Chapter 12
Economics, Global EC, and
Other EC Issues
1
The Components of Digital
Electronics
Digital Products
The Consumers
The Sellers
The Infrastructure companies
The Intermed...
Competition in Marketspace
Lower buyers’ search cost.
Speedy comparisons.
Differentiation.
Lower prices.
Customer services...
Some Issues in Digital Economy and
Success Factors
The need for a critical mass of buyer

4
Virtual Communities
 The Internet Virtual Communities
 The Web is being transformed into a social
Web of communities. Fo...
Virtual Communities (cont.)
Communities of
transactions
Facilitate buying
and selling
Evineyard.com
Sells wine
Provides ex...
Virtual Communities (cont.)
Communities of
relations (practice)
Be organized around
certain life
experiences
Plasticsnet.c...
Virtual Communities (cont.)
Ways to transform a community site into a
commerce site:
Understand a particular niche industr...
Virtual Communities (cont.)
Set up the site to mirror the steps a user goes
through in the information-gathering and
decis...
Virtual Communities (cont.)
The Expected Payback
Customer loyalty increases
Increased sales
Customer participation and fee...
Virtual Communities (cont.)
Creating economic value

Members input useful information in the form
of comments, feedback, e...
Virtual Communities (cont.)
Financial viability of communities

Based on sponsorship and advertisement
Expenses are very h...
Global Electronic Commerce
While geographical market boundaries may be
falling, global interest-based communities will
spr...
Barriers to Global Electronic Commerce
Legal Issues
Uncoordinated actions must be avoided and an
international policy of c...
Barriers to Global
Electronic Commerce (cont.)
Financial Issues
Customs and taxation
Electronic payment systems

Other Iss...
Barriers to Global
Electronic Commerce (cont.)
Other Issues (cont.)

Cultural diversity
International agreements (multi-la...
The U.S. Policy Regarding
Global Electronic Commerce
The private sector should lead
Governments should avoid undue restric...
The U.S. Policy Regarding
Global Electronic Commerce (cont.)
Governments should recognize the unique
qualities of the Inte...
The Opportunities for
Small Businesses
Inexpensive
Source of information
Way of advertising
Way of conducting market resea...
The Opportunities for
Small Businesses (cont.)
Lower transaction cost
Niche market, specialty products (cigars,
wines, sau...
Risks and Disadvantages
for Small Businesses
Inability to use EDI, unless it is EDI/Internet
Lack of resources to fully ex...
Risks and Disadvantages
for Small Businesses (cont.)
Disadvantage when a commodity is the
product (for example, CDs)
No mo...
Success Factors for Small Businesses
Niche products
Low volume
Not carried by
regular retail stores

Small volume
E.g., sp...
Success Factors for
Small Businesses (cont.)
Capital investment must be small
Inventory should be minimal or non-existent
...
Success Factors for
Small Businesses (cont.)
The Web site should be submitted to
directory-based search engine services li...
Success Factors for
Small Businesses (cont.)
Monitor your:
Competition
Technology
Marketplace changes

Keep growth slow an...
Research in EC
Behavioral Issues

Consumer behavior
Building consumers behavioral profiles and
identify ways to utilize th...
Research in EC (cont.)
Technical Issues
Methods that help customers find what they want
Models for extranet design and man...
Research in EC (cont.)
Technical Issues (cont.)
Integrating EC with existing corporate information
systems, databases, etc...
Managerial Research Issues
Advertisement
Measuring the effectiveness, integration and
coordination

Applications
Creating ...
Managerial Research Issues (cont.)
Strategy
Designing strategic advantage strategy for EC
Initiating “where to market” str...
The Future of Electronic Commerce
Opportunities for buying
Increase rapidly

Internet usage
Increase exponentially
Access ...
The Future of
Electronic Commerce (cont.)
Purchasing incentives
Increase buyers’ advantages

Increased security and trust
...
The Future of
Electronic Commerce (cont.)
Virtual Communities
Spreading rapidly

Payment systems
Ability to use e-cash car...
The Future of
Electronic Commerce (cont.)
B2B exchanges
Provide infrastructure

Auctions
Increasing rapidly

Going global
...
The Future of
Electronic Commerce (cont.)
E-government--comprehensive
Government-to-consumers (G2C)
Government-to-governme...
The Future of
Electronic Commerce (cont.)
Technology trends
Clients
Thin client and embedded client
Servers
Windows NT

