copyright © 2003 by south-western. all rights reserved. chapter seven electronic commerce: the...

Copyright © 2003 by South-Western. All Rights Reserved.

CHAPTER SEVENCHAPTER SEVEN

ELECTRONIC COMMERCE: THE ELECTRONIC COMMERCE: THE INTERNET AND ONLINE INTERNET AND ONLINE

BUSINESSBUSINESS

Text by Profs. Gene Boone & David KurtzText by Profs. Gene Boone & David KurtzMultimedia Presentation byMultimedia Presentation byProf. Milton PressleyProf. Milton PressleyThe University of New OrleansThe University of New Orleans

[email protected]@uno.edu


• Discuss how the Internet provides new routes to business success

• Describe the increasing diversity of Internet users

• Summarize the Internet’s four functions and give examples of each

• List the major forms of business-to business e-commerce

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS

• Describe some of the challenges associated with internet selling

• Describe how companies develop and manage successful Web sites

• Explain how global opportunities result from technological advances


THE INTERNET: KEY TO THE INTERNET: KEY TO BUSINESS SUCCESSBUSINESS SUCCESSTHE INTERNET: KEY TO THE INTERNET: KEY TO BUSINESS SUCCESSBUSINESS SUCCESS• Internet (or Net): worldwide network

of interconnected computers that lets anyone with access to a personal computer send and receive images and data anywhere

• World Wide Web: collection of resources on the internet that offers easy access to text, graphics, sound, and other multimedia resources

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THE INTERNET: KEY TO THE INTERNET: KEY TO BUSINESS SUCCESSBUSINESS SUCCESSTHE INTERNET: KEY TO THE INTERNET: KEY TO BUSINESS SUCCESSBUSINESS SUCCESS

• Web site: integrated document composed of electronic pages that integrate text, graphics, audio, and video elements, as well as hypertext links to other documents

• Domain Name: a Web site address

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How The Internet WorksHow The Internet WorksHow The Internet WorksHow The Internet Works• Remarkable System of cooperating

networks

Figure 7.1: How Information Travels on the Internet


How The Internet WorksHow The Internet WorksHow The Internet WorksHow The Internet Works

• Internet Service Provider (ISP) organization that provides access to the internet, usually via the public telephone network

• Digital Subscriber Line (DSL) a cable modem, or a satellite link to the internet which makes the data move at fast speeds


How The Internet WorksHow The Internet WorksHow The Internet WorksHow The Internet Works

• ISP’s Server: a larger, special computer that holds information, providing it to clients on request

• Client: another computer or device that relies on the resources of other servers to help with its own processing


WHO’S ON THE NET?WHO’S ON THE NET?WHO’S ON THE NET?WHO’S ON THE NET?

• Users on every continent• 43% of Internet Users in

the US• Share from other countries

is growing

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Figure 7.2: Top Ten Internet Users


• Once dominated by men• Gender gap has narrowed

• Women users now represent more than ½ in the U.S.

• Women users growing rapidly in other nations

WHO’S ON THE NET?WHO’S ON THE NET?WHO’S ON THE NET?WHO’S ON THE NET?

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Figure 7.3: Four Functions of the Internet

Using the Net’s Four FunctionsUsing the Net’s Four FunctionsUsing the Net’s Four FunctionsUsing the Net’s Four Functions



CommunicationCommunication• Instant messaging –

when a message sent is immediately displayed on recipient’s screen

• Online communities – a forum (often a chat room) in which a group of people can share messages

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InformationInformation

CommunicationCommunication • Newsgroups provide a forum for participants to share information on selected topics

• Portals: sites designed to be a user’s starting place when entering the WWW

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Figure 7.4: Web Page Sweepstakes Designed to Generate Customer Data



EntertainmentEntertainment


CommunicationCommunication • Everything from concert Webcasts to online gaming available online

• Telewebbers: watch television while surfing the WWW

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Business Transactions:E-Commerce

Business Transactions:E-Commerce

EntertainmentEntertainment


CommunicationCommunication • E-commerce: short for electronic commerce

• Growing at lightening speed

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THE SCOPE OF ELECTRONIC THE SCOPE OF ELECTRONIC COMMERCECOMMERCETHE SCOPE OF ELECTRONIC THE SCOPE OF ELECTRONIC COMMERCECOMMERCE

