Lecture 1 Introduction to Electronic Commerce PDF

LECTURE 1 Basic E-Commerce overview.  Learning Objectives In this chapter, you will learn: Distinguish between e-business, e-commerce and social commerce. Categories of e-commerce E-commerce data exchange Business processes Introduction to e-commerce business mod...

LECTURE 1 Basic E-Commerce overview.  Learning Objectives In this chapter, you will learn: Distinguish between e-business, e-commerce and social commerce. Categories of e-commerce E-commerce data exchange Business processes Introduction to e-commerce business models How to identify opportunities for and barriers to electronic commerce initiatives. How businesses use SWOT analysis to identify electronic commerce opportunities 2 E-business, E-commerce and Social Commerce Defined E-business is the optimization of a company’s business activities using digital technology. E-commerce is the subset of e-business focused on transactions. Social commerce The e-commerce activities conducted in social networks and/or by using social software (i.e., Web 2.0 tools such as wikis, RSS feeds, blogs, microblogs i.e Twitter) + Social Media 8  E-business vs E-commerce What is the difference between e-commerce and e-business? E-Business E-business or digital business is similar to e-commerce but broader in scope and refers to using digital technology to manage a range of business processes incorporating the sell-side and buy-side e-commerce as well as other key supporting business processes including research and development, marketing, manufacturing and inbound and outbound logistics. E-Commerce E-commerce also refers to both financial and informational electronically mediated transactions between an organisation and any third party it deals with. Example: Online sales transactions, inbound customer service enquiries and outbound email broadcasts 4  In simple terms….. E-Business A broader definition of EC that includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization E-Commerce The process of buying, selling, or exchanging products, services, or information via computer 5  Categories of Electronic Commerce Business-to-consumer (B2C) – Consumer shopping on the Web Business-to-business (B2B): e-procurement – Transactions conducted between Web businesses – Supply management (procurement) departments Negotiate purchase transactions with suppliers Business processes – Use of Internet technologies within the business 6  Categories of Electronic Commerce (cont.) 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 – B2G transactions included in B2B discussions 7  Electronic Data Exchange Electronic Data Interchange (EDI) – Business-to-business transmission of computer- readable data in standard format – Standard transmitting formats benefits Reduces errors, avoids printing and mailing costs and eliminates need to reenter data 8  Electronic Exchange (cont’d.) Trading partners – Businesses engaging in EDI with each other – EDI pioneers (example: Walmart) improved purchasing processes and supplier relationships – Pioneers faced high implementation costs Value-added network (VAN) – Independent firm offering EDI connection and transaction-forwarding services EDI continues to be a large portion of B2B electronic commerce 9  Business Processes Business activity is a task performed by a worker doing his or her job – May or may not be related to a transaction Transaction is an exchange of value – Purchase, sale, or conversion of raw materials into finished product – Involves at least one business activity Business processes are groups of logical, related, sequential activities and transactions Web helps people work more effectively 10  © Cengage Learning 2017 Elements of electronic commerce 11  Focus on Specific Business Processes Examples of business processes – 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 that benefit from ecommerce technologies – Not all processes can be improved with technology – Firms can use it to help them adapt to change 12  Role of Merchandising Combination of store design, layout, and product display knowledge Salespeople have skills to identify customer needs and meet them Merchandising and personal selling skills can be difficult to practice remotely – Companies must be able to transfer these skills to have Web site success – Some products are easier to sell on the Internet than others 13  Product/Process Suitability to Electronic Commerce (cont’d.) Easier-to-sell products have: – Strong brand reputation – Appeal to small but geographically diverse groups Traditional commerce better for: – Products relying on personal selling skills – Transactions involving large amounts of money Combination of electronic and traditional commerce strategies best when: – Business process includes both commodity and personal inspection aspects 14  Product/Process Suitability to Electronic Commerce Some products good candidates for electronic commerce – Customers do not need to experience physical characteristics before purchase – Technology has made more processes suitable for electronic