Chapter 7

Overview of E-Business and E-Commerce

- The dot-com era

- Over 3 billion people are now connected to the Internet.
- More than 130 million people are buying online.
- E-commerce began in 1995.
- Marketplace → Marketspace

Definitions and Concepts

E-Commerce (EC): describes the process of buying, selling, transferring or exchanging of

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

E-business is a broader definition of EC, including:

- buying and selling of goods and services
- servicing customers
- collaborating with partners
- conducting e-learning
- conducting electronic transactions within an organization.

The degree of digitization is the extent to which the commerce has been transformed
from physical to digital.
Pure versus Partial EC depends on the degree of digitization involved:
● The product can be physical or digital.

● The process can be physical or digital.

● The delivery agent can be physical or digital.

Brick-and-mortar: purely physical organizations.

Click-and-mortar (partial play): organizations are those that conduct some EC

activities, yet their business is primarily done in the physical world [multichannel]

Pure Play (virtual): organizations that are engaged only in EC.

Example: Amazon
 Bricks and Mortar, Partial EC, and Pure EC

Buy books at Family Bookshop. (bricks and mortar)

Order physical book from Amazon. (partial EC)

Order and download book from Amazon. (pure EC)

Which type of EC is this?

▪ Bricks and Mortar
▪ Partial EC
▪ Pure EC
Types of E-Commerce

-Business-to-Consumer (B2C): the sellers are organizations, and the buyers are

individuals.

-Business-to-Business (B2B): both the sellers and buyers are business organizations.

B2B comprises the vast majority of EC volume.

-Consumer-to-Consumer (C2C): both the sellers and buyers are individuals.

The major strategies for conducting C2C on the Internet are auctions and classified
ads.

-Business-to-Employee (B2E): An organization uses e-commerce internally to provide

information and services to its employees.

E-Government (E-Gov.): the use of Internet technology to deliver information about

public services to citizens (Government-to-Citizen [G2C]), business partners and
suppliers (called government-to-business [G2B]) and between governments [G2G].
E-government makes government more efficient and effective, especially in the delivery
of public services.
An example of G2C electronic commerce is electronic benefits transfer, in which
governments transfer benefits, such as Social Security and pension payments, directly
to recipients’ bank accounts.

Mobile Commerce (m-commerce): e-commerce that is conducted using a mobile

phone.
The term m-commerce refers to e-commerce that is conducted entirely in a wireless
environment. An example is using cell phones to shop over the Internet.
Business Model

A business model is the method by which a company generates revenue to sustain

itself.

(How business operate? / How business communicate with customers? / How they
provide services? / How they make money?)
 E-Commerce Business Models

Manufacturers or retailers sell directly to customers. Very

Online Direct Marketing: efficient for digital products and services. Can allow for
product or service customization. (www.dell.com)

Businesses (or governments) request quotation from

Electronic Tendering suppliers [uses B2B or G2B]
System:
Example: e-tendering The Tender Board

An auction which is held over the Internet.

www.ebay.com

E-auction
Forward Auction: the highest bidder wins the
auction.
Reverse Auction: the lowest bidder wins the
auction. (most common auction model for large purchases)
Customers decide how much they want to pay. An
Name-your-own-price intermediary tries to match a provider.

Example: www.priceline.com or price line

Customers specify a need and an intermediary
compares provider and shows the lowest price. Customers
Find-the-best-price must accept the offer in a short time or may lose the deal.

Affiliate marketing Vendors ask partners to place logos or banners on partner’s

site. If customers click on logo, go to the vendor’s site, and
buy, then the vendor pays commission to partners.

Example: www.howstuffworks.com

Note the Sony logo at

the top of this Web
.page
 Receivers send information about your product to their
Viral marketing: (words friends.
of moths)

Small buyers aggregate demand to get a large volume

Group purchasing discount, the group then conducts tendering or negotiates a
low price.
[E-Coops]

Customers use the Internet to self-configure products or

services. Sellers then price them and fulfil them quickly.
Product customization (build-to-order).

Example: www.dell.com and www.bluenile.com

/www.jaguar.com

company offers deep price discounts. Appeals to

Deep discounters customers who consider only price in their purchasing
decisions.
Example: (www.half.com)

Only members can use the services provided, including access

to certain information, conducting trade, etc.
(www.egreetings.com)
Membership
 Customize the book.

What type of EC Business Model is this?

▪ Name-your-own-price
▪ E-auction
▪ Find-the-best-price

Benefits of E-Commerce

1- Benefits to organizations
- Makes national and international markets more accessible.
- Lowering costs of processing, distributing, and retrieving information.
2- Benefits to customers
Access a vast number of products and services around the clock (24/7/365).
3- Benefits to Society
Ability to deliver information, services, and products easily and conveniently to people
in cities, rural areas and developing countries.
 Limitations of E-Commerce

Technological Limitations
- Lack of universally accepted security standards
- Insufficient telecommunications bandwidth
- Expensive accessibility
Non-technological Limitations
- Perception that EC is unsecure.
- Unresolved legal issues
- Lacks a critical mass of sellers and buyers.

Business-to-Consumer B2C
Electronic Storefronts and Malls

Electronic retailing (E-tailing): the direct sale of products and services through the
Internet.

E-marketplace: A central, virtual market space on the Web where many buyers and
sellers can conduct E-commerce and E-Business activities

E-storefront: A Web site that represent a single store. (www.dell.com.)

