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E-Commerce: The Second Wave Fifth Annual Edition Chapter 1: Introduction to Electronic Commerce Objectives In this chapter, you will learn about: What electronic commerce is and how it is poised for a second wave of growth and profitability

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e commerce the second wave fifth annual edition chapter 1 introduction to electronic commerce

E-Commerce: The Second WaveFifth Annual EditionChapter 1:Introduction to Electronic Commerce

objectives
Objectives
  • In this chapter, you will learn about:
  • What electronic commerce is and how it is poised for a second wave of growth and profitability
  • Why business models have given way to revenue models and the analysis of business processes as key elements of electronic commerce initiatives

E-Commerce: The Second Wave, Fifth Annual Edition

objectives3
Objectives
  • How economic forces have created a business environment that is fostering a rebirth of electronic commerce How businesses use value chains to identify electronic commerce opportunities
  • How businesses use SWOT analysis to analyze and evaluate business opportunities

E-Commerce: The Second Wave, Fifth Annual Edition

objectives4
Objectives
  • Why electronic commerce is international by its very nature and what challenges arise in doing global electronic commerce

E-Commerce: The Second Wave, Fifth Annual Edition

electronic commerce the second wave
Electronic Commerce: The 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

E-Commerce: The Second Wave, Fifth Annual Edition

categories of electronic commerce
Categories of Electronic 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 devoted to negotiating purchase transactions with suppliers

E-Commerce: The Second Wave, Fifth Annual Edition

elements of electronic commerce
Elements of Electronic Commerce

E-Commerce: The Second Wave, Fifth Annual Edition

categories of electronic commerce continued
Categories of Electronic Commerce (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
    • Employee logs in to company computer through Internet instead of traveling to office

E-Commerce: The Second Wave, Fifth Annual Edition

electronic commerce categories
Electronic Commerce Categories

E-Commerce: The Second Wave, Fifth Annual Edition

the development and growth of electronic commerce
The Development and Growth of 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

E-Commerce: The Second Wave, Fifth Annual Edition

the development and growth of electronic commerce continued
The Development and Growth of Electronic Commerce (Continued)
  • Trading partners
    • Businesses that engage in EDI with each other
  • Value-added network (VAN)
    • Independent firm
    • Offers connection and transaction-forwarding services to buyers and sellers engaged in EDI

E-Commerce: The Second Wave, Fifth Annual Edition

actual and estimated online sales in b2c and b2b categories
Actual and Estimated Online Sales in B2C and B2B Categories

E-Commerce: The Second Wave, Fifth Annual Edition

the second wave of electronic commerce
The Second Wave of Electronic Commerce
  • Defining characteristics of first wave
    • Dominant influence of U.S. businesses
    • Extensive use of the English language
    • Low bandwidth data transmission technologies
    • Unstructured use of e-mail
    • Overreliance on advertising as a revenue source

E-Commerce: The Second Wave, Fifth Annual Edition

the second wave of electronic commerce continued
The Second Wave of Electronic Commerce (Continued)
  • As second wave begins
    • Future of electronic commerce will be international in scope
    • Language translation and handling currency conversion problem will need to be solved
    • E-mail will be used as an integral part of marketing and customer contact strategies

E-Commerce: The Second Wave, Fifth Annual Edition

business models revenue models and business processes
Business Models, Revenue Models, and Business Processes
  • Business model
    • A set of processes that combine to yield a profit
  • Revenue model
    • Used to
      • Identify customers
      • Market to those customers
      • Generate sales to those customers

E-Commerce: The Second Wave, Fifth Annual Edition

focus on specific business processes
Focus on Specific Business Processes
  • Merchandising
    • Combination of store design, layout, and product display knowledge
  • Commodity item
    • Hard to distinguish from the same products or services provided by other sellers
    • Features have become standardized and well known

E-Commerce: The Second Wave, Fifth Annual Edition

focus on specific business processes continued
Focus on Specific Business Processes (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

E-Commerce: The Second Wave, Fifth Annual Edition

advantages of electronic commerce
Advantages of Electronic Commerce
  • Can increase sales and decrease costs
  • If advertising done well on the Web
    • 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

E-Commerce: The Second Wave, Fifth Annual Edition

advantages of electronic commerce continued
Advantages of Electronic Commerce (Continued)
  • Increases purchasing opportunities for buyer
  • 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

E-Commerce: The Second Wave, Fifth Annual Edition

disadvantages of electronic commerce
Disadvantages of Electronic Commerce
  • Perishable grocery products are much harder to sell online
  • 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