• Electronic Commerce Electronic Commerce (E-Commerce):(E-Commerce): process process for online marketing of for online marketing of goods and services – goods and services – including product including product information, ordering, information, ordering, invoicing, and payment invoicing, and payment processes, and customer processes, and customer servicesservices

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Figure 7.5: This Advertisement Shows IBM’s Key Role in Electronic Commerce

Figure 7.5: This Advertisement Shows IBM’s Key Role in Electronic Commerce


Profiting from E-Commerce


The Scope of Electronic CommerceThe Scope of Electronic CommerceThe Scope of Electronic CommerceThe Scope of Electronic Commerce

• So far, only a minority of firms report profits from Web Site Operations• Only 42% of sites

surviving for at least 3 years claim to be profitable

• Profitability among B2C is highest among those who have established names (I.e., Land’s End)

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Figure 7.6: Benefits of E-commerce


B2B TransactionsLead the Way





• Business-to-Business E-Commerce (B2B): electronic business transactions between organizations using the internet

• Electronic Date Interchange (EDI): computer-to-computer exchanges of business documents between buyers and sellers

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• Electronic Exchanges: Web-Based marketplaces that cater to a specific industry's needs

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Figure 7.7: How Online Parts Exchanges Save Money for Automakers







• Extranets: secure networks used for e-commerce and accessible through the firm’s Web site by authorized users

• Private Exchange: secure Web site at which a company and its suppliers share all types of data related to e-commerce

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Figure 7.8: Benefits from Allying with Distribution Partners


B2C TransactionsGain Ground







• Business-to-consumer (B2C) commerce: selling directly to consumers over the Internet

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Figure 7.9: Top Five Products Purchased Online








The Scope of Electronic CommerceThe Scope of Electronic CommerceThe Scope of Electronic CommerceThe Scope of Electronic Commerce• Electronic Storefront:

Web sites where items are offered for sale to consumers

• Electronic Shopping Cart: a file that displays items that a consumer has indicated that they wish to buy. consumer can review cart and make changes if desired

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• Developing Safe Online Payment Systems• Encryption: encoding

data for security purposes

• Electronic Cash: Buyers register with a bank to make secure Internet Payment

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• Electronic Wallet: a computer file containing electronic cash, credit card information, owner identification, address, and other information

• Smart Cards: plastic cards that store encrypted information on embedded computer chips instead of magnetic strips

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E-CommerceChallenges

E-CommerceChallenges








• E-Commerce has it’s problems and challenges as shown in the next few slides . . .

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Figure 7.10: Roadblocks to E-Commerce


E-Commerce ChallengesE-Commerce ChallengesE-Commerce ChallengesE-Commerce Challenges

• Internet Security and Privacy• Electronic Signatures: a way to enter

into a legal contract

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Figure 7.11: TRUSTe Organization Attempts to Build

Customer Confidence Online


E-Commerce ChallengesE-Commerce ChallengesE-Commerce ChallengesE-Commerce Challenges• Children’s Online Privacy Protection Children’s Online Privacy Protection

Act (COPA): Act (COPA): requires that Web sites requires that Web sites targeting children younger than 13 targeting children younger than 13 obtain “verifiable parental consent” obtain “verifiable parental consent” before collecting certain types of databefore collecting certain types of data• Laws also being considered by Congress to Laws also being considered by Congress to

protect adult internet usersprotect adult internet users

• Firewall:Firewall: Electronic barrier between an Electronic barrier between an organization’s internal network and the organization’s internal network and the internet that limits access into and out of internet that limits access into and out of the organization’s network.the organization’s network.

