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Introduction To Electronic Commerce


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Introduction To Electronic Commerce

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