1. MIS 205: E-Business Lecture 2 E-Commerce Fundamentals
Md. Mahbubul Alam, PhD
Associate Professor

2. Intended Learning Outcomes
Complete an online marketplace analysis to assess competitor, customer, and intermediary use of the Internet as part of strategy development,
Identify the main business and marketplace models for electronic communications and trading,
Evaluate the effectiveness of business and revenue models for online businesses.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

3. Situation Analysis and Environmental Scanning
B2B traditionally sells products through its distributors, however they can bypass distributors and sales directly and reach customers via their websites and/or B2B marketplaces.
B2C can market its products through online intermediaries.
Situation analysis: Collection and review of information about an organization’s external environment and internal processes and resources in order to inform its strategies.
Online element of an organization’s environment are the part of situation analysis (see next page).
Environmental Scanning: The process of continuously monitoring the environment and events and responding accordingly.
Online intermediaries: Web sites which help connect web users with content they are seeking on destination sites, e.g., search engines, shopping comparison sites and traditional brokers, directories, blogs, social media.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

4. Prepared & Presentation by Md. Mahbubul Alam, PhD
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

5. e-Business 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?
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

6. e-Business Environment: Constraints and Opportunities (cont’d)
Macro-environment
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?
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

7. Prepared & Presentation by Md. Mahbubul Alam, PhD
Strategic Agility
The capability to respond to environmental opportunities and threats to gain competitive advantages.
“The capability to innovative and so gain competitive advantages within a marketplace by monitoring changes within an organization’s marketplace and then to efficiently evaluate alternative strategies and then select, review and implement appropriate candidate strategies”.
Strongly associated with knowledge management theory.
Why its needed?
Reviewing opportunities and threats of the marketplace and selecting appropriate strategy option.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

8. Strategic Agility: Requirements
Efficient collection, dissemination and evaluation of different information sources from the micro-and-macro-environment.
Effective process for generating and reviewing the relevance of new strategies based on creating new value for customers.
Efficient research into potential customer value against the business value generated.
Efficient implementation of prototypes of new functionality to deliver customer value.
Efficient measurement and review of results from prototypes to revise further to improve proposition or to end trial.
Question: Why are environmental influence important?
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

9. Prepared & Presentation by Md. Mahbubul Alam, PhD
OVP: Benefits of a e-commerce site which ideally should not available in competitor offerings or offline offerings.
An Online Marketplace Map
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

10. Online Marketplace Analysis: Elements
Customer segments
Identify and summarize different target segments
Understand their online media consumption, buyer behavior and type of content they searched.
Search intermediaries
Different search engines are popular in different country or region.
Identify which search engine is more effective in harnessing search traffic.
“Share of Search”: the audience share of Internet searches achieved by a particular audience in a particular market.
The precise key phrases used by visitors to actually reach a site from different search engines.
Intermediaries and media sites (see next page)
Destination sites
The sites that the marketer tries to generate traffic to.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

11. Online Marketplace Analysis: Elements (Cont’d)
Intermediaries and Media Sites
Mainstream news media sites or portal, e.g., Google news
Niche or vertical media sites, e.g., e-consultancy, ClickZ.com in B2B
Price comparison sites (also called aggregator), e.g., , Moneysupermarket, Shopping.com
Super-affiliates:
A company promoting merchant typically through a commission-based arrangement either direct or through an affiliate network.
Niche affiliate or bloggers:
Often small or individual sites, e.g., Martin Lewis of Moneysavingexpert.com
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

12. How do you analyse e-Marketplace?
Unique visitors
Individual visitors to a site measured through cookies or IP addresses on an individual computer.
Resources:
Alexa ( Free service, owned by Amazon, provides traffic ranking of a site.
Hitwise ( Paid service, compare audience size and search and site usage.
Comscore ( : Panel service based on at-home and at-work users, favorite tool for media planners.
Forrester ( : Offers reports on Internet usage & best practice in different vertical sectors.
Gartner ( : Focused on technology adoption.
(Ref. pp , Tab 2.2.)
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

13. Marketplace Channel Structure
It describes the way a manufacture / supplier delivers products and services to its customers.
Distribution channel often consist of one or more intermediaries such as wholesalers and retailers.
However, manufacturers can bypass retailers and sell direct to the customers.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

