E-commerce

1. E-commerce Name : Dr. Nasim Z. Hosein E-Mail : nhosein@northern.edu Phone number : 605-626-7724

2. Agenda • Marketing • Commerce • History of Internet • Computer, Networks • Intro to E-commerce • History of E-commerce • WWW • What is E-commerce • Forces shaping E-commerce • E-commerce today • Categories of E-commerce • What is a web based business • E-commerce marketing strategies • Setting up for E-marketing (online) • Benefits of E-commerce • Strategy Formulation • Business Model

3. Definition of Marketing • Philip Kotler • Social and Managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others. • This definition rests on the following core concepts: needs, wants, demands, products, value, cost and satisfaction, exchange and transactions, relationships and networks, markets, marketers and prospects.

4. Definition (cont) • Needs – exist in biology they are not created by marketers – i.e. shelter, food, clothing, safety, belonging, esteem • Wants – Need food want hamburger, fries, coke. • Desire – Wants for specific products backed by an ability and willingness to buy them

5. Definition of Commerce • The exchange of goods and services for money • Consists of: Buyers - these are people with money who want to purchase a good or service. Sellers - these are the people who offer goods and services to buyers. Producers - these are the people who create the products and services that sellers offer to buyers.

6. Elements of Commerce • You need a Product or service to sell • You need a Place from which to sell the products • You need to figure out a way to get people to come to your place. • You need a way to accept orders. • You also need a way to accept money. • You need a way to deliver the product or service, often known as fulfillment. • Sometimes customers do not like what they buy, so you need a way to accept returns. • You need a customer service and technical support department to assist customers with products.

7. History of The Internet • Started as a US government project in 1969. • The purpose was to create a net that can function even if one center is destroyed in a military attack. - “Hub and spokes” can be useless if the hub is destroyed. - Network can continue to be functional even if some nodes are destroyed, as long as information can pass through other nodes. • Effective in 1971 with computers on both coasts of the US.

8. In the 1980´s • Personal computers or terminals were connected to a server. • The server was a mainframe, or connected to a mainframe computer. • The mainframe was connected to another mainframe of the company in another location via dedicated lines. • Only large companies could afford the expense and investment in equipment.

9. Today • Connections across countries and continents made through dedicated fast lines. • A company may have one local network (LAN) in NY, which is connected to the Internet through a Regional network. • Well established in N.A., Europe and certain Asian countries

10. Computer classifications • Mainframes: - term for very large computers - used to handle large amount of data or complex processes - main advantage is reliability • Midrange: - medium sized, less expensive and smaller - usually a server • Micro-computer: - work stations with computing capabilities - single-users systems linked to form a network

11. What is a network • Series of points or nodes interconnected by communication paths • Node is a connection point for transmitting data • Network can interconnect with other networks to form global networks

12. Benefits of a network • Facilitates resource sharing • Provides reliability • Cost effective • Provide a powerful medium across geographical divide

13. Geographical Distance • Local area network (LAN): small area, share a single server • Metropolitan area network (MAN): a wider network, can bridge several LAN’s • Wide area network (WAN): a broader area covered, can include several MAN’s • Internet: a network of networks that covers the entire globe

14. Internet addressing system • Internet uses TCP/IP, therefore every computer on the Internet has an IP address • IP address is numerical, separated by dots • Works with DNS: - com: for commercial purposes - net: for Internet Service Providers - org: for non-profit, non-commercial groups - gov: reserved for government - mil: reserved for military - int: reserved for international organizations

15. Assimilation of Technology • Technology first adopted to increase efficiency – doing the same tasks faster e.g. word processing instead of typing • Technology next adopted to increase effectiveness – doing tasks not only faster but better e.g. spreadsheets transformed finance and accounting (as well as science and other fields)

16. Introduction to E-commerce • E-Commerce, Web, Networks, Internet • The evolution of new businesses • The adoption of Brick and Mortar companies to the new economy • Market failures and economic explanations for the new economy

17. EC applications first developed in the early 1970s - Electronic funds transfer (EFT) Limited to: - Large corporations - Financial institutions - A few other daring businesses History of E-commerce EFT

18. E-Commerce Mechanisms • Transformation of economic activity into digital media - Exchange information, content, agreements, and services among parties that are connected to through the Internet. • Enables new ways of creating, delivering and capturing value to customers. - Availability - Convenience

19. World Wide Web (WWW) • World Wide Web (Web): - A collection of documents that reside on computers, and that can be accessed by other computers on the Internet. • Multimedia documents: - Text - Images - Sounds - Drawings - Video • Hypertext: - Links to other documents - Can begin execution of a program

20. Web Browsers • Computer programs that can: - Display Web documents - Follow links - Execute other programs - Enhance applications such as real-time audio or video • Netscape and Internet Explorer • The Microsoft legal trouble due to the Explorer.

