Electronic Commerce
E-Business, Ninth Edition
Chapter 1
The Second Wave of Global
E-Business
E-Business, Ninth Edition
Learning
Objectives
• What electronic commerce is
• Second wave of electronic commerce
• Revenue model, business processes,
business models
• Economic Forces
• Identify electronic commerce opportunities
• The international nature of electronic commerce
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Contents
Six International
nature of EC
One
Five Identifying
Two Business models
revenue modes
business processes
EC opportunities
Four Economic
forces and EC
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EC: The 2nd wave
Three Advantages and
disadvantages of EC
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Key Terms
electronic business
电子商务
electronic commerce 电子商务
business-to-business (B2B) 企业间
business-to-consumer (B2C) 企业与消费者间
business-to-government (B2G) 企业与政府间
consumer-to-consumer (C2C)
消费者间
Key Terms Cont’d
commodity item 商品
merchandise 商品
procurement
采购
e-procurement
电子采购
electronic data interchange (EDI) 电子数据交换
electronic fund transfer (EFT) 电子资金转帐
firm 企业
flat rate access
固定费率访问
localization 本地化
Key Terms Cont’d
business model
revenue model
business process
shipping profile
strategic alliance
strategic partner
strategic partnership
trading partner
商业模式
盈利模式
业务流程
运输规格
战略联盟
战略伙伴
战略伙伴关系
贸易伙伴
Key Terms Cont’d
supply management 供应管理
SWOT （Strengths, Weaknesses, Opportunities, Threats）analysis
SWOT分析
transaction 交易
transaction cost
交易成本
telecommuting
远程办公
telework
远程工作
virtual community
虚拟社区
virtual company
虚拟企业
Key Terms Cont’d
value-added network(VAN) 增值网
增值网:租用公用网的通信线路与计算机连接，进行信息的
存储、处理的通信网系统 . 例如企业外部网（Extranet）
1.1
Electronic Commerce:
The Second Wave
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1.1 Electronic Commerce: The Second Wave
1.1 Electronic Commerce: The second wave
1.1.1 Electronic Commerce and Electronic Business
1.1.2 Categories of Electronic Commerce
1.1.3 The Development and Growth of Electronic Commerce
1.1.4 The Dot-Com Boom, Bust, and Rebirth
1.1.5 The Second Wave of Electronic Commerce
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1.1 Electronic Commerce: The Second Wave
1.1 Electronic Commerce: The second wave
• Electronic commerce history
–
–
–
–
Mid-1990s to 2000: rapid growth
“Dot-com boom” followed by “dot-com bust”
2000 to 2003: overly gloomy news reports
2003: signs of new life
• Sales and profit growth return
• Electronic commerce growing at a rapid pace
• Electronic commerce becomes part of general economy
– 2008 general recession
• Electronic commerce hurt less than most of economy
– Second wave underway
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1.1 Electronic Commerce: The Second Wave
1.1.1 Electronic commerce and Electronic Business
• Electronic commerce (e-commerce, EC)
– Shopping on the Web
– Includes many other activities
– Such as businesses trading with other businesses and
internal company processes
– Broader term: electronic business (e-business)
– The transformation of key business processes through the
use of internet technologies (IBM)(使用互联网技术进行
的关键业务流程转型)
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– “electronic commerce” and “electronic business ”
interchangeably
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1.1 Electronic Commerce: The Second Wave
1.1.1 Electronic commerce and Electronic Business
• Electronic commerce includes:
– All business activities using Internet technologies
• Internet and World Wide Web (Web)
• Other technologies, such as wireless transmissions on
mobile telephone networks
• Dot-com (pure dot-com)
– Companies operating only online
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1.1 Electronic Commerce: The Second Wave
1.1.2 Categories of Electronic Commerce
– E-commerce categories
• Five general e-commerce categories (by types of entities
participating in the transactions or business process)
– Business-to-consumer (B2C)
– Business-to-business (B2B)
most commonly used
– Business processes
– Consumer-to-consumer (C2C)
– Business-to-government (B2G)
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1.1 Electronic Commerce: The Second Wave
1.1.2 Categories of Electronic Commerce（P7）
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1.1 Electronic Commerce: The Second Wave
1.1.2 Categories of Electronic Commerce
• Related terms
– Supply management/procurement
• Entire departments devoted to negotiating purchase
transactions with their suppliers.
