IT8005

E- Commerce
DEPARTMENT OF INFORMATION TECHNOLOGY
REGULATION 2017
SEMESTER: 8

UNIT 5
Introduces e-business and e-commerce and
their relevance to businesses and consumers.
It clarifies e-business terms and concepts such
as online business, revenue and technology
models by reviewing alternative applications
through activities and case studies.
 Introduction to e-business and e-
 The impact of the electronic communications on
commerce
traditional businesses.
 What is the difference between e-commerce and
e-business?
 E-business opportunities.
 Business adoption of digital technologies for e-
commerce and e-business.
 E-business risks and barriers to business
adoption.
 Management responses to e-commerce and e-
business.
 Learning outcomes

 Define the meaning and scope of e-business and e-

commerce and their different elements
 Summarize the main reasons for adoption of e-
commerce and e-business and barriers that may
restrict adoption
 Outline the ongoing business challenges of
managing e-business and e-commerce in an
organization.
 Management issues

 How do we explain the scope and implications

of e-business and e-commerce to staff?
 What is the full range of benefits of
introducing e-business and what are the risks?
 How do we evaluate our current e-business
capabilities?
 Introduction
 Organizations have now been applying technologies
based on the Internet, World Wide Web and wireless
communications to transform their businesses for over
15 years since the creation of the first web site
(http://info.cern.ch) by Sir Tim Berners-Lee in 1991.
 Deploying these technologies has offered many
opportunities for innovative e-businesses to be created
based on new approaches to business.
 Table 1.1 highlights some of the best-known examples
and in Activity 1.1 you can explore some of the reasons
for success of these e-businesses.
 Table 1.1
 Year Company / site Category of innovation and business model
Founded:
 1994 Amazon Retailer.
 1995 (March) Yahoo! (yahoo.com) Directory and portal.
 1995 (Sept) eBay Online auction.
 1995 (Dec) AltaVista (altavista.com) Search engine.
 1996 Hotmail (hotmail.com) Web-based e-mail,Viral marketing (using
e-mail signatures to promote service),Purchased by Microsoft in 1997.
 1998 GoTo.com (goto.com) Pay-per-click search marketing.
 Overture (2001) Purchased by Yahoo! in 2003.
 1998 Google (google.com) Search engine.
 1999 Blogger (blogger.com) Blog publishing platform
Purchased by Google in 2003.
 1999 Alibaba (alibaba.com) B2B marketplace with $1.7 billion IPO on
Hong Kong stock exchange in 2007. See case in Chapter 2.
 1999 MySpace (myspace.com) Social network.
 Formerly eUniverse Purchased by News Corp in 2005.
 2001 Wikipedia (wikipedia.com) Open encyclopedia.
 2002 Last.fm A UK-based Internet radio and music
community web site,founded in 2002. On 30 May 2007,
CBS Interactive acquired Last.fm for £140m (US$280m).
 2003 Skype (skype.com) Peer-to-peer Internet telephony
VoIP – Voice over Internet protocol.
 Purchased by eBay in 2005, 2003.
 Second Life (secondlife.com) Immersive virtual world.
 2004 Facebook (facebook.com) Social network applications
and groups.
 2005 YouTube (youtube.com) Video sharing and rating
 2007 Joost (joost.com) Quality video broadcast service.
 IPTV – Internet Protocol TV.
 ?? The future ??
 Continue
 For the author, e-business and e-commerce is an exciting
area to be involved with, since many new opportunities
and challenges arise yearly, monthly and even daily.
Innovation is a given, with the continuous introduction
of new technologies, new business models and new
communications approaches.
 For example, Google innovates relentlessly. Its service
has developed a long way since 1998 (Figure 1.1) with
billions of pages now indexed and other services such as
web mail, pay per click adverts, analytics and social
networks all part of its offering. Complete Activity 1.1 or
view Table 1.1 to see other examples of the rate at
which new innovations occur.
Figure 1.1 Google circa 1998
Source: Wayback machine archive: http://web.archive.org/web/19981111183552/google.stanford.edu
 E-business innovation and opportunity
 Since Google was launched in 1998 which
e-business start-ups have transformed the way we
work, live and play?

 How has Google innovated in search and its

business table?

