10/12/2011. People are connecting... Worldwide Internet Usage. Overview of Global E-Business Issues

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1 People are connecting... 2 E-Business Environment and E-Business Process October 12, 2011 Assist. Prof. Dr. Özge Özgen, Global E-Business and Trade Overview of Global E-Business Issues Worldwide Internet Usage The globe is literally a world of opportunities. Exhibit 4.1 shows that worldwide internet usage increased more than 58% from 2004 to Asia has the most internet users. Africa saw the greatest growth in internet use. North America has the highest penetration as a percent of the population. 1

2 4-5 Internet Use Varies by Country The world s largest online markets are the U.S. (215 million users now: 239 million) and China (162 million users - now: 420 million). The top 10 countries account for 70% of all global users. Some smaller countries, such as Norway, Netherlands and Iceland, have the highest penetration, over 85% of their populations. Top Ten Internet Usage Countries Ex Turkey: Internet Usage and Population Statistics Developed Economies 4-8 YEAR Users Population % Pop ,000,000 70,140, % ,500,000 73,556, % ,220,000 74,709, % ,000,000 77,804, % Source: Developed countries are highly industrialized, use technology to increase efficiency, and have a high GDP per capita. Western Europe North America Japan Australia & New Zealand Developed countries are ideal for the e-business activities Pearson Education, Inc. Publishing as Prentice Hall 2

3 Emerging Economies Importance of Information Technology 4-9 Have low levels of GDP per capita and are experiencing rapid economic growth. Emerging economies can be found on every continent. Mexico, Central & South America Baltic States & Eastern Europe Russia, Belarus & Ukraine Africa Central & Southeast Asia China 4-10 The internet accelerates the process of economic growth through diffusion of new technologies. Bangalore, India is the center of India s explosive growth in software and IT. Aditi ( provides customer support for Real Media. The customer in America who needs support will have his problem solved via by a team of Indians Challenges for Emerging Markets Internet marketing differences in emerging economies include: Fewer computer users Limited credit card use Lack of secure online payment methods Unexpected power failures 4-12 Market Approaches Ex 4.4 3

4 4-13 E-Commerce Payment and Trust Issues E-commerce in emerging markets is often hampered by limited use of credit cards and lack of trust in safely conducting online transactions. Nepal, for example, is a cash-based economy and credit cards are scarce. In Bolivia, only 2.3 percent of the population has a credit card. Credit card use is virtually non-existent in Ethiopia E-Commerce Payment and Trust Issues, cont. In addition to credit card usage, e-marketers working in emerging economies should understand attitudes toward online purchasing. A 2007 study in Lithuania found that 51% of internet users had not made an online purchase because they thought it was too risky. To overcome trust issues, ebanka, an internet bank, was established in the Czech Republic in 1998 to handle secure online purchases. Technological Readiness Influences Marketing Computers & Telephones 4-15 E-marketers must deal with daunting issues of basic technology: Limited access to and use of computers and telephones High internet connection costs Slow internet connections speeds Unpredictable power supplies 4-16 Computer access is unevenly distributed throughout the world. Exhibit 4.6 shows computer ownership data for selected countries. Ownership ranges from 84% in Kuwait to 2% in Bangladesh and Uganda. Telephones (and connectivity) can be scarce and expensive. Many consumers in countries with emerging economies access the internet from free-standing shops rather than homes. 4

5 The Number of Internet Cafes is 16,000, number of computers in internet cafes 350,000 in Turkey million people are getting service everyday (Gozlem, 02 Mart 2010) Internet Connection Costs Countries with emerging economies often have higher internet-related business costs. Dial-up connection costs can vary considerably. Broadband connections are developing quickly. In 2002, 88 countries had broadband vs. 166 countries in Broadband connections are still expensive in most countries. 19 OECD ülkeleri, ilan edilen farklı hızlara göre ortalama bağlantı ücretleri, ABD doları, satın alma gücü paritesine göre, Ekim OECD Ülkeleri, megabit/saniye başına en düşük fiyat, ABD doları, satın alma gücü paritesine göre, Ekim

