E-commerce

Name :

Dr. Nasim Z. Hosein

E-Mail : nhosein@northern.edu
Phone number : 605-626-7724

Agenda

Marketing
Commerce
History of Internet
Computer, Networks
Intro to E-commerce
History of E-commerce
WWW
What is E-commerce
Forces shaping E-commerce
E-commerce today
Categories of E-commerce
What is a web based business
E-commerce marketing strategies
Setting up for E-marketing (online)
Benefits of E-commerce
Strategy Formulation
Business Model

Definition of Marketing
Philip

Kotler

Social and Managerial process by which

individuals and groups obtain what they need
and want through creating, offering, and
exchanging products of value with others.
This

definition rests on the following core

concepts: needs, wants, demands, products, value,
cost and satisfaction, exchange and transactions,
relationships and networks, markets, marketers and
prospects.
3

Definition (cont)
Needs

exist in biology they are not

created by marketers i.e. shelter, food,
clothing, safety, belonging, esteem
Wants Need food want hamburger, fries,
coke.
Desire Wants for specific products
backed by an ability and willingness to
buy them
4

Definition of Commerce
The

exchange of goods and services for

money
Consists of:
Buyers - these are people with money who
want to purchase a good or service.
Sellers - these are the people who offer
goods and services to buyers.
Producers - these are the people who
create the products and services that sellers
offer to buyers.

Elements of Commerce
You

need a Product or service to sell

You need a Place from which to sell the products
You need to figure out a way to get people to
come to your place.
You need a way to accept orders.
You also need a way to accept money.
You need a way to deliver the product or service,
often known as fulfillment.
Sometimes customers do not like what they buy,
so you need a way to accept returns.
You need a customer service and technical
support department to assist customers with
products.

History of The Internet

Started

as a US government project in 1969.

The purpose was to create a net that can
function even if one center is destroyed in a
military attack.
- Hub and spokes can be useless if the hub is
destroyed.
- Network can continue to be functional even if
some nodes are destroyed, as long as
information can pass through other nodes.
Effective

in 1971 with computers on both

coasts of the US.
7

In the 1980s
Personal

computers or terminals were

connected to a server.
The server was a mainframe, or connected
to a mainframe computer.
The mainframe was connected to another
mainframe of the company in another
location via dedicated lines.
Only large companies could afford the
expense and investment in equipment.
8

Today
Connections

across countries and

continents made through dedicated fast
lines.
A company may have one local network
(LAN) in NY, which is connected to the
Internet through a Regional network.
Well established in N.A., Europe and
certain Asian countries
9

Computer classifications
Mainframes:

- term for very large computers

- used to handle large amount of data or
complex processes
- main advantage is reliability
Midrange:
- medium sized, less expensive and smaller
- usually a server
Micro-computer:
- work stations with computing capabilities
- single-users systems linked to form a network

10

What is a network
Series

of points or nodes interconnected by

communication paths
Node is a connection point for transmitting
data
Network can interconnect with other
networks to form global networks

11

Benefits of a network
Facilitates

resource sharing
Provides reliability
Cost effective
Provide a powerful medium across
geographical divide

12

Geographical Distance
Local

area network (LAN): small area,

share a single server
Metropolitan area network (MAN): a
wider network, can bridge several LANs
Wide area network (WAN): a broader area
covered, can include several MANs
Internet: a network of networks that covers
the entire globe
14

Internet addressing system

Internet

uses TCP/IP, therefore every computer on the

Internet has an IP address
IP address is numerical, separated by dots
Works with DNS:
- com: for commercial purposes
- net: for Internet Service Providers
- org: for non-profit, non-commercial groups
- gov: reserved for government
- mil: reserved for military
- int: reserved for international organizations
16

Assimilation of Technology
Technology

first adopted to increase

efficiency doing the same tasks faster
e.g. word processing instead of typing

Technology

next adopted to increase

effectiveness doing tasks not only faster
but better e.g. spreadsheets transformed
finance and accounting (as well as science
and other fields)
17

Introduction to E-commerce
E-Commerce,

Web, Networks, Internet

The evolution of new businesses
The adoption of Brick and Mortar
companies to the new economy
Market failures and economic explanations
for the new economy

18

History of E-commerce
EC

applications first
developed in the early
1970s
- Electronic funds
transfer (EFT)

