E-COMMERCE
Leonardo Da Vinci
2011-1-HR1-LEO05-00827
Author: MAKRO
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Contents
1.
Introduction to e-Business...............................................................................................4
1.1 History of Internet ....................................................................................................4
1.2 History of World Wide Web .....................................................................................4
1.3 What is “Electronic Business”? ................................................................................5
1.4 The Future of E-Business .........................................................................................6
1.5 The Explosion of E-Business ....................................................................................7
1.6 The Benefits of E-Business .......................................................................................8
1.7 Success in E-Business ............................................................................................ 10
1.8 Outsourcing, Tearing-Down, Building –Up ............................................................ 11
1.9 Change Your Paradigm .......................................................................................... 13
1.10
Integrating Technology into Your Business ......................................................... 15
1.11
Specify Your Customer ....................................................................................... 16
1.12
E-Business Plan .................................................................................................. 17
2. Introduction to E-Marketing .......................................................................................... 19
2.1 The Web as a Marketing Tool................................................................................. 20
2.2 Marketing Tool: The Web ...................................................................................... 22
2.3 Supporting a Web Site ............................................................................................ 26
2.4 Web Marketing Tools ............................................................................................. 26
2.5 Intelligent Agents ...................................................................................................30
2.6 Strategies for an Effective Marketing Plan .............................................................. 31
2.7 Business-to-Business Marketing on the Web .......................................................... 32
2.8 Cultural Differences ............................................................................................... 32
3. E-Commerce ................................................................................................................. 34
3.1 Introduction to E-commerce ................................................................................... 34
3.2 Comparing Traditional Commerce and E-Commerce.............................................. 35
3.3 E-Commerce Business Models ............................................................................... 36
3.3.1 Merchant model .............................................................................................. 37
3.3.2 Brokerage model ............................................................................................. 38
3.3.3 Advertising model ........................................................................................... 39
3.3.4 Info-mediary Model ........................................................................................ 40
3.3.5 Subscription model .......................................................................................... 40
3.3.6 Affiliation Model ............................................................................................ 41
3.3.7 Community Model .......................................................................................... 41
3.4 Major Types of e-Commerce .................................................................................. 42
3.4.1 Business-to-Consumer E-Commerce ............................................................... 42
3.4.2 Business-to-Business E-Commerce ................................................................. 44
3.4.3 Consumer-to-Consumer e-Commerce .............................................................. 47
3.4.4 Consumer-to-Business E-Commerce ............................................................... 48
3.4.5 Non-Business and Government E-Commerce .................................................. 48
3.4.6 Intra-Business E-Commerce ............................................................................48
3.5 Advantages and Disadvantages of e-Commerce ...................................................... 49
3.5.1 Advantages of e-Commerce............................................................................. 49
3.5.2 Disadvantages of e-Commerce ........................................................................50
3.6 Wireless (Mobile) e-Commerce .............................................................................. 51
3.7 Voice-Based E-Commerce ..................................................................................... 51
References ............................................................................................................................ 53
Appendix I ........................................................................................................................ 54
Appendix II ...................................................................................................................... 55
Appendix III ..................................................................................................................... 58
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Appendix IV ..................................................................................................................... 59
Appendix V ...................................................................................................................... 60
Appendix VI ..................................................................................................................... 61
Appendix VII.................................................................................................................... 62
Appendix VIII .................................................................................................................. 63
Appendix IX ..................................................................................................................... 64
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1. Introduction to e-Business
1.1
History of Internet
The Internet had its roots during the 1960's as a project of the United States government's
Department of Defence, to create a non-centralized network. This project was called
ARPANET (Advanced Research Projects Agency Network), created by the Pentagon's
Advanced Research Projects Agency established in 1969 to provide a secure and survivable
communications network for organizations engaged in defense-related research.
In order to make this network more global, a new sophisticated and standard protocol was
needed. As a result, IP (Internet Protocol) technology which defined how electronic
messages were packaged, addressed, and sent over the network was developed. The
standard protocol was created in 1977 and was called TCP/IP (Transmission Control
Protocol/Internet Protocol). TCP/IP allowed users to link various branches of other complex
networks directly to the ARPANET, which soon came to be called the Internet.
Researchers and academics in other fields began to make use of the network, and eventually
the National Science Foundation (NSF), which had created a similar parallel network, called
NSFNet, took over much of the TCP/IP technology from ARPANET and established a
distributed network of networks capable of handling far greater traffic. In 1985, NSF began a
program to establish Internet access across the United States. They created a backbone
called the NSFNET and opened their doors to all educational facilities, academic researchers,
government agencies, and international research organizations. By the 1990's the Internet
experienced explosive growth. During this period the number of computers connected to
the Internet was doubling every year.
Businesses rapidly realized that, by making effective use of the Internet they could tune their
operations and offer new and better services to their customers, so they started spending
vast amounts of money to develop and enhance the Internet. This triggered a fierce
competition among the communications carriers and hardware and software suppliers. The
result was a tremendous increase in the bandwidth (i.e. the information carrying capacity of
communications lines) on the Internet as well as reduced service costs.
1.2
History of World Wide Web
The World Wide Web (WWW) allows computer users to access multimedia-based
documents (i.e., documents with text, graphics, animations, audios and/or videos) on almost
any subject easily and conveniently. Even though the Internet was developed more than
three decades ago, the introduction of the WWW is a relatively recent event. In 1990, Tim
Berners-Lee of CERN (the European Laboratory for Particle Physics) developed the World
Wide Web and several communication protocols that form the backbone of the WWW.
Before the Internet, most computer applications ran on stand alone computers (i.e.
computers that were not connected to one another). Today’s applications can be written to
communicate among the world’s hundreds of millions of computers. The Internet makes our
work easier by mixing computing and communications technologies. It makes information
immediately and conveniently accessible worldwide. It makes it possible for individuals and
small businesses to get worldwide contact.
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In the last decade, the Internet and World Wide Web have altered the way people
communicate, conduct business and manage their daily lives. They are changing the nature
of the way business is done.
1.3
What is “Electronic Business”?
Electronic business (e-business) can be defined as "the application of Internet technology to
streamline all aspects of business processes". E-Business is comprised of e-marketing, ecommerce, and e-operations:
E-marketing: Building an online presence, showcasing a company, and providing detailed
information on the web (The majority of small businesses on the Internet today are actively
doing e-marketing).
E-commerce: Selling products and services online, conducting payments, handling
transaction details, and supporting automated customer inquiries.
E-operations: Streamlining of business processes and steps to enhance business efficiencies
between functional departments of a company (This also includes streamlining the supply
chain between your company and key suppliers).
Taken together,
The use of ICT by SMEs is increasingly common according to survey for EU countries. The
recent Eurostat statistics on ICT usage shows that 97 out of 100 enterprises equipped with
computers. Internet access is also a commonplace among enterprises; 95 out of 100 have
internet access in the workplaces. While Internet penetration is generally higher in larger
enterprises, the gap between larger firms and SMEs is narrowing.
In EU-27 countries, Internet penetration rates for small-sized firms (10-49 employees) is
94,42% while the medium and small sized enterprises is around 99%. High level of use of ICT
leads the enterprises to promote themselves more in IT environment.
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Figure 1.1 How are EU Enterprise Web-Sites being used?
The companies that want to enter to e-business world generally start with e-marketing. The
next level is e-commerce. And, the third aspect of e-business is e-operations.
The Eurostat figures in 2010 are summarized on the Chart 1.1. above. While vast majority of
the enterprises are involved e-marketing by having a web site or homepage with a
percentage of 68, the involvement of e-commerce and e-operations are significantly lower.
1.4
The Future of E-Business
2006
2011
World population
6.5 billion
7.0 billion
Not using the Internet
82%
65%
Using the Internet
18%
35%
Users in the developing world
8%
22%
Users in the developed world
10%
13%
Figure 1.2 The number of users of the Internet grows every year
Each year, more and more people get connected to the Internet. In 2006, 18% of the world
poplation were online in the world, this amount increase to 35% hitting 2.450 million in
2011.
Eventually, those people make their way around to buying something or just visiting a
company's Web site. Once they get to the site, it is important to have something that people
want to see and buy.
However, the coverage of the business that can be picked up from the Internet is not limited
to people sitting in their living rooms surfing the Web. Businesses that sell to other
businesses are discovering just how useful the Internet is to reinforce existing business
partnerships and look after new, profitable relationships.
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1.5
The Explosion of E-Business
E-business is still young and evolving, and the future looks nothing but bright for companies
that decide to perform business online. A business professional generally asks the following
question:
The answer comes from the level of involvement and willingness of a businessman to make
some hard business decisions. Some companies naturally bring their own name recognition
to the game, thus gaining instant customers.
Victoriassecret.com is a good example to this. In late 1998, just three months before
officially launching its Web site, Victoria’s Secret posted a display page at the site’s address.
The page requested that visitors leave their e-mail addresses. Even without advertising the
website, the company collected e-mail addresses of more than 300,000 customers.
That is great for a company with such strong name recognition as Victoria’s Secret, but they
are not the only ones doing well. Think about all the e-business sites you routinely visit—
were they all well-known companies before the Internet? If you are frequently visiting the
sites such as Amazon.com, eBay.com, johnlewis.com or hepsiburada.com, this is a proof to
the power of the Internet.
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Other forward-thinking business professionals and customers see the power of the Internet
too, and that is why it is becoming more and more powerful. Because of the variety of
options and choices in the World Wide Web (including online stores), customers are
attracted to the www. This, in turn, brings more businesses to the Web in search of the
customers, which brings more customers to the Web and so forth.
1.6
The Benefits of E-Business
By taking a business into the Internet’s kingdom, a businessman opens the operation up to
vistas a businessman would never encounter if he were limited to a shop on a street. The
benefits are great. If a businessman designs and implements the e-business correctly he will
see great advantages. The benefits of e-business can be summarized as:
 The opportunity to access new markets across the globe
 The chance to target market segments more effectively
 Greater speed in getting the product and services to market
 Providing more accurate information and improve customer experience
 Providing convenience and comfort for the customers
 Allowing 24/7 access to the products and services
 The opportunity to increase sales
 The opportunity to reduce costs by reducing overheads - for example, not having a
retail outlet in a busy high street location with high rents, reducing stock costs etc.
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 Improving the efficiency of the supply chain
 Improving employee motivation through more flexible working methods
 The opportunity to seem like a larger company even you are a small one
The above benefits are mainly related to speed, financial issues, increasing the market
reach, and appearing bigger. Let’s say a few more words about them.
Speed:
In the past, if a businessman wanted to sell something, he had to:
 rent a storefront
 hire employees
 stock the shelves
 spend some some money on advertising
 maybe mail out some catalogs and
 wait for customers to come in or mail in their order forms
In e-businesses, with the help of the Internet, the time between developing your product or
service and having it ready for the consumer is cut down considerably. Obviously,
businessmen are more close to the potential customers. Once a product is ordered, it has to
work through the shipping and handling channels. In fact, some e-sellers have collocated
their warehouses with the post office or shipping companies (such as Federal Express, DHL,
Yurtiçi Kargo) to cut down on shipping times.
In addition to speed, more products can be made available compared to a conventional
store. As a customer, you could simply log onto a site like amazon.com or debenhams.com,
find exactly which product you want, type in your credit card details and wait for the
package to arrive. Even if the company does not have the product in stock, there are more
sites within easy reach where you can find what you are looking for.
Financial Issues:
Whether it is a street vendor stand on the side of the road or a multinational corporation
with thousands of employees, the whole reason businessmen want to take their
organization to the Internet is to make money and lots of it if possible.
If the lessons of the past continue, there is money to be made on the Internet. Consider the
example of Amazon.com founder Jeff Bezos. Starting with just three Sun workstations and a
dream, he turned his garage in suburban Seattle into the biggest success story of the
Internet. Businesses know that “there’s gold in the Web.” The fantastic growth and business
presence will continue and mean more money for e-businesses which know what they’re
doing.
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Increasing Market Reach:
The Internet helps pulling the world closer together and expanding business contacts. When
customers go to an e-business site, they do not have to physically go to any store. Once they
get online, their computer will link to the e-business, where the customer can browse, shop,
and make a purchase. Actually, the physical store (if there is one) could be thousands of
miles away from the server housing the e-business content, which in turn could be
thousands of miles away from the consumer. Internet is bringing your company with its
products and services to people anywhere in the world.
