e-commerce

business. technology. society.

eighth edition

Kenneth C. Laudon
Carol Guercio Traver
Copyright 2012 Pearson Education

Chapter 1

Introduction to E-commerce

About the course

Main book: E-commerce: business, technology and society.

What to expect from students:

Have a good knowledge about e-commerce including e-commerce strategies,

infrastructure, concepts etc.
Implement an e-commerce shopping cart.

Assessment:

Final exam 50.

Blog activity 10.
Project 20.
Case study: 20.

Copyright 2012 Pearson Education

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E-commerce Trends 20112012

Social networking continues to grow
Expansion of social e-commerce platform
Mobile platform begins to rival PC

platform
Localization of e-commerce (Groupon)
Explosive growth in online video viewing
Continued privacy and security concerns
Copyright 2012 Pearson Education

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What Is E-commerce?
Use of Internet and Web to transact

business

More formally:
Digitally enabled commercial transactions

between and among organizations and

individuals
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E-commerce vs. E-business

E-business:
Digital enabling of transactions and processes

within a firm, involving information systems

under firms control
Does not include commercial transactions
involving an exchange of value across
organizational boundaries

Copyright 2012 Pearson Education

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Copyright 2012 Pearson Education

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Why Study E-commerce?

E-commerce technology is different, more powerful

than previous technologies (old technologies change very slowly).

E-commerce brings fundamental changes to

commerce

Traditional commerce:

Consumer as passive targets

Sales-force driven
Fixed prices
Information asymmetry (hidden information e.g. price)

Copyright 2012 Pearson Education

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Unique Features of E-commerce

Technology
Ubiquity (available everywhere)
Global reach
Universal standards
Information richness
Interactivity
Information density

1.
2.
3.
4.
5.
6.
1.
2.

7.
8.

(reduces inf. Cost and increase quality)

Cost transparency more information about customers

Personalization/customization
Social technology

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Web 2.0
User-centered applications and social

media technologies

User-generated content and communication

Highly interactive, social communities
Large audiences; yet mostly unproven business

models
e.g., Twitter, YouTube, Facebook, Second Life,

Wikipedia, Digg
Copyright 2012 Pearson Education

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Types of E-commerce
Classified by market relationship

Business-to-Consumer (B2C)

Business-to-Business (B2B)

Consumer-to-Consumer (C2C)

Classified by technology used

Peer-to-Peer (P2P)

Mobile commerce (M-commerce)

Copyright 2012 Pearson Education

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Technology and E-commerce

in Perspective
The Internet and Web: Just two of a long list

of technologies that have greatly changed

commerce. Others:
Automobiles
Radio

E-commerce growth will eventually cap as it

confronts its own fundamental limitations.

Copyright 2012 Pearson Education

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The Internet
Worldwide network of computer networks

built on common standards

Created in late 1960s

Services include the Web, e-mail, file

transfers, etc.

Can measure growth by looking at number of

Internet hosts with domain names

Copyright 2012 Pearson Education

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The Growth of the

Internet, Measured
by Number of
Internet Hosts with
Domain Names
Figure 1.2, Page 23

SOURCE: Internet Systems Consortium,

Inc., 2011.
Copyright 2012 Pearson Education

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The Web
Most popular Internet service
Developed in early 1990s
Provides access to Web pages
HTML documents that may include text,

graphics, animations, music, videos

Web content has grown exponentially

Google reports 1 trillion unique URLs; 120

billion pages indexed

Copyright 2012 Pearson Education

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Origins and Growth of E-commerce

Precursors:

Baxter Healthcare (order supplies by telephone then by pc)

Electronic Data Interchange (EDI) (commercial documents)

French Minitel (1980s videotex system) (telephone with screen to order

services)

None had functionality of Internet. (just telephone)

1995: Beginning of e-commerce

First sales of banner advertisements

In 2000 dot-com peak (thousands of companies were formed) 125 billion, then collapsed.

Just 10% of these companies survived, and just few have profits.

2001-2006 shift from technology driven to business driven approach,

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The Growth of B2C E-commerce

Figure 1.3, Page 25

SOURCES: Based on data from eMarketer, Inc., 2011a; authors estimates.

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The Growth of B2B E-commerce

Figure 1.4, Page 28

SOURCES: Based on data from U.S. Census Bureau, 2011b; authors estimates.
Copyright 2012 Pearson Education

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Potential Limitations on the Growth

of B2C E-commerce

Expensive technology

Sophisticated skill set

Persistent cultural attraction of physical markets

and traditional shopping experiences

Persistent global inequality limiting access to

telephones and computers

Saturation and ceiling effects

Copyright 2012 Pearson Education

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E-commerce: A Brief History

19952000: Innovation

Key concepts developed

Dot-coms; heavy venture capital investment

20012006: Consolidation

Emphasis on business-driven approach

2006Present: Reinvention

Extension of technologies
New models based on user-generated content, social
networks, services

Copyright 2012 Pearson Education

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Early Visions of E-commerce

Computer scientists:

Inexpensive, universal communications and computing

environment accessible by all

Economists:

Nearly perfect competitive market;

friction-free commerce (costs are low, prices adjusted to reflect
actual demand, intermediaries decline,)
Lowered search costs, disintermediation, price transparency,
elimination of unfair competitive advantage

Entrepreneurs:

Extraordinary opportunity to earn far above normal returns on

investmentfirst mover advantage

Copyright 2012 Pearson Education

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Assessing E-commerce
Many early visions not fulfilled
Friction-free commerce
Consumers less price sensitive
Unfair competitive continues

Perfect competition
Information asymmetries continue

Intermediaries have not disappeared

First mover advantage
Fast-followers often overtake first movers
Copyright 2012 Pearson Education

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Predictions for the Future

Technology will propagate through all commercial activity

Prices will rise to cover the real cost of doing business

Cast of players will change

Traditional Fortune 500 companies will play dominant role

New startup ventures will emerge with new products, services

Number of successful pure online stores will remain smaller

than integrated offline/online stores

Regulatory activity worldwide will grow

Cost of energy will have an influence

Copyright 2012 Pearson Education

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Understanding E-commerce:
Organizing Themes
Technology:

We need to understand the basic technologies including the

Internet, web and infrastructure, Clint/server computing.

Business:

New technologies present businesses with new ways of organizing

production and transacting business. Understand business models
and concepts).

Society:

Intellectual property, individual privacy, public welfare

policy

Copyright 2012 Pearson Education

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Copyright 2012 Pearson Education

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