Electronic Commerce

Electronic Commerce (Electronic Commerce ( 电子商务电子商务 ))

Lecture 1: Introduction to Lecture 1: Introduction to Electronic CommerceElectronic Commerce

TSL School of Business and Technology Information TSL School of Business and Technology Information （（ TSBITSBITT ））

泉州师院陈守仁工商信息学院泉州师院陈守仁工商信息学院

Instructor: Zhonghui Ouyang (Instructor: Zhonghui Ouyang ([email protected]@qztc.edu.cn))

The Position of Electronic Commerce (The Position of Electronic Commerce ( 电子商务电子商务 ) in Your 4YR Study) in Your 4YR Study

A type courses

Economics

Biz English

Management

HR

Behavior of Consumer

Accounting

Market

B2B

TSBIT’s Graduate Student

B2C

SCM

CRM

ERP

Electronic Commerce

Linear Algebra

Calculus

SeCM

Graduate Schools Public SectorsCompanies

Course AdministrationCourse AdministrationInstructor: Zhonghui Ouyang (Instructor: Zhonghui Ouyang ([email protected]@qztc.edu.cn))Teaching assistants: Teaching assistants: 王建福、马瑾玉、刘小铭、黄哲日 王建福、马瑾玉、刘小铭、黄哲日 Course web page: http://210.34.121.252:82/index.htmCourse web page: http://210.34.121.252:82/index.htm

Course -> EC -> Outline, Plan, WorkCourse -> EC -> Outline, Plan, WorkSlides posted on web page the night before lectureSlides posted on web page the night before lecture

18 Lectures, 16 Computer Lab , 1 Middle Exam, 1 Final 18 Lectures, 16 Computer Lab , 1 Middle Exam, 1 Final ExamExam

Grading:Grading:Computer Lab & Homework 32% (2% each)Computer Lab & Homework 32% (2% each)

Class Participation 8%Class Participation 8%Middle Exam 10%Middle Exam 10%Final Exam 50%Final Exam 50%

EC Computer Lab ScheduleEC Computer Lab Schedule(TSBIT Building RM 412)(TSBIT Building RM 412)

MonMon TueTue WedWed ThrThr

77 、、 88 6:06:00P0PMM

0202 级国贸级国贸1-381-38 号号

0202 级国贸级国贸77-11477-114 号号

0303 级国贸级国贸43-8443-84 号号

0303 级营销级营销 118-598-59 号号

9 9 、、1010

7:47:40P0PMM

0202 级国贸级国贸39-7639-76 号号

0303 级国贸级国贸1-421-42 号号

0303 级国贸级国贸85-10985-109 号号0303 级营销级营销1-171-17 号号

0303 级营销级营销 660-1000-100 号号

Lab Lab Instr.Instr.

马瑾玉马瑾玉 黄哲日黄哲日 刘小铭刘小铭 王建福王建福

CASE1: Students’ experience for purchasing a ref bookCASE2: US buyer’s experience for purchasing a car

Autobytel.com >> Autoweb.com & CarSmart.com

From this CASE, we learn the impact of Internet on Car Biz:

1. About 70% of car buyers do research on the internet before buying their cars

2. Autobytel processes 800,000 trans. worth $21 billion per year

3. Autobytel sales accounted 5% of all US new vehicle sales in 2002

4. Car buyer benefits 2-4% less via Autobytel

5. Car dealers reduce selling cost from $420 to $150 per car via Autobytel

Traditional Commerce and Electronic Traditional Commerce and Electronic CommerceCommerce

The basic info of changing direction from The basic info of changing direction from traditional commerce to electronic commerce:traditional commerce to electronic commerce:

1.1. Internet ActivitiesInternet Activities

2.2. Daily Internet ActivitiesDaily Internet Activities

3.3. Overall Growth of Online PursuitsOverall Growth of Online Pursuits

4.4. Daily Growth of Online PursuitsDaily Growth of Online Pursuits

5.5. Worldwide consumer shopping on the Web: Worldwide consumer shopping on the Web: $130 billion (2002) => $500 billion (2004)$130 billion (2002) => $500 billion (2004)

6.6. Worldwide business activities on the Web: Worldwide business activities on the Web: $6 trillion (2004)$6 trillion (2004)

7.7. Intel accepts 95% of orders through the Intel accepts 95% of orders through the Internet & did $24 billion in Web site sales Internet & did $24 billion in Web site sales (2002)(2002)

Traditional Commerce and Electronic Commerce (ConTraditional Commerce and Electronic Commerce (Cont)t)

