The document discusses several key aspects of business operations that are impacted by the internet, including order fulfillment, response time, inventory management, distribution channels, and profitability/productivity. Specifically, it notes that continuous inventory controls updated electronically are best for online selling, direct distribution channels without intermediaries can reduce costs, and the internet has led to both disintermediation and re-intermediation of distribution channels. Overall, the internet allows for increased productivity through streamlined supply chains and elimination of unnecessary steps, boosting profitability for businesses.

1. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review 1
Effects of the Internet on
Consumers and Businesses--A
Marketing Review
Before we can consider
the present and future...
We must first understand our past...

2. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review2
Order Fulfillment:
 In the relationship between buyer and seller, there
are many activities that transpire between the buyer's
selection of the product and the shipment of the
selected product to the buyer.
 Selecting the merchandise
 Responding to the order
 Checking to make sure the order has been fulfilled
 Packing
 Shipping
 Billing for the merchandise
Note: the above steps do not necessarily follow in that order

3. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review3
Response Time
 This refers to the amount of time it takes a
seller to respond to a customer's inquiry for
purchase or service. It also applies to any
post-purchasing responses such as
customer service.
 The success of many businesses is
determined by this factor. Customers do not
like to wait nor do they want to be ignored!

4. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review4
Inventory Management
 Much of the determination of a good response time
relies on how well a seller manages the product
inventory. It also has a major bearing on a
business's profitability. Some of the factors to
consider in inventory management are:
 Cost of Storage
 Stock on hand
 Just in Time Inventory
 Tracking Inventory

5. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review5
Stock-On-Hand
 Too small-
decreases response
time
 Too large-increases
storage cost
 Too large-increases
cost of inventory

6. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review6
Just-in-Time Inventory
 Products
manufactured
"as needed"
 Reduces
inventory costs
 May reduce
response time

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Tracking Inventory
 Determines ability to
respond to customer
inquiry
 Determines ability to
anticipate and respond
to inventory
needs/updates

8. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review8
Inventory Controls
 The management of inventory requires that a
business maintain up-to-date data on the
product stock. In the case of manufacturing,
this may mean keeping track of materials in
addition to product.
 This process is called "inventory control."
The inventory controls used are determined
by the type of inventory and the demand for
that inventory. Two types of inventory control
frequently used are: Manual and Continuous

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Manual Inventory Controls
 Counting and collecting information
manually or by hand.
 Is done periodically due to expense
 Status of stock-on-hand may not be up-to-
date.
 NOT well-suited to online selling

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Continuous Inventory Controls
 managed with electronic database
 is updated INSTANTANEOUSLY
 status of stock-on-hand is current
 is best choice for online selling!
Many Retail Stores Use a
Continuous System that is
updated automatically at the
checkout

11. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review11
Distribution Channels
 Distribution Channels The product has been
manufactured. What's next? How does it
reach the consumer? This is where Product
Distribution Channels are important. Product
Distribution Channels refer to all of the
steps in the movement of products or
services to the consumer. Two primary
methods of accomplishing this are:
 Indirect Distributions Channels
 Direct Distributions Channels

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Indirect Distribution Channels
 Require an intermediary such as a retail
distributor to add value
 Product cost is increased-"markup"
 Travel Agents are just one type of
Intermediary

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Direct Distribution Channels
 Company produces goods or services
 Delivers directly to consumer
 Does not use intermediary
 No added cost--product better value

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Intermediation
 An Intermediary is somewhat like a
"middleman" in the process of Product
Distribution. An intermediary is a business
person such as a broker, or sales
representative, who negotiate transactions
between the seller and the buyer. There are
two events that can effect the distribution
channels for a business:
 Disintermediation
 Re-Intermediation

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Disintermediation
 The process of losing distribution channels
when they are no longer needed
 Are a response to buying trends such as
online shopping.
 Can cause decrease in cost of product.

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Re-Intermediation
 the process of adding a level of the
distribution system.
 response to trends in consumption,
technology, pop-culture, etc.
 an entrepreneur's "dream"--many are
exploiting new markets made possible by
the Internet
 E-Check is an example.

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Disintermediation & Re-
Intermediation Examples
 Stock markets have
experienced
disintermediation by
eliminating the need for
the traditional
brokerage.
 Stock Markets have
experienced re-
intermediation with the
advent of online trading.

18. EC02.01 Explain the Effects of the Internet on Businesses-A Marketing Review18
Profitability and Productivity
 What is the number one goal of any
business?
 Make money! In the world of marketing there
is a direct relationship between productivity
and earning profit. Economists say that we
are more productive now than ever due to our
advances in technology.

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Profitability & Productivity
 Profitability--the ability to make a profit after
expenses are deducted from sales. Expense
variables include
 facilities & utilities
 equipment
 inventory
 distribution
 wages

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Productivity
 Productivity--the amount of output for each
hour of work. Increased productivity:
 Deters inflation of prices and wages
 Is achieved through elimination of
unnecessary steps in the supply chain
 Is often attributed to increases in technology
and the growth of the Internet.

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Resources
 Inventory Management
http://www.inventoryops.com/articles.htm
 Inventory Controls http://www.small-business-stock-
control.com/stocktheories.htm
 An e-Commerce and Marketing Dictionary of Terms
http://www.udel.edu/alex/dictionary.html
 Facts for Consumers—Electronic Check Conversion
http://www.ftc.gov/bcp/conline/pubs/credit/echeck.ht
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