{"id":101,"date":"2018-12-26T10:19:10","date_gmt":"2018-12-26T15:19:10","guid":{"rendered":"http:\/\/pressbooks.library.upei.ca\/smallbusinessmanagement\/chapter\/e-business-and-e-commerce\/"},"modified":"2020-01-06T09:58:38","modified_gmt":"2020-01-06T14:58:38","slug":"e-business-and-e-commerce","status":"publish","type":"chapter","link":"https:\/\/pressbooks.library.upei.ca\/smallbusinessmanagement\/chapter\/e-business-and-e-commerce\/","title":{"raw":"Chapter 16: E-Business and E-Commerce: The Difference","rendered":"Chapter 16: E-Business and E-Commerce: The Difference"},"content":{"raw":"
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Learning Objectives<\/h3>\r\n
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  1. Define e-business and e-commerce and explain the difference between them.<\/li>\r\n \t
  2. Understand that there are several different types of e-commerce and that a business can be engaged in more than one type at the same time.<\/li>\r\n \t
  3. Explain what a business model is and why the model that is selected is so important.<\/li>\r\n<\/ol>\r\n<\/div>\r\nE-business and e-commerce are terms that are often used interchangeably. But e-business<\/strong><\/em> and e-commerce<\/strong><\/em> are not the same. This section will elaborate on the differences between the two and some of the foundational knowledge that is critical to understanding and using e-commerce in particular.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
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    E-Business<\/h2>\r\n

    It is important that small businesses understand the nature of e-business and how it can facilitate operations as well as growth\u2014if growth is desired. It has been said on other occasions, and it will continue to be said, that not all small businesses look for growth, choosing instead to happily remain small. For the small businesses that do want to grow, however, e-business can help them do it through the internet and online technologies to create operational efficiencies, thereby increasing customer value.[footnote]Kelly Wright, \u201cE-Commerce vs. E-Business,\u201d Poole College of Management, November 27, 2002, accessed October 10, 2011, scm.ncsu.edu\/scm-articles\/article\/e-commerce-vs.-e-business[\/footnote]<\/p>\r\n\r\n

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    E-Business Components<\/h2>\r\n

    E-business involves several major components: business intelligence (BI), customer relationship management (CRM), supply chain management (SCM), enterprise resource planning (ERP), e-commerce, conducting electronic transactions within the firm, collaboration, and online activities among businesses.[footnote]Terri C. Albert and William B. Sanders, e-Business Marketing (Upper Saddle River, NJ: Prentice-Hall, 2003), 2\u20134; and Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson\/Prentice Hall, 2008), 4[\/footnote]<\/p>\r\n\r\n

    \r\n\r\n[caption id=\"\" align=\"aligncenter\" width=\"453\"]\"image\" Figure 16.1 Components of E-Business[\/caption]\r\n\r\n<\/div>\r\n

    [pb_glossary id=\"760\"]Business intelligence[\/pb_glossary]<\/strong><\/em><\/span> is about the activities that a small business may undertake to collect, store, access, and analyze information about its market or competition to help with decision making. When conducted online, BI is efficient and quick, helping companies to identify noteworthy trends and make better decisions faster. BI has been described as \u201cthe crystal ball of the 21st century.\u201d[footnote]Lena L. West, \u201cBusiness Intelligence: The Crystal Ball of Champions,\u201d Small Business Computing.com, April 11, 2006, accessed October 10, 2011, www.smallbusinesscomputing.com\/biztools\/article.php\/3598131\/Business -Intelligence-The-Crystal-Ball-of-Champions.htm.[\/footnote]<\/p>\r\n

