Digital Business Ecosystem

Showing
(a)the original situation,
(b)(b) disintermediation omitting the wholesaler, and
(c) (c) disintermediation omitting both wholesaler and retailer.

Source: Chaffey, 2009.

 Disintermediation Reintermediation

 Disintermediation is a market practice where there is

a reduction in the use of middlemen or intermediaries
between the producer and the consumer
 higher profit margins and access to valuable
customer information are the main drivers for
disintermediation.
 Dell has discovered that it can better meet
customer needs through direct contact with
customers and even offers customers the option of
customizing their products during the order
process
 arguments for disintermediation focus primarily on
costs and do not take into consideration the value
that intermediaries bring to the value chain.
 Implications:

 Travel agencies must understand these changes and adapt their

 Disintermediation and reintermediation have a significant impact on business way of thinking to the needs of tomorrow’s travelers.
business organizations such as travel agencies, which exist Airlines provide customers with the service of booking and
planning their travel through their websites, however, they are
primarily as intermediaries between suppliers of travel services. not as informative and global as intermediaries.
 Therefore they do not offer consumers the convenience for a
complete travel package that can be booked online.
 E.g. The role of travel agencies is to provide customers with not
physical products but with information. Due to the huge widespread  Re intermediation of services in the travel industry have been
made possible by the expansion of business-to-business
of the internet, many airlines and other travel companies have information exchange via the internet and enabling value added
started to sell directly to passengers. networks to deliver convenience and efficient service to the end
user.
 Thus, Agencies have a higher degree of independence than
 As a result of this, airlines no longer need to pay commission to airlines would prefer, leading them to serve the interests of
travel agencies for tickets which have been booked through them. customers, or their own interests, rather than the interests of
This has disintermediated several travel agencies and they have now those whose products they are distributing
resorted to charging fees for their services and broadening the scope  Agencies and retailers have increasing power as the information
of services. control point in the distribution channel.
CUSTOMER
SHOPPING
MECHANISM
 Webstore

 Amazon. Amazon is one of the biggest online stores with a global presence. ...
 Flipkart. Flipkart is an Indian based e-commerce venture and over the years, it has garnered a lot of interest
in the minds of Indian consumers. ...
 Jabong. ...
 Snapdeal. ...
 Myntra. ...
 Shopclues. ...
 PayTm.
 electronic mall

 electronic mall [also known as digital mall] is a website that  Shopping24.de is a virtual Shopping Mall that was
displays catalogs from several suppliers and charges commission founded in 1997 as one of the first companies that
from them for the sales revenue generated at that site operated in the E-Commerce sector.4)

 Online Malls - also known as virtual Shopping Malls - are the  It combines the product offer of more than 500 retailers
internet based counterpart of physically existing Shopping Malls. (in the internet jargon they are called e-tailers) and
They can be defined as a collection of multiple Online Shops within service providers within one common website.
the same website.1) The different shops are listed in a directory or
index.2)
 The customers have the possibility to either visit one of
 Some Online Malls function as a form of Web Hosting.3) That means the online shops directly (e.g. Otto) or to search for a
that the individual online shop operators transfer their shop files to certain product within the entire Mall's product offer.
the Mall's webpage in order to present their offer online. Furthermore
they pay a monthly fee to the Online Mall authoring utilities for
using one of the Mall's Web Server. Other Online Malls give the  To facilitate this search, the various products are
online shop operators the possibility to state a hyperlink of their own classified into different categories such as fashion,
shop website, even if they are actually hosted by another server. multimedia, household & living, sports & leisure,
babies & children and beauty & healthcare.
The basic four types of online stores are:

1. General stores/malls: These are general stores that have a presence in the online market. They include stores like
Junglee.com and infibeam.com which act as an interface between the buyer and seller. They are stores that have a variety of
items for sale and are thus called general stores. They do not specialize in selling any one item.

2. Specialized stores/malls: The specialized stores would sell only specialized items. For example there are Websites selling
only mobiles like themobilestore.com and Websites selling only property like 99acres.com.Thus, they specialize in their areas
of product and are named as specialized stores.

3. Regional versus global store: Another classification of e-stores is regional and global stores. For example, in the tourism
industry, e-stores like Air India in are among the local stores of India, while Airtel.com is a global e-store.

