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  1. Management Information Systems Amina Tariq Room # N111-C-------------------- Ext # 161 National University of Computer & Emerging Sciences (Islamabad Campus)

  2. e-Commerce: Digital Markets, Digital Goods NUCES-Islamabad

  3. E - COMMERCE: DIGITAL MARKET AND DIGITAL GOODS E-commerce began in 1995 when one of the first Internet Portals, ( accepted the first advertisements from major corporations and popularized the idea that the Web could be used as a new medium for advertising and sales. No one envisaged at the time that that would turn out to be exponentially growth curve for e-commerce retail sales which tripled and doubled in the early years. NUCES-Islamabad

  4. BASICCONCEPT OF E-COMMERCE • WHAT IS E-COMMERCE • E-Commerce is about digitally enabled commercial transactions (that occur over the Internet and the Web) between and among organizations and individuals • Commercial transactions involve the exchange of value (e.g. Money) across organizational or individual boundaries in return for products and services. • In a nut shell, E-Commerce refer to the use of the Internet and the Web to conduct business. NUCES-Islamabad

  5. The Internet and the e-commerce technologies are much more rich and powerful than the previous technology revolutions. • UBIQUITY • Internet /Web technology (E-commerce) is available everywhere; At work, at • home, at car, and elsewhere via mobile devices, anytime. • This result is called Marketrspace, which means A Market place extended beyond traditional boundaries and removed from a temporal and geographic location. • From a Customer point of view, Ubiquity reduces transaction costs – i.e. the cost of participating in a marker • GOBAL RESEARCH E-commerce permits commercial transactions to cross cultural and national boundaries far more convenient and cost effective than is true in traditional commerce. WHY E-COMMERCE IS DIFFERENT NUCES-Islamabad

  6. WHY E-COMMERCE IS DIFFERENT • UNIVERSAL STANDARDS: The Technical standards of Internet and therefore the Technical Standards for conducting e-commerce are universal standards. • The Universal Technical Standards of Internet and e-commerce greatly lower Market entry costs; Which is the cost that merchants must pay simply to bring their goods to market. • Universal Standards also reduce Search Costs (the effort to find suitable products) for consumers. • RICHNESS • Information Richness referees to the complexity and content of a message. The Web makes it possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people. • INTERACTIVITY • Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face experience but on a massive, global scale. E-commerce Technologies are interactive, meaning that they allow for two-way communication between merchant and consumer. NUCES-Islamabad

  7. WHY E-COMMERCE IS DIFFERENT E-commerce technologies reduce information collection, storage, processing, and communication costs while greatly increasing the currency, accuracy, and timelines of information.. Information Density in e-commerce markets make Prices and Costs more transparent. Price Transparency refers to the ease of finding out the variety of Prices in a market. Cost Transparency refers to the ability of consumers to discover the actual cost of Merchants pay for products. Online Merchants can discover much more about customers than in the past. This allows merchants to segment market into groups who are willing to pay different prices and permits the merchant to engage in Price Discrimination (Selling the same goods, to different targeted groups , to different targeted groups at different prices.) Information Density also helps merchants differentiate their products in terms of costs, brand, and quality. • Information Density NUCES-Islamabad

  8. E - COMMERCE: DIGITAL MARKET AND DIGITAL GOODS • Personalization & Customization E-commerce technologies permit ‘’Personalization’’. Merchants can target their Marketing messages to specific individuals by adjusting the messages to a person’s name, interests, and past purchases. E-commerce technologies also permits ‘’Customization’’. (Changing the delivered product or services based on a user’s preferences or prior behaviour. NUCES-Islamabad

  9. KEY CONCEPTS IN E-COMMERCE INFORMATION ASYMMETRY The Internet shrinks Information Asymmetry. • An Information Asymmetry exists one party in a transaction has more information that is important for the transaction than the other party. That information helps determine their relative bargaining power. In Digital Markets, Consumers and Suppliers can ‘’see’’ the prices being charged for goods, and in that sense Digital Markets are said to be more ‘’Transparent’’ than Traditional markets. NUCES-Islamabad