 See Table 1.1 for some of major innovators

 The impact of the Internet on business
 Andy Grove, Chairman of Intel, one of the early
adopters of e-commerce, has made a
meteorological analogy with the Internet. He
says:
Is the Internet a typhoon force, a ten times force,
or is it a bit of wind? Or is it a force that
fundamentally alters our business? (Grove, 1996)
 E-business opportunities

 Reach
 Over 1 billion users globally
 Connect to millions of products
 Richness
 Detailed product information on 20 billion + pages
indexed by Google. Blogs, videos, feeds…
 Personalized messages for users
 Affiliation
 Partnerships are key in the networked economy
 Internet risks – what can go wrong with a transactional site?

False orders made by customers.1  

Incorrectly input orders .2 
Insufficient security .3 
People are usually hesitant to give out banking details over the internet .4 
After sales service may be hard to organize depending on store location and .5 
postage
‫ ما الذي يمكن أن يحدث خطأ في موقع المعامالت؟‬
‫ • أوامر كاذبة من قبل العمالء‬
‫ • أوامر إدخالها بشكل غير صحيح‬
‫ • عدم كفاية األمن‬
‫ • الناس عادة ما يترددون في إعطاء تفاصيل مصرفية عبر اإلنترنت‬

‫• خدمة ما بعد البيع قد يكون من الصعب تنظيم اعتمادا على موقع مخزن والبريد‬ 
 What is e-commerce and e-business?
You are attending a role in the e-business team of a global bank You
anticipate you may be asked the distinction between
e-commerce and e-business.
E-commerce: Electronic commerce (e-commerce)
All electronically mediated information exchanges between an organization
and its external stakeholders Kalakota and Whinston (1997) refer to a
range of different perspectives for
e-commerce:
1 A communications perspective – the delivery of information,
products or services or payment by electronic means.
2 A business process perspective – the application of technology
towards the automation of business transactions and work-flows.
3 A service perspective – enabling cost cutting at the same time
as increasing the speed and quality of service delivery.
4 An online perspective – the buying and selling of products and
information online.
 E-business:
Electronic business (e-business)
All electronically mediated information exchanges,
both within an organization and with external
stakeholders supporting the range of business
processes.
 Buy-side e-commerce and Sell-side
e-commerce
 Buy-side e-commerce
E-commerce transactions between a purchasing
organization and its suppliers.
 Sell-side e-commerce
E-commerce transactions between a supplier
organization and its customers.
Figure 1.2 The distinction between buy-side and sell-side e-commerce
Figure 1.3 Three definitions of the relationship between e-commerce and e-business
 In Figure 1.3(a) there is a relatively small overlap between
e-commerce and e-business.
From Figure 1.2 we can reject Figure 1.3(a) since the overlap
between buy-side and sell-side e-commerce is significant.
Figure 1.3(b) seems to be more realistic, and indeed many
commentators seem to consider e-business and e-commerce
to be synonymous.
It can be argued, however, that Figure 1.3(c) is most realistic since
e-commerce does not refer to many of the transactions
within a business, such as processing a purchasing order, that
are part of e-business.
So e-commerce can best be conceived of as a subset of e-business and
this is the perspective we will use in this book.
Since the interpretation in Figure 1.3(b) is equally valid, what is
important within any given company is that managers involved with
the implementation of e-commerce or e-business are agreed on the
scope of what they are trying to achieve!.
Figure 1.4 The relationship between intranets, extranets and the Internet
 Intranet and Extranet
 Intranet :
A private network within a single company using
Internet standards to enable employees to access
and share information using web publishing
technology.
 Extranet :
A service provided through Internet and web
technology delivered by extending an intranet
beyond a company to customers, suppliers and
collaborators.
 If information is restricted to employees inside an organization, this is
an intranet as is shown in Figure 1.4.
 In a survey of 275 managers responsible for an intranet
featured in CIO (2002),
The main benefits mentioned by managers were:
1. Improved information sharing (customer service), 97%
2. Enhanced communications and information sharing (communications),
95%
3. Increased consistency of information (customer service), 94%
4. Increased accuracy of information (customer service), 93%
5. Reduced or eliminated processing, 93%
6. Easier organizational publishing, 92%.