Appearing Bigger:
The Internet is the great equalizer. Even if you have a small company, you may seem like a
big one. Everything comes across to the customer the same way—it comes across on the
customer’s computer however the company presents it. It does not matter whether you, as
a businessman, have a tiny little shop or a big company having a giant store. On the internet,
the
only
thing
limiting
a
small
business’
presence
is
itself.
When you are developing a Web site, the only thing that limits your presence is your ability
to develop the Web page. To be sure, the big companies hire big shot consultants, but with a
little knowledge, a little effort, and the right software, everyone can develop an excellent
Web site.
1.7
Success in E-Business
Up until early 2000, it seemed that in the kingdom of e-business, every company that went
online was successful. Then the bottom dropped out. Nowadays it is clear that not every
business’ online presence will be successful. So many companies tried their own hand at
online success. Some won; some lost. Let’s take a look at two examples of e-business:
Amazon.com, Toysmart.com
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Case Studies:
What Worked: Amazon
What Didn’t: ToySmart
Usually, managers, CEOs, and presidents think they can simply move their businesses online
and conduct business as usual. But that is not the case any more. Since e-business is a
marriage of business and technology, it is infinitely significant to understand the
technological side of the union along with how technology affects the existing business.
Reformation in Your Business:
Technology is a major component of e-business. Therefore, e-business changes are harder to
manage as they include technological changes as well as changes in business. Value in an ebusiness is different from value in conventional businesses. E-business' value is not found in
tangible properties, like materials, surplus, furnishing and so on. Rather, value is found in
intangible ones like branding, customer relationships, and supplier integration.
E-businesses should alter the environment and adapt to the changing marketplace in which
they compete. Changing only the method of delivery of their products to the customers
won’t be enough. Unfortunately, many businesses have not developed an information-based
business design to deal with the necessary business change. An enterprise must develop a
precise plan to accommodate the increased flow of information.
When managers are overconfident, not able to foresee change in the market place and not
able to implement changes; companies fail to change at all or does not change fast enough
or effectively enough to hold off disaster. The problem sits squarely on the shoulders of
management. The managers can also fail to manage properly once the changes have been
made. They have to see the changes before their competition does, make rapid changes, and
be able to make drastic changes to their business model. There are different customs for the
change in business models: Outsourcing, Tearing Down and Building up.
1.8
Outsourcing, Tearing-Down, Building –Up
Outsourcing:
Companies can get the help they need from third parties, as companies can not do
everything on their own. To manage the rapid change, many businesses have seen
outsourcing as a solution. Outsourcing comes in many sizes and shapes. At first, outsourcing
was focused on technology management. Recently, contract manufacturing has become
popular in the technological world. However, the two parties must work closely together,
even as the work is given out to another company. In such cases, the job has to get done
quickly, effectively, and efficiently. That means that the outsourcing company must act
almost as a part of the contracting company. The complex outsourcing alliances aren't just a
simple, fashionable way to do business. They are critical. As technology develops and
expands, outsourcing alliances become easier and easier to implement, especially if both
sides are using compatible business application software.
Managers simply do not have the tools they need to stay on top of all the changes in
business, so they must find a helper who can assist them stay competitive.
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Tearing Down:
The business value is specified by the customer's needs, not by the products the business
sells. Businesses may try to separate the resources (in this case, the product) from the ends
(the customers’ needs). This process calls for your business to recognize, value, and care for
what your business is all about. Eventually, this will guide you to re-examine what service
you are providing to your customers and what role your products play in that service. In this
way, managers take apart the business, rethink its core purpose, and spot where new values
can be developed and
created.
Building Up:
Once a company is torn down and studied, it must be recombined. Recombination allows a
businessman to make the company’s value chain more efficient, and it also serves for
customer’s needs in significant and valuable new ways. Recombination allows new and
growing companies to serve a new niche. Now, let's look at example of Priceline.com.
There was no lack of travel companies operating on the Internet, before Priceline set up its
virtual shop. The travel industry had not given up all its business to the Internet, but there
was a reasonably strong presence of online travel agents. The Priceline founders analyzed an
important need—lower price—and figured out how they could deliver less expensive airline
tickets, rather than looking for another way to sell the same product.
The Priceline’s founders determined that customers would not only like cheaper tickets but
would actually enjoy making price offers for them as well (Name Your Own Price® service).
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In July 2005, conscious about the need of enlarging the market, the Priceline Group
acquired European hotel booking website booking.com helping to increase the company
profit from $10 million in 2003 to a profit of $1.1 billion in 2011.
This was the result of tearing down the business and looking at it from the customer’s point
of view. While developing an e-business, using technology to recombine the value chain is
very important.
A businessman can follow the following steps to effectively tear down and recombine his
business:
 Challenge the traditional ideas of value.
 Define value in terms of your customers' needs.
 Engineer the end-to-end value stream.
 Create a new technology-based enterprise that is based on customer needs.
 Make sure your company’s leaders understand how to continue the self-examination
process.
For an extreme case of challenging traditional ideas of value, check the million-dollarwebpage.
The Million Dollar Homepage is a website created in 2005 by Alex Tew, a university student
from England, to raise money for his education. The home page consists of a million pixels
arranged in a 1000 × 1000 pixel grid; the image-based links on it were sold for US$1 per pixel
in 10 × 10 blocks. The purchasers of these pixel blocks provided tiny images to be displayed
on them, a url to which the images were linked, and a slogan to be displayed when hovering
a cursor over the link. The aim of the website was to sell all of the pixels in the image, thus
generating a million dollars of income for the creator. After its launch, the website became
an internet phenomenon and reached a ranking around 127 on web traffic in three years.
1.9
Change Your Paradigm
In every business, especially while adapting a company to an e-business environment, if a
businessman wants to make customers happy he must deal with at least one (if not all) of
these four points:
Price: No one will ever think they spent too little for something and no one likes to
think they got cheated. Businesses that offer unique services and products for a reasonable
price always do well.
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Convenience: "Efficiency" is a critical word in the dot-com world. One-stop shopping
is pleasant, but customers also want the process to move smoothly and with as few steps as
possible.
Speed: To stay competitive, a businessman must deliver the products and services as
fast and efficiently as possible. No one likes to wait -especially in the age of Internet-.
Personalization: Treating your customers as individuals is what they want. The more
the choices customers get, and the fewer decisions made by the company, the happier they
will be.
As you develop your company to compete in an e-business arena, you should be thinking
about how you can use technology to address these needs. If you can shape it out, you will
be a step ahead. Innovative businesses look at what new things customers want, rather than
the differences among the customers. Don't focus too much on market segmentation—that
only works in a stable business climate. In the promising world of e-business, “stable” is not
a word that is used very often.
Changes for the Customer:
Technology can change your customers' view of value. All of the services that are mentioned
above – price, convenience, speed, and personalization - have grown critical in the high-tech
world in which we live. Customers are now faced with many companies offering the same
goods and services. Because of this information overload, customers find themselves making
decisions based on:
The cheapest: All the extra costs between the manufacturer and the customer should
have been minimized in order to be competitive.
The most familiar: Brand recognition by customer is extremely important especially
in e-business environment as they can't touch, taste, or feel what they are buying and they
want to trust the company.
The best quality: It means giving the customers what they want, when they want it,
and at a value they are pleased about. It is a moving target, and one of the most critical
issues for any business.
Technological Changes:
Customers know that better technology results in a better shopping experience. In ebusiness, a businessman should find the services that they want in order to attract
customers and present something new and valuable.
Particularly in the case of e-business, customers provide data about their shopping
experience while using the Web sites. Therefore, customers have come to expect a little
something extra for their cyber practice. This extra value is something that creative
businesses understand their customers want.
Just to push products into the market is not enough. Companies that will be successful are
the ones that realize the value of using technological improvement to serve customers. One
of the problems that many e-businesses experience is that they simply build a Web existence
to have a Web existence. There has to be something that brings customers to the business
that they cannot get anywhere else.
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1.10 Integrating Technology into Your Business
Integrating technology into e-business is not as simple as it may seem. To make an effective,
useful solution, you must make some complex technological changes. The necessity for
integrated applications is more important where e-business is concerned, since; customers
expect and want something more out of online businesses. With the knowledge that
shopping efficiency is a factor in business design, the need for an integrated infrastructure
should become very clear.
Integration means that your organization must have a solid, faultless set of applications that
must work fluidly. The process requires a major application renovate so that you can
develop a back-end infrastructure that permits your e-business functions to work faultlessly.
Are You Ready to Integrate?
Frequently, managers put the responsibility for the e-business solely on the shoulders of
their IT managers. The responsibility for the technological side of an e-business solution is
the IT manager's department; however, the business planning and modeling behind the
solution should not be delegated to the technical department. A manager should develop an
e-business solution to identify how he can deliver what the customer wants via technology.
In many cases, it is found that integration is not simply a technological barrier that must be
discussed. Now, let's consider Manna Freight Systems of Mendota Heights, Minnesota:
To remain competitive, Manna developed a computerized system that links them with
airlines and trucking companies. Manna is linked via computer with their subcontractors.
Unlike other cargo companies, Manna is able to discover if there is enough room in an
airplane before it lifts off and before the customer's goods are left behind, causing a late
delivery. Once Manna discovers there is a problem with a particular flight or transporter,
they are able to check with their online system and locate another mode of transportation.
This system has afforded the company a 95 percent on-time rate. This shows how
application integration enables Manna to serve its customers in a more effective way than
the competition can.
Getting It Together
To make an e-business strategy work, organizations must pay attention to new architectures
that support organizational liveliness in terms of business applications. To be profitable, the
company must be able to meet the needs of the market without extreme costs, unnecessary
delays, organizational interruption, or loss of performance. The organizations must be level
with their customers' needs: diversity, price, quality, and fast delivery. The models becoming
increasingly popular are customer-centric and support a number of complex business
15
designs. If you have a static model with no room for change, none of these needs can be
met.
When designing an integrated, lively e-business infrastructure, it is necessary to make well
researched and tended decisions in many different disciplines. Frequently, e-business
infrastructures fail somewhere between the problem and the solution execution slipped off
the path; not because the technology was not working. The main reasons e-businesses crash
into trouble can be summarized as following:
 Poorly linked solutions to an organizational plan.
 Faulty strategies and tactics.
 Improperly executed plans.
 Failing to understand all the faces of an organizational problem.
1.11 Specify Your Customer
At first, one might think that there is only one type of customer out there—someone at
home surfing around for goods or services. This is an important customer; however, the
Internet is also suited for business-to-business (B2B) sales. In actual fact, if you have a
supply-chain partner with whom you need to be in steady contact, the Internet can provide
a low-cost connection between your companies. Businessman should define who are their
customers and why should target them.
Public
Consumers account for about 10 percent of all online sales. It is actually most often the
smallest share of the e-business pie; even though it is the one we hear about most often. It is
important to recognize how to get at that 10 percent, if your business provides to the public.
Consumers want good contract, efficient transactions, and honest customer service. Almost
certainly consumers are the most inconsistent and the hardest to sell to. You must ensure
that you have something that they want—or at least you have it cheaper than the
competitor, if you want to attract consumers to your e-business. Consumers expect a little
more out of the Internet. They want it cheaper, faster, or they want something special with
it. There is sure to innovate something new and exciting that the general public wants will
take e-business to the next level.
Business to Business ( B2B)
Supply chain management basically is the coordination of material, information, and
financial flows between and among supply chain partners. The explosion of the Internet
allowed the companies to combine their internal systems with the suppliers, partners, and
customers. This synthesis improves efficiency and effectiveness especially in supply chain
management by making companies integrate systems they share with other organizations.
With the Internet help to assemble information between your company and your partner,
you will cut costs and overhead. Let's see an example: PartMiner.com. The PartMiner Free
Trade Zone is a suite of integrated online services that address design and procurement
tasks relating to electronic components. This includes part research and selection at design
time, finding parts, buying parts.
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Atlas Services, one of PartMiner's partners, is a $300-million- a-year distributor of electronic
and computer components. When Atlas Services gets an invoice of materials from a
computer manufacturer, it goes to PartMiner.com and finds out which suppliers have the
parts on hand. PartMiner.com eases the buying and selling of electronic components on the
Internet. After switching to the Internet to fill orders, extremely time-consuming telephonebased effort was drastically reduced and Atlas has saved 15 percent on productprocurement costs.
