 Business or Consumer models of e-commerce transactions: It is

now commonplace to describe e-commerce transactions between an

organization and its stakeholders according to whether they are
primarily with consumers (business-to-consumer – B2C) or other
business (business-to-business – B2B).

Fig: Summary and examples of transaction alternatives between businesses,

consumer and governmental organizations
 Often companies like Dell Computers or HP will have products that
appeal to both consumers and businesses, so will have different parts
of their site to appeal to these audiences.

 The previous figure also presents two additional types of transaction,

those where consumers transact directly with other consumers
(C2C) and where they initiate trading with companies (C2B).

 These monikers are less widely used, but they do highlight

significant differences between Internet-based commerce and earlier
forms of commerce.

 Consumer-to-consumer interactions (also known as peer-to-peer or

person-to-person, P2P) were relatively rare, but are now very
common in the form of social networks.

 Hoffman and Novak (1986) suggested that C2C interactions are a key
characteristic of the Internet that is important for companies to take
into account, but it is only in recent years with the growth of
broadband and mobile access to the web that these have become so
popular.
 C2C or P2P transactions are also the main basis for some online
business models for e-businesses such as Betfair, eBay, OLX etc.,
which run on a business basis, and some blogs which are not run by
companies but by individuals.

 Finally, the diagram also includes government and public services

organizations which deliver online or e-government services.

 Now it is also been suggested by the management thinkers that

employees should be considered as a separate type of consumer
through the use of intranets which are referred to as Employee-to-
employee or E2E.

 E-government: E-government refers to the application of e-

commerce technologies to government and public services.

 In the same way that e-business can be understood as transactions

with customers (citizens), suppliers and internal communications, e-
government covers a similar range of applications.
• Citizens: Facilities for dissemination of information and use of online
services at local and national levels. For example, at a local level we
can find out by which date we have to pay our electricity bill and at the
national level it is possible to fill in tax returns.

• Suppliers: The government departments have a vast network of

suppliers which can be better managed using electronic supply chain
management and e-procurement.

• Internet Communications: This includes information collection

and dissemination and e-mail and workflow systems for improving
efficiency within government departments.

 E-government is now viewed as one of the most important

implementations within government in many countries.
 E-business opportunities: E-business has introduced new
opportunities for small and large organizations to compete in the
global marketplace.

 Many commentators have noted that one of the biggest changes

introduced by electronic communications is, how approaches to
transmitting and transforming information can be used for
competitive advantage.

 Impact of Disruptive Internet technologies: Evans and Wurster of

Harvard argue in their classic 1997 paper ‘Strategy and the new
economics of information’ that there are three characteristics of
information which, when combined with disruptive internet
technologies, can give a major impact on a marketplace.

• These are:

1. Reach: Conventionally, ‘reach’ refers to the potential number of

customers a business can interact with. The internet enables reach to
be increased nationally and internationally at low cost through
making content available via search engines.
o ‘Reach’ also refers to the number of different categories and products
a consumer interface (e.g. stores, catalogue or website) can cover.

2. Richness: This is a characteristic of the information itself. The

internet enables more detailed information about products, prices
and availability.

o It also enables more interactivity and customization to engage

customers and to provide more up-to-date information.

o But, Evans and Wurster also noted that richness is limited by

bandwidth (the volume of information that can be transmitted using a
communications link in a given time), the accuracy or reliability of
information and its security.

3. Affiliation: This refers to the effectiveness of links with partners. In

an online context, an organization which has the most and richest
links with other compatible organizations will be able to gain a larger
reach and influence.
o For example, consider how e-businesses such as eBay, Google and
Yahoo! have successfully formed partnerships or acquired other
companies to provide new diverse information services such as social
networking, mapping, voice communications and online
photography to name a few.

 The internet also provides significant opportunities for many

businesses to build closer relationships with their existing customers
and suppliers online to help achieve customer retention.

 Encouraging use of online, e-business services by customers and

suppliers can significantly reduce costs while providing a new,
convenient channel for purchase and customer service.

 By providing high-quality online services, organizations can build

lasting relationships with their stakeholders, as sometime it is said
that ‘online, your customers are only a mouse click away from your
competitors’.
 This means that a customer or supplier continues to use a service
since they find the service valuable, they have invested time in
learning the service or integrating it with their systems and there are
some costs in switching.

 Definitely the ideal is that the service meets the needs of its users so
well and delivers value in such a way that they at-least have the
desired satisfaction and do not consider switching.

 Business adoption of digital technologies for e-commerce and e-

business: As manager, one need to assess the impact of e-commerce
and e-business on the market-place and organizations.

 Drivers of business Internet adoption: Business adoption of e-

commerce and e-business is driven by benefits to different parts of the
organization.

 First and foremost, businesses are concerned about how the benefits
of e-business will impact on profitability or generating value to an
organization.
 The two main ways in which this can be achieved are:

1. Potential for increased revenue arising from increased reach to a

larger customer base and encouraging loyalty and repeat purchases
among existing customers.

2. Cost reduction achieved through delivering services electronically.

Reductions include staff costs, transportation costs and costs of
materials such as paper.