Limited

to:

- Large corporations
- Financial institutions
- A few other daring
businesses

19

E-Commerce Mechanisms
Transformation

digital media

of economic activity into

- Exchange information, content, agreements,

and services among parties that are connected
to through the Internet.
Enables

new ways of creating, delivering

and capturing value to customers.
- Availability
- Convenience
22

World Wide Web (WWW)

World

Wide Web (Web):

- A collection of documents that reside on computers,

and that can be accessed by other computers on the
Internet.
Multimedia

documents:

- Text
- Images
- Sounds
- Drawings
- Video
Hypertext:

- Links to other documents

- Can begin execution of a program

23

Web Browsers
Computer

programs that can:

- Display Web documents

- Follow links
- Execute other programs
- Enhance applications such as real-time audio
or video
Netscape

and Internet Explorer

The Microsoft legal trouble due to the
Explorer.
24

Web Servers
Computers

that run server software.

A server waits for request to arrive from a
user.
- The request is typically for a document.
The

server sends (serves) the document to

the requesting computer.
Sometimes the server allows a user to fill
in information on a document, and the then
transfers the information to another
program or a server.
25

WWW and Internet

The

World Wide Web (WWW) is not the

Internet
Access to the Internet doesnt mean you
have e-commerce
WWW works in HTTP
Web pages works in HTML
Web browser provide access to
information on the WWW
27

What is E-commerce
Distributing,

buying, selling and marketing

products and services over electronic systems
E-business for commercial transactions
Involves supply chain management, e-marketing,
online marketing, EDI
Uses electronic technology such as:
- Internet
- Extranet/Intranet
- Protocols
28

Forces Shaping the Digital Age

29

Forces Shaping the Digital Age

Digitalization

Connectivity

&

Intranets : connect people

within a company.
Extranets : connect a
company with its suppliers,
distributors, and outside
partners.
Internet : connects users
around the world.

Internet

Explosion

Explosive worldwide
growth forms the heart of
the New Economy.
Increasing numbers of
users each month.
Companies must adopt
Internet technology or risk
being left behind.
30

Definitions
Internet:

- A collection of computers that speak a common

language protocol
Intranet:

- Private version of the Internet

- Main purpose to share company information
and computing resources among employees
Extranet:
- Private network that users outside the company
can access
- Requires security and privacy
- Collaborate with other companies

31

Forces Shaping the Digital Age

New

Types of Intermediaries:

Direct selling via the Internet bypassed

existing intermediaries (disintermediation).
Brick-and-mortar firms became click-andmortar companies.
As a result, some click-only companies have
failed.
32

Forces Shaping the Digital Age

Customization

and Customerization:

With customization, the company custom

designs the market offering for the customer.
With customerization, the customer designs
the market offering and the company makes it.

33

E-commerce as the Networked

Economy
Create value largely through gathering, synthesizing and
distribution of information
Formulate strategies that make management of the enterprise
and technology convergent
Compete in real time rather than in cycle time
Operate in a world characterized by low barriers to entry, nearzero variable costs of operation and shifting competition
Organize resources around the demand side rather than supply
side
Manage better relationships with customers through
technology

34

E-commerce Today
The

Internet is the perfect vehicle for ecommerce because of its open standards and
structure.
No other methodology or technology has proven
to work as well as the Internet for distributing
information and bringing people together.
Its cheap and relatively easy to use it as a
medium for connecting customers, suppliers, and
employees of a firm.
No other mechanism has been created that allow
organizations to reach out to anyone and
everyone like the Internet.

35

E-commerce Today
The

Internet allows big businesses to act like

small ones and small businesses to act big.
The challenge to businesses is to make
transactions not just cheaper and easier for
themselves but also easier and more convenient
for customers and suppliers.
Its more than just posting a nice looking Web
site with lots of cute animations and expecting
customers and suppliers to figure it out
Web-based solutions must be easier to use and
more convenient than traditional methods if a
company hopes to attract and keep customers.

36

Four Categories of E-Commerce

Business originating from...
Business

Consumers

Business

B2B

C2B

Consumers

B2C

C2C

And selling
to...

