Download Chapter 7 - Electronic Commerce: Doing Business Online

Chapter 7
E-Business: Doing Business Online
Describe some of the challenges
1
Define e-business and discuss
how it can help achieve business
success.
5 associated with e-business.
Discuss how organizations use
6 Internet communications to
advance their objectives.
Distinguish between a corporate
2 and a marketing Web site.
3
List the major forms of B2B
e-business.
4 Explain B2C e-business and
identify the products most often
sold online.
7
8
Discuss Web sites and identify
methods for measuring
Web site effectiveness.
Explain the global scope
of e-business.
WHAT IS E-BUSINESS?
Electronic business (e-business) Conducting business via
the Internet.
• E-tailing, or virtual storefronts on Web sites.
• Online business-to-business transactions.
• Electronic data interchange (EDI), the
business-to-business exchange of data using
compatible software.
• E-mail, instant messaging, and other Web-enabled
communication tools and their use as media for reaching
prospective and existing customers.
• The gathering and use of demographic, product, and other
information through Web contacts.
Capabilities and Benefits of E-Business
• Global reach. The Net allows goods and services to be sold to customers
regardless of geographic location.
• Personalization. Companies can begin the production process when an order is
received to better satisfy customer needs and sharply reduce inventory.
• Interactivity. Customers and suppliers negotiate prices online, resulting in an
ideal product at the right price that satisfies both parties.
• Right-time and integrated marketing. Online retailers provide products when and
where customers want them and can coordinate promotional activities and
communication to create a unified, customer-oriented message.
• Cost savings. E-business can markedly reduce the costs associated with
operating and starting a business.
• University of Phoenix
• FreshDirect
• Boston Symphony Orchestra
Business Web Sites
Corporate Web site Web site designed to increase a firm’s visibility, promote its
offerings, and provide information to interested parties.
• Attempt to build customer goodwill and assist retailers and other resellers in
their marketing efforts.
• Use for a variety of other purposes
• Disseminating financial information to investors
• Enabling prospective employees to apply online for jobs
• Providing e-mail communication.
Marketing Web site Web site whose main purpose is to increase purchases by
visitors.
BUSINESS-TO-BUSINESS (B2B) EBUSINESS
Business-to-business e-business (B2B) Electronic
business transactions between businesses using the
Internet.
• B2B transactions account total $2.5 trillion.
• By some estimates, account for 80 percent of all
e-commerce activities.
• Can reduce cost of B2B transactions by almost 25 percent.
Electronic Data Interchanges, Extranets, and
Private Exchanges
Electronic Data Exchange
• Computer-to-computer exchanges of invoices, purchase orders, price quotations,
and other sales information between buyers and sellers.
• Allows retailers like Walmart to use a system of quick response, is the retailing
equivalent of just-in-time inventory.
Extranet
• Secure networks used for e-business and accessible through the firm’s Web site
by external customers, suppliers, or other authorized users.
• Provide selected outsiders with internal information.
Private Exchanges
• A secure Web site at which a company and its suppliers share all types of data
related to e-business.
• Participants collaborate on product ideas, production scheduling, distribution,
order tracking, and any other functions a business wants to include.
• Sometimes called c-business.
Electronic Exchanges and E-Procurement
• Electronic exchanges are online marketplaces that bring buyers and sellers
together and cater to a specific industry’s needs.
• Initially 15,000 were launched but only 20 percent remain.
• E-procurement is Web- based systems that enable all types of
organizations to improve the efficiency of their procurement processes.
ONLINE SHOPPING COMES OF AGE
Business-to-consumer e-business (B2C) Selling directly to consumers over
the Internet.
• E-tailing accounts for eight percent of all U.S. sales.
• Thirty percent of the U.S. population shops online.
• Services also are important participants in e-business.
E-Tailing and Electronic Store Fronts
Electronic storefronts Company Web site that sells products to consumers.
• Growth of broadband is aiding e-tailing.
• Fifty-five percent of American Internet users have broadband.
• Expected to rise to 70 percent.
Who Are the Online Buyers and Sellers?
Who Are the Online Buyers and Sellers?
• Typical user is young, highly educated, urban or suburban, and affluent.
• Demographics are shifting; there is decreasing difference in Internet purchasing
habits among groups.
Who Are the Online Buyers and Sellers?
• Online market is changing as customers become more familiar with online
shopping.
Benefits of B2C e-Business
Lower Prices
• Many products cost less online.
• Internet allows customers to easily compare prices from multiple sellers.
Convenience
• Can order products from around the world anytime day or night.
• Can register customer information to streamline transactions.
