Chapter 2
E-MARKETPLACES:
STRUCTURE, MECHANISMS,
ECONOMICS,
AND IMPACTS
Electronic Marketplaces
• Markets play a central
role in the economy
facilitating the
exchange of:
–
–
–
–
information
goods
services
payments
• Markets create
economic value for:
– buyers
– sellers
– market
intermediaries
– society at large
5
Electronic Marketplaces (cont.)
•
What are the functions of markets?
1. matching buyers and sellers
2. facilitating the exchange of information, goods,
services, and payments associated with market
transactions
3. providing an institutional infrastructure, such as
a legal and regulatory framework, that enables
the efficient functioning of the market
6
Types of Electronic Markets
• Electronic storefront: A
single or company Web site
where products and
services are sold
• Mechanisms necessary for
conducting the sale:
–
–
–
–
–
–
electronic catalogs
search engine
e-auction facilities
payment gateway
shipment court
customer services
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Types of Electronic Markets (cont.)
• e-mall (online mall): An
online shopping center where
many stores are located
– some are merely directories
– some provide shared services
(e.g., choicemall.com).
– some are actually large clickand-mortar retailers
– some are virtual retailers (e.g.,
buy.com)
9
Information Portals
• Information portal: a single point of
access through a Web browser to
business information inside and/or
outside an organization
– Yahoo
– MSN
13
Information Portals (cont.)
•
Six types of portals
1.
2.
3.
4.
5.
Commercial (public) portals
Corporate portals
Publishing portals
Personal portals
Mobile portals: a portal accessible via a mobile
device
6. Voice portals: a portal accessed by telephone or cell
phone
14
Intermediation and Syndication in ECommerce
• Intermediaries (brokers) provide
value-added activities and services
to buyers and sellers
• Intermediaries in the physical world
are wholesalers and retailers
– Infomediaries: electronic intermediaries
that control information flow in
cyberspace, often aggregating
information and selling it to others
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Intermediation and Syndication in ECommerce (cont.)
• Disintermediation and reintermediation
– Disintermediation:
Elimination of intermediaries between sellers and
buyers
– Reintermediation:
Establishment of new intermediary roles for
traditional intermediaries that were
disintermediated
18
Intermediation and Syndication in ECommerce (cont.)
• Syndication as an EC mechanism
– Syndication:
The sale of the same good (e.g., digital content) to many
customers, who then integrate it with other offerings and
resell it or give it away free
19
Electronic Catalogs
•
Electronic catalogs:
The presentation of product information in an
electronic form; the backbone of most e-selling sites
•
Electronic catalogs can be classified by the
following dimensions:
1. The dynamics of the information presentation
2. The degree of customization
3. Integration with business processes
20
Auctions as EC Market Mechanisms
• Auction:
A market mechanism by which a seller places an
offer to sell a product and buyers make bids
sequentially and competitively until a final price
is reached
• Auctions can be done:
–
–
–
–
online
off-line
at public sites (eBay)
at private sites (by invitation)
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Auctions as EC Market
Mechanisms (cont.)
•
Four major categories of dynamic pricing
1. One buyer, one seller
2. One seller, many potential buyers
3. One buyer, many potential sellers (reverse
auction; name your price)
4. Many sellers, many buyers (Double auction)
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E-Commerce in the Wireless
Environment: M-Commerce
• Mobile computing:
Permits real-time access to information, applications,
and tools that, until recently, were accessible only
from a desktop computer
• Mobile commerce (m-commerce):
E-commerce conducted via wireless devices
• m-business:
The broadest definition of m-commerce, in which ebusiness is conducted in a wireless environment
33
E-Commerce in the Wireless
Environment: M-Commerce (cont.)
• Promise of m-commerce
– Mobility significantly changes the manner in which
people and trading partners interact, communicate,
and collaborate
– Mobile applications are expected to change the way
we live, play, and do business
– Much of the Internet culture may change to one
based on mobile devices
– M-commerce creates new business models for EC,
notably location-based applications
34
E-Commerce in the Wireless
Environment: M-Commerce (cont.)
• DoCoMo’s
(nttdocomo.com) iMode—pioneering
wireless service—with
a few clicks on a
handset, i-Mode users
can conduct a large
variety of m-commerce
activities
–
–
–
–
–
Shopping guides
Maps and transportation
Ticketing
News and reports
Personalized movie
service
– Entertainment
– Dining and reservations
– Additional services
35
Issues in E-Markets: Liquidity, Quality,
and Success Factors
• Early liquidity:
Achieving a critical mass of buyers and
sellers as fast as possible, before a start-up
company’s cash disappears
• Quality uncertainty:
The uncertainty of online buyers about the
quality of non-commodity type products that
they have never seen, especially from an
unknown vendor
36
E-Market Success Factors
• Product Characteristics
Digitizable products can be electronically
distributed to customers, resulting in very low
distribution costs, allowing order-fulfillment
cycle time “to be minimal”
• Industry Characteristics
Electronic markets are most useful when they
are able to directly match buyers and sellers
37
E-Market Success Factors (cont.)
• Seller Characteristics
Electronic markets reduce search costs,
allowing consumers to find sellers offering
lower prices
• Consumer Characteristics
e-markets require a certain degree of effort
on the part of the consumer, e-markets are
more conducive to consumers who do some
comparison and analysis before buying
38
Economics of
E-Marketplaces
39
Competition in the Digital Economy
• Internet ecosystem:
The business model of the Internet economy
• Competitive factors
– Lower search costs for buyers
– Speedy comparisons
– Differentiation and personalization
Differentiation: Providing a product or service that is unique
Personalization: The ability to tailor a product, service, or Web
content to specific user preferences
– Lower prices
– Customer service
40
Competition in the
Digital Economy (cont.)
• Characteristics necessary for perfect
competition are the following:
– Many buyers and sellers must be able to enter the
market at little or no entry cost
– Large buyers or sellers are not able to individually
influence the market
– Products must be homogeneous (no product
differentiation)
– Buyers and sellers must have comprehensive
information about the products and about the
market participants’ demands, supplies, and
conditions
41
Competition in the
Digital Economy (cont.)
• Porter’s competitive forces model:
The model that says that five major forces of
competition determine industry structure and
how economic value is divided among the
industry players in the industry; analysis of
these forces helps companies develop their
competitive strategy
42
Exhibit 2.9 Porter’s Competitive Forces
Model: How the Internet Influences Industry
Structure
43
Impacts of E-Markets on Business
Processes and Organizations
• Improving direct marketing
–
–
–
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–
–
–
–
–
–
Product promotion
New sales channel
Direct savings
Reduced cycle time
Improved customer service
Brand or corporate image
Customization
Advertising
Ordering systems
Market operations
44
Transforming Organizations
• Technology and organizational learning—the
changing nature of work
• Redefining organizations
• New and improved product capabilities
• New business models
• Improving the supply chain
• Impacts on manufacturing
Build-to-order: Production system in which
manufacturing or assembly will start only after an
order is received
45