1.12 E-Business Plan
While opening your e-business, you will have to plan for both the predictable business and
the technological changes that come with opening your virtual doors. In developing an ebusiness plan:
 The first step is to take a look at where your organization is: The existing state of the
business, identification of the customers and their needs, specifying whether the
organization is serving them adequately and how can they be served better.
 The second step is to take a look inside your organization: Specifying whether the
organization is ready to make the move online, what do the organization currently
have that will accommodate the move, what will it need to become a workable ebusiness.
 The third step is to understand the environment and technology trends.
 Finally, as a businessman, you have to develop your e-business design: Specify what
kind of model will be followed and how can it be well-matched with the organization.
The First Step
The miserable truth is that most managers don't really understand what their customers
want. Additionally, the relationship between the customer and profit is also cloudy to many
businessmen. If you take the time and make the effort to ask the hard questions about your
customers' wants and needs, you'll be able to design a profitable e-business solution.
A businessman needs to know the different customers within the broad group of customers.
It's necessary to break that huge group into smaller groups whose behavior can be analyzed
systematically. Here's how your customers might break down: (This is just an example, you
might break down differently according to the needs of your organization)
Occasional customers: These customers buy at irregular intervals and usually just one at a
time.
Regular customers: These customers buy at regular intervals (e.g. every week) and usually
more than one product.
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Hardcore customers: These customers buy at frequent intervals (e.g. every day) and usually
more than one product.
After segmenting the customers, the following questions must be asked for each group:
What is important to each customer segment? The customers who buy from you may
also buy a number of other goods and services. By figuring out what's important to that
segment, you can apply this information to your e-business. While moving into the digital
realm, a businessman will also have to foresee what a new batch of customers will interact
with the business.
What the customers in each segment want and need: spoken (explicit) and unspoken
(implicit)? The customers' needs are truly a moving target. The skill in staying on top in
business is realizing what your customer wants and needs, and then reacting before they've
moved on to something new. To understand what the customers want and need, there's an
easy, underused method— listen to them. While moving into the digital realm, you'll also
have to anticipate what a new batch of customers who interact with you online will want
and need. The best way to look into the future is to look at the past. What were your
customers like five years ago? Based on how they've changed, what will they be like five
years from now?
Is the organization meeting these needs? The question “how do you add new forms of
value” is important when migrating from a bricks-and-mortar company to a dot com. The
customers want value, innovation, and savings. The organization should have a new, exciting
product that customers will be hurried for or offer them some sort of savings or make things
more convenient for them, etc. The organization should use technology to serve the
customers.
The Second Step
To find out if an organization is capable of making a jump into e-business, these two
important questions needs to be answered:
What are the Organization Abilities?: A businessman should review the organization's
strengths and weaknesses. Take a look at the traits listed in Appendix I. In the ever-changing
business world, what is strength today may be a weakness tomorrow. Therefore, the list
should be reexamined from time to time.
When the organization is considering moves to e-business models, it should also consider
how a technology implementation can either help or delay an organization's ability to adapt
to changing business environments. It is also important to take a closer look at the IT
department and determine if they have a different business philosophy from management.
This is one of the biggest points of failure in companies where the application infrastructure
is not in position with the business' objectives.
How can the Organization Improve?: The organization must develop solid enterprise
architecture, one that will provide a logical, consistent plan of activities and coordinated
projects that will lead the business applications and infrastructure from their current state to
the final goal.
This is a comprehensive plan that must include the specifics of each department, plus a plan
that will allow them to develop in combination with one another. Further, the plan must
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include the overall strategy and the movement steps. The plan should also include guidelines
to show how integration can occur.
The Third Step
The organization should be aware of how the industry and the marketplace are operating
and knowledgeable about technology trends. The organization should also be aware of its
competitors in the business environment. The organization needs to make sure that
someone else can't offer the customers something the organization should be offering.
Final step: Design the E-Business
Finally, the organization can start thinking about how the e-business will be designed.
Designing the e-business is a two-step process:
Choose a Design: First, a business should choose a design to model the e-business. Then,
the businessman should personalize it and make it its own. Appendix II shows the basic ebusiness designs. A businessman should choose the one that is the closest to what the
organization is trying to accomplish. Once a design is found in which your e-business fits,
next step is to customise it for the company.
Make It Own: After selecting the model the e-business is suited to, a businessman
should look back to the first, second and third steps of the e-business plan to develop an
accurate picture of the e-business model so that it best suits the organization and its goals.
By applying the information discovered about the organization and the customers, a
businessman will be able to customize and add the own sources of value to these stock ebusiness models. Further, a businessman should repeatedly analyze the e-business to ensure
that it is unique.
Given all the variables, research, and study involved in developing your e-business, it's
obvious that this is not something that can be written in a few minutes before a meeting. To
develop your e-business requires a fair amount of study and critical self-reflection . In the
end, however, when considering the benefits that come from a quality e-business solution,
the work on it would be profitable and make your company successful in the long run.
2. Introduction to E-Marketing
The Internet and the World Wide Web provide marketers with new tools and added
convenience that can increase the success of their marketing efforts. The Web offers several
technologies and applications that enhance customer service, marketing and advertising
efforts with a reasonable cost. The Internet could improve customer service by sending e19
mails for order confirmation, product announcements, and order tracking. The Web provides
customer service through corporate web sites, integrated call centers, online help desks, and
online customer services.
In recent years, customers have been using business web sites for many different
applications: downloading forms, downloading product information and user manuals,
software patches, hardware drivers, minor upgrades to an existing software, and receiving
on time answers to frequently asked questions. All of these features have improved
customer service and lowered costs for both the business and its customers.
If you use well, Web is an effective marketing instrument. Different advertising and
marketing tools on the Web include banner advertisements, Web Forums, e-mail and
registering e-mail, links on other web sites, online classified advertisements, message boards
and special interest shopping centers, display screens, spot leasing, intelligent agents,
advertising using search engines.
The Web helps in online customer research. Legal data about customers can be collected
directly or indirectly through cookies, intelligent agents and online questionnaires quickly
and with minimum cost. Intelligent agents are rule based software that can be used
effectively in the e-commerce environment. Intelligent agents and shopping bots are
increasingly used in the e-commerce world to assist customers in finding the cheapest
possible prices for the customer. They are also a marketing tool for collecting relevant
information regarding customers’ purchasing habits and the sites they usually visit.
Some commonly used terminology about Web marketing and advertising can found in Ecommerce part of the Glossary.
2.1
The Web as a Marketing Tool
The Web puts large and small organizations on the same foothold. Regardless of size or
financial strengths, any business can sell goods and services through the Web. In such a
democratic environment, customers have the power. They can respond individually to a
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marketing attempt or they can spread the word to their associates. If they support,
everything is fine; however, if they dislike, there is a problem.
Customers could get unhappy receiving materials they haven't asked for. Here are some
guidelines for successful Internet advertising.
 Never send disturbing messages.
 Use full agreement to conduct direct selling or promotions.
 Obtain the consumer’s permission when carrying out research.
 Take permission of the user prior to selling consumer data.
 Never use Internet communications to hide real activities of the business.
Businesses successfully use passive advertising by setting up bulletin boards. This requires
minimal investment to cover the hardware and software costs. An alternative would be to
publish advertisements through an Internet service provider (ISP) such as SuperOnline or EKolay, a directory such as Yahoo!, or a search engine such as Google. However, if you plan to
deal with e-marketing, a home page is the medium perhaps best suited for advertising on
the World Wide Web.
Many companies have established home pages for business advertising. Here, the advantage
is that marketing messages can be individually customized for each customer. Companies
are generally making product information, press releases, e-mail index, and financial
information available via the Web. Some manufacturers includes an URL address on their
cans or bottles or packets that a customer can access for additional information on the
product, such as information related to the ingredients, nutritional facts, and so forth.
Basic Web Design Rules:
In order to have a successful business online, the visual presentation of your web site needs
to stick to the following rules:
Content: Focus your attention first on content and then on design.
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Consistency: Design your site consistently without varying the content.
Density: Break up content into little pieces without tearing it apart.
Design: Use few colors without designing a monotone web site.
Size: Use small graphics with large impact.
Page-loading speed has a direct association with the number of visitors viewing the page;
therefore, complex graphics and large tables should be avoided at least in the initial page.
The increasing subscriptions to fiber optic networks and 3G is resulting in increased
popularity and business usage of the Web and allowing marketers to reach a more diverse
range of customers.
2.2
Marketing Tool: The Web
Any organization using the Web can advertise all over the world and sell 7-days a week, 24hours a day. The Web serves as a strong marketing tool for all types of organizations
regardless of their size and the types of products and services that they sell (Figure 2.1).
Figure 2.1 Web as a marketing tool
Collecting marketing data through the Web could improve the marketing efforts of any
organization. An organization using these data will be able to customize a particular product
or service to the specific needs and requirements of a potential buyer. Marketing data can
be collected through various tools available on the Web with reasonable cost. E-mail, online
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forms, online questionnaires, Web Forums, cookies, and intelligent agents are among the
popular tools that can be used for this purpose.
Advertising traditional products to sell through the Web has become popular in recent
years. Online stores are able to offer a variety of choices and in many cases at lower prices
than high-street prices. With the introduction of e-wallets, e-cash, and other electronic
payment systems (EPSs), customers are able to pay for these products and services with
improved security and convenience. This is basically transferring the old trade model to the
Web and taking advantage of all the technologies and applications that the Web offers.
Advertising digital products to sell is a new way that businesses can generate revenue with
reasonable expenses. Downloading software, songs, magazine articles, books or movies are
some examples. These applications are expected to increase dramatically, with the increased
popularity of usage of fiber optic communication and mobile network and tighter security
measures.
A good example to such digital products is Apple’s iTunes Store where the customers could
download songs, complete albums, tv shows, applications and movies. Between the period
of April 2003 (when it was first opened) to January 2013 the store sold more than 16.5 billion
songs and 2 billion applications.
Online marketing is becoming a popular application of Web marketing. Marketers are able
to reach a wide geographic base and collect marketing data with reasonable cost. These
marketing data can be used for testing various experiments, such as the attractiveness of an
advertising campaign or the strengths and weaknesses of a marketing medium, with
moderate costs.
Supporting marketing 4P can be done by the help of the Web. Marketing is related with
product, price, promotion, and place (4P). The data related to the four factors of marketing
can be collected very rapidly with moderate cost. The Web provides unparalleled support for
these 4Ps.
 The product factor is concerned with the type of products and services that an ebusiness plans to sell. These products and services could be brand new or a
development over existing products and services. The improvements might be price,
features and/or usability.
 The price factor is concerned with the most suitable price for the product or service.
Overpricing and under pricing are both undesirable. Collecting online data and
analyzing a competitor's offerings could help the e-business to establish a reasonable
price for its products or services.
 The promotion factor aims to inform, convince, and remind customers regarding new
products and services and encourage repeat sales. Web technology is able to do this
with reasonable costs.
 The place factor is concerned with the mechanisms that the e-business uses to get
products and services to customer. In many cases, the Web provides virtual
storefronts for some customers that otherwise could not have been able to do any
transaction with a particular e-business. Customers in remote or rural areas or
customers who are immobile and unable to shop in traditional stores are some
examples.
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Customization can be provided by the Web with moderate cost. For example, Amazon.com
displays specific recommendations based on the customer’s previous purchases. These kinds
of services are very expensive in traditional marketing. The e-business can move from
providing general products or services to providing products or services customized to a
customer’s needs, tastes and preferences by the help of the Web. The following two
technologies are commonly used to provide customization/personalization:
 Push technology (Also called server push or webcasting): The customer is
automatically delivered information using a set of predefined request parameters.
The Web sends relevant information to the customer workstation.
 Pull technology: The customer must express a need in order to receive information.
The Web is able to implement this strategy very effectively with moderate cost.
Virtual storefronts -the Web servers- help the businesses to attract the customers. This
virtual site of a business can effectively express the unique offerings of an e-commerce site
to potential visitors and can be easily modified to reflect the new offerings. Customers can
browse through the site at their own speed to find special products and services. Figure 2.2,
Figure 2.3 and Figure 2.4 demonstrate the opening page of ticketmaster.co.uk,
hepsiburada.com and ebay.com , respectively. Each storefront has diverse goals and
purposes, and each one express a different message to its customers. Browse through these
sites to see how effectively they are using the Web for diverse business purposes.
Figure 2.2 ticketmaster
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Figure 2.3 Debenhams
Figure 2.4 eBay
Matching products and services to customers' needs is a powerful feature of Web
marketing. The internal search engines available on many of e-commerce sites allow the
customer to search for a particular product and service.
