Unit 7 E-commerce Basic concepts of e-commerce Applications of e-commerce

Unit 7
• Basic concepts of e-commerce
• Applications of e-commerce
Starting up
• Do you buy over the Net? What goods or
services have you brought over the Net?
• Name the most popular e-business company
in your mind.
• Translate the term “电子商务” into English.
Part I Basic concepts
Key concepts
• E-commerce
– The process of buying, selling, or exchanging
products, services, and information via computer
• E-business
– Application of Internet technologies in the
management of day-to-day business processes.
– A broader definition of EC, which includes not just
the buying and selling of goods and services, but
also servicing customers, collaborating with
business partners, and conducting electronic
transactions within an organization.
E-business vs. E-commerce
• The main difference between them is that ecommerce defines interaction between
organizations and their customers, clients, or
constituents. On the other hand, e-business is a
broader term that also encompasses an
organization’s internal operations.
• E-commerce describes the buying and selling of
products, services, and information via computer
networks including the Internet, where e-Business
describes the broadest definition of EC. It includes
buying and selling of products and services,
servicing customers, collaborating with business
partners, and conducting other intra-business tasks.
Components of e-commerce
To execute those applications, companies need the right
information, infrastructure, and support services. As
People: Sellers, buyers, intermediaries, information
systems specialists and other employees, and any other
Public policy: Legal and other policy and regulating
issues, such as privacy protection and taxation
Marketing and advertising: Like any other business, EC
usually requires the support of marketing and advertising
Support services: Many services are needed to support
EC. They range from payments to order delivery and
content creation
Business partnerships: Joint ventures, e-marketplaces,
and partnerships are some frequently occurring
relationships in e-business
• What are the advantages of e-commerce?
• What are the disadvantages of e-commerce?
E-commerce: transaction types
• Business-to-business (B2B)
– Business that sells products or provides services to
other businesses.
– WalMart, GE, Oracle
• Business-to-consumer (B2C)
– Business that sells products or provides services to
end-user consumers.
– Amazon, Bank of America
• Consumer-to-consumer (C2C)
– Consumers sell directly to other consumers.
– e-bay, Taobao
E-commerce: transaction types
• Business-to-government (B2G)
– Government buys or provides goods, services or
information to/from businesses or individual citizens
• Business-to-employee (B2E)
– Information and services made available to
employees online .
• Mobile commerce (m-commerce)
– E-commerce transactions and activities conducted in
a wireless environment
• Collaborative commerce (c-commerce)
– Individuals or groups communicate or collaborate
E-commerce: transaction types
• Consumer-to-business (C2B)
– Consumers make known a particular need for a
product or service, and suppliers compete to provide it.
• Government-to-citizen/consumer (G2C)
– A government provides services to its citizens via EC
• Consumer to Government (C2G)
• Government to Business (G2B)
• Government to Government (G2G)
Internet terms
• p.55 Vocabulary
More terms
• Business/revenue model: 商业/经营/盈利模式
– How does a firm make money (generate revenues)
– Advertising, transaction fee, sales, subscription, affiliate
• Electronic funds transfers (EFT): 电子资金转帐
– Electronic exchange of account information over
communications networks.
– Online bill payment.
• Electronic data interchange (EDI): 电子数据交换
– Electronic exchange of computer-readable data in a
standard format between trading partners.
– Purchase orders, sales invoice, request for quotes, etc.
• Value-added network (VAN): 增值网络
– Third party provider of connection and transaction
services to businesses for EDI, EFT, etc.
– 通过计算机服务网络,使不同企业、不同的网络系统可以相互连接,
More terms
– Process of building, sustaining, and improving ebusiness relationships with existing and potential
customers through digital media.
• SCM = Supply Chain Management
– Process of moving goods from customer order
through the raw materials, supply, production, and the
distribution of products to the customer.
Part II Applications
Examples of e-commerce
Internet Advertisement
Internet Shop
Internet Bank
Internet Auction
Internet Gambling
Internet advertisement
• The most common money making method in the
Internet is to establish a popular web site, where other
parties are willing to advertise on the web site.