37

Distinct Categories of E-Commerce

Business to Business (B2B) refers to the full spectrum of ecommerce that can occur between two organizations.
This includes purchasing and procurement, supplier
management, inventory management, channel management,
sales activities, payment management &service and support.
Examples: FreeMarkets, Dell and General Electric

Business to Consumer (B2C) refers to exchanges between

business and consumers, activities tracked are consumer
search, frequently asked questions and service and support.
Examples: Amazon, Yahoo and Charles Schwab & Co
38

Distinct Categories of E-Commerce

(contd)

Peer to Peer (C2C) exchanges involve transactions

between and among consumers. These can include third
party involvement, as in the case of the auction website
Ebay.
Examples: Owners.com, Craiglist, Monster

Consumer to Business (C2B) involves when

consumers band together to present themselves as a
buyer in group.
Example: www.planetfeedback.com
39

Convergence of e-Commerce Categories

Business originating from

Business
Consumers

And Selling to

Business
Publishers order
paper supplies from
paper companies
Amazon orders
from publishers

Consumers buy
thousands of Harry
Potter books from
Amazon

Consumers
Consumers search
out sellers, offers
and initiate
purchases from
Amazon

Consumers resell
copies on eBay

40

What is a web-based business

Business

that uses the WWW to fulfill its

business process
Four basic business processes:
- information dissemination
- data capture
- promotions and marketing
- transacting with stakeholders
Business objectives interact with web based
applications
41

Key Drivers of E-commerce

Technological

degree of advancement of
telecommunications infrastructure
Political role of government, creating
legislation, funding and support
Social IT skills, education and training of
users
Economic general wealth and
commercial health of the nation
46

Key Drivers of E-business

Organizational

culture- attitudes to R&D,

willingness to innovate and use technology
Commercial benefits- impact on financial
performance of the firm
Skilled/committed workforce- willing and able to
implement and use new technology
Requirements of customers/suppliers- in terms of
product and service
Competition- stay ahead of or keep up with
competitors
47

Appeal of E-commerce
Lower

transaction costs - if an e-commerce site is

implemented well, the web can significantly
lower both order-taking costs up front and
customer service costs
Larger purchases per transaction - Amazon offers
a feature that no normal store offers
Integration into the business cycle
People can shop in different ways. The ability to
build an order over several days
The ability to configure products and see actual prices
The ability to easily build complicated custom orders
The ability to compare prices between multiple
vendors easily
The ability to search large catalogs easily

Larger catalogs
Improved customer

interactions - company.

48

Limitations of E-commerce
To organizations:

lack of security, reliability,

standards, changing technology, pressure to
innovate, competition, old vs. new
technology
To consumers: equipment costs, access costs,
knowledge, lack of privacy for personal data,
relationship replacement
To society: less human interaction, social
division, reliance on technology, wasted
resources, JIT manufacturing

49

Technical limitations
There

is a lack of universally accepted standards

for quality, security, and reliability
The telecommunications bandwidth is
insufficient
Software development tools are still evolving
There are difficulties in integrating the Internet
and EC software with some existing (especially
legacy) applications and databases.
Special Web servers in addition to the network
servers are needed (added cost).
Internet accessibility is still expensive and/or
inconvenient

50

Web based technology

Websites
E-mail
Search

engines
Interactive communications

51

Old Economy Firms

Brick

and Mortar companies need to adopt

to the new economy
- Create a new Internet company.
- Create a new subsidiary.
- Invest in an Internet competitor.
- Buy the technology from a consultant.
- Work with other firms to create an exchange.
- Integrate with suppliers and or customers.
52

Old Economy Firms

Failure

of old economy companies to

adopt may result in:
- Loss of market share.
- Inability to meet new economy competitors
prices.
- Reduced profits and cash flows.
- Inability to raise new financing.
- Loss of control in an acquisition by a new
economy firm.
53

Business Opportunity
The

Internet revolutionized ways of doing

business
Entrepreneurs found ways to exploit
market failures and earn economic rents
New businesses were created that were not
feasible earlier
The new economy poses threats to old
economy firms that do not wish to adapt
The transformation is still in process. The
evolution continues

