chapter four navigating the world of e-business. copyright © houghton mifflin company. all rights...

Chapter Four

Navigating the World of e-Business

Copyright © Houghton Mifflin Company. All rights reserved. 4 | 2

Defining e-Business

• e-Business (electronic business)- The organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet

• e-Commerce- Buying/selling activities conducted online- Identifying suppliers, selecting products or services, making purchase commitments, completing financial transactions, and obtaining service

• Outsourcing- the process of finding outside vendors and suppliers that provide professional help, parts, or materials at a lower cost.


Combining e-Business Resources


Satisfying Needs Online

• The Internet has created new customer needs

• E-business can satisfy those needs as well as traditional ones– Global access to information and

entertainment

– Virtually unlimited selections of products

– Opportunities for interaction

– Individually custom-tailored content


Creating e-Business Profit

• Revenue growth– Revenue stream

• Source of revenue flowing into a firm

– Sales of merchandise online– Intelligent information systems to

suggest purchases to repeat online customers

– Increased sales in physical stores because of product information available online

– Advertising on web pages– Subscription fees charged for

access to online services and content


Creating e-Business Profit (cont’d)

• Expense reduction– Offering services that

• Reduce transaction costs• Provide information• Provide customer assistance

– Reduces the costs of dealing with customers

– Reduces the need for as many physical store locations


Advantages and Disadvantages of e-Business


A Framework for Understanding e-Business

• World Wide Web– The Internet’s multimedia environment of audio, visual,

and text data

• Digitized data– Data that have been converted to a type of signal that

the computers and telecommunications equipment that make up the Internet can understand


A Brief History of the Internet and e-Business


The Three Primary Groups of e-Business

• The activities of most technology firms overlap into more than one area of e-business


Opportunities in e-Business

• Global e-Business– All three primary groups of e-business firms

are competing to capture global business– The ability to customize content on the

Internet makes it adaptable for global business

• Small e-Business– Challenges

• Security concerns, technology challenges, products unsuited for selling online

– Opportunities• Marketing/advertising, market research,

networking with other entrepreneurs, managing accounts, low cost, ability to target a niche, venue for finding an audience, dealing directly with customers


Fundamental Models of e-Business

• Business model– A group of common characteristics and

methods of doing business to generate sales revenues and reduce expenses

• Business-to-Business (B2B) model– Firms that use the Internet to conduct

business with other businesses• Facilitating sales transactions between

businesses• Elicit bids and offers from suppliers and

potential suppliers; learning about the customer’s rules and procedures. Cost savings: reduced labor to enter and track orders and reduced order entry errors


Fundamental Models of e-Business (cont’d)

• Business-to-Consumer (B2C) model – Firms that focus on

conducting business with individual buyers

– Success comes from understanding how the customer behaves online to build good customer relationships


Insert table 4.2, 9e with title, p. 127

Other e-Business Models


Planning for a New Internet Business or Building an Online Presence for an Existing Business


Social and Legal Concerns

• Ethics and social responsibility– Opportunity

• The Internet provides a shelter of anonymity for both individuals and firms

– Privacy issues• Cookie: A small piece of software

sent by a website that tracks an individual’s Internet use

– Questionable content such as pornography and hate literature


Social and Legal Concerns (cont’d)

• Privacy and confidentiality issues– Monitoring employees

• Log-file records: Files that store a record of the websites visited

– Using and/or selling customer information• Data mining: The practice of searching through

data records looking for useful information



• Security concerns and cybercrime– Computer viruses

• Software codes that are designed to disrupt normal computer operations

– Fraud and larceny

– Secure electronic transaction (SET)

• An encryption process developed by MasterCard, Visa, IBM, Microsoft, and Netscape that prevents merchants from ever actually seeing any transaction data, including the customer’s credit card number



• Digital property and copyright concerns– Copyright

• Legal right to control content ownership

– Ease of copying and distributing content without permission

– Ease of copying and using company name or trademark without permission

• Government regulation and taxation– The Internet is an extension of the traditional business

and workplace– Online vendors are legally treated like mail-order

companies regarding taxes– Sale and distribution of restricted products (such as

prescriptions)


The Future of e-Business: Growth, Opportunities, and Challenges

• The Internet will continue to expand along with related technologies

• Opportunity: Only one billion of the world’s 6 billion people are online

• Americans comprise 20 percent of all users—the largest group online.

• Of the almost 300 million people making up the American population, 185 million use the Internet—140 million actively

• More than 40% of Americans enjoy fast broadband access at home

• American men spend 6.7 hours online per week; and American women spend 5.3 hours per week


Internal and External Forces That Affect an e-Business


Environmental Forces Affecting e-Business

• Globalization– Positive: Drawing people of the

world together– Negative: A threat to national

cultures, identities, languages, ways of life

• Convergence of technologies– The overlapping capabilities and

the merging of products and services into one fully integrated interactive system


The Future of e-Business: Growth, Opportunities, and Challenges (cont’d)

• Online communities– Groups of individuals or firms that want

to exchange information, products, or services over the Internet

• Partnering online– By playing a role with a large entity,

small firms can enjoy competitive advantage and access to marketable items, thereby increasing their rate of market penetration and growth

chapter four navigating the world of e-business. copyright © houghton mifflin company. all rights...

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