Chapter Two:

Technology in E-procurement
Origin of the internet and new uses of internet

• The history of internet can be segmented in to three

phases:

• Innovation Phase (1961 – 1974)

• Institutional Phase (1975 -1995)
• Commercialization Phase (1995 )
 Origin of the internet and new uses of internet
• The history of internet can be segmented in to three phases:
Innovation Phase (1961 – 1974)
– Fundamental building blocks were conceptualized and realized
Packet-switching, client/server computing and TCP/IP to link
together large mainframe computers in college campuses & form
one-to-one communication
• Institutional Phase (1975 -1995)
– Large institutions provide funding for the invention (DoD, National
Science Foundation,
– DoD develop the concept of Internet in to military communication
system,
– ARPANET – Advanced Research Project Agency Network was a WAN
to share computing facilities
– Grows exponentially connecting academic, research and US
government sites
 Cont’d.

Commercialization Phase (1995)

• Private corporations involved in expanding the
Internet to be used by ordinary citizens
 The Internet: Key Technology Concepts
Packet switching: Packet: The packages into which
digital messages are shared for transmission over the
Internet
Protocol: A set of rules for formatting, ordering,
compressing, and error checking messages
TCP/IP: is a set of communications protocols used to
connect hosts on the Internet
establishes the connections among sending and
receiving Web computers
Client/server computing
 Routers: device that interconnect the computer networks that
make up the Internet
 Cont’d.
• Internet is a system of interconnected computer
Internet networks that uses a standard IP/(TCP) GLOBAL
network .
• Intranet is a computer network system in which a
intranets specific organizational systems share information,
computing services and operational systems with
each other by using an Internet Protocol(IP). This
term basically refers to the network of a specific
organization.
• computer network that allows the outside users to
Extranets access the Intranet of organization for business to
business (B2B) purpose, which allows the outside
users of an organization to remain in touch with the
activities of organization.
• WWW is an information system that enables content
WWW sharing over the Internet.
 Internet protocol

• A set of rules that command how data should be delivered

over the public network (Internet).
• Often works in combination with the transmission control
protocol (TCP), which divides traffic into packets for
efficient transport through the Internet; together they are
referred to as TCP/IP.
 Markup Languages and the Web

• A markup language is a set of rules that defines how the layout

and presentation of text and images should appear in a digital
document.
• It allows structuring documents, adding formatting, and specifying
how different elements should be displayed (or “rendered”) on
webpages
Some prominent markup language include
 HTML
 XML
 HTML (Hypertext Markup Language
It is a set of special instructions (called “tags” or
“markups”) that are used to specify document structure,
formatting, and links to other multimedia documents.
HTML is the language of the Web. HTML documents are
thus designed for on-screen viewing and interactivity.
 Extensible markup language
• XML is a set of standards that specify how to structure a text-
based document for communication between two computers for
any number of purposes.
• It allows incorporating metadata in the message to be
exchanged, so the data can transmitted and understood by the
receiving party.
 Electronic data interchange (EDI)
Electronic data interchange (EDI) is the direct exchange of business-
related documents between two computers based on a fixed standard
with electronic counterparts of common documents such as purchase
orders, request supports, invoices
 Chapter Three:
Business Models for E-commerce
 E-transaction

• E-commerce transactions typically refer to all interactions between

the owner of a Website and the users of the Website in internet
connected device.
• A standard e-commerce transaction set-up involves the following
transaction players:
Sellers; who include the following:
 Corporate Websites with e-commerce resources, such as secure
transaction servers
 Corporate intranets to process orders
 An effective IT staff who is in charge to manages the flow of
information and maintains the e- commerce system
 Cont’d.

• Banking institutions; that process and approve credit card

payments and electronic fund transfers
• Freight companies; that facilitate the movement of goods to
and from the source and destination places
 Authentication authorities; that serve as a safe third party to
ensure the integrity and security of transactions
 Consumers; with access to the Internet, disposable income
and a willingness to purchase goods online other than by
physical inspection
E-commerce Enablers
 Eight Key ingredients of a Business Model :-
1. Value Proposition :- A value proposition defines how a
company’s product or service fulfills the needs of customers.
• To develop or analyze a firms value proposition, you need to
understand why customers will choose to do business with the
firm instead of another company and what the firm provides that
other firms do not and cannot.
• A successful value proposition include: personalization and
customization of product offerings, reduction of product search
cost, reduction of price and facilitation of transactions by
managing product delivery.
Value Proposition (cont’d.)
• How does the product or service fulfill customer needs
• E-commerce value propositions:
– Personalization/customization
– Convenience
– Price/No shipping cost
– Quick delivery
– Product/service quality
(2) Revenue Model:-- A firms Revenue model describes how
the firm will earn revenue, generate profits and produce a
superior return on invested capital.
The function of business organization is both to generate
profits and to produce returns on invested capital that
exceed alternative investments.
The Following are the Major Revenue Model :--
(a) Advertising Revenue Model :-- A website that offers its
users content, services, and products also provides a
opportunity 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 are able to charge higher
advertising rates. Ex: yahoo, YouTube, Facebook..etc
b. Subscription Revenue Model :-- A websites or company offers
its users content or services and charges a subscription fee for
access to some or all of its offerings.
c. Transaction fee Revenue Model :-- A company receives a fee
for enabling or executing a transaction. For Ex:eBay, E-trade,
Credit cards
d. Sales Revenue Model :-- A company derives revenue
by selling goods, information or services.
Example; Amazon, Gap
e. Affiliate Revenue Model :-- A company steers
business to an affiliate and receives a referral fee or
percentage of the revenue from any resulting sales.
 3. Market Opportunity

