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Introduction To E-Commerce

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Vilma Solayao
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0% found this document useful (0 votes)
67 views43 pages

Introduction To E-Commerce

report

Uploaded by

Vilma Solayao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 43

Chapter 1:

Introduction to Electronic Commerce

ELECTRONIC
COMMERCE, SEVENTH
ANNUAL EDITION
Objectives 2

In this chapter, you will learn about:

 What electronic commerce is and how it


is experiencing a second wave of growth
with a new focus on profitability
 Why companies now concentrate on
revenue models and the analysis of
business processes instead of business
models when they undertake electronic
commerce initiatives
Objectives (continued) 3

 How economic forces have created a business


environment that is fostering the second wave of
electronic commerce
 How businesses use value chains and SWOT analysis to
identify electronic commerce opportunities
 The international nature of electronic commerce and the
challenges that arise in engaging in electronic commerce
on a global scale
Electronic Commerce: The 4

Second Wave
 Electronic commerce (e-commerce)
 Businesses trading with other businesses and
internal processes

 Electronic business (e-business)


 Term used interchangeably with e-commerce

 The transformation of key business processes


through the use of Internet technologies
Categories of Electronic 5
Commerce
 Five general e-commerce categories:
 Business-to-consumer
 Business-to-business
 Business processes
 Consumer-to-consumer
 Business-to-government

 Supply management or procurement


 Departments are devoted to negotiating
purchase transactions with suppliers
6
Categories of Electronic Commerce 7
(continued)
 Transaction
 An exchange of value
 Business processes
 The group of logical, related, and sequential activities and
transactions in which businesses engage
 Telecommuting or telework
 Employees log in to company computers through the Internet
instead of traveling to the office
8
9
The Development and Growth of 10
Electronic Commerce
 Electronic funds transfers (EFTs)
 Also called wire transfers
 Electronic transmissions of account exchange information
over private communications networks
 Electronic data interchange (EDI)
 Transmitting computer-readable data in a standard format to
another business
11
The Development and Growth
of Electronic Commerce
(continued)
 Trading partners
 Businesses that engage in EDI with each other

 Value-added network (VAN)


 Independent firm that offers connection and transaction-
forwarding services to buyers and sellers engaged in EDI
12
The Second Wave of 13
Electronic Commerce
 Defining characteristics of the first wave:
 Dominant influence of U.S. businesses
 Extensive use of the English language
 Many new companies started with outside investor money
 Unstructured use of e-mail
 Over-reliance on advertising as a revenue source
The Second Wave of 14

Electronic Commerce
(continued)
 Second wave:
 Global enterprises in many countries are participating in
electronic commerce
 Established companies fund electronic commerce initiatives
with their own capital
 Customized e-mail strategies are now integral to customer
contact
Business Models, Revenue 15

Models, and Business


Processes
 Business model
 A set of processes that combine to yield a profit
 Revenue model
 A specific collection of business processes used to:
 Identify customers
 Market to those customers
 Generate sales to those customers
Role of Merchandising 16

 Merchandising
 Combination of store design, layout, and product display
knowledge
Product/Process Suitability 17

to Electronic Commerce
 Commodity item
 Hard to distinguish from the same products or services
provided by other sellers
 Features have become standardized and well known
Product/Process Suitability 18

to Electronic Commerce
(continued)
 Shipping profile
 Collection of attributes that affect how easily a product can
be packaged and delivered

 High value-to-weight ratio


 Can make overall shipping cost a small fraction of the selling
price
Advantages of Electronic 19

Commerce
 Electronic commerce can increase sales and
decrease costs
 If advertising is done well on the Web, it can get a
firm’s promotional message out to potential
customers in every country
 Using e-commerce sales support and order-taking
processes, a business can:
 Reduce costs of handling sales inquiries
 Provide price quotes
Advantages of Electronic 20

Commerce (continued)
 It increases purchasing opportunities for buyers
 Negotiating price and delivery terms is easier
 The following cost less to issue and arrive securely and
quickly:
 Electronic payments of tax refunds
 Public retirement
 Welfare support
Disadvantages of 21

