Summary
-
Introduction to E-Business and Online Commerce
Reference: E-commerce 2021-2022, Global Edition, 17th Edition, Kenneth C. Laudon & Carol
Guercio Traver
Excluded parts of this summary:
Chapter 3: 3.2, 3.3,
Chapter 4: 4.2, 4.3, 4.4, 4.5,
Chapter 5: 5.3, 5.4,
Chapter 11: 11.3,
Chapter 12: 12.4, 12.5
,1. Introduction to E-commerce
1.2 Introduction to E-commerce
E-commerce → The use of the Internet, the Web, and mobile apps and browsers running on mobile
devices to transact business. More formally, digitally enabled commercial transactions between and
among organizations and individuals.
The internet is a worldwide network of computer networks, and the Web is one of the Internet’s most
popular services, providing access to billions of web pages.
An app (shorthand for application) is a software application. The term is typically used when referring
to mobile applications, although it is also sometimes used to refer to desktop computer applications as
well.
A mobile browser is a version of web browser software accessed via a mobile device.
Commercial transactions involve the exchange of value (e.g., money) across organizational or
individual boundaries in return for products and services. Exchange of value is important for
understanding the limits of e-commerce. Without an exchange of value, no commerce occurs.
E-commerce and digital commerce are the same.
E-business → The digital enabling of transactions and processes within a firm, involving information
systems under the control of the firm.
For the most part, in our view, e-business does not include commercial transactions involving an
exchange of value across organizational boundaries.
→ For example, a company’s online inventory control mechanisms are a component of e-business,
but such internal processes do not directly generate revenue for the firm from outside businesses or
consumers, as e-commerce, by definition, does.
E-commerce and e-business systems blur together at the business firm boundary, at the point where
internal business systems link up with suppliers or customers (see Figure 1.1). E-business
applications turn into e-commerce precisely when an exchange of value occurs.
,Internet → Worldwide network of computer networks built on common standards.
Some experts estimate that as of 2019, there were anywhere from around 10 billion to 25 billion
connected devices already installed.
One way to measure the growth of the Internet is by looking at the number of Internet hosts with
domain names. (An Internet host is defined by the Internet Systems Consortium as any IP address
that returns a domain name in the in-addr.arpa domain, which is a special part of the DNS namespace
that resolves IP addresses into domain names.)
The Internet has shown extraordinary growth patterns when compared to other electronic
technologies of the past.
World Wide Web (the Web) → An information system running on Internet infrastructure that provides
access to billions of web pages.
The Web provides access to billions of web pages indexed by Google and other search engines.
These pages are created in a language called HTML (HyperText Markup Language). HTML pages
can contain text, graphics, animations, and other objects. The Internet prior to the Web was primarily
used for text communications, file transfers, and remote computing. The Web introduced far more
powerful capabili- ties of direct relevance to commerce.
The deep Web contains databases and other content that is not routinely identified by search engines
such as Google (see Figure 1.2).
Mobile platform → Provides the ability to access the Internet from a variety of mobile devices such
as smartphones and tablets.
Today, in contrast, more Americans access the Internet via a mobile app on a mobile device than by
using a desktop computer and web browser. Insight on Technology: Will Apps Make the Web
Irrelevant? examines the challenge that apps and the mobile platform pose to the Web’s dominance
of the Internet ecosphere in more depth.
,From a business perspective, one of the most important trends to note is that all forms of e-commerce
continue to show very strong growth. The Covid-19 pandemic which emerged in the first quarter of
2020 is expected to result in an increased and lasting shift to e-commerce.
Technology perspective:
- Mobile messaging (Facebook Messenger, Whatsapp and Snapchat)
- Cloud computing (Storage on cloud servers)
- Track and Analyze online data (big data)
At the societal level, other trends are apparent. The Internet and mobile platform pro- vide an
environment that allows millions of people to create and share content, establish new social bonds,
and strengthen existing ones through social network, photo- and video- posting, and blogging sites
and apps, while at the same time creating significant privacy issues.
1.3 Unique Features of E-commerce
Figure 1.4 illustrates eight unique features of e-commerce technology that both chal- lenge traditional
business thinking and help explain why we have so much interest in e-commerce.
Information asymmetry → Refers to any disparity in relevant market information among parties in a
transaction.
Marketplace → A physical place you visit in order to transact.
Ubiquity → It is available just about everywhere, at all times.
