Chapter 7 E-Business: Doing Business Online Learning Goals 5 1 6 2 7 3 Describe some of the challenges associated with e-business. Discuss how organizations use Internet communications to advance their objectives. Discuss Web sites and identify methods for measuring Web site effectiveness. Explain the global scope of e-business. 5 Define e-business and discuss how it can help achieve business success. Distinguish between a corporate and a marketing Web site. List the major forms of B2B e-business. Explain B2C e-business and identify the products most often sold online. 1 6 2 7 3 4 8

WHAT IS E-BUSINESS? Electronic business (e-business) Conducting business via the Internet. • E-tailing, or virtual storefronts on Web sites. • Online business-to-business transactions. • Electronic data interchange (EDI), the business-to- business exchange of data using compatible software. • E-mail, instant messaging, and other Web-enabled communication tools and their use as media for reaching prospective and existing customers. • The gathering and use of demographic, product, and other information through Web contacts.

Capabilities and Benefits of E-Business • Global reach. The Net allows goods and services to be sold to customers regardless of geographic location. • Personalization. Companies can begin the production process when an order is received to better satisfy customer needs and sharply reduce inventory. • Interactivity. Customers and suppliers negotiate prices online, resulting in an ideal product at the right price that satisfies both parties. • Right-time and integrated marketing. Online retailers provide products when and where customers want them and can coordinate promotional activities and communication to create a unified, customer-oriented message. • Cost savings. E-business can markedly reduce the costs associated with operating and starting a business.

Business Web Sites Corporate Web site Web site designed to increase a firm’s visibility, promote its offerings, and provide information to interested parties. • Attempt to build customer goodwill and assist retailers and other resellers in their marketing efforts. • Use for a variety of other purposes • Disseminating financial information to investors • Enabling prospective employees to apply online for jobs • Providing e-mail communication. Marketing Web site Web site whose main purpose is to increase purchases by visitors.

BUSINESS-TO-BUSINESS (B2B) E- BUSINESS Business-to-business e-business (B2B) Electronic business transactions between businesses using the Internet. • B2B transactions account total $2.5 trillion. • By some estimates, account for 80 percent of all e-commerce activities. • Can reduce cost of B2B transactions by almost 25 percent.

Electronic Data Interchanges, Extranets, and Private Exchanges Electronic Data Exchange • Computer-to-computer exchanges of invoices, purchase orders, price quotations, and other sales information between buyers and sellers. Extranet • Secure networks used for e-business and accessible through the firm’s Web site by external customers, suppliers, or other authorized users. Private Exchanges • A secure Web site at which a company and its suppliers share all types of data related to e-business. • Sometimes called c-business because of use as a collaborative tool.

Electronic Exchanges and E-Procurement • Electronic exchanges are online marketplaces that bring buyers and sellers together and cater to a specific industry’s needs. • Initially 15,000 were launched but only 20 percent remain. • E-procurement is Web- based systems that enable all types of organizations to improve the efficiency of their procurement processes.

ONLINE SHOPPING COMES OF AGE Business-to-consumer e-business (B2C) Selling directly to consumers over the Internet. • E-tailing accounts for eight percent of all U.S. sales. • Thirty percent of the U.S. population shops online. • Services also are important participants in e-business. E-Tailing and Electronic Store Fronts Electronic storefronts Company Web site that sells products to consumers. • Growth of broadband is aiding e-tailing. • Fifty-five percent of American Internet users have broadband. • Expected to rise to 70 percent.

Who Are the Online Buyers and Sellers?

Who Are the Online Buyers and Sellers? • Online market is changing as customers become more familiar with online shopping.

Benefits of B2C e-Business Lower Prices • Many products cost less online. • Internet allows customers to easily compare prices from multiple sellers. Convenience • Can order products from around the world anytime day or night. • Can register customer information to streamline transactions. Personalization • Emphasis on personalized, one-on-one marketing to increase repeat purchases.

Developing Safe Online Payment Systems • Response to customer concerns about security of sending credit card information over the Internet. • Through encryption, data is encoded for security purposes. • Many companies use Secure Sockets Layer (SSL) technology to increase to encrypt information and verify senders and receivers. • Others use electronic method payment method, a computer data file at an e- business site’s checkout counter that contains not only electronic cash but credit card information, owner identification, and address.

E-BUSINESS CHALLENGES Privacy Issues • Privacy is among the top concerns of Internet users. • E-business sites often require passwords and use electronic signatures, an electronic form of identity verification. • Companies can track customers’ shopping and viewing habits through cookies. • Customers usually prefer that companies do not share their personal information. Merchants have responded by joining privacy organizations. • Privacy protections may soon become legally required. • Employees also have concerns that employers are monitoring their Internet behavior. • Companies worry about data theft.

Poor Web Site Design and Service Internet Fraud • Internet Crime Complaint Center logged more than 207,000 complaints in a recent year, an increase of 67 percent over the prior year. Phishing Using e-mail or pop-up messages to get unsuspecting victims to disclose personal information. Poor Web Site Design and Service • Two-thirds of Internet shopping carts are abandoned before any purchase is made. • Companies that have brick-and-mortar experience often have better success satisfying customers than Internet-only retailers. Channel Conflicts • Direct sales to customers can compete with business partners such as retailers and distributors, disputes called channel conflicts.

USING THE WEB’S COMMUNICATION FUNCTION • Web has four main functions: e-business, entertainment, information, and communication. • Communication is Web’s most popular function. • Firms use e-mail to communicate with customers, suppliers, and other partners. Spam Popular name for junk e-mail. Online Communities • Internet forums, newsgroups, electronic bulletin boards, and Web communities that appeal to people who share common interests.

Blogs Web-Based Promotions Blog Short for Web log, an online journal written by a blogger. • Corporate blogs can help build brand trust. • Employee blogs present ethical issues. Web-Based Promotions • Companies buy banner ads and pop-up ads on Web sites customers are likely to visit. Search marketing Paying search engines a fee to make sure the company’s listing appears toward the top of search results. • Companies use online coupons to promote their products.

MANAGING A WEB SITE Developing Successful Web Sites Planning and Preparation • What is the company’s goal for its Web site? • Will the site be maintained in-house or by a contractor? • What will the site be named? Content and Connections • Content an important factor for whether visitors return to a site. • Resources should be relevant, easy to access and understand, updated regularly, and compelling. • Small businesses may be better off outsourcing to meet their hosting and maintenance needs.

Costs and Maintenance • Variety of costs: • Development • Placing the site on a Web server. • Maintaining and updating the site. • Promoting the site.

Measuring Web Site Effectiveness Click-through rates Percentage of people presented with a Web banner ad who click on it. Conversion rates Percentage of visitors to a Web site who make a purchase.

GLOBAL ENVIRONMENT OF E-BUSINESS • Future growth of many companies is linked to a global strategy that incorporate e-business. • U.S. leads world in Internet users but ranks only fifth in Internet penetration. • International competition is growing. • Can heighten competition in the global marketplace.