E-

commerce:
An Overview

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Definition of Marketing

Social and Managerial process by which

individuals and groups obtain what they need
and want through creating, offering, and
exchanging products of value with others.
This definition rests on the following core
concepts: needs, wants, demands, products, value,
cost and satisfaction, exchange and transactions,
relationships and networks, markets, marketers
and prospects.

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 Definition (cont)
•Needs – exist in biology they are not
created by marketers – i.e. shelter, food,
clothing, safety, belonging, esteem
•Wants – Need food want hamburger,
fries, coke.
•Desire – Wants for specific products
backed by an ability and willingness to buy
them

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 Definition of Commerce
The exchange of goods and services for
money
Consists of:
Buyers - these are people with money
who want to purchase a good or service.
Sellers - these are the people who offer
goods and services to buyers.
Producers - these are the people who
create the products and services that
sellers offer to buyers.
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 Elements of Commerce
You need a Product or service to sell
You need a Place from which to sell the
products
You need to figure out a way to get people to
come to your place.
You need a way to accept orders.
You also need a way to accept money.
You need a way to deliver the product or
service, often known as fulfillment.
Sometimes customers do not like what they
buy, so you need a way to accept returns.
You need a customer service and technical
support department to assist customers with
products.
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 E-commerce
E-Commerce, Web, Networks,
Internet
The evolution of new businesses
The adoption of Brick and Mortar
companies to the new economy
Market failures and economic
explanations for the new economy
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Commerce

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 History of E-commerce

EC applications Limited to:

first developed - Large
in the early corporations
1970s - Financial
institutions
- Electronic funds
- A few other
transfer (EFT) daring
businesses
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 History of E-
commerce
Electronic data
Enlarged pool of
interchange (EDI)
—electronic participants to
transfer of include:
documents: - Manufacturers
- Purchase orders - Retailers
- Invoices - Service providers
- E-payments
between firms
doing business
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 E-Commerce
Transformation
Mechanisms of economic activity
into digital media
- Exchange information, content,
agreements, and services among
parties that are connected to through
the Internet.
Enables new ways of creating,
delivering and capturing value to
customers.
- Availability
- Convenience
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 What is E-
commerce
Distributing, buying, selling and
marketing products and services over
electronic systems
E-business for commercial transactions
Involves supply chain management, e-
marketing, online marketing, EDI
Uses electronic technology such as:
- Internet
- Extranet/Intranet
- Protocols 11
Forces Shaping the
Digital Age

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Forces Shaping the
Digital Age
Digitalization &
Internet Explosion

Connectivity – Explosive worldwide

Intranets : connect growth forms the
people within a heart of the New
company. Economy.
Extranets : connect a – Increasing numbers
company with its of users each month.
suppliers, distributors,
and outside partners. – Companies must
Internet : connects adopt Internet
users around the technology or risk
world. being left behind.
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Forces Shaping the
Digital Age
•New Types of Intermediaries:
•Direct selling via the Internet bypassed
existing intermediaries
(disintermediation).
•“Brick-and-mortar” firms became “click-
and-mortar” companies.
•As a result, some “click-only” companies
have failed.

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Forces Shaping the
Digital Age
Customization and Customerization:
With customization, the company
custom designs the market offering for
the customer.

With customerization, the customer

designs the market offering and the
company makes it.

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 E-commerce Today
The Internet is the perfect vehicle for e-
commerce because of its open standards
and structure.
No other methodology or technology has
proven to work as well as the Internet for
distributing information and bringing
people together.
It’s cheap and relatively easy to use it as a
medium for connecting customers,
suppliers, and employees of a firm.
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 E-commerce
Today
The Internet allows big businesses to act like small
ones and small businesses to act big.
The challenge to businesses is to make
transactions not just cheaper and easier for
themselves but also easier and more convenient
for customers and suppliers.
It’s more than just posting a nice looking Web site
with lots of cute animations and expecting
customers and suppliers to figure it out
Web-based solutions must be easier to use and
more convenient than traditional methods if a
company hopes to attract and keep customers.
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Four Categories of E-Commerce
Business originating from...
Business Consumers

Business B2B C2B

And selling to...

Consumers B2C C2C

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Distinct Categories of E-
Commerce
 Business to Business (B2B) refers to the full
spectrum of e-commerce that can occur between
two organizations.
This includes purchasing and procurement, supplier
management, inventory management, channel
management, sales activities, payment management
&service and support.
Examples: FreeMarkets, Dell and General Electric
Business to Consumer (B2C) refers to exchanges
between business and consumers, activities tracked
are consumer search, frequently asked questions and
service and support. Examples: Amazon, Yahoo
and Charles Schwab & Co 19
Distinct Categories of E-
Commerce (cont’d)
Peer to Peer (C2C) exchanges involve
transactions between and among consumers.
These can include third party involvement, as
in the case of the auction website Ebay.
Examples: Owners.com, Craiglist, Monster
Consumer to Business (C2B) involves when
consumers band together to present themselves
as a buyer in group.
Example: www.planetfeedback.com

