INTRODUCTION Chapter 1 The Second Wave of Global

INTRODUCTION Chapter 1 The Second Wave of Global E-Business

e Traditional E-marketing Consumer Interaction Passive Sales-force driven Active More participatory Customer Message Same for all More personalized Community Limited Multiple communities More peer-to-peer Internal & External Community Information Asymmetry Symmetry Pricing Fixed Frequent updates, promotions Fundamental changes to Traditional commerce

Blendtec viral campaign microsite (www. willitblend. com) Viral videos- popular through a viral process of Internet sharing ● High reach, Low cost marketing ● Often funny content, engaging (active) customers ● No guarantee of a content of being viral

Google 1998 vs now A case in point- innovation and opportunity Search Engines, Work, Entertainment, Life Style How has Google innovated in search and its business model? What happened? Who is involved? When did it take place? Where did it take place? Why did that happen? How did it happen?

Ecommerce history • • “Dot-com boom” – Mid-1990 s to 2000: rapid growth – Innovation- Key concepts developed – Dot-coms; heavy venture capital investment “Dot-com bust” – 2000 to 2003: overly gloomy news reports – Irrational exuberance • 12, 000 Internet-related businesses started • $200 billion invested • $100 billion of investors’ money – 5, 000+ companies went out of business or acquired

Ecommerce history. . . • The second wave 2003 -Now – 2003: signs of new life – – – • • Sales and profit growth at a rapid pace • Driving force: people with Internet access increasing Emphasis on business-driven approach Electronic commerce becomes part of general economy 2008 general recession- ecommerce hurt less Covid- ecommerce is most resilient Extension of technologies New models based on user-generated content, social networking, services A third wave?

THE GROWTH OF B 2 C E-COMMERCE SOURCES: e. Marketer, Inc. , 2009 a; U. S. Census Bureau, 2009 b; THE GROWTH OF B 2 B E-COMMERCE

E-BUSINESS INNOVATION Discussion • Which company / website impacted on Internet or the web? • How do we measure their success? • What made them successful?

What Is E-commerce And E-business? Three definitions of the relationship between e-commerce and e-business Different Definitions

Buy-side (B 2 B) and sell-side (B 2 C) e-commerce

B 2 B and B 2 C Characteristics B 2 C (Consumer) B 2 B Proportion of ebuisness adopters Low to medium High to very high Complexity of buying decisions Relatively simple – individual and influencers More complex – buying process involves users, specifiers, buyers, etc. Channel Relatively simple – direct or from retailer More complex, direct or via wholesaler, agent or distributor Purchasing characteristics Low value, high volume or high value, low volume. May be high involvement Similar volume/value. May be high Involvement. Repeat orders (rebuys) more common Product characteristic Often standardized items Standardized items or bespoke for Sale

Ebusiness categories

Evolution of web technologies

Ebusiness- tools and technologies Electronic Data Interchange (EDI) • B 2 B Transactions – – • Trading partners – – • Computer-readable data in standard format Standard transmitting formats benefits • Reduces errors • Avoids printing and mailing costs • Eliminates need to re-enter data Businesses engaging in EDI with each other EDI pioneers (General Electric, Sears, Wal-Mart) • Improved purchasing processes and supplier relationships 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 EFT VPN 15

Ebusiness- tools and technologies Electronic Data Interchange (EDI). . . • Challenges – – – • High implementation cost Expensive computer hardware and software Establishing direct network connections to trading partners or subscribing to value-added network Solutions – – Gradually moved EDI traffic to the Internet Reduced EDI costs 16

Ebusiness Transformation (E)Business Process • Activity: Task performed by a worker – May or may not be related to a transaction • Transaction: exchange of value – Purchase, sale, or conversion of raw materials into finished product • Business processes Also called business method or business function – – ■ Group of logical, related, sequential activities and transactions Collection of related, structured activities or tasks for a particular customer or customers. Break business down into a series of value-adding activities to generate profits, meet firm’s goal 17

Ebusiness Transformation Transforming Business Processes • • Example 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 18

Transaction Costs • Total costs a buyer and seller incur – While gathering information and negotiating purchase-and-sale transaction – Includes: • Brokerage fees and sales commissions • Cost of information search and acquisition 19

Ebusiness Transformation (E)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 ● Instead of copying model, examine business elements ○ Streamline, enhance, replace with Internet technology driven processes Handout- Business Model 20

Ebusiness Transformation Revenue model ● Specific collection of business processes ○ ○ ○ Identify customers Market to those customers Generate sales ● Helpful for classifying revenue-generating activities ○ Communication and analysis purposes 21

E- Merchandising Merchandisers coordinate with buying teams and store managers to sell products Traditional • • • Store design, layout, product display knowledge Salespeople skills- Identify customer needs and find products or services meeting needs Challenging to practice remotely – Transfer merchandising skills to the Web Easier for some products than others Photos, User-generated content, Brand, Context/BI. . . 22

Product/Process Suitability Depend on currently available technologies 23

Product/Process Suitability. . . • 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 product’s 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 24

Product/Process Suitability. . . • 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 25

Advantages • Increases sales and decreases costs • Virtual community: gathering of people online • Increases purchasing opportunities – Identifies new suppliers and business partners – Efficiently obtains competitive bid information – Increases speed, information exchange accuracy – Wider range of choices available 24 hours a day – Immediate access to prospective purchase information Benefits extend to general society welfare • Lower costs to issue and secure: – Electronic payments of tax refunds – Public retirement – Welfare support • Provides fraud, theft loss protection – Electronic payments easier to audit and monitor • Reduces commuter-caused traffic, pollution • Products and services available in remote areas 26

