Chapter 6

E-Commerce: Digital
Markets, Digital Goods

10.1 © 2010 by Prentice Hall

 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.
• Identify the principal payment systems for
electronic commerce.

10.2 © 2010 by Prentice Hall

 Why study this course
•Technology is no longer an afterthought in forming business
strategy, but the actual cause and driver.
•The ability to streamline the structure, influence, and control
of the flow of information is dramatically more powerful and
cost-effective than moving and manufacturing physical
products.
•Inability to overthrow the dominant, outdated business design
often leads to business failure.
•The goal of new business designs is to create flexible
outsourcing alliances between companies that not only off-
load costs, but also make customers ecstatic.

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 Why study this course
•E-commerce is enabling companies to listen to their customers
and become either “the cheapest,” “the most familiar,” or “the
best.”
•Don’t use technology just to create the product. Use
technology to innovate, entertain, and enhance the entire
experience surrounding the product, from selection and
ordering to receiving and service.
•The business design of the future increasingly uses
reconfigurable e-business community models to best meet
customers’ needs.
•The tough task for management is to align business strategies,
processes, and applications fast, right, and all at once. Strong
leadership is imperative.
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 Definition of E-commerce
Electronic Commerce (E-commerce) is an
emerging concept that describes the process
buying and selling or exchanging of products
and services and information via computer
networks including the internet.

E-business is a broader definition of EC, including

buying and selling of goods and services, and
also servicing customers, collaborating with
partners, conducting e-learning and conducting
electronic transactions within an organization.
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 Management Information Systems
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.
Figure 10-1
10.6 © 2010 by Prentice Hall
 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
• Supports video, audio, and text messages

10.7 © 2010 by Prentice Hall

 Management Information Systems
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 density—the total amount and
quality of information available to all market participants
7. Personalization/Customization:
• Technology permits modification of messages, goods
8. Social technology
• The technology promotes user content generation and social
networking

10.8 © 2010 by Prentice Hall

 Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods

Electronic Commerce and the Internet

• Key concepts in e-commerce

• Digital markets reduce
• Information asymmetry
• Search costs
• Transaction costs
• Menu costs
• Digital markets enable
• Price discrimination
• Dynamic pricing
• Disintermediation

10.9 © 2010 by Prentice Hall

 Management Information Systems
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
10.10 © 2010 by Prentice Hall
 Dimensions of E-commerce

Digital Product

Physical
Agent
Physical
Product

Digital Agent
Physical
Process

Digital
Process
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 Dimensions of E-commerce

Traditional Commerce:
•All dimensions are physical in nature
•Perform all transactions off-line
•Buy and sell all products and services through
physical agents and representatives

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 Dimensions of E-commerce

Pure E-commerce:
•All the dimensions are digital in nature
•Pure online (virtual) organisations
•Buy and sell all products and services online

Hybrid approach:
•A combination of digital and physical dimensions

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 Electronic Commerce:
Concepts
• Where EC is conducted
electronic market (e-marketplace)
An online marketplace where buyers and sellers meet
to exchange goods, services, money, or information
interorganizational information systems (IOSs)
Communications system that allows routine
transaction processing and information flow between
two or more organizations
intraorganizational information systems
Communication systems that enable e-commerce
activities to go on within individual organizations
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 Classifications of E-commerce
• Business-to-business (B2B)
• Business-to-consumers (B2C)
• Consumer-to-consumer (C2C)
• Consumer-to-Business-(C2B)
• Mobile commerce (m-commerce)
• Location base e-commerce
• Intra-business (organizational) EC
• Non-business EC

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 Classifications of E-commerce

business-to-business (B2B)
E-commerce model in which all of the participants are
businesses or other organizations
business-to-consumer (B2C)
E-commerce model in which businesses sell to individual
shoppers
consumer-to-business (C2B)
E-commerce model in which individuals use the Internet
to sell products or services to organizations or individuals
seek sellers to bid on products or services they need

consumer-to-consumer (C2C)
E-commerce model in which consumers sell directly to
other consumers
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 Classifications of E-commerce

mobile commerce (m-commerce)

E-commerce transactions and activities conducted in a wireless
environment
location-based commerce (l-commerce)
M-commerce transactions targeted to individuals in specific
locations, at specific times

intrabusiness EC
E-commerce category that includes all internal organizational
activities that involve the exchange of goods, services, or
information among various units and individuals in an
organization

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 Classifications of E-commerce

business-to-employees (B2E)
E-commerce model in which an organization
delivers services, information, or products to its
individual employees
collaborative commerce (c-
commerce)
E-commerce model in which individuals or
groups communicate or collaborate online
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 Benefits E-Commerce

To Consumers 
• Open 24 hours a day
• More choices
• Better prices
• Quick delivery
• Product information in seconds
• Interact with other consumers
• Facilitates competition

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 Benefits E-Commerce

To Organizations 
• Expands the marketplace
• Decreases the cost (less paper)
• Pull-type supply chain management
• Customisation = competitive advantage
• Less time between outlay of capital and receipt of
products and services
• Supports BPR efforts 

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 Benefits E-Commerce

To Society 
• Work at home  less traveling  less
traffic and pollution
• Lower prices benefit less affluent people
• Third world and rural areas access products
otherwise unavailable
• Public services at a reduced cost and
improved quality  

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 Limitations E-Commerce

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