E-Entrepreneurship

OBJECTIVES
12-1 Explain the difference between bricks-and-mortar and virtual
businesses.
12-2 Discuss the scope of the e-entrepreneurship market and how to
address e-entrepreneurship in the business plan.
12-3 Explain the process of creating an e-business web site.
12-4 Discuss e-entrepreneurship and the law.
12-5 Evaluate an e-business web site according to a checklist of
important factors.
12-6 Discuss the myths of e-entrepreneurship.
12-7 Analyze common e-entrepreneurship mistakes.
E-entrepreneur
 An e-entrepreneur is defined as an
individual willing to take the risk of
investing time and money in an
electronic business that has the
potential to make a profit or incur a loss.
 E-entrepreneurship is the act of
managing an electronic enterprise that
has the potential to make a profit or
incur a loss.
Bricks and Mortar Business
 Has a material presence
 Has a tangible location where potential
customers can actually walk in and
interact with employees
 Examples: storefront, storage facility,
office space, or manufacturing facility
Virtual Business
 Does not have a material space
designed to receive customers
 Transacts most of its business online
 Can deal with customers from any
location that offers Internet capability
The E-Entrepreneurship Market
 Approximately 75 percent of Americans
have access to the Internet from home.
 That means over 200 million people are
potential customers for the
entrepreneur with an Internet site.
History of E-Entrepreneurship
 In the early 1990s, electronic data interchange was
standardized and companies could reliably complete
transactions among themselves.
 In 1992, Compuserve offered online retail products to
its customers.
 Netscape arrived on the scene in 1994 and provided
users with a simple and colorful browser with which
to surf the Internet.
 Netscape also provided a safe online transaction
technology called Secure Sockets Layer.
 (continued)
History of E-Entrepreneurship
 The following year saw the launch of Amazon.com
and eBay.
 In 1998, DSL, or Digital Subscriber Line, which
provided fast, always-on Internet service, was offered
to customers across California.
 By 1999 retail spending over the Internet reached an
estimated $20 billion.
 In 2004, the U.S. government extended the original
1998 moratorium on Internet taxes until at least 2009.
E-Entrepreneurship
in the Business Plan
 The e-entrepreneurship components of the
business planning process integrate your
Internet site and your basic business model.
 They should address web site planning,
development, marketing, legal, financial,
management, and special considerations.
 They should be designed to ensure that your
Internet content reaches the right customer
while leveraging the full value of the Internet
as a marketing tool.
Create an E-Business
 The first step toward e-entrepreneurship
is usually the selection and registration
of a domain name, which is the unique
name that identifies an Internet site.
 The selection of a domain name is a
chief concern when doing business
online.
Domain Name Process
 Choose a domain name that is easy to
remember and is not easily confused with
other names.
 Use a search engine to check for other
companies using the same name or a
derivation of it.
 Through registration it becomes a legitimate
part of the Domain Name System (DNS).
Domain Name System
 Every computer linked to the Internet has an
exclusive address, called its Internet
Protocol (IP) address.
 The DNS makes using the Internet easier by
allowing a recognizable string of letters (the
domain name) to be used instead of the
numeric IP address.
 So instead of keying a long number, you can
key the URL (Uniform Resource Locator), for
example http://domainname.com.
ICANN
 Registration of domain names is controlled by
a private-public partnership called the
Internet Corporation for Assigned Names
and Numbers (ICANN).
 Numerous companies have been accredited
by ICANN to act as registrars.
 Domain names can be registered through the
many different registrar companies.
Components of
an E-Business Site
 Web site design
 Content
 Web host
 Security and/or firewalls
 Search site submission
 On-site search engine
 Database software
Additional Features
Needed for Online Payment
