Unit - 1 Chapter-1.pptx Introduction Ecommerce
- 1. Chapter 1 Introduction to Electronic Commerce
- 2. 1. Introduction • COMMERCE: • Commerce is a division of trade or production which deals with the exchange of goods and services from producer to final consumer. • It comprises the trading of something of economic value such as goods, services, information, or money between two or more entities.
- 3. • E-commerce: • E-commerce, which is short for electronic- commerce • Commonly known as Electronic Marketing • “It consist of buying and selling goods and services over an electronic systems Such as the internet and other computer networks.” • “E-commerce is the purchasing, selling and exchanging goods and services over computer networks (internet) through which transaction or terms of sale are performed Electronically.
- 4. • E-commerce, which is short for electronic- commerce, is associated with the buying and selling of information, products and services via computer network today. It is a modern business methodology that addresses the desire of a firm, consumer and management to cut cost while improving the quality of goods and increasing the speed of services. • When buyer-seller transactions occur in the electronic marketplace, information is accessed, absorbed, arranged and sold in different ways. The information of a product or service is as important as the physical product or service itself in terms of its effect on a company’s profits. Thus, information based business transactions are creating new ways of doing business, and even new types of business.
- 5. • Ecommerce refers to the paperless exchange of business information using the following ways − • Electronic Data Interchange (EDI) • Electronic Mail (e-mail) • Electronic Bulletin Boards • Electronic Fund Transfer (EFT) • Other Network-based technologies
- 7. • In the late 1990s, electronic commerce was still emerging as a new way to do business; at that time, most companies were doing very little buying or selling online. • They still were selling products in physical stores or taking orders over the telephone and by mail. • However, a few companies had established solid footholds online. Amazon.com was a rapidly growing bookseller and eBay had taken the lead as a profitable auction site.
- 8. • Features: • E-Commerce provides the following features − • Non-Cash Payment • 24x7 Service availability • Advertising / Marketing • Improved Sales • Support • Inventory Management • Communication improvement
- 10. 2. Electronic Commerce: ❑ Electronic Commerce and Electronic Business: • Some people use the terms "e-business" and "e-commerce" interchangeably, but they aren't synonymous. • To put it simply, e-commerce refers to buying and selling online, while e- business encompasses all business conducted online. E-commerce can be viewed as a subset of e-business. • For example, IBM defines electronic business as “the transformation of key business processes through the use of Internet technologies.”
- 11. • E-Commerce : • E-Commerce refers to the performing online commercial activities, transactions over internet. It includes activities like buying and selling product, making monetary transactions etc over internet. • Internet is used for E-commerce. Websites and applications (apps) are required for e-commerce. it is mainly connected with the end process of flow means connected with the end customer. • Examples of E-Commerce are online retailers like amazon, flipkart, Myntra, paytm mall, seller of digital goods like ebooks, online service etc.
- 12. • Activities of E-Commerce are : • Buying and selling product online • Online ticketing • Online Payment • Paying different taxes • Online accounting software • Online customer support
- 13. • E-Business : • E-Business refers to performing all type of business activities through internet. It includes activities like procurement of raw materials/goods, customer education, supply activities buying and selling product, making monetary transactions etc over internet. • Internet, intranet, extranet are used in e-business. Websites, apps, ERP, CRM etc are required for e-business. • Examples of E-Business are e-commerce companies and its various internal business activities, auction site, classified site, software and hardware developer site etc.
- 15. • Activities of E-Business are : • Online store setup • Customer education • Monetary business transaction • Supply Chain Management • E-mail marketing
- 16. ❑ Categories of E – Commerce / Business model: • E-commerce business models can generally be categorized into the following categories: • Business - to - Business (B2B) • Business - to - Consumer (B2C) • Consumer - to - Consumer (C2C) • Consumer - to - Business (C2B) • Business - to - Government (B2G) • Government - to - Business (G2B)
- 17. • Business-to-Business (B2B): • Business-to-Business (B2B) e-commerce encompasses all electronic transactions of goods or services conducted between companies. • Producers and traditional commerce wholesalers typically operate with this type of electronic commerce. • About 80% of e-commerce is of this type. • Examples: • Intel selling microprocessor to Dell, Heinz selling ketchup to Mc Donalds, TradeIndia.com, India-Mart.com, etc.
- 18. As an example, a wholesaler places an order from a company's website and after receiving the consignment, sells the end product to the final customer who comes to buy the product at one of its retail outlets.
- 20. • Business-to-Consumer (B2C): • The Business-to-Consumer type of e- commerce is distinguished by the establishment of electronic business relationships between businesses and final consumers. • Business-to-consumer e-commerce, or commerce between companies and consumers, involves customers gathering information; purchasing physical goods or receiving products over an electronic network. • Example: • Dell selling me a laptop, www.flipkart.com, www.myntra.com, etc.
- 22. • Consumer-to-Consumer (C2C): • Consumer-to-consumer e-commerce or C2C is simply commerce between private individuals or consumers. • A website following the C2C business model helps consumers to sell their assets like residential property, cars, motorcycles, etc., or rent a room by publishing their information on the website. • Website may or may not charge the consumer for its services. Another consumer may opt to buy the product of the first customer by viewing the post/advertisement on the website.
