Chapter 1 Overview of Electronic Commerce

Learning Objectives 1. Define electronic commerce (EC) and describe its various categories. 2. Describe and discuss the content and framework of EC. 3. Describe the major types of EC transactions. 4. Discuss e-commerce 2.0. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-1

Learning Objectives 6. Understand the elements of the digital world. 7. Describe the drivers of EC as they relate to business pressures and organizational responses. 8. Describe some EC business models. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-2

Electronic Commerce: Definitions and Concepts  electronic commerce (EC) The process of buying, selling, or exchanging products, services, or information via computer  e-business servicing customers, collaborating with business partners, and conducting electronic transactions within an organization Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-3

Electronic Commerce: Concepts EC Organizations defined by the three dimensions 1. Ordering system- order, payment 2. Processing – create product 3. Delivery method - digital some physical Pure vs. Partial 1. brick-and-mortar – all three are physical 2. virtual- all three are digital 3. click-and-mortar- some digital and some physical Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-4

1.2 Brief History and Classification Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 5

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Transactions  B2B  B2C  C2C  G2C  B2B2C B2B2C  C2B C2B  Intra EC  C-Commerce  M-Commerce 1-8

Classification  business-to-business-to-consumer (B2B2C) E-commerce model in which a business provides some product to a client business that maintains its own customers 1-9

Classification  consumer-to-business (C2B) E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals who seek sellers to bid on products or services they need Fotolia 1-10

Classification  intrabusiness EC E-commerce category that includes all internal organizational activities that involve  exchange of goods  Services  Information 1-11

Classification  collaborative commerce (c-commerce) E-commerce model in which individuals or groups communicate or collaborate online  For example, a Web server hub could substitute for distributed groupware for jointly managing projects such as constructing a building.  "Instead of all the partners buying the same groupware product, they'll all just sign on to the Web site," 1-12

History of EC  Internet began with the U.S. Government  Tim Berner’s Lee : WorldWide Web:Tim Berner’s LeeWorldWide Web  1993 Dot Com Boom- Netscape  1995-Transaction E-Commerce B2B, B2C  Dot Com Bust Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-13

Web. 1.0  Trading, e-services,, corporate- sponsored collaboration. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-14

Money down the drain.  Boo.com – spent $188 million in just six months in an attempt to create a global online fashion store that went bankrupt in May Boo.com  GeoCities – Purchased by Yahoo! for $3.57 billion in January Yahoo! closed GeoCities on October 26, 2009 GeoCitiesYahoo! Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-15

EC Failures.  62% of dot coms lacked financial skills  50% had little experience with marketing  Many companies failed to ensure they had the inventory and distribution setup to meet the fluctuation and increasing demands for their products  eToys.com, pet.com, Webvan…. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-16

EC Success  Ebay, Google, Facebook, Yahoo, Amazon, Zappos Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-17

History of EC  B2E, Ccommerce, Egovernment, Elearning, Mcommerce  2005 Social Networks- Web 2.0!!  2009 Social Commerce - Fcommerce Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-18

1.3 Ecommerce 2.0 Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-19 E-Commerce 2.0: E-Commerce 2.0: From Social Commerce to Virtual Worlds

Facebook  As Facebook turns ten years old and Mark Zuckerberg turns thirty  The company is worth around $135 billion  56 percent profit margins and $11.45 billion in cash, Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-20

 Social Computing- blogs, mashups, instant messaging, social networks, wikis  Shift from traditional top-down management communication to…… a bottom-up strategy. i.e. tripadvisor, customer reviews on amazon, yelp Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-21

 Digital Economy  Digital Enterprises  Digital Society Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall The Digital World:

 Digital Economy- based on digital technologies including digital communication networks, computers, software Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-23 The Digital World Economy

The Digital Enterprises  Selling online  Online inventory forecasting  Electronic marketplace  Electronic billing  Mass customization Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-24

The Digital Society  The way people live, work, play, shopping, entertainment, travel, medical care, education. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-25

Business Performance  Mission, goals, strategy and plans  The business process – collection of related activities that create a product or service  The process has inputs and outputs and its activities can be measured. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-26

 The business environment creates pressures, problems, and opportunities that drive what organizations are doing in their business processes Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall The Changing Business Environment

1. Market 2. Legal, Societal 3. Technological Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-28 Business Pressures

Market Pressures Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-29 The Global Economy and Strong Competition The Changing Nature of the Workforce Powerful Customers

Societal/Political/Legal  Social Responsibility  Manufacturing sustainability Manufacturing sustainability  Distribution  Humane working conditions  Government Regulations

1. Reaction to a specific pressure already in existence 2. Initiative that will defend against future pressures 3. Activity that exploits an opportunity created by changing conditions Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-31

Organizational Response Strategies 1-32

1.6 Electronic Commerce Business Models  Business model- method of doing business by which a company can generate revenue to sustain itself  Revenue model –describes how a company will generate revenue 1-33

Electronic Commerce Business Models  TYPICAL EC BUSINESS MODELS 1. Online direct marketing- selling products or services online. 2. Tendering (bidding) system- 1. Large volume or large value purchases 2. Buyer request and possible sellers to submit bids. Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-34

Electronic Commerce Business Models  TYPICAL EC BUSINESS MODELS 3. Electronic marketplaces -approved vendors to purchase products or services for their businesses. 4. Viral marketing- social commerce 5. Group purchasing Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-35

Revenue Models  Sales- selling merchandise or services on their websites.  Transaction Fees- Commission based on a transaction: Stock Trade, Home Sale  Subscription Fees- fixed amount, usually monthly to get some type of service. Lynda.com Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-36

Revenue Models  Advertising Fees- Companies Charge others for allowing them to place a banner on their sites  Affiliate Fees- Companies receive commissions for referring customers to others’ websites Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 1-37