Chapter 1 Introduction to Electronic Commerce

Traditional Commerce and Electronic Commerce To many people, the term electronic commerce means shopping on the part of the Internet called the World Wide Web. –Consumer shopping on the Web was running about $130 billion per year in 2002 –Expected to exceed $500 billion by 2004 E-commerce more than just “shopping” on the web

Electronic Commerce Business activities using electronic data transmission via the World Wide Web. Processes that support selling and purchasing on the Web The main elements of e-commerce are: –Business-to-consumer –Business-to-business –Consumer-to-consumer –Consumer-to-Government

Electronic Commerce

Electronic Funds Transfers (EFTs) –Banks Electronic Data Interchange (EDI) – One business transmits computer-readable data in a standard format to another business. –Reduces Time Money Paperwork Errors

Buyer Side

Seller Side

Activities as Business Processes Activities and transactions in which businesses engage, including: –Promote product –Placing orders –Sending invoices –Transferring funds –Shipping goods to customers –Support Customers

Comparing Traditional Commerce and Electronic Commerce

Business Process Suitability to Type of Commerce

Electronic Commerce Items Commodity item – product or service that is hard to distinguish by sellers –Office product –CD’s –Brand Identity – reduce risk of purchase Shipping profile –affects how easily a product can be packaged and delivered. –High value vs. low weight

Advantages of Electronic Commerce Increase sales and decrease costs. Increases speed and accuracy for information exchange Reaches a large amount of potential customers throughout the world. The Web creates virtual communities for specific products or services.

Advantages of Electronic Commerce Reduce its costs in its sales support and order-taking processes. Electronic commerce increases sale opportunities for the seller. Electronic commerce increases purchasing opportunities for the buyer.

Disadvantages of Electronic Commerce Some business processes are difficult to be implemented through electronic commerce. Return-on-investment is difficult to apply –Difficult to interface with existing systems Businesses face cultural and legal obstacles to conducting electronic commerce. –Fear, Privacy

International Electronic Commerce About 60 percent of all electronic commerce sites are in English, therefore many language barriers need to be overcome. The political structures of the world present some challenges. Legal, tax, and privacy are concerns of international electronic commerce.

Transaction Costs Transaction Costs are the total of all –Costs that a buyer and a seller incur –Gather information –Negotiate a purchase-sale transaction. –Investment a seller makes in equipment –Hiring of skilled employees to supply the product and services to the buyer.

Economic Forces Market Structure

Economic Forces Hierarchical Structure

The Role of Electronic Commerce Reduce transaction costs. Network economic structure – companies coordinate their strategies, resources, and skill sets by forming long-term, stable relationships with other companies and individuals based on shared purposes.

The Role of Electronic Commerce Virtual companies – when strategic partnerships occur between companies operating on the Internet. Electronic commerce can make network economic structures, which rely on information sharing, and are much easier to construct and maintain.

The Role of Electronic Commerce Network Structure

Value Chains Value-adding activities –generate profits and help meet other goals. Value Chains –Those activities necessary to do business Design Produce Promote Market Deliver Support

Strategic Business Unit Value Chains

Role of ECommerce Examine Value Chains to –Reduce Costs –Improve product –Reach new customers/suppliers –Create new ways to sell products