Electronic Commerce  COMP3210 Session 1: An Introduction to Electronic Commerce Dr. Paul Walcott  Department of Computer S...
Session Objectives <ul><li>Define e-commerce? </li></ul><ul><li>Compare and contrast the advantages and disadvantages of e...
Session Objectives Cont’d <ul><li>Discuss the following: </li></ul><ul><ul><li>Markets </li></ul></ul><ul><ul><li>Value ch...
What is Commerce? <ul><li>Traditional commerce may be defined as: </li></ul><ul><ul><li>From Webster's Revised Unabridged ...
What is E-Commerce? <ul><li>Electronic commerce (e-commerce) is a general term for any type of business, or commercial tra...
What is E - Commerce  Cont’d ? <ul><li>Electronic commerce is the use of electronic communication to do business.  E-comme...
What is E - Commerce  Cont’d ? <ul><li>Most fundamentally, e-commerce represents the realization of digital, as opposed to...
What  is   E-Commerce Cont’d?  <ul><li>In summary, e-commerce is the </li></ul><ul><ul><li>use of electronic communication...
From Traditional Commerce to E-commerce 3 Sailing ships Printing press Steam engine Telephone Opened avenues for trade bet...
From Traditional Commerce to E-commerce Cont’d Electronic Funds Transfer (EFTs) Electronic Data Interchange (EDI) Internet...
Business Processes Suited to Certain Type of Commerce 3 <ul><li>E-commerce </li></ul><ul><ul><li>Sale/purchase of books & ...
Business Processes Suited to Certain Type of Commerce Cont’d <ul><li>A combination of E-commerce and Traditional Commerce ...
Business Processes Suited to Certain Type of Commerce Cont’d <ul><li>Traditional Commerce </li></ul><ul><ul><li>Sale/purch...
What are the Advantages of E-commerce? 3 <ul><li>Increases sales, decreases cost </li></ul><ul><ul><li>Allows small busine...
What are the Advantages of E-commerce Cont’d? <ul><li>Business can be transacted 24 hours a day </li></ul><ul><li>The leve...
What are the Disadvantages of E-commerce? 3 <ul><li>Inability to sell certain products (e.g. high cost jewelry and perisha...
What are the Disadvantages of E-commerce Cont’d? <ul><li>A large capital investment is required to startup and run e-comme...
The  1 st  Wave of E-commerce 3 <ul><li>The 1 st  wave was from the mid 1990s to 2003 </li></ul><ul><li>During the dot-com...
Characteristics of the  1 st  Wave <ul><li>It was primarily a U.S. phenomenon </li></ul><ul><li>Web pages were in English ...
The  2 nd  Wave of E-commerce <ul><li>Beginning in 2003 e-commerce showed new signs of life </li></ul><ul><li>Companies li...
Characteristics of the  2 nd  Wave <ul><li>International scope - sellers do business in many countries and languages </li>...
Characteristics of the  2 nd  Wave  Cont’d <ul><li>E-commerce is an integral part of marketing and customer contact strate...
E-commerce Categories 3 <ul><li>There are five general e-commerce categories: </li></ul><ul><ul><li>Business to Consumer (...
B2 C  e-commerce <ul><li>Description </li></ul><ul><ul><li>Businesses sell products or services to individual customers (c...
B2B e-commerce <ul><li>Description </li></ul><ul><ul><li>Businesses sell products or services to other businesses </li></u...
Business Processes that Support Buy/Sell Activities <ul><li>Description </li></ul><ul><ul><li>Businesses and other  organi...
C 2 C  e-commerce <ul><li>Description </li></ul><ul><ul><li>Participants in an online marketplace can buy and sell goods f...
B2 G  e-commerce <ul><li>Description </li></ul><ul><ul><li>Business sell goods or services to governments and government a...
E-commerce Categories Example <ul><li>You are a computer manufacturing company who performs the following activities on th...
Relative Sizes of E-commerce Categories 3 Business processes that support buy/sell  activities B2C e-commerce B2B e-commerce
Relative Sizes of E-commerce Categories Cont’d 6800 (estimate) 240 (estimate) 2007 5300 (estimate) 190 (estimate) 2006 60 ...
Relative Sizes of E-commerce Categories Cont’d <ul><li>At the end of 2006 actual B2C sales revenue in the US was US$219 bi...
Economic Forces <ul><li>Economics is the study of how people allocate scare resources </li></ul><ul><li>Resources are allo...
Markets <ul><li>A market is a place where sellers can come into contact with buyers and a medium of exchange (e.g. currenc...
Hierarchical  Organisations  (Firms)
Transaction Costs <ul><li>Transaction costs are the total costs that a buyer and seller incur as they gather information a...
Transaction Costs Example <ul><li>Transaction costs incurred by a sweater dealer when purchasing from independent sweater ...
