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Introduction to E-Commerce
PRINCIPLES OF MANAGEMENT :

Compiled By: Er. Ayush Shrestha [ 9841515311 ]

Lesson 1: Overview of Electronic Commerce

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Topics
1. Overview of Electronic Commerce

EC definitions and concepts

The EC framework and field

EC business plans, cases, and models

Benefits and limitations of EC

The digital revolution and the economic impact of EC

The contributions of EC to organizations

Managerial issues

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E-Commerce: 5

Electronic commerce is an emerging concept describes the process of buying and

selling or exchanging of products, services and information via computer network
including the internet.

E-Commerce is a modern business methodology that addresses the needs of

organization merchant and consumers to cut cost while improving the quality of
goods and services and increasing the speed of service delivery

E- Commerce is refers to the paperless exchange of business information using

electronic data interchange, electronic mail etc.

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 E-Commerce: 6

UK government
E-commerce is the exchange of information across electronic networks, at any stage in the
supply chain, whether within an organization, between businesses, between businesses and
consumers, or between the public and private sector, whether paid or unpaid.
(Cabinet Office, 1999)

definitions show that electronic commerce is not solely restricted to the actual buying and
selling of products, but also includes pre-sale and post-sale activities across the supply chain.

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E-Commerce Vs E-business: 7

E-Business: A broader definition of EC

that includes not just the buying and
selling of goods and services but also
servicing customers, collaborating with
business partners and conducting
electronic transactions within an
organization

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Major Ecommerce concepts
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Pure versus Partial EC

EC Organization

-Brick- and mortar (old economy) organization

Old economy organization (corporation) that perform their
primary business offline, selling physical products by means of physical agents

- Virtual (pure-play) organization

Organization that conduct their business activities solely online eg.
amazon.com buy, sell, deliver

- Click and mortar (Click and brick) organization

Organization that conduct some ecommerce activities usually as an
additional marketing channel
Physical and virtual presence eg. Walmart, bhabhateni [eSewaPasal]

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 Electronic Markets and networks: 9
Electronic Market (e-marketplace): An online marketplace where buyers and
sellers meet to exchange goods, services, money or information

Intranet:
An internal corporate or government network that uses internet tools such as
web browsers and internet protocol

Extranet:
A network that uses the internet to link multiple intranets
Supplier can replenishment

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Relationship Between intranet , extranet and Internet 10

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The EC framework and field

The EC framework
EC application are supported by infrastructure and by the following 5 support areas:

1. People

2. Public Policy

3. Marketing and advertising

4. Support Services

5. Business Partnerships

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1.People: 12
Sellers, buyers, intermediaries, information systems and technology specialists, other
employees, and any other participants.

2 . Public policy:
Legal and other policy and regulatory issues, such as privacy protection and taxation,
which are determined by governments. Included are technical standards and
compliance.

3 . Marketing and advertising:

Like any other business, EC usually requires the support of marketing and advertising.
This is especially important in B2C online transactions, in which the buyers and sellers
usually do not know each other.

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4 . Support services:
Many services are needed to support EC. These range from content creation to
payments to order delivery.

5 . Business partnerships :
Joint ventures, exchanges, and business partnerships of various types are common in
EC. These occur frequently throughout the supply chain(i.e., the interactions between
a company and its suppliers, customers, and other partners).

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 Classification of EC by the nature if the transaction and the relationships 14
among participants:

● Business to Business (B2B):

Ecommerce model in which all of the participants are business or other
organization

● Business to Consumer (B2C):

Ecommerce model in which businesses sell to individuals shopper
E-tailing: Online retailing, usually B2C

● Business-to-business-to-consumer (B2B2C)
E-commerce model in which a business provides some product or
service to a client business that maintains its own customers

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● Consumer-to-business (C2B)
E-commerce model in which individuals use the Internet to sell products or
services to organizations or individuals who seek sellers to bid on products or
services they need

● Intrabusiness EC
E-commerce category that includes all internal organizational activities
that involve the exchange of goods, services, or information among various units
and individuals in an organization

● Business-to-employees (B2E)
E-commerce model in which an organization delivers services, information,
or products to its individual employees

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● Consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to other consumers

● Collaborative commerce (c-commerce)

E-commerce model in which individuals or groups communicate or
collaborate online

● e-government
E-commerce model in which a government entity buys or provides
goods, services, or information from or to businesses or individual citizens

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 The digital revolution and the economic impact of EC
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Digital economy
An economy that is based on digital technologies, including digital communication networks,
computers, software, and other related information technologies; also called the Internet
economy, the new economy, or the Web economy

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The final, and perhaps most important, element of the digital world is people and the
way they work and live. Clearly, the digital revolution has changed almost any activity 19
one can think of – work, play, shopping, entertainment, travel, medical care,
education, and much more. Just think about your digital phone, camera, TV, car,
home, and almost anything else. It is only natural that people are utilizing technology
and EC at an increasing rate.
Let’s take a look at some examples:

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ELECTRONIC COMMERCE BUSINESS MODELS 20
A business model describes the manner in which business is done to generate revenue and
create value. This is accomplished by attaining organizational objectives. A key area is
attracting enough customers to buy the organization’s products or services.

