1 University of Palestine E-Business ITBS 3202 Ms. Eman Alajrami 2 nd Semester

2 Chapter 2 – part1 E-commerce fundamentals

3 Learning objectives Evaluate changes in business relationships between organizations and their customers enabled by e- commerce Identify the main business and marketplace models for electronic trading Describe different revenue models and transaction mechanisms available through hosting an e-commerce site.

4 Issues for managers What are the implications of changes in marketplace structures for how we trade with customers and other partners? Which business models and revenue models should we consider to exploit the Internet? What will be the importance of online marketplace hubs or exchanges to our business?

5 The e-business environment Figure 2.1 The environment in which e-business services are provided

6 Environment constraints and opportunities Micro-environment Customers – which services are they offering via their web site that your organization could support them in? Competitors – need to be benchmarked in order to review the online services they are offering – do they have a competitive advantage? Intermediaries – are new or existing intermediaries offering products or services from your competitors while you are not represented? Suppliers – are suppliers offering different methods of procurement to competitors that give them a competitive advantage? Macro-environment (SLIPT) Society – what is the ethical and moral consensus on holding personal information? Country specific, international legal – what are the local and global legal constraints for example on holding personal information, or taxation rules on sale of goods? Country specific, international economic – what are the economic constraints of operating within a country or global constraints? Technology – what new technologies are emerging by which to deliver online services such as interactive digital TV and mobile phone-based access?

7 B2B and B2C models Figure 2.2 B2B and B2C interactions between an organization, its suppliers and its customers

8 Transaction alternatives between businesses and consumers Figure 2.3 Summary of transaction alternatives between businesses and consumers

9 B2B and B2C characteristics CharacteristicB2CB2B Proportion of adopters with access Low to mediumHigh to very high Complexity of buying decisionsRelatively simple – individual and influencers More complex – buying process involves users, specifiers, buyers, etc. ChannelRelatively simple – direct or from retailer More complex, direct or via wholesaler, agent or distributor Purchasing characteristicsLow value, high volume or high value, low volume. May be high involvement Similar volume/value. May be high involvement. Repeat orders (rebuys) more common Product characteristicOften standardized itemsStandardized items or bespoke for sale

10 Disintermediation Figure 2.4 Disintermediation of a consumer distribution channel showing (a) the original situation, (b) disintermediation omitting the wholesaler, and (c) disintermediation omitting both wholesaler and retailer

11 Reintermediation Figure 2.7 Reintermediation process: (a) original situation, (b) reintermediation contacts

12 Countermediation Creation of a new intermediary Example: B&Q Opodo Boots Ford, DaimlerChrysler ( Partnering with existing intermediary – Mortgage broker Charcol and Freeserve

13 Search engines Directories News aggregators MR aggregators Comparers Exchanges Meta services Portal ‘A gateway to information resources and services’

14 Types of portal Type of portalCharacteristicsExample Access portalAssociated with ISPFreeserve ( Horizontal or functional portalRange of services: search engines, directories, news recruitment, personal information management, shopping, etc. Yahoo! ( Excite ( Lycos ( VerticalMay cover a single function e.g.: – news – and industry sector Moreover ( SciQuest ( Geographical (region, country, local area) May be: – horizontal – vertical Yahoo! country versions Countyweb ( MarketplaceMay be: – horizontal – vertical – geographical CommerceOne ( PlasticsNet ( Media typeVoice portal Wireless portal Streaming media portal Verizon VoiceGear ( Vodafone Vizzavi ( Silicon (

15 Invisible web Not indexed by search engines 5 Yahoo! Google Methods for finding web pages

16 Trading arrangements Commercial (trading) mechanismOnline transaction mechanism of Nunes et al. (2000) 1. Negotiated deal Example: Can use similar mechanism to auction as on Commerce One( Negotiation – bargaining between single seller and buyer. Continuous replenishment – ongoing fulfilment of orders under pre-set terms 2. Brokered deal Example: Intermediaries such as Screentrade ( Achieved through online intermediaries offering auction and pure markets online 3. Auction Examples: C2C: E-bay ( B2B: Industry to Industry ( Seller auction – buyers’ bids determine final price of sellers’ offerings. Buyer auction – buyers request prices from multiple sellers. Reverse – buyers post desired price for seller acceptance 4. Fixed price sale Example: All e-tailers Static call – online catalogue with fixed prices Dynamic call – online catalogue with continuously updated prices and features 5. Pure markets Example: Electronic share dealing Spot – buyers’ and sellers’ bids clear instantly 6. Barter Example: and Barter – buyers and sellers exchange goods. According to the International Reciprocal Trade Association ( barter trade was over $9 billion in

17 Chapter 2 – part2 E-commerce fundamentals

18 Business model Timmers (1999) defines a ‘business model’ as: An architecture for product, service and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various business actors; and a description of the sources of revenue.

