1. 1 1 Chapter 1 Introduction to Electronic Commerce

2. 2 1 Objectives u Differences between e-commerce and traditional commerce u Advantages and disadvantages of using e-commerce to conduct business u International nature of e-commerce u Fostering of e-commerce through economic forces u Utilizing value chains

3. 3 1 What is Electronic Commerce? u Also known as “e-commerce” u More than on-line shopping u Encompasses other business activities u Used interchangeably with “Electronic Business”

4. 4 1 EFT and EDI u Electronic Funds Transfers (EFT) l Used by the banking industry to exchange account information over secured networks u Electronic Data Interchange (EDI) l Used by businesses to transmit data from one business to another

5. 5 1 Traditional Commerce u The exchange of valuable objects or services between at least two parties u Includes all activities that each party undertakes to complete the transaction u Barter system eventually gave way to the use of currency

6. 6 1 The Buyer Figure 1-1

7. 7 1 The Seller Figure 1-2

8. 8 1 Activities as Business Processes u The activities in which businesses engage as they conduct commerce are often referred to as Business Processes. l Transferring funds l Placing orders l Sending invoices l Shipping goods to customers

9. 9 1 Traditional vs. Electronic Commerce Figure 1-3

10. 10 1 Business Processes Suitability Figure 1-4

11. 11 1 Advantages of Electronic Commerce u Increased sales l Reach narrow market segments in geographically dispersed locations l Create virtual communities u Decreased costs l Handling of sales inquiries l Providing price quotes l Determining product availability

12. 12 1 Disadvantages of Electronic Commerce u Loss of ability to inspect products from remote locations u Rapid developing pace of underlying technologies u Difficult to calculate return on investment u Cultural and legal impediments

13. 13 1 International Electronic Commerce u Language barriers must be overcome u Political structures l Currency conversion l Tariffs and import/export restrictions u Legal, tax, and privacy concerns l Who has jurisdiction to levy taxes? l How is personal information handled?

14. 14 1 The Internet and World Wide Web u The Internet is a large system of interconnected networks that spans the globe u The World Wide Web (WWW) is part of the Internet and allows users to share information with an easy-to-use interface

15. 15 1 Origins of the Internet u Developed by the U.S. Department of Defense in the early 1960s u The world’s telephone companies were early models for networked computers u Researchers at universities were connected in 1969

16. 16 1 New Uses for the Internet u E-mail l The ability to send messages to one or many across the Internet u File Transfer Protocol (FTP) l The ability to transfer data files from one computer to another u Telnet l The ability to remotely logon to another computer

17. 17 1 New Uses for the Internet u World Wide Web (WWW) l The ability to access information using a common interface u Videoconferencing l The ability to use video across the Internet for conferencing purposes u Multimedia l The ability to use video, audio, and animations across the Internet

18. 18 1 Commercial Use of the Internet u During the 1980s, the National Science Foundation prohibited commercial network traffic on its networks u In 1989, the NSF permitted MCI Mail and CompuServe to establish limited connections to the Internet u By 1990, over 300,000 computers were connected to the Internet

19. 19 1 Growth of the Internet and the Web Figure 1-5

20. 20 1 Hypertext Markup Language (HTML) u A language that uses codes attached to text l l mail u Hypertext links, or hyperlinks, allow the user to move from one HTML document to another on a different computer

21. 21 1 Growth of the World Wide Web Figure 1-6

22. 22 1 Economic Forces and Electronic Commerce u Transaction Costs l The total of all costs that the buyer and seller incur as they gather information and negotiate a purchase-sale transaction u The “Market” l Potential sellers must come in contact with potential buyers l A medium of exchange must be available

23. 23 1 Transaction Costs u Brokerage fees u Sales Commissions u Information search and acquisition u Investment in equipment u Hiring of skilled employees

24. 24 1 Markets and Hierarchies Figure 1-7

25. 25 1 Markets and Hierarchies Figure 1-8

26. 26 1 Role of Electronic Commerce u Reduces transaction costs l Improves information flow l Increases coordination of actions u Improvement of existing markets u Creation of new markets

27. 27 1 Network Form of Economic Organization Figure 1-9

28. 28 1 Value Chains in Electronic Commerce Defined as the way of organizing the activities undertaken to design, produce, promote, market, deliver, and support the products or services a business sells.

29. 29 1 Strategic Business Unit Value Chains Figure 1-10

30. 30 1 Value Chain Primary Activities u Identify customers l Market research, customer satisfaction surveys u Design l Concept research, engineering, test marketing u Purchase materials and supplies l Vendor selection, quality and timeliness of delivery

31. 31 1 Value Chain Primary Activities u Manufacture l Fabrication, assembly, testing, packaging u Market and sell l Advertising, promotion, pricing, monitoring sales and distribution channels u Deliver l Warehousing, materials handling, monitoring timeliness of delivery

32. 32 1 Value Chain Primary Activities u Provide after-sale service and support l Installation, testing, maintenance, repair, warranty replacement, replacement parts

33. 33 1 Value Chain Support Activities u Finance and administration l Accounting, bill payment, borrowing, regulations, compliance with laws u Human resources l Recruiting, hiring, training, compensation, benefits u Developing technology l Research, development, improvement studies, maintenance procedures

34. 34 1 Industry Value Chains Figure 1-11

35. 35 1 Role of Electronic Commerce u Reducing costs u Improving product quality u Reaching new customers or suppliers u Creating new ways of selling existing products