1. E-Business and E-Commerce
CHAPTER 7
E-Business and E-Commerce

2. CHAPTER OUTLINE 7.1 Overview of E-Business & E-Commerce
7.2 Business-to-Consumer (B2C) Electronic Commerce
7.3 Business-to-Business (B2B) Electronic Commerce
7.4 Electronic Payments
7.5 Ethical and Legal Issues in E-Business

3. LEARNING OBJECTIVES
1. Describe the six common types of electronic commerce; provide specific personal examples of how you have used or could use B2C, C2C, G2C, and mobile commerce; and offer a specific example of B2B and G2B.
2. Discuss the five online services of business-to-consumer electronic commerce, provide a specific example of each service, and state how you have used or would use each service.

4. LEARNING OBJECTIVES (continued)
3. Describe the three business models for business-to-business electronic commerce, and provide a specific example of each model.
4. Describe the four types of electronic payments, provide a specific example of each one, and explain whether you would use each type.

5. LEARNING OBJECTIVES (continued)
5. Illustrate the ethical and legal issues relating to electronic commerce with two specific examples of each issue, and describe how you would respond or react to the four examples you have provided.

6. 7.1 Overview of E-Business and E-Commerce
Definitions and Concepts
Types of E-Commerce
E-Commerce and Search
Major E-Commerce Mechanisms
Benefits and Limitations of E-Commerce
Electronic commerce (e-commerce, EC) describes the buying, selling, transferring or
exchanging of products, services or information via computer networks, including the Internet.
E-business is a broader definition of EC, including buying and selling of goods and services,
and also servicing customers, collaborating with partners, conducting e-learning and conducting
electronic transactions within an organization.

7. Definitions and Concepts
Electronic commerce Electronic business
Electronic commerce (e-commerce, EC) describes the buying, selling, transferring or
exchanging of products, services or information via computer networks, including the Internet.
E-business is a broader definition of EC, including buying and selling of goods and services,
and also servicing customers, collaborating with partners, conducting e-learning and conducting
electronic transactions within an organization.

8. Definitions and Concepts (continued)
Pure versus Partial Electronic Commerce depends on the degree of digitization involved.
Brick-and-mortar organizations
Virtual organizations
Click-and-mortar organizations
Pure vs. Partial EC
--The product can be physical or digital.
--The process can be physical or digital.
--The delivery agent can be physical or digital.
Brick-and-mortar organizations are purely physical organizations.
Virtual organizations are companies that are engaged only in EC. (Also called pure play)
Click-and-mortar organizations are those that conduct some e-commerce activities, yet their
business is primarily done in the physical world. i.e. partial EC.

9. Bricks and Mortar, Partial EC, and Pure EC
Example Buy books at university bookstore:
bricks and mortar
Use Internet to order physical book from Amazon:
partial EC
Order and download book from Amazon: pure EC
Source: Rubberball/Mike Kemp/Getty Images, Inc.

10. Types of E-Commerce Business-to-Consumer (B2C)
Business-to-Business (B2B)
Consumer-to-Consumer (C2C)
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.
B2B represents the vast majority of e-commerce.
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. Companies allow employees to manage their benefits, take training classes electronically; buy discounted insurance, travel packages, and event tickets.
E-Government: the use of Internet Technology in general and e-commerce in particular to deliver
information about public services to citizens (called Government-to-citizen [G2C EC]), business partners
and suppliers (called government-to-business [G2B EC]),
Mobile Commerce (m-commerce) refers to e-commerce that is conducted in a wireless environment.
For example, using cell phone to shop over the Internet.
Source: Don Farrall/Photodisc/Getty Images, Inc.

11. Types of E-Commerce (continued)
Business-to-Employee (B2E)
E-Government
Mobile Commerce (m-commerce)
Source: Don Farrall/Photodisc/Getty Images, Inc.

12. B2B and B2C Electronic Commerce
© Toh Kheng Guan/Age Fotostock America, Inc.

13. E-Commerce and Search

14. Major E-Commerce Mechanisms
Auctions Forward Auctions Reverse Auctions
An auction is a competitive process in which either a seller solicits consecutive
bids from buyers or a buyer solicits consecutive bids from sellers.
Sellers use a forward auction as a channel to many potential buyers. Note that
Sotheby’s uses forward auctions.
In reverse auctions, one buyer, usually an organization, wants to buy a product
or a service. The buyer posts a request for quotation (RFQ) on its Web site
or on a third-party Web site. The RFQ contains detailed information on the
desired purchase. Suppliers study the RFQ and submit bids, and the lowest
bid wins the auction.
© ZOONAR GMBH LBRF/Age Fotostock America, Inc.