 It is apparent that benefits focus on information delivery suggesting

that management of information quality is a key to successful use of
intranets.
 As an example, an online bank can potentially use many
of these technologies to communicate with its customers
according to the customers’ preferences – some prefer
to use the web, others mobile banking or SMS alerts,
others wireless or interactive TV and others traditional
channels.
 Bank First Direct (www.firstdirect.com) which is part of
the HSBC banking group has a strategy of innovation and
showcases its latest approaches in First Direct Interactive
(Figure 1.5).
 It uses SMS short codes as direct response from TV or
print advertising to integrate traditional and digital
media channels and also uses SMS periodically to deliver
relevant related product offers to customers.
Figure 1.5 First Direct Interactive (www.firstdirect.com)
 Mini Case Study 1.1 gives an example
of a viral campaign which helped sell
 This example shows how an engaging idea can be
products
discussed initially online and then in traditional
media to help increase the awareness of a brand.
 On the WillItBlend campaign micro-site
(www.willitblend.com, Figure1.6) a blender
designed for making smoothies has blended an
iPhone, an iPod, golf balls, glow sticks and a
video camera and more.
Figure 1.6 Blendtec viral campaign micro-site (www.willitblend.com)
Figure 1.7 summarizes the evolution of
 digital and
Since the Web 2.0web-related technologies
concept has been widely applied, it is
natural that commentators would try to evolve the concept to
Web 3.0, although the term hasn’t been widely applied to
date. We can suggest that as web functionality evolves, these
approaches which could be deemed ‘Web 3.0’ will become
more important:
1.Web applications. Usage of web-based applications and
services (like Google word processor and spreadsheets) using
the web in this way is sometimes termed ‘cloud computing’
where all that is really needed for many activities is a
computer with a web browser, with local software
applications used less widely.
2. Syndication. Increased incorporation of syndicated content
and services from other sites or a network into a site (using
tools such as Yahoo! Pipes and XML exchange between
widgets).
 continue
3.Streamed video or IPTV. Increased use of streamed
video from existing TV providers and user-generated
content (as suggested by use of YouTube and IPTV
services such as Joost);
4. Virtual worlds. Increased use of immersive virtual
environments such as Second Life;
5. Personal data integration. Increased exchange of data
between social networks fulfilling different needs (as
indicated by the recent Google development of
OpenSocial);
6. The semantic web. Increased use of semantic markup
leading to the semantic web envisioned by Tim
Berners-Lee over 10 years ago.
Figure 1.7 Evolution of web technologies
Source: Adapted from Spivack (2007)
 Figure 1.8 Summary and examples of transaction alternatives
between businesses, consumers and governmental organizations

 It is now commonplace to describe e-commerce transactions between an

organization and its stakeholders according to whether they are primarily
with consumers (business-to consumer– B2C) or other businesses (business-
to-business – B2B).
 Figure 1.8 gives examples of different companies operating in the business-to-
consumer (B2C) and business-to-business (B2B) spheres.
 Often companies such as BP or Dell Computer will have products that appeal
to both consumers and businesses, so will have different parts of their site to
appeal to these audiences.
 Figure 1.8 also presents two additional types of transaction, those
where consumers transact directly with other consumers (C2C) and
where they initiate trading with companies(C2B).
 Finally, the diagram also includes government and public services
organizations which deliver online or e-government services.
 As well as the models shown in Figure 1.8, it has also been suggested that
employees should be considered as a separate type of consumer through the
use of intranets which are referred to as employee-to-employee or (E2E).
Figure 1.8 Summary and examples of transaction alternatives between
businesses, consumers and governmental organizations
Additional activity – drivers and barriers to
adoption
 You are in a team of advisers at a local
business link (a local government agency
encouraging adoption of e-commerce)
 List
 Drivers to adoption of sell-side e-commerce by business
and how you can reinforce these by marketing benefits
 Barriers to adoption of sell-side e-commerce by
business and how you can reinforce these by stressing
benefits
 Cost/efficiency and competitiveness
drivers
 Cost/efficiency drivers
 Increasing speed with which supplies can be obtained
 Increasing speed with which goods can be dispatched
 Reduced sales and purchasing costs
 Reduced operating costs
 Competitiveness drivers
 Customer demand
 Improving the range and quality of services offered
 Avoid losing market share to businesses already using e-
commerce
 Usage of different e-business services in European countries.