Personalization
• Emphasis on personalized, one-on-one marketing to increase repeat purchases.
Developing Safe Online Payment Systems
• Response to customer concerns about security of sending credit card information
over the Internet.
• Through encryption, data is encoded for security purposes.
• Many companies use Secure Sockets Layer (SSL) technology to increase to
encrypt information and verify senders and receivers.
• Others use electronic method payment method, a computer data file at an ebusiness site’s checkout counter that contains not only electronic cash but
credit card information, owner identification, and address.
E-BUSINESS CHALLENGES
Privacy Issues
• Privacy is among the top concerns of Internet users.
• E-business sites often require passwords and use electronic signatures, an
electronic form of identity verification.
• Companies can track customers’ shopping and viewing habits through cookies.
• Customers usually prefer that companies do not share their personal information.
Merchants have responded by joining privacy organizations.
• Privacy protections may soon become legally required.
• Employees also have concerns that employers are monitoring their Internet
behavior.
• Companies worry about data theft.
Internet Fraud
• Internet Crime Complaint Center logged more than 207,000 complaints in a
recent year, an increase of 67 percent over the prior year.
• Seventy percent of the complaints referred to law enforcement agencies dealt
with online auctions.
Phishing Growing form of Internet fraud that uses e-mail or pop-up messages
claiming to be from familiar businesses or organizations to get unsuspecting
victims to disclose personal information.
• Payment fraud is also growing.
• Cardholder fraudulently claims ordered merchandise was never delivered and
asks credit issuer for a chargeback.
Poor Web Site Design and Service
• Two-thirds of Internet shopping carts are abandoned before any purchase is
made.
• Problems with system overloads during holiday and other busy shopping
seasons.
• Problems with delivery and returns.
• Companies that have brick-and-mortar experience often have better success
satisfying customers than Internet-only retailers.
Channel Conflicts
• Direct sales to customers can compete with business partners such as retailers
and distributors, disputes called channel conflicts.
• Example: Mattel sells only specialty products online.
USING THE WEB’S COMMUNICATION
FUNCTION
• Web has four main functions: e-business, entertainment, information, and
communication.
• Communication is Web’s most popular function.
• Firms use e-mail to communicate with customers, suppliers, and other partners.
Spam Popular name for junk e-mail.
Online Communities
• Internet forums, newsgroups, electronic bulletin boards, and Web communities
that appeal to people who share common interests.
Blogs
Blog Short for Web log, an online journal written by a blogger.
• Some incorporate wikis, a Web page that anyone can edit.
• Some incorporate podcasts, video & audio recordings that are posted
online. According to iPodder.org, more than 3,000 podcasts
operate worldwide.
• Corporate blogs can help build brand trust.
• Example: Apple’s iLounge
• Builds iPod brand.
• Gives Apple ideas for product improvement.
• Employee blogs present ethical issues.
• Negative comments can harm company.
• Form of free speech that humanizes a company.
Web-Based Promotions
• Companies buy banner ads and pop-up ads on Web sites customers are likely to
visit.
Search marketing Paying search engines a fee to make sure the company’s
listing appears toward the top of search results.
• Companies use online coupons to promote their products.
• Some companies, such as ValPak Marketing Systems, offer virtual,
searchable coupons.
• Nike’s Joga Bonita marketing campaign and world’s longest soccer clip, to
which Nike invites fans to contribute.
MANAGING A WEB SITE
Developing Successful Web Sites
Planning and Preparation
• What is the company’s goal for its Web site?
• Determines content and design.
• Determines scope.
• Will the site be maintained in-house or by a contractor?
• What will the site be named?
Content and Connections
• Content an important factor for whether visitors return to a site.
• Available resources should be relevant to viewers, easy to access and understand,
updated regularly, and written or displayed in a compelling, entertaining way.
• Small businesses are better off outsourcing to meet their hosting and
maintenance needs.
Costs and Maintenance
• Variety of costs:
• Development
• Placing the site on a Web server.
• Maintaining and updating the site.
• Promoting the site.
Measuring Web Site Effectiveness
Click-through rates Percentage of people presented with a Web
banner ad who click on it.
Conversion rates Percentage of visitors to a Web site who make a
purchase.
GLOBAL ENVIRONMENT OF
E-BUSINESS
• Future growth of many companies is linked to a global strategy that incorporate
e-business.
• U.S. leads world in Internet users but ranks only fifth in Internet penetration.
• International competition is growing.
• U.S. firms run eight of the 10 most popular e-business sites in Europe, but
French-owned Fnac.com is now more popular than Amazon.com in both
France and Spain.
• Three of four Web pages are written in English.
• Can heighten competition in the global marketplace.