- 23. Example: • eBay.com, olx.com, etc.
- 24. • Consumer - to - Business (C2B): • In this model, a consumer approaches a website showing multiple business organizations for a particular service. • In C2B there is a complete reversal of the traditional sense of exchanging goods. This type of e-commerce is very common in crowdsourcing based projects. • The consumer places an estimate of amount he/she wants to spend for a particular service. • Example: • Bloggers, Freelancers, etc.
- 26. • Business - to - Government (B2G): • Business-to-government e-commerce or B2G is generally defined as commerce between companies and the public sector. • It refers to the use of the Internet for public procurement, licensing procedures, and other government- related operations. • Example: • Business pay taxes, file reports, sell goods and services to Govt. agencies.
- 28. • Government - to - Business (G2B): • Governments use B2G model websites to approach business organizations. Such websites support auctions, tenders, and application submission functionalities. • Ex: The govt. plans to build a fly over. For this, the government requests for tenders from various contractors online. • Example: The govt. selling research services through Universities and Institutes of Technology to SMEs (Small and Medium sized Enterprises).
- 30. ❑ Development and growth of e-commerce: • Trading partners • Businesses that engage in EDI with each other • Value-added network (VAN) • Independent firm that offers connection and transaction-forwarding services to buyers and sellers engaged in EDI
- 33. • The 1st Wave of E-commerce: 1995–2003 • The 1st wave was from the mid 1990s to 2003 • Dot-com boom (over $100 billion in investment): Rapid growth from mid- 1990s to 2000 • Dot-com bust: in 2000 • Gloom years: 2000 –2003 (over $200 billion in investment)
- 34. • Characteristics of the 1st Wave: • It was primarily a U.S. phenomenon • Web pages were in English • Internet technologies were slow and inexpensive (e.g. dial-up lines) • Bar codes and scanners used to track parts (B2B and Business processes) • Email, tool for unstructured communication • On-line advertising main revenue source
- 35. • The 2nd Wave of E-commerce: 2004–2009 • Beginning in 2003 e-commerce has shown signs of new life • Companies like Amazon.com (books), and eBay.com (auctions) who survived the downturn were beginning to show profits • Continuous growth of B2C sales: 20-30% each year since 2000
- 36. • Characteristics of the 2nd Wave: • International scope where sellers do business in many countries and languages • Faster, cheaper connections (x20 faster), broadband at home (although more expensive) • Radio frequency ID devices and smart cards • Fingerprint readers and retina scanners (biometric technologies) used for tracking • Email, integral part of marketing
- 37. • The 3rd Wave of E-commerce: 2010–Present • In 2010, a number of factors came together to start a third wave in the development of electronic commerce. Some of these factors include: • A critical mass of mobile users with powerful devices (smartphones and tablets) that, for the first time, allowed them to interact online with businesses along with proliferation of high-speed mobile phone networks throughout the world that provide useful connections among users and companies • Widespread participation in social networking platforms combined with businesses’ increased willingness to use them for advertising, promotion, and sales
- 38. • Increased online participation by smaller businesses in sales, purchasing, and capital-raising activities • Highly sophisticated analysis of the large amounts of data that companies collect about their online customers • Increased integration of tracking technologies into B2B electronic commerce and the management of business processes within companies
- 39. 3. Business model, Revenue model and Business process - Merchandising: • Business model: • Set of processes combined to achieve company goal • In the first wave of electronic commerce, investors sought Internet- driven business models • Expectations of rapid sales growth, market dominance • Successful “dot-com” business models emulated • Led to many business failures • Michael Porter argued business models did not exist
- 40. • Instead of copying model, companies should examine their business elements • Streamline, enhance, or replace with Internet technology driven processes • Revenue model • Specific collection of business processes used to identify, market and make sales to customers • Classifies revenue-generating activities for communication and analysis purposes
- 41. • Examples of business processes: • Purchasing raw materials or goods for resale • Converting materials and labor into finished goods • Managing transportation and logistics • Hiring and training employees • Managing business finances • Identify processes that benefit from ecommerce technologies: • Not all processes can be improved with technology • Firms can use it to help them adapt to change
- 42. • Role of Merchandising: • Combination of store design, layout, and product display knowledge • Salespeople have skills to identify customer needs and meet them • Merchandising and personal selling skills can be difficult to practice remotely • Companies must be able to transfer these skills to have Web site success • Some products are easier to sell on the Internet than others
- 43. ❑ Advantages and Disadvantages of E-Commerce: • Advantages of E-Commerce: • Faster buying/selling procedure, as well as easy to find products. • Buying/selling 24/7. • More reach to customers, there is no geographic limitations. • Low operational costs and better quality of services. • No need of physical company set-ups.