Marketspace → A marketplace extended beyond traditional boundaries and removed from a
temporal and geographic location.
From a consumer point of view, ubiquity reduces transaction costs—the costs of partic- ipating in a
market. To transact, it is no longer necessary that you spend time and money traveling to a market. At
,a broader level, the ubiquity of e-commerce lowers the cognitive energy required to transact in a
marketspace. Cognitive energy refers to the mental effort required to complete a task.
E-commerce technology permits commercial transactions to cross cultural, regional, and national
boundaries far more conveniently and cost-effectively than is true in tra- ditional commerce.
Global reach → A measure of the total number of users or customers an e-commerce business can
obtain.
Universal standards → Standards that are shared by all nations around the world (e-commerce).
In contrast, most traditional commerce technologies differ from one nation to the next.
The universal technical standards of e-commerce greatly lower market entry costs— the cost
merchants must pay just to bring their goods to market. At the same time, for consumers, universal
standards reduce search costs—the effort required to find suitable products. And by creating a single,
one-world marketspace, where prices and product descriptions can be inexpensively displayed for all
to see, price discovery becomes simpler, faster, and more accurate.
Users, both businesses and individuals, also experience network externalities—benefits that arise
because everyone uses the same technology. With e-commerce technologies, it is possible for the
first time in history to easily find many of the suppliers, prices, and delivery terms of a specific product
anywhere in the world, and to view them in a coher- ent, comparative environment.
Richness → The complexity and content of a message.
E-commerce technologies have the potential for offering considerably more infor- mation richness
than traditional media such as printing presses, radio, and television because they are interactive and
can adjust the message to individual users. Chatting with an online salesperson, for instance, comes
very close to the customer experience in a small retail shop.
The richness enabled by e-commerce technologies allows retail and service merchants to market and
sell “complex” goods and services that heretofore required a face-to-face presentation by a sales
force to a much larger audience.
Interactivity → Technology that allows for two-way communication between merchant and
customers, and among customers.
Interactivity allows an online merchant to engage a consumer in ways similar to a face-to-face
experience.
Comment features, community forums, and social networks with social sharing functionality such as
Like and Share buttons all enable consumers to actively interact with merchants and other users
Information density → The total amount and quality of information available to all market
participants, consumers, and merchants alike.
E-commerce technologies reduce information collection, storage, processing, and communication
costs. At the same time, these technologies greatly increase the cur- rency, accuracy, and timeliness
of information—making information more useful and important than ever. As a result, information
becomes more plentiful, less expensive, and of higher quality.
, Price transparency refers to the ease with which consumers can find out the variety of prices in a
market; cost transparency refers to the ability of consumers to discover the actual costs merchants
pay for products. As a result the entire marketplace potentially becomes more price competitive.
Price discrimination, selling the same goods, or nearly the same goods, to different targeted groups at
different prices. → Merchants also have enhanced abilities to differentiate their products in terms of
cost, brand, and quality.
Personalization → The targeting of marketing messages to specific individuals by adjusting the
message to a person’s name, interests and past purchases.
Customization → Changing the delivered product or service based on a user’s preferences or prior
to behavior.
With the increase in information density, a great deal of information about the consumer’s past
purchases and behavior can be stored and used by online merchants. The result is a level of
personalization and customization unthinkable with traditional commerce technologies
Personalization and customization allow firms to precisely identify market segments and adjust their
messages accordingly.
Social technology: User-generated content and social networks
In a way quite different from all previous technologies, e-commerce technologies have evolved to be
much more social by allowing users to create and share content with a worldwide community.
E-commerce technologies have the potential to invert this standard media model by giving users the
power to create and distribute content on a large scale, and permit users to program their own content
consumption. E-commerce technologies provide a unique, 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.
B2C e-commerce includes purchases of retail goods; travel, financial, real estate, and other types of
services; and online content.
Business-to-Business (B2B) E-commerce → Online businesses selling to other businesses.
B2B is the largest form of e-commerce, with almost $8 trillion in transactions in the United States in
2020 and about $27 trillion worldwide.
Consumer-to-consumer (C2C) E-commerce → Consumers selling to other consumers.
C2C provides a way for consumers to sell to each other with the help of an online market maker (also
called a platform provider).
In C2C e-commerce, the consumer prepares the product for market, places the prod- uct for auction
or sale, and relies on the market maker to provide catalog, search engine, and transaction-clearing