 At a relatively early point in e-business adoption, a government report

(DTI, 2000) identified two main categories of drivers which remain
relevant today:

i. Cost / efficiency drivers:

a. Increased speed with which supplies can be obtained.
b. Increased speed with which goods can be dispatched.
c. Reduced sales and purchasing costs.
d. Reduced operating costs.
ii. Competitiveness drivers:
a. Customer demand.
b. Improving the range and quality of services offered.
c. Avoiding losing market share to businesses already using e-commerce.

 in an interview with Australian businesses, Perrott (2005) identifies

four key areas that drive performance are cost-benefit, competitive
pressures, market advantage and value adding (i.e. improving
customer satisfaction while building strong relationships).

 When reviewing potential benefits, it is useful to identify both

tangible benefits (for which monetary savings or revenues can be
identified) and intangible benefits (for which it is more difficult to
calculate cost savings).

 The types of potential benefits can be summarized as:

Table: Tangible and intangible benefits from e-commerce and e-business
 E-business risks and barriers to business adoption:
Opportunities have to be balanced against the risks of introducing e-
business services which include strategic and practical risks.

 One of the main strategic risks is making the wrong decision

about e-business investments. In every business sector, some
companies have taken advantage of e-business and gained a
competitive advantage, but others have invested without achieving
the expected returns, either because the execution of the plan was
flawed, or simply because the approaches were inappropriate.

 The impact of the Internet and technology varies by industry. Andy

Grove, the then Chairman of Intel and one of the early adopters of
e-business, noted that every organization needs to ask whether, for
them: The internet is a typhoon, a ten time force, or is it a bit of wind?
Or is it a force that fundamentally alters our business? (Grove, 1996)

 This statement still seems to encapsulate how managers must respond

to different digital technologies; the impact will vary through time
from minor for some companies to significant for others, and an
appropriate response is required.
 There are also many practical risks to manage which, if ignored, can
lead to bad customer experiences and bad news storied which
damage the reputation of the company and may result in switching
to other online options.

 Some examples of poor online customer experience include:

• Websites that fail because of a spike in visitor traffic after a peak-hour

TV advertising campaign.

• Hackers penetrating the security of the system and stealing credit and
debit card details.

• A company e-mails customers without receiving their permission, so

annoying customers and potentially breaching privacy and data
protection laws.

• Problems with fulfilment of goods ordered online, meaning customer

orders go missing or are delayed.

• E-mail customer-service enquiries from the website don’t reach the

right person and are ignored.
 Business-to-Consumer (B2C): B2C applies to any business or
organization that sells its products or services to consumers over the
Internet for their own use. i.e. it provides a direct sales between the
supplier and the individual customer.

 B2C e-commerce involves what is known as electronic retailing or e-

tailing. E-tailing involves online retail sales and makes it easier for a
manufacturer to sell directly to a customer, cutting out the need for an
intermediary (retailer) there by eliminating the need for a physical
store for distribution of the products.

 An electronic or Web storefront refers to a single company web site

where products and services are sold.

 The first noticeable success came around 1995 with the launch of eBay
and amazon.com which is being followed by many imitators.

 The main things which are browsed and sell well over the Internet
include:
i. Computer Hardware and Software: While hardware is most
popular, more and more people buy software online.

ii. Consumer Electronics: Is the second largest product category sold

online.

iii. Sporting Goods: It is difficult to measure the exact figure as there

are only a few e-tailers that sell sporting goods exclusively online.

iv. Office Supplier: B2C sales of office supplies are increasing rapidly
all over the world.

 Other things which are doing well as far as sales over the internet
include:

• Books and music

• Toys
• Health and beauty
• Entertainment
• Apparel
• Services

 Major Activities of B2C E-Commerce:

a. Information Sharing: A B2C e-commerce model may use some or

all of the following applications and technologies to share
information with customers:

• Company Web site

• Online catalogs
• E-mail
• Online advertisements
• Message board system
• Newsgroups and discussion groups
 Ordering

Service & Support Fulfillment

B2C E-Commerce

Information Sharing Payment

Company Website Credit cards

Online Catalogs Electronic cheques
E-mail Digital cash
Online Advertisements
Message Board System
Newsgroups & Discussion groups

Fig: Various kind of Activities of e-commerce

b. Ordering: A customer may use electronic forms similar to paper
forms or e-mail to order a product or service.

c. Payment: There are a variety of option available today like Credit

cards, Electronic cheques, Digital cash etc.

d. Fulfilment: The fulfilment function could be very complex

depending upon the delivery of physical products (books, videos and
CD’s) or digital products (software, music, electronic documents).
Fulfilment is responsible for physically delivering the product
or service from the merchant to the customer.

e. Service and Support: This aspect is more important as e-commerce

companies lack a traditional physical presence and need other ways
to maintain current customers. The means are:
• E-mail confirmation.
• Periodic news flash
• Online surveys
• Help desk
• Guaranteed secure transactions
• Guaranteed online auctions.

 All these five activities need to be used in conjunction with one

another for a B2C business to be successful.

 Models of B2C:

a. Auctions: Electronic auctions offer an electronic implementation of

the bidding mechanism which can be accompanied by multimedia
presentation of the goods. They may also offer integration of the
bidding process with contracting, payments and delivery.