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• Internet FraudInternet Fraud is a type of crime that is another barrier to e-commerce

• Traffic Jams Caused by System Overload • e.g., Encyclopedia Britannica’s initial

inability to handle the number of people signing onto its site

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• Poor Web Site Design and Service• Unlike Amazon.com’s and other well-

designed and maintained Web sites, some are not well designed and easy to use


Figure 7.12: Five Products Consumers Would Prefer to Purchase Online


E-Commerce ChallengesE-Commerce ChallengesE-Commerce ChallengesE-Commerce Challenges• Unreliable Delivery and Unreliable Delivery and

ReturnReturnss • (e.g., Toy ‘R Us Web site (e.g., Toy ‘R Us Web site

which couldn’t meet demand which couldn’t meet demand early in it’s existence)early in it’s existence)

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• Lack of Retail ExperienceLack of Retail Experience• ““Pure-play” dot-com companies Pure-play” dot-com companies

that started their existence onlinethat started their existence online

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• Competition and Disagreements Among Competition and Disagreements Among Buyers and SellersBuyers and Sellers• Companies who have partnered with other

companies often find they are competing with each other when they sell directly to customers online

• Such competition can lead to disagreements

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• Protection of Intellectual Property Protection of Intellectual Property • Difficult to accomplish on the Difficult to accomplish on the

internetinternet• Open Sharing of information on the Open Sharing of information on the

Internet can conflict with the desire to Internet can conflict with the desire to protect intellectual propertyprotect intellectual property

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MANAGING A WEB SITE: DOING MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNETBUSINESS ON THE INTERNETMANAGING A WEB SITE: DOING MANAGING A WEB SITE: DOING BUSINESS ON THE INTERNETBUSINESS ON THE INTERNET

• Some key questions to consider in Some key questions to consider in developing a Web site are shown developing a Web site are shown on the next slide . . .on the next slide . . .

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Figure 7.13: Questions to Consider in Developing a Web Site



• Planning and PreparationPlanning and Preparation• What’s the goal?• Whether to create and

maintain a site in-house or contract with outside experts

Developing Successful Web Sites

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Figure 7.14: Macromedia: E-Commerce Web Site DeveloperFigure 7.14: Macromedia: E-Commerce Web Site Developer


• Content and Connections• Need interesting material• Who should host the site?• How to draw business to the

site?


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• Costs are highly variableCosts are highly variable• Development CostsDevelopment Costs• Web Host CostsWeb Host Costs• Keeping Web Site CurrentKeeping Web Site Current


Costs and Maintenance

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• Some measures of Some measures of effectiveness are shown on effectiveness are shown on the next slide . . .the next slide . . .


Costs and Maintenance

Measuring Web Site

Effectiveness

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Figure 7.15: Measures of Web Site Effectiveness

• Click-through rate: Click-through rate: the percentage of people the percentage of people presented with a Web banner ad who click on itpresented with a Web banner ad who click on it

• Conversion rate: Conversion rate: the percentage of visitors to a the percentage of visitors to a Web site who make a purchaseWeb site who make a purchase


THE GLOBAL ENVIRONMENT OF THE GLOBAL ENVIRONMENT OF E-COMMERCEE-COMMERCETHE GLOBAL ENVIRONMENT OF THE GLOBAL ENVIRONMENT OF E-COMMERCEE-COMMERCE• Internet creates an enormous pool of potential Internet creates an enormous pool of potential

customerscustomers• Firms can market their offerings internationally Firms can market their offerings internationally

and locate distribution sources and trading and locate distribution sources and trading partners onlinepartners online

• Customers can search for products and Customers can search for products and information convenientlyinformation conveniently

• Sites must consider both language and global Sites must consider both language and global cultural variationscultural variations

• E-commerce can heighten competitionE-commerce can heighten competition

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Figure 7.16: Importance of Considering the Internet’s Global PopulationFigure 7.16: Importance of Considering the Internet’s Global Population


WHAT’S AHEADWHAT’S AHEADWHAT’S AHEADWHAT’S AHEAD

• In upcoming chapters we’ll:In upcoming chapters we’ll:• Look at other trends that are reshaping Look at other trends that are reshaping

the business worldthe business world• Explore how companies:Explore how companies:

• Organize, lead, and manage their work Organize, lead, and manage their work processesprocesses

• Manage and motivate their employeesManage and motivate their employees• Empower their employeesEmpower their employees• Handle labor and workplace disputesHandle labor and workplace disputes• Create world-class goods and servicesCreate world-class goods and services

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copyright © 2003 by south-western. all rights reserved. chapter seven electronic commerce: the...

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