Electronic Commerce
 Perishable grocery products are much harder to sell online
 It is difficult to:
 Calculate return on investment
 Integrate existing databases and transaction-processing
software into software that enables e-commerce
 Cultural and legal obstacles also exist
Economic Forces and 22

Electronic Commerce
 Economics
 Study of how people allocate scarce resources

 Two conditions of a market


 Potential sellers of a good come into contact with potential
buyers

 A medium of exchange is available


Transaction Costs 23

 Transaction costs are the total costs that a buyer and seller
incur

 Significant components of transaction costs:

 Cost of information search and acquisition

 Investment of the seller in equipment or in the hiring of skilled


employees to supply products or services to the buyer
Using Electronic 24

Commerce to Reduce
Transaction Costs
 Businesses and individuals can use electronic commerce
to reduce transaction costs by:

 Improving the flow of information

 Increasing coordination of actions


Network Economic 25

Structures
 Network economic structures
 Neither a market nor a hierarchy
 Companies coordinate their strategies, resources, and skill
sets by forming long-term, stable relationships with other
companies and individuals based on shared purposes
 Strategic alliances (strategic partnerships)
 Relationships created within the network economic structure
Network Economic 26

Structures (continued)
 Virtual companies

 Strategic alliances that occur between or among companies


operating on the Internet

 Strategic partners

 Entities that come together as a team for a specific project or


activity
Network Effects 27

 Law of diminishing returns


 Most activities yield less value as the amount of
consumption increases

 Network effect
 As more people or organizations participate in a
network, the value of the network to each
participant increases
Identifying Electronic 28

Commerce Opportunities
 Firm
 Multiple business units owned by a common set of
shareholders
 Industry
 Multiple firms that sell similar products to similar customers
Strategic Business Unit 29

Value Chains
 Value chain
 A way of organizing the activities that each strategic business
unit undertakes
 Primary activities include:
 Designing, producing, promoting, marketing, delivering, and
supporting the products or services it sells
 Supporting activities include:
 Human resource management and purchasing
30
Industry Value Chains 31

 Value system

 Larger stream of activities into which a particular business


unit’s value chain is embedded

 Also referred to as industry value chain


32
SWOT Analysis: Evaluating 33

Business Unit Opportunities


 In SWOT analysis:

 An analyst first looks into the business unit to identify its


strengths and weaknesses

 The analyst then reviews the operating environment and


identifies opportunities and threats
34
35
International Nature of 36

Electronic Commerce
 Companies with established reputations:
 Often create trust by ensuring that customers know who they
are
 Can rely on their established brand names to create trust on
the Web
 Customers’ inherent lack of trust in “strangers” on the Web
is logical and to be expected
Language Issues 37

 To do business effectively in other cultures a


business must adapt to those cultures
 Researchers have found that customers are more
likely to buy products and services from Web sites
in their own language
 Localization
 Translation that considers multiple elements of the
local environment
Culture Issues 38

 An important element of business trust is


anticipating how the other party to a transaction
will act in specific circumstances
 Culture:
 Combination of language and customs
 Varies across national boundaries
 Varies across regions within nations
Infrastructure Issues 39

 Internet infrastructure includes:


 Computers and software connected to the Internet
 Communications networks over which message packets
travel
 Organization for Economic Cooperation and
Development’s (OECD) Statements on Information and
Communications Policy deal with telecommunications
infrastructure development issues
Infrastructure Issues 40

(continued)
 Flat-rate access system
 Consumer or business pays one monthly fee for
unlimited telephone line usage
 Contributed to rapid rise of U.S. electronic
commerce
 Targets for technological solutions include
paperwork and processes that accompany
international transactions
41
Summary 42

 Commerce
 Negotiated exchange of goods or services
 Electronic commerce
 Application of new technologies to conduct business more
effectively
 First wave of electronic commerce
 Ended in 2000
 Second wave of electronic commerce
 New approaches to integrating Internet technologies into
business processes
Summary (continued) 43

 Using electronic commerce, businesses have:


 Created new products and services
 Improved promotion, marketing, and delivery of existing
offerings
 The global nature of electronic commerce leads to many
opportunities and few challenges
 To conduct electronic commerce across international
borders, you must understand the trust, cultural, language,
and legal issues

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