Electronic Commerce 043002

Chapter 1: An Introduction to Electronic Commerce Dr. Jing Zhou

Dr. Jing Zhou - School of Computer Science, Communication University of China, Beijing; email [email protected]

; © 2007

Learning Objectives

 What electronic commerce is and how it is poised ( 坦然自若的 ) for a second wave of growth and profitability ( 收益率 )  Why business models ( 商业模式 ) have given way to revenue models ( 赢利模式 ) and the analysis of business processes ( 业务流程 ) as key elements of electronic commerce initiatives ( 开始 )  How economic forces have created a business environment that is fostering ( 养育 ) a rebirth of electronic commerce

Learning Objectives Cont

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 How businesses use value chains ( 价值链 ) to identify electronic commerce opportunities  How businesses use SWOT analysis to analyze and evaluate business opportunities  Why electronic commerce is international by its very nature and what challenges arise in doing global electronic commerce

Key Terms

activity 业务活动 business model 商业模式 business process 业务流程 business unit 业务单位 business-to-business (B2B) 企业间 business-to-consumer (B2C) 企业与消费者间 business-to-government (B2G) 企业与政府间 consumer-to-consumer (C2C) 消费者间 commodity item company 公司 商品 culture 文化 e-procurement 电子采购

Key Terms Cont

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electronic business 电子商务 electronic data interchange (EDI) 电子数据交换 electronic fund transfer (EFT) 电子资金转帐 firm 企业 flat rate access 固定费率访问 hierarchical business organization 等级制企业组织 industry 行业 industry value chain 行业价值链 law of diminishing return localization 本地化 边际效益递减

Key Terms Cont

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machine translation 机器翻译 market 市场 merchandising 零售推销 network economic structure network effect 网络效应 primary activity 基本活动 procurement 采购 revenue model 盈利模式 shipping profile 运输规格 strategic alliance 战略联盟 网络经济结构

Key Terms Cont

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strategic business unit strategic partner 战略业务单位 战略伙伴 strategic partnership 战略伙伴关系 supply management 供应管理 supporting activity SWOT analysis telecommuting telework SWOT 分析 远程办公 远程工作 trading partner transaction 交易 辅助活动 贸易伙伴

Key Terms Cont

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transaction cost value-added network value chain 价值链 value system 增值网 价值系统 vertical integration 垂直一体化 virtual community 交易成本 虚拟社区 virtual company 虚拟企业

Electronic Commerce: The Second Wave

 Electronic commerce (e-commerce)  Shopping on the Web  Businesses trading with ( 进行交易 ) other businesses and internal processes ( 内部流程 )  Electronic business (e-business)  Term used interchangeably with e-commerce  The transformation of key business processes through the use of Internet technologies (IBM)

Electronic Commerce: The Second Wave Cont’d

 Definition of e-commerce (used in this course)  All business activities ( 商务活动 ) conducted using electronic data transmission technologies ( 电子数据 传输技术 )

Categories of Electronic Commerce

 Five general e-commerce categories   Business-to-consumer Business-to-business (aka e-procurement)    Business processes Consumer-to-consumer Business-to-government  Supply management ( 供应管理 ) or procurement ( 采购 )  Departments devoted to negotiating purchase transactions with suppliers ( 供应商 )

Categories of Electronic Commerce Cont’d

 Activity ( 业务活动 )  A task performed by a worker in the course of doing his/her job  Transaction ( 交易 )  An exchange of value, such as a purchase, a sale, or the conversion of raw materials into a finished product  Business processes ( 业务流程 )  The group of logical, related, and sequential activities and transactions in which businesses engage

The Development and Growth of Electronic Commerce

 Electronic funds transfers (EFTs, 电子资金转帐 )  Used by banking industry for more than 30 yrs  Also called wire transfers ( 电汇 )  Electronic transmissions of account exchange information over private communications networks  Electronic data interchange (EDI, 电子数据交换 )  Businesses have been engaging in EDI for many yrs  Transmitting computer-readable data in

a standard format

to another business

The Development and Growth of Electronic Commerce Cont’d

 Trading partners ( 贸易伙伴 )  Businesses that engage in EDI with each other  Value-added network (VAN, 增值网 )  Independent firm  Offers connection and transaction-forwarding services to buyers and sellers engaged in EDI

