Chapter 2
E-Marketplaces,
Structures,Mechanisms,
Economics,and Impacts
Electronic Commerce Prentice Hall? 2006 2
Learning Objectives
1,Define e-marketplaces and list their components.
2,List the major types of e-marketplaces and describe their
features.
3,Describe the various types of EC intermediaries and
their roles.
4,Describe electronic catalogs,shopping carts,and search
engines.
5,Describe the various types of auctions and list their
characteristics.
6,Discuss the benefits,limitations,and impacts of
auctions.
Electronic Commerce Prentice Hall? 2006 3
Learning Objectives
7,Describe bartering and negotiating online.
8,Define m-commerce and explain its role as a
market mechanism.
9,Discuss liquidity,quality,and success factors in
e-marketplaces.
10,Describe the economic impact of EC.
11,Discuss competition in the digital economy.
12,Describe the impact of e-marketplaces on
organizations.
Electronic Commerce Prentice Hall? 2006 4
E-Marketplaces
Markets (electronic or otherwise) have three
main functions,
1,Matching buyers and sellers;
2,Facilitating the exchange of information,goods,
services,and payments associated with market
transactions; and
3,Providing an institutional infrastructure,such as a legal
and regulatory framework,which enables the efficient
functioning of the market.
Electronic Commerce Prentice Hall? 2006 5
E-Marketplaces
Electronic marketplaces (e-marketplaces or
marketspaces),changed several of the processes
used in trading and supply chains
– Greater information richness
– Lower information search costs for buyers
– Diminished information asymmetry between sellers and
buyers
– Greater temporal separation between time of purchase and
time of possession
– Greater temporal proximity between time of purchase and
time of possession
– Ability of buyers and sellers to be in different locations
Electronic Commerce Prentice Hall? 2006 6
E-Marketplaces
marketspace
A marketplace in which sellers and buyers
exchange goods and services for money (or for
other goods and services),but do so electronically
Electronic Commerce Prentice Hall? 2006 7
E-Marketplaces
Marketspace components
– Customers
– Sellers
– Products and services
digital products
Goods that can be transformed into digital format
and delivered over the Internet
– Infrastructure
Electronic Commerce Prentice Hall? 2006 8
E-Marketplaces
Marketspace components
front end
The portion of an e-seller’s business processes
through which customers interact,including the
seller’s portal,electronic catalogs,a shopping cart,a
search engine,and a payment gateway
back end
The activities that support online order-taking,It
includes fulfillment,inventory management,
purchasing from suppliers,payment processing,
packaging,and delivery
Electronic Commerce Prentice Hall? 2006 9
E-Marketplaces
Marketspace components
intermediary
A third party that operates between sellers and
buyers.
– Other business partners
– Support services
Electronic Commerce Prentice Hall? 2006 10
Types of E-Marketplaces,
From Storefronts to Portals
Electronic Storefronts
storefront
A single company’s Web site where products or
services are sold
Most common mechanisms are a(n),
– electronic catalog
– search engine
– electronic cart
– e-auction facilities
– payment gateway
Electronic Commerce Prentice Hall? 2006 11
Types of E-Marketplaces,
From Storefronts to Portals
e-mall (online mall)
An online shopping center where many online stores
are located
Types of Stores and Malls
– General stores/malls
– Specialized stores/malls
– Regional versus global stores
– Pure online organizations versus click-and-mortar
stores
Electronic Commerce Prentice Hall? 2006 12
Types of E-Marketplaces,
From Storefronts to Portals
Types of E-Marketplaces
e-marketplace
An online market,usually B2B,in which buyers and
sellers exchange goods or services; the three types of
e-marketplaces are private,public,and consortia
private e-marketplaces
Online markets owned by a single company; may be
either sell-side or buy-side e-marketplaces.
