It is very use ful to undrstand the basics of E- Commerce

1. 1
E-commerce
Name : P.Siddeswara Reddy
E-Mail :siddeswarareddy.p@gmail.com
Mobile:9052003065

2. 2
Agenda
 Marketing
 Commerce
 History of Internet
 Computer, Networks
 Intro to E-commerce
 History of E-commerce
 WWW
 What is E-commerce
 Forces shaping E-commerce
 E-commerce today
 Categories of E-commerce
 What is a web based business
 E-commerce marketing strategies
 Setting up for E-marketing (online)
 Benefits of E-commerce
 Strategy Formulation
 Business Model

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Definition of Marketing
 Philip Kotler
– Social and Managerial process by which
individuals and groups obtain what they need
and want through creating, offering, and
exchanging products of value with others.
 This definition rests on the following core
concepts: needs, wants, demands, products, value,
cost and satisfaction, exchange and transactions,
relationships and networks, markets, marketers and
prospects.

4. 4
Definition (cont)
 Needs – exist in biology they are not
created by marketers – i.e. shelter, food,
clothing, safety, belonging, esteem
 Wants – Need food want hamburger, fries,
coke.
 Desire – Wants for specific products
backed by an ability and willingness to buy
them

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Definition of Commerce
 The exchange of goods and services for
money
 Consists of:
Buyers - these are people with money who
want to purchase a good or service.
Sellers - these are the people who offer
goods and services to buyers.
Producers - these are the people who
create the products and services that sellers
offer to buyers.

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Elements of Commerce
 You need a Product or service to sell
 You need a Place from which to sell the products
 You need to figure out a way to get people to
come to your place.
 You need a way to accept orders.
 You also need a way to accept money.
 You need a way to deliver the product or service,
often known as fulfillment.
 Sometimes customers do not like what they buy,
so you need a way to accept returns.
 You need a customer service and technical
support department to assist customers with
products.

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History of The Internet
 Started as a US government project in
1969.
 The purpose was to create a net that can
function even if one center is destroyed in
a military attack.
- “Hub and spokes” can be useless if the hub is
destroyed.
- Network can continue to be functional even if
some nodes are destroyed, as long as
information can pass through other nodes.
 Effective in 1971 with computers on both
coasts of the US.

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In the 1980´s
 Personal computers or terminals were
connected to a server.
 The server was a mainframe, or connected
to a mainframe computer.
 The mainframe was connected to another
mainframe of the company in another
location via dedicated lines.
 Only large companies could afford the
expense and investment in equipment.

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Today
 Connections across countries and
continents made through dedicated fast
lines.
 A company may have one local network
(LAN) in NY, which is connected to the
Internet through a Regional network.
 Well established in N.A., Europe and
certain Asian countries

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Computer classifications
 Mainframes:
- term for very large computers
- used to handle large amount of data or
complex processes
- main advantage is reliability
 Midrange:
- medium sized, less expensive and smaller
- usually a server
 Micro-computer:
- work stations with computing capabilities
- single-users systems linked to form a network

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What is a network
 Series of points or nodes interconnected by
communication paths
 Node is a connection point for transmitting
data
 Network can interconnect with other
networks to form global networks

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Benefits of a network
 Facilitates resource sharing
 Provides reliability
 Cost effective
 Provide a powerful medium across
geographical divide

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Geographical Distance
 Local area network (LAN): small area,
share a single server
 Metropolitan area network (MAN): a
wider network, can bridge several LAN’s
 Wide area network (WAN): a broader area
covered, can include several MAN’s
 Internet: a network of networks that covers
the entire globe

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Internet addressing system
 Internet uses TCP/IP, therefore every computer on the
Internet has an IP address
 IP address is numerical, separated by dots
 Works with DNS:
- com: for commercial purposes
- net: for Internet Service Providers
- org: for non-profit, non-commercial groups
- gov: reserved for government
- mil: reserved for military
- int: reserved for international organizations

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Assimilation of Technology
 Technology first adopted to increase
efficiency – doing the same tasks faster
e.g. word processing instead of typing
 Technology next adopted to increase
effectiveness – doing tasks not only faster
but better e.g. spreadsheets transformed
finance and accounting (as well as science
and other fields)

