CHAPTER 1

The Revolution Is Just

Beginning

Copyright © 2002 Pearson Education, Inc.

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Learning Objectives
 Define e-commerce and describe how it
differs from e-business
 Identify the unique features of e-commerce
technology and their business significance
 Describe the major types of e-commerce
 Limitations of e-commerce
Learning Objectives
 Describe the major themes underlying the
study of e-commerce
 Identify the major academic disciplines
contributing to e-commerce research
 Amazon.com: Before and
After
 Most well-known e-commerce company
 Conceived by Jeff Bezos in 1994
 Opened in July 1995
 Four compelling reasons to shop
 Selection (1.1 million titles)
 Convenience (anytime, anywhere)
 Price (high discounts on bestsellers)
 Service (automated order confirmation,
tracking, and shipping information)
E-commerce vs. E-
business
E-commerce involves
 Digitally enabled commercial transactions
between organizations and individuals.
 Digitally enabled transactions include all
transactions mediated by digital
technology eg the use of net, phones,
computers, networks etc
 Commercial transactions involve the
exchange of value across organizational or
individual boundaries in return for
products or services
E-commerce vs. E-
business
E-business involves
 Digital enablement of transactions and processes within a firm,
involving information systems under the control of the firm
 E-business does not involve commercial transactions across
organizational boundaries where value is exchanged
 The Difference Between E-
commerce and E-Business
Page 8, Figure 1.1
Unique Features of E-commerce
Technology and Their Business
Significance
E-commerce:
 is ubiquitous
 has global reach
 operates according to universal standards
 provides information richness
 is interactive
 increases information density
 permits personalization
Seven Unique Features of E-commerce
Technology and Their Business
Significance
Changing Trade-Off Between Richness
and Reach

Copyright © 2002 Pearson Education, Inc.

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Major Types of E-
Commerce
 Market relationships
 Business-to-Consumers (B2C)
 Business-to-Business (B2B)
 Consumer-to-Consumer (C2C)
 Technology-based
 Peer-to-Peer (P2P)
 Mobile Commerce (M-commerce)
 Major Types of E-
Commerce
Page 14, Table 1.2
Business-to-Consumer E-
commerce
 Most commonly discussed type
 Online businesses attempt to
reach individual consumers
 Consumers will spend $65 billion
in 2001.
Business-to-Business E-
commerce
 Businesses focus on sell to other businesses
 Largest form of e-commerce
 $700 billion in transactions in 2001
 Primarily involved inter-business exchanges at first
 Other models have developed
 e-distributors
 infomediaries
 B2B service providers
Consumer-to-Consumer E-
commerce
 Provide a way for consumers to sell
to each other
 Estimated $5 billion market
 Consumer:
 prepares the product for market
 places the product for auction or
sale
 relies on market maker to provide
catalog, search engine, and
transaction clearing capabilities
Peer-to-Peer E-commerce
 Enables Internet users to share
files and computer resources
 Napster
Mobile E-commerce
 Wireless digital devices enable
transactions on the Web
 Uses personal digital assistants
(PDAs) to connect
 Used most widely in Japan and
Europe
Growth of the Internet and the
Web
 Computer network-Any technology that allows people to connect
computers to each other
 The Internet -A large system of interconnected computer
networks spanning the globe
 World Wide Web-A subset of computers on the Internet
HISTORY AND ORIGIN OF INTERNET

 Early 1960s
 U.S. Department of Defense funded research to explore creating a
worldwide network
 In 1969
 Defense Department researchers connected four computers into a
network called ARPANET
 Throughout the 1970s and 1980s
 Academic researchers connected to ARPANET and contributed to its
technological developments
Emergence of the World Wide
Web
Tim Berners-Lee developed code for a hypertext server program
 Hypertext server:
 Stores files written in the hypertext markup language
 Lets other computers connect to it and read files
 Hypertext Markup Language (HTML)
 Includes a set of codes (or tags) attached to text
Intranets and Extranets

 Intranet-Interconnected network that does not

extend beyond the organization that created it
 Extranet-Intranet extended to include entities
outside the boundaries of an organization
 Connects companies with suppliers, business
partners, or other authorized users
 The Growth of the Internet
Page 16, Figure 1.3
 The Growth of Web
Content
Page 17, Figure 1.4

Copyright © 2002 Pearson Education, Inc.

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Technology and E-Commerce in
Perspective

Internet and the Web are just two of a long list

of technologies that have greatly change
commerce
 Other technologies spawned business
models and strategies
 Explosive early growth followed by
retrenchment and then long-term
successful exploitation of the
technology
 Technology and E-Commerce in
Perspective

Although e-commerce has grown

explosively, there is no guarantee it will
continue to grow
 Confront own fundamental
limitations
 B2C only about 1% of overall retail
market
 With current growth rates, B2C
will roughly equal the annual
revenue of Wal-Mart in 2005
 Limitations of the Growth of
B2C
Page E-Commerce
23, Table 1.3

Copyright © 2002 Pearson Education, Inc.