4. Pure online organizations versus click-and-mortar stores: The last classification is that of pure online stores versus the
click-and-mortar stores. The pure online stores sell their products only through the online stores. The best examples of these
are Amazon.com and Makemytrip.com, which operate only through the Internet.
 Online Malls
Advantages and disadvantages

 Advantage  Disadvantage
 For retailers the participation in an Online Mall increases
the awareness level of their products due to the  Participating in an Online Mall means that
integration in a big website.5)
 retailers have less control of their brand
 They benefit from corporate Marketing activities that
target to gain new customers by sending out coupons image and their customer satisfaction.
or Newsletters.
 They are dependent on the performance
 Furthermore all vendors can make use of bundled
services regarding delivery or payment. and image of the Online Mall providers.7)
 The Online Mall providers earn money by charging the  The main problem for the Mall providers is
retailers for using the Mall's Web server as well as through to ensure a high quality of the Search
commissions that they receive for sold products.6)
Engine.
 The main advantage for customers is the reduction of
time needed to search for various goods on multiple  This is of crucial importance for the
websites or in physical Shopping Malls. The Online Mall is
accessible from any computer in the world, 24 hours a customers to minimize complexity and to
day, 7 days a week. find the articles they are searching for in a
quick and easy way.8
 Shopping cart

 A shopping cart on an online retailer's site is a piece of  Two basic types of carts:
software that facilitates the purchase of a product or
service.  Hosted shopping carts: A third-party firm "hosts" the solution
and is responsible for server backups, maintenance and
 It accepts the customer's payment and organizes the upgrades. The beauty of a hosted solution is that hosting
distribution of that information to the comes free, which means it doesn't cost anything for the
merchant, payment processor and other parties. third party to keep your site functional on the Web. The main
drawback with hosted solutions is that customers will be
 A cart typically has three common aspects: directed to another domain for payment processing.
 It stores product information  Licensed shopping carts: This type of solution allows business
 It's a gateway for order, catalog and customer owners to build their own type of cart and customize it to
management their specific needs. There is much greater flexibility in
changing features and functionality, as well as in adding
 It renders product data, categories and site information third-party tools if need be. However, the upfront costs are
for user display often higher and require more hands-on expertise for
troubleshooting issues and technical support.
 E-Catalogues offer many
advantages

 An electronic catalogue is an online publication, that is to say a

graphic interface -generally an html page in which the products
and services offered by a company are showed.
 E-Catalogues offer many advantages to their users:
Improved reliability, updating and relevance of Product data in
circulation
 Elimination of time spent inputting Product data
 Fewer non-quality costs relating to input errors
 Substantial cost reductions for data processing operations
 Time-saving with respect to data exchanges
 Improved ordering procedures (e-procurement system)
 Simplified supplies management (e-procurement system),
Auctions
Auctions and Examples

 The word "auction" is derived from the  Spectrum auctions, in which companies
Latin augeō, which means "I increase" purchase licenses to use portions of
the electromagnetic spectrum for
 An auction is a process of buying and communications (e.g., mobile phone
selling goods or services by offering them up networks)
for bid, taking bids, and then selling the item
to the highest bidder.  Timber auctions, in which companies
purchase licenses to log on government land
 The open ascending price auction is arguably
the most common form of auction in use  Debt auctions, in which governments sell debt
today instruments, such as bonds, to investors.
 Auto auctions, in which car dealers purchase
used vehicles to retail to the public.
 IPL auction of players
Types of Auctions

 English auction, also known as an open  Dutch auction also known as an open
ascending price auction. This type of auction is descending price auction.[1]
arguably the most common form of auction in
use today.[1] Participants bid openly against one  In the traditional Dutch auction the auctioneer
another, with each subsequent bid required to be begins with a high asking price for some quantity
higher than the previous bid.[2] of like items; the price is lowered until a
participant is willing to accept the auctioneer's
 An auctioneer may announce prices, bidders price for some quantity of the goods in the lot or
may call out their bids themselves (or have a until the seller's reserve price is met.[2]
proxy call out a bid on their behalf), or bids may
be submitted electronically with the highest  If the first bidder does not purchase the entire lot,
current bid publicly displayed.[2] the auctioneer continues lowering the price until
all of the items have been bid for or the reserve
 In some cases a maximum bid might be left with price is reached. Items are allocated based on
the auctioneer, who may bid on behalf of the bid order; the highest bidder selects their item(s)
bidder according to the bidder's instructions.[2] first followed by the second highest bidder, etc
 The auction ends when no participant is willing to
bid further, at which point the highest bidder pays
their bid.
 Types of Auctions

 Sealed first-price auction or blind  Traditional vs E Auctions

auction,[24] also known as a first-price sealed-
bid auction (FPSB).  In a traditional auction, or live auction,
potential buyers get the chance to examine
 In this type of auction all bidders simultaneously items up close and ask questions before
submit sealed bids so that no bidder knows the purchasing.
bid of any other participant.
 Bidders get an idea about what type of items
 The highest bidder pays the price they will go up for auction and can estimate how
submitted.[1][2] This type of auction is distinct much items may go for.
from the English auction, in that bidders can
only submit one bid each.  Traditional auctions allow buyers to discuss
items with the seller and get details about
 Furthermore, as bidders cannot see the bids of them before the auction begins.
other participants they cannot adjust their own
bids accordingly.[2  Traditional auctions also allow buyers to make
educated purchasing decisions in person.
 Traditional vs E Auctions

 Disadvantages and benefits of traditional and

 The main difference between traditional auctions and online auctions
online auctions is that online auctions are meant for
convenience.  A traditional auction is exciting, and buyers can get caught up in the
bidding.
 Items are listed on auction house websites in a catalog
fashion, and buyers can click on them to learn more  The excitement may raise the stakes for other bidders and become an
details about them. advantage for sellers to make more profit from their items.

