Read Chapter 9 – Diffusion of Electronic Commerce Read pages 241-253. Read Conclusion pages 268 -269 Ship the math section
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Electronic commerce technology – business transactions that uses the internet
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Using E-commerce
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Firms want to adopt e-commerce
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E-commerce changes the way to do business
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Internet company
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Needs a warehouse for products
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Computer servers with specialize databases
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Companies usually use UPS, DHL, or the postal service to deliver products
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Traditional companies
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Benefits of E-Commerce
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Internet companies have lower transaction costs
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Eliminates retail space and sales force
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Sales force is the largest fraction of traditional retailers’ costs
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Making payments, keeping records, managing inventory, ordering, invoicing, and exchanging information with customers, employees, and suppliers are all electronic records
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Internet companies stock a much larger selection of products
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Problems
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Consumers have different utility levels for buying in stores versus the internet
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Consumers
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Consumers have to wait for product delivery
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Consumers cannot inspect quality
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Consumers may have loyalty to a traditional business
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Consumers are reluctant to give out credit card or bank information to new firms
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Note – consumers may develop loyalty to an internet business where the consumers have had positive experiences
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Traditional companies adopted e-commerce
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Expand their customer base
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Expand geographic location – anyone with internet access, credit card, and postal service can buy through internet
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Close down non performing stores without losing customers
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Expand buying hours – internet is on 24 hours a day, 7 days a week
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Should a traditional company adopt e-commerce?
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Cannibalization – if traditional company adopts e-commerce, their regular customers switch from store to internet purchases
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Bureaucratic resistance – traditional companies tend to be large companies with layers of management, especially large corporations
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Internet sales were approximately 2% in 2002
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Books and magazines 46%
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Electronics 46%
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Office equipment and supplies 40%
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Other products that are suited for the internet
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Sales are taking off for jewelry companies
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E-commerce flourished under low taxes
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