Page 47 - Introduction to Electronic Commerce and Social Commerce

24 1 Overview of Electronic Commerce and Social Commerce

4. Viral advertising and marketing. According to the viral 3. Describe the following business models: direct market-
marketing model (see Chapter 7), people use e-mail and ing, tendering system, electronic exchanges, viral market-
social networks to spread word-of-mouth advertising. It is ing, and social networking/commerce.
basically Web-based word-of-mouth advertising, and is 4. Identify some business models related to buying and
popular in social networks. those related to selling.
5. Group purchasing. Group purchasing is a well-known 5. Describe how viral marketing works.
off-line method, both in B2C and B2B. It is based on the
concept of quantity discounts (“cheaper by the dozen”).
The Internet model allows individuals to get together, so 1.7 THE LIMITATIONS, IMPACTS,
they can gain the large-quantity advantage. This model AND THE FUTURE OF E-COMMERCE
was not popular in B2C until 2010 when Groupon intro-
duced a modified model in which people are grouped As indicated in Section 1.4 there are some limitations and
around special deals, as illustrated in Chapter 7. Note that failures in EC.
the model is very popular in China.
The Limitations and Barriers of EC
A company may use several EC models as demonstrated
in Starbucks opening case, the NFL closing case, and the
Dell case (Online File W1.1). Barriers to EC are either non-technological or technological.
Representative major barriers are listed in Table 1.5.
One important area that may limit some EC project is
Classification of Business Models ethics.
in E-Commerce
Ethical Issues
Rappa (2010) classified the EC business models into eight
Ethical issues can create pressures or constraints on EC busi-
categories:
ness operations. Yet some ethical sites increase trust and help
EC vendors. Ethics relates to standards of right and wrong.
1. Brokerage: Market makers that charges fee for their
services. Ethics is a difficult concept, because what is considered ethi-
cal by one person may seem unethical to another. Likewise,
2. Advertising: Websites that provide content and charge
advertisers for related ads. what is considered ethical in one country may be unethical in
another. See Chapter 11.
3. Infomediary: Provide information and/or infrastructure that
help buyers and/or sellers and charge for their services.
4. Merchant: Retailers (such as Walmart or Amazon): These Table 1.5 Limitations of electronic commerce
buy the products and sell them at profit. Technological limitations Non-technological limitations
5. Direct model: Sell without intermediaries. Need for universal standards for Security and privacy concerns
6. Affiliate: Paying website owners to place banners. Share quality, security, and reliability deter customers from buying
fees received from advertisers. The telecommunications Lack of trust in sellers, in
bandwidth is insufficient, computers, and paperless
7. Community: A social media-based model that utilizes
especially for m-commerce, faceless transactions hinders
Web 2.0 tools, social networks, and the characteristics videos, and graphics buying
presented in Chapter 7. Software development tools are Resistance to change
still evolving
Rappa (2010) provides examples of each plus their reve- It is difficult to integrate Internet Many legal and public policy
nue models. In addition, he presents the major varieties in and EC software with some issues are not resolved or are not
existing (especially legacy) clear
each category. applications and databases
Special Web servers are needed National and international
in addition to the network government regulations
SECTION 1.6 REVIEW QUESTIONS servers, which add to the sometimes get in the way
cost of EC
Internet accessibility is still It is difficult to measure some of
1. What is a business model? Describe its functions and
expensive and/or inconvenient the costs and benefits of EC
properties.
Large-scale B2C requires Not enough customers. Lack of
2. Describe a revenue model and a value proposition. How special automated warehouses collaboration along the supply
are they related? for order fulfillment chain