Study Material — Complete Set

Evolution of eMarketplaces

IT6506 · e-Business Technologies · Level III · Semester 6 · UCSC BIT
Topic 02 Questions 5 All Sub-topics Covered Click card to reveal answer
// Questions & Model Answers
Q 01
eMarketplace Overview, Classification & Evolution
Define eMarketplaces and explain the TWO main types (horizontal and vertical) with examples. Describe the role electronic marketplaces play in the economy. Then outline the key stages in the evolution of eMarketplaces from the 1990s to the present, and provide FOUR Sri Lankan and FOUR global eMarketplace examples stating what makes each unique. 25 marks
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eMarketplaces — also called online marketplaces — are digital platforms that connect buyers and sellers of goods and services, allowing businesses and individuals to list products or services where potential customers can browse and purchase them. They are central to the modern digital economy.
// Types of eMarketplaces

Horizontal eMarketplaces

Offer a wide range of products and services across multiple industries. Target the broadest possible audience with no category specialisation.

Examples: Amazon (books, electronics, groceries, cloud services), eBay (consumer goods across all categories), Daraz.lk (Sri Lanka's widest product range platform)

Vertical eMarketplaces

Specialise deeply in a single industry or category, offering greater depth and domain expertise within that niche.

Examples: Airbnb (lodging only), Etsy (handmade/vintage goods only), Zillow (real estate only), Fiverr (freelance services only), Healthguard.lk (healthcare products only)

Intermediary Model

Platform facilitates the transaction and takes a commission on each sale. Examples: eBay, Amazon Marketplace.

Direct Connection Model

Platform connects buyers and sellers directly without taking a per-transaction commission. Example: Alibaba — connects global businesses directly with Chinese manufacturers.

// Role of eMarketplaces in the Economy

What Markets Facilitate

  • Exchange of Information
  • Exchange of Goods
  • Exchange of Services
  • Exchange of Payments

Economic Value Created For

  • Buyers — wider choice, better prices
  • Sellers — broader reach, lower marketing cost
  • Markets & Intermediaries — commissions, data
  • Society — jobs, access, innovation
// Evolution of eMarketplaces — Key Stages
1

Early Days (mid-1990s)

First basic online marketplaces. eBay (1995) and Amazon (1994) launched, connecting buyers and sellers digitally for the first time.

2

Expansion (late 1990s–2000s)

Proliferation of specialised (vertical) and general (horizontal) platforms. Etsy, Airbnb, and Daraz.lk emerged targeting specific niches.

3

Mobile Revolution (2010s)

Smartphones created mobile-first platforms. Uber and PickMe revolutionised ride-hailing via apps; mobile became the primary channel.

4

Digital Transformation — B2B Growth

B2B eMarketplaces scaled. Alibaba and ThomasNet enabled business procurement globally through digital supply chains.

5

Platformisation

Marketplaces became full ecosystems. Amazon expanded into AWS, Prime Video, Alexa — far beyond its original retail purpose.

6

Blockchain Era (present)

Decentralised eMarketplaces (OpenBazaar, Bitify) emerged, operating without central authority using blockchain and cryptocurrency.

// Global & Sri Lankan Examples
PlatformCountryTypeUnique Value
AmazonGlobalHorizontalLargest ecommerce platform; full ecosystem (AWS, streaming, AI devices)
AlibabaGlobal (B2B)Direct ConnectionConnects global businesses with Chinese manufacturers without per-transaction fees
AirbnbGlobalVertical (Lodging)Peer-to-peer lodging; monetises unused rooms; disrupted the hospitality industry
FiverrGlobalVertical (Freelance)Freelance micro-services from $5 upward; global talent market for digital work
Daraz.lkSri LankaHorizontalLargest Sri Lankan ecommerce platform; backed by Alibaba; electronics to groceries
Ikman.lkSri LankaClassifiedsFree classified ads for vehicles, property, electronics, jobs — widest local reach
KaprukaSri LankaGifts & ServicesSpecialises in gifting, flowers, food delivery; strong overseas Sri Lankan user base
Healthguard.lkSri LankaVertical (Health)Exclusively healthcare/wellness products — vitamins, supplements, personal care
HorizontalVertical EvolutionBlockchain DarazAlibaba Economic ValueB2B
Q 02
Traditional vs New Business Models & Porter's Five Forces
Compare traditional and new eBusiness models across SIX dimensions (Production, Distribution, Communication, Finance, Markets, Assets). Then explain Michael Porter's Five Forces model and for EACH force: (a) describe when the force is strongest, and (b) recommend ONE eBusiness strategy to reduce it, with an example. 25 marks
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The shift from traditional to eBusiness models represents one of the most fundamental transformations in commerce. Simultaneously, Michael Porter's Five Forces provides the analytical lens through which companies choose the right digital strategies to stay competitive.
// Traditional vs New eBusiness Models
DimensionTraditional ModelNew eBusiness Model
ProductionMass production — large quantities of identical standardised goodsPersonalised production tailored to individual needs (e.g., Dell build-to-order computers)
DistributionRelies on middlemen — wholesalers, distributors, retailersDirect-to-customer, eliminating intermediaries (e.g., Dell Direct Model)
CommunicationChained and closed — hierarchical, slow information flowNetworked and open — real-time, multi-directional digital communication
FinanceSlow transactions, limited hours, difficult cross-border paymentsFaster, easier, 24/7 digital banking, mobile payments, instant international transfers
MarketsLocal or geographically constrainedGlobal reach with no geographic boundaries (Amazon, Alibaba serve 190+ countries)
AssetsTangible/physical — factories, warehouses, storesIntangible/virtual — software, data, brand equity, digital IP