15. Forward and Reverse Auctions
Bid price
Bid price
In general, forward auctions result in higher prices over time, where
reverse auctions result in lower prices over time.
Time
Time
Forward Auction
Reverse Auction

16. E-Commerce Business Models
Online direct marketing
Electronic tendering system
Name-your-own-price
Find-the-best-price
Online direct marketing: manufacturers or retailers sell directly to customers.
Electronic tendering system: businesses (or governments) request quotes from suppliers;
uses B2B (or G2B) with reverse auctions. Image above is the Hong Kong Government’s
electronic tending system homepage.
Name-your-own-price: customers decide how much they want to pay.
Image above is William Shatner, Priceline’s spokesman.
Find-the-best-price. customers specify a need and an intermediary compares providers
and shows the lowest price.
Note: clicking on the images will take you to the respective Web pages.
Source: Rubberball/Mike Kemp/Getty Images, Inc.

17. E-Commerce Business Models (continued)
Affiliate marketing
Affiliate marketing: Vendors ask partners to place logos or banners on partner’s site.
If customers click on logo, go to vendor’s site, and buy, then vendor pays commission
to partners.
Note: clicking on image above will take you to the Web page.

18. E-Commerce Business Models (continued)
Viral marketing
Group purchasing
Online auctions
Bartering Online
Viral marketing: receivers send information about your product to their friends.
Group purchasing: small buyers aggregate demand to get a large volume; then
the group conducts tendering or negotiates a lower price.
Online auctions: companies run auctions of various types on the Internet.
Note: clicking on the bottom two images will take you to the respective Web pages.
© ZOONAR GMBH LBRF/Age Fotostock America, Inc.

19. E-Commerce Business Models (continued)
Product customization
Deep discounters
Membership
Product customization: customers use the Internet to self-configure products or services.
Sellers then price them and fulfill them quickly.
Deep discounters: company offers deep price discounts.
Membership: only members can use the services provided.
Note: clicking on the images above will take you to the respective Web pages.
(We address Electronic marketplaces and exchanges in later PowerPoints.)
Source: G Gunnar/Age Fotostock America, Inc.

20. Benefits of E-Commerce
Benefits to organizations
Makes national and international markets more accessible
Lowering costs of processing, distributing, and retrieving information
Benefits to customers
Access a vast number of products and services around the clock (24/7/365)

21. Benefits of E-Commerce (continued)
Benefits to Society
Ability to easily and conveniently deliver information, services and products to people in cities, rural areas and developing countries.

22. Limitations of E-Commerce
Technological Limitations
Lack of universally accepted security standards
Insufficient telecommunications bandwidth
Expensive accessibility
Non-technological Limitations
Perception that EC is unsecure
Unresolved legal issues
Lacks a critical mass of sellers and buyers

23. 7.2 Business-to-Consumer (B2C) Electronic Commerce
Electronic storefronts Electronic malls
An electronic storefront is a Web site that represents a single store.
Electronic malls are collections of individual shops under a single Internet address.
Note: clicking on the images above will take you to the respective Web sites.

24. Luxury E-Commerce
© Andy Dean/Age Fotostock America, Inc.

25. Online Service Industries
Cyberbanking
Online securities trading
Online job market
Travel services
Online advertising
Cyberbanking involves conducting banking activities from home, a place of business,
or on the road instead of at a physical bank location.
Virtual banks are dedicated only to Internet transactions.
Note: Clicking on images above will take you to the respective Web sites. However,
NetBank has been acquired by ING Direct, so the NetBank image has no link.

26. Disintermediation A key issue is disintermediation
Online service involves customers accessing services via the Web.
Intermediaries or middlemen provide information and/or provide value-added services.
When the function(s) of these intermediaries can be automated or eliminated, this
process is called disintermediation.

27. Online Advertising Online Advertising methods Banners Pop-up ad
Pop-under ad
Permission marketing
Viral marketing
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.

28. Issues in E-Tailing Channel conflict Order fulfillment
Channel conflict occurs when manufacturers disintermediate their channel partners,
such as distributors, retailers, dealers, and sales representatives, by selling
their products directly to consumers, usually over the Internet through electronic
commerce.
Multichanneling is a process in which a company integrates its offline and online channels.
Order fulfillment involves finding the product to be shipped; packaging the product; arrange
for speedy delivery to the customer; and handle the return of unwanted or defective products.

29. Drivers of today’s online advertising
The emergence of “communitainment.” The increasing popularity of Usites. Mainstreaming of the Internet. Declining usage of traditional media. Fragmentation of content consumption. Consumers are multitasking and they do not like ads.
PiperJaffray is an investment bank. See PiperJaffray at
Source: PiperJaffrey

30. Communitainment
Communitainment is the blending of community, communication, and entertainment into a new form of online activity driven by consumers.  
The bank predicts that consumers will shift more than 50% of their content consumption over the next decade to communitainment formats (e.g., social networking, video, and photo sharing sites), displacing traditional forms of media content like TV, magazines, and large Internet sites. 
This trend presents a major challenge for advertisers.

31. Popular Usites “Usites” are Web sites devoted to user-driven content.
Yelp hosts an online database of user-generated reviews of local businesses.
StumbleUpon is a web browser plugin that allows its users to discover and
rate webpages, photos, videos, and news articles.
Broadcaster is a video entertainment community and live webcam social network.
The site allows users to create personal profiles, post pictures, upload videos,
and chat with the site's other users through a live webcam chat feature.

