lecture six internet and e-commerce

7/21/2019 Lecture Six Internet and E-commerce

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INTERNET AND

E-COMMERCE



The Internet

The Internet is a worldwide network ofcomputer links linking hundreds of thousandsof individual networks all over the world.

The Internet has a range of capabilities thatorganizations are using to exchangeinformation internally or to communicateexternally with other organizations.

This giant network of networks has becomethe primary infrastructure for both electroniccommerce and electronic business.



The Internet

The Internet evolved from ARPA!T" whichwas developed in #$%$ by the AdvancedResearch Pro&ect Agency 'ARPA( of the )*+epartment of +efense.

The Internet 'Internet Protocol , IP( addressesare used to identify the systems containing

the information needed.



The World Wide Web-orld -ide -eb '---( is a system of

universally accepted standards for storing"retrieving" formatting" and displayinginformation using clientserver architecture.

It was developed to allow collaborators inremote sites share their ideas on all aspects of

a common pro&ect.--- is the multimedia part of the Internet.



The World Wide Web The -eb is a system consisting of an

international distributed collection ofmultimedia /les supported by clients 'users(and servers 'information providers(.

!ach /le is addressed in a consistent mannerusing its )niform Resource 0ocator ')R0(.

The -eb enables you to point and click yourway to thousands of hyper linked web sitesand resources of multimedia information"entertainment" or electronic commerce.



at t e nternet a esPossible

Electronic Mail (E-Mail) senet Ne!s"ro#$s (%or#&s)'

Chattin"

TelnetE- co&&erce

Teleconerencin" Data conerencin" and*ideoconerencin"



E-co&&erce De+ned

!,commerce involves digitally enabled

commercial transactions between and amongorganizations and individuals

Digitally enabled transactions include alltransactions mediated by digital technology

Commercial transactions involve theexchange of value across organizational orindividual boundaries in return for products orservices



E-co&&erce

!,commerce technology includes processes thattouch customers" suppliers" and externalpartners including sales" order taking" delivery"customer service etc.

!,commerce has challenged much traditionalbusiness thinking



E-b#siness

!,business includes e commerce but also coversinternal processes such as production" inventorymanagement" product development" riskmanagement" etc.

It is primarily the digital enablement of transactionsand processes within a /rm" including informationsystems under the control of the /rm



,een ni.#e %eat#res o E-co&&erceTechnolo"/ and Their ,i"ni+cance

Is ubi1uitous 'available everywhere" all the time(23ers global reach 'across culturalnational boundaries(2perates according to universal standards 'lowers

market entry for merchants and search costs forconsumers(

Provides information richness 'more powerful sellingenvironment(

Is interactive 'can simulate face,to,face experience" buton global scale(

Increases information density 'amount and 1uality of

information available to all market participants(Permits personalizationcustomization



*even )ni1ue 4eatures of !,commerce Technology



Types of !,commerce

Classi+ed b/ nat#re o &arket relationshi$5usiness,to,6onsumer '576(

5usiness,to,5usiness '575(

6onsumer,to,6onsumer '676(

5usiness to government

Classi+ed b/ t/$e o technolo"/ #sed

Peer,to,Peer 'P7P(8obile commerce '8,commerce(



0#siness-to-Cons#&er (01C)

Involves online businesses attempting to reachindividual consumers

8any types of business models within this

category including online retailers" contentproviders" portals" transaction brokers" serviceproviders" market creators and communityproviders



0#siness-to-0#siness (010)

Involves businesses focusing on selling to otherbusinesses

Two primary business models within 5759 et marketplaces 'includes e,distributors" e,

procurement companies" exchanges and industryconsortia( Private industrial networks 'includes single /rm

networks and industry,wide networks(



Cons#&er-to-Cons#&er

Provides a way for consumers tosell to each other" with the help ofan online market maker

e5ay most well,known example



Classi+cation b/ t/$e o technolo"/

P1P, )ses peer,to,peer technology" whichenables Internet users to share /les andcomputer resources without having to go

through a central -eb server

M- co&&erce- )se of wireless hand helddigital devices such as cell phones to enable

transactions on the -eb



!,commerce 5usiness 8odels:

Introduction0#siness &odel ; set of planned activities

designed to result in a pro/t in a marketplace

5usiness plan ; document that describes a

/rm<s business model!,commerce business model ; aims to use and

leverage the uni1ue 1ualities of Internet and-eb



=ey Ingredients of a 5usiness 8odel

> l P iti



>alue Proposition

+e/nes how a company<s product or service ful/lls theneeds of customers?uestions to ask9

