Chapter 2 E-Marketplaces Structures Mechanisms Economics and Impacts

Chapter 2 E-Marketplaces: Structures, Mechanisms, Economics, and Impacts

Learning Objectives 1. Define e-marketplaces and list their components. 2. List the major types of e-marketplaces and describe their features. 3. Describe the various types of EC intermediaries and their roles. 4. Describe electronic catalogs, shopping carts, and search engines. 5. Describe the major types of auctions and list their characteristics. 2 -2

Learning Objectives 6. Discuss the benefits, limitations, and impacts of auctions. 7. Describe bartering and negotiating online. 8. Define m-commerce and explain its role as a market mechanism. 9. Discuss competition in the digital economy. 10. Describe the impact of e-marketplaces on organizations and industries. 2 -3

E-Marketplaces l Markets (electronic or otherwise) have three main functions: 1. Matching buyers and sellers; 2. Facilitating the exchange of information, goods, services, and payments associated with market transactions; and 3. Providing an institutional infrastructure, such as a legal and regulatory framework, which enables the efficient functioning of the market. Electronic Commerce Prentice Hall © 2006 4

E-Marketplaces l marketspace A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services) but do so electronically 2 -5

E-Marketplaces l e-marketplace An online market, usually B 2 B, in which buyers and sellers exchange goods or services; the three types of 2 -6

Some benefits of e-marketplace: • Greater information richness of transactional and relational environment • the ability of buyers, sellers, and the virtual market to be on different locations • Lower information search costs for buyers 2 -7

E-Marketplaces E-Marketplace Components and Participants l Customers l Sellers l Products and services l digital products Goods that can be transformed to digital format and delivered over the Internet l l Infrastructure Front end Back end Intermediaries Third parties that operates between sellers and buyers l Other business partners l Support services 2 -8

E-Marketplaces l front end The portion of an e-seller’s business processes through which customers interact, including the seller’s portal, electronic catalogs, a shopping cart, a search engine, and a payment gateway l back end The activities that support online order fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery 2 -9

Types of E-Marketplaces: From Storefronts to Portals l Electronic Storefronts l storefront A single company’s Web site where products or services are sold l e-mall (online mall) An online shopping center where many online stores are located 2 -10

Types of E-Marketplaces: From Storefronts to Portals l Types of E-Marketplaces 1) Private e-marketplaces Online markets owned by a single company; may be either sell-side and/or buy-side emarketplaces. sell-side e-marketplace A private e-marketplace in which a company sells either standard or customized products to qualified companies buy-side e-marketplace A private e-marketplace in which a company makes purchases from invited suppliers 2 -11

Types of E-Marketplaces: From Storefronts to Portals 2) Public e-marketplaces B 2 B marketplaces, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges Electronic Commerce Prentice Hall © 2006 12

Types of E-Marketplaces: From Storefronts to Portals 3) information portal A single point of access through a Web browser to business information inside and/or outside an organization l Types of Portals l Commercial (public) l Corporate l Publishing l Personal l Mobile l Voice l Knowledge 2 -13

Transactions, Intermediation, and Process in E-Commerce l The Roles and Value of Intermediaries in E-marketplaces l Intermediaries link sellers and buyers and play an important role in commerce by providing value-added activities and services (usually for a fee) 2 -14

Transactions, Intermediation, and Process in E-Commerce l On-line Intermediaries l Broker a company that facilitates transactions between buyers and sellers l Infomediaries Electronic intermediaries that gather and organize large amounts of data and provide and/or control information flow in cyberspace, often aggregating information and selling it to others 2 -15

Transactions, Intermediation, and Process in E-Commerce l Intermediaries can address the following five important limitations of direct interaction: 1. 2. 3. 4. 5. Search costs Lack of privacy Incomplete information Contract risk Pricing inefficiencies 2 -16

Transactions, Intermediation, and Process in E-Commerce l e-distributor An e-commerce intermediary that connects manufacturers with business buyers (customers) by aggregating the catalogs of many manufacturers in one place—the intermediary’s Web site 2 -17

Transactions, Intermediation, and Process in E-Commerce l disintermediation Elimination of intermediaries between sellers and buyers l reintermediation Establishment of new intermediary roles for traditional intermediaries that have been disintermediated, or for newcomers 2 -18

Transactions, Intermediation, and Process in E-Commerce 2 -19

Electronic Catalogs and Other Market Mechanisms l electronic catalogs The presentation of product information in an electronic form; the backbone of most eselling sites l Classification of electronic catalogs 1. The dynamics of the information presentation 2. The degree of customization 3. Integration with business processes 2 -20

Electronic Catalogs and Other Market Mechanisms 2 -21

Electronic Catalogs and Other Market Mechanisms l search engine A computer program that can access databases of Internet resources, search for specific information or keywords, and report the results l software (intelligent) agent Software that can perform routine tasks that require intelligence 2 -22