  10. KEY CONCEPTS IN E-COMMERCE For example: Until Automobile (Auto) Retailing sites appeared on the Web, there was a pronounced Information Asymmetry between Auto Dealers and Customers. Only Dealers knew the Manufacturers’ prices, and it was difficult for shop around for the best price. Auto Dealers’ Profit margins depended on this asymmetry of Information. Today’s Consumers have access to a legion of Web sites providing competitive pricing information, and three-fourths of U.S Auto buyers use the Internet to shop around the best deal. Thus, the Web has reduced the information Asymmetry surrounding an auto purchase. The Internet has also helped businesses seeking to purchase from other businesses reduce information Asymmetries and locate better prices and terms. NUCES-Islamabad

  11. Digital Markets are very flexible and efficient because they operate with :- - Reduced search and Transaction costs , - Lower Menu Costs (Merchants’ costs of charging prices), - Price Discrimination, - Ability to change prices dynamically based on market conditions. • In Dynamic Pricing - The price of a product varies depending on the demand characteristics of the Customer or the supply situation of the Seller. • Digital markets may either reduce or increase Switching costs, depending on the nature of the product or services being sold, and they may cause some extra delay in gratification. • Unlike a Physical Market, you can not immediately consume a product such as clothing purchased over the Web. • Digital Markets provide many opportunities to sell directly to the Consumer, bypassing intermediaries , such as Distributors or Retail outlets. • Eliminating intermediaries in the Distribution channel can significantly lower purchase transaction costs. KEY CONCEPTS IN E-COMMERCE NUCES-Islamabad

  12. By selling directly to Consumers, or reducing the number of intermediaries, companies are able to raise profits while charging lower prices. The removal of organizations or business process layers responsible for intermediately steps in a Value Chain is called ‘’Disintermediation’’. Figure - The Benefits of Disintermediation to the Consumer The typical Distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer. KEY CONCEPTS IN E-COMMERCE NUCES-Islamabad

  13. KEY CONCEPTS IN E-COMMERCE Airlines and Hotels operating their own Reservation sites online, earn more Ticket because they have eliminated Travel Agents as intermediaries. Table below summaries the differences between Digital Markets and Traditional Markets. NUCES-Islamabad

  14. DIGITAL GOODS • Digital Gods are goods that can be delivered over a Digital network such as Music, tracks, Video, Software, Newspapers, magazines and books. • Digital Goods can be expressed, stored, delivered, and sold as purely Digital products. NUCES-Islamabad

  15. DIGITAL GOODS cont.. The impact of Internet on the market of these kind of Digital Gods is nothing short of revolutionary, and we see the results around us every day. NUCES-Islamabad

  16. INTERNET BUSINESS MODELS • All new Business Models that have emerged, use the Internet in one way or the other, to add extra value to existing products and Services or to provide the foundation for new products and services. • Most of these Business Models are called ‘’ Pure-play Business Models ‘’ because they are based purely on the Internet. • These Firms did not have an existing ‘’Bricks-and-Mortar Business’’ when they designed their Internet Business. However some firms like The Wall Street Journal, L.L Bean, Office Depot etc…. Have developed Web sites as extensions of their traditional Bricks-and-Mortar businesses. • Such businesses represent a hybrid ‘’Click-and-Mortar Business Model ‘’ NUCES-Islamabad

  17. INTERNET BUSINESS MODELS • E-Bay is an online auction forum that uses e-mail and other interactive features of the Web. • The System accepts bids entered on the Internet , evaluates the bids, and notifies the highest bidder. • e-Bay collects a small commission on each listing and sales. • E-Bay has become so popular that its site serves as a huge trading platform for other companies, hosting hundreds of thousands of ‘’Virtual Storefronts’’. • Business-to-business auctions’’ have also emerged. For example , GoIndustry features Web-based auction services for Business-to-business sales of industrial equipment and machinery. NUCES-Islamabad

