Lecture 2Title: E-Business Advantages

By: Mr Hashem AlaidarosMIS 326

ObjectivesAdvantages of E-Business,What you can Sell on-line?Internet and businessFeatures of e-commerce,M-CommerceFeatures of digital markets,Features of digital goods.

E-Business Adv• Low Startup Costo The price of computers continue to drop rapidly,

while technology improving.o Cutting the cost of rent, utilities, employees,

paper work, and moreo Obtaining lower price on some suppliers

Cont.• Steady Stream of New Customero Searching product on-line (engines, forum..etc)

• Diverse Productso Text, video, image, audio, services...etco Anything that can be sold in the physical world can be sold

through a web siteo Non-physical product: medical or legal advice

Cont.• Speed the flow of products and serviceso Getting products to market faster

• Improve the level of customer serviceso Adjusting more quickly to customer demando Improving the speed of communications (email,

chat room...etc)• Improve relationships with suppliers

Cont.• Manage inventory more efficiencyo Online database

• Organize accountancy and statistics more efficiency. o Online database

What can sell online?1.Selling Consumer Products2.Selling Information3.Selling Professional Services4.Technology and Computer Services5.On-line Opportunities for Artist

Internet and OrganizationWhat are the benefits that the Internet offers to

organizations?Compare how you would shop for a car today, as

opposed to how they might have shopped for a car ten years ago

http://www.autobytel.com/

Electronic Commerce and the Internet• E-commerce

• Use of the Internet and Web to transact business

• Digitally enabled transactions

• History of e-commerce

• Began in 1995 and grew exponentially; still growing at an annual rate of 16 percent

• Rapid growth led to market bubble

• E-commerce today the fastest growing form of retail trade in U.S., Europe, Asia

E-Commerce Features1. Ubiquity

• Internet/Web technology available everywhere: work, home, etc., and anytime (Marketspace)

• Reduce transaction cost

2. Global reach• The technology reaches across national boundaries, around

Earth

3. Universal standards• One set of technology standards in all nations: Internet

standards

Cont.4. Richness

• Supports video, audio, and text messages

5. Interactivity

• The technology works through interaction with the consumer

• E.g. no conversation in TV

6. Information density

• Vast increases in information density—the total amount and quality of information available to all market participants

• E-commerce technologies reduce information collection, storage, processing, and communication costs while increase the accuracy and timeliness of information.

Cont.7. Personalization/Customization:

• The technology allows personalized messages to be delivered to individuals as well as groups.

• Merchants can target their marketing message to specific individuals by adjusting the message to person’s name, interest, and past purchases.

• The technology also permits customization by changing the delivered product or service based on a user’s preference or prior behavior.

Cont.8. Social technology

• The technology promotes user content generation and social networking

• The technology allows people to establish a social network and communicate with each other via instant messaging or email.

Mobile Commerce• Although m-commerce represents small fraction of total e-

commerce transactions, revenue has been steadily growing

• Location-based services

• Shopping

• Banking and financial services

• Wireless Advertising

• Games and entertainment

• what applications and services they use with their cell-phones. Have any purchased games or entertainment, and from what companies?

Digital Market• Digital markets reduce:

1. Information asymmetry

• When one party in a transaction has more information that is important for the transaction than the other party

• Consumer and supplier can “see” the prices being charged for goods, and in that sense digital markets are said to be more “transparent” that traditional market (e.g. Auto retailer).

Cont.2. Search costs

3. Transaction costs (The cost of participating in a market)

4. Menu costs (Merchants’ costs of changing prices)

Cont.• Digital markets enable:

1. Dynamic pricing

• The price of a product varies depending on the demand characteristics of the customer or the supply situation of the seller

2. Disintermediation

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

Figure 10-2

The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer.

The Benefits of Disintermediation to the ConsumerThe Benefits of Disintermediation to the Consumer

Digital Goods• Digital goods

• Goods that can be delivered over a digital network

• E.g., Music tracks, video, software, newspapers, books

• Cost of producing first unit almost entire cost of product: marginal cost of producing 2nd unit is about zero

• Costs of delivery over the Internet very low

• Marketing costs remain the same; pricing highly variable

• Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.)