Electronic Commerce Prentice Hall? 2006 13
Types of E-Marketplaces,
From Storefronts to Portals
Types of E-Marketplaces
sell-side e-marketplace
A private e-marketplace in which a company sells
either standard or customized products to qualified
companies
buy-side e-marketplace
A private e-marketplace in which a company makes
purchases from invited suppliers
Electronic Commerce Prentice Hall? 2006 14
Types of E-Marketplaces,
From Storefronts to Portals
public e-marketplaces
B2B marketplaces,usually owned and/or managed by
an independent third party,that include many sellers
and many buyers; also known as exchanges
information portal
A single point of access through a Web browser to
business information inside and/or outside an
organization
Electronic Commerce Prentice Hall? 2006 15
Types of E-Marketplaces,
From Storefronts to Portals
Six major types of portals
– Commercial (public) portals
– Corporate portals
– Publishing portals
– Personal portals
– Mobile portals
– Voice portals
Electronic Commerce Prentice Hall? 2006 16
Types of E-Marketplaces,
From Storefronts to Portals
mobile portal
A portal accessible via a mobile device
voice portal
A portal accessed by telephone or cell phone
Electronic Commerce Prentice Hall? 2006 17
Intermediation in EC
infomediaries
Electronic intermediaries that control information flow in cyberspace,
often aggregating information and selling it to others
Five limitations of direct interaction
– Search costs
– Lack of privacy
– Incomplete information
– Contract risk
– Pricing inefficiencies
Electronic Commerce Prentice Hall? 2006 18
Exhibit 2.3 Infomediaries and the
Information Flow Model
Electronic Commerce Prentice Hall? 2006 19
Intermediation in EC
e-distributor
An e-commerce intermediary that connects
manufacturers (suppliers) with business buyers by
aggregating the catalogs of many suppliers in one
place—the intermediary’s Web site
Electronic Commerce Prentice Hall? 2006 20
Intermediation in EC
disintermediation
Elimination of intermediaries between sellers and
buyers
reintermediation
Establishment of new intermediary roles for traditional
intermediaries that have been disintermediated
Electronic Commerce Prentice Hall? 2006 21
Electronic Catalogs and
Other Market Mechanisms
electronic catalogs
The presentation of product information in an electronic
form; the backbone of most e-selling sites
Classification of electronic catalogs
1,The dynamics of the information presentation
2,The degree of customization
3,Integration with business processes
Electronic Commerce Prentice Hall? 2006 22
Electronic Catalogs and
Other Market Mechanisms
Online catalogs
– Ease of updating
– Ability to be integrated with the purchasing process
– Coverage of a wide spectrum of products
– Interactivity
– Customization
– Strong search capabilities
Electronic Commerce Prentice Hall? 2006 23
Electronic Catalogs and
Other Market Mechanisms
Two approaches to creating customized catalogs
– Let the customers identify the parts of interest to them
from the total catalog
– Let the system automatically identify customer
characteristics based on the customer’s transaction
records
Electronic Commerce Prentice Hall? 2006 24
Electronic Catalogs and
Other Market Mechanisms
search engine
A computer program that can access a database of
Internet resources,search for specific information or
keywords,and report the results
software (intelligent) agent
Software that can perform routine tasks that require
intelligence
Electronic Commerce Prentice Hall? 2006 25
Electronic Catalogs and
Auctions as EC Market Mechanisms
electronic shopping cart
An order-processing technology that allows customers to
accumulate items they wish to buy while they continue to
shop
auction
A competitive process in which a seller solicits
consecutive bids from buyers (forward auctions) or a
buyer solicits bids from sellers (backward auctions),
Prices are determined dynamically by the bids
Electronic Commerce Prentice Hall? 2006 26
Auctions As EC
Market Mechanisms
Limitations of Traditional Off-line Auctions
– The rapid process may give potential buyers little time
to make a decision
– Bidders do not have much time to examine the goods
– Bidders must usually be physically present at auctions
– Difficult for sellers to move goods to an auction site
– Commissions are fairly high
Electronic Commerce Prentice Hall? 2006 27
Auctions As EC
Market Mechanisms
electronic auction (e-auction)
Auctions conducted online
dynamic pricing
Prices that change based on supply and demand
relationships at any given time
Electronic Commerce Prentice Hall? 2006 28
Auctions As EC
Market Mechanisms
Types of auctions
– One Buyer,One Seller
– One Seller,Many Potential Buyers
forward auction
An auction in which a seller entertains bids from buyers