 The sources of income for the auction provider are in selling the
technology platform, in transactions and collection of e-shops that
usually gets enhanced by a common umbrella like that of a well known
brand.
 Advantages of Internet auctions:

i. Convenience: It gives the participants convenience, as bidder can

stay at his home or office and still participate in the bidding. In
addition, it is also more convenient for a bidder to find more about
the goods being auctioned.

ii. Flexibility: Traditional auctions allow only synchronous bidding

requiring all bidders to participated at the same time. In contrast,
Internet auctions allow asynchronous bidding lasting days or weeks,
which offers more flexibility to the bidders.

iii. Increased Reach: The potential of reach of an Internet based

auction site is global and thus the market for auctioned good is
extremely vast.

iv. Economical to Operate: These are cheaper to run as lot of costs

relating to infrastructure required for a conventional auction system
is not necessary.
 Disadvantages of Internet auctions:

i. Inspection of goods: In an Internet based auction, it is not possible

to physically inspect the goods. The bidders have to rely on the
information provided or on some electronic images of the goods on
auction.

ii. Potential for Fraud: Internet bidder has to trust that the seller
would actually send the good for which he has paid. Also the
payments are made online using the card details or bank details
which may not be necessarily safe all the time.

b. Online Stores: It refers to marketing of a company’s products

through the web.

 Benefits to the Company:

i. Increased demand.
ii. A low-cost route to global reach.
iii. Cost-reduction of promotion and sales.
iv. Reduced costs.
 Benefits for the Customers:

i. Lower prices.
ii. Wider choice.
iii. Better information.
iv. Convenience.

 Delivering value to Customers: In order to develop and deliver

more value to the customers the following thing can be considered:

i. Merchants have to try to find ways to gain competitive advantage in

factors other than just the price.

ii. Online shops need to provide a shopping experience that addresses all
of the customer’s requirements. It should also try to provide an
environment that is easy to explore.

iii. Expansion of the range of services.

iv. Find cost-effective ways to increase customer base and generate

higher revenues.
c. Online Services: Many companies are using Internet to provide
customer service. Service sector banking and Stock trading is one
such example.

 Major Challenges of B2C e-commerce: Getting good browsers,

building customer’s trust and loyalty are few of the challenges, which
need proper attention while offering a Business the benefits of e-
commerce solution.

i. Getting browsers to buy things: Getting visitors to the site is only

half the battle. Whether they buy something is what determines the
success.

• Customers are still abandoning their online shopping carts for a

number of reasons, including clunky design. HTML is the cause of the
most of the usability problems associated with e-commerce.

• Now that broadband is more widespread, companies are boosting

their conversion rates by deploying more advance web technologies
and rich media.
ii. Building customer Trust/ Privacy: There is no silver bullet that
will stop all security breaches and all identity thieves. Still, the
companies need to take steps to ensure their customer information
is well protected.

 First of all, companies should secure web transactions using the

secure socket layer protocol, then should also consider two-part
authentication, which can combine passwords with a security key
with a changing code.

iii. Building customer Loyalty: Customer loyalty is particularly

important given the fact that more consumers are using search
engines to research products online, rather than going directly to a
particular store’s site.

 To build a strong relationship with the customers the following can be

considered:

• Focus on Personalization: A wide array of software is available to

help e-commerce sites create unique boutiques that target specific
customers.
 For example, American Airlines has personalized its website so that
business fliers view it as a business airline and leisure travelers see it
as a vacation site.

 Amazon and Flipkart which built their own personalization and

customer relationship management system, is well known for their
ability to recognize customers’ individual preferences.

• Create an easy-t0-use customer service application: Providing

just an e-mail address can be frustrating to customers with questions.
Live interactions may help a lot in this regard.

 Also, the site should be made easy as far as user friendliness is

concerned.

d. Fulfillment: E-commerce has increased the focus on customer

satisfaction and delivery fulfilment. One cautionary tale is ‘Toys “R”
Us’ holiday debacle in 1999, when fulfillment problems caused some
Christmas orders to be delivered late.
 Since then, companies have spent billions to improve their logistical
systems in order to guarantee on-time delivery.

 Providing instant gratification for customers still isn’t easy, but

successful B2C e-commerce operations are finding that fulfilment
headaches can be eased with increased focus and investment in
Supply Chain and Logistic technologies.

 Business-to-Business (B2B): B2B involves online transactions

between two businesses or any two organization. In B2B, companies
buying from and sell to each other online.

 It has evolved to encompass supply chain management as more

companies outsource parts of their supply chain to their trading
partners. For example a company like TATA Motors may deal
electronically with its dealers and may place online orders to its
vendors for the raw materials and component parts and can track the
status of those orders.
 A large number of companies are adopting this technique to curb the
existing inefficiencies involved in potentially time consuming and
tedious tasks, while cutting down the costs.

 B2B activity refers to all e-commerce transactions that can occur

between two organizations. This includes purchasing and
procurement, supplier management, inventory management,
channel management, sales activities, payment management, and
service and support.

 Examples of B2B include online companies that specialize in

marketing strategies, advertising, email companies, internet
consultants, website development etc.

