Chapter Four

Navigating the World of e-Business

Defining e-Business

– The organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet

Creating Profit with e-Business 2 ways to do it -raise profits or cut costs

• Revenue Growth-Raise profits– New revenue stream

A source of money flowing into a firm (store sales, home parties, b2b, phone sales) !! Careful re: cannibalization

– Sell more goods due to 24/7 nature of e-shopping

– Sell more in physical stores - product info is available online

– Collect advertising fees from ads placed by outsiders on

company’s web page

– Charge subscriber fees for data

Creating e-Business Profit

• Expense Reduction -Cut costs

– Reduce costs of dealing with customers - information is delivered via self service

– Reduce the need for as many physical store locations

– Reduce transaction costs- ads online cause less mailers and printing fees, and they update quickly

– Provide customer assistance without the salary expenses of live interaction (e-mail contact)

Advantages of e-Business

• Easily serve small and dispersed markets

• Allows convenient communication any time or place

• Provides prompt and correct information

• Shopping and profit making anytime; anywhere

• Cheap way to advertise goods & promote the firm

• Revenue source through ads placed on your site

Disadvantages of e-business

• Requires customer to have specialized knowledge

• Users must have a computer and internet access

• Increased competition from distant sellers

• Fear of identity theft

A Framework for Understanding e-Business

– Original use of internet was military messaging in event of war

– Before 1994 - NSF restricted internet use to email and file sharing - no selling

• Digitized data-the web’s universal language

– Information is converted to a type of signal telecommunications equipment can understand

– 1’s & 0’s - like Morse code - on or off

The Three Primary Groups of e-Businesses

• 1. Hardware manufacturers. They make the

gadgets used to access the internet.• IBM, Dell, Intel

• 2. Software producers. They produce the programs needed to decode and manipulate the digitized language of the www.

• Ex - Microsoft Explorer, Google, Outlook.

• 3. Online sellers and information providers • Amazon or news sites.

Business-to-Business Model (B2B)

– Firms that use the Internet to conduct business with other businesses - vast majority of e-traffic

1.Facilitate sales transactions for completed merchandise between businesses

2.Elicit bids and offers from potential suppliers of parts to your finished product

3.Learn about customer’s rules and procedures for placing orders & doing business.

Cost savings: reduced labor to enter & track orders & less order entry errors

Business-to-Consumer Model (B2C)

– Firms that conduct e-business with individual buyers

– Success comes from understanding the customer -is he the same as or different from the in-store shopper

– Must ask if consumer:• Is comparison shopping only• Is ready to buy but wants to see what store

will carry items he wants• Typically buys your item online or in a store

Other E-Business Models

Advertising – Ads displayed on a firm’s website for a fee

Brokerage – Sites where buyers an sellers are brought together to exchange goods and services

Subscription – Content available on a pay per view basis

Ethics, Legalities and Social Responsibility

Opportunity determines poor behavior & the internet provides this opportunity through anonymity

– Privacy issues• Cookie: A small piece of software sent by a website

that tracks an individual’s Internet use. It produces valuable customer info, but is seen as an invasion of privacy because its unauthorized.

– Questionable content & spam pornography and hate literature can be blocked but not removed

Subject Matter of Spam

Racial

Financial

Spiritual

Gambling

Adult

Education

Commercial

Health

Social and Legal Concerns- Confidentiality

– Monitoring employees• Log-file records: Files that store a record of the

websites visited

– Using and/or selling customer information• Data mining: The practice of searching through

data records looking for useful information.

ie-registration before release of info

then selling info to interested buyers

Social and Legal Concerns-Cybercrime

– Computer viruses• Software codes that disrupt normal computer

operations

– Fraud and larceny • buy goods with bogus credit cards

Secure electronic transaction (SET)

• An encryption process that prevents merchants from seeing transaction data like a customer’s credit card #

Social and Legal Concerns-taxes and copyrights

• Digital property & copyright concerns

– Easy to copy & distribute content without permission

– Easy to copy & use company name or trademark without permission

• Government regulation and taxation– Online vendors (Craigslist sellers) not taxed like

mail-order companies

– Quality control of restricted products (such as prescriptions) sold via cyberspace

The Future of e-Business• Opportunity for growth:

– Only 1 billion of the world’s 6 billion people are online

– The global Internet user spends an average of 7.6 hours online each month

– As of 6/07, there are 232 million U.S. online users (70%),

which is only 20% of the world’ usage