Network Economic Structures <ul><li>Many businesses operate in an economic structure that is neither market or hierarchica...
Value Chains <ul><li>A  value chain  is a way to organise the activities that a business undertakes to design, produce, pr...
Strategic Business Unit Value Chains <ul><li>A  strategic business unit  is a particular combination of product, distribut...
Manufacturer Value Chain Finance & admin HR Technology development Support activities Design Identify  customers Manufactu...
Primary Activities <ul><li>Identify new customers, and sell new services to existing customers (research & surveys) </li><...
Primary Activities Cont’d <ul><li>Market and sell – advertising, promoting, managing sales staff, pricing and monitoring s...
Primary Activities Cont’d <ul><li>If a strategic business unit provides a service then the value chain will include a “Pro...
Support Activities <ul><li>Each business unit must also undertake support activities that provide the infrastructure for t...
Industry Value Chains <ul><li>Industry value chains describes the larger stream of activities into which a particular busi...
Industry Value Chain Example <ul><li>A value chain for a wooden chair: </li></ul><ul><ul><li>Logger cuts down tree </li></...
SWOT Analysis 3 <ul><li>SWOT analysis is used to analyse and evaluate business opportunities </li></ul><ul><li>SWOT is an ...
SWOT Analysis Cont’d <ul><li>An analyst examines the business unit to determine strengths and weaknesses </li></ul><ul><li...
SWOT Analysis Cont’d <ul><li>Questions asked during SWOT analysis: </li></ul><ul><li>Strengths </li></ul><ul><ul><li>What ...
SWOT Analysis Cont’d <ul><li>Opportunities: </li></ul><ul><ul><li>Are industry trends moving upwards? </li></ul></ul><ul><...
SWOT Analysis Cont’d <ul><li>In the mid-1990s DELL Computer did the following SWOT analysis: </li></ul><ul><li>Strengths: ...
SWOT Analysis Cont’d <ul><li>Opportunities: </li></ul><ul><ul><li>Consumers desire for one-stop shopping </li></ul></ul><u...
International Issues 3 <ul><li>Trust issues </li></ul><ul><li>Language issues </li></ul><ul><li>Culture issues </li></ul><...
Trust Issues <ul><li>Anyone can create a website </li></ul><ul><li>These individuals or businesses can easily remain anony...
Language Issues (localisation) <ul><li>Global impact requires local language Web sites </li></ul><ul><ul><li>customers pre...
Language Issues (localisation) <ul><li>Translating entire websites is expensive </li></ul><ul><ul><li>25-90 cents per word...
Culture Issues <ul><li>Culture is the combination of language and customs </li></ul><ul><li>Culture varies across national...
Culture Issues Cont’d <ul><li>Choice of icons on Web pages becomes problematic on international Web sites: </li></ul><ul><...
Culture Issues Cont’d <ul><li>In some cases unrestricted access to the Internet is not permitted, for example in the Middl...
Infrastructure Issues <ul><li>Limited telecommunication infrastructure may lead to unreliable Internet access </li></ul><u...
Conclusion <ul><li>In this session: </li></ul><ul><ul><li>It was made clear that e-commerce was not a new business, rather...
Conclusion Cont’d <ul><ul><li>The importance of reducing transaction costs was considered </li></ul></ul><ul><ul><li>The i...
Definitions <ul><li>A  commodity item  is a product or service that is hard to distinguish from the same products or servi...
Definitions Cont’d <ul><li>Merchandising  is a combination of store design, layout and product display knowledge </li></ul...
Definitions Cont’d <ul><li>The definition of a  market  satisfies two conditions: </li></ul><ul><ul><li>Potential seller o...
Definitions Cont’d <ul><li>Transaction costs  are the total costs that a buyer and seller incur as they gather information...
References <ul><li>[ 1 ]   NSW Department of State and Regional Development, “Brief on Electronic Commerce”,  http://www.s...
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Session 1: An Introduction to e-Commerce

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  • There is no single definition
  • Since EDI was facilitated via ex pensive private networks its up take was only by larger businesses, those who could afford it. The Internet, on the other hand, which is a cost effective communication medium, has fuelled electronic commerce.
  • Definitions of Procurement : Dealing with the legal problems that arise from large contracts for the supply of goods or services, especially for businesses or government organisations.
  • Example Intel sells products to other businesses rather than consumers. Intel accepts &gt; 95% of its orders online ($26 billion in 2003); also Intel purchases billions of dollars worth of raw materials on-line every year
  • Assume a company sells a product to the consumer (B2C) and receives raw materials from suppliers (B2B). In order to produce the product the business needs to hire and manage people, rent storage space for the product, maintain accounts and create marketing campaigns. These are all internal business processes which more and more can be performed on the web.