 A well-executed B2B system can take care of a wide spectrum of

activities. It can take up the role of a number of workers of a
company. It reduces the cycle time substantially. It assists a firm in
replacing the existing business practices with new, quick, efficient
and secure business practices.
 By using B2B e-commerce, business can reengineer their supply
chain and partnership. B2B will help access to the following types of
information:
• Product: Price, sales history etc.
• Customers: Sales history and forecast.
• Suppliers: Product line and lead-time, sales terms and conditions.
• Product process: Capacity, product plan.
• Competitors: Market share, product offerings.
• Sales and marketing: Promotions.
• Supply chain process: Quality, delivery time etc.

 B2B Exchange: A B2B exchange (also called a marketplace or hub) is a

website where many companies can buy from and sell to each other
using a common technology platform.

 Many exchange also offer additional services, such as payment or

logistics services that help members complete a transaction.
 Exchange may also support community activities, like distributing
industry news, sponsoring online discussions and providing research
on customer demand or industry forecasts for components and raw
materials.

 B2B sales are also generated by providing a specialized product line

or service not available to the general public. This form of B2B
transaction is very common in the manufacturing world.

 For example, A company which produces shaving cream in cans, may

need a specific plastic nozzle. Several plastic injection molding
companies would send sales representatives to pitch their particular
designs. These nozzles would be useless for individual customers,
but a manufacturer may order thousands of them.

 Development of B2B e-commerce: Considering the present

situation the development of B2B e-commerce can typically be broken
down into five stages:
1. Stage One: The business has an interest in getting on-line, can see it
could bring competitive advantage and is increasingly aware of the
need to maintain competitive parity. The company doesn’t use e-mail
and has neither Internet access nor a company web site.

2. Stage Two: The internet is being used as a marketing and

communication tool. There is a company web site for increasing
their marketing reach and the Net is used to gather information
regarding possible competitors and suppliers.

 E-mail is widely used among the partners but there is no link between
any web activity and existing back office systems.

3. Stage Three: The business uses the Internet to interact with their
customers. Their use of e-commerce has developed to the point
where they are offering a full service storefront and possibly an
online account management facility.
4. Stage Four: This help the companies to move towards a more
integrated, on-line relationship with trading partners.

5. Stage Five: The business joins online exchanges, e-marketplaces

and related services, using the Internet to connect them with
business partners, suppliers and customers. This may result in a
significant pricing efficiencies.

 Types of B2B Markets: B2B electronic commerce can be

implemented by different e-marketplace. These models can be
broadly divided into categories based on the way in which they are
operated.

i. Independent e-marketplace: This category is operated by a third

party who is neither a buyer nor a seller. These are usually public
marketplaces open to all buyers or sellers in a particular industry or
region. There is typically some form of payment is required to
participate. The main reason for the third party creating this type of
e-marketplace is to generate revenue.
ii. Buyer-oriented e-marketplace: This category is normally run by a
consortium of buyers in order to establish an efficient purchasing
environment.

 The intention is to help buyers lower their administrative costs and

achieve optimum prices from their suppliers.

 The e-marketplace is open to existing suppliers who are encouraged to

place their catalogues online so that they can be accessed by all
members of the consortium.

iii. Supplier-oriented e-marketplace: This marketplace is set-up and

operated by a number of suppliers who are seeking to establish an
efficient sales channel via the Internet to a large number of buyers.

iv. Vertical and horizontal e-marketplace: Vertical e-marketplace

address the requirements of a specific industry sector such as
automotive, chemical, construction or textiles.
 A large organization may set up such a marketplace to enable it to
work with smaller businesses in its supply chain.

 A Horizontal marketplace addresses regional or functional

requirements. Companies use such marketplaces to purchase
indirect products such as office equipment or stationery.

 Business purchases can be classified into two broad levels –

Manufacturing inputs and Operating inputs. The second aspect
is about how businesses buy products and services – either through
Systematic sourcing or through Spot sourcing.

• Manufacturing inputs: These are raw materials and components

that go directly into the products or process.

• Operating inputs: These are not parts of finished goods but include
things like office supplies and spare parts. These are often called
Maintenance, Repair and Operating (MRO) goods.
• Systematic sourcing: These involve negotiated contracts involving
long-term relationship between buyer and seller.

• Spot sourcing: In this case the buyer’s objective is to fulfill an

immediate need at the lowest possible cost and does not involve any
long-term relationship between the buyer and seller.

 B2B hubs can be categorized into various categories:

a. MRO (Maintenance, repair and operating) hubs: These hubs

concentrate on goods with low value. The transaction cost is
relatively higher. These hubs provide value by increasing the
efficiency in the procurement process.

• These hubs use third party logistics supplier to deliver goods, thus
enabling them to disintermediate or bypass existing middlemen in the
channel. Ex:- mro.com, bizbuyer.com and ariba.
b. Yield manager: This type of e-markets creates spot markets for
common operating resource like manufacturing capacity, labor or
advertising. This functionality allows the companies to expand or
contract their operations at a short notice.

• Yield managers add great value in situations where there is high

degree of price and demand volatility, and where fixed assets cannot
be liquidated or acquired quickly. Youtilities, employease, elance for
human resource, iMark for capital equipment and capacity Web for
manufacturing are few good examples.

c. Exchanges: Online exchange allow purchasing manager to

effectively manage peaks and ebbs in demand and supply by allowing
them to exchange commodities or near commodities for production.

