E-commerce 2020-2021: Business. Technology.
Society
Chapter 1
Introduction to E-commerce
20 November 2021
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Sixteenth Edition, Global Edition
Copyright © 2018 Pearson Education Ltd
COURSE ASSESSMENT JTU396E
1. Group Assignment
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20%
2. Continuous Assessment (PB)
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20%
3. Final Exam
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60%
------Total
100%
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COURSE SYNOPSIS AND TOPICS JTU396E
Course Synopsis
The course covers the development of information technology and the e-commerce related
technology. The course also focuses on the understanding about developing of web page,
application of online transaction and network management.
Chap 1: Introduction to e-commerce
Chap 2: E-commerce Infrastructure
Chap 3: Building an E-commerce Presence
Chap 4: E-commerce Security and Payment Systems
Chap 5: E-commerce Business Strategies
Chap 6: E-commerce Marketing and Advertising
Chap 7: Social, Mobile, and Local Marketing
Chap 8: Ethics, Law, and E-commerce
Chap 9: Online Media
Chap 10: Online Communities
Chap 11: E-commerce Retailing and Services
Chap 12: B2B E-commerce
Copyright © 2018 Pearson Education Ltd
Learning Objectives
•
•
•
•
•
•
•
1.1 Understand why it is important to study e-commerce.
1.2 Define e-commerce, understand how e-commerce differs from e-business,
identify the primary technological building blocks underlying e-commerce, and
recognize major current trends in e-commerce.
1.3 Identify and describe the unique features of e-commerce technology and
discuss their business significance.
1.4 Describe the major types of e-commerce.
1.5 Understand the evolution of e-commerce from its early years to today.
1.6 Describe the major themes underlying the study of e-commerce.
1.7 Identify the major academic disciplines contributing to e-commerce.
Copyright © 2018 Pearson Education Ltd
Learning Objectives
•
1.1 Understand why it is important to study e-commerce.
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Why it is important to study e-commerce
• First 20 years of e-commerce
– Just the beginning
– Rapid growth and change
• Technologies evolve at exponential rates
– Disruptive business change
– New opportunities
• Why study e-commerce
– Understand opportunities and risks
– Analyze e-commerce ideas, models, issues
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Learning Objectives
•
1.2 Define e-commerce, understand how e-commerce differs from ebusiness, identify the primary technological building blocks underlying
e-commerce, and recognize major current trends in e-commerce.
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Introduction to E-commerce – “What”
• Use of Internet to transact business
– Includes World Wide Web (Web) such as:
mobile apps and browsers
• Formal definition
– Digitally enabled commercial transactions between and
among organizations and individuals.
– e-commerce refers to the digital enabling of transactions and
processes involving an exchange of value across organizational
boundaries.
Watch this video for more explanation on E-Commerce at this link.
https://www.youtube.com/watch?v=-ZAznOtqaiY
duration: 8.50 minutes)
(IWD
Agency,
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The Difference Between E-commerce and E-business
• E-business:
– Digital enabling of transactions and processes
within a firm, involving information systems
under firm’s control.
– Does not include commercial transactions
involving an exchange of value across
organizational boundaries.
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Technological Building Blocks Underlying Ecommerce
• Internet
• World Wide Web
– HTML
• Mobile platform
– Mobile apps
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Major Trends in E-commerce
• Business trends include:
– All forms of e-commerce show very strong growth
– Growth rate of > 20%
– More in emerging market like China, India and Brazil.
• Technology trends include:
– Mobile platform has made mobile e-commerce reality
– E.g WhatsApp used by > 60% of smartphone users.
• Societal trends include:
– Increased online social interaction and sharing such as posts,
tweets and blogs.
– Increases issues e.g spams, hacked and misused of customer
information.
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Learning Objectives
•
1.3 Identify and describe the unique features of e-commerce technology
and discuss their business significance.
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Unique Features of E-commerce Technology (1 of 3)
1. Ubiquity – available everywhere; every time and no
physical space. If physical place – market place.
2. Global reach – cross cultural, no boundaries.
3. Universal standards – the standards are the same for all
nations because everyone uses the same technology.
E.g price discovery less costly, faster and accurate,
search for supplier becomes easier.
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Unique Features of E-commerce Technology
(2 of 3)
4. Information richness – selling of complex goods and
services becomes less complex but higher message content
(integrate video, audio and text). E.g chatting with online
sales person may reach larger audience.
5. Interactivity – allows for two-way communication
(merchant & consumer or among consumer).
6. Information density – information becomes
plentiful, less expensive and of higher quality.
more
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Unique Features of E-commerce Technology
(3 of 3)
7. Personalization/customization – Personalization - marketing message
can be adjusted according to the consumer’s profile. Customization Permits customization where the technology helps changing the
product/services based on consumer needs and preferences.
8. Social technology – giving users the power to create and distribute
content on a large scale and allow users to program their content
consumption.
Click the link for a video on the unique features of e-commerce
technology.
https://www.youtube.com/watch?v=bF7AqfKLIC8
(Alice
Hafner, 2.17 minutes)
Copyright © 2018 Pearson Education Ltd
Learning Objectives
•
1.4 Describe the major types of e-commerce.
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Types of E-commerce
• Business-to-Consumer (B2C) – online businesses selling to individual
consumers (most popular). E.g purchase of retail goods and services,
or travel reservation.
• Business-to-Business (B2B) – online business selling to other
business.
• Consumer-to-Consumer (C2C) – consumers sell to each other with the
help from online market maker/platform provider . E. g mudah.com
• Mobile e-commerce (M-commerce) – use of mobile devices to perform
online transactions – determined by the type of technology used in the
transaction.
• Social e-commerce – e-commerce enabled by social networks (e.g
Instagram, twitter, pinterest) and social relationships. E. g network
notification seeking approval for products/services.
• Local e-commerce – focused on engaging consumer based on their
geographical location. E. g notification from shop. They locate your
location.
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Learning Objectives
•
1.5 Understand the evolution of e-commerce from its early years to
today.
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The Worldwide Growth of B2C E-Commerce
Based on data from eMarketer, Inc., 2019c; 2019d.
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Periods in the Development of E-commerce
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E-commerce: A Brief History (1 of 4)
• Precursors
• Late 1970s - Baxter Healthcare modem-based system – started a
primitive form of B2B e-commerce using telephone-based modem.
• During 1980s – Order entry systems expanded – PC-based order
system before the internet.
• The 1980s development of Electronic Data Interchange (EDI)
standards – allows exchange of documents and digital
transactions across private networks.
• In B2C French Minitel using videotext system was introduced that
combines telephone and screen.
• None of this precursor system had the functionality of internet.
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E-commerce: A Brief History (2 of 4)
• 1995–2000: Invention
– Sale of simple retail goods on the internet. The
growth patterns is quite slow.
– Limited bandwidth and media – the most was just
the static display only.
– Dot-com crash of 2000 – stock market valuation
plunged with thousands of companies
disappearing.
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E-commerce: A Brief History (3 of 4)
• 2001–2006: Consolidation
– Emphasis on business-driven approach rather than
technology driven.
– Traditional large firms expand presence – learn how to use
Web
– Start-up financing shrinks – capital market rejected startup
firms.
– Not just retail products but more complex products and
services sold such as travel and financial service
– Growth of search engine advertising. E. g video ads.
– Business Web presences expand – not just websites but
also e-mail, multiple websites for each product.
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E-commerce: A Brief History (4 of 4)
• 2007–Present: Reinvention
– Rapid growth of:
 Web 2.0, including online social networks (user generated
content)
 Mobile platform (smartphone and tablet)
 Local commerce (local goods and services)
 On-demand service economy
– Entertainment content develops as source of revenues – easy
to attract people.
– Transformation of marketing – use of social networks, word-ofmouth, viral marketing and personal marketing from data
repositories.
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Assessing E-commerce
• Stunning technological success
• Early years a mixed business success
– Few early dot-coms have survived
– Online sales growing rapidly
• Many early visions not fulfilled
– Price dispersion
– Information asymmetry
– New intermediaries
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Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Learning Objectives
•
1.6 Describe the major themes underlying the study
•
of e-commerce.
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Understanding E-commerce: Organizing Themes
• Technology:
– Development and mastery of digital computing and
communications technology
• Business:
– New technologies present businesses with new ways
of organizing production and transacting business
• Society:
– Intellectual property, individual privacy, public welfare
policy
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Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Learning Objectives
•
1.7 Identify the major academic disciplines contributing
•
to e-commerce.
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Academic Disciplines Concerned with Technology
E-commerce covers every disciplines (multidisciplinary). Two primary
approaches:
• Technical
– Computer science, management science, information systems
• Behavioral
– Information systems research, economics,
management, finance/accounting, sociology.
marketing,
Economists share their interest with marketing scholars to achieve
higher returns on investment. Economists DO NOT take a purely
technical approach to e-commerce.
Management scientists are interested in e-commerce as an
opportunity to study how business firms can exploit the Internet to
achieve more efficient business operations.
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Thank You
SEE YOU AGAIN ON 11 DEC 2021 @ 4PM
Copyright © 2018 Pearson Education Ltd
E-commerce 2020 -2021
business. technology. society.
16th edition
Chapter 2
E-commerce Infrastructure
11th December 2021
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
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3.1 Discuss the origins of, and the key technology concepts behind, the Internet.
3.2 Explain the current structure of the Internet.
3.3 Understand the limitations of today’s Internet and the potential capabilities of the
Internet of the future.
3.4 Understand how the Web works.
3.5 Describe how Internet and web features and services support e-commerce.
3.6 Understand the impact of mobile applications.
Copyright © 2018 Pearson Education Ltd.
The Internet: Technology Background
• Internet
– Interconnected network of thousands of networks and millions of
computers
– Links businesses, educational institutions, government agencies,
and individuals (stakeholders).
– Internet provides services such as e-mail, apps, shopping,
research, music, videos, and news.
• World Wide Web (Web)
– One of the Internet’s most popular services
– Provides access to billions, possibly trillions, of web pages
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The Evolution of the Internet
1961–Present
• Innovation Phase, 1961–1974
– Creation of fundamental building blocks
• Institutionalization Phase, 1975–1995
– Large institutions provide funding and legitimization
• Commercialization Phase, 1995–present
– Private corporations take over, expand Internet backbone and
local service
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The Internet: Key Technology Concepts
• Internet defined as network that:
– Uses IP addressing
– Supports TCP/IP
– Provides services to users, in manner similar to telephone system
• Three important concepts (basic technological
foundations of the Internet)
– Packet switching (a method of slicing digital message into
packets)
– TCP/IP (core communication protocol for the internet)
– Client/server computing (a model of computing that connected
client computers in a network together with one or more servers
for common functions)
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Packet Switching
• Slices digital messages into packets
• Sends packets along different communication paths as
they become available
• Reassembles packets once they arrive at destination
• Uses routers – special purpose computer
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Packet Switching
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TCP/IP
• Transmission Control Protocol (TCP)
– Establishes connections among sending and receiving computers
– Handles assembly of packets at point of transmission, and
reassembly at receiving end
• Internet Protocol (IP) - Address allows billions of
computers communicate with one another by sending and
receiving TCP packets
• Four TCP/IP layers
– Network interface layer
– Internet layer
– Transport layer
– Application layer
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Domain Names, DNS, and URLs
• Domain name
– IP address expressed in natural language
– We cannot remember the 32-bit numbers, so we use domain
name which is more natural.
• Domain name system (DNS)
– Allows numeric IP addresses to be expressed in natural language
such as Google.com
• Uniform resource locator (URL)
– Address used by web browser to identify location of content on the
Web
– For example: http://www.azimuth-interactive.com/
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Client/Server Computing
• Powerful personal computers (clients) connected
in network with one or more servers
• Servers perform common functions for the clients
– Storing files
– Software applications
– Access to printers, and so on
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The Mobile Platform
• Primary Internet access is now through tablets
and smartphones
• Tablets supplement PCs for mobile situations
• Smartphones are a disruptive technology
– New processors and operating systems that alter e-commerce
landscape.
– In 2019, 3.3 billion people access Internet using smartphones
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The Internet “Cloud Computing” Model (1 of 2)
• It is a computing concept where the firms and individuals
obtain computing power and software over Internet.
• a model of computing in that computer processing,
storage, software, and other services are provided as a
shared pool of virtualized resources over the Internet.
• No purchasing and installing needed on our own
computers.
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The Internet “Cloud Computing” Model (2 of 2)
• Hybrid clouds offer both public and private cloud options.
• A private cloud hosted internally or externally. It is operated
solely for the benefit of a single tenant.
• Public cloud has NO stringent privacy and security
requirements. E.g Dropbox
• Radically reduces cost
– Building and operating websites
– Infrastructure, IT support
– Hardware, software
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Internet Protocols and Utility Programs –
offers internet services
• Internet protocols
– HTTP (internet protocol used to transfer web pages)
– E-mail: SMTP (internet protocol used to send mail to server),
POP3, IMAP
– FTP (internet services that permits users to transfer files from the
server to client computer, vise versa.
• Utility programs
– Ping (program used to check the connection btw client and server)
– Tracert (route-tracing used to follow the path of message)
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The Internet Today
• Internet growth has boomed without disruption
because of:
– Client/server computing model – highly extensible
– Hourglass, layered architecture – each layer can change without
disturbing other layers. E.g the technology to move the message
faster without disturbing desktop application running.