• B2B electronic commerce is sometimes called
e-procurement
– Activity 业务活动
• A task performed by a worker in the course of doing
his or her job
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1.1.2 Categories of Electronic Commerce
1.1 Electronic Commerce: The Second Wave
• Related terms
– Transaction 交易
• An exchange of value
• such as a purchase, a sale, or the conversion of raw
materials into a finished product
• All transactions involve at least one activity , some
transactions involve many activities.
– Business processes 业务流程
• The group of logical, related, and sequential activities and
transactions in which businesses engage
– Telecommuting or telework 远程办公
• Employees log in to company computers through the
Internet instead of traveling to the office
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1.1 Electronic Commerce: The Second Wave
1.1.2 Categories of Electronic Commerce
FIGURE 1-1 Elements of
electronic commerce
– Relative sizes of elements
• Rough approximation
– Dollar volume and number of transactions
• B2B much greater than B2C
– Number of transactions
• Supporting business processes greater than B2C
and B2B combined
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1.1 Electronic Commerce: The Second Wave
1.1.2 Categories of Electronic Commerce
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1.1 Electronic Commerce: The Second Wave
1.1.2 Categories of Electronic Commerce
• Classification of EC by transactions or interactions
(from Turban)
•
•
•
•
•
•
•
•
•
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Business-to-consumer (B2C)
Business-to-business (B2B)
Consumer-to-business (C2B)
Consumer-to-consumer (C2C)
Mobile commerce (m-commerce)
Intrabusiness EC
Business-to-employees (B2E)
E-learning
E-government
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Case
1.1 Electronic Commerce: The Second Wave
• Consider a company that manufactures stereo speakers
 The company might sell its finished product to consumers on
the Web
 It might also purchase the materials it uses to make the
speakers from other companies on the Web
 The company must also undertake many other activities to
convert the purchased materials into speakers. These activities
might include:
• hiring and managing the people who make the speakers,
• renting or buying the facilities in which the speakers are made and
stored,
• shipping the speakers,
• maintaining accounting records,
• purchasing insurance,
• developing advertising campaigns,
• designing new versions of the speakers.
 An increasing number of these transactions and business
processes can be done on the Web.
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1.1 Electronic Commerce: The Second Wave
1.1.3 The Development and Growth of Electronic
Commerce
– The Internet has changed the way people buy, sell, hire and
organize business activities in more ways and more rapidly than
any other technology in the history of business.
– In a broader sense, EC has existed for many years.
– Electronic funds transfers (EFTs)电子资金转帐: using by banks
• Also called wire transfers（电信传输）
• Electronic transmissions of account exchange information
over private communications networks
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1.1 Electronic Commerce: The Second Wave
1.1.3 The Development and Growth of Electronic
Commerce
• Electronic data interchange (EDI) 电子数据交换
– Transmitting computer-readable data in a standard format to
another business
– By creating a set of standard formats for transmitting that
information electronically, businesses were able to reduce
errors, avoid printing and mailing costs, and eliminate the need
to reenter the data.
– The standard formats used in EDI contain the same information
that business have always included in their standard paper
invoices, purchase orders, and shipping documents.
– initiator:
• GE and Wal-Mart
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1.1 Electronic Commerce: The Second Wave
1.1.3 The Development and Growth of Electronic
Commerce
– Trading partners 贸易伙伴
• Businesses that engage in EDI with each other
– One serious problem that potential adopters of EDI faced was
the high cost of implementation.
• To use EDI: buying expensive computer hardware and
software; establishing direct network connections to all
trading partners or subscribing to a VAN.
– Value-added network (VAN) 增值网
• Independent firm that offers connection and transactionforwarding services to buyers and sellers engaged in EDI
– Gradually moved EDI traffic to the Internet
• Reduced EDI cost
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1.1 Electronic Commerce: The Second Wave
1.1.4 The Dot-Com Boom, Bust, and Rebirth（P9）
• Dot-Com Boom 繁荣
• Between 1997 and 2000:internet-related businesses were
started with more than $100 billion of investors’ money
• Dot-Com Bust 破产
• More than 5000 of these companies went out of business
or were acquired in the downturn that began in 2000
• Dot-Com Rebirth重生
• Between 2000 and 2003:more than $200 billion was
invested in purchasing electronic commerce businesses
that were in trouble and starting new online ventures
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1.1 Electronic Commerce: The Second Wave
1.1.4 The Dot-Com Boom, Bust, and Rebirth
• Between 2000 and 2003:more than $200 billion was invested
in purchasing electronic commerce businesses that were in
trouble and starting new online ventures.