21. Web Servers • Computers that run server software. • A server waits for request to arrive from a user. - The request is typically for a document. • The server sends (serves) the document to the requesting computer. • Sometimes the server allows a user to fill in information on a document, and the then transfers the information to another program or a server.

22. WWW and Internet • The World Wide Web (WWW) is not the Internet • Access to the Internet doesn’t mean you have e-commerce • WWW works in HTTP • Web pages works in HTML • Web browser provide access to information on the WWW

23. What is E-commerce • Distributing, buying, selling and marketing products and services over electronic systems • E-business for commercial transactions • Involves supply chain management, e-marketing, online marketing, EDI • Uses electronic technology such as: - Internet - Extranet/Intranet - Protocols

24. Forces Shaping the Digital Age

25. Digitalization & Connectivity Intranets : connect people within a company. Extranets : connect a company with its suppliers, distributors, and outside partners. Internet : connects users around the world. Forces Shaping the Digital Age • Internet Explosion • Explosive worldwide growth forms the heart of the New Economy. • Increasing numbers of users each month. • Companies must adopt Internet technology or risk being left behind.

26. Definitions • Internet: • A collection of computers that speak a common language – protocol • Intranet: - Private version of the Internet - Main purpose to share company information and computing resources among employees • Extranet: - Private network that users outside the company can access - Requires security and privacy - Collaborate with other companies

27. Forces Shaping the Digital Age • New Types of Intermediaries: • Direct selling via the Internet bypassed existing intermediaries (disintermediation). • “Brick-and-mortar” firms became “click-and-mortar” companies. • As a result, some “click-only” companies have failed.

28. Forces Shaping the Digital Age • Customization and Customerization: • With customization, the company custom designs the market offering for the customer. • With customerization, the customer designs the market offering and the company makes it.

29. E-commerce as the Networked Economy • Create value largely through gathering, synthesizing and distribution of information • Formulate strategies that make management of the enterprise and technology convergent • Compete in real time rather than in “cycle time” • Operate in a world characterized by low barriers to entry, near-zero variable costs of operation and shifting competition • Organize resources around the demand side rather than supply side • Manage better relationships with customers through technology

30. E-commerce Today • The Internet is the perfect vehicle for e-commerce because of its open standards and structure. • No other methodology or technology has proven to work as well as the Internet for distributing information and bringing people together. • It’s cheap and relatively easy to use it as a medium for connecting customers, suppliers, and employees of a firm. • No other mechanism has been created that allow organizations to reach out to anyone and everyone like the Internet.

31. E-commerce Today • The Internet allows big businesses to act like small ones and small businesses to act big. • The challenge to businesses is to make transactions not just cheaper and easier for themselves but also easier and more convenient for customers and suppliers. • It’s more than just posting a nice looking Web site with lots of cute animations and expecting customers and suppliers to figure it out • Web-based solutions must be easier to use and more convenient than traditional methods if a company hopes to attract and keep customers.

32. Four Categories of E-Commerce Business originating from... Consumers Business B2B C2B Business And selling to... Consumers B2C C2C

33. Distinct Categories of E-Commerce • Business to Business (B2B) refers to the full spectrum of e-commerce that can occur between two organizations. This includes purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management &service and support. Examples: FreeMarkets, Dell and General Electric • Business to Consumer (B2C) refers to exchanges between business and consumers, activities tracked are consumer search, frequently asked questions and service and support. Examples: Amazon, Yahoo and Charles Schwab & Co

