Role of the Internet : technological development,development of e-Commerce, different commercial models, diverse roles of websites. • Internet strategy : virtual value chain dis-intermediation, cybermediaries • Business to Business : Intranets and Extranets; communication , recruitment and procurement , exchanges. • Consumer behavior : flow theory; Hoffman’s Many – to- Many model; Internet branding and loyalty ; Internet communities ; how the Internet is changing consumer behavior. • Internet market research : secondary research, online focus groups, MEGS , web surveys , Email surveys. • Internet retailing : reducing role of location , online shopping.
7. Internet promotion : advertising : types , measurement, effectiveness , integration ; affiliation marketing , PR ; word-on-line ; direct marketing. 8. Website design : website design guidelines , best practice , building traffic. Convergence and future development : interactive TV , mobile internet , PDA , groupware , SMS , interactive appliances.
Role of Internet With the use of internet, it is possible to transmit/receive information containing images, graphics, sound and videos. ISP industry can offer services as: • Linking consumers and businesses via internet. • Monitoring/maintaining customer's Web sites. • Network management/systems integration. • Backbone access services for other ISP's. • Managing online purchase and payment systems. The internet is designed to be indefinitely extendible and the reliability of internet primarily depends on the quality of the service providers' equipments.
Benefits of Internet: • Doing fast business. • Trying out new ideas. • Gathering opinions. • Allowing the business to appear alongside other established businesses. • Improving the standards of customer service/support resource. • Supporting managerial functions. Limitations: • Security • Privacy Threats: Hackers, viruses etc.
Managing in the Virtual World - Market Space What is Market Place • Physical World of Resources to create products/ services What is Marketspace • Virtual World of Info. that complements/ substitutes the physical world
Business have been looking for ways to increase their profits and market share . The search for more efficient ways of doing business has been driving another revolution in the conduct of business .This revolution is known as electronic commerce which is any purchasing or selling through an electronic communications medium. Business planners in institutions and organizations now see technology not only as a supportive cofactor, but as a key strategic tool. They see electronic commerce as a “wave of future”. Information technology has revolutionized and digitalized economic activity , and made it a truly global phenomenon .One of the most visible icons of the IT Revolution is the internet – the world wise web. Which is a gigantic anarchic network of computers world wide , which is essentially used for communicating , interaction , interactive long distance computing and exchange of information giving rise to a host of applications from military and government to business , education and entertainment.
E-commerce exists because of internet. It has been born on the net and is growing with the net . It involves carrying business on and through the net . E-commerce is a product of the digital economy. It is a source of a paradigm shift , in redefining technology, individual and global societies , as well as national and global economies. Electronic commerce is a symbolic integration of communications , data management , and security capabilities to allow business applications within different organizations to automatically exchange information related to the sale if goods and services . Communication services support the transfer of information from the originator to the recipient. Data management services define the exchange format of the information.Security mechanisms authenticate the source of information, guarantee the integrity of the information received , prevent disclosure of information to inappropriate users , and document that the information was received by the intended recipient.
Prior to the development of e-commerce, the process of marketing and selling goods was a mass-marketing and sales-force driven process . Customers were viewed as passive targets of advertising “campaigns” .Selling was conducted in well-insulated “channels” .Consumers were trapped by geographical and social boundaries, unable to search widely for the best price and quality . E-commerce has challenged much of this traditional business thinking.
E-Commerce Defined : “The use of internet and the WEB to transact business . More formally , digitally enabled commercial transactions between and among organizations and individuals.” “Electronic commerce is commerce via any electronic media , such as TV,fax, and online networks.Internet-based commerce makes use of any Internet facility and service. Web-based commerce focuses on the opportunity of the World Wide Web apparatus , in particular , its ubiquity and its ease of use .”
Benefits/Features of E-Commerce : Electronic commerce increases the speed,accuracy, and efficiency of business and personal transactions. The benefits of E-commerce include the following : • Ubiquity : E-commerce is ubiquitous, meaning that it is available just about everywhere , at all times.It liberates the market from being restricted to a physical space and makes it possible to shop from your desktop, at home, at work , or even from your car using mobile commerce .From customer point of view , ubiquity reduces transaction costs – the costs of participating in a market.To transact it is no longer necessary to spend time and money traveling to market.At a broader level, the ubiquity of e-commerce lowers the cognitive energy required to transact in a marketplace . Cognitive energy refers to the mental effort required to complete a task.
