E-commerce
Business Technology Society
seventh edition 2011
Kenneth C. Laudon
Carol Guercio Traver
Chapter 1
Introduction and Overview
Electronic Commerce (E-Commerce, or EC)
is a concept that describes the process of
buying and selling or exchanging of products,
services, and information via computer
networks including the Internet.
EC can be defined from the following perspectives:
From a communication perspective, EC is the delivery of
information, products/services, or payments over telephone lines,
computer networks, or any other electronic means.
 From a business process perspective, EC is the application of
technology toward the automation of business transactions and
work flow.
 From a service perspective, EC is a tool that addresses the desire
of firms, consumers, and management to cut service costs while
improving the quality of goods and increasing the speed of service
delivery.
 From an online perspective, EC provides the capability of buying
and selling products and information on the internet and other
online services.
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E-commerce covers outward-facing processes
that touch customers, suppliers and external
partners, including sales, marketing, order
taking, delivery, customer service, purchasing of
raw materials and supplies for production and
procurement of indirect operating-expense
items, such as office supplies. It involves new
business models and the potential to gain new
revenue or lose some existing revenue to new
competitors.
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E-business includes E-commerce but also
covers internal processes such as production,
inventory management, product
development, risk management, finance,
knowledge management and human
resources. E-business strategy is more
complex, more focused on internal processes,
and aimed at cost savings and improvements
in efficiency, productivity and cost savings.
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E-commerce technology is different, more
powerful than previous technologies
E-commerce bringing fundamental changes
to commerce
Traditional commerce:
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Passive consumer
Sales-force driven
Fixed prices
Information asymmetry
1.
2.
3.
4.
5.
6.
7.
8.
Ubiquity
Global reach
Universal standards
Information richness
Interactivity
Information density
Personalization/customization
Social technology
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Technologies that allow users to:
 Create and share content, preferences,
bookmarks, and online personas
 Participate in virtual lives
 Build online communities
▪ E.g. Twitter, YouTube, Facebook, Second Life, Wikipedia,
Digg
 EC applications started in the early 1970s, with such
innovations as electronic fund transfer(EFT). It was
limited to large corporations, financial institutions,
and few small businesses.
 Then came Electronic Data Interchange, which
enlarged the participating companies to
manufacturers, retailers, services and so on.
 Many other applications followed, ranging from stock
trading to travel reservation systems. Such systems
were described as telecommunication applications
and their value was widely recognized.
 With the commercialization of the Internet in the
early 1990s and its rapid growth to millions of
potential customers, the term EC was coined and its
applications was expanded rapidly.
 One reason for this rapid expansion was the
development of networks, protocols, software, and
specifications.
 Almost every medium and large sized organizations in
developed countries has a web site.
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1995-2000: Innovation
 Key concepts developed
 Dot-coms; heavy venture capital investment

2001-2006: Consolidation
 Emphasis on business-driven approach
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2006-Present: Reinvention
 Extension of technologies
 New models based on user-generated content, social
networks, services
 Many people think EC is just having a Web site, but it is much
more that.
 There are dozens of applications of EC such as home banking,
shopping in online stores, buying stocks, finding a job,
conducting an auction, and collaborating electronically on
research and development projects.
 To execute these applications, it is necessary to have supporting
information and organizational infrastructure and systems.
 Infrastructure is dependent on four major areas: people, public
policy, technical standards and other organizations.
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Classified by market relationship
 Business-to-Consumer (B2C)
 Business-to-Business (B2B)
 Consumer-to-Consumer (C2C)
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Classified by technology used
 Peer-to-Peer (P2P)
 Mobile commerce (M-commerce)
 Electronic markets: Buying and selling goods
and services.
 Inter-organizational systems (IOS)
Facilitating inter and intra-organization flow
of information, communication and
collaboration.
 Providing customer service.
Electronic Markets
 An Electronic market is not a physical
building but rather a network-based location
where business interactions occur. It is a place
where the shoppers and sellers meet.
Inter-organizational Information Systems (IOS)
 An IOS involves information flow among two or more
organizations.
 Its major objective is efficient transaction processing,
such as transmitting orders, bills and payments using
EDI.
 All relationships are predetermined: there is no
negotiation, just execution.
 In contrast, in electronic markets, sellers and buyers
negotiate, submit bids, agree on an order, and finish
the execution on- or offline.
 IOS are used for B2B applications, whereas electronic
markets exist in both B2B and B2C cases.
The types of IOS are as follows:
 Electronic data interchange (EDI)
 Extranets
 Electronic funds transfer
 Electronic forms
 Integrated messaging
 Shared databases
 Supply chain management
 Business-to-business (B2B). It includes the IOS and
electronic market transactions between
organizations. Most of EC today is of this type.
 Business-to-consumer (B2C). These are retailing
transactions with individual shoppers that is
consumer or customer.
 Consumer-to-consumer (C2C). In this category,
consumer sells directly to consumers. Examples are
selling residential property, cars, and so on.
Advertising personal services and auctions are
examples of C2C as well.
Consumer-to-business (C2B). It includes individuals who
sell products or services to organizations.
 Non-business EC. An increased number of non-business
institutions such as academic institutions, not-for-profit
organizations,
religious
organizations,
social
organizations, and government agencies are using various
types of EC to reduce their expanses or to improve their
operations and customer service.
 Intra-business (organizational) EC. In this category we
include all internal organizational activities, usually
performed on intranets, that involve exchange of goods,
services, or information. Activities range from selling
corporate products to employees to online training and
cost-reduction activities.
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Benefits to Organizations
 Global reach
 Cost reduction
 Supply chain improvements
 Extended hours: 24/7/365
 Customization
 New business models
 Vendors’ specialization
Benefits to Organizations (cont.)
 Rapid time-to-market
 Lower communication costs
 Efficient procurement
 Improved customer relations
 Up-to-date company material
 No city business permits and fees
 Other benefits
Benefits to Consumer
 Extended hours 24/7/365 from any location
 More choices from many vendors and more
products
 Low price, better comparison with others
 Having information in short time
 Virtual auctions
 Competition which results more discount
 No sales tax
Benefits to Society
 Enabling people to work at home
 Less traveling-less traffic-low pollution
 Hope for the poor
 Availability of public services such as health
care, education, government services etc.
Technical Limitations of EC
 There is a lack of universally accepted standards for
quality, security and reliability.
 The telecommunication bandwidth is insufficient.
 Software development tools are still evolving
(developing gradually)
 It is difficult to integrate the Internet and EC software
with some existing applications and databases.
 Special web servers are needed in addition to the
network servers.
 Internet accessibility is still expensive and/or
inconvenient.
None-technical Limitations of EC
Security and privacy concerns deters customers from
buying.
 Lack of trust in EC and in unknown sellers hinders buying
 Many legal and public policy issues including taxation are
still unresolved.
 National and international government regulations are not
refined enough.
 Some customers like to feel and touch products
 People do not yet sufficiently trust paperless, faceless
transactions
 There is an increasing amount of fraud (cheating) on the
Internet
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Technology will propagate through all commercial activity.
Prices will rise to cover the real cost of doing business.
E-commerce margins and profits will rise to levels more
typical of all retailers.
Cast of players will change.
 Traditional Fortune 500 companies will play dominant role.
 New startup ventures will emerge with new products, services.
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Number of successful pure online stores will remain smaller
than integrated offline/online stores.
Regulatory activity worldwide will grow.
Cost of energy will have an influence.
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Technical approach
 Computer science
Behavioral
approach
 Management science
 Information systems
 Information systems
 Economics
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 Marketing
 Management
 Finance/accounting
 Sociology