1. E-Business and E-Commerce
Chapter 9
E-Business and
E-Commerce

2. Chapter Outline
9.1 Overview of E-Business and E-Commerce 9.2 Business-to-Consumer (B2C) Electronic Commerce 9.3 Business-to-Business (B2B) Electronic Commerce 9.4 Ethical and Legal Issues in E-Business

3. Learning Objectives
Describe the six common types of electronic commerce.
Describe the various online services of business-to-consumer (B2C) commerce providing specific examples of each.
Describe the three business models for business-to-business electronic commerce.
Identify the ethical and legal issues related to electronic commerce, providing examples.

4. Introduction Opening Case: Gemvara
Do you remember your first purchase over the Internet? What did you buy? When?
What do you think are the impacts of e-commerce on sellers and buyers?
© Antagin/iStockphoto
E-commerce increases an organization’s reach -- the number of potential customers to whom the company
can market its products
Electronic commerce has been to remove many of the barriers that previously impeded entrepreneurs seeking to start their own businesses.

5. 9.1 Overview of E-Business and E-Commerce
Organizations use Web sites to:
Sell goods and services
Induce people to visit a physical location
Reduce operational and transaction costs
Enhance reputation
It is difficult to accomplish all of them at the same time. Why?
© Toh Kheng Guan/Age Fotostock America, Inc.

6. Definitions and Concepts
Electronic commerce (e-commerce, EC)
Buying, selling, transferring, or exchanging of products, services, or information via computer networks, including the Internet
Electronic business (E-business)
A broader definition of EC
Buying and selling goods and services
Servicing customers
Collaborating with partners
Conducting e-learning
Conducting electronic transactions within an organization

7. Degree of Digitization
Extent to which the commerce has been transformed from physical to digital
Bricks-and-mortar
Purely physical organizations
Example: Purchasing books from a physical bookstore
Partial EC
Mix of digital/physical dimensions in terms of product, payment, process, delivery
Clicks-and-mortar (clicks-and-bricks)
Conduct e-commerce activities
Conduct primary business in physical world
Example: Purchasing a book from an online store
Pure-play (virtual organizations)
All dimensions are digital
Example: Purchasing e-books from an online store
This book uses e-commerce to cover both partial and pure-play.

8. 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
Larger volume than B2C
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
Examples: Manage benefits, conduct training, buy discounted insurance and tickets
E-government
Government-to-citizen (G2C) and government-to-business (G2B)
Use of Internet technology and e-commerce to deliver information about public services to citizens, business partners, and suppliers
Mobile commerce (m-commerce)
E-commerce conducted in a wireless environment

9. E-Commerce Business Models

10. E-Commerce Business Models

11. E-Commerce Mechanisms
Mechanism through which businesses and customers can buy and sell on the Internet
Electronic catalogs
Backbone of most e-commerce sites
Include product database, directory, search and presentation capabilities
© Andy Dean/Age Fotostock America, Inc.

12. E-Commerce Mechanisms
Electronic auctions
Auctions can be conducted from the seller’s site, the buyer’s site, or a third party’s site
Forward auctions
Sellers place items at sites for auction and buyers bid continuously for them
Reverse auctions
Buyers post a request for quotation (RFQ) with information on the desired purchase
Suppliers study the RFQ and submit bids electronically
© ZOONAR GMBH LBRF/Age Fotostock America, Inc.

13. E-Commerce Mechanisms
Electronic storefronts
A Web site that represents a single store
Electronic mall (cybermall, e-mall)
Collection of individual shops under one Internet address
Associated with B2C e-commerce
Electronic marketplace
A central, virtual market space on the Web where many buyers and many sellers can conduct e-commerce and e-business activities
Associated with B2B e-commerce

14. Electronic Payment Systems
Enable buyers to pay for goods and services electronically
Electronics checks (e-checks)
Used mostly in B2B
Frederic Lucano/Stone/Getty Images, Inc.