Old Model vs Online Model — Strategic View

Old: Physical operations, own core competencies, geographical coverage, high switching costs, IT as a support function, barriers: brand + physical location.

New: Online operations, collaborative competencies, global coverage, low switching costs (standardised tech), IT as the core strategy, barriers: brand name + 1:1 digital relationships + quality of service.

// Porter's Five Forces — Forces, Conditions & eBusiness Strategies
ForceWhen It Is StrongesteBusiness StrategyExample
Rivalry Among Competitors Slow-growing market; homogenous/undifferentiated products; high fixed costs; easy customer switching Value-Added Product Differentiation + CRM + Product Bundling Amazon bundles Prime (delivery + video + music + storage) making it extremely hard to match or switch from
Threat of New Entrants Low start-up costs; weak brand loyalty; unprotected processes; easy access to inputs and customers Strengthen entry barriers: CRM loyalty programs + Strategic Alliances + Cost Leadership Apple's iOS ecosystem (App Store, iCloud, device lock-in) creates high switching costs that deter new smartphone entrants
Bargaining Power of Suppliers Few suppliers; unique inputs; easy for supplier to bypass you and sell direct to your customers Backward Integration + Supply Chain Management (SCM) + ePortal for bulk ordering Walmart's Retail Link portal gives suppliers real-time inventory data while Walmart uses its bulk-buying scale to negotiate lower prices
Bargaining Power of Buyers Buyers are large and purchase much of your output; products undifferentiated; low switching costs Forward Integration + CRM Loyalty Programs + Value-Added Differentiation Daraz.lk uses personalised recommendations and DCoins loyalty rewards to reduce buyer switching to Takas or Kapruka
Threat of Substitutes Easy customer switching; low loyalty; product offers no real unique benefit over alternatives Product Diversification + Market Diversification + Strategic Alliances Netflix diversified from DVD rental into streaming and then original content production to make itself the substitute rather than the victim

Key Insight: In the Sri Lankan garment sector, the forces are: Rivalry — Very High; Buyer Power — Very High; Threat of New Entrants — High; Substitutes — High; Supplier Power — Low. Strategies include SCM portals, CRM systems, and direct digital channels to foreign buyers, bypassing traditional intermediaries.

Traditional vs NewFive Forces CRMSCM Dell ModelBackward Integration Product BundlingDiversification
Q 03
Technologies Enabling New Business Models
Explain how disruptive technologies have changed traditional business rules (provide at least FOUR examples of old rule → new rule transformations). Then describe FIVE information systems commonly used within businesses. Finally, explain the roles of SCM and CRM in the modern eBusiness value chain and how new business processes are structured around Process, Technology, and People. 25 marks
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Technology has not merely improved existing business processes — it has fundamentally disrupted the rules that governed them. The traditional value chain (Supplier → Distributor → Manufacturer → Reseller → Customer) has been transformed at every stage by information systems, connectivity, and intelligent software.
// Disruptive Technology — Old Rules vs New Rules
Old RuleDisruptive TechnologyNew Rule
Information exists in one place at a timeShared DatabasesInformation appears simultaneously across multiple locations in real time
Only experts can perform complex tasksExpert Systems (AI/ML)A generalist can do the work of an expert using intelligent systems
Businesses must choose: centralise or decentraliseTelecommunications NetworksBusinesses benefit from both centralisation AND decentralisation simultaneously
Only managers make decisionsDecision Support Systems (DSS)Decision-making becomes part of everyone's job at all levels
Field staff need an office to access or give informationWireless/Mobile/InternetField staff are connected from wherever they are, at any time
Best contact with a buyer is personal (face-to-face)Internet / World Wide WebBest contact with a buyer is effective contact — digital, personalised, and timely
// Five Key Information Systems Used in Businesses