E-mall/ Cybermall: a collection of individual shops under one Internet address.

http://www.e-mall.com.sa/

There are two types of cybermalls:

1- Referral Mall: you cannot buy anything. Instead, you are transferred from the
mall to a participating storefront. www.bing.com/shopping

2- Second type of mall (e.g., http://shopping.google.com), you can actually make a

purchase. At this type of mall, you might shop from several stores, but you make
only one purchase transaction at the end. You use an electronic shopping cart to
gather items from various vendors and then pay for all of them in a single
transaction. The mall organizer, such as Google, takes a commission from the
sellers for this service.
Online Service Industries
A key issue is disintermediation also known as middlemen

The removal of intermediaries in a supply chain.

Cyberbanking: involves conducting banking activities from home, a place of business or

on the road instead of at a physical bank location.
E-Bank / virtual Bank/ Cyber Bank: a bank that is dedicated only to Internet
transactions.
Example: www.firstib.com

Online securities trading: Millions of Americans use computers to trade stocks, bonds,
and other financial instruments. In fact, several well-known securities companies,
including E Trade, Ameritrade, and Charles Schwab offer only online trading.

it is cheaper than a full-service or discount broker.

Online job market: The internet offers promising new environment for job seekers and
for companies searching for hard- to-find employees.
Example: www.monster.com, www.simplyhired.com, www.linkedin.com, and
www.truecareers.com

Travel services: The internet is an ideal place to plan, explore and arrange almost any
trip economically.

Real Estate http://www.findaproperty.com/

Real Estate http://www.findaproperty.com/

Issues in E-Tailing

Channel conflict: occurs when manufacturers disintermediate their channel partners

such as distributors, retailers, dealers, and sales representatives, by selling their
products directly to consumers, usually over the Internet through e-commerce.
[Ford allows customers to configure a car online but requires them to pick it up from a
dealer, where they arrange financing, warranties and services]

Multichanneling: is a process in which a company integrates its offline and online

channels.

Order fulfilment: finding the product to be shipped; packaging the product; arrange for
speedy delivery to the customer; and handle the return of unwanted or defective
products.

It is very difficult to accomplish these activities both effectively and efficiently in B2C,
because a company has to ship small packages to many customers and do it quickly. For
this reason, companies involved in B2C activities often experience difficulties in their
supply chains.
 Online Advertising

Advertising: an attempt to disseminate information in order to influence a buyer-seller

transaction.

Online Advertising methods:

● Banner: simply electronic billboard [can be customized]

● Pop-up ad: appears in front of the current browser window.

● Pop-under ad: appears underneath the active window.

● Permission marketing: asks consumers to give their permission to voluntarily

accept online advertising and e-mail.
[sometimes customers are paid to view online advertisements]

● Viral marketing: refers to online “word-of-mouth” marketing.

Business-to-Business (B2B)

In B2B e-commerce, the buyers and sellers are organizations.

There are several business models for B2B applications:

⮚ B2B Sell-Side Marketplace

⮚ B2B Buy-Side Marketplace
⮚ Electronic Exchanges

1- B2B Sell-Side Marketplace

In the sell-side marketplace, organizations sell their products or services to other

organizations electronically from their own Web site and/or from a third-party Web
site.
This model is similar to the B2C model in which the buyer comes to the seller’s site,
views catalogs, and places an order. In the B2B sell-side marketplace, the buyers are
organizations.
Key mechanisms: electronic catalogs and forward auctions.
2- B2B Buy-Side Marketplace

The buy-side marketplace is a model in which organizations buy needed products and
services from other organizations electronically.

Key mechanism: reverse auctions.

✔ E-procurement

3- Electronic Exchanges

Exchanges independently own by a third party and connect many buyers and many
sellers.
-Vertical Exchanges: connects buyers and sellers in a given industry
www.plasticsnet.com www.papersite.com
-Horizontal Exchanges: connects buyers and sellers across many industries, and are
used mainly for MRO materials www.alibaba.com
-Functional Exchanges: needed services such as temporary help or extra office space
are traded on an “as- needed” basis.
www.employease.com

Electronic Payments

- Implementing EC typically requires E-payment.

- E-payment systems enable you to pay for goods and services electronically.
E-check: encrypted check with digital signature that is similar to a paper check, and is
used mostly in B2B.
E-credit card allows customers to charge online payments to their credit card account,
and is used mostly in B2C.
How E-Credit Cards Work

Purchasing card: is the B2B equivalent of electronic credit cards and is typically used for
unplanned B2B purchases.

Electronic cash:
Stored-value money cards allow you to store a fixed amount of prepaid money and
then spend it as necessary.
Smart cards contain a chip called a microprocessor that can store a considerable
amount of information and are multipurpose – can be used as a debit card, credit card
or a stored-value money card.
Person-to-person payments are a form of e-cash that enables two individuals or an
individual and a business to transfer funds without using a credit card.

E-wallet

What type of Electronic Payment System is this?

▪ E-check
▪ E-credit card
▪ Electronic cash
Ethical and Legal Issues

Privacy: ecommerce provides opportunities for businesses to track online consumers

using cookies or special spyware
Fraud on the Internet

Domain Name Competition

Cybersquatting refers to the practice of registering domain names solely for the
purpose of selling them later at a higher price.
www.ou.edu.om
The original owner of www.tom.com received $8 million for the name.

Taxes and other Fees: when and where (and in some cases whether) electronic sellers
should pay taxes.

Copyright: protecting intellectual property in e-commerce and enforcing copyright laws

is extremely difficult.