54

Benefits and Challenges of E-commerce

Benefits
Benefits

Challenges
Challenges

Persistent
Persistent connection
connection with
with customers
customers

Cannibalization
Cannibalization

New
New value
value for
for customers
customers

Channel
Channel conflict
conflict

Access
Access to
to new
new customers
customers

Customer
Customer confusion
confusion

Scalability
Scalability

Investor
Investor confusion
confusion

55

Front end systems

Direct

user interface with business processes

Accessible via WWW
Front-end systems:
- e-CRM
- e-marketing
- e-services
- e-marketplace
- e-auction
56

Marketing Strategy in the Digital Age

Requires a new model for marketing
strategy and practice
Some suggest that all buying and selling
will eventually be done electronically
Companies need to retain old skills and
practices but add new competencies
57

E-Business in the Digital Age

Involves

the use of electronic platforms to

conduct company business.
Web sites for selling and customer relations
Intranets for within-company communication
Extranets connecting with major suppliers and
distributors

58

E-Commerce in the Digital Age

More

specific than e-business.

Involves buying and selling processes
supported by electronic means, primarily
the Internet.
Includes:
e-marketing
e-purchasing (e-procurement)
59

E-commerce vs. E-business

E-commerce

is about doing business

electronically
E-commerce conducting financial transactions
electronically
E-business

is conducting business on the

Internet
E-business is the transformation of business
processes through the Internet
60

E-Marketing in the Digital Age

The

marketing side of e-commerce.

Includes efforts to communicate about,
promote, and sell products and services over
the Internet.
E-purchasing is the buying side of ecommerce.
It consists of companies purchasing goods,
services, and information from online suppliers.
61

Types of e-Marketers

62

Click-Only Companies
E-tailers
Enabler
Sites

Content
Sites

Types of
Sites
Transactio
n Sites

Search
Engines
and Portals
Internet
Service
Providers
63

Reasons for dot.com Failures

Poor

research or planning.
Relied on spin and hype instead of
marketing strategies.
Spent too heavily on brand identities.
Devoted too much effort to acquiring new
customers instead of building loyalty.

64

Click-and-Mortar Companies
Most

established companies resisted adding Web

sites because of the potential for channel conflict
and cannibalization.
Many are now doing better than click-only
companies.
Reasons:

Trusted brand names and more resources

Large customer bases
More knowledge and experience
Good relationships with suppliers
Can offer customers more options
65

Setting Up for E-Marketing

Online Marketing

66

Setting up for E-Marketing

Options
Creating

websites
Placing online ads and
promotions
Creating or using Web
communities
Using E-mail

Corporate

websites

Build goodwill and

relationships; generate
excitement
Marketing

websites

Engage consumers
and attempt to influence
purchase
Website

design

7 Cs of effective website
design

67

Conducting E-Commerce
Seven Cs of Website Design
Context

Communication

Content

Connection

Community

Commerce

Customization
68

The 7Cs of Website design

Context

Content

Sites layout and design

Text, pictures, sound and video

that web pages contain

Commerce

Community

Sites capabilities to enable

commercial transactions

The ways sites enable user-touser communication

Connection

Customization

Degree site is linked to other

sites

Sites ability to self-tailor to

different users or to allow users
to personalize the site

Communication
The ways sites enable site-touser communication or two-way
communication

69

Fit and Reinforcement of Cs

Business
Business Model
Model

Individually Supporting Fit

Context
Context

Content
Content

Community
Community

Customization
Communication
Customization Communication

Connectio
Connectionn

Commerce
Commerce

Consistent Reinforcement

70

Setting up for E-Marketing

Options
Creating

websites
Placing online ads
and promotions
Creating or using
Web communities
Using E-mail

Online

forms of ads and

promotions
Banner ads/tickers
Skyscrapers
Interstitials
Content sponsorships
Microsites
Viral marketing
Future of online ads

71

Web Advertising

Banner ads: allows for more targeted advertising

Pop-up ads: pop-under ads are displayed in a separate

browser window beneath your main browser window
and remain there until you close them

This is a pop-up ad
Click here to close me

Skyscrapers: An advertisement on a Web site that is

vertically oriented on the page and larger than the
typical banner ad

72

Web Advertising
Interstitials: are usually full-page ads displayed while a user is
in transit from one page to another, triggered by code included in the
link

73

Web Advertising
Content Sponsorship: are sites that pay for placement in search
results on keywords that are relevant to their business
The upper: This is the part of the shoe that wraps around and over the top of the foot. It may be made of leather or a synthetic material that is lighter and
breathable (to reduce heat from inside the running shoe). The tongue of the upper should be padded to cushion the top of the foot against the pressure from the
laces. Often, at the back of the running shoe, the upper is padded to prevent rubbing and irritation against the achilles tendon.
The heel counter: This is a firm and inflexible cup which is built into the upper of running shoes and surrounds the heel. It is usually very firm so that it can control
motion of the rearfoot.
Post or footbridge: This is the firm material in the midsole which increases stability along the inner side (arch side; medial side) of the running shoe.