Ne...
The Future of
Electronic Commerce (cont.)
Technology Trends
EC software and services
Availability of all types of EC softw...
Managerial Issues
Finding a community that matches your
business
Going global
Threats—difficult to accomplish, especially ...
Managerial Issues (cont.)
Small can be beautiful
Competing on commodities with the big guys is
very difficult (especially ...
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E-Commerce 12

  1. 1. Chapter 12 Economics, Global EC, and Other EC Issues 1
  2. 2. The Components of Digital Electronics Digital Products The Consumers The Sellers The Infrastructure companies The Intermediaries The Support services Content creaters 2
  3. 3. Competition in Marketspace Lower buyers’ search cost. Speedy comparisons. Differentiation. Lower prices. Customer services. Other competitive factors to consider are: The size of the firm may not be a significant competitive advantage. Geographical distance from consumer may play an insignificant role. Some language barriers may be easily removed. Digital products lack normal wear and tear. 3
  4. 4. Some Issues in Digital Economy and Success Factors The need for a critical mass of buyer 4
  5. 5. Virtual Communities  The Internet Virtual Communities  The Web is being transformed into a social Web of communities. Four major types: Communities Communities Communities Communities of of of of transactions interest relations (practice) fantasy 5
  6. 6. Virtual Communities (cont.) Communities of transactions Facilitate buying and selling Evineyard.com Sells wine Provides expert information on wines Provides chat room Communities of interest Place for people to interact with each other on a specific topic Motley fool (fool.Com) Forum for individual investors 6
  7. 7. Virtual Communities (cont.) Communities of relations (practice) Be organized around certain life experiences Plasticsnet.com used by thousands of engineers in the plastics industry Communities of fantasy Place for participants to create imaginary environments ESPNet participants create competing teams and “play” with Michael Jordan 7
  8. 8. Virtual Communities (cont.) Ways to transform a community site into a commerce site: Understand a particular niche industry Its information needs Use a step-by-step process by which it does the research needed to do business Build a site that provides valuable information Through partnerships with existing publishers and information providers By gathering it independently 8
  9. 9. Virtual Communities (cont.) Set up the site to mirror the steps a user goes through in the information-gathering and decision-making process Build a community that relies on the site for decision support Start selling products and services, such as sample chips to engineers, that fit into the decision-support process 9
  10. 10. Virtual Communities (cont.) The Expected Payback Customer loyalty increases Increased sales Customer participation and feedback increases Increased repeat traffic to site Drive new traffic to the site 10
  11. 11. Virtual Communities (cont.) Creating economic value Members input useful information in the form of comments, feedback, elaborating their attitudes and beliefs, and information needs of the community The community brings together consumers of specific demographic and interest Communities charge members content fees for downloading certain articles, music, or pictures 11
  12. 12. Virtual Communities (cont.) Financial viability of communities Based on sponsorship and advertisement Expenses are very high because of the need to provide: Fresh content Free services Free membership This model did not work well, many companies sustained heavy losses in 2000-2001; too few members, too few purchases 12
  13. 13. Global Electronic Commerce While geographical market boundaries may be falling, global interest-based communities will spring up Mainly in support of business-to-business financial and other repetitive, standard transactions, e.g. EFT & EDI The emergence of the Internet and the extranets resulted in an inexpensive and flexible infrastructure that can greatly facilitate global trade 13
  14. 14. Barriers to Global Electronic Commerce Legal Issues Uncoordinated actions must be avoided and an international policy of cooperation should be encouraged Market Access Issues Companies starting e-commerce need to evaluate bandwidth needs by analyzing the data required, time constraints, access demands, and user technology limitations 14
  15. 15. Barriers to Global Electronic Commerce (cont.) Financial Issues Customs and taxation Electronic payment systems Other Issues Identification of buyers and sellers Trust Security (for example, viruses) 15
  16. 16. Barriers to Global Electronic Commerce (cont.) Other Issues (cont.) Cultural diversity International agreements (multi-lateral agreements) Role of government Purchasing in local currencies Language and translation Purchasing in different currencies 16
  17. 17. The U.S. Policy Regarding Global Electronic Commerce The private sector should lead Governments should avoid undue restrictions on electronic commerce Where government involvement is needed, its aim should be to support and enforce a predictable minimalistic, consistent and simple legal environment for commerce 17
  18. 18. The U.S. Policy Regarding Global Electronic Commerce (cont.) Governments should recognize the unique qualities of the Internet Electronic commerce on the Internet should be facilitated on a global basis Global marketspace erases national borders and gives small companies worldwide reach 18