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There are 8 components which make up Business Model:
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1) Value Proposition
Define how a company's product or service fulfils the need of customers.
-Personalization/ Customization
-Facilitation of transactions by managing product delivery
Google: search, news, mail, sites, maps, advertising, video, contact, google assistant

2) Revenue Model
Define how the firm will earn revenue generates profits and produce a superior return on invested capital
-Major types:
Advertising revenue models: CNN.com
Subscription revenue models: MATCH.com
Transaction fee revenue model: EBay, E-Trade, Hotwire
Sales revenue model: Amazon, LLbean, Gap.com
Affiliate revenue model: E-pinions, Banner Exchange, Edmunds à sends traffic to another website
Google: 96% of the revenue come from Adword

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3) Market Opportunity
Refers to a company's intended market space and the overall potential financial
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opportunities available to the firm in that market space

4) Competitive Environment
Refers to the other competition selling similar products and operating in the same market space
-Influenced by
How many competitors are active?
How large operations are
The market share for each competitor
How profitable these firms are
How they price their product
Google: yahoo, bing , new market entrants

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5) Competitive Advantage
Achieved when a firm can produce a superior product and/or bring a product to market, 23
at a lower price than most, or all, of their competitors.
-Types of competitive advantage:
First mover advantage
Unfair competitive advantage
Google: technology infrastructure 9,00,000 servers, innovative services , market share by 2012 holds 66.4 %

6) Market Strategy
Plan that details how a company intends to enter a new market and attract strategy
Google: Design logo and search , content, simple quick and accurate

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7) Organizational Development 24
Describes how the company will organize the work that needs to be accomplished
Google: Google Inc. was restructured as a subsidiary directly owned by Alphabet.

8) Management Team
Employees of the company responsible for making the business model work
-Strong management team gives instant credibility to outside investors
Google: Larry Page and Sergey Brin founded google in 1998 grown to more than 40,000 employee

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BENEFITS OF e-Commerce 25
Firms are interested in electronic commerce because, quite simply, it can help increase
profits. All the advantages of electronic commerce for businesses can be summarized in one
statement: Electronic commerce can increase sales and decrease costs

Advertising done well on the Web can get even a small firm’s promotional message out to
potential customers in every country in the world

A firm can use electronic commerce to reach small groups of customers that are geographically
scattered

The Web is particularly useful in creating virtual communities that become ideal target markets
for specific types of products or services.

Just as electronic commerce increases sales opportunities for the seller, it increases purchasing
opportunities for the buyer.

Businesses can use electronic commerce to identify new suppliers and business partners.
Negotiating price and delivery terms is easier in electronic commerce because the Internet can
help companies efficiently obtain competitive bid information
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Many companies are reducing their costs of handling sales inquiries, providing price 26
quotes, and determining product availability by using electronic commerce in their sales
support and order-taking processes.

Cisco Systems, a leading manufacturer of computer networking

equipment, currently sells almost all its products online. Because no
customer service representatives are involved in making these sales,
Cisco operates very efficiently. In 1998, the first year in which its online
sales initiative was operational, Cisco made 72 percent of its sales on the
Web. Cisco avoided handling 500,000 calls per month and saved $500
million in that first year. Today, Cisco conducts more than 99 percent of its
purchase and sales transactions online.

Electronic commerce provides buyers with a wider range of choices than traditional
commerce because buyers can consider many different products and services from a
wider variety of sellers. This wide variety is available for consumers to evaluate 24 hours a
day, every day

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Electronic commerce provides buyers with an easy way to customize the level of detail 27
in the information they obtain about a prospective purchase.
[ Instead of waiting days for the mail to bring a catalog or product specification sheet,
or even minutes for a fax transmission, buyers can have instant access to detailed
information on the Web ]

Some digital products, such as software, music and video files, or images, can even be
delivered through the Internet, which reduces the time buyers must wait to begin
enjoying their purchases. The ability to deliver digital products online is not just a cost-
reduction opportunity. It can increase sales, too

Electronic payments can be easier to audit and monitor than payments made by
check, providing protection against fraud and theft losses

Electronic commerce can also make products and services available in remote areas.
For example, distance education is making it possible for people to learn skills and earn
degrees no matter where they live or which hours they have available for study.

