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Chapter 1

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  1. Chapter 1 Introduction to Electronic Commerce

  2. Traditional Commerce and Electronic Commerce • To many people, the term electronic commerce means shopping on the part of the Internet called the World Wide Web. • Consumer shopping on the Web was running about $130 billion per year in 2002 • Expected to exceed $500 billion by 2004 • E-commerce more than just “shopping” on the web

  3. Electronic Commerce • Business activities using electronic data transmission via the World Wide Web.Processes that support selling and purchasing on the Web • The main elements of e-commerce are: • Business-to-consumer • Business-to-business • Consumer-to-consumer • Consumer-to-Government

  4. Electronic Commerce

  5. Electronic Commerce • Electronic Funds Transfers (EFTs) • Banks • Electronic Data Interchange (EDI) • One business transmits computer-readable data in a standard format to another business. • Reduces • Time • Money • Paperwork • Errors

  6. Buyer Side

  7. Seller Side

  8. Activities as Business Processes • Activities and transactions in which businesses engage, including: • Promote product • Placing orders • Sending invoices • Transferring funds • Shipping goods to customers • Support Customers

  9. Comparing Traditional Commerce and Electronic Commerce

  10. Business Process Suitability to Type of Commerce

  11. Electronic Commerce Items • Commodity item – product or service that is hard to distinguish by sellers • Office product • CD’s • Brand Identity – reduce risk of purchase • Shipping profile –affects how easily a product can be packaged and delivered. • High value vs. low weight

  12. Advantages of Electronic Commerce • Increase sales and decrease costs. • Increases speed and accuracy for information exchange • Reaches a large amount of potential customers throughout the world. • The Web creates virtual communities for specific products or services.

  13. Advantages of Electronic Commerce • Reduce its costs in its sales support and order-taking processes. • Electronic commerce increases sale opportunities for the seller. • Electronic commerce increases purchasing opportunities for the buyer.

  14. Disadvantages of Electronic Commerce • Some business processes are difficult to be implemented through electronic commerce. • Return-on-investment is difficult to apply • Difficult to interface with existing systems • Businesses face cultural and legal obstacles to conducting electronic commerce. • Fear, Privacy

  15. International Electronic Commerce • About 60 percent of all electronic commerce sites are in English, therefore many language barriers need to be overcome. • The political structures of the world present some challenges. • Legal, tax, and privacy are concerns of international electronic commerce.

  16. Transaction Costs • Transaction Costs are the total of all • Costs that a buyer and a seller incur • Gather information • Negotiate a purchase-sale transaction. • Investment a seller makes in equipment • Hiring of skilled employees to supply the product and services to the buyer.

  17. Economic Forces Market Structure

  18. Economic Forces Hierarchical Structure

  19. The Role of Electronic Commerce • Reduce transaction costs. • Network economic structure – companies coordinate their strategies, resources, and skill sets by forming long-term, stable relationships with other companies and individuals based on shared purposes.

  20. The Role of Electronic Commerce • Virtual companies – when strategic partnerships occur between companies operating on the Internet. • Electronic commerce can make network economic structures, which rely on information sharing, and are much easier to construct and maintain.

  21. The Role of Electronic CommerceNetwork Structure

  22. Value Chains • Value-adding activities • generate profits and help meet other goals. • Value Chains • Those activities necessary to do business • Design • Produce • Promote • Market • Deliver • Support

  23. Strategic Business Unit Value Chains

  24. Role of ECommerce • Examine Value Chains to • Reduce Costs • Improve product • Reach new customers/suppliers • Create new ways to sell products