 An online auction may be less expensive for sellers due to  A live auction allows buyers to see the items beforehand and discuss them
with sellers, while an online auction doesn’t give buyers that benefit.
the elimination of costs associated with holding a
traditional auction, but may limit buyers.  You must be present (or have a representative) at a live auction to bid,
but online auctions have the benefit of allowing anyone to bid,
 Once buyers see items they are interested in, they can bid anywhere.
for purchases using their credit card information.  A traditional auction has costs associated with it that an online auction
does not. Online auctions are becoming more popular due to the fact
 Online auctions are available to more potential buyers, not that they are convenient, and in today’s busy world, this is a great benefit.
just buyers located in a specific area near the auction
house.  Buyers don’t have to take time out of their busy schedules to attend an
auction held at a certain time and location.
 Having a wider range of bidders during an auction can be  Online auctions allow buyers to log on, place their bids, and pay for their
beneficial to the seller. purchases on one website.
 Dynamic Pricing & Dynamic Pricing-Uber

 The practice of varying the price for a  When you go to request a ride on a Saturday night,
product or service to reflect changing you might find that the price is different than the
market conditions, in particular the cost of the same trip a few days earlier. That’s
because of our dynamic pricing algorithm, which
charging of a higher price at a time of adjusts rates based on a number of variables, such
greater demand. as time and distance of your route, traffic and the
current rider-to-driver demand. Sometimes, this can
 Simply put, dynamic pricing is a strategy in mean a temporary increase in price during
particularly busy periods.
which product prices continuously adjust,
sometimes in a matter of minutes, in  When demand increases, Uber uses variable
costs to encourage more drivers to get on the road
response to real-time supply and demand. and help deal with number of rider requests. When
For example: Amazon, the global we notify you of an Uber fare increase, we notify
drivers as well. If you decide to go ahead and
ecommerce giant, is one of the largest request your ride, you’ll get an alert on the app to
retailers to have adopted dynamic pricing make sure you know that the rates have changed.
and updates prices every 10 minutes.
Changing
Supply Chains
 EC Order
Fulfillment
Process
 Step 1: Demand seamless
integration. ...
 Step 2: Enable end-to- Amazon enjoys a cult following. It is a favorite choice
end order visibility. ...
for customers due to one crucial reason: quick and
 Step 3: Choose the right
shipper. ... efficient supply chain management.
 Step 4: Enable exception- The combination of sophisticated information
based order
management. ... technology, an extensive network of warehouses,
 Step 5: Be smart about
multi-tier inventory management, and excellent
your warehouse transportation makes Amazon’s supply chain the
locations. ...
most efficient among all the major companies in the
 Step 6: Communicate
with your customer. ... world.
 Step 7: Accept returns & Those efficiencies have made the current shop-from-
refund like a champ.
home world possible.
 Outsourcing
Logistics

Logistics Outsourcing (4PL)

can be defined as the
strategic use
of outside parties (business
independency) to perform
activities traditionally
handled by internal staff
and resources. Allyn
allocates resources to your
company in order to
manage your supply chain
 Mass customization
It is a marketing and manufacturing technique which
Order Fulfillment combines the flexibility and personalization of
custom-made products with the low unit costs
associated with mass production

Make to order (MTO), Build to order

 Make to order (MTO), or made to  Build to Order is a production
order, is a business production strategy approach where products are not
built until a confirmed order for
that typically allows consumers to
products is received.
purchase products that are
customized to their specifications.  Thus, the end consumer determines
the time and number of produced
 It is a manufacturing process in which products.
the production of an item begins only
 The ordered product is customized,
after a confirmed customer order is
meeting the design requirements of
received. an individual, organization or business
Mass Production and Mass Customization
Digital Payments
 The success of any e- payment system
depends on factors like
Independence. Most forms of e-payment
 • Anonymity. Some buyers want their
require the merchant to install specialized
 identities and purchase records to be
software and hardware to authorize and
 anonymous. This can be done only
process a payment. Specialized methods
 when cash is used. To succeed, special
may be cumbersome and costly.
 payment methods, such as e-cash, have
• Interoperability and portability. An
 to maintain anonymity
e- payment method must be integrated
 Divisibility. Since most merchants
with existing information systems.
 accept credit cards only if the purchase
• Security. How safe is the money transfer?
 price is over a certain amount, it is necessary
What if the money transfer is compromised?
 for a successful EC transaction to
Only safe systems will
 address the issue of small payments
succeed.
Person-to-Person
(P2P) Payments