  • Session 1: An Introduction to e-Commerce

    1. 2. Electronic Commerce COMP3210 Session 1: An Introduction to Electronic Commerce Dr. Paul Walcott Department of Computer Science, Mathematics and Physics University of the West Indies, Cave Hill Campus Barbados The Department of Computer Science Mathematics and Physics, University of the West Indies, Cave Hill Campus, Barbados © 2007 Dr. Paul Walcott
    2. 3. Session Objectives <ul><li>Define e-commerce? </li></ul><ul><li>Compare and contrast the advantages and disadvantages of e-commerce </li></ul><ul><li>Compare and contrast the 1 st and 2 nd waves of e-commerce </li></ul><ul><li>Comprehend the categories of e-commerce ? </li></ul>
    3. 4. Session Objectives Cont’d <ul><li>Discuss the following: </li></ul><ul><ul><li>Markets </li></ul></ul><ul><ul><li>Value chains </li></ul></ul><ul><ul><li>Transaction cost </li></ul></ul><ul><li>Evaluate international electronic commerce issues </li></ul>
    4. 5. What is Commerce? <ul><li>Traditional commerce may be defined as: </li></ul><ul><ul><li>From Webster's Revised Unabridged Dictionary </li></ul></ul><ul><ul><li>Commerce  :  Com&quot;merce, noun. The exchange or buying and selling of commodities; esp. the exchange of merchandise, on a large scale, between different places or communities; extended trade or traffic. </li></ul></ul>
    5. 6. What is E-Commerce? <ul><li>Electronic commerce (e-commerce) is a general term for any type of business, or commercial transaction that involves the transfer of information across the Internet. This covers a range of different types of businesses from consumer-based retail sites, like Amazon.com, through auction and music sites like eBay or MP3.com, to business exchanges trading goods or services between corporations. </li></ul>
    6. 7. What is E - Commerce Cont’d ? <ul><li>Electronic commerce is the use of electronic communication to do business. E-commerce is not about technology . It is not a new business. E-commerce is a method for companies to create and operate their business in new and efficient ways. 1 </li></ul>
    7. 8. What is E - Commerce Cont’d ? <ul><li>Most fundamentally, e-commerce represents the realization of digital, as opposed to paper-based, commercial transactions between businesses, between a business and its consumers, or between a government and its citizens or constituent business. 2 </li></ul>
    8. 9. What is E-Commerce Cont’d? <ul><li>In summary, e-commerce is the </li></ul><ul><ul><li>use of electronic communication to do business </li></ul></ul><ul><ul><ul><li>Specifically, the transfer of information (transactions), over the Internet </li></ul></ul></ul><ul><li>Some people use the term e-business to refer to all the categories of e-commerce </li></ul><ul><ul><li>E.g. IBM defines e-business as: </li></ul></ul><ul><ul><ul><li>The transformation of key business processes through the use of Internet technologies </li></ul></ul></ul>
    9. 10. From Traditional Commerce to E-commerce 3 Sailing ships Printing press Steam engine Telephone Opened avenues for trade between buyers and sellers. Ancient times (thousands of years ago)
    10. 11. From Traditional Commerce to E-commerce Cont’d Electronic Funds Transfer (EFTs) Electronic Data Interchange (EDI) Internet Wire transfers - used by banks Businesses transfer electronic data - data not re-keyed - high implementation cost, thus excluded small businesses On-line shopping
    11. 12. Business Processes Suited to Certain Type of Commerce 3 <ul><li>E-commerce </li></ul><ul><ul><li>Sale/purchase of books & CDs, travel services, investments and insurance services </li></ul></ul><ul><ul><li>Online delivery of software </li></ul></ul><ul><ul><li>Online shipment tracking </li></ul></ul>
    12. 13. Business Processes Suited to Certain Type of Commerce Cont’d <ul><li>A combination of E-commerce and Traditional Commerce </li></ul><ul><ul><li>Sale/purchase of automobiles and residential real estate (e.g. do research online then buy from a dealer or real estate agent) </li></ul></ul><ul><ul><li>Online banking </li></ul></ul><ul><ul><li>Roommate matching service </li></ul></ul>
    13. 14. Business Processes Suited to Certain Type of Commerce Cont’d <ul><li>Traditional Commerce </li></ul><ul><ul><li>Sale/purchase of impulse items for immediate use, high fashion jewelry and antiques (personal inspection required; prefer to touch, smell or examine closely) </li></ul></ul><ul><ul><li>Small denomination purchases and sales (since there is not yet a standard for transferring small amounts of money) </li></ul></ul>