• These exchanges maintain relationships with buyers and sellers,

making it very convenient for business to conduct business over
exchanges, and in many cases the buyers and sellers never even see
each other. Ex:- PaperExchange and e-steel.
d. Catalog Units: These are industry specific hubs that bring many
suppliers together at one easy-to-use web site. These hubs automate
the sourcing of non-commodity manufacturing inputs and create
value by reducing transaction costs.

• Catalog hubs can be either buyer focused or seller focused. Some hubs
would work as distributors for suppliers while others would work for
buyers in their negotiations with sellers. Ex:- PlasticNet.com in the
plastics industry and Chemdex in the chemical industry.

e. Private Exchanges: In these exchanges company connects with its

supplier base or known customer base. In other words, it is one to
many connection between the company and its trading partners.

• In private exchanges companies do not look beyond their existing

customer / supplier base, but provide deep collaboration and focus on
direct material procurement capabilities.

• These exchanges generally have sophisticated eMarket capabilities,

developed through use of advanced software applications and
integration with trading partners ERP systems.
• Private exchanges offer greater privacy, security and superior
collaborative capabilities and provide an opportunity for increased
competitive advantage.

f. Industry consortium: This model provides some to many

connections among industry members and their trading partners.

• These e-Markets give individual members access to each other’s

trading partners.

• These exchanges also offer collaborative capabilities as private

exchanges. Industry consortiums serve large and captive customer
base.

g. Independent markets: This type of e-market brings buyers and

sellers together in the form of many-to-many connection among
buyers and sellers and has the widest variety of participants but at
the same time makes collaboration difficult.
 These exchange focus on low risk activities like MRO and indirect
materials and have a challenging task of building trust among
unfamiliar buyers and sellers.

 Many independent markets offer trust building services like supplier

ratings, credit verification and escrow services.

h. The e-Hub Concept: To fully exploit the potential of B2B companies

need to think in terms of e-Hubs. An e-Hub is web-enabled platform
that allow trading partners to find, exchange and share information
related to buying and selling activities.

 Kevin and Mark Simmonds define “e-Hub is a set of technologies that

provide end-to-end supply chain integration and collaboration,
information sharing, visibility into broad range of activities associated
with demand planning, direct procurement, and order execution. In
doing so, the e-Hub optimizes the supply chain itself and all its
participants”.
Fig: e-Hub
 E-Hub provides complete transparency at all stages of execution of a
transaction and information flows to all concerned enabling them to
respond efficiently and on time.

 All the parties contribute their share of information to create a pool

of dynamic information at “mission control center” in the e-Hub.

 It provides not only current view of the order but also provides
visibility into other aspects of fulfilling that order, such as
production capacity, inventory availability, and logistics and
fulfillment status.

 Relationship of B2B e-commerce with other perspectives:-

i. Electronic Marketing: B2B platform can be used to sell the

company’s product and services to business customers on the
internet. This model can be called seller oriented marketing as
customers visit the web site that the supplier has prepared.
ii. Procurement Management: From the purchasing company’s point
of view, B2B is a medium of facilitating procurement management
such as reduced prices and reduced cycle time because to the
suppliers, participating to the customers oriented marketplace and
winning the bid is the major concern.

iii. Electronic Intermediaries: Individual consumers and business

purchases a group of items such as books, stationery and personal
computers, in such cases the consumers and business buyers can
share the intermediary.

 Certain items such as industrial equipment and parts are purchased

only by business buyers.

 Since the purchasing party is a business who has to deal with many
suppliers and intermediaries, an integrated and tailored buyer’s
directory linked suppliers and intermediaries is needed.
iv. Just in Time: JIT delivery of parts to manufacturing buyers is crucial
to realize JIT manufacturing. Direct marketing requires an internal
JIT manufacturing system; the JIT delivery and advanced
confirmation of supplier’s inventory are essential elements of B2B.

v. Electronic Data Interchange: EDI is the electronic exchange of

specially formatted standard business documents such as orders,
bills approval of credit, shipping details and confirmation sent
between business partners.

 Managing trading partner relationship: The effective use of e-

commerce can have a significant impact on trading partner
relationships and for some, B2B e-commerce is a significant enabler in
their move towards greater trading partner collaboration.

 E-commerce technologies have allowed even the smaller companies to

improve the processes for interfacing with customers. They are now
able to develop services for individual clients rather than provide a
standard service.
 It has also provided effective communications about the status of
orders and delivery, together with the speedy resolution of queries
and post sales support issues.

 Benefits of B2B e-commerce: It has been proved that e-commerce

can help the companies a lot as far as saving on the buy side and
increasing profits on the sell side is concerned.

 Some ways the companies have been benefited from B2B e-commerce
include:

• Managing inventory more efficiently.

• Adjusting more quickly to customer demand.

• Getting products to market faster.

• Cutting the cost of paper-work.

• Obtaining lower prices on some supplies.

 Difference between B2C and B2B e-Commerce: B2B
customers are other companies while B2C customers are individuals.
B2B transactions are more complex and have higher security needs.
Beyond that, there are two big distinctions:

a. Negotiation: Selling to another business involves haggling over

prices, delivery and product specifications which is not the case with
most of consumer sales.

b. Integration: Retailers don’t have to integrate with their customers’

systems where as, companies selling to other businesses, need to
make sure they can communicate without human intervention.

