Chapter 10
E-Commerce: Digital
Markets, Digital Goods
10.1
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
LEARNING OBJECTIVES
Identify the unique features of e-commerce, digital
markets, and digital goods.
Describe how Internet technology has changed
business models.
Identify the various types of e-commerce and
explain how e-commerce has changed consumer
retailing and business-to-business transactions.
Evaluate the role of m-commerce in business, and
describe the most important m-commerce
applications.
Identify the principal payment systems for
electronic commerce.
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
E-Business
refers to the use of digital technology and the Internet to
execute the major business processes in the enterprise.
E-business includes activities for the internal management of
the firm and for coordination with suppliers and other business
partners. It also includes e-commerce.
E-commerce
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is the part of e-business that deals with the buying and selling
of goods and services over the Internet.
It encompasses activities supporting those market
transactions, such as advertising, marketing, customer
support, security, delivery, and payment.
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
E-commerce
Use of the Internet and Web to transact business
Digitally enabled transactions
History of e-commerce
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Began in 1995 and grew exponentially; still growing at an
annual rate of 16 percent
Rapid growth led to market bubble
While many companies failed, many survived with soaring
revenues
E-commerce today the fastest growing form of retail trade in
U.S., Europe, Asia
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
The Growth of E-Commerce
Retail e-commerce revenues have grown
exponentially since 1995 and have only recently
slowed to a very rapid 16 percent annual
increase, which is projected to remain the same
until 2010.
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Figure 10-1
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Eight unique features of e-commerce technology
1. Ubiquity
Internet/Web technology available everywhere: work, home,
etc., and anytime
2. Global reach
The technology reaches across national boundaries, around
Earth
3. Universal standards
One set of technology standards: Internet standards
4. Richness
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Supports video, audio, and text messages
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Eight unique features (cont.)
5. Interactivity
The technology works through interaction with the user
6. Information density
Vast increases in information densitythe total amount and
quality of information available to all market participants
7. Personalization/Customization:
Technology permits modification of messages, goods
8. Social technology
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The technology promotes user content generation and social
networking
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Key concepts in e-commerce: The effects of digital
markets on the ways companies conduct business.
Digital markets reduce
Information asymmetry
Search costs:
Transaction costs:
Menu costs:
Digital markets enable
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Price discrimination
Dynamic pricing
Disintermediation
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
The Benefits of Disintermediation to the Consumer
The typical distribution channel has several intermediary layers, each of which adds to the
final cost of a product, such as a sweater. Removing layers lowers the final cost to the
consumer.
Figure 10-2
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Key concepts in e-commerce (cont.)
Digital goods
Goods that can be delivered over a digital network
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E.g., Music tracks, video, software, newspapers, books
Cost of producing first unit almost entire cost of product:
marginal cost of producing 2nd unit is about zero
Costs of delivery over the Internet very low
Marketing costs remain the same; pricing highly variable
Industries with digital goods are undergoing revolutionary
changes (publishers, record labels, etc.)
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Internet business models
Pure-play models
Clicks-and-mortar models
Social Network
Online meeting place
Social shopping sites
Can provide ways for corporate clients to target customers through
banner ads and pop-up ads
Online marketplace:
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Provides a digital environment where buyers and sellers can
meet, search for products, display products, and establish prices
for those products
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Content provider
Providing digital content, such as digital news, music, photos,
or video, over the Web
Online syndicators: Aggregate content from multiple sources,
package for distribution, and resell to third-party Web sites
Service provider
Provides Web 2.0 applications such as photo sharing and
interactive maps, and services such as data storage
Portal
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Supersite that provides comprehensive entry point for huge
array of resources and services on the Internet
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce and the Internet
Virtual storefront:
Sells physical products directly to consumers or to
individual businesses. Such as Amazon.com
Information broker:
Provides product, pricing, and availability information to
individuals and businesses. Such as Realtor.com.
Transaction broker:
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Saves users money and time by processing online sales
transactions and generating a fee for each transaction,
Such as E*Trade.com
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Types of Electronic Commerce
Business-to-consumer (B2C)
Retailing products and services to individual shoppers
Business-to-business (B2B)
Sales of goods and services among businesses
Consumer-to-consumer (C2C)
Consumers selling directly to other consumers
Mobile commerce (m-commerce)
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the purchase of goods and services using handheld wireless
devices.
