4.1 © 2003 by Prentice Hall 4 4 THE DIGITAL FIRM: ELECTRONIC COMMERCE AND ELECTRONIC BUSINESS Chapter

4.1 © 2003 by Prentice Hall

44

THE DIGITAL FIRM: THE DIGITAL FIRM: ELECTRONIC ELECTRONIC

COMMERCE AND COMMERCE AND ELECTRONIC ELECTRONIC

BUSINESSBUSINESS

Chapter


• How has Internet technology changed How has Internet technology changed value propositions and business models?value propositions and business models?

• What is electronic commerce? How has What is electronic commerce? How has electronic commerce changed consumer electronic commerce changed consumer retailing and business-to-business retailing and business-to-business transactions?transactions?

• What are the principal payment systems What are the principal payment systems for electronic commerce?for electronic commerce?

Essentials of Management Information SystemsEssentials of Management Information SystemsChapter 4 Electronic Commerce & Electronic BusinessChapter 4 Electronic Commerce & Electronic Business

OBJECTIVES


• How can Internet technology support electronic How can Internet technology support electronic business and supply chain management?business and supply chain management?

• What are the major managerial and What are the major managerial and organizational challenges posed by electronic organizational challenges posed by electronic commerce and electronic business?commerce and electronic business?


OBJECTIVES


• Emerging digital firmEmerging digital firm

• Electronic commerceElectronic commerce

• Electronic businessElectronic business

• Challenges and opportunitiesChallenges and opportunities

MANAGEMENT CHALLENGES



1.1. Electronic commerce and electronic business Electronic commerce and electronic business require new mind setrequire new mind set

2.2. Finding a successful Internet business modelFinding a successful Internet business model

MANAGEMENT CHALLENGES



Internet Technology and The Digital Firm

• Information technology infrastructure:Information technology infrastructure: Provides a universal and easy-to-use set of Provides a universal and easy-to-use set of technologies and technology standards that technologies and technology standards that can be adopted by all organizationscan be adopted by all organizations

• Direct communication between trading Direct communication between trading partners:partners: Disintermediation removes Disintermediation removes intermediate layers, streamlines processintermediate layers, streamlines process


ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM


• Round-the-clock service:Round-the-clock service: Web sites available Web sites available to consumers 24 hours a dayto consumers 24 hours a day

• Extended distribution channels: Extended distribution channels: Outlets created for attracting customers who Outlets created for attracting customers who otherwise would not patronize otherwise would not patronize

• Reduced transaction costs:Reduced transaction costs: Costs of Costs of searching for buyers, sellers, etc. reducedsearching for buyers, sellers, etc. reduced


Internet Technology and the Digital Firm



Business Model: Business Model: • Defines an enterprise Defines an enterprise

• Describes how the enterprise delivers a Describes how the enterprise delivers a product or serviceproduct or service

• Shows how the enterprise creates wealthShows how the enterprise creates wealth


New Business Models and Value Propositions



• Information asymmetry: Information asymmetry: One party in a One party in a transaction has more information than the othertransaction has more information than the other

• Increases richness:Increases richness: Depth and detail of Depth and detail of informationinformation

• Increases reach:Increases reach: Number of people contacted Number of people contacted


The Changing Economies of Information



Ric

hn

es

sR

ich

ne

ss New levels of richness and reach attainable

Reach

ENABLERS

Explosion of connectivity

Dissemination of

standards

Figure 4-1


The Changing Economics of Information



Internet Business Models

• Virtual storefront:Virtual storefront: Sells goods, services Sells goods, services on-lineon-line

• Information broker:Information broker: Provide info on Provide info on products, pricing, etc.products, pricing, etc.

• Transaction broker:Transaction broker: Buyers view rates, Buyers view rates, terms from various sourcesterms from various sources




• OnlineOnline Marketplace:Marketplace: Concentrates Concentrates information from several providersinformation from several providers

• Content provider:Content provider: Creates revenue Creates revenue through providing client for a fee, and through providing client for a fee, and advertisingadvertising





• On-line service provider:On-line service provider: Provides Provides service, support for hardware, software service, support for hardware, software productsproducts

• Virtual community:Virtual community: Chat room, on-line Chat room, on-line meeting placemeeting place





• Portal:Portal: Initial point of entry to Web, Initial point of entry to Web, specialized content, servicesspecialized content, services

• Syndicator:Syndicator: Aggregate information from Aggregate information from several sources sold to other companiesseveral sources sold to other companies

• Auction:Auction: Electronic clearinghouse Electronic clearinghouse products, prices, change in response to products, prices, change in response to demand demand





• Dynamic pricing: Dynamic pricing: real-time interactions real-time interactions

betweenbetween buyers and sellersbuyers and sellers determine determine worth of itemsworth of items

• Banner ad:Banner ad: Graphic display used for Graphic display used for advertising, linked to the advertiser’s Web advertising, linked to the advertiser’s Web sitesite





Categories of Electronic Commerce

• Business-to-customer (B2C):Business-to-customer (B2C): Retailing Retailing of products and services directly to of products and services directly to individual customersindividual customers

• Business-to-business (B2B): Business-to-business (B2B): Sales of Sales of goods and services among businessesgoods and services among businesses

• Consumer-to-consumer (C2C):Consumer-to-consumer (C2C): Individuals use Web for private sales or Individuals use Web for private sales or exchangeexchange


ELECTRONIC COMMERCE


Business-To-Consumer

• Customer-centered retailing:Customer-centered retailing: Closer, Closer, yet more cost-effective relationship with yet more cost-effective relationship with customerscustomers

• Web sites:Web sites: Provide information on Provide information on products, services, prices, ordersproducts, services, prices, orders


