Chapter 1
Overview of Electronic Commerce
© 2008 Pearson Prentice Hall, Electronic Commerce 2008, Efraim Turban, et al.
Reconstructed by Noor Maizudin Bin Mohamad Noor, FBA, Unitar
Learning Objectives
1. Define electronic commerce (EC) and
describe its various categories.
2. Describe and discuss the content and
framework of EC.
3. Describe the major types of EC transactions.
4. Describe the digital revolution as a driver of
EC.
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Learning Objectives
5. Describe some EC business models.
6. Describe the benefits of EC to organizations,
consumers, and society.
7. Describe the limitations of EC.
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Electronic Commerce:
Definitions and Concepts
electronic commerce (EC)
The process of buying, selling, or exchanging
products, services, or information via computer
networks
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Electronic Commerce:
Definitions and Concepts
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
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Electronic Commerce:
Definitions and Concepts
Pure versus Partial EC
EC can take several forms depending on the
degree of digitization
1. the product (service) sold
2. the process (e.g., ordering, payment,
fulfillment)
3. the delivery method
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Electronic Commerce:
Definitions and Concepts
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Electronic Commerce:
Definitions and Concepts
brick-and-mortar (old economy) organizations
Old-economy organizations (corporations) that
perform their primary business off-line, selling physical
products by means of physical agents
virtual (pure-play) organizations
Organizations that conduct their business activities
solely online
click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce
activities, usually as an additional marketing channel
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Electronic Commerce:
Definitions and Concepts
electronic market (e-marketplace)
An online marketplace where buyers and sellers meet
to exchange goods, services, money, or information
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The EC Framework,
Classification, and Content
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The EC Framework,
Classification, and Content
EC applications are supported by infrastructure and by
these five support areas:
People
Public policy
Marketing and advertisement
Support services
Business partnerships
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The EC Framework,
Classification, and Content
Classification of EC by the Nature of the
Transactions or Interactions
business-to-business (B2B)
E-commerce model in which all of the participants
are businesses or other organizations
business-to-consumer (B2C)
E-commerce model in which businesses sell to
individual shoppers
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The EC Framework,
Classification, and Content
business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides
some product or service to a client business that
maintains its own customers
consumer-to-business (C2B)
E-commerce model in which individuals use the
Internet to sell products or services to organizations or
individuals who seek sellers to bid on products or
services they need
mobile commerce (m-commerce)
E-commerce transactions and activities conducted in a
wireless environment
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The EC Framework,
Classification, and Content
location-based commerce (l-commerce)
M-commerce transactions targeted to individuals in
specific locations, at specific times
intrabusiness 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
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The EC Framework,
Classification, and Content
business-to-employees (B2E)
E-commerce model in which an organization delivers
services, information, or products to its individual
employees
collaborative commerce (c-commerce)
E-commerce model in which individuals or groups
communicate or collaborate online
consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to
other consumers
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The EC Framework,
Classification, and Content
peer-to-peer (P2P)
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
e-learning
The online delivery of information for purposes of
training or education
e-government
E-commerce model in which a government entity buys
or provides goods, services, or information from or to
businesses or individual citizens
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The EC Framework,
Classification, and Content
exchange-to-exchange (E2E)
E-commerce model in which electronic exchanges
formally connect to one another for the purpose of
exchanging information
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Digital Revolution 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 economy
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Digital Revolution Drives EC
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EC Business Models
business model
A method of doing business by which a company can
generate revenue to sustain itself
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EC Business Models
Six elements of a business model include descriptions of:
1. Customers to be served and the company’s relationships
with these customers including customers’ value
proposition
2. All products and services the business will offer
3. The business process required to make and deliver the
products and services
4. The resources required and the identification of which
ones are available, which will be developed in house, and
which will need to be acquired
5. The organization’s supply chain, including suppliers and
other business partners
6. The revenues expected (revenue model), anticipated
costs, sources of financing, and estimated profitability
(financial viability)
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EC Business Models
revenue model
Description of how the company or an EC project will
earn revenue
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EC Business Models
The major revenue models are:
Sales – Companies generate revenue from selling
merchandise or services over their Web sites. An
example is when Wal-Mart, Amazon.com sells a
product online
Transaction fees – A company receives a
commission based on the volume of transactions
made. For example, when a homeowner sells a
house, he typically pays a transaction fee to the
broker.