Electronic Commerce Prentice Hall? 2006 29
Auctions As EC
Market Mechanisms
Types of auctions
– One Buyer,Many Potential Sellers
reverse auction (bidding or tendering system)
Auction in which the buyer places an item for bid
(tender) on a request for quote (RFQ) system,potential
suppliers bid on the job,with the price reducing
sequentially,and the lowest bid wins; primarily a B2B or
G2B mechanism
Electronic Commerce Prentice Hall? 2006 30
Exhibit 2.5 The Reverse Auction
Process
Electronic Commerce Prentice Hall? 2006 31
Auctions As EC
Market Mechanisms
Types of auctions
– One Buyer,Many Potential Sellers
“name-your-own-price” model
Auction model in which a would-be buyer specifies the
price (and other terms) he or she is willing to pay to any
willing and able seller,It is a C2B model that was
pioneered by Priceline.com
Electronic Commerce Prentice Hall? 2006 32
Auctions As EC
Market Mechanisms
Types of auctions
– Many Sellers,Many Buyers
double auction
Auctions in which multiple buyers and their bidding
prices are matched with multiple sellers and their
asking prices,considering the quantities on both sides
Electronic Commerce Prentice Hall? 2006 33
Auctions As EC
Market Mechanisms
Limitations of E-Auctions
– Minimal security
– Possibility of fraud
– Limited participation
Impacts of E-Auctions
– Auctions as a coordination mechanism
– Auctions as a social mechanism to determine a price
– Auctions as a highly visible distribution mechanism
– Auctions as an EC component
Electronic Commerce Prentice Hall? 2006 34
Bartering and Negotiating Online
bartering
The exchange of goods or services
e-bartering (electronic bartering)
Bartering conducted online,usually by a bartering
exchange
bartering exchange
A marketplace in which an intermediary arranges barter
transactions
Electronic Commerce Prentice Hall? 2006 35
Bartering and Negotiating Online
Online negotiating—Three factors may facilitate
online negotiation,
1,The products and services that are bundled and
customized
2,The computer technology that facilitates the
negotiation process
3,The software (intelligent) agents that perform
searches and comparisons,thereby providing quality
customer service and a base from which prices can be
negotiated
Electronic Commerce Prentice Hall? 2006 36
EC in the Wireless Environment:
M-Commerce
mobile computing
Permits real-time access to information,applications,and
tools that,until recently,were accessible only from a
desktop computer
mobile commerce (m-commerce)
E-commerce conducted via wireless devices
m-business
The broadest definition of m-commerce,in which
e-business is conducted in a wireless environment
Electronic Commerce Prentice Hall? 2006 37
Competition in the Digital Economy
Internet ecosystem
The business model of the Internet economy
differentiation
Providing a product or service that is unique
personalization
The ability to tailor a product,service,or Web
content to specific user preferences
Electronic Commerce Prentice Hall? 2006 38
Competition in the Digital Economy
Competitive Factors in the Internet Economy
– Lower prices
– Customer service
– Barriers to entry are reduced
– Virtual partnerships multiply
– Market niches abound
Electronic Commerce Prentice Hall? 2006 39
Competition in the Digital Economy
Porter’s Competitive Analysis in an Industry
competitive forces model
Model,devised by Porter,that says that five major
forces of competition determine industry structure
and how economic value is divided among the
industry players in an industry; analysis of these
forces helps companies develop their competitive
strategy
Electronic Commerce Prentice Hall? 2006 40
Exhibit 2.6 Porter’s Competitive
Forces Model
Electronic Commerce Prentice Hall? 2006 41
Impacts of EC on
Business Processes and Organizations
Improving Direct
Marketing
– Product promotion
– New sales channel
– Direct savings
– Reduced cycle time
– Improved customer
service
– Brand or corporate
image
Other Impacts on Direct
Marketing
– Customization
– Advertising
– Ordering systems
– Market operations
Electronic Commerce Prentice Hall? 2006 42
Exhibit 2.7 The Analysis-of-Impacts
Framework
Electronic Commerce Prentice Hall? 2006 43
Impacts of EC on
Business Processes and Organizations
Transforming Organizations
– Technology and organizational learning:
Corporate change must be planned and managed
Organizations may have to struggle with different
experiments and learn from their mistakes
– The changing nature of work
Firms are reducing the number of employees down to
a core of essential staff and outsourcing whatever
work they can to countries where wages are
significantly lower
Electronic Commerce Prentice Hall? 2006 44
Impacts of EC on
Business Processes and Organizations
Redefining Organizations
