1301383 electronic commerce chapter 2 - webs · 1301383 electronic commerce objectives define...
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1301383 Electronic Commerce
This presentation is part of : 1301383 Electronic CommerceFaculty of Information and Computer Technology, Mae Fah Luang University. Academic Year 2008
Presentation by:
Supichaya SmerchuarSupichaya Smerchuar
Chapter 2EE--MarketplacesMarketplaces
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ObjectivesDefine e-marketplaces and list their componentsList the major types of e-marketplaces and describe their featuresDescribe the various types of EC intermediaries and their rolesDescribe electronic catalogs, shopping carts, and search engines.Discuss liquidity, quality, and success factors in e-marketplacesDescribe the economic impact of ECDiscuss competition in the digital economyDescribe the impact of e-marketplaces on organizations
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Electronic marketplaces• Electronic marketplace: a space in which sellers and
buyers exchange goods and services for money (or for other goods and services) electronically.
• Functions of markets:– matching buyers and sellers– Facilitating exchanges of goods/services and payments
associated with market transactions– Provide institutional infrastructure
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Changes in Markets Mechanisms• Together with IT, EC has greatly increased market
efficiencies– by expediting or improving the functions of market– And lowering transaction and distribution cost – Leading to a well-organized “friction-free” markets
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Market-space• The area of actual or potential commercial value
in which a company intends to operate
• Market-space can occur for any type of EC e.g. B2C, B2B, C2C etc.
B2C Marketspace: Online storefrontsB2B Marketspace: E-MarketplacesC2C Marketspace: eBay
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Market-space components• Customers: the hundreds of millions of people surfing the web are potential
buyers of goods/services offered on the net. They looking for– good deals– Customized items– Collectors items– Entertainment etc
• Organizations are the major consumers of EC activities. (85%)
• Sellers: millions of storefronts on the Web offering a huge variety of products. ( sells can be done directly from sellers site or from E-marketplaces
• Products: both physical and digital products (what are the advantages of a digital product?)
• Infrastructure: hardware, software, networks etc.
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Market-space components• Front end: the portion of an e-seller’s business processes through which
customers interact, e.g. seller’s portal, e-catalogs, shopping cart, search engine and payment gateway
• Back end: activities that support online order-taking. E.g. order aggregation and fulfillment, inventory management, purchasing from suppliers, payment processing, packaging and delivery
• Intermediaries: create and manage online markets. Match buyers and sellers, provide some infrastructure services to and help buyers/sellers to institute and complete transaction. (mostly operate as computerized systems)
• Other business partners: includes business collaboration mostly along supply chain.
• Support services: ranging from certification to trust services
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Market-space Components
• Customers• Sellers• Products (physical, digital)• Infrastructure
Web, network, bandwidth• Front end
Shopping cart, search engine, e-catalog, payment gateway
• Back endOrder fulfillment, logistics, accounting, procurement, inventory mgt.
• Intermediaries• Business partners• Support services
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Types of electronic markets• There are various types of marketplaces
– B2C• Electronic storefronts• Electronic malls
– B2B• Private e-marketplace
– Sell-side– Buy-side
• Public e-marketplaces• consortia
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Types of electronic markets• B2C
– Electronic storefronts: single company’s Web site where product/services are sold (electronic store)
• A storefront has various mechanism for conducting sale– Electronic catalogs (presentation of product information in an electronic form)– A search engine ( a program that can access a database of Internet
resources, search for specific information/keywords, and report the result)– An electronic shopping cart: order processing technology that allow shoppers
to accumulate items they wish to buy while they continue to shop)– E-auction facilities– A payment gateway etc.
– Electronic malls: an online shopping center where many stores are located
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Types of electronic markets• B2B
– Private E-Marketplace: owned by a single company • Sell-side E-Marketplace: a private e-market in which a company
sells either standard or customized to qualified companies• Buy-side: a private e-market in which a company buys from
invited suppliers
– Public E-Marketplace: e-market usually owned by am independent 3rd party with many buyers and many sellers (exchanges)
– Consortia: usually owned by a small group of major sellers or buyers usually in the same industry
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Mechanisms Necessary for Conducting Online Sales
• Electronic catalogs• Search engine • E-auction facilities• Payment gateway• Shipment information• Customer services
Your Name Here
Your Name Here
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Electronic Catalogs• The presentation of product information in an electronic
form; the backbone of most e-selling sites• Electronic catalogs considerations:
The dynamics of the information presentationThe degree of customizationIntegration with business process
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Comparison of Online Catalogs with Paper Catalogs
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Other 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 shopping cart:An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop
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Impact of E-Commerce on Value Chain: Disintermediation• The removal of organizations or business process layers
responsible for certain intermediary steps in a given value chain
• Eliminating the traditional intermediaries, such as wholesalers, distributors, and retailers, to reduce the cost
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Impact of E-Commerce on Value Chain: Reintermediation• Reintermediation — the shifting or transfer of the
intermediary functions which creates a new business opportunity
• Reintermediation such as electronic shopping malls, directory and search engine service, and comparison aids using agents create the role of reintermediation
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Intermediation in ECDisintermediationElimination of intermediaries between sellers and buyers
ReintermediationEstablishment of new intermediary roles for traditional intermediaries that have been disintermediated
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Intermediation in E-Commerce• Intermediaries (brokers) provide value-added activities and
services to buyers and sellers• Intermediaries in the physical world are wholesalers and
retailers• E-Commerce Intermediary
Infomediaries: electronic intermediaries that control information flow in cyberspace, often aggregating and manipulating information to add values before selling it to others
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Roles and Values of Intermediaries in E-Markets
• Lower search costs• Improve privacy• More complete information• Reduce pricing inefficiencies
ValuesRoles
IntermediariesIntermediaries
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E-Markets Success Factors Product Characteristics
Digitizable products can be electronically distributed to customers, resulting in very low distribution costs, allowing order-fulfillment cycle time “to be minimal”
Industry CharacteristicsElectronic markets are most useful when they are able to directly match buyers and sellers
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E-Markets Success Factors (cont.)
