Introduction to e-Commerce

Week of May 31 June 9

Categories of e-Commerce:
o

Electronic commerce includes shopping on the World Wide Web as well as

activities such as businesses trading with other businesses or the government,
etc., and is broken down by the authors into five categories (p. 5):
1. Business-to-consumer (B2C) occurs when businesses sell finished products
or services to individual consumers (pp. 5,7).
2. Business-to-business (B2B) occurs when businesses sell unfinished materials,
products, or services to other businesses (pp. 5,7).
3. Business processes that support buying and selling activities includes the
maintenance and sharing of information with their customers, suppliers,
employees, and partners. These are processes that help organizations work
more efficiently (pp. 5-7).

A transaction is an exchange of value, such as a purchase, a sale, or the

conversion of raw materials into a finished product.

Business processes are the group of logical, related, and sequential

activities and transactions in which businesses engage.

4. Consumer-to-consumer (C2C) occurs when individuals buy and sell items

among themselves. Online auctions such as eBay would be perfect examples
(pp. 7-8).
5. Business-to-government (B2G) includes business transactions with
government agencies. Businesses pay taxes, file reports, or sell goods and
services to government agencies (pp. 7-8).
6. Instructors note: The authors fail to mention a sixth category of e-Commerce,
government-to-government (G2G). This includes transactions between one
government agency and another.

Older e-Commerce Technologies:

o

It is important to note that commerce was conducted online before the popularity
of the World Wide Web through technologies such as EFT and EDI.

Introduction to e-Commerce

1 of 6

Electronic Funds Transfers (EFT) are electronic transmissions of account

information over private communications networks (p. 8).

Electronic data interchange (EDI) occurs when one business transmits computerreadable data in a standard format to another business. An example might be
when Wal-Mart sends an online purchase order to a vendor. The vendor receives
the order online and ships the product to Wal-Mart. Notice how in this process
no paper ever changes hands (pp. 8-9).

History of e-Commerce:
o

First Wave:

Between the mid-1990s and 2000, e-Commerce grew rapidly. In this

period, 12000 e-Commerce sites were started and $100 billion was
invested (p. 9).

In this first wave, most of the sites were based on bad ideas (p. 9).

In the first wave, most of these businesses were dependent on online

advertising (p. 12).

In the first wave, many companies and investors were particularly

interested in establishing the first-mover advantage. Often, these
companies jumped into volatile markets trying to establish first-mover
advantage (p. 12).

In the first wave, the technologies being used were slow and inexpensive,
such as dial-up modems (p. 11).

Dot-com Bust:

Between 2000 and 2003, more than 5000 of these companies went out of
business (p. 9).

Second Wave:

The second wave of e-Commerce began in 2003 (p. 4).

The second wave is more international in scope (p. 11).

Introduction to e-Commerce

2 of 6

The second wave of e-Commerce has seen established companies

(instead of new ones) look to e-Commerce to carefully and steadily grow
their company (p. 11).

The second wave of e-Commerce is more dependent on companies

taking advantage of the number of consumers with broadband
connections (p. 11).

The second wave of e-Commerce has seen companies take advantage of

new technologies (such as RFID, smart cards, biometrics) to better
manage inventory, share information, and ship products more efficiently
thus leading to higher levels of customer satisfaction (p. 11).

The authors predict that smaller companies (fewer than 200 employees)
will have a much more prevalent role in the first wave (p. 13).

Advantages of Electronic Commerce:

o

Advantages for the seller:

Increases sales opportunities by identifying new suppliers and business

partners (p. 17).

Companies can get better prices for goods and services by accepting
competitive bids (p. 17).

Reduces costs by performing business processes online such as sales

inquiries, price quotes, order-taking, and inventory tracking (p. 17).

Advantages for the buyer:

Increases purchasing opportunities by providing a wider range of choices

than traditional commerce because buyers can consider many different
products and services from many different sellers (p. 17).

Varying levels of information about products and services is available 24

hours-a-day, every day (p. 17).

Digital products such as software, video, music, or images can be

downloaded immediately through the Internet thus reducing shipping
costs and time spent waiting for the product (p. 17).

Introduction to e-Commerce

3 of 6

Facilitate the electronic payment of bills, the monitoring of bills, the

reception of payments, etc., and things that make peoples lives easier (p.
17).

Provide products and services available in remote areas (p. 18).

Disadvantages of Electronic Commerce:

o

It can be challenging to begin a business. Many products and services require a

large number of buyers equipped and willing to buy products online. There are
some buyers unwilling to do some things online. Some people want to deal in
person (pp. 18-19).

It is hard to quantify costs and benefits because technologies change so often (p.
19).

Many businesses face cultural and legal obstacles to conducting electronic

commerce (p. 19).

There are a myriad of privacy issues (p. 19).

Basic Economic Terminology:

o

A market is an environment in which potential sellers of a good or service come

into contact with potential buyers and some medium (such as currency or trade)
of exchange is available (p. 20).

Transaction costs are the total of all costs that a buyer and seller incur as they
gather information and negotiate a transaction (p. 21).

It includes such things as brokerage fees, sales commissions, searching

for product information, equipment, salaries, and wages.

Hierarchical business organizations are firms that include multiple levels with
varying responsibilities starting with a president at the top and moving downward
to vice presidents, middle managers, and eventually low-level employees such as
clerks (p. 20).

The downward flow of information is thought to lower transaction costs.

E-Commerce is thought to assist in the coordination of this downward
flow of information.

Introduction to e-Commerce

4 of 6

A strategic business unit is a unit within a company that is organized around a

specific combination of product, distribution channels, or customer type (p. 23).

A firms transaction costs are lowered because one unit within a firm is
allowed to negotiate with another within the firm.

In this network economic structure, companies coordinate their strategies,

resources, and skill sets by forming long-term, stable relationships with other
companies through strategic alliances or strategic partnerships (p. 24).

E-Commerce makes these alliances easier to construct or maintain

through information sharing (p. 25).

As more and more businesses or organizations join a network, the value

of each participant increases (p. 25).

The SWOT analysis stands for strengths, weaknesses, opportunities, and threats.
It is a systematic approach for an organization to utilize its strengths, work
around weaknesses, identify opportunities, and avoid threats (pp. 30-31).

International Nature of e-Commerce:

o

The Web is international and thus e-Commerce is international. To operate in

this environment, a business must address a number of specific issues:

Trust. Shoppers may not perceive foreign businesses as trustworthy as

businesses from their homelands (pp. 32-33).

Language. 50% of Internet users do not read English and 75% of users
are outside the United States.

Culture. An example would be Asian cultures not valuing private

property in the same way as Europeans and North American cultures.
Another example given by the textbook is that Europeans dont use
shopping carts and may not recognize a Shopping Cart icon on a Web
site (pp. 34-36).

Government. Some countrys governments are much more restrictive in

what is allowed on the Internet than others (pp. 36-38).

Introduction to e-Commerce

5 of 6

Infrastructure. Infrastructure includes the computer and software

connected to the Internet. The level of infrastructure varies in different
parts of the world (pp. 38-39).

Introduction to e-Commerce

6 of 6