– New and improved product capabilities
– New business models
– Improving the supply chain
– Impacts on Manufacturing
build-to-order (pull system)
A manufacturing process that starts with an order
(usually customized),Once the order is paid for,the
vendor starts to fulfill it
– Real-time demand-driven manufacturing
– Virtual manufacturing
– Assembly lines
Electronic Commerce Prentice Hall? 2006 45
Exhibit 2.10 Changes in the
Supply Chain
Electronic Commerce Prentice Hall? 2006 46
Exhibit 2.11 Real-Time Demand-Driven
Manufacturing
Electronic Commerce Prentice Hall? 2006 47
Impacts of EC on
Business Processes and Organizations
Redefining Organizations
– Impacts on Finance and Accounting
E-markets require special finance and accounting
systems,Most notable of these are electronic
payment systems
– Impacts on Human Resource Management and
Training
EC is changing how people are recruited,evaluated,
promoted,and developed
EC also is changing the way training and education
are offered to employees
Companies are cutting training costs by 50% or more,
and virtual courses and programs are mushrooming
Electronic Commerce Prentice Hall? 2006 48
Managerial Issues
1,What about intermediaries?
2,Should we auction?
3,Should we barter?
4,What m-commerce opportunities are
available?
5,How do we compete in the digital economy?
6,What organizational changes will be needed?
Electronic Commerce Prentice Hall? 2006 49
Summary
1,E-marketplaces and their components.
2,The role of intermediaries.
3,The major types of e-marketplaces.
4,Electronic catalogs,search engines,and
shopping carts.
5,Types of auctions and their characteristics.
Electronic Commerce Prentice Hall? 2006 50
Summary
6,The benefits and limitations of auctions.
7,Bartering and negotiating.
8,The role of m-commerce.
9,Competition in the digital economy.
10,The impact of e-markets on organizations.
E-Marketplaces,
Structures,Mechanisms,
Economics,and Impacts
Electronic Commerce Prentice Hall? 2006 2
Learning Objectives
1,Define e-marketplaces and list their components.
2,List the major types of e-marketplaces and describe their
features.
3,Describe the various types of EC intermediaries and
their roles.
4,Describe electronic catalogs,shopping carts,and search
engines.
5,Describe the various types of auctions and list their
characteristics.
6,Discuss the benefits,limitations,and impacts of
auctions.
Electronic Commerce Prentice Hall? 2006 3
Learning Objectives
7,Describe bartering and negotiating online.
8,Define m-commerce and explain its role as a
market mechanism.
9,Discuss liquidity,quality,and success factors in
e-marketplaces.
10,Describe the economic impact of EC.
11,Discuss competition in the digital economy.
12,Describe the impact of e-marketplaces on
organizations.
Electronic Commerce Prentice Hall? 2006 4
E-Marketplaces
Markets (electronic or otherwise) have three
main functions,
1,Matching buyers and sellers;
2,Facilitating the exchange of information,goods,
services,and payments associated with market
transactions; and
3,Providing an institutional infrastructure,such as a legal
and regulatory framework,which enables the efficient
functioning of the market.
Electronic Commerce Prentice Hall? 2006 5
E-Marketplaces
Electronic marketplaces (e-marketplaces or
marketspaces),changed several of the processes
used in trading and supply chains
– Greater information richness
– Lower information search costs for buyers
– Diminished information asymmetry between sellers and
buyers
– Greater temporal separation between time of purchase and
time of possession
– Greater temporal proximity between time of purchase and
time of possession
– Ability of buyers and sellers to be in different locations
Electronic Commerce Prentice Hall? 2006 6
E-Marketplaces
marketspace
A marketplace in which sellers and buyers
exchange goods and services for money (or for
other goods and services),but do so electronically
Electronic Commerce Prentice Hall? 2006 7
E-Marketplaces
Marketspace components
– Customers
– Sellers
– Products and services
digital products
Goods that can be transformed into digital format
and delivered over the Internet
– Infrastructure
Electronic Commerce Prentice Hall? 2006 8
E-Marketplaces
Marketspace components
front end
The portion of an e-seller’s business processes
through which customers interact,including the
seller’s portal,electronic catalogs,a shopping cart,a
search engine,and a payment gateway
back end
The activities that support online order-taking,It
includes fulfillment,inventory management,
purchasing from suppliers,payment processing,
packaging,and delivery
Electronic Commerce Prentice Hall? 2006 9
E-Marketplaces
Marketspace components
intermediary
A third party that operates between sellers and
buyers.
