E commerce fundamentals and designs and elements

Learn how to build an ecommerce platform

1. MIS 207: E-Business E-Commerce Fundamentals YAR

2. Situation Analysis and Environmental Scanning B2B traditionally sells products through its distributors , however they can bypass distributors and sales directly and reach customers via their websites and/or B2B marketplaces. B2C can market its products through online intermediaries. Situation analysis : Collection and review of information about an organization’s external environment and internal processes and resources in order to inform its strategies. Online element of an organization’s environment are the part of situation analysis (see next page). Environmental Scanning : The process of continuously monitoring the environment and events and responding accordingly. Online intermediaries : Web sites which help connect web users with content they are seeking on destination sites, e.g., search engines, shopping comparison sites and traditional brokers, directories, blogs, social media. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

3. e-Business Environment 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

4. e-Business Environment: Constraints and Opportunities Micro-environment Customers which services are they offering via their web site that your organization could support them in? Competitors need to be benchmarked in order to review the online services they are offering – do they have a competitive advantage? Intermediaries are new or existing intermediaries offering products or services from your competitors while you are not represented? Suppliers are suppliers offering different methods of procurement to competitors that give them a competitive advantage? 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

5. e-Business Environment: Constraints and Opportunities (cont’d) Macro-environment Society what is the ethical and moral consensus on holding personal information ? Country specific, international legal what are the local and global legal constraints for example, on holding personal information , or taxation rules on sale of goods? Country specific, international economic what are the economic constraints of operating within a country or global constraints ? Technology what new technologies are emerging by which to deliver online services such as interactive digital TV and mobile phone-based access? 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

6. Strategic Agility The capability to respond to environmental opportunities and threats to gain competitive advantages. “The capability to innovative and so gain competitive advantages within a marketplace by monitoring changes within an organization’s marketplace and then to efficiently evaluate alternative strategie s and then select, review and implement appropriate candidate strategies”. Strongly associated with knowledge management theory. Why its needed? Reviewing opportunities and threats of the marketplace and selecting appropriate strategy option. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

7. An Online Marketplace Map 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

8. Online Marketplace Analysis: Elements Customer segments Identify and summarize different target segments Understand their online media consumption, buyer behavior and type of content they searched. Search intermediaries Different search engines are popular in different country or region. Identify which search engine is more effective in harnessing search traffic. “Share of Search ”: the audience share of Internet searches achieved by a particular audience in a particular market. The precise key phrases used by visitors to actually reach a site from different search engines. Intermediaries and media sites (see next page) Destination sites The sites that the marketer tries to generate traffic to. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

9. Online Marketplace Analysis: Elements (Cont’d) Intermediaries and Media Sites Mainstream news media sites or portal , e.g., Google news Niche or vertical media sites , e.g., e-consultancy, ClickZ.com in B2B Price comparison sites (also called aggregator), e.g., http://www.pricecanada.com/ , Moneysupermarket, Shopping.com Super-affiliates : A company promoting merchant typically through a commission-based arrangement either direct or through an affiliate network. Niche affiliate or bloggers : Often small or individual sites, e.g., Martin Lewis of Moneysavingexpert.com 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

10. How do you analyse e-Marketplace? Unique visitors Individual visitors to a site measured through cookies or IP addresses on an individual computer. Resources: Alexa ( www.alexa.com ): Free service, owned by Amazon, provides traffic ranking of a site. Hitwise ( www.hitwise.com ): Paid service, compare audience size and search and site usage. Comscore ( www.comscore.com ) : Panel service based on at-home and at-work users, favorite tool for media planners. Forrester ( www.forrester.com ) : Offers reports on Internet usage & best practice in different vertical sectors. Gartner ( www.gartner.com ) : Focused on technology adoption. (Ref. pp. 63-64, Tab 2.2.) 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

11. B2B and B2C Characteristics Characteristics B2C ( Consumer ) A lot of customers, low sales amount B2B Few customer/supplier, high E - business adopters Low to medium High to very high Complexity of buying decisions Relatively simple – individual and influencers More complex – buying process involves users, specifiers, buyers, etc. Channel Relatively simple – direct or from retailer More complex, direct or via wholesaler, agent or distributor Purchasing characteristics Low value, high volume high value, low volume. H igh involvement Similar volume/value Some Involvement Repeat orders (rebuys) Product characteristic Often standardized items Standardized items or bespoke for Sale

12. Disintermediation of a consumer distribution channel showing (a) the original situation, (b) disintermediation omitting the wholesaler, and c) disintermediation omitting both wholesaler and retailer. A Disintermediation Process 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#› Disintermediation The removal of intermediaries such as distributors or brokers that formerly linked a company to its customers. Benefits Remove the sales and infrastructure cost. 28% for Case b, 62% for Case c.

