Chapters 1 & 2 – Wrap up Economics, and Impacts. Electronic CommercePrentice Hall © 2006 2 Competition in the Digital Economy Internet ecosystem The business

Chapters 1 & 2 – Wrap upEconomics, and Impacts

Prentice Hall © 2006 2Electronic Commerce

Competition in the Digital Economy

Internet ecosystem

The business model of the Internet economy

web of interrelationships vs. hierarchical

differentiation

Providing a product or service that is unique

personalization

The ability to tailor a product, service, or Web content to specific user preferences



• Competitive Factors in the Internet Economy– Lower prices, search costs– Speedy comparisons– Customer service– Barriers to entry are reduced– Virtual partnerships multiply– Market niches abound



• Porter’s Competitive Analysis in an Industry

competitive forces model

Model, devised by Porter, that says that five major forces of competition determine industry structure and how economic value is divided among the industry players in an industry; the analysis of these forces helps companies develop their competitive strategy



Prentice Hall © 2006 6


Electronic Commerce


Exhibit 2.6 Porter’s Competitive Forces Model


Perfect Competition

• Many buyers and sellers must be able to enter the market at little or no entry cost (no barriers to entry).

• Large buyers or sellers are not able to individually influence the market – No Hierarchy

• The products must be homogeneous (commodities). (For customized products, therefore, there is no perfect competition.)

• Buyers and sellers must have comprehensive information about the products and about the market participants’ demands, supplies, and conditions.

Electronic Commerce


What drives EC

• In the Digital Revolution the economy is based on digital technologies – Digital economy– Internet economy– New economy– Web economy

Electronic Commerce


Costs

• TC – Total Cost• FC – Fixed Cost• VC – Variable Cost• AC – Average Cost• MC – Marginal Cost

– The change in TC because of addition to production level by one unit of goods

TC = FC + VC * q

AC = TC/q = FC/q + VC

Electronic Commerce


Costs – Cont’d

Electronic Commerce


Impacts of EC on Business Processes and Organizations

• Improving Direct Marketing

– Product promotion– New sales channel– Direct savings– Reduced cycle time– Improved customer

service– Brand or corporate

image

• Other Impacts on Direct Marketing– Customization– Advertising– Ordering systems– Market operations


Exhibit 2.7 The Analysis-of-Impacts Framework



• Transforming Organizations– Technology and organizational learning:

• Corporate change must be planned and managed• Organizations may have to struggle with different

experiments and learn from their mistakes– The changing nature of work

• Firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly lower



• Redefining Organizations– New and improved product capabilities– New business models– Improving the supply chain– Impacts on Manufacturing

build-to-order (pull system)A manufacturing process that starts with an order (usually customized). Once the order is paid for, the vendor starts to fulfill it

– Real-time demand-driven manufacturing– Virtual manufacturing– Assembly lines


Exhibit 2.10 Changes in the Supply Chain



• Redefining Organizations– Impacts on Finance and Accounting

E-markets require special finance and accounting systems. Most notable of these are electronic payment systems

– Impacts on Human Resource Management and Training• EC is changing how people are recruited, evaluated,

promoted, and developed• EC also is changing the way training and education

are offered to employees• Companies are cutting training costs by 50% or more,

and virtual courses and programs are mushrooming


Managerial Issues

1. What about intermediaries?2. Should we auction?3. Should we barter?4. What m-commerce opportunities are

available?5. How do we compete in the digital economy?6. What organizational changes will be

needed?


EC, our country and the challenge

• Low speed internet and infrastructures• Filtering• Sanctions• Liquidity – the state of owning something of a

value that can be easily exchanged for cash• Early Liquidity• Quality Uncertainty and Assurance

Electronic Commerce


Homework Assignment 2

1. Enter respond.com and send a request for a product or a service. Once you receive replies, select the best deal. You have no obligation to buy. Write a short report on your experience.

2. Enter Dice.com, create an account, submit your resume for a job listing, create a search agent for the job you are looking for. Write a report about the services provided on dice and your experience.

Electronic Commerce


Homework Assignment 2 – Cont’d

3. Enter bidder-network.com and view all the different types of auction software and auction hosting available.

4. Examine the process used by sorcity.com regarding reverse auctions. Review the process and membership agreements for both buyers and sellers. Check out the demo. Write a report based on your findings.

Electronic Commerce


Homework Assignment 2 – Cont’d

5. Examine how bartering is conducted online at tradeaway.com.

6. Using Porter’s Model, analyze the chances of success in launching a storefront for selling shoes in Iran.

Electronic Commerce

Documents

Chapters 1 & 2 – Wrap up Economics, and Impacts. Electronic CommercePrentice Hall © 2006 2 Competition in the Digital Economy Internet ecosystem The business