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Introduction to E-commerce
 E-Commerce, Web, Networks, Internet
 The evolution of new businesses
 The adoption of Brick and Mortar
companies to the new economy
 Market failures and economic explanations
for the new economy

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History of E-commerce
 EC applications first
developed in the early
1970s
- Electronic funds
transfer (EFT)
 Limited to:
- Large corporations
- Financial institutions
- A few other daring
businesses

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E-Commerce Mechanisms
 Transformation of economic activity into
digital media
- Exchange information, content, agreements,
and services among parties that are connected
to through the Internet.
 Enables new ways of creating, delivering
and capturing value to customers.
- Availability
- Convenience

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World Wide Web (WWW)
 World Wide Web (Web):
- A collection of documents that reside on computers,
and that can be accessed by other computers on the
Internet.
 Multimedia documents:
- Text
- Images
- Sounds
- Drawings
- Video
 Hypertext:
- Links to other documents
- Can begin execution of a program

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Web Browsers
 Computer programs that can:
- Display Web documents
- Follow links
- Execute other programs
- Enhance applications such as real-time audio
or video
 Netscape and Internet Explorer
 The Microsoft legal trouble due to the
Explorer.

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Web Servers
 Computers that run server software.
 A server waits for request to arrive from a
user.
- The request is typically for a document.
 The server sends (serves) the document to
the requesting computer.
 Sometimes the server allows a user to fill
in information on a document, and the then
transfers the information to another
program or a server.

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WWW and Internet
 The World Wide Web (WWW) is not the
Internet
 Access to the Internet doesn’t mean you
have e-commerce
 WWW works in HTTP
 Web pages works in HTML
 Web browser provide access to
information on the WWW

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What is E-commerce
 Distributing, buying, selling and marketing
products and services over electronic systems
 E-business for commercial transactions
 Involves supply chain management, e-marketing,
online marketing, EDI
 Uses electronic technology such as:
- Internet
- Extranet/Intranet
- Protocols

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Forces Shaping the Digital Age

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Forces Shaping the Digital Age
 Digitalization &
Connectivity
– Intranets : connect people
within a company.
– Extranets : connect a
company with its suppliers,
distributors, and outside
partners.
– Internet : connects users
around the world.
 Internet Explosion
– Explosive worldwide
growth forms the heart of
the New Economy.
– Increasing numbers of
users each month.
– Companies must adopt
Internet technology or risk
being left behind.

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Definitions
 Internet:
- A collection of computers that speak a common
language – protocol
 Intranet:
- Private version of the Internet
- Main purpose to share company information
and computing resources among employees
 Extranet:
- Private network that users outside the company
can access
- Requires security and privacy
- Collaborate with other companies

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Forces Shaping the Digital Age
 New Types of Intermediaries:
– Direct selling via the Internet bypassed
existing intermediaries (disintermediation).
– “Brick-and-mortar” firms became “click-and-
mortar” companies.
– As a result, some “click-only” companies have
failed.

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Forces Shaping the Digital Age
 Customization and Customerization:
– With customization, the company custom
designs the market offering for the customer.
– With customerization, the customer designs
the market offering and the company makes it.

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E-commerce as the Networked
Economy
 Create value largely through gathering, synthesizing and
distribution of information
 Formulate strategies that make management of the enterprise
and technology convergent
 Compete in real time rather than in “cycle time”
 Operate in a world characterized by low barriers to entry,
near-zero variable costs of operation and shifting
competition
 Organize resources around the demand side rather than
supply side
 Manage better relationships with customers through
technology

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E-commerce Today
 The Internet is the perfect vehicle for e-
commerce because of its open standards and
structure.
 No other methodology or technology has proven
to work as well as the Internet for distributing
information and bringing people together.
 It’s cheap and relatively easy to use it as a
medium for connecting customers, suppliers, and
employees of a firm.
 No other mechanism has been created that allow
organizations to reach out to anyone and
everyone like the Internet.

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E-commerce Today
 The Internet allows big businesses to act like
small ones and small businesses to act big.
 The challenge to businesses is to make
transactions not just cheaper and easier for
themselves but also easier and more convenient
for customers and suppliers.
 It’s more than just posting a nice looking Web
site with lots of cute animations and expecting
customers and suppliers to figure it out
 Web-based solutions must be easier to use and
more convenient than traditional methods if a
company hopes to attract and keep customers.