– https://www.youtube.com/watch?v=6mBO2vqLv38 (IoT, Simplilearn
Channel, Duration 5.51 minutes)
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The Current Structure of the Internet
Network Architecture
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Limitations of the Current Internet
• Bandwidth limitations
– Slow peak-hour service (insufficient capacity)
• Quality of service limitations
– Latency – delays due to uneven flow of information packets and
notice in streaming video and telephone call
• Network architecture limitations
– Identical requests are processed individually (the server attends
each request individually).
– Different from television where the programs broadcasted once to
all.
• Wired Internet
– Still using cables where the Copper cables are too old and
expensive fiber-optic cables
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The First Mile and the Last Mile
• Most significant private initiatives
– Fiber optic trunk-line bandwidth (first mile) – backbone internet
service that carry bulk traffic long distances.
– Wireless internet services (last mile) – carry service from the
larger internet to the user’s smartphone, tablet and laptop.
– https://www.youtube.com/watch?v=Sfzo4xm5eX8 (How the Internet
Works, Blastertechnology, Duration 4.03)
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Fiber Optics and the Bandwidth Explosion
in the First Mile
• “First mile”: Backbone Internet services that carry
bulk traffic over long distances
• Fiber-optic cable: hundreds of glass strands that
use light to transmit data
– Faster speeds and greater bandwidth
– Thinner, lighter cables
– Less interference
Advantage
– Better data security
• Substantial investments in fiber optic by
telecommunications firms in last decade
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The Last Mile: Mobile Internet Access
• “Last mile”: From Internet backbone to user’s
computer, smartphone, and so on
• Two basic types of wireless Internet access:
– Telephone-based (mobile phones, smartphones)
– Computer network–based (wireless local area network–based)
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Wireless Local Area Network (WLAN) –
based Internet Access
• Connects client to server within local areas (few hundred meters)
• Functions by sending radio signals broadcasted over the airwaves in
certain radio frequency ranges.
• Wi-Fi
– Evolving high-speed, fixed broadband wireless LAN (WLAN)
– Wireless access point (“hot spots”)
– Limited range but inexpensive
• WiMax (high-speed, medium-range of coverage)
• Bluetooth (modest-speed, short-range)
• Internet access drones
– Google, Facebook initiatives to provide internet access to the
remote part of the world.
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The Web
“Without Web, no e-commerce”
• 1989–1991: Web invented
– Tim Berners-Lee at CERN
– HTML, HTTP, Web server, Web browser
• 1993: Mosaic web browser w/GUI
– Andreessen and others at NCSA
– Runs on Windows, Macintosh, or Unix
• 1994: Netscape Navigator, first commercial web
browser
• 1995: Microsoft Internet Explorer
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Understand How the Web Works
These key concepts are important to understand how
the web works.
• Hypertext
• HTTP
• URLs
• HTML
• XML
• Web server software
• Web clients
• Web browsers
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What is Hypertext
• Text formatted with embedded links
– Links connect documents to one another, and to other objects
such as sound, video, or animation files
• Uses Hypertext Transfer Protocol (HTTP) and
URLs to locate resources on the Web
– Example URL: http://megacorp.com/content/features/082602.html
– .com known as top-level domains
• URL is the address used by a browser to identify
the location of content on the Web.
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Markup Languages
• Hypertext Markup Language (HTML)
– Fixed set of pre-defined markup “tags” used to format text
– Controls “look and feel” of data on web pages
– HTML5 the newest version
• eXtensible Markup Language (XML)
– Designed to describe data and information
– Tags used are defined by user
– The HTML and XML is used in combination for information display
and data description
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Web Servers and Web Clients
• Web server software
– Enables a computer to deliver web pages to clients on a network
that request this service by sending an HTTP request
– Basic capabilities: Security services, FTP, search engine, data
capture
• Web server
– May refer to either web server software or physical server
– Specialized servers: Database servers, ad servers, and so on
• Web client
– Any computing device attached to the Internet that is capable of
making HTTP requests and displaying HTML pages
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What is Web Browsers
A software program
• Primary purpose is to display web page, but may include
added features such as e-mail
– Google’s Chrome: 67% of desktop market, 64% mobile
market (the most popular web browser)
– Mozilla Firefox: 9% desktop, 1% mobile
– Internet Explorer: 8% of desktop, <1% mobile
– Microsoft Edge: 5% desktop
– Apple’s Safari: 4% desktop, 27% mobile (2nd most
popular mobile browser)
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The Internet and Web: Features
• How the Internet and Web Features support ecommerce:
– Communication tools
– Search engines
– Downloadable and streaming media
– Web 2.0 applications and services
– Virtual reality and augmented reality
– Intelligent personal assistants
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Mobile Apps
• Use of mobile apps has exploded
– Have become most popular entertainment media
– Always present shopping tool
– Almost all top 100 brands have shopping app
• Platforms
– iPhone/iPad (iOS), Android, Windows Phone
• App marketplaces
– Google Play, Apple’s App Store, Windows Phone Marketplace
Copyright © 2018 Pearson Education Ltd.
Thank you...
See you again next year on
15/01/2022
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020
business. technology. society.
16th edition
Chapter 3
Building an E-commerce
Presence
15th January 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
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3.1 Understand the questions you must ask and answer, and the steps you should take, in
developing an e-commerce presence.
3.2 Explain the process that should be followed in building an e-commerce presence.
3.3 Identify and understand the major considerations involved in choosing web server and
e-commerce merchant server software.
3.4 Understand the issues involved in choosing the most appropriate hardware for an ecommerce site.
3.5 Identify additional tools that can improve website performance.
3.6 Understand the important considerations involved in developing a mobile website and
building mobile applications.
Copyright © 2018 Pearson Education Ltd.
Imagine Your E-commerce Presence
• What’s the idea? The vision includes:
– Mission statement
– Target audience
– Intended market space
– Strategic analysis – e.g SWOT analysis – simple but powerful
method to strategize the business and understand where we
should focus the efforts.
– Marketing matrix
– Development timeline
– Preliminary budget
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Figure 4.2: E-commerce Presence Map
To have ongoing
conversation with
customers
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Building an E-commerce Site: A Systematic Approach
• Main factors to consider
– Management
1.
Developing a clear understanding of business objectives
2.
Knowing how to choose the right technology to achieve those objectives
When developing an e-commerce presence, it is important to understand
that the business must drive technology decisions, not the reverse
– Hardware architecture
– Software
– Design
– Telecommunications
– Human resources
• Objective of E-commerce site - display goods, execute a transaction
and provide production and supplier links
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Planning: The Systems Development Life Cycle
(SDLC)
• Methodology for understanding business objectives of a
system and designing an appropriate solution .
• Five major steps:
– Systems analysis/planning
– Systems design
– Building the system
– Testing
– Implementation
Copyright © 2018 Pearson Education Ltd.
Step 1: System Analysis/Planning
• Business objectives:
– List of capabilities you want your site to have
• System functionalities:
– List of information system capabilities needed to achieve business
objectives.
– E.g 1. Objective - to display goods on a website we use digital catalog.
– E. g 2. Objective – to personalize/customize products – we use customer
on-site tracking
• Information requirements:
– Information elements that system must produce in order to achieve
business objectives
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Step 2 - Systems Design: Hardware and Software
Platforms
• System design specification:
– Description of main components of a system and their relationship to one
another
• Two components of system design:
– Logical design
 typically include a data flow diagram to describe the flow of information for an e-commerce
site (the processing functions and databases).
– Physical design
 Specifies actual hardware, software components, models, and so on-used in a system
Copyright © 2018 Pearson Education Ltd.
Step 3 - Building the System: In-house versus
Outsourcing
• Outsourcing: Hiring vendors to provide services involved in building
site
• Build own vs. outsourcing:
– Build your own requires team with diverse skill set; choice of software tools; both
risks and possible benefits
• Host own vs. outsourcing
– Hosting: Hosting company responsible for ensuring site is accessible 24/7, for
monthly fee
– Co-location: Firm purchases or leases web server (with control over its operation),
but server is located at vendor’s facility
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Step 4: Testing the System
• Testing
– Unit testing
– System testing
– Acceptance testing
– A/B testing (split testing)
– Multivariate testing – the most sophisticated as it involved identifying the
specific elements or variables on a web page such as headline, image,
button and text, followed by creating unique combination of each
elements and version to test.
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Step 5: Implementation and Maintenance
• Systems break down unpredictably
• Maintenance is ongoing
• Maintenance costs: Similar to development costs
– A $40K e-commerce site may require $40K annually to upkeep
• 60% of maintenance time devoted to general administration, making
changes and enhancements to the system
• Benchmarking
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Factors to Consider in Choosing Software Package: Web
Server Software vs E-Commerce Merchant Server
Software
Copyright © 2018 Pearson Education Ltd.
Web Server Software
• Apache
– Leading web server software
– Works with UNIX, Linux operating systems
– Reliable, stable, part of open software community
• Microsoft’s Internet Information Server (IIS)
– Second major Web server software
– Windows-based
– Integrated, easy-to-use
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E-commerce Merchant Server Software
• Provides basic functionality for sales
– Online catalog
 List of products available on website
– Shopping cart
 Allows shoppers to set aside, review, edit selections, and then make purchase
– Credit card processing
 Typically works in conjunction with shopping cart
 Verifies card and puts through credit to company’s account at checkout
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Choosing Hardware
• Hardware platform:
– Underlying computing equipment needed for
e-commerce functionality
• Objective:
– Enough platform capacity to meet peak demand without wasting money
• Important to understand the factors that affect speed, capacity, and
scalability of a site
Copyright © 2018 Pearson Education Ltd.
The Eight Most Important Factors in Successful E-commerce
Site Design
FACTOR
DESCRIPTION
Functionality
Pages that work, load quickly, and point the customer toward
your product offerings
Informational
Links that customers can easily find to discover more about
you and your products
Ease of use
Simple foolproof navigation
Redundant
navigation
Alternative navigation to the same content
Ease of
purchase
One or two clicks to purchase
Multi-browser
functionality
Site works with the most popular browsers
Simple
graphics
Avoids distracting, obnoxious graphics and sounds that the
user cannot control
Legible text
Avoids backgrounds that distort text or make it illegible
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Consideration in Developing a Mobile Website and Building
Mobile Applications
• Types of m-commerce software
– Mobile website
 Responsive web design
 used prebuilt templates has made mobile website less expensive
 The cost of hardware, software, and telecommunications services needed to build a
website have decreased dramatically over the last decade
– Mobile web app
- Native app – most expensive
- Hybrid app
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020
business. technology. society.
16th edition
Chapter 4
E-commerce Security and
Payment Systems
15th January 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
•
•
4.1 Understand the scope of e-commerce crime and security problems, the key
dimensions of e-commerce security, and the tension between security and other values.
4.2 Identify the key security threats in the e-commerce environment.
4.3 Describe how technology helps secure Internet communications channels and protect
networks, servers, and clients.
4.4 Appreciate the importance of policies, procedures, and laws in creating security.
4.5 Identify the major e-commerce payment systems in use today.
4.6 Describe the features and functionality of electronic billing presentment and payment
systems.
Copyright © 2018 Pearson Education Ltd.
The E-commerce Security Environment
• Overall size and losses of cybercrime unclear
– Reporting issues
• 2018 survey: Average total cost of data breach to U.S.
corporations was almost $4 million
• Low-cost web attack kits
• Online credit card fraud
• Underground economy marketplace
Copyright © 2018 Pearson Education Ltd.
What Is Good E-commerce Security?
• To achieve highest degree of security
– New technologies
– Organizational policies and procedures
– Industry standards and government laws
Copyright © 2018 Pearson Education Ltd.
Customer and Merchant Perspectives on the Different
Dimensions of E-commerce Security
DIMENSION
CUSTOMER’S PERSPECTIVE
MERCHANT’S PERSPECTIVE
Integrity
Has information I transmitted or
received been altered?
Has data on the site been altered/changed
without authorization? Is data being received
from customers valid?
E.g An unauthorized person intercepts an online
communication and changes its contents.
Nonrepudiation
Can a party to an action with me later
deny taking the action?
Can a customer deny ordering products?
Authenticity
Who am I dealing with? How can I be
assured that the person or entity is
who they claim to be?
What is the real identity of the customer?
Confidentiality
Can someone other than the intended
recipient read my messages?
Are messages or confidential data accessible to
anyone other than those authorized to view
them?
Privacy
Can I control the use of information
about myself transmitted to an
e-commerce merchant?
(e.g online purchasing history being
sold to other merchants without our
consent)
What use, if any, can be made of personal data
collected as part of an e-commerce transaction?
Is the personal information of customers being
used in an unauthorized manner?
Availability
Can I get access to the site?
Is the site operational?
Copyright © 2018 Pearson Education Ltd.
The Tension Between Security and
Other Values
• Ease of use
– The more security measures added, the more difficult a site is to
use, and the slower it becomes
• Public safety and criminal uses of the Internet
– Use of technology by criminals to plan crimes or threaten nationstate
Why China's New Digital Currency Raises Privacy Concerns
https://www.youtube.com/watch?v=Y6YLQXM5izM (WSJ, duration 6.35
min)
Copyright © 2018 Pearson Education Ltd.
Security Threats in the E-commerce Environment
• Three key points of vulnerability in e-commerce
environment:
– Client
– Server
– Communications pipeline (Internet communications channels)
• The most common and most damaging forms of
security threats to e-commerce consumers and site
operators
– Malicious code
– Potentially unwanted programs
– Pishing
– Hacking
– Cybervandalism
Copyright © 2018 Pearson Education Ltd.
