Chapter 2
E-Marketplaces:
Structures, Mechanisms,
Economics, and Impacts
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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 various types of auctions and list their characteristics.
Discuss the benefits, limitations, and impacts of auctions.
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Learning Objectives
Describe bartering and negotiating online.
Define m-commerce and explain its role as a market mechanism.
Discuss liquidity, quality, and success factors in e-marketplaces.
Describe the economic impact of EC.
Discuss competition in the digital economy.
Describe the impact of e-marketplaces on organizations.
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E-Marketplaces
Markets (electronic or otherwise) have three main functions:
Matching buyers and sellers;
Facilitating the exchange of information, goods, services, and payments associated with market transactions; and
Providing an institutional infrastructure, such as a legal and regulatory framework, which enables the efficient functioning of the market.
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E-Marketplaces
Electronic marketplaces (e-marketplaces or marketspaces), changed several of the processes used in trading and supply chains
Greater information richness
Lower information search costs for buyers
Diminished information asymmetry between sellers and buyers
Greater temporal separation between time of purchase and time of possession
Greater temporal proximity between time of purchase and time of possession
Ability of buyers and sellers to be in different locations
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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
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E-Marketplaces
Marketspace components
Customers
Sellers
Products and services
digital products
Goods that can be transformed into digital format and delivered over the Internet
Infrastructure
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E-Marketplaces
Marketspace components
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-taking. It includes fulfillment, inventory management, purchasing from suppliers, payment processing, packaging, and delivery
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E-Marketplaces
Marketspace components
intermediary
A third party that operates between sellers and buyers.
Other business partners
Support services
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Types of E-Marketplaces:
From Storefronts to Portals
Electronic Storefronts
storefront
A single company’s Web site where products or services are sold
Most common mechanisms are a(n):
electronic catalog
search engine
electronic cart
e-auction facilities
payment gateway
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Types of E-Marketplaces:
From Storefronts to Portals
e-mall (online mall)
An online shopping center where many online stores are located
Types of Stores and Malls
General stores/malls
Specialized stores/malls
Regional versus global stores
Pure online organizations versus click-and-mortar stores
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Types of E-Marketplaces:
From Storefronts to Portals
Types of E-Marketplaces
e-marketplace
An online market, usually B2B, in which buyers and sellers exchange goods or services; the three types of e-marketplaces are private, public, and consortia
private e-marketplaces
Online markets owned by a single company; may be either sell-side or buy-side e-marketplaces.
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Types of E-Marketplaces:
From Storefronts to Portals
Types of E-Marketplaces
sell-side e-marketplace
A private e-marketplace in which a company sells either standard or customized products to qualified companies
buy-side e-marketplace
A private e-marketplace in which a company makes purchases from invited suppliers
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Types of E-Marketplaces:
From Storefronts to Portals
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
information portal
A single point of access through a Web browser to business information inside and/or outside an organization
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Types of E-Marketplaces:
From Storefronts to Portals
Six major types of portals
Commercial (public) portals
Corporate portals
Publishing portals
Personal portals
Mobile portals
Voice portals
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Types of E-Marketplaces:
From Storefronts to Portals
mobile portal
A portal accessible via a mobile device
voice portal
A portal accessed by telephone or cell phone
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Intermediation in EC
infomediaries
Electronic intermediaries that control information flow in cyberspace, often aggregating information and selling it to others
Five limitations of direct interaction
Search costs
Lack of privacy
Incomplete information
Contract risk
Pricing inefficiencies
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Exhibit Infomediaries and the
Information Flow Model
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Intermediation in EC
e-distributor
An e-commerce intermediary that connects manufacturers (suppliers) with business buyers by aggregating the catalogs of many suppliers in one place—the intermediary’s Web site
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Intermediation in EC
disintermediation
Elimination of intermediaries between sellers and buyers
reintermediation
Establishment of new intermediary roles for traditional intermediaries that have been disintermediated
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Electronic Catalogs and
Other Market Mechanisms
electronic catalogs
The presentation of product information in an electronic form; the backbone of most e-selling sites
Classification of electronic catalogs
The dynamics of the information presentation
The degree of customization
Integration with business processes
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Electronic Catalogs and
Other Market Mechanisms
Online catalogs
Ease of updating
Ability to be integrated with the purchasing process
Coverage of a wide spectrum of products
Interactivity
Customization
Strong search capabilities
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Electronic Catalogs and
Other Market Mechanisms
Two approaches to creating customized catalogs
Let the customers identify the parts of interest to them from the total catalog