74

Web Advertising
Microsites: limited areas on the Web managed and
paid for by external companies

http://www.autotrader.com/

75

Viral Marketing

Gillette used viral marketing

to introduce the 3-bladed
Venus razor for women,
greatly expanding the
audience reached by its
Reveal the Goddess in You
truck tour and beach-site
promotions.

76

Setting up for E-Marketing

Options
Creating

websites
Placing online ads
and promotions
Creating or using
Web communities
Using E-mail

Web

communities allow
members with special
interests to exchange views
Social communities
Work-related
communities
Marketers find welldefined demographics and
shared interests useful when
marketing

77

Setting up for E-Marketing

Options
Creating

websites
Placing online ads and
promotions
Creating or using Web
communities
Using E-mail

E-mail

marketing

Key tool for B2B and

B2C marketing
Clutter is a problem
Enriched forms of
e-mail attempt to
break through clutter
Spam is a problem
78

Benefits of E-commerce
To consumers:

24/7 access, more choices, price

comparisons, improved delivery, competition
To organizations: International marketplace
(global reach), cost savings, customization,
reduced inventories, digitization of
products/services
To society: flexible working practices, connects
people, delivery of public services
79

Benefits to Consumers
Convenience
Buying is easy and private
Provides greater product access and
selection
Provides access to comparative
information
Buying is interactive and immediate
80

Benefits to Organizations
Powerful tool for building customer
relationships
Can reduce costs
Can increase speed and efficiency
Offers greater flexibility in offers and
programs
Is a truly global medium
81

Benefits to Society
More individuals can work from home
Benefits less affluent people
Third world countries gain access
Facilitates delivery of public services

82

Discussion Questions
What

features do you look for on a

Web site that you feel make the site
appealing?
What are your major concerns about
making online purchases?
What types of things can an online
retailer do to create a more secure
buying environment?
83

Online Ads and Promotion

Forms

of online advertising & promotion:

Banner ads & tickers (move across the screen)

Skyscrapers (tall, skinny ads at the side of a page)
Rectangles (boxes that are larger than a banner)
Interstitials (pop up between changes on Web site)
Content sponsorships (sponsoring special content)
Microsites (limited areas paid for by an external
company)
Viral marketing (Internet version of word-of-mouth)
84

Business Pressures
The

term business environment refers to

the social, economic, legal,
technological, and political actions that
affect business activities
Business pressures are divided into the
following categories:
- Market (economic)
- Societal
- Technological
85

Major Business Pressures & the Role

of EC

86

Organizational Responses
Strategic

systems

- Provide organizations with strategic advantages, enabling

them to:
Increase their market share
Better negotiate with their suppliers
Prevent competitors from entering into their territory

Continuous

improvement efforts

- Many companies continuously conduct programs to

improve:
Productivity
Quality
Customer service

Business

process reengineering (BPR)

- Strong business pressures may require a radical change

- Such an effort is referred to as business process
reengineering (BPR)

87

Organizational Responses
Business

alliances

- Alliances with other companies, even competitors, can be

beneficial
- Virtual corporationelectronically supported temporary joint
venture
Special organization for a specific
Time-limited mission

Electronic

markets

- Optimize trading efficiency

- Enable their members to compete globally
- Require the collaboration of the different companies and
competitors

88

Organizational Responses
Reduction

in cycle time and time to market

- Cycle time reductionshortening the time it

takes for a business to complete a productive
activity from its beginning to end
- Extremely important for increasing productivity
and competitiveness
- Extranet-based applications expedite steps in the
process of product or service development,
testing, and implementation
89

Strategy Formulation
Porters three

generic strategies for

business:
- focus
- low cost leadership
- differentiation
Differentiation in the new e-commerce
sector is the key to success