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Four Categories of E-Commerce
B2B
B2C
C2B
C2CConsumers
Business
And selling
to...
Business originating from...
Business Consumers

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Distinct Categories of E-Commerce
 Business to Business (B2B) refers to the full spectrum of e-
commerce that can occur between two organizations.
This includes purchasing and procurement, supplier
management, inventory management, channel management,
sales activities, payment management &service and support.
Examples: FreeMarkets, Dell and General Electric
 Business to Consumer (B2C) refers to exchanges between
business and consumers, activities tracked are consumer
search, frequently asked questions and service and support.
Examples: Amazon, Yahoo and Charles Schwab & Co

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Distinct Categories of E-Commerce
(cont’d)
 Peer to Peer (C2C) exchanges involve transactions
between and among consumers. These can include third
party involvement, as in the case of the auction website
Ebay.
Examples: Owners.com, Craiglist, Monster
 Consumer to Business (C2B) involves when
consumers band together to present themselves as a
buyer in group.
Example: www.planetfeedback.com

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Convergence of e-Commerce Categories
Business originating from…
Business Consumers
AndSellingto…
ConsumersBusiness
Publishers order
paper supplies from
paper companies
Amazon orders
from publishers
Consumers search
out sellers, offers
and initiate
purchases from
Amazon
Consumers resell
copies on eBay
Consumers buy
thousands of Harry
Potter books from
Amazon

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What is a web-based business
 Business that uses the WWW to fulfill it’s
business process
 Four basic business processes:
- information dissemination
- data capture
- promotions and marketing
- transacting with stakeholders
 Business objectives interact with web based
applications

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Key Drivers of E-commerce
 Technological – degree of advancement of
telecommunications infrastructure
 Political – role of government, creating
legislation, funding and support
 Social – IT skills, education and training of
users
 Economic – general wealth and
commercial health of the nation

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Key Drivers of E-business
 Organizational culture- attitudes to R&D,
willingness to innovate and use technology
 Commercial benefits- impact on financial
performance of the firm
 Skilled/committed workforce- willing and able to
implement and use new technology
 Requirements of customers/suppliers- in terms of
product and service
 Competition- stay ahead of or keep up with
competitors

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Appeal of E-commerce
 Lower transaction costs - if an e-commerce site is
implemented well, the web can significantly
lower both order-taking costs up front and
customer service costs
 Larger purchases per transaction - Amazon offers
a feature that no normal store offers
 Integration into the business cycle
 People can shop in different ways. The ability to
build an order over several days
– The ability to configure products and see actual prices
– The ability to easily build complicated custom orders
– The ability to compare prices between multiple
vendors easily
– The ability to search large catalogs easily
 Larger catalogs
 Improved customer interactions - company.

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Limitations of E-commerce
 To organizations: lack of security, reliability,
standards, changing technology, pressure to
innovate, competition, old vs. new technology
 To consumers: equipment costs, access costs,
knowledge, lack of privacy for personal data,
relationship replacement
 To society: less human interaction, social
division, reliance on technology, wasted
resources, JIT manufacturing

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Technical limitations
 There is a lack of universally accepted standards
for quality, security, and reliability
 The telecommunications bandwidth is
insufficient
 Software development tools are still evolving
 There are difficulties in integrating the Internet
and EC software with some existing (especially
legacy) applications and databases.
 Special Web servers in addition to the network
servers are needed (added cost).
 Internet accessibility is still expensive and/or
inconvenient

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Web based technology
 Websites
 E-mail
 Search engines
 Interactive communications

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Old Economy Firms
 Brick and Mortar companies need to adopt
to the new economy
- Create a new Internet company.
- Create a new subsidiary.
- Invest in an Internet competitor.
- Buy the technology from a consultant.
- Work with other firms to create an exchange.
- Integrate with suppliers and or customers.

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Old Economy Firms
 Failure of old economy companies to
adopt may result in:
- Loss of market share.
- Inability to meet new economy
competitors´prices.
- Reduced profits and cash flows.
- Inability to raise new financing.
- Loss of control in an acquisition by a new
economy firm.

