Unit 7 E-commerce Basic concepts of e-commerce

Unit 7 E-commerce • Basic concepts of e-commerce • Applications of e-commerce

Starting up • Do you buy over the Net? What goods or services have you brought over the Net? • Name the most popular e-business company in your mind. • Translate the term “电子商务” into English.

Part I Basic concepts

Key concepts • E-commerce – The process of buying, selling, or exchanging products, services, and information via computer networks. • E-business – Application of Internet technologies in the management of day-to-day business processes. – A broader definition of EC, which includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conducting electronic transactions within an organization.

E-business vs. E-commerce • The main difference between them is that ecommerce defines interaction between organizations and their customers, clients, or constituents. On the other hand, e-business is a broader term that also encompasses an organization’s internal operations. • E-commerce describes the buying and selling of products, services, and information via computer networks including the Internet, where e-Business describes the broadest definition of EC. It includes buying and selling of products and services, servicing customers, collaborating with business partners, and conducting other intra-business tasks.

Components of e-commerce • • • To execute those applications, companies need the right information, infrastructure, and support services. As shown: People: Sellers, buyers, intermediaries, information systems specialists and other employees, and any other participants Public policy: Legal and other policy and regulating issues, such as privacy protection and taxation Marketing and advertising: Like any other business, EC usually requires the support of marketing and advertising Support services: Many services are needed to support EC. They range from payments to order delivery and content creation Business partnerships: Joint ventures, e-marketplaces, and partnerships are some frequently occurring relationships in e-business

Discussion • What are the advantages of e-commerce? • What are the disadvantages of e-commerce?

E-commerce: transaction types • Business-to-business (B 2 B) – Business that sells products or provides services to other businesses. – Wal. Mart, GE, Oracle • Business-to-consumer (B 2 C) – Business that sells products or provides services to end-user consumers. – Amazon, Bank of America • Consumer-to-consumer (C 2 C) – Consumers sell directly to other consumers. – e-bay, Taobao

E-commerce: transaction types • Business-to-government (B 2 G) – Government buys or provides goods, services or information to/from businesses or individual citizens • Business-to-employee (B 2 E) – Information and services made available to employees online. • Mobile commerce (m-commerce) – E-commerce transactions and activities conducted in a wireless environment • Collaborative commerce (c-commerce) – Individuals or groups communicate or collaborate online

E-commerce: transaction types • Consumer-to-business (C 2 B) – Consumers make known a particular need for a product or service, and suppliers compete to provide it. • Government-to-citizen/consumer (G 2 C) – A government provides services to its citizens via EC technologies. • Consumer to Government (C 2 G) • Government to Business (G 2 B) • Government to Government (G 2 G)

Internet terms • p. 55 Vocabulary

More terms • Business/revenue model: 商业/经营/盈利模式 – How does a firm make money (generate revenues) – Advertising, transaction fee, sales, subscription, affiliate • Electronic funds transfers (EFT): 电子资金转帐 – Electronic exchange of account information over communications networks. – Online bill payment. • Electronic data interchange (EDI): 电子数据交换 – Electronic exchange of computer-readable data in a standard format between trading partners. – Purchase orders, sales invoice, request for quotes, etc. • Value-added network (VAN): 增值网络 – Third party provider of connection and transaction services to businesses for EDI, EFT, etc. – 通过计算机服务网络, 使不同企业、不同的网络系统可以相互连接，从而使不同形式的数据交换成为可能

More terms • E-CRM – Process of building, sustaining, and improving ebusiness relationships with existing and potential customers through digital media. • SCM = Supply Chain Management – Process of moving goods from customer order through the raw materials, supply, production, and the distribution of products to the customer.

