Management Information Systems:

Managing the Digital Firm

Sixteenth Edition • Global Edition

Chapter 10
E-commerce: Digital Markets, Digital
Goods

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Learning Objectives
10.1 What are the unique features of e-commerce, digital markets,
and digital goods?
10.2 What are the principal e-commerce business and revenue
models?
10.3 How has e-commerce transformed marketing?
10.4 How has e-commerce affected business-to-business
transactions?
10.5 What is the role of m-commerce in business, and what are
the most important m-commerce applications?
10.6 What issues must be addressed when building an
e-commerce presence?
10.7 How will MI S help my career?
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Video Cases
• Case 1: Walmart Takes on Amazon: A Battle of I T and
Management Systems
• Case 2: Groupon: Deals Galore
• Case 3: Etsy: A Marketplace and Community
• Instructional Video 1: Walmart’s E-commerce Fulfillment
Center Network
• Instructional Video 2: Behind the Scenes of an Amazon
Warehouse

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Uber Storms Europe. Europe Strikes
Back
• Problem
– Opportunities presented by new technology
– Political and regulatory hurdles
• Solutions
– Driver and rider apps
– Demand prediction software
• Illustrates the use of IT to create new services as well as
business models
• Demonstrates the disruptive effects of new technologies

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E-Commerce Today
• E-commerce: Use of the Internet and Web to transact business
• Began in 1995 and grew exponentially; still stable even in a recession
• Companies that survived the dot-com bubble now thrive
• The new e-commerce: social, mobile, local
• Move from desktop to smartphone

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Figure 10.1 The Growth of E-Commerce

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Why E-Commerce is Different (1 of 2)
• Ubiquity
– Marketspace is virtual
– Transaction costs reduced
• Global reach
– Transactions cross cultural and national boundaries
• Universal standards
– One set of technology standards: Internet standards
• Richness
– Supports video, audio, and text messages

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Why E-Commerce is Different (2 of 2)
• Interactivity
• Information density
– Greater price and cost transparency
– Enables price discrimination
• Personalization/customization
– Technology permits modification of messages, goods
• Social technology
– Promotes user content generation and social
networking

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Key Concepts in E-Commerce –
Digital Markets and Digital Goods in a
Global Marketplace
• Internet and digital markets have changed the way companies
conduct business
• Information asymmetry reduced
• Menu costs, search and transaction costs reduced
• Dynamic pricing enabled
• Switching costs
• Delayed gratification
• Disintermediation
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Figure 10.2 The Benefits of
Disintermediation to the Consumer

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Digital Goods
• Goods that can be delivered over a digital network
• Cost of producing first unit is almost entire cost of product
• 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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Types of E-Commerce
• Three major types
– Business-to-consumer (B2C)
 Example: Barnes and Noble.com
– Business-to-business (B2B)
 Example: ChemConnect
– Consumer-to-consumer (C2C)
 Example: e Bay
• E-commerce can be categorized by platform
– Mobile commerce (m-commerce)

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E-Commerce Business Models
• Portal
• E-tailer
• Content provider
• Transaction broker
• Market creator
• Service provider
• Community provider

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Interactive Session – Organizations:
Deliveroo: Australian Food Delivery
Platform
• Class discussion
– Analyze Deliveroo using the competitive forces and
value chain models. What is its competitive advantage?
– What is the relationship between information
technology and Deliveroo’s business model? Explain
your answer.
– Is Deliveroo a viable business? Explain your answer.