  18. provides an online Community for woman sharing similar interests, such as diet and fitness, pregnancy, parenting, home and garden, and food. • A major source of revenue for these communities involves providing ways for corporate clients to target customers, including the placement of banner ads, and pop-up ads on their Web sites. • Social networking is the practice of expanding the number of one’s business or social contacts by making connections through individuals. Social Networking sites link people through their mutual business or personal connections, enabling them to mine their friends for sales leads, job hunting tips, or new friends. • (, and appeal to people who are primarily interested in extending their friendship, while LinkedIn .com focuses on job networking.) Communications & Community model NUCES-Islamabad

  19. Impact Social Networking Model • Social Networking is so appealing that it has inspired a new type of e-commerce experience called ‘’Social Shopping’’ . • Social Shopping sites such as Kaboodle, ThisNext, and provide online meeting places for people to swap shopping ideas. These sites provide tools for users to create their own Web pages with information and images about items they like to help other shoppers. NUCES-Islamabad

  20. DIGITAL CONTENT, ENTERTEINMENT, & SERVICES MODEL • The ability to deliver Digital goods and Digital content over the Web has created new alternatives to traditional print and broadcast media. • Online Games attract huge numbers of players. For example Blizzard Entertainment’s online role-playing game World of Warcraft earned 1 Billion Dollars in 2006 alone, from 7 million players worldwide. • Favourite radio channels such as the BBc or Classic Rock on the Web as well as many independent channels • Service like Yahoo!’s LAUNCHcast and RealNetworks’ Rapsody even put together individualized radio channels for listeners. NUCES-Islamabad

  21. DIGITAL CONTENT, ENTERTEINMENT, & SERVICES MODEL • Broadband connections now make it possible for Web sites to display full-length films and television shows. • The popularity of Apple’s iTunes music services and Apple’s iPod portable music player has inspired a new form of digital content delivery called Podcasting. • Podcasting is a method of publishing audio broadcasts via the Internet, allowing subscribing users to download audio files onto their PC or Portable music players. • Video clips designed to be downloaded and viewed on a portable device are called Vcasts. • Podcast also have internal uses for businesses who want to distribute information in audio form to their employees. NUCES-Islamabad

  22. DIGITAL CONTENT, ENTERTEINMENT, & SERVICES MODEL • Portals have emerged as an Internet business Model. • As an e-commerce Business Model, a Portal is a ‘’Supersite’’ that provides a comprehensive entry point for a huge array of resources and services on the Internet. • Yahoo! Is an example: It provides, capabilities for locating information on the Internet along with news, sports, weather, telephone directors, maps, games, shopping, email, chat, discussion boards, and links to other sites. NUCES-Islamabad

  23. TYPES OF ELECTRONIC COMMERCE • TYPES OF ELECTRONIC COMMERCE • There are many ways of classifying Electronic Commerce transactions. • One way is by looking at the nature of the participants in the e-commerce transactions. • The three major e-commerce categories are : • Business-to-Consumer (B2C) • Business-to-Business (B2B) • Consumer-to-Consumer (C2C) • Another way of classifying e-commerce transactions is in terms of th participants’ physical connection to the Web. • e-commerce over Wired networks • e-commerce over Wireless network (Mobile Commerce or M-commerce)) NUCES-Islamabad

  24. TYPES OF ELECTRONIC COMMERCE Business-to-Consumer Electronic Commerce (B2C) B2C involves retailing products and services to individual shoppers., which sells books to consumers is an example of B2C e-commerce. Business-to-Business Electronic Commerce (B2B) B2B involves sales of goods and services among businesses. ChemConnect’s Web site for buying and selling natural gas liquids, refined and intermediate fuels, chemicals, and plastic is an example of B2B e-commerce. Consumer-to-Consumer Electronic Commerce (C2C) C2C involvesConsumers selling directly to consumers. For example, e-Bay enables people to sell their goods to other consumers by auctioning the merchandise off to the highest bidder. Wired Network Electronic Commerce Until recently, almost all e-commerce transactions took place over Wired networks. Wireless Network Electronic Commerce (M-commerce) The use of handheld wireless devices for purchasing goods and services from any locations has been termed as Mobile Commerce or m-commerce. Both B2B and B2C e-commerce transactions can take place using m-commerce technology. NUCES-Islamabad

