Introduction to Electronic Commerce

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Chapter 1

• Introduction to Electronic Commerce

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Traditional Commerce and Electronic Commerce

• To many people, electronic commerce shopping on
  the part of the Internet called the World Wide
  Web.
• Consumer shopping on the Web about US50
  billion per year in 2001 and is expected to
  exceed US350 billion by 2004
• E-commerce is much broader and encompasses many
  more business activities than just Web shopping.

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Traditional Commerce and Electronic Commerce

• Electronic commerce - business activities
  conducted using electronic data transmission via
  the Internet and World Wide Web.
• 3 main elements of e-commerce
• Business-to-consumer B2C
• Business-to-business B2B
• Transactions and business processes that support
  selling and purchasing activities on the Web
• 4th category consumer-to-consumer C2C

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Electronic Commerce
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Electronic Commerce

• Examples
• Electronic Funds Transfers (EFTs) - 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.

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Electronic Commerce

• Businesses who engage in EDI with each other
  trading partners.
• Standard formats used in EDI - same information
  that businesses have always included in their
  standard paper invoices, purchase orders, and
  shipping documents.
• General Electric and Wal-Mart - pioneers in using
  EDI to improve their purchasing process.

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Value Added Network (VAN)

• Value added network independent firm that
  offers connection and EDI transaction forwarding
  services to buyers and sellers engaged in EDI.
• VANs - responsible for ensuring the security of
  transmitted data.
• VANs - charge a fixed monthly fee plus a
  per-transaction charge to subscribers.

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Activities as Business Processes

• Business processes group of logical, related,
  and sequential activities and transactions in
  which businesses engage, including
• Transferring funds
• Placing orders
• Sending invoices
• Shipping goods to customers

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• What is the difference between traditional
  commerce and electronic commerce?

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Comparing Traditional Commerce and Electronic
Commerce
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• What type of business processes are suitable for
  
• Electronic
• Traditional commerce
• Electronic traditional commerce

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Business Process Suitability to Type of Commerce
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Electronic Commerce

• Commodity item product or service that is hard
  to distinguish from the same products or services
  provided by other sellers, making them especially
  well suited to electronic commerce.
• Shipping profile collection of attributes that
  affect how easily a product can be packaged and
  delivered.

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Advantages of Electronic Commerce

• Electronic commerce - increase sales and decrease
  costs.
• Web advertising - reaches a large amount of
  potential customers throughout the world.
• Web - creates virtual communities for specific
  products or services.

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Advantages of Electronic Commerce

• Business - can reduce costs by using electronic
  commerce in sales support and order-taking
  processes.
• Electronic commerce - increases sale
  opportunities for the seller.
• Electronic commerce - increases purchasing
  opportunities for the buyer.

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Disadvantages of Electronic Commerce

• Some business processes - difficult to be
  implemented through electronic commerce.
• Return-on-investment - difficult to apply to
  electronic commerce.
• Businesses - cultural and legal obstacles to
  conducting electronic commerce.

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International Electronic Commerce

• About 60 percent of all electronic commerce sites
  are in English - many language barriers need to
  be overcome.
• Political structures of the world present some
  challenges.
• Legal, tax, and privacy are concerns of
  international electronic commerce.

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Transaction Costs

• Transaction costs 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 investment a seller makes in equipment or
  in the hiring of skilled employees to supply the
  product and services to the buyer.

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Economic Forces and Electronic Commerce
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Economic Forces and Electronic Commerce
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The Role of Electronic Commerce

• Businesses and individuals - use electronic
  commerce to 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.

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The Role of Electronic Commerce

• Virtual companies when strategic partnerships
  occur between companies operating on the
  Internet.
• Electronic commerce - make network economic
  structures, which rely on information sharing,
  and are much easier to construct and maintain.

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The Role of Electronic Commerce
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Value Chains

• 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 - break the
  business down into a series of value-adding
  activities that combine to generate profits and
  meet other goals.

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Value Chains

• A strategic business unit one particular
  combination of product, distribution channel, and
  customer type.
• A value chain 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.

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Strategic Business Unit Value Chains
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Strategic Business Unit Value Chains

• The support activities of a value chain for a
  strategic business unit include
• Finance and administration
• Human resources
• Technology development

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Industry Value Chains

• Value system describes the larger stream of
  activities into which a particular business
  units 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.