    [pb_glossary id=\"761\"]Customer relationship management (CRM)[\/pb_glossary]<\/strong><\/em> refers to \u201c\u2026a customer service approach that focuses on building long-term and sustainable customer relationships that add value for the customer and the company.\u201d[footnote]Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson\/Prentice Hall, 2008), 759[\/footnote] It is a company-wide strategy that brings together information from all data sources within an organization (and sometimes from external data sources) to give one holistic view of each customer in real time. The goal is to reduce costs and increase profitability while providing customer satisfaction.[footnote]\u201cWhat Is CRM?,\u201d cestination CRM applications are available for even the smallest businesses. CRM.com, February 19, 2010, accessed October 10, 2011, www.destinationcrm.com\/Articles\/CRM-News\/Daily-News\/What-Is-CRM-46033.aspx[\/footnote]<\/p>\r\n

    Every small business has a supply chain, the network of vendors that provide the raw components that are needed to make a product or deliver a service. The management of this network is known as supply chain management (SCM). Efficiently and effectively improving the way that a company finds raw components and then delivers the product or the service to the customer; SCM is about efficiently and effectively improving the way that a company finds those raw components and then delivers the product or the service to the customer.[footnote]Thomas Wailgum and Ben Worthen, \u201cSupply Chain Management Definition and Solutions,\u201d CIO, November 20, 2008, accessed October 10, 2011, www.cio.com\/article\/40940\/Supply_Chain_Management_Definition_and_Solutions[\/footnote] SCM applications are now available for small businesses. More details about SCM are presented in Chapter 12 \"People and Organization\"<\/a>.<\/p>\r\n

    [pb_glossary id=\"763\"]Enterprise resource planning (ERP)[\/pb_glossary]<\/strong><\/em>, is about integrating all departments and functions across a company (sales, marketing, human resources, finance, accounting, production, engineering, etc.) into a single computer system that can serve the particular needs of each department. The objective is to provide information quickly and efficiently to those who need it. Small businesses have many vendor choices for ERP systems. There are more than thirty vendors in the field, and they are looking to small and midsize businesses as their primary growth market.[footnote]Mary O. Foley, \u201cERP for Small Business: The Time is Ripe,\u201d Inc., October 1, 2007, accessed October 10, 2011, technology.inc.com\/2007\/10\/01\/erp-for-small-business -the-time-is-ripe[\/footnote]<\/p>\r\n

    [pb_glossary id=\"764\"]E-commerce[\/pb_glossary]<\/strong><\/em>, is the marketing, selling, and buying of goods and services online. It generates revenue, which e-business does not. E-commerce is typically associated with e-marketing,\u00a0but most of this chapter is dedicated to the operational, nonmarketing dimensions of e-commerce.<\/p>\r\n

    Conducting electronic transactions within a firm can occur through an [pb_glossary id=\"765\"]intranet[\/pb_glossary]<\/strong><\/em>, a\u00a0private network within a business that is used for information sharing, processing, and communication., e-mail, and instant messaging. An intranet is a private network within a business that is used for information sharing, processing, and communication. The goal is to \u201cstreamline the workplace and allow easy information exchange within an organization.\u201d[footnote]Dachary Carey, \u201cWhat Is Intranet Technology Used For?,\u201d Life123, accessed October 10, 2011, www.life123.com\/technology\/internet\/intranet\/what-is-intranet.shtml[\/footnote]<\/p>\r\n

    Collaboration can occur internally or externally, and it often involves business partners. The goal is to help teams or business partners communicate with each other more effectively and efficiently, manage projects and shared materials, save companies the costs of travel, and reduce travel-related productivity losses.\u00a0E-mail, instant messaging, newsgroups, bulletin boards, discussion boards, virtual team rooms, online meetings, and [pb_glossary id=\"766\"]wikis[\/pb_glossary]<\/strong><\/em>, a web page that can be viewed and modified by anybody with a web browser and access to the Internet unless it is password protected, are common means of collaboration.[footnote]\u201c7 Things You Should Know about Wikis,\u201d Educause Learning Initiative, July 2005, accessed October 10, 2011, net.educause.edu\/ir\/library\/pdf\/ELI7004.pdf[\/footnote] The most well-known wiki is Wikipedia<\/a><\/em>.<\/p>\r\n