• Seller CharacteristicsElectronic markets reduce search costs, allowing consumers to find sellers offering lower prices
• Consumer CharacteristicsE-markets require a certain degree of effort on the part of the consumer, e-markets are more conducive to consumers who do some comparison and analysis before buying
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Digital Economy• An economy based on new trading mechanisms
where transactions are more efficient, demands and supplies are more fluid, and information is playing an important role in generating wealth
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Impact of Internet on Industry Structure• E-commerce changes the nature of players in an industry
and their relative bargaining power by changing:the basis of competition among rivalsthe barriers to entrythe threat of new substitute productsthe strength of suppliersthe bargaining power of buyers
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Competition in the Digital Economy• Porter’s Competitive Analysis in an Industry
competitive forces modelModel, 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
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Competitive Factors in the Digital Economy
• Lower search costs for buyers• Speedy comparisons• Differentiation and personalization
Differentiation: Providing a product or service that is unique Personalization: The ability to tailor a product, service, or Web content to specific user preferences
• Lower prices• Customer service
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E-commerce Business Models• Business model – set of planned activities
designed to result in a profit in a marketplace• Business plan – document that describes a firm’s
business model• E-commerce business model – aims to use and
leverage the unique qualities of Internet and Web
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Developing a new business model generally requires a consideration of …
Value Proposition
Marketspace
Resource
Financial Model
Products/services to offer
Delivery channels
Revenue generation
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Key Ingredients of a Business Model
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Value Proposition• Defines how a company’s product or service fulfills the needs of
customersTarget customersCustomer benefitsFirm’s competitiveness
• Questions to ask:Why will customers choose to do business with your firm instead of another?What will your firm provide that others do not or cannot?
• Examples of successful value propositions include:Personalization/customizationReduction of product search costsReduction of price discover costsFacilitation of transactions by managing product delivery
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Value Proposition
Target SegmentsTarget
Segments
Definition : The result of a combination of choices about the customers, the benefits offered and the unique capabilities of the firm:
“The special occasion segment”
Key Benefits Offered
Key Benefits Offered
Unique Capabilities
Unique Capabilities
Value Proposition
Value Proposition+ +
• Online experience• Unique, broad product line of complementary gifts
MisslilyMisslily• Fresh flowers• Complementary gifts• Low prices
“Misslily serves the special occasion segment by providing fresh flowers and unique complementary gifts”
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Revenue Model• Describes how the firm will earn revenue, generate profits,
and produce a superior return on invested capital• Terms financial model and revenue model often used
interchangeably• Major types:
Advertising revenue modelSubscription revenue modelTransaction fee revenue modelSales revenue modelAffiliate revenue model
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Advertising Revenue Model
• Web site that offers content, services and/or products also provides a forum for advertisements and receives fees from advertisers
• Example: Yahoo.com
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Subscription Revenue Model
• Web site that offers users content or services charges a subscription fee for access to some or all of its offerings
• Examples: Consumer Reports Online
Yahoo! Platinum
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Transaction Fee Revenue Model
• Company that receives a fee for enabling or
executing a transaction
• Examples:
eBay.com
E-Trade.com
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Sales Revenue Model
• Company derives revenue by selling goods, information, or services to customers
• Examples:Amazon.comLLBean.comGap.com
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Affiliate Revenue Model
• Sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales
• Example:MyPoints.com
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Market Opportunity• Refers to a company’s intended marketspace and the
overall potential financial opportunities available to the firm in that marketspace
• Marketspace – the area of actual or potential commercial value in which a company intends to operate
• Realistic market opportunity is defined by revenue potential in each of market niches in which company hopes to compete
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Competitive Environment• Refers to the other companies selling similar products and
operating in the same marketspace• Influenced by:
how many competitors are activehow large their operations arewhat market share for each competitor ishow profitable these firms are how they price their products
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Competitive Environment (cont) • Direct competitors – companies that sell products or
services that are very similar and into the same market segment
Example: Priceline.com and Travelocity.com
• Indirect competitors – companies that may be in different industries but that still compete indirectly because their products can substitute for one another
Example: CNN.com and ESPN.com
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Competitive Advantage• Achieved when firm can produce a superior product and/or
bring product to market at a lower price than most, or all, of competitors
• Firms achieve competitive advantage when they are able to obtain differential access to the factors of production that are denied to competitors
• Asymmetry – when one participant in a market has more resources than others
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Competitive Advantage (cont)• Types of competitive advantage include:
First mover advantage – results from a firm being first into a marketplaceUnfair competitive advantage – occurs when one firm develops an advantage based on a factor that other firms cannot purchase
• Companies leverage their competitive assets when they use their competitive advantages to achieve more advantage in surrounding markets
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Market Strategy
• A plan that details how a company intends to enter a new market and attract customers
• Best business concepts will fail if not properly marketed to potential customers
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• Describes how the company will organize the work that needs to be accomplished
• Work is typically divided into functional departments
• Move from generalists to specialists as the company grows
Organizational Development
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Management Team• Employees of the company responsible for making the
business model work• Strong management team gives instant credibility to
outside investors• A strong management team may not be able to salvage a
weak business model, but should be able to change the model and redefine the business as it becomes necessary