 Consumer–To–Consumer OR Peer–To–Peer (C2C / P2P): C2C or

P2P is defined as exchanges between / among consumers. These
exchanges can involve a third-party involvement, which can facilitate
and provide the infrastructure, place and governance for the
transactions / exchanges. Ex:- Ebay, OLX etc.
 Other examples are service and employment websites like
monster.com, naukri.com, seek.com etc. which provide valuable
service to consumers looking for jobs.

 C2C applications are a growing area of e-commerce and as online

business expands, C2C transactions will continue to grow in
popularity and the industry will become highly profitable.

 Consumer–To–Business (C2B): Here the consumers present

themselves to the business organizations who are the buyer group.
Ex:- CTB, SpeakOut.com.

 These sites provide consumers with market strategies and businesses

and also use them to gain insight into what the consumer wants.

 These groups may be economically motivated, as with demand

aggregators, or socially oriented.

 Business–To–Government (B2G): It is also known as e-government

where the idea is that the government agencies and businesses can use
central Web sites to conduct business and interact with each other
more efficiently and effectively.
 For example, a Web site offering B2G services could provide
businesses with a single place to locate applications and tax forms for
one or more levels of government (city, state, country and so forth);
provide the ability to send in filled–out forms and payments; update
corporate information; request answers to specific questions and so
forth.

 B2G may also include e-procurement services, in which businesses

learn about the purchasing needs of agencies and agencies request
proposal response.

 B2G may also support the idea of a virtual workplace in which a

business and an agency could coordinate the work on a contracted
project by sharing a common site to coordinate online meetings,
review plans and manage progress.

 It may also include the rental of online applications and databases

designed especially for use by government agencies.
 Trade Cycle: A trade cycle is the series of exchanges between a
customer and supplier that take place when a commercial exchange is
executed. A general trade cycle consists of four phases:-

i. Pre-Sales: This phase consists of various tasks in finding a supplier

and agreeing the terms.

 This phase can be further classified in:

• Search – Finding a supplier.
• Negotiate – Agreeing the terms of trade.

ii. Execution: This phase consists of various tasks in selecting goods

and taking delivery.

 This phase can be further classified in:

• Order
• delivery
iii. Settlement: This phase consists of various tasks in invoice (if any)
and payment.

 This phase can be further classified in:

• Invoice
• Payment

iv. After-Sales: This phase consists of various tasks in following up

complaints or providing maintenance.

 Generic Trade Cycle: Three generic trade cycles can also be

identified:

a. Repeat trade cycle: These trade cycles contains regular, repeat

transactions between commercial trading partners.

b. Credit trade cycle: These trade cycles contains irregular

transactions between commercial trading partners.
c. Cash trade cycle: These trade cycles contains irregular transactions
in once-off trading relationships (commercial or retail).

EDI
Fig: Trade Cycles
 Nature of Trade Cycle: For B2B transactions the trade cycle
typically involves the provision of credit with execution preceding
settlement whereas in C2B these two steps are typically co-incident.

 The nature of the trade cycle can indicate the e-commerce technology
most suited to the exchange. On this basis business transactions are
classified as:
• Commercial transactions that are repeated on a regular basis, such as
supermarkets replenishing their shelves. EDI is the e-commerce
technology appropriated to these exchanges.

Fig: EDI Trade Cycle

• Consumer transactions tend to be once off (or at least vary each time)
and payment is made at the time of the order. Internet e-commerce
is the technology for these exchanges.

Fig: Consumer e-commerce

• The third generic trade cycle is the non-repeating commercial trade
cycle and Internet e-commerce or an electronic market is the
appropriate e-technology for this.
 Supply Chain Management: Supply chain is a network of facilities
and distribution options that performs the functions of procurement
of materials (from supplier), transformation of these materials into
intermediate and finished products (manufacturing), and the
distribution of these finished products to customers (to customer).

 This network adds value for customers through the manufacture and
delivery of products.

Fig: Supply Chain

 A supply chain, logistics network, or supply network is a coordinated
system of entities, activities, information and resources involved in
moving a product or service from supplier to customer.
 But, when distinguishing between buy-side and sell-side e-commerce
we look at different aspects of managing an organization’s supply
chain.

 Supply chain management (SCM) is the coordination of all supply

activities of an organization from its suppliers and delivery of
products to its customers.

 The value chain is a related concept that describes the different

value-adding activities that connect a company’s supply side with its
demand side.

 In today’s rapidly changing business environment, continuously

increased demands are being placed on business:-
• To provide products and services quicker.
• With greater added value.
• To the correct location.
• With no relevant inventory position.
 Customers want more quality, design, innovation, choice,
convenience and service, and at the same time want to spend less
money, effort, time and risk. The supply chain of a company consists
of different departments, ranging from procurement of materials to
customer service.

 The aim of supply chain management is to transform a company’s

‘supply chain’ into an optimally efficient, customer-satisfying
process, where the effectiveness of the whole supply chain is more
important than the effectiveness of each individual department.