ELECTRONIC COMMERCE


Business-To-Consumer

• Disintermediation:Disintermediation: The removal of The removal of organizations or business process layers organizations or business process layers responsible for certain intermediary steps responsible for certain intermediary steps in a value chainin a value chain

• Reintermediation:Reintermediation: The shifting of the The shifting of the intermediary role in a value chain to a new intermediary role in a value chain to a new sourcesource


ELECTRONIC COMMERCE


Benefits of Disintermediation to the Consumer

Figure 4-2


Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/

Sweater

$48.50

$40.34

$20.45

ELECTRONIC COMMERCE


Interactive Marketing and Personalization

Web personalization:Web personalization:

• Benefits of using individual sales peopleBenefits of using individual sales people

• Dramatically lower costsDramatically lower costs


ELECTRONIC COMMERCE


Web Site Personalization


ELECTRONIC COMMERCE


M-Commerce and Next Generation Marketing

Mobile commerce (m-commerce):Mobile commerce (m-commerce):• Wireless devices used to conduct both Wireless devices used to conduct both

business-to-consumer and business-to-business-to-consumer and business-to-business e-commerce transactions over business e-commerce transactions over the Internetthe Internet

• Extend personalization by delivering new Extend personalization by delivering new value-added services directly to value-added services directly to customers at any time and placecustomers at any time and place


ELECTRONIC COMMERCE


Customer Personalization


Figure 4-4

ELECTRONIC COMMERCE


Business-To-Business Electronic Commerce

Automation of purchase, sale transactions Automation of purchase, sale transactions

from business to business from business to business

• Private industrial networks:Private industrial networks: Coordination Coordination between companies for efficient supply chain between companies for efficient supply chain management and collaborative activitiesmanagement and collaborative activities

• Electronic hubs:Electronic hubs: On-line marketplaces, On-line marketplaces, point-to-point connections, integrated point-to-point connections, integrated informationinformation


ELECTRONIC COMMERCE


A Private Industrial Network


Figure 4-5

ELECTRONIC COMMERCE


A Net Marketplace


Figure 4-6

ELECTRONIC COMMERCE


Exchanges: Third-party net marketplaceExchanges: Third-party net marketplace

• Primarily transaction orientedPrimarily transaction oriented

• Connects buyers and suppliers for spot Connects buyers and suppliers for spot purchasingpurchasing


ELECTRONIC COMMERCE


Electronic Commerce Payment Systems


SYSTEM DESCRIPTION

CREDIT CARDS SECURE SITE PRESERVES INFORMATION

ELECTRONIC CASH DIGITAL CURRENCY USED FOR MICROPAYMENTS

PERSON-TO-PERSON SEND MONEY TO SITES UNABLE TO USE CREDIT CARDS

DIGITAL WALLET SOFTWARE STORES CREDIT CARD INFORMATION

ELECTRONIC CHECK CHECK WITH ENCRIPTED DIGITAL SIGNATURE

SMART CARD MICROCHIP STORES ELECTRONIC CASH

ELECTRONIC BILL PAYMENT ELECTRONIC FUNDS TRANSFER

ELECTRONIC COMMERCE


Electronic Commerce Information Flows


Figure 4-7

ELECTRONIC COMMERCE


• BenefitsBenefits

• Functional applicationsFunctional applications

• Supply chain managementSupply chain management

How Intranets Support Electronic Business


ELECTRONIC BUSINESS AND THE DIGITAL FIRM


• Connectivity: accessible from most computing Connectivity: accessible from most computing platformsplatforms

• Can be tied to internal corporate systems and Can be tied to internal corporate systems and core transaction databasescore transaction databases

• Can create interactive applicationsCan create interactive applications

• Scalable to larger or smaller computing Scalable to larger or smaller computing platformsplatforms

Benefits of Intranets




• Easy-to-use, universal Web interfaceEasy-to-use, universal Web interface

• Low start-up costsLow start-up costs

• Richer, more responsive information Richer, more responsive information environmentenvironment

• Reduced information distribution costsReduced information distribution costs


Benefits of Intranets



• Finance and accountingFinance and accounting

• Human resourcesHuman resources

• Sales and marketingSales and marketing

• Manufacturing and productionManufacturing and production

Functional Applications of Intranet





Figure 4-8

Functional Applications of Intranets



Finance and Accounting

• General ledger reportingGeneral ledger reporting

• Project costingProject costing

• Annual reportsAnnual reports

• BudgetingBudgeting




Human Resources

CompanyCompany• On-line publishing of corporate policyOn-line publishing of corporate policy• Job postings and internal job transfersJob postings and internal job transfers• Company telephone directories, and trainingCompany telephone directories, and training

Employees Employees • HealthcareHealthcare• Employee savingsEmployee savings• Competency testsCompetency tests




Sales and Marketing

• Competitor analysisCompetitor analysis

• Price updatesPrice updates

• Promotional campaignsPromotional campaigns

• Sales presentationsSales presentations

• Sales contractsSales contracts




Manufacturing and Production

• Quality measurementsQuality measurements

• Maintenance schedulesMaintenance schedules

• Design specificationsDesign specifications

• Machine outputsMachine outputs

• Order trackingOrder tracking




The Future Internet-Driven Supply Chain


Figure 4-9



• Unproven business modelsUnproven business models

• Business process change requirementsBusiness process change requirements

• Channel conflictsChannel conflicts

• Legal issuesLegal issues

• Security and privacySecurity and privacy

MANGEMENT CHALLENGES & OPPORTUNITIES



44

ELECTRONIC ELECTRONIC COMMERCE & COMMERCE & ELECTRONIC ELECTRONIC

BUSINESSBUSINESS

Chapter

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4.1 © 2003 by Prentice Hall 4 4 THE DIGITAL FIRM: ELECTRONIC COMMERCE AND ELECTRONIC BUSINESS Chapter