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Introduction to Information Technology
Turban, Rainer and Potter
John Wiley & Sons, Inc.
Copyright 2005
Chapter 5
E-Business and E-Commerce
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Chapter Outline
Overview of E-Business and E-Commerce
Major EC Mechanisms
Business-to-Consumer Applications
Online Advertising
B2B Applications
Intrabusiness and Business-to–Employees
E-Government and Consumer-to-Consumer EC
E-Commerce Support Services
Ethical and Legal Issues in E-Business
Failures and Strategies for Success.
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Learning Objectives
Describe electronic commerce, its scope, benefits, limitations,
and types.
Understand the basics of how online auction and bartering work.
Describe the major applications of business-to-consumer
commerce, including service industries, and the major issues
faced by e-tailers.
Discuss the importance and activities of online advertising.
Describe business-to-business applications.
Describe intrabusiness and B2E e-commerce
Describe e-government activities and consumer-to-consumer ecommerce
Describe the e-commerce support services, specifically
payments and logistics.
Discuss some ethical and legal issues relating to e-commerce
Describe EC failures and strategies for success.
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5.1 Overview of E-Business and E-Commerce
 Electronic commerce (e-commerce, EC). The
process of buying, selling, transferring, or
exchanging products, services, and/or
information via computer networks, including
the Internet.
 E-business. A broader definition of EC,
including buying and selling of goods and
services, and also servicing customers
collaborating e-learning, and conducting
electronic transactions within an organization.
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Pure versus partial EC
 Electronic commerce can take several forms
depending on the degree of digitization- the
transformation from physical to digital- involved. The
degree of digitization can relate to:(1) the product
(service) sold, (2) the process, or (3) the delivery
agent (or intermediary).
 In pure EC all dimensions are digital.
 If there is at least one digital dimension, we consider
the situation partial EC.
 Brick- and-mortar organizations. Organization in
which the product, the process, and the delivery
agent are all physical.
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Pure vs Partial EC cont…
Virtual organization. Organization in which
the product, the process, and the delivery
agent are all digital; also called pure – play
organization
Click-and– mortar. Organization in which the
product, the process, and the delivery agent
may be physical or digital .
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Types of E-Commerce Transactions
Business-to-Business (B2B): E-commerce in
which both the sellers and the buyers are
business organizations.
Collaborative commerce ( c-commerce): E –
commerce in which business partners
collaborate electronically
Business-to-Consumers (B2C): E-commerce
in which the seller are organizations and the
buyers are individual also known as e-tailing.
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Types of E-Commerce Transaction
cont…
Consumer-to-Consumer(C2C).:E-commerce
in which an individual sells products or
services to other individuals.
Customer -to-Business (C2B).:E-commerce in
which customers make known a particular
need for a product or service, and suppliers
complete to provide the product or service to
consumers .
Intrabusiness( intraorganizational) commerce.
E-commerce in which an organization uses
EC internally to improve its operations.
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Types of E-commerce cont…
B2E( business to employees) EC: A special case of
intrabusiness e-commerce in which an organization
delivers product or services to its employees.
Government–to–Citizens(G2C): E-commerce in
which a government provide services to its citizen via
EC technologies.
Government-to–business (G2B): E-commerce in
which a government does business with other
governments as well as with businesses.
Mobile Commerce (m-commerce): E-commerce
conducted in a wireless environment.
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EC Business Model
The major business model of EC are
summarized in Manager’s Checklist 5.1
Business Model. The method by which a
company generates revenues to sustain itself .
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The Scope of EC
EC applications are supported by an
infrastructure that includes hardware,
software, and networks, ranging from
browsers to multimedia, and also by five
support areas.
People
Public Policy
Marketing and advertising
Support services
Business Partnerships
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Benefits of E-commerce
Benefits to organization:
The availability of natural and international markets,
The decreased cost of processing, distributing, and
retrieving information.
Benefit to customer:
The access to a vast number of products and services,
around the clock.
Benefit to society :
The ability to deliver information, services, and product
to people in cities, in rural areas and in developing
countries.
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Technological Limitations
The lack of universally accepted security
standards.
Insufficient telecommunication bandwidth.
Expensive accessibility
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Nontechnological Limitations
A perception that EC is insecure.
Unresolved legal issue.
A lack of a critical mass of sellers and buyers.