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EC Business Models
The major revenue models are:
Subscription fees – customers pay a fixed
amount, usually monthly to get some type of
service. An example would be the access fee for
AOL.
Advertising fees – Companies can charge others
for allowing them to place a banner on their web
sites. This is how Google has made its fortune.
Affiliate fees – Companies receive commissions
for referring customers to others’ Web sites
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EC Business Models
The major revenue models are:
Other revenue sources – some companies allow
people to play games for a fee or to watch a sports
competition in real time foe a fee (e.g., see
espn.go.com)
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EC Business Models
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EC Business Models
Typical EC Business Models
Online direct marketing
Electronic tendering
systems.
Name your own price
Find the best price
Affiliate marketing
Viral marketing
Group purchasing
Online auctions
Product and service
customization
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EC Business Models
Online direct marketing
The most obvious model is that of selling products or
services online. Sales may be from a manufacturer to
a customer, eliminating intermediaries or physical
stores, or from retailers to consumers, making
distribution more efficient.
Electronic tendering systems
Model in which a buyer requests would-be sellers to
submit bids; the lowest bidder wins
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EC Business Models
Name-your-own-price
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
According to this model, a customer specifies a need
and then an intermediate company, such as
Hotwire.com, matches the customer need against a
database, locates the lowest price, and submits it to
consumer. The potential buyer then has 30-60 minutes
to accept or reject the offer
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EC Business Models
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 (aggregated) purchasing that enables groups
of purchasers to obtain a discount price on the
products purchased
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EC Business Models
Online auctions
In the most popular type of auction, online shoppers
make consecutive bids for various goods and services,
and the highest bidders get the items auctioned.
(example: eBay – the world’s largest online auction
site)
Product and Service Customization
With customization, a product or service is created
according to the buyer’s specifications. Dell is a good
example of a company that customizes PCs for its
customers
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Benefits and Limitations of EC
Benefits to
Organizations
Consumers
Society
Limitations
Technological
Nontechnological
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Benefits and Limitations of EC
Benefits to Organizations
Locating customers and/or suppliers worldwide, at
reasonable cost and fast
Lower cost of information processing, storage,
distribution
Open 24/7/365; no overtime or other cost
Facilitate innovation and enable unique business
model
Direct interaction with customers, better CRM
Saves time and reduce delays
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Benefits and Limitations of EC
Benefits to Consumers
Can shop any time from any place
Large selection to choose from (vendor, products)
Can customize many products and/or services
Can compare and shop for lowest prices
Digitized products can be downloaded immediately
upon payment
Easy finding what you need, with details, demos,
etc
Do auctions any time from any place
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Benefits and Limitations of EC
Benefits to Society
Facilitate work at home; less traffic, pollution
Make education, health, etc., available for more
people
Facilitate home security
Can buy more and cheaper goods/services
Allow people in developing countries and rural
areas to accept more services and purchase what
they really like
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Benefits and Limitations of EC
Technological limitations
Lack of universal standards for quality, security,
and reliability
The telecommunications bandwidth is insufficient,
especially for m-commerce
Software development tools are still evolving
It is difficult to integrate Internet and EC software
with some existing applications and databases
Internet accessibility is still expensive and/or
inconvenient
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Benefits and Limitations of EC
Nontechnological limitations
Security and privacy concerns deter customers
from buying
Lack of trust in EC and in unknown sellers hinders
buying
People do not yet sufficiently trust paperless,
faceless transactions
Many legal and public policy issues, including
taxation, have not yet been resolved
Some customers like to feel and touch the products
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The End
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