Malicious Code
• Exploits and exploit kits
• Maladvertising
• Drive-by downloads
• Viruses
• Worms
• Ransomware (scareware)
• Trojan horses - appears to be benign, but then does something other
than expected.
• Backdoors
• Bots, botnets
Copyright © 2018 Pearson Education Ltd.
Potentially Unwanted Programs
• Browser parasites
– Monitor and change user’s browser
• Adware
– Used to call pop-up ads
• Spyware
– Tracks user’s keystrokes, e-mails, IMs, etc.
Copyright © 2018 Pearson Education Ltd.
Phishing
• Any deceptive, online attempt by a third party to obtain
confidential information for financial gain
• Tactics
– Social engineering
– E-mail scams
– Spear phishing
• Used for identity fraud and theft
Copyright © 2018 Pearson Education Ltd.
Hacking, Cybervandalism, and Hacktivism
• Hacking
– Hackers vs. crackers
– Goals: cybervandalism, data breaches
• Cybervandalism:
– Disrupting, defacing, destroying website
• Hacktivism
– Hacktivists attack governments, organization and individuals for political purposes
Copyright © 2018 Pearson Education Ltd.
Data Breaches
• When organizations lose control over corporate
information to outsiders
• Leading causes
– Hacking
– Employee error/negligence
– Accidental e-mail/Internet exposure
– Insider theft
Copyright © 2018 Pearson Education Ltd.
Credit Card Fraud/Theft
• Systematic hacking and looting of corporate servers storing credit card
information is the primary cause of stolen credit card and card
information.
• Central security issue: establishing customer identity
– E-signatures
– Multi-factor authentication
– Fingerprint identification, face ID – biomatrix devices
Copyright © 2018 Pearson Education Ltd.
Identity Fraud/Theft
• Unauthorized use of another person’s personal data for
illegal financial benefit
– Social security number
– Driver’s license
– Credit card numbers
– Usernames/passwords
Copyright © 2018 Pearson Education Ltd.
Spoofing, Pharming, and Spam (Junk) Websites
• Spoofing
– Attempting to hide true identity by using someone else’s e-mail or IP address
• Pharming
– Automatically redirecting a web link to a different address, to benefit the hacker
• Spam (junk) websites
– Offer collection of advertisements for other sites, which may contain malicious
code
Copyright © 2018 Pearson Education Ltd.
Sniffing and Man-in-the-Middle Attacks
• Sniffer
– Eavesdropping program monitoring networks
– Can be used by criminals to steal proprietary information
• E-mail wiretaps
– Recording e-mails at the mail server level
• Man-in-the-middle attack
– Attacker intercepts and changes communication between two parties who believe
they are communicating directly
Copyright © 2018 Pearson Education Ltd.
Denial of Service (DoS) and Distributed Denial of
Service (DDoS) Attacks
• Denial of service (DoS) attack
– Flooding website with pings and page requests
– Overwhelm and can shut down site’s web servers
– Often accompanied by blackmail attempts
– Botnets
• Distributed Denial of Service (DDoS) attack
– Uses hundreds or thousands of computers to attack target network
– Can use devices from Internet of Things, mobile devices
Copyright © 2018 Pearson Education Ltd.
Insider Attacks
• Largest threat to business institutions come from insider
embezzlement
• Employee access to privileged information
• Poor security procedures
• Insiders more likely to be source of cyberattacks than outsiders
Copyright © 2018 Pearson Education Ltd.
Poorly Designed Software
• Increase in complexity of and demand for software has led to increase
in flaws and vulnerabilities
• SQL injection attacks
• Zero-day vulnerability
• Heartbleed bug
Copyright © 2018 Pearson Education Ltd.
Social Network Security Issues
• Social networks an environment for:
– Viruses, site takeovers, identity fraud, malware-loaded apps, click hijacking,
phishing, spam
• Manual sharing scams
• Fake offerings, fake Like buttons, and fake apps
Copyright © 2018 Pearson Education Ltd.
Mobile Platform Security Issues
• Vishing
• Smishing
• SMS spoofing
• Madware
Copyright © 2018 Pearson Education Ltd.
Cloud Security Issues
• DDoS (distributed denial of service) attacks
• Cloud offers a popular cloud file-sharing service where the data could
be accessed without authorization on Dropbox.
• Lack of encryption and strong security procedures
Copyright © 2018 Pearson Education Ltd.
Internet of Things Security Issues
What is internet of things (IoT)
The use of internet to connect wide variety of devices,
machines and sensors
• Challenging environment to protect
• Vast quantity of interconnected links
• Near identical devices with long service lives
• Many devices have no upgrade features
• Little visibility into workings, data, or security
Copyright © 2018 Pearson Education Ltd.
Technology Solutions (1 of 2)
• Protecting Internet communications
– Encryption – transform the message into code
– These 4 key dimensions of e-commerce security involve encryption:
 Message integrity
 Nonrepudiation
 Authentication
 Confidentiality
-
•
Availability and privacy do not related to encryption
Public key cryptography
-
public key cryptography uses two mathematically related digital keys.
-
public key cryptography does not ensure message integrity.
-
public key cryptography is based on the idea of irreversible mathematical
functions.
• Securing channels of communication
– SSL, TLS, VPNs, Wi-Fi
Copyright © 2018 Pearson Education Ltd.
Technology Solutions (2 of 2)
• Protecting networks
– Firewalls - hardware or software that act as a filter to prevent
unwanted packets from entering their network
– proxy servers - software servers that handle all communications
from or sent to the Internet (dual home systems)
• Protecting servers and clients
– OS security
– anti-virus software - easiest and least expensive way to prevent
threats to system integrity
Copyright © 2018 Pearson Education Ltd.
Securing Channels of Communication
• Secure Sockets Layer (SSL)/Transport Layer Security (TLS)
–
Establishes secure communication by verification of username and password (credit card
processing)
– Processes the certificates and private/public key information issued for
authentication of an online merchant
• Virtual Private Network (VPN)
–
Allows remote users to securely access internal network via the Internet
• Digital certificate includes:
–
Name of subject/company
–
subject's public key.
–
digital signature of the certification authority.
–
digital certificate serial number
–
Expiration date, issuance date
–
Digital signature of CA
• Wireless (Wi-Fi) networks
–
WPA2 is the current standard used to protect Wi-Fi networks
Copyright © 2018 Pearson Education Ltd.
Management Policies, Business Procedures, and
Public Laws
• Managing risk includes:
– Technology
– Effective management policies – e.g authorization management system restrict
access to private information within a company’s internet infrastructure. Specified
where and when a user is permitted to access certain parts of a website
– Public laws and active enforcement
Copyright © 2018 Pearson Education Ltd.
Developing an E-commerce Security Plan
• The security organization typically administers access control, authentication procedures and
authorization policies.. Biometric devices for example face ID can be used for verification of an
individual.
• Example of access control – firewalls, proxy servers, login procedures
Copyright © 2018 Pearson Education Ltd.
E-commerce Payment Systems
• In U.S., credit and debit cards are primary online payment
methods
– Other countries have different systems
• Limitations of online credit card payment
– Security, merchant risk
– Cost
– Social equity
Copyright © 2018 Pearson Education Ltd.
Electronic Billing Presentment and Payment (EBPP)
• Online payment systems for monthly bills
• Four EBPP business models:
– Online banking model (most widely used)
– Biller-direct
– Mobile
– Consolidator
• All models are supported by EBPP infrastructure providers
Copyright © 2018 Pearson Education Ltd.
Thank You
th
See you on 29 Jan 2022
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology. society.
16th edition
Chapter 5
E-commerce Business
Strategies
29th January 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
5.1 Identify the key components of e-commerce business models.
5.2 Describe the major B2C business models.
5.3 Describe the major B2B business models.
5.4 Understand key business concepts and strategies applicable to e-commerce.
Copyright © 2018 Pearson Education Ltd.
E-commerce Business Models
• Business model
– Set of planned activities designed to result in a profit in a
marketplace
• Business plan
– Describes a firm’s business model
• E-commerce business model
– Uses/leverages unique qualities of Internet and Web
Copyright © 2018 Pearson Education Ltd.
Eight Key Elements of a Business Model
1. Value proposition
2. Revenue model
most important and easily identifiable
aspects of a company's business model
3. Market opportunity
4. Competitive environment
5. Competitive advantage
6. Market strategy
7. Organizational development
8. Management team
Copyright © 2018 Pearson Education Ltd.
1. Value Proposition
• “Why should the customer buy from you?” - a firm
provides what the other firms do not and cannot
• Successful e-commerce value propositions:
– Personalization/customization - to leverage the ubiquitous nature of
the Web to differentiate your product
– Reduction of product search, price discovery costs
– Facilitation of transactions by managing product delivery
Copyright © 2018 Pearson Education Ltd.
2. Revenue Model
• “How will you earn money?”
- profit and return on invested capital. If not, go out of market.
- How a firm will produce a superior return on invested capital
• Major types of revenue models:
– Advertising revenue model - Stickiness is an important attribute
– Subscription revenue model
 Freemium strategy - a company giving away a certain level of
product or services without charge, but then charging a fee for
premium levels of the product or service.
– Transaction fee revenue model
– Sales revenue model
– Affiliate revenue model
Copyright © 2018 Pearson Education Ltd.
3. Market Opportunity
• “What marketspace do you intend to serve and
what is its size?”
– Marketspace: Area of actual or potential commercial value in
which company intends to operate
– Realistic market opportunity: Defined by revenue potential in each
market niche in which company hopes to compete
• Market opportunity typically divided into smaller
niches
Copyright © 2018 Pearson Education Ltd.
4. Competitive Environment
• “Who else occupies your intended marketspace?”
– Other companies selling similar products in the same marketspace
(substitute products)
– Includes both direct and indirect competitors
– The existence of many competitors in any one market segment
may indicate the market is saturated
• Influenced by:
–
–
–
–
Number and size of active competitors
Each competitor’s market share
Competitors’ profitability
Competitors’ pricing
Copyright © 2018 Pearson Education Ltd.
5. Competitive Advantage
• “What special advantages does your firm bring to the marketspace?”
• Is your product superior to or cheaper to produce than your
competitors’? - less expensive suppliers, better employees, superior
products
• Important concepts:
- Asymmetries
– Unfair competitive advantage
– Leverage - the use of a company's competitive advantage to
penetrate surrounding markets
– Perfect markets - there are no competitive advantages or
asymmetries because all firms have equal access to all the factors
to production
Copyright © 2018 Pearson Education Ltd.
6. Market Strategy
• “How do you plan to promote your products or
services to attract your target audience?”
– Details how a company intends to enter market and attract/find
customers and sell the products
– Best business concepts will fail if not properly marketed to
potential customers
Copyright © 2018 Pearson Education Ltd.
7. Organizational Development
• “What types of organizational structures within the
firm are necessary to carry out the business
plan?”
• Describes how firm will organize work
– Typically, divided into functional departments
– As company grows, hiring moves from generalists to specialists
Copyright © 2018 Pearson Education Ltd.
8. Management Team
• “What kind of backgrounds should the company’s
leaders have?”
• A strong management team:
–
–
–
–
Can make the business model work
Can give credibility to outside investors
Has market-specific knowledge
Has experience in implementing business plans
Copyright © 2018 Pearson Education Ltd.
Raising Capital
• Seed capital
• Elevator pitch
• Traditional sources
– Incubators - Organizations that typically provide an array of services
to startup companies along with a small amount of funding
– angel investors - A wealthy individual who invests personal funds in
a startup in exchange for an equity share in the business
– Commercial banks, venture capital firms
– Strategic partners
• Crowdfunding
– Internet allows individual to contribute money to
support projects
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
B2C Business Models
• E-tailer
• Community provider (social network)
• Content provider
• Portal
• Transaction broker
• Market creator
• Service provider
Copyright © 2018 Pearson Education Ltd.
B2C Models: E-tailer
• Online version of traditional retailer
• Revenue model: Sales
• Variations (types of E-tailer)
– Virtual merchant
– Bricks-and-clicks
– Catalog merchant
– Manufacturer-direct
• Low barriers to entry
Copyright © 2018 Pearson Education Ltd.
B2C Models: Community Provider
• The basic value proposition of community providers is they
offer a fast, convenient one-stop site where users can
focus on their most important concerns and interests.
• Provide online environment (social network) where people
with similar interests can transact, share content, and
communicate
– Examples: Facebook, Twitter, Pinterest
• Revenue models:
– Typically hybrid, combining advertising, subscriptions, sales,
transaction fees, and so on
Copyright © 2018 Pearson Education Ltd.
B2C Models: Content Provider
• Digital content on the Web:
– News, music, video, text, artwork
• Revenue models:
– Use variety of models, including advertising, subscription; sales of
digital goods
– Key to success is typically owning the content
• Variations (types of content provider)
– Syndication
– Aggregators
Copyright © 2018 Pearson Education Ltd.
B2C Business Models: Portal
• Search plus an integrated package of content and
services
• Portals do not sell goods
• Revenue models:
– Advertising, referral fees, transaction fees, subscriptions for
premium services
• Variations:
– Horizontal/general
– Vertical/specialized (vortal)
– Search and advertising services
Copyright © 2018 Pearson Education Ltd.
B2C Models: Transaction Broker
• Process online transactions for consumers
– Primary value proposition—saving time and money
• Revenue model:
– Transaction fees
• Industries using this model:
– Financial services
– Travel services
– Job placement services
Copyright © 2018 Pearson Education Ltd.
