Tuesday, December 16, 2014

chapter 7: Electronic Commerce: Applications and Issues

In these post I will highlight the most important point in every section of chapter seven

7.1 Overview of E-Business and E-Commerce


*Definitions and Concepts

Electronic commerce (e-commerce, EC) describes the 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, and also servicing customers, collaborating with partners, conducting e-learning and conducting electronic transactions within an organization.

Pure versus Partial Electronic Commerce depends on the degree of digitization involved.
Brick-and-mortar organizations are purely physical organizations.

Virtual organizations are companies that are engaged only in EC. (Also called pure play)

Click-and-mortar organizations are those that conduct some e-commerce activities, yet their business is primarily done in the physical world. i.e. partial 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 represents the vast majority of e-commerce.

Consumer-to-consumer (C2C): an individual sells products or services to other individuals.

Business-to-employee (B2E): An organization uses e-commerce internally to provide information and services to its employees. Companies allow employees to manage their benefits, take training classes electronically; buy discounted insurance, travel packages, and event tickets.
E-Government: the use of Internet Technology in general and e-commerce in particular to deliver information about public services to citizens (called Government-to-citizen [G2C EC]), business partners and suppliers (called government-to-business [G2B EC]),

Mobile Commerce (m-commerce) refers to e-commerce that is conducted in a wireless environment. For example, using cell phone to shop over the Internet.


*Major E-Commerce Mechanisms

Auctions: An auction is a competitive process in which either a seller solicits consecutive bids from buyers or a buyer solicits consecutive bids from sellers.

Forward Auctions: Sellers use a forward auction as a channel to many potential buyers.

Reverse Auctions: In reverse auctions, one buyer, usually an organization, wants to buy a product or a service. The buyer posts a request for quotation (RFQ) on its Web site or on a third-party Web site.  The RFQ contains detailed information on the desired purchase. Suppliers study the RFQ and submit bids, and the lowest bid wins the auction.
In general, forward auctions result in higher prices over time, where reverse auctions result in lower prices over time.



*E-Commerce Business Models

Online direct marketing: manufacturers or retailers sell directly to customers.

Electronic tendering system: businesses (or governments) request quotes from suppliers; uses B2B (or G2B) with reverse auctions.  Image above is the Hong Kong Government’s electronic tending system homepage.

Name-your-own-price: customers decide how much they want to pay. Image above is William Shatner, Priceline’s spokesman.

Find-the-best-price: customers specify a need and an intermediary compares providers and shows the lowest price.

Affiliate marketing: Vendors ask partners to place logos or banners on partner’s site. If customers click on logo, go to vendor’s site, and buy, then vendor pays commission to partners.

Viral marketing: receivers send information about your product to their friends.

Group purchasing: small buyers aggregate demand to get a large volume; then the group conducts tendering or negotiates a lower price.

Online auctions: companies run auctions of various types on the Internet.

Product customization: customers use the Internet to self-configure products or services. Sellers then price them and fulfill them quickly.

Deep discounters: company offers deep price discounts.

Membership: only members can use the services provided.


*Benefits of E-Commerce

Benefits to organizations:-
  • Makes national and international markets more accessible
  • Lowering costs of processing, distributing, and retrieving information



Benefits to customers:-
  • Access a vast number of products and services around the clock (24/7/365)



Benefits to Society
  • Ability to easily and conveniently deliver information, services and products 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 unsecured
  • Unresolved legal issues
  • Lacks a critical mass of sellers and buyers





7.2 Business-to-Consumer (B2C) Electronic Commerce


Electronic storefronts: An electronic storefront is a Web site that represents a single store.    

Electronic malls: Electronic malls are collections of individual shops under a single Internet address.


*Online Advertising

Advertising is an attempt to disseminate information in order to influence a buyer-seller transaction.

Online Advertising methods:-

Banners are simply electronic billboards.

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.

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


Eight Types of Web sites for Advertising:
  • Portals: most popular; best for reach but not targeting
  • Search: second largest reach; high advertising value
  • Commerce: high reach; not conducive to advertising
  • Entertainment: large reach; strong target ability
  • Community: emphasize being a part of something; good for specific advertising
  • Communications: not good for branding; low target ability
  • News/weather/sports: poor target ability
  • Games: good for very specific types of advertising







7.3 Business-to-Business (B2B) Electronic Commerce


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

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.


B2B Buy-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.



*Electronic Exchanges

Vertical Exchanges: Vertical exchanges connect buyers and sellers in a given industry.

Horizontal Exchanges: Horizontal exchanges connect buyers and sellers across many industries and are used mainly for MRO materials.

Functional Exchanges: In functional exchanges, needed services such as temporary help or extra office space are traded on an “as-needed” basis.




7.4 Electronic Payments


Electronic payment systems enable you to pay for goods and services electronically.

Checks (e-checks) are similar to paper checks and are used mostly in B2B.

Electronic credit cards allow customers to charge online payments to their credit card account.

Purchasing cards are the B2B equivalent of electronic credit cards and are 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.






7.5 Ethical and Legal Issues


*Ethical Issues

Privacy: ecommerce provides opportunities for businesses and employers to track individual activities on the WWW using cookies or special spyware. This allows private/personal information to be tracked, compiled, and stored as an individual profile. This profile can be used or sold to other businesses for target marketing or by employees to aide in personnel management decisions (i.e., promotions, raises, layoffs).

Job Loss


*Legal Issues Specific to E-Commerce

Fraud on the Internet: i.e. stocks, investments, business opportunities, auctions.

Domain Names: problems with competition.

Cybersquatting: refers to the practice of registering domain names solely for the purpose of selling them later at a higher price.

Domain Tasting: is a practice of registrants using the five-day "grace period" at the beginning of a 
domain registration to profit from pay-per-click advertising.

Taxes and other Fees: when and where (and in some cases whether) electronic sellers should pay 
business license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.

Copyright: protecting intellectual property in e-commerce and enforcing copyright laws is extremely difficult.


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