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LIMITATIONS OF e-Commerce 28
The major limitations of EC are the resistance to new technology, fear from fraud,
integration with other IT systems may be difficult, costly order fulfillment, privacy issue,
unclear regulatory issues, lack of trust in computers, and unknown business partners,
difficulties to justify EC initiatives, and lack of EC skilled employees.

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 LIMITATIONS OF e-Commerce 29
Technological limitations Non-technological limitations
Need for universal standards for quality, security, Security and privacy concerns deter customers
and Reliability from buying
The telecommunications bandwidth is Lack of trust in sellers, in computers, and
insufficient, especially for m-commerce, videos, paperless faceless transactions hinders Buying
and graphics
Software development tools are still evolving Resistance to change
It is difficult to integrate Internet and EC software Many legal and public policy issues are not
with some existing (especially legacy) resolved or are not clear
applications and databases
Special Web servers are needed in addition to National and international government
the network servers, which add to the cost of EC regulations sometimes get in the way
Internet accessibility is still expensive and/or It is difficult to measure some of the costs and
inconvenient benefits of EC
Large-scale B2C requires special automated Not enough customers. Lack of collaboration
warehouses for order fulfillment along the supply chain
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BENEFITS OF EC TO ORGANIZATIONS, CONSUMERS, AND SOCIETY

EC offers numerous benefits to all participants. Because these benefits are substantial, it looks
as though EC is here to stay and cannot be ignored. Also, organizations can go into remote
and global markets for both selling and buying at better prices. Organizations can speed
time-to- market to gain competitive advantage. They can improve the internal and
external supply chain as well as increase collaboration. Finally, they can better comply
with government regulations.

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Managerial Issues

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Why is B2B e-commerce so essential and successful?
B2B EC is essential for several reasons .First, some B2B models are easier to implement than B2C
models. The volume and value of transactions is larger in B2B than in B2C, and the potential
savings are larger and easier to justify in contrast to B2C, which has several major problems,
ranging from channel conflict with existing distributors to fraud to a lack of a critical mass of
buyers. Many companies can start B2B by simply buying from existing online stores and B2B
exchanges or selling electronically by joining existing marketplaces or an auction house. The
problem is determining what and whereto buy or sell.

Which EC business model should I choose?

Beginning in early 2000, the news was awash with stories about the failure of many dot-
coms and EC projects. Industry consolidation often occurs after a “gold rush.” About 100
years ago, hundreds of companies tried to manufacture cars, following Ford’s success in
the United States; only three survived. The important thing is to learn from the successes
and failures of others, and discover the right business model for each endeavor.

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How can we exploit social commerce?
There are major possibilities here. Some companies even open their own social networks.
Advertising is probably the first thing to consider. Recruiting can be a promising avenue as
well. Offering discounted products and services should also be considered. Providing customer
services and conducting market research can be a useful activity as well. Finally, the ultimate
goal is associating the social network with commerce so that revenue is created

What are the top challenges of EC today?

The top 10 technical issues for EC (in order of their importance) are security, adequate
infrastructure, virtualization, back-end systems integration, more intelligent software, cloud
computing, data warehousing and mining, scalability, and content distribution. The top 10
managerial issues for EC are justification, budgets, project deadlines, keeping up with technology,
privacy issues, unrealistic management expectations, training, reaching new customers,
improving customer ordering services, and finding qualified EC employees

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Thank You

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Any Question?

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Assignment
Deadline: 18th Dec 2018

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How to submit Assignment:
1. email:
- Subject: EC_Assign1_RamShrestha
- Deadline: 12:00AM
- Formatting:

2. Hand written:
- Deadline: Submit to the class or to faculty head
- Formatting : [cover page, clear handwriting]

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1. Compare brick-and-mortar and click-and- mortar organizations.
2. Why is buying with a smart card from a vending machine considered EC?
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3. Explain how EC can reduce cycle time, improve employees’ empowerment, and
facilitate customer service.
4. Compare and contrast viral marketing with affiliate marketing.
5. Identify the contribution of Web 2.0. What does it add to EC?
6. Carefully examine the non-technological limitations of EC. Which are company-
dependent and which are generic?
7. Does digital business eliminate the “human touch” in trading? And if “yes,” is it really bad?
8. Visit amazon.com and locate recent information in the following areas:
(a) Find the five top-selling books on EC.
(b) Find a review of one of these books.
(c) Review the personalized services you can get from Amazon.com and describe the benefits
you receive from shopping there.
(d) Review the products directory.
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