B2C Models: Market Creator
• a web-based business builds a digital environment in
which buyers and sellers can meet, display products,
search for products, and establish prices.
• Create digital environment where buyers and sellers can
meet and transact
– Examples: Priceline, eBay
– Revenue model: Transaction fees, fees to merchants
for access
• On-demand service companies (sharing economy):
platforms that allow people to sell services
– Examples: Grab, Airbnb
Copyright © 2018 Pearson Education Ltd.
B2C Models: Service Provider
• Online services
– Example: Google—Google Maps, Gmail, and so on
• Value proposition
– Valuable, convenient, time-saving, low-cost alternatives to
traditional service providers
• Revenue models:
– Sales of services, subscription fees, advertising, sales of
marketing data
Copyright © 2018 Pearson Education Ltd.
B2B Business Models
• Net marketplaces
– E-distributor
Supplies products and services directly to individual businesses.
– E-procurement
Single firms create digital markets for thousands of sellers and
buyers.
– Exchange
Independently owned digital marketplace for direct inputs
– Industry consortium
Industry-owned vertical digital market
• Private industrial network
Industry-owned private industrial network that coordinates supply
chains with a limited set of partners.
Copyright © 2018 Pearson Education Ltd.
How E-commerce Changes Business
• E-commerce changes industry structure by
changing:
–
–
–
–
–
Rivalry among existing competitors
Barriers to entry
Threat of new substitute products
Strength of suppliers
Bargaining power of buyers
• Industry structural analysis
Copyright © 2018 Pearson Education Ltd.
Business Strategy
• Plan for achieving superior long-term returns on
capital invested: that is, profit
• Five generic strategies
– Product/service differentiation
– Cost competition - competitive strategy in which firms attempt to
achieve lower business process costs
– Scope
– Focus/market niche
– Customer intimacy
Copyright © 2018 Pearson Education Ltd.
E-commerce Technology and
Business Model Disruption
• Disruptive technologies
• Digital disruption
• Sustaining technology - technologies that enable
the incremental improvement of products and
services
• Stages
–
–
–
–
Disruptors introduce new products of lower quality
Disruptors improve products
New products become superior to existing products
Incumbent companies lose market share
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology. society.
16th edition
Chapter 6
E-commerce Marketing and
Advertising
29th January 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
6.1 Understand the key features of the Internet audience, the basic concepts of consumer
behavior and purchasing, and how consumers behave online.
6.2 Identify and describe the basic digital commerce marketing and advertising strategies
and tools.
6.3 Identify and describe the main technologies that support online marketing.
6.4 Understand the costs and benefits of online marketing communications.
Copyright © 2018 Pearson Education Ltd.
Consumers Online: The Internet
Audience and Consumer Behavior (1 of 2)
• Broadband and mobile
– Significant inequalities in broadband access
– Older adults, lower income, lower educational levels
– Non-broadband household still accesses Internet via mobile or
other locations
• Community effects
– Role of social emulation in consumption decisions
– “Connectedness”
 Top 10–15% are more independent
 Middle 50% share more purchase patterns of friends
Copyright © 2018 Pearson Education Ltd.
Consumers Online: The Internet
Audience and Consumer Behavior (2 of 2)
• Consumer behavior models
– Study of consumer behavior; social science discipline
– Attempt to predict or explain wide range of consumer decisions
– Based on background demographic factors and other intervening,
more immediate variables
• Profiles of online consumers
– Consumers shop online primarily for convenience
Copyright © 2018 Pearson Education Ltd.
The Online Purchasing Decision (1 of 2)
• Five stages in Consumer Decision Process
–
–
–
–
–
Awareness of need
Search for more information
Evaluation of alternatives
Actual purchase decision
Post-purchase contact with firm
Copyright © 2018 Pearson Education Ltd.
Figure 6.2: The Consumer Decision Process
and Supporting Communications
Copyright © 2018 Pearson Education Ltd.
The Online Purchasing Decision (2 of 2)
• Decision process similar for online and offline
behavior
• General online behavior model
– User characteristics. E.g consumer skills refers knowledge
consumers have about how to conduct online transactions
– Product characteristics
– Website features: latency, usability, security
– Attitudes toward online purchasing
– Perceptions about control over online environment
Copyright © 2018 Pearson Education Ltd.
What Consumers Shop for and Buy Online
• Big ticket items ($1000 or more)
– Travel, computer hardware, electronics
– Consumers now more confident in purchasing costlier items
• Small ticket items ($100 or less)
– Apparel, books, office supplies, software, etc.
• Sales of bulky goods, furniture, and large
appliances rapidly expanding
• Online traffic also influenced by offline brands and
shopping
Copyright © 2018 Pearson Education Ltd.
How Consumers Shop
• How shoppers find online vendors
–
–
–
–
Highly intentional, goal-oriented
Search engines
Marketplaces (Amazon, eBay)
Specific retail site
• About 9% of Internet users don’t shop online
– Trust factor
– Hassle factors (shipping costs, returns, etc.)
Copyright © 2018 Pearson Education Ltd.
Trust, Utility, and Opportunism in Online
Markets
• Two most important factors shaping decision to
purchase online:
– Utility:
 Better prices, convenience, speed
– Trust:
 Perception of credibility, ease of use, perceived risk
 Sellers develop trust by building strong reputations for honesty,
fairness, delivery
Copyright © 2018 Pearson Education Ltd.
Digital Commerce Marketing and
Advertising: Strategies and Tools
• Features of Internet marketing (vs. traditional)
–
–
–
–
More personalized
More participatory
More peer-to-peer
More communal
• The most effective Internet marketing has all four
features
Copyright © 2018 Pearson Education Ltd.
Multi-Channel Marketing Plan – 5 types of
marketing
• Website
– to establishing a relationship with the customer
– Establish brand identity and customer expectations
• Traditional online marketing
– Search engine, display, e-mail, affiliate
• Social marketing
– Social networks, blogs, video, games
• Mobile marketing
– Mobile/tablet sites, apps
• Offline marketing
– Television, radio, newspapers
Copyright © 2018 Pearson Education Ltd.
Online Marketing and Advertising
• Online advertising
– Display, search, mobile messaging, sponsorships, classifieds, lead
generation, e-mail
– Currently, online advertising expenditures exceed TV advertising
(offline marketing)
– Advantages:
 18–34 age audience is online
 Ad targeting to individuals
 Price discrimination – target specific price to specific customer
 Personalization – specific message to specific customer to fit their needs
Copyright © 2018 Pearson Education Ltd.
Traditional Online Marketing and Advertising Tools
(1 of 2)
• Search engine marketing and advertising e.g
google, Bing, Yahoo
– Google search engine algorithms - Google introduced Panda to its
search algorithm to weed out low quality sites from search results
• Display ad marketing e.g. banner ads
• E-mail marketing
– Messages sent directly to interested users - inexpensive
• Affiliate marketing – the advertisers pay
commission to affiliate websites for referring
potential customers to their website
Copyright © 2018 Pearson Education Ltd.
Traditional Online Marketing and
Advertising Tools (2 of 2)
• Viral marketing – a form of social marketing that getting
customers to pass along a company's marketing message
to friends, family, and colleagues
• Lead generation marketing
• Permission marketing
• Sponsorship marketing
Copyright © 2018 Pearson Education Ltd.
Pricing Strategies (1 of 2)
• Pricing: integral part of marketing strategy
- Free pricing strategy
 Free products and services can knock out potential and
actual competitors.
 Free products and services can help build market
awareness.
 It is difficult to convert free customers into paying
customers.
• Traditional pricing based on fixed costs, variable costs, demand
curve
– Marginal costs - The incremental cost of building the next
unit of a good
• Law of One Price - complete price transparency in a perfect
information marketplace. One world price for every product.
Copyright © 2018 Pearson Education Ltd.
Pricing Strategies (2 of 2)
• Free and freemium
• Versioning - Creating multiple variations of information goods (same
product) and selling these to different market segments at different prices.
• Bundling
• Dynamic pricing
The mechanism include:
– Auctions
– Yield management
– Surge pricing
– Flash marketing - involves merchants offering products or services
for a very low price for a short period of time
Copyright © 2018 Pearson Education Ltd.
Long Tail Marketing
• Internet allows for sales of obscure products with
little demand - merchants offering many products
for which there is little demand
• Substantial revenue because
– Near zero inventory costs
– Little marketing costs
Copyright © 2018 Pearson Education Ltd.
Internet Marketing Technologies
• Internet’s main impacts on marketing:
– Scope of marketing communications broadened
– Richness of marketing communications increased - It allows video,
audio, and text to be integrated into a single marketing message and
consuming experience
– Information intensity of marketplace expanded
– Always-on mobile environment expands marketing opportunities
• Universal standards - features of e-commerce technology
has reduced the cost of delivering marketing messages
and receiving feedback from users
Copyright © 2018 Pearson Education Ltd.
Web Transaction Logs
• Built into web server software
• Record user activity at website
• Provides much marketing data, especially
combined with:
– Registration forms
– Shopping cart database
• Answers questions such as:
– What are major patterns of interest and purchase?
– After home page, where do users go first? Second?
Copyright © 2018 Pearson Education Ltd.
Hadoop and the Challenge of Big Data
• Big data
– Petabyte, exabyte range
– Web traffic, e-mail, social media, content
– Traditional DBMS unable to process the Internet of Things
• Hadoop
– Open-source software framework
– Processes any type of data, even unstructured
– Distributed processing
Copyright © 2018 Pearson Education Ltd.
Online Marketing Metrics: Lexicon
• Audience size/market share metrics
– E.g., impressions, click-through rate (CTR), page views,
viewability rate, stickiness, loyalty, reach, recency
• Conversion to customer metrics
– E.g., acquisition rate - percentage of visitors who indicate an
interest in a site's products by registering or visiting a product's
pages.
– conversion rate, browse-to-buy ratio, cart conversion rate,
abandonment rate
• Video ad metrics
– E.g., view time, completion rate
• E-mail campaign metrics
– E.g., open rate, delivery rate, click-through rate, bounce-back rate
Copyright © 2018 Pearson Education Ltd.
The Costs of Online Advertising
• Pricing models
– Barter, cost per thousand (CPM), cost per click (CPC), cost per
action (CPA), hybrid, sponsorship
• Measuring issues
– Correlating online marketing to online or offline sales
• In general, online marketing is more expensive on
CPM basis, but more efficient in producing sales
• Effective cost-per-thousand (eCPM)
Copyright © 2018 Pearson Education Ltd.
Marketing Analytics
• Software that analyzes data at each stage of the
customer conversion process
–
–
–
–
–
Awareness
Engagement
Interaction
Purchase activity
Loyalty and post-purchase
• Helps managers
– Optimize ROI on website and marketing efforts
– Build detailed customer profiles
– Measure impact of marketing campaigns
Copyright © 2018 Pearson Education Ltd.
Thank You
See you during intensive (7/3/2022 –
27/3/2022)
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology.
society.
16th edition
Chapter 7
Social, Mobile, and Local
Marketing
24th March 2021
(Intensive Week)
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
7.1 Understand the difference between traditional online marketing and the new socialmobile-local marketing platforms and the relationships between social, mobile, and local
marketing.
7.2 Understand the social marketing process from fan acquisition to sales and the
marketing capabilities of social marketing platforms such as Facebook, Twitter, and
Pinterest.
7.3 Identify the key elements of a mobile marketing campaign.
7.4 Understand the capabilities of location-based local marketing.
Copyright © 2018 Pearson Education Ltd.
Introduction to Social, Mobile, and Local
Marketing
• New marketing concepts
– Conversations
– Engagement
• Impact of smartphones and tablets
• Social-mobile-local nexus
– Strong ties between consumer use of social networks, mobile
devices, and local shopping
Copyright © 2018 Pearson Education Ltd.
Figure 7.3: Online Marketing Platforms
Mobile marketing is the fastest growing form of online marketing
Copyright © 2018 Pearson Education Ltd.
1. Social Marketing
• Traditional online marketing goals
– Deliver business message to the most consumers
• Social marketing goals
– Encourage consumers to become fans and engage and enter
conversations
– Strengthen brand by increasing share of online conversation
• Social marketing differs markedly from traditional
online marketing.
Copyright © 2018 Pearson Education Ltd.
Social Marketing Players
• The most popular sites account for over 90% of all
social network visits – The top seven social networks
– Facebook, Instagram, Twitter, LinkedIn, Pinterest, Snapchat, and
Tumblr
– Unique visitors vs. engagement
 Engagement measures the amount and intensity of user involvement
 Facebook dominates in both measures
– Dark social – sharing outside of major social networks (e-mail, IM,
texts, etc.)
Copyright © 2018 Pearson Education Ltd.
Figure 7.5: The Social Marketing Process
Copyright © 2018 Pearson Education Ltd.
Facebook Marketing
• Basic Facebook features
– News Feed
– Timeline (Profile)
– Search
• Social density of audience is magnified
– Facebook is largest repository of deeply personal information
– Facebook geared to maximizing connections between users
Copyright © 2018 Pearson Education Ltd.
Facebook Marketing Tools
• Reactions Buttons
• Brand Pages
• News Feed Page Post Ads
• Right-Hand Column Sidebar Ads
• Facebook Life
• Video Ads/Mobile Ads
• Facebook Messenger
• Facebook Exchange (FBX)
Copyright © 2018 Pearson Education Ltd.