 Product catalog
 Shopping cart
 Merchant account provider
 Alternative payment options
 Order fulfillment
 Customer service
 E-mail notification
 Customer FAQs
E-Entrepreneurship and the Law
 Fraud and deception are unlawful no
matter what the medium.
 The Federal Trade Commission has
enforced and will continue enforcing its
consumer protection laws.
Advertising
 Online consumers are protected by
many of the general principles of
advertising law that also apply to
Internet ads.
 The same consumer protection laws
that apply to commercial activities in
other media apply online.
Spam
 Spam is defined as unsolicited “junk” e-
mail sent to large numbers of people to
promote products or services.
E-Consumer Complaints
 The FTC has an online general
complaint form that can be used by
consumers to register complaints
relating to online transactions in the
U.S.
 Another FTC form may be used for e-
business complaints involving a foreign
company.
Global E-Entrepreneurship
Agreement
 The U.S. and 29 other countries are
members of the Organization for
Economic Cooperation and
Development (OECD).
Global E-Entrepreneurship
Agreement Guidelines
 Fair business, advertising, and marketing
practices
 Enough information to allow consumers to
make informed choices, including disclosures
about online businesses, their goods and
services, and the terms and conditions of sale
 Clear processes for confirming transactions
 Secure payment mechanisms
Global E-Entrepreneurship
Agreement Guidelines (continued)
 Timely and affordable dispute resolution and
redress processes
 Privacy protection
 Consumer and business education
 International government cooperation
Application of OECD Guidelines
 Follow fair business, advertising, and marketing
practices.
 Provide accurate, clear, and easily accessible
information about the company and the goods or
services it offers.
 Disclose full information about the terms, conditions,
and costs of the transaction.
 Ensure that consumers know they are making a
commitment to buy before closing the deal.
 Provide an easy-to-use and secure method for online
payments.
 (continued)
Application of OECD Guidelines
 Protect consumer privacy during electronic
transactions.
 Have policies and procedures to address consumer
problems quickly, fairly, and without excessive cost or
inconvenience to the consumer.
 Adopt fair, effective, and easy-to-understand self-
regulatory policies and procedures.
 Help educate consumers about electronic commerce,
thereby contributing to a consumer-friendly electronic
marketplace.
Better Business Bureau/
BBB Online
Code of Online Business Practices
 Truthful and accurate communications
 Disclosure
 Information practices and security
 Customer satisfaction
 Protecting children
Web Site
Checklist
Myths of E-Entrepreneurship
 E-entrepreneurship is a no-brainer.
 E-entrepreneurship is cheap.
 The best price is always online.
 E-commerce will kill traditional retail.
 E-entrepreneurships make an obscene
amount of money.
 E-entrepreneurship is not safe.
 (continued)
Myths of E-Entrepreneurship
 E-entrepreneurship success depends
on the right technology.
 Getting products to consumers is an
e-entrepreneur’s biggest cost.
 Most Web consumers are “young.”
 If a product or service can be sold, it
can be sold on the Web.
 Everyone else is selling online.
15 Most Common
E-Entrepreneurship Mistakes
1. Trying to sell the wrong product online
2. Misjudging the web site’s potential
3. Forgetting that a first impression can
only be made once
4. Making the site too complicated
5. Using a complicated navigation system
6. Forgetting to list your phone number
7. Supporting only one browser
8. Featuring out-of-date content
15 Most Common
E-Entrepreneurship Mistakes (continued)
9. Requiring excessive download times
10. Ignoring customer service
11. Not validating the functionality of your site
12. Not merging your web site with your
conventional business
13. Not promoting the site
14. Using spam promotion
15. Failing to deliver products
Creating a Winning E-Business
 Learning Objectives
 Identify entrepreneurial abilities
 Describe the entrepreneurial process
 Understand the factors affecting e-
business success
 Identify ways to exploit e-business
advantages

