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					Chapter 1

Introduction to Electronic
       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 US$50
    billion per year in 2001 and is expected to
    exceed US$350 billion by 2004
   E-commerce is much broader and encompasses
    many more business activities than just Web
        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
Electronic Commerce
     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.
    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
 General Electric and Wal-Mart -
  pioneers in using EDI to improve their
  purchasing process.
     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.
Activities as Business
 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
   What is the difference between
    traditional commerce and electronic
Comparing Traditional Commerce
and Electronic Commerce
   What type of business processes are
    suitable for :
     Electronic
     Traditional commerce
     Electronic & traditional commerce
Business Process Suitability
to Type of Commerce
    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
 Advantages of Electronic
 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.
    Advantages of Electronic
 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.
    Disadvantages of Electronic

   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.
    International Electronic

 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.
     Transaction Costs

   Transaction costs = total of all costs that a
    buyer and a seller incur as they gather
    information and negotiate a purchase-sale
   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.
Economic Forces
and Electronic Commerce
Economic Forces
and Electronic Commerce
       The Role of Electronic
   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.
   The Role of Electronic
 Virtualcompanies – 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.
The Role of Electronic
     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.
       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.
Strategic Business Unit Value
Strategic Business Unit Value
 The support activities of a value
 chain for a strategic business unit
   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

   IVC is used to identify opportunities for cost
    reduction, product improvement, or channel
       SWOT Analysis:
       Evaluating Business Unit
   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
The Internet and World Wide
   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
      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.
      New Uses for the Internet

   1972 - a researcher wrote a program that
    could send and receive messages over the

   E-mail was born and became widely used.

   The network software includes:
      File Transfer Protocol (FTP)
      User’s News Network (Usenet)
      Commercial Use of the
   1980 - companies used the PC to construct their

   1980s - National Science Foundation (NSF)
    funded network services.

   1989 - NSF permitted two commercial e-mail

   Early 1990s - Internet started to serve the global
    resource accesses.
        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.
Growth of the Internet,
1991 - 2001
    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.

   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.
Web Browser and Markup
   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.
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
Growth of the World Wide Web
Uniform Resource Locator

   Unique address of a web page or file on the
   Case-sensitive
hypertext transfer protocol

        Protocol – rules
        Communication using links
      Domain name


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


     Directories and file names that specify a
               particular web page
Top-level Domain
Represent the purpose of the organization of entity

May be a two-letter country code

    Netscape Communicator

    Microsoft Internet Explorer

   Used to explore the Internet
   Dials the ISP
   Display web pages
Parts of the screen
Functions 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
Functions 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
Menus and Buttons

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

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