Question

1. Outline the main options for trading between businesses and consumers.
2. Explain the concepts of disintermediation and re-intermediation with reference to a particular
industry; what are the implications for a company operating in this industry?
3. Describe the three main alternative locations for trading within the electronic marketplace.
4. What are the main types of commercial transactions that can occur through the Internet or in
traditional commerce?

Answer 1

1.Outline the main options for trading between businesses and consumers.
Answer :
These are: ·
B2C–retail to consumers ·
B2B–interorganizational ·
C2C–consumer interactions, e.g. auctions ·
C2B–customer make offers to businesses, e.g. Priceline

2.Explain the concepts of disintermediation and re-intermediation with reference to a particular industry; what are the implications for a company operating in this industry?
Answer :
Example: air travel. A carrier has the option of:
Disintermediation:–selling direct from its web site.It means to remove intermediation from the supply chain. With the advent of internet based shopping in the 1990’s the term became the buzzword signifying the elimination of middlemen as a result of direct to consumer e-commerce methods and consumers dealing directly with service providers.The disintermediation of intermediaries whose cost become greater than the value sees the reduction of inefficiencies in its supply chain such as a decrease in the time lapse between production and delivery and resultantly increase profit for manufacturers.

• Furthermore, without the middlemen adding additional charges for their services, the final price decreases for the end consumer. Moreover, the power shifts away to manufacturers by providing access to consumer information and being able to build direct consumer relationships such as loyalty, customization and resolving technical issues e.g. Dell computers or travel industry where travel agencies once advised where to travel, offered travel and tour packages. The Internet has transformed travel booking into the hand of the consumer. An airline such as Ryanair deals directly with consumers directly.
• In many ways disintermediation sees the producer becoming the distributor. It also leads to sabotage the relationship with intermediaries. Also, new customer services may be required to replace those eliminated by the process e.g. customer service centers and distribution related services such as low order sizes and shipment to consumers.The value of intermediaries varies and is influenced by factors such as technology, industry life cycles, consumer abilities, and economic climate.

Re-intermediation:–selling via new online intermediaries with new pricing models such as Priceline, Last minute or Expedia.This is the process of adding intermediaries to the supply chain. It occurs when pre-existing intermediaries offer a new value proposition and re-enter with a new function or when offer innovative value-adding services.

There are 4 general roles:

Aggregation: to aggregate the demand as an online equivalent of a traditional intermediary substituting direct consumers contact for a highly personalized online service e.g. Amazon, Expedia
Matching: to act as a marketplace matching demand to supply and linking buyers to sellers. The database driven portal offers a range of product and services that are not held as inventory by the intermediary e.g. Travel comparison service Kayak or auction portal e-bay
Trust: to counter the loss of trust from a lack of pre-purchase physical contact by providing some sort of guarantee e.g. Online financial transaction agents e.g. PayPal, VeriSign
Facilitation: to act as a broker in the transferral of information online, managing various financial administration factors e.g. travel booking software, SABRE or crowdfunding site Kickstarter

3.Describe the three main alternative locations for trading within the electronic market place.
Answer :
1)Seller controlled sites:

These sites are the main home page of the company and are e-commerce-enabled. They are basically vendor sites, i.e. home site of organization selling products. This is the most common type for both consumers and businesses. In this model the sellers who provide to fragmented markets such as chemicals, electronics, and auto components come together to generate a common trading place for the buyers. While the sellers aggregate their market power, it simplifies the buyers search for alternative sources.

2)Buyer controlled sites:

Buyer-controlled sites are intermediaries which have been set up so that it is the buyer who initiates the market-making. This can occur through procurement posting where a purchaser specifies what they wish to purchase, it is sent by e-mail to suppliers registered on the system and then offers are awaited. This model is used by large companies with significant buying power or a consortium of several large companies. Using this model the buyers are looking to efficiently manage the procurement process, lower administrative cost, and exercise uniform pricing.

3)Neutral sites:

Neutral sites are independent evaluator intermediaries that enable price and product comparison. They are basically intermediaries not controlled by buyer’s industry. This model offers suppliers a direct channel of communication to buyers through online storefronts. The marketplace makes revenue from the fees generated by matching buyers and sellers. These marketplaces are usually active either in a vertical or horizontal market. Product-specific search engines, comparison sites and auction space are examples of neutral sites.