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Interactive marketing and personalization
Web sites are bountiful source of details about customer
behavior, preferences, buying patterns used to tailor
promotions, products, services, and pricing
Clickstream tracking tools: Collect data on customer
activities at Web sites
Used to create personalized Web pages
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Collaborative filtering: Compares customer data to other
customers to make product recommendations
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Blogs
Personal web pages that contain series of chronological
entries by author and links to related Web pages
Has increasing influence in politics, news
Corporate blogs: New channels for reaching customers,
introducing new products and services
Blog analysis by marketers
Customer self-service
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Web sites and e-mail to answer customer questions or to
provide customers with product information
Reduces need for human customer-support expert
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
B2B e-commerce: New efficiencies and
relationships
Electronic data interchange (EDI)
Computer-to-computer exchange of standard transactions
such as invoices, purchase orders
Major industries have EDI standards that define structure
and information fields of electronic documents for that
industry
More companies increasingly moving away from private
networks to Internet for linking to other firms
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E.g., Procurement: Businesses can now use Internet to locate
most low-cost supplier, search online catalogs of supplier
products, negotiate with suppliers, place orders, etc.
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Electronic Data Interchange (EDI)
Companies use EDI to automate transactions for B2B e-commerce and continuous inventory
replenishment. Suppliers can automatically send data about shipments to purchasing firms. The
purchasing firms can use EDI to provide production and inventory requirements and payment
data to suppliers.
Figure 10-5
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Private industrial networks (private exchanges)
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Large firm using extranet to link to its suppliers, distributors and
other key business partners
Owned by buyer
Permits sharing of:
Product design and development
Marketing
Production scheduling and inventory management
Unstructured communication (graphics and e-mail)
A private industrial network, also known as a private exchange, links a firm
to its suppliers, distributors, and other key business partners for efficient
supply chain management and other collaborative commerce activities.
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Net marketplaces (e-hubs)
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Single market for many buyers and sellers
Industry-owned or owned by independent intermediary
Generate revenue from transaction fees, other services
Use prices established through negotiation, auction, RFQs, or
fixed prices
May focus on direct or indirect goods
May support long-term contract purchasing or short-term spot
purchasing
May serve vertical or horizontal marketplaces
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
A Net Marketplace
Net
marketplaces
are online
marketplaces
where multiple
buyers can
purchase from
multiple
sellers.
Figure 10-7
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http://emallsofamerica.com/
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Consumer-to-Consumer
(C2C)
Online auctions
Electronic auction (e-auction) - Sellers
and buyers solicit consecutive bids from each
other and prices are determined dynamically
Forward auction - Sellers use the site as a
selling channel to many buyers and the
highest bid wins
Reverse auction - Buyers use the site to
purchase a product or service, selecting the
seller with the lowest bid
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce
M-commerce services and applications
Although m-commerce represents small fraction of
total e-commerce transactions, revenue has been
steadily growing
10.24
Location-based services
Banking and financial services
Wireless Advertising
Games and entertainment
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce
Global M-commerce Revenue 2000-2012
M-commerce sales represent a small fraction of total e-commerce sales, but that
percentage is steadily growing.
Figure 10-8
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce
Limitations in mobiles access of Web information
Data limitations
Small display screens
Wireless portals (mobile portals)
Feature content and services optimized for mobile
devices to steer users to information they are most
likely to need
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce Payment Systems
Types of electronic payment systems
Digital wallet
Stores credit card and owner identification information and
enters the shoppers name, credit card number, and
shipping information automatically when invoked to
complete a purchase
Accumulated balance digital payment systems
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Used for micropayments ($10 or less)
Accumulating debit balance that is paid periodically on
credit card or telephone bills
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce Payment Systems
Stored value payment systems
Enable online payments based on value stored in online
digital account
May be merchant platforms or peer-to-peer (PayPal)
Digital checking
Extend functionality of existing checking accounts to be used
for online payments
Electronic billing presentment and payment
systems
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Paying monthly bills through electronic fund transfers or credit
cards
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce Payment Systems
Digital payments systems for m-commerce
Three types of mobile payment systems in
use in Japan
Stored value system charged by credit cards or
bank accounts
Mobile debit cards
Mobile credit cards
In the U.S., the cell phone has not yet
evolved into a mobile payment system
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NEW TRENDS IN E-BUSINESS:
E-GOVERNMENT
E-government - refers to the application
of the Internet and networking technologies
to digitally enable government and public
sector agencies' relationships with citizens,
businesses, and other arms of government.
In addition to improving delivery of
government services, e-government can
make government operations more efficient
and also empower citizens by giving them
easier access to information.
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NEW TRENDS IN E-BUSINESS:
E-GOVERNMENT
G2C
G2B
G2G
10.31
and
and
C2G
B2G
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NEW TRENDS IN E-BUSINESS:
E-GOVERNMENT
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2010 by Pearson
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Copyright 2010 Pearson Education, Inc.
Publishing as Pearson
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2010 by Pearson
