Liquidity Liquid assets-Assets that can be easily bought or

sold Availability of liquid assets to a market or

company e.g. cash Asset's ability to be easily converted buying or

selling without losing in value., are known as liquid assets.

Also the need for a critical mass of buyers and sellersThe fixed cost of deploying EC can be very highWithout a large number of buyers, sellers will

not make money Early liquidity—achieving a critical mass of

buyers and sellers as fast as possible, before the market-maker’s cash disappears

Quality Uncertainty & Assurance

Quality uncertainty—the uncertainty of online buyers about the quality of products that they have never seen, especially from an unknown vendorProvide free samplesReturn if not satisfied

Microproduct—a small digital product costing a few cents

Insurance, escrow, and other services

Electronic Catalogs

Electronic catalogs—the presentation of product information in an electronic form; the backbone of most e-selling sites

Evolution of electronic catalogs Merchants—advertise/promote

products/services Customers—source of infoand price

comparisons Consist of product database, directory and

search capability and presentation function Replication of text that appears in paper

catalogs More dynamic, customized, and integrated

Classifications ofElectronic Catalogs

Electronic catalogs allow integration of:Order taking and fulfillmentElectronic paymentIntranet workflowInventory and accounting systemSuppliers’ extranetRelationship to paper catalogs

Customized Catalogs Assembled specifically for:

A companyAn individual shopper

Customization systems can:Create branded, value-added

capabilitiesAllows user to compose orderMay have individualized prices,

products, and display formatsAutomatically identify the

characteristics of customers based on the transaction records

Electronic Catalogs at Boise Cascade

Boise Cascade Office Products--$3-billion office products wholesaler of over 200,000 different itemsThey had a 900-page paper

catalog that was mailed once each year; minicatalogs tailored to customers’ individual needs

The company placed its catalogs online in 1996 (boiseoffice.com)

Boise Cascade (cont.)

Sales through the Web site: 1997—20 percent 1999—30 percent 2004—80 percent (expected) 2009—even higher sales

Production of a single paper catalog took 6 weeks/Web catalog takes 1 week to set

Pricing major advantage of customized catalogs Electronic orders cost 55% less to process than

paper-based orders

Search Engines

Search engine—a computer program that can access a database of Internet resources, search for specific information or keywords, and report the results

Software (intelligent) agent—software that can perform routine tasks that require intelligence

Search Engines, Intelligent Agents and Shopping Carts

E-commerce users use both search engines and intelligent agents Search engines find products or services Software agents conduct other tasks (comparisons)

e.g. Buyer agents or shopping bots User or personal agents Monitoring-and-surveillance agents Data Mining agents

Electronic shopping cart—an order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop

Auctions

Auction—a market mechanism by which a seller places an offer to sell a product and buyers make bids sequentially and competitively until a final price is reached

Auctions deal with products and services for which conventional marketing channels are ineffective or inefficient

Limitations of Traditional Auctions

Traditional auctions are generally a rapid process

It may be difficult for sellers to move goods to the auction site

Commissions are fairly high

Electronic Auctions Electronic auctions (e-auctions)—

auctions conducted onlineHost sites on the Internet serve as

brokers offering: Services for sellers to post their goods for sale

Allowing buyers to bid on those itemsMany sites have certain etiquette/

rules that must be adhered to in order to conduct fair business

Electronic Auctions (cont.) Auctions are mainly based on dynamic

pricingMajor online auctions offer:

Consumer products Electronic parts Artwork Vacation packages Airline tickets Collectibles Excess supplies and inventories being auctioned off by B2B

Dynamic Pricing

Dynamic pricing—prices change based on supply and demand relationships at any given time

The four major categories of dynamic pricing are based on the number of buyers and sellers involved: One buyer, one seller One seller, many potential buyers One buyer, many potential sellers Many sellers, many buyers

Dynamic Pricing (cont.)

One buyer, one seller usesNegotiationBargainingBartering

Price will be determined by:Each party’s bargaining powerSupply and demand in marketBusiness environment factors

Dynamic Pricing (cont.) One seller, many potential buyers

Forward auction—an auction in which a seller entertains bids from buyers

English auction—an auction in which buyers bid on an item in sequence, as price rises with time

Yankee auction—auction of multiple identical items in which bidders can bid for any number of the items offered, and the highest bid wins

Dynamic Pricing (cont.)

Dutch auction—auction of multiple identical items, with prices starting at a very high level and declining as the time passes

Free-fall (declining price) auction—a variation of the Dutch auction in which only one item is auctioned at a time; the price starts at a very high level and declines at fixed time intervals, the winning bid is the lowest one when the time expires

English Auction: Ascending Price

Dynamic Pricing (cont.)