    14. 15. What are the Advantages of E-commerce? 3 <ul><li>Increases sales, decreases cost </li></ul><ul><ul><li>Allows small businesses to have global customer base </li></ul></ul><ul><ul><li>Reduced cost through electronic sales enquires, price quotes and order taking </li></ul></ul><ul><li>Provides purchasing opportunities for buyers (businesses can identify new suppliers and partners) </li></ul><ul><li>Increases the speed and accuracy of exchanged information, thus reduces cost </li></ul>
    15. 16. What are the Advantages of E-commerce Cont’d? <ul><li>Business can be transacted 24 hours a day </li></ul><ul><li>The level of detail of purchase information is selected by user </li></ul><ul><li>Digital products can be delivered instantly </li></ul><ul><li>Tax refunds, public retirement and welfare support costs less when distributed over the Internet </li></ul><ul><li>Allows products and services to be available in remote areas, e.g. remote learning </li></ul>
    16. 17. What are the Disadvantages of E-commerce? 3 <ul><li>Inability to sell certain products (e.g. high cost jewelry and perishable foods; although supermarkets such as www.Tesco.com deliver perishable food items to your home) </li></ul><ul><li>The newness and evolution of the current technology </li></ul><ul><li>Many products require large sales volumes in order to be viable </li></ul><ul><ul><li>This is a challenge for small island economies; in the Caribbean the CARICOM Single Market and Economy (CSME) might provide opportunities since it comprises some 14 million people (if Haiti is included – only 6 million if it is not) </li></ul></ul><ul><ul><ul><li>http://www.ab.gov.ag/gov_v2/government/docs/csme/aboutcsme/background_info.html </li></ul></ul></ul>
    17. 18. What are the Disadvantages of E-commerce Cont’d? <ul><li>A large capital investment is required to startup and run e-commerce initiatives </li></ul><ul><li>Difficulty in integrating current databases and transaction processing systems (legacy systems) into e-commerce solutions </li></ul><ul><li>Cultural and legal obstacles </li></ul><ul><ul><li>Transmission of credit card information </li></ul></ul><ul><ul><li>Some consumers’ resistance to change </li></ul></ul><ul><ul><li>E-commerce legislation is not well developed and is often unclear </li></ul></ul><ul><li>Shipping profile </li></ul><ul><ul><li>Products with a low value-to-weight ratio that can not be efficiently packed and shipped are unsuitable for e-commerce (use traditional commerce) </li></ul></ul>
    18. 19. The 1 st Wave of E-commerce 3 <ul><li>The 1 st wave was from the mid 1990s to 2003 </li></ul><ul><li>During the dot-com boom over $100 billion was invested and a rapid growth of e-commerce was seen (mid-1990s – 2000) </li></ul><ul><li>The dot-com bust occurred in 2000 </li></ul><ul><li>This was followed by the gloom years, 2000 – 2003 (however, during this time over $200 billion was invested in e-commerce) </li></ul>
    19. 20. Characteristics of the 1 st Wave <ul><li>It was primarily a U.S. phenomenon </li></ul><ul><li>Web pages were in English </li></ul><ul><li>Internet technologies were slow and inexpensive (e.g. dial-up lines) </li></ul><ul><li>Bar codes and scanners used to track parts (B2B and Business processes) </li></ul><ul><li>Email, tool for unstructured communication </li></ul><ul><li>On-line advertising main revenue source </li></ul>
    20. 21. The 2 nd Wave of E-commerce <ul><li>Beginning in 2003 e-commerce showed new signs of life </li></ul><ul><li>Companies like Amazon.com (books), and eBay.com (auctions) who survived the downturn were beginning to show profits </li></ul><ul><li>Continuous growth of B2C sales: 20-30% each year since 2000 </li></ul>
    21. 22. Characteristics of the 2 nd Wave <ul><li>International scope - sellers do business in many countries and languages </li></ul><ul><li>Faster connections (x20 faster), broadband at home (although more expensive) </li></ul><ul><li>Radio frequency ID devices (are used to track packages) and smart cards </li></ul><ul><li>Fingerprint readers and retina scanners (biometric technologies) used for tracking (physical security) </li></ul><ul><li>Email is now an integral part of marketing </li></ul>
    22. 23. Characteristics of the 2 nd Wave Cont’d <ul><li>E-commerce is an integral part of marketing and customer contact strategy </li></ul><ul><li>Some categories of on-line advertising, e.g. employment services (job want ads) have replaced traditional advertising outlets </li></ul><ul><li>Some problems however include: </li></ul><ul><ul><li>Language conversions </li></ul></ul><ul><ul><li>Currency conversions </li></ul></ul>
    23. 24. E-commerce Categories 3 <ul><li>There are five general e-commerce categories: </li></ul><ul><ul><li>Business to Consumer (or B2C ) e-commerce </li></ul></ul><ul><ul><li>Business to Business (or B2B ) e-commerce (sometimes called e-procurement) </li></ul></ul><ul><ul><li>Business processes that support buying and selling activities </li></ul></ul><ul><ul><li>Consumer-to-consumer (or C2C ) e-commerce </li></ul></ul><ul><ul><li>Business-to-government (or B2G ) e-commerce </li></ul></ul>
