2

Chapter 2
E-Marketplaces: Structures, Mechanisms, Economics, and Impacts
Learning Objectives
Define e-marketplaces and list their components.
List the major types of e-marketplaces and describe their features.
Describe the various types of EC intermediaries and their roles.
Describe electronic catalogs, shopping carts, and search engines.
Describe the major types of auctions and list their characteristics.
Learning Objectives
Discuss the benefits, limitations, and impacts of auctions.
Describe bartering and negotiating online.
Define m-commerce and explain its role as a market mechanism.
Discuss competition in the digital economy.
Describe the impact of e-marketplaces on organizations and industries.
E-Marketplaces
A virtual marketplace in which buyers and seller meet and conduct business transactions.
Usually we use the term to refer to B-B.
The three types of e-marketplaces are private, public, and consortia
E-Marketplaces
E-Marketplaces
marketspace
A marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services) but do so electronically
What is the difference between marketspace & marketplace?

e-marketplace and transactions electronically
E-marketplace transactions may not be electronic but manual
Hence is a subset of e-marketplace

Customers
Sellers
Products and services
Physical products
digital products
Goods that can be transformed to digital format and delivered over the Internet
Infrastructure
Front end
Back end
Intermediaries
Third parties that operates between sellers and buyers
Other business partners
Support services
E-Marketplaces
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
back end
The activities that support online order fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery
Types of E-Marketplaces: From Storefronts to Portals
Electronic Storefronts
storefront
A single company’s Web site where products or services are sold
e-mall (online mall)
An online shopping center where many online stores are located
Visualization and virtual realty in shopping malls
Types of E-Marketplaces: From Storefronts to Portals
Types of Stores and Malls
General stores/malls
Specialized stores/malls
Regional versus global stores
Pure-play online organizations versus click-and-mortar stores


Types of E-Marketplaces: From Storefronts to Portals
Types of E-Marketplaces: From Storefronts to Portals
Types of E-Marketplaces
private e-marketplaces
Online markets owned by a single company; may be either sell-side and/or buy-side e-marketplaces
sell-side e-marketplace
A private e-marketplace in which one company sells either standard and/or customized products to qualified companies
buy-side e-marketplace
A private e-marketplace in which one company makes purchases from invited suppliers
Types of E-Marketplaces: From Storefronts to Portals
Types of E-Marketplaces
public e-marketplaces
B2B marketplaces, usually owned and/or managed by an independent third party, that include many sellers and many buyers; also known as exchanges

Types of E-Marketplaces: From Storefronts to Portals
information portal
A single point of access through a Web browser to business information inside and/or outside an organization
Types of Portals
Commercial (public)
Corporate
Publishing
Personal
Mobile
Voice
Knowledge
Types of E-Marketplaces: From Storefronts to Portals
Transactions, Intermediation, and Process in E-Commerce
Sellers, Buyers, and Transactions
A seller (retailer, wholesaler, or manufacturer) sells to customers
The seller buys from suppliers: either raw material (as a manufacturer) or finished goods (as a retailer)


Transactions, Intermediation, and Process in E-Commerce
Transactions, Intermediation, and Process in E-Commerce
The Roles and Value of Intermediaries in E-marketplaces
infomediaries
Electronic intermediaries that provide and/or control information flow in cyberspace, often aggregating information and selling it to others

Transactions, Intermediation, and Process in E-Commerce
A broker is a company that facilitates transactions between buyers and sellers
Types of brokers
Buy/sell fulfillment
Virtual mall
Metamediary
Bounty
Search agent
Shopping facilitator
Transactions, Intermediation, and Process in E-Commerce
Intermediaries can address the following five important limitations of direct interaction:
Search costs
Lack of privacy
Incomplete information
Contract risk
Pricing inefficiencies
Transactions, Intermediation, and Process in E-Commerce
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
Transactions, Intermediation, and Process in E-Commerce
disintermediation
Elimination of intermediaries between sellers and buyers
reintermediation
Establishment of new intermediary roles for traditional intermediaries that have been disintermediated, or for newcomers
Transactions, Intermediation, and Process in E-Commerce
Electronic Catalogs and Other Market Mechanisms
electronic catalogs
The presentation of product information in an electronic form; the backbone of most e-selling sites
Three dimensions of electronic catalogs:
The dynamics of the information presentation
The degree of customization
Integration with business processes
Electronic Catalogs and Other Market Mechanisms
Electronic Catalogs and Other Market Mechanisms
search engine
A computer program that can access databases of Internet resources, search for specific information or keywords, and report the results
software (intelligent) agent
Software that can perform routine tasks that require intelligence
Electronic Catalogs and Other Market Mechanisms
electronic shopping cart
An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop

Auctions as EC Market Mechanisms
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
Auctions as EC Market Mechanisms
Traditional Auctions versus
E-Auctions
Limitations of traditional offline auctions
rapid process gives potential buyers little time to make a decision
electronic auction (e-auction)
Auctions conducted online
dynamic pricing
Prices that change based on supply and demand relationships at any given time

Auctions as EC Market Mechanisms
Types of Auctions
One buyer, one seller
One seller, many potential buyers
forward auction
An auction in which a seller entertains bids from buyers. Bidders increase price sequentially


Auctions as EC Market Mechanisms
One buyer, many potential sellers
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 B2B or G2B 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 C2B model that was pioneered by Priceline.com

Auctions as EC Market Mechanisms
Auctions as EC Market Mechanisms
Many sellers, many buyers
double auction
Auctions in which multiple buyers and their bidding prices are matched with multiple sellers and their asking prices, considering the quantities on both sides

Auctions as EC Market Mechanisms
Benefits of E-Auctions
Benefits to Sellers
Benefits to Buyers
Benefits to E-Auctioneers
Limitations of E-Auctions
Minimal security
Possibility of fraud
Limited participation
Auctions as EC Market Mechanisms
Impacts of Auctions
Auctions as a coordination mechanism
Auctions as a social mechanism to determine a price
Auctions as a highly visible distribution mechanism
Auctions as an EC component
Bartering and Negotiating Online
Online Bartering
bartering
The exchange of goods or services
e-bartering (electronic bartering)
Bartering conducted online, usually in a bartering exchange
bartering exchange
A marketplace in which an intermediary arranges barter transactions
Bartering and Negotiating Online
Online Negotiating
Negotiated pricing commonly is used for expensive or specialized products
Negotiated prices also are popular when large quantities are purchased
Much like auctions, negotiated prices result from interactions and bargaining among sellers and buyers

E-Commerce in the Wireless Environment
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

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

E-Commerce in the Wireless Environment
The Mobility Revolution
Organizations are embracing mobilized computing technologies for several reasons:
Improved productivity of workers in the field
Wireless telecom support for mobility is growing quickly
More applications can run both online and offline
The prices of notebook computers, wireless handhelds, and smart phones continue to fall as their capabilities increase
E-Commerce in the Wireless Environment
The Promise of M-Commerce
location-based commerce (LBC)
An m-commerce application targeted to a customer whose location, preferences, and needs are known in real time
M-Commerce Adoption
Although there are currently many hurdles to the widespread adoption of m-commerce, many companies are already shifting their strategy to the mobile world
Competition in the Digital Economy and Its Impact on Industries
Internet ecosystem
The business model of the Internet economy
Competition in the Digital Economy and Its Impact on Industries
Lower search costs for buyers
Speedy comparisons
Lower prices
Customer service

Barriers to entry are reduced
Virtual partnerships multiply
Market niches abound
Differentiation and personalization
Competition in the Digital Economy and Its Impact on Industries
differentiation
Providing a product or service that is unique
personalization
The ability to tailor a product, service, or Web content to specific user preferences
Competition in the Digital Economy and Its Impact on Industries
Porter’s Competitive Analysis in an Industry
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
Competition in the Digital Economy and Its Impact on Industries
Impact on Whole Industries
Patient self-care is growing rapidly
The amount of free medical information is exploding
Patient empowerment is gaining importance
Increasing electronic interaction among patients, hospitals, pharmacies, etc.
Increasing digital hospital and other health-care facilities
Data collected about patients is growing in amount and quality
Easy and shared access to patient data
Elder care and special types of care are improving significantly due to wireless systems
Increasing need to protect patient privacy and contain cost

Impacts of EC on Business Processes and Organizations
Impacts of EC on Business Processes and Organizations
Impacts of e-marketplaces on B2C direct marketing:
Product promotion
New sales channel
Direct savings
Reduced cycle time
Improved customer service
Brand or corporate image
Customization
Advertising
Ordering systems
Market operations
Accessibility
Impacts of EC on Business Processes and Organizations
Transforming Organizations
Technology and organizational learning
The changing nature of work
Redefining Organizations
New and improved product capabilities
New industry order and business models
Improving the supply chain
Impacts of EC on Business Processes and Organizations
Impacts of EC on Business Processes and Organizations
Impacts of EC on Business Processes and Organizations
Impacts on manufacturing
Build-to-Order Manufacturing
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
Real-Time Demand-Driven Manufacturing
Virtual Manufacturing
Assembly Lines
Impacts on Finance and Accounting
Impact on Human Resources Management and Training
Managerial Issues
What about intermediaries?
Should we auction?
Should we barter?
What m-commerce opportunities are available?
How do we compete in the digital economy?
What organizational changes will be needed?