Developement of E-commerce in the Czech republic Business Management in the Czech Republic Lukas Gottwald lukasgottwald@gmail.com Department of Business Management Lecture Structure n 1. E-commerce ¨ Definition, Characteristics, Quotes, Benefits&Riscs n 2. E-commerce developement Timeline 1995-1999 ¨ In USA ¨ In the Czech republic ¨ Summary 1995 - 1999 n 3. 2000 Dot Com bubble bust ¨ Disillusion, more realistic investor expectations in the Western economies ¨ Comparatively small effect in the Czech republic n 4. E-commerce developement in 2001-2009 ¨ In the USA ¨ In the Czech republic ¨ Trends & 2009 Outlook n 5. Case Study: Opening an e-store as a SMC ¨ Why and How n Managerial and marketing considerations E-commerce n Defintion ¨ „Refers to commercial transactions occurring over open networks, such as the Internet. Both business-to-business and business-to-consumer transactions are included.“worldbank.org n Definition 2.: „Electronic Commerce, commonly known as (electronic marketing) e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks.“ wikipedia.org E-commerce n Characteristics ¨ Custumer has to own a „gadget“ connected to a network in order to participate in e-commerce (i.e. PC) ¨ Merchant has to have a space within the network (i.e. domain name and website) ¨ Customer obtains information about the product electronically ¨ Customer confirms his decision to purchase the product electronically (i.e. filling in a form on a website) ¨ Payment can be made online n Credit Cards, Paypal, PaySec(Czech), SMS payments ¨ Distibution n Electronic - Online ( i.e. songs, books, software, services) n Physical - Offline ( necessary for physical goods) E-commerce n Characteristics ¨ Quote from Rubens Ricuper Secretary-General of the UNCTAD (2000) n „Electronic commerce is quickly emerging as a particularly visible and spectacular incarnation of globalization. At this stage, it is still too early to say whether electronic commerce will narrow or broaden the gap between rich and poor. However, it is safe to say that the rapid expansion of electronic transactions constitutes a major opportunity for trade and development…“ n However further on in the 2000 UNCTD report ¨ The United States and Europe will dominate world e-commerce ¨ The change here will come from Europe’s progressive “catching up” with the United States. § Most available data show that the United States will retain its global lead in e-commerce well into the next decade (2000-2010) E-commerce n Characteristics ¨ Quote from Kofi A. Annan Secretary-General of the UN (2004) n „Information and communications technologies have considerable potential to promote development and economic growth. They can foster innovation and improve productivity. They can reduce transaction costs and make available, in mere seconds, the rich store of global knowledge. In the hands of developing countries, and especially small- and medium-sized enterprises, the use of ICTs can bring impressive gains in employment, gender equality and standards of living.“ E-commerce n Benefits ¨ Lower transaction cost n Merchant side ¨ Store, inventory, staff, communication n Customer side ¨ Time needed to get info and compare prices, communication ¨ Global market ¨ Outsource services globaly ¨ Take advatage of price diffreneces, exchange rates etc… ¨ Marketing ¨ Whole AIDA + payment + distribution in one moment ¨ Both B2B and B2C in one channel § example: www.hp.com E-commerce n Riscs & Drawbacks ¨ Security Issues n Fraud, both on Merchant and Customer sides ¨ Virtual relationship n No face-to-face interaction – may contribute to the trust problem ¨ Technology & Equipment n Direct proportion between Internet expansion and E-commerce growth ¨ Consumer behaviour more „item specific“ n According to Stuchlik, Dvoracek (2002) customers engage mostly in „targeted shopping“ not in „leisure shopping“ in the online environment E-Commerce Timeline 1995-1999 CZECH REPUBLIC n 1995 ¨ „Czech Telecom“ looses monopol ¨ It is now possible for other providers to offer Internet connection ¨ First households connect to internet. E-Commerce Timeline 1995-1999 UNITED STATES n 1996 ¨ Google began in January 1996 as a research project by Larry Page, a Ph.D. student at Stanford, he was soon joined