    Online activities between businesses focus on information sharing and communication via e-mail, online meetings, instant messaging, and extranets. An [pb_glossary id=\"767\"]extranet[\/pb_glossary],\u00a0<\/strong><\/em>is the part of an intranet that is made available to business partners, vendors, or others outside a company. It allows a business \u201cto share documents, calendars, and project information with distributed employees, partners, and customers\u201d and \u201cit enables 24\/7 private, secure access to collaborative tools with just an Internet connection.\u201d[footnote]\u201cCommunicate Quickly and Efficiently Through Intranets, Extranets and Portals,\u201d Gozapit Interactive, 2009, accessed October 10, 2011, www.gozapit.com\/intranet-extranet.htm [\/footnote]They make communication easier, eliminate redundant processes, reduce paperwork, increase productivity, provide immediate updates and information, and provide quick response times to problems and questions.\u201d[footnote]Communicate Quickly and Efficiently Through Intranets, Extranets and Portals,\u201d Gozapit Interactive, 2009, accessed October 10, 2011, www.gozapit.com\/intranet-extranet.htm[\/footnote]<\/span> The result is money and time saved for employees, the company, vendors, and your customers. Commercial transactions typically do not take place on extranets.<\/p>\r\n

    As integral as e-business may be to many small businesses, however, there will be small businesses that choose not to go the e-business route. Small businesses that are nonemployers and\/or are very small operations that choose to stay that way\u2014for example, local delis, gift shops, restaurants, dry cleaners, and ice cream shops can be and are successful without having to make a commitment to e-business. Therefore, a small business can choose to incorporate all, some, or none of the e-business components. Given the ways in which the Internet continues to transform small businesses, however, it would be virtually impossible for a small business to operate totally outside the realm of e-business.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

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    E-Commerce<\/h2>\r\n

    The moment that an exchange of value occurs, e-business becomes e-commerce.[footnote]Elias M Awad, Electronic Commerce: From Vision to Fulfillment (Upper Saddle River, NJ: Pearson Education, 2005), 4.[\/footnote] E-commerce is the revenue generator for businesses that choose to use the Internet to sell their goods and services. Some small businesses rely on the Internet to grow and survive. Many small businesses also look to e-commerce for their own business needs, such as computers and office technology, capital equipment and supplies, office furnishings, inventory for online sale, or other business-related goods.[footnote]\u201cE-commerce: Small Businesses Become Virtual Giants on the Internet,\u201d accessed October 10, 2011, www.score.org\/system\/files\/become_a_virtual_giant.pdf[\/footnote] This is not surprising considering the pervasiveness of the Internet for business transactions of all shapes and sizes.<\/p>\r\n\r\n

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    Types of E-Commerce<\/h2>\r\n

    Every Internet business is either [pb_glossary id=\"1027\"]pure-play<\/strong>[\/pb_glossary]<\/em>, or [pb_glossary id=\"1028\"]brick-and-click<\/strong>[\/pb_glossary]<\/em>. A pure-play business, such as Amazon and Zappos, has an online presence only and uses the capabilities of the Internet to create a new business. Brick-and-click businesses, such as Barnes and Noble and Vermont Country Store, combine a physical presence with an online presence. These businesses use the Internet to supplement their existing businesses.\u00a0[footnote]Sandeep Krishnamurthy, E-Commerce Management: Text and Cases (Mason, OH: South-Western, 2003), 73.[\/footnote]<\/span><\/p>\r\n

    There are several different types of e-commerce. A common classification system is with respect to the nature of transactions or the relationships among participants.[footnote]\u00a0Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson\/Prentice Hall, 2008), 8.[\/footnote] There are seven major types of e-commerce:<\/p>\r\n\r\n