  19. 19. The Opportunities for Small Businesses Inexpensive Source of information Way of advertising Way of conducting market research Way to build (or rent) a storefront Way of providing catalogs Way to reach worldwide customers 19
  20. 20. The Opportunities for Small Businesses (cont.) Lower transaction cost Niche market, specialty products (cigars, wines, sauces) are the best place to be Image and public recognition can be accumulated fast 20
  21. 21. Risks and Disadvantages for Small Businesses Inability to use EDI, unless it is EDI/Internet Lack of resources to fully exploit the Web Lack of expertise in legal issues, advertisement Less risk tolerance than a large company 21
  22. 22. Risks and Disadvantages for Small Businesses (cont.) Disadvantage when a commodity is the product (for example, CDs) No more personal contact, which is a strong point of a small business No advantage to being in a local community 22
  23. 23. Success Factors for Small Businesses Niche products Low volume Not carried by regular retail stores Small volume E.g., special books Old technical International products Not easily available to off-line customers Information GartnerGroup provides access to online research material by subscription Smaller companies may provide specialized information (home and gardening) 23
  24. 24. Success Factors for Small Businesses (cont.) Capital investment must be small Inventory should be minimal or non-existent Electronic payments schema exist Payment methods must be flexible Logistical services must be quick and reliable 24
  25. 25. Success Factors for Small Businesses (cont.) The Web site should be submitted to directory-based search engine services like Yahoo, in a correct way Join an online service or mall and do banner exchange Design a Web site that is functional and provides all needed services to consumers 25
  26. 26. Success Factors for Small Businesses (cont.) Monitor your: Competition Technology Marketplace changes Keep growth slow and steady Delegate Develop good internal communications 26
  27. 27. Research in EC Behavioral Issues Consumer behavior Building consumers behavioral profiles and identify ways to utilize them Seller’s behavior and motivation Issue-oriented research (e.g., trust, intermediaries) Internet usage pattern and willingness to buy Mental model of consumer product search process, comparison process, and negotiation How to build trust in the e-marketspace 27
  28. 28. Research in EC (cont.) Technical Issues Methods that help customers find what they want Models for extranet design and management Natural language processing and automatic language translation Matching smart card technology with payment mechanisms 28
  29. 29. Research in EC (cont.) Technical Issues (cont.) Integrating EC with existing corporate information systems, databases, etc. Retrieval of information from an electronic industry directory Establishing standards for international trade Building a mobile Internet distribution command system 29
  30. 30. Managerial Research Issues Advertisement Measuring the effectiveness, integration and coordination Applications Creating a methodology of finding EC business applications 30
  31. 31. Managerial Research Issues (cont.) Strategy Designing strategic advantage strategy for EC Initiating “where to market” strategy Finding way to integrate EC into organizations Impacts Identify the necessary organization structure and culture Integration with ERP and SCM 31
  32. 32. The Future of Electronic Commerce Opportunities for buying Increase rapidly Internet usage Increase exponentially Access via cell phones! M-commerce No need for a computer brings more people to the web 32
  33. 33. The Future of Electronic Commerce (cont.) Purchasing incentives Increase buyers’ advantages Increased security and trust Significant improvement is expected Efficient information handing Accessible from anywhere Innovative organizations Restructured and reengineered 33
  34. 34. The Future of Electronic Commerce (cont.) Virtual Communities Spreading rapidly Payment systems Ability to use e-cash cards and make micropayments is getting close to reality Business-to-business Continues to grow rapidly 34
  35. 35. The Future of Electronic Commerce (cont.) B2B exchanges Provide infrastructure Auctions Increasing rapidly Going global Most appealing benefit of EC 35
  36. 36. The Future of Electronic Commerce (cont.) E-government--comprehensive Government-to-consumers (G2C) Government-to-government (G2G) Government-to-business (G2B) Government-to-employees (G2E) Intrabusiness EC Improving internal supply chain 36
  37. 37. The Future of Electronic Commerce (cont.) Technology trends Clients Thin client and embedded client Servers Windows NT Networks XDSL and wireless communication 37
  38. 38. The Future of Electronic Commerce (cont.) Technology Trends EC software and services Availability of all types of EC software Companies support auctions and multiple types of certifications EC knowledge The quantity and quality of EC knowledge is increasing rapidly Networked economy 38
  39. 39. Managerial Issues Finding a community that matches your business Going global Threats—difficult to accomplish, especially on large scale Opportunities—create collaborative projects with partners in other countries (last a long time) 39
  40. 40. Managerial Issues (cont.) Small can be beautiful Competing on commodities with the big guys is very difficult (especially in cyberspace) Finding niche markets is advisable More opportunities in providing support services than in trading Restructuring is likely; should be investigated The future of EC is very bright, but planning is a must 40

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