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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.
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
EC Organizations
 brick-and-mortar (old-economy) organizations
Purely physical organizations (companies/corporations) are called brick-and-mortar organizations. These
organizations perform their business off-line, selling physical products by means of physical agents.
 virtual (pure-play) organizations
Organizations that conduct their business activities solely online (that is, engaged only in EC) are called
Virtual (or Pure Play) organizations.
 click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce activities (usually as an additional marketing channel,
e.g., any organization having simple informative website), but conduct their primary business in the
physical world.
Gradually, many brick-and-mortar companies are changing to click-and-mortar ones.
Internet versus Non-Internet EC
 Most EC is done over the Internet, but EC also can be conducted on private networks, such as valueadded networks (VANs) , local area networks (LANs), or on a single computerized machine
 Non-Internet EC examples include the use of mobile handwriting-recognition computers used by
field reps to write their notes in the field.
Electronic Markets and Inter-Organizational & Intra-Organizational Information
System.
EC can be conducted in an Electronic Market (or e-marketplace) where buyers and sellers meet online
to exchange good, services, money, or information.
Electronic Markets may be supplemented by Inter-organizational or intra-organizational information
systems
 Inter-organizational information systems (IOSs)
Communications systems that allow routine transaction processing and information flow between two or
more organizations
 intra-organizational information systems
Communication systems that enable e-commerce activities to go on within individual organization. These
systems are also known as Intra-business EC.
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. It is a major
part (more than 70%) of EC. For example, EC between Dell Company and its Suppliers.
 Business-to-Consumer (B2C)
E-commerce model in which businesses sell to individual shoppers. Examples are Dell, Amazon, etc. B2C
model is also called e-tailing.
 e-tailing
Online retailing, usually B2C.
 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 to whom the product or service is provided without adding any value to it.
For example, Airline Company or Hotel provides travel services, such as airline tickets and hotel rooms, to
business partners, such as Travel Agencies. These travel agencies then sell the same product and service
to customer.
 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. Priceline.com is a well-known
organizer of C2B transactions.
 Mobile Commerce (M-Commerce)
If E-commerce transactions and activities are conducted (in full or in part) in a wireless environment, it is
known as M-Commerce. e.g., Banking through Internet enabled mobile device, such as cell phone or Tab.
 Location-based commerce (L-commerce)
If M-commerce transactions are targeted to individuals in specific locations, at specific times; it is called
L-Commerce. For example, Roaming Scheme Message, and nearby facility searching.
 Intra-Business 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. For example,
selling to employees, providing online training, or collaborative design preparation. Intra-Business EC is
normally performed over Intranet or Corporate Portals (gateways to the Web).
 Business-to-Employees (B2E)
E-commerce model in which an organization delivers services, information, or products to its individual
employees. It is a subset of Intra-business EC. A major category of employees is mobile employees, such
as field representatives. EC support to such employees is called B2ME (Business-to-Mobile Employees).
 Collaborative Commerce (C-Commerce)
E-commerce model in which individuals or groups communicate or collaborate online. The examples are:
designing a product together using screen sharing, managing inventory online, jointly forecasting product
demand, developing IT standards.
 Consumer-to-Consumer (C2C)
E-commerce model in which consumers sell (transact) directly to other consumers. Examples of C2C
include individual selling residential property or car in online classified ads. The advertisement of personal
services over the Internet and the selling of knowledge and expertise online are other examples of C2C.
 Peer-to-Peer (P2P) Applications
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. For example, in P2P application (Viber, WeChat,
etc.), people can exchange music, photo, and other digitized goods electronically.
 e-learning
The online delivery of information for purposes of training or education. It is used by organizations and
virtual universities.
 e-government
E-commerce model in which a government entity buys or provides goods, services, or information from
or to businesses or individual citizens
 exchange
A public electronic market with many buyers and sellers
 exchange-to-exchange (E2E)
E-commerce model in which two or more electronic exchanges are formally connected to one another
for the purpose of exchanging information
Benefits and Limitations of EC
Benefits of EC
EC provides benefits to organization, individual customers, and society.