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Business Opportunity
 The Internet revolutionized ways of doing
business
 Entrepreneurs found ways to exploit
market failures and earn economic rents
 New businesses were created that were not
feasible earlier
 The new economy poses threats to old
economy firms that do not wish to adapt
 The transformation is still in process. The
evolution continues

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Benefits and Challenges of E-commerce
Benefits
 Persistent connection with customers
 New value for customers
 Access to new customers
 Scalability
Challenges
 Cannibalization
 Channel conflict
 Customer confusion
 Investor confusion

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Front end systems
 Direct user interface with business processes
 Accessible via WWW
 Front-end systems:
- e-CRM
- e-marketing
- e-services
- e-marketplace
- e-auction

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Marketing Strategy in the Digital Age
Requires a new model for marketing strategy
and practice
Some suggest that all buying and selling will
eventually be done electronically
Companies need to retain old skills and
practices but add new competencies

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E-Business in the Digital Age
 Involves the use of electronic platforms to
conduct company business.
– Web sites for selling and customer relations
– Intranets for within-company communication
– Extranets connecting with major suppliers and
distributors

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E-Commerce in the Digital Age
 More specific than e-business.
 Involves buying and selling processes
supported by electronic means, primarily
the Internet.
 Includes:
– e-marketing
– e-purchasing (e-procurement)

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E-commerce vs. E-business
 E-commerce is about doing business
electronically
 E-commerce conducting financial
transactions electronically
 E-business is conducting business on the
Internet
 E-business is the transformation of
business processes through the Internet

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E-Marketing in the Digital Age
 The marketing side of e-commerce.
 Includes efforts to communicate about,
promote, and sell products and services over
the Internet.
 E-purchasing is the buying side of e-
commerce.
– It consists of companies purchasing goods,
services, and information from online suppliers.

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Types of e-Marketers

54. 63
Click-Only Companies
E-tailers
Search
Engines and
Portals
Internet
Service
Providers
Transaction
Sites
Content
Sites
Enabler
Sites
Types of
Sites

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Reasons for dot.com Failures
 Poor research or planning.
 Relied on spin and hype instead of
marketing strategies.
 Spent too heavily on brand identities.
 Devoted too much effort to acquiring new
customers instead of building loyalty.

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Click-and-Mortar Companies
 Most established companies resisted adding Web
sites because of the potential for channel conflict
and cannibalization.
 Many are now doing better than click-only
companies.
 Reasons:
– Trusted brand names and more resources
– Large customer bases
– More knowledge and experience
– Good relationships with suppliers
– Can offer customers more options

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Setting Up for E-Marketing
Online Marketing

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Setting up for E-Marketing
Corporate websites
– Build goodwill and
relationships; generate
excitement
Marketing websites
– Engage consumers
and attempt to influence
purchase
Website design
– 7 C’s of effective website
design
Options
Creating websites
Placing online ads and
promotions
Creating or using Web
communities
Using E-mail

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Seven C’s of Website Design
Conducting E-Commerce
Context
Content
Community
Communication
Connection
Commerce
Customization

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The 7C’s of Website design
Context
Site’s layout and design
Commerce
Site’s capabilities to enable
commercial transactions
Connection
Degree site is linked to other
sites
Communication
The ways sites enable site-to-
user communication or two-way
communication
Customization
Site’s ability to self-tailor to
different users or to allow users
to personalize the site
Community
The ways sites enable user-to-
user communication
Content
Text, pictures, sound and video
that web pages contain

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Fit and Reinforcement of Cs
Context Content Community Customization Communication Connection Commerce
Business Model
Consistent Reinforcement
Individually Supporting Fit

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Online forms of ads and
promotions
– Banner ads/tickers
– Skyscrapers
– Interstitials
– Content sponsorships
– Microsites
– Viral marketing
Future of online ads
Creating websites
Placing online ads
and promotions
Creating or using
Web communities
Using E-mail
Setting up for E-Marketing
Options

63. 72
Web Advertising
 Banner ads: allows for more targeted advertising
 Pop-up ads: pop-under ads are displayed in a separate
browser window beneath your main browser window
and remain there until you close them
 Skyscrapers: An advertisement on a Web site that is
vertically oriented on the page and larger than the
typical banner ad
This is a pop-up ad
Click here to close me

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Web Advertising
 Interstitials: are usually full-page ads displayed while a user is
in transit from one page to another, triggered by code included in the
link