  25. ACHIEVING CUSTOMER INTIMACY: INTERACTIVE MARKETING, PERSONALIZATION, AND SELF SERVICE Firms can create unique personalized Web pages that display content or ads for products or services of special interest to individual users, improving the customer experience and creating additional value. NUCES-Islamabad

  26. ACHIEVING CUSTOMER INTIMACY: INTERACTIVE MARKETING, PERSONALIZATION, AND SELF SERVICE One technique for Web Personalization is ‘’Collaborative Filtering””, which compares information gathered about a specific user’s behaviour at a Web site to data about other customers with similar interests to predict what the user would like to see next. The Software then makes recommendations to users based on their assumed interests. For example: use Collaborative Filtering Software to prepare personalized book recommendations: ‘’Customers who bought this book also bought ……” . These recommendations are made just at the point of purchase, an ideal time to prompt a consumer into purchasing a related product. NUCES-Islamabad

  27. Blogs • Blogs have emerged as another promising Web-based tool for Marketing. • A Blog, the popular term for a Weblog, is a personal Web page that typically contains a series of chronological entries (newest to oldest) by its author, and links to related Web pages. • The Blog may include a Blogroll (a collection of links to other Blogs) and Trackbacks (a list of entries in other Blogs that refer to a post on the first Blog). • Blogs are either hosted by a third party site such as (owned by Google) ACHIEVING CUSTOMER INTIMACY: INTERACTIVE MARKETING, PERSONALIZATION, AND SELF SERVICE NUCES-Islamabad

  28. Many companies use their Web sites ands e-mail to answer customer questions or to provide customers with product information, reducing the need for human Customer-support experts. • For example: American, Northwest, THY and many other Airlines have created Web sites where customers can review flight times, seating chars, Airport logistics; check frequent-flayer miles; and purchase tickets online. • New Softwrae products are even integrating the Web with customer call centres, where customer service problems have been traditionally handled over the telephone. • A Call Centre is an organizational department responsible for handling customer service issues by telephone and other channels. • . CUSTOMER SELF SERVICE NUCES-Islamabad

  29. B2B E-commerce • About 80% of B2B e-commerce is still based on proprietary Systems for Electronic Data Interchange (EDI), which enables the computer-to-computer exchange between two organizations of standard transactions such as Invoices, Bill of lading, Shipment schedules, or Purchase orders. • EDI originally automated the exchange of documents such as Purchase Orders, Invoices, and Shipping notices. • Although many organizations still use EDI for document automation, firms engaged in just-in-time Inventory Replenishment and continuous Production use EDI as a System for continuous Replenishment. NUCES-Islamabad

  30. B2B E-commerce Suppliers have online access to selected parts of the Purchasing firm’s production and Delivery Schedules and automatically ship materials and goods to meet prespecified targets without intervention by firm Purchasing Agents. Figure below shows Electronic Data Interchange (EDI) NUCES-Islamabad

  31. Private Industry Networks (Private exchange) typically consist of a large firm using an Extranet to link its Suppliers and other key Business partners. The Private network is owned by the Buyer, and it permits the firm and designated Suppliers, Distributors, and other Business partners to share product design and development , marketing production scheduling , inventory management , and unstructured communicating, including graphics and e-mail. E.g. links the Volkswagen Group and its Suppliers. It handles 90% of all global purchasing for Volkswagen, including all automotive and parts components. B2B E-commerce NUCES-Islamabad

  32. Net Marketplace also called e-hub,provides a single Digital marketplace based on Internet technology for many different buyers and sellers. • Net Marketplaces are owned or operate as independent intermediaries between Buyers and Sellers. Net Marketplace generates revenue from purchase and sale transactions and other services provided to clients. Net Marketplace NUCES-Islamabad

  33. Net Market Place There are many different types of Net Marketplaces and ways of classification: a) Net Marketplace by Selling Types - Direct Goods Selling Net Markets - Indirect Goods Selling Net Markets b) Net Markets by Purchasing Support - Contractual Purchasing Support Net Marketplace - Spot Purchasing Support Net Marketplace Contractual purchasing support is based on long term relationship s with designated Suppliers Spot Purchasing Support is short term support where goods are purchased based on immediate needs, often from many different Suppliers. NUCES-Islamabad

