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CHAPTER 5

Chapter 5:
E-Business and E-Commerce
5.1 Overview of E-Business & E-Commerce
5.2 Business-to-Consumer (B2C) Electronic
Commerce
5.3 Business-to-Business (B2B) Electronic
Commerce
5.4 Electronic Payments
5.5 Ethical and Legal Issues in E-Business

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LEARNING OBJECTIVES
1. Describe the six common types of electronic
commerce; provide specific personal examples of how
you have used or could use B2C, C2C, G2C, and
mobile commerce; and offer a specific example of B2B
and G2B.
2. Discuss the five online services of business-toconsumer electronic commerce, provide a specific
example of each service, and state how you have used
or would use each service.

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LEARNING OBJECTIVES
(CONTINUED)
3. Describe the three business models for business-tobusiness electronic commerce, and provide a specific
example of each model.
4. Describe the four types of electronic payments, provide
a specific example of each one, and explain whether
you would use each type.
5. Illustrate the ethical and legal issues relating to
electronic commerce with two specific examples of
each issue.
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CASE 5.1 FROM SOCIAL NETWORKS


TO SOCIAL COMMERCE
The Problem
Were all familiar with national advertising campaigns
for big brands that spend millions on 30-second
television commercials, as an example. But did you
know that local advertising is also big business? Much
of that money is wasted, because local commerce is
highly segmented and inefficient. A small company
cannot acquire customers or advertise with the
efficiency of a large chain that has multiple locations
in the same town. The problem, therefore, is how to
make local advertising more efficient and effective for
small businesses.
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CASE 5.1 FROM SOCIAL NETWORKS


TO SOCIAL COMMERCE
The Solution
The solution may lie in the emerging area of social
commerce, as illustrated by Groupon
(www.groupon.com). Every day, Groupon e-mails its
subscribers discounts on goods and services, but only
if a minimum of people sign up for the deals.
Groupons social commerce model pays off in three
ways: (1) The subscriber gets a better price; (2) the
merchant gets additional business and potential new
customers; and (3) Groupon receives a share of the
revenues generated by the deals.
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CASE 5.1 FROM SOCIAL NETWORKS


TO SOCIAL COMMERCE
The Results
Groupons business model has been wildly successful. The
company has about 10,000 employees and sends out more than
900 deals each day in over 550 markets. The company, which
launched in 2008, gained 1 million subscribers within a year and
went from zero to $500 million in sales within 18 months. In
2012, gross billings rose by 35 percent to $5.4 billion.

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CASE 5.1 FROM SOCIAL NETWORKS


TO SOCIAL COMMERCE

Discussion
Discuss the attributes of Groupons business model.
How does Groupon remain competitive in the market facing
more than 500 companies around the world offering similar
services?

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5.1 OVERVIEW OF E-BUSINESS


AND E-COMMERCE

Definitions and Concepts


E-commerce, Social Commerce, Degree of Digitalization, Ebusiness

Types of E-Commerce
E-Commerce and Search
Major E-Commerce Mechanisms
Benefits and Limitations of E-Commerce

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DEFINITIONS AND CONCEPTS


(CONTINUED)

Pure versus Partial Electronic Commerce depends on


the degree of digitization involved.
Brick-and-mortar organizations
Virtual organizations
Click-and-mortar organizations

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BRICKS AND MORTAR, PARTIAL


EC, AND PURE EC

Example Buy books at university bookstore:


bricks and mortar

Use Internet to order physical book from Amazon:


partial EC

Order and download book from Amazon: pure EC

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TYPES OF E-COMMERCE

Business-to-Consumer (B2C)
Business-to-Business (B2B)
Consumer-to-Consumer (C2C)

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TYPES OF E-COMMERCE
(CONTINUED)

Business-to-Employee (B2E)
E-Government
Mobile Commerce (m-commerce)

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E-COMMERCE AND SEARCH

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E-COMMERCE BUSINESS MODELS

On-line direct
Electronic tendering system
Name-your-own-price
Affiliate marketing
Viral Marketing
Group purchasing

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E-COMMERCE BUSINESS MODELS

Online direct marketing


Electronic tendering system
Name-your-own-price
Find-the-best-price
Affiliate marketing

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E-COMMERCE BUSINESS MODELS


(CONTINUED)

Product customization
Deep discounters
Membership

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E-COMMERCE BUSINESS MODELS


(CONTINUED)

Viral marketing
Group purchasing
Online auctions
Bartering Online

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MAJOR E-COMMERCE
MECHANISMS

On-line Auctions
Forward Auctions
Reverse Auctions

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FORWARD AND REVERSE


AUCTIONS

Bid
price

Bid
price

Time

Time

Forward Auction

Reverse Auction

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BENEFITS OF E-COMMERCE

Benefits to organizations
Makes national and international markets more
accessible
Lowering costs of processing, distributing, and
retrieving information
Benefit to customers
Access a vast number of products and services
around the clock (24/7/365)
Benefit to society
Ability to easily and conveniently deliver information,
services, and products to people in cities, rural areas,
and developing countries
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LIMITATIONS OF E-COMMERCE

Technological Limitations
Lack of universally accepted security standards
Insufficient telecommunications bandwidth
Expensive accessibility