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    1. [pb_glossary id=\"1029\"]Business-to-business (B2B)[\/pb_glossary]\u00a0<\/strong><\/em> e-commerce, where businesses focus on selling to other businesses or organizations, is the largest form of e-commerce.[footnote]Kenneth C. Laudon and Carol G. Traver, E-commerce: Business, Technology, Society (Upper Saddle River, NJ: Prentice Hall, 2007), 58.[\/footnote][footnote]Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson\/Prentice Hall, 2008), 8.[\/footnote]<\/span> Cisco, Staples, and Spiceworks (information technology [IT] and IT networks for the small- and medium-sized business) are all B2B companies.<\/li>\r\n \t
    2. [pb_glossary id=\"1030\"]Business-to-consumer (B2C)[\/pb_glossary]<\/strong><\/em> is the earliest form of e-commerce, but it is second in size to B2B. It refers to retail sales between businesses and individual consumers. Consumers gather information; purchase physical goods, such as books and clothing; purchase information goods, such as electronic material or digitized content, such as software; and, for information goods, receive products over an electronic network. [footnote]Zorayda Ruth Andam, \u201ce-Commerce and e-Business,\u201d Asia and Pacific Training Centre for Information and Communication Technology for Development, May 2003, accessed June 21, 2012, http:\/\/www.unapcict.org\/ecohub\/resources\/e-commerce-and-e-business\/at_download\/attachment1[\/footnote]<\/span><\/li>\r\n \t
    3. [pb_glossary id=\"1031\"]Consumer-to-consumer (C2C)[\/pb_glossary]<\/strong><\/em>e-commerce is where consumers sell products and personal services to each other with the help of an [pb_glossary id=\"1032\"]online market maker[\/pb_glossary] to provide catalog, search engine, and transaction-clearing capabilities so that products can be easily displayed, discovered, and paid for. The most well-known C2C business is eBay, but there are many other online market makers as well. Craigslist<\/a> is an extremely popular small e-commerce business for placing classified ads.<\/li>\r\n \t
    4. [pb_glossary id=\"1033\"]Business-to-government (B2G)[\/pb_glossary]<\/strong><\/em> e-commerce can generally be defined as transactions with the government. The Internet is used for procurement, filing taxes, licensing procedures, business registrations, and other government-related operations. This is an insignificant segment of e-commerce in terms of volume, but it is growing.<\/li>\r\n \t
    5. [pb_glossary id=\"1035\"]Consumer-to-business (C2B)[\/pb_glossary]<\/strong><\/em> e-commerce is between private individuals who use the Internet to sell products or services to organizations and individuals who seek sellers to bid on products or services. [footnote]Efraim Turban et al., Electronic Commerce: A Managerial Perspective (Upper Saddle River, NJ: Pearson\/Prentice Hall, 2008), 8.[\/footnote] <\/span>Elance<\/a> is an example of C2B where a consumer posts a project with a set budget deadline and within hours companies and\/or individuals review the consumer\u2019s requirements and bid on the project. The consumer reviews the bids and selects the company or individual that will complete the project. Elance empowers consumers around the world by providing the meeting ground and platform for such transactions.\u201cEcommerce Definition and Types of Ecommerce,\u201d DigitSmith<\/em>, accessed October 10, 2011, www.digitsmith.com\/ecommerce-definition.html<\/a>.<\/span> Priceline.com is a well-known example of C2B e-commerce.<\/li>\r\n \t
    6. [pb_glossary id=\"1036\"]Mobile commerce (m-commerce)[\/pb_glossary]<\/strong><\/em> refers to the purchase of goods and services through wireless technology, such as cell phones, and handheld devices, such as Blackberries and iPhones. Japan has the lead in m-commerce, but it is expected to grow rapidly in the United States over the next several years. eMarketer predicts mobile content revenues will grow to more than $3.53 billion in 2014, a compound annual growth rate of nearly 20 percent for the period 2009\u20132014, with the fastest growth coming from mobile music.[footnote]\u201cMobile Content Soars Thanks to Device and Network Advances,\u201d eMarketer, August 31, 2010, accessed October 10, 2011, www.emarketer.com\/Articles\/Print.aspx?1007899[\/footnote]<\/span><\/li>\r\n \t
    7. [pb_glossary id=\"1037\"]Peer-to-peer (P2P)[\/pb_glossary]<\/strong><\/em> technology makes it possible for Internet users to share files and computer resources directly without having to go through a central web server. P2P began with Napster offering free music downloads via a file-sharing system.[footnote]Free Encyclopedia of Ecommerce, \u201cPeer-to-Peer Technology (P2P),\u201d accessed June 1, 2012, http:\/\/ecommerce.hostip.info\/pages\/840\/Peer-Peer-Technology-P2P.html[\/footnote] <\/span>Tamago<\/a> launched the world\u2019s first P2P commerce system in 2005, which allowed people to sell every type of digital media directly from their computers to customers all over the world. People who publish videos, photos, music, e-books, and so forth can earn royalties, while buyers earn commissions for distributing media to others.[footnote]\u201cTamago Launches First Peer-to-Peer eCommerce System,\u201d PR Leap, October 15, 2006, accessed October 10, 2011, www.prleap.com\/pr\/51931[\/footnote]<\/span><\/li>\r\n<\/ol>\r\n
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      Figure 16.2<\/span> How P2P E-Commerce Works at Tamago.com<\/strong><\/h3>\r\n\"image\"\r\n
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      Source: [footnote]\u201cPeer to Peer Profit,\u201d http:\/\/www.tamago.us<\/a> (accessed October 10, 2011).[\/footnote]<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