Examples of poor online customer experience which you will certainly

be familiar with include:
 Web sites that fail because of a spike in visitor traffic after a peak-hour
TV advertising campaign.
 Hackers penetrating the security of the system and stealing credit
card details.
 A company e-mails customers without receiving their permission, so
annoying customers and potentially breaking privacy and data
protection laws.
 Problems with fulfilment of goods ordered online, meaning customer
orders go missing or are delayed and the customer never returns.
 E-mail customer-service enquiries from the web site don’t reach the
right person and are ignored.
 The perception of these risks may have limited adoption of e-business
in many organizations which is suggested by the data in (Figure 1.10).
Figure 1.10 Usage of different e-business services in European countries
Source: European Commission, 2008
 Barriers to development of online
technologies
 A DTI (2002) study evaluated some of the barriers
to B2B e-commerce (Figure 1.12) which remain
valid today.
You can see that reasons of cost were the most
important factors.
This suggests the importance of managers
assessing e-business to develop a cost–benefit
analysis that considers both the initial investment
costs and the ongoing costs that form the total
cost of ownership (TCO) against the value created
from the tangible and intangible benefits.
Figure 1.12 Barriers to development of online technologies
Source: DTI (2002)
A simple stage model for buy-side and
sell-side e-commerce
 An example of a basic stage model reviewing
capabilities for sell-side and buy-side e-commerce
is shown in (Figure 1.13) .This shows how
companies will introduce more complex
technologies and extend the range of processes
which are e-business-enabled.
Figure 1.13 A simple stage model for buy-side and sell-side e-commerce
 Variation in different online activities
by gender
One example of demand analysis is popularity or
adoption rates for different online services. The
range of different ways in which consumers use
the Internet to research or transact is shown in
(Figure 1.14) .
You can see that male and female usage of the
Internet for different activities is now very similar,
but with downloading of different types of digital
content generally more popular amongst males.
Figure 1.14 Variation in different online activities by gender
Source: UK National Statistics (2006) Individuals accessing the Internet – Report from the UK National Statistics Omnibus
Survey. Published online at www.statistics.gov.uk
 Typical benefits of online services are summarized by the ‘Six
Cs’, a simple mnemonic(‫ذكري‬11‫ )ت‬to show different types of
customer value
1. Content – In the mid-1990s it was often said that ‘content is king’. Well,
relevant rich content is still king. This means more detailed, in-depth
information to support the buying process for transactional or
relationship-building sites or branded experiences to encourage product
usage for FMCG brands.
2. Customization – In this case mass customization of content, whether
received as web site pages such as ‘Amazon recommends’ or e-mail alerts,
and commonly known as ‘personalization’.
3 Community – The Internet liberates consumers to discuss anything they
wish through forums, chat-rooms and blog comments. We will explore
these techniques more in Chapters 2 and 3.
4 Convenience – This is the ability to select, purchase and in some cases use
products from your desktop at any time: the classic 24 × 7 × 365
availability of a service. Online usage of products is, of course, restricted
to digital products such as music or other data services. Amazon has
advertised off-line using creative showing a Christmas shopper battling
against a gale-swept ( (‫ عاصفة‬street clutching several bags to reinforce the
convenience message.
5 Choice – The web gives a wider choice of products and suppliers than via
conventional distribution channels. The success of online intermediaries
such as Kelkoo (www.kelkoo.com) and Screen trade
(www.screentrade.com) is evidence of this. Similarly, Tesco.com provides
Tesco with a platform to give consumers a wider choice of products
(financial, travel, white goods) with more detailed information than are
physically available in-store.
6 Cost reduction – The Internet is widely perceived as a relatively low-
cost place of purchase. Often customers expect to get a good deal online
as they realize that online traders have a lower cost-base as they have
lower staff and distribution costs than a retailer that runs a network of
high-street stores. A simple price differential is a key approach to
encouraging usage of online services. In the late 1990s, low-cost airline
easy Jet encouraged the limited change behavior required from phone
booking to online booking by offering a £2.50 discount on online flight
bookings.
 Barriers to consumer Internet
An indication of some of the barriers to using the Internet,
adoption
in particular for consumer purchases, is clear from a survey
(Booz Allen Hamilton, 2002) of perceptions in different
countries.
 It noted that consumer barriers to adoption of the
Internet included:
 No perceived benefit
 Lack of trust
 Security problems
 Lack of skills
 Cost.
This lack of demand for Internet services from this group
needs to be taken into account when forecasting future
demand
 Eight Unique Features of
E-commerce Technology
1. Ubiquity -Internet/Web technology is available everywhere: at work, at
home, and elsewhere via mobile devices, anytime.
2. Global reach
3. Universal standards
4. Information richness – videos, audio and text marketing messages
5. Interactivity –works with interaction with users
6. Information density-technology reduces information cost and raises quality
7. Personalization/customization
8. Social technology-enable user content

