1. e-commerce
business. technology. society.
Kenneth C. Laudon
Carol Guercio Traver
Introduction to E-commerceeighth edition
eighth edition
Copyright © 2012 Pearson Education
Chapter 1
1

2. Class Discussion
Facebook: The New Face of E-commerce?
E-commerce Trends 2011–2012
n
n
n
n
n
n
n
n
n
Do you use Facebook, and if so, how often?
What has the experience been like?What has the experience been like?
Have you purchased anything based on an
advertisement on Facebook or by using a link
provided by a friend?
Are you concerned about the privacy of the
information you have posted on Facebook?
Social networking continues to grow
Expansion of social e-commerce platform
Mobile platform begins to rival PC
platform
Localization of e-commerce (Groupon)Localization of e-commerce (Groupon)
Explosive growth in online video viewing
Continued privacy and security concerns
Slide 1-3
Slide 1-4
2
Copyright © 2012 Pearson Education

3. The First 30 Seconds
First 16 years of e-commerce
Technologies continue to evolve at
exponential rates
What Is E-commerce?
Use of Internet and Web to transact
business
More formally:
n
v
v
n
v
v
n
n
v
v
Just the beginning
Rapid growth and change
Disruptive business change
New opportunities
Digitally enabled commercial transactions
between and among organizations and
individualsindividuals
Commercial transactions involve the exchange of
value across organizational or individual
boundaries in return for products or services
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-5
Slide 1-6
3

4. E-commerce vs. E-business
E-business:
Why Study E-commerce?
E-commerce technology is different, more
powerful than previous technologies (TV
Commerce, Radio Commerce, Direct Mail
Commerce)
E-commerce brings fundamental changes to
commerce
Traditional commerce:
n
v
v
v
n
n
n
v
v
v
v
Digital enabling of transactions and processes
a firm, involving information systems undera firm, involving information systems under
firm’s control
include commercial transactions involving
an exchange of value across organizational
boundaries
However, a firm’s e-business infrastructure
provides support for on-line e-commerce
exchanges
Consumer as passive targets
Sales-force driven
Fixed prices
Information asymmetry
withinwithin
Does not
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-7
Slide 1-8
4

5. Unique Features of E-commerce
Technology
1. Ubiquitous – Internet available everywhere, and anytime
2. Global reach – the technology reaches across national
boundaries, around the Earthboundaries, around the Earth
3. Universal standards – one set of technology standards, namely
Internet standards
4. Information richness – video, audio, text messages
5. Interactivity – technology works through interaction with user
6. Information density – storage, communication costs drop, while
concurrency, accuracy, and timeliness improve greatly
7. Personalization/customization – allows personalized messages
delivery to individuals and groups
8. Social technology – user content generation and social
networking
Unique Features of E-commerce Technology
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-9
Slide 1-10
5

6. The Changing Trade-Off Between
Richness and Reach
Web 2.0
User-centered applications and social
media technologies
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-11
Slide 1-12
n
v
v
v
v
User-generated content and communication
Highly interactive, social communities
Large audiences; yet mostly unproven business
models
e.g., Twitter, YouTube, Facebook, Second Life,
Wikipedia, Digg
6

7. Types of E-commerce
Classified by market relationship
Classified by technology used
The Internet
Worldwide network of computer networks built
on common standards
Created in late 1960s to connect small number
of mainframe computers and their users
Services include the Web, e-mail, file transfers,Services include the Web, e-mail, file transfers,
newsgroups, shopping, research, IM, music,
video, news, etc.
Can measure growth by looking at number of
Internet hosts with domain names
n
v
v
v
n
v
v
n
n
nn
n
Business-to-Consumer (B2C), e.g., Amazon
Business-to-Business (B2B)
Consumer-to-Consumer (C2C), e.g. eBay, Craigslist
Peer-to-Peer (P2P), e.g., BitTorrent
Mobile commerce (M-commerce)
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-13
Slide 1-14
7

8. The Growth of the
Internet, Measured
by Number of
Internet Hosts withInternet Hosts with
Domain Names
Figure 1.2, Page 23
The Web
Most popular Internet service
Developed in early 1990s
Provides access to Web pages
Web content has grown exponentially
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-15
Slide 1-16
SOURCE: Internet Systems Consortium,
Inc., 2011.
n
n
n
v
n
v
HTMLdocuments that may include text,
graphics, animations, music, videosgraphics, animations, music, videos
Google reports 1 trillion unique URLs; 120
billion pages indexed
8

9. The Growth of Web Content
Origins and Growth of E-commerce
Precursors:
1995: Beginning of e-commerce
E-commerce fastest growing form of
commerce in United States
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-17
Slide 1-19
Figure 1.4, Page 24
SOURCE: Google Inc., 2008; authors’ estimates
n
v
v
v
n
v
n
Baxter Healthcare
Electronic Data Interchange (EDI)
French Minitel (1980s videotex system)
First sales of banner advertisements
9

