Subject Code: ENTREP ELEC 3

Course Description: E-Commerce

Instructor: John Vincent S. Jagolino

CHAPTER 1:
BASICS AND DEFINITIONS

THE TERM “E-COMMERCE”

Electronic commerce, commonly know as “E-Commerce”, is the trading in products or services using computer
networks, such as the “Internet”. Electronic commerce draws on technologies such as mobile commerce, electronic
funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange
(EDI), inventory management systems, and automated data collection systems.

E-Commerce business may employ some or all of the following:

 Online shopping
 Online marketplace
 Business-to-business (buying and selling)
 Web contacts and social media
 Online launching of new products (pretail)

Pretail

“Pretail”, also referred as pre-retail or pre-commerce, is a sub-category of E-Commerce and online retail for
introducing new products, services and brands to market by pre-launching online, sometimes reservations in limited
quantity before release, realization, or commercial activity.

5-C MODEL

Commerce
 In the electronic marketplaces there is a matching of customers and suppliers, an establishing of the
transaction terms and the facilitation of exchange transaction.

Collaboration
 More or less, formal collaborations are created or emerge on the Web.

Communication
 As an interactive medium, the Web has given rise to a multiplicity of media products.
 This universal medium has become a forum of self-expression
 The rapidly growing M-Commerce enables connectivity in context, with location sensitive products and
advertising
 In the communications domain, the Web also serves as a distribution channel for digital products.

Connection
 The Internet, as a network of networks that is easy to join and out of which it is relatively easy to carve
out virtual private networks (VPN), is the universal telecommunications network, now widely expanding
in the mobile domain.

Computation
 Internet infrastructure enables large scale sharing of computational and storage resources, thus leading
to the implementation of the decades-old idea of utility computing.

ADDITIONAL TERMS

M-Commerce
 M-Commerce is commonly understood as the usage of mobile devices for business purposes, especially mobile
phones and PDAs (Personal Digital Assistants).

Mainfeatures of M-Commerce are:

 Location independence
 High availability of services
 Increasing computing power of mobile devices
 Interactivity of mobile devices (voice and data transfer)
 Security (when using mobile phone networks)
 Localization of customers
 Accessibility of customers
 Potential of personalized services/offers

E-Procurement (Electronic Procurement)

E-Procurement is the automation of an organization’s procurement processes using Web-based applications. It

enables widely dispersed customers and suppliers to interact and execute purchase transactions. Each step in the
procurement process is captured electronically, and all transaction data is routed automatically, reducing time and cost of
procurement. If properly deployed, E-Procurement can deliver tremendous value to enterprises in different ways.

E-Government (Electronic Government)

“E-Government (short for electronic government, also known as e-gov, Internet government, digital government,
online government, or connected government) consists of the digital interactions between citizens and their government
(C2G), between governments and government agencies (G2G), between government and citizens (G2C), between
government and employees (G2E), and between government and businesses/commerce(G2B).

E-Administration (Electronic Administration)

E-administration refers to those mechanisms which convert the paper processes in a traditional office into
electronic processes, with the goal to create a paperless office. Its objective is to get total transparency and accountability
within any organization.

E-Democracy (Electronic Democracy)

E-Democracy incorporates 21st-century information and communications technology to promote democracy. That
means a form of government in which all adult citizens are presumed to be eligible to participate equally in the proposal,
development, and creation of laws.

ROLE OF INTERNET

In the dot-com era, E-Commerce came to include activities more precisely termed “Web commerce” — the
purchase of goods and services over the World Wide Web, usually with secure connections with E-Shopping carts and
with electronic payment services such as credit card payment authorizations.

The emergence of E-Commerce also significantly lowered barriers to entry in the selling of many types of goods;
many small home-based proprietors are able to use the Internet to sell goods. Established suppliers had to close their
shops and to change their business model to an E-Commerce model to stay profitable and in the business (e.g. travel
agencies).

Often, small suppliers use online auction sites such as eBay or sell via large corporate websites, to ensure that
they are seen and visited by potential customers.

BUSINESS MODELS RELATED TO E-COMMERCE

INTERNET BASED BUSINESS

Access provider
 The access provider ensures (technical) access to the Internet. We should have in mind, that somebody has to
pay the access provider so that we can get access to the Internet. Who pays? We or somebody else? In many (most?)
areas of the world it is a totally privatized business, though sometimes in the political arena the access to the Internet is
declared as a modern human right.

Search engine

Search engines are the most used software in the Internet. They are the starting step for many Internet-based
activities.

Online shop

An online shop is a website, where you can buy products or services.

Traditional and similar business models are direct mail selling (no shop facility, offering of goods via a printed
catalogue, ordering by letters or telephone calls) and factory outlets (producer has own shop facility, does not sell his
products via merchants).

Content provider

Content providers offer content, a completely digital good, e.g. information, news, documents, music. A specific
variant of a content provider is the information broker, who is a trader of information.

Traditional business models in this area are newspaper publishers, magazine publishers, radio and television
broadcasting services or publishing companies.

Portal

A portal is a website, which provides a set of services to the user so that he/she sometimes thinks that he/she is
using a single but very complex software system. Portals are often used in big organizations to control the access of
employees to the different ICT systems; each employee gets a specific menu of “his”/“her” applications. Also, content
providers use portals, though in the narrow sense that they only deliver content and no application systems.

Online marketplace/electronic mall

An online marketplace is a website, where suppliers and potential customers can come together like on a real
marketplace in a small town. An E-Mall is a set of online shops, which can be found on one website.

Examples of traditional and similar business models are shopping centers, omnibus orders (One person is
customer of the shop and buys for a group of people), marketplaces and buying associations.