Global Reach : E-commerce technology permits commercial transactions to cross cultural and national boundaries far more conveniently and cost effectively than is true in traditional commerce.As a result, the potential market size for e-commerce merchants is roughly equal to the size of the world’s online population.The total number of users or customers an e-commerce business can obtain is a measure of its reach. Universal Standards : The technical standards for conducting e-commerce , are universal standards – they are shared by all nations around the world. The universal technical standards of e-commerce greatly lower the market entry costs - the cost merchants must pay just to bring their goods to market. At the same time , for consumers , universal standards , reduce search cost – the effort required to find a suitable products.
Richness : Information richness refers to the complexity and content of a message. Interactivity : E-commerce technologies are interactive , meaning they allow for two-way communication between merchant and consumer .It allows an online merchant to engage a consumer in ways similar to a face-to face experience , but on a much more massive , global scale. Information Density : the internet and the Web vastly increase information density –the total amount and quality of information available to all market participants , consumers, and merchants alike.E-commerce technologies reduce information collection, storage , processing , and communication costs .At the sale time, these technologies increase greatly, the accuracy and timeliness of information-making information more useful and important than ever.As a result information becomes more plentiful,cheaper and of higher quality.
Personalization/Customization : E-commerce technologies permit personalization – merchants can target their marketing messages to specific individuals by adjusting the message to a person’s name,interests , and past purchases.The technology also permits customization –changing thedelivered product or service based on a users preference or prior behavior.Given the interactive nature of e-commerce technology, a great deal of information about the consumer can be gathered in the marketplace at the moment of purchase.With the increase in information density , a great deal of information about the consumer’s past purchases and behavior can be stored and used by online merchants.The result is increase in the level of personalization and customization.
Types of E-Commerce : There are different types of e-commerce and many different ways to characterize these types . The five major types of e-commerce are : • B2C • B2B • C2C • P2P • M-Commerce
B2C : (Business-to-Consumer) The most commonly discussed type of e-commerce is Business-to-Consumer (B2C) e-commerce, in which online business attempt to reach individual consumers is done .It has grown exponentially since 1995, and is the type of e-commerce that most consumers are likely to encounter . Within the B2C category there are many different types of business models: portals , online retailers , content providers , transaction brokers , market creators , service providers , and community providers.
B2B : (Business-to-Business) In this type of e-commerce , one business focuses on selling to other business .It is the largest form of e-commerce.The ultimate size of B2B e-commerce could be huge . At first, B2B e-commerce primarily involved inter-business exchanges , but a number of other B2B business models have developed, including e-distribution , B2B service providers , matchmakers , and info-mediaries that are widening the use of e-commerce.
C2C : Consumer-to-Consumer C2C e-commerce provides a way for consumers to sell to each other , with the help of an online market maker such as the auction site .In C2C e-commerce , the consumer prepares the product for market , places the product for auction or sale, and relies on the market maker to provide catalog , search engine ,and transaction clearing capabilities so that products can be easily displayed , discovered , and paid for.
P2P : (Peer-to-Peer) Peer-to-Peer technology enables Internet users to share files and computer resources directly without having to go through a central Web server. In peer-to-peer’s purest form, no intermediary is required . Entrepreneurs and venture capitalists have attempted to adapt various aspects of peer-to-peer (P2P) e-commerce. E.g. Napster.com established to aid internet users in finding and sharing music files (mp3 files). It is partially peer-to-peer because it relies on a central database to show which users are sharing music files.
M-commerce : Mobile commerce or m-commerce , refers to the use of wireless digital devices to enable transactions on the Web . These devices utilize wireless networks to connect cell phones and handheld devices to the Web. Once connected , mobile consumers can conduct many types of transactions , including stock trades, banking, travel reservations , and more. ***B2G : Business to Government
E-Commerce Business Models : A business model is a set of planned activities (sometimes referred to as business process) designed to result in a profit in a marketplace. The business model is at the center of the business plan. A business plan is a document that describes a firm’s business model . An e-commerce business model aims to use and leverage the unique qualities of the internet and the World Wide Web.