– Other business partners
– Support services
Electronic Commerce Prentice Hall? 2006 10
Types of E-Marketplaces,
From Storefronts to Portals
Electronic Storefronts
storefront
A single company’s Web site where products or
services are sold
Most common mechanisms are a(n),
– electronic catalog
– search engine
– electronic cart
– e-auction facilities
– payment gateway
Electronic Commerce Prentice Hall? 2006 11
Types of E-Marketplaces,
From Storefronts to Portals
e-mall (online mall)
An online shopping center where many online stores
are located
Types of Stores and Malls
– General stores/malls
– Specialized stores/malls
– Regional versus global stores
– Pure online organizations versus click-and-mortar
stores
Electronic Commerce Prentice Hall? 2006 12
Types of E-Marketplaces,
From Storefronts to Portals
Types of E-Marketplaces
e-marketplace
An online market,usually B2B,in which buyers and
sellers exchange goods or services; the three types of
e-marketplaces are private,public,and consortia
private e-marketplaces
Online markets owned by a single company; may be
either sell-side or buy-side e-marketplaces.
Electronic Commerce Prentice Hall? 2006 13
Types of E-Marketplaces,
From Storefronts to Portals
Types of E-Marketplaces
sell-side e-marketplace
A private e-marketplace in which a company sells
either standard or customized products to qualified
companies
buy-side e-marketplace
A private e-marketplace in which a company makes
purchases from invited suppliers
Electronic Commerce Prentice Hall? 2006 14
Types of E-Marketplaces,
From Storefronts to Portals
public e-marketplaces
B2B marketplaces,usually owned and/or managed by
an independent third party,that include many sellers
and many buyers; also known as exchanges
information portal
A single point of access through a Web browser to
business information inside and/or outside an
organization
Electronic Commerce Prentice Hall? 2006 15
Types of E-Marketplaces,
From Storefronts to Portals
Six major types of portals
– Commercial (public) portals
– Corporate portals
– Publishing portals
– Personal portals
– Mobile portals
– Voice portals
Electronic Commerce Prentice Hall? 2006 16
Types of E-Marketplaces,
From Storefronts to Portals
mobile portal
A portal accessible via a mobile device
voice portal
A portal accessed by telephone or cell phone
Electronic Commerce Prentice Hall? 2006 17
Intermediation in EC
infomediaries
Electronic intermediaries that control information flow in cyberspace,
often aggregating information and selling it to others
Five limitations of direct interaction
– Search costs
– Lack of privacy
– Incomplete information
– Contract risk
– Pricing inefficiencies
Electronic Commerce Prentice Hall? 2006 18
Exhibit 2.3 Infomediaries and the
Information Flow Model
Electronic Commerce Prentice Hall? 2006 19
Intermediation in EC
e-distributor
An e-commerce intermediary that connects
manufacturers (suppliers) with business buyers by
aggregating the catalogs of many suppliers in one
place—the intermediary’s Web site
Electronic Commerce Prentice Hall? 2006 20
Intermediation in EC
disintermediation
Elimination of intermediaries between sellers and
buyers
reintermediation
Establishment of new intermediary roles for traditional
intermediaries that have been disintermediated
Electronic Commerce Prentice Hall? 2006 21
Electronic Catalogs and
Other Market Mechanisms
electronic catalogs
The presentation of product information in an electronic
form; the backbone of most e-selling sites
Classification of electronic catalogs
1,The dynamics of the information presentation
2,The degree of customization
3,Integration with business processes
Electronic Commerce Prentice Hall? 2006 22
Electronic Catalogs and
Other Market Mechanisms
Online catalogs
– Ease of updating
– Ability to be integrated with the purchasing process
– Coverage of a wide spectrum of products
– Interactivity
– Customization
– Strong search capabilities
Electronic Commerce Prentice Hall? 2006 23
Electronic Catalogs and
Other Market Mechanisms
Two approaches to creating customized catalogs
– Let the customers identify the parts of interest to them
from the total catalog