Typical Facebook Marketing Campaign
• Establish Facebook brand page
• Use comment and feedback tools to develop fan
comments
• Develop a community of users
• Encourage brand involvement through video, rich media,
contests
• Use display ads for other Facebook pages and social
search
• Display Like button liberally
Copyright © 2018 Pearson Education Ltd.
Measuring Facebook Marketing Results
• Basic metrics:
–
–
–
–
–
Fan acquisition (impressions)
Engagement (conversation rate)
Amplification (reach)
Community
Brand strength/sales
• Facebook analytics tools
– Facebook Page Insights
– Social media management systems (HootSuite)
– Analytics providers (Google Analytics, Webtrends)
Copyright © 2018 Pearson Education Ltd.
Twitter Marketing
• Real-time interaction with consumers
• 310 million active users worldwide
– Over 90% access Twitter from mobile device
• Basic features
– Tweets, retweets, followers, message (DM), hashtag, mention,
reply, links
– Moments tab, Timeline
Copyright © 2018 Pearson Education Ltd.
Twitter Marketing Tools
•
•
•
•
•
•
•
•
•
Promoted Tweets
Promoted Trends
Promoted Accounts
Enhanced Profile Page
Amplify
Promoted Video
Television Ad Retargeting
Lead Generation Cards
Mobile Ads
Copyright © 2018 Pearson Education Ltd.
Typical Twitter Marketing Campaign
• Follow others relevant to your content and
conversation
• Experiment with simple Promoted Tweets
• For larger budgets, use Promoted Trends and TV
ad retargeting
• For retail business local sales, build Lead
Generation Card
Copyright © 2018 Pearson Education Ltd.
Measuring Twitter Marketing Results
• Similar to Facebook results
– Fan acquisition, engagement, amplification, community, brand
strength/sales
• Analytics tools
– Twitter’s real-time dashboard
– Twitter’s Timeline activity and Followers dashboards
– Third-party tools
 TweetDeck, Twitalyzer, BackTweets
Copyright © 2018 Pearson Education Ltd.
Pinterest Marketing
• One of the fastest-growing and largest image-sharing sites
• Enables users to talk about brands using pictures rather
than words
• Features include:
– Pins and re-pins to boards
– Share
– Follow
– Contributors
– Links to URLS
– Price displays
Copyright © 2018 Pearson Education Ltd.
Pinterest Marketing Tools
•
•
•
•
•
•
•
•
•
•
Rich Pins, Promoted Pins, Cinematic Pins
Buyable Pins/Shop Our Picks
Promoted Video
Add Pin It and Follow buttons
Pin as display ad
Theme-based (lifestyle) boards
Brand pages
URL link to stores
Integration with other social sites
Network with users, followers, others
Copyright © 2018 Pearson Education Ltd.
Typical Pinterest Marketing Campaign
• Create Pinterest brand page and multiple lifestylethemed boards
– Improve quality of photos, use URL links and keywords
• Utilize Pinterest Rich Pins and/or Product pins,
Pin It buttons
• Integrate with Facebook and Twitter
• Follow and interact with other pinners and boards
• Measuring Pinterest Marketing Results
– Same dimensions as Facebook, Twitter
Copyright © 2018 Pearson Education Ltd.
Marketing on Other Social Networks
• Instagram
– Brand profiles, ad campaigns (display and video), Buy buttons,
Marquee ads
• LinkedIn
– Company profiles, showcase pages, Career Page, Display ads
(Feeds), self-service ads or Advertising Partner Solutions,
sponsored inMail, LinkedIn Pulse
• Snapchat
– Snapchat Stories, Live Stories, Discover, Snap Ads, Sponsored
Geofilters, Sponsored Lenses
Copyright © 2018 Pearson Education Ltd.
The Downside of Social Marketing
• Loss of control
– Where ads appear in terms of other content
– What people say
 Posts
 Comments
 Inaccurate or embarrassing material
- In social marketing, business cannot tightly control their brand
messaging.
• In contrast, TV ads maintain near complete control
Copyright © 2018 Pearson Education Ltd.
2. Mobile Marketing
• In 2019, 3.3 billion people worldwide use mobile
device
– Devices used multiple times per day
– A substantial part of mobile marketing should be counted as social
marketing
• Challenges: Mobile search
– Motivating consumers to click
– Raising fees for each click
Copyright © 2018 Pearson Education Ltd.
How People Actually Use Mobile Devices
• Majority of mobile minutes actually occur at home
• Activities are similar to desktop activities
• Rapidly growing smartphone m-commerce sales
• Mobile devices currently used more for
communicating and entertainment over shopping
and buying
Copyright © 2018 Pearson Education Ltd.
In-App Experiences and Ads
• Mobile use
– Apps—85% of smartphone time
– People use most of their mobile minutes while they are at home
and not on the go
• App marketing
– Most effective are in-app ads
– Placed in most popular apps
– Targeted to immediate activities and interests
Copyright © 2018 Pearson Education Ltd.
How the Multi-Screen Environment
Changes the Marketing Funnel
• Consumers becoming multi-platform
– Desktops, smartphones, tablets, TV
– 90% of multi-device users use multiple devices to complete action
 View ad on TV, search on smartphone, purchase on tablet
• Marketing implications
– Consistent branding
– Responsive design
– Increased complexity, costs
Copyright © 2018 Pearson Education Ltd.
Mobile Marketing Features
• Mobile marketing 70% of all online marketing
• Dominant players are Google, Facebook
• Mobile device features
– Personal communicator and organizer
– Screen size and resolution
– GPS location
– Web browser
– Apps
– Ultraportable and personal
– Multimedia capable
– Touch/haptic technology
Copyright © 2018 Pearson Education Ltd.
Mobile Marketing Tools: Ad Formats
• Mobile marketing formats
– Search ads
– Display ads
– Video
– Text/video messaging
– Other: e-mail, classifieds, lead generation
Copyright © 2018 Pearson Education Ltd.
Mobile Marketing Campaigns
• Mobile website
• Facebook and Twitter brand pages
• Mobile versions of display advertising campaigns
• Ad networks
• Interactive content aimed at mobile user
• Tools for measuring responses
– Key dimensions follow desktop and social marketing metrics
Copyright © 2018 Pearson Education Ltd.
3. Local and Location-Based Marketing
• Location-based marketing
– Targets messages to users based on location
– Marketing of location-based services
• Location-based services
– Provide services to users based on location
 Personal navigation
 Point-of-interest
 Reviews
 Friend-finders, family trackers
• Consumers have high likelihood of responding to
local ads
Copyright © 2018 Pearson Education Ltd.
Location-Based Marketing Platforms
• Google
– Android OS, Google Maps, Google Places, AdMob, AdWords
• Facebook
• Apple
– iOS, iAd
• Twitter
• Others: Pandora, Millenial
Copyright © 2018 Pearson Education Ltd.
Why Is Local Mobile Attractive to
Marketers?
• Mobile users more active, ready to purchase than
desktop users
• Over 80% of U.S. smartphone users use mobile
devices to search for local products, services
– 50% visit a store within 1 day of local search
– 18% make a purchase
Copyright © 2018 Pearson Education Ltd.
Location-Based Marketing Tools
• Geo-social-based services marketing
• Location-based services marketing
• Mobile-local social network marketing
• Proximity marketing
• In-store messaging
• Location-based app messaging
Copyright © 2018 Pearson Education Ltd.
Location-Based Marketing Campaigns
• Location-based considerations
– Action-based, time-restrained offers and opportunities
– Target demographic and location-aware mobile user demographics
– Strategic analysis of marketspaces
• Measuring marketing results
– Same measures as mobile and web marketing
– Metrics for unique characteristics
 Inquire
 Reserve
 Click-to-call
 Friend
 Purchase
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology.
society.
16th edition
Chapter 8
Ethics, Law, and E-commerce
24th March 2021
(Intensive Week)
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
•
8.1 Understand why e-commerce raises ethical, social, and political issues.
8.2 Understand basic concepts related to privacy and information rights, the practices of
e-commerce companies that threaten privacy, and the different methods that can be used
to protect online privacy.
8.3 Understand the various forms of intellectual property and the challenges involved in
protecting it.
8.4 Understand how the Internet is governed.
8.5 Identify major public safety and welfare issues raised by e-commerce.
Copyright © 2018 Pearson Education Ltd.
Understanding Ethical, Social, and Political
Issues in E-commerce
• Internet, like other technologies, can:
– Enable new crimes
– Affect environment
– Threaten social values
• Costs and benefits must be carefully considered,
especially when there are no clear-cut legal or
cultural guidelines
Copyright © 2018 Pearson Education Ltd.
A Model for Organizing the Issues
• Issues raised by Internet and e-commerce can be
viewed at individual, social, and political levels
• Four major categories of issues:
– Information rights
– Property rights
– Governance
– Public safety and welfare
Copyright © 2018 Pearson Education Ltd.
Figure 8.1: The Moral Dimensions of an
Internet Society
Copyright © 2018 Pearson Education Ltd.
Basic Ethical Concepts
• Ethics
– Study of principles used to determine right and wrong courses of
action
• Responsibility
• Accountability
• Liability
– Laws permitting individuals to recover damages
• Due process
– Laws are known, understood
– Ability to appeal to higher authorities to ensure laws applied
correctly
Copyright © 2018 Pearson Education Ltd.
Analyzing Ethical Dilemmas
• Process for analyzing ethical dilemmas:
1. Identify and clearly describe the facts
2. Define the conflict or dilemma and identify the higherorder values involved
3. Identify the stakeholders
4. Identify the options that you can reasonably take
5. Identify the potential consequences of your options
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Analyzing Ethical Dilemmas
• Process for analyzing ethical dilemmas:
Step 1 - Identify and clearly describe the facts
Find out who did what to whom, and where, when, and how. It helps
to get the opposing parties involved in an ethical dilemma to agree
on the facts.
Step 2 - Define the conflict or dilemma and identify the higher-order
values involved
Ethical, social, and political issues always reference higher values.
Otherwise, there would be no debate. The parties to a dispute all
claim to be pursuing higher values (e.g., freedom, privacy, protection
of property, and the free enterprise system).
Copyright © 2018 Pearson Education Ltd.
Analyzing Ethical Dilemmas – the Five-step process
• Process for analyzing ethical dilemmas :
Step 3 -Identify the stakeholders
Every ethical, social, and political issue has stakeholders:
players in the game who have an interest in the outcome, who
have invested in the situation, and usually who have vocal
opinions. Find out the identity of these groups and what they
want. This will be useful later when designing a solution
Step 4 - Identify the options that you can reasonably take
You may find that none of the options satisfies all the interests
involved, but that some options do a better job than others.
Sometimes, arriving at a "good" or ethical solution may not
always be a balancing of consequences to stakeholdersions
Copyright © 2018 Pearson Education Ltd.
Analyzing Ethical Dilemmas
• Process for analyzing ethical dilemmas:
• Step 5 - Identify the potential consequences of your options
Some options may be ethically correct, but disastrous from
other points of view. Other options may work in this one
instance, but not in other similar instances. Always ask
yourself, "What if I choose this option consistently over time?"
Copyright © 2018 Pearson Education Ltd.
Candidate Ethical Principles
• Golden Rule
• Universalism
• Slippery Slope
• Collective Utilitarian Principle
• Risk Aversion
• No Free Lunch
• The New York Times Test
• The Social Contract Rule
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Privacy and Information Rights
• Privacy
– Moral right of individuals to be left alone, free from surveillance or
interference from other individuals, organizations, or state.
– Most adult social network participants expect personal privacy
when using a social network
• Information privacy: Four premises
– Right to control information collected about them
 “Right to be forgotten”
– Right to know when information is collected and give consent
 “Informed consent”
– Right to personal information due process
– Right to have personal information stored in a secure manner
Copyright © 2018 Pearson Education Ltd.
Privacy in the Public Sector: Privacy Rights
of Citizens
• Public sector privacy rights have long history
– First Amendment
– Fourth Amendment
– Fourteenth Amendment
• Constitutional, implied privacy rights did not cover
collection and use of personal information
• 1974 Privacy Act
• Federal and state law to protect individuals
against unreasonable government intrusion
Copyright © 2018 Pearson Education Ltd.
Privacy in the Private Sector: Privacy
Rights of Consumers
• Privacy issues rose with first large-scale,
nationwide computerized systems
– Credit card systems, credit rating agencies
• Historically, few claims to privacy in public, open
markets
• Emergence of Internet has created enormous
collections of personal data
– Ideal environment for business and government to invade
personal privacy of consumers
– Google, Amazon, Netflix, etc.
Copyright © 2018 Pearson Education Ltd.
Information Collected by Websites
• Data collected includes
– Personally identifiable information (PII)
– Anonymous information
• Types of data collected
– Name, address, phone, e-mail, Social Security number
– Bank and credit accounts, gender, age, occupation, education
– Preference data, transaction data, clickstream data, browser type
Copyright © 2018 Pearson Education Ltd.
Key Issues in Online Privacy of Consumers
• Top concerns
– Profiling and ad targeting
– Social network privacy
– Sharing of information by marketers
– Mobile phone privacy
Copyright © 2018 Pearson Education Ltd.
Marketing: Profiling, Behavioral Targeting,
and Retargeting (1 of 2)
• Profiling
– Creation of data images that characterize online individual and
group behavior
– Anonymous profiles
– Personal profiles
• Advertising networks
– Track consumer and browsing behavior on Web
– Dynamically adjust what user sees on screen
– Build and refresh profiles of consumers
Copyright © 2018 Pearson Education Ltd.
