The E Commerce Environment
General introduction 3
E-Commerce and Value Chain 5
E Commerce Business Models 6
Importance of e comm. Environment 7
E-commerce is buying and selling goods and services over the Internet. Ecommerce is
part of e -business. E -business is a structure that includes not only those transactions that
center on buying and selling goods and services to generate revenue, but also those
transa ctions that support revenue generation. These activities include generating demand
for goods and services, offering sales support and customer service, or facilitating
communications between business partners.
Business Uses Of Internet:
The followings ar e the business uses of the Internet. These services and capabilities are a
core part of a successful e -commerce program. They are either parts of a value chain or
are inc luded as supporting activities.
Some of the important business uses of the internet ar e:
• Buying and selling products and services
• Providing customer service
• Collaborating with others
• Gathering information (on competitors, and so forth)
• Providing seller support
• Publishing and distributing information
• Providing softw are update and patches
• Communicating within organizations
Examples of E Commerce
? Airline and travel tickets ,
? banking services ,
? books ,
? computer hardware,
? and other electronics,
? gifts are some popular products and servic es that can be purchased online.
? An individual purchases a book on the Internet.
? A government employee reserves a hotel room over the Internet.
? A business calls a toll free number and orders a computer using the seller’s interactive
? A bus iness buys office supplies on -line or through an electronic auction.
? A retailer orders merchandise using an EDI network or a supplier’s extranet.
? A manufacturing plant orders electronic components from another plant within the
company using the company’s i ntranet.
? An individual withdraws funds from an automatic teller machine (ATM).
Several successful e -businesses have established their business models around selling these
products and services. Ecommerce has the potential to generate revenue and reduce co sts for
businesses and entities. Marketing, retailers, banks, insurance, government, training, online
publishing, travel industries are some of the main recipients of e -commerce. For instance, banks
use the Web for diverse business practices and customer s ervice. Appendix I lists companies
using e -commerce, stressing the products and services that are most suitable for web
E -Commerce and Value Chain
Typical business organizations (or parts within a business organization) design , produce ,
market , deliver , and support its product(s)/service(s). Each of these activities adds cost
and value to the product/service that is eventually distributed to the customer. The value –
chain consists of a series of activities designed to satisfy a busine ss need by adding value
(or cost) in each phase of the process. In addition to these primary activities that result in
a final product/service, supporting activities in this process also should be included:
• Managing company infrastructure
• Managing human resources
• Obtaining various inputs for each primary activity
• Developing technology to keep the business competitive
For instance, in a furniture manufacturing company, the company buys wood (raw
materials) from a logging company and then conv erts the wood into chair (finished
product); chairs are shipped to retailers, distributors, or customers. The company markets
and services these chairs products. Those are the primary activities (value -chain) that
adds value and result in a final product/s ervice for the company. Value -chain analysis
may highlight the opportunity for the company to manufacture products directly . This
means, for furniture manufacturer, it may enter in the logging business directly or
through partnership with others. The valu e chain may continue after delivering chairs to
the furniture store. The store, by offering other products/services and mixing and
matching this product with other products, may add additional value to the chair.
E Commerce Business Models
The ultim ate goal of an e -business is to generate revenue and make a profit, similar to
traditional businesses. It is factual that the Internet has improved productivity for almost
all the organizations that are using it. Nevertheless, the bottom line is that produ ctivity
must be converted to profitability. To achieve profitability as the final goal, different e –
businesses or e -commerce sites position themselves in different parts of the value -chain.
To generate revenue, an e -business either sells products/services or shortens the link
between the suppliers and consumers
• Merchant model:
This model b asically transfers the old retail model to the e -commerce world by using the
Internet. There are different types of merchant models. The most common type of
merchant model is similar to a traditional business model that sells goods and services
over the Web. Amazon.com is a good example of this type. An e -business similar to
Amazon.com utilizes the services and technologies off ered by the Web to sell products
and services directly to the consumers.
• Brokerage model:
The e -business brings the sellers and buyers together on the Web and collects a
commission on the transactions by using this model. The best example of this type is an
online auction site s uch as eBay .
• Advertising model:
This model is an extension of traditional advertising media, such as television and radio.
Search engines and directo ries such as Google and Yahoo provide contents (similar to
radio and TV) and allow the users to access this content for free. By creating significant
traffic, these e -businesses are able to charge advertisers for putting banner ads or leasing
spots on thei r sites.
• Mixed model:
This model generates revenue both from advertising and subscriptions. Internet service
providers (ISPs) such as America On -line (AOL), and SuperOnline generate revenue
from advertising and their customers’ subscription fees for Int ernet access.
• Info -mediary model:
E-businesses that use this model collect information on consumers and businesses and
then sell this information to interested parties for marketing purposes.
Importance of E C ommerce E nvironment
Ecommerce proved its importance ba sed on the fact where time is essence. In the
commercial markets, time plays an important role to both the business and consumers.
From the business perspective, with less time spent during each transaction, more
transaction can be achieved on the same day . As for the consumer, they will save up more
time during their transaction. Because of this, Ecommerce steps in and replaced the
traditional commerce method where a single transaction can cost both parties a lot of
valuable time. With just a few clicks in minutes, a transaction or an order can be placed
and completed via the internet with ease. For instance, a banking transaction can be
completed through the Internet within a few minutes compared to the traditional banking
method which may take up to hours . This fact obviously proves that Ecommerce is
beneficial to both business and consumer wise as payment and documentations can be
completed with greater efficiency .
From the business viewpoint, Ecommerce is much more cost effective compared to
traditional commerce method. This is due to the fact where through Ecommerce, the cost
for the middleperson to sell their products can be saved and diverted to another aspect of
their business. One example is the giant computer enterprise, Dell, which practice such a
method by running most of their business through internet without involving any third
parties. Aside from that, marketing for Ecommerce can achieve a better customer to cost
ratio as putting an advertisement on the internet is comparably much cheaper than putting
up a roadside banner or filming a television commercial. For Ecommerce, the total
overheads needed to run the business is significantly much less compared to the
traditional commerce method. The reason due to that is where most of the cost can be
reduced in Ecommerce . For example, in running an Ecommerce business, only a head
office is needed rather than a head office with a few branches to run the business
To both the consumers and business, connectivity plays an important part as it is the key
factor determining the whole business. From the business point of view, Ecommerce
pro vides better connectivity for its potential customer as their respective website can be
accessed virtually from anywhere through Internet. This way, more potential customers
can get in touch with the company’s business and thus, eliminating the limits of
geographical location. From the customer standpoint, Ecommerce is much more
convenient as they can browse through a whole directories of catalogues without any
hassle, compare prices between products, buying from another country and on top of that,
they can do it while at home or at work, without any necessity to move a single inch from
their chair. Besides that, for both consumers and business, Ecommerce proves to be more
convenient as online trading has less red tape compared to traditional commerce method .
If without any major obstacles, Ecommerc e will certainly continue to
mature in the global market and eventually, it will become an essential
business plan for a company in order to survive and stay competitive
in the ever changing market .