E- Business
Ninth Edition
Chapter 1
The Second Wave of Global E-Business
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Learning Objectives
In this chapter, you will learn about:
What electronic commerce is and how it has
evolved into a second wave of growth
Why companies concentrate on revenue models
and the analysis of business processes instead of
business models when they undertake electronic
commerce initiatives
How economic forces have created a business
environment that is fostering the second wave of
electronic commerce
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Learning Objectives (contd.)
How businesses use value chains and SWOT
analysis to identify electronic commerce
opportunities
The international nature of electronic commerce and
the challenges that arise in engaging in electronic
commerce on a global scale
E- Business, Ninth Edition
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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Electronic Commerce and Electronic
Business
Electronic commerce
Shopping on the Web
Businesses trading with other businesses
Internal company processes
Broader term: electronic business (e-business)
Electronic commerce includes:
All business activities using Internet technologies
Internet and World Wide Web (Web)
Wireless transmissions on mobile telephone networks
Dot-com (pure dot-com)
Businesses operating only online
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FIGURE 1-2 Electronic commerce categories
What
about
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Edition
government to consumer (G2C) e-commerce?
FIGURE 1-1 Elements of electronic commerce
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Categories of Electronic Commerce
(contd.)
Activity
Task performed by a worker in the course of doing his
or her job
May or may not be related to a transaction
Transaction: exchange of value
Purchase, sale, or conversion of raw materials into
finished product
Involves at least one activity
Business processes
Group of logical, related, sequential activities and
transactions.
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The Development and Growth of
Electronic Commerce
Electronic Funds Transfers (EFTs)
Wire transfers
Electronic transmissions of account exchange
information
Uses private communications networks
Electronic Data Interchange (EDI)
Business-to-business transmission
Computer-readable data in standard format
Standard transmitting formats benefits
Reduces errors
Avoids printing and mailing costs
Eliminates need to reenter data
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The Development and Growth of
Electronic Commerce (contd.)
EDI pioneers problem
High implementation cost
Expensive computer hardware and software
Establishing direct network connections to trading
partners or subscribing to value-added network
Value-added network (VAN)
Independent firm offering EDI connection and
transaction-forwarding services
Ensure transmitted data security
Charge fixed monthly fee plus per transaction charge
Gradually moved EDI traffic to the Internet
Reduced EDI costs
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FIGURE 1-3 Actual and estimated online sales in B2C and B2B categories
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The Second Wave of Electronic
Commerce
Four Waves of Industrial Revolution
Wave 1: inventions relating to textile industry (18th
century)
Wave 2: railroads, steam engines and printing (19th
century)
Wave 3: steel, electronics, and automabiles (20th
century)
Wave 4: oil/gasoline, business computers and plastics
(1939 1982?)
(See more at the Kondratiev Waves)
The concept of waves of e-commerce is based on
the four waves of industrial revolution
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FIGURE 1-4 Key characteristics of the first two waves of electronic commerce
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Business Models, Revenue Models,
and Business Processes
Business model
Set of processes combined to achieve company goal
of yielding profit
Electronic commerce first wave
Investors sought Internet-driven business models
Expectations of rapid sales growth, market dominance
Saw copying of successful dot-com business
models
Michael Porter argued business models did not exist
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Business Models, Revenue Models,
and Business Processes (contd.)
Instead of copying model, examine business
elements
Streamline, enhance, replace with Internet technology
driven processes
Revenue model used today
Specific collection of business processes
Identify customers
Market to those customers
Generate sales
Helpful for classifying revenue-generating activities
Communication and analysis purposes
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Focus on Specific Business Processes
Companies think in terms of 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 processes benefiting from e-commerce
technology
Uses of Internet technologies
Improve existing business processes, identify new
business opportunities, adapt to change
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Product/Process Suitability to
Electronic Commerce
FIGURE 1-5 Business process suitability to type of commerce
Classifications
Depend on available technologies current state
Change as new e-commerce tools emerge
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Product/Process Suitability to
Electronic Commerce (contd.)
Commodity item: 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
Consider products shipping profile
Collection of attributes affecting how easily that
product can be packaged and delivered
Note value-to-weight ratio
DVD: good example
Expensive jewelry: high value-to-weight ratio
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Product/Process Suitability to
Electronic Commerce (contd.)
Easier-to-sell products have:
Strong brand reputation (Kodak camera)
Appeal to small but geographically diverse groups
Traditional commerce
Better for products relying on personal selling skills
Combination of electronic and traditional commerce
Business process includes both commodity and
personal inspection items
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Advantages and Disadvantages of
Electronic Commerce
E-commerce increases sales and decreases costs
Virtual community: gathering of people online
Using Web 2.0 technologies
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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Advantages and Disadvantages of
Electronic Commerce (contd.)
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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Disadvantages of Electronic Commerce
Poor choices for electronic commerce
Perishable foods and high-cost, unique items
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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Disadvantages of Electronic Commerce
(contd.)
Additional problems
Calculating return on investment
Recruiting and retaining employees
Technology and software issues
Cultural differences
Consumers resistant to change
Conflicting laws
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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
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 sites pages
Difficult to determine bank size or how well established
Business must overcome distrust in Web strangers
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Language Issues
Business must adapt to local cultures
Think globally, act locally
Provide local language versions of Web site
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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Language Issues (contd.)
Large site translation may be prohibitive
Decided by corporate department responsible for
page content
Mandatory translation into all supported languages
Home page
All first-level links to home page
High priority pages to translate
Marketing, product information, establishing brand
Use translation services and software
Human translation: key marketing messages
Software: routine transaction processing functions
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Cultural Issues
Important element of business trust
Anticipating how the other party to a transaction will
act in specific circumstances
Culture
Combination of language and customs
Varies across national boundaries, regions within
nations
Personal property concept
Valued in North America and Europe (not Asia)
Cultural issue example
Virtual Vineyards (now [Link])
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Cultural Issues (contd.)
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
(see [Link] for more)
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)
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Cultural Issues (contd.)
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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Culture and Government
Online discussion inhospitable to cultural
environments
Government controls in some cultures
Unfettered communication not desired
Unfettered communication not considered acceptable
Denounced Internet material content
Unrestricted Internet access forbidden
Filter Web content
Regularly reviews ISPs and their records
Impose language requirements
Internet censorship
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Infrastructure Issues
Internet infrastructure
Computers and software connected to Internet
Communications networks message packets travel
Infrastructure variations and inadequacies exist
Outside United States
Government-owned industry
Heavily regulated
High local telephone connection costs
Affect buying online behavior
International orders: global problem
No process to handle order and paperwork
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Infrastructure Issues (contd.)
Business face challenges posed by variations and
inadequacies in the infrastructure supporting the
Internet throughout the world
Local connection costs
Inability to handle order
Freight forwarder
Arranges international transactions shipping and
insurance
Customs broker
Arranges tariff payment and compliance
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Infrastructure Issues (contd.)
Bonded warehouse
Secure location
Holds international shipments until customs
requirements or payments satisfied
Handling international transactions paperwork
Annual cost: $800 billion
Software automates some paperwork
Countries have their own paper-based forms,
procedures
Countries have incompatible computer systems
See Figure 1-14: complex information flows
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FIGURE 1-14 Parties involved in a typical international trade transaction
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