Marketing: Profiling, Behavioral Targeting,
and Retargeting (2 of 2)
• Business perspective:
– Increases effectiveness of advertising, subsidizes content
– Enables sensing of demand for new products
• Critics' perspective:
– Undermines expectation of anonymity and privacy
– Enables price discrimination
Copyright © 2018 Pearson Education Ltd.
Social Networks Privacy and SelfRevelation
• Social networks
– Encourage sharing personal details
– Pose unique challenge to maintaining privacy
• Facebook
– Massive database
– Serving ads to users not on Facebook
– Sharing information with third parties
• A social consequence of the richness of Internet information is very
persuasive messages might reduce the need for multiple independent
sources of information
Copyright © 2018 Pearson Education Ltd.
Mobile Devices: Privacy Issues
• Mobile apps
– Funnel personal information to mobile advertisers for
targeting ads
– Track and store user locations
– Track users’ use of other apps
• Persistent location tracking – e.g Twitter’s “Find Friends”
feature
• U.S. Supreme Court rules that police need warrant prior to
searching a cell phone for information
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Privacy Policies
• Website Terms of Use Notices
• Recent study showed these polices would take average
reader 8 hours to read
• Have conflicting statements
• Little oversight and comparison between policies of
different companies
Copyright © 2018 Pearson Education Ltd.
Technology Solutions
• Solutions include
– Intelligent Tracking Protection (ITP)
– Differential privacy software
– Privacy default browsers
– Message encryption
– Spyware blockers
– Pop-up blockers and ad blockers
– Secure e-mail, anonymous remailers
– Cookie managers
– Public key encryption
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Privacy Protection
• Privacy protection as a business
– Personal Data Economy (PDE)
– Internet of Me
– Life Management tools
• Privacy advocacy groups
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Intellectual Property Rights
• Intellectual property:
– All tangible and intangible products of human mind
• Major ethical issue:
– How should we treat property that belongs to others?
• Major social issue:
– Is there continued value in protecting intellectual property in
the Internet age?
• Major political issue:
– How can Internet and e-commerce be regulated or
governed to protect intellectual property?
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Intellectual Property Protection
• Main types of protection:
– Copyright
– Patent
– Trademark law
– Trade secrets law
• Goal of intellectual property law:
– Balance two competing interests-public and private
• Maintaining this balance of interests is always challenged
by the invention of new technologies
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Copyright
• Protects original forms of expression (not ideas) from
being copied by others for a period of time
• Example of a violation copyright law - Downloading a
music track owned by a record company without
paying for it
Copyright © 2018 Pearson Education Ltd.
Patents
• Grant owner 20-year monopoly on ideas behind an
invention
• Invention must be new, non-obvious, novel
• Encourages inventors
• Promotes dissemination of new techniques through
licensing
• Stifles competition by raising barriers to entry
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Trademarks
• Identify, distinguish goods, and indicate their source
• Purpose
– Ensure consumer gets what is paid for/expected to receive
– Protect owner against piracy and misappropriation
• Infringement
• Dilution
– Federal Trademark Dilution Act and Trademark Dilution
Revision Act
• Uniform Rapid Suspension System (URS)
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Trade Secrets
• Business procedures, formulas, methods of
manufacture and service delivery
• May not be unique or novel
• Trade secrets are
– (a) secret
– (b) have commercial value to owner
– (c) owner has taken steps to protect
Copyright © 2018 Pearson Education Ltd.
Who Governs the Internet and Ecommerce?
• Mixed mode environment
– Self-regulation, through variety of Internet policy and
technical bodies, co-exists with limited government
regulation
• ICANN : Domain Name System
• Internet can be easily controlled, monitored, and regulated
from a central location
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Public Safety and Welfare
• Protection of children against pornography and
privacy infringement
• Efforts to control gambling and restrict sales of
drugs and cigarettes
– Prevent All Cigarette Trafficking Act
– Unlawful Internet Gambling Enforcement Act
– Increase in number of states allowing online gambling
Copyright © 2018 Pearson Education Ltd.
Thank You
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology. society.
16th edition
Chapter 9
Online Media
9th April 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
9.1 Understand the major trends in the consumption of media and online content, the
major revenue models for digital content delivery, digital rights management, and the
concept of media convergence.
9.2 Understand the key factors affecting the online publishing industry.
9.3 Understand the key factors affecting the online entertainment industry.
Copyright © 2018 Pearson Education Ltd.
What’s New in Online Content and Media (1 of 2)
Business
1. Mobile platform accelerates the transition to digital
content
2. Distributors become significant players in content
production business
3. Continued growth of online video and music
4. Digital music sales top physical sales, and more on
streaming music than downloaded music.
5. Online readership of newspapers exceeds in print form
Copyright © 2018 Pearson Education Ltd.
What’s New in Online Content and Media (2 of 2)
Technology
1. Smartphones, tablet computers and e-readers create a
rich mobile entertainment environment
2. Cloud storage serves huge market for mobile device
content
3. Netflix remains the largest consumer of Internet
Society
1. Time spends using digital media exceeds with television,
so as mobile devices and desktop
2. Media consumption: people spend more hours for
various types of media compared hours for work.
Copyright © 2018 Pearson Education Ltd.
Content Audience and Market
• Average American adult spends 4,500 hrs/yr consuming
various media
• 50% U.S. population watches TV online
• Desktop and mobile use: 6.5 hrs/day – TV only 3.5 hrs/day
• Usage of Internet for watching digital video (including TV
shows and movies) is higher than cable/satellite TV
subscription.
Copyright © 2018 Pearson Education Ltd.
Internet and Traditional Media
• Cannibalization vs. complementary
– Does time on Internet reduce time spent with other media?
– Massive shift of audience to Web, tablets, smartphones
• Television viewing, music consumption remains
strong, book reading also has increased
• Impact of Internet:
– Increase in total demand for media, including traditional products
like books
– Physical media has decreased and replaced by digital media
contents
Copyright © 2018 Pearson Education Ltd.
Digital Content Revenue Models
• Online content delivery revenue models
– Subscription
– A la carte (pay for what you use)
– Advertising supported (free/freemium)
• Free content can drive users to paid content.
Why? Users increasingly paying for high-quality,
unique content
• A metered subscription model is most similar to
freemium revenue models.
Copyright © 2018 Pearson Education Ltd.
Free or Fee
• Early years: Internet audience expected free
content but willing to accept advertising
– Early content was low quality
• With advent of high-quality content, fee models
successful
– iTunes
– Millions of users buy from legal music sites
– YouTube cooperating with Hollywood and New York film
production studios
Copyright © 2018 Pearson Education Ltd.
Digital Rights Management (DRM)
• What is DRM? - Technical and legal means to
protect digital content from unlimited reproduction
and distribution
• How? - DRM hardware and software encrypts
content
• Streaming content
– Difficult to copy
– Walled garden
Copyright © 2018 Pearson Education Ltd.
Media Convergence
• Technological convergence
– Hybrid devices
– Smartphones are an example of technological convergence
• Content convergence
– Three aspects: Design, production, distribution
– New tools for digital editing and processing
• Industry convergence
– Merger of media enterprises into firms that create and crossmarket content on different platforms
Copyright © 2018 Pearson Education Ltd.
Figure 10.5: Convergence and the
Transformation of Content: Books
2019
Copyright © 2018 Pearson Education Ltd.
Online Publishing Industry
• $80 billion media sector based originally in print,
moving rapidly to Internet and mobile delivery.
• Three segments
– Online newspapers
– E-books
– Online magazines
Copyright © 2018 Pearson Education Ltd.
Online Newspapers
• Most troubled segment of publishing industry
– Revenues shrunk from $60 billion in 2000 to about $25.3 billion in
2018.
• Four factors towards to decline newspaper revenue
– Growth of Web, mobile devices as alternative medium - The
growth of the Web and mobile devices as an alternative medium
for news and advertising. The movement of consumers to an
online life style has drained billions of ad dollars (including
classified ads) from the printed newspaper
– Alternative digital sources for news - The rise of alternative digital
sources for news, commentary, feature stories, and articles.
Online news sources are attracting millions of consumers
everyday and steer potential newspaper readers both online and
offline away from the most valuable front page of print and digital
edition newspapers
Copyright © 2018 Pearson Education Ltd.
Online Newspapers
• Four factors towards to decline newspaper
revenue
– Failure to develop suitable new business models - The difficulty of
traditional newspaper firms and their managers to develop suitable
business and revenue models that could survive and even prosper
on the Internet, and the mobile/social platform.
– Rise of social media and search engine, especially google that
directed users to news sites for single articles rather than to the
newspaper’s websites.
Copyright © 2018 Pearson Education Ltd.
Online Newspaper Industry: Strengths and
Challenges
• Strength: Newspaper audience size and growth
• Challenge: Digital ad revenue
• Strength: Content is king
• Challenge: Finding a revenue model
• Challenge: Growth of pure digital competitors
• Challenge: Can newspapers survive digital
disruption
Copyright © 2018 Pearson Education Ltd.
Magazines Rebound
• Physical magazine circulation falls after 2001
– Exception is special interest magazines
Copyright © 2018 Pearson Education Ltd.
E-book Business Models
• E-book industry composition
– Intermediary retailers (booksellers), traditional publishers,
technology developers, device makers (e-readers), vanity presses
• Wholesale model
– Retailers pay wholesale price and establish retail price
• Agency model
– Distributor as agent must charge publisher’s retail price
Copyright © 2018 Pearson Education Ltd.
Online Entertainment Industry (1 of 2)
• Major players in entertainment industry (measures
based on revenue)
– Television
– Home entertainment (TV and movies)
– Hollywood films (box-office movies)
– Recorded music
– Radio
– Games (new arrival)
Copyright © 2018 Pearson Education Ltd.
Online Entertainment Industry (2 of 2)
• Internet is transforming industry:
– Mobile devices
– Social networks featuring video streaming
– Download and streaming services
– Growth in broadband access
• Emergence of very large-scale, integrated
technology media companies
– Amazon, Google, Apple, and Netflix
Copyright © 2018 Pearson Education Ltd.
Television
Leading factors in changing the television industry
i) increasing broadband penetration – download
program/movies conveniently.
ii) development of the mobile platform has changed viewing
experience – now can include friends from different location
iii) increased popularity of binge watching compared to
watching linear TV
Copyright © 2018 Pearson Education Ltd.
Music
• Most disrupted of content industries
– Move from physical (CD) to digital product (download)
• Two types of digital music services
– Streaming subscription services (Internet radio) – Eg Spotify,
Apple Music
– Digital download (download to own) – provided by Apple iTunes,
Amazon, and Google Play.
– Increasingly uses cloud storage
Copyright © 2018 Pearson Education Ltd.
Games
• Online gaming has had explosive growth (revenue
increased from 6b to 43b in 2018)
• Why increased?
– Pokemon GO for free
– Mobile platform
• Types of digital gamers
– Casual
– Social
– Console
• E-sports
Copyright © 2018 Pearson Education Ltd.
Thank you
see you again on 21 May 2022
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology. society.
16th edition
Chapter 10
Online
Communities
21 May 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
10.1 Describe the different types of social networks and online communities and their
business models.
10.2 Describe the major types of auctions, their benefits and costs, how they operate,
when to use them, and the potential for auction abuse and fraud.
10.3 Describe the major types of Internet portals and their business models.
Copyright © 2018 Pearson Education Ltd.
Social Networks and Online Communities
• Internet began as communications medium for
scientists
• Early communities were bulletin boards,
newsgroups (e.g., the Well)
• Today social networks, photo/video sharing, blogs
have created new era of online socializing
• Social networks now one of most common
Internet activities
• The amount of time visitors spend on a site called
engagement
Copyright © 2018 Pearson Education Ltd.
What Is an Online Social Network?
• Working definition of social network
– Group of people
– Shared social interaction
– Common ties
– Sharing an area for period of time
• Online social network
– Internet removes geographic and time limitations of offline social
networks
Copyright © 2018 Pearson Education Ltd.
Figure 10.1 Top U.S. Social Networks
2019
Based on data from eMarketer, 2020, 2019e, 2019f.
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Turning Social Networks into Businesses
• Most social networks monetize audiences through
advertising
– LinkedIn – fees for premium services
– Twitter – struggling to make profits
• Business use of social networks
– Marketing and branding
– Reaching younger audience
– Listening tool, monitoring online reputation
– Collaboration tool
Copyright © 2018 Pearson Education Ltd.
Figure 10.2 U.S. Ad Spending on Top
Social Networks, 2019
Based on data from eMarketer, Inc. 2019i; McKenna, 2020.
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Types of Social Networks and Their
Business Models (1 of 2)
• General communities:
– Offer opportunities to interact with general audience
organized into general topics
– Advertising supported by selling ad space on pages
and videos
• Practice networks:
– Offer focused discussion groups, help, and knowledge
related to area of shared practice
– May be profit or nonprofit; rely on advertising or user
donations
Copyright © 2018 Pearson Education Ltd.
Copyright © 2021 Pearson Education Ltd. All Rights Reserved
Types of Social Networks and Their
Business Models (2 of 2)
• Interest-based social networks:
– Offer focused discussion groups based on shared interest
in some specific subject
– Usually advertising supported
• Affinity communities:
– a community of members who self-identify with a demographic or
geographic category.
