Chapter 7E-Business: Doing Business Online

Learning Goals

Define e-business and discuss how it can help achieve business success.

Distinguish between a corporate and a marketing Web site.

List the major forms of B2B e-business.

Explain B2C e-business and identify the products most often sold online.

Describe some of the challenges associated with e-business.

Discuss how organizations use Internet communications to advance their objectives.

Discuss Web sites and identify methods for measuring Web site effectiveness.

Explain the global scope of e-business.

1

2

3

5

6

7

4 8

WHAT IS E-BUSINESS?

Electronic business (e-business) Conducting business via the Internet.

• E-tailing, or virtual storefronts on Web sites.

• Online business-to-business transactions.

• Electronic data interchange (EDI), the business-to-business exchange of data using compatible software.

• E-mail, instant messaging, and other Web-enabled communication tools and their use as media for reaching prospective and existing customers.

• The gathering and use of demographic, product, and other information through Web contacts.

Capabilities and Benefits of E-Business

• Global reach. The Net allows goods and services to be sold to customers regardless of geographic location.

• Personalization. Companies can begin the production process when an order is received to better satisfy customer needs and sharply reduce inventory.

• Interactivity. Customers and suppliers negotiate prices online, resulting in an ideal product at the right price that satisfies both parties.

• Right-time and integrated marketing. Online retailers provide products when and where customers want them and can coordinate promotional activities and communication to create a unified, customer-oriented message.

• Cost savings. E-business can markedly reduce the costs associated with operating and starting a business.

Business Web Sites

Corporate Web site Web site designed to increase a firm’s visibility, promote its offerings, and provide information to interested parties.

• Attempt to build customer goodwill and assist retailers and other resellers in their marketing efforts.

• Use for a variety of other purposes

• Disseminating financial information to investors

• Enabling prospective employees to apply online for jobs

• Providing e-mail communication.

Marketing Web site Web site whose main purpose is to increase purchases by visitors.

BUSINESS-TO-BUSINESS (B2B) E-BUSINESS

Business-to-business e-business (B2B) Electronic business transactions between businesses using the Internet.

• B2B transactions account total $2.5 trillion.

• By some estimates, account for 80 percent of all e-commerce activities.

• Can reduce cost of B2B transactions by almost 25 percent.

Electronic Data Interchanges, Extranets, and Private Exchanges

Electronic Data Exchange

• Computer-to-computer exchanges of invoices, purchase orders, price quotations, and other sales information between buyers and sellers.

Extranet

• Secure networks used for e-business and accessible through the firm’s Web site by external customers, suppliers, or other authorized users.

Private Exchanges

• A secure Web site at which a company and its suppliers share all types of data related to e-business.

• Sometimes called c-business because of use as a collaborative tool.

Electronic Exchanges and E-Procurement

• Electronic exchanges are online marketplaces that bring buyers and sellers together and cater to a specific industry’s needs.

• Initially 15,000 were launched but only 20 percent remain.

• E-procurement is Web- based systems that enable all types of organizations to improve the efficiency of their procurement processes.

ONLINE SHOPPING COMES OF AGE

Business-to-consumer e-business (B2C) Selling directly to consumers over the Internet.

• E-tailing accounts for eight percent of all U.S. sales.

• Thirty percent of the U.S. population shops online.

• Services also are important participants in e-business.

E-Tailing and Electronic Store Fronts

Electronic storefronts Company Web site that sells products to consumers.

• Growth of broadband is aiding e-tailing.

• Fifty-five percent of American Internet users have broadband.

• Expected to rise to 70 percent.

Who Are the Online Buyers and Sellers?

Who Are the Online Buyers and Sellers?

• Online market is changing as customers become more familiar with online shopping.

Benefits of B2C e-Business

Lower Prices

• Many products cost less online.

• Internet allows customers to easily compare prices from multiple sellers.

Convenience

• Can order products from around the world anytime day or night.

• Can register customer information to streamline transactions.

Personalization

• Emphasis on personalized, one-on-one marketing to increase repeat purchases.

Developing Safe Online Payment Systems

• Response to customer concerns about security of sending credit card information over the Internet.

• Through encryption, data is encoded for security purposes.

• Many companies use Secure Sockets Layer (SSL) technology to increase to encrypt information and verify senders and receivers.

• Others use electronic method payment method, a computer data file at an e-business site’s checkout counter that contains not only electronic cash but credit card information, owner identification, and address.

E-BUSINESS CHALLENGES

Privacy Issues

• Privacy is among the top concerns of Internet users.

• E-business sites often require passwords and use electronic signatures, an electronic form of identity verification.

• Companies can track customers’ shopping and viewing habits through cookies.

• Customers usually prefer that companies do not share their personal information. Merchants have responded by joining privacy organizations.

• Privacy protections may soon become legally required.

• Employees also have concerns that employers are monitoring their Internet behavior.

• Companies worry about data theft.

Internet Fraud• Internet Crime Complaint Center logged more than 207,000 complaints in a

recent year, an increase of 67 percent over the prior year.

Phishing Using e-mail or pop-up messages to get unsuspecting victims to disclose personal information.

Poor Web Site Design and Service• Two-thirds of Internet shopping carts are abandoned before any purchase is

made.

• Companies that have brick-and-mortar experience often have better success satisfying customers than Internet-only retailers.

Channel Conflicts• Direct sales to customers can compete with business partners such

as retailers and distributors, disputes called channel conflicts.

USING THE WEB’S COMMUNICATION FUNCTION

• Web has four main functions: e-business, entertainment, information, and communication.

• Communication is Web’s most popular function.

• Firms use e-mail to communicate with customers, suppliers, and other partners.

Spam Popular name for junk e-mail.

Online Communities

• Internet forums, newsgroups, electronic bulletin boards, and Web communities that appeal to people who share common interests.

BlogsBlog Short for Web log, an online journal written by a blogger.

• Corporate blogs can help build brand trust.

• Employee blogs present ethical issues.

Web-Based Promotions• Companies buy banner ads and pop-up ads on Web sites

customers are likely to visit.

Search marketing Paying search engines a fee to make sure the company’s listing appears toward the top of search results.

• Companies use online coupons to promote their products.

MANAGING A WEB SITE

Developing Successful Web Sites

Planning and Preparation

• What is the company’s goal for its Web site?

• Will the site be maintained in-house or by a contractor?

• What will the site be named?

Content and Connections

• Content an important factor for whether visitors return to a site.

• Resources should be relevant, easy to access and understand, updated regularly, and compelling.

• Small businesses may be better off outsourcing to meet their hosting and maintenance needs.

Costs and Maintenance• Variety of costs:

• Development

• Placing the site on a Web server.

• Maintaining and updating the site.

• Promoting the site.

Measuring Web Site Effectiveness

Click-through rates Percentage of people presented with a Web banner ad who click on it.

Conversion rates Percentage of visitors to a Web site who make a purchase.

GLOBAL ENVIRONMENT OF E-BUSINESS

• Future growth of many companies is linked to a global strategy that incorporate e-business.

• U.S. leads world in Internet users but ranks only fifth in Internet penetration.

• International competition is growing.

• Can heighten competition in the global marketplace.