Why Ebusiness? • Cost/efficiency drivers ● Increasing speed with which supplies can be obtained Increasing speed with which goods can be dispatched Reduced sales and purchasing costs Reduced operating costs ● ● ● Competitiveness drivers ● ● ● Customer demand Improving the range and quality of services offered Avoid losing market share to businesses already using ecommerce 27

Reduce Transaction Costs • Change vertical integration attractiveness • Change transaction costs’ level and nature • Example: employment transaction – Telecommuting- May reduce or eliminate transaction costs • Social distancing has increased the costs of in-person interactions A Major Advantage 28

Parties involved in a typical international transaction 29

Strategic Agility- Capability to respond to environmental opportunities and threats to gain competitive advantages

Challenges! Really • Certain types of products – Perishable foods and high-cost, unique items • Measurement- Calculating ROI • Recruiting and retaining employees • Technology and software issues • Cultural differences • Conflicting laws • • Expensive technology Sophisticated skill set Consumers resistant to change Persistent cultural attraction of physical markets and traditional shopping experiences • Persistent global inequality 31

An online marketplace map

Network Economic Structures • Strategic alliances/partnership – Coordinate strategies, resources, skill sets – Well suited to informationintensive technology industries • Strategic partners – Come together for specific project or activity – Intercompany teams • Undertake variety of ongoing activities A Major Advantage 33

Network Economic Structures. . . • Ebusiness makes such networks easier to construct and maintain – Will be predominant in the near future More people or organizations participate in network value of network to each participant increases. E. g. Matrimonial. com. . Knitters organize into networks of smaller organizations – Specialize in styles or designs

Value Chains & Strategic Business Unit Value chain – A set of activities that a firm performs to deliver a valuable product Strategic business unit (SBU) – A combination of product, distribution channel, and customer type – SBU primary activities- Identify customers, design, purchase materials and supplies, manufacture product or create service, market and sell, deliver, provide after-sale service and support Organizing SBU activities to design, produce, promote, market, deliver, and support the products or services 35

Value chain for a strategic business unit 36

Industry Value Chains • Industry value chain refers to value systems • SBUs within an industry • Awareness of businesses value chain activities – Allows identification of new opportunities – Useful way to think about general business strategy 37

E-business is Powerful!

A simple model progress towards e Stage model of e-commerce

MCKINSEY 7 S FRAMEWORK The model is most often used as an organizational analysis tool to assess and monitor changes in the internal situation of an organization. For an organization to perform well, these seven elements need to be aligned and mutually reinforcing.

Enterprise software- categories ● ● Business Intelligence (BI) Customer Relationship Management (CRM) Supply Chain Management (SCM) Enterprise Resource Planning (ERP) - which is a broad category covering: Accounting, Human Resource, Corporate performance and governance, Customer Services, Sales, Procurement, Production, Distribution ● Human Resource Management (HRM) ● Knowledge Management (KM) ●. . . https: //en. wikipedia. org/wiki/Enterprise_software

Operating globally already Challenges Solution Trust Brand Culture & Language Local representatives Think globally, act locally Local language versions Gerber Baby food in jars in Africa! Shopping cart versus shopping baskets, trolleys Government Traditional Guideline, Negotiation Filter Web content Infrastructure Internet cost, Accessibility, Develop? Tariff, Traditional governmental policies 42

Ebusiness Opportunities Reach • Over 1 billion users globally • Connect to millions of products Richness • Detailed product information, Google. Blogs, videos, feeds… • Personalized messages for users Affiliation • Partnerships are key in the networked economy • Intermediary

SWOT Analysis: Evaluating Opportunities Results of Dell’s SWOT analysis ~ SOSTAC is a digital marketing model ~ PEST, VRIO. . . 44

Business Adoption of E-Commerce/Business

Internet Risks – What Can Go Wrong With A Transactional Site?

Ebusiness- tools and technologies • Internet – Changed way people buy, sell, hire, organize activities • Electronic Funds Transfers (EFTs) – Electronic transmissions of account exchange information • External API (Background Services) • Uses private communications networks (VPNs) 48

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 49 E- Business, Ninth Edition

Learning Objectives (cont’d. ) • 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 50

The Second Wave of Electronic Commerce • Four waves based on the Industrial Revolution • First and second wave characteristics – Regional scope • First wave: United States phenomenon • Second wave: international – Start-up capital • First wave: easy to obtain • Second wave: companies using internal funds – Internet technologies used • First wave: slow and inexpensive (especially B 2 C) E- Business, Ninth Edition 51

The Second Wave of Electronic Commerce (cont’d. ) • First and second wave characteristics (cont’d. ) – Internet technology integration • First wave: bar codes, scanners • Second wave: Radio Frequency Identification (RFID) devices, smart cards, biometric technologies – Electronic mail (e-mail) use • First wave: unstructured communication • Second wave: integral part of marketing, customer contact strategies – Revenue source • First wave: online advertising (failed) E- Business, Ninth Edition 52

The Second Wave of Electronic Commerce (cont’d. ) • First and second wave characteristics (cont’d. ) – Digital product sales • First wave: fraught with difficulties (music industry) • Second wave: fulfilling available technology promise • Mobile telephone based commerce (mobile commerce or m-commerce) • Smart phone technology enabling mobile commerce • Web 2. 0: making new Web business possible – Business online strategy • First wave: first-mover advantage E- Business, Ninth Edition • Second wave: businesses not relying on first-mover 53

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 • Technology improvements – Create new products and services E- Business, Ninth Edition 54 – Improved promotion, marketing, delivery of existing

Summary (cont’d. ) • Technology improvements (cont’d. ) – 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 • Electronic commerce E- Business, Ninth Edition 55

Summary (cont’d. ) • 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 – Culture and language E- Business, Ninth Edition 56