6 Wireless Internet Access The Digital Divide At the end of 2007, there were 3.25 billion mobile phone subscriptions worldwide. Countries with emerging economies have leapfrogged industrial countries in terms of usage. Challenges of wireless e-marketing: Modification of Web site content for small screens Text entry using tiny keypads Content development Pricing and secure payments E-marketers must consider the social environment in which e-business operates. Disparities with regard to technology access can create a digital divide between countries or populations. The digital divide raises challenging questions for global policy, international business, and entrepreneurship. China: A View of the Future Popular Web Sites in China Ex China is expected to be the largest economy in the world by China represents both the promise and challenge of e-marketing in emerging market economies. 70% of all Chinese internet users are under the age of 30. China s vibrant, growing online market requires adaption to success Pearson Education, Inc. Publishing as Prentice Hall 6

7 Level of business Impact 10/12/2011 Business Models Selecting a Business Model 2-25 A business model is a method for long-term survival and a value proposition for partners, customers, and revenue. E-business models include the use of information technology to achieve long-term goals. Firm selects one or more models as strategies to accomplish enterprise goals A firm will select one or more business models as strategies to accomplish enterprise goals. Components of business model selections: Customer value Price Connected activities Scope Revenue sources Implementation Capabilities Sustainability Level of Commitment to E-Business 2-28 Business Transformation (competitive advantage, industry redefinition) Effectiveness (customer retention) Efficiency (cost reduction) Pure Play Enterprise Business Process Activity Pure dot-com Pure Dot-Com (Amazon, MySpace) (Amazon) Both online and offline Click (Dell and most Mortar retailers) (eschwab, most retailers) Customer Relationship Management , Brochureware blog 7

8 Activity-Level Models Business Process-Level Models Order processing 2. Online purchasing Content publisher 5. Business intelligence (BI) 6. Online advertising and public relations (PR) 7. Online sales promotions 8. Dynamic pricing strategies online 1. Customer relationship management (CRM) 2. Knowledge management (KM) 3. Supply chain management (SCM) 4. Community building online 5. Database marketing 6. Enterprise resource planning (ERP) 7. Mass customization Enterprise-Level Models Pure Play Models E-commerce, direct selling, content sponsorship 2. Portal 3. Social networking 4. Broker models Online exchange, hub Online auction 5. Agent models Manufacturer s/selling agents Shopping agent Reverse auction Pure plays are businesses that began on the internet. They represent the top level of the E-Business pyramid. Pure plays face significant challenges. They must compete as new brands. They may need to take customers away from established businesses. Some pure plays have redefined industries: EBay, Yahoo!, MySpace. 8

9 1-33 CLASSIFICATION OF EC BY THE NATURE OF THE TRANSACTIONS AND THE RELATIONSHIPS AMONG PARTICIPANTS business-to-business (B2B) E-commerce model in which all of the participants are businesses or other organizations. business-to-consumer (B2C) E-commerce model in which businesses sell to individual shoppers e-tailing Online retailing, usually B2C. business-to-business-to-consumer (B2B2C) E-commerce model in which a business provides some product or service to a client business that maintains its own customers. consumer-to-business (C2B) E-commerce model in which individuals use the Internet to sell products or services to organizations or individuals who seek sellers to bid on products or services they need intrabusiness EC E-commerce category that includes all internal organizational activities that involve the exchange of goods, services, or information among various units and individuals in an organization. business-to-employees (B2E) E-commerce model in which an organization delivers services, information, or products to its individual employees. consumer-to-consumer (C2C) E-commerce model in which consumers sell directly to other consumers collaborative commerce (c-commerce) E-commerce model in which individuals or groups communicate or collaborate online. e-learning The online delivery of information for purposes of training or education. e-government E-commerce model in which a government entity buys or provides goods, services, or information from or to businesses or individual citizens. 9

10 1-37 business model A method of doing business by which a company can generate revenue to sustain itself. value proposition The benefits a company can derive from using EC. THE STRUCTURE AND PROPERTIES OF BUSINESS MODELS Revenue Models Sales Transaction Fees Subscription Fees Advertising Fees Affiliate Fees Functions of a Business Model Describe the major business processes of a company Describe the business models positioning within the value network linking suppliers and customers Formulate the venture s competitive strategy and its longrange plans Articulate a customer value proposition Identify a market segment Define the venture s specific value chain structure Estimate the cost structure and profit potential 1-40 TYPICAL EC BUSINESS MODELS Online direct marketing Electronic tendering systems tendering (bidding) system Model in which a buyer requests would-be sellers to submit bids; the lowest bidder wins. Electronic marketplaces and exchanges Viral marketing Social networking and Web 2.0 tools 10