Contact with customers is allowed by the Web to the e-businesses. Using e-mail and the
company web site, customers can freely state their opinions regarding the products and
services sold by a potential e-commerce site, as the e-business and its customers are in close
contact. In other words, the Web offers an open forum for customers.
Appendix III gives some Web resources for conducting successful Web marketing and
advertising.
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2.3
Supporting a Web Site
An e-business must first attract customers and visitors to its Web site to be able to sell its
products and services. The Web site can be powerfully marketed using the following
suggestions:
 The Web site can be registered with all (at least most popular) search engines and
directories. The site can be listed in popular search engines and directories such as
Google, Bing or in industry specific sites. When the site is registered, the location of
the keyword in the site (whether it's in the body or in the heading) and the frequency
of the word's use will have direct effect on the ranking of a page. A typical surfer
usually looks at the top 10 to 20 listings after conducting a Web search. The Web site
must make sure that the search engine lists the site among the top 10; otherwise, the
chances of being seen by many surfers are low.
 The Web site can be promoted by using banners and other Web advertising methods
on popular search engines, directories, and Web portals. For a brief list of banner
advertising rules, see Appendix IV.
 The Web domain name can be written on all printed and written forms, letterhead,
envelopes, business cards, company cars, and equipment, and so forth.
 The Web site can be advertised to existing customers. Present customers will be the
first to be glad about the added handiness of online business and pass the word to
their friends and families.
 The Web site can be promoted by joining online discussion groups to people already
interested in the company's offerings.
 URL links can be exchanged with other web sites that offer companion products or
services.
 The business can participate in free ad banner exchanges. Your company can agree to
carry banner advertising in exchange for other sites carrying your company ad
banners.
 E-mail lists can be used to send out notices or newsletters on the company's products
and services.
 The company can offer bargain, competitions, quizzes, coupons.
While registering your domain name, try to keep it simple and choose something that is easy
to remember. A bad example is www.acunilicaliproduction.com which is very difficult to
read especially when it is shown briefly on the TV screen (The company wisely changed the
domain name to www.acunmedya.com later)!
2.4
Web Marketing Tools
An e-commerce site may use a combination of traditional and Web marketing tools to
promote its products/services. Obviously marketing methods that have the potential to
reach the highest number of prospective customers are more expensive. Each of the
following techniques has advantages and disadvantages and may be appropriate for a
specific type of business:
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Traditional Marketing Tools: Magazines, newspapers, posters, press releases, radio, and
television commercials, and word of mouth are the traditional methods that can be used to
promote an e-marketing/commerce site. For instance, a television commercial can be very
effective during popular shows and programs; however, they are extremely expensive and
usually beyond the budget of many e-marketing/commerce sites. Newspapers and
magazines could be effective especially if the e- marketing/commerce site has a traditional
business in place already.
E-Mail: E-mail is generally used for shipment confirmations, order confirmations, common
communication with customers and product announcements. Capturing customer
information could be necessary for repeat sales. Therefore, successful e-businesses register
the customer's e-mail and other relevant information using online forms. E-mail could be
quite effective for repeat sales, reminding the customer for the next purchase or for the next
visit. As an example, consider an e-business that sells flowers. An automatic e-mail system
can alert a customer that a particular birthday is coming up. With a mouse click the
customer can order flowers. However, with all these advantages, e-mail must be used with
caution. Customers should not be attacked with needless e-mails. The sale and the customer
can be lost, if a customer gets irritated.
Web Forums: An e-business can subscribe to one or several discussions lists and post
relevant information regarding its products/services. Web Forums provide a strong
advertising medium. However, the organizations must first carry out careful analysis and find
the most suitable list that might be interested in the offerings of the e-marketing/commerce
site. Appendix V lists several resources to find suitable Web Forum resources.
Banner Advertisements: A banner advertisement -an advertising image- is usually a graphic
image that displays the name or identity of a site. A banner can be clickable, which will
transfer surfers to another site, or just static, which shows some relevant information about
a site, product/service offered by the e-commerce site. Banner advertising is one of the
easiest ways of advertisement on the web. Complex animations may be attractive, but most
users won’t be thankful for them. The simpler it is, the more customers are able to
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understand what a business wants to achieve. A banner ad is much less costly than TV ads.
Where to put a banner ad is also very important. For instance, if the site is selling insurance,
then the banner ad should be placed in an online car dealer site or in a bank site or a
mortgage company site. The banners in msn sites on autos and entertainment, for example,
diverge consistently with the related Web site theme. (Figures 2.5 and 2.6) Banners should
be placed on sites that attract large traffic. However, it should be noted that the cost of
banner ads varies with the popularity and the traffic that the sponsoring site carries. Please
have a look at Appendix V for the rules to implement a successful online banner campaign.
Figure 2.5 MSN Auto
Figure 2.6 MSN Entertainment
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Message Boards and Special Interest Malls: A product and or service can be listed in several
of message boards and special interest malls throughout the Web. Before you list a product
or service a complete search must be conducted in order to find the most suitable message
board for the intended product or service.
Links on Other Web Sites: An e-business could create a partnership with other e-businesses
for link exchange agreements. Your site creates a link to another site, and that site creates a
link to your site.
Initial Web Site Page: An initial web site page which can display the e-business's corporate
image and brand in some cases captures the surfer's attention for a short period. It displays
a message to the surfer indicating the requirement for viewing the page, such as the
browser type and the specific software. This advertising medium that may use multimedia
effects could be very effective for attracting visitors to an e-business site.
Push Technology: Push technology means relevant information is pushed to the user based
on his or her prior inquiries, interests, or specifications. The Web works based on pull
technology, meaning the user searches the Web to find (to pull) information. However, push
technology is more suitable for the marketing of certain products/services. Using this
technology, marketing information, product lists, prices, and product updates can be directly
updated in real time and sent to the customers. Push technology can be effective for both
business-to-consumer (B2C) and business-to-business (B2B) marketing. For instance, a
computer manufacturer may send the latest information on new models, prices, features,
and other related information to all of its dealers in real time. This could be a major cost
saving and it certainly improves business relations and customer service.
Several software vendors, as part of their e-commerce solutions, supporting push
technology can be seen at Appendix VI.
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2.5
Intelligent Agents
An intelligent agent is a software that is capable of reasoning (using some form of artifical
intelligent) and rule-based meaning, by following a series of well-defined rules. Intelligent
agents are capable of performing certain tasks to assist the user. For example, a
sophisticated mail agent can prioritize all your e-mail messages and can even respond to
some of them while you were not at work. It can sort your messages by date, name, or
subject or send them to your mobile phone.
The followings are some of the important capabilities of a sophisticated intelligent agent:
 Mobility: The capability to migrate in a self-directed way from one platform to
another.
 Reactivity: The capability to selectively understand and act in a given situation.
 Autonomy: The capability to be goal-directed, self-starting, and proactive.
 Adaptability: The capability to learn from prior knowledge and go beyond what has
been given previously.
 Humanlike interface: The capability to interact with users in a language similar lo
natural language.
 Collaborative behavior: The capability to work with other agents to achieve a
common objective.
Intelligent agents perform many tasks in the e-business environment. An important
application is their use for Web marketing. Intelligent agents can collect relevant information
about customers, such as items purchased, customer profile, address, age, gender, purchase
history, expressed preferences, and unspoken preferences. This information can be
effectively used by the e-business to better market its products and services to customers.
These software agents are called product-brokering agents, also known as shopping bots.
They alert the customers about a new product or a new release of a product that might be of
interest to them. For example, agents of Amazon.com have been doing this successfully. The
Amazon website will offer you a list of books that you might like on the basis of what you're
buying now and/or what you have bought in the past. These software agents are also
assisting Web marketing with smart or interactive catalogs, also called “virtual catalogs.” A
smart catalog displays a description and structure of a product based on the customer's prior
experience and preferences. These catalogs are kept up-to-date and created dynamically
from source material, and they are searchable by content using common concepts (similar to
human behavior) rather than navigated through links. They are also cross searchable and
referenced so that suitable entries satisfying a user request (a query) can be found in
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multiple catalogs. There are several categories of intelligent agents on the market.
Personalized agents, shopping agents, mail agents, are some of the popular types.
Personalized agents
Personalized agents, help the user by customized functionalities such as assembling
customized news reports (such as The Register's The Reg Desktop News Alerts), by finding
information on the subject of user's choice, filling out forms on the Web automatically,
storing information for future reference and scanning web pages looking for and highlighting
text that constitutes the "important" part of the information available.
Shopping Agents
Shopping agents are capable of doing comparison shopping and finding the best price for a
specific item. For example, Kelkoo shows you all competitive prices, shipping costs and
availability of a product for a particular vendor. BestBookBuys is another example of a
shopping agent. MyTradeMaster is an online market place where its Members buy and sell
new, refurbished and pre-owned computer equipments such as networks, servers, parts,
peripherals and PC/Laptops at highly competitive compared prices and make good bargains.
Mail Agents
A typical mail agent may generate specific auto-response messages, selectively forward
incoming messages, or create e-mail messages based on the content of incoming messages.
Many recent e-mail clients have mail agents built-in, such as Microsoft Sharepoint.
2.6
Strategies for an Effective Marketing Plan
Below is a list that may help businessman to put together an effective Web marketing plan:
 Identify the strategic goals and objectives of the organization related to Web
marketing. The e-business has to carefully define the types of products/services that
will be sold through the Web site. It has to recognize the competitors, the added
benefits of its products and services compared to the competitor. Furthermore,
selection of the market (local, national or international) that these products/services
are going to be sold is also essential. Specification of the price and customer services
is another important factor that should be highlighted in the marketing campaign.
 Take corrective actions if the goals are not accomplished.
 Establish a budget.
 The first step is to bring customers to the site . A more important task is to keep the
customers at the site and encourage them to browse and shop. This can be done in a
number of ways. Good customer service, a help desk, availability of a live operator (in
case), a clear return policy, a clear statement regarding security concerns, ease of
navigation, and the look and appearance of the site, offering visitors alternative
methods to buy (telephone, retail shops, and through the Web) and personalization
of the site all help to keep the customers at the site and encourage them to return.
 Use all or a combination of Web marketing tools discussed in section 2.3.
 Utilize the ways discussed in section 2.4 to promote the e-commerce site.
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 Make electronic catalogs available to your customers. Electronic catalogs enable
customers to browse through diverse groups of products/services and compare
prices and features. In addition, lower costs, higher speed of navigation by the
customers, multimedia options (animation, video, and audio), easier updating and
availability of virtual interactive catalogs that could match the product to the
customer's taste and preferences are some advantages offered by electronic catalogs
compared with traditional catalogs.
 Utilize the services of marketing agencies. The outsourcing the marketing program to
agencies that provide these kinds of services is another option.
2.7
Business-to-Business Marketing on the Web
Business-to-business (B2B) marketing can be different from business-to-customer (B2C)
marketing. Usually more than one person is involved in a company’s purchasing process. This
is different from B2C marketing, where one customer is usually making the decision to buy.
B2B marketers must consider their companies’ distributors, resellers, retailers and partners
when developing their marketing strategies. Therefore, marketing to another business
requires the marketer to be conscious of all parties involved in the purchasing decision and
to design a marketing strategy accordingly. Maintaining strong relationships is the key to the
growth and success of business-to-business companies. Businesses making large purchases
depend on their suppliers and expect them to be reliable and to deliver quality products and
services on time.
B2B marketers can use the Internet to market to the other businesses. E-mails sent to
companies should be addressed to all people involved in the purchasing decision and should
be tailored to provide informative and personalized content. Personalization should include
why and how your company’s products and services will benefit the targeted business. It is a
good idea to require registration when a site visitor requests more information about your
company. The marketer can then research the company and design an e-mail response that
will present relevant marketing materials that address the inquiring company in a more
customized manner.
When you sell your product or service to another business, you may be selling to someone
who is not the direct user of the product or service. Because the user of the product might
have an opinion or comment different from what you are hearing from your business
contact, ask your contact to speak with the end users. They may have suggestions that could
improve your product or service.
Industry marketplaces are good resources for companies that want to sell to other
businesses. Searching marketplaces for potential clients can help you define your target
market and generate customer leads more effectively.
2.8
Cultural Differences
When expanding your companies to cover other countries, get to know the local customs.