– Let the system automatically identify customer
characteristics based on the customer’s transaction
records
Electronic Commerce Prentice Hall? 2006 24
Electronic Catalogs and
Other Market Mechanisms
search engine
A computer program that can access a database of
Internet resources,search for specific information or
keywords,and report the results
software (intelligent) agent
Software that can perform routine tasks that require
intelligence
Electronic Commerce Prentice Hall? 2006 25
Electronic Catalogs and
Auctions as EC Market Mechanisms
electronic shopping cart
An order-processing technology that allows customers to
accumulate items they wish to buy while they continue to
shop
auction
A competitive process in which a seller solicits
consecutive bids from buyers (forward auctions) or a
buyer solicits bids from sellers (backward auctions),
Prices are determined dynamically by the bids
Electronic Commerce Prentice Hall? 2006 26
Auctions As EC
Market Mechanisms
Limitations of Traditional Off-line Auctions
– The rapid process may give potential buyers little time
to make a decision
– Bidders do not have much time to examine the goods
– Bidders must usually be physically present at auctions
– Difficult for sellers to move goods to an auction site
– Commissions are fairly high
Electronic Commerce Prentice Hall? 2006 27
Auctions As EC
Market Mechanisms
electronic auction (e-auction)
Auctions conducted online
dynamic pricing
Prices that change based on supply and demand
relationships at any given time
Electronic Commerce Prentice Hall? 2006 28
Auctions As EC
Market Mechanisms
Types of auctions
– One Buyer,One Seller
– One Seller,Many Potential Buyers
forward auction
An auction in which a seller entertains bids from buyers
Electronic Commerce Prentice Hall? 2006 29
Auctions As EC
Market Mechanisms
Types of auctions
– One Buyer,Many Potential Sellers
reverse auction (bidding or tendering system)
Auction in which the buyer places an item for bid
(tender) on a request for quote (RFQ) system,potential
suppliers bid on the job,with the price reducing
sequentially,and the lowest bid wins; primarily a B2B or
G2B mechanism
Electronic Commerce Prentice Hall? 2006 30
Exhibit 2.5 The Reverse Auction
Process
Electronic Commerce Prentice Hall? 2006 31
Auctions As EC
Market Mechanisms
Types of auctions
– One Buyer,Many Potential Sellers
“name-your-own-price” model
Auction model in which a would-be buyer specifies the
price (and other terms) he or she is willing to pay to any
willing and able seller,It is a C2B model that was
pioneered by Priceline.com
Electronic Commerce Prentice Hall? 2006 32
Auctions As EC
Market Mechanisms
Types of auctions
– Many Sellers,Many Buyers
double auction
Auctions in which multiple buyers and their bidding
prices are matched with multiple sellers and their
asking prices,considering the quantities on both sides
Electronic Commerce Prentice Hall? 2006 33
Auctions As EC
Market Mechanisms
Limitations of E-Auctions
– Minimal security
– Possibility of fraud
– Limited participation
Impacts of E-Auctions
– Auctions as a coordination mechanism
– Auctions as a social mechanism to determine a price
– Auctions as a highly visible distribution mechanism
– Auctions as an EC component
Electronic Commerce Prentice Hall? 2006 34
Bartering and Negotiating Online
bartering
The exchange of goods or services
e-bartering (electronic bartering)
Bartering conducted online,usually by a bartering
exchange
bartering exchange
A marketplace in which an intermediary arranges barter
transactions
Electronic Commerce Prentice Hall? 2006 35
Bartering and Negotiating Online
Online negotiating—Three factors may facilitate
online negotiation,
1,The products and services that are bundled and
customized
2,The computer technology that facilitates the
negotiation process
3,The software (intelligent) agents that perform
searches and comparisons,thereby providing quality
customer service and a base from which prices can be
negotiated
Electronic Commerce Prentice Hall? 2006 36
EC in the Wireless Environment:
M-Commerce
mobile computing
Permits real-time access to information,applications,and
tools that,until recently,were accessible only from a