14. B2B and B2C Characteristics
Proportion of adopters with access
Low to medium
High to very high
Complexity of buying decisions
Relatively simple – individual and influencers
More complex – buying process involves users, specifiers, buyers, etc.
Channel
Relatively simple – direct or from retailer
More complex, direct or via wholesaler, agent or distributor
Purchasing characteristics
Low 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 characteristic
Often standardized items
Standardized items or bespoke for Sale
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

15. A Disintermediation Process
The removal of intermediaries such as distributors or brokers that formerly linked a company to its customers.
Benefits
Remove the sales and infrastructure cost.
28% for Case b, 62% for Case c.
Disintermediation of a consumer distribution channel showing (a) the original situation, (b) disintermediation omitting the wholesaler, and c) disintermediation omitting both wholesaler and retailer.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

16. Original Situation to Disintermediation to Reintermediation
Significant phenomenon resulting from Internet-based communications.
The creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation.
e.g., ,
1. What are the implications of intermediaries for the e-commerce manager?
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

17. Prepared & Presentation by Md. Mahbubul Alam, PhD
Countermediation
Creation of a new intermediary by an established company.
Marketers cannot rely on the online presence of existing intermediaries-instead they create their own online intermediaries.
Why?
Forming partnerships or setting up sponsorship with some intermediaries can give better online visibility compared to competitors.
Monitor the prices of other suppliers within this sector.
Examples
Creating own intermediary, like B&Q
Opodo set up by nine European airlines.
Ford, Daimler (
Partnering with existing intermediary – Mortgage broker Charcol and Freeserve
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

18. Prepared & Presentation by Md. Mahbubul Alam, PhD
Where do We Trade?
Electronic Marketplace
A virtual marketplace such as the Internet in which no direct contact occurs between buyers and sellers.
There could be many alternative virtual locations.
Types of location where we can trade:
Seller-controlled: home site of organization selling products, e.g.,
Seller-oriented: intermediaries, controlled by third party, but seller-focused, e.g.,
Neutral: independent evaluator intermediaries that enable price and product comparison, e.g., eBay, CNET.
Buyer-oriented: Intermediaries, controlled by buyers, e.g.,
Buyer-controlled: Web-site procurement posting on company’s own site, buyers initiates the market making, e.g., GE
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

19. Variations in the location and scale of trading on e-commerce sites
Most e-tailers, e.g., Amazon, Dell
Many suppliers to a single customer, e.g., (GE Subsidiary Global eXchange Services)
Many suppliers to many customers, e.g.,
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

20. Commercial Mechanisms & Online Transactions
Negotiated deal: Negotiation-bargaining between single seller and buyer, e.g.,
Brokered deal: Intermediaries offering auction, e.g.,
Auction: e.g.,
Fixed-price sale: Online catalogue with fixed prices, e.g., all e-tailers.
Pure markets: e.g., electronic seller dealing, buyers’ and sellers’ bids instantly
Barter: Buyers and sellers exchanges goods, e.g., ,
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

21. Prepared & Presentation by Md. Mahbubul Alam, PhD
Name Your Own Price!
Completely new commercial mechanism.
Users can enter the price they wish to pay.
Core services: airline tickets, hotels, car hire.
Priceline match the user’s price and inventory, thereafter the deal will go ahead.
Priceline Hong Kong service (
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

22. Multi-channel Marketplace Model
Consumers use a combination of channels for their purchases.
M-Channel Defines how different marketing channels should integrate and support each other.
Channel chain map for consumers selecting an estate agent to sell their property.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

23. Types of Online Intermediary
Infomediary:
A business who capture customer information and develop detailed profiles of individual customers and sell to the third parties, online auction, list brokers, advertising network e.g., DoubleClick, Google AdWords, Comscore, Hitwise.
Metamediaries:
Intermediaries that assist with selection and discussion of about different product and services.
Bring buyers and sellers together, e.g., , CNET, , or price comparison site.
Other online intermediaries
Directories (Yahoo!, Excite), Search engines (AltaVista, Infoseek)
Malls (BarclaySquare, Buckingham Gate), Virtual resellers (Amazon, CDNow)
Financial Intermediaries (Digiicash), Virtual Communities, online forums, fan clubs
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

24. Prepared & Presentation by Md. Mahbubul Alam, PhD
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”.
Alternatively, it’s a summary of how a company
will generate a profit
identifies its core product or service value proposition,
target customer
Position in competitive marketplace or value chain
projection for revenue and costs.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