13. Original Situation to Disintermediation to Reintermediation 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#› Reintermediation Significant phenomenon resulting from Internet-based communications. The creation of new intermediaries between customers and suppliers providing services such as supplier search and product evaluation. e.g., www.pricecanada.com , www.esurance.com

14. Countermediation Creation of a new intermediary by an established company. Marketers cannot rely on the online presence of existing intermediaries-instead they create their own online intermediaries. Why? Forming partnerships or setting up sponsorship with some intermediaries can give better online visibility compared to competitors. Monitor the prices of other suppliers within this sector. Examples Creating own intermediary, like B&Q www.diy.com Opodo www.opodo.com , set up by nine European airlines. Ford, Daimler ( www.covisint.com ) Partnering with existing intermediary – Mortgage broker Charcol and Freeserve 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

15. Where do We Trade? Electronic Marketplace A virtual marketplace such as the Internet in which no direct contact occurs between buyers and sellers. There could be many alternative virtual locations. Types of location where we can trade: Seller-controlled : home site of organization selling products, e.g., www.dell.com Seller-oriented : intermediaries, controlled by third party, but seller-focused, e.g., www.opodo.com Neutral : independent evaluator intermediaries that enable price and product comparison, e.g., eBay, CNET. Buyer-oriented : Intermediaries, controlled by buyers, e.g., www.covisint.com Buyer-controlled : Web-site procurement posting on company’s own site, buyers initiates the market making, e.g., GE 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

16. Variations in the location and scale of trading on e-commerce sites 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#› Most e-tailers, e.g., Amazon, Dell Many suppliers to a single customer, e.g., www.gxs.com (GE Subsidiary Global eXchange Services) Many suppliers to many customers, e.g., www.vetmarkets.com

17. Commercial Mechanisms & Online Transactions Negotiated deal : Negotiation- bargaining between single seller and buyer, e.g., www.commerceone.net ) Brokered deal : Intermediaries offering auction, e.g., www.screentrade.co.uk Auction : e.g., www.eBay.com Fixed-price sale : Online catalogue with fixed prices, e.g., all e-tailers. Pure markets : e.g., electronic seller dealing, buyers’ and sellers’ bids instantly Barter : Buyers and sellers exchanges goods , e.g., www.bartercard.co.uk , www.intaglio.com 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

18. Types of Online Intermediary Infomediary: A business who capture customer information and develop detailed profiles of individual customers and sell to the third parties, online auction, e-mail list brokers, advertising network e.g., DoubleClick, Google AdWords, Comscore, Hitwise. Metamediaries: Intermediaries that assist with selection and discussion of about different product and services. Bring buyers and sellers together , e.g., http://www.metacritic.com/ , CNET, www.download.com , or price comparison site. Other online intermediaries Directories (Yahoo!, Excite), Search engines (AltaVista, Infoseek) Malls (BarclaySquare, Buckingham Gate), Virtual resellers (Amazon, CDNow) Financial Intermediaries (Digiicash), Virtual Communities, online forums, fan clubs 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

19. Business model Timmers (1999) defines a ‘business model’ as: “An architecture for product, service and information flows, including a description of the various business actors and their roles; and a description of the potential benefits for the various business actors; and a description of the sources of revenue”. Alternatively, it’s a summary of how a company will generate a profit identifies its core product or service value proposition, target customer Position in competitive marketplace or value chain projection for revenue and costs. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

20. Business model: Key Elements Key elements: 8 Value proposition : which products & services will the company offer? Market or audience : which audience will the company serve and target? Revenue models and cost base : How will company generate its income? Competitive environment : who are the direct and indirect competitors and their possession in the marketplace? Value chain and marketing positioning : How is the company and its service positioned compare to its competitors? Representation in the physical & virtual world : relative representation in the offline and online market, e.g., high-street presence, online only, intermediary, mixture? Organizational structure : internal structure to create, promote, deliver services. Management : experience, skills and expertise of a management team. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

21. Alternative Perspectives on Business Models 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#› Marketplace position perspective Book publisher => manufacturer Amazon => retailer Yahoo! => intermediaries Revenue model perspective Book publisher => sell direct Amazon, Yahoo! => commission fee Yahoo!=> advertising Commercial arrangement perspective All companies => fixed price sales Yahoo => offers alternatives