The Internet offers the advantage that you can go to local web sites and see how they do
business. In order to build up a subsidiary get in people from that particular country who
better know what to do. If you are planning a major investment then consider learning some
phrases and visit the country. Otherwise the investment may result in a failure, which can
result in financial trouble for the whole company.
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Foreign cultures might have difficulties with behaviors that are common in one’s own area
or country, although it may be hard to understand. They will have totally different
expectations that may lead to misunderstandings. A simple example would be the way
people order drinks in a bar. In Turkey you are first served and pay when you leave generally.
In Italy you have to pay first and then order and in Ireland you order first and pay
immediately. A Turk in Ireland or Italy would sit down at a table and wait until a waiter
comes. as the expectations are different. The Turk may think that the Irish and Italian are
discriminating against him. The Irish and Italian on the other hand may think that the Turk is
not interested in anything to drink and will just ignore the person.
The Asian countries, for example, have difficulties in using standard applications like a word
processor from the United States, not because it has not been translated properly, but
because the logic and the habits are those of Americans and not of Asians.
Just because you know your local market does not mean that you are able to repeat the
success in other markets or even create a global market for your products and services.
These errors are often repeated by online businesses. Many companies encounter some
dilemmas when extending their business to other countries. Disney, for example, had
problems with cultural differences, when they opened their theme park near Paris, France.
The American managers thought that they could use their existing business model and
values and introduce them into the French market. It soon became quite clear that the
company needed to adapt to the local market. Other than expected; the customers to the
Euro Disney were mostly Americans living in Europe and Japanese tourists. The Europeans
coming to the theme park were also not staying as long as their American and Japanese
counterparts. Instead of staying four days in the theme park, most Europeans came for one
day, making it difficult for Disney to fill all the hotels that they built around the theme park.
If local laws are not taken into consideration, providing a business model that will work in
every country fails in most cases, and also a single advertisement for several countries can
easily fail.
When localizing Internet applications do not only translate the texts and adjust currencies,
but think also about local habits. If you have, for example, a hotel in Kemer, Antalya you
could offer an online reservation service. Customers from Turkey who want to book a hotel
may want to take their pets with them. So there should be a check box where they can click,
if they want to bring their dogs or cats along. If you now translate the pages into Japanese
then it would not make much sense to have the pet option, as it would be very unlikely that
Japanese tourist would bring their pets to Turkey. This option may confuse them, especially
if the translations are not perfect, which happens quite often on the Internet. Badly
translated texts destroy more business on the Internet than they generate.
In order to be successful in local markets it is necessary to know how people react to your
offerings. In Southern Europe, for example, people are far more responsive to spoken words,
while Northern Europeans prefer a written order. A phone conversation with people from
Southern Europe is often more effective than sending an e-mail.
The National Forum on Cultural Differences is also a good place to start investigations. The
forum offers the opportunity to ask questions about cultural differences and people who
seem to know more about the other culture are able to respond. The place may be a good
starting point for your world-wide expansion.
33
3. E-Commerce
3.1
Introduction to E-commerce
E-commerce is buying and selling goods and services over the Internet. E-commerce is an
integral part of e-business as discussed in Section 1. E-business is a structure that includes
not only those transactions that center on buying and selling goods and services to generate
revenue, but also those transactions that support revenue generation. These activities
include generating demand for goods and services, offering sales support and customer
service, or facilitating communications between business partners.
By the help of the flexibility offered by computer networks and the availability of the
Internet, e-commerce develops on traditional commerce. E-commerce creates new
opportunities for performing profitable activities online. It promotes easier cooperation
between different groups: businesses sharing information to improve customer relations;
companies working together to design and build new products/services; or multinational
companies sharing information for a major marketing campaign.
The followings are the business uses of the Internet. These services and capabilities are a
core part of a successful e-commerce program. They are either parts of a value chain or are
included as supporting activities:
 Buying and selling products and services.
 Providing customer service.
 Communicating within organizations.
 Collaborating with others.
 Gathering information (on competitors, and so forth).
 Providing seller support.
 Publishing and distributing information.
 Providing software update and patches.
Airline and travel tickets, banking services, books, clothing, computer hardware, software,
and other electronics, flowers and gifts are some popular products and services that can be
purchased online. Several successful e-businesses have established their business models
around selling these products and services. E-commerce has the potential to generate
revenue and reduce costs for businesses and entities. Marketing, retailers, banks, insurance,
government, training, online publishing, travel industries are some of the main recipients of
e-commerce. For instance, banks use the Web for diverse business practices and customer
34
service. Appendix VII lists some companies using e-commerce, stressing the products and
services that are most suitable for web transactions.
3.2
Comparing Traditional Commerce and E-Commerce
In e-commerce there may be no physical store and in most cases the buyer and seller do not
see each other. The Web and telecommunications technologies play a major role in ecommerce. Although the goals and objectives of both e-commerce and traditional
commerce are the same—selling products and services to generate profits—they do it quite
differently. Traditional commerce presents product information by using magazines and
flyers. On the other hand, e-commerce presents by using web sites and online catalogs.
Traditional commerce communicates by regular mail, phone yet e-commerce by e-mail.
Traditional commerce checks product availability by phone, fax and letter. However, ecommerce checks by e-mail, web sites, and internal networks. Traditional commerce
generates orders and invoices by printed forms but e-commerce by e-mail, and web sites.
Traditional commerce gets product acknowledgments by phone and fax. On the other hand,
e-commerce gets by e-mail, web sites, and Electronic Data Interchange(EDI).
It is important to note that currently many companies operate with a mix of traditional
commerce and e-commerce. Just about all medium and large organizations have some kind
of e-commerce presence. The followings are some examples, Toys-R-Us, Wal-Mart Stores,
Blizzard and LEGO.
E-Commerce and Value Chain:
Typical business organizations (or parts within a business organization) design, produce,
market, deliver, and support their product(s) / service(s). Each of these activities add cost
and value to the product/service that is eventually distributed to the customer. The valuechain consists of a series of activities designed to satisfy a business need by adding value (or
cost) in each phase of the process. In addition to these primary activities that result in a final
product/service, supporting activities in this process also should be included:
 Managing company infrastructure.
 Managing human resources.
 Obtaining various inputs for each primary activity.
 Developing technology to keep the business competitive.
For instance, in a furniture manufacturing company, the company buys wood (raw materials)
from a logging company and then converts the wood into chair (finished product); chairs are
shipped to retailers, distributors, or customers. The company markets and services these
products. Those are the primary activities (value-chain) that adds value and result in a final
product/service for the company. Value-chain analysis may highlight the opportunity for the
company to manufacture products directly . This means, for furniture manufacturer, it may
enter in the logging business directly or through partnership with others. The value chain
may continue after delivering chairs to the furniture store. The store, by offering other
products/services and mixing and matching this product with other products, may add
additional value to the chair.
35
The Internet can increase the speed and accuracy of communications between suppliers,
distributors, and customers. Furthermore, the Internet's low cost allows companies of any
size to be able to take advantage of value-chain integration. E-commerce may improve value
chain by identifying new opportunities for cost reduction . For instance, using e-mail to
notify customers instead of using regular mail helps for reducing cost. Selling to distant
customers using the company web site may allow revenue improvement or generation.
These sales may not have been materialized otherwise or selling digital products such as
songs or computer software or distributing software through the Web. Offering online
customer service or new sales channel identification helps for product/service
improvement.
Dell Computer generates a large portion of its revenue through the Web by eliminating the
middleman. Cisco Systems sells much of its networking hardware and software over the
Web, improving revenue and reducing cost. United Parcel Service (UPS) and Federal Express
use the Internet to track packages that result in enhanced customer service.
3.3
E-Commerce Business Models
As mentioned in Chapter 1, the ultimate goal of an e-business is to generate revenue and
make a profit, similar to traditional businesses. The Internet has improved productivity for
almost all the organizations that are using it. Nevertheless, the bottom line is that
productivity must be converted into profitability. To achieve this goal, different e-businesses
or e-commerce sites position themselves in different parts of the value-chain. To generate
revenue, an e-business either sells products/services or shortens the link between the
suppliers and consumers. Many business-to-business models try to eliminate the middleman
by using the Web to deliver products/services directly to their customers. By doing this they
may be able to offer cheaper products and better customer service to their customers. The
end result would be a differentiation between them and their competitors, increased market
share, and increased customer loyalty. Products sold by e-businesses could be either
traditional products, such as books and clothing, or digital products, such as songs, computer
software, or electronic books. Therefore, a business model is a group of shared or common
characteristics, behaviors, and methods of doing business that enables a firm to generate
profits by increasing revenues and reducing costs.
E-commerce models are either an extension or revision of traditional business models, such
as advertising model, or a new type of business model that is suitable for the Web
implementation, such as info-mediary. Merchant, brokerage, advertising, info-mediary,
subscription, affilation and community are the most popular e-commerce models:
36
3.3.1 Merchant model
This model basically transfers the old retail model to the e-commerce world by using the
Internet. The most common types of merchant model are similar to a traditional business
model that sells goods and services over the Web. There are different types of merchant
models which can be categorized in two groups; e-tailers and manufacturers. Amazon.com is
a good example of the e-tailer type (see Annex VIII). An e-business similar to Amazon.com
uses the services and technologies offered by the Web to collect orders from consumers and
either sells products and services directly to the consumers or pass the order to
manufacturer or wholesaler for delivery. By offering good customer service and reasonable
prices, these companies establish a brand on the Web.
The merchant model is also used by manufacturers to sell goods and services over the
Internet. (In some classifications this model is defined as “manufacturer model”) Dell, Cisco
Systems, and HP are popular examples. These companies eliminate the middleman by
generating a portion of their total sale over the Web and by accessing difficult-to-reach
customers. Dell’s strategy is one of the most successful ones. Instead of selling its products
over the intermediaries (such as CompUSA), Dell establishes direct consumer relationships
to increase its market share. Most of the airlines are also successfully implement this
strategy in order to sell their tickets directly rather than using intermediaries such as travel
agents. thy.com and lufthansa.com can be given some as examples of the airline companies
According to Michael Rappa merchant and manufacturer models can be further detailed as;
Merchant Model:
Virtual Merchant - or e-tailer, is a retail merchant that operates solely over the web.
[Amazon.com]
Catalog Merchant - mail-order business with a web-based catalog. Combines mail, telephone
and online ordering. [Lands' End]
Click and Mortar - traditional brick-and-mortar retail establishment with web storefront.
[Barnes & Noble]
Bit Vendor - a merchant that deals strictly in digital products and services and, in its purest
form, conducts both sales and distribution over the web. [Apple’s iTunes Music Store]
Manufacturer (Direct) Model:
Purchase - the sale of a product in which the right of ownership is transferred to the buyer.
Lease - in exchange for a rental fee, the buyer receives the right to use the product under a
“terms of use” agreement. The product is returned to the seller upon expiration or default of
37
the lease agreement. One type of agreement may include a right of purchase upon
expiration of the lease.
License - the sale of a product that involves only the transfer of usage rights to the buyer, in
accordance with a “terms of use” agreement. Ownership rights remain with the
manufacturer (e.g., with software licensing).
Brand Integrated Content - in contrast to the sponsored-content approach (i.e., the
advertising model), brand-integrated content is created by the manufacturer itself for the
sole basis of product placement.
3.3.2 Brokerage model
The e-business brings the sellers and buyers together on the Web and collects a commission
on the transactions by using this model. This model plays a common role in both businessto-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C) markets.
The best examples of this type are online auction sites such as eBay or webstore.com which
also generate additional revenue by selling banner advertisement on their sites. Another
successful example is E*TRADE which aims to facilitate the exchange of financial securities
by means of bringing buyers and sellers together. Similar to other brokerage models,
E*TRADE also makes profit by collecting commissions on the sales of the securities. The
higher the value of the sale, the higher the commission E*TRADE receives. See Appendix IX
for a detailed analysis of E*TRADE.
According to M. Rappa, brokerage models can be further detailed as;
Marketplace Exchange - offers a full range of services covering the transaction process, from
market assessment to negotiation and fulfillment. Exchanges operate independently or are
backed by an industry consortium. [Orbitz, ChemConnect]
Buy/Sell Fulfillment - takes customer orders to buy or sell a product or service, including
terms like price and delivery. [CarsDirect, Respond.com]
Demand Collection System - the patented "name-your-price" model pioneered by
Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service,
and the broker arranges fulfillment.[Priceline.com] Note that, this model is defined as
“dynamic pricing model” in some references which is a separate e-business model category.