10. n
v
v
v
n
n
nn
n
Precursors:
Origins & Growth of E-commerce
None of these precursor systems had
functionality of Internet
Origins and Growth of E-commerce
1995 the beginning of e-commerce,
following the appearance of first banner
ad placed by AT&T, Volvo, Sprint, and
others on Hotwired in late October
1994, and
The first sales of banner ad space byThe first sales of banner ad space by
Netscape and Infoseek in early 1995
Since then, e-commerce has been
fastest growing form of commerce in
the U.S. (see next figure)
In late 1970s, pharmaceutical firm, Baxter Healthcare,
initiated primitive B2B e-commerce form using modem that
lets hospitals to reorder supplies from itlets hospitals to reorder supplies from it
During 1980s, Electronic Data Interchange (EDI) standards
were developed to let firm exchange commercial
documents and conduct digital commercial transactions
across private networks
In 1981, French Minitel, videotext system that combines
phone with 8” screen, was deployed to provide >13,000
different services, including ticket agencies, travel services,
retail products, online banking
B2BB2B
B2C
10
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-20
Slide 1-21

11. The Growth of B2C E-commerce
Figure 1.3, Page 25
The Growth of B2B E-commerce
Figure 1.4, Page 28
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-22
Slide 1-23
SOURCES: Based on data from eMarketer, Inc., 2011a; authors’ estimates.
SOURCES: Based on data from U.S. Census Bureau, 2011b; authors’ estimates.
11

12. Technology and E-commerce
in Perspective
The Internet and Web: Just two of a long list
of technologies that have greatly changedof technologies that have greatly changed
commerce. Others:
E-commerce growth will eventually cap as it
confronts its own fundamental limitations.
Potential Limitations on the Growth
of B2C E-commerce
Expensive technology
Sophisticated skill set
Persistent cultural attraction of physical markets
and traditional shopping experiencesand traditional shopping experiences
Persistent global inequality limiting access to
telephones and computers
Saturation and ceiling effects
n
v
v
n
n
n
n
n
n
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-24
Slide 1-25
Automobiles
Radio
12

13. Potential Limitations on the Growth of B2C E-
commerce
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-26
Slide 1-27
However, wireless Web technology is the most
significant technology that can reduce barriers to Internet
access
13

14. E-commerce: A Brief History
1995–2000: Innovation
2001–2006: Consolidation
2006–Present: Reinvention
Early Visions of E-commerce
Computer scientists:
Economists:
Entrepreneurs:
n
v
vv
n
v
n
v
v
n
v
n
v
v
n
v
Key concepts developed
Dot-coms; heavy venture capital investmentDot-coms; heavy venture capital investment
Emphasis on business-driven approach
Extension of technologies
New models based on user-generated content, social
networks,services
Inexpensive, universal communications and computing
environment accessible by all
Nearly perfect competitive market (price, cost, and quality info
equally distributed); friction-free commerce (low transaction costs,
dynamicallyadjusting prices based on actual demand, declined
intermediaries,eliminated unfair competitive advantage)intermediaries,eliminated unfair competitive advantage)
Lowered search costs, disintermediation,price transparency,
elimination of unfair competitive advantage
Extraordinary opportunity to earn far above normal returns on
investment—first mover advantage
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-28
Slide 1-30
14

15. Amounts Raised by Internet-Related
Venture-Backed Firms
Assessing E-commerce
Many early visions not fulfilled
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-31
Slide 1-32
n
v
n
n
v
n
v
v
n
Friction-free commerce
Consumers less price sensitive than expected
Considerable price dispersion (from 8% in 2000 to
10% in 2009) remains
Perfect competitionPerfect competition
Information asymmetries persist
Intermediaries have not disappeared
First mover advantage
Established fast-followers often overtake first
movers
15

16. Predictions for the Future
E-commerce technology (Internet, Web, and wireless Internet
devices) will propagate through all commercial activity
Prices will rise to cover the real cost of doing business
E-commerce margins and profits will rise to levels more typical ofE-commerce margins and profits will rise to levels more typical of
all retailers
Cast of players will change
Number of successful pure online stores will remain smaller than
integrated offline/online stores
Regulatory activity worldwide will grow
Cost of energy, e.g., gasoline and diesel will have an influence
n
n
nn
n
v
v
n
n
n
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-33
Slide 1-34
TraditionalFortune 500 companies will play dominant role (see next
table)
New startup ventures will emerge with new products,services
16

17. Understanding E-commerce:
Organizing Themes
Technology: Infrastructure
Business: Basic concepts
Society: Taming the juggernaut
The Internet and
the Evolution
of Corporate
Computing
Figure 1.8, Page 82
n
vv
n
v
n
v
Development and mastery of digital computing andDevelopment and mastery of digital computing and
communications technology
New technologies present businesses with new ways of
organizing production and transacting business
Intellectual property,individual privacy, public welfare
policy
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-35
Slide 1-36
17

18. Academic Disciplines
Concerned with E-commerce
Technical approach Behavioral approachn n
v
v
v
v
v
v
v
v
v
Copyright © 2012 Pearson Education
Copyright © 2012 Pearson Education
Slide 1-38
Slide 1-39
Computer science
Management science
Information systems
Information systems
Economics
Marketing
Management
Finance/accounting
Sociology
18