4.What are the main types of commercial transactions that can occur through the Internet or in traditional commerce?
Answer :
Commercial (trading) mechanism:
1. Negotiated deal:
With the rapid development of electronic commerce, more and more people have begun to go shopping on the Internet. Price negotiation has become increasingly important for two reasons. From the consumer's view, price negotiation provides an opportunity to debate the price; from the vendor's view, the ability to negotiate the price allows for flexibility in pricing that a rigidly fixed price cannot offer. An obstacle that hinders the development of electronic commerce is that price negotiation on the Internet is not like shopping in store. In this paper, the author wants to design an agent-based price negotiation system for electronic commerce. It would allow the seller to negotiate with the buyers on the Internet. Firstly we put forward a framework of agent-based price negotiation, then we propose a price negotiation model based on equilibrium theory of game theory. Finally, the paper describes the behavior definition of agent and explains the rules for communication between agents.
2. Brokered deal:
An ecommerce business broker sells established ecommerce businesses. The role of the business is as follows.

1. Value ecommerce businesses.
2. Develop a selling document.
3. Market the business to qualified buyer.
4. Field offers.
5. Assist with due diligence.
6. Assist with deal closing.
7. Manage the admin

3. Auction:
An online auction is a service in which auction users or participants sell or bid for products or services via the Internet. Virtual auctions facilitate online activities between buyers and sellers in different locations or geographical areas. Various auction sites provide users with platforms powered by different types of auction software.
4. Fixed price sale:
Many online retail businesses use one of three popular strategies to set product prices: cost-based, competitor-based, and value-based.

Cost-based pricing or, as it is sometimes called, cost-plus pricing may be the most popular pricing model in the retail industry. Its greatest advantage is simplicity. It permits a store, be it brick-and-mortar or online, to set prices without significant customer or market research and ensure a minimum return on each product sold.
Cost-based pricing strategies hedge a retail ecommerce business against losses, but can sometimes leave profit behind. First, it is possible that your customer would have been happy to pay more for the product, which would have earned additional profit on each sale. Second, it is just as likely that your price could be too high, and you sell many fewer units of the product, resulting in less profit.
Competitor-based Ecommerce Pricing
With a competitor-based pricing strategy, you simply monitor what your direct competitors are charging for a particular product, and set your price relative to theirs.

This retail pricing model works when you sell identical products as your competitors and have no differentiators. In effect, you’re assuming that your competition has done some research or has some experience or is at least visible enough in the marketplace that their pricing must be matched.

You might set your store’s price for a particular product relative to your competitor’s price for that same product.

Unfortunately, this pricing strategy can lead to pricing competition and what some call a race to the bottom. Imagine that you’re also selling your products on the Amazon Marketplace. You have a product that you normally sell for $299.99 on your own website, so you set your Amazon price at $299.99, expecting the orders to pour in. But they don’t come in as expected. You discover that a competitor is selling the identical product for $289.99, so you lower your price to $279.99. Before long both of you have obliterated your margins and selling the product is hardly worth it.

The warning, then, is to use competitor-based ecommerce pricing carefully. The aim is to maximize your ecommerce store’s profitability.

Value-based Ecommerce Pricing
If you focus on the value you can deliver to a customer, setting prices based on what you perceive a shopper — in the industry segment you serve — will pay for a particular product at a particular time, you have taken the value-based or value-optimized approach to ecommerce pricing.
5. Pure markets:
A pure play is a company that invests its resources in only one line of business. As such, this type of stock has a performance that correlates highly to the performance of the stock's particular industry. For example, many electronic retailers or "e-tailers" are pure plays. All they do is sell one particular type of product over the internet. Therefore, if internet buying declines even slightly, these companies are negatively affected.

6. Barter:

Brater is a method of trade by exchanging one commodity (good and services) for another without using a exchange of medium.

In ancient times, before money invented trade as a whole was based on barter system. This was possible only in a simple economy where the exchange of goods was possible without a medium of exchange but it was confusing and inefficient. But the development of economy, money became as a medium of exchange.