  34. Net Marketplace c) Net Marketplaces by Market Types - Vertical Markets serving Net Marketplaces - Horizontal Markets serving Net Marketplaces Net Markets that serve those Vertical Markets for specific industries, such as automobiles, telecommunications etc.. Net Markets that serve Horizontal Markets in various industries, such as Office Equipment or Transportation. Examples: Exostar is an Industry owned Net Marketplace (Sponsored by Aerospaced and Defense industries), focusing on long-term Contracts Purchasing relationships and on providing common Networks and Computing platforms for reducing Supply Chain inefficiencies. Exchanges are independently owned third-party Net Marketplace that connects thousands of Suppliers and Buyers for Spot Purchasing. Nowadays, Suppliers are reluctant to participate in Exchanges since they encourage competitive bidding that drove prices down and do not offer any long term relationships with Buyers. NUCES-Islamabad

  35. M-Commerce Wireless Mobile devices are starting to be used for purchasing goods and services as well as transmitting messages. M-COMMERCE SERVICES AND APPLICATIONS M-commerce Applications have taken off for services that are time-critical, that appeal to people on the move, or that accomplish a task more efficiently than other methods. 1. Content and Location-Based Services Services, such as searching for local bushiness, movie shows, restaurants, checking weather forecasts finding information about hotels, airlines and so on.. can access Wireless Web Services to check train schedules, weather forecasts, search for local businesses, airline flights etc.. . e.g. Go2 Mobile Directory users NTT DoCoMo Wireless Services in Japan NUCES-Islamabad

  36. 2. Banking and Financial Services Wireless alerts about changes in Account information on Mobile phones that support text messaging or web access operated by many Banks. Use of Mobile telephones to check account balance, transfer funds between accounts, and paying bill services provided by many Banks. 3. Wireless Advertising Some major Wireless Services Providers are starting to include advertising on their sites. e.g. When consumers use go2 Mobile Directory to search for local restaurants or movie theatres, Yahoo-sponsored advertisers appear in the list of search restaurants. M-Commerce NUCES-Islamabad

  37. M-Commerce • 4. Games and Entertainment • Cell phones are quickly turning into portable entertainment platforms. • Mobile phone services offer downloadable Digital games and ringtones. • Users with broadband services can down load on demand movie clips, news clips and weather reports. • Film companies are starting to produce short films explicitly designed to play on mobile phones. • e.g. MobiTV features live TV programs. NUCES-Islamabad

  38. ACCESSING INFORMATION FROM THE WIRELESS WEB Although Cell phones, PDAs and other handheld mobile devices are able to acces Web at anytime from anyplace, the amount of information that they can actually handle is very limited. Until 3G Broadband services comes into widespread use, the handheld mobile devices will not be able to transmit or receive large amount of data. The information must fit onto small display screens. e.g. Special Wireless Portals (Mobile Portals) such as MSN Mobile Portal, provides access to news, sports, local traffic reports, restaurant listings. Yellow pages, and Stock market reports, as well as managing e-mail messages and instant messaging. NUCES-Islamabad

  39. M-Commerce Challenges The number of Wi-Fi hotspots for Wireless Internet access has been mushrooming in many countries because the technology combines high speed Internet access with a measure of flexibility and mobility. However, rollout of mobile m-commerce services, has proved more problematic since: - Keyboards and screens on cell phones are still tiny and awkward to use; - The data transfer rate on second generation cellular network are very slow compared to dial-up high speed Internet connections for PCs. Each second of waiting for download costs money to customers; - Most Internet-enabled phones have limited memory and power supplies. M-commerce will benefit from 3G networks and other cellular broadband services and from standardize Mobile Payment Systems. NUCES-Islamabad

