CH 5 E Commerce History of e commerce E commerce process of buying selling or exchanging products services and information via computer networks The Internet first enhanced this type of commerce It allows customers consumers and companies to form relationship that would be impossible without the Internet Consumers from all over the world can connect and do business within a few hours However there must be a path to profitability P2P formal business plan that outlines key business issues like customer targets marketing strategies operations strategies etc in order to be successful First wave of e commerce B2C e commerce an individual customer ordering a product from a website such as Amazon This started in the early 1990s when e commerce started changing relationships by allowing manufactures and customers to do business between themselves which was done through disintermediation businesses contacted the customer in ways they could not before The costs of transactions decreased due to e commerce because there is always a cost associated with a transaction Being a first mover in e commerce had several advantages because customers would come to your business since no others were in the market It also allowed you to establish a reputation so when other businesses jumped on the e commerce bandwagon customers would not want to deal with switching costs such as time effort and money Lastly first movers could create network effects such as the telephone because the more people you have involved with something the more valuable it is One person having a phone does that person absolutely no good if they cannot call anyone else Successful e commerce businesses AOL Yahoo Amazon eBay Unsuccessful e commerce businesses Xanga Myspace How the Internet Web changed commerce The Internet allows excessive experimentation complement not substitute resources and makes strategy more important than ever Ex Of a failed website Disobey com bad execution of ideas and Staples operates as 2 separate stores The customer could not return an item purchased online to a physical store 1 The role of strategy The Internet and e commerce makes the role of strategy more important than ever This will be demonstrated in the explanation of Kozmo com and its failure described below Why did many early dot coms fail Businesses should not compete strictly on efficiency or price but should implement the path to profitability strategy Businesses need to provide complementary products services and not implement a substitution strategy Ex Staples customer could not return an item purchased online to a physical store Businesses need to confirm that there is a need for the product service they want to provide Ex Ice Cream Delivery impulse buy people want to purchase it and receive it within a short amount of time unlike the business example talked about in class when the ice cream was delivered days after purchased Businesses need to create a product that has an economic value and becomes a commodity to the consumer Businesses need a business plan and to follow through with it Businesses need to not downplay traditional metrics Ex Business failed because they claimed they were successful but were sacrificing profit E commerce raises the bar Never developed a clear path to profitability How e commerce has changed the way we shop The Internet is not always considered a good thing It may be helpful for consumers but ultimately lowers profitability by changing how industries run their business The Internet is considered the great leveler by speeding up the process of competitive leveling and by mass replication which ultimately does not help the economy The Internet has created new industries and changed industries that are already in business The key question is How should we do e commerce Difference between e commerce and e business E commerce or exchanging products services and information utilization of the Internet in the process of purchasing selling 2 E business business partners and the use of electronic transactions the process of servicing customer s needs getting together with What are the different e commerce business models business sells business sells individual sells o Business to Business B2B e commerce o Consumer to Business C2B e commerce o Business to Consumer B2C e commerce o Consumer to Consumer C2C e commerce products services to another business Ex Gates Rubber Company selling belts to General Motors products services to individuals Ex You ordering a product from Amazon product services to business Ex Fotolia website where you can post pictures videos and businesses will look through them and purchase ones they like products services to another individual Ex You put an item up for sale on eBay and another individual purchases it products services to a government entity Ex Lockheed Martin selling products to U S Department of Defense o Consumer to Government C2G e commerce products services to a government entity C2G is very uncommon and the individual has to register in order to do this type of e commerce When involved in this type of e commerce the individual is technically not an individual anymore but an organization government entity sells products services to a business Ex Small Business Administration providing small businesses with loans o Business to Government B2G e commerce o Government to Business G2B e commerce individual sells individual sells business sells o Government to Consumer G2C e commerce exchange between a o Government to Government G2G e commerce government entity and its consumers Ex Paying taxes and registering vehicles government entity electronically exchanging products services to another government entity This may be within a nation s government or between other nation s governments How e commerce customers perceive value B2C Convenience vs Specialty o Convenience lower price and bought more often Ex Groceries o Specialty higher price and bought less often Ex Computer B2C Commodity like and Digital o Best type of product to sell 3 o Commodity These products are the same no matter where you buy o Commodity compete based on price ease and speed of delivery ease of ordering and return policy o Commodity goals minimize price for buyer and minimize internal them Ex Books costs for seller o Digital goals eliminate shipping costs by making transactions complete via the Internet Ex Music B2C Mass Customization o Definition the ability of an organization to give its customers the