 Porter’s Value Chain Model: Michael Porter introduced a generic

value chain model that comprises a sequence of activities found to be
common to a wide range of firms in the form of Primary activities and
Support activities.

 The primary value chain activities are:

a. Inbound Logistics: The receiving and warehousing of raw materials,

and their distribution to manufacturing, as they are required.
b. Operations: (Production) The processes of transforming inputs
into finished products and services.

c. Outbound Logistics: The warehousing and distribution of finished

goods.

d. Marketing & Sales: The identification of customer needs and the

generation of sales.

e. Service: The support to customers after the products and services

are sold to them.

 These primary activities are supported by (Support activities):

a. The infrastructure of the firm: Organizational structure, control

systems, company culture etc.

b. Human resource management: Employee recruiting, hiring,

training, development, and compensation.
c. Technology development: Technologies to support value-creating
activities.

d. Procurement: Purchasing inputs such as materials, supplies, and

equipment.

Fig: Porter’s Value chain model

 Role of Electronic Commerce in Value Chain: The capability of
Internet technology is changing the way we do business with our
suppliers and customers, as well as the face of business as:-

• Intranet is a secured network of web pages and applications, which

can be accessed by anyone within a company firewall.

• Internet is a collection of servers and networks, which allow users

access to information and applications outside the company firewall.

• Extranet is a collaborative (private / secure) network that uses

Internet technology to link businesses with their suppliers, customers,
or partners that share common goals.

• E-Commerce is buying and selling electronically. And e-business is

using the capabilities of Internet technology to conduct business
electronically.
 E-Commerce enhances value chain by providing:-

a. Electronic Value Chain: Through electronic value chain, e-

commerce enhances business by supporting:-
• Reduced time frame.
• Changed cost structure.

b. Re-engineered Value Chain: Through re-engineered value chain, e-

commerce enhances business by supporting:-
• Just-in-time manufacturing.
• Quick response supply.
• Efficient document processing.

c. Competitive Advantage: e-commerce supports accompany for

gaining competitive advantage.
 E-business provides various strategies for supply chain:-

a. E-Procurement: E-procurement provides cross-enterprise system to

system integration, electronic catalogs, on-line buying and selling.
Various advantages of e-procurement are:-
• It enhances efficiency.
• It reduced cost/cycle time.
• It helps in contract compliance and customer reach.

b. E-Collaboration: E-collaboration provides cross-enterprise

technology / design interaction (customer & supplier). Various
advantages of e-collaboration are:-
• Design cycle time.
• Design synergy reuse.
• Revenue.
c. Integrated Planning / Manufacturing: Integrated planning /
manufacturing provides Cross-enterprise planning / execution,
system-to-system integration, and Outsourced manufacturing
visibility. The advantages are:-
• Lead time, margin.
• Accuracy / Flexibility
• Inventory levels.
• On-time delivery.

d. Integrated Delivery: Integrated delivery provide cross-enterprise

logistics management / consignment visibility. The advantages are:-
• Logistics cycle time.
• Reduced cost.
• Lead time.

e. Online Marketing: Online marketing provides product boundary

extension, new products / services creation, new markets / channel
creation. The advantages are:-
• Market Segment Share.
• Customer reach.
 Competitive Advantage: A firm is said to pose a competitive
advantage over its rivals, if it is able to sustains profit that exceed the
average for its industry. And the goal of much of business strategy is
to achieve a sustainable competitive advantage.

 Michael Porter identified two basic types of competitive advantage:-

• Cost advantage.
• Differentiation advantage.

 A competitive advantage exists when the firm is able to deliver the

same benefits as it’s competitors but at a lower cost (cost advantage),
or deliver benefits that exceed those of competing products
(differentiation advantage).

 Thus, a competitive advantage enables the firm to create superior

value for its customers and superior profits for itself and this is why
the Cost and Differentiation advantages are known a positional
advantages. It describes the firm’s position in the industry as a leader
in either cost or differentiation.
 A resource-based view emphasizes that a firm utilizes its resources
and capabilities to create a competitive advantage that ultimately
results in superior value creation.

Resources

Cost Advantage
Distinctive
Or Differentiation Value Creation
Competencies
Advantage

Capabilities

Fig: A Model of Competitive Advantage

 Resources and Capabilities: Resources are the firm-specific assets
useful for creating a cost or differentiation advantage and only a few
competitors can acquire it easily. For example:-
• Patents and Trademarks.
• Proprietary know-how.
• Installed customer base.
• Reputation of the firm.
• Brand equity.

 Capabilities refer to the firm’s ability to utilize its resources

effectively. For example, The ability to bring a product to the market
faster than the competitors.

 Such capabilities are embedded in the routines of the organization

and are not easily documented as procedures and thus are difficult for
competitors to replicate.

 The firms resources and capabilities together form its Distinctive

competencies.
 These competencies enable innovation, efficiency, quality, and
customer responsiveness, all of which can be leveraged to create a
cost advantage or a differentiation advantage.

 Value Creation: The firm creates value by performing a series of

activities that Porter identified as the value chain. In addition to the
firm’s own value-creating activities, the firm operates in a value system
of vertical activities including those of upstream suppliers and
downstream channel members.

 To achieve a competitive advantage, the firm must perform one or

more value creating activities in a way that creates more overall value
than do competitors.