The useful types of electronic commerce:The useful types of electronic commerce:

1.1. Business-to-consumer (or B2C)Business-to-consumer (or B2C)2.2. Business-to-business (or B2B)Business-to-business (or B2B)3.3. The transactions & biz processes of government & otThe transactions & biz processes of government & ot

her org. invoked the Internether org. invoked the Internet4.4. Consumer-to-consumer (or C2C)Consumer-to-consumer (or C2C)5.5. Business-to-government (or B2G)Business-to-government (or B2G)6.6. Telecommuting or teleworkTelecommuting or telework7.7. Before Web, electronic funds transfers (or: EFT, wire Before Web, electronic funds transfers (or: EFT, wire

transfers) and electronic data interchange (EDI) occtransfers) and electronic data interchange (EDI) occurs urs

Traditional Commerce and Electronic Commerce Traditional Commerce and Electronic Commerce (Cont)(Cont)

Traditional CommerceTraditional Commerce

•The (car) Buyer: The (car) Buyer: –Identify specific needIdentify specific need–Search for products or services that will satisfy the specific Search for products or services that will satisfy the specific needneed–Select a vendorSelect a vendor–Negotiate a purchase transaction, including:Negotiate a purchase transaction, including:

Delivery logisticsDelivery logisticsInspection, testing, and acceptanceInspection, testing, and acceptance

–Make paymentMake payment–Perform regular maintenance and make warranty claimsPerform regular maintenance and make warranty claims

•The (car) Seller:The (car) Seller:–Conduct market research to identify customer needsConduct market research to identify customer needs–Create product or service that will meet customers’ needsCreate product or service that will meet customers’ needs–Advertise and promote product or serviceAdvertise and promote product or service–Negotiate a sale transaction, including:Negotiate a sale transaction, including:

Delivery logisticsDelivery logisticsInspection, testing, and acceptanceInspection, testing, and acceptance

–Ship goods and invoice customerShip goods and invoice customer–Receive and process customer paymentReceive and process customer payment–Provide after-sale support, maintenance, and warranty Provide after-sale support, maintenance, and warranty servicesservices

Traditional Commerce and Electronic Traditional Commerce and Electronic Commerce (Cont)Commerce (Cont)

Traditional CommerceTraditional Commerce

•Activities, Transactions, and Business Activities, Transactions, and Business ProcessesProcesses

–Activity: a task performed by a business Activity: a task performed by a business workerworker–Transaction: the records of business Transaction: the records of business activities are performingactivities are performing–Business Processes: the group of logical, Business Processes: the group of logical, related, and sequential activities and related, and sequential activities and transactionstransactions

Traditional Commerce and Electronic Commerce Traditional Commerce and Electronic Commerce (Cont)(Cont)

Electronic CommerceElectronic Commerce

•Business Processes in CommerceBusiness Processes in CommerceWell suited to electronic Well suited to electronic commercecommerce

Suited to a combination Suited to a combination of electronic and of electronic and

traditional commerce traditional commerce strategiesstrategies

Well suited to traditional Well suited to traditional commercecommerce

Sale/purchase of books Sale/purchase of books and CDsand CDs

Sale/purchase of Sale/purchase of automobilesautomobiles

Sale/purchase of Sale/purchase of impulse items for impulse items for immediate useimmediate use

Online delivery of Online delivery of softwaresoftware

Online bankingOnline banking Sale/purchase of Sale/purchase of perishable food productsperishable food products

Sale/purchase of travel Sale/purchase of travel servicesservices

Roommate-matching Roommate-matching servicesservices

Small-denomination Small-denomination purchase and salespurchase and sales

Online shipment Online shipment trackingtracking

Sale/purchase of Sale/purchase of residential real estateresidential real estate

Sale/purchase of high-Sale/purchase of high-value jewelry and value jewelry and antiquesantiques

Sale/purchase of Sale/purchase of investment and investment and insurance productsinsurance products

Traditional Commerce and Electronic Commerce Traditional Commerce and Electronic Commerce (Cont)(Cont)

Electronic CommerceElectronic Commerce•Advantage of Electronic CommerceAdvantage of Electronic Commerce

–EC can increase sales & decrease costsEC can increase sales & decrease costsCisco: 72% of its 1998 sales -> 97% of its 2003 sales, it Cisco: 72% of its 1998 sales -> 97% of its 2003 sales, it avoided handling 500,000 calls monthly and saved $500 avoided handling 500,000 calls monthly and saved $500 million in that year alonemillion in that year aloneEC can help general welfare of society: tax refunds, EC can help general welfare of society: tax refunds, public retirementpublic retirementEC has accomplished remote education, remote EC has accomplished remote education, remote medicare, etcmedicare, etc