– Offer focused discussion and interaction with other people
who share same affinity (self or group identification)
– Advertising and revenues from sales of products
• Sponsored communities:
– Created by government, nonprofit, or for-profit
organizations for purpose of pursuing organizational goals
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Social Network Features and Technologies
• Algorithms, computer algorithms
– Produce relationship-based content
– Affinity groups
• Profiles, Newsfeed - allows users to view a list of updates from friends
as well as advertisements and notifications in chronological order, Timeline,
Favorites (Like)
• Games and apps
• Storage
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Online Auctions
• C2C auctions, e.g. eBay
• B2C auctions
• Several hundred different auction sites in United
States alone
• Can be used to
 Sell goods and services
 Allocate resources
 Allocate and bundle resources
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Benefits of Auctions
• Liquidity
• Price discovery – more efficient
• Price transparency increased (benefit as no cost
involved)
• Market efficiency increased
• Lower transaction costs
• Consumer aggregation
• Network effects
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Risks and Costs of Auctions
• Delayed consumption costs
• Monitoring costs
– Possible solutions include fixed pricing, proxy bidding, watch lists
• Equipment costs - computer/device
• Trust risks
• Fulfillment costs
• Merchants also face risks; e.g. nonpayment, false
bidding, bid rigging, and so on
Copyright © 2018 Pearson Education Ltd.
Auctions as an E-commerce Business
Model
• No inventory
• No fulfillment activities
– No warehouses, shipping, or logistical facilities
• eBay makes money from every stage in auction cycle
– Transaction fees, listing fees, financial services fees,
advertising or placement fees
• Difficulty in establishing audience
– eBay dominates online auction market
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Types of Auctions
(1 of 2)
• English auction:
– Single item up for sale to single seller
– Highest bidder wins
• Dutch Internet auction:
– Public ascending price, multiple units
– Final price is lowest successful bid, which sets price for all
higher bidders
• Penny (bidding fee) auction
– Must purchase bids ahead of time
– Items owned by the site
– Timed auction; last and highest bidder wins
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Types of Auctions
(2 of 2)
• Name Your Own Price Auction
– Users specify what they are willing to pay for goods or
services and multiple providers bid for their business
– Prices do not descend and are fixed
 Consumer offer is commitment to buy at that price
– Enables sellers to unload unsold excess capacity
– Example: Priceline
Watch this YouTube video on main auction types and its
history at this link https://youtu.be/0oBkrqEerp8 (duration:
2.27m from KnowNow)
Copyright © 2018 Pearson Education Ltd.
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Table 10.6 Factors to Consider When
Choosing Auctions
Considerations
Description
Type of product
Rare, unique, commodity, perishable
Stage of product life cycle
Early, mature, late
Channel-management issues
Conflict with retail distributors; differentiation
Type of auction
Seller v s buyer bias
Initial pricing
Low v s high
Bid increment amounts
Low v s high
Auction length
Short v s long
Number of items
Single v s multiple
Price-allocation rule
Uniform v s discriminatory
Information sharing
Closed v s open bidding
ersu
ersu
ersu
ersu
ersu
ersu
ersu
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Auction Prices: Are They the Lowest?
• Auction prices not necessarily the lowest
• Auctions are social events
• Herd behavior
• Unintended results:
– Winner’s regret
– Seller’s lament
– Loser’s lament
• Consumer trust an important motivating factor in auctions
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Fraud and Abuse in Auctions
• Fraud produces information asymmetries between buyers
and sellers, causing auctions to fail
• Types include:
– Bid rigging, price matching, shill feedback, feedback
extortion, shill bidding, bid siphoning - e-mailing
another seller's bidders and offering the same product
for less.
• Fraud prevention solutions include:
– Rating systems, watch lists, proxy bidding
– Investigation units
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E-commerce Portals
• Among the most frequently visited sites on Web
• Original portals were search engines
– As search sites, attracted huge audiences
• Today provide:
– Navigation of the Web
– Commerce
– Content (owned and others’)
• Goal is to keep visitors present and viewing ads
• Enterprise portals
– Help employees find important organizational content
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Types of Portals
• General purpose portals:
– Attempt to attract very large general audience
– Portals are subject to network effects - depends on the number of
audience reached.
– Retain audience by providing in-depth vertical content channels.
The content and value provided by portals is positively related
– Example: Yahoo, MSN
• Vertical market portals:
- Sometimes also referred to as destination sites or vortals.
– Attempt to attract highly-focused, loyal audiences with specific
interest in:
 Community
 Specialized content
 from sports to the weather
– In addition to their focused content, vertical market portals have
recently begun adding many of the features found in general
purpose portals.
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Figure 10.5 Two General Types of Portals:
General Purpose and Vertical Market Portals
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Portal Business Models
• General advertising revenue
• Tenancy deals
– Fixed charge for number of impressions, exclusive
partnerships, “sole providers”
• Commissions on sales
• Subscription fees
– Charging for premium content
• Applications and games
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Thank you for your attention.
See you again in the next class on
11 June 2022
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology. society.
16th edition
Chapter 11
E-commerce Retailing
and Services
11 June 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
•
•
•
•
11.1 Understand the environment in which the online retail sector operates
today.
11.2 Explain how to analyze the economic viability of an online firm.
11.3 Identify the challenges faced by the different types of online retailers.
11.4 Describe the major features of the online service sector.
11.5 Discuss the trends taking place in the online financial services industry.
11.6 Describe the major trends in the online travel services industry today.
11.7 Identify current trends in the online career services industry.
11.8 Understand the business models of on-demand service companies.
Copyright © 2018 Pearson Education Ltd.
What’s New in Online Retail
• Retail mobile e-commerce exploding
• Social networks experiment with social e-commerce
• Local e-commerce skyrockets
• Online retail still the fastest growing retail channel
• Selection of goods increases, includes luxury goods
• Specialty retail sites show rapid growth
• Big data plays an important role in predictive marketing.
Copyright © 2018 Pearson Education Ltd.
Figure 11.1: Composition of the U.S. Retail
Industry
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E-commerce Retail: The Vision
• The Vision
– Reduced search and transaction costs; customers able to find
lowest prices. Online consumers were rational and cost-driven.
– Lowered market entry costs, lower operating costs, higher
efficiency. Entry costs to the online retail market would be much
less than those needed to establish a physical storefront.
– The cost of acquiring customers would be much lower.
– Traditional physical store merchants forced out of business
– Some industries would be disintermediated as the
manufacturer maintain direct relationship with customers.
Disintermediation happen not because of first mover
middlemen.
• Few of these assumptions were correct—structure of retail
marketplace has not been revolutionized
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The Online Retail Sector Today (1 of 2)
• Smallest segment of retail industry (14%)
• Growing at faster rate than offline segments
• Revenues have resumed growth
• 55% of Internet users bought online in 2019
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The Online Retail Sector Today (2 of 2)
• Omni-channel integration
– Integrating web operations with physical store operations
 Leverage value of physical store
 Types of integration, e.g. online order, in-store pickup
• Social e-commerce growth
• Location-based marketing of local goods and
services
• Rapidly growing mobile platform
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The Advantages of the online retail industry
• Lower supply chain costs.
• Ability to change prices nearly instantly
• Increased opportunities
customization
for
personalization
and
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The central challenges facing the online
retail industry
• Consumer concerns about the privacy of personal
information
• Inconvenience in returning goods
• Delivery delays
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Analyzing the Viability of Online Firms
• Economic viability:
– Ability of firms to survive as profitable business firms during
specified period (i.e., 1–3 years)
• Two business analysis approaches:
– Strategic analysis
 Focuses on both industry as a whole and firm itself
– Financial analysis
 How firm is performing
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Strategic Analysis Factors (1 of 2)
• Key industry strategic factors
– Barriers to entry
– Power of suppliers
–
–
–
–
Power of customers
Existence of substitute products
Industry value chain
Nature of intra-industry competition
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Strategic Analysis Factors (2 of 2)
• Firm-specific factors
– Firm value chain
– Core competencies
– Synergies
– Technology
– Social and legal challenges
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Financial Analysis Factors (1 of 2)
• Statements of Operations
– Revenues
– Cost of sales
– Gross margin
– Operating expenses (marketing costs, administrative overhead,
amortization of goodwill
– Operating margin
– Net margin
 Pro forma earnings—EBITDA
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Financial Analysis Factors (2 of 2)
• Balance sheet
– Assets
– Current assets
–
–
–
–
Liabilities
Current liabilities
Long-term debt
Working capital
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E-tailing Business Models
• Virtual merchant
– Amazon, Newegg, Overstock, Wayfair, Blue Nile
• Omni-channel merchants (bricks-and-clicks)
– Walmart, Macy’s, JCPenney, Staples, Target
• Catalog merchant
– Lands’ End, L.L.Bean, CDW Corp, Cabela’s
• Manufacturer-direct
– Apple, Dell, Sony
– Channel conflict
– Move from supply-push model to demand-pull
• Nature of virtual merchant business model - Virtual merchants are singlechannel e-commerce firms that generate almost all their revenue from online
sales
• In becoming financially viable, virtual merchants face extraordinary strategic
challenges.
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Virtual merchant – Challenges (1/2)
• They must build a business and brand name from scratch
quickly, and face many virtual merchant competitors.
• They also face large costs in building and maintaining an
e-commerce presence, building an order fulfillment
infrastructure, and developing a brand name.
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Virtual merchant – Challenges (2/2)
• Their gross margins are low. Therefore, virtual merchants
must achieve highly efficient operations to preserve a
profit, while building a brand name quickly to attract
sufficient customers to cover their costs of operations.
• Most merchants in this category adopt low-cost and
convenience strategies, coupled with extremely effective
and efficient fulfillment processes to ensure customers
receive what they ordered as quickly as possible.
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The Service Sector: Offline and Online
• Service sector:
– Largest and most rapidly expanding part of economies of
advanced industrial nations
– Concerned with performing tasks in and around households,
business firms, and institutions
 Includes doctors, lawyers, accountants, business consultants, and so on
– Employs 4 out of 5 U.S. workers
– 80% of U.S. GDP
– Service sector is a natural avenue for e-commerce. Why? Much of
the value in services is based on the collection, storage, and
exchange of information.
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Service Industries
• Major service industry groups:
– Finance
–
–
–
–
–
Insurance
Real estate
Travel
Professional services—legal, accounting
Business services—consulting, advertising,
information processing
– Health services
– Educational services
marketing,
and
• Within these groups, companies providing service can be categorized
into those involve transaction brokering (intermediaries) and providing
hands-on service.
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Online Financial Services
• E-commerce has transformed banking and financial
services
– Major institutions deploy online services
• Online financial consumer behavior
– Most online consumers use financial services sites
 Check balances
 Pay bills
– Experienced users move on to more complex financial
services
* Financial services require less personalization
compared to legal services, medical services and
accounting services
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Multi-channel vs. Pure Online Financial
Service Firms
• Online consumers prefer multi-channel firms with
physical presence
• Multi-channel firms
– Growing faster than pure online firms
– Lower online customer acquisition costs
• Pure online firms
– Cannot provide all services that require face-to-face interaction
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Financial Portals and Account Aggregators
• Financial portals
– independent financial advice, financial planning
– Revenues from advertising, referrals, subscriptions
– Example: Yahoo! Finance, Quicken, MSN Money
• Account aggregation
– Pulls together all of a customer’s financial data at a personalized
website
– Privacy concerns: control of personal data, security, and so on
– Example: Yodlee
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Online Mortgage and Lending Services
• Three kinds of online mortgage vendor today
– Established online banks, brokerages, and lending organizations
– Traditional mortgage vendors
– Pure online mortgage firms
• Online mortgage industry has not transformed
process of obtaining mortgage
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Online Insurance Services
• Online term life insurance
– The Internet has resulted in lower search costs, increases price
comparison, lower prices
• Most insurance not purchased online
• Online industry geared more toward
–
–
–
–
Product information, search
Price discovery
Online quotes
Influencing the offline purchasing decision
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Online Real Estate Services
• Early vision: Disintermediation of a complex
industry
• However, major impact is influence of purchases
offline
– Impossible to complete property transaction online
– Main services are online property listings, loan calculators,
research and reference material, with mobile apps increasing
• Despite revolution in available information, there
has not been a revolution in the industry value
chain
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Online Travel Services (1 of 2)
• One of the most successful B2C e-commerce
segments
– More travel is booked online than offline
– Online travel services revenues in 2015: Almost $170 billion
• For consumers: More convenient than traditional
travel agents
• For suppliers: A singular, focused customer pool
that can be efficiently reached through onsite
advertising
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Online Travel Services (2 of 2)
• Travel an ideal service/product for Internet
– Information-intensive product
– Electronic product—travel arrangements can be accomplished for
the most part online
– Does not require inventory
– Does not require physical offices with multiple employees
– Suppliers are always looking for customers to fill excess capacity
– Does not require an expensive multi-channel presence
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The Online Travel Market
• Four major sectors:
– Airline tickets
 Greatest source of revenue
– Hotel reservations
– Car rentals
– Travel packages
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Online Travel Industry Dynamics
• Intense competition among online providers
• Price competition difficult
• Industry consolidation
• Industry impacted by meta-search engines
– Commoditize online travel
• Mobile applications are also transforming industry
• Social media content, reviews have an increasing
influence on travel purchases
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Online Career Services
• Two main players: CareerBuilder, Monster
– Indeed, Glassdoor, SimplyHired, LinkedIn
• Five traditional recruitment tools:
– Classified and print ads, career expos, on-campus recruitment,
staffing firms, internal referral programs
• Online recruiting
– More efficient, cost-effective, reduces total time-to-hire
– Enables job hunters to more easily distribute resumes while
conducting job searches
– Ideally suited for Web due to information-intense nature of process
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On-Demand Service Companies
• Platforms for users to share/lease assets and
resources
– Bikes, cars, homes, rooms with beds, etc.