90

Classic Framework for Strategy Management

Mission
Goals
External
Analysis

Strategy
Formulation

Internal
(Company)
Analysis

Corporate
Business-unit
Functional
Operating

Implementation
Control and
Monitoring

91

E-commerce and Organizations

Organizations

that undertake e-commerce do so

from two possible starting points:
- new online organizations
- traditional established organizations
Factors for success:
- first-mover advantage
- differentiation in the marketplace
- flexibility and agility in the electronic
marketspace
92

Seven dimensions of E-commerce Strategy

Four
Four positional
positional factors
factors

Three
Three bonding
bonding factors
factors

Technology:
Technology: goal
goal must
must be
be
understood
understood within
within its
its market
market and
and
industry
industry
Market:
Market: must
must determine
determine its
its
target
target market
market and
and whether
whether itit is
is
still
still open
open to
to new
new entrants
entrants
Service:
Service: must
must know
know its
its
customers
customers expectations
expectations
Brand:
Brand: must
must understand
understand ifif itit has
has
the
the ability
ability to
to create
create aa strong
strong
brand
brand

Leadership:
Leadership: vision
vision of
of CEO
CEO for
for eecommerce
commerce
Infrastructure:
Infrastructure: technology
technology
support
support for
for new
new model
model of
of
business
business
Organizational
Organizational Learning:
Learning: does
does
the
the organization
organization support
support internal
internal
learning
learning

93

Technology Leadership
Involves

more than hardware and software

Seven major areas:
- strategy: focus upon alignment and planning
- structure: focus upon becoming an e-organization
- systems: technology integration
- staffing: developing a strong pool of skills
- skills: developing the necessary knowledge
- style: add value to customers
- shared values: must build value to the organization
94

Service Leadership
Established

strategies of customer still apply

Internet service strength derived from providing
additional information to the customer
Internet provides a low-cost, high-quality
service channel with a global reach
Call centre strategy must be defined
E-mail interface channel must be defined
95

Brand Leadership
Branding

strength comes from being a first

mover
Brand reinforcement is a continuous task
Brand positioning can be defined using the
Internet service value chain
Brand followers need to reposition as
quickly and effectively as possible
Four brand

96

Developing a Winning E-strategy

Ensure

that the project is backed by senior management

Develop a strategy before a Web presence
Develop a strategy by focusing on technology,
branding, marketing and service
Identify and use knowledge in the organization
Strategy must add value for customers and must change
as the requirements of the customers change

97

The Three Approaches to Strategy

Position approach: Where should we be vs. our

competition?

Resources approach: what resources should we

possess?

Simple rules approach: What processes should we

follow?

98

Three Approaches to Strategy

Position
Strategic Logic
Strategic Steps

Strategic Question

Resources

Simple Rules

Establish position

Leverage resources

Pursue opportunities

Identify an attractive
market
Locate a defensible
position
Fortify and defend

Establish a vision
Build resources
Leverage across markets

Jump into the confusion

Keep moving
Seize opportunities
Finish strong

Where should we be?

What should we be?

How should we proceed?

Unique, valuable position Unique, valuable,

inimitable resources
activity system

Key processes and

unique simple rules

Works Best In

Slowly changing, wellstructured markets

Moderately changing,
well structured markets

Rapidly changing,
ambiguous markets

Duration of
Advantage

Sustained

Sustained

Unpredictable

It will be too difficult to

alter position as conditions
change
Profitability

Company will be too slow

to build new resources as
conditions change
Long-term dominance

Managers will be too

tentative in executing on
promising opportunities
Growth

Source of Advantagewith tightly integrated

Risk
Performance Goal

99

Business Model

100

Business Models
A method

of doing business by which a

company can generate revenue to sustain
itself
Spells out where the company is positioned
in the value chain
Business models are a component of a
business plan or a business case
101

Business Plans & Business Cases

Business

plan:
- A written document
that identifies the
business goals and
outlines the plan of
how to achieve them

Business

case:
- A written document
that is used by
managers to garner
funding for specific
applications or
projects; its major
emphasis is the
justification for a
specific investment
102

The Content of a Business Plan

Mission

statement and
company description
The management team
The market and the
customers
The industry and
competition
The specifics of the
products and/or services

