Introduction to Electronic Commerce Chapter 1 Introduction to Electronic Commerce

Traditional Commerce and EC Electronic commerce is most commonly associated with shopping on the World Wide Web. Consumer shopping on the Web was @ $130 billion per year in 2002 and is expected to exceed $500 billion by 2004 e-commerce activity is much broader Electronic commerce encompasses broader business activities conducted using electronic data transmission via the Internet and the World Wide Web. The three main elements of e-commerce are: Business-to-consumer Business-to-business Transactions and business processes that support selling and purchasing activities on the Web Other categories include: consumer-to-consumer and consumer-to-government.

Electronic Commerce

Foundations of Electronic Commerce Electronic Funds Transfers (EFTs) have been used by banks for many years. Electronic Data Interchange (EDI) occurs when one business transmits computer-readable data in a standard format to another business. Businesses who engage in EDI with each other are called trading partners. The standard formats used in EDI contain the same information that businesses have always included in their standard paper invoices, purchase orders, and shipping documents. Firms, such as General Electric and Wal-Mart, have been pioneers in using EDI to improve their purchasing process. What further technology leap has Wal-Mart announced it will use for inventory tracking?

Value Added Networks/Business Processes A value added network is an independent firm that offers connection and EDI transaction forwarding services to buyers and sellers engaged in EDI. VANs are responsible for ensuring the security of transmitted data. VANs charge a fixed monthly fee plus a per-transaction charge to subscribers. Business processes refer to the group of logical, related, and sequential activities and transactions in which businesses engage, including: Transferring funds Placing orders Sending invoices Shipping goods to customers

Comparing Traditional & EC Buyer Side Seller Side

Business Process Suitability Commodity item – product or service hard to distinguish from that provided by others Shipping profile – collection of attributes that affect how easily a product can be packaged and delivered.

Electronic Commerce Advantages: Disadvantages: Increased sales and decreased costs. The Web creates virtual communities for specific products or services. Reduced costs in sales support and order-taking processes. Increased sale opportunities for the seller. Increased purchasing opportunities for buyers. Some business processes difficult to implement. Return-on-investment difficult to apply to electronic commerce. Businesses face cultural and legal obstacles to conducting electronic commerce. Not trivial to accomplish technically, politically, and structurally.

International Electronic Commerce Language barriers need to be overcome @ 60 percent of all electronic commerce sites are in English Cultural differences may impact design decisions The political structures of the world present some challenges. Access Content controls Legal, tax, and privacy are concerns of international electronic commerce. Other issues?

Economic Forces & Transaction Costs Most business activity today occurs within large hierarchical business organizations, referred to as firms or companies rather than markets. Transaction costs are the total of all costs that a buyer and a seller incur as they gather information and negotiate a purchase-sale transaction. Another significant component of transaction costs can be the investment a seller makes in equipment or in the hiring of skilled employees to supply the product and services to the buyer.

Economic Forces and Electronic Commerce

Economic Forces and Electronic Commerce

Economic Forces and Electronic Commerce

Network Effects & Value Chains As more people or organizations participate in a network, the value of the network to each participant increases. Example: An email account that is part of the Internet is far more valuable than an email account that connects only to other people in the company. Electronic commerce includes so many activities and transactions that it can be difficult for managers to decide where and how to use it in their businesses. One way to focus on specific business processes as candidates for electronic commerce is to break the business down into a series of value-adding activities that combine to generate profits and meet other goals.

Value Chains A strategic business unit is one particular combination of product, distribution channel, and customer type. A value chain is a way of organizing the activities that each strategic business unit undertakes to design, produce, promote, market, deliver, and support the products or services it sells. The support activities of a value chain for a strategic business unit include: Finance and administration Human resources Technology development

Industry Value Chains Value system describes the larger stream of activities into which a particular business unit’s value chain is embedded. Industry value chain (IVC) refers to value systems. IVC is used to identify opportunities for cost reduction, product improvement, or channel reconfiguration.

Value Chain for Strategic Business Units

SWOT Analysis: Evaluating Business Unit Opportunities Most electronic commerce initiatives add value by either reducing transaction costs, creating some type of network economics effect, or a combination of both. In SWOT analysis, you list the strengths and weaknesses of the business unit and then identify opportunities presented by the markets of the business unit.

SWOT Analysis: Evaluating Business Unit Opportunities

Major Roles of Electronic Commerce Electronic commerce can play a role in reducing costs improving product quality reaching new customers or suppliers creating new ways of selling existing products By examining elements of the value chain outside of the individual business unit, managers can identify many business opportunities, including those that can be exploited by using electronic commerce.