CH. 5 E-CommerceHistory of e-commerce- E-commerce: process of buying, selling, or exchanging products, services, andinformation 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 1990swhen 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 barNever 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: utilization of the Internet in the process of purchasing, selling, or exchanging products, services, and information2- E-business: the process of servicing customer’s needs, getting together with business partners, and the use of electronic transactions What are the different e-commerce business models?o Business to Business (B2B) e-commerce: business sells products/services to another business. (Ex. Gates Rubber Company selling belts to General Motors) o Business to Consumer (B2C) e-commerce: business sells products/services to individuals. (Ex. You ordering a product from Amazon) o Consumer to Business (C2B) e-commerce: individual sells product/services to business. (Ex. Fotolia – website where you can post pictures/videos and businesses will look through them and purchase ones they like)o Consumer to Consumer (C2C) e-commerce : individual sells products/services to another individual (Ex. You put an item up for sale on eBay and another individual purchases it)o Business to Government (B2G) e-commerce: business sells products/services to a government entity. (Ex. Lockheed Martin selling products to U.S. Department of Defense)o Consumer to Government (C2G) e-commerce: individual sells products/services to a government entity. C2G is very uncommon andthe 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.o Government to Business (G2B) e-commerce : government entity sells products/services to a business. (Ex. Small Business Administration providing small businesses with loans)o Government to Consumer (G2C) e-commerce: exchange between a government entity and its consumers (Ex. Paying taxes and registering vehicles)o Government to Government (G2G) e-commerce: 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. Specialtyo Convenience: lower price and bought more often (Ex. Groceries)o Specialty: higher price and bought less often (Ex. Computer)- B2C: Commodity-like and Digitalo Best type of product to sell3o Commodity - These products are the same no matter where you buy them (Ex. Books)o Commodity compete based on: price, ease and speed of delivery, ease of ordering,