Digital Firm, Digital
Laudon & Laudon
Electronic Business, Electronic
Commerce, and the Emerging Digital
commerce refers to:
The use of the Internet and the Web to transact
Digitally enabled commercial transactions between
and among organizations and individuals.
GROWTH OF E
THE GROWTH OF E
The rapid growth of e
commerce since 1995 is due to
the unique features of the Internet and the Web as a
Internet/Web technology is everywhere, at work,
home, and elsewhere, and anytime, providing a ubiquitous
, a marketplace removed from a temporal and
The technology reaches across national
There is one set of Internet
technology standards, which greatly lower market entry
costs (the costs to bring goods to market) and reduce
(the effort to find products) for the consumer.
THE GROWTH OF E
refers to the
complexity and content of a message. Internet
technology allows for rich video, audio, and text
messages to be delivered to large numbers of
The technology works through
interaction with the user.
THE GROWTH OF E
is the total
amount and quality of information available to all market
participants. Internet technology reduces information costs
and raises quality of information, enabling
(the ease for consumers of finding a variety
of prices) and
(the ability of consumers
to determine the actual costs of products). Information
density allows merchants to engage in
(selling goods to targeted groups at
(targeting personal messages to
(changing a product or
service based on consumer preference or history.
Digital markets are very flexible and efficient
because they allow:
Reduced search and transaction costs
Lower menu costs
(merchant's costs of changing
(prices changing based on the
demand characteristics of the customer or the seller's
Elimination of intermediaries
such as distributors or retailers
The three major types of electronic commerce
: Retailing products and
services to individual shoppers
: Sales of goods and
services among businesses
: Consumers selling
directly to other consumers.
is a form of E
Commerce but with
the purchase of goods and services using
handheld wireless devices, rather than wired
Marketers can use the interactive features of Web
pages to hold consumers' attention or to capture
information about their tastes and interests. This
information may be obtained by asking visitors to
"register" online and provide information about
themselves or by using special software such as
to track the activities of
Web site visitors. Companies can then analyze
this information to develop more precise profiles
of their customers.
WEB SITE VISITOR
Personalization: tailored products and
Communications and product offerings can also
be tailored precisely to individual customers.
By using Web personalization technology to
modify Web pages presented to each customer,
marketers can achieve the benefits of using
individual salespeople at dramatically lower costs.
Personalization can help firms form lasting
relationships with customers by providing
individualized content, information and services.
Firms can create
Web pages that
display content or ads
for products or
services of special
interest to individual
users, improving the
and creating additional
Much of B2B e
commerce is still based on
proprietary systems for electronic data
computer exchange between two
organizations of standard transactions such as
invoices, bills of lading, shipment schedules,
or purchase orders.
Companies use EDI to automate transactions for B2B e
commerce and continuous inventory replenishment.
Suppliers can automatically send data about shipments to
purchasing firms. The purchasing firms can use EDI to
provide production and inventory requirements and
payment data to suppliers.
commerce environments include:
Private industrial networks
: Typically consisting of a large firm
using an extranet to link to its suppliers and other
key business partners.
A private industrial network, also known as a private exchange, links a firm to
its suppliers, distributors, and other key business partners for efficient supply
chain management and other collaborative commerce activities.
PRIVATE INDUSTRIAL NETWORK
for many different buyers and sellers. Net marketplaces are
industry owned or operate as independent intermediaries
between buyers and sellers, generating revenue from
transaction fees or services to clients. Net marketplaces
may sell direct goods (used in a production process) and
some sell indirect goods. They may support contractual
purchasing based on long
term relationships with
designated suppliers, and others support short
purchasing, where goods are purchased based on
immediate needs, often from many different suppliers.
Some net marketplaces may serve vertical markets for
specific industries or horizontal markets, with goods and
services for many industries.
A NET MARKETPLACE
: Independently owned third
marketplaces that can connect thousands of
suppliers and buyers for spot purchasing. Many
exchanges provide vertical markets for a single
industry. However, many exchanges have failed
because they encourage competitive bidding that
drove prices down without offering long
commerce represents a small
fraction of total e
revenue has been steadily growing.
Africa has been particularly fast due to greater
reliance on mobile phones
COMMERCE REVENUE, 2000
commerce sales represent a small fraction of total e
commerce sales, but that
percentage is steadily growing.
Source: Jupiter Research; eMarketer, 2006; eMarketer, 2005; authors.
commerce applications have taken off for
services that are time
critical, that appeal to
people on the move, or that accomplish a task
more efficiently than other methods. Popular
commerce applications include:
Content and location
checking travel information, schedules, news,
movie times, weather forecasts, etc
Banking and financial services:
account balances, transferring funds, paying bills
Selling of advertising space in
commerce applications, such as sponsored search
results from the go2Directory search site
Games and entertainment:
games, movies, music, and ringtones
Because handheld mobile devices can only
display small amounts of information at a time,
commerce enabled Web sites are being
designed as special
portals) with content optimized for smaller
Fi hotspots are increasing, m
commerce faces challenges such as:
Awkwardness and small screens of handheld
Slow transfer speeds with second generation cell
Lack of standardized payment systems
Digital credit card payment systems
: These systems extend the
functionality of credit cards so they can be used for online shopping
payments, providing mechanisms authentication and money
: Digital wallets store credit card, electronic cash,
and owner identification information and provide that information at
commerce site's checkout page, making paying for purchases
over the Web more efficient by eliminating the need for shoppers to
repeatedly enter their information into order forms.
: These systems use accumulated balance or
stored value payment systems for purchases of less than $10. Many
commerce transactions are small, frequent purchases for items
such as soft drinks, sports scores, newspapers, or mobile games that
require special micropayment systems.
Accumulated balance digital payment systems
users to make payments on the Web, accumulating a debit
balance on their credit card or telephone bills.
Stored value payment systems
, including smart cards,
enable users to make instant payments based on the value
stored in a digital account.
(plastic cards that store digital information,
such as health records, identification, or financial data) can
be used for micropayments in a stored value system. A
smart card requires use of a special card reading and writing
device to recharge the card with cash or to transfer cash
either to an online or offline merchant.
is currency represented in electronic form that
is moving outside the normal network of money. Users are
supplied with client software and can exchange money with
peer payment systems
serve people who want to
send money to vendors or individuals who are not set up to
accept credit card payments.
Digital checking systems
extend existing checking
accounts by using a digital signature that can be verified
and can be used for payments in electronic commerce.
Electronic bill presentment and payment services
used for paying and managing routine monthly bills
Commerce in Kenya
Opportunities and challenges