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Convergence of e-Commerce
Categories
Business originating from…
And Selling to…
Business Consumers
Business
Publishers order Consumers search
paper supplies out sellers, offers
from paper and initiate
companies purchases from
Amazon orders Amazon
Consumers

from publishers
Consumers buy
thousands of Harry Consumers resell
Potter books from copies21on eBay
 What is a web-based business
Business that uses the WWW to fulfill it’s
business process
Four basic business processes:
- information dissemination
- data capture
- promotions and marketing
- transacting with stakeholders
Business objectives interact with web
based applications
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 Key Drivers of E-
commerce
Technological – degree of advancement
of telecommunications infrastructure
Political – role of government, creating
legislation, funding and support
Social – IT skills, education and training
of users
Economic – general wealth and
commercial health of the nation
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 Key Drivers of E-
business
Organizational culture- attitudes to R&D,
willingness to innovate and use technology
Commercial benefits- impact on financial
performance of the firm
Skilled/committed workforce- willing and
able to implement and use new technology
Requirements of customers/suppliers- in
terms of product and service
Competition- stay ahead of or keep up with
competitors
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 Appeal of E-
commerce
Lower transaction costs - if an e-commerce site is
implemented well, the web can significantly lower
both order-taking costs up front and customer
service costs
Larger purchases per transaction - Amazon offers a
feature that no normal store offers
Integration into the business cycle
People can shop in different ways. The ability to
build an order over several days
The ability to configure products and see actual prices
The ability to easily build complicated custom orders
The ability to compare prices between multiple vendors
easily
The ability to search large catalogs easily
Larger catalogs
Improved customer interactions - company. 25
 Limitations of E-
commerce
To organizations: lack of security,
reliability, standards, changing
technology, pressure to innovate,
competition, old vs. new technology
To consumers: equipment costs, access
costs, knowledge, lack of privacy for
personal data, relationship replacement
To society: less human interaction, social
division, reliance on technology, wasted
resources, JIT manufacturing
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 Technical limitations
There is a lack of universally accepted
standards for quality, security, and reliability
The telecommunications bandwidth is
insufficient
Software development tools are still evolving
There are difficulties in integrating the
Internet and EC software with some existing
(especially legacy) applications and databases.
Special Web servers in addition to the
network servers are needed (added cost).
Internet accessibility is still expensive and/or
inconvenient
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The process of e-commerce
1. Attract customers
 Advertising, marketing
2. Interact with customers
 Catalog, negotiation
3. Handle and manage orders
 Order capture
 Payment
 Transaction
 Fulfillment (physical good, service good, digital good)
4. React to customer inquiries
 Customer service
 Order tracking
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Web-based E-commerce
Architecture

Tier 1 Tier 2 Tier 3 Tier N

DMS

Clien
Web Applicati Databas
t Server on e Server
Server

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E-commerce Technologies
Internet
Mobile technologies Access security
Web architecture Cryptographic
Component security
programming Watermarking
Data exchange Payment systems
Multimedia
Search engines
Data mining
Intelligent agents
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Infrastructure for E-commerce
The Internet
system of interconnected networks that spans
the globe
routers, TCP/IP, firewalls, network
infrastructure, network protocols
The World Wide Web (WWW)
part of the Internet and allows users to share
information with an easy-to-use interface
Web browsers, web servers, HTTP, HTML
Web architecture
Client/server model
N-tier architecture; e.g., web servers,
application servers, database servers, scalability

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E-Commerce Software
Content Transport
pull, push, web-caching, MIME
Server Components
CGI, server-side scripting
Programming Clients
Sessions and Cookies

EMTM 553
Object Technology
CORBA, COM, Java Beans/RMI
Technology of Fulfillment of Digital
Goods
Secure and fail-safe delivery, rights
management
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System Design Issues
Good architectural properties
Functional separation
Performance (load balancing,
web caching)
Secure
Reliable

EMTM 553
Available
Scalable

3/9/01 33
Creating and Managing Content

What the customer see

Static vs. dynamic content
Different faces for different users
Tools for creating content

EMTM 553
Multimedia presentation
Integration with other media
Data interchange
HTML, XML (Extensible Markup
Language)
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Cryptography
• Keeping secrets
• Privacy: interceptor cannot use information
• Authentication: sender’s identity cannot be forged
• Integrity: data cannot be altered
• Non-repudiation: sender cannot deny sending
• How to evaluate cryptography
• Secret key (symmetric) cryptography; e.g., DES

EMTM 553
• Public key (asymmetric) cryptosystems; e.g, RSA
• Digital signatures, digital certificates
• Key management; e.g., PKI

3/9/01 35
 Security
Concerns about security
Client security issues
Server security issues
Security policy, risk assessment
Authentication methods
Something you know: passwords

EMTM 553
Something you have: smart card
Something you are: biometrics
Firewalls, proxy servers, intrusion detection
Denial of service (DOS) attacks, viruses, worms