Virtual community

A virtual community is a platform for communication and exchange of experience. It is similar to a virtual club or
association.

Information broker

An information broker collects, aggregates and provides information, e.g. information with respect to products,
prices, availabilities or market data, economical data, technical information

Traditional and similar business models are magazines running tests of computers, cars,
consumer goods, restaurants.

Transaction broker

A transaction broker is a person or an organization to execute sales transactions. Sometimes those brokers are
used to hide the real customer to the supplier. A transaction broker is an agent who is an expert in a specific area and can
take over parts of a business. A similar traditional business model is the free salesman.

Online service provider/cloud service provider (CSP)

 An online service provider provides services, which can be run electronically, e.g. application software services or
ICT infrastructure services like storage or backup services. If this organization uses so-called cloud technologies it is
called a cloud service provider.

ADVANTAGES & DISADVANTAGES

Advantages
For the customer For the Provider
 Flexible shopping hours (24/7)  Better customer service can be offered
 No waiting queues (if net is available and  Fast communication with customer
software appropriately designed)  New customer potential through global visibility
 Shopping at home (we don't have to leave our
apartment, refuel our car or buy a subway ticket,
look for a parking place, etc.)
 Individual needs can be covered (if customization
is offered)
 Global offers, more competition, pressure on
prices

Disadvantages
For the customer For the Provider
 Security risks:  Higher logistics cost (goods have to be sent to
o Data theft (e.g. stealing account or credit the customer's location)
card numbers)  Anonymity of customers (how to make targeted
o Identity theft (acting under our name or user advertisements?)
identity)
o Abuse (e.g. third person orders goods with
our identity, gets them delivered and we have
to pay for it)
 Crime:
o Bogus firm (firm does not really exist)
o Fraud (e.g. order is confirmed, invoice has to
be paid, but goods are never delivered)
 Uncertain legal status (if something goes
wrong, can we accuse the provider?)

BUSINESS NET TYPES

Business Web Agora

 Objective: To run a marketplace for goods and values.

 Attributes: Market information available, negotiation processes established, dynamic pricing through
negotiations between market participants.
 Role of the customer: Market participant.
 Benefits: Negotiable products and services.
 Examples: eBay, [Link].

Business Web Aggregator

 Objective: To run a digital super market.

 Attributes: Presentation of a great variety of products, fixed prices and no negotiation between supplier and
customer, simple fulfilment from the customer’s point of view.
 Role of the customer: Customer.
 Benefits: Convenient selection and fulfilment from the customer’s point of view.
 Examples: etrade, amazon.

Business Web Integrator

  Objective: To establish an optimized value creation chain.
 Attributes: Systematic supplier selection, process optimization for the total value chain, product integration along
the value chain.
 Role of the customer: Value driver.
 Benefits: Creation and delivery of customer-specific products.
 Examples: Cisco, Dell.

Business Web Alliance

 Objective: To establish a self-organizing value creation space.

 Attributes: Innovation in products and processes, trust building between different actors, abstinence of
hierarchical supervision.
 Role of the customer: Contributor.
 Benefits: Creative and collaborative solutions.
 Examples: Linux, [Link].

Business Web Distributor

 Objective: Exchange of information, goods and services.

 Attributes: Net optimization, unlimited usage, logistics processes.
 Role of the customer: Recipient.
 Benefits: In-time delivery.
 Examples: UPS, AT&T, Telekom.

WEB 2.0

Web 2.0 describes World Wide Web sites that emphasize user generated content, usability, and interoperability.
Although Web 2.0 suggests a new version of the World Wide Web, it does not refer to an update of any technical
specification, but rather to cumulative changes in the way Web pages are made and used. Characteristic application types
of Web 2.0 are:

 Blogs: A blog (a truncation of the expression weblog) is a discussion or informational site published on the World
Wide Web and consisting of discrete entries (“posts”) typically displayed in reverse chronological order (the most
recent post appears first). We normally see “multi-author blogs” (MABs) with posts written by large numbers of
authors and professionally edited. MABs from newspapers, universities, think tanks, advocacy groups and similar
institutions account for an increasing quantity of blog traffic. The rise of Twitter and other “micro-blogging”
systems helps integrate MABs and single-author blogs into societal news streams.

 Social networking services: A social networking service (also social networking site or SNS) is a platform to
build social networks or social relations among people who share similar interests, activities, backgrounds or real-
life connections. A SNS consists of a representation of each user (often a profile), his or her social links, and
a variety of additional services such as career services. SNS s are Web-based services that allow individuals to
create a public profile, create a list of users with whom to share connections, and view and cross the connections
within the system. Most SNS’s provide means for users to interact over the Internet, such as E-Mail and instant
messaging. SNS’s incorporate new information and communication tools such as mobile connectivity,
photo/video/sharing and blogging.

 Online communities: An online community is a virtual community whose members interact with each other
primarily via the Internet. Those who wish to be a part of an online community usually have to become a member
via a specific site and necessarily need an Internet connection. An online community can act as an information
system where members can post, comment on discussions, give advice or collaborate. Commonly, people
communicate through SNS’s, chat rooms, forums, E-Mail lists and discussion boards. People may also join online
communities through video games, blogs and virtual worlds.

 Forums/Bulletin boards: An Internet forum, or message board, is an online discussion site where people can
hold conversations in the form of posted messages. They differ from chat rooms in that messages are often
longer than one line of text, and are at least temporarily archived. Also, depending on the access level of a user
or the forum set-up, a posted message might need to be approved by a moderator before it becomes visible.

 Content aggregators: An aggregator is a website or computer software that aggregates a specific type of
information from multiple online sources.