Introduction to electronic commerces

1. Chapter 3
Introduction to Electronic Commerce
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2. Learning Objectives
In this chapter, you will learn about:
• The basic elements of electronic commerce
• Differences between electronic commerce
and traditional commerce
• Advantages and disadvantages of using
electronic commerce
• The international nature of electronic
commerce
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3. Learning Objectives
• The Internet and the World Wide Web have
stimulated the emergence of electronic
commerce.
• Economic forces that have created a
business environment to foster electronic
commerce
• The ways by which businesses use value
chains to identify electronic commerce
opportunities
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4. Defining Electronic Commerce
• Electronic commerce refers to business activities
conducted using electronic data transmission via
the Internet and the World Wide Web.
• Three main elements of e-commerce:
– Business-to-consumer
– Business-to-business
– The transactions and business processes that support
selling and purchasing activities on the Web
Click to see Figure 1-1
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6. Forms of Electronic Commerce
• Web-based e-commerce
• Electronic funds transfers (EFTs)
• Electronic data interchange (EDI)
– General Electric
– Wal-Mart
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7. Value Added Network (VAN)
• A value added network is an independent
firm that offers connection and EDI
transaction forwarding services to buyers
and sellers engaged in EDI.
• VANs are responsible for ensuring the
security of data transmitted.
• VANs charged a fixed monthly fee plus a
per-transaction charge to subscribers.
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8. Elements of Traditional
Commerce: the Buyer’s Side
• Identify specific need
• Search for products or services that will satisfy the
specific need
• Select a vendor
• Negotiate a purchase transaction
• Make payment
• Perform regular maintenance and make warranty
claims
Click to see Figure 1-2
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10. Elements of Traditional
Commerce: the Seller’s Side
• Conduct market research to identify
customer needs
• Create product or service that will meet
customers’ needs
• Advertise and promote product or service
• Negotiate a sale transaction
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11. Elements of Traditional
Commerce: the Seller’s Side
• Ship goods and invoice customer
• Receive and process customer payments
• Provide after-sale support, maintenance,
and warranty services
Click to see Figure 1-3
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13. Activities as Business Processes
• Business Processes refer to activities in
which businesses engage as they
accomplish a specific element of commerce,
including:
– Transfer funds
– Placing orders
– Sending invoices
– Shipping goods to customers
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14. Electronic Commerce Processes
• Electronic fund transfer (EFT)
• Electronic data interchange (EDI)
• Internet commerce
• Electronic business (IBM style)
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15. Electronic Commerce Processes
• Examples of business processes:
– Well suited to electronic commerce
– Well suited to traditional commerce
– A combination of both strategies
Click to see figure 1-4
Click to see figure 1-5
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18. Well-suited E-commerce
Business Processes
• Sale/purchase of books and CDs and other
commodities
• Online delivery of software
• Promotion and delivery of travel services
• Online shipment tracking
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19. Well-suited Traditional Business
Processes
• Sales/purchase of high-fashion clothing
• Sale/purchase of perishable food products
• Processing of small-denomination
transactions
• Sale of high-value jewelry and antiques
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20. Business Processes Suited to
Both Commerce Strategies
• Sale/purchase of automobiles
• Online banking
• Roommate-matching services
• Sale/purchase of investment and insurance
products
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21. Advantages of Electronic
Commerce
• Electronic commerce can increase sales and
decrease costs.
• Web advertising reaches to potential
customers in the world.
• Web creates virtual communities for
specific products or services.
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22. Advantages of Electronic
Commerce
• A business can reduce the costs by using
electronic commerce in its sales support and
order-taking processes.
• Electronic commerce increases sale
opportunities for the seller.
• Electronic commerce increases purchasing
opportunities for the buyer.
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23. General Welfare of Society
• Electronic commerce benefits the general
welfare of society because:
– Electronic payments of tax refunds and welfare
cost less to issue and arrive securely.
– Electronic payments can be audited easily.
– Electronic commerce enables people to work
from home.
– Electronic commerce makes products and
services available in remote areas.
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24. Disadvantages of Electronic
Commerce
• Some business processes are difficult to be
implemented through electronic commerce.
• Return-on-investment is difficult to apply to
electronic commerce.
