Introduction to Electronic Commerce Chapter 1 Introduction to Electronic Commerce

Traditional Commerce and Electronic Commerce To many people, electronic commerce = shopping on the part of the Internet called the World Wide Web. Consumer shopping on the Web = about US$50 billion per year in 2001 and is expected to exceed US$350 billion by 2004 E-commerce is much broader and encompasses many more business activities than just Web shopping.

Traditional Commerce and Electronic Commerce Electronic commerce - business activities conducted using electronic data transmission via the Internet and World Wide Web. 3 main elements of e-commerce : Business-to-consumer = B2C Business-to-business = B2B Transactions and business processes that support selling and purchasing activities on the Web 4th category = consumer-to-consumer = C2C

Electronic Commerce

Electronic Commerce Examples : Electronic Funds Transfers (EFTs) - used by banks for many years. Electronic Data Interchange (EDI) occurs when one business transmits computer-readable data in a standard format to another business.

Electronic Commerce Businesses who engage in EDI with each other = trading partners. Standard formats used in EDI - same information that businesses have always included in their standard paper invoices, purchase orders, and shipping documents. General Electric and Wal-Mart - pioneers in using EDI to improve their purchasing process.

Value Added Network (VAN) Value added network = independent firm that offers connection and EDI transaction forwarding services to buyers and sellers engaged in EDI. VANs - responsible for ensuring the security of transmitted data. VANs - charge a fixed monthly fee plus a per-transaction charge to subscribers.

Activities as Business Processes Business processes = group of logical, related, and sequential activities and transactions in which businesses engage, including: Transferring funds Placing orders Sending invoices Shipping goods to customers

What is the difference between traditional commerce and electronic commerce?

Comparing Traditional Commerce and Electronic Commerce

What type of business processes are suitable for : Electronic Traditional commerce Electronic & traditional commerce

Business Process Suitability to Type of Commerce

Electronic Commerce Commodity item – product or service that is hard to distinguish from the same products or services provided by other sellers, making them especially well suited to electronic commerce. Shipping profile – collection of attributes that affect how easily a product can be packaged and delivered.

Advantages of Electronic Commerce Electronic commerce - increase sales and decrease costs. Web advertising - reaches a large amount of potential customers throughout the world. Web - creates virtual communities for specific products or services.

Advantages of Electronic Commerce Business - can reduce costs by using electronic commerce in 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 - difficult to be implemented through electronic commerce. Return-on-investment - difficult to apply to electronic commerce. Businesses - cultural and legal obstacles to conducting electronic commerce.

International Electronic Commerce About 60 percent of all electronic commerce sites are in English - many language barriers need to be overcome. Political structures of the world present some challenges. Legal, tax, and privacy are concerns of international electronic commerce.

Transaction Costs Transaction costs = total of all costs that a buyer and a seller incur as they gather information and negotiate a purchase-sale transaction. Another significant component of transaction costs = investment a seller makes in equipment or in the hiring of skilled employees to supply the product and services to the buyer.

Economic Forces and Electronic Commerce

Economic Forces and Electronic Commerce

The Role of Electronic Commerce Businesses and individuals - use electronic commerce to 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 - make network economic structures, which rely on information sharing, and are much easier to construct and maintain.

The Role of Electronic Commerce

Value Chains Electronic commerce includes so many activities and transactions that it can be difficult for managers to decide where and how to use it in their businesses. One way to focus on specific business processes as candidates for electronic commerce - break the business down into a series of value-adding activities that combine to generate profits and meet other goals.

Value Chains A strategic business unit = one particular combination of product, distribution channel, and customer type. A value chain = a way of organizing the activities that each strategic business unit undertakes to design, produce, promote, market, deliver, and support the products or services it sells.

