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E-Commerce
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Electronic commerce.
The exchange or buying and selling of commodities; esp. the
exchange of merchandise, on a large scale, between different
places or communities; extended trade or traffic.
Most fundamentally, e-commerce represents the realization of
digital, as opposed to paper-based, commercial transactions
between businesses, between a business and its consumers, or
between a government and its citizens or constituent business.
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From Traditional Commerce to E-
commerce
Sailing ships
Printing press
Steam engine
Telephone
Opened avenues for trade
between buyers and sellers.
Ancient times (thousands ofyears ago)
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From Traditional Commerce to E-
commerce Contd
) Electronic Funds Transfer (EFTs
Electronic Data Interchange (EDI)
Internet
Wire transfers - used by
banks.
Businesses transfer electronic
data.
- data not re-keyed.
- high implementation cost,
thus excluded smallbusinesses.
On-line shopping.
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Electronic Commerce Processes
Electronic fund transfer (EFT)
Electronic data interchange (EDI)
Internet commerce.
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The 1stWave of E-commerce
The 1st wave was from the mid 1990s to 2003.
During the dot-com boom over $100 billion was invested and a rapidgrowth of e-commerce was seen (mid-1990s 2000).
The dot-com bust occurred in 2000.
This was followed by the gloom years, 2000 2003 (however, duringthis time over $200 billion was invested in e-commerce).
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Characteristics of the 1stWave
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.
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The 2nd Wave of E-commerce
Beginning in 2003 e-commerce showed new signs of 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.
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Characteristics of the 2nd Wave International scope - sellers do business in many countries and
languages.
Faster connections , broadband at home .
Radio frequency ID devices and smart cards.
Fingerprint readers and retina scanners used for tracking .
Email is now an integral part of marketing.
Some problems however include:
Language conversions
Currency conversions
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E-commerce Categories
There are five general e-commerce categories:
Business to Consumer (or B2C) e-commerce
Business to Business (or B2B) e-commerce (sometimes
called e-procurement) Business processes that support buying and selling
activities
Consumer-to-consumer (or C2C) e-commerce
Business-to-government (or B2G) e-commerce
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B2C e-commerce
Description
Businesses sell products or services to individual customers(consumers).
Example
Walmart.com sells merchandise to consumers through its Website
Web site
www.walmart.com
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B2B e-commerce
Description
Businesses sell products or services to other businesses.
Example
Grainger.com sells industrial supplies to large and small
businesses through its Web site. Web site
www.grainger.com
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Business Processes that Support
Buy/Sell Activities Description Businesses and other organisations maintain and use
information to identify and evaluate customers,suppliers and employees . More and more of this
information is being shared.
Example Dell Computer uses secure internet connections to
share current sales and forecasts information with
suppliers who use it to plan their production. As a result they deliver the right quantities of components at
the right time
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C2C e-commerce
Description
Participants in an online marketplace can buy and sell
goods from each other.
Example Consumers and businesses trade with each other on
eBay.com
Web site
www.ebay.com
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B2G e-commerce
Description
Business sell goods or services to governments and governmentagencies.
Example
Cal-Buy portal for businesses that want to sell online to the Stateof California.
Web site
www.pd.dgs.ca.gov/calbuy/default.htm
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E-commerce Categories Example
You are a computer manufacturing companywho performs the following activities on theInternet:
Sells computers to individuals (B2C) Purchases parts (e.g. hard drives, power supplies etc.)
from a supplier (B2B)
Hires staff, manage customer accounts, advertise, etc.(Business processes)
Sells computers to the Government to be used inschools (B2G)
On eBay.com individuals buy and sell this brand ofcomputers (C2C)
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Business processes
that support buy/sell
activities
Relative Sizes of E-commerce
Categories
B2C e-commerce
B2B e-commerce
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Establishing Trading Partner
Relationship
Retailer
Distributor
Customer/
Consumer
Customer
Supplier
Intermediary
Relationships between Participants/ Trading Partners
Raw Material Producer
Manufacturer
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Economic Forces
Economics is the study of how people allocatescare resources.
Resources are allocated through:
Commerce (markets) Government actions (e.g. taxes)
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Markets
A market is a place where sellers can come intocontact with buyers and a medium of exchange(e.g. currency) is available (e.g. the stockmarket).
Some hierarchal organizations (companies)however, due to high transaction cost, choose toreplace supplier markets with its own hierarchal
structure for creating the product. This is calledvertical integration.
E.g. Thomson Financial, a financial software provider,purchased the financial data supplier Datastream ICV
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Transaction Costs
Transaction costs are the total costs that a buyer and seller
incur as they gather information and negotiate a
purchase/sale transaction
Transaction costs are the main reason for vertical integration
(Ronald Coase).
Businesses can use e-commerce to reduce transaction costs
(e.g. telecommuting rather than physical commuting to allow
global employment opportunities).
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Transaction Costs Example
Transaction costs incurred by a sweater dealer when
purchasing from independent sweater knitters:
Cost of identifying independent knitters.
Cost of site visit to negotiate purchase price, arrange delivery and
inspection of sweaters.
