Madda Walabu University

College of Business and Economics

Department of Marketing Management
E-Commerce (MKTM 525)

Chapter One: An Overview of E-Commerce

Learning Objectives
After the completion of this chapter, you will be able to:
Describe the origins and growth of E-commerce
Define the term E-Commerce, E-Business, E-Marketing and M-Commerce.
Identify the benefits of the E-commerce market
Discuss the scope of internet and the Web
Using the web to reach customers
A Historical Perspective

INFO NOT
NEEDED FOR
EXAM
 1.1. Origin and Growth of E-Commerce
 Precursors to e-commerce include:
 Late 1970s: Baxter Healthcare- Use of telephone modems to send digital orders.
 Late 1970s and early 1980s: Electronic Data Interchange (EDI)
 Used by businesses to transmit data from one business to another.
 French Minitel (1980s videotext system that combined a telephone with an 8-inch screen)
 None had the functionality of the Internet.

 1995: Beginning of E-Commerce

– First sales of banner advertisements
 Since then, EC has been fastest growing form of commerce.
 E-Commerce: A Brief History
 Understanding the evolution of e-commerce from its early years to today.
1995–2000: Invention
– Key concepts developed
– Limited bandwidth and media to accommodate complex products
– Static web pages
– Euphoric visions of:
• Disintermediation
• Friction-free commerce
– Lowered search costs, disintermediation, price transparency, elimination of unfair
competitive advantage
• First-mover advantages
– Network profits
– Dot-com crash of 2000
 E-Commerce: A Brief History (Cont.)
2001–2006: Consolidation
– Emphasis on business-driven approach
– Traditional large firms expand presence
– Start-up financing shrinks up
– More complex products and services sold
– Growth of search engine advertising
– Business Web presences expand to include e-mail, display and search advertising, and
limited community feedback features
 E-Commerce: A Brief History (Cont.)
2007–Present: Reinvention
– Rapid growth of:
• Online social networks
• Mobile platform
• Local commerce
– Entertainment content develops as source of revenues
– Transformation of marketing
• Coordinated marketing on social, mobile, local platforms
• Analytic technologies
 Meaning of Electronic Commerce (E-Commerce)
 Commerce refers to all activities of purchase and sales of goods or services.
 Marketing,
 Sales,
 Payment,
 Fulfillment and customer service
 Electronic Commerce
 Doing commerce with the use of computers, networks and commerce-enabled software
(more than just online shopping).
 The use of the Internet, the World Wide Web (Web), and mobile apps to transact business.
 Describes the process of buying and selling or exchanging of products, services, and
information via computer networks/electronic medium including the internet.
 Meaning of Electronic Commerce (E-Commerce)
 More formally:
 Digitally enabled commercial transactions between and among organizations and
individuals.
 Digitally enabled transactions include all transactions mediated by digital technology.
 Commercial transactions include the exchange of value (e.g. money) across
organizational or individual boundaries in return for goods and services.
1.2. Eight Unique Features of E-Commerce Technology
1. Ubiquity (Available everywhere at all times)
 Marketspace is created; shopping can take place anywhere.
 Reduces transaction costs, costs of participating in the market.
2. Global Reach
 Commercial transactions is enabled across cultural and national boundaries.
 The total number of users or customers an e-commerce business can obtain.

3. Universal Standards
 There is one set of technology standards, namely Internet standards.
 Universal standards such as XML, HTML…. shared by all nations.
 Lower market entry costs.
 Cont’d…
4. Information Richness: Piece of textual, graphic, audio, or video information.
5. Interactivity: Allows for two-way communication between merchant and consumer.
6. Information Density
 Amount and quality of information available to consumers and merchants alike:
 Price transparency
 Cost transparency
 Price discrimination
7. Personalization/Customization of products/services
8. Social Technology: Users creating and sharing content on the web.
 E-Commerce Cont’d
E-Commerce includes E-Marketing and E-Purchasing\E-Procurement.

E-Marketing E-Purchasing\E-Procurement
 E-marketing is the marketing side of e-commerce.  The flip side of e-marketing is e-
 It consists of the company’s efforts to communicate purchasing, the buying side of e-
about, promote, and sell products and services over commerce.
the Internet or through digital tools. Thus Dell.com,  It consists of companies decide to
Amazon.com, Wal-Mart.com etc. conduct e-marketing purchase goods, services, and
at their websites. information from various online
 Activities that connect buyers and sellers suppliers.
electronically.
 Transforming marketing strategies to create more
customer value.

