Advances In Management. Vol. 2 (12) December (2009)

An Analysis of E-Commerce Models and StrategiesMishra Rohita Kumar'* and Mahalik Debendra Kumar^

1. IIPM-School of Management, Kansbahal, Orissa, INDIA2. Department of Business Administration, Sambalpur University, JyotiVihar, Burla, INDIA

*rohitkmishra@rediffmail.com

AbstractE-Commerce is the buzzword of today's global

business. In order to take the advantage, organizationsare adopting different strategy and utilizing a lot ofresources. This paper focuses on analysis of different e-commerce web sites and their categorization withrespect to different e-commerce models. It alsoemphasizes the strategic issues relating to e-commerce.

Keywords: E-commerce, Strategy, Models.

IntroductionCommerce is basically the exchange of goods and

services. When it is done with the help of computer andInternet, it is known as Electronic Commerce (e-commerce).Electronic commerce is a system that combines the resourcesof information systems with the reach of networkconnectivity, to directly link the key business constituents -Customers and Businesses - to improve the efficiency of thestructures and attributes of commerce (Eig.l). The exchangeof information attribute in the electronic commerce systemmay include banner advertisements; web site containingdetails of products/services and electronic catalogues thatprovide detailed information on pricing, quality, delivery andpayment terms'. In some cases, it also gives guidedcustomization or an interaction via electronic mail. Thecustomer then enters the second phase or to the orderprocessing attribute after sufficient level of interaction. Theorder stage is followed by exchange of values which mayinvolve physical or electronic shipment. In electroniccommerce, payment can be done through traditional methods,using the credit card over the network; or by new methods,utilizing electronic wallets containing digital money.

There are other two attributes, service towardscustomer and marketing. In the electronic commerce systemthe product/service providers are directly connected throughthe reach of the network. Direct reach to the provider of theservice can become a major source of efficiency in addressingproblems, keeping customers up-to-date with the newdevelopments, thus, assisting them in realizing the fullperformance value of the product/service. The networkprovision of service to customers also gives the producersaccurate access to data regarding problems encountered bythe customers, as well as their product preferences. The useof e-commerce primarily refers to buying, selling, marketingand other related aspects. The commerce faces different typesof ups and down daily due to certain changes, so also the e-

* Author for correspondence

commerce. Hence the organization should adopt differentstrategies to minimize the effect of change.

E-commerce deals with three models, which arecontrolled by three parties, one those controlled by sellers,another controlled by buyers and rest controlled by thirdparties. Generally sellers controlled e-commerce web sites aremanaged by the seller itself and they set up the web sites toincrease the market share and to have a greater reach. Theygenerally adopt E-commerce principles, when they feel, theexisting brick mortar company's marketing strategy are notadequate to the new market demand and to increase theirmarket penetration. For example Cisco and Dell computersenable buyers to configure their own demand for computersand other networking devices like router, switch etc. andcheck lead time, prices and order and shipment status online,which leads to increase the market share and reach. The sitesgenerate about 40% of sales through the web sites alone. Inaddition the CISCO system, publish technical details andcustomer online help, they save 270 million $ annually inprinting expense, order and on telephone based technicalsupport. The online facilities increase the customer loyaltyand help in maintaining customer relation in a better way.

Buyers controlled market places are set up by one ormore buyers with the aim of shifting power and value in themarket place to the buyer side. Many such players required aintermediary. It is due to the free market online, a smallcompany that helps traditional firms locates a pool ofcompetitive suppliers for semi-complex assembly parts suchas plastics injection moldings service to refine the buyer'sspecification and screen potential suppliers. When the bestcontenders have been identified, it sets up and conducts online bidding session, which generally lasts for up to threehours. The service offers a buyer average price savings of 10to 25 percent and helps them to buy more effectively.

Third party neutral market places are set up by thirdparty intermediaries to match many buyers to many sellers.One such intermediary is. bazee.com, which operates anintermediary for consumable items. All the parties bothsellers and buyers get benefited from this services. In thisprocess the sellers get higher price than they would have gotin traditional broker environment and so also the buyers. Thisprocess in the other way eliminates the traditional boundaryof location, easy and immediate transaction. How ever neutralmarket places do not necessarily eliminate traditionalintermediaries.

