E-BUSINESS VS E-COMMERCE

E-BUSINESS

VS

E-COMMERCE

Dr. BALAMURUGAN MUTHURAMAN

Chapter 3

MEANING & DEFINITIONS

• Electronic business, commonly referred to as "e-business", or an internet business, may be defined as the application of information and communication technologies in support of all the activities of business.

• e-business may be defined as the conduct of industry, trade, and commerce using the computer networks.

• The term "e-business" was coined by IBM's marketing and Internet teams in 1996.

• Electronic business methods enable companies to link their internal and external data processing systems more efficiently and flexibly, to work more closely with suppliers and partners, and to better satisfy the needs and expectations of their customers. The internet is a public through way. Firms use more private and hence more secure networks for more effective and efficient management of their internal functions.

• E-Business industry is growing at a remarkable

pace due to high penetration of interest and

sophisticated electronic devices. E-Business is

the future of the businesses of 21

Century.

• Around 40% of the world population has an

internet connection today.

• The number of internet users has increased

from 1995 to 2014. The First billion was

reached in 2005. The second billion 2010. The

third billion in 2014.

• In the year 2014 world internet users are

increased in China 21.97 %, US 9.58% and

India 8.33%.

• Growth of internet users in last one year

between 2013-2014 are 16% in Nigeria(2.30),

14% in India (8.33) and 10% Russia (2.89).

• The e-business site receives over 500,000

visitors daily (6.5 million per week),

• In practice, e-business is more than just e-commerce.

While e-business refers to more strategic focus with

an importance on the functions that occur using

electronic capabilities, e-commerce is a subset of an

overall e-business strategy.

• E-commerce seeks to add revenue streams using

the World Wide Web or the Internet to build and

enhance relationships with clients and partners and to

improve efficiency using the Empty Vessel strategy.

Often,

e-commerce

involves

the

application

• E-Commerce refers to buying and selling of products and services by business and consumer through an electronic medium, without using any paper documents. E-commerce is widely considered the buying and selling of products over the internet, but any transaction that is completed solely through electronic measures can be considered e-commerce. • E-commerce is subdivided into three categories: business to

business or B2B (Cisco), business to consumer or B2C (Amazon), and consumer to consumer or C2C (eBay). also

Differences between E-business and

E-commerce

• E-business is broader in scope and e-commerce is just

an aspect or a subset of it.

• E-business

involves

marketing,

product

design,

consumer service evaluation, and more.

• E-commerce only covers business transactions such as

buying and selling of goods and services over the

internet.

• E-commerce essentially involves monetary trade while

in e-business, money transactions are not necessary.

E-BUSINESS – Processes

• E-business involves business processes spanning the entire

value chain: electronic purchasing and supply chain

management, processing orders electronically, handling

customer service, and cooperating with business partners.

Special technical standards for e-business facilitate the

exchange of data between companies.

• E-business software solutions allow the integration of

intra and inter firm business processes. E-business can be

conducted using the Web, the Internet, intranets, extranets,

or some combination of these.

DIFFERENCES BETWEEN

TRADITIONAL BUSINESS

AND E-BUSINESS

• Location's requirements:- In traditional business the location should be in proximity to the source of raw materials or the market for products. Whereas there is no such specific location is required for e-business.

• Operating cost:- Operating cost is high in traditional business due to fixed charges associated with the investment in procurement and storage, production, marketing and distribution facilities. But on the other hand operating cost is low as a result of reliance on network of relationship rather than ownership of resources.

• Nature of contact with suppliers and customers:- In traditional business contact is through the intermediaries and there is no direct contact with customers. But in e-business there is a direct relation with customers.

• Response Time:- In traditional business it will take

long time to get a response from the customer. But the

business man gets instant response in e-business.

• Shape of organizational structure:- Traditional

business structure is vertical/tall due to hierarchy of

chain of command. But structure of e-business is

horizontal/flat due to directness of command and

communication.

• Opportunity for interpersonal touch:- Traditional

business has less opportunities to have international

touch. But at the same time e-business have much more

opportunities to go international.

PRACTICAL COMMUNITIES

• A virtual community is a social network of individuals who interact through specific social media, potentially crossing geographical and political boundaries in order to pursue mutual interests or goals. One of the most pervasive types of virtual community operate under social networking services consisting of various online communities.