commerce Commodity items are standardized, well-known products only differentiated by price – Must have attractive shipping profile to sell online – Includes books, clothing, shoes, kitchen accessories and other small household items 15  Business Models, Revenue Models, and Business Processes (cont’d.) Instead of copying model, companies should examine their business elements – Streamline, enhance, or replace with Internet technology driven processes Revenue model – Specific collection of business processes used to identify, market and make sales to customers – Classifies revenue-generating activities for communication and analysis purposes 16  E-COMMERCE BUSINESS MODELS Evaluate different business Models: – Build a business model that works for you: Maximizing Profits Defensibility (inimitability) Starting quickly 17  E-COMMERCE BUSINESS MODELS (cont.) Drop-shipping Reselling White labelling Manufacturing Digital products Make it yourself Choosing a specific model depends on the level of advantages and disadvantages. 18 E-COMMERCE BUSINESS MODELS (cont.) 1. Ease of Entry 2.Transitioning 3.Defensibility Does it take a lot Does this model Can someone of time or money synergize or copy your to get started? overlap with other success? models? 19  Opportunities for Electronic Commerce Electronic commerce can help increase profits and sales and decrease business costs Virtual community – Gathering of people sharing a common interest E-commerce purchasing opportunities – Identify new suppliers and business partners – Efficiently obtain competitive bid information – Increase speed, information exchange accuracy – Wider range of choices available 24 hours a day 20 Opportunities for Electronic Commerce (cont’d.) Benefits extend to general society – Lower costs to issue and secure Electronic payments of tax refunds Public retirement Welfare support – Provides faster transmission – Provides fraud, theft loss protection Electronic payments easier to audit and monitor – Telecommuting reduces traffic, pollution – Products and services available in remote areas 21  Electronic Commerce: Current Barriers Poor choices for electronic commerce – Perishable foods and high-cost, unique items Four barriers – Need for critical mass of customers with appropriate technology – Unpredictability in costs and revenues – Insufficient tools for hardware and software integration – Cultural and legal barriers 22  SWOT Analysis: Evaluating Business Unit Opportunities Define SWOT (strengths, weaknesses, opportunities, and threats) First look into business unit – Identify strengths and weaknesses Then review operating environment – Identify opportunities and threats presented Take advantage of opportunities – Build on strengths – Avoid threats – Compensate for weaknesses 23 SWOT analysis questions 24 Results of Dell’s SWOT analysis 25  Trust Issues on the Web Important for all businesses to establish trusting relationships with customers Companies can rely on established brand names Challenging for new companies because anonymity exists when trying to establish a Web presence – Plan for establishing credibility is essential – Sellers cannot assume site visitors will know they are trustworthy Business must overcome distrust in Web “strangers” 26  Language Issues Business must adapt to local cultures – “Think globally, act locally” – Provide local language versions of Web site as customers are more likely to buy from sites in own language Websites available in English only have declined dramatically to about 25% of total sites Languages may require multiple translations for separate dialects – Localization means a translation considers multiple elements of the local environment 27  Cultural Issues Important element of business trust is anticipating how the other party to a transaction will act in specific circumstances Culture is the combination of language and customs – Varies across national boundaries, regions within nations Care must be taken in choosing packaging, product names, icons used to represent common actions and even colors Japanese shoppers resisted US sites for years because of their resistance to use of credit cards 28  Culture and Government Some areas have cultural environments inhospitable to online discussions that occur on the Internet – May lead to government controls that limit electronic commerce development – Many countries filter available Web content and some have denounced the Internet Countries such as the People’s Republic of China and Singapore traditionally control access to information but want to reap the benefits of electronic commerce – Result has been many regulations and requirements 29  Infrastructure Issues Computers and software connected to Internet and the related communications networks Telecommunications industry is either government owned or regulated – Inhibits development or limits expansion High local telephone connection costs affect online behavior Over half of all Websites turn away international orders because of no process to handle them – Problem is increasing globally 30