Chapter 5

Electronic Commerce

Strategies for the New

Economy

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 Presentation Overview
 The Growth of E-Commerce
 The Advantages of Business To
Consumer E-Commerce
 Keys To Success in Business To
Consumer E-Commerce
 Business To Business E-Commerce
 The Role of E-Government
 E-Commerce Payment Systems

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 Opening Case Study
Sodas and Snack Food on the Web
 Soda and snack foods are one of the last
things we would consider buying online
because they are available on nearly
every street corner.

 How can products that are easily available

take advantage of generating sales on the
Internet?

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 The Growth of E-Commerce

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 The Growth of E-Commerce
 E-commerce – is commerce, but it is
commerce accelerated and enhanced by
IT, in particular the Internet.

 Demand aggregation – combines

purchase requests from multiple buyers
into a single large order, which justifies a
discount from the business.

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 The Growth of E-Commerce
Global E-commerce Growth Projections

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 The Growth of E-Commerce
The Digital Divide
 Digital divide - expresses the fact that different
peoples, cultures, and areas of the world or
within a nation do not have the same access to
information and telecommunications
technologies.

 Global digital divide - specifically describes the

differences in IT access and capabilities
between different countries or regions of the
world.
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 The Advantages of Business
To Consumer E-Commerce
 The Internet’s most prominent advantages are:
1. Shopping can be faster and more convenient.
2. Offerings and prices can change instantaneously.
3. Call centers can be integrated with the Web site.
4. Broadband telecommunications will enhance the
buying experience.

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The Advantages of Business To
Consumer E-Commerce
Shopping Can Be Faster and More
Convenient
 E-tailer - an Internet retail site.

 Pure plays - Internet retailers such as

Amazon.com that have no physical stores.

 Clicks–and-mortar retailers, (also called

“bricks–and-clicks”), are like Nordstrom,
which has both an Internet presence and
one or more physical stores.
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 The Advantages of Business To
Consumer E-Commerce
Shopping Can Be Faster and More Convenient

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 The Advantages of Business To
Consumer E-Commerce
Shopping Can Be Faster and More Convenient

 M-commerce - describes e-commerce

conducted over a wireless device such as
a cell phone or personal digital assistant
(PDA).

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 The Advantages of Business
To Consumer E-Commerce
Offerings and Prices Can Change
Instantaneously
 E-tailers can change On Your Own
product offerings and
prices instantaneously
in response to
changes in customer
B2C Services
demand. (p. 250)

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 The Advantages of Business
To Consumer E-Commerce
Call Centers Can Be Integrated With the
Web Site
 Interactive chat - lets you engage in real-time
typed exchange of information between you and
one or more other individuals over the Internet.

 Internet telephony - a combination of hardware

and software that uses the Internet as the
medium for transmission of telephone calls in
place of traditional telephone networks.

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 The Advantages of Business
To Consumer E-Commerce
Broadband Telecommunications Will
Enhance The Buying Experience
 Purchase a full-length feature film and download it in
minutes.

 Travel sites will offer full-motion video tours of vacation

destinations.

 Automobile buying sites will be able to offer virtual test

drives to let you narrow down your choices before you
take the time to visit an auto dealership.

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 The Advantages of Business
To Consumer E-Commerce
Broadband Telecommunications Will
Enhance The Buying Experience
Team Work

Broadband Services:
Where Do You Place Your Bets?
(p. 251)
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Keys To Success In Business
To Consumer E-Commerce
 Important lessons include:
 Commoditylike items work best.
 Digital products are the best of all.
 Attracting and retaining customers.
 Remember the importance of
merchandising.
 You must execute well.
 Watch the competition.
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Keys To Success In Business
To Consumer E-Commerce
Commoditylike Items Work Best
 People tend to be more comfortable
buying items on the Internet that are
commoditylike, that is, uniform.

 People tend to be less comfortable buying

“high touch” items on the Internet such as
furniture.

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Keys To Success In Business
To Consumer E-Commerce
Digital Products Are the Best of All
 The reasons digital products are best suited for
B2C e-commerce are the following:
 They are commoditylike products.
 They can be mass-customized and personalized.
 They can be delivered at the time of purchase.
 They foster disintermediation.
 They have global reach.