25. Business model: Key Elements
Value proposition: which products & services will the company offer?
Market or audience: which audience will the company serve and target?
Revenue models and cost base: How will company generate its income?
Competitive environment: who are the direct and indirect competitors and their possession in the marketplace?
Value chain and marketing positioning: How is the company and its service positioned compare to its competitors?
Representation in the physical & virtual world: relative representation in the offline and online market, e.g., high-street presence, online only, intermediary, mixture?
Organizational structure: internal structure to create, promote, deliver services.
Management: experience, skills and expertise of a management team.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

26. Alternative Perspectives on Business Models
Marketplace position perspective
Book publisher => manufacturer
Amazon => retailer
Yahoo! => intermediaries
Revenue model perspective
Book publisher => sell direct
Amazon, Yahoo! => commission fee
Yahoo!=> advertising
Commercial arrangement perspective
All companies => fixed price sales
Yahoo => offers alternatives
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

27. Online Publisher and Intermediary Revenue Model
Advertising CPM (cost per thousand/mille), e.g., FT.com
Advertising CPC (cost per click), e.g., Google Adsence (
Sponsorship of site sections or content types: typically fixed fee for a period,
Affiliate Revenue (CPA or CPC), cost per acquisition-> the cost to the advertiser for each outcome such as a lead or sale generated after a click to a third-party site.
Transaction Fee, e.g., eBay, PayPal.
Subscription access to content or services, e.g., FT.com
Per-per-view Access to document
Subscription Data Access for Marketing
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

28. Revenue Generating Techniques
What factors to consider?
Number and size of ad units
Ads Capacity to be sold
Fee level negotiated for different ads models: pay per performance.
Traffic
Visitor engagement (time to stay or “stickiness”)
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

29. Prepared & Presentation by Md. Mahbubul Alam, PhD
Auction
Auction:
A process of determining the basis of product or service exchange between a buyer and seller according to particular trading rules that help select the best match between the buyer and seller from a number of participants.
Offer:
a commitment for a trader to sell under certain conditions such as a minimum price.
Bid:
a commitment made by a trader to buy under certain conditions such as a commitment to purchase at a particular price.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

30. Prepared & Presentation by Md. Mahbubul Alam, PhD
Auction: Roles
Price discovery:
auction helps to establish a realistic price for a product, e.g., antiques
Efficient Allocation mechanism:
sale of products which is difficult to distribute through traditional channels. ‘Damage inventory’, aircraft flight, e.g.,
Distribution mechanism:
attracting particular audiences.
Coordination mechanism:
coordinate the sale of a product to a number of interested parties, e.g., broadband spectrum licenses for 3G telecoms.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

31. Prepared & Presentation by Md. Mahbubul Alam, PhD
Types of Auctions
Forward, upward or English auctions
Single item up for sale to single buyer, highest bidder wins, sellers-initiated, seller sets the rules and timing, increasing bids are placed within a certain time limit, conventional auctions we commonly seen in physical world and on virtual market.
Reverse, downward, or Dutch Internet auction
Common in B2B marketplace, buyer places a RFQ/tender, many suppliers compete, decreasing the price, NOT always lowest price wins due to factors like quality & capability of the bidders.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

32. Business Model-Start-ups
Many dot.com (businesses whose main trading presence is on the Internet) start-ups failed. Some succeeded and newer ones are still created.
Often they have been overvalued by investors who are keen to make a fast return.
Valuing the Internet start-ups
The cost of acquiring a customer through marketing
The contribution margin per customer (before acquisition cost)
The average annual revenues per year from customers and other revenues such as banner ads and affiliate revenues
The total number of customers
The customer churn rate-> the proportion of customers that no longer purchase a company’s products in a time period
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

33. How to Assess the dot.com
Concept: potentiality to generate revenue, value proposition, realistic market size.
Innovation: whether company merely imitates the existing real-world or online model.
Execution: promotion, performance, availability, security, fulfilment (for details, plz see page 90).
Traffic: Page impression (no. of visitors, no. of pages visited, no. of transactions made).
Financing: company’s ability to attract venture capital or other funding to help execute the idea. Important for promoting new business ideas.
Profile: company’s ability to generate favorable publicity and to create awareness within its target market.
9/17/2018
Prepared & Presentation by Md. Mahbubul Alam, PhD

34. Prepared & Presented by Md. Mahbubul Alam, PhD
Question Please ?
Acknowledgement:
“E-Business and E-Commerce Management: Strategy, Implementation and Practice” by Dave Chaffey
9/17/2018
Prepared & Presented by Md. Mahbubul Alam, PhD