M-Commerce
 Most recent development in Internet infrastructure.
 Refers to the use of mobile devices to enable online transactions.
 Enables access to the Internet via wireless networks or cell-phone service.
 Mobile devices include: Tablets, Smartphones, Ultra-lightweight laptops
 Objectives and Functions of E-Marketing

Smith and Chaffey (2005) stated five objectives of E-marketing objectives can be
E-Marketing as: summarized in short as the ‘5 Ss’:
 Grow sales (Through wider distribution, A.Sell: Determining what to whom.
promotion and sales)
B.Serve: Used to add values for customers at
 Add values (Give customers extra benefits online)
different stages of the buying process.
 Get closer to customers (By tracking them,
C.Speak: Getting close to customers again.
asking them questions, creating dialogue…)
Speaking to them.
 Save costs (Of service, sales transactions and
administration, print and post) D.Save: Cost reduction- saving time, money
and effort.
 Extend the brand- Online reinforce brand values
in a totally new medium. E.Sizzle: As a brand building tool.
 Why Study E-Commerce?
E-Commerce ─ Advantages
 More powerful than any of the other technologies.
 Help increase profits and decrease costs.
 Wide base for customers – internationally; geographically scattered; areas not previously
reached.
 Identify new suppliers and business partners.
 Ability to create highly specialized businesses.
 Lower communication costs.
 Buyers have wide range of choices of vendors and products.
 Buying/selling availability 24/7.
 Competitive market causes decrease in prices, discounts or “freebies” thrown in.
 Customers receive relevant and detailed information in seconds.
 Allows individuals to work from home, do less travel.
 No need of physical company set-ups.
 E-Commerce ─ Disadvantages
• Initial cost
 Adopting new technology is proportionately heavier for small than for large firm.
• User resistance
• Lack of ICT knowledge and skills
• Security/Privacy:
 Ensuring security on payment and privacy of online transaction.
 Lack of trust to make online payment.
• Lack of touch or feel of products during online shopping.
• Many developing countries has poor telecommunication infrastructure.
• Internet access is still not cheaper and is inconvenient.
 E-Commerce vs. E-Business
E-Commerce E-Business
 E-commerce is more specific than e-business. – Digital enabling of transactions and processes
 Involves buying and selling processes supported
within a firm, involving information systems
under the control of the firm.
by electronic means, primarily the Internet; e-
markets are market spaces rather than physical  E.g. Online inventory control
marketplaces. – E-business does not include commercial
 Primarily involves transactions that cross firm transactions involving an exchange of value
boundaries. across organizational boundaries but E-
commerce involves commercial transaction.
 Online transaction of business, featuring linked
computer systems of the vendor, host, and – Includes all electronic–based information
buyer. exchanges within or between companies and
customers.
 Electronic transactions involve the transfer of
ownership or rights to use a good or service. – Involves the use of electronic platforms-
intranets, extranets and Internet to conduct a
company’s business.
 The Difference Between E-Commerce and E-Business

E-Commerce
o Involves transactions that cross firm Three alternative definitions of the relationship
boundaries. between e-business and e-commerce
E-Business
o Involves the application of digital
technologies to business processes
within the firm.
 The Scope of EB,EM,EC and MC

E-Business
Reading Assignment
 Discuss the main difference
between EB, EC and EM.
E-Commerce

E-Marketing

M-Commerce
 Infrastructure For E-commerce
Internet
 Worldwide network of computer networks built on common standards for data
transfer.
 Created in late 1960s.
 Services include the Web, e-mail, file transfers, and so on.
 Can measure growth by number of Internet hosts with domain names.
 The Internet:
Key Technology Concepts
• Three important concepts:
1. Packet switching
2. Uses and supports TCP/IP communications protocol

3. Client/server computing: Provides services to users

 Packet Switching
 Packet Switching
• A method of slicing digital messages
into packets, sending the packets along
different communication paths as they
become available, and then
reassembling the packets once they
arrive at their destination.

 Routers
– Special purpose computer that
interconnects the computer networks
that make up the Internet and routes
packets to their ultimate destination as
they travel the Internet.
– Routing algorithms: Computer program
that ensures that packets take the best
available path toward their destination.
 TCP/IP
• Protocol:
 A set of rules and standards for data transfer.
 Govern the formatting, ordering, compressing, and error-checking of messages, as well as
specify the speed of transmission on the network.
• Transmission Control Protocol (TCP):
– Establishes connections between sending and receiving Web computers.
– Handles assembly of packets at point of transmission, and reassembly at receiving end.
• Internet Protocol (IP):
– Provides the Internet’s addressing scheme and is responsible for the actual delivery of
the packets.
 Internet Protocol (IP) Addresses
IPv4 vs IPv6
 Current Version: IPv4
– Internet address expressed as a 32-bit number
that appears as a series of four separate
numbers marked off by periods, such as
64.49.254.91

 New Version: IPv6 multicast is used

o Internet address expressed as a 128-bit number.
o It can support up to 2128 (3.4×1038) addresses,
many more than IPv4.
 TCP/IP Layers
 TCP/IP is divided into four separate layers
 Application Layer
 Provides a wide variety of applications with the ability to access the services of the
lower layers.
 Transport Layer
 Responsible for providing communication with the application by acknowledging and
sequencing the packets to and from the application.
 Internet Layer
 Responsible for addressing, packaging, and routing messages on the Internet.
 Network Interface Layer
 Responsible for placing packets on and receiving them from the network medium.
 TCP/IP Layers
Application Layer- HyperText Transfer
Protocol (HTTP), File Transfer Protocol (FTP), Simple Mail Transport Layer- TCP
Transfer Protocol (SMTP), Telnet…
Carries
Applications
START
END Carries Application,
and TCP details

Carries Application, TCP details,

IP details and Link details

Network
Interface Layer- Internet Layer- IP
Ethernet, ATM

Carries
Application,
TCP details,
and IP details
 Client/Server Computing
 A model of computing in which powerful personal computers are connected in a
network together with one or more servers.
 Client: A powerful personal computer that is part of a network.
 Server: Networked computer dedicated to common functions that the client
computers on the network need.