19 Business models Figure 2.11 Alternative perspectives on business models

20 Business Models (cont.) Revenue model: description of how the company or an EC project will earn revenue Sales Transaction fees Subscription fees Advertising Affiliate fees Other revenue sources

21 Typical Business Models in EC 1. Online direct marketing 2. Electronic tendering systems tendering (reverse auction): model in which a buyer requests would-be sellers to submit bids, and the lowest bidder wins 3. Name your own price: a model in which a buyer sets the price he or she is willing to pay and invites sellers to supply the good or service at that price 4. Affiliate marketing: an arrangement whereby a marketing partner (a business, an organization, or even an individual) refers consumers to the selling company’s Web site 5. Viral marketing: فيروسي word-of-mouth (WOM) marketing in which customers promote a product or service to friends or other people

22 Typical Business Models in EC (cont.) 6.Group purchasing: quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased 7. SMEs: small to medium enterprises 8.Online auctions 9. Product and service customization customization: creation of a product or service according to the buyer’s specifications 10. Electronic marketplaces and exchanges 11. Value-chain integrators 12. Value-chain service providers

23 Typical Business Models in EC (cont.) 12. Information brokers سمسار 13. Bartering مقايضة 14. Deep discounting 15. Membership 16. Supply chain improvers Note :Business models can be independent or they can be combined amongst themselves or with traditional business models

24 Classification of EC by Transactions or Interactions business-to-consumer (B2C) : online transactions are made between businesses and individual consumers business-to-business (B2B): businesses make online transactions with other businesses 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 consumer-to-business (C2B): e-commerce model in which individuals use the Internet to sell products or services to organizations or individuals seek sellers to bid on products or services they need

25 Classification of EC by Transactions or Interactions (cont.) consumer-to-consumer (C2C): e-commerce model in which consumers sell directly to other consumers peer-to-peer (P2P): 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 mobile commerce ((m-commerce): e-commerce transactions and activities conducted in a wireless environment location-based commerce (l-commerce): m-commerce transactions targeted to individuals in specific locations, at specific times

26 Classification of EC by Transactions or Interactions (cont.) intrabusiness 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 business-to-employees (B2E): e-commerce model in which an organization delivers services, information, or products to its individual employees collaborative commerce (c-commerce): e-commerce model in which individuals or groups communicate or collaborate online e-learning: the online delivery of information for purposes of training or education exchange (electronic): a public electronic market with many buyers and sellers

27 Classification of EC by Transactions or Interactions (cont.) exchange-to-exchange (E2E): e-commerce model in which electronic exchanges formally connect to one another the purpose of exchanging information e-government: e-commerce model in which a government entity buys or provides goods, services, or information to businesses or individual citizens

28 Ecommerce can be divided into five distinct categories: Business business Network-based ordering from suppliers, invoicing, making payments Business consumer Web based electronic retailing Business government Transactions such bidding for government contracts Consumer government Epayment of taxes, receiving govt. services Consumer consumer Peer-to-peer, bartering, auctions From Indiana Slides

29 Electronic Commerce: Definitions and Concepts (cont.) Pure vs. Partial EC depends upon the degree of digitization (the transformation from physical to digital) of: the product (service) sold; the process; and for the delivery agent (or digital intermediary) Brick-and-Mortar organizations are old- economy organizations (corporations) that perform most of their business off-line, selling physical products by means of physical agents

30 Electronic Commerce: Definitions and Concepts (cont.) Virtual (pure-play) organizations conduct their business activities solely online Click-and-mortar organizations conduct some EC activities, but do their primary business in the physical world Electronic market (e-marketplace) online marketplace where buyers and sellers meet to exchange goods, services, money, or information

31 Electronic Commerce: Definitions and Concepts (cont.) Interorganizational information systems (IOSs): allow routine transaction processing and information flow between two or more organizations Intraorganizational information systems enable EC activities to go on within individual organizations