15. Electronic Payment Systems
Electronic credit cards
Customers charge online payments to their credit card account
Used mostly in B2C
Virtual credit cards
A single-use credit card
Purchasing cards
Electronic credit cards for B2B
Electronic cash
Stored-value money card
Store a fixed amount of prepaid money and then spend it as necessary
Smart cards
Contain a chip 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

16. Figure 9.1 How E-Credit Cards Work
Step 1: When you buy a book from Amazon, for example, your credit card information and purchase amount are encrypted in your browser. This way the information is safe while it is “traveling” on the Internet to Amazon.
• Step 2: When your information arrives at Amazon, it is not opened. Rather, it is transferred automatically (in encrypted form) to a clearinghouse, where it is decrypted for verification and authorization.
• Step 3: The clearinghouse asks the bank that issued you your credit card (the card issuer bank) to verify your credit card information.
• Step 4: Your card issuer bank verifies your credit card information and reports this to the clearinghouse.
• Step 5: The clearinghouse reports the result of the verification of your credit card to Amazon.
• Step 6: Amazon reports a successful purchase and amount to you.
• Step 7: Your card issuer bank sends funds in the amount of the purchase to Amazon’s bank.
• Step 8: Your card issuer bank notifies you (either electronically or in your monthly statement) of the debit on your credit card.
• Step 9: Amazon’s bank notifies Amazon of the funds credited to its account.

17. Electronic Payment Systems
Person-to-person payments
Enables two individuals or an individual and a business to transfer funds without using a credit card
Example: PayPal

18. Benefits of E-Commerce
To organizations
Makes national and international markets more accessible
Lowers costs of processing, distributing, and retrieving information
To customers
Provides access to a vast number of products and services around the clock (24/7/365)
To society
Offers ability to easily and conveniently deliver information, services, and products to people in cities, rural areas, and developing countries

19. Limitations of E-Commerce
Technological limitations
Lack of universally accepted security standards
Insufficient telecommunications bandwidth
Expensive accessibility
Nontechnological limitations
Perception that e-commerce is unsecure
Unresolved legal issues
Lacks a critical mass of sellers and buyers

20. 9.2 Business-to-Consumer (B2C) Electronic Commerce
Involves a large number of buyers making millions of diverse transactions per day with a relatively small number of sellers
Basic mechanisms
Purchasing products
Electronic storefronts
Electronic malls
Accessing online services
Source: Don Farrall/Photodisc/Getty Images, Inc.

21. Electronic Storefronts and Malls
E-tailing
Direct sale of products and services
Utilizes electronic storefronts or electronic malls
Designed around an electronic catalog and/or auctions
Electronic storefront
A Web site that represents a single store
Electronic mall (cybermall, e-mall)
Collection of individual shops under one Internet address
Regular e-mall: Customer can make a purchase
Example: Shopping.google.com
Referral e-mall: Customer cannot buy anything but will be transferred to a participating storefront
Example:

22. Online Service Industries
Customers accessing services via the Web
Cyberbanking
Conducting banking activities not at a physical location
Virtual banks dedicated solely to Internet transactions
Example: First Internet Bank of Indiana
Online securities trading
Use computers to trade stocks, bonds, and other financial instruments
Examples: E*Trade, Ameritrade, and Charles Schwab
Online job market
Organizations advertise available positions, accept resumes, and applications via the Internet
Job seekers reply online to employment ads and place resumes on various sites
Travel services
Comprehensive online travel services: Expedia.com
Set your own prices: Priceline.com

23. Online Service Industries
Online advertising
Banner ad: Electronic billboards
Pop-up ad: Appears in front of the current browser window
Pop-under ad: Appears underneath the active window. Users see it when they close the active window.
Sent to address on a customer database
Spamming: Indiscriminate distribution of electronic ads without the permission of the receiver
Permission marketing
Asks consumers to give their permission to voluntarily accept online advertising and
Viral marketing
Online word-of-mouth marketing
People forward messages to friends, family members, and other acquaintances suggesting they “check this out.”
Advertising is an attempt to disseminate information in order to influence a
buyer-seller transaction.
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 .
Viral marketing refers to online “word-of-mouth” marketing.

