Introduction to E-Business and Online Commerce (E_IBA3_IEOC)
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Vrije Universiteit Amsterdam (VU)
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E-Commerce 2019
Full summary of the book E-Commerce 2019 by Kenneth Laudon, for the Minor E-Business and Online Commerce (chapter 1 to 12). Introduction to E-Business and Online Commerce
Introduction to E-business & Online Commerce (Answers to end of chapter questions)
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Introduction to E-Business and Online Commerce (E_IBA3_IEOC)
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Samenvatting E-Commerce 2019
Chapter 1: Introduction to E-Commerce
1.1 Why you should study e-commerce
to be able to perceive and understand the opportunities and risks that lie ahead
To be able to analyze an existing or new idea for an e-commerce business
1.2 Introduction to e-commerce
E-commerce: the use of internet, the web and mobile apps running on mobile devices to transact
business
digitally enabled commercial transactions between and among organizations and individuals
(transactions mediated by digital technology)
Commercial transactions: the exchange of value across organizational or individual boundaries in
return for products or services
The internet: worldwide network of computer networks
The web: provides access to billions of web pages
E-business: the digital enabling of transactions and
processes within a firm, involving information systems
under the control of the firm
Does not include commercial transactions
E-business infrastructure provides support for e-
commerce exchanges
Blur together at the business firm boundary, internal
business systems link up with suppliers or customers
The internet links together businesses, institutions, individuals and agencies. Provides users with
services (e-mail, transfer, shopping, research etc.)
Measure the growth of internet looking at hosts with domain names
Internet host: defined by an IP address that returns a domain name
HTML: Hypertext markup language (language of web pages)
Trends in e-commerce:
Business
E-commerce continues to grow (worldwide)
Technology
Mobile platform mobile e-commerce
Cloud computing
Big data
IoT
Society
Communities
Privacy issues
1.3 Unique features of e-commerce technology
Information asymmetry: any disparity in relevant market information among parties in transaction
Taken away because of e-commerce technologies
Merchants get to know more about customers and are able to use this information
Can also get to know more about other merchants
,Eight unique features of e-commerce technology:
1. Ubiquity
Available just about everywhere, at all times
Not restricted to a physical store (marketspace: a marketplace extended beyond
traditional boundaries)
Ubiquity reduces transaction costs
Lowers the cognitive energy (mental effort required to complete a task)
2. Global Reach
Total number of users or customers an e-commerce business can obtain
Potential market size equal to the size of the world’s online population due to e-commerce
(no longer restricted to physical stores, people can order from all over the world)
3. Universal Standards
Standards that are shared by all nations around the world
Lower market to entry costs
Reduce search costs
Price discovery becomes simpler
Experience network externalities (benefits that arise from everybody using the same
technology)
4. Richness
The complexity and content of a message
E-commerce technologies have the potential for offering more information richness than
traditional media (because they are interactive, can personalize messages)
5. Interactivity
Technology that allows for two-way communication between merchant and customer
For example, community forums, social networks, change format depending on device,
changing product images etc.
6. Information Density
The total amount and quality of information available to all market participants
E-commerce technologies reduce information collection, storage, processing and
communication costs
Increase currency, accuracy and timeliness of information
Information more useful and important than ever
Price transparency: the ease with which consumers can find the variety of prices
Costs transparency: ability of consumers to discover actual costs
7. Personalization and customization
Marketing messages to specific individuals / changing the delivered product or service based
on an individual
Increase information density higher level of personalization and customization
8. Social Technology: User generated content and social networks
Users can create and share content with a worldwide community
From one-to-many, to many-to-many model of mass communication
1.4 Types of e-commerce
Business-to-consumer (B2C) e-commerce: online businesses selling to individual consumers
Different types of B2C:
1. Online retailers
2. Service providers
3. Transaction brokers
4. Content providers
5. Community providers/social networks
6. Market creators
7. Portals
, Business-to-business (B2B) e-commerce: online businesses selling to other businesses
Two primary business models:
1. Net market places (e-distributors, e-procurement, exchanges, industry consortia)
2. Private industrial networks
Consumer-to-consumer (C2C) e-commerce: consumers selling to other consumers
With the help of an online market maker (platform provider)
Mobile e-commerce (M-commerce): the use of mobile devices to enable online transactions
Factors driving m-commerce:
o Increasing amount of time consumers spend on mobile devices
o Larger smartphone screen sizes
o Greater use of responsive design (better optimized websites for mobile)
o Mobile checkout and payment
o Enhanced mobile search functionality
Social e-commerce: e-commerce enabled by social networks and online social relationships
Often intertwined with m-commerce
Growth of social e-commerce driven by:
o Increasing popularity of social sign-on (signing onto websites using social network
account)
o Network notification
o Online collaborative shopping tools
o Social search (recommendations from online friends)
o Increasing prevalence of integrated social commerce tools (buy buttons, shopping
tabs, virtual shops)
Local e-commerce: e-commerce that is focused on engaging the consumer based on his or
her current geographic location
1.5 E-commerce, a brief history
Disintermediation: Loss of intermediaries between producers and consumers, by a new direct
relationship between producers and consumers
Friction-free commerce: vision of commerce in which information is equally distributed, transaction
costs are low, prices can by dynamically adjusted to reflect actual demand, intermediaries decline,
unfair competitive advantages are eliminated
First mover: firm that is first to the market
Network effect: when users receive value from the fact that everyone else uses the same tool or
product
Web 2.0: set of applications and technologies that enable user-generated content
, 1.6 Understanding e-commerce: organizing themes
Technology: Infrastructure
Core of e-commerce: the internet and the web
Underlying: Cloud computing, desktop computers, smartphones, tablet computers, local area
networks, relational and non-relational databases, client/server computing, data mining etc.
Major stages in development of corporate
computing and indicates how the internet and the
web fit into this development trajectory
Business: Basic concepts
Business applications create the interest and
excitement in e-commerce
New technologies new ways of organizing
production and transaction business
Society: Taming the juggernaut
E-commerce is subject to the laws of nations and
global entities
Issues: individual privacy, intellectual property,
public policy
Individual privacy: Internet and web adept at tracking the identity and behavior of individuals online -
E-commerce raises difficulties for preserving privacy
Intellectual property: Cost of distributing digital copies is nearly zero e-commerce poses challenges
to protect intellectual property rights
Public policy: Issues of equity, equal access, content regulation, taxation issues because of global
nature of e-commerce
Chapter 2: E-commerce Infrastructure
2.1 The Internet: Technology Background
The internet: interconnected network of thousands of networks and millions of computers linking
businesses, institutions, agencies and individuals
The Web: One of internets’ most popular services, providing access to web pages
No one controls the internet or how it functions, no one owns the internet
Three phases of the internet:
1. Innovation phase: fundamental building blocks were conceptualized and implemented
2. Institutionalization phase: Large institutions funded and legitimized the fledging Internet
3. Commercialization phase: Encouraging private corporations to take over and expand the
internet backbone
Packet switching: Method of slicing digital messages into discrete units called packets, sending the
packets along different communication paths as they become available, the reassembling the packets
once they arrive
Router: special-purpose computer that interconnects the computer networks that make up the
internet and routes packets to their destination
Routing algorithm: Computer program that ensures that packets take the best available path toward
their destination
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