– This second wave of financial investment has not been reported
extensively in either the general or business media, but it is
fueling a rebirth of growth in online business activity
• Between 2008 and 2009：Although the recession devastated
many traditional retailers, online sales continued to grow
during that period.
– B2C and B2B increasing growth rates continue
– Driving force: people with Internet access increasing
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
• Many researchers have noted that electronic commerce is a
major change in the way business is conducted and compare
it to other historic changes in economic organization such as
the Industrial Revolution.
• Four waves based on the Industrial Revolution
• Electronic commerce and the information revolution brought
about by the Internet will likely go through a series of waves,
too.
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
（P13）
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
• Start-up capital
– First wave: Investors were excited about electronic
commerce and wanted to participate, no matter
how much it cost or how weak the underlying
ideas were.
• Internet technologies used
• Second wave: The increase in broadband
connections in homes is a key element in the B2C
component of the second wave
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
• Digital product sales
– Second wave: fulfilling available technology promise
• Mobile telephone based
• Smart phone technology enabling m-commerce
• Web 2.0: making new Web business possible
 Blog, SNS, Twitter, wiki
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
• Business online strategy
– First wave: first-mover advantage
•
Many companies and investors believed that being
the first Web site to offer a particular type of
product or service would give them an opportunity
to be successful
– Second wave: businesses not relying on first-mover
advantage
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1.1 Electronic Commerce: The Second Wave
1.1.5 The Second Wave of Electronic Commerce
• Not all of the future of EC is based in it’s second
wave.
• Some of the first wave companies were successful,
such as Amazon.com, eBay, and Yahoo. The second
wave of EC will provide new opportunities for these
business .
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1.2
Business models, Revenue models
and Business processes
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1.2.1
Focus on Specific Business
Process
1.2.2
Role of Merchandising
1.2.3
Product/Process Suitability to
Electronic Commerce
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1.2 Business models, revenue models, and business processes
1.2 Business models, revenue models, and
business processes
• Business model 商业模式
– A set of processes that combine to achieve a company's goal,
which is to yield a profit
– A good business model was expected to lead to rapid sales
growth and market dominance.
– The idea that the key to success was simply to copy the
business model of a successful dot-com business led the way
to many business failures, some of them quite dramatic.
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1.2 Business models, revenue models, and business processes
1.2 Business models, revenue models, and
business processes
• Business model 商业模式
– copying or adapting someone else‘s business model is neither
an easy nor wise road map to success.
– Instead, companies should examine the elements of their
business; that is, they should identify business processes that
they can streamline, enhance, or replace with processes
driven by Internet technologies.
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1.2 Business models, revenue models, and business processes
1.2 Business models, revenue models, and
business processes
• Revenue model 盈利模式
– A specific collection of business processes used to:
• Identify customers
• Market to those customers
• Generate sales to those customers
– The revenue model idea is helpful for classifying revenue
generating activities for communication and analysis
purposes.
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1.2 Business models, revenue models, and business processes
1.2 Business models, revenue models, and
business processes
1.2.1 Focus on Specific 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 those businesses processes that firm
benefiting from e-commerce technology
• Uses of Internet technologies
– Improve existing business processes, identify new business
opportunities, adapt to change
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1.2 Business models, revenue models, and business processes
• Companies think in terms of business processes
1.2.2 Role of Merchandising
– Combination of store design, layout, product display
knowledge
• Salespeople skills
– Identify customer needs and find products or services
meeting needs
• The skills of merchandising and personal selling
– Difficult to practice remotely
• Web site success
– Transfer merchandising skills to the Web
• Easier for some products than others
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1.2 Business models, revenue models, and business processes
• Merchandising零售推销
FIGURE 1-5 Business process suitability to type of commerce
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1.2 Business models, revenue models, and business processes
1.2.3 Product/Process Suitability to
Electronic Commerce（P16）
• Commodity item: 商品，日用品
– Well suited to e-commerce selling
– Product or service hard to distinguish from same products
or services provided by other sellers
– Features: standardized and well known
– Price: distinguishing factor
– Gasoline, office supplies, soap, computers, and airline
transportation are all examples of commodity products or
services, as are the books and CDs sold by Amazon.com
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1.2 Business models, revenue models, and business processes
1.2.3 Product/Process Suitability to
Electronic Commerce
• Shipping profile 运输规格
– Another key factor that can make an item well suited to EC
– Collection of attributes affecting how easily that product
can be packaged and delivered
– Note value-to-weight ratio 价值/重量比
• Can help by making overall shipping cost a small fraction of the
selling price
• An airline ticket is an excellent example of an item that has a high
value-to-weight ratio.
