Introduction to E-commerce

E-commerce Basics

• Electronic commerce (e-commerce, eCommerce) involves exchanging information or business transactions through electronic communication.
• E-commerce operates in business-to-business, business-to-consumer, consumer-to-consumer, and consumer-to-business market segments.
• E-commerce uses electronic devices like computers, tablets, and smartphones, functioning as a digital version of mail-order catalog shopping.

Advantages of E-commerce

• Convenience: operates 24/7
• Increased selection: offers a wider array of products compared to brick-and-mortar stores.

Disadvantages of E-commerce

• Limited customer service: lacks face-to-face interaction.
• Lack of instant gratification: requires waiting for shipping.
• Inability to touch products: Online images may not accurately represent the item, leading to dissatisfaction.

E-commerce in the Philippines

• E-commerce accounts for USD 1.3 trillion of the world’s economy, enabling local businesses to expand beyond the Philippines.
• Filipinos can easily engage in personal e-commerce using various buy and sell sites.
• Businesses can establish e-commerce facilities through their websites.
• Increased demand for e-commerce in the Philippines due to the global pandemic.
• Social distancing has shifted the culture toward digital shopping.
• The Philippines has an estimated 76 million active social media users.
• 75 million users are on Facebook, 12 million on Twitter, and 4 million on LinkedIn.
• Filipinos spent USD 4.7 billion on online purchases in 2018.
• USD 3.5 billion was spent on online travel purchases.
• USD 840 million was spent on online consumer goods.
• Electronics and physical media hold the largest share of online consumer goods purchases.
• USD 286 million was the spending of internet users on digital media products (video games, streaming services, digital news, etc.).
• The average Filipino e-commerce shopper spent USD 18 on online consumer goods in 2018, excluding travel and digital media.
• Top online product spent by Filipinos in 2019 was fashion and beauty.

Economic Terms

• Utility: satisfaction from consuming a good or service.
• Util: measurable unit of satisfaction.
• Total Utility: combined satisfaction from consuming more of a good.
• Marginal Utility: additional satisfaction from consuming more of a good.
• Contractionary Monetary Policy: increasing interest rates and slowing money supply growth to lower inflation.

Economic Policies

• Fiscal Policy: government use of spending and tax policies.
• Monetary Policy: control of money supply and interest rates.
• Keynesian Economics: adjusting tax levels and public spending.

Production Theory

• Production: combining inputs to create an output for consumption.
• Input: resources used to produce goods and services.
• Output: product created from combining inputs.
• Total Product (TP): combined production from several units of input.
• Marginal Product: additional output from an additional unit of input.
• Average Product: average contribution per unit of input, calculated as TP/i.

Consumer Theory

• Focuses on how people choose to spend money.
• Consumption: using goods and services to satisfy wants.

Basic Assumptions About Human Behavior

• Utility maximization: individuals make calculated decisions to purchase the products that bring the greatest benefit.
• Nonsatiation: People are seldom satisfied with one trip to the shops and always want to consume more
• Decreasing marginal utility: satisfaction decreases with increased consumption of a product.

Porter's Five Forces Analysis

• Developed by Michael E. Porter.
• Framework for evaluating a business organization’s competitive strength.
• Competitive Rivalry: intensity of competition, based on the number of competitors and their capabilities.
• Bargaining Power of Suppliers: influence suppliers have over raising prices.
• Bargaining Power of Buyers: consumer influence over pricing and quality.
• Threat of New Entrants: ease or difficulty for competitors to enter the market.
• Threat of Substitute Products or Services: ease for consumers to switch to alternatives.

SWOT Analysis

• Framework to evaluate a company's competitive position and develop strategic planning.

Internal Factors

• Strengths: what an organization excels at and what separates it from the competition.
• Weaknesses: factors that prevent optimal performance.
• Financial, physical, and human resources, access to resources, and current processes are included in these factors.

External Factors

• Opportunities: favorable external factors giving a competitive advantage.
• Threats: factors that can harm the organization.
• Economic and market trends, laws, and competitive threats are included in these factors.

Business Environment

• Includes internal and external factors affecting a company's performance: employees, customers, management, and competition.

Environmental Scanning

• Helps organizations monitor their internal and external environments to identify opportunities and threats.

Environmental Analysis

• Strategic tool to assess threats and opportunities.

Internal Environment

• Controllable factors like value system, mission, structure, culture, and employee quality.

External Environment

• Micro and macro factors that are generally beyond the business's control.

Micro Environment Factors

• Suppliers control the success of the business when they hold power.
• Resellers (intermediaries, middlemen) contribute to product delivery.
• Customers (individuals or other businesses) drive revenues.
• Competitors: those selling similar products or services.

Macro Environment Factors

• Political factors include government policy, stability, trade policy, tax and labor laws.
• Economic factors are economic growth, interest rates, exchange rates, inflation, and income.
• Social factors are population belief and attitudes.
• Technological factors are new production, distribution, and communication methods.
• Environmental factors relate to resource scarcity and ethical practices.
• Legal factors include health and safety, equal opportunities, and consumer laws.

Business plan

• Systematic evaluation of and summary of the entrepreneur's proposed business.
• Serve as a roadmap.

Two Essential Functions of A Business Plan

• Guiding the company by charting its future and devising a strategy
• Attract investors, lenders, etc.

Elements of A Business PLan

• Executive Summary
• Vision and Mission Statement
• Company History
• Business and Industry Profile
• Industry Analysis
• Business Strategy
• Competitive Strategy
• Company Products and Services
• Marketing Strategy
• Location and Layout

Other Elements of A Business Plan

• Competitor Analysis
• Description of Management Team
• Plan of Operation
• Financial Forecast
• Loan or Investment Proposal
• Appendices

Brand Strategy and Branding

• Brand: A name, symbol, or other feature
• Brand strategy: long-term design for the development of a popular brand to achieve goals
• Branding: powerful and sustainable marketing strategy to influence a brand

Aspects of Branding

• Have a puropse
• Consistency with your brand
• Emotional connection
• Flexibility

Employee Involvement and Brand awareness

• Involve employees with your brand
• Promote loyalty with your existing customers
• Be aware of your competition

Production System

• 3 Elements include input, production and output

4 M's of Production

• Serious issues for the whole production system
• Input and transformation
• Elements include manpower, method, machine and materials
• Manpower -labor force, main of production
• Materials- raw materials, must be good quality
• Machine- manufacturing equipment used in the production
• Method- method of transforming raw materials into finished product.

Business Model

• Creates, delivers, and captures value in economic, social, cultural or other contexts
• Important phases of development include identifying the specific audience, establishing business process, recording business resources, developing strong value proposition, determining key business partners.