MIS — Management Information Systems

Collects data from various sources and presents it in a form that helps managers make decisions, plan operations, and control business activities.

TPS — Transaction Processing Systems

Processes large volumes of routine transactions — purchases, sales, inventory updates — quickly and accurately with minimal human intervention.

DSS — Decision Support Systems

Uses data models and analytical tools to help managers analyse complex business scenarios and make evidence-based decisions.

ESS — Executive Support Systems

Designed for senior executives; provides easy access to key strategic information (KPIs, dashboards) needed for high-level decision-making.

ICS — Inventory Control Systems

Manages inventory levels, tracks stock movement, minimises holding costs, and ensures products are available when needed across the supply chain.

KM — Knowledge Management Systems

Captures, stores, and disseminates organisational knowledge among employees — preserving expertise and improving collective productivity.

// SCM vs CRM in the eBusiness Value Chain

SCM — Supply Chain Management

  • Manages the flow of goods from supplier to end customer
  • Coordinates procurement, production, inventory, logistics, distribution
  • Uses software, tracking systems, and communication networks
  • Reduces costs, improves quality, increases customer satisfaction
  • Achieves competitive advantage through end-to-end efficiency

CRM — Customer Relationship Management

  • Manages interactions with current and potential customers
  • Centralises: contact info, purchase history, preferences
  • Enables personalised marketing and targeted communication
  • Increases loyalty, reduces acquisition costs, drives upselling
  • Delivers higher customer satisfaction and retention
// Process — Technology — People Framework
RelationshipBetweenDescriptionExample
LinkageProcess ↔ ProcessOutput of one process becomes the input of another in a connected chainOnline order → triggers inventory deduction → triggers supplier restocking
InterconnectionTechnology ↔ TechnologyDigital systems share data in real time through APIs, databases, and networksPayment gateway connects to warehouse management system connects to delivery tracking
Co-operationPeople ↔ TechnologyHuman actors work alongside digital systems, each contributing what they do bestCustomer service agent uses CRM dashboard to resolve a buyer dispute using live data

Key Insight: As more businesses, suppliers, customers, and partners connect digitally, the number of Process–Technology–People relationships grows exponentially. This is why successful eBusiness organisations treat IT as strategy (not just a support function) — the complexity requires deliberate governance, not ad-hoc management.

MISTPSDSS SCMCRM Disruptive Technology Process-Technology-PeopleValue Chain
Q 04
Mass Customisation & Direct-to-Customer Interaction
Define mass customisation and distinguish it from mass personalisation. Describe FOUR benefits and FOUR problems of mass customisation in manufacturing with examples. Then explain the Direct-to-Customer interaction model: describe its five-stage cycle, contrast it with traditional retail distribution, and explain why it is growing in importance for modern eBusiness. 25 marks
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Mass customisation addresses the fundamental tension in modern commerce: customers want personalised products, but businesses need economies of scale to remain profitable. Direct-to-Customer (DTC) models complement this by removing intermediaries so that personalisation information flows directly between producer and buyer.
// Mass Customisation — Definition

Definition

Mass customisation is a manufacturing process that combines the advantages of mass production (economies of scale, efficiency) with customisation (personalisation to individual needs), producing tailored goods without sacrificing cost-effectiveness. It is enabled by technologies such as CAD, 3D printing, EDI, automation, and web-based configurators.