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Web Advertising
Content Sponsorship: are sites that pay for placement in search
results on keywords that are relevant to their business
The upper: This is the part of the shoe that wraps around and over the top of the foot. It may be made of leather or a synthetic material that is lighter and
breathable (to reduce heat from inside the running shoe). The tongue of the upper should be padded to cushion the top of the foot against the pressure from the
laces. Often, at the back of the running shoe, the upper is padded to prevent rubbing and irritation against the achilles tendon.
The heel counter: This is a firm and inflexible cup which is built into the upper of running shoes and surrounds the heel. It is usually very firm so that it can control
motion of the rearfoot.
Post or footbridge: This is the firm material in the midsole which increases stability along the inner side (arch side; medial side) of the running shoe.

66. 75
Web Advertising
 Microsites: limited areas on the Web managed and
paid for by external companies
http://www.autotrader.com/

67. 76
Viral Marketing
Gillette used viral marketing to
introduce the 3-bladed Venus
razor for women, greatly
expanding the audience reached
by its “Reveal the Goddess in
You” truck tour and beach-site
promotions.

68. 77
Web communities allow
members with special
interests to exchange views
– Social communities
– Work-related
communities
Marketers find well-
defined demographics and
shared interests useful when
marketing
Creating websites
Placing online ads
and promotions
Creating or using
Web communities
Using E-mail
Setting up for E-Marketing
Options

69. 78
E-mail marketing
– Key tool for B2B and
B2C marketing
– Clutter is a problem
– Enriched forms of
e-mail attempt to
break through clutter
– Spam is a problem
Creating websites
Placing online ads and
promotions
Creating or using Web
communities
Using E-mail
Setting up for E-Marketing
Options

70. 79
Benefits of E-commerce
 To consumers: 24/7 access, more choices, price
comparisons, improved delivery, competition
 To organizations: International marketplace
(global reach), cost savings, customization,
reduced inventories, digitization of
products/services
 To society: flexible working practices, connects
people, delivery of public services

71. 80
Benefits to Consumers
Convenience
Buying is easy and private
Provides greater product access and selection
Provides access to comparative information
Buying is interactive and immediate

72. 81
Benefits to Organizations
Powerful tool for building customer relationships
Can reduce costs
Can increase speed and efficiency
Offers greater flexibility in offers and programs
Is a truly global medium

73. 82
Benefits to Society
More individuals can work from home
Benefits less affluent people
Third world countries gain access
Facilitates delivery of public services

74. 83
Discussion Questions
 What features do you look for on a
Web site that you feel make the site
appealing?
 What are your major concerns about
making online purchases?
 What types of things can an online
retailer do to create a more secure
buying environment?

75. 84
Online Ads and Promotion
 Forms of online advertising & promotion:
– Banner ads & tickers (move across the screen)
– Skyscrapers (tall, skinny ads at the side of a page)
– Rectangles (boxes that are larger than a banner)
– Interstitials (pop up between changes on Web site)
– Content sponsorships (sponsoring special content)
– Microsites (limited areas paid for by an external
company)
– Viral marketing (Internet version of word-of-mouth)

76. 85
Business Pressures
 The term business environment refers to
the social, economic, legal,
technological, and political actions that
affect business activities
 Business pressures are divided into the
following categories:
- Market (economic)
- Societal
- Technological

77. 86
Major Business Pressures & the Role
of EC

78. 87
Organizational Responses
 Strategic systems
- Provide organizations with strategic advantages, enabling
them to:
 Increase their market share
 Better negotiate with their suppliers
 Prevent competitors from entering into their territory
 Continuous improvement efforts
- Many companies continuously conduct programs to
improve:
 Productivity
 Quality
 Customer service
 Business process reengineering (BPR)
- Strong business pressures may require a radical change
- Such an effort is referred to as business process
reengineering (BPR)

79. 88
Organizational Responses
 Business alliances
- Alliances with other companies, even competitors, can be
beneficial
- Virtual corporation—electronically supported temporary
joint venture
 Special organization for a specific
 Time-limited mission
 Electronic markets
- Optimize trading efficiency
- Enable their members to compete globally
- Require the collaboration of the different companies and
competitors

80. 89
Organizational Responses
 Reduction in cycle time and time to market
- Cycle time reduction—shortening the time it
takes for a business to complete a productive
activity from its beginning to end
- Extremely important for increasing
productivity and competitiveness
- Extranet-based applications expedite steps in
the process of product or service development,
testing, and implementation