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Keys To Success In Business
To Consumer E-Commerce
Digital Products Are the Best of All
 Micro-payments - techniques to facilitate
the exchange of small amounts of money
for an Internet transaction.

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Keys To Success In Business
To Consumer E-Commerce
Attracting and Retaining Customers
 Marketing mix - the set of marketing tools that the firm
uses to pursue its marketing objectives in the target
market.

 Additional techniques for attracting Internet customers

include:
1. Registering with search engines
2. Online ads
3. E-Mail and viral marketing
4. Affiliate programs
5. Selling to existing customers

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Keys To Success In Business
To Consumer E-Commerce
Attracting and Retaining Customers
1. Registering with Search Engines
 Meta tags - part of a Web site text not displayed to
users but accessible to browsers and search
engines for finding and categorizing Web sites.

2. Online Ads
 Many Web sites use banner ads, a small ad on one
Web site that advertises the products and services
of another business, usually another dot-com
business

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Keys To Success In Business
To Consumer E-Commerce
Attracting and Retaining Customers
1. E-Mail and Viral Marketing
 Spam - unsolicited e-mail.

 Viral marketing – encourages users

of a product or service supplied by a

B2C company to ask friends to join in
as well.

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Keys To Success In Business
To Consumer E-Commerce
Attracting and Retaining Customers
1. Affiliate Programs
 Affiliate programs - arrangements made
between e-commerce sites that direct users
from one site to the other.
 Click-throughs - a count of the number of
people who visit one site, click on an ad, and
are taken to the site of the advertiser.

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Keys To Success In Business
To Consumer E-Commerce
Attracting and Retaining Customers
1. Selling to Existing Customers
 One of the keys to success in the B2C
space is to encourage customers to
continue to buy from you.
 Conversion rate - the percentage of
customers who visit the site who actually
buy something.

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Keys To Success In Business
To Consumer E-Commerce
Remember the Importance of
Merchandising

 A B2C business must do an effective job

of merchandising.

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Keys To Success In Business
To Consumer E-Commerce
You Must Execute Well
 Executing well simply means that when a
customer places an order on your Web site, you
have to follow through and execute the
necessary business processes to get the right
item to the customer in a timely fashion.

 A good B2C site immediately sends an e-mail

acknowledgement of the order, containing all of
the order details and an estimated ship date.
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Keys To Success In Business
To Consumer E-Commerce
Watch the Competition
 Retaining customers is one of the keys to
e-commerce success.

 Spend time on the Web surfing around

seeing what’s going on in your competitive
space by looking at the Web sites of
known competitors.

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Keys To Success In Business
To Consumer E-Commerce
Watch the Competition
Team Work

Evaluating Competing
Web Sites
(p. 258)

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 Business to Business
E-Commerce
Value Networks
 Intermediaries - specialist companies that
provide services better than their client
companies can themselves.

 Complementors - provide products and

services that complement the offerings of
the enterprise and thereby extend its value-
adding capabilities to its customers.
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 Business to Business
E-Commerce
Value Networks
 Value network - all of the
resources behind the
click on a Web page that
the customer doesn’t see,
but that together create
the customer relationship
– service, order
fulfillment, shipping,
financing, information
brokering, and access to
other products and offers.

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 Business to Business
E-Commerce
Corporate Purchasing Segments
 Purchasing applications are usually
divided into three segments:
1. Purchasing of direct materials
2. Purchasing of indirect materials (MRO)
3. Purchasing of services

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 Business to Business
E-Commerce
Corporate Purchasing Segments
 Direct materials - materials that are used in
production in a manufacturing company or are
placed on the shelf for sale in a retail
environment.

 Indirect materials - materials that are

necessary for running a modern corporation, but
do not relate to the company’s primary business
activities.
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 Business to Business
E-Commerce
Corporate Purchasing Segments
 Electronic data
interchange (EDI) - the
direct computer-to-
computer transfer of
transaction information
contained in standard
business documents
such as invoices and
purchase orders, in a
standard format.