// Mass Customisation vs Mass Personalisation
AspectMass CustomisationMass Personalisation
DefinitionCustomised product/service + competitive advantage via combinations of technological and management methodsA personalised experience based on co-creation, analysis of user behaviour and organisational changes
Key ElementsData-driven; limited customer impact; harmonisation between diversity, costs and quality; demand-driven supply chainData-driven; strong customer interaction and co-creation; demand-driven
AimTailored product/service oriented to competitive advantageGreater access to information; streamlined processes; tailored experience for target audience; smart service
// Benefits & Problems of Mass Customisation

Benefits

  • Higher customer satisfaction: Products match individual needs; customers pay more for personalised items (revenue premium)
  • Reduced inventory costs: Products made on demand — no need for large pre-built stock warehouses
  • Competitive differentiation: Competitors cannot easily replicate your unique product range, creating a sustainable advantage
  • Reduced waste: Only ordered quantities are produced — environmentally and financially efficient

Problems in Manufacturing

  • Cannot build stock ahead: Impossible to forecast and pre-manufacture — every order starts from scratch
  • Demand forecasting difficult: Wide option range makes sales trend prediction unreliable, creating procurement uncertainty
  • Supply chain disruption: Wide variety of inputs affects 3rd-party partner workflows and increases lead times
  • Higher machinery costs: Maintaining varied machinery capable of different configurations, colours, and shapes is expensive
// Apparel Industry Example — Enabling Technologies
StageCustomisation OptionEnabling Technology
PatternsCustom fit or designBody scanner, digitiser and CAD
DesignComponent choice: size, style, fabricCAD and web-based product configurators
Production PlanningData forecastingEDI and production planning software
AssemblySmall-lot repeatsElectronically-controlled robotics and UPS
DistributionPoint-of-sale dataEDI and supply chain management software
// Direct-to-Customer (DTC) — The Five-Stage Interaction Cycle
  • 01
    Awareness

    Customers are in the early stage of their purchase journey, looking for information about what the business does. Action: educate through content marketing, SEO, and social media.

  • 02
    Consideration

    Customers evaluate the product's unique value proposition against competitors. Action: help prospects move down the funnel with demos, comparisons, and reviews.

  • 03
    Conversion

    The final stage of the sales cycle — the prospect becomes a paying customer. Action: smooth checkout experience, targeted promotions, clear call-to-action.

  • 04
    Retention

    Gaining customers should never be the sole goal. Check in, seek feedback, and ensure customers remain satisfied. Action: post-purchase emails, customer service excellence, loyalty programs.

  • 05
    Advocacy

    Loyal customers become brand ambassadors. Action: referral programs, social sharing incentives, testimonials to bring in new customers organically.

// Traditional Retail vs DTC Distribution

Traditional Retail Distribution

Manufacturer → Wholesaler → Distributor → Retailer → Consumer

Multiple intermediaries increase cost, reduce margins, slow delivery, and prevent direct customer data collection.

Direct-to-Consumer (DTC)

Manufacturer → Advertising/Website → Consumer

Fewer intermediaries = higher margins, richer first-party customer data, faster feedback loops, and ability to personalise at scale. Example: Dell, Nike iD, Tesla (sells only through its own website/stores).

Mass CustomisationDTC Customer CycleCAD/EDI RetentionAdvocacy ApparelMass Personalisation
Q 05
Virtual Organisations, Business Goals & Applied Case Study
(a) Explain the concept, key characteristics, benefits, and concerns of a Virtual Organisation. (b) Describe the THREE business goals that drive organisational reengineering (Survival, Sustainability, Growth). (c) Apply Porter's Five Forces to the following scenario and recommend TWO eBusiness strategies for the most critical forces identified:

"SpiceRoute is a Sri Lankan online spice export marketplace connecting local farmers with international buyers. Two large supermarket chains recently launched competing import apps. Global B2B players are considering entering the Sri Lankan export market." 25 marks
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Virtual organisations represent the full realisation of eBusiness — geographically dispersed, digitally co-ordinated, with no physical footprint. Understanding them alongside business reengineering goals and competitive strategy gives a complete picture of how modern eBusiness operates.
// Part (a) — Virtual Organisations

Definition

A virtual organisation is a network of individuals or groups who work together to achieve common goals while being geographically dispersed, communicating primarily through technology (email, IM, video conferencing, online collaboration tools). They operate without a physical office, moving businesses from place to space — replacing cash, cheques, and storefronts with digital/electronic/virtual interconnections.

