E-EntrepreneurshipOBJECTIVES12-1 Explain the difference between bricks-and-mortar and virtual businesses.12-2 Discuss the scope of the e-entrepreneurship market and how to address e-entrepreneurship in the business plan.12-3 Explain the process of creating an e-business web site.12-4 Discuss e-entrepreneurship and the law.12-5 Evaluate an e-business web site according to a checklist of important factors.12-6 Discuss the myths of e-entrepreneurship.12-7 Analyze common e-entrepreneurship mistakes.
E-entrepreneur An e-entrepreneur is defined as an individual willing to take the risk of investing time and money in an electronic business that has the potential to make a profit or incur a loss. E-entrepreneurship is the act of managing an electronic enterprise that has the potential to make a profit or incur a loss.
Bricks and Mortar Business Has a material presence Has a tangible location where potential customers can actually walk in and interact with employees Examples: storefront, storage facility, office space, or manufacturing facility
Virtual Business Does not have a material space designed to receive customers Transacts most of its business online Can deal with customers from any location that offers Internet capability
The E-Entrepreneurship Market Approximately 75 percent of Americans have access to the Internet from home. That means over 200 million people are potential customers for the entrepreneur with an Internet site.
History of E-Entrepreneurship In the early 1990s, electronic data interchange was standardized and companies could reliably complete transactions among themselves. In 1992, Compuserve offered online retail products to its customers. Netscape arrived on the scene in 1994 and provided users with a simple and colorful browser with which to surf the Internet. Netscape also provided a safe online transaction technology called Secure Sockets Layer.
(continued)History of E-Entrepreneurship The following year saw the launch of Amazon.com and eBay. In 1998, DSL, or Digital Subscriber Line, which provided fast, always-on Internet service, was offered to customers across California. By 1999 retail spending over the Internet reached an estimated $20 billion. In 2004, the U.S. government extended the original 1998 moratorium on Internet taxes until at least 2009.
E-Entrepreneurshipin the Business Plan The e-entrepreneurship components of the business planning process integrate your Internet site and your basic business model. They should address web site planning, development, marketing, legal, financial, management, and special considerations. They should be designed to ensure that your Internet content reaches the right customer while leveraging the full value of the Internet as a marketing tool.
Create an E-Business The first step toward e-entrepreneurship is usually the selection and registration of a domain name, which is the unique name that identifies an Internet site. The selection of a domain name is a chief concern when doing business online.
Domain Name Process Choose a domain name that is easy to remember and is not easily confused with other names. Use a search engine to check for other companies using the same name or a derivation of it. Through registration it becomes a legitimate part of the Domain Name System (DNS).
Domain Name System Every computer linked to the Internet has an exclusive address, called its Internet Protocol (IP) address. The DNS makes using the Internet easier by allowing a recognizable string of letters (the domain name) to be used instead of the numeric IP address. So instead of keying a long number, you can key the URL (Uniform Resource Locator), for example http://domainname.com.
ICANN Registration of domain names is controlled by a private-public partnership called the Internet Corporation for Assigned Names and Numbers (ICANN). Numerous companies have been accredited by ICANN to act as registrars. Domain names can be registered through the many different registrar companies.
Components ofan E-Business Site Web site design Content Web host Security and/or firewalls Search site submission On-site search engine Database software
Additional FeaturesNeeded for Online Payment Product catalog Shopping cart Merchant account provider Alternative payment options Order fulfillment Customer service E-mail notification Customer FAQs
E-Entrepreneurship and the Law Fraud and deception are unlawful no matter what the medium. The Federal Trade Commission has enforced and will continue enforcing its consumer protection laws.
Advertising Online consumers are protected by many of the general principles of advertising law that also apply to Internet ads. The same consumer protection laws that apply to commercial activities in other media apply online.
Spam Spam is defined as unsolicited “junk” e- mail sent to large numbers of people to promote products or services.
E-Consumer Complaints The FTC has an online general complaint form that can be used by consumers to register complaints relating to online transactions in the U.S. Another FTC form may be used for e- business complaints involving a foreign company.
Global E-EntrepreneurshipAgreement The U.S. and 29 other countries are members of the Organization for Economic Cooperation and Development (OECD).
Global E-EntrepreneurshipAgreement Guidelines Fair business, advertising, and marketing practices Enough information to allow consumers to make informed choices, including disclosures about online businesses, their goods and services, and the terms and conditions of sale Clear processes for confirming transactions Secure payment mechanisms
Global E-EntrepreneurshipAgreement Guidelines (continued) Timely and affordable dispute resolution and redress processes Privacy protection Consumer and business education International government cooperation
Application of OECD Guidelines Follow fair business, advertising, and marketing practices. Provide accurate, clear, and easily accessible information about the company and the goods or services it offers. Disclose full information about the terms, conditions, and costs of the transaction. Ensure that consumers know they are making a commitment to buy before closing the deal. Provide an easy-to-use and secure method for online payments.
(continued)Application of OECD Guidelines Protect consumer privacy during electronic transactions. Have policies and procedures to address consumer problems quickly, fairly, and without excessive cost or inconvenience to the consumer. Adopt fair, effective, and easy-to-understand self- regulatory policies and procedures. Help educate consumers about electronic commerce, thereby contributing to a consumer-friendly electronic marketplace.
Better Business Bureau/BBB OnlineCode of Online Business Practices Truthful and accurate communications Disclosure Information practices and security Customer satisfaction Protecting children
Myths of E-Entrepreneurship E-entrepreneurship is a no-brainer. E-entrepreneurship is cheap. The best price is always online. E-commerce will kill traditional retail. E-entrepreneurships make an obscene amount of money. E-entrepreneurship is not safe.