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A framework for e-commerce
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5.2 Major EC Mechanism
The major mechanisms for buying and selling on the
Internet are electronic catalogs. Electronic auctions,
and online bartering
Electronic Catalogs. Electronic catalogs on CD-ROM
and the Internet have gained popularity. Electronic
catalogs consist of a product database, directory and
search capabilities and a presentation function.
Electronic Auctions (E-auction). A market mechanism
by which sellers place offers and buyers make
sequential bids, and prices are determined
dynamically by competitive bidding.
Electronic battering. The exchange of goods or
services without a monetary transaction.
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Electronic catalogs can be classified
according to three dimension:
The dynamic of the information
presentation.
The degree of customization.
The degree of integration with other
business process or features.
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Types of Electronic Auctions:
Forward auction: An auction that sellers use
as a selling channel to many potential buyers;
the highest bidder wins the item.
Reverse auction:: An auction in which one
buyer, usually an organization, seeks to buy a
product or a service, and suppliers submit
bids; most common model for large purchase.
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5.3 Business-to-Consumer Applications
 Electronic relating (e-tailing): The direct sale of
products and services through electronic storefronts
or electronic malls, usually designed around an
electronic catalog format and/or auctions.
 Two popular shopping location online are electronic
storefronts and electronic malls:


Electronic storefront: The website of a single company,
with its own Internet address, at which orders can be
placed.
Electronic malls (cyber mall): A collection of individual
shops under one Internet address.
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B2C Applications cont…
 Cyberbanking. Various banking activities
conducted electronically from home, a
business, or on the road instead of at a
physical bank location.
 Virtual bank. A banking institution dedicated
solely to internet transactions.
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Phases in Customer Service Life Cycle.
 Phase 1: Requirement: Assist the customer to
determine needs by providing photographs of a
product, video presentation, textual descriptions,
articles or reviews, sound bites on a CD, and
downloadable demonstration files.
 Phase 2: Acquisition: Help the customer to acquire a
product or service.
 Phase 3: Ownership: Support the customer on an
ongoing basis
 Phase 4: Retirement: Help the client to dispose of a
service or product.
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Issues in E-tailing
Resolving channel conflict
Resolving conflicts within click–and-mortar
organizations
Organizing order fulfilment and logistics.
Determining viability and risk of online etailers.
Identifying appropriate revenue models
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5.4 Online Advertising
 Improves traditional forms of advertising in a number of
ways:
 can be updated any time at minimal cost
 can reach very large numbers of potential buyers all
over the world
 sometimes cheaper
 can be interactive and targeted to specific interest
groups and / or to individuals.
 It makes sense to move advertising to the Internet,
where the number of viewers is growing .
 Shortcomings: most of which relate to the difficulty in
measuring the effectiveness and cost-justification of the
ads.
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Advertising Method
Banners: Electronic billboards, which typically contain
a short text or graphical message to promote a
product or a vendor.
Keyword banner: Banner advertising that appears
when a predetermined word is queried from a search
engine.
Random banner: Banner advertising that appears
randomly.
Pop-up ad: An advertisement that is automatically
launched by some trigger and appears underneath
the active window.
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Some Advertising Issues and Approaches
Unsolicited Advertising: Spamming is the indiscriminate
distribution of electronic ads without permission of the receiver.
Permission marketing: Method of marketing that asks
consumers to give their permission to voluntarily accept online
advertising and e-mail.
Viral Marketing: Virtual marketing refer to online ’’word-ofmouth’’ marketing. The main idea is to have people forward
message to friends, suggesting that they ‘’check this out’’
Interactive Advertising and Marketing: The term interactive
points it the ability to an individual, to gather and remember that
person’s responses, and to serve that customer based on his or
her previous unique responses.
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Online Promotions: Attracting Visitors to a site.
Making the top of the list of search engine.
Online events, promotion and attractions.
Online coupons.
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5.5 B2B Applications
In business to business (B2B) applications,
the buyers, sellers, and transactions involve
only organizations
The major models are: sell-side
marketplaces, buy-side marketplaces, and
electronic exchanges.
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Major B2B Models
Sell-side marketplace. B2B model in which
organizations sell to other organizations from
their own private e-marketplace and/or from a
third-party site
Buy-side marketplace. B2B model in which
organizations buy needed products or service
from other organizations electronically often
through a reverse auction.
E-procurement. Purchasing by using
electronic support.
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Sell-Side Marketplaces
The key mechanisms in the sell–side model
are:
 Electronic catalogs that can be customized
for each large buyer and
 Forward auctions.