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 Types of E-commerce
 May be classified by market relationship or technology

 Business-to-Consumer (B2C)
 Business-to-Business (B2B)
 Consumer-to-Consumer (C2C)
 Social e-commerce
 Mobile e-commerce (M-commerce)
 Local e-commerce

Copyright © 2014 Pearson Education, Inc. Slide 1-47

Business-to-Consumer (B2C) E-commerce
The most commonly discussed type of e-commerce is
business-to-consumer (B2C)
e-commerce, in which online businesses attempt to
reach individual consumers. B2C commerce includes
purchases of retail goods, travel services, and online
content.

Copyright © 2014 Pearson Education, Inc. Slide 1-48

 The Growth of B2C E-commerce
Figure 1.1, Page 13

SOURCE: Based on data from eMarketer, Inc., 2012; authors’ estimates.

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Business-to-business (B2B) e-commerce
In which businesses focus on selling to
other businesses, is the largest form of e-
commerce.

Copyright © 2014 Pearson Education, Inc. Slide 1-50

 The Growth of B2B E-commerce
Figure 1.2, Page 14

SOURCE: Based on data from U.S. Census Bureau, 2012b; authors’ estimates.

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 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 eBay or Etsy,
or the classifieds site Craigslist.

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 Social e-commerce
is e-commerce that is enabled by social
networks and online social relationships.
It is sometimes also referred to as
Facebook commerce, but in actuality is a
much larger phenomenon that extends
beyond just Facebook (Renren).

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 Mobile e-commerce (M-commerce)
use of mobile devices to enable
transactions on the Web

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 local e-commerce
e-commerce that is focused on engaging the consumer
based on his or her current geographic location.

Groupon offers subscribers daily deals from

local businesses in the form of “Groupons,”
discount coupons that take effect once enough
subscribers have agreed to purchase.

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 The Internet
 Worldwide network of computer networks
built on common standards
 Created in late 1960s
 Services include the Web, e-mail, file
transfers, etc.
 Can measure growth by looking at number
of Internet hosts with domain names

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 The Web
 Most popular Internet service
 Provides access to Web pages
 HTML documents that may include text,
graphics, animations, music, videos
 Web content has grown exponentially
 Google reports one trillion unique URLs; 120
billion Web pages indexed

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 Understanding E-commerce:
Organizing Themes
 Technology:
 Development and mastery of digital computing and
communications technology
 Business:
 New technologies present businesses with new ways of
organizing production and transacting business
 Society:
 Intellectual property, individual privacy, public welfare
policy

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 Fa Xian/Pinterest
Launched in March 2010, Pinterest allows you to create virtual
scrapbooks of images, video, and other content that you “pin”
to a virtual bulletin board or pin board on the Web site. Find
someone whose taste you admire or who shares your
passions? You can follow one or more of that pinner’s boards
to keep track of everything she or he pins. According to
comScore, Pinterest is one of the fastest growing Web sites it
has ever tracked, growing an astounding 4,377% from May
2011 to May 2012.

Copyright © 2014 Pearson Education, Inc. Slide 1-59

 Fa Xian/Pinterest
A study of 25,000 online stores using the Shopify e-commerce platform found there
was as much traffic originating from Pinterest as from Twitter, and that Pinterest
users spend an average of $80 each time they make an online purchase, twice the
amount of Facebook users. It found that almost a third of online shoppers surveyed
a study of 25,000 online stores using the Shopify e-commerce platform found there
was as much traffic originating from Pinterest as from Twitter, and that Pinterest
users spend an average of $80 each time they make an online purchase, twice the
amount of Facebook users.

A third of online shoppers surveyed have made a purchase based on what they’d
seen on Pinterest and other image-sharing sites; an even higher percentage (37%)
have seen items they want to buy but have not yet purchased. As a result, savvy
retailers are starting to work Pinterest into their marketing mix.

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 Class Discussion

In Class Assignment in Groups- Pinterest:

A Picture Is Worth a Thousand Words
 Have you used Pinterest/Fa Xian or any other
content curation sites? What are your main
interests?
 Have you purchased anything based on a pin or
board on Pinterest or any other curation site?
 Why do Pinterest links drive more purchasing
than Facebook links?

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