CHAPTER 4: ELECTRONIC

COMMERCE & ELECTRONIC

BUSINESS

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 Management Challenges
Internet provides many opportunities,
but also challenges, such as:
Electronic commerce &
electronic business require a new
way of thinking
Finding a successful Internet
business model
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New Business Models and Value
Propositions
Business Model: How an organization delivers
a product or service

Changing Economics of Information

The Internet reduces information asymmetry
The Internet eliminates the tradeoff between
richness and reach of information
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 Business Models
Bricks and Mortar
Clicks and Mortar (Bricks and Clicks)
Canadian Tire
Pure Play
Amazon

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Internet Business Models: Selling
Virtual Storefront
Sells goods and /or services online
www.amazon.com

Aggregator
groups come together to gain volume discounts

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 Internet Business Models:
Auctions
Auction
Dynamic pricing
www.eBay.com

Reverse Auction
Consumers submit a bid to multiple sellers
www.priceline.com

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 Business Models: Online
Delivery, Products & Services
Digital Product Delivery
Sell and deliver software, multimedia, etc.
www.Compusmart.com

Content provider
creates revenue through providing content for a fee,
and through advertising
www.yahoo.com

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Internet Business Models: Brokers
Information Broker
Provides information about products
www.baystreet.ca

Transaction Broker
Buyers view rates and terms & completes transaction
www.TDWaterhouse.com

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Internet Business Models: Web
Entries & Communities
Virtual community
Provides an online meeting place for people
with common interests
www.kidshelp.sympatico.ca
Portal
Initial point of entry to Web, specialized
content, services
www.lycos.com

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 Electronic Commerce
Business Originating From:

Business Consumers
And Selling to:

Business B2B C2B

Consumers B2C C2C

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 Electronic Commerce
Business Originating From:
Business Consumers

Business Publishers order paper supplies

from paper companies
Consumers aggregate to bulk
And Selling to:

purchase from Amazon

Amazon orders from publishers

Consumers

Consumers buy thousands of Consumers resell copies on

Harry Potter Books from eBay
Amazon

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 Customer-Centric Retailing
Direct sales over the Web
Interactive Marketing and Personalization
M-Commerce and Next Generation
Marketing
Customer Self-Service

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 B2B: Business to Business
Exchanges: commercial online market; many buyers,
many sellers

VERTICAL EXCHANGES
Set up for specific industries
e.g. Steel and Chemical Industries
HORIZONTAL EXCHANGES
Address functions that occur cross industry
e.g. purchasing office equipment

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 E-commerce Payment Systems
Digital wallet
E-cash
Smart card
Person-to-person payments
Credit Cards

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 Security: Credit Cards
Transfer of data from customer to vendor
Transfer of data from vendor to payment
processor
Protection of customer data in stored in
merchants database
Secure Socket Layers (SSL)

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 Intranets
Using Internet technology to support internal
organizational needs
Email
Document sharing
Online repositories of information
Remote access to resources
Group collaboration

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 Example: Sun Microsystems
Intranet to support Sales Team

The good news is theres lots of information

The bad news is theres lots of information

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 Intranets: Organizational Benefits
Cross platform availability
Can be tied to internal & transaction processing systems
Interactive applications with text, audio, video
Scalable as required
Easy to use Web interface
Low start-up costs
Improved information sharing
Reduced cost of distributing information

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 Challenges & Opportunities
Unproven business models
Business processes require change
channel conflicts
Legal Issues
Security and Privacy

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 E-commerce in Canada
There is a higher percentage of Canadians than
Americans using the Internet
But . . . Canadian businesses are underrepresented
on the Internet
Only 6 percent of Canadian businesses selling online in
2000, down from 10% in 1999
In 2000, e-commerce sales accounted for 0.4 % of
revenues, up from 0.2% in 1999
Canadians purchase from US companies

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 Barriers to e-commerce in
Canada
High percentage of SMEs in Canada
May not have adequate resources to
develop e-commerce strategy & solution
Shortage of skilled IT workers
Lack of sense of urgency
Conservative investor culture
Tax structure
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 E-commerce Taxation Issues
Cross-border shopping
Digital downloads

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Who is Making Money on the Web?
190 companies split into 7 categories
Portals
Transaction
Commerce
Content
ISP
Enablers
Advertising
Evaluated on financial metrics
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 Who is Making Money on the
Web? Ctd.
Results
Winner: Transaction (8/11 cos. had positive earnings)
Why: solid revenue model
Losers: Content Providers and ISPs (4/34 CPs had
positive earnings)
Commerce (0/26 had positive earnings)
Conclusion: <1/5 that met necessary requirements to go
public had positive earnings. Transaction companies
making money; others are investing in building brands
and customer bases. Only a fraction of these cos. will
succeed.
Source: Scherbakovsky and Siegal

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