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Technological Limitations

 1. There is a lack of universally accepted standards for quality,

security, and reliability
 2. The telecommunications bandwidth is insufficient, especially
for m-commerce
 3. Software tools are still developing
 4. There are difficulties in integrating the Internet and EC
software with some existing (especially legacy) applications and
databases.
 5. Special Web servers are needed in addition to the network
servers (added cost).
 6. Internet accessibility is still expensive and/or inconvenient.
 7. Order-fulfillment of large-scale B2C requires special
automated warehouses.
Copyright © 2002 Pearson Education, Inc.
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Non-technological Limitations

 1. Security and privacy concerns deter customers from buying.

 2. Lack of trust in EC and in unknown sellers hinder buyers.
 3. Many legal and public policy issues, including taxation, are as yet unresolved.
 4. National and international government regulations sometimes get in the way
 5. It is difficult to measure some benefits of EC, such as
 advertising. There is a lack of measurement and methodology.
 6. Some customers like to feel and touch products. Also,
 customers are resistant to the change from a real to a virtual store.
 7. People do not yet sufficiently trust paperless, faceless
 transactions.
 8. In most case, there is an insufficient number (critical mass) of sellers and buyers which are needed for profitable
EC operations.
 9. There is an increasing amount of fraud on the internet.
 10. It is difficult to obtain venture capital due to the dot-com
 disaster (failure of many dot-coms)
 Understanding E-Commerce:
Organizing Themes
 Technology: Infrastructure
 development and mastery of digital computing
and communications technology
 Business: Basic Concepts
 new technologies present businesses and
entrepreneurs with new ways of organizing
production and transacting business
 Society: Taming the Juggernaught
 global nature of e-commerce poses public
policy issues of equity, equal access, content
regulation, and taxation
Copyright © 2002 Pearson Education, Inc.
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 Disciplines Concerned
with E-Commerce
Page 39, Figure 1.9
KEY DRIVERS OF ECOMMERCE
 It is important to identify the key drivers of e-
commerce to allow a comparison between
different countries. It is often claimed that e-
commerce is more advanced in the USA than in
Europe.
 These key drivers can be measured by a number
of criteria that can highlight the stages of
advancement of e-commerce in each of the
respective countries.
KEY DRIVERS OF ECOMMERCE
 Technological factors – The degree of
advancement of the telecommunications
infrastructure which provides access to the new
technology for business and consumers.
 Political factors – including the role of
government in creating government legislation,
initiatives and funding to support the use and
development of e-commerce and information
technology.
 Social factors – incorporating the level and
advancement in IT education and training which
will enable both potential buyers and the workforce
to understand and use the new technology.
 Economic factors – including the general wealth
and commercial health of the nation and the
elements that contribute to it.
LIMITATION OF ECOMMERCE TO FIRMS
 Lack of sufficient system security, reliability, standards
and communication protocols.-There are numerous reports
of websites and databases being hacked into, and security holes
in software.
 For example, Microsoft has over the years issued many security
notices and ‘patches’ for their software.
 Several banking and other business websites, including Barclays
Bank, Powergen and even the Consumers’ Association in the UK,
have experienced breaches in security where ‘a technical
oversight’ or ‘a fault in its systems’ led to confidential client
information becoming available to all.
 Rapidly evolving and changing technology, so there is
always a feeling of trying to ‘catch up’ and not be left behind.
DISADVANTAGES OF ECOMMERCE TO
FIRMS
 Under pressure to innovate and develop business
models to exploit the new opportunities which
sometimes leads to strategies detrimental to the
organisation. The ease with which business models can be
copied and emulated over the Internet increase that
pressure and curtail longer-term competitive advantage.
 Facing increased competition from both national and
international competitors often leads to price wars and
subsequent unsustainable losses for the organisation.
 Problems with compatibility of older and ‘newer’
technology. There are problems where older business
systems cannot communicate with web based and Internet
infrastructures, leading to some organisations running
almost two independent systems where data cannot be
shared
disadvantages of e-commerce to consumers
 Computing equipment is needed for individuals
to participate in the new‘digital’ economy, which
means an initial capital cost to customers.
 A basic technical knowledge is required of both
computing equipment and navigation of the
Internet and the World Wide Web.
 Cost of access to the Internet, whether dial-up
or broadband tariffs is high
 Cost of computing equipment. Not just the
initial cost of buying equipment but making sure
that the technology is updated regularly to be
compatible with the changing requirement of the
Internet, websites and applications.
disadvantages of e-commerce to
consumers
 Lack of security and privacy of personal data.
There is no real control of data that is collected
over the Web or Internet. Data protection laws are
not universal and so websites hosted in different
countries may or may not have laws which protect
privacy of personal data.
 Physical contact and relationships are
replaced by electronic processes. Customers are
unable to touch and feel goods being sold on-line
or gauge voices and reactions of human beings.
 A lack of trust because they are interacting with
faceless computers.
Limitations of e-commerce to society
 Breakdown in human interaction. As people become
more used to interacting electronically there could be an
erosion of personal and social skills which might eventually
be detrimental to the world we live in where people are more
comfortable interacting with a screen than face to face.
 Social division. There is a potential danger that there will
be an increase in the social divide between technical haves
and have-nots – so people who do not have technical skills
become unable to secure better-paid jobs and could form an
underclass with potentially dangerous implications for social
stability.
 Wasted resources. As new technology dates quickly how
do you dispose of all the old computers, keyboards,
monitors, speakers and other hardware or software?