      Although these types of e-commerce have been discussed individually, there are many instances in which one company engages in multiple types. Office Depot and Staples are brick-and-click businesses that engage in B2B, B2C, and perhaps B2G e-commerce. Carbonite<\/a> and Gourmet Gift Baskets<\/a> are both pure-play small businesses that engage in B2C and B2B e-commerce.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

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      E-Commerce Business Models<\/h2>\r\n

      The decision to engage in e-commerce is an important one. The advantages are clear: lower business costs; 24\/7 accessibility anywhere; the potential for stronger customer service; the ability to introduce a niche product; the ability to reach global markets on a more equalized basis with larger firms, making mass customization possible; and greater customer loyalty. But the risks are there as well. Internet problems, website problems, security and privacy breaches, intellectual property theft, legal liability, product and\/or service failure, customer deceit, and customer dissatisfaction are but a few of the risks. Therefore, the choice of an e-commerce business model must be made carefully. Each model will have different implications in terms of business planning and strategy.<\/p>\r\n

      An [pb_glossary id=\"1038\"]e-commerce business model[\/pb_glossary]<\/strong><\/em> is the method that a business uses to generate revenue online. \u201cThe business model spells out how a company makes money by specifying where it is positioned in the value chain. Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. Other models can be more intricately woven.\u201d[footnote]Michael Rappa, \u201cBusiness Models on the Web,\u201d DigitalEnterprise.org, January 17, 2010, accessed October 10, 2011, digitalenterprise.org\/models\/models.html[\/footnote]<\/span> Another way to look at a business model is that it \u201creflects management\u2019s hypothesis about what customers want, how they want it, and how the enterprise can organize to best meet those needs, get paid for doing so, and make a profit.\u201d[footnote]David J. Teece, \u201cBusiness Models, Business Strategy and Innovation,\u201d Long Range Planning 43, no. 2\u20133 (2010): 172\u201394.[\/footnote] There are many models to choose from, and new models will continue to emerge as technology evolves and businesses look for new and creative ways to generate revenue. Some of the many e-commerce business models are as follows:[footnote]For additional discussions of business models, see Michael Rappa, \u201cBusiness Models on the Web,\u201d DigitalEnterprise.org, January 17, 2010, accessed October 10, 2011, digitalenterprise.org\/models\/models.html; and Robert D. Atkinson et al., \u201cThe Internet Economy 25 Years After .Com: Transforming Commerce & Life,\u201d Information Technology & Innovation Foundation, March 2010, accessed October 10, 2011, www.itif.org\/files\/2010-25-years.pdf[\/footnote]<\/span><\/p>\r\n\r\n