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SWOT AnalysisEvaluating 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.

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SWOT AnalysisEvaluating Business Unit
Opportunities
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The Internet and World Wide Web

• Internet - large system of interconnected
  computer networks that spans the globe.
• Internet - supports e-mail, online newspapers and
  publications, discussion groups, games, and free
  software.
• World Wide Web - includes an easy-to-use standard
  interface for accessing Internet resources.

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Origins of the Internet

• Early 1960s - U.S. Department of Defense started
  research on networking computers.
• Its researchers developed a multiple channels
  network.
• 1969 - Defense Department used this network model
  to connect four mainframe computers at different
  locations.

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New Uses for the Internet

• 1972 - a researcher wrote a program that could
  send and receive messages over the network.
• E-mail was born and became widely used.
• The network software includes
• File Transfer Protocol (FTP)
• Users News Network (Usenet)

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Commercial Use of the Internet

• 1980 - companies used the PC to construct their
  networks.
• 1980s - National Science Foundation (NSF) funded
  network services.
• 1989 - NSF permitted two commercial e-mail
  services.
• Early 1990s - Internet started to serve the
  global resource accesses.

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Growth of the Internet

• 1991 - NSF further eased its restriction on
  Internet commercial activity.
• 1995 - Privatization of the Internet was
  substantially completed.
• New structure of the Internet was based on four
  network access points (NAPs).
• Internet service providers (ISPs) sell Internet
  access rights directly to customers.

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Growth of the Internet, 1991 - 2001
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Development of Hypertext

• 1960s - Ted Nelson described his page-linking
  system hypertext.
• 1987 - Nelson published a book about a global
  system for online hypertext publishing and
  commerce.
• 1991 - Berners-Lee of CERN developed the code for
  a hypertext server program and made it available
  on the Internet.

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HTML

• Hypertext server - a computer that stores files
  written in the hypertext markup language (HTML).
• HTML - a language that includes a set of codes
  (or tags) attached to text.
• Hypertext link - points to another location in
  the same or another HTML document.

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Web Browser and Markup Languages

• Web browser - a software interface that lets
  users browse HTML documents.
• HTML is based on the Standard Generalized Markup
  Language (SGML).
• eXtensible Markup Language (XML) allows users to
  define new meanings for its commands in Web
  pages.

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Graphical User Interface

• Graphical user interface (GUI) - a way of
  presenting program control functions and program
  outputs to users.
• Web browsers include
• Mosaic
• Netscape Navigator
• Microsoft Internet Explorer

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Growth of the World Wide Web
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URLUniform Resource Locator
http//domain-name.top-level-domain/last-section

• Unique address of a web page or file on the
  Internet
• Case-sensitive

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httphypertext transfer protocol
http//domain-name.top-level-domain/last-section

• Protocol rules
• Communication using links

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Domain name
http//domain-name.top-level-domain/last-section

• Address of the ISP
• Domain names are registered
• Ongoing fee is paid for each domain name

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Last section
http//domain-name.top-level-domain/last-section

• Directories and file names that specify a
  particular web page

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Top-level Domain

• Represent the purpose of the organization of
  entity
• .com
• .gov
• .edu
• .org
• .net
• May be a two-letter country code

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Browser

• Netscape Communicator
• Microsoft Internet Explorer

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Browser

• Used to explore the Internet
• Dials the ISP
• Display web pages

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BrowserParts of the screen
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BrowserFunctions and Features

• Browser display window
• Displays contents of web page from each Internet
  site visited
• Screen limits how much of the site you can view
  at a time. The page can be scrolled using the
  scroll bar to see its entire contents
• Status line progress of data being transferred
  and other messages

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BrowserFunctions and Features

• Welcome banner on title bar
• Browser logo animation indicates you are in the
  process of moving to a new site
• Hot list
• Bookmark
• Favorites
• Store your favorite URLs
• Browser control panel menus and buttons

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BrowserMenus and Buttons

• Pull-down menu
• Buttons
• Convenient shortcuts for commonly used functions
• Click button rather than locate command from
  pull-down menu