• Expensive jewelry has a high value-to-weight ratio, but many
people are reluctant to buy it without examining it in person
unless the jewelry is sold under a well-known brand name and
with a generous return policy
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1.2 Business models, revenue models, and business processes
1.2.3 Product/Process Suitability to
Electronic Commerce
• Easier-to-sell products have:
– Strong brand reputation
• A product that has a strong brand identity—such as a Kodak
camera—is easier to sell on the Web than an unbranded item,
because the brand‘s reputation reduces the buyer’s concerns about
quality when buying that item sight unseen
– Appeal to small but geographically diverse groups
• Other items that are well suited to electronic commerce are those
that appeal to small, but geographically 地理上dispersed, groups of
customers.
• Collectible comic books are an example of this type of product.
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1.2 Business models, revenue models, and business processes
1.2.3 Product/Process Suitability to
Electronic Commerce
• Traditional commerce
– Better for products relying on personal selling skills, as in
commercial real estate sales, or when the condition of the
products is difficult to determine without making a
personal inspection as in purchases of high-fashion
clothing, antiques, or perishable food products
• Combination of electronic and traditional commerce
– Business process includes both commodity and personal
inspection items can be a better way to sell the items or
services
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1.2 Business models, revenue models, and business processes
1.2.3 Product/Process Suitability to
Electronic Commerce
• Many people are finding information on the Web about new and used
automobiles.
• Autobytel has had much success handling new car transactions.
– People are willing to take delivery of（提货） a particular make（构造）
and model of a new vehicle even if they did not testdrive the specific car
they are purchasing through Autobytel.
– Fewer people are willing to buy a used car without driving that specific
car and personally inspecting it.
– In the case of used cars, electronic commerce provides a good way for
buyers to obtain information about available models, features, reliability
可信度, prices, and dealerships; but the variability可变性 in the condition of
used cars makes the traditional commerce component of personal
inspection a key part of the transaction negotiation.
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1.2 Business models, revenue models, and business processes
1.2.3 Product/Process Suitability to
Electronic Commerce
1.3
Advantages and Disadvantages
Of Electronic Commerce
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1.3 Advantages and Disadvantages of
Electronic Commerce
• 1.3.1
Advantages of Electronic Commerce
• 1.3.2
Disadvantages of Electronic Commerce
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1.3 Advantages and Disadvantages of
Electronic Commerce
• Electronic commerce is a major development in the
way business is conducted
• However, it is not something that every business can
or should do
• Like any business strategy, electronic commerce has
advantages and disadvantages
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1.3.1 Advantages of Electronic Commerce
• All the advantages of electronic commerce for businesses can be
summarized in one statement: 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
– A firm can use electronic commerce to reach small groups of
customers that are geographically scattered.
– The Web is particularly useful in creating virtual communities that
become ideal target markets for specific types of products or
services.
• virtual community 虚拟社区 is a gathering of people who share a common
interest, but instead of this gathering occurring in the physical world, it
takes place on the Internet.
