Chapter 1:

Introduction to Electronic Commerce

Electronic Commerce

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• Electronic commerce (e-commerce)

– An concept describing the process of buying

and selling or exchanging of products,
services, and information via computer
networks including the Internet.

• Issues of e-commerce
– Trust issues

– Data security

– Revenue models

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 Categories of Electronic
Commerce
• Three general e-commerce categories
– Business-to-consumer (B2C)
• Consumer shopping on the Web
– Business-to-business (B2B)
• Transactions conducted between Web businesses
• Supply management (procurement) departments
• Negotiate purchase transactions with suppliers
– Consumer-to-consumer (C2C)
• Individuals buying and selling among themselves
• Web auction site

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FIGURE 1-4 Key characteristics of the first two waves of electronic commerce

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 The Third Wave Begins
• Accentuated by mobile telephone based
commerce (mobile commerce or m-
commerce)
• Smart phone technology and tablet computers
have made Internet available everywhere
• Internet technology integration
– First wave: bar codes, scanners
– Second wave: Radio Frequency Identification (RFID) devices,
smart cards, biometric technologies
– Increasing integration will lead to more effective B2B
• Web 2.0: making new Web business possible
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Alibaba.com

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 Focus on Specific Business
Processes
• Commodity item
– Hard to distinguish from the same products or services
provided by other sellers
– Features have become standardized and well known

• Shipping profile
– Collection of attributes that affect how easily a product can
be packaged and delivered

• Strong brand

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FIGURE 1-5 Business process suitability to type of commerce

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 Advantages of Electronic
Commerce
• Electronic commerce can increase sales and
decrease costs
• If advertising is done well on the Web, it can
get a firm’s promotional message out to
potential customers in every country
• Using e-commerce sales support and order-
taking processes, a business can
– Reduce costs of handling sales inquiries
– Provide price quotes

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 Advantages of Electronic
Commerce (continued)
• It increases purchasing opportunities for
buyers
• Negotiating price and delivery terms is easier
• The following cost less to issue and arrive
securely and quickly
– Electronic payments of tax refunds
– Public retirement
– Welfare support

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 Disadvantages of Electronic
Commerce
• Perishable grocery products are much harder
to sell online
• It is difficult to
– Calculate return-on-investment
– Integrate existing databases and transaction-
processing software into software that enables e-
commerce

• Cultural and legal obstacles also exist

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 SWOT Analysis: Evaluating
Business Unit Opportunities

• SWOT analysis

– An analyst first looks into the business unit to

identify its strengths and weaknesses

– The analyst then reviews the operating

environment and identifies opportunities and
threats

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SWOT Analysis Questions

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Results of Dell’s SWOT Analysis

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 International Nature of Electronic
Commerce
• Key international commerce issues
– Trust
– Culture
– Language
– Government
– Infrastructure

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 Trust Issues on the Web
• Important to establish trusting relationships
with customers
– Rely on established brand names
• Difficult for online businesses
– Anonymity exists in Web presence
– Banking example: browsing site’s pages
• Difficult to determine bank size or how well
established
• Business must overcome distrust in Web
“strangers”

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 Language Issues
• To do business effectively in other cultures
– Must adapt to those cultures

• Researchers have found that

– Customers are more likely to buy products and
services from Web sites in their own language

• Localization
– Translation that considers multiple elements of the
local environment

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 Culture Issues
• Important element of business trust
– Anticipate how the other party to a transaction will
act in specific circumstances

• Culture
– Combination of language and customs
– Varies across national boundaries
– Varies across regions within nations

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 Infrastructure Issues
• Internet infrastructure includes
– Computers and software connected to the Internet
– Communications networks over which message
packets travel
• Organization for Economic Cooperation and
Development’s (OECD) statements on
Information and Communications Policy deal
with telecommunications infrastructure
development issues

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 Infrastructure Issues (continued)

• Flat-rate access system

– Consumer or business pays one monthly fee for
unlimited telephone line usage
– Contributed to rapid rise of U.S. electronic
commerce

• Targets for technological solutions

– Paperwork and processes that accompany
international transactions

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 Parties Involved in a Typical
International Trade Transaction

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