32. Mainstreaming of the Internet
Source: Mike Flippo/Shutterstock

33. Declining usage of traditional media
© JUICE LIGHT LBRF/Age Fotostock America, Inc.

34. Eight Types of Web sites for Advertising
Portals: most popular; best for reach but not targeting
Search: second largest reach; high advertising value
Commerce: high reach; not conducive to advertising
Portals and Search have the greatest reach.
Community and Games have the highest level of engagement.
Search and News/Weather/Sports have the highest monetization.
Source: PiperJaffray

35. Eight types of sites (continued)
Entertainment: large reach; strong targetability
Community: emphasize being a part of something; good for specific advertising
Communications: not good for branding; low targetability
Portals and Search have the greatest reach.
Community and Games have the highest level of engagement.
Search and News/Weather/Sports have the highest monetization.

36. Eight types of sites (continued)
News/weather/sports: poor targetability
Games: good for very specific types of advertising
Portals and Search have the greatest reach.
Community and Games have the highest level of engagement.
Search and News/Weather/Sports have the highest monetization.
Source: Don Farrall/Photodisc/Getty Images, Inc.

37. 7.3 Business-to-Business (B2B) Electronic Commerce
In B2B e-commerce, the buyers and sellers are organizations.
© Richard Thomas/Age Fotostock America, Inc.

38. B2B Sell-Side Marketplace
Key mechanisms: electronic catalogs and forward auctions
Common Sell-Side Marketplaces include:
Ariba
Dell Auction
bigboXX.com
In the sell-side marketplace, organizations sell their products or services to other organizations
Electronically from their own Web site and/or from a third-party Web site.
This model is similar to the B2C model in which the buyer comes to the seller’s site, views
catalogs, and places an order. In the B2B sell-side marketplace, the buyers are organizations.
© Richard Thomas/Age Fotostock America, Inc.

39. B2B Buy-Side Marketplace
Key mechanism: reverse auctions
United Sourcing Alliance is a common Sell-Side Marketplace
In the sell-side marketplace, organizations sell their products or services to other organizations
Electronically from their own Web site and/or from a third-party Web site.
This model is similar to the B2C model in which the buyer comes to the seller’s site, views
catalogs, and places an order. In the B2B sell-side marketplace, the buyers are organizations.
© Richard Thomas/Age Fotostock America, Inc.

40. Electronic Exchanges Vertical Exchanges Horizontal Exchanges
Functional Exchanges
Exchanges have many buyers and many sellers.
Vertical exchanges connect buyers and sellers in a given industry.
Horizontal exchanges connect buyers and sellers across many industries and are used
mainly for MRO materials.
In functional exchanges, needed services such as temporary help or extra office space
are traded on an “as-needed” basis.

41. Frederic Lucano/Stone/Getty Images, Inc.
7.4 Electronic Payments
Electronic checks (e-checks)
Electronic credit cards
Purchasing cards
Electronic cash
Stored-value money cards
Smart cards
Person-to-person payments
Electronic payment systems enable you to pay for goods and services electronically.
checks (e-checks) are similar to paper checks and are used mostly in B2B.
Electronic credit cards allow customers to charge online payments to their credit card account.
Purchasing cards are the B2B equivalent of electronic credit cards and are typically used for unplanned B2B purchases.
Electronic cash
Stored-value money cards allow you to store a fixed amount of prepaid money and then spend it as necessary.
Smart cards contain a chip called a microprocessor 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.
Person-to-person payments are a form of e-cash that enables two individuals or an individual and a business to transfer funds without using a credit card.
Frederic Lucano/Stone/Getty Images, Inc.

42. 7.5 Ethical and Legal Issues
Ethical Issues
Privacy
Job Loss
Privacy: ecommerce provides opportunities for businesses and employers to track individual activities on the WWW using cookies or special spyware. This allows private/personal information to be tracked, compiled, and stored as an individual profile. This profile can be used or sold to other businesses for target marketing or by employees to aide in personnel management decisions (i.e., promotions, raises, layoffs).

43. Legal Issues Specific to E-Commerce
Fraud on the Internet
Domain Names
Cybersquatting
Fraud on the Internet i.e. stocks, investments, business opportunities, auctions.
Domain Names problems with competition.
Cybersquatting refers to the practice of registering domain names solely for the purpose of selling them later at a higher price.
Source: maxstockphoto/Shutterstock

44. Legal Issues Specific to E-Commerce (continued)
Domain Tasting Taxes and Other Fees Copyright
Domain Tasting is a practice of 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 when and where (and in some cases whether) electronic sellers should pay business license taxes, franchise fees, gross-receipts taxes, excise taxes, …etc.
Copyright protecting intellectual property in e-commerce and enforcing copyright laws is extremely difficult.
Source: maxstockphoto/Shutterstock

45. Chapter Closing Case
The Problem
The Solution
The Results