3/9/01 36
Payment Systems
Role of payment
Cash
properties: wide accept, convenient, anonymity,
untraceability, no buyer transaction cost
Online credit card payment, Smart Cards
Secure protocols: SSL, SET
Internet payment systems

EMTM 553
Electronic cash, digital wallets
Micro-payments
Wireless devices

3/9/01 37
Electronic Payment Systems

• Digital certificate: an attachment to an e-mail message or data

embedded in a Web page that verifies the identity of a sender or a Web
site
• Certificate authority (CA): a trusted third party that issues digital
certificates
• Secure Sockets Layer (SSL): a communications protocol used to secure
sensitive data
• Electronic cash: an amount of money that is computerized, stored, and
used as cash for e-commerce transactions

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E-Business in the Digital Age
Involves the use of electronic platforms to
conduct company business.
Web sites for selling and customer relations
Intranets for within-company communication
Extranets connecting with major suppliers
and distributors

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E-Commerce in the Digital
Age
More specific than e-business.
Involves buying and selling
processes supported by
electronic means, primarily the
Internet.
Includes:
e-marketing
e-purchasing (e-
procurement)
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E-commerce vs. E-business
E-commerce is about doing business
electronically
E-commerce conducting financial
transactions electronically

E-business is conducting business on the

Internet
E-business is the transformation of business
processes through the Internet

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E-Marketing in the Digital Age
The marketing side of e-commerce.
Includes efforts to communicate about,
promote, and sell products and services
over the Internet.
E-purchasing is the buying side of e-
commerce.
It consists of companies purchasing
goods, services, and information from
online suppliers.
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Types of e-Marketers

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 Click-Only Companies

E-tailers Search
Enabler Engines
Sites and
Types of Portals

Sites Internet
Content
Service
Sites
Providers
Transactio
n Sites
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 Click-and-Mortar Companies
Most established companies resisted adding
Web sites because of the potential for
channel conflict and cannibalization.
Many are now doing better than click-only
companies.
Reasons:
Trusted brand names and more resources
Large customer bases
More knowledge and experience
Good relationships with suppliers
Can offer customers more options
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Setting Up for E-Marketing
Online Marketing

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 Setting up for E-
Marketing
Corporate websites
Options Build goodwill and
relationships; generate
Creating websites excitement
Placing online ads Marketing websites
and promotions Engage consumers
Creating or using and attempt to influence
purchase
Web communities Website design
Using E-mail 7 C’s of effective website
design

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 Benefits of E-commerce
To consumers: 24/7 access, more choices,
price comparisons, improved delivery,
competition
To organizations: International marketplace
(global reach), cost savings, customization,
reduced inventories, digitization of
products/services
To society: flexible working practices,
connects people, delivery of public services

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 Benefits to
Consumers
Convenience
Buying is easy and private

Provides greater product access

and selection

Provides access to comparative

information
Buying is interactive and
immediate 49
 Benefits to
Organizations
Powerful tool for building
customer relationships
Can reduce costs
Can increase speed and
efficiency
Offers greater flexibility in offers
and programs

Is a truly global medium

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 Benefits to
Society
More individuals can work from
home

Benefits less affluent people

Third world countries gain

access
Facilitates delivery of public
services
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 Organizational Responses
 Strategic systems
- Provide organizations with strategic advantages,
enabling them to:
Increase their market share
Better negotiate with their suppliers
Prevent competitors from entering into their
territory
 Continuous improvement efforts
- Many companies continuously conduct programs to
improve:
Productivity
Quality
Customer service
 Business process reengineering (BPR)
- Strong business pressures may require a radical change
- Such an effort is referred to as business process
reengineering (BPR)
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 Organizational Responses
Business alliances
- Alliances with other companies, even
competitors, can be beneficial
- Virtual corporation—electronically
supported temporary joint venture
Special organization for a specific
Time-limited mission
Electronic markets
- Optimize trading efficiency
- Enable their members to compete globally
- Require the collaboration of the different
companies and competitors
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 Organizational Responses
Reduction in cycle time and time to market
- Cycle time reduction—shortening the time
it takes for a business to complete a
productive activity from its beginning to
end
- Extremely important for increasing
productivity and competitiveness
- Extranet-based applications expedite steps
in the process of product or service
development, testing, and implementation
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 E-commerce and
Organizations
Organizations that undertake e-commerce
do so from two possible starting points:
- new online organizations
- traditional established organizations
Factors for success:
- first-mover advantage
- differentiation in the marketplace
- flexibility and agility in the electronic
marketspace
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 Seven dimensions of E-commerce
Strategy
Four positional factors Three bonding factors
•Technology: goal must be •Leadership: vision of
understood within its’ market CEO for e-commerce
and industry •Infrastructure: technology
•Market: must determine its’
target market and whether it
support for new model of
is still open to new entrants business
•Service: must know its’ •Organizational Learning:
customer’s expectations does the organization
•Brand: must understand if it support internal learning
has the ability to create a
strong brand 56