  40. Electronic Payment Systems • Special electronic Payment System have been developed to pay for goods electronically on the Internet. • Electronic Payment Systems includes: • Systems for Credit Card Payments; • Digital Wallets • Accumulated Balance Digital Payment Systems • Digital Cash • Peer-to-Peer Payment Systems, • Digital Checking • Electronic Billing Presentment and Payment Systems NUCES-Islamabad

  41. Types of Electronic Payment Systems 1. DIGITAL CREDIT CARD PAYMENT SYSTEM Digital Credit Card Payment System extend the functionality of Credit Cards so they can be used for online shopping payments. 2. DIGITAL WALLETS Digital Wallets enters the Shopper’s name, Credit Card number, and Shipping information automatically when invoked to complete the purchase. Q*Wallet and Google Toolbar Autofill are examples of Digital Wallet. NUCES-Islamabad

  42. Types of Electronic Payment Systems 3. ACCUMULATED BALANCE DIGITAL PAYMENT SYSTEMS Enable users to make Micropayments and purchases on the Web, accumulating a Debit balance that they must pay periodically on their Credit card or Telephone bills. Micropayment Systems have been developed for purchases of less than $10, such as downloads of individual articles for music clips, which would be too small for Credit Card payments QPass enables Wireless customers to charge ringtones, games and other digital products and services to their monthly Phone bills. NUCES-Islamabad

  43. 4. STORED VALUE PAYMENT SYSTEMS Enables customers to make instant online payments to merchants and other individuals based on Value stored in a Digital Account. (e.g. eCount) Online Value Systems rely on the value stored in a Consumer’s Bank, Checking , or Credit Card account, and some of these Systems require the use of Digital Wallet. Smart Cards another type of Stored Value System used for Micropayments. The Mondex Smart card contains electronic cash and can be used to transfer funds to Merchants in physical storefronts and to Merchants on the Internet. Types of Electronic Payment Systems NUCES-Islamabad

  44. Types of Electronic Payment Systems 5. DIGITAL CASH (Electronic Cash) Digital Cash is currently represented in electronic form that moves outside the normal network of money . Users are supplied with Client Software and can exchange money with another e-cash user over the Internet or with a retailer accepting e-cash. ClearBITis an Example of a Digital Cash service. 6. PEER-TO-PEER PAYMENT SYSTEMS Web-based Peer-to-Peer Payment Systems such as PayPal serve people who want to send money to vendors or individuals who are not set up to accept Credit Card Payments. The party sending money uses his Credit Card to create an account with designated payment at a Web site dedicated to Peer-to-Per Payments. The Recipient ‘’Picks up’’ the payment by visiting Web site and supplying info about where to send the payment (A Bank account or a physical address) NUCES-Islamabad

  45. Types of Electronic Payment Systems 7. DIGITAL CHECKING PAYMENT SYSTEMS Digital Checks are less expensive than Credit Cards and much faster than traditional Checking. Digital Checks are encrypted with a Digital Signature that can be verified and used for payments in e-commerce. Digital Checks (Electronic Checks) are useful in B2B . Example is eCheck. 8. ELECTRONIC BILLING PRESENTMENT AND PAYMENT SYSTEMS They enable the users to view their bills electronically and pay them through Electronic Fund Transfers (EFT) from Bank to Credit Card Accounts. These services support payments for online and physical store purchases of goods services after purchase has taken place such as paying routine monthly bills. NUCES-Islamabad

  46. M-Commerce Payment Systems With a Wi-Fi connection all Electronic Payment Systems can be used . The fact that connection is with wireless should have no impact . Many m-commerce transactions, however, are small, frequent purchases for items such as soft drinks, newspapers or mobile games that require special Micropayment Systems eBay’s PayPall Mobile Text2Buy Service allows consumers to send payments to PayPall Mobile Accounts, purchase items from select retailers, or denote money to some charities by entering a short text code into a cell phone. NTTDoCoMo in Japan offers a cell phone with a stored Payment System for purchases in designated Stores, Restaurants and vending machines and another handset model with an embedded Credit Card. NUCES-Islamabad

  47. Suggested Reading • Chapter 10 (Laudon & Laudon) NUCES-Islamabad