the seller.

Check out the vendor with the local chamber of commerce or better business bureau (bbbonline.org). Look for seals of authenticity such as TRUSTe.

Investigate how secure the seller’s site is by examining the security procedure and by reading theposted privacy notice

Examine the money- back guarantees, warranties, and service agreements.

Compare price to those in regular stores. too.-low prices are too good to be true, and some ‘’catch ‘’is probably involved.

Ask friends what they know . Find testimonials and endorsements in community sites and well –known bulletin boarder.

find out what your rights are in case of a dispute . Consult consumer protections agencies and the national fraud information center (fraud.org)

check consumerworld.org for a listing of useful resources.

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