“Demand sensitive pricing model” can also be included in this model where an item’s price
gets lower if more costumers are buying. (using bulk buying power).
Auction Broker - conducts auctions for sellers (individuals or merchants). Broker charges the
seller a listing fee and commission scaled with the value of the transaction. Auctions vary
widely in terms of the offering and bidding rules. [eBay]
Transaction Broker - provides a third-party payment mechanism for buyers and sellers to
settle a transaction. [PayPal, Escrow.com]
Distributor - is a catalog operation that connects a large number of product manufacturers
with volume and retail buyers. Broker facilitates business transactions between franchised
distributors and their trading partners.
Search Agent - a software agent or "robot" used to search-out the price and availability for a
good or service specified by the buyer, or to locate hard to find information.
38
Virtual Marketplace - or virtual mall, a hosting service for online merchants that charges
setup, monthly listing, and/or transaction fees. May also provide automated transaction and
relationship marketing services. [zShops and Merchant Services at Amazon.com]
3.3.3 Advertising model
This model is an extension of traditional advertising media, such as television and radio.
Search engines and directories such as Google and Yahoo provide contents (similar to radio
and TV) and allow the users to access this content for free. By creating significant traffic,
these e-businesses are able to charge advertisers for banner ads or leasing spots on their
sites. Another example is MSN.com which is one of the biggest content providers created by
Microsoft. However, the advertising model is also used by small-scale firms or even
individual entrepreneurs as the entry to the market is much easier in internet. Practically,
anyone who has a good idea to attract people to create traffic on his/her web site can use
advertising model successfully. For example, this model has been used by consultants such
as financial advisers and lawyers, who might provide free articles about topics specific to
their expertise and practice. The banks would be interested in putting advertising to such
sites. (e.g. about mortgage loans.)
According to M. Rappa, advertising models can be further detailed as;
Portal - usually a search engine that may include varied content or services. A high volume of
user traffic makes advertising profitable and permits further diversification of site services. A
personalized portal allows customization of the interface and content to the user. A niche
portal cultivates a well-defined user demographic. [Yahoo!]
Classifieds - list items for sale or wanted for purchase. Listing fees are common, but there
also may be a membership fee. [Monster.com, Craigslist]
User Registration - content-based sites that are free to access but require users to register
and provide demographic data. Registration allows inter-session tracking of user surfing
habits and thereby generates data of potential value in targeted advertising campaigns.
[NYTimes]
Query-based Paid Placement - sells favorable link positioning (i.e., sponsored links) or
advertising keyed to particular search terms in a user query, such as Overture's trademark
"pay-for-performance" model. [Overture]
Contextual Advertising / Behavioral Marketing - freeware developers who bundle adware
with their product. For example, a browser extension that automates authentication and
form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual
advertisers can sell targeted advertising based on an individual user's surfing activity.
Content-Targeted Advertising - pioneered by Google, it extends the precision of search
advertising to the rest of the web. Google identifies the meaning of a web page and then
automatically delivers relevant ads when a user visits that page. [Google’s Adsense] This
type of advertising is also used in bloggs commonly.
39
3.3.4 Info-mediary Model
E-businesses which use this model collect information on consumers and businesses and
then sell this information to interested parties for marketing purposes. For instance,
Netzero.com provides free Internet access; in return it collects information related to the
buying habits and surfing behavior of customers. This information is later sold to advertisers
for direct marketing. eMachines.com offers free PCs to its customers for the same purpose.
According to M. Rappa, info-mediary models can be further detailed as;
Advertising Networks - feed banner ads to a network of member sites, thereby enabling
advertisers to deploy large marketing campaigns. Ad networks collect data about web users
that can be used to analyze marketing effectiveness. [DoubleClick]
Audience Measurement
[Nielsen//Netratings]
Services
-
online
audience
market
research
agencies.
Incentive Marketing - customer loyalty program that provides incentives to customers such
as redeemable points or coupons for making purchases from associated retailers. Data
collected about users is sold for targeted advertising. [Coolsavings]
Metamediary - facilitates transactions between buyer and sellers by providing
comprehensive information and ancillary services, without being involved in the actual
exchange of goods or services between the parties. [Edmunds]
3.3.5 Subscription model
This e-business model aims to generate revenue by means of using subscription, pay-per
view, or membership. In order to view the website content, the users are charged a periodic
fee. (e.g. daily, monthly) This model is commonly combined with the advertising model.
Business Week and Reader’s Digest are two examples of this model which provide free
content that are accompanied by advertisements and than attempt to sell further services
through subscription. Another aim is to attract consumers by free content which will lead
them to buy the printed version. AjansPress is another example of this model that sells
business news and analysis based on subscription.
According to M. Rappa, subscription models can be further detailed as;
Content Services - provide text, audio, or video content to users who subscribe for a fee to
gain access to the service. [Listen.com, Netflix]
Person-to-Person Networking Services - are conduits for the distribution of user-submitted
information, such as individuals searching for former schoolmates. [Classmates]
Trust Services - come in the form of membership associations that abide by an explicit code
of conduct, and in which members pay a subscription fee. [Truste]
Internet Services Providers - offer network connectivity and related services on a monthly
subscription. [America Online]
40
3.3.6 Affiliation Model
The affiliation model involves payments to website operators for customers who find their
way to a company’s site and either buy merchandise or services or perform some other
action, such as registering and providing certain information. This is done by offering
percentage of the revenue to affiliated partner sites for each transaction. For instance
anyone can register to Amazon.com and create an online link in his/her website.
Amazon.com currently pays 15 percent of commission to the website operator which sent
the costumers.
According to M. Rappa, affiliation models can be further detailed as;
Banner Exchange - trades banner placement among a network of affiliated sites.
Pay-per-click - site that pays affiliates for a user click-through.
Revenue Sharing - offers a percent-of-sale commission based on a user click-through in
which the user subsequently purchases a product.
3.3.7 Community Model
The rationale of the community model is to generate revenue by means of establishing a
community and making people to participate into this community. Communities vary widely
and can include people trying to find their former school mates or sharing a common hobby
or wishing to play an online game. Revenue can be generated through advertising and
subscription for premium services as well as through donations. The social networking sites
(such as Facebook) are good examples of this model which are very popular today.
According to M. Rappa, affiliation models can be further detailed as;
Open Source - software developed collaboratively by a global community of programmers
who share code openly. Instead of licensing code for a fee, open source relies on revenue
generated from related services like systems integration, product support, tutorials and user
documentation. [Red Hat]
Open Content - openly accessible content developed collaboratively by a global community
of contributors who work voluntarily. [Wikipedia]
Public Broadcasting - user-supported model used by not-for-profit radio and television
broadcasting extended to the web. A community of users support the site through voluntary
donations. [(WCPE.org)]
Social Networking Services - sites that provide individuals with the ability to connect to other
individuals along a defined common interest (professional, hobby, romance). Social
networking services can provide opportunities for contextual advertising and subscriptions
for premium services. [Flickr, Twitter, ask.fm, Foursquare, Google+, Facebook]
41
3.4
Major Types of e-Commerce
The several types of e-commerce in use today are classified based on the nature of the
transactions: business-to-consumer (B2C), business-to-business (B2B), consumer-toconsumer (C2C), consumer-to-business (C2B), non-business/not-for-profit, government, and
organizational (intra-business).
3.4.1 Business-to-Consumer E-Commerce
In B2C e-commerce, businesses sell a diverse group of products and services directly to
customers. In addition to pure B2C e-commerce players such as Amazon.com, and
hepsiburada.com other traditional businesses have entered the virtual marketplace by
establishing comprehensive web sites and virtual storefronts. In these cases, e-commerce
supplements the traditional commerce by offering products and services through electronic
channels. Wal-Mart Stores, and the Gap are examples of companies that are very active in
B2C e-commerce. Some of the advantages of these e-commerce sites and companies include
availability of physical space (customers can physically visit the store), availability of returns
(customers can return a purchased item to the physical store), and availability of customer
service in these physical stores. Figure 3.1 illustrates a B2C relationship. In the figure ISP,
means Internet service provider.
Figure 3.1 A business-to-consumer (B2C) e-commerce relationship
A Business-to-Consumer e-Commerce Cycle
There are five major activities involved in conducting B2C e-commerce. The B2B e-commerce
model uses a similar cycle, as shown in Figure 3.2.
42
Figure 3.2 Major activities for B2C e-commerce.
1. Info sharing: A B2C e-commerce may use some or all of the following applications
and technologies to share information with customers: Online advertisements, email, company web site, online catalogs, message board systems, bulletin board
systems, multiparty conferencing.
2. Ordering: A customer may use e-mail or forms available on the company's web site
to order a product from a B2C site. A mouse click sends the essential information
relating to the requested piece(s) to the B2C site.
3. Payment: Credit cards, electronic checks, and digital cash are among the popular
options that the customer has as options for paying for the goods or services.
4. Fulfillment: This is the stage where the product or service is physically delivered from
the merchant to the customer. In case of physical products (books, videos, CDs), the
filled order can be sent to the customer using regular mail or courier. For faster
delivery, the customer generally has to pay additional money. In case of digital
products (software, music, electronic documents), the e-business uses digital
documentations to assure security, integrity, and privacy of the product. It may also
include delivery address verification and digital warehousing that stores digital
products on a computer until they are delivered. The e-business can handle its own
fulfillment operations or out-source this function to third parties with moderate
costs.
5. Service and support: It is much cheaper to maintain current customers than to
attract new customers. For this reason, e-businesses should do whatever they can in
order to provide timely, high-quality service and support to their customers. As ecommerce companies lack a traditional physical presence and need other ways to
maintain current customers, service and support are even more important in ecommerce than traditional businesses. The following are some examples of
technologies and applications used for providing service and support: (E-mail
confirmation, periodic news flash, and online surveys may also be used as marketing
tools).
a. E-mail confirmation: In most cases, the e-mail confirmation provides the
customer with a confirmation number that the customer can use to trace the
product or service. E-mail confirmation informs the customer that a particular
43
order has been processed and that the customer should receive the
product/service by a certain date.
b. Periodic news flash: They used to give customers with the latest information
on the company or on a particular product or offering.
c. Online Surveys: Their results can assist the e-commerce site to provide better
services and support to its customers based on what has been collected in the
survey, even though online surveys are mostly used as a marketing tool.
d. Help desks: They provide answers to common problems or provide advice for
using products or services. They are used for the same purpose as in
traditional businesses.
e. Assured secure transactions & assured online auctions: They guarantee
customers that the e-commerce site covers all the security and privacy issues.
As many customers still do not feel comfortable conducting online business,
the security and privacy services are especially important.
3.4.2 Business-to-Business E-Commerce
Business-to-Business e-commerce holds electronic transactions among and between
businesses. The Internet and reliance of all businesses upon other companies for supplies,
utilities, and services has enhanced the popularity of B2B e-commerce and made B2B the
fastest growing segment within the e-commerce environment. In recent years extranets
(more than one intranet) have been effectively used for B2B operations. B2B e-commerce
creates dynamic interaction among the business partners; this represents a fundamental
shift in how business will be conducted in the 21st century.
Oracle, SAP, Broadvision, Webmd, Ariba , Commerceone are some of the major vendors of ecommerce and B2B solutions.
Companies using B2B e-commerce relationship observe cost savings by increasing the speed,
reducing errors, and eliminating many manual activities. Wal-Mart Stores is an example for
B2B e-commerce. Wal-Mart's major suppliers (e.g., Procter and Gamble, Johnson and
Johnson, and others) sell to Wal-Mart Stores electronically; all the paperwork is handled
electronically. These suppliers can access the inventory status in each store online and put
orders for required products in a timely manner. In a B2B environment, purchase orders,
invoices, inventory status, shipping logistics, and business contracts handled directly through
the network result in increased speed, reduced errors, and cost savings. B2B e-commerce
reduces cycle time, inventory, and prices and enables business partners to share relevant,
accurate, and timely information. The end result is improved supply-chain management
among business partners. The following figure illustrates a generic B2B relationship.
44
Figure 3.3 A business-to-business (B2B) e-commerce relationship
Advantages of B2B e-commerce can be summarized as follows:
 A B2B e-commerce lowers production cost by eliminating many labor-intensive tasks.
 More timely information is achieved by the formation of a direct online connection in
the supply chain.
 Accuracy is increased because fewer manual steps are involved.