The Second Wave (

第二次浪潮

) of Electronic Commerce

 Defining characteristics of first wave       It was primarily a U.S. phenomenon Web pages were in English Internet technologies were slow and inexpensive (e.g. dial-up lines) Bar codes ( 条形码 ) and scanners ( 扫描仪 ) used to track parts ( 零部件 ), assemblies ( 组装 ), inventories ( 库 存 ), and production ( 生产状态 ) Email, tool for unstructured communication On-line advertising main revenue source ( 收入来源 )

The Second Wave of Electronic Commerce Cont’d

 As second wave begins   International scope where sellers do business in many countries and languages Faster broadband connections ( 宽带连接 ) at home (x10 faster, although more expensive) — key element   Radio frequency ID ( 无线射频标签 ) devices and smart cards ( 智能卡 ) Fingerprint ( 指纹 ) readers and retina ( 视网膜 ) scanners (biometric technologies) used for tracking  Email, integral part of marketing

Business Models, Revenue Models, and Business Processes

 Business model ( 商业模式 )  A set of processes that combine to yield a profit  Revenue model ( 盈利模式 )  Used to  Identify customers  Market to those customers  Generate sales to those customers

Focus on Specific Business Processes

 In addition to the revenue model, companies think of the rest of their operations as

specific business processes

including  Purchasing raw materials or goods for resale  Converting materials and labor into finished goods  Managing transportation and logistics ( 物流 )  And many other activities 

This course will help you learn how to identify the specific business processes that firms can accomplish more effectively by using e-commerce technologies

Role of Merchandising (

零售推销

)

 Merchandising  Combination of store design ( 店面设计 ), layout ( 布 局 ), and product display ( 产品陈列 ) knowledge  Skills of merchandising and personal selling can be difficult to practice ( 实行 ) remotely

Product/Process Suitability to Electronic Commerce

 Commodity item ( 商品 )  Hard to distinguish from the same products or services provided by other sellers  Features have become standardized and well known  Shipping profile ( 运输规格 )  Collection of attributes that affect how easily a product can be packaged ( 包装 ) and delivered ( 交付 )  High value-to-weight ratio ( 价值

/

重量比 )  Can make overall shipping cost a small fraction ( 小部 分 ) of selling price How about jewelry?

Business Processes Suited to Certain Type of Commerce

 E-Commerce  Sale/purchase of books & CDs, travel services, investments and insurance products  Online delivery of software  Online shipment tracking ( 运货跟踪 )

Business Processes Suited to Certain Type of Commerce Cont

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 E-Commerce & Traditional  Sale/purchase of automobiles, residential real estate ( 房地产 ) (e.g. do research online then buy from a dealer ( 经销商 ) or real estate agent), and high value jewelry and antiques (personal inspection required; prefer to touch, smell or examine closely)  Online banking ( 在线银行 )  Roommate-matching ( 室友匹配 ) service

Business Processes Suited to Certain Type of Commerce Cont

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 Traditional  Sale/purchase of impulse items ( 一时冲动购买的商品 ) for immediate use  Small denomination ( 小额货币 ) purchases and sales (since there is not yet a standard for transferring small amounts of money on the Web)

Advantages of Electronic Commerce

 Increases sales ( 销售 ), decreases cost ( 费用 )   Allows small businesses to have global customer base ( 客户群 ) Reduced cost through electronic sales enquires, price quotes ( 报价 ) and order taking ( 接受订单 )  Provides sales opportunities for sellers (businesses can identify new suppliers and partners) and purchasing opportunities for buyers  Increases speed and accuracy for exchanged information, thus reducing cost

