E-Commerce and Its Business Model
E-Commerce and Its Business Model
E-Commerce and Its Business Model
AND E-BUSINESS
Ebenezer Nortey Yebuah
(ETONY)
outline
Introduction to E-Commerce
• Definition of E-Commerce and E-business
• Major types of E-Commerce (briefly)
• History of E-Commerce
• Benefits of E-Commerce to
Organizations
Consumers
society
• Limitations of E-Commerce
The digital economy
• The new Business environment
• Business pressures
• Organizational responses
E-Marketing
• E-marketing issues
• Economics of E-marketing
• Effects of marketing on organizations
E-Commerce technology/infrastructure
Communications network
Security and legal issues
• Need for E-Commerce security
• Basic security issues
• Types and treats and attacks
• Security risk management
• Securing E-Commerce communication
Business models for E-Commerce
Implementation of E-business systems
Definition of E-Commerce and
business
E-Commerce: the process of buying, selling, or exchanging products,
services, and information through computer networks.
• Commercial: the ability to buy and sell products, services, and information
electronically
• Services: tool for improving the quality of customer services, and increasing
the speed of service delivery whiles cutting cost
• learning: enables online training and educations
• Global reach: can easily and quickly locate the best suppliers, more customers
and more suitable business partners. i.e. buy cheaper and sell more.
• Cost reduction: EC decreases the cost of creating, processing, distribution,
storing and retrieving paper-based information.
• Supply chain improvement: supply chain inefficiencies can be minimized e.g..
Inventory and deliver delays
• Extended hours:24/7/365
• Customization: pull-type production (build-to-order)
• New business models: tendering (reverse auction), name-your-own-price model,
affiliate marketing, viral marketing etc.
• Vendors’ specialization: EC enables high degree of specialization
• Lower communication cost: EC lowers telecommunications cost.
• Efficient procurement: EC can reduce administrative cost, purchasing prices, and
reducing cycle time.
• Improved customer relations: EC enable close customer relations
• Up-to-date company material: EC enables company information to be updated
by the minute
• No city business permits and fees
• etc
Benefits of E-Commerce
Consumer benefits
• A vast array of digital products: databases, news & information, books, software
ETC, that delivered over a digital infrastructure any time, anywhere in the world
Electronic markets
Functions of markets:
• matching buyers and sellers
• Facilitating exchanges of goods/services and
payments associated with market transactions
• Provide institutional infrastructure
Electronic marketplaces
Together with IT, EC has greatly
increased market efficiencies
• by expediting or improving the
functions of market
• And lowering transaction and
distribution cost
• Leading to a well-organized “friction-
free” markets
Market-space components
Customers: the hundreds of millions of people surfing the web are
potential buyers of goods/services offered on the net. They looking for
• good deals
• Customized items
• Collectors items
• Entertainment etc
Organizations are the major consumers of EC activities. (85%)
Products: both physical and digital products (what are the advantages
of a digital product?)
One seller, many buyers: (forward auction) a seller entertains bids from buyers.
• English and Yankee auctions: prices increase as auctions progress
• Dutch and free fall: prices go down as auctions progress
Assignment (what is English, Yankee, Dutch and free fall auctions) to be submitted before mid-day 29th
Feb.. 2008
Many sellers, many buyers: (double auction) multiple buyers and their bids are
much with their multiple sellers and their asking prices, considering the quantities.
E-Auctions
Benefit to sellers Benefits to buyers Benefits to e-auctioneers
E-Commerce applications
Direct marketing, online Banking, E-government, E-purchasing,
job search, M-commerce, auctions, consumer services, etc
PILLARS
Business
People Public policy
Marketing & Adv.
Support services
Buyers, sellers, Taxes, legal, Logistics, pay’t,
Partnerships
Market’g research, Joint ventures,
Intermediaries, privacy issues, Content, &
promotions, Exchanges,
IS people, and Regulations and security
& web content E-marketplace
management Tech. standards systems dev.