Different players adopt different model and thesemodels can be categorised as follows:

(7)

Advances In Management. i Vol. 2 (12) December (2009)

Information Content Model: The web today is probably thelargest source of information, available free of cost to theusers. Academicians, scientists and researchers were^the earlybirds who realized the power of web and created atremendous body of information on the public network. Earlyon, many web sites were set up by amateurs, containingscientific, country, culture and tourism related information.Many other web sites organized the plethora of availableinformation content in the form of virtual online libraries. Inthis model these sites attract visitors by offering theminformation content that is organized to facilitate search anddiscovery. Virtual Library is the oldest catalog of the web,started by tim Berners-Lee, the creator of html and the worldwide web itself. It is run by a loose confederation ofvolunteers, who compile pages of key links for particularareas in which they have expertise. Virtual library pages are

'widely recognized as being amongst the highest quality^guides to the particular sections of the web. The NationalInformatics Center (http://www.nic.in) maintains contents forthe Indian government and many state governments of India.

,The International Council of Museums also maintains avirtual library of museum pages (http://www.icom.org),containing information of museums spread around the globe.

Freeware Model: Internet Software companies haveextensively utilized the freeware model to offer downloads oftheir products. Web browsers by Netscape and Microsofthave been available for free downloads to individual users.Linux, a cooperating operating system developmentmovement has utilized internet and web technology toconnect developers, users and systems administrations tomaintain, download and answer support queries. Linux usesfree peer-driven customer support where a group of Linuxusers help each other by providing solutions to problem facedby members. Apache (http://apache.org), yet another webservice is popular today.

Information Exchange Model: This model is based «ponthe exchange of information between individuals andorganization, over the Internet. The information capturedduring the interaction about a person can be used for buildingthe profile of individual users. The profile can be laterutilized by target marketing and advertising companies forscreening out and creating mailing lists. Users may provideinformation voluntarily as a part of registration process, as inthe case with businesses like hotmail.com, amazon.com andyahoo.com in order to utilize the service offered by website.Users may also provide the information, during theinteraction. Many of the news delivery services and targetedadvertising services indulge in this model.

Subscription Model: Content creators and publishers haverelied on a subscription based service model. Scientificjournals, newsmagazines and other periodic content havebeen offered on a subscription basis. Leading publishers andcreators of digital content have adapted this model on the

Internet. Presently many journals and magazines arepublished in digital form. In addition many news services andvaluable audio and video content are also available in digitalformat. Multimedia technologies used for publishing digitalcontent are fully compatible with the web • technology forbrowsing and delivery of content. In this model,, userssubscribe to the web site in order to access the databaseand/or information for a period of time and pay for access tothe site. The model requires that the content being offeredessentially adds a high value to the subscriber and is notavailable at other places for free. The ACM and IEEE Journalsubscription service (http:// www.acm.org) for members isbuilt upon this model.

Brokerage Model: This type of model is generally applied toa third party, where they collect different types of brokeragefrom different parties to sustain in the market. They act as anagent and develop a market place, where, they bring buyersand sellers together and facilitate transactions. Usually theirrole is felt in B2B, B2C and C2C models. They generally takea charge, a fee or commission for each transaction. In somecases they collect some entry fees. The charge of fees canvary. Examples: www.metaljunction.com, www.e-steel.com,www.e-bay.com, www.bazee.com

Advertising Model: This model is an extension of thetraditional media broadcaster. In this a web site providescontent (usually, but not necessary, for free) and services likeemail, chat, forums mixed with the advertising messages inthe form of banner of advertisement. The banner or theadvertisement may be the major source of revenue for thebroadcaster. These types of models work when the volume ofviewer traffic is large. In some case the parties takes differenttypes of fees for availing these facilities. Example: Yahooportal, match.com, monster.com, jobsahead.com, except thesemodels, there are other types of models like Electronic StoreModel, Manufacturer model, Metered Service Model andDigital Products Merchant Model.