 Cycle time improves because flow of information and products between business
partners is made simpler and quicker. Since raw materials are received faster and
information related to customer demands is more quickly transferred.
 Naturally this close communication between the business partners improves overall
communication .
 Increased communications results in improved inventory management and control.
Major Models of Business-to-Business e-Commerce
o Seller-controlled marketplace: This is the most popular type of B2B model. In this
model the sellers who provide to fragmented markets such as chemicals, electronics,
and auto components come together to generate a common trading place for the
buyers. While the sellers aggregate their market power, it simplifies the buyers
search for alternative sources. Businesses use the seller's product catalog to order
products and services online.
One popular application of this model is e-procurement, which significantly
streamlines the traditional procurement process by using the Internet and web
technologies. E-procurement is radically changing the buying process by allowing
employees throughout the organization to order and receive supplies/services from
their desktop with just a few mouse clicks. This results in major cost savings and
improves the timeliness of procurement processes and the strategic alliances
between suppliers and participating organizations. E-procurement may qualify
45
customers for volume discounts or special offers. E-procurement software may make
it possible to automate some buying and selling, resulting in reduced costs and
improved processing speeds. The participating companies expect to be able to
control inventories more effectively, reduce purchasing-agent overhead, and
improve manufacturing cycles. E-procurement is expected to be integrated into
standard business systems with the trend toward computerized supply-chain
management.
o Buyer-controlled marketplace: This model is used by large companies with
significant buying power or a consortium of several large companies. The consortium
among Ford, General Motors and Daimler AG is a good example of this model. In this
model a buyer or a group of buyers opens an electronic marketplace and invites
sellers to bid on the announced products or RFQs (request for quotation). Using this
model the buyers are looking to efficiently manage the procurement process, lower
administrative cost, and exercise uniform pricing. Companies are making investments
in a buyer-controlled marketplace with the goal of establishing new sales channels
that increase market presence and lower the cost of each sale. By participating in a
buyer-controlled marketplace a seller could perform the following:
o Get better understanding of buying behaviors
o Carry out pre-sales marketing
o Carry out sales transactions
o Carry out post-sales analysis
o Reduce order placement and delivery cycle time
o Offer an alternative sales channel
o Automate the order management process
o Automate the fulfillment process
o
Third-party exchanges marketplace: A third-party-controlled marketplace model is
controlled by a third party not by sellers or buyers. A third-party-controlled
marketplace model offers suppliers a direct channel of communication to buyers
through online storefronts. The interactive procedures within the marketplace
contain features like product catalogs, request for information (RFI), rebates and
promotions, broker contacts, and product sample requests. The marketplace makes
revenue from the fees generated by matching buyers and sellers. These marketplaces
are usually active either in a vertical or horizontal market .
A vertical market focuses on a specific industry or market. The following are
some examples of this type: wwwood.net (connecting suppliers and consumers in
wood industry), PlasticsNet.com (raw materials and equipment), SciQuest.com
(laboratory products), Textileexnet.com (A B2B portal of worldtradexnet specially for
textile products)
A horizontal market concentrates on a specific function or business process. They
provide the same function or automate the same business process across different
industries.
46
o Trading partner agreements: The main objectives of the trading partner agreements
B2B e-commerce model are to automate the processes for negotiating and enforcing
contracts between participating businesses. This relatively new model is gaining
popularity. This model is expected to become more common as extensible markup
language (XML) and the e-business XML initiative (ebXML) become more accepted.
This worldwide project is attempting to standardize the exchange of e-business data
via XML, including electronic contracts and trading partner agreements. Using this
model enables customers to submit electronic documents that previously required
hard-copy signatures via the Internet. The Directive on a Community framework for
electronic signatures was adopted by the European Parliament in 13th December
1999.
3.4.3 Consumer-to-Consumer e-Commerce
Using C2C e-commerce, consumers sell directly to other consumers using the Internet and
web technologies. Individuals sell a wide variety of services/products on the Web or through
auction sites such as eBay.com, and gittigidiyor.com through classified ads or by advertising.
Figure 3.4 illustrates a general C2C e-commerce relationship. Consumers are also able to
advertise their products and services in organizational intranets and sell them to other
employees.
Figure 3.4 A consumer-to-consumer (C2C) e-commerce relationship
47
3.4.4 Consumer-to-Business E-Commerce
Consumer-to-business (C2B) e-commerce that involves individuals selling to businesses may
include a service/product that a consumer is willing to sell. Individuals offer certain prices for
specific products/services. Figure 3.5 shows a C2B e-commerce relationship.
Figure 3.5 A consumer-to-business (C2B) e-commerce relationship
3.4.5 Non-Business and Government E-Commerce
Political, social and not-for-profit organizations also use e-commerce applications for various
activities, such as fundraising and political forums. These organizations also use e-commerce
for customer service and for purchasing to decrease cost and get better speed. The ecommerce applications in government and many non-business organizations are also on the
rise.
3.4.6 Intra-Business E-Commerce
The organization intranets provide the right platform for intra-business e-commerce. Intrabusiness e-commerce involves all the e-commerce-related activities that take place within
the organization. These activities may include exchange of information, goods, or services
among the employees of an organization. This may include selling organization
products/services to the employees, offering human resources services, conducting training
programs, and much more.
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3.5
Advantages and Disadvantages of e-Commerce
3.5.1 Advantages of e-Commerce
The followings underline some of the selected advantages of e-commerce:
 Gaining extra knowledge about probable customers: Using various tools such as email, cookies, the e-commerce site and the company web site, it is possible to gain
additional knowledge about probable customers. For example, the e-business is able
know the customer shopping behavior, preferences, gender, age group, and so forth.
This knowledge could be successfully used to better market products/services.
 Enhanced customer service: Many of the customers' questions and concerns are
answered using tools such as an online help desk, company web sites, and e-mail
with minimum cost. An e-commerce site is able to improve customer service by using
these tools. Printing forms online, downloading software patches and reviewing
frequently asked questions (FAQs) are other examples of customer service.
 Enhanced customer involvement: The customer can offer an online review of a
product that he/she has recently purchased from the e-commerce site or the
customer may participate in various open forums, chat groups, and discussions. In
the e-commerce environment, customer involvement could be significantly
improved.
 Enhanced relationships with the financial community: An e-commerce site can
improve its relationships with the financial community through the timely transfer of
business transactions and a better understanding of the business partner's financial
status.
 Enhanced relationships with suppliers: E-commerce technologies enable businesses
to exchange relevant information with their partners on a timely basis with minimum
cost. Using B2B e-commerce assists businesses in managing a comprehensive
inventory management system. A B2B e-commerce site can improve its relationships
with suppliers.
 Improved flexibility and case of shopping: The customer does not need to leave
his/her home or office and commute to purchase an item. Shopping tasks can be
done from the privacy of the home with a few clicks of mouse. Improved flexibility
and ease of shopping is a significant advantage of e-commerce.
 Increased return on capital/investment: An effective e-commerce program is able to
operate with no inventory or with minimum inventory. By having no or minimal
inventory, the e-commerce site could avoid devaluation in inventory due to the
release of a new product, change in fashion, season, and so forth. In many cases an
e-commerce site should be able to increase return on capital and investment since
no inventory is needed.
 Increased number of customers: Customers from remote locations and those
outside of the business's geographical boundaries can purchase products/services
from the e-commerce site. An e-business or a traditional business with an ecommerce presence could increase its potential customers.
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 Product and service customization: By collecting relevant information on different
customers, a particular product/service could be tailor-made to customer taste and
preference.
 Personalized service: In many cases an e-commerce site, by using various web
technologies, is able to offer personalized service to its customers and at the same
time customize a product or service to suit a particular customer
 Doing business around the world 24 hours a day, 7 days a week: Customers in any
part of the world with an Internet connection can log onto the e-commerce site and
order a product or service. Holidays, weekends, after hours, and differences in time
zones do not pose any problem. In the e-commerce world, doing business around the
globe 24 hours a day, 7 days a week is a reality.
3.5.2 Disadvantages of e-Commerce
Many of the disadvantages of e-commerce are related to technology and business practices.
The following lists some of the disadvantages of e-commerce:
 Potential capacity and bandwidth problems: Possible capacity and bandwidth
problems could be a serious problem. If the web site is responding slowly or not
responding at all, customers quickly get turned off.
 Security concerns: Security issues are main worry for many consumers. Security
issues and measures are expected to improve in coming years, through the use of
media other than credit cards on the Web, such as e-wallet, e-cash, and other
payment systems, acceptance of digital signatures, more widespread application and
acceptance of encryption technology, and greater awareness and understanding of
customers' concerns.
 Accessibility: Not everybody is connected to the Web yet. The reduction in cost of
PCs, and other Internet appliances will further increase Internet applications and
result in further accessibility of e-commerce. As the number of Internet users
increases daily, the accessibility of customers concern will definitely become more
convenient.
 Acceptance: Not everybody accepts the technology. The growth of the Internet and
of online shopping points helps to further acceptance of e-commerce applications.
However, acceptance of e-commerce by the majority of people will take time, similar
to other technologies.
 A lack of understanding of business strategy and goals: When the technology is fully
accepted, a company's e-business strategies and goals will also become better
understood.
As result, similar to traditional businesses, e-commerce presents many advantages and
disadvantages. The advantages of e-commerce significantly outweigh its disadvantages, if
the e-commerce is established based on the correct business model.
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3.6
Wireless (Mobile) e-Commerce
Wireless e-commerce based on SMS (Short Message Service) and 3G has been around for
several years and many telecommunications companies have been offering Web-ready
cellular phones. Already, a lot of companies made it possible to purchase various products,
track shipments, get information about train and flight schedules and book cinema tickets
using these wireless devices.
Wireless marketing initially started using SMS and became very popular in Europe and some
parts of Asia. Today, several 100millions of SMSs advertisiments are sent to customers.
Wireless e-commerce has also grown into a big market; today, buying applications music and
videos using mobiles is commonplace. In the UK, in 2005 the "Crazy Frog" ringtone made it
to the top spot in UK music charts, which was the first time a ringtone was in the charts!
SMS also makes tracking customer response easier. Customers could give feedback or vote
using SMSs. To make it more convenient to users, short codes are supported by many
networks, which allows applying for a short (such as 4 digit) special numbers to receive
customer response.
The advertisers should make sure that the customer has opted in for the service. They also
should allow the user to cancel the service at any time. Guidelines to be followed by mobile
marketers are available in several countries.
Marketing by bluetooth and infrared have also been tried, however they haven't really been
popular. The most promising type of the wireless marketing is utilising the internet. The
internet connection in mobile phones and other mobile devices are getting faster and the
screens and user interfaces of these devices are getting more suitable for internet use. With
the wider deployment of 3G mobile networks, mobile e-commerce is expected to find more
common use. Today, many e-commerce web sites are simply unusable or very difficult to use
with mobile devices. If customers using mobile devices is targeted, the e-commerce web site
should be designed accordingly.
Location based services (LBS), which offers customised service to the customers is also a
promising and emerging area. Based on their current location, the customers are sent
custom advertising, such as information or special deals from a nearby restaurant. Mobile
devices could get location information from a built-in GPS chip or using trilateration based
on the signal strength to the closest mobile phone masts.
3.7
Voice-Based E-Commerce
Nowadays, just picking up a phone and accessing a web site you can order a product. At the
core of these new services are voice recognition and text-to-speech technologies that have
improved significantly during the past decades. Customers will be able to speak the name of
the web site or service they want to access and the system will recognize the command and
respond with spoken words. By using voice commands, consumers soon will be able to
search a database by product name and locate the merchant with the most competitive
prices.
One method to conduct voice-based e-commerce is to use digital wallets (e-wallets) online.
In addition to financial information these wallets include other related information, such as
the customer's address, billing information, driver's license, and so forth. This information
can be conveniently transferred online. Digital wallets are created through the customers'
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PCs and used for voice-based e-commerce transactions. Security features for voice-based ecommerce are expected to include the following: Voice recognition, so that authorizations
have to match a specific voice, call recognition, so that calls have to be placed from specific
mobile devices. Voice-based e-commerce will be suitable for applications such as the
following: Receiving sports scores, finding directions to a new restaurant, reserving tickets
for local movies, buying a book.
There are already several voice portals on the market. Most popular companies that provide
voice portal are: Avaya.com and Cisco.com.