Costs incurred by knitters:
Knitting tools and yarn purchase
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Network Economic Structures
Many businesses operate in an economicstructure that is neither market or hierarchical.
These businesses form, long-term, strategicalliances with other companies who sharecommon goals and strategies.
These alliances may occur over the Internet which are called virtual companies.
Teams complete a project or activity then dissolve
New teams are creating as required
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Value Chains
A value chain is a way to organize the activities that a businessundertakes to design, produce, promote, market, deliver andsupport the products or services it sells.
There are several types of value chains including: Business unit value chains
Industry value chains
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StrategicBusiness UnitValue
Chains A strategic business unit is a particularcombination of product, distribution channeland customer type (large firms often break down
their business into these units).
The value chain for a strategic business unitincludes:
Primary activities (the activities that the strategicbusiness unit undertakes).
Support activities (such as human resourcemanagement and purchasing)
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ManufacturerValue Chain
Finance
& admin HRTechnology
development
Support activities
Design
Identify
customers
Manufacture
product or createservice
deliver
After sales
service & support
Market & sellPurchase materials
and supplies
Primary activities
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IndustryValue Chain Example
A value chain for a wooden chair:
Logger cuts down tree.
Sawmill converts logs to lumber.
Lumberyard provides selection of lumber.
Chair manufacture assembles chair. Furniture retailer markets and sells chair.
Consumer purchases and uses chair.
Landfill or recycler disposes of chair.
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SWOT Analysis
SWOT analysis is used to analyse and evaluate business
opportunities
SWOT is an acronym for:
Strengths
Weaknesses
Opportunities
Threats
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SWOT Analysis Contd
Questions asked during SWOT analysis:
Strengths What does the company do well?
Is the company strong in its market?
Does the company have a strong sense of purpose andthe culture to support it?
Weaknesses: What does the company do poorly?
What problems could be avoided? Does the company have serious financial liabilities?
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SWOT Analysis Contd
Opportunities: Are industry trends moving upwards?
Do new markets exist for the companys products/services?
Are there new technologies that the company can exploit?
Threats: What are the competitors doing well?
What obstacles does the company face?
Are there troubling changes in the companys businessenvironment (technologies, law and regulations)?
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International Issues
Trust issues
Language issues
Culture issues
Infrastructure issues
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TrustIssues
Anyone can create a website
These individuals or businesses can easily remainanonymous.
Without an established brand, consumers find itdifficult to trusts on-line businesses:
especially with personal information and credit cardnumbers.
The key is to develop methods which wouldallow legitimate businesses to establish trustrelationships quickly with consumers .
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Language Issues
Global impact requires local language Web sites customers prefer to buy from sites in native language.
60% of web content today is in English; but morethan 50% of the current users do not readEnglish.
Multiple translations may be required fordifferent dialects, e.g. Spanish- Mexico andSpain.
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Culture Issues
Culture is the combination of language and customs.
Culture varies across national boundaries and in many cases
regions within nations.
Example:
General Motors Chevrolet Nova automobile amused people in
Latin America since no va means it will not go.
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Culture Issues Contd
In France any advertisement for a product or service must in inFrench by law.
This means that French companies must provide websites in atleast two languages if they want to sell goods outside of France.
In some cases unrestricted access to the Internet is not
permitted, for example in the Middle East and North Africa.
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Infrastructure Issues
Limited telecommunication infrastructure may lead tounreliable Internet access.
Internet connection cost might be high.
Reduces time businesses might spend surfing for new suppliers orproducts.
Flat-rate access to the Internet is required.
These are major issue in developing countries, including
Barbados
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What are the Advantages of E-
commerce? Increases sales, decreases cost
Allows small businesses to have global customer base
Reduced cost through electronic sales enquires, pricequotes and order taking.
Provides purchasing opportunities for buyers(businesses can identify new suppliers andpartners).
Increases the speed and accuracy of exchangedinformation, thus reduces cost
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Advantages of E-commerce Contd
Business can be transacted 24 hours a day.
The level of detail of purchase information is selected by user.
Digital products can be delivered instantly.
Tax refunds, public retirement and welfare support costs less
when distributed over the Internet. Allows products and services to be available in remote areas,
e.g. remote learning.
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What are the Disadvantages of E-
commerce? Inability to sell certain products (e.g. high cost jewelry
and perishable foods; although supermarkets such aswww.Tesco.com deliver perishable food items to yourhome).
The newness and evolution of the current technology.
Many products require large sales volumes in order to beviable.
This is a challenge for small island economies; in the Caribbeanthe CARICOM Single Market and Economy (CSME) might provideopportunities since it comprises some 14 million people (if Haitiis included only 6 million if it is not)
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Disadvantages of E-commerce
Contd A large capital investment is required to startup and run e-
commerce initiative.
Difficulty in integrating current databases and transaction processingsystems (legacy systems) into e-commerce solutions.
Cultural and legal obstacles. Transmission of credit card information.
Some consumers resistance to change.
E-commerce legislation is not well developed and is often unclear.
Shipping profile
Products with a low value-to-weight ratio that can not be efficientlypacked and shipped are unsuitable for e-commerce (use traditionalcommerce).
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RAHUL PILLAI