Chap 7 E Commerce e-commerce e-commerce e-commerce

Introduction

•

_{This chapter describes the key features of}

electronic commerce.

•

_{Have you ever purchased something}

online?

•

_{How many have used their cell phones to}

search for products, or purchase products?

•

_{How has e-commerce changed how they}

shop and purchase goods and services?

Internet/interconnectivity Benefits

to Organizations

•

The development, expansion and the popu

larity of

the Internet left many business organizations

scrambling to define a new paradigm in computing

- the network - centric computing.

•

Business organizations have realized that the

Internet is a rich source of tools and information

and has enormous potential.

•

_{Therefore, Internet has become an integral}

Internet Benefits to Organizations

–

_{Due to Internet capabilities and web technology,}

traditional business organization has undergone

change where scope of the enterprise now

includes other company locations, business

partners, customers and vendors.

–

_{The modern organization has no geographic}

boundaries as it can extend its operations where

Internet works.

–

_{E-business enterprise is open twenty-four hours,}

and being independent, managers, vendors,

customers transact business any time from

anywhere.

Internet Benefits to Organizations

•

Internet capabilities have given E-business enterprise a

advantage to increase the business value.

•

_{It has opened new channels of business as buying and selling}

can be done on Internet.

•

_{It enables the organization to reach new markets anywhere in}

the world.

•

_{It has empowered customers and vendors / suppliers through}

secured access to information to act, wherever necessary.

•

_{The cost of business operations has come down significantly}

due to the elimination of paper-driven processes, faster

communication and effective collaborative working.

•

_{The effect of these radical changes is the reduction in}

Intranets and Extranets

•

Intranet:

Are computer network, based on

Internet technology, that is accessible to

the members of an organization only.

•

Intranets are designed to meet the internal

needs for sharing information within a

single organization or company.

•

They are widely used for supporting

employee access to organization

information through Web-based company

Intranets and Extranets

•

_{For example,}

_{Company intranet would include:}

–

_{phone directories;}

–

_{staff newsletters;}

–

_{company procedures and policies}

–

_{Announcements}

–

_{information about new products}

•

_{Communications and collaboration}

Intranets and Extranets

•

_Extranet:

_{An extranet is a private network}

that uses the Internet technology and it is

accessible to the members of the

organization and limited members outside

the organization e.g. customers.

•

_{Access to the extranet is controlled}

through the use of usernames, and

passwords, plus firewalls, security

6-9

Business Value of Extranets

•

Web browser technology makes customer

and supplier access to extranets easier and

faster

•

Another way to build and strengthen

strategic relationships

•

Enables and improves collaboration between

a business, customers, and partners

•

_{Facilitates online, interactive product}

E-business and E-Commerce

•

_{Electronic business (e-business): Refers}

to the use of digital technology and the

Internet to execute the major business

processes in the enterprise. E-business

includes activities for the internal management

of the firm and for coordination with suppliers

and other business partners.

•

_{It also includes electronic commerce, or}

commerce. E-commerce is the part of

E-business and E-Commerce

•

The technologies associated with e-business have

also brought about similar changes in the public

sector. Governments on all levels are using

Internet technology to deliver information and

services to citizens, employees, and businesses

with which they work.

WHY E-COMMERCE IS

DIFFERENT

•

_{E-commerce has grown so rapidly}

because of the unique nature of the

Internet and the Web.

•

_{Internet and e-commerce}

technologies are much more rich and

powerful than previous technology

Digital markets and Goods

•

_{Digital goods}

–

_{Goods that can be delivered over a digital network}

•

_{E.g. Music, video, software, newspapers, books}

–

_{Cost of producing first unit almost entire cost of}

product: marginal cost of 2nd unit is about zero

–

_{Costs of delivery over the Internet very low}

–

_{Marketing costs remain the same; pricing highly}

variable

–

_{Industries with digital goods are undergoing}

Digital markets and Goods

•

Digital market:

Information system that links buyers and

sellers to exchange information, products, services, payments

•

Digital markets greatly lower

– Market entry costs—the cost merchants must pay simply to bring their goods to market.

