1. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Part 2 Starting and Growing Your Business

2. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 7 Electronic Commerce: The Internet and Online Business

3. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-3 Chapter Objectives 1.Discuss how the Internet provides new routes to business success. 2.Describe the increasing diversity of Internet users. 3.Summarize the Internet’s four functions and give examples of each. 4.List the major forms of business-to-business (B2B) and business-to-consumer (B2C) e-commerce. 5.Describe some challenges associated with Internet selling. 6.List the steps involved in developing successful Web sites. 7.Identify methods for measuring Web site effectiveness. 8.Explain how global opportunities result from technological advances.

4. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-4 The Internet: A Key to Business Success Internet—worldwide network of interconnected computers that lets anyone with access to a personal computer send and receive images and data anywhere. World Wide Web—collection of resources on the Internet that offers easy access to text, graphics, sound, and other multimedia resources.

5. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-5 The Internet: A Key to Business Success Website—integrated document composed of electronic pages that integrate text, graphics, audio, and video elements, as well as hypertext links to other documents. Domain Name—a Web site address

6. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-6 How Information Travels on the Internet

7. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-7 How the Internet Works Internet Service Provider—organization that provides access to the Internet, via a telephone or cable television network. Digital Subscriber Line (DSL) a cable modem, or a satellite link to the internet which makes the data move at fast speeds

8. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-8 How the Internet Works ISP’s Server—a larger, special computer that holds information, providing it to clients on request Client—another computer or device that relies on the resources of other servers to help with its own processing

9. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-9 The Internet: A Key to Business Success Who’s on the Net Once dominated by men Gender gap has narrowed Women users now represent more than ½ in the U.S. Women users growing rapidly in other nations

10. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-10 Top Ten Internet Users

11. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-11 Four Functions of the Internet

12. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-12 Using the Net’s Four Functions Communication Email—electronic messages sent via the Internet. Instant messaging—when a message sent is immediately displayed on recipient’s screen Online communities—a forum (often a chat room) in which a group of people can share messages

13. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-13 Using the Net’s Four Functions Information Newsgroups provide a forum for participants to share information on selected topics Portals—sites designed to be a user’s starting place when entering the WWW Search Engines  Google

14. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-14 Using the Net’s Four Functions Entertainment Everything from concert Webcasts to online gaming available online NFL Game Day a “video game” played on the Internet.

15. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-15 Using the Net’s Four Functions Business Transactions: E-Commerce  Electronic e-commerce—online marketing of goods and services, including product information, ordering, invoicing, payment processes, and customer service.

16. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-16 The Scope of Electronic Commerce E-Commerce and the Not-for-Profit Sector Girl Scouts use the Internet to streamline their cookie sales Girl Scouts also have a online storefront

17. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-17 Benefits of E-Commerce

18. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-18 The Scope of Electronic Commerce Profiting from E-Commerce Websites catering to business customers, only a minority of firms report profits from Web Site Operations Websites catering to consumers are making steady progress in becoming profitable

19. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-19 The Scope of Electronic Commerce Business-to-Business Transactions Lead the Way Business-to-Business e-commerce— electronic business transactions between organizations using the Internet. Electronic Data Interchange Electronic Exchanges—Web-Based marketplaces that cater to a specific industry's needs

20. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-20 How Online Parts Exchanges Save Money for Automakers

21. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-21 The Scope of Electronic Commerce Business-to-Business Transactions Lead the Way Extranets—secure networks used for e- commerce and accessible through the firm’s Web site by authorized users Private Exchange—secure Web site at which a company and its suppliers share all types of data related to e-commerce

22. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-22 The Scope of Electronic Commerce Online Shopping Comes of Age Business-to-consumer (B2C) commerce: selling directly to consumers over the Internet Electronic Storefront—Web sites where items are offered for sale to consumers Electronic Shopping Cart—a file that displays items that a consumer has indicated that they wish to buy. consumer can review cart and make changes if desired

23. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-23 Top Products Sold Online

24. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-24 The Scope of Electronic Commerce Online Shopping Comes of Age Developing Safe Online Payment Systems  Encryption: encoding data for security purposes  Electronic Cash: Buyers register with a bank to make secure Internet Payment  Electronic Wallet: a computer file containing electronic cash, credit card information, owner identification, address, and other information  Smart Cards: plastic cards that store encrypted information on embedded computer chips instead of magnetic strips

25. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-25 Roadblocks to E-Commerce

26. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-26 The Scope of Electronic Commerce E-Commerce Challenges Privacy Issues  Electronic Signatures—a way to enter into a legal contract  Children’s Online Privacy Protection Act  Firewall—electronic barrier between a company’s internal network and the Internet that limits access into and out of the network.

27. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-27 The Scope of Electronic Commerce E-Commerce Challenges Internet Fraud Traffic Jams Caused by System Overload Poor Web Site Design and Service

28. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-28 The Scope of Electronic Commerce E-Commerce Challenges Unreliable Delivery and Returns Lack of Retail Experience Competition and Disagreements among Buyers and Sellers Protection of Intellectual Property

29. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-29 Questions to Consider in Developing a Web Site

30. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-30 Managing a Web Site Developing Successful Websites Planning and Preparation Naming your Web Site Content and Connections

31. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-31 Managing a Web Site Costs and Maintenance Costs are highly variable Development Costs Web Host Costs Keeping Web Site Current

32. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-32 Managing a Web Site Measuring Website Effectiveness Click-through rates—percentage of people presented with a Web banner ad who click it. Conversion rate—percentage of visitors to a Web site who make a purchase.

33. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-33 Measures of Web Site Effectiveness

34. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-34 The Global Environment of E-Commerce Internet creates an enormous pool of potential customers Firms can market their offerings internationally and locate distribution sources and trading partners online Customers can search for products and information conveniently Sites must consider both language and global cultural variations E-commerce can heighten competition

35. Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 7-35 Importance of Considering the Internet’s Global Population