• The term Market Opportunity refers to the company’s intended

marketspace and the overall potential financial opportunities
available to the firm in that marketspace. The market
opportunity is usually divided into smaller market niches.
• The realistic market opportunity is defined by the revenue
potential in each of the market niches where you hope to
compete.
 4. Competitive Environment

• A firms competitive environment refers to the other companies

selling similar products and operating in the same marketspace.
• It also refers to the presence of substitute products and potential
new entrants to the market, as well as the power of customers and
suppliers over your business.
 5. Competitive Advantage
• Firms achieve a competitive advantage when they can produce a
superior product and bring the product to market at a lower price
than most, or all, of their competitors. For following reason firm
achieve competitive advantage.

a. Asymmetry :-- An asymmetry exists whenever one participant in

a market has more resources than other participants which is like
financial backing, knowledge, information or power than other
participants.

b. First mover advantage :-- A competitive market advantage for a

firm that results from being the first into a marketplace with a
serviceable product or service.
 Cont’d
C. Leverage :-- When a company uses its competitive
advantages to achieve more advantage in surrounding
markets.
 6. Market Strategy

• The best business concept or idea will fail if it is not properly

marketed to potential customers. Everything you do to promote
your company’s products and services to potential customers is
known as marketing.
• Market Strategy is the plan you put together that details exactly
how you intend to enter a new market and attract new customers.
 7.Organizational Development

• Organizational development that describes how the company will

organize the work that needs to be accomplished.
• Typically, work is divided into functional departments, such as
production, shipping, marketing, customer support, and finance.
Jobs within these functional areas are defined and then recruitment
begins for specific job titles and responsibilities.
 8.Management Team
• The most important element of a business model is the
management team responsible for making the model work.
• A strong management team gives a model instant credibility to
outside investors, immediate market specific knowledge, and
experience in implementing business plans.
 Business to consumer business model
• B2C e-commerce refers to the process of selling goods and
services directly to individual customers through an online
platform.
• In a B2C E-Commerce transaction, a business organizations
creates an online store where customers can browse and purchase
products or services.
The various types of B2C models each offer a unique set of features
 Direct Sellers

Direct selling is a business model in which goods are sold directly to

consumers, often in their homes or offices.
 Cont’d.

B2C Drop shipping

• B2C drop shipping type of e-commerce involves the business
owner sourcing products from a third-party supplier who then
ships the product directly to the customer.
• Businesses using this model don't need to maintain a large
inventory, allowing them to reduce costs associated with
warehousing.
Major Business-to-Consumer (B2C) Business Models
 Major Business-to-Consumer (B2C) Business Models
continued
 Business-to-Business E-commerce
 Largest form of e-commerce
 Businesses focus on sell to other businesses
 Primarily involved inter-business exchanges at first
 This business model include: e-distributors, intermediaries,
B2B service providers
 B2B can be open to all interested parties or limited to specific,
pre-qualified participants (private electronic market).

 Companies doing business with each other such as

manufacturers selling to distributors and wholesalers selling to
retailers.
Major Business-to-Business (B2B) Business
Models
 Consumer-to-Consumer E-commerce
 Provide a way for consumers to sell to each other
 Consumer:
 prepares the product for market
 places the product for auction or sale
 relies on market maker to provide catalog,
search engine, and transaction clearing
capabilities
 Consumer-to-Consumer E-commerce cont’d.
 In C2C e-commerce, consumers selling to other
consumers.
 e-commerce provides a way for consumers to sell to
each other, with the help of an online market maker
such as the auction site eBay.
 It facilitates the online transaction of goods or
services between two people.
 CONSUMER TO BUSINESS (C2B)

• A consumer posts his/her project with a set of budget

online and within hours companies review the
consumer's requirements and bid on the project.

• The consumer reviews the bids and selects the

company that will complete the project.

• C2B empowers consumers around the world by

providing the meeting ground and platform for such
transactions.