    24. 25. B2 C e-commerce <ul><li>Description </li></ul><ul><ul><li>Businesses sell products or services to individual customers (consumers) </li></ul></ul><ul><li>Example </li></ul><ul><ul><li>Walmart.com sells merchandise to consumers through its Web site </li></ul></ul><ul><li>Web site </li></ul><ul><ul><li>www.walmart.com </li></ul></ul>
    25. 26. B2B e-commerce <ul><li>Description </li></ul><ul><ul><li>Businesses sell products or services to other businesses </li></ul></ul><ul><li>Example </li></ul><ul><ul><li>Grainger.com sells industrial supplies to large and small businesses through its Web site </li></ul></ul><ul><li>Web site </li></ul><ul><ul><li>www.grainger.com </li></ul></ul>
    26. 27. Business Processes that Support Buy/Sell Activities <ul><li>Description </li></ul><ul><ul><li>Businesses and other organisations maintain and use information to identify and evaluate customers, suppliers and employees (and to support buying, selling hiring, planning and other activities). More and more of this information is being shared </li></ul></ul><ul><li>Example </li></ul><ul><ul><li>Dell Computer uses secure internet connections to share current sales and forecasts information with suppliers who use it to plan their production. </li></ul></ul><ul><ul><ul><li>As a result they deliver the right quantities of components at the right time </li></ul></ul></ul>
    27. 28. C 2 C e-commerce <ul><li>Description </li></ul><ul><ul><li>Participants in an online marketplace can buy and sell goods from each other </li></ul></ul><ul><li>Example </li></ul><ul><ul><li>Consumers and businesses trade with each other on eBay.com </li></ul></ul><ul><li>Web site </li></ul><ul><ul><li>www.ebay.com </li></ul></ul>
    28. 29. B2 G e-commerce <ul><li>Description </li></ul><ul><ul><li>Business sell goods or services to governments and government agencies </li></ul></ul><ul><li>Example </li></ul><ul><ul><li>Cal-Buy portal for businesses that want to sell online to the State of California </li></ul></ul><ul><li>Web site </li></ul><ul><ul><li>www.pd.dgs.ca.gov/calbuy/default.htm </li></ul></ul>
    29. 30. E-commerce Categories Example <ul><li>You are a computer manufacturing company who performs the following activities on the Internet: </li></ul><ul><ul><li>Sells computers to individuals ( B2C ) </li></ul></ul><ul><ul><li>Purchases parts (e.g. hard drives, power supplies etc.) from a supplier ( B2B ) </li></ul></ul><ul><ul><li>Hires staff, manage customer accounts, advertise, etc. ( Business processes ) </li></ul></ul><ul><ul><li>Sells computers to the Government to be used in schools ( B2G ) </li></ul></ul><ul><ul><li>On eBay.com individuals buy and sell this brand of computers ( C2C ) </li></ul></ul>
    30. 31. Relative Sizes of E-commerce Categories 3 Business processes that support buy/sell activities B2C e-commerce B2B e-commerce
    31. 32. Relative Sizes of E-commerce Categories Cont’d 6800 (estimate) 240 (estimate) 2007 5300 (estimate) 190 (estimate) 2006 60 50 2000 1600 100 2003 2800 130 2004 4100 150 2005 B2B Sales ($Billions) in the US B2C Sales ($Billions) in the US Year
    32. 33. Relative Sizes of E-commerce Categories Cont’d <ul><li>At the end of 2006 actual B2C sales revenue in the US was US$219 billion 4 </li></ul><ul><li>However, in the same period the B2C sales revenue in Europe was US$133 billion 5 </li></ul><ul><ul><li>E-Commerce in Europe is currently dominated by the UK, Germany and France (72% total online sales) </li></ul></ul><ul><ul><li>Annual growth of 25% is expected over the next 4 years 5 </li></ul></ul>
    33. 34. Economic Forces <ul><li>Economics is the study of how people allocate scare resources </li></ul><ul><li>Resources are allocated through: </li></ul><ul><ul><li>Commerce (markets) </li></ul></ul><ul><ul><li>Government actions (e.g. taxes) </li></ul></ul>
    34. 35. Markets <ul><li>A market is a place where sellers can come into contact with buyers and a medium of exchange (e.g. currency) is available (e.g. the stock market) </li></ul><ul><li>Some hierarchal organisations (companies) however, due to high transaction cost , choose to replace supplier markets with its own hierarchal structure for creating the product. This is called vertical integration </li></ul><ul><ul><li>E.g. Thomson Financial, a financial software provider, purchased the financial data supplier Datastream ICV </li></ul></ul>
    35. 36. Hierarchical Organisations (Firms)
