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Chapter 9

BUS 237 Chapter Notes - Chapter 9: Computer Hardware, Linkedin, Viral Marketing


Department
Business Administration
Course Code
BUS 237
Professor
Zorana Svedic
Chapter
9

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BUS 237 CHAPTER 9
Ecommerce, Social Networking, and Web 2.0
Ecommerce is the buying and selling of goods and services over public and private computer
networks.
Ecommerce is a subset of the broader definition of electronic business, which involves
application of information and communication technologies to the conduct of business
between organizations, company to consumer, or consumer to consumer.
Ecommerce has many implications.
The emergence of ecommerce has provided much more information for consumers,
through research, referral website, etc.
From a technological perspective, additional infrastructure is required by organizations
to support ecommerce. The technological issues are not usually the biggest
consideration for large organizations. However, smaller organizations may have
difficulty keeping up with this technological change. One option with the smaller
companies is to purchase the technologies as business services. Example: goods and
services provided by smaller companies may be listed on Amazon, payments may be
processed through PayPal, etc.
Ecommerce requires an increased coordination between organizations and systems. In
the case of large companies, the linkages required by ecommerce could be extensive,
especially when partners are involved. Inventory, for example, will need to be updated
and require communications among the supply chain management (SCM) system, the
customer relationship management system (CRM), and the accounting system. In short,
ecommerce requires interconnectedness of the entire enterprise resource planning
(ERP) process.
Ecommerce has large implications for management and governments. Before the EMS
are securely connected, organizations have to ensure that all aspects of businesses
operate smoothly and do not operate at cross purposes. Companies need to ensure that
end-to-end consumer security is enabled and that the information is only shared
appropriately and with consumer permission.
Merchant companies are defined as those that take title to the goods they sell-they buy
goods and resell them. Nonmerchant companies are those that arrange for the
purchase and sale of goods without ever owning or taking title to those goods. Merchant
companies sell services that they provide; Nonmerchant companies sell services
provided by others.
Ecommerce Merchant companies:
3 main types of merchant companies:
1. Those that sell directly to consumer
2. Those that sell to companies
3. Those that sell to government
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Business-to-consumer (B2C) ecommerce concerns sales between a supplier and a retail
customer (the consumer). A typical information system for B2C provides a web-based
application or web storefront by which customer enter and manage their profits.
Business-to-business (B2B) ecommerce refers to sales between companies. Raw materials
suppliers use B2B systems to sell to manufacturers, manufacturers use B2B systems to sell
to distributors, and distributors use B2B systems to sell to retailers.
Business-to-government (B2G) ecommerce refers to sales between companies and
governmental organizations. A manufacturer that uses an ecommerce site to sell computer
hardware to a government ministry is engaging in B2G commerce. B2C applications first
captured the attention of mail-order and related businesses. However, companies in all
sectors of the economy soon realized the enormous potential of B2B and B2G ecommerce.
Nonmerchant Ecommerce:
The most common Nonmerchant ecommerce companies are auctions (such as eBay)
and clearinghouses. Ecommerce auctions match buyers and sellers by using an
ecommerce version of a standard auction. This ecommerce application enables the
auction company to offer goods for sale and to support a competitive bidding process.
The best-known auction company is eBay.
Clearinghouses provide goods and services at a stated price and arrange for the delivery
of the goods, but they never take title.
Other examples of clearinghouse businesses are electronic exchanges that match
buyers and sellers; the business process is similar to that of a stock exchange. Sellers
offer goods at a given price through the electronic exchange, and buyers make offers to
purchase over the same exchange. Price matches result in transactions from which the
exchange takes a commission.
BENEFITS OF ECOMMERCE:
Ecommerce leads to greater market efficiency
1. Disintermediation:
It is the removal of intermediaries between parties. Elimination of the intervening layers
between manufacturers and end consumers facilitated by direct website layers. The general
results of disintermediation are higher revenues for manufacturers and lower consumer
prices. However, there is a negative implication as well. If consumers keep buying online,
the lage aouts of a out’s eoo ae disupted.
Manufacturers have found it more difficult to eliminate intermediaries, and although
distribution channels have become more efficient, new players have inserted themselves
into the sales and distribution processes (this process is called intermediation or sometimes
reintermediation). Exepedia.com, Trivago.com, etc. are some examples.
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2. Ecommerce also improves the flow of price information.
As a consumer, you can go to any number of websites that offer product price comparisons.
The improved distribution of information about price and terms enables you to pay the
lowest possible price and serves ultimately to remove inefficient vendors. The market as a
whole becomes more efficient.
Fo the selle’s side, eoee podues ifoatio aout pie elastiity that has not
been available before. Price elasticity measures how much demand rises or falls by change
i pie. I this a, the opa a udestad oe aout aious ustoes’
willingness to pay a particular price, or what is often called the shape of the price elasticity
curve.
Managing prices by direct interaction with the customer yields better information compared
ith aagig pies  athig opetito’s piig.
The challenges of ecommerce:
Companies need to consider the following economic factors before branching out to
ecommerce:
1. Channel conflict:
This refers to the conflict between different channels of distribution. If the value of the lost
sales is more than the value of a B2B, B2G or B2C transaction, then ecommerce is not a
good solution.
2. Price conflict:
When a business engages in ecommerce, it may also cause price-conflict with its traditional
channels. Because of disintermediation, the manufacturer may be able to offer a lower price
and still make a profit.
3. Logistics expense:
The existing distribution and retailing partners do provide value; they are not just a cost.
Without them, the manufacturer will have the increased logistic expense of entering and
processing orders in small quantities. If the expense of a single-unit order is the same as
that for processing a 12-unit order, the average logistic expense per item will be much
higher for goods sold via e-commerce.
4. Customer service expense:
These expenses are likely to increase for manufacturers that use ecommerce to sell directly
to consumers (B2C). The manufacturer will be required to provide service to less-
sophisticated users and on a one-by-one basis. Such services require additional training and
expense.
5. Showrooming:
A growing issue for merchants with traditional stores is that of showrooming. Showrooming
occurs when a customer learns about or tries a product or service in the high cost bricks-
and-mortar retail store while completing the sales transaction at the low-cost internet sales
channel of another retailer.
Online purchases are often price sensitive, particularly when the product is interchangeable
and there are limited expectations for service.
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