The Second

INTRODUCTION Wave of Global

E-Business
e

Traditional Marketing E-marketing

Consumer Interaction Passive Active

Sales-force driven 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
What happened?
Who is involved?
When did it take place?
Where did it take place?
Why did that happen?
How did it happen?

A case in point- innovation and opportunity

Search Engines, Work, Entertainment-- Life Style
How has Google innovated in search and its business model?
Ecommerce history
• “Dot-com boom”
– Mid-1990s 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?
 Growth of B2C e-commerce
Economic Downturn
● 2020+ Covid
● 2008 Financial Crisis

SOURCES: eMarketer, Inc., 2009a;

U.S. Census Bureau, 2009b;

Growth of B2B e-commerce

E-business Innovation • C2C Transport
Online class

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
Sell-side
B2B
B2C
 B2B and B2C Characteristics
Characteristics B2C (Consumer) B2B

Proportion of e-buisness adopters Low to medium High to very high

Complexity of buying decisions Relatively simple – individual and More complex – buying process
influencers involves users, specifiers, buyers,
etc.

Channel Relatively simple – direct or from More complex, direct or via

retailer wholesaler, agent or distributor

Purchasing characteristics Low value, high volume or high Similar volume/value. May be high
value, low volume. May be high Involvement. Repeat orders (rebuys)
involvement 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)

• B2B Transactions
– Computer-readable data in standard format
– Standard transmitting formats benefits
• Reduces errors
• Avoids printing and mailing costs
• Eliminates need to re-enter data
• Trading partners
– Businesses engaging in EDI with each other
– EDI pioneers (General Electric, Sears, Wal-Mart)
• Improved purchasing processes and supplier relationships
• Value-added network (VAN) [More on B2B Chapter]
–
EFT
Independent firm offering EDI connection and transaction-forwarding services
– Ensure transmitted data security
– Charge fixed monthly fee plus per transaction charge
V
A VPN
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N
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

V
A
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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
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Ebusiness Transformation

Transforming Business Processes

• Example business processes
– Purchasing raw materials or goods for resale
– Converting materials and labor into finished goods
– Scheduling transportation for delivery (logistics)
– Hiring and training employees
– Managing business finances
• Identify processes benefiting from technology
– Uses of Internet technologies
– Improve existing business processes, identify new business
opportunities, adapt to change

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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
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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 and other technology

Handout- Business Model

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Ebusiness Transformation

Revenue model
● Specific business process(es)
○ Identify customers
○ Market to those customers
○ Generate sales/revenue

● Helpful for classifying revenue-generating activities

○ Communication and analysis purposes

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 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 ...

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Circa 2010

Product/Process Suitability
Depend on currently available technologies
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 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
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 Advantages
• Increases sales and decreases costs
• Virtual community: gathering of people
online
• Increases purchasing opportunities
– Identifies new suppliers and partners
– Efficiently obtains competitive bid
– Increases speed, information exchange
accuracy
– Wider range of choices
– 24 hours a day
– Immediate access to prospective
purchase information
Benefits extend to general society welfare (G2X)
• 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
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 Why Ebusiness? Drivers
• Cost/efficiency drivers Competitiveness drivers

● Increasing speed with which supplies can be ● Customer demand changes

obtained
● Increasing speed with which goods can be
dispatched
● Reduced sales and purchasing costs
● Reduced operating costs
● Improving the range and quality of
services offered
● Avoid losing market share to
businesses already using e-commerce

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 Reduce Transaction Costs
A Major Advantage
• 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

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Parties involved in a
typical international
transaction

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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
• Retraining w/ new technology
• 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
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An online
marketplace map
 Network Economic Structures
A Major Advantage
• Strategic alliances/partnership
– Coordinate strategies,
resources, skill sets
– Well suited to information-
intensive technology industries
• Strategic partners
– Come together for specific
project or activity
– Intercompany teams
• Undertake variety of
ongoing activities
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 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 Knitters organize into networks of smaller
increases. E.g. Matrimonial.com .. 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, Organizing SBU activities to
purchase materials and supplies, manufacture design, produce, promote,
product or create service, market and sell, deliver, market, deliver, and support the
provide after-sale service and support products or services

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 36
Value chain for a strategic business unit
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

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E-business is Powerful!
 A simple model progress towards e

Stage model of e-commerce

 MCKINSEY 7S 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 & Local representatives

Language 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
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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 ...
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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)

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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 50
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 51

 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 B2C)
E- Business, Ninth Edition 52
 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
E- Business,•Ninth
First wave:
Edition online advertising (failed) 53
 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
• Second wave: businesses not relying on first-mover
E- Business, Ninth Edition 54
 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
– Improved promotion, marketing, delivery of existing55
 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 56
 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
E- Business, and language
Ninth Edition 57