Let the system automatically identify customer characteristics based on the customer’s transaction records
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Electronic Catalogs and
Other Market Mechanisms
search engine
A computer program that can access a database 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
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Electronic Catalogs and
Auctions as EC Market Mechanisms
electronic shopping cart
An order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop
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
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Auctions As EC
Market Mechanisms
Limitations of Traditional Off-line Auctions
The rapid process may give potential buyers little time to make a decision
Bidders do not have much time to examine the goods
Bidders must usually be physically present at auctions
Difficult for sellers to move goods to an auction site
Commissions are fairly high
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Auctions As EC
Market Mechanisms
electronic auction (e-auction)
Auctions conducted online
dynamic pricing
Prices that change based on supply and demand relationships at any given time
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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
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Auctions As EC
Market Mechanisms
Types of auctions
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
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Exhibit The Reverse Auction Process
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Auctions As EC
Market Mechanisms
Types of auctions
One Buyer, Many Potential Sellers
“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
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Auctions As EC
Market Mechanisms
Types of auctions
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
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Auctions As EC
Market Mechanisms
Limitations of E-Auctions
Minimal security
Possibility of fraud
Limited participation
Impacts of E-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
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Bartering and Negotiating Online
bartering
The exchange of goods or services
e-bartering (electronic bartering)
Bartering conducted online, usually by a bartering exchange
bartering exchange
A marketplace in which an intermediary arranges barter transactions
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Bartering and Negotiating Online
Online negotiating—Three factors may facilitate online negotiation:
The products and services that are bundled and customized
The computer technology that facilitates the negotiation process
The software (intelligent) agents that perform searches and comparisons, thereby providing quality customer service and a base from which prices can be negotiated
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EC in the Wireless Environment:
M-Commerce
mobile computing
Permits real-time access to information, applications, and tools that, until recently, were accessible only from a desktop computer
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
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Competition in the Digital Economy
Internet ecosystem
The business model of the Internet economy
differentiation
Providing a product or service that is unique
personalization
The ability to tailor a product, service, or Web content to specific user preferences
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Competition in the Digital Economy
Competitive Factors in the Internet Economy
Lower prices
Customer service
Barriers to entry are reduced
Virtual partnerships multiply
Market niches abound
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Competition in the Digital Economy
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
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Exhibit Porter’s Competitive
Forces Model
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Impacts of EC on
Business Processes and Organizations
Improving Direct Marketing
Product promotion
New sales channel
Direct savings
Reduced cycle time
Improved customer service
Brand or corporate image
Other Impacts on Direct Marketing
Customization
Advertising
Ordering systems
Market operations
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Exhibit The Analysis-of-Impacts
Framework
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Impacts of EC on
Business Processes and Organizations
Transforming Organizations
Technology and organizational learning:
Corporate change must be planned and managed
Organizations may have to struggle with different experiments and learn from their mistakes
The changing nature of work
Firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly lower
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Impacts of EC on
Business Processes and Organizations
Redefining Organizations
New and improved product capabilities
New business models
Improving the supply chain
Impacts on 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
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Exhibit Changes in the
Supply Chain
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Exhibit Real-Time Demand-Driven
Manufacturing
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Impacts of EC on
Business Processes and Organizations
Redefining Organizations
Impacts on Finance and Accounting
E-markets require special finance and accounting systems. Most notable of these are electronic payment systems
Impacts on Human Resource Management and Training
EC is changing how people are recruited, evaluated, promoted, and developed
EC also is changing the way training and education are offered to employees
Companies are cutting training costs by 50% or more, and virtual courses and programs are mushrooming
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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?
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Summary
E-marketplaces and their components.
The role of intermediaries.
The major types of e-marketplaces.
Electronic catalogs, search engines, and shopping carts.
Types of auctions and their characteristics.
Prentice Hall © 2006
Summary
The benefits and limitations of auctions.
Bartering and negotiating.
The role of m-commerce.
Competition in the digital economy.
The impact of e-markets on organizations.
Prentice Hall © 2006
