Chapter 5: E-Commerce

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Ryerson University
Information Technology Management
ITM 102
David Atkinson

CHAPTER 5 E-COMMERCE E-COMMERCE DEFINED • E-commerce: use of information systems, technologies, and computer networks by individuals and organizations to carry out transactions in order to create or support the creation of business value • Includes all types of computer networks, transactions, and business relationships and models TYPE OF E-COMMERCE TRANSACTIONS TRANSACTION DESCRIPTION Business-to-customer (B2C) Online equivalent of retail store as well as other services / Business-to-business (B2B) Electronic exchanges between companies (worldwide retail exchange) Business-to-government Online sales to government agencies, as well as electronic payment of (B2G) taxes Consumer-to-government Electronic payment of taxes as well as purchase of various types of (C2G) licences Consumer-to-consumer Use of online auctions / E-COMMERCE AND PRODUCTS PHYSICAL AND DIGITAL • Products divided into two primary categories: 1. PHYSICAL anything that require actual shipment of item from a central distribution point to the buyer and requires off-line supply chain to handle the sales, order processing, and delivery of goods 2. DIGITAL over the Internet or other computer networks and requires use of a completely IT- enabled supply chain • Difference is that physical still needs back-office elements to handle order which requires substantial technology interfaces between Web and computerized business systems (web integration) • Digital does not offer “return” when something is successfully downloaded because electronic products or services have immediate value and cannot be off-loaded (deleted or disabled) by vendor E-COMMERCE BUSINESS MODELS • E-commerce business model: combines specific type of website with successful revenue model that produces profits for website owner • Answer for online retailer: sell good products at good price, delivered on time, that will leave enough margin (difference between selling price and COGS) to make reasonable profit to pay website’s operation • Business models deal with how Internet companies, and traditional companies using Internet, can make money online • Having great e-commerce business model will not generate profit if not associated with website that brings in customers or visitors THE E-COMMERCE ADVANTAGE • Frictionless transactions is the ability of consumer to move from thought to action (i.e. buying to instantly fulfilling the product) • Creates new business opportunities to operate at lower costs by easing burden of supply chain electronically • Consider technology, competitive issues, and strategy associated with e-commerce has unique benefits: universal standards, global reach, ubiquity and accessibility, customization, higher information density • Marketplace becoming marketspace because of direct access to Internet in varying degrees • Internet users with significant buying power is often concentrated because those with Internet access often represent more economically advantaged economic class overall • Perfect market is an ideal situation that theoretically produces highest consumption at lowest price for most goods INFORMATION CLUTTER • Information density: quality and quantity of information about products and services of interest to them • Ability of buyers to obtain endless amount of information creates new business challenges • Some businesses respond by creating business value based on customization-oriented approach linked to e-commerce • Must make website easy for potential customers to find it: ONLINE ADVERTISING • Linking paid advertising to searches of keywords by consumers • Cost per click (CPC) maximums, work almost like an auction of those competing for placements against popular words and phrases • Banner ad placements SEARCH ENGINE OPTIMIZATION • Spiders crawl the web and catalogue its content into labels and ranks • Insure site uses technologies that are easy to search, creating lots of links between your site and others, and making good use of meta-tags and content density to appear like a site that offers information and value PARTNERING AND TAFFIC TRADING • Online, partner with other sites and each of you can cross-list others’ website and trade potential traffic that comes to one site • Easy to track origin of traffic and reward partner site with commission or fee related to sales it generates for you or vice-versa; low-cost • Mass customization: ability to create custom products or services on-demand • Personalization: marketing message that a business customizes for each potential customer’s interests, based on searching, browsing, and buying habits • Possible because of previously shared information through website registration WEB USAGE AND STATISTICS • Pay attention to how traffic that finds your site uses your site • Uses web statistics reporting software programs or SaaS to get web metrics for various timeframes • EX. number of unique visits, number of page views, where user is coming from, which page users exit from site, which search engines visitors use to find website E-COMMERCE COMPETITIVE DIFFERENCE • E-commerce affects competition between organizations: • Reducing barriers to market entry • Preventing company from “owning” the market • Enhancing collaboration/alliances • Multiplying market niches • Changing marketplace drivers (i.e. limitations such as time, distance, and price) • Co-operative website: owners co-operate by advertising on the same site • Niche markets: one area where e-commerce has shown itself to be superior to almost any existing form of marketing E-COMMERCE AND BUSINESS STRATEGY • Business strategy is a plan, pattern, position, and perspective • Strategy emerges and evolves over time in natural response to constantly emerging competitive landscape and individual performance level of competitor in that market space • May start a new perspective (vision, direction) that calls for a certain position • E-commerce strategy: general term of how a business intends to use computer web-based networks and information systems to compete in global marketplace • Meaningful e-commerce strategy requires two di
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