 Superior value is created through lower costs or superior benefits to

the consumer (differentiation).
 Porter’s Five Forces Model: This model involves a relationship
between competitors within an industry, potential competitors,
suppliers, buyers and alternative solutions to the problem being
addressed.

 While each industry involves all of these factors, the relational

strengths vary.

 Business Insight uses input from the user to create a unique model of
their industry. Then thousands of “rules” are applied to evaluate
hundreds of marketing and business concepts as they relate to the
user’s unique circumstances, which results in a set of analyses:-
• A success potential rating in all the key areas.

• A list of strategic strengths and weaknesses.

• A written critique of the strategy.

• A graphic analysis of key marketing concepts.

• A written draft of a marketing plan.

Fig: Porter’s Model for Competitive Forces
 E-Commerce Application in Manufacturing: Manufacturing is
the transformation of raw materials into finished goods for sale, or
intermediate processes involving the production or finishing of
semi-manufactures.

 The production of goods and services is the result of the efforts of

many organization – a complex web of contracts and co-operation
known as the supply chain or the value system.

 Manufacturing requires various components, sub-assemblies etc., as

well as include transportation, storage and paperwork.

Fig: Manufacturing (Supply Chain)

 Each supply chain transaction adds cost without adding intrinsic
value. E-commerce can be applied to the supply chain to reduce
costs or improve service, and hence can enhance manufacturing
process by:-
• Enhancing efficiency.
• Reducing cost / cycle time.
• Providing accuracy and flexibility.
• Supporting Inventory levels.

 E-Commerce application in Wholesale: Wholesale is the sale of

goods or services in large quantities and at lower prices to someone
other than customers and are also sometimes called middleperson,
middleman or distributor.

 Role of E-Commerce in Wholesale: In a sound market economy, low

operating costs, access to information and quick response are the key
to success for an enterprise.
 Through advanced information technology, enterprises can reach
out to the global market and at the same time obtain information
from around the world at low cost and high speed.

 E-commerce provides a fundamental solution to the problem of

diminishing profit margin and brings new opportunities to the
stagnant traditional wholesale business. It supports:-
• Low operating costs.
• Access to information.
• Quick response.
• Gaining competitive edge.

 By shortening the distance between manufacturer and consumer, e-

commerce poses serious threats to intermediaries in the supply chain.

 It also weakens the role of traditional wholesalers and those who are
unable to adapt to the network economy will be hard hit, while those
that make use of new technology and seek change will transform into
small but powerful new players.
 E-Commerce Application in Retail: Retailing involves selling
products and services to consumers for their personal or family use.

Distributor /
Manufacturer Retailers Consumer
wholesaler

Fig: Retail Business

 Importance of Retailing: Retailers are the final link between

consumers and manufacturers, and add value to products by making
it easier for manufacturers to sell and consumers to buy because
otherwise it would have become very costly and time consuming for
anyone to locate, contract and make a purchase from the
manufacturer every time one would like to buy anything.

 Similarly, it would be very costly for the manufacturers of these

products to locate and distribute them to consumers individually.

 By bringing multitudes of manufacturers and consumers together at a

single point, retailers make it possible for products to be sold, and
consequently, business to be done.
 Retailers also provide services that make it less risky and more fun to
buy products. They have sales people who can answer questions, may
offer credit, and display products so that consumers know what is
available and can see if before buying.

 In addition, retailers may provide many extra services, from personal

shopping to gift wrapping to delivery, that increase the value of
products and services to consumers.

 Role of e-commerce in Retiling: Advances in technology, like the

Internet, have helped make retailing an even more challenging and
exciting field in recent years.

 Though the nature of the business and the way retailing is done are
currently undergoing fundamental changes, some form of retailing
will always be necessary.

 For example, even though the Internet is beginning to make it

possible for manufacturers to sell directly to consumers, the very
vastness of cyberspace will still make it very difficult for a consumer to
purchase every product directly.
 Retailers who offer personal services, like hair styling, will need to
have face-to-face interaction with the consumer.

 Even with products like gold or diamond jewelry, customers often

want to see, touch and try them before buying, or in case of an
urgency where the customer want the products immediately
traditional retailing will come into rescue.

 E-Commerce Application in Service Sector: The service sector or

the service industry is one of the three main industrial categories of a
developed economy, the other being secondary industry
(manufacturing and primary goods production such as agriculture),
and primary industry (extraction such as mining and fishing).

 The tertiary sector of industry involves the provision of services to

other businesses as well as final consumers. It may involve the
transport, distribution and sale of goods from producer to a consumer
as may happen in wholesaling and retailing, or may involve the
provision of a service, such as in pest control or entertainment.
 Here the focus in on people interacting with people and serving the
customer rather than transforming physical goods.

 The service sector consists of the “soft” parts of the economy such as
insurance, tourism, banking, retail and education.

 Public utilities are often considered part of the tertiary sector as they
provide services to people, while creating the utility’s infrastructure
is often considered part of the secondary sector.

 Role of E-Commerce in Service Sector: E-commerce will improve

the speed of transactions, reduce management expenditure, increases
competitiveness and helpful in the banking, insurance & financial
sectors, telecom, tourism, postal and logistics services.