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Buy-Side Marketplaces
Group Purchasing: The aggregation of
purchasing orders from many buyers so that a
volume discount can be obtained.
Desktop Purchasing: E-procurement method
in which supplier’s catalogs are aggregated
into an internal master catalog on the buyer’s
server for use by the company’s purchasing
agents.
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Four Types of Electronic Exchanges
Public exchanges (exchanges): E-marketplace
in which there are many sellers and many
buyers, and entry is open to all; Frequently
owned and operated by a third party. Four basic
types:
Vertical distributors for direct materials
Vertical exchanges for indirect materials.
Horizontal distributors
Functional exchanges
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5.6 Intrabusiness and Business-to-Employees
Intrabusiness. E- commerce within an
organization (between an organization and its
employees or among business units) .
Business to its Employees (B2E) commerce
E-commerce between and among units within
the business
E-commerce between and among corporate
Employees.
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5.7 E-Government and Consumer-to-Consumer EC
E-government. The use of e-commerce to
deliver information and public services to
citizens, business partners and suppliers of
government entities, and those working in
public sector.
E-government application can be divided into
three major categories; government-tocitizens (G2C), government–to–business
(G2B), and government-to–government
(G2G).
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Customer-to-Consumer(C2C)
E-commerce in which both the buyer and the
seller are individuals (not businesses).
C2C auctions
Classified Ads.
Personal Services.
Support services to C2C
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5.8 E-commerce support services
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Electronic Payments
Electronic Checks
Electronic Credit Cards
Purchasing Cards
Electronic Cash
Electronic Bill Presentment and Payments
Paying Bills at ATMs.
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Three forms of electronic cash
Person- to-Person Payment. A form of e-cash that
enables the transfer of funds between two
individuals, or between an individual and a business,
without the use of a credit card.
Stored-value money card. A form of e-cash on which
a fixed amount of prepaid money is stored, the
amount is reduced each time the card is used.
Smart card. A form of e-cards, that contains a
microprocessor (chip) that enables the card to store a
considerable amount of information and to conduct
processing .
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Security in Electronic Payment
Authentication. The buyer, the seller, and the paying
institution must be assured of the identity of the parties with
whom they are dealing.
integrity. It is necessary to ensure that data and information
transmitted in EC, are not accidentally or maliciously altered
or destroyed during transmission.
Nonrepudiation. Merchants need protection against the
customer’s unjustified denial of placing an order. On the
other hand , customers need protection against merchant’s
unjustified denial of payment made. (such denials, of both
types, are called repudiation)
Privacy. Many customers want their identify to be secured.
Safety. Customers want to be sure that it is safe to provide a
credit card number on the Internet.
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Security Protection
E-wallets (digital wallets). Mechanisms that
combine security measure and convenience
in EC purchasing.
Virtual credit card. A payment mechanism
that allows a buyer to shop with an ID number
and a password instead of with a credit card
number.
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5.9 Ethical issues in e-business
Privacy
Loss of Jobs
One of the most interesting EC issues relating to loss
of jobs is that of intermediation . Intermediaries
provide two types of services. (1) matching and
providing information and (2) value-added services
such as consulting.
Disintermediation: Elimination of intermediaries in
EC.
Reintermediation: Occurs where intermediaries such
as brokers, who provide value-added services and
expertise, cannot be entirely eliminated from EC.
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Legal Issues Specific to E-Commerce
Fraud on the internet
Domain names
Taxes and other fees.
copyright
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Tips for Safe Electronic Shopping
 Look for reliable brand names at sites like Wal-Mart online, and Amazon.com. Before purchasing,
make sure that the site is authentic by entering the site directly and not from an unverified link
 Search any unfamiliar selling site for the company’s address and phone and fax numbers. Call up
and quiz the employee about the seller.
Check out the vendor with the local chamber of commerce or better business bureau (bbbonline.org).
Look for seals of authenticity such as TRUSTe.
 Investigate how secure the seller’s site is by examining the security procedure and by reading the
posted privacy notice
Examine the money- back guarantees, warranties, and service agreements.
 Compare price to those in regular stores. too.-low prices are too good to be true, and some ‘’catch ‘’
is probably involved.
 Ask friends what they know . Find testimonials and endorsements in community sites and well –
known bulletin boarder.
find out what your rights are in case of a dispute . Consult consumer protections agencies and the
national fraud information center (fraud.org)
check consumerworld.org for a listing of useful resources.
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