One buyer, many sellersReverse auction (bidding, or tendering system)—auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with price reducing sequentially, and the lowest bid wins; primarily a B2B or G2B mechanism

The Reverse Auction Process

Dynamic Pricing One buyer, many potential sellers

”Name-your-own-price” modelConsumer-to-business (C2B)

model Many sellers, many buyers

Double Auction—buyers and their bidding prices and sellers and their asking prices are matched, considering quantities on both sides

Limitations of e-auctions Possibility of fraud—defective

goods or receive goods/services without paying

Limited participation—invitation only or open to dealers only

Lack of security—C2C auctions sometimes unencrypted

Limited software

Bartering Online Bartering—an exchange of goods and

servicesBartering exchanges

Give your offer to intermediary Intermediary assesses value of your product or service in”points”

Use “points” to buy what you needBartering sites must be financially

secureIntermediary auctions/sells the item or

service to recover its money with profit

Bartering Online (cont.)

E-bartering—bartering conducted online, usually by a bartering exchange

Bartering exchange—a marketplace in which an intermediary arranges barter transactions

Mobile Commerce

Mobile computing permits real-time access to info, applications and tools that were accessible only from a desktop computer

Mobile commerce (m-commerce)—EC conducted via wireless devices

M-business—the broadest definition of m-commerce, in which e-business is conducted in a wireless environment

The Promise of M-Commerce

Mobility significantly changes the manner in which people and customers:InteractCommunicate Collaborate

Mobile applications are expected to change the way we:LivePlayDo business

The Promise of M-Commerce

The PC-based Internet culture is changing to one based on mobile devices

M-commerce creates new business models for EC, notably location-based applications

Large corporations transforming their businesses to include m-commerce-based products and services

I-Mode: Successful Mobile Portal

Shopping guides Maps &

transportation Ticketing News and reports Personalized movie

service

Entertainment Dining and

reservations Additional services

Banking Stock trading Telephone

directory searches Dictionary

services Horoscopes

An example of the spread of m-commerce is DoCoMo’s i-Mode; some applications of I-Mode are:

Impacts of E-Markets on Business Processes & Organizations

Product promotion New sales channel Direct savings Reduced cycle time Customer service

Brand or corporate image

Customization Advertising Ordering systems Market operations

Impacts of e-markets on B2C direct marketing:

Transforming Organizations

Technology and organizational learningTo survive, companies will have to learn and adapt quickly to the new technologies

Corporate change must be planned and managed

New technologies will require new organizational structures and approaches

Transforming Organizations

The changing nature of workMore competition in the global

marketplace means firms reducing employees and outsourcing to countries where labor is cheap

This creates new opportunities and new risks; forces us to think new ways about jobs, careers and salaries

Transforming Organizations

Digital-age workers need flexibility—truly secure jobs will be few, many will work from home

Digital-age companies will have to prize core workers as its most valuable asset—empowering them and providing them with means to expand their knowledge and skill base

Redefining Organizations

New/improved product capabilitiesE-markets allow for new products to

be created and/or for existing products to be customized in innovative ways

Customer profiles and data on customer preferences—source of information for improving products or designing new ones

Customization creates specific products for each customer, based on their exact needs

Redefining Organizations

New business modelsE-markets affect individual

companies, products, entire industries

Improving the supply chainImpacts on manufacturing

Manufacturing systems changing from mass production lines to demand-driven, just-in-time manufacturing

Redefining Organizations

Impacts on Manufacturing (cont.)Build-to-order—the biggest

change in manufacturing will be the move to build-to-order systems Manufacturing or assembly will start only after an order is received

Will change not only the production planning and control, but also the entire supply chain

Redefining Organizations Impacts on finance and accounting

E-markets require special finance and accounting systems—most are electronic payment systems complicated by legal issues and international standards

Executing an electronic order triggers back-office transactions

These activities must be efficient, synchronized, and fast so EC is not slowed

Redefining Organizations Impact on human resource

management and trainingEC is changing how people are

recruited, evaluated, promoted, and developed

EC also is changing the way training and education are offered to employees Online distance learning and virtual courses are exploding

Training costs falling by 50% or more

Managerial Issues How do we compete in the web

economy? What about intermediaries? What organizational changes do we

need? Should we auction and what? Should we have our own auction site

or use a third-party site? Should we barter? What m-commerce and l-commerce

opportunities are available?