81. 90
Strategy Formulation
 Porter’s three generic strategies for
business:
- focus
- low cost leadership
- differentiation
 Differentiation in the new e-commerce
sector is the key to success

82. 91
Classic Framework for Strategy Management
Mission
Goals
Implementation
Control and
Monitoring
Strategy
Formulation
•Corporate
•Business-unit
•Functional
•Operating
External
Analysis
Internal
(Company)
Analysis

83. 92
E-commerce and Organizations
 Organizations that undertake e-commerce do so
from two possible starting points:
- new online organizations
- traditional established organizations
 Factors for success:
- first-mover advantage
- differentiation in the marketplace
- flexibility and agility in the electronic
marketspace

84. 93
Seven dimensions of E-commerce Strategy
Four positional factors
•Technology: goal must be
understood within its’ market and
industry
•Market: must determine its’ target
market and whether it is still
open to new entrants
•Service: must know its’
customer’s expectations
•Brand: must understand if it has
the ability to create a strong
brand
Three bonding factors
•Leadership: vision of CEO for e-
commerce
•Infrastructure: technology
support for new model of
business
•Organizational Learning: does
the organization support internal
learning

85. 94
Technology Leadership
 Involves more than hardware and software
 Seven major areas:
- strategy: focus upon alignment and planning
- structure: focus upon becoming an e-organization
- systems: technology integration
- staffing: developing a strong pool of skills
- skills: developing the necessary knowledge
- style: add value to customers
- shared values: must build value to the organization

86. 95
Service Leadership
 Established strategies of customer still apply
 Internet service strength derived from providing
additional information to the customer
 Internet provides a low-cost, high-quality
service channel with a global reach
 Call centre strategy must be defined
 E-mail interface channel must be defined

87. 96
Brand Leadership
 Branding strength comes from being a first
mover
 Brand reinforcement is a continuous task
 Brand positioning can be defined using the
Internet service value chain
 Brand followers need to reposition as
quickly and effectively as possible
 Four brand

88. 97
Developing a Winning E-strategy
 Ensure that the project is backed by senior management
 Develop a strategy before a Web presence
 Develop a strategy by focusing on technology,
branding, marketing and service
 Identify and use knowledge in the organization
 Strategy must add value for customers and must change
as the requirements of the customers change

89. 98
The Three Approaches to Strategy
 Position approach: “Where should we be vs. our
competition?”
 Resources approach: “what resources should we
possess?”
 Simple rules approach: “What processes should we
follow?”

90. 99
Three Approaches to Strategy
Position Resources Simple Rules
Strategic Logic
Strategic Steps
Strategic Question
Source of Advantage
Works Best In
Duration of
Advantage
Risk
Performance Goal
• Establish position • Leverage resources • Pursue opportunities
• Identify an attractive
market
• Locate a defensible
position
• Fortify and defend
• Establish a vision
• Build resources
•Leverage across markets
• Jump into the confusion
•Keep moving
•Seize opportunities
•Finish strong
• Where should we be? • What should we be? • How should we proceed?
• Unique, valuable position
with tightly integrated
activity system
• Unique, valuable,
inimitable resources
• Key processes and
unique simple rules
• Slowly changing, well-
structured markets
• Moderately changing,
well structured markets
• Sustained
• It will be too difficult to
alter position as conditions
change
• Sustained • Unpredictable
• Company will be too slow
to build new resources as
conditions change
• Managers will be too
tentative in executing on
promising opportunities
• Profitability • Long-term dominance • Growth
• Rapidly changing,
ambiguous markets

91. 100
Business Model

92. 101
Business Models
 A method of doing business by which a
company can generate revenue to sustain
itself
 Spells out where the company is positioned
in the value chain
 Business models are a component of a
business plan or a business case

93. 102
Business Plans & Business Cases
 Business plan:
- A written document
that identifies the
business goals and
outlines the plan of
how to achieve them
 Business case:
- A written document
that is used by
managers to garner
funding for specific
applications or
projects; its major
emphasis is the
justification for a
specific investment