Marketing

and sales

plan
Operations plan
Financial projections
and plans
Risk analysis
Technology analysis

103

Structure of Business Models

All

business models must specify their

revenue model (the description of how the
company or an E-commerce project will
earn revenue)
Value proposition is the description of the
benefits a company can derive from using
EC
Revenue sources are
- Transaction fees
- Subscription fees
- Advertisement fees

- Affiliate fees
- Sales
- Other models

104

Business Models in E-commerce

Method

of doing business
Well-planned model gives a competitive
advantage
Impacts on sustainability and growth
Three areas:
- value stream
- revenue stream
- logistical stream
105

Transaction costs
Cost

of providing some good or service through

the market
Effects of e-commerce and the internet that
impacts the business model
Searching for an obtaining information
Participating in a market
Policing and enforcing transactions
Bargaining and decision costs
Actual cost of buying or selling the product
106

Value Stream
Create

long-term sustainability
Benefit for business stakeholders
Can be achieved in four ways:
- creation/participation in an e-marketplace
- creation/participation of virtual communities
- additional value offers
- exploitation of offers
107

Creation/participation in an e-marketplace
Reduce transaction costs directly/indirectly
Economics of e-market similar to traditional market
Can be setup by supplier/buyer or run independently
Buyer value:
- reduced costs
- improved service
- convenience
Supplier value:
- reduced costs
- differentiation
- reduced lead time

108

Creation/participation of virtual
communities
Bringing

together members of a community

Larger communities mean larger sources
Improves customer service

109

Additional value offers

Value

is added by improving product mix

Through association or partnership
Can be achieved with minimum costs
Can be integrated into the host sites

110

Exploitation of offers
E-commerce/Internet

economy founded on

information
Value can be added by using this information
Target customers demographically
Can bridge the uncertainty gap
Can post RFPs
111

Revenue Stream
Short-term

realization of value proposition

Direct:

- cost reduction
- free offerings of service/products
- pricing strategies
Indirect:
- internet advertising
- selling customer information
- joining affiliate programs
112

Logistical stream
Examines

organization restructure to deliver

value added and revenue streams
Issues such as:
- organizational culture
- pre/post restructuring
- implementing information
- communication and training
- reward systems for motivation
113

Kinds of business models

Brokerage:

market makers bring together

buyer and sellers
Advertising: web advertising providing
advertising messages
Infomediary: collecting and disseminating
information

115

Assessing a business model

Can

be assessed by looking at the marketing

strategy
Can also be assessed by technology
- imitation
- complementary assets
Financial measures
Competitor benchmarking
Market analysis
116

Traditional vs. New Business

Models
Traditional

New Business

Production

Mass
Manufactures push

Personalized
Customer Pull

Distribution

Middleman

Direct

Communications

Closed

Open

Finance

Slow
Difficult

Fast
Easier

Markets

Local
Mass

Global
Niche

Assets

Physical

Virtual

117

Consumer Decision Process

Problem
Problem--Recognition
Recognition
PRE-PURCHASE

Information
InformationSearch
Search
Evaluation
Evaluationof
ofAlternatives
Alternatives

PURCHASE

Purchase
PurchaseDecision
Decision
Satisfaction
Satisfaction

POST-PURCHASE

Loyalty
Loyalty
Disposal
Disposal

118

Consumer Decision Process Flower Example

Flowers
Problem
Problem--Recognition
Recognition

Pre-Purchase

Need recognition, potentially triggered by a

holiday, anniversary or everyday events

Search for ideas and offerings, including:

Available on-line and off-line stores
Gift ideas and recommendations
Advice on selection style and match

Evaluation of alternatives along a number of

dimensions, such as price, appeal, availability, etc.

Purchase decision
Message selection (medium and content)

Information
InformationSearch
Search

Evaluation
EvaluationofofAlternatives
Alternatives

Purchase

Purchase
PurchaseDecision
Decision

Post-sales support
Order tracking
Customer service

Education on flowers and decoration

Post sales perks

Satisfaction
Satisfaction
PostPurchase

Loyalty
Loyalty

Disposal
Disposal

119

Metrics
Metrics: If it moves, measure it!
Measures of performance; may be quantitative
or qualitative
Response

times
Site availability
Download times
Timeliness

Security

and privacy
On-time order
fulfillment
Return policy
Navigability
120