Strategy: In the era of globalization, where all the companiesare doing their best to attract their customer. E-commerceoption are wide open for the players, provided they takeproper strategy to implement the same, that will lead tocustomer attraction and retention of customers. One strategyis to choose a model, which suits the present and the futurerequirement like whether to go for own e-commerce basedtransaction web site or to have a third party. Generally in theposition of greater market share and better well-establishedbrand like CISCO, Dell etc, going for own e-commerce basedtransaction is better. In case with little and less aware brand,one should go for a third party market place, as follower isthe better option than a leader"*.

There are some factors which give rise to thedissatisfaction with online customer so while designing theweb site; these factors must be taken into consideration:• Can not touch and feel good

(8)

Advances In Management. ; .'. Vol. 2 (12) December (2009)

• Don't feel secure enough to transact over internet• Absence of humane touch• Quality of goods doubtful• Price higher than market rates• Delivery takes a long time• Satisfied with offline buy• Chances of Goods damage/spoilt while transportation• Many rules and regulations• Not having credit card and other tools like computer and

internet• Illiteracy of computer• Not enough infrastructure

Technical issues:• Use trickle-down navigation• Sweep Navigating under the carper• Make the product look good, but do it quickly• Do not skim on the information• For best color accuracy, test and test again• Protect your brand identity• Stick to the lowest common denominator• Make your site for easy navigation• Find technical ways to generate repeat visit of your site• Continuous updating and modification as required• Do not give unnecessary instruction to the user• Register your web site with search engine• Publicizing y»ur web site through different sources• Immediate response to the query of the customers

Steps for E-commerce:• Finding and developing a Web presence for an organi-

zation• Moving to a truly e-commerce business scenario• Defining, Streamline and optimize business process• Computerization of business process or computerization

of different department• Integration of different function in a department• Integration of all the department• Integration of all the function which are diversified in

different location• Making interference with customer so that a customer

can buy and sell their products over internet'• Integration with supplier• Integration with distributor• Integration with competitor to make a e-market

f

Different types of web sites:• Information provider• . Intermediaries• E-commerce portala. B2C (Business to Consumer)b. C2B (Consumer to Business)c. C2C (Consumer to Consumer)d. B2B (Business to Business)

Business to Consumer Electronic Commerce: Business-toConsumer (B2C) electronic commerce focuses consumers thecapability to browse, select and buy merchandise online, froma wider variety of sellers and at better prices. There are twoentities interacting with each other like selling business andconsumer. The selling businesses offer a set of merchandiseat given prices, discounts and shipping and delivery options.In this type of electronic commerce the sellers and consumersboth benefited through round the clock shopping accessibilityfrom any part of the world. The use of electronic commercein the retailing segment has evolved from an online version ofcatalog selling to accepting orders and payments onlinehaving zero inventories into huge discounts on the prices ofitems'. The B2C model of electronic commerce transaction isideally suited for the following types of merchandise:

• Goods that can be easily transformed into digital formatsuch as books, music clips and videos and softwarepackages.

• Items that follow standard specifications like printerribbons, ink, cartridges etc.

• Branded items that are highly rated or items with returnsecurity such as Dell and Compaq computers, electronicgadgets from Sony etc.

• Those items which are sold in packets and cannot beopened even in physical stores e.g. Kodak film rolls.

• Relatively cheap items where savings outweigh risks.

Consumer to Business Electronic Commerce: Consumer-to-Business (C2B) is- a form of electronic commerce wherethe transaction, originated by the customer has a set ofrequirement specifications and specific price for acommodity, service or item. The mail aim is to match therequirements of the consumers to the best possible extent.C2B enables a consumer to determine the price of a productand/or service offered by a company. Here consumers get achoice of a wide variety of commodities and services, alongwith the opportunity to specify the range of prices they canafford. As a result, it reduces the bargaining time, increasesthe flexibility and creates ease at the point of sale for both theparty.