Non-technological Limitations
Perception that EC is unsecure
Unresolved legal issues
Lacks a critical mass of sellers and buyers

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5.2 BUSINESS-TO-CONSUMER
(B2C) ELECTRONIC COMMERCE

Electronic storefronts
Electronic malls

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5.2 IT`S ABOUT BUSINESS


LUXURY E-COMMERCE
In recent years, more major luxury goods companies such
as Burberry, and LVMH Mot Hennessy Louis Vuitton, have
realized that selling their items on-line does not take away
from their posh image and have launched e-commerce.
Luxury consumers dont want a point-and-click transaction;
they want an on-line shopping experience, including a
guide to the latest styles. To provide this guiding hand,
websites such as Net-a-Porter ups the e-tailing ante by
offering an interactive shopping fashion magazine that
publishes 52 weeks of editorial content each year in
addition to its designer clothes sales operations. In 2009,
Net-a-Porter launched a sister website, theOutnet.com
which offers discounted designer clothes.
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ONLINE SERVICE INDUSTRIES

A key issue is disintermediation

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ONLINE SERVICE INDUSTRIES

Cyberbanking
Online securities trading
Online job market
Travel services

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ONLINE ADVERTISING

Online Advertising methods

Banners (example of a banner ad below)


Pop-up ad
Pop-under ad
Spamming
Permission marketing
Viral marketing

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ONLINE ADVERTISING ON SOCIAL


NETWORKS

Types of Online Advertising:


Self-service advertising is advertising purchased without the
assistance of a sales representative.
Brand advertising relies on large advertising campaigns that
emphasize the companys brand and use special features like
fan pages that are unique to Facebook and other social
networking sites.

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ONLINE ADVERTISING ON SOCIAL


NETWORKS (CONTINUED)

Performance-based advertising occurs when the


advertising company pays only for measurable results;
that is, when someone clicks on a companys ad and
goes on to purchase something.
Impression-based advertising occurs when a
company purchases a set amount of impressions. An
impression is a single instance of an ad appearing on a
website.

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ISSUES IN E-TAILING

Channel conflict: occurs when clicks-and-mortar


companies may face a conflict with their regular
distributors when they sell directly to customers on-line.
Multichannelling: a process many companies use to
integrate their on-line and off-line channels
Order fulfillment: involves finding the product to be
shipped; packaging the product; arrange for speedy
delivery to the customer; and handle the return of
unwanted or defective products.

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5.3 BUSINESS-TO-BUSINESS
(B2B) ELECTRONIC COMMERCE

In B2B e-commerce, the buyers and sellers are


organizations.

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B2B SELL-SIDE MARKETPLACE

Key mechanisms: electronic catalogs and forward


auctions
Click on the Dell Auction link to access a Sell-Side
Marketplace:
Dell Auction

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B2B BUY-SIDE MARKETPLACE

Key mechanism: reverse auctions


Click on the link below to access a Buy-Side
Marketplace:
United Sourcing Alliance is a common Sell-Side Marketplace

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ELECTRONIC EXCHANGES

There are three basic types of public exchanges:


vertical, horizontal, and functional
Vertical Exchanges
Horizontal Exchanges
Functional Exchanges

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5.4 ELECTRONIC PAYMENTS

Electronic checks (e-checks)


Electronic credit cards
Purchasing cards
Electronic cash
Stored-value money cards
Smart cards
Person-to-person payments

Digital Wallets

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HOW E-CREDIT CARDS WORK

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5.5 ETHICAL AND LEGAL ISSUES

Ethical Issues
Privacy
Job Loss

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LEGAL ISSUES SPECIFIC TO


E-COMMERCE

Fraud on the Internet: fraudulent activity i.e. stocks,


auctions, investments, business opportunities.
Domain Names are considered to be legal when the
person or business who owns the name has operated a
legitimate business under that name for some period of
time. http://www.cira.ca/
Cybersquatting is the practice of registering or using
domain names for the purpose of profiting from the
goodwill or the trademark that belongs to someone else.

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LEGAL ISSUES SPECIFIC TO ECOMMERCE (CONTINUED)


Domain Tasting
Taxes and Other Fees
Copyright

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CHAPTER CLOSING

Six common types of electronic commerce: B2C, B2B, C2C,


B2E, G2C EC and G2B EC
Five on-line services of B2C EC: Electronic banking, On-line
securities trading, On-line job matching, On-line travel services,
and, On-line advertising
Four types of electronic payments: Electronic cheques, Electronic
credit, Electronic cash (e-cash), and, Person-to-person payments
Three business models for B2B EC: sell-side marketplace, buyside marketplace, and, public exchanges.
Two major ethical issues relating to electronic commerce:
privacy and job loss

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Copyrigh
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Copyright 2014 John Wiley & Sons Canada,
Ltd. All rights reserved. Reproduction or
translation of this work beyond that permitted
by Access Copyright (the Canadian copyright
licensing agency) is unlawful. Requests for
further information should be addressed to the
Permissions Department, John Wiley & Sons
Canada, Ltd. The purchaser may make back-up
copies for his or her own use only and not for
distribution or resale. The author and the
publisher assume no responsibility for errors,
omissions, or damages caused by the use of
these files or programs or from the use of the
information contained herein.

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