– Fees collected from sellers and buyers
• Use of online reputation systems, peer review
• Successful firms are disrupters, lowering cost of
services
– Uber
– Airbnb
Copyright © 2018 Pearson Education Ltd.
Thank you for your attention
See you in the last class on 25 June 2022
The future of shopping: what's in store?
https://www.youtube.com/watch?v=adGuV6YIMI (The Economist,
duration:13.56 min)
Copyright © 2018 Pearson Education Ltd.
E-commerce 2020-2021
business. technology. society.
16th edition
Chapter 12
B2B E-commerce
25 June 2022
Dr. Zainil Hanim Saidin
zainilhanimsaidin@usm.my
Copyright © 2018 Pearson Education Ltd.
Learning Objectives
•
•
•
•
•
12.1 Discuss the evolution and growth of B2B e-commerce, as well as its potential
benefits and challenges.
12.2 Understand how procurement and supply chains relate to B2B e-commerce.
12.3 Identify major trends in supply chain management and collaborative commerce.
12.4 Understand the different characteristics and types of Net marketplaces.
12.5 Understand the objectives of private industrial networks, their role in supporting
collaborative commerce, and the barriers to their implementation.
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Trends in B2B E-commerce
1. Growing emphasize on optimal supply chains
2. Resurgence in Net marketplaces bringing together hundreds of
suppliers and thousands of buying firms
3. Supply chain visibility—obtaining real time data
4. Social/mobile commerce and customer intimacy
5. Cloud computing
6. Big data and growing use of business analytics
7. Internet of Things
8. Accountable and sustainable supply chains
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Basic Definitions
• B2B commerce:
– All types of computer-enabled inter-firm trade
– Before Internet, B2B transactions called trade or procurement
process
• B2B e-commerce:
– The portion of B2B commerce enabled by the Internet
• Supply chains
– Organizations, people, business processes, technology,
information required to produce products efficiently
– Often global
– Highly centralized supply chains provide lower short-term costs,
but higher, longer-term risk protection.
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The Evolution of B2B Commerce
• Automated order-entry systems
– Seller-side solution
• Electronic data interchange (EDI)
– Buyer-side solution
– Hub-and-spoke system
– Serve vertical markets
• B2B e-commerce websites
• Net marketplaces - bring hundreds to thousands
of suppliers into a single Internet-based
environment to conduct trade
• Private industrial networks
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The Growth of B2B E-commerce (1 of 2)
• B2B e-commerce will grow to 51% of total U.S.
inter-firm trade by 2020
• Private industrial networks continue to play
dominant role in B2B
• Non-EDI B2B e-commerce most rapidly growing
type of e-commerce
• EDI continues as workhorse of B2B commerce
Copyright © 2018 Pearson Education Ltd.
The Growth of B2B E-commerce (2 of 2)
• Not all industries similarly affected by B2B
e-commerce
• Not all industries would benefit equally
• Factors influencing move to e-commerce
– Significant utilization of EDI
– Large investments in IT and Internet infrastructure
– Market concentrated on purchasing or selling
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Potential Benefits and Challenges of B2B
E-commerce (1 of 2)
• Lower administrative costs
• Lower search costs for buyers
• Reduced inventory costs
• Lower transaction costs
• Increased production flexibility by ensuring just-intime parts delivery
• Improved quality of products by increasing
cooperation among buyers and sellers
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Potential Benefits and Challenges of B2B
E-commerce (2 of 2)
• Decreased product cycle time
• Increased opportunities for collaboration
• Greater price transparency
• Increased visibility, real-time information sharing
• However, some risk is posed by increased
globalization and consolidation
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The Procurement Process and the Supply
Chain
• Procurement process:
– The way firms purchase materials they need to make products
• Steps in procurement process
– Deciding who to buy from and what to pay
– Completing transaction
– Each step is composed of many business processes and
subactivities requiring data to be recorded in seller, buyer, and
shipper information systems
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The Procurement Process
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Types of Procurement (1 of 2)
• Firms purchase two types of goods
– Direct goods: Integrally involved in production process
– Indirect goods: All goods not directly involved in production
process (MRO goods)
• Firms use two methods to purchase
– Contract purchasing:
 Involves long-term written agreements to purchase specified products, with
agreed-upon terms and quality
– Spot purchasing:
 Involves purchase of goods based on immediate needs in larger marketplaces
that involve many suppliers
Copyright © 2018 Pearson Education Ltd.
Types of Procurement (2 of 2)
• Procurement is highly information intensive and
labor intensive
– Requires managing information among many corporate systems
– Involves over 1 million U.S. workers
• Purchasing managers
– Key players in procurement process
– Key decision makers for adoption of B2B e-commerce solutions
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Multi-tier Supply Chain
• Complex series of transactions between firm and
thousands of suppliers, supplying thousands of
goods
• Challenges
– Supply chain visibility
– Demand forecasting
– Production scheduling
– Order management
– Logistics management
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Trends in Supply Chain Management
• Supply chain management (SCM)
– Activities used to coordinate procurement process
• Major trends in SCM
– Continual efforts to improve process
– Trends include: Just-in-time and lean production, supply chain
simplification, adaptive supply chains, sustainable supply chains,
electronic data interchange, supply chain management (SCM)
systems
Copyright © 2018 Pearson Education Ltd.
Just-in-Time and Lean Production
• Just-in-Time production
– Method of inventory cost management
– Seeks to keep excess inventory at a bare minimum
– Eliminate excess inventory
• Lean production
– Set of production methods and tools
– Focuses on elimination of waste throughout customer value chain,
not just inventory
Copyright © 2018 Pearson Education Ltd.
Supply Chain Simplification
• Reducing size of supply chain
– Working with strategic group of suppliers to reduce product and
administrative costs and improve quality
• Essential for just-in-time production models
• May involve:
– Joint product development and design
– Integration of computer systems
– Tight coupling
 Ensuring precise delivery of ordered parts at specific times
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Adaptive Supply Chains
• Reducing centralization
– Reduce risks caused by relying on single suppliers who are
subject to local instability
 For example: European financial crisis, Japanese earthquake
• Creating regional- or product-based supply chains
– Allowing production to be moved to temporary safe harbors in
case of local manufacturing disruptions
– Focus on “optimal-cost,” distributed manufacturing, and flexible
supply chains that can shift to low-risk areas
Copyright © 2018 Pearson Education Ltd.
Accountable Supply Chains
• Accountable supply chains provide information to
consumers about the labor conditions of employees of the
firm's suppliers and ensure that these conditions are
satisfactory to their consumers
• Example – Nike criticized for exploiting foreign workers,
employing children, and allowing dangerous condition in its
subcontractor factories. As a result of accountable supply
chain, Nike has introduced significant changes to its global
supply chains by making the labor condition in
underdeveloped countries visible and morally acceptable
to consumers
Copyright © 2018 Pearson Education Ltd.
Sustainable Supply Chains
• Taking social and ecological interests into account
– For example: water usage, air pollution
• Using most efficient environment for production,
distribution, logistics
– Good business, over long term
 Good risk management
– Create value for consumers, investors, communities
Copyright © 2018 Pearson Education Ltd.
Electronic Data Interchange (EDI)
• Communications protocol for exchanging documents
among computers
– Each industry has own standards
• Developed in 1970s and ‘80s to automate exchange and
reduce cost and errors in purchase orders, shipping
documents, and more
• Today, provides for exchange of critical business
information between computer applications supporting
wide variety of business processes
Copyright © 2018 Pearson Education Ltd.
Mobile B2B
• Mobile devices increasingly important in all
aspects of B2B e-commerce
– Used in all phases of purchase process
– Over 75% of B2B decision makers use mobile devices to research
products
– Users increasingly expect B2B e-commerce sites to be accessible
from mobile devices
• Supply chain software and network providers
providing support for mobile platform
Copyright © 2018 Pearson Education Ltd.
B2B In the Cloud
• Cloud-based B2B systems
– Shift much of the expense of B2B systems from firm to B2B network
provider (data hub or B2B platform)
• Cloud platform owner provides
– Computing/telecommunications capabilities
– Software
– Connectivity
– Data cleansing and quality
– File storage
• Network effects: Costs spread out over all members
• Cloud-based solutions can be implemented rapidly
Copyright © 2018 Pearson Education Ltd.
Collaborative Commerce
• Use of digital technologies for organizations to
collaboratively design, produce, and manage products
through life cycles
• Moves focus from transactions to relationships among
supply chain participants
• Collaborative commerce has a much broader mission than
EDI
• Use of Internet technologies for rich communications
environment
– Sharing designs, documents, messages, network meetings,
videconferencing
– foster sharing sensitive internal information with suppliers and
purchasers.
Copyright © 2018 Pearson Education Ltd.
Social Networks and B2B
• Social networks can provide personal connections
that can help decision making in supply chain
• Example: Mazree
• Example: Dell’s YouTube channel
• Example: Cisco’s Facebook pages for product
campaigns for business clients
Copyright © 2018 Pearson Education Ltd.
B2B Marketing
• More interpersonal than traditional retail marketing
• B2B contract selling
– Very long-standing relationships between suppliers and buyers
Copyright © 2018 Pearson Education Ltd.
Net Marketplaces
• Ways to classify Net marketplaces:
– Pricing mechanism, nature of market served, ownership
• By business functionality
– What businesses buy (direct vs. indirect goods)
– How businesses buy (spot purchasing vs. long-term sourcing)
– Four main types
 E-distributors
 E-procurement
 Exchanges
 Industry consortia
Copyright © 2018 Pearson Education Ltd.
A B2B Vocabulary
Characteristic
Meaning
Bias
Sell-side vs. buy-side vs. neutral. Whose interests are
advantaged: buyers, sellers, or no bias?
Ownership
Industry vs. third party. Who owns the marketplace?
Pricing mechanism
Fixed-price catalogs, auctions, bid/ask, and
RFPs/RFQs
Scope/focus
Horizontal vs. vertical markets
Value creation
What benefits do they offer customers or suppliers?
Access to market
In public markets, any firm can enter, but in private
markets, entry is by invitation only
Copyright © 2018 Pearson Education Ltd.
Pure Types of Net Marketplaces
Copyright © 2018 Pearson Education Ltd.
E-distributors
• Most common type of Net marketplace
• Electronic catalogs representing products of thousands of
direct manufacturers
• Typically, independently owned intermediaries
• Offer industrial customers single source to purchase
indirect goods (MRO) on spot basis
• Typically, horizontal
• Usually, fixed price discounts for large customers
• Example: W.W. Grainger, Amazon Business
Copyright © 2018 Pearson Education Ltd.
E-procurement Net Marketplaces
• Independently owned intermediaries
• Connect hundreds of suppliers of indirect goods
• Firms pay fees to join market
• Long-term contractual purchasing of indirect goods
• Revenues from transaction fees, licensing consultation
services and software, network fees
• Offer value chain management (VCM) services
• Many-to-many market
• Example: Ariba
Copyright © 2018 Pearson Education Ltd.
Note about e-distributors and eprocurement
• E-distributors and e-procurement Net
marketplaces deal with INDIRECT GOODS
Copyright © 2018 Pearson Education Ltd.
Exchanges
• Independently owned online marketplaces
• Connect hundreds to thousands of suppliers and buyers in
dynamic, real-time environment
• Vertical markets, spot purchasing in single industry
• Charge commission fees on transaction
• Variety of pricing models
• Tend to be buyer-biased
• Suppliers disadvantaged by competition
• Many have failed due to low liquidity
Copyright © 2018 Pearson Education Ltd.
Industry Consortia
• Industry-owned vertical markets
• Purchase of direct inputs from set of invited participants
• Emphasize long-term contractual purchasing, stable
relationships, creation of data standards
• Ultimate objective:
– Unification of supply chains within entire industries through
common network and computing platform
• Revenue from transaction and subscription fees
– Many different pricing mechanisms
Copyright © 2018 Pearson Education Ltd.
Private Industrial Networks (1 of 2)
• Most prevalent form of B2B e-commerce
• Web-enabled networks for coordination of transorganizational business processes (collaborative
commerce)
• Range in scope from single firm to entire industry
• Example: Procter & Gamble
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Private Industrial Networks (2 of 2)
• Objectives include:
– Efficient purchasing and selling industry-wide
– Increasing supply chain visibility
– Closer buyer–supplier relationships
– Global scale operations
• Focus on continuous business process
coordination
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Private Industrial Networks and
Collaborative Commerce
• Forms of collaboration:
– Collaborative resource planning, forecasting, and replenishment
(CPFR):
– Demand chain visibility
– Marketing coordination and product design
 Can ensure products fulfill claims of marketing
 Feedback enables closed loop marketing
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Implementation Barriers
• Concerns about sharing of proprietary, sensitive
data
• Integration of private industrial networks into
existing ERP systems and EDI networks difficult,
expensive
• Requires change in mindset and behavior of
employees and suppliers
– All participants lose some independence
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Big data
https://www.youtube.com/watc
h?v=bAyrObl7TYE
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Thank you
Good luck for exam
21 July 2022 (Thursday) @
2.15pm
Chapter to prepare
1-12
Copyright © 2018 Pearson Education Ltd.