Page 47 - Electronic Commerce

Chapter 1

commerce. This section outlines some opportunities and points out some cautions that
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businesses should consider in evaluating opportunities to engage in online business
activities.

Opportunities for Electronic Commerce
Electronic commerce is attractive to businesses because, quite simply, it can help
increase profits. It can do this because electronic commerce can increase sales and
decrease business costs. Advertising done well on the Web can get even a small firm’s
promotional message out to potential customers in every country in the world. A firm can
use electronic commerce to reach small groups of customers that are geographically
scattered. The Web is particularly useful in creating virtual communities that become
ideal target markets for specific types of products or services. A virtual community is a
gathering of people who share a common interest, but instead of this gathering occurring
in the physical world, it takes place on the Internet. In recent years, virtual communities
have taken advantage of Web 2.0 technologies to make their activities more accessible
and interesting to community members. Thomas Petzinger has written extensively in his
Wall Street Journal newspaper columns and his book, The New Pioneers, about new
patterns of work and commerce that have evolved from these virtual communities. As you
learned earlier in this chapter, businesses in the third wave of electronic commerce are
starting to use virtual community structures and tools to conduct social commerce. You
will learn about Web sites (called social networking sites) that individuals and businesses
use to conduct social interactions online and the business opportunities they present in
Chapter 6.
Just as electronic commerce increases sales opportunities for the seller, it also
increases purchasing opportunities for the buyer. Businesses can use electronic commerce
to identify new suppliers and business partners. Negotiating price and delivery terms is
easier in electronic commerce because the Internet can help companies efficiently obtain
competitive bid information. Electronic commerce increases the speed and accuracy with
which businesses can exchange information, which reduces costs on both sides of
transactions. Many companies are reducing their costs of handling sales inquiries,
providing price quotes, and determining product availability by using electronic
commerce in their sales support and order-taking processes.
Cisco Systems, a leading manufacturer of computer networking equipment, currently
sells almost all its products online. Because no customer service representatives are
involved in making these sales, Cisco operates very efficiently. In 1998, the first year in
which its online sales initiative was operational, Cisco made 72 percent of its sales on the
Web. Cisco avoided handling 500,000 calls per month and saved $500 million in that first
year. Today, Cisco conducts more than 99 percent of its purchase and sales transactions
online.
Electronic commerce provides buyers with a wider range of choices than traditional
commerce because buyers can consider many different products and services from a
wider variety of sellers. This wide variety is available for consumers to evaluate 24 hours a
day, every day. Some buyers prefer a great deal of information in deciding on a purchase;
others prefer less. Electronic commerce provides buyers with an easy way to customize

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