Exercise 1

1. Visit http://yahoo.com and http://facebook.com as examples of online communities.
a. What is meant by “online community” and how it is important for e-commerce?

From the Cambridge Dictionary of American English, a community is defined as “…all the people who live in a particular area, or a group of people who are considered as a unit because of their shared interests, background, or nationality”. For an “online community”, the people still get together by shared interests, but they could be scattered in any part of the world, with different background or nationality. Even further, they could be joining without knowing each other, and set up and dismiss quickly.

The online community is important for e-commerce because it is not limited by the traditional community like background, nationality or geographically area. When a merchants advertising on e-commerce hit a certain online community’s interest, the market size and potential revenue could be immensely big. Take yahoo as example, yahoo provides web advertisement for products for visitors shopping, and web analysis of the visitors information like using what search engine and other demographic information for the e-commerce company to evaluate and planning. About facebook, it can create market awareness by building a certain community group, e.g. diet, then gathering a group of people and introducing a certain product indirectly.
Further more, the incurred cost has not to be linear with the business like traditional community. For example, a local community CD shop cannot serve the people outside the proximity. If the CD shop wants to grow the business, they need to have a bigger shop, improve decoration, more marketing activities. With an online community, to reach thousands or millions of potential users basically cost no difference.

b. Is there a common thread and a local community sense in action?
Yes, of course. There is a vertical column on the yahoo home page that contains easy-to-use categories of information. People with same interest can visit the related information easily and form a common thread of community. In facebook, people are connected through friends network and theme groups, that also establish a common thread as a community.

2. Visit the famous online store front at http://www.amazon.com
a. Why has it been a successful site? How does a purchase of a book work?
There are a lot of successful factors of Amazon web site. From the previous staffs, some of them are listed below:

Small task force teams are assigned with full authority so that problem can be tackled effectively. Build system from a customer perspective. Develop APIs for other people, so that an healthy systems can be self-maintained. Keep things as simple as possible, avoid unnecessary complexity.

Source: Matt (2007). Secrets to Amazon's success. Retrieved from http://37signals.com/svn/posts/600-secrets-to-amazons-success on 10 March 2010.

Purchase a book is easy and intuitive on amzon.com. It’s a 1-click system. It means you can find what you want by keeping clicking the options. For example, the first step is to select the type from the top left column of categories. ‘Books’ is on the top of the list, and four options inside. Then you can keep going by selecting the sub-options until you get what you want. When you have finished the selection, there is a check out option for you to confirm the purchase and settle the payment.


3. What happens with new emerging models like price comparison site?

There always be new technology and purchasing model. The price comparison site certainly makes the competition fiercer. The price comparison site does help to place small organizations to reach more customers and effectively use their simple cost overhead advantages. In the old days, small companies do not have the marketing fund or the capability to build company image. However, with the price comparison site, customer basically only compare prices, those large companies (with higher cost structure) might seem no difference from a 3-people shop.