    36. 37. Transaction Costs <ul><li>Transaction costs are the total costs that a buyer and seller incur as they gather information and negotiate a purchase/sale transaction </li></ul><ul><li>Transaction costs are the main reason for vertical integration (Ronald Coase) </li></ul><ul><li>Businesses can use e-commerce to reduce transaction costs (e.g. telecommuting rather than physical commuting to allow global employment opportunities) </li></ul>
    37. 38. Transaction Costs Example <ul><li>Transaction costs incurred by a sweater dealer when purchasing from independent sweater knitters: </li></ul><ul><ul><li>Cost of identifying independent knitters </li></ul></ul><ul><ul><li>Cost of site visit to negotiate purchase price, arrange delivery and inspection of sweaters </li></ul></ul><ul><ul><li>Costs incurred by knitters: </li></ul></ul><ul><ul><ul><li>Knitting tools and yarn purchase </li></ul></ul></ul>
    38. 39. Network Economic Structures <ul><li>Many businesses operate in an economic structure that is neither market or hierarchical </li></ul><ul><li>These businesses form, long-term, strategic alliances with other companies who share common goals and strategies </li></ul><ul><li>These alliances may occur over the Internet – which are called virtual companies </li></ul><ul><ul><li>Teams complete a project or activity then dissolve </li></ul></ul><ul><ul><li>New teams are creating as required </li></ul></ul>
    39. 40. Value Chains <ul><li>A value chain is a way to organise the activities that a business undertakes to design, produce, promote, market, deliver and support the products or services it sells </li></ul><ul><li>There are several types of value chains including: </li></ul><ul><ul><li>Business unit value chains </li></ul></ul><ul><ul><li>Industry value chains </li></ul></ul>
    40. 41. Strategic Business Unit Value Chains <ul><li>A strategic business unit is a particular combination of product, distribution channel and customer type (large firms often break down their business into these units) </li></ul><ul><li>The value chain for a strategic business unit includes: </li></ul><ul><ul><li>Primary activities (the activities that the strategic business unit undertakes </li></ul></ul><ul><ul><li>Support activities (such as human resource management and purchasing) </li></ul></ul>
    41. 42. Manufacturer Value Chain Finance & admin HR Technology development Support activities Design Identify customers Manufacture product or create service deliver After sales service & support Market & sell Purchase materials and supplies Primary activities
    42. 43. Primary Activities <ul><li>Identify new customers, and sell new services to existing customers (research & surveys) </li></ul><ul><li>Design – from concept to manufacturing </li></ul><ul><li>Purchase materials and supplies – includes contracts, vendor selection, monitoring quality and delivery timeliness </li></ul><ul><li>Manufacture product or create service –transform materials and labour into finished products </li></ul>
    43. 44. Primary Activities Cont’d <ul><li>Market and sell – advertising, promoting, managing sales staff, pricing and monitoring sales </li></ul><ul><li>Deliver – store, deliver distribute and ship final product – warehousing, consolidating freight, selecting shippers and monitoring delivery timeliness </li></ul><ul><li>Provide after-sale service and support – promote relationship with customer, e.g. installing, maintaining, testing, repairing, and warranties </li></ul>
    44. 45. Primary Activities Cont’d <ul><li>If a strategic business unit provides a service then the value chain will include a “Provide service” activity instead of “Manufacture activity” </li></ul>
    45. 46. Support Activities <ul><li>Each business unit must also undertake support activities that provide the infrastructure for the primary activities: </li></ul><ul><ul><li>Finance and administration – accounting, paying bills, borrowing, compliance with laws </li></ul></ul><ul><ul><li>Human resources – recruiting, hiring, training, compensation and benefits </li></ul></ul><ul><ul><li>Technology development – improves the product or service, including basic and applied research and development, process improvement and field tests of maintenance procedures </li></ul></ul>
    46. 47. Industry Value Chains <ul><li>Industry value chains describes the larger stream of activities into which a particular business unit’s value chain is embedded </li></ul><ul><li>When a business unit delivers a product to a customer the customer might use the product as purchased materials in its value chain </li></ul><ul><li>By examining how other business units in the industry value chain conduct their business, cost reduction and product improvement may result </li></ul>
