CHAPTER 4: ELECTRONIC
COMMERCE & ELECTRONIC
BUSINESS
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Management Challenges
Internet provides many opportunities,
but also challenges, such as:
• Electronic commerce &
electronic business require a new
way of thinking
• Finding a successful Internet
business model
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New Business Models and Value
Propositions
Business Model: How an organization delivers
a product or service
Changing Economics of Information
– The Internet reduces information asymmetry
– The Internet eliminates the tradeoff between
richness and reach of information
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Business Models
• Bricks and Mortar
• Clicks and Mortar (Bricks and Clicks)
– Canadian Tire
• Pure Play
– Amazon
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Internet Business Models: Selling
• Virtual Storefront
– Sells goods and /or services online
– www.amazon.com
• Aggregator
– groups come together to gain volume discounts
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Internet Business Models:
Auctions
• Auction
– Dynamic pricing
– www.eBay.com
• Reverse Auction
– Consumers submit a bid to multiple sellers
– www.priceline.com
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Business Models: Online
Delivery, Products & Services
• Digital Product Delivery
– Sell and deliver software, multimedia, etc.
– www.Compusmart.com
• Content provider
– creates revenue through providing content for a fee,
and through advertising
– www.yahoo.com
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Internet Business Models: Brokers
• Information Broker
– Provides information about products
– www.baystreet.ca
• Transaction Broker
– Buyers view rates and terms & completes transaction
– www.TDWaterhouse.com
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Internet Business Models: Web
Entries & Communities
• Virtual community
– Provides an online meeting place for people
with common interests
– www.kidshelp.sympatico.ca
• Portal
– Initial point of entry to Web, specialized
content, services
– www.lycos.com
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Electronic Commerce
Business Originating From:
And Selling to:
Business
Consumers
Business
B2B
C2B
Consumers
B2C
C2C
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Electronic Commerce
Business Originating From:
Business
Business
Consumers
Publishers order paper supplies
from paper companies
And Selling to:
Consumers aggregate to bulk
purchase from Amazon
Amazon orders from publishers
Consumers
Consumers buy thousands of
Harry Potter Books from
Amazon
Consumers resell copies on
eBay
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Customer-Centric Retailing
• Direct sales over the Web
• Interactive Marketing and Personalization
• M-Commerce and Next Generation
Marketing
• Customer Self-Service
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B2B: Business to Business
Exchanges: commercial online market; many buyers,
many sellers
VERTICAL EXCHANGES
Set up for specific industries
e.g. Steel and Chemical Industries
HORIZONTAL EXCHANGES
Address functions that occur cross industry
e.g. purchasing office equipment
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E-commerce Payment Systems
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•
•
•
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Digital wallet
E-cash
Smart card
Person-to-person payments
Credit Cards
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Security: Credit Cards
• Transfer of data from customer to vendor
• Transfer of data from vendor to payment
processor
• Protection of customer data in stored in
merchant’s database
• Secure Socket Layers (SSL)
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Intranets
Using Internet technology to support internal
organizational needs
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–
–
–
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Email
Document sharing
Online repositories of information
Remote access to resources
Group collaboration
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Example: Sun Microsystems
Intranet to support Sales Team
“The good news is there’s lots of information”
“The bad news is there’s lots of information”
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Intranets: Organizational Benefits
•
•
•
•
•
•
•
•
Cross platform availability
Can be tied to internal & transaction processing systems
Interactive applications with text, audio, video
Scalable as required
Easy to use Web interface
Low start-up costs
Improved information sharing
Reduced cost of distributing information
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Challenges & Opportunities
• Unproven business models
• Business processes require change
– channel conflicts
• Legal Issues
• Security and Privacy
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E-commerce in Canada
• There is a higher percentage of Canadians than
Americans using the Internet
• But . . . Canadian businesses are underrepresented
on the Internet
– Only 6 percent of Canadian businesses selling online in
2000, down from 10% in 1999
– In 2000, e-commerce sales accounted for 0.4 % of
revenues, up from 0.2% in 1999
– Canadians purchase from US companies
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Barriers to e-commerce in
Canada
• High percentage of SMEs in Canada
– May not have adequate resources to
develop e-commerce strategy & solution
• Shortage of skilled IT workers
• Lack of sense of urgency
• Conservative investor culture
• Tax structure
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E-commerce Taxation Issues
• Cross-border shopping
• Digital downloads
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Who is Making Money on the Web?
• 190 companies split into 7 categories
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–
–
–
–
–
–
Portals
Transaction
Commerce
Content
ISP
Enablers
Advertising
• Evaluated on financial metrics
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Who is Making Money on the
Web? Ctd.
• Results
– Winner: Transaction (8/11 cos. had positive earnings)
• Why: solid revenue model
– Losers: Content Providers and ISPs (4/34 CPs had
positive earnings)
– Commerce (0/26 had positive earnings)
– Conclusion: <1/5 that met necessary requirements to go
public had positive earnings. Transaction companies
making money; others are investing in building brands
and customer bases. Only a fraction of these cos. will
succeed.
Source: Scherbakovsky and Siegal
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