by Sergey Brin n 1997 ¨ Business.com sold for 150 000 USD ¨ Amazon IPO on Nasdaq ¨ 30% US population is online (59 mil. people) E-Commerce Timeline 1995-1999 UNITED STATES n 1998 & 1999 ¨ Dot Com bubble growing, lot of start ups, some suceed n Paypal founded 2000) ¨ In 1999: 3,7 billions USD spent on online advertising 1995 – 1999 Summary Czech republic ¨ The concept of e-commerce has been much slower to develop in the Czech Republic than in most of Western Europe. ¨ Czechs are a relatively well-educated group and computer literate. Yet, there were many difficulties in accessing the Internet. A significant factor was the reletively very high cost of access ¨ low personal-computer penetration ¨ slow growth of the financial applications needed to conduct online commerce, mainly those concerning credit cards and more-sophisticated banking methods globaltechforum.eiu.com 1995 – 1999 Summary n Internet usage growth - worldwide n 1995 – 2008 1995 – 1999 Summary Internet usage growth in Czech rep. Dot Com Bubble Bust n USA Dot Com Bubble Bust n Czech republic ¨ Less money involved, bubble bust indirec effect ¨ Faster Internet user growth after 2000 n Online ad spending in Czech rep. ¨ 1999: 2.5mil USD ¨ 2000: 4 mil USD ¨ 2001: 6 mil USD n User base - growth ¨ 3/1999: 1 163 170 people ¨ 2/2001: 1 806 800 people E-commerce Timeline 2001 – 2009 E-commerce Sales 2001 – 2009 n USA E-commerce Sales 2004 – 2009 n USA Common Online Activities E-commerce Timeline 2001 – 2009 n Highlights 2005 - 2009 ¨ Rapid growth of social networks & Google E-commerce Outlook n E-marketer report Brief Case study: opening an e-store n Considerations from SME Management perspective ¨ Why? n Global sales channel at low cost n Global Networking possibilities n Typically low transaction cost n Economies of scale – great possibilities (one store for millions of people) ¨ Why not? n Profitability – lot of competition n Restrictions in human resources (typical for SMEs) Brief Case study: opening an e-store n Marketing ¨ Benefits n Imagine buying software offline and online ¨ Promotion – AIDA continously, seemlesly - one click… ¨ Product - Automatization in product customization ¨ Price – custom price, or auction type interactive price + internet as a payment channel ¨ Place – Internet as distribution Channel (Software… iTunes…) n Viral marketing, PR, buzz marketing, WOM ¨ Give your satisfied customers a platform for sharing their emotions and experiences ¨ Give your satisfied customers a possibility to endorse ypur products ina easy and entertaining way ¨ Riscs n Security + Product lifecycle „Time runs faster online“ Thank you n ?UESTIONS ¨ lukasgottwald@gmail.com Next Lecture n Special Guest: Mr. Teixeir ¨ Public Offerings: Motivations and Case Study ¨ Mergers and Acquisitions: Strategies against Aquisitions References n E-commerce definition: web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTINFORMATIONANDCOMMUNICATIONANDTECHNOLOGIES/0,,contentMD K:21035032~menuPK:2888320~pagePK:210058~piPK:210062~theSitePK:282823,00.html n E-commerce on wikipedia http://en.wikipedia.org/wiki/E-commerce n UNTCD 2000 report http://r0.unctad.org/ecommerce/docs/building.pdf n UNTCD 2004 report http://www.unctad.org/en/docs/ecdr2004_en.pdf n STUCHLIK, P.; DVORACEK, M. Reklama na Internetu. Grada Publishing. 2002.226 p. n Internet timeline http://www.webopedia.com/quick_ref/timelne.asp n Amazon History: http://en.wikipedia.org/wiki/Amazon.com#History_and_business_model n US ad spending in 1999 http://www.socialresearchmethods.net/Gallery/Cho2/noname6.htm n Czech e-commerce http://globaltechforum.eiu.com/index.asp?layout=rich_story&doc_id=9933&title=Czech+Republic:+Overvi ew+of+e-commerce&categoryid=29&channelid=4 n Dot Comm bubble http://en.wikipedia.org/wiki/Dot-com_bubble n E-comm sales usa: http://www.emarketer.com/Article.aspx?R=1007068 n Global internet usage http://www.globalpolicy.org/globaliz/charts/internet.htm n USA internet usage 1995-2006 http://blogs.zdnet.com/ITFacts/?p=10998 n Electronic Commerce:Concepts, Methodologies, Tools, and Applications http://www.igi-global.com/downloads/excerpts/reference/ecom.pdf n Czech internet usage statistics http://www.czso.cz/csu/redakce.nsf/i/3_kolik_ceskych_domacnosti_ma_pocitac_a_internet