1. Copyright © 2003 by South-Western. All Rights Reserved. CHAPTER SEVEN ELECTRONIC COMMERCE: THE INTERNET AND ONLINE BUSINESS Text by Profs. Gene Boone & David Kurtz Multimedia Presentation by Prof. Milton Pressley The University of New Orleans milton.pressley@uno.edu

2. Copyright © 2003 by South-Western. All Rights Reserved. Discuss how the Internet provides new routes to business success Describe the increasing diversity of Internet users Summarize the Internet’s four functions and give examples of each List the major forms of business-to business e-commerce LEARNING GOALS

3. Copyright © 2003 by South-Western. All Rights Reserved. LEARNING GOALS Describe some of the challenges associated with internet selling Describe how companies develop and manage successful Web sites Explain how global opportunities result from technological advances

4. Copyright © 2003 by South-Western. All Rights Reserved. THE INTERNET: KEY TO BUSINESS SUCCESS Internet (or Net): 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 © PhotoDisc

5. Copyright © 2003 by South-Western. All Rights Reserved. THE INTERNET: KEY TO BUSINESS SUCCESS Web site: 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 © PhotoDisc

6. Copyright © 2003 by South-Western. All Rights Reserved. How The Internet Works Remarkable System of cooperating networks Figure 7.1: How Information Travels on the Internet

7. Copyright © 2003 by South-Western. All Rights Reserved. How The Internet Works Internet Service Provider (ISP) organization that provides access to the internet, usually via the public telephone 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 © 2003 by South-Western. All Rights Reserved. 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 © 2003 by South-Western. All Rights Reserved. WHO’S ON THE NET? Users on every continent 43% of Internet Users in the US Share from other countries is growing © PhotoDisc

10. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.2: Top Ten Internet Users

11. Copyright © 2003 by South-Western. All Rights Reserved. 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 WHO’S ON THE NET? © PhotoDisc

12. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.3: Four Functions of the Internet Using the Net’s Four Functions

13. Copyright © 2003 by South-Western. All Rights Reserved. Using the Net’s Four Functions Communication 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 © PhotoDisc

14. Copyright © 2003 by South-Western. All Rights Reserved. Using the Net’s Four Functions Information Communication 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 © PhotoDisc

15. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.4: Web Page Sweepstakes Designed to Generate Customer Data

16. Copyright © 2003 by South-Western. All Rights Reserved. Using the Net’s Four Functions Entertainment Information Communication Everything from concert Webcasts to online gaming available online Telewebbers: watch television while surfing the WWW © PhotoDisc

17. Copyright © 2003 by South-Western. All Rights Reserved. Using the Net’s Four Functions Business Transactions: E-Commerce Business Transactions: E-Commerce Entertainment Information Communication E-commerce: short for electronic commerce Growing at lightening speed © PhotoDisc

18. Copyright © 2003 by South-Western. All Rights Reserved. THE SCOPE OF ELECTRONIC COMMERCE Electronic Commerce (E-Commerce): process for online marketing of goods and services – including product information, ordering, invoicing, and payment processes, and customer services Electronic Commerce (E-Commerce): process for online marketing of goods and services – including product information, ordering, invoicing, and payment processes, and customer services © PhotoDisc

19. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.5: This Advertisement Shows IBM’s Key Role in Electronic Commerce

20. Copyright © 2003 by South-Western. All Rights Reserved. Profiting from E-Commerce The Scope of Electronic Commerce So far, only a minority of firms report profits from Web Site Operations Only 42% of sites surviving for at least 3 years claim to be profitable Profitability among B2C is highest among those who have established names (I.e., Land’s End) © PhotoDisc

21. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.6: Benefits of E-commerce

22. Copyright © 2003 by South-Western. All Rights Reserved. B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce Business-to-Business E-Commerce (B2B): electronic business transactions between organizations using the internet Electronic Date Interchange (EDI): computer-to-computer exchanges of business documents between buyers and sellers © PhotoDisc

23. Copyright © 2003 by South-Western. All Rights Reserved. B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce Electronic Exchanges: Web-Based marketplaces that cater to a specific industry's needs © PhotoDisc

24. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.7: How Online Parts Exchanges Save Money for Automakers

25. Copyright © 2003 by South-Western. All Rights Reserved. B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce 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 © PhotoDisc

26. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.8: Benefits from Allying with Distribution Partners

27. Copyright © 2003 by South-Western. All Rights Reserved. B2C Transactions Gain Ground B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce Business-to-consumer (B2C) commerce: selling directly to consumers over the Internet © PhotoDisc

28. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.9: Top Five Products Purchased Online

29. Copyright © 2003 by South-Western. All Rights Reserved. B2C Transactions Gain Ground B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce 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 © PhotoDisc

30. Copyright © 2003 by South-Western. All Rights Reserved. B2C Transactions Gain Ground B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce Developing Safe Online Payment Systems Encryption: encoding data for security purposes Electronic Cash: Buyers register with a bank to make secure Internet Payment © PhotoDisc

31. Copyright © 2003 by South-Western. All Rights Reserved. B2C Transactions Gain Ground B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce 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 © PhotoDisc

32. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges B2C Transactions Gain Ground B2B Transactions Lead the Way Profiting from E-Commerce The Scope of Electronic Commerce E-Commerce has it’s problems and challenges as shown in the next few slides... © PhotoDisc

33. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.10: Roadblocks to E-Commerce

34. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Internet Security and Privacy Electronic Signatures: a way to enter into a legal contract © PhotoDisc

35. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.11: TRUSTe Organization Attempts to Build Customer Confidence Online

36. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Children’s Online Privacy Protection Act (COPA): requires that Web sites targeting children younger than 13 obtain “verifiable parental consent” before collecting certain types of data Children’s Online Privacy Protection Act (COPA): requires that Web sites targeting children younger than 13 obtain “verifiable parental consent” before collecting certain types of data Laws also being considered by Congress to protect adult internet users Laws also being considered by Congress to protect adult internet users Firewall: Electronic barrier between an organization’s internal network and the internet that limits access into and out of the organization’s network. Firewall: Electronic barrier between an organization’s internal network and the internet that limits access into and out of the organization’s network. © PhotoDisc

37. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Internet Fraud Internet Fraud is a type of crime that is another barrier to e-commerce Traffic Jams Caused by System Overload e.g., Encyclopedia Britannica’s initial inability to handle the number of people signing onto its site © PhotoDisc

38. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Poor Web Site Design and Service Unlike Amazon.com’s and other well- designed and maintained Web sites, some are not well designed and easy to use

39. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.12: Five Products Consumers Would Prefer to Purchase Online

40. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Unreliable Delivery and Returns Unreliable Delivery and Returns (e.g., Toy ‘R Us Web site which couldn’t meet demand early in it’s existence) (e.g., Toy ‘R Us Web site which couldn’t meet demand early in it’s existence) © PhotoDisc

41. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Lack of Retail Experience Lack of Retail Experience “Pure-play” dot-com companies that started their existence online “Pure-play” dot-com companies that started their existence online © PhotoDisc

42. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Competition and Disagreements Among Buyers and Sellers Competition and Disagreements Among Buyers and Sellers Companies who have partnered with other companies often find they are competing with each other when they sell directly to customers online Such competition can lead to disagreements © PhotoDisc

43. Copyright © 2003 by South-Western. All Rights Reserved. E-Commerce Challenges Protection of Intellectual Property Protection of Intellectual Property Difficult to accomplish on the internet Difficult to accomplish on the internet Open Sharing of information on the Internet can conflict with the desire to protect intellectual property Open Sharing of information on the Internet can conflict with the desire to protect intellectual property © PhotoDisc

44. Copyright © 2003 by South-Western. All Rights Reserved. MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNET Some key questions to consider in developing a Web site are shown on the next slide... Some key questions to consider in developing a Web site are shown on the next slide... © PhotoDisc

45. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.13: Questions to Consider in Developing a Web Site

46. Copyright © 2003 by South-Western. All Rights Reserved. MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNET Planning and Preparation Planning and Preparation What’s the goal? Whether to create and maintain a site in-house or contract with outside experts Developing Successful Web Sites © PhotoDisc

47. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.14: Macromedia: E-Commerce Web Site Developer

48. Copyright © 2003 by South-Western. All Rights Reserved. Content and Connections Need interesting material Who should host the site? How to draw business to the site? Developing Successful Web Sites © PhotoDisc MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNET

49. Copyright © 2003 by South-Western. All Rights Reserved. Costs are highly variable Costs are highly variable Development Costs Development Costs Web Host Costs Web Host Costs Keeping Web Site Current Keeping Web Site Current Developing Successful Web Sites Costs and Maintenance © PhotoDisc MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNET

50. Copyright © 2003 by South-Western. All Rights Reserved. Some measures of effectiveness are shown on the next slide... Some measures of effectiveness are shown on the next slide... Developing Successful Web Sites Costs and Maintenance Measuring Web Site Effectiveness © PhotoDisc MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNET

51. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.15: Measures of Web Site Effectiveness Click-through rate: the percentage of people presented with a Web banner ad who click on it Click-through rate: the percentage of people presented with a Web banner ad who click on it Conversion rate: the percentage of visitors to a Web site who make a purchase Conversion rate: the percentage of visitors to a Web site who make a purchase

52. Copyright © 2003 by South-Western. All Rights Reserved. THE GLOBAL ENVIRONMENT OF E-COMMERCE Internet creates an enormous pool of potential customers Internet creates an enormous pool of potential customers Firms can market their offerings internationally and locate distribution sources and trading partners online Firms can market their offerings internationally and locate distribution sources and trading partners online Customers can search for products and information conveniently Customers can search for products and information conveniently Sites must consider both language and global cultural variations Sites must consider both language and global cultural variations E-commerce can heighten competition E-commerce can heighten competition © PhotoDisc

53. Copyright © 2003 by South-Western. All Rights Reserved. Figure 7.16: Importance of Considering the Internet’s Global Population

54. Copyright © 2003 by South-Western. All Rights Reserved. WHAT’S AHEAD In upcoming chapters we’ll: In upcoming chapters we’ll: Look at other trends that are reshaping the business world Look at other trends that are reshaping the business world Explore how companies: Explore how companies: Organize, lead, and manage their work processes Organize, lead, and manage their work processes Manage and motivate their employees Manage and motivate their employees Empower their employees Empower their employees Handle labor and workplace disputes Handle labor and workplace disputes Create world-class goods and services Create world-class goods and services © PhotoDisc