There are Eight Key Ingredients of a Business Model : • Value proposition : It defines how a company’s product or service fulfils the needs of the customers.To develop and/or analyze a proposition, the following questions need to be answered : - Why will customers choose to business with your firm instead of another company ? - What will your firm provide that other firms do not and cannot ? From the consumer point of view , successful e-commerce value propositions include : personalization and customization of product offerings, reduction of product search costs, reduction of price discovery costs, and facilitation of transactions by managing product delivery.
2. Revenue model : The firms revenue model describes how the firm will earn revenue , generate profits,and produce a superior return on invested capital.The function of business organizations is both to generate profits and to produce returns on invested capital that exceed alternative investments. * The advertising model : A website that offers its users content, services , and/or products also provides a forum for advertisements and receives fees from advertisers. Those websites that are able to attract the greatest viewer ship and are able to retain user attention are able to charge higher advertising rates.
* Subscription Revenue Model : In the subscription revenue model , a Web site that offers its users content or services charges a subscription fee for access to some or all of its offerings . * Transaction fee revenue model : In this model a company receives a fee for enabling or executing a transaction. (e.g. Online auction websites taking some commission from buyer as well as the seller). * Sales Revenue Model : In the sales revenue model , a companies derive revenue by selling goods, information , or services to customers . E.g. amazon.com
* Affiliate Revenue model : In the affiliate revenue model , sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales.
3.Market Opportunity : The term market opportunity refers to the company’s intended marketplace and the overall potential financial opportunities available to the firm in that marketplace . The market opportunity is usually divided into smaller market niches. The realistic market opportunity is defined by the revenue potential in each of the market niches . 4. Competitive Environment : The firms competitive environment refers to the other companies operating in the same marketplace selling similar products . The competitive environment for a company is influenced by several factors : how many competitors are active, how large their operations are , what the market share of each competitor is , how profitable these firms are , and how they price their products.
5.Competitive Advantage : Firms achieve a competitive advantage when they can produce a superior product a superior product and/or bring the product to market at lower than most, or all, of their competitors . Firms also compete on scope .Some firms can develop global markets while other firms can only develop a national or regional market .Firms that can provide superior products at lowest cost on global basis are truly advantaged. 6. Market strategy : Market strategy is the plan the company put together that details exactly how the company intend to enter the market and attract new customers.
7.Organizational Development : Describes how the company will organize the work that needs to be accomplished. 8. Management Team : Employees of the company responsible for making the business model work.
Categorizing E-Commerce Business Models
Major B2C business models : There are a number of different models being used in the B2C e-commerce arena . The major models include the following : • Portal :-Offers powerful search tools plus an integrated package of content services ;typically utilizes a combined subscription/advertising revenue/transaction fee model ;may be general or specialized. • E-tailer :- Online version of traditional retailer; includes virtual merchants (online retail stores) , clicks and mortar e-tailers (online distribution channel for a company that also has a physical store);catalog merchants (online version of direct mail catalog); online malls (online version of mall);manufacturers selling directly over the Web.
Content Provider :- Information and entertainment companies that provide digital content over the Web; typically utilizes an advertising , subscription ,or affiliate referral fee revenue model. Transaction broker :- Process online sales transactions; typically utilizes a transaction fee revenue model. Market creator :- Uses Internet technology to create markets that bring buyers and sellers together ; typically utilizes a transaction fee revenue model. Service provider :- Offers services online. Community provider :- Provides an online community of like-minded individuals for networking and information sharing ; revenue is generated by referral fees , advertising , and subscription.
Major B2B business models : The major business models used to date in B2B arena include : • Hub, also known as marketplace/exchange – electronic market place where suppliers and commercial purchasers can conduct transactions ; may be general (a horizontal marketplace ) or specialized (a vertical marketplace) . • E-distributor :- Supplies products directly to individual businesses. • B2B service provider :- Sells business services to other firms. • Matchmaker :- Link business together , changes transaction on usage fees. • Infomediary :- Gathers information and sells it to business .