 A considerable number of EC transactions are

conducted between individuals.
 Payments from unknown buyers are critical to
the success of EC where transactions are
conducted online and the participants are in
different places and do not know each other.
 The following are some of the methods used
 in P2P payments:
 • Using PayPal (described earlier)
 • Using prepaid cards
 • Using the clearXchange
 Using Bitcoin and other digital currencies
 Payment

 Payment cards are electronic cards  2. Charge cards. These are special
that contain credit
 payment-related data  cards where the balance must be
 1. Credit cards. A credit card enables paid in
its  full by the due date and usually
 holder to charge items (and pay have
later),  annual fees. Examples of issuers
 or obtain cash up to the cardholder’s are

 authorized limit. With each purchase,  American Express and Diner’s Club
(they
 the credit card holder receives a loan
 both offer regular credit cards as
 from the credit card issuers well).
 Mobile Payment

 Aggregation. Payments from a single  Direct payment. In this case an

 consumer are accumulated and aggregation is used but the
processed periodically (e.g., once a micropayments are processed
month), or as a certain level is with an existing monthly bill (e.g.,
reached (e.g., $100). This model fits a mobile phone bill).
vendors with a high volume of  Service providers of this type are
 repeat business. Both Apple’s iTunes PayOne ( payone.com ), M-coin (
and App stores use this model. The mcoin.com ),
transportation card used in Seoul,
Korea and many other places is of this
nature
 Mobile Payments

 The term mobile payment refers to payment

transactions initiated or confirmed using a person’s
mobile device, usually a smartphone.
 Mobile payments are replacing some traditional
nonelectronic payment methods, such as the
purchasing of products (services), money transfers.
 Mobile payments are used extensively in East Asia,
Africa, China, Western Europe, and North America.
 • In 2015, digital goods may account for about 70%
of mobile payments.
 • Greater collaboration among involved stakeholders
is needed to assure even greater success.
 A digital (virtual) currency is a medium of payment
that is electronically created, stored, and used in e-
commerce. It can be used to pay for either physical
goods or virtual ones.
Security Issues
 Legal Issues Ethical Issues

 According to stopybullying.gov ,  Google and several other software application

cyberbullying is “bullying that takes
place using electronic technology.  providers have incorporated new spyware on
 Electronic technology includes devices  company smartphones given to employees,
and equipment such as cell phones, which enables employers to monitor the
computers and tablets as well as whereabouts of their employees using the
communication tools including social smartphones’ built-in GPS tracking systems.
media sites, text messages, chat, and  Google’s Latitude enables companies to know
websites.” Examples of cyberbullying their employees’ location at all times.
include mean text messages or e-mails,
rumors sent by e-mail or posted on social  Employees are encouraged to check their social
networking sites, and embarrassing networks only once or twice a day,
pictures, videos, websites, or fake profiles

Define cyberbullying. What damages can it

cause?
 Cyberbashing  Trademark dilution is the
 Associated with hate use of “famous” trademark
sites is cyberbashing , by a third party, which
which is the registration causes the lessening (or
of a domain name that dilution) of the
criticizes ‘distinguishing quality’ of
the mark
 (normally maliciously) an
organization, product,
or person (e.g.,
paypalsucks.com ,
walmartsucks.org
verizonpathetic.com ).
 SCHOOL ADMINISTRATORS USED WEBCAMS TO SPY ON STUDENTS AT HOME
 Unbeknownst to the students in a Pennsylvania high school, administrators were
caught spying on the activities of the underage students. The administrators
did this by remotely activating webcams built into each laptop that was issued
to the students by the Lower Merion School District,
 without the permission or knowledge of the students or their parents The
continued surveillance of the students, even while they were at home, by
school officials
 at Harriton High School revealed that one student was conducting what the
school defined as
 “improper behavior.” Based on the video taken at his home, the student was
confronted at the school by the assistant principal, and shown “photographic
evidence.”
Technology Issues- Other methods of
collecting data about people are:

 • Site transaction logs. These logs show  wealth of information about users’ activities
 what users are doing on the Internet.  and personalities.
 • EC ordering systems and shopping  • Behavioral targeting. Using tools to
 carts. These features permit sellers to  learn people’s preference.
 know buyers’ ordering history.  • Polling and surveys. People’s demographics,
 • Search engines. Search engines can be  thoughts, and opinions are collected in
surveys.
 used to collect information about users’
 • Payment information and e-wallets.
 areas of interest.
 These may include sensitive information
 • Web 2.0 tools . Blogs, discussion groups, about shoppers.
 chatting, social networks, etc. contain a