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1.3.1 Advantages of Electronic Commerce
• E-commerce buyer opportunities
– Increases purchasing opportunities
– Identifies new suppliers and business partners
– Efficiently obtains competitive bid information
• Easier to negotiate price and delivery terms
– Increases speed, information exchange accuracy
– Wider range of choices available 24 hours a day
• Immediate access to prospective purchase information
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1.3.1 Advantages of Electronic Commerce
• Benefits extend to general society welfare
– Lower costs to issue and secure:
• Electronic payments of tax refunds
• Public retirement
• Welfare support
– Provides faster transmission
– Provides fraud, theft loss protection
• Electronic payments easier to audit and monitor
– Reduces commuter-caused traffic, pollution
• Due to telecommuting
– Products and services available in remote areas
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1.3.2 Disadvantages of Electronic Commerce
• Problems
–
–
–
–
–
–
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Calculating return on investment
Recruiting and retaining employees
Technology and software issues
Cultural differences
Consumers resistant to change
Conflicting laws
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1.3.2 Disadvantages of Electronic Commerce
• Disadvantages will disappear when:
– E-commerce matures
• Becomes more available to and accepted by general
population
– Critical masses of buyers become equipped, willing to
buy through Internet
• Online grocery industry example
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1.4
Economic Forces
And Electronic Commerce
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1.4 Economic Forces and Electronic Commerce
1.4.1 Transaction Costs
1.4.2 Markets and Hierarchies
1.4.3 Using EC to Reduce Transaction Costs
1.4.4 Network Economic Structures
1.4.5 Network Effects
1.4.6 Using EC to Create Network Effects
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1.4 Economic Forces and Electronic Commerce
• Economics
– Is the study how people allocate scarce resources
• One important way that people allocate resource is through commerce
• The other major way is through government actions, such as taxes or
subsides
• Many economists are interested in how people organize
their commerce activities. One way people do commerce
activities is to participate in markets.
• Two conditions of a market
– Potential sellers come into contact with potential buyers
– A medium of exchange is available (currency or barter)
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1.4 Economic Forces and Electronic Commerce
• 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.
– These large firms often conduct many different business activities
entirely within the organizational structure of the firm and participate in
markets only for purchasing raw materials and selling finished products.
– If markets are indeed highly effective mechanisms for allocating scarce
resources, these large corporations should participate in markets at
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production
and
value-generation
processes. 58
1.4 Economic Foreces and Electronic Commerce
1.4 Economic Forces and Electronic Commerce
• Organization hierarchy (flat or many levels)
– Bottom level includes largest number of employees
– Pyramid structure
• Nobel laureate Ronald Coase wrote an essay in
1937:why individuals who engaged in commerce
often created firms to organize their activities.
– Coase concluded : that transaction costs were the main
motivation for moving economic activity from markets to
hierarchically structured firms.
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1.4.1 Transaction Costs
• Transaction cost交易成本
– Total costs that a buyer and seller incur as they gather
information and negotiating purchase-and-sale transaction
– Significant components of transaction costs:
• Brokerage fees and sales commissions
• Cost of information search and acquisition
• Investment of the seller in equipment or in the hiring of skilled
employees to supply products or services to the buyer
• Sweater dealer example (Figure 1-6)
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1.4.2 Markets and Hierarchies
• Coase reasoned that when transaction costs were high,
businesspeople would form organizations to replace
market-negotiated transactions.
• The organization may:
–
–
–
–
Hire knitters instead of negotiating with individuals
Supply them with yarn and knitting tools
Supervise and monitor their work activity
Information flow
• Supervision and monitoring from lower levels to higher levels
• Control from upper levels to lower levels
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1.4.2 Markets and Hierarchies
• Vertical integration
– The practice of an existing firm replacing one or more of its
supplier markets with its own hierarchical structure for creating
the supplied product
• During the years from the Industrial Revolution through the present,
the size and level of vertical integration of firms have increased.
• In some very large organizations, however, monitoring systems have
not kept pace with the organization’s increase in size.
• Strategic business unit (business unit)
– One particular combination of product, distribution channel,
and customer type
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1.4.3 Using Electronic Commerce to
Reduce Transaction Costs
• Businesses and individuals can use electronic commerce
to reduce transaction costs by:
– Improving the flow of information
– Increasing coordination of actions
• EC can change the attractiveness of vertical integration
for many firms by:
– Reducing the cost of searching for potential buyers and sellers
– increasing the number of potential market participants
• Electronic commerce
– Change vertical integration attractiveness
– Change transaction costs’ level and nature
– Example: employment transaction
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1.4.4 Network Economic Structure
• Network economic structures
– Neither a market nor a hierarchy
– Companies coordinate their strategies, resources, and skill sets by forming
long-term, stable relationships with other companies and individuals based
on shared purposes
• Strategic alliances (strategic partnerships)
– Relationships created within the network economic structure
• Virtual companies
– Strategic alliances that occur between or among companies operating on
the Internet
• Strategic partners
– Entitles that come together for specific project or activity
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1.4.4 Network Economic Structure
• Network organizations
– Are particularly well suited to technology industries that are
information intensive.