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 The Entrepreneur and the
Entrepreneurial Process
 Entrepreneur
 Assumes the risks of starting and operating
his or her own business
 Must be able to lead others
 Must believe in his or her business idea
 Must have the self-confidence to accomplish
business goals

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 E-business entrepreneur examples

 Jeff Bezos, Amazon.com
 Pierre Omidyar, eBay
 Kelby Hagar, GroceryWorks.com and Digital
Witness
 Jason Zasky, Failure Magazine

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 Entrepreneurial abilities
 Leadership traits
 High-energy level
 Self-confidence
 Organizational skills
 Ability to act quickly and decisively
 Independent, goal-oriented, creative,
competitive

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 Entrepreneurial process
 Stage 1: Are you an entrepreneur?
Assess your entrepreneurial abilities
Evaluate time and effort involved in
starting/running your own business
Consider the effect of the business commitment on
your family life

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 Entrepreneurial process (continued)

 Stage 2: Buy existing business or start own
business?

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 Entrepreneurial process (continued)

 Stage 3: For a new business startup you must
Define the business idea
Create a business plan
Secure financing

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 Entrepreneurial process (continued)

 Stage 4: Operate and grow your business

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 The Entrepreneur and the
Entrepreneurial Process (continued)

 Entrepreneurial process (continued)

 Stage 5: Harvest your business
Continue to operate “cash cow”
Go public
Sell the business
Liquidate the business

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 The Entrepreneur and the
Entrepreneurial Process (continued)

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 Factors Affecting
E-Business Success
 The network effect
 Total value of a product, service, or
technology grows as more and more people
use it
Telephone system example
 Single telephone has no value; as more people join the
telephone system, the value of each telephone increases
uBid online auction site example
 As more people participate, the auction site becomes
more valuable to buyers and sellers

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 Factors Affecting
E-Business Success (continued)

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 Factors Affecting
E-Business Success (continued)

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 Factors Affecting
E-Business Success (continued)
 Innovative marketing ideas
 Hotmail and viral marketing example
Hotmail users grew at a rapid rate because of
electronic word of mouth coupled with the network
effect
Electronic word of mouth or viral marketing
spreads from user to user in the same way a
human virus spreads from person to person

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 Factors Affecting
E-Business Success (continued)

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 Factors Affecting
E-Business Success (continued)
 Scalability
 Ability of a business to function well in the
face of rapid growth
Systems and procedures meet customers needs
AllAdvantage e-business failure example
 E-business idea: Paying for users to browse the Web
and view advertising
 Millions of customers signed on; advertisers did not
 No scalability with rapid growth in customers

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 Factors Affecting
E-Business Success (continued)
 Ease of entry into electronic markets
 Low-cost technologies make it easy to create
new e-businesses
 eBay and online auction example
Easy for consumers to interact at auction site
Web auction software is cheap and easy to
install /maintain
E-businesses earn commissions without having to
manage, warehouse, and distribute products

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 Factors Affecting
E-Business Success (continued)

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 Factors Affecting
E-Business Success (continued)
 Ease of entry into electronic markets
(continued)
 Competitive barriers to overcome
Failure to secure first-mover advantage
Lack of name identification
Lack of customer loyalty

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 Factors Affecting
E-Business Success (continued)

 Ability to quickly adapt to marketplace

changes
 Rapid knowledge transfer
 Need to make decisions quickly
 Exploit new ideas and opportunities
 Handle new challenges
Amazon.com is an example of ongoing evolution
from a basic e-business idea

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 Factors Affecting
E-Business Success (continued)

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 Exploiting E-Business
Advantages (continued)
 Expand the market
 Business and consumers are no longer bound
by constraints of time, space, physical
location
 Opportunity to reach larger market
 Ticketmaster example

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)
 Acquire greater business visibility
 Get business name, products, and services in
front of potential customers more quickly
 Auto industry example

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)

 Use power of the Internet and Web to

maximize customer relationships and
improve responsiveness
 Create customer loyalty
 Stay in touch with customer needs
 Build one-on-one relationships
 Provide information to enrich customers’
online experience
Southwest Airlines example

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)

 Create new products and services

 Opportunities for new e-business ideas where
products or services are accessed over the
Web
Business software applications
Server facilities for data file backup
Legal dispute resolution
 Cybersettle example
Web hosting services
 Rackspace Managed Hosting example

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)

 Reduce costs of running a business

 Sales and customer support costs
 Transaction costs
 Order handling costs
Dell Computers, Cisco Systems, and Microsoft
Corporation examples

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 Exploiting E-Business
Advantages (continued)

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 Exploiting E-Business
Advantages (continued)

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 Summary
 An entrepreneur assumes the risks of
starting and operating his or her own
business
 Entrepreneurial abilities
 Leadership
 High-energy
 Self-confidence
 Organization skills
 Ability to act quickly
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 Summary
(continued)
 Five stages of the entrepreneurial process
 Decide if you are an entrepreneur
 Decide to buy or start new business
 Plan the business
 Operate the business
 Harvest the business

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 Summary
(continued)
 Factors that can affect e-business
success
 Network effect
 Innovative marketing ideas
 Scalability of the e-business idea
 Cost of entry into the marketplace
 Ability to overcome competitive barriers
 Ability to exploit inherent advantages

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