CHAPTER 7 E-Business and E-Commerce

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

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.

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.

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.

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

Definitions and Concepts Electronic commerce the buying, selling, transferring or exchanging of products, services or information via computer networks, including the Internet Electronic business 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

Definitions and Concepts (continued) Pure versus Partial Electronic Commerce depends on the degree of digitization involved. Brick-and-mortar organizations Click-and-mortar organizations Virtual organizations What is your choice for buying books?

Bricks and Mortar, Partial EC, and Pure EC Source: Rubberball/Mike Kemp/Getty Images, Inc.

Types of E-Commerce Business-to-Consumer (B2C) Business-to-Business (B2B) Consumer-to-Consumer (C2C) Source: Don Farrall/Photodisc/Getty Images, Inc. ‘consumer’ is the final destination where the good is used up – all other intermediate stops are ‘business’

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

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

E-Commerce and Search

Major E-Commerce Mechanisms Auctions Forward Auctions a channel to many potential buyers 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 © ZOONAR GMBH LBRF/Age Fotostock America, Inc.

Forward and Reverse Auctions Bid price Time Forward AuctionReverse Auction

E-Commerce Business Models Online direct marketing to customers Electronic tendering system by an organization (could be a government) seeking bids for items and/or services Name-your-own-price [the Priceline example and recently Find-the-best-price

E-Commerce Business Models (continued) Affiliate marketing: asking 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

E-Commerce Business Models (continued) Viral marketing - receivers send information about your product to their friends (think of word-of-mouth in the age of social media) Group purchasing - small buyers aggregate demand to get a large volume; then the group conducts tendering or negotiates a lower price Online auctions Bartering Online

E-Commerce Business Models (continued) Product customization Deep discounters Membership Source: G Gunnar/Age Fotostock America, Inc.

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)

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.

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

7.2 Business-to-Consumer (B2C) Electronic Commerce Electronic storefronts Electronic malls

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

Online Service Industries Cyberbanking Online securities trading Online job market Travel services Online advertising

Disintermediation A key issue is disintermediation. 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

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

Issues in E-Tailing Channel conflict Order fulfillment

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. Source: PiperJaffrayPiperJaffray Hulu

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.

Popular Usites Yelp Broadcaster - 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. (has been taken off the web)

Mainstreaming of the Internet Source: Mike Flippo/Shutterstock

Declining usage of traditional media © JUICE LIGHT LBRF/Age Fotostock America, Inc. For example, the demise of the Boston Globe

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 Source: PiperJaffray

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

Eight types of sites (continued) News/weather/sports: poor targetability Games: good for very specific types of advertising Source: Don Farrall/Photodisc/Getty Images, Inc.

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

B2B Sell-Side Marketplace Key mechanisms: electronic catalogs and forward auctions Common Sell-Side Marketplaces include: Ariba Dell Auction bigboXX.com © Richard Thomas/Age Fotostock America, Inc.

B2B Buy-Side Marketplace United Sourcing Alliance United Sourcing Alliance is a common Sell-Side Marketplace Key mechanism: reverse auctions © Richard Thomas/Age Fotostock America, Inc.

Electronic Exchanges Vertical Exchanges – connect buyers and sellers in a specific industry Horizontal Exchanges – connect buyers and sellers across industries, frequently for maintenance/operations/repair materials Functional Exchanges – typically services required on an ‘as needed’ basis

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 Frederic Lucano/Stone/Getty Images, Inc.

7.5 Ethical and Legal Issues Ethical Issues Privacy Job Loss

Legal Issues Specific to E-Commerce Fraud on the Internet Domain Names Cybersquatting - refers to the practice of registering domain names solely for the purpose of selling them later at a higher price

Legal Issues Specific to E-Commerce (continued) Domain Tasting Taxes and Other Fees Copyright

Chapter Closing Case The Problem The Solution The Results