Transcript Internet and computing

Using the Internet
for Business Success
Chapter 18
Chapter 18 Learning Goals
1. What is the Internet, and how does it
work?
2. Who uses the Internet, and for what?
3. How has the Internet economy changed
the business environment?
4. How can companies incorporate ecommerce into their overall business
strategies?
Chapter 18 Learning Goals
(cont’d.)
5. What benefits do businesses achieve
through e-commerce?
6. What steps are involved in launching an
e-commerce venture?
7. What lies ahead for the Information
Superhighway?
Learning Goal 1
• What is the Internet, and how does it
work?
– The Internet
• A global “network of networks”
• Revolutionizing how businesses operate
• Combines high-speed communications and computing
power
• Transmits information immediately
• Provides
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–
–
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Resources of the World Wide Web
File transfer capabilities
E-mail and chat sessions
Newsgroups
Internet:
A worldwide computer network
that includes both commercial &
public networks
Offers capabilities such as:
–email
–file transfer
–online chat sessions
–newsgroups
The Internet
• Transmission control
protocol/Internet protocol (TCP/IP)
• World Wide Web (WWW)
• Web sites
• Hypertext
• Internet service provider (ISP)
• browser
Diagram of Internet Networks
ISP. A bank of
modems takes
your signal and
moves it along
the Internet.
Network
service
provider
(NSP)
Home. Your
PC connected
to modem or
ISDN adapter.
Telephone
line
T1 line(s)
Learning Goal 2
• Who uses the Internet, and for what?
– 378 million people worldwide use the Internet
– Most popular Web sites are those with
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•
•
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Company and product information
News and financial quotes
Reference materials and periodicals
Entertainment
– Businesses use the Internet to
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Gather industry information and learn about competitors
Provide customer service
Communicate with employees, vendors, and customers
Market and sell products; purchase supplies
Internet Users
• 378 million people worldwide as of
September 2000
• 51.4 % male, 48.6% female
• 38% have college degrees
• average income is $65,000
• more diverse people (age, income,
race) are becoming Internet users
Internet Users
P e rc e n t o f R e s p o n d e n ts
• The most popular online purchases are
books & magazines, software, and music
80
CDs
1997
70
1999
60
50
40
30
20
10
0
Source: Consumer Reports
survey, Consumer Reports,
Dec. 1999, p. 10.
Used the
Internet
Users Who
Purchased
Online
Learning Goal 3
• How has the Internet economy changed
the business environment?
– New types of companies are created to
provide service and technology
– Channel relationships are changing
• Companies can sell directly to consumers
• Distributors are providing order fulfillment services
• Consumers are empowered by easy access to
information and price comparison
The New Internet Economy
• New face of competition
• Going direct
• Power to the consumer
Learning Goal 4
• How can companies incorporate e-commerce into
their overall business strategies?
– Two market segments of E-commerce
• Business-to-business
– Accounts for about 75% of all e-commerce revenue
• Business-to-consumer
– Models for e-commerce
• Selling goods and services over the Web
• Providing information for a fee
• Supporting an information or entertainment site with advertising or
referral fees
• Providing e-commerce-enabling services
• Gathering industry or consumer information into “infomediary” sites
Electronic commerce (ecommerce):
The process of selling a product
or service via the Internet
Capitalizing on E-Commerce
• New e-commerce business models
– selling products or services
– providing entertainment or information
– auctions
• Business-to-business boom
– extranets
• E-tailing (business-to-consumer)
E-tailing (Business-to-Consumer)
•Number of visitors to e-tailers in one week in
December 1999, and the increase over 1998:
Store
Amazon.com
Etoys.com
Buy.com
Toysrus.com
Cdnow.com
% Increase
97
59
366
339
3
1999
7,045
2,256
1,907
1,746
1,492
Source: Keynote, in The Star Ledger, Dec. 19, 1999, Section 3, p. 1, 3, 4.
Cost Comparison
Average sale
Less: Discount
Shipping & handling
Sales tax
Customer pays
Superstore
$100
- 10
NA
7
$ 97
Online Store
$100
- 20
11
NA
$ 91
Cost of sales, S&H
Gross profit
70
$ 27
68
$ 23
Operating expenses:
Rent
Labor & store
Web site development
Marketing
Total
1
11
NA
3
$ 15
5
NA
3
17
$ 25
Operating profit per order $ 12
$ -2
Learning Goal 5
• What benefits do businesses achieve
through e-commerce?
– Benefits of e-commerce
• Reduces costs by streamlining company operating procedures
• Offers lower prices and greater selection of products and
vendors
• Around-the-clock ordering and customer service availability
• Ease of updating and distributing of product catalogs with no
printing costs
• Ability to track customer and product sales data
• Companies can sell directly to consumers
Benefiting from E-Commerce
• Lower prices
• Greater selection of products &
vendors
• Access to customer & product
sales data
• Around-the-clock ordering &
customer service
• Lower costs
• Customized products
Benefits of E-Commerce
Business owners were asked: What costs do
you believe the Internet has reduced?
Reduced cost
of research
Reduced cost of shipping
Faster decision-making
Reduced cost of
handling
orders/payments
Reduced cost of
telecommunications
Source: American Express Small Business
Exchange, home3.americanexpress.
com/smallbusiness
Reduced cost of
marketing/advertising
Reduced need for
international travel
Barriers to Smooth E-Commerce
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Disruptions in channel relationships
Poor customer service
Payment problems
Security & privacy issues
• Toys “R” Us took more online orders than it
could handle for Christmas 1999; it failed to
deliver some toys on time & offered those
customers $100 gift certificates to make up
for the failure
Learning Goal 6
• What steps are involved in launching an
e-commerce venture?
– Levels of e-commerce
 Basic promotional Web site
 Add order-taking and customer service features
 Integrate Web activities into a company’s existing business structure
– Companies can implement an e-commerce strategy by
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Considering merchandising
Web site costs and design
Marketing
Customer service and order fulfillment
Operations and infrastructure
Launching a
Successful E-Business
Four stages of E-Commerce:
4. Business transformation
3. Select
one or more
alternatives
3. Business
Integration
2. Prospecting
1. Basic presence
Key Issues in
Developing E-Business
1. Merchandising/ product
2. Web site costs/ design
3. Marketing
4. Customer service/ order fulfillment
5. Web site operations
6. Infrastructure
Learning Goal 7
• What lies ahead for the Information
Superhighway?
– One-to-one marketing is on the rise
• Companies recognize the value of personalization
– Solutions are being developed to protect
consumer privacy
– Industry leaders are protecting their turf by
acquiring other companies
Internet Trends
 Increased direct marketing
 Increased consumer concern about
privacy policies
 experts warn that “the assaults on
privacy will be very, very hard to
protect against” (Source: Peter Schwartz in
Consumer Reports, Jan. 2000, p. 17)
 Industry consolidation