Consumer to Consumer Electronic Commerce: Consumer-to-Consumer (C2C) electronic commerce provides theopportunity for trading of products and/or services amongstconsumers who are connected through the Internet. Hexeelectronic tools and Internet infrastructure are employed tosupport transactions between individuals. Much of thetransactions in these categories correspond to small gift items,craft merchandise and similar items that are generally soldthrough 'flea' markets or bazaars, where individuals sell theirgoods to other individuals at a market determined prices^.C2C electronic commerce promotes the opportunity forconsumers to transact goods or services with other consumersavailable on the Internet. The C2C models the exchangesystems with a modified form of deal making. For dealmaking purposes a large virtual consumer trading communityis developed^. The customer operates by the rules of this

(9)

Advances In Management. ., Vol. 2 (12) December (2009)

community to compete, check and decide the own basicselling and/or buying prices.

fBusiness-To Business Electronic Commerce: Business-toBusiness electronic commerce facilitates inter-organizationalinteraction and transaction. Here two or more businessentities interact with each other directly or through anintermediary. The intermediaries in B2B electronic commercemay be market makers, directory service providers who assistin matching buyers and sellers and striking a deal. Thebusiness application of B2B electronic commerce can beutilized to facilitate almost all facets of interactions amongorganizations like inventory management, channel manage-ment, distribution management, order fulfillment and deliveryand payment management^ The B2B electronic commercecan be a supplier centric, buyer centric or an intermediarycentric. In the supplier-centric model, a supplier sets up theelectronic commerce marketplace. The supplier may providecustomized solutions and pricing to fit the needs of buyers'businesses.

Factors Responsible for Unsuccessful of E-Commerce

Electronic Commerce has not been successful due tothe three different angles such as social angle, organizationalangle and technological angle. The factors corresponding tothe particular angle are identified below:

Social angle:• People awareness (cyber law)• People confidence (on the system, rules etc)• Traditional Mindset (high cost of internet)• Feeling good factor• Not having plastic money• Social reaction• After sale service• Improper infrastructure• Less option (not all product are available)• Lots of web presence• Nearest presence• Not well managed web site

Organizational angle:• Lack of payment facility• Online catalog• On line ordering facility• Product search facility• Supply chain integration• Customer relation

Technological angle:• Technological difference• Frequently changes in technology• Internet access• Health hazards

Why people are ready for e-commerce:• Time saving• Home delivery but surprisingly not with lower cost

ConclusionThe development of electronic market place is

inevitable in many if not most, industries. But before that it isreally a hard task to choose appropriate model and strategy.Whether to go for the E-Commerce into the organization isalso a big question. Before arriving any solution, thecompanies should therefore conduct a detailed analysis ofselling and procurement process to discover how much can besaved, its effectiveness and its adaptability. After finalizingthe concept, next step would be to finalize the model. Furtherproper strategy and only moving to the arena to the E-commerce will not improve the financial position of theorganization. E-commerce alone can not bring success but theintegration of other functional departments like supply chain,inventory, manufacturing needs to be streamlining to bringthe overall efficiency. Finally clear vision of the topmanagement is the key success factor for E-commerce.

iExchange ofInformation

r

Order processing

1»hipment of

goods

r

Payment

Marketingactivities

i

Servtowa

custo

ice

rds

Fig.l: Attributes of Electronic Commerce

References1. Armstrong Arthur and Hagel John, "The real value of on linecommunities". Harvard Business Review, 134-141 (1996)

2. Benjamin R.R Wigand, "Electronic markets and virtual valuechains on the information superhighway". Solan ManagementReview, 62-72, Winter (1995)

3. Bhasker Bharat, "Electronic Commerce: Framework. Techn-ologies & Applications", Tata McGraw-Hill Publishing CompanyLimited, New Delhi, 2"" ed. (2006)

4. McKenna R., "Real-Time Marketing", Harvard Business Review,87-95 (1995)

5. Debora Spar and Busgang Jeffrey J., "the Net", Harvard BusinessReview, 125-133 (1996)

(Received 6"" August 2009, accepted 30"^ October 2009)

(10)

Copyright of Advances in Management is the property of Advances in Management and its content may not be

copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written

permission. However, users may print, download, or email articles for individual use.