Strategic Business Unit Value Chains

Strategic Business Unit Value Chains The support activities of a value chain for a strategic business unit include: Finance and administration Human resources Technology development

Industry Value Chains Value system describes the larger stream of activities into which a particular business unit’s value chain is embedded. Industry value chain (IVC) refers to value systems. IVC is used to identify opportunities for cost reduction, product improvement, or channel reconfiguration.

SWOT Analysis: Evaluating Business Unit Opportunities Most electronic commerce initiatives add value by either reducing transaction costs , creating some type of network economics effect, or a combination of both. In SWOT analysis, you list the strengths and weaknesses of the business unit and then identify opportunities presented by the markets of the business unit.

SWOT Analysis: Evaluating Business Unit Opportunities

The Internet and World Wide Web Internet - large system of interconnected computer networks that spans the globe. Internet - supports e-mail, online newspapers and publications, discussion groups, games, and free software. World Wide Web - includes an easy-to-use standard interface for accessing Internet resources.

Origins of the Internet Early 1960s - U.S. Department of Defense started research on networking computers. Its researchers developed a multiple channels network. 1969 - Defense Department used this network model to connect four mainframe computers at different locations.

New Uses for the Internet 1972 - a researcher wrote a program that could send and receive messages over the network. E-mail was born and became widely used. The network software includes: File Transfer Protocol (FTP) User’s News Network (Usenet)

Commercial Use of the Internet 1980 - companies used the PC to construct their networks. 1980s - National Science Foundation (NSF) funded network services. 1989 - NSF permitted two commercial e-mail services. Early 1990s - Internet started to serve the global resource accesses.

Growth of the Internet 1991 - NSF further eased its restriction on Internet commercial activity. 1995 - Privatization of the Internet was substantially completed. New structure of the Internet was based on four network access points (NAPs). Internet service providers (ISPs) sell Internet access rights directly to customers.

Growth of the Internet, 1991 - 2001

Development of Hypertext 1960s - Ted Nelson described his page-linking system hypertext. 1987 - Nelson published a book about a global system for online hypertext publishing and commerce. 1991 - Berners-Lee of CERN developed the code for a hypertext server program and made it available on the Internet.

HTML Hypertext server - a computer that stores files written in the hypertext markup language (HTML). HTML - a language that includes a set of codes (or tags) attached to text. Hypertext link - points to another location in the same or another HTML document.

Web Browser and Markup Languages Web browser - a software interface that lets users browse HTML documents. HTML is based on the Standard Generalized Markup Language (SGML). eXtensible Markup Language (XML) allows users to define new meanings for its commands in Web pages.

Graphical User Interface Graphical user interface (GUI) - a way of presenting program control functions and program outputs to users. Web browsers include: Mosaic Netscape Navigator Microsoft Internet Explorer

Growth of the World Wide Web

URL Uniform Resource Locator http://domain-name.top-level-domain/last-section Unique address of a web page or file on the Internet Case-sensitive

http hypertext transfer protocol http://domain-name.top-level-domain/last-section Protocol – rules Communication using links

Domain name http://domain-name.top-level-domain/last-section Address of the ISP Domain names are registered Ongoing fee is paid for each domain name

Directories and file names that specify a particular web page Last section http://domain-name.top-level-domain/last-section Directories and file names that specify a particular web page

Top-level Domain Represent the purpose of the organization of entity .com .gov .edu .org .net May be a two-letter country code

Browser Netscape Communicator Microsoft Internet Explorer

Browser Used to explore the Internet Dials the ISP Display web pages

Browser Parts of the screen

Browser Functions and Features Browser display window Displays contents of web page from each Internet site visited Screen limits how much of the site you can view at a time. The page can be scrolled using the scroll bar to see its entire contents Status line – progress of data being transferred and other messages

Browser Functions and Features Welcome banner on title bar Browser logo – animation indicates you are in the process of moving to a new site Hot list Bookmark Favorites Store your favorite URLs Browser control panel – menus and buttons

Browser Menus and Buttons Pull-down menu Buttons Convenient shortcuts for commonly used functions Click button rather than locate command from pull-down menu