Advantages of Electronic Commerce Cont’d

 Business can be transacted 24hrs a day  The level of detail of purchase information is selected by user  Digital products can be delivered instantly  Tax refunds ( 退税 ), public retirement ( 退休金 ) and welfare support ( 社会福利金 ) costs less when distributed over the Internet  Allows products and services to be available in remote areas, e.g. remote learning

Disadvantages of Electronic Commerce

 Inability to sell some products (e.g. high cost jewelry and perishable ( 易腐烂的 ) foods)  Many products require a large number of people to purchase to be viable ( 可行的 )  High capital investment ( 资本投资 )  Difficulty in integrating ( 集成 ) current databases and transaction processing systems into e-commerce solutions

Disadvantages of Electronic Commerce

 Cultural and legal obstacles ( 障碍 )  Transmission of credit card details  Some consumers resistant to change  Laws are unclear  Shipping profile: Products with a low value-to-weight ratio that can not be efficiently packed and shipped are unsuitable (use traditional commerce)

Economic Forces (

力量

) and Electronic Commerce

 Economics  Study of how people allocate scarce ( 稀少的 ) resources  Two conditions of a market  Potential sellers of a good come into contact with potential buyers  A medium of exchange is available

Hierarchical Business Organizations (Firms)

Firms participate in markets to purchase raw materials and sell finish products.

Chief Operating Officer 首席运营官 Executive1 Executive2 ManagerA ManagerB ManagerE ManagerF ManagerJ ManagerK WorkerA WorkerB WorkerE WorkerF Executive3 WorkerJ WorkerK 主管 经理 工人

Transaction Costs (

交易成本

)

 The total costs that a buyer and seller incur as they gather information and negotiate a purchase/sale transaction  Cost of information search and acquisition  Investment of seller in equipment or in the hiring of skilled employees to supply product or service to buyer

Transaction Costs Example

 Transaction costs incurred by a sweater dealer when purchasing from independent sweater knitters ( 编织工 ):  Cost of identifying independent knitters  Cost of site visit ( 现场访问 ) to negotiate purchase price, arrange delivery and inspection of sweaters  Costs incurred by knitters:  Knitting tools and yarn ( 毛线 ) purchase

Transaction Costs Example Cont

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 When transaction costs were high, businesspeople would form organizations to replace market-negotiated transactions.

 Vertical integration ( 垂直一体化 )  Existing firms replace one or more of its supplier markets with its own hierarchical structure for creating the supplied product

The Role of Electronic Commerce

 Businesses and individuals can use electronic commerce to reduce transaction costs by  Improving flow of information ( 信息流 )  Increasing coordination of actions ( 行为的协调 )  Businesses can use e-commerce to reduce transaction costs by  supporting telecommuting ( 远程工作 ) rather than physical commuting ( 通勤 ) to allow global employment opportunities

Network Economic Structures

 Network economic structure ( 网络经济结构 )  Companies coordinate their strategies ( 战略 ), resources, and skill sets by forming long-term ( 长 期的 ), stable ( 稳定的 ) relationship based on shared purposes  Strategic alliances (strategic partnerships 战略 联盟或战略伙伴关系 )  Relationships created within the network economic structure

Network Economic Structures Cont’d

 Virtual companies ( 虚拟企业 )  Strategic alliances that occur between or among companies operating on the Internet  Strategic partners  Come together as a team for a specific project or activity  E-commerce can make network organizations relying extensively on information sharing, much easier to construct and maintain

Network Effects

 Law of diminishing returns ( 边际效益递减 )  Most activities yield less value as the amount of consumption increases  Network effect ( 网络效应 )  As more people or organizations participate in a network  Value of network to each participant increases  Using e-commerce to create network effects

Value Chains (

价值链

) in Electronic Commerce

 Strategic business unit (or business unit 战略业 务单位或业务单位 )  One particular combination of product, distribution channel ( 分销渠道 ), and customer type  Firm ( 公司 )  Multiple business units owned by a common set of shareholders ( 股东 )  Industry ( 行业 )  Multiple firms that sell similar products to similar customers