    47. 48. Industry Value Chain Example <ul><li>A value chain for a wooden chair: </li></ul><ul><ul><li>Logger cuts down tree </li></ul></ul><ul><ul><li>Sawmill converts logs to lumber </li></ul></ul><ul><ul><li>Lumberyard provides selection of lumber </li></ul></ul><ul><ul><li>Chair manufacture assembles chair </li></ul></ul><ul><ul><li>Furniture retailer markets and sells chair </li></ul></ul><ul><ul><li>Consumer purchases and uses chair </li></ul></ul><ul><ul><li>Landfill or recycler disposes of chair </li></ul></ul>
    48. 49. SWOT Analysis 3 <ul><li>SWOT analysis is used to analyse and evaluate business opportunities </li></ul><ul><li>SWOT is an acronym for: </li></ul><ul><ul><li>S trengths </li></ul></ul><ul><ul><li>W eaknesses </li></ul></ul><ul><ul><li>O pportunities </li></ul></ul><ul><ul><li>T hreats </li></ul></ul>
    49. 50. SWOT Analysis Cont’d <ul><li>An analyst examines the business unit to determine strengths and weaknesses </li></ul><ul><li>Then examines the business environment to identify opportunities and threats </li></ul>
    50. 51. SWOT Analysis Cont’d <ul><li>Questions asked during SWOT analysis: </li></ul><ul><li>Strengths </li></ul><ul><ul><li>What does the company do well? </li></ul></ul><ul><ul><li>Is the company strong in its market? </li></ul></ul><ul><ul><li>Does the company have a strong sense of purpose and the culture to support it? </li></ul></ul><ul><li>Weaknesses: </li></ul><ul><ul><li>What does the company do poorly? </li></ul></ul><ul><ul><li>What problems could be avoided? </li></ul></ul><ul><ul><li>Does the company have serious financial liabilities? </li></ul></ul>
    51. 52. SWOT Analysis Cont’d <ul><li>Opportunities: </li></ul><ul><ul><li>Are industry trends moving upwards? </li></ul></ul><ul><ul><li>Do new markets exist for the company’s products/services? </li></ul></ul><ul><ul><li>Are there new technologies that the company can exploit? </li></ul></ul><ul><li>Threats: </li></ul><ul><ul><li>What are the competitors doing well? </li></ul></ul><ul><ul><li>What obstacles does the company face? </li></ul></ul><ul><ul><li>Are there troubling changes in the company’s business environment (technologies, law and regulations)? </li></ul></ul>
    52. 53. SWOT Analysis Cont’d <ul><li>In the mid-1990s DELL Computer did the following SWOT analysis: </li></ul><ul><li>Strengths: </li></ul><ul><ul><li>Sell directly to consumers </li></ul></ul><ul><ul><li>Keep costs below competitors </li></ul></ul><ul><li>Weaknesses: </li></ul><ul><ul><li>No strong relationships with computer retailers </li></ul></ul>
    53. 54. SWOT Analysis Cont’d <ul><li>Opportunities: </li></ul><ul><ul><li>Consumers desire for one-stop shopping </li></ul></ul><ul><ul><li>Consumers know what they want to buy </li></ul></ul><ul><ul><li>Internet could be a powerful marketing tool </li></ul></ul><ul><li>Threats: </li></ul><ul><ul><li>Competitors have stronger brand names </li></ul></ul><ul><ul><li>Competitors have strong relationships with computer retailers </li></ul></ul>
    54. 55. International Issues 3 <ul><li>Trust issues </li></ul><ul><li>Language issues </li></ul><ul><li>Culture issues </li></ul><ul><li>Infrastructure issues </li></ul>
    55. 56. Trust Issues <ul><li>Anyone can create a website </li></ul><ul><li>These individuals or businesses can easily remain anonymous </li></ul><ul><li>Without an established brand, consumers find it difficult to trusts on-line businesses: </li></ul><ul><ul><li>especially with personal information and credit card numbers </li></ul></ul><ul><li>The key is to develop methods which would allow legitimate businesses to establish trust relationships quickly with consumers </li></ul>
    56. 57. Language Issues (localisation) <ul><li>Global impact requires local language Web sites </li></ul><ul><ul><li>customers prefer to buy from sites in native language </li></ul></ul><ul><li>60% of web content today is in English; but more than 50% of the current users do not read English </li></ul><ul><li>Multiple translations may be required for different dialects, e.g. Spanish- Mexico and Spain </li></ul>
    57. 58. Language Issues (localisation) <ul><li>Translating entire websites is expensive </li></ul><ul><ul><li>25-90 cents per word for human translators (400-600 words per hour) </li></ul></ul><ul><ul><li>Automated software translation (machine translation) is cheaper (400,000 word per hour) but less accurate </li></ul></ul><ul><li>The home page should be translated to all supported languages, as well as marketing and product pages </li></ul>
    58. 59. Culture Issues <ul><li>Culture is the combination of language and customs </li></ul><ul><li>Culture varies across national boundaries and in many cases regions within nations </li></ul><ul><li>Example: </li></ul><ul><ul><li>General Motors Chevrolet Nova automobile amused people in Latin America since no va means “it will not go” </li></ul></ul>