24. Issues in E-Tailing Channel conflict
Occurs when manufacturers sell directly to customers online, alienating the distributors
Multichanneling
A company integrates its offline and online channels
Order fulfillment effectiveness
Involves finding the product to be shipped; packaging the product; arranging for delivery to the customer; and handling returns
Very difficult to accomplish these activities both effectively and efficiently. Why?
It is very difficult to accomplish these activities both effectively and efficiently in B2C, because a company has to ship small packages to many customers and do it quickly. For this reason, companies involved in B2C activities oft en experience difficulties in their supply chains.

25. 9.3 Business-to-Business (B2B) Electronic Commerce
Buyers and sellers are organizations
Sell-side marketplace
Buy-side marketplace
Exchanges
© Richard Thomas/Age Fotostock America, Inc.

26. Business-to-Business (B2B) Electronic Commerce
Sell-side marketplace
Organizations sell their products or services to other organizations electronically either from their own or from a third-party Web site
Mechanisms: E-catalogs and forward auctions
Examples: Ariba, Dell Auction, bigboXX.com
Buy-side marketplace
E-procurement and group purchasing
Key mechanism: Reverse auctions
Example: United Sourcing Alliance
Exchanges: Connect many buyers and many sellers
Vertical exchanges: In a given industry Go2Paper
Horizontal exchanges: Across many industries mainly for MRO materials TraderCity
Functional exchanges: Needed services such as temporary help or extra office space are traded on an “as-needed” basis Employease

27. 9.4 Ethical and Legal Issues in E-Business
Ethical Issues
Privacy
Protecting buyers’ identities and tracking
Clickstream tracking
Job loss
How should the company handle layoffs?
Should companies be required to retrain employees for new positions?
How should the company compensate or assist displaced workers?

28. Legal Issues Specific to E-Commerce
Fraud on the Internet
Stocks, investments, business opportunities, auctions
Domain name conflicts
Delta.com belongs to Delta Faucet before Delta Airlines purchased it
Cybersquatting
Registering domain names solely for the purpose of selling them later at a higher price
Domain tasting: 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
Whether, when, and where electronic sellers and/or buyer should pay business license taxes, franchise fees, gross-receipts taxes, excise taxes, value-added tax, etc.
Copyright
Enforcing copyright laws is extremely difficult

29. What’s in IT for ME? Accounting
Involves billing, payments, and electronic documents
Finance
Many financial activities are conducted online
Marketing
Marketing channels are transformed
Production/Operations Management
EC changes manufacturing system from product-push mass production to order-pull mass customization
Human Resources Management
Need to understand the new labor markets and the impacts of EC on old labor markets as well as be familiar with legal issues related to EC and employment
MIS
Provide the information technology infrastructure necessary for electronic commerce to function

30. Closing Case 1: The Flash Crash
The Problem
A Stopgap Solution
The Results
Questions
Do you think information technology has made it easier to do business? Or has IT only raised the bar on what is required to be able to do business in the 21st century? Support your answer with specific examples.
With the rise of electronic commerce, what do you think will happen to those without computer skills, Internet access, computers, smart phones, and so on? Will they be able to survive and advance by hard work?

31. Closing Case 2: Kickbucks to Shop!
The Problem
The IT Solution
The Results
Questions
If you were the CEO of Shopkick, in what direction would you expand your service next? Provide specific examples to support your answer.
Do you see any potential disadvantages of Shopkick for the consumer? For the retailer? Provide examples to support your answer.
As Shopkick’s app improves, what effects will tailored offers from retailers have on shopper habits and on the stores making the offers?