-hy will customers choose to do business with your/rm instead of another@

-hat will your /rm provide that others do not orcannot@

!xamples of successful value propositions include9 Personalizationcustomization

Reduction of product search costs Reduction of price discover costs 4acilitation of transactions by managing product

delivery

R 8 d l



Revenue 8odel

+escribes how the /rm will earn revenue"generate pro/ts" and produce a superior returnon invested capital

Terms /nancial model and revenue model often

used interchangeably8a&or types9

Advertising revenue model *ubscription revenue model

Transaction fee revenue model *ales revenue model Aliate revenue model



8odel

-eb site that o3ers content" servicesandor products also provides a forum foradvertisements and receives fees from

advertisers!xample9 Bahoo.com

8 d l



8odel

-eb site that o3ers users content orservices charges a subscription fee foraccess to some or all of its o3erings

!xamples9 6onsumer Reports 2nline

BahooC Platinum



Transaction 4ee Revenue 8odel

6ompany that receives a fee for enablingor executing a transaction

!xamples9

e5ay.com !,Trade.com



*ales Revenue 8odel

6ompany derives revenue by selling goods"information" or services to customers

!xamples9 Amazon.com

005ean.com Dap.com



Aliate Revenue 8odel

*ites that steer business to an EaliateFreceive a referral fee or percentage of therevenue from any resulting sales

!xample9 8yPoints.com



8arket 2pportunityRefers to a company<s intended market

space and the overall potential /nancialopportunities available to the /rm in that

market space8arket space ; the area of actual orpotential commercial value in which acompany intends to operate

Realistic market opportunity is de/ned byrevenue potential in each of market nichesin which company hopes to compete

6 titi



6ompetitive!nvironment

Refers to the other companies sellingsimilar products and operating in the samemarketspace

InGuenced by9 how many competitors are active how large their operations are what market share for each competitor is how pro/table these /rms are

how they price their products



6ompetitive AdvantageAchieved when /rm can produce a superior

product andor bring product to market at alower price than most" or all" ofcompetitors.

4irms achieve competitive advantage whenthey are able to obtain di3erential accessto the factors of production that are deniedto competitors

Asymmetry ; when one participant in amarket has more resources than others



8arket *trategy

A plan that details how a company intendsto enter a new market and attractcustomers

5est business concepts will fail if notproperly marketed to potential customers

2rganizational



2rganizational+evelopment

+escribes how the company will organizethe work that needs to be accomplished

-ork is typically divided into functional

departments8ove from generalists to specialists as the

company grows



8anagement Team*trong management team gives instant

credibility to outside investors

A strong management team may not be

able to salvage a weak business model" butshould be able to change the model andrede/ne the business as it becomesnecessary



!,6ommerce Applications8anufacturing ; 2n line *68

8arketing ; -eb marketing" personalization"customer pro/ling

Investment and 4inance ; Increased eciency egon line stock trading

2n,0ine 5anking,

Auctions



Adanta"es o E-Co&&erce

*horten Procurement cycles through the use of on,linecatalogues" ordering and payment

6ut costs on materials through competitive bidding

Dain access to world wide markets at a fraction of

traditional costs!nsure product" marketing information and prices are

always up to date

Allow small and medium sized businesses to compete

with large businesses over a common platform



Adanta"es o E-Co&&erce

Increase of purchasing opportunities for the buyer as italso increases sales opportunities for the seller

Availability of the goods on 7H

!lectronic systems are easier to audit and monitor

than check systemsReduction of trac &ams and environmental pollution

Availability on global scale even in remote areas



Disadanta"es

6an cause disintermediation which is the processof cutting out the middlemen by by,passingtraditional retail channels 'retail stores and mail,orderhouses( and selling directly to the customer

0ack of insurance available to cover losses due to

hackers destroying /les" stealing inventory" tradesecrets or in&ecting viruses into the systems

Re1uires /rms to rethink their business models andways of interacting with customers

Traditional audit trails change or disappear" makingerror correction" disaster recovery" and applicationtesting more dicult



Disadanta"es

4ear of customers sending their credit card numbersover the internet and having on,line merchants youhave never met

6ustomers resistance to change and computerphobia

Inability to physically inspect the goods

0ack of clear legal framework

+igital divide problem



Review ?uestionsJow can a /rm use the internet to achieve

customer intimacy@

Jow has internet technology changedbusiness models@

Jow has ecommerce changed customerretailing and business to business retailing@



Jow can a /rm use the internet to achievecustomer intimacy@Interactive marketing

Personalization

*elf service

6lick stream trackingJow has internet technology changed

business models@Adding value to existing products and services

6reating new products and services!mergence of many business models egK

storefronts" information brokers" serviceprovidersL



Jow has ecommerce changed customerretailing and business to business retailing@Internet creates new channels for marketing

and sales

2pportunity for customer support

!nhancing customer intimacy-eb personalization

Reduced transaction cost



END

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