E-Commerce: The Second Wave, Fifth Annual Edition

economic forces and electronic commerce
Economic Forces and 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

E-Commerce: The Second Wave, Fifth Annual Edition

transaction costs
Transaction Costs
  • Total costs that a buyer and seller incur
  • Significant components of transaction costs
    • Cost of information search and acquisition
    • Investment of seller in equipment or in the hiring of skilled employees to supply product or service to buyer

E-Commerce: The Second Wave, Fifth Annual Edition

the role of electronic commerce
The Role of Electronic Commerce
  • Businesses and individuals
    • Can use electronic commerce to reduce transaction costs by
      • Improving flow of information
      • Increasing coordination of actions

E-Commerce: The Second Wave, Fifth Annual Edition

network economic structures
Network Economic Structures
  • Network economic structure
    • Companies coordinate their strategies, resources, and skill sets
  • Strategic alliances (strategic partnerships)
    • Relationships created within the network economic structure

E-Commerce: The Second Wave, Fifth Annual Edition

network economic structures continued
Network Economic Structures (Continued)
  • Virtual companies
    • Strategic alliances that occur between or among companies operating on the Internet
  • Strategic partners
    • Come together as a team for a specific project or activity

E-Commerce: The Second Wave, Fifth Annual Edition

network effects
Network Effects
  • 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
      • Value of network to each participant increases

E-Commerce: The Second Wave, Fifth Annual Edition

value chains in electronic commerce
Value Chains in Electronic Commerce
  • Strategic business unit
    • One particular combination of product, distribution channel, and customer type
  • Firm
    • Multiple business units owned by a common set of shareholders
  • Industry
    • Multiple firms that sell similar products to similar customers

E-Commerce: The Second Wave, Fifth Annual Edition

strategic business unit value chains
Strategic Business Unit Value Chains
  • Value chain
    • A way of organizing the activities that each strategic business unit undertakes
  • Primary activities
    • Design, produce, promote, market, deliver, and support the products or services it sells
  • Supporting activities
    • Human resource management and purchasing

E-Commerce: The Second Wave, Fifth Annual Edition

value chain for a strategic business unit
Value Chain for a Strategic Business Unit

E-Commerce: The Second Wave, Fifth Annual Edition

industry value chains
Industry Value Chains
  • Value system
    • Larger stream of activities into which a particular business unit’s value chain is embedded
    • Also referred to as industry value chain

E-Commerce: The Second Wave, Fifth Annual Edition

industry value chain for a wooden chair
Industry Value Chain for a Wooden Chair

E-Commerce: The Second Wave, Fifth Annual Edition

swot analysis evaluating business unit opportunities
SWOT Analysis: Evaluating Business Unit Opportunities
  • SWOT analysis
    • Analyst first looks into the business unit to identify its strengths and weaknesses
    • Analyst then reviews operating environment and identifies opportunities and threats

E-Commerce: The Second Wave, Fifth Annual Edition

swot analysis questions
SWOT Analysis Questions

E-Commerce: The Second Wave, Fifth Annual Edition

results of dell s swot analysis
Results of Dell’s SWOT Analysis

E-Commerce: The Second Wave, Fifth Annual Edition

international nature of electronic commerce
International Nature of 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
    • Logical and to be expected

E-Commerce: The Second Wave, Fifth Annual Edition

this cartoon from the new yorker illustrates anonymity on the web
This Cartoon from The New Yorker Illustrates Anonymity on the Web

E-Commerce: The Second Wave, Fifth Annual Edition

language issues
Language Issues
  • To do business effectively in other cultures
    • Must adapt to culture
  • 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 local environment

E-Commerce: The Second Wave, Fifth Annual Edition

culture issues
Culture Issues
  • Important element of business trust
    • Anticipate 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

E-Commerce: The Second Wave, Fifth Annual Edition

infrastructure issues
Infrastructure Issues
  • Internet infrastructure includes
    • Computers and software connected to 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

E-Commerce: The Second Wave, Fifth Annual Edition

infrastructure issues continued
Infrastructure Issues (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
    • Paperwork and processes that accompany international transactions

E-Commerce: The Second Wave, Fifth Annual Edition

parties involved in a typical international trade transaction
Parties Involved in a Typical International Trade Transaction

E-Commerce: The Second Wave, Fifth Annual Edition

summary
Summary
  • 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

E-Commerce: The Second Wave, Fifth Annual Edition

summary43
Summary
  • Using electronic commerce, businesses have
    • Created new products and services
    • Improved promotion, marketing, and delivery of existing offerings
  • 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, and language legal issues

E-Commerce: The Second Wave, Fifth Annual Edition

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