94. 103
The Content of a Business Plan
 Mission statement and
company description
 The management team
 The market and the
customers
 The industry and
competition
 The specifics of the
products and/or services
 Marketing and sales
plan
 Operations plan
 Financial projections
and plans
 Risk analysis
 Technology analysis

95. 104
Structure of Business Models
 All business models must specify their
revenue model (the description of how the
company or an E-commerce project will
earn revenue)
 Value proposition is the description of the
benefits a company can derive from using
EC
 Revenue sources are
- Transaction fees
- Subscription fees
- Advertisement fees
- Affiliate fees
- Sales
- Other models

96. 105
Business Models in E-commerce
 Method of doing business
 Well-planned model gives a competitive
advantage
 Impacts on sustainability and growth
 Three areas:
- value stream
- revenue stream
- logistical stream

97. 106
Transaction costs
 Cost of providing some good or service through
the market
 Effects of e-commerce and the internet that
impacts the business model
 Searching for an obtaining information
 Participating in a market
 Policing and enforcing transactions
 Bargaining and decision costs
 Actual cost of buying or selling the product

98. 107
Value Stream
 Create long-term sustainability
 Benefit for business stakeholders
 Can be achieved in four ways:
- creation/participation in an e-marketplace
- creation/participation of virtual communities
- additional value offers
- exploitation of offers

99. 108
Creation/participation in an e-marketplace
 Reduce transaction costs directly/indirectly
 Economics of e-market similar to traditional market
 Can be setup by supplier/buyer or run independently
 Buyer value:
- reduced costs
- improved service
- convenience
 Supplier value:
- reduced costs
- differentiation
- reduced lead time

100. 109
Creation/participation of virtual
communities
 Bringing together members of a community
 Larger communities mean larger sources
 Improves customer service

101. 110
Additional value offers
 Value is added by improving product mix
 Through association or partnership
 Can be achieved with minimum costs
 Can be integrated into the host sites

102. 111
Exploitation of offers
 E-commerce/Internet economy founded on
information
 Value can be added by using this information
 Target customers demographically
 Can bridge the uncertainty gap
 Can post RFP’s

103. 112
Revenue Stream
 Short-term realization of value proposition
 Direct:
- cost reduction
- free offerings of service/products
- pricing strategies
 Indirect:
- internet advertising
- selling customer information
- joining affiliate programs

104. 113
Logistical stream
 Examines organization restructure to
deliver value added and revenue streams
 Issues such as:
- organizational culture
- pre/post restructuring
- implementing information
- communication and training
- reward systems for motivation

105. 115
Kinds of business models
 Brokerage: market makers bring together
buyer and sellers
 Advertising: web advertising providing
advertising messages
 Infomediary: collecting and disseminating
information

106. 116
Assessing a business model
 Can be assessed by looking at the
marketing strategy
 Can also be assessed by technology
- imitation
- complementary assets
 Financial measures
 Competitor benchmarking
 Market analysis

107. 117
Traditional vs. New Business
Models
Traditional New Business
Production Mass Personalized
Manufactures push Customer Pull
Distribution Middleman Direct
Communications Closed Open
Finance Slow Fast
Difficult Easier
Markets Local Global
Mass Niche
Assets Physical Virtual

108. 118
Consumer Decision Process
Disposal
Loyalty
Satisfaction
Purchase Decision
Evaluation of Alternatives
Information Search
Problem - Recognition
PRE-PURCHASE
PURCHASE
POST-PURCHASE

109. 119
Consumer Decision Process — Flower Example
Flowers
Disposal
Loyalty
Satisfaction
Purchase Decision
Evaluation of Alternatives
Information Search
Problem - Recognition
Pre-Purchase
Purchase
Post-
Purchase
 Need recognition, potentially triggered by a
holiday, anniversary or everyday events
 Search for ideas and offerings, including:
– Available on-line and off-line stores
– Gift ideas and recommendations
– Advice on selection style and match
 Evaluation of alternatives along a number of
dimensions, such as price, appeal, availability, etc.
 Purchase decision
 Message selection (medium and content)
 Post-sales support
– Order tracking
– Customer service
 Education on flowers and decoration
 Post sales perks

110. 120
Metrics
 Response times
 Site availability
 Download times
 Timeliness
 Security and privacy
 On-time order
fulfillment
 Return policy
 Navigability
Measures of performance; may be quantitative
or qualitative
Metrics: If it moves, measure it!