22. Publisher and Intermediary Revenue Model Advertising CPM (cost per thousand/mille), e.g., FT.com Advertising CPC (cost per click), e.g., Google Adsence ( http://adsense.google.com ) Sponsorship of site sections or content types: typically fixed fee for a period, Affiliate Revenue (CPA or CPC), cost per acquisition- > the cost to the advertiser for each outcome such as a lead or sale generated after a click to a third-party site. Transaction Fee , e.g., eBay, PayPal. Subscription access to content or services, e.g., FT.com Per-per-view Access to document Subscription Data Access for e-mail Marketing 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

23. Revenue Generating Techniques What factors to consider? Number and size of ad units Ads Capacity to be sold Fee level negotiated for different ads models: pay per performance. Traffic Visitor engagement (time to stay or “stickiness”) 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

24. Auction Auction: A process of determining the basis of product or service exchange between a buyer and seller according to particular trading rules that help select the best match between the buyer and seller from a number of participants. Offer: a commitment for a trader to sell under certain conditions such as a minimum price. Bid: a commitment made by a trader to buy under certain conditions such as a commitment to purchase at a particular price. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

25. Auction: Roles Price discovery: auction helps to establish a realistic price for a product, e.g., antiques Efficient Allocation mechanism: sale of products which is difficult to distribute through traditional channels. ‘Damage inventory’, aircraft flight, e.g., www.lastminute.com Distribution mechanism: attracting particular audiences. Coordination mechanism: coordinate the sale of a product to a number of interested parties, e.g., broadband spectrum licenses for 3G telecoms. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

26. Internet Auction Basics Different from traditional auctions Last much longer (usually a week) Variable number of bidders who come and go from auction arena Market power and bias in dynamically priced markets Neutral : Number of buyers and sellers is few or equal, e.g., Stock Exchanges Seller bias : Few sellers and many buyers, e.g., eBay Buyer bias : Many sellers and few buyers, e.g., Priceline, such as Sealed-bid RFQ Fair market value, i.e., average price for a product or service Price Allocation Rules Uniform pricing rule : Multiple winners who all pay the same price Discriminatory pricing rule : Winners pay different amount depending on what they bid Public vs. private information Prices bid may be kept secret Bid rigging Open markets Price matching 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

27. Types of Auctions Forward, upward or English auctions 🡪 Single item up for sale to single buyer, highest bidder wins, sellers-initiated, seller sets the rules and timing, increasing bids are placed within a certain time limit, conventional auctions we commonly seen in physical world and on virtual market. Reverse, downward, or Dutch Internet auction 🡪 Common in B2B marketplace, buyer places a RFQ/tender, many suppliers compete, decreasing the price, NOT always lowest price wins due to factors like quality & capability of the bidders. Name Your Own Price Auctions Users specify what they are willing to pay for goods or services and multiple providers bid for their business, e.g., Priceline Group buying auctions (demand aggregators) Group buying of products at dynamically adjusted discount prices based on high volume purchases Two principles Sellers more likely to offer discounts to buyers purchasing in volume Buyers increase their purchases as prices fall Professional service auctions : sealed-bid, dynamic-priced market, e.g., Elance.com 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

28. ‹#› Industry Value Chains Industry value chain refers to value systems SBUs within an industry Walton Group (Virtual Companies) AC/Fridge Compressor (B2B) Kitchen Appliance Difference- Marketing, Manufacturing Common- Accounting, HR, Marketing Awareness of businesses value chain activities Allows identification of new opportunities Useful way to think about general business strategy

29. ‹#› ‹#› Network Economic Structures Strategic alliances /partnership Coordinate strategies, resources, skill sets Well suited to information-intensive technology industries Strategic partners Come together for specific project or activity I ntercompany teams Undertake variety of ongoing activities A Major Advantage A Virtual Organization

30. How to Assess the dot.com Concept : potentiality to generate revenue, value proposition, realistic market size. Innovation: whether company merely imitates the existing real-world or online model. Execution : promotion, performance, availability, security, fulfilment (for details, plz see page 90). Traffic : Page impression (no. of visitors, no. of pages visited, no. of transactions made). Financing : company’s ability to attract venture capital or other funding to help execute the idea. Important for promoting new business ideas. Profile : company’s ability to generate favorable publicity and to create awareness within its target market. 1/26/2016 Prepared & Presentation by Md. Mahbubul Alam, PhD ‹#›

31. Question Please ? 1/26/2016 Prepared & Presented by Md. Mahbubul Alam, PhD ‹#› Acknowledgement: “E-Business and E-Commerce Management: Strategy, Implementation and Practice” by Dave Chaffey