• Businesses face cultural and legal obstacles
to conducting electronic commerce.
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25. International Electronic
Commerce
• About 60 percent of all electronic
commerce sites are in English, languages
barrier needs to be overcome.
• The political structures of the world
presents some challenges.
• Legal, tax, and privacy are concerns of the
international electronic commerce.
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26. The Internet and World Wide
Web
• The Internet is a large system of interconnected
computer networks that spans the globe.
• The Internet supports e-mail, online newspapers
and publications, discussion group, game, and free
software.
• The World Wide Web includes an easy-to-use
standard interface for Internet resources accesses.
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27. Origins of the Internet
• In the early 1960s, the U.S. Department of
Defense started research on networking
computers.
• Its researchers developed a multiple
channels network.
• In 1969, the Defense Department used this
network model to connect four mainframe
computers at different locations.
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28. New Uses for the Internet
• In 1972, a researcher wrote a program that
could send and receive messages over the
network.
• E-mail was born and became widely used.
• The network software include:
– File Transfer Protocol (FTP)
– User’s News Network (Usenet)
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29. Commercial Use of the Internet
• Companies used PC to construct their
networks in 1980s.
• National Science Foundation (NSF) funded
the network services in 1980s.
• In 1989, NSF permitted two commercial e-
mail services.
• As the 1990s began, the Internet started to
serve the global resource accesses.
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30. Growth of the Internet
• In 1991, the NSF further eased its restriction on
Internet commercial activity.
• The privatization of the Internet was substantially
completed in 1995.
• The new structure of the Internet was based on
four network access points (NAPs).
• Internet service providers (ISPs) sell Internet
access rights directly to customers.
Click to see Figure 1-6
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32. Development of Hypertext
• In the 1960s, Ted Nelson described his
page-linking system hypertext.
• In 1987, Nelson published a book about a
global system for online hypertext
publishing and commerce.
• In 1991, Berners-Lee of CERN developed
the code for a hypertext server program and
made it available on the Internet.
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33. HTML
• A hypertext server is a computer that stores
files written in the hypertext markup
language (HTML).
• HTML is a language that includes a set of
codes (or tags) attached to text.
• A hypertext link points to another location
in the same or another HTML document.
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34. Web Browser and Markup
Languages
• A web browser is a software interface that
lets users browse HTML documents.
• HTML is based on Standard Generalized
Markup Language (SGML).
• eXtensible Markup Language (XML)
allows users to define new meanings for its
commands in web page.
Click to see Figure 1-7
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36. Graphical User Interface
• A graphical user interface (GUI) is a way of
presenting program control functions and
program output to users.
• Web browsers include:
– Mosaic
– Netscape Navigator
– Microsoft Internet Explorer
Click to see Figure 1-8
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38. Economic Forces of Electronic
Commerce
• Transaction costs were the main motivation for
moving economic activity from markets to
hierarchically structured firms.
• Transaction costs are the total of all costs that a
buyer and a seller incur for business.
• Types of economic organization:
– Market form
– Hierarchically-structured form
Click to see Figure 1-9
Click to see Figure 1-10
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41. The Role of Electronic
Commerce
• Businesses and individuals can use
electronic commerce to reduce transaction
cost.
• Electronic commerce can make network
economic structure, which rely on
information sharing, much easier to
construct and maintain.
Click to see Figure 1-11
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43. Value Chains
• A strategic business unit is one particular
combination of product, distribution
channel, and customer type.
• A value chain is a way of organizing the
activities that each strategic business unit
undertakes to design, produce, promote,
market, deliver, and support the products or
services it sells.
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44. Strategic Business Unit Value
Chains
• For each business unit, the primary activities are:
– Identify customers
– Design
– Purchase materials and supplies
– Manufacture
– Market and sell
– Deliver
– Provide after-sale service and support
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45. Strategic Business Unit Value
Chains
• The support activities of value chain for a
strategic business unit include:
– Finance and administration
– Human resources
– Technology development
Click to see Figure 1-12
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47. Industry Value Chains
• Value system describes the larger stream of
activities into which a particular business
unit’s value chain is embedded.
• Industry value chain refers to value
systems.
• Using the value chain reinforces the idea
that electronic commerce should be a
business solution.
Click to see Figure 1-13
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