MNG 3204
Ecommerce, Digital Markets and
Digital Goods
Lecturer:
Seon Renville
Text:
Laudon, K. C. & Laudon, J.P.
About the Management Information
Systems
Course
Managing the Digital Firm
Chapter 10
Learning Objectives
● What are the unique features of e-commerce, digital markets, and digital
goods?
● What are the principal e-commerce business and revenue models?
● How has e-commerce transformed marketing?
● How has e-commerce affected business-to-business transactions?
● What is the role of mobile commerce in business and what are the most
important m-commerce applications?
● What issues must be addressed when building an e-commerce Web site?
What is E Commerce?
E-commerce refers to the use of
the Internet and the Web to transact
business. More formally, e-
commerce is about digitally enabled
commercial transactions between
and among organizations and
individuals. For the most part, this
means transactions that occur over
the Internet and the Web.
Commercial transactions involve the
exchange of value (e.g., money)
across organizational or individual
boundaries in return for products
What is E Commerce?
The e-commerce revolution is still
unfolding. Individuals and
businesses will increasingly use the
Internet to conduct commerce as
more products and services come
online and households switch to
broadband telecommunications.
More industries will be transformed
by e-commerce, including travel
reservations, music and
entertainment, news, software,
education, and finance.
E Commerce
Advancement
Features of E Commerce
KEY CONCEPTS IN E-COMMERCE: DIGITAL MARKETS AND DIGITAL GOODS IN A
GLOBAL MARKETPLACE
The location, timing, and revenue
models of business are based in
some part on
the cost and distribution of
information. The Internet has
created a digital
marketplace where millions of
people all over the world are able to
exchange
massive amounts of information
directly, instantly, and for free. As a
result, the
Internet has changed the way
companies conduct business
and increased their
KEY CONCEPTS IN E-COMMERCE: DIGITAL MARKETS AND DIGITAL GOODS IN A
GLOBAL MARKETPLACE
The Internet reduces information
asymmetry. An information
asymmetry exists when one party in
a transaction has more information
that is important for the transaction
than the other party. That
information helps determine their
relative bargaining power. In digital
markets, consumers and suppliers
can “see” the prices being charged
for goods, and in that sense digital
markets are said to be more
“transparent” than traditional
markets.
KEY CONCEPTS IN E-COMMERCE: DIGITAL MARKETS AND DIGITAL GOODS IN A
GLOBAL MARKETPLACE
Digital markets are very flexible and
efficient because they operate with
reduced search and transaction
costs, lower menu costs
(merchants’ costs of
changing prices), greater price
discrimination, and the ability to
change prices
dynamically based on market
conditions. In dynamic pricing, the
price of a
product varies depending on the
demand characteristics of the
customer or the
supply situation of the seller.
KEY CONCEPTS IN E-COMMERCE: DIGITAL MARKETS AND DIGITAL GOODS IN A
GLOBAL MARKETPLACE
These new digital markets may
either reduce or increase switching
costs, depending on the nature of
the product or service being sold,
and they may cause some extra
delay in gratification. Unlike a
physical market, you can’t
immediately consume a product
such as clothing purchased over the
Web (although immediate
consumption is possible with digital
music downloads and other digital
products.)
KEY CONCEPTS IN E-COMMERCE: DIGITAL MARKETS AND DIGITAL GOODS IN A
GLOBAL MARKETPLACE
Digital markets provide many
opportunities to sell directly to the
consumer, bypassing
intermediaries, such as distributors
or retail outlets. Eliminating
intermediaries in the distribution
channel can significantly lower
purchase transaction costs. To pay
for all the steps in a traditional
distribution channel, a product may
have to be priced as high as 135
percent of its original cost to
manufacture.
Digital Goods
The Internet digital marketplace has
greatly expanded sales of digital
goods. Digital goods are goods that
can be delivered over a digital
network. Music tracks, video,
Hollywood movies, software,
newspapers, magazines, and books
can all be expressed, stored,
delivered, and sold as purely digital
products. Currently, most of these
products are sold as physical goods,
for example, CDs, DVDs,
newspapers, and hard-copy books.
But the Internet offers the
possibility of delivering all these
Digital Goods
TYPES OF E-COMMERCE
There are many ways to classify
electronic commerce transactions. One
is by looking at the nature of the
participants in the electronic commerce
transaction. The three major electronic
commerce categories are business-to-
consumer (B2C) e-commerce, business-
to-business (B2B) e-commerce, and
consumer-to-consumer (C2C) e-
commerce..
Internet Business Models
Changes in the economics of
information described earlier have
created the conditions for entirely new
business models to appear, while
destroying older business models. Table
10-5 describes some of the most
important Internet business models
that have emerged. All, in one way or
another, use the Internet to add extra
value to existing products and services
or to provide the foundation for new
products and services.
E Commerce Revenue Models
A firm’s revenue model describes
how the firm will earn revenue,
generate profits, and produce a
superior return on investment.
Although there are many different
e-commerce revenue models that
have been developed, most
companies rely on one, or some
combination, of the following six
revenue models: advertising,
sales, subscription,
free/freemium, transaction fee,
and affiliate.
M-COMMERCE SERVICES AND APPLICATIONS
M-commerce applications have
taken off for services that are
time-critical, that appeal to
people on the move, or that
accomplish a task more
efficiently than other methods.
They are especially popular in
Europe, Japan, South Korea, and
other countries with strong
wireless broadband
infrastructures.
Building an Ecommerce Website