desktop computer
mobile commerce (m-commerce)
E-commerce conducted via wireless devices
m-business
The broadest definition of m-commerce,in which
e-business is conducted in a wireless environment
Electronic Commerce Prentice Hall? 2006 37
Competition in the Digital Economy
Internet ecosystem
The business model of the Internet economy
differentiation
Providing a product or service that is unique
personalization
The ability to tailor a product,service,or Web
content to specific user preferences
Electronic Commerce Prentice Hall? 2006 38
Competition in the Digital Economy
Competitive Factors in the Internet Economy
– Lower prices
– Customer service
– Barriers to entry are reduced
– Virtual partnerships multiply
– Market niches abound
Electronic Commerce Prentice Hall? 2006 39
Competition in the Digital Economy
Porter’s Competitive Analysis in an Industry
competitive forces model
Model,devised by Porter,that says that five major
forces of competition determine industry structure
and how economic value is divided among the
industry players in an industry; analysis of these
forces helps companies develop their competitive
strategy
Electronic Commerce Prentice Hall? 2006 40
Exhibit 2.6 Porter’s Competitive
Forces Model
Electronic Commerce Prentice Hall? 2006 41
Impacts of EC on
Business Processes and Organizations
Improving Direct
Marketing
– Product promotion
– New sales channel
– Direct savings
– Reduced cycle time
– Improved customer
service
– Brand or corporate
image
Other Impacts on Direct
Marketing
– Customization
– Advertising
– Ordering systems
– Market operations
Electronic Commerce Prentice Hall? 2006 42
Exhibit 2.7 The Analysis-of-Impacts
Framework
Electronic Commerce Prentice Hall? 2006 43
Impacts of EC on
Business Processes and Organizations
Transforming Organizations
– Technology and organizational learning:
Corporate change must be planned and managed
Organizations may have to struggle with different
experiments and learn from their mistakes
– The changing nature of work
Firms are reducing the number of employees down to
a core of essential staff and outsourcing whatever
work they can to countries where wages are
significantly lower
Electronic Commerce Prentice Hall? 2006 44
Impacts of EC on
Business Processes and Organizations
Redefining Organizations
– New and improved product capabilities
– New business models
– Improving the supply chain
– Impacts on Manufacturing
build-to-order (pull system)
A manufacturing process that starts with an order
(usually customized),Once the order is paid for,the
vendor starts to fulfill it
– Real-time demand-driven manufacturing
– Virtual manufacturing
– Assembly lines
Electronic Commerce Prentice Hall? 2006 45
Exhibit 2.10 Changes in the
Supply Chain
Electronic Commerce Prentice Hall? 2006 46
Exhibit 2.11 Real-Time Demand-Driven
Manufacturing
Electronic Commerce Prentice Hall? 2006 47
Impacts of EC on
Business Processes and Organizations
Redefining Organizations
– Impacts on Finance and Accounting
E-markets require special finance and accounting
systems,Most notable of these are electronic
payment systems
– Impacts on Human Resource Management and
Training
EC is changing how people are recruited,evaluated,
promoted,and developed
EC also is changing the way training and education
are offered to employees
Companies are cutting training costs by 50% or more,
and virtual courses and programs are mushrooming
Electronic Commerce Prentice Hall? 2006 48
Managerial Issues
1,What about intermediaries?
2,Should we auction?
3,Should we barter?
4,What m-commerce opportunities are
available?
5,How do we compete in the digital economy?
6,What organizational changes will be needed?
Electronic Commerce Prentice Hall? 2006 49
Summary
1,E-marketplaces and their components.
2,The role of intermediaries.
3,The major types of e-marketplaces.
4,Electronic catalogs,search engines,and
shopping carts.
5,Types of auctions and their characteristics.
Electronic Commerce Prentice Hall? 2006 50
Summary
6,The benefits and limitations of auctions.
7,Bartering and negotiating.
8,The role of m-commerce.
9,Competition in the digital economy.
10,The impact of e-markets on organizations.