• A virtual community is a community of people

sharing common interests, ideas, and feelings

over the Internet or other collaborative networks.

• The term virtual community is attributed to the

book of the same title by Howard Rheingold,

published in 1993. The book's discussion ranges

from

Rheingold's

adventures

on

The

WELL, computer-mediated communication and

social groups and information science.

WEB PORTAL

• Portal is a major visiting center for internet users.

• Portal is a single, web based interface to content data, aggregated and customized, based on the user’s profile, subscription and access.

• an Internet portal is a Web site that acts as a starting point for browsing the Web. Portals typically include search engines and large directories of websites. Some popular portals are Yahoo, MSN. There are also many smaller portals, known as "niche portals," for specific interests.

GENERAL CONSUMER SALE

• In this type of sale, bidders are listed, but the bid amounts are not disclosed until after the sale is over.

• The most successful consumer sale Web sites is eBay and the most common format used is a computerized version of the English

sale.

• Note that in the eBay English sale sellers are allowed to set a reserve price. In this type of sale, bidders are listed, but the bid amounts are not disclosed until after the sale is over.

• The main difference between eBay and a live English sale is that bidders do not know who placed which bid until the sale is over.

SPECIALTY CONSUMER SALE

• It is very hard to compete with a well-established rival such as eBay in the general consumer sale market, a number of firms have decided to identify special-interest market targets and create specialized Web sale sites that meet the needs of those market segments.

• Several early Web sale sites started by featuring technology items such as computers, computer parts, photographic equipment, and consumer electronics.

• pottery auctio.com and justbeads.com are best examples of sale sites that cater to buyer and sellers who are geographically dispersed but share highly focused interests.

BUSINESS-TO-BUSINESS SALE:

• Unlike consumer online sales, business-to –business online sale evolved to meet a specific existing need. Two of three emerging business-to-business web sale are direct descendants of these two traditional methods for handling excess inventory.

• In the large company model the business creates its own sale site that sells excess inventory. In the small company model, a third party web sale site takes the place of the liquidation broker and sale excess inventory listed on the site by a number of smaller sellers.

• The third business to business web sale model resembles consumer online sale.

REVENUE MODELS

• Revenue model describes how the firm will earn revenue, generate profits, and produce a superior return on invested capital. • The terms revenue model and financial model are used

interchangeably. The function of business organizations is both to generate profits and to produce returns on invested capital that exceed alternative investments. Profits alone are not sufficient to make a company “successful”.

• In order to be considered successful, a firm must produce returns greater than alternative investments. Firms that fail this test go out of existence.

DIFFERENT REVENUE MODELS

• Although there are many different e-commerce revenue models that have been developed, most companies rely on one, or some combination, of the following major revenue models:

• The advertising model, • The subscription model, • The transaction fee model, • The sales model, and

• Advertising revenue model, a Web site that offers its users content, services, and/or products also provides a forum for advertisements and receives fees from advertisers.

• Those Web sites that are able to attract the greatest viewership or that have a highly specialized, differentiated viewership and are able to retain user attention (“stickiness”) are able to charge higher advertising rates.

• In the subscription revenue model, a Web site that offers its users content or services charges a subscription fee for access to some or all of its offerings.

• Experience with the subscription revenue model indicates that to successfully overcome the disinclination of users to pay for content on the Web, the content offered must be perceived as a high-value-added, premium offering that is not readily available elsewhere nor easily replicated.

• Transaction fee revenue model, a company receives a fee for enabling or executing a transaction.

• For example, eBay provides an online sale marketplace and receives a small transaction fee from a seller if the seller is successful in selling the item.

• Sales revenue model, companies derive revenue by selling goods, information, or services to customers. Companies such as Amazon (which sells books, music, and other products), LLBean.com, and Gap.com, all have sales revenue models.

• Affiliate revenue model, sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales.

• For example, MyPoints makes money by connecting companies with potential customers by offering special deals to its members. When they take advantage of an offer and

R E V E N U E M O D E L E XA M P L E S R E V E N U E S O U R C E Advertising Subscription Transaction Fee Sales Affiliate Yahoo WSJ.com Consumerreports.org eBay E-Trade Amazon LLBean Gap JCPenny.com MyPoints

Fees from advertisers in exchange for advertisements Fees from subscribers in exchange for access to content or services

Fees (commissions) for enabling or executing a Transaction

Sales of goods, information, or services