• For example, you can provide an Internet search engine
for Internet surfers to search some specific information
in a fast manner.
• Your web site may then receive a number of hits per day
and could therefore become an ideal place for
advertising. How much money you can make is
dependent upon how popular your site is.
• This kind of money making methods may not require
complex client/server, but you need to have bright
marketing thinking to find a hot topic for your site.
Internet shop
• With the growth of the Internet, there are more
and more on-line shops available in the Internet.
• An Internet shop functions like a normal shop,
where you buy goods by cash, cheque, or credit
• Most Internet shops use credit card based
payment systems. That is, you pay your goods by
sending your credit card information to the vendor
through a secure channel provided by the Internet
• Of course, the security and fairness are the key
issues to enable a payment.
Internet banking
• More and more banks now consider the Internet banking as a
"must go" way to further reduce banking cost.
• However, many people are still cautious about Internet banking
due to security fears.
• If security is reassured, more people will start to use the Internet
as a faster and more convenient way of banking.
• An Internet banking system is a client/server system. The bank is
the server who provides the banking service.
• When a customer opens the client page on a banking site, what
he or she can do is dependent on the service provided. The
services include:
Checking your account balance.
Transferring your money from one account to the other.
Doing digital cash transaction:
Withdraw digital cash
Deposit digital cash
Internet auction
• The auction server provides the service for bidders to
submit their bids. A typical Internet bidding protocol
looks like:
• 1. Auction Server: provide auction information on the
• 2. Bidder: cast its bid to the server via a secure channel.
• 3. Auction Server: open bids after the bidding time is
over and announces the highest bid (seller-oriented
• 4. Bidder: send its payment to the Server via a secure
Internet gambling
• Internet gambling is very much dependent upon the
electronic commerce.
• The most on-line gambling systems use the existing
electronic commerce protocols.
• Therefore, an Internet gambling server must provide
two basic services, i.e., game service and ecommerce service.
How a transaction takes
Consumer finds
something she wants to
buy at a “shop” on the
Verification and
remittance of actual
Consumer sends on
enciphered request for
payment to her bank
The electronic bank
sends back a secure
packet of e-cash
Consumer’s Bank
sends the ecash to the
Public Key
The shop
sends the
packet of
cash to its
Merchant Bank
Trading on the Internet
• Listening p.54
“Trading on the Internet”
Major players
Success stories: amazon.com
Opened: July 1995
Employees: > 9,000 worldwide
Revenue: $6.92 billion net sales in 2004
Customers: Nearly 49 million active accounts
Success stories: Dell Computers
• Dell Computers made waves in industry circles when
they announced that they sold over a billion dollars
worth of Personal Computers directly off the Web in
– Moving routine interactions to the Web
– 50,000 customers use Dell’s web site to check their
order status each week.
– 90,000 S/W files are downloaded. (It costs $150,000 a
– 200,000 customers access Dell’s trouble-shooting tips
Business model
Why Did the “.com” Companies Fail?
• Flawed business model
– Companies view the technology as their business,
rather than having a business
– Lose money on individual transactions
• Amazon.com loses almost $3 per order on
multi-product orders
– Lack of control over supply of what they sell
• Priceline.com
– All the good ideas duplicated by established
concerns with deep pockets and staying power
Five basic rules
e Business rules
Five rules need follow if you want to be profitable
network business :
1. If you are interested in a market and no competitors
yet, but the potential market volume is not significant.
Try to be the biggest e Business player.
2. If you prefer enter a e-market, and the overall market
is large enough. Then you make a quick enter and create
your own advantage.
3. If the e-market large enough, but has a very strong
competitor inside. Then you use the model to subvert
their profitability.
Five basic rules
e Business rules
4. If the e-market is not big, but has a very strong
competitor inside. Well, you just make your own
personal website.
5. If you don‘t clear about the market, think about
that who would be your first clear customers.
• Reading pp.56-57
“Using the Net”