Strategic Business Unit Value Chains

 Value chain ( 价值链 ) --- by Michael Porter in1985  A way of organizing the activities that each strategic business unit undertakes  Primary activities ( 基本活动 )  Design, produce, promote, market, deliver, and support the products or services it sells  Supporting activities ( 辅助活动 )  Finance and administration, human resource management, and technology development

Industry Value Chains (

行业价值链

)

 Value system ( 价值系统 )  Larger stream of activities ( 业务活动流 ) into which a particular business unit’s value chain is embedded  Also referred to as industry value chain  Managers can identify new opportunities for cost reduction, product improvement, or channel reconfiguration ( 渠道重组 ) by knowing how other business units in the industry value chain conduct activities

SWOT Analysis: Evaluating Business Unit Opportunities

 SWOT analysis  Analyst first looks into the business unit to identify its strengths ( 优势 ) and weaknesses ( 劣势 )  Analyst then reviews operating environment and identifies opportunities ( 机遇 ) and threats ( 威胁 )

International Nature of Electronic Commerce

 Trust Issues ( 信任问题 )  Companies with established reputations ( 知名的公 司 )  Often create trust by ensuring that customers know who they are  Can rely on their established brand names to create trust on the Web  Customers’ inherent lack of trust in “strangers” on the Web  Logical and to be expected

Language Issues

 To do business effectively in other cultures  Must adapt to culture (think globally, act locally)  Researchers have found that  Customers are more likely to buy products and services from Web sites in their own language  Localization ( 本地化 )  Translation that considers multiple elements of local environment

Culture Issues

 Important element of business trust  Anticipate how the other party to a transaction will act in specific circumstances  Culture  Combination of language ( 语言 ) and customs ( 习惯 )  Varies across national boundaries  Varies across regions within nations

Infrastructure Issues

 Internet infrastructure includes  Computers and software connected to Internet  Communications networks over which message packets travel  Organization for Economic Cooperation and Development’s (OECD 经合组织 ) issued Statements on Information and Communications Policy  Deal with telecommunications infrastructure development issues

Infrastructure Issues Cont’d

 Flat-rate access ( 固定费率访问 ) system  Consumer or business pays one monthly fee for unlimited telephone line usage  Contributed to rapid rise of U.S. electronic commerce  Targets for technological solutions  Paperwork ( 单证 ) and often convoluted processes ( 流转 ) that accompany international transactions

Summary

 Commerce  Negotiated exchange of goods or services  Electronic commerce  Application of new technologies to conduct business more effectively  First wave of electronic commerce  Ended in 2000  Second wave of electronic commerce  New approaches to integrating Internet technologies into business processes

Summary

 Using electronic commerce, businesses have  Created new products and services  Improved promotion, marketing, and delivery of existing offerings  Global nature of electronic commerce  Leads to many opportunities and few challenges  To conduct electronic commerce across international borders  You must understand the trust, cultural, language and legal issues

Definitions

   A

commodity item

is a product or service that is hard to distinguish from the same products or services provided by other sellers (e.g. gasoline, office suppliers, soap and computers).

A

transaction

is an exchange of value, such as a purchase or sale, or the conversion of raw materials into finished products (a transaction has one or more associated activity).

A

business process

is the set of logically related and sequential activities and transactions in which businesses engage.

Definitions Cont

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

Merchandising

is a combination of store design, layout and product display knowledge  A

shipping profile

is the collection of attributes that affect how easily that product can be packaged and delivered (e.g. airline tickets have a high value-to-weight ratio)

Definitions Cont

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 The definition of a

market

satisfies two conditions:   Potential seller of a good (product) comes into contact with buyers A medium of exchange is available (e.g. currency or barter (to exchange goods or services directly without the use of money) 物物交换 )

Definitions Cont

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

Transaction costs

are the total costs that a buyer and seller incur as they gather information and negotiate a purchase/sale transaction. This includes:    Brokerage fees ( 回扣 ) and sales commissions ( 佣 金 ) Cost of information search and acquisition Seller ’ s investment in equipment or hiring of skilled employees