 Benefits to Organizations
 Expands the marketplace to national and international markets
 Decreases the cost of creating, processing, distributing, storing and retrieving paperbased information
 Allows reduced inventories and overhead by facilitating pull-type supply chain
management
 The pull-type processing allows for customization of products and services which
provides competitive advantage to its implementers
 Reduces the time between the outlay of capital and the receipt of products and services
 Supports business processes reengineering (BPR) efforts
 Lowers telecommunications cost - the Internet is much cheaper than value added
networks (VANs)
 Benefits to consumers
 Enables consumers to shop or do other transactions 24 hours a day, all year round from
almost any location
 Provides consumers with more choices
 Provides consumers with less expensive products and services by allowing them to shop
in many places and conduct quick comparisons
 Allows quick delivery of products and services (in some cases) especially with digitized
products
 Consumers can receive relevant and detailed information in seconds, rather than in days
or weeks
 Makes it possible to participate in virtual auctions
 Allows consumers to interact with other consumers in electronic communities and
exchange ideas as well as compare experiences
 Facilitates competition, which results in substantial discounts
Limitations of EC
Framework of EC
The EC field involves many activities, organizational units, and technologies A
framework that describes its content shown in following figure
To implement EC applications, Organization needs right information,
infrastructure, and support services. EC applications are supported by
infrastructure and 5 (Five) support areas
 People: Sellers, buyers, intermediaries, information system specialist, other
employees, and any other participants comprise an important support area.
 Public policy/Technical standards and protocols: Legal and other policy and
regularity issues, such as privacy protection and taxation, which are
determined by governments. Included as a part of public policy is the issue of
technical standards, which are established by government or industrymandated policy-making groups. Compliance with the regulation is an
important issue.
 Marketing and advertisement. Like any other business, EC usually requires the
support of marketing and advertising. This is especially important in B2C online
transactions, in which the buyers and sellers usually do not know each other.
 Business partnerships. Joint ventures, exchanges, and business partnerships of
various types are common in EC. These occur frequently throughout the supply
chain (i.e., the interactions between a company and its suppliers, customers,
and other partners).
 Support services. Many services are needed to support EC. These range from
content creation to payments to order delivery.
The infrastructure for EC is shown at the bottom of above figure. Infrastructure
describes the hardware, software, and networks used in EC. All of these
components require good management practices. This means that companies need
to plan, organize, motivate, devise strategy, and restructure processes, as needed,
to optimize the business use of EC models and strategies. Management also deals
with strategic and operational decisions.
Impacts of EC: Marketing, Manufacturing, Finance, and Accounting, Human
Resource
Impacts on Direct Marketing
Traditional direct marketing is done by catalogs or telephone. Following are the
impacts on the direct marketing.
 Product Promotion: Contact with the customer is become more informational
and more interactive. The extent (size/scope) of E-Marketplace is increased,
that resulted in increased promotion of product and services through the direct
marketing.
 New Sales Channel: Because of the direct marketing (direct reach to the
customer) & by directional nature of the communication in EC, a new
distribution channel for existing product is created.
 Direct Selling: The cost of delivery of information (and in some cases, of product)
is reduced when it is performed through Internet.
 Improved Customer Services: The delivery time of the digitized product and
services is almost zero. Even delivery time for physical goods and services is also
reduced greatly (for example, EC can inform the nearby warehouse to deliver
goods)
 Improved Customer Services: The Customer Services can be enhanced by
enabling customer to find out the required product information and product
support online by various effective means such as FAQ, and Search Facility.
 Brand or Corporate Image: The new customer can understand corporate image
very quickly.
Impact on Manufacturing
EC is changing manufacturing system from mass production to demand
production. These new production system are integrated with finance, marketing
and other functional system. Using the Web based ERP system (Enterprise
Resource Planning) the companies can take directly customer order and can fulfill
it (the requirement of the customer).
 Build to order manufacturing: in these types of manufacturing process, the
manufacturing process of a product starts after order is received/confirmed
(sometimes, even paid) by the customer. This changes not only production
planning but also the entire supply chain as well as payment cycle.
 Real time demand manufacturing: Successful manufacturing organization must
respond quickly & efficiently to the demand. It provides the customer with
exactly what they want (customization), when they want, and where they
want. Effective communication between supply chain and factory floor is
needed to make it happen.