    59. 60. Culture Issues Cont’d <ul><li>Choice of icons on Web pages becomes problematic on international Web sites: </li></ul><ul><ul><li>In the US a shopping cart is useful, in the UK a shopping basket is more appropriate, Australians call shopping carts, shopping trolleys </li></ul></ul><ul><ul><li>In many places the hand gesture where the index finger touches the thumb means okay; while in Brazil it is an obscene gesture </li></ul></ul>
    60. 61. Culture Issues Cont’d <ul><li>In some cases unrestricted access to the Internet is not permitted, for example in the Middle East and North Africa </li></ul><ul><ul><li>This limits the growth of e-commerce </li></ul></ul><ul><li>In France any advertisement for a product or service must in in French – by law </li></ul><ul><ul><li>This means that French companies must provide websites in at least two languages if they want to sell goods outside of France </li></ul></ul>
    61. 62. Infrastructure Issues <ul><li>Limited telecommunication infrastructure may lead to unreliable Internet access </li></ul><ul><li>Internet connection cost might be high </li></ul><ul><ul><li>Reduces time businesses might spend surfing for new suppliers or products </li></ul></ul><ul><ul><li>Flat-rate access to the Internet is required </li></ul></ul><ul><li>These are major issue in developing countries, including Barbados </li></ul>
    62. 63. Conclusion <ul><li>In this session: </li></ul><ul><ul><li>It was made clear that e-commerce was not a new business, rather a new way of doing business </li></ul></ul><ul><ul><li>The advantages and disadvantages of e-commerce were discussed </li></ul></ul><ul><ul><li>The characteristics of the first and second waves were compared and contrast </li></ul></ul><ul><ul><li>The five e-commerce categories were presented </li></ul></ul>
    63. 64. Conclusion Cont’d <ul><ul><li>The importance of reducing transaction costs was considered </li></ul></ul><ul><ul><li>The importance of SWOT analysis was demonstrated through a useful example </li></ul></ul><ul><ul><li>Issues involved in international commerce were also considered </li></ul></ul>
    64. 65. Definitions <ul><li>A commodity item is a product or service that is hard to distinguish from the same products or services provided by other sellers (e.g. gasoline, office suppliers, soap and computers) </li></ul><ul><li>A transaction is an exchange of value, such as a purchase or sale, or the conversion of raw materials into finished products (a transaction has one or more associated activity) </li></ul><ul><li>A business process is the set of logically related and sequential activities and transactions in which businesses engage </li></ul>
    65. 66. Definitions Cont’d <ul><li>Merchandising is a combination of store design, layout and product display knowledge </li></ul><ul><li>A shipping profile is the collection of attributes that affect how easily that product can be packaged and delivered (e.g. airline tickets have a high value-to-weight ratio) </li></ul>
    66. 67. Definitions Cont’d <ul><li>The definition of a market satisfies two conditions: </li></ul><ul><ul><li>Potential seller of a good (product) comes into contact with buyers </li></ul></ul><ul><ul><li>A medium of exchange is available (e.g. currency or barter ( t o exchange goods or services directly without the use of money )) </li></ul></ul>
    67. 68. Definitions Cont’d <ul><li>Transaction costs are the total costs that a buyer and seller incur as they gather information and negotiate a purchase/sale transaction. These costs include: </li></ul><ul><ul><li>Brokerage fees and sales commissions </li></ul></ul><ul><ul><li>Cost of information search and acquisition </li></ul></ul><ul><ul><li>Seller’s investment in equipment or hire of skilled employees </li></ul></ul>
    68. 69. References <ul><li>[ 1 ] NSW Department of State and Regional Development, “Brief on Electronic Commerce”, http://www.smallbiz.nsw.gov.au/textonly/issues/technology/brief/index.html </li></ul><ul><li>[ 2 ] Ford, Warwick, “Secure Electronic Commerce: Building the Infrastructure for Digital Signatures and Encryption (2 nd Edition), pp. 1, 2000 </li></ul><ul><li>[ 3 ] Schneider, Gary, P., “Electronic Commerce”, Thomson Course Technology, Seventh Annual Edition, 2007 </li></ul><ul><li>[4] Gourmet Retailer, “Online Sales of Food/Beverage/Grocery Down”, May 2007. Available online at http://www.gourmetretailer.com/gourmetretailer/headlines/article_display.jsp?vnu_content_id=1003585259 </li></ul><ul><li>[5] Cheap Web Hosting Directory, “E-Commerce Report, Details $133 Billion Online B2C Sales”, August 21, 2007. Available online at http://www.cheaphostingdirectory.com/news-e-commerce-report-details-133-billion-online-b2c-sales-3304.html </li></ul>

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