(continued)Myths of E-Entrepreneurship E-entrepreneurship success depends on the right technology. Getting products to consumers is an e-entrepreneur’s biggest cost. Most Web consumers are “young.” If a product or service can be sold, it can be sold on the Web. Everyone else is selling online.
15 Most CommonE-Entrepreneurship Mistakes1. Trying to sell the wrong product online2. Misjudging the web site’s potential3. Forgetting that a first impression canonly be made once4. Making the site too complicated5. Using a complicated navigation system6. Forgetting to list your phone number7. Supporting only one browser8. Featuring out-of-date content
15 Most CommonE-Entrepreneurship Mistakes (continued)9. Requiring excessive download times10. Ignoring customer service11. Not validating the functionality of your site12. Not merging your web site with yourconventional business13. Not promoting the site14. Using spam promotion15. Failing to deliver products
Learning Objectives Identify entrepreneurial abilities Describe the entrepreneurial process Understand the factors affecting e- business success Identify ways to exploit e-business advantages31
The Entrepreneur and the Entrepreneurial Process Entrepreneur Assumes the risks of starting and operating his or her own business Must be able to lead others Must believe in his or her business idea Must have the self-confidence to accomplish business goals32
The Entrepreneur and the Entrepreneurial Process (continued) E-business entrepreneur examples Jeff Bezos, Amazon.com Pierre Omidyar, eBay Kelby Hagar, GroceryWorks.com and Digital Witness Jason Zasky, Failure Magazine33
The Entrepreneur and the Entrepreneurial Process (continued) Entrepreneurial abilities Leadership traits High-energy level Self-confidence Organizational skills Ability to act quickly and decisively Independent, goal-oriented, creative, competitive34
The Entrepreneur and the Entrepreneurial Process (continued) Entrepreneurial process Stage 1: Are you an entrepreneur? Assess your entrepreneurial abilities Evaluate time and effort involved in starting/running your own business Consider the effect of the business commitment on your family life35
The Entrepreneur and the Entrepreneurial Process (continued) Entrepreneurial process (continued) Stage 2: Buy existing business or start own business?36
The Entrepreneur and the Entrepreneurial Process (continued) Entrepreneurial process (continued) Stage 3: For a new business startup you must Define the business idea Create a business plan Secure financing37
The Entrepreneur and the Entrepreneurial Process (continued) Entrepreneurial process (continued) Stage 4: Operate and grow your business38
The Entrepreneur and the Entrepreneurial Process (continued) Entrepreneurial process (continued) Stage 5: Harvest your business Continue to operate “cash cow” Go public Sell the business Liquidate the business39
The Entrepreneur and the Entrepreneurial Process (continued)40
Factors Affecting E-Business Success The network effect Total value of a product, service, or technology grows as more and more people use it Telephone system example Single telephone has no value; as more people join the telephone system, the value of each telephone increases uBid online auction site example As more people participate, the auction site becomes more valuable to buyers and sellers41
Factors Affecting E-Business Success (continued) Innovative marketing ideas Hotmail and viral marketing example Hotmail users grew at a rapid rate because of electronic word of mouth coupled with the network effect Electronic word of mouth or viral marketing spreads from user to user in the same way a human virus spreads from person to person44
Factors Affecting E-Business Success (continued) Scalability Ability of a business to function well in the face of rapid growth Systems and procedures meet customers needs AllAdvantage e-business failure example E-business idea: Paying for users to browse the Web and view advertising Millions of customers signed on; advertisers did not No scalability with rapid growth in customers46
Factors Affecting E-Business Success (continued) Ease of entry into electronic markets Low-cost technologies make it easy to create new e-businesses eBay and online auction example Easy for consumers to interact at auction site Web auction software is cheap and easy to install /maintain E-businesses earn commissions without having to manage, warehouse, and distribute products47
Factors Affecting E-Business Success (continued) Ease of entry into electronic markets (continued) Competitive barriers to overcome Failure to secure first-mover advantage Lack of name identification Lack of customer loyalty49
Factors Affecting E-Business Success (continued) Ability to quickly adapt to marketplace changes Rapid knowledge transfer Need to make decisions quickly Exploit new ideas and opportunities Handle new challenges Amazon.com is an example of ongoing evolution from a basic e-business idea50
Exploiting E-Business Advantages (continued) Expand the market Business and consumers are no longer bound by constraints of time, space, physical location Opportunity to reach larger market Ticketmaster example52
Exploiting E-Business Advantages (continued) Acquire greater business visibility Get business name, products, and services in front of potential customers more quickly Auto industry example54
Exploiting E-Business Advantages (continued) Use power of the Internet and Web to maximize customer relationships and improve responsiveness Create customer loyalty Stay in touch with customer needs Build one-on-one relationships Provide information to enrich customers’ online experience Southwest Airlines example57
Exploiting E-Business Advantages (continued) Create new products and services Opportunities for new e-business ideas where products or services are accessed over the Web Business software applications Server facilities for data file backup Legal dispute resolution Cybersettle example Web hosting services Rackspace Managed Hosting example59
Exploiting E-Business Advantages (continued) Reduce costs of running a business Sales and customer support costs Transaction costs Order handling costs Dell Computers, Cisco Systems, and Microsoft Corporation examples62
Summary An entrepreneur assumes the risks of starting and operating his or her own business Entrepreneurial abilities Leadership High-energy Self-confidence Organization skills Ability to act quickly65
Summary (continued) Five stages of the entrepreneurial process Decide if you are an entrepreneur Decide to buy or start new business Plan the business Operate the business Harvest the business66
Summary (continued) Factors that can affect e-business success Network effect Innovative marketing ideas Scalability of the e-business idea Cost of entry into the marketplace Ability to overcome competitive barriers Ability to exploit inherent advantages67