- 44. • Easy to start and manage a business. • Customers can easily select products from different providers. • Lots of Choices • Easier to Compare Prices • No Need to Handle Currency Notes • Eliminate Travel Time and Cost • E-commerce helps organization to provide better customer services
- 45. • Disadvantages of E-Commerce: • Unable to examine products personally • Not everyone is connected to the Internet • There is the possibility of credit card number theft :Security • Lack of Personal Touch › Delay in Receiving Goods
- 46. 4. ECONOMIC FORCES AND ELECTRONIC COMMERCE: • Economics is the study of how people allocate scarce resources. One important way that people allocate resources is through commerce. • One way people do this is to participate in markets. • Economists use a formal definition of market that includes two conditions: • first, that the potential sellers of a good come into contact with potential buyers, and • second, that a medium of exchange is available.
- 47. • Most economists agree that markets are strong and effective mechanisms for allocating scarce resources. • Thus, one would expect most business transactions to occur within markets. • However, much business activity today occurs within large hierarchical business organizations, which economists generally refer to as firms, or companies. • Transaction costs were the main motivation for moving economic activity from markets to hierarchically structured firms.
- 48. • Transaction Costs: • Transaction costs are the total of all costs that a buyer and seller incur as they gather information and negotiate a purchase-and-sale transaction. • Costs include: • Brokerage fees and sales commissions • Cost of information search and acquisition • Sweater dealer example: • To understand better how transaction costs occur in markets, consider the following example:
- 50. • Markets and Hierarchies: • Coase’s analysis of high transaction costs: • Hierarchical organizations replace market-negotiated transactions • Supervision and worker-monitoring elements • Vertical integration sweater example:
- 52. • Oliver Williamson (extended Coase’s analysis): • Complex manufacturing, assembly operations • Hierarchically organized, vertically integrated • Manufacturing innovations increased monitoring activities’ efficiency and effectiveness
- 53. 5. Identifying Electronic Commerce Opportunities: • Focus on specific business processes: • Break business down • Series of value-adding activities that combine to meet firm’s goals • Business activities conducted by firms of all sizes • Firm • Multiple business units owned by a common set of shareholders • Industry • Multiple firms selling similar products to similar customers
- 54. • Strategic Business Unit Value Chains: • Value chain: • Organizing strategic business unit activities to design, produce, promote, market, deliver, and support the products or services • Michael Porter includes supporting activities such as human resource management and purchasing • Strategic business unit primary activities: • Design, identify customers, purchase materials and supplies, manufacture product or create service, market and sell, deliver, provide after-sale service and support
- 55. • Importance of primary activities depends on: • Product or service • Customers • Central corporate organization support activities • Finance and administration • Human resource • Technology development
- 57. • Industry Value Chains: • Examine where strategic business unit fits within industry • Porter’s value system • Describes larger activities stream into which particular business unit’s value chain is embedded • Industry value chain refers to value systems • Awareness of businesses value chain activities • Allows identification of new opportunities • Useful way to think about general business strategy
- 59. 6. International Nature of Electronic Commerce: • Internet connects computers worldwide • When companies use Web to improve business process they automatically operate in global environment • Third wave • Rapidly increasing proportion outside US • China, India, and Brazil have seen enormous recent growth • Key issues in international commerce include trust, culture, language, government and infrastructure
- 61. • Trust Issues on the Web: • Important for all businesses to establish trusting relationships with customers • Companies can rely on established brand names • Challenging for new companies because anonymity exists when trying to establish a Web presence • Plan for establishing credibility is essential • Sellers cannot assume site visitors will know they are trustworthy • Business must overcome distrust in Web “strangers”
- 62. • Language Issues: • Business must adapt to local cultures • “Think globally, act locally” • Provide local language versions of Web site as customers are more likely to buy from sites in own language • Websites available in English only have declined dramatically to about 25% of total sites • Languages may require multiple translations for separate dialects • Localization means a translation considers multiple elements of the local environment
- 63. • Cultural Issues: • Important element of business trust is anticipating how the other party to a transaction will act in specific circumstances • Culture is the combination of language and customs • Varies across national boundaries, regions within nations • Care must be taken in choosing packaging, product names, icons used to represent common actions and even colors • Japanese shoppers resisted US sites for years because of their resistance to use of credit cards
- 64. • Culture and Government: • Some areas have cultural environments inhospitable to online discussions that occur on the Internet • May lead to government controls that limit electronic commerce development • Many countries filter available Web content and some have denounced the Internet • Countries such as the People’s Republic of China and Singapore traditionally control access to information but want to reap the benefits of electronic commerce • Result has been many regulations and requirements
- 65. • Infrastructure Issues: • Computers and software connected to Internet and the related communications networks • Outside the U.S. the telecommunications industry is either government owned or regulated • Inhibits development or limits expansion • High local telephone connection costs affect online behavior • Over half of all Websites turn away international orders because of no process to handle them • Problem is increasing globally
- 66. • Freight forwarder arranges international transactions’ shipping and insurance • Customs broker arranges tariff payment and compliance with international shipping laws • Bonded warehouse is a secure location that holds international shipments until customs requirements or payments satisfied • Handling international transactions paperwork has an annual cost of $700 billion • Software automates some paperwork