Introduction to Electronic Commerce 1 E-commerce is a transaction of buying or selling online. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction's life cycle although it may also use other technologies such as e-mail. 2 E-commerce businesses may employ some or all of the following: • Online shopping web sites for retail sales direct to consumers • Providing or participating in online marketplaces, which process third-party business-to-consumer or consumer-to-consumer sales • Business-to-business buying and selling • Gathering and using demographic data through web contacts and social media • Business-to-business (B2B) electronic data interchange • Marketing to prospective and established customers by e-mail or fax (for example, with newsletters) • Online financial exchanges for currency exchanges or trading purposes 3 Introduction • Late 1990s: few companies doing buying or selling online – Amazon, EBay establishing footholds • 1998: Google search engine established – Provided more relevant search results than existing search engine Web sites – Sells advertising based on a keyword bidding model – One of most successful online companies today 4 The Evolution of Electronic Commerce • Electronic commerce history – – – – Rapid growth from mid-1990s to 2000 “Dot-com boom” followed by “dot-com bust” 2000 to 2003: overly gloomy news reports 2003: signs of new life • Sales and profit growth return • Electronic commerce growing at a rapid pace • Electronic commerce becomes part of general economy 5 The Evolution of Electronic Commerce • Electronic commerce history (cont’d.) – 2008 general recession • Electronic commerce hurt less than most of economy – From 2003 to the present • Electronic commerce expanded more in good times and contracted less in bad times 6 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) Includes all business activities using Internet technologies • Internet and World Wide Web (Web) • Wireless transmissions on mobile telephone networks • Dot-com (pure dot-com) – Businesses operating only online 7 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 8 Relative Size of Electronic Commerce Elements • Rough approximation shown in Figure 1-1 • Dollar volume and number of transactions – B2B much greater than B2C • Number of transactions – Supporting business processes greater than B2C and B2B combined 9 FIGURE 1-1 Elements of electronic commerce 10 Relative Size of Electronic Commerce Elements (cont’d.) • 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 11 FIGURE 1-2 Electronic commerce categories 12 The First Wave of Electronic Commerce, 1995-2003 • 1997 to 2000 – More than 12,000 Internet businesses begun • 2000 to 2003 – $200 billion invested – Fueled online business activity growth rebirth • 2008 to 2009 recession – Growth continued, but at a slower rate 13 FIGURE 1-3 Actual and estimated global online sales in B2C and B2B categories © Cengage Learning 2015 14 The Second Wave of Electronic Commerce, 2004-2009 • Electronic commerce first and second wave characteristics – Regional scope • First wave: United States phenomenon • Second wave: international – Start-up capital • First wave: easy to obtain • Second wave: companies using internal funds – Internet technologies used • First wave: slow and inexpensive (especially B2C) • Second wave: broadband connections 15 The Second Wave of Electronic Commerce, 2004-2009 (cont’d.) • First and second wave characteristics (cont’d.) – Electronic mail (e-mail) use • First wave: unstructured communication • Second wave: integral part of marketing, customer contact strategies – Revenue source • First wave: online advertising (failed) • Second wave: Internet advertising (more successful) 16 The Second Wave of Electronic Commerce, 2004-2009 (cont’d.) • First and second wave characteristics (cont’d.) – Digital product sales • First wave: fraught with difficulties (music industry) • Second wave: supports legal distribution on the Web – Business online strategy • First wave: first-mover advantage • Second wave: second mouse gets the cheese • Web 2.0 technologies – Users participate in creating and modifying content 17 The Third Wave of Electronic Commerce • Factors in the third wave – Emergence of mobile commerce • Smart phone technology and tablet computers have made Internet available everywhere • Ever-increasing number of people have access to the Internet – Critical mass of mobile users with powerful devices – Widespread participation in social networking • Often used to promote or sell goods and services 18 The Third Wave of Electronic Commerce (cont’d.) • Factors (cont’d.) – Smaller businesses using Internet for sales, purchasing, and raising capital • Crowdsourcing – Analysis of large amounts of collected customer data • Big data • Data analytics – Tracking technologies integrated into B2B electronic commerce • RFID devices • Biometric technologies 19 FIGURE 1-4 Key characteristics of the first three waves of electronic commerce © Cengage Learning 2015 20 FIGURE 1-5 Business process suitability to type of commerce 21 Transaction Costs • Total costs a buyer and seller incur – While gathering information and negotiating purchase-and-sale transaction • Costs include: – Brokerage fees and sales commissions – Cost of information search and acquisition • Sweater dealer example (Figure 1-6) 22 FIGURE 1-6 Market form of economic organization 23 FIGURE 1-7 Hierarchical form of economic organization 24 FIGURE 1-8 Network form of economic organization 25 FIGURE 1-10 Industry value chain for a strategic business unit © Cengage Learning 2015 26 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 27 FIGURE 1-11 SWOT analysis questions 28 FIGURE 1-12 Results of Dell’s SWOT analysis © Cengage Learning 2015 29 International Nature of Electronic Commerce • Internet connects computers worldwide • When companies use Web to improve business process: – They automatically operate in global environment • Third wave – Rapidly increasing proportion outside US – China, India, and Brazil have seen enormous recent growth 30 FIGURE 1-13 Proportion of online B2C sales by geographic region, 2013 © Cengage Learning 2015 31 International Nature of Electronic Commerce (cont’d.) • Key international commerce issues – – – – – Trust Culture Language Government Infrastructure 32 FIGURE 1-14 Parties involved in a typical international trade transaction © Cengage Learning 2015 © Cengage Learning 2015 33 Infrastructure Issues (cont’d.) • Handling international transactions paperwork – Annual cost: $700 billion – Software automates some paperwork • Countries have own paper-based forms, procedures • Countries have incompatible computer systems 34
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