Major C2C business models : A variety of business models can be found in the customer-to-customer e-commerce , peer-to-peer e-commerce, and m-commerce areas : • C2C business models connect consumers with other consumers .The most successful has been the market creator business model used by eBay.com . • P2P business models enable consumers to share files and services via Web without common servers. A challenge has been finding a revenue model that works. • M-commerce business models take traditional e-commerce models and leverage emerging wireless technologies to permit mobile access to the Web. • E-commerce enablers business models focus on providing the infrastructure necessary for e-commerce companies to exist, grow, and prosper.
Key business concepts and strategies applicable to e-commerce : • Industry structure : The nature of players in an industry and their relative bargaining power – by changing the basis of competition among rivals , the barriers to entry , the threat of new substitute products , the strength of suppliers , and the bargaining power of buyers. • Industry value chains : The set of activities performed in an industry by suppliers , manufacturers , transporters , distributors and retailers that transforms raw inputs into final products and services – by reducing the cost of information and other transaction costs. • Firm value chains : The set of activities performed within an individual firm to create final products from raw inputs – by increasing operational efficiency .
Business strategy : A set of plans for achieving superior long-term returns on the capital invested in a firm – by offering unique ways to differentiate products , obtain cost advantages , compete globally , or compete in a narrow market or product segment.
Technology Infrastructure for E-Commerce The Internet and World Wide Web E-Commerce Infrastructure
The Internet : Technology Background The Internet is an interconnected network of thousands of networks and millions of computers (sometimes called as host computers or just hosts) linking business , educational institutions , government agencies , and individuals together .The internet provides services such as e-mail, news-groups, shopping, research , instant messaging , music videos and news . No one organization controls the Internet or how it functions , nor it is owned by anybody , yet it has provided the infrastructure for a transformation in commerce, scientific research, and culture .The word internet is derived from the word internetwork or the connecting together of two or more computer networks.The World Wide Web is one of the internet’s most popular services, providing access to over one billion Web pages , which are documents created in a programming language called HTML and which can contain text , graphics , audio, video, and other objects, as well as “hyperlinks” that permit a user to jump from one page to another.
The Internet : Key Technology Concepts; Based in the definition , the internet means a network that uses the IP (Internet Protocol) addressing scheme, supports the Transmission Control Protocol (TCP), and ,makes services available to users much like a telephone system makes voice and data services available to the public. Behind this formal definition are three extremely important concepts that are the basis for understanding the Internet : packet switching , the TCP/IP communications protocol , and client/server computing .Although the Internet has evolved and changed dramatically, these three concepts are at the core of how the Internet functions today and are the foundation for Internet.
Packet Switching : It is a method of slicing digital messages into parcels called “packets” sending the packets along different communication paths as they become available , and then reassembling the packets once they arrive at their destination .Prior to the development of packet switching , early computer networks used leased , dedicated telephone circuits to communicate with terminals and other computers. In packet-switched networks , messages are first broken down into packets.Appended to each packet are digital codes that indicate a source address(the origination point) and the destination address, as well as sequencing information and error-control information for the packet.Rather than being sent directly to the destination , in a packet network , the packets travel from computer to computer until they reach their destination. The computers are called Routers . Routers are special purpose computers that interconnect thousands of different computer networks that make up the internet and route packets along to their ultimate destination as they travel.To ensure that packets take the best available path towards their destination, the routers use computer programs called routing algorithms. Packet switching makes full use of almost all available communication lines and capacity.If some lines are disabled or too busy , the packets can be sent on any available line that eventually leads to the destination point.
TCP/IP : TCP refers to the Transmission Control Protocol . IP refers to the Internet Protocol. A protocol is a set of rules for formatting , ordering , compressing , and error checking messages.It may also specify the speed of transmission and means by which devices on the network will indicate they have stopped sending and/or receiving messages. Protocols can be implemented in either hardware or software .TCP/IP is implemented in Web software called server software .It is the agreed upon protocol for transmitting data packets over the Web.TCP establishes connections among sending and receiving Web computers , handles the assembly of packets at the point of transmission , and their reassembly at the receiving end.