Key Characteristics

  • Borderless — no physical geographic limits
  • Faceless — interaction is digital, not face-to-face
  • Paperless — digital documents replace physical ones
  • Multiple business entities sharing information via a shared virtual hub to serve the same customer
  • Particularly suited to knowledge-based industries: software development, consulting, R&D

Key Concerns

  • Trust: Can you rely on parties you have never met in person?
  • Security: Risk of data breaches, identity fraud, cyber attacks
  • Convenience: Always-on availability vs digital fatigue and work-life boundary issues
  • Managing remote teams across multiple time zones
  • Legal compliance across different country jurisdictions

Benefits

  • Access to a wider global talent pool without geographic limits
  • Reduced overhead — no rent, utilities, or physical maintenance
  • Greater flexibility: when and where people work
  • Reduced environmental impact (less commuting)
  • Enhanced collaboration through specialised digital tools

Changing Business Model

In a virtual organisation model, Business A, B, and C each hold their own information and processes. A shared Virtual Organisation hub combines their capabilities to serve the same customer — creating value none could create alone, without co-locating staff or sharing physical infrastructure.

// Part (b) — Three Business Goals for Reengineering

1. Survival

  • Companies in deep trouble — no choice but to reengineer
  • Reactive, crisis-driven digital transformation
  • Urgency is extreme; risk tolerance is low
  • Example: A traditional travel agent losing 80% of bookings to online platforms must digitise immediately or close

2. Sustainability

  • Not yet in trouble, but foresees disruption coming
  • Proactive, preventive digital transformation
  • Has the foresight to act before a crisis hits
  • Example: A bank that sees fintech disruption and proactively launches mobile banking and digital wallets

3. Growth

  • Ambitious and already competitive
  • Uses reengineering as an opportunity to extend their lead
  • Aggressive, opportunity-driven transformation
  • Example: Amazon continuously reinventing — retail to AWS to Alexa to healthcare — well ahead of any crisis
// Part (c) — Applied Case Study: SpiceRoute
SpiceRoute is a Sri Lankan online B2B spice export marketplace connecting local farmers with international buyers. Two large supermarket chains recently launched competing import apps with significant capital. Global B2B players are considering entering the Sri Lankan export market.
ForceLevel for SpiceRouteJustification
Rivalry Among CompetitorsVERY HIGHLarge supermarket chains with capital, brand recognition, and logistics infrastructure are launching direct competing apps — most immediate and damaging force
Threat of New EntrantsHIGHGlobal B2B platforms (Alibaba, Amazon Business) have the technology and capital to enter the Sri Lankan spice export market rapidly with standardised platforms
Bargaining Power of BuyersMEDIUM-HIGHInternational buyers can compare spice suppliers across multiple platforms with low switching costs — they hold significant price leverage
Bargaining Power of SuppliersLOW-MEDIUMLocal farmers are fragmented and small-scale — individually weak. However, SpiceRoute IS their primary export channel, creating mutual dependency
Threat of SubstitutesMEDIUMBuyers could source spices from India, Vietnam, or Indonesia through other platforms — geographic alternatives exist but Sri Lankan spices have quality differentiation
// Recommended Strategies for the TWO Most Critical Forces

Force 1: Rivalry (Very High) — Strategy: Value-Added Differentiation + CRM

Value-Added Differentiation: SpiceRoute should emphasise provenance and quality transparency that supermarket apps cannot offer — visible farmer profiles, certified organic labelling, direct farm-to-export traceability using QR codes, and guaranteed harvest dates. International buyers in premium markets (UK, EU, USA) will pay significantly more for authenticated, traceable origin.

CRM Strategy: Build a buyer relationship management system that tracks purchase patterns of international buyers, sends automatic re-order alerts when their previous order quantity was typically reordered, and provides personalised seasonal harvest calendars — creating a "sticky" service relationship that supermarket apps cannot replicate.

Force 2: Threat of New Entrants (High) — Strategy: Strategic Alliances + Product Bundling

Strategic Alliances: Partner with the Sri Lanka Spice Council, Export Development Board (EDB), and Sri Lanka Customs to become the officially endorsed digital export channel. This creates institutional legitimacy and regulatory relationships that a new international entrant would take years to replicate.

Product Bundling: Bundle spice exports with complementary services: export documentation assistance, phytosanitary certification, freight-forward partnerships, and customs clearance — making SpiceRoute a full-service export hub rather than just a listing platform. Global B2B players entering without these local service integrations cannot immediately compete on the same value.

The Final Goal of eBusiness (from the lecture): "The ability to connect with, access information, conduct business or deliver services to anyone — from anywhere — anytime — using almost any device — securely — easily — cost effectively — and with a single click." SpiceRoute's ambition should be measured against this standard.

Virtual Organisation Survival / Sustainability / Growth Case Study Applied Strategic Alliances CRMDifferentiation Product BundlingFinal Goal