E-Business

Chapter 1
Introduction to Electronic Commerce
 Electronic Commerce and Electronic
Business
• Electronic commerce
– Shopping on the Web
– Businesses trading with other businesses
– Internal company processes
– Broader term: electronic business (e-business)
• Electronic commerce includes:
– All business activities using Internet technologies
• Internet and World Wide Web (Web)
• Wireless transmissions and personal digital assistants
• Dot-com (pure dot-com)
– Businesses operate only online

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 Categories of Electronic Commerce
• Business-to-consumer (B2C)
– Consumer shopping on the Web
• Business-to-business (B2B): e-procurement
– Transactions conducted between Web businesses
– Procurement department negotiates purchase
transactions with suppliers
• Business processes
– Using Internet technologies to support organization
selling and purchasing activities

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 Categories of Electronic Commerce
(cont’d.)
• Web helping people work more effectively
– Telecommuting (telework)
• Consumer-to-consumer (C2C)
– Individuals buying and selling among themselves
• Web auction site
– C2C sales included in B2C category
• Seller acts as a business (for transaction purposes)
• Business-to-government (B2G)
– Business transactions with government agencies
• Paying taxes, filing required reports

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 Categories of Electronic Commerce
(cont’d.)
• Activity
– Task performed by worker in the course of doing job
• Transaction: exchange of value
– Purchase, sale, conversion of raw materials into
finished product
– Involves at least one activity
• Might not be related to transaction
• Business processes
– Group of logical, related, sequential activities and
transactions

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 The Development and Growth of
Electronic Commerce
• Electronic Funds Transfers (EFTs)
– Wire transfers
– Electronic transmissions of account exchange
information
• Uses private communications networks
• Electronic Data Interchange (EDI)
– Business-to-business transmission
• Computer-readable data in standard format
– Standard transmitting formats benefits
• Reduces errors
• Avoids printing and mailing costs
• Eliminates need to reenter data
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 The Development and Growth of
Electronic Commerce (cont’d.)
• Trading partners
– Businesses engaging in EDI with each other
– EDI pioneers (General Electric, Sears, Wal-Mart)
• Improved purchasing processes and supplier
relationships
• EDI pioneers problem
– High implementation cost
• Expensive computer hardware and software
• Establishing direct network connections to trading
partners or subscribing to value-added network

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 The Development and Growth of
Electronic Commerce (cont’d.)
– Value-added network (VAN)
• Independent firm offering EDI connection and
transaction-forwarding services
• Ensure transmitted data security
• Charge fixed monthly fee plus per transaction charge
– Gradually moved EDI traffic to the Internet
• Reduced EDI costs

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 Business Models, Revenue Models,
and Business Processes
• Business model
– Set of processes combined to achieve company goal
• Yield profit
– Investors sought out appealing business models
• Expectations of rapid sales growth, market dominance
• Michael Porter argued business models did not exist
– Key to success: copy successful model
• Neither easy nor wise

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 Business Models, Revenue Models,
and Business Processes (cont’d.)
• Instead of copying model, examine business
elements
– Streamline, enhance, replace with Internet technology
driven processes
• Revenue model
– Specific collection of business processes
• Identify customers
• Market to those customers
• Generate sales
– Helpful for classifying revenue-generating activities
• Communication and analysis purposes
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 Focus on Specific Business Processes
• Companies think in business process terms
– Purchasing raw materials or goods for resale
– Converting materials and labor into finished goods
– Managing transportation and logistics
– Hiring and training employees
– Managing business finances
• Identify processes benefiting from e-commerce
technology
• Uses of Internet technologies
– Improve existing business processes, identify new
business opportunities, adapt to change

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 Role of Merchandising
• Merchandising
– Combination of store design, layout, product display
knowledge
• Salespeople skills
– Identify customer needs
• Find products or services meeting needs
• Merchandising and personal selling
– Difficult to practice remotely
• Web site success
– Transfer merchandising skills to the Web
• Easier for some products than others

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 Product/Process Suitability to
Electronic Commerce
• Electronic commerce good candidates
– No physical characteristics experience required
– Selling commodity item
• Hard to distinguish product or service from same
products or services provided by other sellers
• Features: standardized and well known
– Product’s shipping profile
• Note value-to-weight ratio
– Strong brand reputation (Kodak camera)
• Electronic commerce site advantage
– One site offers wider selection than physical store

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 Product/Process Suitability to
Electronic Commerce (cont’d.)

• Classifications
– Depend on available technologies’ current state
• Change as new e-commerce tools emerge
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 Product/Process Suitability to
Electronic Commerce (cont’d.)
• Electronic commerce site not advantageous
– Personal product inspection required
– Solution
• Combination of traditional commerce and electronic
commerce
• Works best when process includes commodity and
personal inspection elements

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 Advantages of Electronic Commerce
(not in the book, please study from here)
• Virtual community: gathering of people online
• Seller
– Increases profits and sales; decreases costs
• Buyer
– Increases purchasing opportunities
– Identifies new suppliers and business partners
– Easier negotiating price and delivery terms
• Efficiently obtain competitive bid information
– Increases speed, information exchange accuracy
– Wider range of choices
– Customizes prospective purchase information detail

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 Advantages of Electronic Commerce
(not in the book, please study from here)
• Benefits extend to general society welfare
– Lower costs to issue:
• Electronic payments of tax refunds
• Public retirement
• Welfare support
– Secure and quick Internet transmission
– Fraud, theft loss protection
• Electronic payments easier to audit and monitor
– Reduced commuter-caused traffic, pollution
• Due to telecommuting
– Products and services available in remote areas

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 Disadvantages of Electronic Commerce
(not in the book, please study from here)
• Poor choices for electronic commerce
– Perishable foods and high-cost, unique items
• Disadvantages will disappear when:
– E-commerce matures
• Becomes more available to and accepted by general
population
– Critical masses of buyers become equipped, willing to
buy through Internet
• Online grocery industry example

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 Disadvantages of Electronic Commerce
(not in the book, please study from here)
• Additional problems
– Calculating return on investment
– Recruiting and retaining employees
– Technology and software issues
– Cultural differences
– Consumers resistant to change
– Conflicting laws

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 Transaction Costs
• Total of all costs that a buyer and seller incur
• Gathering information and negotiating purchase-and-
sale transaction
– Brokerage fees and sales commissions
– Cost of information search and acquisition

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 Using Electronic Commerce to Reduce
Transaction Costs
• Electronic commerce
– Change vertical integration attractiveness
– Change transaction costs’ level and nature
• Example: employment transaction
– Telecommuting
• May reduce or eliminated transaction costs

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 Network Economic Structures
• Neither market nor hierarchy
• Strategic alliances (strategic partnerships)
– Coordinate strategies, resources, skill sets
– Form long-term, stable relationships with other
companies and individuals
• Based on shared purposes
• Strategic partners
– Come together for specific project or activity
– Form many intercompany teams
• Undertake variety of ongoing activities

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