AMA University
Course code: ABI 204
Course Name: Introduction to E-Commerce
Prelim Period
 Unit 1:
 Introduction to E-Commerce
 Unit2:
 Technology Infrastructure: The Internet and the World
Wide Web
 Page 1 – 10 from the notes
Unit 1: Objectives
In this chapter, you will learn about:
 The basic elements of electronic commerce
 Differences between electronic commerce and traditional
commerce
 Advantages and Disadvantages of E-Commerce
 Business Process Suitability for E-Commerce
 Economic forces that have created a business environment
that fosters electronic commerce
 The ways in which businesses use value chains to identify
electronic commerce opportunities
What is E-Commerce?
 Electronic commerce refers to business activities conducted
using electronic data transmission via the Internet and the
World Wide Web.
 The three main elements of e-commerce are:
 Business-to-consumer(B2C)
 Business-to-business (B2B)
 The transactions and business processes that support selling and
purchasing activities on the Web
 Other categories include: consumer-to-consumer (C2C) and
consumer-to-government (C2G).
EFTs and EDIs
 Electronic Funds Transfers (EFTs) refers to the computer-based systems
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used to perform financial transactions electronically. It has been used by
banks for many years.
Electronic Data Interchange (EDI) occurs when one business transmits
computer-readable data in a standard format to another business.
EDI refers to the structured transmission of data between organizations
by electronic means. It is used to transfer electronic documents from
one computer system to another, i.e. from one trading partner to
another trading partner.
Businesses who engage in EDI with each other are called trading
partners.
Firms, such as General Electric and Wal-Mart, have been pioneers in
using EDI to improve their purchasing process.
Value Added Network (VAN)
 A value added network is an independent firm that offers
connection and EDI transaction forwarding services to
buyers and sellers engaged in EDI.
 VANs are responsible for ensuring the security of
transmitted data.
 VANs charge a fixed monthly fee plus a per-transaction
charge to subscribers.
Activities as Business Processes
 Business processes refer to the group of logical,
related, and sequential activities and transactions
in which businesses engage, including:
 Transferring funds
 Placing orders
 Sending invoices
 Shipping goods to customers
Important Factors Affecting Product Suitability
 Commodity item – product or service that has become
standardized and well known. Office supplies, computers and
airline transportation are examples of products or services.
 Shipping profile – collection of attributes that affect how
easily a product can be packaged and delivered.
Advantages of Electronic Commerce
 Electronic commerce can increase sales and decrease costs.
 Web advertising reaches a large amount of potential
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customers throughout the world.
The Web creates virtual communities for specific products or
services.
A business can reduce its costs by using electronic commerce
in its sales support and order-taking processes.
Electronic commerce increases sale opportunities for the
seller.
Electronic commerce increases purchasing opportunities for
the buyer.
Disadvantages of Electronic Commerce
 Some business processes are difficult to be
implemented through electronic commerce.
 Return-on-investment is difficult to apply to
electronic commerce.
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 Businesses face cultural and legal obstacles to
conducting electronic commerce.
International Electronic Commerce
 About 60 percent of all electronic commerce
sites are in English, therefore many language
barriers need to be overcome.
 The political structures of the world present
some challenges.
 Legal, tax, and privacy are concerns of
international electronic commerce.
Internet and World Wide Web
 Internet is a large system of interconnected computer
networks that spans the globe.
 A part of the internet known as World Wide Web is a
subset of computers on the internet that are connected
to each other in a specific way that makes their contents
easily accessible to each other.
 Web includes an easy-to- use standard interface. This
interface makes it possible for people who are not
computer experts to use the web.
Economic Forces and Electronic Commerce
Business activity
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Business activity today occurs within large hierarchical
business organizations, referred to as firms or companies.
Transaction Costs
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Transaction costs are the total of all costs that a buyer and a
seller incur as they gather information and negotiate a
purchase-sale transaction.
Network Effects
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As more people or organizations participate in a network, the
value of the network to each participant increases.
The Role of Electronic Commerce
 Electronic commerce can play a role in
1. reducing costs
2. improving product quality
3. reaching new customers or suppliers
4. creating new ways of selling existing
products
Value Chains in E-Commerce
 A value chain is a way of organizing the activities that
each strategic business unit undertakes to design,
produce, promote, market, deliver, and support the
products or services it sells.
 Strategic Business UnitValue Chains
 The support activities of a value chain for a strategic
business unit include:
 Finance and administration
 Human resources
 Technology development
Industry Value Chains
 Value system describes the larger stream of activities into
which a particular business unit’s value chain is embedded.
 Industry value chain (IVC) refers to value systems.
 IVC is used to identify opportunities for cost reduction,
product improvement, or channel reconfiguration.