•Disadvantage of Electronic CommerceDisadvantage of Electronic Commerce–Some goods could not be delivered or inspected remotely Some goods could not be delivered or inspected remotely (perishable foods, custom-designed jewelry, etc)(perishable foods, custom-designed jewelry, etc)–Cultural and legal obstacles (fearful of sending credit card Cultural and legal obstacles (fearful of sending credit card numbers over the Internet, privacy issues, etc)numbers over the Internet, privacy issues, etc)

International CommerceInternational Commerce•60% of all EC sites on the Web are in English while 75% of world 60% of all EC sites on the Web are in English while 75% of world population is non-English speakingpopulation is non-English speaking•Currency conversions, tariffs, import and export restrictions, Currency conversions, tariffs, import and export restrictions, local business customs, and laws of each country in which a local business customs, and laws of each country in which a trading partner resides can make int’l e-Commerce difficulttrading partner resides can make int’l e-Commerce difficult

Economic Forces and Electronic CommerceEconomic Forces and Electronic Commerce

Economics = study of how people allocate scarce Economics = study of how people allocate scarce resourcesresources

•1st way people allocate scarce resources: commerce1st way people allocate scarce resources: commerce•2nd way people allocate scarce resources: government 2nd way people allocate scarce resources: government taxtax

Market = how people organize their commerce Market = how people organize their commerce activitiesactivities

•Sellers and buyers of a goodSellers and buyers of a good•A medium of exchangeA medium of exchange

Hierarchical business organizations = firms/companiesHierarchical business organizations = firms/companies•Hierarchical organization has a pyramid-shaped structure Hierarchical organization has a pyramid-shaped structure (President, CEO, Managers)(President, CEO, Managers)•The transaction costs is the main motivation for moving The transaction costs is the main motivation for moving economic activity from markets to hierarchical firmseconomic activity from markets to hierarchical firms

Transaction CostsTransaction Costs•The total costs of seller/buyer’s activities on the s/b The total costs of seller/buyer’s activities on the s/b transaction of a good: info, negotiation, investment, transaction of a good: info, negotiation, investment, equipment, post-s/b support, and hiring employees for the equipment, post-s/b support, and hiring employees for the goodgood

Economic Forces and Electronic Commerce (cont)Economic Forces and Electronic Commerce (cont)

Markets and HierarchiesMarkets and Hierarchies•Before Industry Revolution: The transaction costs and Before Industry Revolution: The transaction costs and the economic needs are the forces for moving market-the economic needs are the forces for moving market-negotiated transaction to forming hierarchical negotiated transaction to forming hierarchical organizations – we learn this from EC4e’s sweater caseorganizations – we learn this from EC4e’s sweater case•From Industry Revolution to middle 20 century: the size From Industry Revolution to middle 20 century: the size and level of vertical integration of firms have increasedand level of vertical integration of firms have increased•From later 20 century to present: the decentralization From later 20 century to present: the decentralization approaches seems back to the world because more approaches seems back to the world because more customized needs force firms to re-organize their customized needs force firms to re-organize their structures structures

Why changes were happened? Answer: for low transaction Why changes were happened? Answer: for low transaction costscosts

The Role of Electronic CommerceThe Role of Electronic Commerce•Benefits of EC: improving the flow of information and Benefits of EC: improving the flow of information and increasing the coordination of actions -> reduce increasing the coordination of actions -> reduce transaction coststransaction costs

Economic Forces and Electronic Commerce (cont)Economic Forces and Electronic Commerce (cont)The Role of Electronic CommerceThe Role of Electronic Commerce

BUYERFINDS

SELLER

NEGOTIATION

PAYMENT

SALE

DELIVERY

POST-SALEACTIVITY

SELECTIONOF GOODS

SEARCH ENGINE

SHOPPING BOT

AGGREGATOR

ON-LINE CATALOG

AUTOMATED AGENTS

TRACKING AGENT

ON-LINE HELP

INTERNET TELEPHONY

CUSTOMER PREFERENCES

BARGAINING STRATEGIES

PRICE SENSITIVITIES

CREDIT/PAYMENT INFORMATION

ON-LINE PROBLEM REPORTS

FOLLOW-ON SALES OPPORTUNITIES

SOME TECHNOLOGIES USED: SOME INFORMATION GATHERED:

BROWSING BEHAVIOR

DELIVERY REQUIREMENTSE-PAYMENT SYSTEMS

CONFIGURATOR

RECOMMENDER AGENT

TRANSACTION PROCESSOR

DATA INTERCHANGE

CRYPTOGRAPHY

BROWSER SHARING

MARKET BASKET

PERSONAL DATA

CUSTOMER SATISFACTION

SEARCH BEHAVIOR

EFFECTIVENESS OF PROMOTIONS

INFORMATION

PHYSICAL+INFORMATION

Economic Forces and Electronic Commerce (cont)Economic Forces and Electronic Commerce (cont)

Network Economic StructureNetwork Economic Structure

•Network economic structure -> strategic alliance / Network economic structure -> strategic alliance / strategic partnerships -> virtual companiesstrategic partnerships -> virtual companies

•Strategic partners or sector associations share Strategic partners or sector associations share technological standards, information, resources, etctechnological standards, information, resources, etc

Network EffectsNetwork Effects

•Law of diminishing returnsLaw of diminishing returns

•Network effectsNetwork effects

Value Chains in Electronic CommerceValue Chains in Electronic CommerceStrategic Business Units Value ChainsStrategic Business Units Value Chains

Design DeliverManufactureProduct or

create service

Marketand sell

Identifycustomers

Finance andadministration

HumanResources

Technologydevelopment

Provide after-sale serviceand support

Purchase materials and

supplies

Primary activities

Support activities

Value Chains in Electronic Commerce (cont)Value Chains in Electronic Commerce (cont)Industry Value ChainsIndustry Value Chains

Cotton

Apparel manufacturing

Global logistics

Manufactures fabric

Orders fromretailers

Supply chain management

Consumer purchasing

SWOT Analysis: Evaluating Business Unit SWOT Analysis: Evaluating Business Unit OpportunitiesOpportunitiesStrengthsStrengths

1.1. What does the company do What does the company do well?well?

2.2. Is the company strong in its Is the company strong in its market?market?

3.3. Does the company have a Does the company have a strong sense of purpose and strong sense of purpose and the culture to support that the culture to support that purpose?purpose?

WeaknessesWeaknesses

1.1. What does the company do What does the company do poorly?poorly?

2.2. What problems could be What problems could be avoided?avoided?

3.3. Does the company have Does the company have serious financial liabilities?serious financial liabilities?

OpportunitiesOpportunities

1.1. Are industry trends moving Are industry trends moving upward?upward?

2.2. Do new markets exist for the Do new markets exist for the company’s products/services?company’s products/services?

3.3. Are there new technologies Are there new technologies that the company can exploit?that the company can exploit?

ThreatsThreats

1.1. What are competitors doing What are competitors doing well?well?

2.2. What obstacles does the What obstacles does the company face?company face?

3.3. Are there troubling changes Are there troubling changes in the company’s business in the company’s business environment (technologies, environment (technologies, laws, and regulations)?laws, and regulations)?

Dell’s SWOT AnalysisDell’s SWOT Analysis

StrengthsStrengths

1.1. Sell directly to consumers.Sell directly to consumers.

2.2. Keep costs below competitors’ Keep costs below competitors’ costs.costs.

WeaknessesWeaknesses

1.1. No strong relationships with No strong relationships with computer retailerscomputer retailers

OpportunitiesOpportunities

1.1. Consumer desire for one-step Consumer desire for one-step shippingshipping

2.2. Consumers know what they Consumers know what they want to buywant to buy

3.3. Internet could be a powerful Internet could be a powerful marketing toolmarketing tool

ThreatsThreats

1.1. Competitors have stronger Competitors have stronger brand namesbrand names

2.2. Competitors have strong Competitors have strong relationships with computer relationships with computer retailersretailers

SWOT Analysis: Evaluating Business Unit SWOT Analysis: Evaluating Business Unit OpportunitiesOpportunities

The Role of Electronic Commerce (EC)The Role of Electronic Commerce (EC)

SWOT Analysis identifies that SWOT Analysis identifies that •EC can reduce costsEC can reduce costs

•EC can improve product qualityEC can improve product quality

•EC can reach new customers or suppliersEC can reach new customers or suppliers

•EC can create new ways of selling existing products. EC can create new ways of selling existing products.

The value chain concept lets EC become a business The value chain concept lets EC become a business solution for many firms.solution for many firms.

Next lecture, we will learn how the Internet and the Next lecture, we will learn how the Internet and the Web came to exist and grow to its current state.Web came to exist and grow to its current state.

Review QuestionsReview Questions

ExercisesExercises

For Further Study and ResearchFor Further Study and Research

Q&AQ&A