& consortia
INFRASTRUCTURAL SUPPORT
Common business Massaging & Network
Multimedia cont’t Interfacing
Serv. Infrast’ture info dist. infrastructure
& network Infrastructure
(security, (telecom,
Infrast’ture Publishing (with database,
smart cards/ cable tv
Authentication (EDI, e-mail, Infrastructure
Wireless,
Business partners
Hypertext, (html, java, xml, Applications)
Electronic payment Internet)
Vrml etc.)
The need for E-Commerce security
There is need for E-Commerce security due to the
increasing cyber attacks and cyber crimes.
A recent survey of security practitioners yielded
the following results,
• Organizations continue to have cyber attacks from both
in and outside of the organization
• The cyber attacks varied, e.g. computer virus, Net
abuse ( unauthorized users of the internet) by
employees, denial of services
• The financial losses from cyber attacks can be
substantial
• Takes more then one type of technology to defend
against cyber attacks.
Basic security issues
EC security involves more than just
preventing and responding to cyber
attacks and intrusion.
e.g. a user connects to a Web server at a
market site to obtain some product
literature (Loshin 1998).
• To get the literature, he is asked to fill out a
Web form providing some demographic and
other personal information.
What are the security concerns that
can/will arise in a situation like that?
Basic security issues
From the user’s perspective,
• How can he know, that, the Web server
is own and operated by legitimate
company?
• How does he know that the Web page
and form do not contain some malicious
or dangerous codes or content?
• How does he know that the Web server
will not distribute the information to
some third party?
Basic security issues
From the company’s perspective,
• How does the company know that the
user will not attempt to break into the
Web server or alter the pages and
content at the site?
• How does the company know that the
user will not try to disrupt the server so
that it isn’t available to others?
Basic security issues
from both parties perspective,
• How does the parties know that the
network connection is free from
eavesdropping by a third party
“listening” on the line?
• How do they both know that the
information sent back and forth between
the server has not been altered
Basic security issues
With transactions that involves E-payments, additional types of security must be
confronted.
• Authentication: the process by which one entity verifies that another entity is
who they claim to be.
• Authorization: the process that ensures that a person has the right to access
certain information
How to deal with it: multi-prong approach should be used to combat it.
( Damle 2002)
Some viruses simply spread and infect, others do substantial damage ( e.g.
deleting files or corrupting the hard ware)
Worms: a program that can run independently, will consume the resources
of its host from within in order to maintain itself, and can propagate a
complete working version of itself onto another machine.
Major difference between a worm and a viruses: a worm can propagate between
systems (mostly through a network) whiles viruses propagate locally.
Macro viruses or macro worms: executes when the application object that
contains the macro is open or a particular procedure is executed.
Trojan horse: a program that appears to have a useful function but that
contains a hidden function that presents a security risk.
There are various forms of Trojan horse, but the one of interest is the one
that makes it possible for someone else to gain access and control a
persons computer other the net.
This types of Trojans have two parts: server and clients. The serve is the
program that runs on the computer under attack, and the client is used by
the person perpetrating the attack.
Managing Security
Some basic mistakes in managing security risk, includes
• Affiliate fee: companies get paid for referring customers to other sites
suppliers
Novelty: developing innovative ways for structuring
Network externality
Find the best price: a buyer submits its needs and an intermediate
matches it against a database of sellers, locates the lowest price
and submit it to the buyer to accept or reject.
The underling similarity is the ability to transfer or make a payment from one person
or party to another person or party over a network without face-to-face interaction.
Electronic payments (e-payment)
Whatever the payment method is, five parties may be involved,
• Customer/payer/buyer: the party making the e-payment in exchange
for goods or services
• Merchant/payee/seller: the party receiving the e-payment in exchange
for goods or services
• Issuer: the banks or the non-banking institutions that issued the e-
payment instrument used to make the purchase
• Regulator: usually a government agency whose regulations control the
e-payment process
• Automated Clearing House (ACH): an electronic network that transfers
money between bank accounts.
Because buyers and seller are not at the same place to exchange their
goods and services, issues of trust arise, and PAIN has been devised to
address such issues.
Electronic payments (e-payment)
Characteristic of successful e-payment methods
• How do u get buyers to adopt a method when there are few sellers using it?
• And how do you get sellers to adopt a method when very few buyers are using
it? (chicken and egg problem)