IP addresses :TCP handles the packetizing and routing of Internet messages . IP provides the Internet’s addressing scheme .Every computer connected to the Internet must be assigned an address – otherwise it cannot send or receive TCP packets .When a user sign’s onto the Internet using a dial-up telephone modem, the computer is assigned a temporary address by the Internet service provider. Internet addresses known as IP addresses , are 32-bit numbers that appear as a series of four separate numbers marked off by periods such as 184.108.40.206. Each of the four numbers can range from 0-255. This “dotted quad” addressing scheme contains up to 4 billion addresses of the computer ( 2 to the 32nd power).The leftmost number typically indicates the network address of the computer , while remaining numbers help to identify the specific computer within the group that is sending (or receiving) messages.
Domain Names and URLs : Most people cannot remember 32-bit numbers .IP addresses can be represented by a natural language convention called domain names.The domain name system (DNS) allows expressions to stand for numeric IP addresses. Uniform Resource Locators (URLs ) are addresses used by Web browsers to identify the location of content on the web, also use domain names as a part of the URL.A typical URL contains the protocol to be used when accessing the address, followed by its location. The protocol used is HTTP (Hypertext Transfer Protocol).A URL can have more than one paths.
Client/Server computing : It is a model of computing in which very powerful personal computers called Clients are connected together in a network together with one or more server computers.These clients are sufficiently powerful to accomplish complex tasks such as displaying rich graphics , storing large files, and processing graphics and sound files , all on a local desktop or hand held device. Servers are networked computers dedicated to common functions that their client machines on the network need. Such as storing files , software applications, utility programs such as Web connections , and printers.
Other Internet Protocols : SMTP :Simple mail transfer protocol POP : Post Office Protocol IMAP : Internet message access protocol FTP : File Transfer Protocol for transferring files SSL : Secure Socket Layers for Security For Sending Email
It is difficult to estimate the actual amount of e-commerce crime for a variety of reasons . In many instances , e-commerce crimes are not reported because companies ear of losing the trust of legitimate customers. And even when crimes are reported , it may be hard to quantify the losses incurred .The most serious losses involved theft of proprietary information and financial fraud.Online credit card fraud is perhaps the most high profile form of e-commerce crime. In some cases , the criminals aim to just deface , vandalize and/or disrupt a Web site, rather than steal goods or services . The cost of such an attack includes not only the time and effort to make repairs to the site but also damage done to the site’s reputation and image as well as revenues lost as a result of the attack. Estimates of the overall cost of the various forms of cyber vandalism range into billions.
What is Good E-Commerce Security ? What is a secure commercial transaction ? Anytime a user goes into a market place , he/she takes risks, including the loss of privacy (information about what you purchased).The prime risk as a customer is that you do not get what you paid for.As a merchant in the market , you don’t get paid for what you sell,.Thieves take merchandise and then either walk off without paying anything , or pay you with a fraudulent instrument , stolen credit card , or forged currency. Burglary, breaking and entering , embezzlement , trespass , malicious destruction, vandalism – all crimes in traditional commercial environment – are also present in e-commerce.However , reducing risks in e-commerce is a complex process that involves new technologies, organizational policies and procedures, and new laws and industry standards that empower law enforcement officials to investigate and prosecute offenders.
Security Threats in the E-Commerce Environment : From the technology perspective , there are three key points of vulnerability when dealing with e-commerce : the client, the server and the communication pipeline. • Malicious Code It includes a variety of threats such as viruses , worms , Trojan horses , and “bad applets” . A virus is a computer program that has the ability to replicate or make copies of itself , and spread to other files. In addition to the ability to replicate , most computer viruses deliver a “payload”(destroying files,reformatting the computers hard drive or causing programs to rum improperly.
A Trojan horse does something other than expected . The Trojan horse is not itself a virus because it does not replicate , but is often a way for viruses or other malicious code to be introduced into a computer system. Bad applets also referred to as malicious mobile code , are expected to become an increasing problem as java and Active X controls become more commonplace. Malicious code is a threat to the system’s integrity and continued operation, often changing how a system functions or altering documents created on the system . In many cases the user is unaware of the attack until it affects the system and the data on the system.