Transcript Chapter 1 Introduction to Electronic Commerce

Chapter 1
Introduction to Electronic
Commerce
Traditional Commerce and Electronic
Commerce
• To many people, the term electronic commerce means
shopping on the part of the Internet called the World
Wide Web.
– Consumer shopping on the Web was running
about $130 billion per year in 2002
– Expected to exceed $500 billion by 2004
• E-commerce more than just “shopping” on the web
Electronic Commerce
• Business activities using electronic data
transmission via the World Wide Web.
Processes that support selling and purchasing on the Web
• The main elements of e-commerce are:
– Business-to-consumer
– Business-to-business
– Consumer-to-consumer
– Consumer-to-Government
Electronic Commerce
Electronic Commerce
• Electronic Funds Transfers (EFTs)
– Banks
• Electronic Data Interchange (EDI)
– One business transmits computer-readable data in
a standard format to another business.
– Reduces
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Time
Money
Paperwork
Errors
Buyer
Side
Seller
Side
Activities as Business Processes
• Activities and transactions in which businesses
engage, including:
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Promote product
Placing orders
Sending invoices
Transferring funds
Shipping goods to customers
Support Customers
Comparing Traditional Commerce and
Electronic Commerce
Business Process Suitability
to Type of Commerce
Electronic Commerce Items
• Commodity item – product or service that is hard to
distinguish by sellers
– Office product
– CD’s
– Brand Identity – reduce risk of purchase
• Shipping profile –affects how easily a product can be
packaged and delivered.
– High value vs. low weight
Advantages of Electronic Commerce
• Increase sales and decrease costs.
• Increases speed and accuracy for information
exchange
• Reaches a large amount of potential customers
throughout the world.
• The Web creates virtual communities for specific
products or services.
Advantages of Electronic Commerce
• Reduce its costs in its sales support and order-taking
processes.
• Electronic commerce increases sale opportunities for
the seller.
• Electronic commerce increases purchasing
opportunities for the buyer.
Disadvantages of Electronic Commerce
• Some business processes are difficult to be
implemented through electronic commerce.
• Return-on-investment is difficult to apply
– Difficult to interface with existing systems
• Businesses face cultural and legal obstacles to
conducting electronic commerce.
– Fear, Privacy
International Electronic Commerce
• About 60 percent of all electronic commerce sites are in
English, therefore many language barriers need to be
overcome.
• The political structures of the world present some
challenges.
• Legal, tax, and privacy are concerns of international
electronic commerce.
Transaction Costs
• Transaction Costs are the total of all
– Costs that a buyer and a seller incur
– Gather information
– Negotiate a purchase-sale transaction.
– Investment a seller makes in equipment
– Hiring of skilled employees to supply the product
and services to the buyer.
Economic Forces
Market Structure
Economic Forces
Hierarchical Structure
The Role of Electronic Commerce
• Reduce transaction costs.
• Network economic structure – companies coordinate
their strategies, resources, and skill sets by forming
long-term, stable relationships with other companies
and individuals based on shared purposes.
The Role of Electronic Commerce
• Virtual companies – when strategic partnerships
occur between companies operating on the Internet.
• Electronic commerce can make network economic
structures, which rely on information sharing, and are
much easier to construct and maintain.
The Role of Electronic Commerce
Network Structure
Value Chains
• Value-adding activities
– generate profits and help meet other goals.
• Value Chains
– Those activities necessary to do business
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Design
Produce
Promote
Market
Deliver
Support
Strategic Business Unit Value Chains
Role of ECommerce
• Examine Value Chains to
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Reduce Costs
Improve product
Reach new customers/suppliers
Create new ways to sell products