– Sweater example
• Knitters organize into networks of smaller organizations
• Specialize in styles or designs
– Electronic commerce can make such networks ,which rely extensively
on information sharing, much easier to construct and maintain.
– Some researchers believe that these network forms of
organizing commerce will become predominant in the near
future
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1.4.5 Network Effects
• Law of diminishing returns 边际效益递减
– Most activities yield less value as the amount of consumption increases
– Example：hamburger
• Network effect
– As more people or organizations participate in a network, the value of the
network to each participant increases
– Example：Email
• Internet e-mail accounts are far more valuable than singleorganization e-mail accounts because of the network effect.
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1.4.6 Using Electronic Commerce to
Create Network Effects
• E-mail account example
– Provides access to network of people with e-mail accounts
– If e-mail account is part of smaller network
• E-mail generally less valuable
• Internet e-mail accounts
– Far more valuable than single-organization e-mail
• Due to network effect
• Need way to identify business processes
– Regardless of how businesses in a particular industry organize
themselves—as markets, hierarchies, or networks—you will
need a way to identify business processes and evaluate
electronic commerce suitability for each process
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1.5
Identifying Electronic
Commerce Opportunities
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1.5 Identifying Electronic Commerce Opportunities
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1.5.1
Strategic Business Unit Value
Chains
1.5.2
Industry Value Chains
1.5.3
SWOT Analysis: Evaluating
Business Unit Opportunities
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1.5 Identifying Electronic Commerce Opportunities
1.5 Identifying Electronic Commerce Opportunities
• Identifying electronic commerce opportunities
– One way to focus on specific business processes as candidates
for EC is to break business down into a series of value-adding
activities that combine to generate profits, meet firm’s goal
• Commerce conducted by firms of all sizes
• Firm
– Multiple business units owned by a common set of shareholders
or company
• Industry
– Multiple firms selling similar products to similar customers
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1.5 Identifying Electronic Commerce Opportunities
1.5.1 Strategic Business Unit Value Chains
• Value chain
– A way of organizing strategic business unit activities to design,
produce, promote, market, deliver, and support the products
or services
– In addition to these primary activities, Porter also includes
supporting activities
• Strategic business unit primary activities
– Identify customers, design, purchase materials and supplies,
manufacture product or create service, market and sell, deliver,
provide after-sale service and support
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1.5.1 Strategic Business Unit Value Chains
• Strategic business unit primary activities
– The importance of each primary activity depends on:
• Product or service business unit provides
• To which customers is sells
• Central corporate organization support activities
– Finance and administration
– Human resource
– Technology development
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1.5 Identifying Electronic Commerce Opportunities
1.5.1 Strategic Business Unit Value Chains
• Left-to-right
flow
– Does not imply
strict time
sequence
FIGURE 1-9 Value chain for a strategic business unit
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1.5 Identifying Electronic Commerce Opportunities
1.5.2 Industry Value Chains
• Value system — Porter
– Michael Porter introduced the idea of value chains in his
1985 book, Competitive Advantage
– Porter use the term Value system to describe the larger
stream of activities into which a particular business unit’s
value chain is embedded
– Also referred to as industry value chain — subsequent
researchers and business consultants
• Delivery of product to customer
– Use as purchased materials in its value chain
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1.5 Identifying Electronic Commerce Opportunities
1.5.2 Industry Value Chains
• By becoming aware of how other businesses units in
the industry value chain conduct their activities
– Managers can identify new opportunities for cost
reduction, product improvement, or channel
reconfiguration
• The value chain concept is a useful way to think
about business strategy in general
• Electronic commerce should be a business solution,
not a technology implemented for its own sake.