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 Business to Business
E-Commerce
Corporate Purchasing Segments
 Virtual private
network - uses
software to establish
a secure channel on
the Internet for
transmitting data.

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 Business to Business
E-Commerce
Corporate Purchasing Segments
 XML (eXtensible Markup Language) - a
coding language for the Web that lets
computers interpret the meaning of
information in Web documents.

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 Business to Business
E-Commerce
Corporate Purchasing Segments
 ebXML - a set of technical specifications for
business documents built around XML designed
to permit enterprises of any size and in any
geographical location to conduct business over
the Internet.

 Web Services - software applications that talk to

other software applications over the Internet
using XML as a key enabling technology.

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 Business to Business
E-Commerce
Corporate Purchasing Segments
On Your Own

A Range of Possibilities
For Next-Generation EDI
(p. 265)

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 Business to Business
E-Commerce
B2B Marketplaces
 B2B marketplaces - Internet-based services
that bring together buyers and sellers.

 Reverse auction - the process in which a buyer

posts its interest in buying a certain quantity of
items, and sellers compete for the business by
submitting successively lower bids until there is
only one seller left.

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 Business to Business
E-Commerce
Intranets and Extranets
 Intranet - an internal organizational
Internet that is guarded against outside
access by a special security feature called
a firewall (which can be software,
hardware, or a combination of the two).

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 Business to Business
E-Commerce
Intranets and Extranets

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 Business to Business
E-Commerce
Intranets and Extranets

 Extranet - an intranet that is restricted to

an organization and certain outsiders,
such as customers and suppliers.

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 Business to Business
E-Commerce
Intranets and Extranets

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 Business to Business
E-Commerce
Intranets and Extranets

 Customer relationship management

(CRM) systems - use information about
customers to gain insights into their
needs, wants, and behaviors in order to
serve them better.

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 The Role Of E-Government
 E-Government - describes the application
of e-commerce technologies in
governmental agencies.

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E-Commerce Payment Systems
 Financial EDI (FEDI) - the use of EDI for
payments.

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E-Commerce Payment Systems

Credit Cards and Smart Cards

 Smart cards - plastic cards the size of a

credit card that contain an embedded chip
on which digital information can be stored.

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E-Commerce Payment Systems
Financial Cybermediaries

 Financial cybermediaries - Internet-

based companies that make it easy for
one person to pay another person over the
Internet.

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E-Commerce Payment Systems
Electronic Bill Presentment and Payment

 Electronic Bill Presentment and

Payment (EBPP) systems - send us our
bills over the Internet and give us an easy
way to pay them if the amount looks
correct.

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 Closing Case Study One
eBags: An E-Commerce Success Story
 While many pure play e-commerce sites
have fallen by the wayside, eBags is not
only surviving, it is thriving.

 How has eBags gained a competitive

advantage over traditional bricks-and-
mortar retailers of bags and accessories?

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 Closing Case Study Two
Making Toyota’s Vision a Reality
 Toyota Motor Corporation has plans to
build an IT system that will fabricate
digitally designed cars and build them in
digitally designed factories.

 What advantages will Toyota gain by

implementing this system?

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 Summary
Student Learning Outcomes
1. Describe the four main perspectives of e-
commerce, its current status, and the
global growth expected in the next few
years.
2. Identify the advantages of business to
consumer (B2C) e-commerce.
3. Describe the techniques that lead to
success in B2C e-commerce ventures.

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 Summary
Student Learning Outcomes

1. Describe the variety of ways that business to

business (B2B) e-commerce technologies are
being used, and describe next generation
models which may widen the adoption of
global B2B e-commerce.
2. Identify the unique aspects of e-government
applications.
3. Describe the status and options for e-
commerce payment systems.
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 Summary
Assignments & Exercises

1. Developing m-commerce scenarios for

GPS cell phones
2. Dealing with the global digital divide
3. Alternatives for personalized digital
music

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 Visit the Web to Learn More
www.mhhe.com/haag
 Competitive intelligence
 Storefront software
 Hosting services
 Marketing the site
 B2B marketplaces

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