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E-Commerce Revenue Models
• Advertising
• Sales
• Subscription
• Free/Freemium
• Transaction fee
• Affiliate

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How Has E-commerce Transformed
Marketing?
• Internet provides new ways to identify and communicate
with customers
• Long tail marketing
• Internet advertising formats
• Behavioral targeting
– Tracking online behavior of individuals
• Programmatic ad buying
• Native advertising

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Figure 10.3 Website Visitor Tracking

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Figure 10.4 Website Personalization

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Figure 10.5 How an Advertising
Network Such as DoubleClick Works

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Social E-Commerce and Social
Network Marketing (1 of 2)
• Social e-commerce based on digital social graph
• Features of social e-commerce driving its growth
– Newsfeed
– Timelines
– Social sign-on
– Collaborative shopping
– Network notification
– Social search (recommendations)
• Social media
– Fastest growing media for branding and marketing

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Social E-Commerce and Social
Network Marketing (2 of 2)
• Social network marketing
– Seeks to leverage individuals’ influence over others
– Targeting a social network of people sharing interests
and advice
– Facebook’s “Like” button
– Social networks have huge audiences
• Social shopping sites
• Wisdom of crowds
• Crowdsourcing

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Interactive Session – Management:
“Socializing” with Customers
• Class discussion
– Assess the people, organization, and technology issues for
using social media technology to engage with customers.
– What are the advantages and disadvantages of using social
media for advertising, brand building, market research, and
customer service?
– Give an example of a business decision in this case study
that was facilitated by using social media to interact with
customers.
– Should all companies use social media technology for
customer service and marketing? Why or why not? What
kinds of companies are best suited to use these platforms?
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How Has E-Commerce Affected
Business-To Business Transactions?
• U.S. B2B trade in 2019 is $13.5 trillion
– U.S. B2B e-commerce in 2018 is $6.2 trillion
• Internet and networking helps automate procurement
• Variety of Internet-enabled technologies used in B2B
– Electronic data interchange (ED I)
– Private industrial networks (private exchanges)
– Net marketplaces
– Exchanges

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Electronic Data Interchange (ED I)
• Computer-to-computer exchange of standard transactions
such as invoices, purchase orders
• Major industries have EDI standards
– Define structure and information fields of electronic
documents
• More companies are moving toward web-enabled private
networks
– Allow them to link to a wider variety of firms than EDI
allows
– Enable sharing a wider range of information

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Figure 10.6: Electronic Data
Interchange (ED I)

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New Ways of B2B Buying and Selling
• Private industrial networks
– Private exchanges
– Large firm using a secure website to link to suppliers
and partners
• Net marketplaces (e-hubs)
– Single digital marketplace for many buyers and sellers
– May focus on direct or indirect goods
– May be vertical or horizontal marketplaces
• Exchanges
– Independently owned third-party Net marketplaces for
spot purchasing
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Figure 10.7 A Private Industrial
Network

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Figure 10.8 A Net Marketplace

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What is the Role of M-Commerce in
Business, and What are the Most
Important M-Commerce Applications?
• M-commerce in 2017 is 35 percent of all e-commerce
• Fastest growing form of e-commerce
– Growing at 20 percent or more per year
• Main areas of growth
– Mass market retailing (Amazon, eBay, etc.)
– Sales of digital content (music, T V, etc.)
– In-app sales to mobile devices

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Figure 10.9 Mobile Retail Commerce
Revenues

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Location-Based Services and
Applications
• Used by 74 percent of smartphone owners
• Based on G PS map services
• Geosocial services
– Where friends are
• Geo advertising
– What shops are nearby
• Geo information services
– Price of house you are passing

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Other Mobile Commerce Services
• Financial account management apps
– Banks, credit card companies
• Mobile advertising market
– Google and Facebook are largest markets
– Ads embedded in games, videos, and mobile apps
• 55 percent of online retailers have m-commerce websites

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What Issues Must Be Addressed
When Building an E-Commerce
Presence?
• Most important management challenges
– Developing clear understanding of business objectives
– Knowing how to choose the right technology to achieve
those objectives
• Develop an e-commerce presence map
– Four areas: websites, e-mail, social media, offline
media
• Develop a timeline: milestones
– Breaking a project into discrete phases
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Figure 10.10 E-Commerce Presence
Map

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How Will MI S Help My Career?
• The Company: SportsFantasy Empire
• Position Description: Junior e-commerce data analyst
• Job Requirements
• Interview Questions
• Author Tips

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