Electronic Catalogs and Other Market Mechanisms l electronic shopping cart An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop 2 -23

Auctions as EC Market Mechanisms l auction A competitive process in which a seller solicits consecutive bids from buyers (forward auctions) or a buyer solicits bids from sellers (backward auctions). Prices are determined dynamically by the bids 2 -24

Auctions as EC Market Mechanisms Traditional Auctions versus E-Auctions - Traditional Auctions l Limitations of Traditional Off-line Auctions l The rapid process may give potential buyers little time to make a decision l Bidders do not have much time to examine the goods l Bidders must usually be physically present at auctions l Difficult for sellers to move goods to an auction site l Commissions are fairly high - electronic auction (e-auction) Auctions conducted online 2 -25

Auctions as EC Market Mechanisms l Types of Auctions l forward auction An auction in which a seller entertains bids from buyers. Bidders increase price sequentially l l reverse auction (bidding or tendering system) Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid wins; primarily a B 2 B or G 2 B mechanism “name-your-own-price” model Auction model in which a would-be buyer specifies the price (and other terms) he or she is willing to pay to any willing and able seller. It is a C 2 B model that was pioneered by Priceline. com 2 -26

Auctions as EC Market Mechanisms l Benefits of E-Auctions l Benefits to Sellers l Benefits to Buyers l Benefits to E-Auctioneers l Limitations of E-Auctions l Minimal security l Possibility of fraud l Limited participation 2 -27

Auctions as EC Market Mechanisms l Impacts of Auctions l Auctions as a coordination mechanism l Auctions as a social mechanism to determine a price l Auctions as a highly visible distribution mechanism l Auctions as an EC component 2 -28

Bartering and Negotiating Online l Online Bartering l bartering The exchange of goods or services l e-bartering (electronic bartering) Bartering conducted online, usually in a bartering exchange l bartering exchange A marketplace in which an intermediary arranges barter transactions 2 -29

Bartering and Negotiating Online l Online Negotiating l Negotiated pricing commonly is used for expensive or specialized products l Negotiated prices also are popular when large quantities are purchased l Much like auctions, negotiated prices result from interactions and bargaining among sellers and buyers 2 -30

E-Commerce in the Wireless Environment l mobile computing Use of portable devices, including smart cell phones, usually in a wireless environment. It permits real-time access to information, applications, and tools that, until recently, were accessible only from a desktop computer 2 -31

E-Commerce in the Wireless Environment l mobile commerce (m-commerce) E-commerce conducted via wireless devices l m-business The broadest definition of m-commerce, in which e-business is conducted in a wireless environment 2 -32

E-Commerce in the Wireless Environment l The Mobility Revolution l Organizations are embracing mobilized computing technologies for several reasons: l. Improved productivity of workers in the field l. Wireless telecom support for mobility is growing quickly l. More applications can run both online and offline l. The prices of notebook computers, wireless handhelds, and smart phones continue to fall as their capabilities increase 2 -33

E-Commerce in the Wireless Environment l The Promise of M-Commerce l location-based commerce (LBC) An m-commerce application targeted to a customer whose location, preferences, and needs are known in real time l M-Commerce Adoption l Although there are currently many hurdles to the widespread adoption of m-commerce, many companies are already shifting their strategy to the mobile world 2 -34

Competition in the Digital Economy and Its Impact on Industries l Internet ecosystem The business model of the Internet economy 2 -35

Competition in the Digital Economy and Its Impact on Industries Competitive Factors—Online Transactions Allow: l Lower search costs for buyers l Speedy comparisons l Lower prices l Customer service l Barriers to entry are reduced l Virtual partnerships multiply l Market niches abound l Differentiation and personalization 2 -36

Competition in the Digital Economy and Its Impact on Industries l differentiation Providing a product or service that is unique l personalization The ability to tailor a product, service, or Web content to specific user preferences 2 -37

Competition in the Digital Economy and Its Impact on Industries l Porter’s Competitive Analysis in an Industry l competitive forces model Model devised by Porter that says that five major forces of competition determine industry structure and how economic value is divided among the industry players in an industry; analysis of these forces helps companies develop their competitive strategy 2 -38

Impacts of EC on Business Processes and Organizations 2 -39

Impacts of EC on Business Processes and Organizations l Impacts on manufacturing l Build-to-Order Manufacturing l build-to-order (pull system) A manufacturing process that starts with an order (usually customized). Once the order is paid for, the vendor starts to fulfill it l Real-Time Demand-Driven Manufacturing l Virtual Manufacturing l Assembly Lines l Impacts on Finance and Accounting l Impact on Human Resources Management and Training 2 -40