– Search costs—the effort required to find suitable products

– Transaction costs: The cost of participating in a market

– Information Asymetry: An information asymmetry exists when one party in a transaction has more information that is important for the transaction than the other party. That information helps

determine their relative bargaining power

– The Internet reduces information asymmetry. In digital markets, consumers and suppliers can “see” the prices being charged for goods, and in that sense digital markets are said to be more

Digital markets and Goods

•

_{Digital markets also enable}

–

_{Price discrimination:}

_{Selling the same goods, or}

nearly the same goods, to different targeted groups

at different prices.

–

_{Disintermediation:}

_{The removal of organizations}

or business process layers responsible for

intermediary steps in a value chain

–

_{Digital markets provide many opportunities to sell}

directly to the consumer, bypassing intermediaries,

such as distributors or retail outlets. Eliminating

Electronic Commerce

The benefits of disintermediation to the consumer

Digital markets and Goods

•

_{Reintermediation:}

–

_{Creation of new intermediaries between}

customers and

suppliers providing

services such as supplier search and

product evaluation. easyJet created a

price comparison site easyValue

Interactive Marketing and Presentation

•

_{Collection of customer information}

_using

Web site auditing tools less expensive than

surveys and focus groups

•

_{Web personalization technology}

customizes content on Web site to

individual’s profile and purchase history

•

_{Web sites and marketing}

_{shorten sales}

cycle and reduce time spent in customer

education

ECustomer-Centered Retailing

Customer Self-Service

•

_{Web-based responses to customer}

questions cost a fraction of telephone

costs for live customer service

representation

•

_{Web-based customer self-service}

applications, such as airline flight

information sites

•

_{Traditional, phone-based customer call}

centers being integrated with Web

Electronic Commerce

TYPES OF E-COMMERCE

•

_{There are many ways to classify electronic}

commerce transactions.

•

_{One is by looking at the nature of the}

participants in the electronic commerce

transaction.

•

_{The three major electronic commerce}

categories are:

–

_{business-to-consumer (B2C) e-commerce,}

TYPES OF E-COMMERCE

– Business-to-consumer (B2C): electronic commerce

involves retailing products and services to individual shoppers. BarnesandNoble.com, which sells books, software, and music to individual consumers, is an example of B2C e-commerce.

– Business-to-business (B2B) electronic commerce involves sales of goods and services among businesses. ChemConnect’s Web site for buying and selling chemicals and plastics is an

example of B2B e-commerce.

– Consumer-to-consumer (C2C) electronic commerce

involves consumers selling directly to consumers. For example, eBay, the giant Web auction site, enables people to sell their

goods to other consumers by auctioning their merchandise off to the highest bidder, or for a fixed price. Craigslist is the most

E-commerce Revenue

models

• _{A firm’s revenue model describes how the firm will earn revenue,}

generate profits, and produce a superior return on investment

– _{Advertising Revenue Model: In the advertising revenue model,}

a Web site generates revenue by attracting a large audience of visitors who can then be exposed to advertisements

– _{Sales Revenue Model: In the sales revenue model, companies}

derive revenue by selling goods, information, or services to

customers. Companies such as Amazon (which sells books, music, and other products).

– _{Subscription Revenue Model: In the subscription revenue}

model, a Web site offering content or services charges a

subscription fee for access to some or all of its offerings on an ongoing basis

– _{Transaction Fee Revenue Model: In the transaction fee}

revenue model, a company receives a fee for enabling or

executing a transaction. For example, eBay provides an online auction marketplace and receives a small transaction fee from a seller if the seller is successful in selling an item.

– _{Free/Freemium Revenue Model: In the free/freemium revenue}

E-business benefits

•

_{The benefits to business of adopting}

e-business are a mix of cost reduction

achieved through lower costs of

information transfer and processing and

the potential for increased revenue

arising from increased reach to a larger

audience.