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1.5 Identifying Electronic Commerce Opportunities
1.5.3 SWOT Analysis:
Evaluating Business Unit Opportunities
• Most electronic commerce initiatives add value by either reducing
transaction costs, creating some type of network effect, or a
combination of both
• SWOT analysis
– Strengths, weaknesses, opportunities, and threats
• Consider all issues systematically
– First: look into business unit
• Identify strengths and weaknesses
– Then: review operating environment
• Identify opportunities and threats presented
• Take advantage of opportunities
– Build on strengths, avoid threats, compensate for weaknesses
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1.5 Identifying Electronic Commerce Opportunities
1.5.3 SWOT Analysis:
Evaluating Business Unit Opportunities
FIGURE 1-11 SWOT analysis questions
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1.5 Identifying Electronic Commerce Opportunities
1.5.3 SWOT Analysis:
Evaluating Business Unit Opportunities
FIGURE 1-12 Results of Dell’s SWOT analysis
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1.6
International Nature of
Electronic Commerce
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1.6 International Nature of Electronic Commerce
1.6 International Nature of Electronic Commerce
1.6.1 Trust Issues on the Web
1.6.2 Language Issues
1.6.3 Cultural Issues
1.6.4 Infrastructure Issues
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1.6 International Nature of Electronic Commerce
1.6 International Nature of Electronic Commerce
• Internet connects computers worldwide
• When companies use Web to improve business
process:
– They automatically operate in global environment
• Key international commerce issues
–
–
–
–
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Language
Culture
Infrastructure
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1.6 International Nature of Electronic Commerce
1.6.1 Trust Issues on the Web
• It is important for all businesses to establish trusting
relationships with customers
– Companies with established reputations:
• Often create trust by ensuring that customers know who they are in
the physical world
• Can rely on their established brand names to create trust on the Web
– New companies
• That want to establish online business face a more difficult challenge
because a kind of anonymity exists for companies trying to establish a
Web presence
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1.6 International Nature of Electronic Commerce
1.6.1 Trust Issues on the Web
• Customers’ inherent lack of trust in “strangers” on
the Web is logical and to be expected
• For businesses to succeed on the Web, they must find
ways to generate quickly the trust that traditional
businesses took years to develop.
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1.6 International Nature of Electronic Commerce
1.6.2 Language Issues
• Business must adapt to local cultures
– “Think globally, act locally”
– Provide local language versions of Web site
• The first step that a Web business usually takes to reach
potential customers in other countries or other cultures
– Customers more likely to buy from sites translated
into own language
– 50 percent of Internet content in English
– Half of current Internet users do not read English
• By 2015: 70% of e-commerce transaction will involve at least
one party outside of the United States
• Languages may require multiple translations
– Separate dialects
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1.6 International Nature of Electronic Commerce
1.6.3 Cultural Issues
• Culture
– Combination of language and customs
– Varies across national boundaries
– Varies across regions within nations
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1.6 International Nature of Electronic Commerce
1.6.3 Cultural Issues
• Cultural issue example
– Virtual Vineyards (now Wine.com)
• Subtle language and cultural standard errors
– General Motors’ Chevrolet Nova automobile
– Baby food in jars in Africa
• Select icons carefully
– Shopping cart versus shopping baskets, trolleys
– Hand signal for “OK”: obscene gesture in Brazil
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1.6 International Nature of Electronic Commerce
1.6.3 Cultural Issues
• Dramatic cultural overtones
– India: inappropriate to use cow image in cartoon
– Muslim countries: offended by human arms or legs
uncovered
– White color (purity versus death)
• Online business apprehension
– Japanese shoppers’ unwillingness to pay by credit
• Softbank
– Devised a way to introduce electronic commerce to a
reluctant Japanese population
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1.6 International Nature of Electronic Commerce
1.6.4 Infrastructure Issues
• Businesses still face the challenges posted by
– Variations and inadequacies In the infrastructure that
supports the internet throughout the world
• Internet infrastructure
– Computers and software connected to Internet
– Communications networks’ message packets travel
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Summary
• Electronic commerce
– Application of new Internet and Web technologies
• Helps individuals, businesses, other organizations
conduct effective business
– Adopted in waves of change
• First wave ended in 2000
• Second wave focuses on improving specific business
processes
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Summary
• Technology improvements
– Create new products and services
– Improved promotion, marketing, delivery of existing
offerings
– Improve purchasing and supply activities
– Identify new customers
– Operate finance, administration, human resource
management activities more efficiently
– Reduce transaction costs
– Create network economic effects
• Leads to greater revenue opportunities
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Summary
• Electronic commerce
– Fits into markets, hierarchies, networks
• Value chains
– Occur at business unit, industry levels
• Value chains and SWOT analysis
– Tools to understand business processes
• Analyze suitability for electronic commerce implementation
• Key international commerce issues
– Trust, language, culture and infrastructure
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Review Question
• P44 and
• RQ8. In a paragraph, describe the advantages of a
flat-rate telecommunications access system for
countries that want to encourage electronic
commerce.
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