The Client/server Computing Model

In the client/server model of computing, client computers are connected in a

network together with one or more servers.
 Domain Names, DNS and URLs
 Domain Name
o IP address expressed in natural language.
 Domain Name System (DNS)
o Allows numeric IP addresses to be expressed in natural language.
 Uniform Resource Locator (URL)
 Address used by Web browser to identify location of content on the Web.
General representation of any URL : Protocol://domain_name/directory/resource
E.g: http://www.azimuth-interactive.com/flash_test
 Other Internet Protocols
 Hypertext Transfer Protocol (HTTP)
 The internet protocol used for transferring web pages.
 E-mail Protocols
• Simple Mail Transfer Protocol (SMTP): Used to send mail to a server.
• Post Office Protocol 3 (POP3): Used by the client to retrieve mail from an Internet server.
• Internet Message Access Protocol (IMAP): Allows users to search, organize, and filter their
mail prior to downloading it from the server.
 File Transfer Protocol (FTP): Permits users to transfer files from the server to their client
computer, and vice versa.
 Telnet: A terminal emulation program that runs in TCP/IP. It allow remote login on another
computer.
 Secure Sockets Layer (SSL)/Transport Layer Security (TLS): Secure communications between
the client and the server.
 Development of the Web
 Most popular Internet service.
 Developed in early 1990s.
 1989–1991: Web invented
– Tim Berners-Lee at CERN (European Particle Physics Laboratory)
– HTML, HTTP, Web server, Web browser
 1993: Mosaic Web browser W/GUI
• Andreesen and others at NCSA (National Center for Supercomputing Applications)
– Runs on Windows, Macintosh, or Unix
 1994: Netscape Navigator, first commercial Web browser
– Andreessen, Jim Clark
 1995: Microsoft Internet Explorer
 The World Wide Web (WWW)
 1990s- the WWW on the Internet provides easy to use technology for information
publishing and dissemination.
 Provides access to Web pages.
– Connected by Hypertext Transfer Protocol (HTTP).
– Web pages can be designed by Hypertext Markup Language (HTML).
o HTML documents that may include text, graphics, animations, music, videos.
 Markup Languages
• Generalized Markup Language (GML)—1960s
• Standard Generalized Markup Language (SGML)—Early GML,1986
 SGML is also a meta language - a language that can be used to define other languages.
• Hypertext Markup Language (HTML)
 Provides Web page designers with a fixed set of markup “tags” that are used to format a Web
page.
• eXtensible Markup Language (XML)
– A markup language specification developed by the World Wide Web Consortium (W3C) that is
designed to describe data and information.
– Tags used are defined by user.
 Web Servers and Web Clients
• Web Server Software:
– Software that enables a computer to deliver Web pages written in HTML to client
computers on a network that requests this service by sending an HTTP request.
– Basic capabilities: Security services, File Transfer Protocol (FTP), search engine,
data capture.
• Web Client:
– Any computing device attached to the Internet that is capable of making HTTP
requests and displaying HTML pages.
 Web Browsers
 Software program whose primary purpose is to display Web pages.
 Browsers have added features, such as e-mail and newsgroups.
 Leading web browsers
 Microsoft Internet Explorer (67%) and Mozila Firefox (23%)
 Other browsers include:
– Netscape
– Opera
– Safari (for Apple)
– Google’s Chrome
 Web 2.0
• The “new” Web
• User-centered applications and social media technologies
– User-generated content and communication
– Highly interactive, social communities
• Applications and technologies that allow users to:
– Create, edit, and distribute content
– Share preferences, bookmarks, and online personas
• Examples: Twitter, YouTube, Instagram, Wikipedia, Tumblr, Facebook,
LinkedIn

Evolution Of Web
Technologies
 Using Web To Reach Customers
 Attract customers
 Advertising, marketing
 Internet with customers
 Catalog, negotiation
 Handle and manage orders
 Order capture
 Payment
 Transaction
 Fulfillment (physical good, service good, digital good)
 React to customer inquiries
 Customers service
 Order tracking
 Understanding E-Commerce: Organizing Themes
• Technology:
– Digital computing and communications technology is integral to e-commerce
(cloud computing, mobile devices, datamining, networks and Wi-Fi, etc).
• Business:
– New technologies present businesses with new ways of organizing production and
transacting business.
• Society:
– E-commerce has raised issues of intellectual property, individual privacy, public
welfare policy.
 ********END********
Reading Assignment
 Develop a conceptual model that drive the Ethiopian organizations to adopt EC.
 Identify the different technical and non-technical limitations in the Ethiopian EC.
 Read the different literatures and examine the different levels of EC implementations.