•

_{The Internet also offers opportunities for}

E-business benefits

•

_{Increased sales from new sales leads,}

giving rise to increased revenue from:

–

new customers, new markets. You benefit

from new markets previously not available,

–

existing customers (repeat-selling)

•

_{Marketing cost reductions from:}

–

_{reduced time in customer service}

–

online sales

E-business benefits

•

_{Supply-chain cost reductions from:}

–

reduced levels of inventory

–

increased competition from suppliers

–

shorter cycle time in ordering

•

_{Administrative cost reductions from}

–

more efficient routine business processes such as

recruitment, invoice payment and holiday authorization

•

_{Improved customer service.}

–

Consumers can access more information than was previously

available and businesses collect more information from

customers than they were previously able to.

•

_{Better management of marketing information and}

How Intranets Support Electronic

Business

–

_{Improved information sharing:}

_Intranets

are designed to meet the internal needs for

sharing information within a single organization

or company.

–

_{Human Resources department may also}

give access to documents needed for

employee management such as internal

rules, collective bargaining and working

duration agreements through the

•

_{Connectivity:}

_{Accessible from most computing}

platforms Can be tied to legacy systems and core

transaction databases. Intranets are especially useful

for allowing geographically separated collaborative

teams to work together. As long as you're careful to

use firewalls to secure your Intranet from outside

interference, they are a cheaper, quicker method of

sharing data and files among many workers.

•

_{Can create interactivity:}

_{The company isn't limited}

How Intranets Support Electronic

Business

•

_{A very nice feature of Intranets in organizations is}

their ability to connect different types of

computers with different operating systems. Let's

say that one department has a base of Apple

computers and just loves the way they work.

Another department has PCs that it refuses to

give up. Now it doesn't matter what type of

computer hardware or operating system is being

used: they can all communicate through Web

sites. The company doesn't have to buy new

How Intranets Support Electronic

Business

•

_{Scalable to larger or smaller computing}

platforms as requirements change

•

_{Easy to use, universal Web browser interface}

•

_{Low start-up costs: Businesses can defray lots}

of the cost of establishing an Intranet because

they don't have to create the interface

programs for users

•

_{Richer, more responsive information}

environment

How Intranets Support Electronic

Business

•

Coordination and Supply Chain Management:

An Intranet

can drastically reduce an organization's supply chain costs

and management through improved coordination between

various departments. It's possible that the production and

shipping departments are located in one building, and the

engineering department is located across town. The engineers

can waste a lot of time traveling back and forth across town or

simply fail to coordinate with production altogether.

•

An Intranet offers much improved coordination between these

departments Outside suppliers have an advantage if they

WEB 2.0: SOCIAL NETWORKING

•

One of the fastest growing areas of e-commerce

revenues are Web 2.0 online Services.

•

The most popular Web 2.0 service is social

networking, like Facebook, MySpace, Twitter, LinkedIn,

and hundreds of others.

•

Social networking sites link people through their

mutual business or personal connections, enabling

them to mine their friends (and their friends’ friends)

for sales leads, job-hunting tips, or new friends.

•

Social networking sites and online communities offer

new possibilities for e-commerce.

•

Networking sites like Facebook and MySpace sell

WEB 2.0: SOCIAL

NETWORKING

•

_{Corporations set up their own Facebook and}

MySpace profiles to interact with potential

customers.

•

_{Business firms can also “listen” to what social}

networkers are saying about their products, and

obtain valuable feedback from consumers.

•

_{At user-generated content sites like YouTube,}

high-quality video content is used to display

Management Information Systems

•

_{E-commerce marketing}

–

_{Internet provides marketers with}

new ways of identifying and

communicating with customers

–

_{Long tail marketing:}

_{Ability to reach a}

large audience inexpensively

–

_{Behavioral targeting:}

_{Tracking online}

behavior of individuals on thousands of

Web sites

–

_{Advertising formats include search}

engine marketing, display ads, rich

media, and e-mail

E-commerce: Business and Technology

36 © Pearson Education