34. Distinct Categories of E-Commerce(cont’d) • Peer to Peer (C2C) exchanges involve transactions between and among consumers. These can include third party involvement, as in the case of the auction website Ebay. Examples: Owners.com, Craiglist, Monster • Consumer to Business (C2B) involves when consumers band together to present themselves as a buyer in group. Example: www.planetfeedback.com

35. Convergence of e-Commerce Categories Business originating from… Business Consumers Publishers order paper supplies from paper companies Consumers search out sellers, offers and initiate purchases from Amazon Business Amazon orders from publishers And Selling to… Consumers buy thousands of Harry Potter books from Amazon Consumers resell copies on eBay Consumers

36. What is a web-based business • Business that uses the WWW to fulfill it’s business process • Four basic business processes: - information dissemination - data capture - promotions and marketing - transacting with stakeholders • Business objectives interact with web based applications

37. Key Drivers of E-commerce • Technological – degree of advancement of telecommunications infrastructure • Political – role of government, creating legislation, funding and support • Social – IT skills, education and training of users • Economic – general wealth and commercial health of the nation

38. Key Drivers of E-business • Organizational culture- attitudes to R&D, willingness to innovate and use technology • Commercial benefits- impact on financial performance of the firm • Skilled/committed workforce- willing and able to implement and use new technology • Requirements of customers/suppliers- in terms of product and service • Competition- stay ahead of or keep up with competitors

39. Appeal of E-commerce • Lower transaction costs - if an e-commerce site is implemented well, the web can significantly lower both order-taking costs up front and customer service costs • Larger purchases per transaction - Amazon offers a feature that no normal store offers • Integration into the business cycle • People can shop in different ways. The ability to build an order over several days • The ability to configure products and see actual prices • The ability to easily build complicated custom orders • The ability to compare prices between multiple vendors easily • The ability to search large catalogs easily • Larger catalogs • Improved customer interactions - company.

40. Limitations of E-commerce • To organizations: lack of security, reliability, standards, changing technology, pressure to innovate, competition, old vs. new technology • To consumers: equipment costs, access costs, knowledge, lack of privacy for personal data, relationship replacement • To society: less human interaction, social division, reliance on technology, wasted resources, JIT manufacturing

41. Technical limitations • There is a lack of universally accepted standards for quality, security, and reliability • The telecommunications bandwidth is insufficient • Software development tools are still evolving • There are difficulties in integrating the Internet and EC software with some existing (especially legacy) applications and databases. • Special Web servers in addition to the network servers are needed (added cost). • Internet accessibility is still expensive and/or inconvenient

42. Web based technology • Websites • E-mail • Search engines • Interactive communications

43. Old Economy Firms • Brick and Mortar companies need to adopt to the new economy - Create a new Internet company. - Create a new subsidiary. - Invest in an Internet competitor. - Buy the technology from a consultant. - Work with other firms to create an exchange. - Integrate with suppliers and or customers.

44. Old Economy Firms • Failure of old economy companies to adopt may result in: - Loss of market share. - Inability to meet new economy competitors´prices. - Reduced profits and cash flows. - Inability to raise new financing. - Loss of control in an acquisition by a new economy firm.

45. Business Opportunity • The Internet revolutionized ways of doing business • Entrepreneurs found ways to exploit market failures and earn economic rents • New businesses were created that were not feasible earlier • The new economy poses threats to old economy firms that do not wish to adapt • The transformation is still in process. The evolution continues

46. Benefits and Challenges of E-commerce Benefits Challenges • Persistent connection with customers • New value for customers • Access to new customers • Scalability • Cannibalization • Channel conflict • Customer confusion • Investor confusion

47. Front end systems • Direct user interface with business processes • Accessible via WWW • Front-end systems: - e-CRM - e-marketing - e-services - e-marketplace - e-auction

48. Marketing Strategy in the Digital Age Requires a new model for marketing strategy and practice Some suggest that all buying and selling will eventually be done electronically Companies need to retain old skills and practices but add new competencies

49. E-Business in the Digital Age • Involves the use of electronic platforms to conduct company business. • Web sites for selling and customer relations • Intranets for within-company communication • Extranets connecting with major suppliers and distributors

50. E-Commerce in the Digital Age • More specific than e-business. • Involves buying and selling processes supported by electronic means, primarily the Internet. • Includes: • e-marketing • e-purchasing (e-procurement)