Part II Applications

Examples of e-commerce • • • Internet Advertisement Internet Shop Internet Bank Internet Auction Internet Gambling

Internet advertisement • The most common money making method in the Internet is to establish a popular web site, where other parties are willing to advertise on the web site. • For example, you can provide an Internet search engine for Internet surfers to search some specific information in a fast manner. • Your web site may then receive a number of hits per day and could therefore become an ideal place for advertising. How much money you can make is dependent upon how popular your site is. • This kind of money making methods may not require complex client/server, but you need to have bright marketing thinking to find a hot topic for your site.

Internet shop • With the growth of the Internet, there are more and more on-line shops available in the Internet. • An Internet shop functions like a normal shop, where you buy goods by cash, cheque, or credit card. • Most Internet shops use credit card based payment systems. That is, you pay your goods by sending your credit card information to the vendor through a secure channel provided by the Internet shop. • Of course, the security and fairness are the key issues to enable a payment.

Internet banking • More and more banks now consider the Internet banking as a "must go" way to further reduce banking cost. • However, many people are still cautious about Internet banking due to security fears. • If security is reassured, more people will start to use the Internet as a faster and more convenient way of banking. • An Internet banking system is a client/server system. The bank is the server who provides the banking service. • When a customer opens the client page on a banking site, what he or she can do is dependent on the service provided. The services include: Checking your account balance. Transferring your money from one account to the other. Doing digital cash transaction: Withdraw digital cash Deposit digital cash

Internet auction • The auction server provides the service for bidders to submit their bids. A typical Internet bidding protocol looks like: • 1. Auction Server: provide auction information on the Web. • 2. Bidder: cast its bid to the server via a secure channel. • 3. Auction Server: open bids after the bidding time is over and announces the highest bid (seller-oriented auction). • 4. Bidder: send its payment to the Server via a secure channel.

Internet gambling • Internet gambling is very much dependent upon the electronic commerce. • The most on-line gambling systems use the existing electronic commerce protocols. • Therefore, an Internet gambling server must provide two basic services, i. e. , game service and ecommerce service.

How a transaction takes place?

1 Consumer finds something she wants to buy at a “shop” on the Net 6 Verification and remittance of actual funds Shop 2 Consumer sends on enciphered request for payment to her bank The electronic bank sends back a secure packet of e-cash 3 Consumer’s Bank Merchant Server 4 Consumer sends the ecash to the shop Shop 5 Consumer Public Key The shop sends the packet of cash to its bank Merchant Bank

Trading on the Internet • Listening p. 54 “Trading on the Internet”

Major players

Success stories: amazon. com • • Opened: July 1995 Employees: > 9, 000 worldwide Revenue: $6. 92 billion net sales in 2004 Customers: Nearly 49 million active accounts

Success stories: Dell Computers • Dell Computers made waves in industry circles when they announced that they sold over a billion dollars worth of Personal Computers directly off the Web in 1997. – Moving routine interactions to the Web – 50, 000 customers use Dell’s web site to check their order status each week. – 90, 000 S/W files are downloaded. (It costs $150, 000 a week. ) – 200, 000 customers access Dell’s trouble-shooting tips online.

Business model

Why Did the “. com” Companies Fail? • Flawed business model – Companies view the technology as their business, rather than having a business – Lose money on individual transactions • Amazon. com loses almost $3 per order on multi -product orders – Lack of control over supply of what they sell • Priceline. com – All the good ideas duplicated by established concerns with deep pockets and staying power

Five basic rules e Business rules Five rules need follow if you want to be profitable network business : 1. If you are interested in a market and no competitors yet, but the potential market volume is not significant. Try to be the biggest e Business player. 2. If you prefer enter a e-market, and the overall market is large enough. Then you make a quick enter and create your own advantage. 3. If the e-market large enough, but has a very strong competitor inside. Then you use the model to subvert their profitability.

Five basic rules e Business rules 4. If the e-market is not big, but has a very strong competitor inside. Well, you just make your own personal website. 5. If you don‘t clear about the market, think about that who would be your first clear customers.

Homework • Reading pp. 56 -57 “Using the Net”