 Virtual Manufacturing: It is an organization that is capable to run multiple
manufacturing plants from single place.
 Assembly Lines: The companies such as IBM< General Motors, General Electric
assembles the products from he components that are manufactured fin
different location. Communication, collaborations, and coordination are the
critical points in these system. Such systems are flexible allowing for fast
changes with minimum cost.
Impact on Finance and Accounting
E-Markets require special financial and accounting system, called Electronic
Payment System. Traditional payment system are ineffective for electronic trade.
The use of new payment system such as electronic cash is very efficient because
legal issues and agreements on the international standards are involved in
executing the electronic order (purchase order). These back office activities
related to accounting also needs to be aligned with E-finance.
Impact on Human Resource
EC is changing how people are recruited, evaluated, promoted, and developed.
EC is abolishing the way of training and the education offered to the employees.
Cost of company for training the employees is reduced
Online distant learning provides an opportunities to the new comers.
New E-Learning system offer two way interaction with audio and video. It also
allows to share different types of data (learning material). Such system provides
interactive remote instruction system through high speed Internet.
A business model describes the rationale of how an organization captures, creates and
delivers value. Such a model has to be intuitive and cover all matters of interest, i.e.
encompass the necessary and sufficient conditions of company operation. The concept
should be simple, complete and relevant, without oversimplifying the complexities of
how enterprises actually function. A business model is extremely important to ensure a
business is set up properly and has the ability to run smoothly. The business model is
the main component of a business plan and this is necessary when looking for investors
from both individuals and banks.
There are 8 components which make up Business Model:
1) Value Proposition
Define how a company's product or service fulfils the need of customers.
-Examples of successful value propositions
-Personalization/ Customization
-Reduction of product search, price discovery costs
-Facilitation of transactions by managing product delivery
2) Revenue Model
Define how the firm will earn revenue generates profits and produce a superior return
on invested capital
-Major types:
Advertising revenue models: CNN.com
Subscription revenue models: MATCH.com
Transaction fee revenue model: EBay, E-Trade, Hotwire
Sales revenue model: Amazon, LLbean, Gap.com
Affiliate revenue model: E-pinions, Banner Exchange, Edmunds à sends traffic to
another website
3) Market Opportunity
Refers to a company's intended market space and the overall potential financial
opportunities available to the firm in that market space
4) Competitive Environment
Refers to the other competition selling similar products and operating in the same
market space
-Influenced by
How many competitors are active?
How large operations are
The market share for each competitor
How profitable these firms are
How they price their product
5) Competitive Advantage
Achieved when a firm can produce a superior product and/or bring a product to market,
at a lower price than most, or all, of their competitors.
-Types of competitive advantage:
First mover advantage
Unfair competitive advantage
6) Market Strategy
Plan that details how a company intends to enter a new market and attract strategy
7) Organizational Development
Describes how the company will organize the work that needs to be accomplished
8) Management Team
Employees of the company responsible for making the business model work
-Strong management team gives instant credibility to outside investors
A business model is very important to ensure a business is set up properly and has the
ability to operate the business. The business model is the main component of a business
plan and this is necessary when looking for investors from both individuals or banks. There
are 8 components which make up a business model:
Value proposition: This is describes how a company’s product or service fulfills the needs of
customers and why a customer would buy from the company. For example, a successful
value proposition must include personalization, customization, reduction of product search,
price discovery costs and facilitation of transactions by managing product delivery. Revenue
model: This is describes how a company plans to make money from its business because
earning revenue and produce a superior return on invested capital is the primary objective
of a company. For example, the 5 major e-commerce revenue models include advertising
revenue model, subscription revenue model, transaction fee revenue model, sales revenue
model, affiliate revenue model. Market opportunity: This is describes what market space
does the company intend to serve and what is its size. Basically, it is refers to the
company’s intended market space and the overall potential financial opportunities available
to the company in that market space. Competitive environment: This is describes the direct
and indirect competitors who doing similar business in the same market space. For
example, the additional information includes how large they are, their net profits, their share
of the market space and the price of their product. Competitive advantage: This is describes
the factors that differentiate the business from its competition and which may encourage
customers to purchase the company’s product or service. For example, the product or
service of the company may cheaper or higher quality than its competitors. Market strategy:
This is describes how the...