Figure 3.6 The initial screen of Cisco.com
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References
1. Allan, and C. L. Tucci, “ Internet Business Models and Strategies”, McGraw-Hill-Irwin,
Boston , Massachusetts , 2000
2. Canzer, “e-Business: Strategic Thinking and Practice”, Houghton Mifflin Company, New
York, 2006, pp. 90-102
3. E-commerce Models - http://www.dcs.bbk.ac.uk/~gr/ecommerce_ism/infomodels.pdf ,
Last visit: April 2013
4. E-commerce Tutorial - http://www.easystorecreator.com/ecommerce-tutorial.asp , Last
visit: April 2013
5. E-commerce Tutorial - www.webmonkey.com/category/web design and development ,
Last visit: April 2013
6. H. Bidgoli, “Electronic Commerce: Principles and Practice”, Academic Press, New York ,
2002, ISBN: 0-12-095977-1
7. H. M. Deitel, P. J. Deitel and K.Steinbuhler, “e-Business and e-Commerce for Managers”,
Prentice-Hall, N.
8. J. G. Kobielus, “ BizTalk: Implementing Business-to-Business E-commerce”, 2001,
Prentice Hall, NJ.
9. L. Fickel, “Online Auctions: Bid Business” CIO Web Business Magazine. June 1, 1999
10. M. Rappa, “Business Models on the Web”,
http://digitalenterprise.org/models/models.html, Last Visit: April 2013
11. R. Banham, “The B2B”, Journal of Accountancy, July 2000, pp. 26-30.
12. S. Krishanmurthy, “E-Commerce Management: Texts and Cases”, South-Western, Ohio,
2003, pp. 72-99
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Appendix I
Areas of Evaluation:
Employees
Skills
Training
Knowledge
Commitment by executives
Happiness
Infrastructure
Financial systems
Human resources
Research and development
LAN/WAN
Technology
Legacy applications
Networking
Web site and intranets
Security
IT skills
Customer Interactions
Sales
Marketing
Customer service
Call centers
Distribution channels
Production
Manufacturing
Supply chain management
Distribution
Production scheduling
Inventory management
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Appendix II
E-Business Models - Design Descriptions
Category killer: You want to use the Internet to define a new market by identifying a unique
customer need. If you're aiming for this model, be aware that you'll have to be one of the
first to market and stay in front of the group.
Example: Amazon.com
Channel reconfiguration: You want to use the Internet as a new channel to deal directly with
customers, which will include sales and order fulfillment. This model first aids and then
replaces physical distribution.
Example: Compaq.com
Transaction intermediary: You want to use the Internet to process purchases. This model
performs all the end-to-end functions that a customer would need from searching to
comparing with other products to sales.
Example: eBay.com, debenhams.com
Channel mastery: You want to use the Internet for sales and service. This model is used to
support existing sales rather than supplant them.
Example: Eddiebauer.com
Self-service innovator: You want to use the Internet to provide human resources services
that your customer's employees can use directly. This model allows them to develop a
personalized relationship.
Example: Ceridian.com
Supply-chain innovator: You want to use the Internet to make the transactions between all
members of a supply chain more efficient and streamlined.
Example: SupplyChainBrain.com
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AMAZON
On July 16, 1995, Amazon.com opened its virtual doors to the world. Initially, Amazon was
headquartered in a small, two-bedroom home in Believue, Washington. The garage was
converted into a work area, and three Sun workstations were connected. The site’s founder,
Jeff Bezos, told the 300 friends and family members who tested the site to spread the word.
Within a month, Amazon sold books in all 50 US states and 45 different countries worldwide.
By Christmas 1995, the company was ready to top $1 million per year. This is the e-business
site that entrepreneurs dream about.
However, Bezos’s vision didn’t end at book sales. Gradually, the store has expanded to
include DVDs, CDs, videos, gardening tools, auctions, and space for individuals who want to
open their own shops. That might seem like all the goods that one store can sell, but Bezos
wants more growth and more goods for sale. Now, Amazon handles many products on
clothing, accessories, computer, office, consumer electronics, food, household, health,
beauty, home, garden, kids, baby, sports and fitness.
From a business point of view, Amazon provides a new way to sell things. It creates a flow
experience. This experience, in theory—and seemingly in practice—keeps customers coming
back to Amazon.com to read product reviews or one another’s wish lists. It also smoothes
out the online shopping process from when you finalize your order to when your order
shows up on your home entrance. Amazon’s half-dozen warehouses are part of a nationwide
distribution network uniquely designed to handle e-commerce. The warehouses are located
in low- or no sales-tax states around the US. They are also designed to handle goods
differently than conventional warehouses: they ship materials from the warehouse directly
to the customer rather than pallet goods and ship to a retail store.
The marriage between a bookstore and the Internet was perfect. When Amazon was started,
there were no giant mail-order book companies, because the catalog would be as big as a
phone book and far too expensive to mail. On the Internet, this was not a barrier. Luck also
played a helpful part in the success of Amazon. When Bezos approached book wholesalers,
he discovered that books were one of the most highly data-based items in the world—the
wholesalers even had their databases on CD-ROM. This, again, helped get his fledgling ebusiness up and cashing in.
To get the site up and running, Bezos borrowed $300,000 of his parents’ retirement money.
Today, —as six percent owners of Amazon— his parents are billionaires.
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TOYSMART
The first major e-business victim was three-year-old Toysmart.com. Trouble for Toysmart
started when its partner, the Walt Disney Co., decided not to go through with additional
funding. To compound matters, venture capitalists decided not to throw the toy company a
life preserver, and its highly predictable stock offering was disadvantaged by a turbulance in
tech stock market.
The result was unrecoverable. Creditors soon forced Toysmart into bankruptcy. Some may
say that Toysmart “took one for the e-business team.” Its downfall illustrates just how
quickly a capable business venture can vibrate, break apart, and burn in the atmosphere.
How It Grew: Toysmart was a promising e-business when it started in 1997. Its founder,
David Lord, joined Holt Education Outlet. The small, family-owned, suburban Boston toy
company specialized in educational toys, and Lord moved the company into e-commerce by
putting the store’s wares online. At the end of 1998, Lord and a partner bought the company
from the Holts. After Lord took over the company, renaming it Toysmart the company
started to grow. It grew so fast that by August 1999 it needed more money. Twenty-five
million dollars in funding was offered by a capital investment firm, but Lord rejected the
offer, opting for a partnership with Disney. Disney’s investment included $20 million in cash
and $25 million worth of free advertising across Disney’s vast media belongings.
That contract did not just buy his company money and time—it bought him a partner with a
controlling interest in the company. It was that shift of power that would cover the road to
disaster.
How It Fell: Toysmart’s every move required Disney’s stamp of approval. Because Disney was
used to operating at the pace of a conventional company, Toysmart was about to get itself
into trouble.
Trouble poked up its head at Christmas time, when the company sold $6 million worth of
merchandise, far less than the anticipated $25 million sales. A few months later, when the
stock market started to think twice about e-business investments, Toysmart’s public offering
went out with a cry. And, in another stroke of bad luck, Disney decided to shift its Web focus
from commerce to entertainment.
The company shut its virtual and physical doors in May 2000, and in June creditors pushed
Toysmart into economic failure proceedings. In the end, Toysmart owed $21 million to
scores of creditors, including Zero Stage Capital and Citibank for $4 million each; Arnold
Communications for $2.5 million; and Children’s Television Workshop for $1.3 million The
ripples of Toysmart’s failure radiated outward, affecting hundreds of people—both
employees and those who had business dealings with Toysmart. First, almost 200 employees
lost their jobs and saw their version of the new American Dream—turning stock options into
millions—dashed on the rocks. Then, one must consider the scores of toy makers, software
companies, advertising partners, plumbers, carpenters, distribution companies, vendors, and
any other service providers that can be linked to a company that was left with $21 million in
unpaid invoices.
Toysmart left associated e-businesses scuffling for cash and struggling to survive the ebusiness earthquake. The companies, including Shopnow.com, Lifemjnders.com,
eGreetings.com, Christmas.com, Grden.com, Go2Net.com, and Yesmail.com, are still waiting
to collect $15,000—$ 200,000 in bills.
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Appendix III
Some Web Resources for Conducting Successful Web Marketing
ActiveMedia http://www.activemedia.com : Provides present survey of trends in the Web
marketplace, spending per web site, and so forth
http://www.getuwired.us/Small-Business-Web-Marketing/2011/07/conducting-successfulweb-marketing-campaigns/: Small business web development
http://www.webmarketingexpo.in/about-web-marketing-expo/: A platform created for
trainers, entrepreneurs, students job seekers employers.
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Appendix IV
Banner Advertising Rules
In order to implement a successful online banner campaign the following rules may help:
Keep banners small: The message must be visible within a few seconds even on slow
connectiontions.
Invest in Design: Use a brief design to display your message.
Avoid complex animations: Animations are attractive, but take up a lot of time for
downloading.
Make it readable: Don’t use funny fonts. Display your message in such a way that everyone
is able to read it.
Make sure the link works: Even the best banner ad is useless if the link doesn’t work.
Design a forceful message: Make a short, forceful statement on your product or service.
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Appendix V
Some Web Resources for Marketing the Product/Services of a Web Site
http://www.webcom.com Provides wide-ranging information resources about e-businesses
http://www.o-a.com Focuses on professional discussion of online advertising strategies,
results, studies, tools, and media coverage
https://forums.digitalpoint.com/: Online internet marketing and searchengine optimization
forum
http://www.webhostingtalk.com :Advertising forum
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Appendix VI
Some Web Resources for Several Software Vendors Supporting Push Technology
www.pointcast.com: PointCast is among the earliest push technology providers and
specializes as the Internet news network. Some of the channels of information that the user
can subscribe to include headline news, stocks, sports and weather. The contents are
gathered from major organizations such as CNN, People Magazine, Reuters, and Time.
http://www.backweb.com: BackWeb allows users to pick from many channels to receive
news, multimedia, cartoon and audio announcements, which download onto the computer
desktop.
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Appendix VII
Some Companies Using e-Commerce
Amazon.com provides access to books music CDs, electronics, software, toys, video games,
prescription drugs, and much more electronically. www.amazon.com
American Express successfully uses e-commerce for credit card transactions. www.
americanexpress.com
Apple Computer sells computers online. www.apple.com
Auto-by-Tel sells cars over the Web. www.autobytel.com
Cisco Systems sells data communications components over the Web. www. cisco .com
Dell Computer and Gateway sell computers through their web sites and allow customers to
configure their systems on the Web and then purchase them. www. dell .com , www.
gateway .com
Drugstore.com and CVS.com refill and sell new drugs and vitamins and other health and
beauty products online. www.drugstore.com , www.cvs.com
Epicurious sells exotic foods over the Web. www. epicurious .com
Peapod sells groceries over the Web. www. peapod .com
Procter & Gamble and IBM conduct order placements electronically. www.pg.com , www.
ibm .com
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Appendix VIII
Industry Connection: Amazon.Com Corporation
Amazon.com is one of the leaders in B2C e-commerce. Amazon.com opened its virtual stores
in July 1995 with a mission to use the Internet to transform book buying into the fastest and
easiest shopping experience possible. Amazon.com offers numerous products and services
including books, CDs, videos, DVDs. toys, games, electronics, free electronic greeting cards,
online auctions, and much more. In addition to an extensive catalog of products,
Amazon.com offers a wide variety of other shopping services and partnership opportunities.
Amazon.com's business model is based on the merchant model . By creating customer
accounts, using shopping carts, and using the 1-click technology, Amazon.com makes the
shopping experience fast and convenient. E-mail is used for order confirmation and
customer notification when new products that suit a particular customer become available.
Allowing customers to post their own book reviews, creates an open forum between the
storefront and its customers. Using Amazon.com a prospective shopper can do the
following:
Search for books, music, and many other products and services
Browse virtual aisles in hundreds of product categories from audio books, jazz, and video
documentaries to coins and stamps available for auction.
Get instant personalized recommendations based on the shopper's prior purchases as soon
as the shopper logs on.
Sign up for the Amazon.com e-mail subscription service to receive the latest reviews of new
titles in categories that interest the customer.
Amazon.com offers a safe and secure shopping experience by guaranteeing its shopping and
auction services. It also offers 24-hour-a-day, 7-days-a-week help desk services to assist
shoppers who experience difficulties.
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Appendix IX
E-Trade
Reference: B. Canzer, “e-Business: Strategic Thinking and Practice”, Houghton Mifflin
Company, New York, 2006, pp. 90-102
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