E - commerce As a part of information sys


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E - commerce As a part of information sys

  1. 1. E-commerce business. technology. society.
  2. 2. Chapter 1 The Revolution Is Just Beginning
  3. 3. E-commerce Developments and Themes—2006 <ul><li>More and more people and businesses are using the Internet to conduct commerce </li></ul><ul><li>The e-commerce channel is deepening as more products and services come online </li></ul><ul><li>Broadband and wireless Internet access are growing </li></ul><ul><li>E-commerce business models are being refined to achieve higher levels of profitability </li></ul>
  4. 4. E-commerce Defined <ul><li>E-commerce involves digitally enabled commercial transactions between and among organizations and individuals </li></ul><ul><li>Digitally enabled transactions include all transactions mediated by digital technology </li></ul><ul><li>Commercial transactions involve the exchange of value across organizational or individual boundaries in return for products or services </li></ul>
  5. 5. E-commerce vs. E-business <ul><li>We use the term e-business to refer primarily to the digital enablement of transactions and processes within a firm, involving information systems under the control of the firm </li></ul><ul><li>E-business does not include commercial transactions involving an exchange of value across organizational boundaries </li></ul>
  6. 6. Why Study E-commerce? <ul><li>E-commerce technology is different and more powerful than any of the other technologies that we have seen in the past century. </li></ul><ul><li>E-commerce has challenged much traditional business thinking </li></ul><ul><ul><li>Information asymmetry </li></ul></ul><ul><ul><li>From mass marketing to customization </li></ul></ul><ul><li>E-commerce has a number of unique features that help explain why we have so much interest in e-commerce </li></ul>
  7. 7. Seven Unique Features of E-commerce Technology and Their Significance <ul><li>Is ubiquitous (available everywhere, all the time) </li></ul><ul><li>Offers global reach (across cultural/national boundaries) </li></ul><ul><li>Operates according to universal standards (lowers market entry for merchants and search costs for consumers) </li></ul><ul><li>Provides information richness (more powerful selling environment) </li></ul><ul><li>Is interactive (can simulate face-to-face experience, but on a global scale) </li></ul><ul><li>Increases information density (amount and quality of information available to all market participants) </li></ul><ul><li>Permits personalization/customization </li></ul>
  8. 8. Seven Unique Feature of E-Commerce Technology <ul><li>Ubiquity </li></ul><ul><ul><li>Alters industry structure by creating new marketing channels and expanding size of overall market </li></ul></ul><ul><ul><li>Creates new efficiencies in industry operations and lowers cost of firms’ sales operations </li></ul></ul><ul><ul><li>Enables new differentiation strategies </li></ul></ul><ul><li>Global Reach </li></ul><ul><ul><li>Changes industry structure by lowering barriers to entry, but greatly expands market at the same time </li></ul></ul><ul><ul><li>Lowers cost of industry and firm operations through production and sales efficiencies </li></ul></ul><ul><ul><li>Enables competition on global scale </li></ul></ul>
  9. 9. Seven Unique Features of E-Commerce Technology <ul><li>Universal Standards </li></ul><ul><ul><li>Changes industry structure by lowering barriers to entry and intensifying competition within an industry </li></ul></ul><ul><ul><li>Lowers costs of industry and firm operations by lowering computing and communications costs </li></ul></ul><ul><ul><li>Enables broad-scope strategies </li></ul></ul><ul><li>Richness </li></ul><ul><ul><li>Alters industry structure by reducing strength of powerful distribution channels </li></ul></ul><ul><ul><li>Change industry and firm operations costs by lessening reliance on sales force </li></ul></ul><ul><ul><li>Enhances post-sale support strategies </li></ul></ul>
  10. 10. Seven Unique Features of E-Commerce Technology <ul><li>Interactivity </li></ul><ul><ul><li>Alters industry structure by reducing threat of substitutes through enhanced customization </li></ul></ul><ul><ul><li>Reduces industry and firm costs by lessening reliance on sales force </li></ul></ul><ul><ul><li>Enable differentiation strategies </li></ul></ul><ul><li>Personalization/Customization </li></ul><ul><ul><li>Alters industry structure by reducing threats of substitutes, raising barriers to entry </li></ul></ul><ul><ul><li>Reduces value chain costs in industry and firm by lessening reliance on sales forces </li></ul></ul>
  11. 11. Seven Unique Features of E-Commerce Technology <ul><li>Information Density </li></ul><ul><ul><li>Changes industry structure by weakening powerful sales channels, shifting bargaining power to consumer </li></ul></ul><ul><ul><li>Reduces industry and firm operations costs by lowering costs of obtaining, processing, and distributing information about suppliers and consumers </li></ul></ul>
  12. 12. Types of E-commerce <ul><li>Classified by nature of market relationship </li></ul><ul><li>Business-to-Consumer (B2C) </li></ul><ul><ul><li>Amazon.com </li></ul></ul><ul><li>Business-to-Business (B2B) </li></ul><ul><ul><li>Alibaba.com </li></ul></ul><ul><li>Consumer-to-Consumer (C2C) </li></ul><ul><ul><li>Ebay.com </li></ul></ul><ul><li>Classified by type of technology used </li></ul><ul><li>Peer-to-Peer (P2P) </li></ul><ul><li>Mobile commerce (M-commerce) </li></ul>
  13. 13. Potential Limitations on the Growth of B2C E-commerce <ul><li>Expensive technology </li></ul><ul><li>Complex software interface </li></ul><ul><li>Sophisticated skill set </li></ul><ul><li>Persistent cultural attraction of physical markets and traditional shopping experiences </li></ul><ul><li>Persistent global inequality limiting access to telephones and computers </li></ul>
  14. 14. Assessing E-commerce: Successes, Surprises and Failures <ul><li>E-commerce has been a stunning technological success </li></ul><ul><li>Early years of e-commerce have been a mixed success from a business perspective </li></ul><ul><li>Many visions developed during early days of e-commerce not fulfilled </li></ul>
  15. 15. Predictions for the Future <ul><li>Technology of e-commerce will continue to propagate through all commercial activity </li></ul><ul><li>E-commerce prices will rise to cover the real cost of doing business on the Web and pay investors reasonable rate of return </li></ul><ul><li>E-commerce margins and profits will rise to levels more typical of all retailers </li></ul><ul><li>In B2C and B2B, traditional Fortune 500 companies will play growing and dominant role </li></ul><ul><li>Number of successful pure online companies will decline and most successful e-commerce firms will adopt mixed “clicks and bricks” strategies </li></ul><ul><li>Growth of regulatory activity worldwide </li></ul>
  16. 16. Amazon @ 15 <ul><li>Story of Amazon in many ways mirrors story of e-commerce itself </li></ul><ul><li>Jeff Bezos, VP, D.E SHAW </li></ul><ul><li>Started in July 1995 </li></ul><ul><li>Process of continuous change and exploration for profits </li></ul><ul><li>What are the reasons why people shop at Amazon? </li></ul><ul><li>Why wasn’t it profitable from Day 1? </li></ul><ul><li>When did it become profitable? </li></ul><ul><li>How many of you have used Amazon recently? </li></ul><ul><li>What was your experience? </li></ul><ul><li>Do you think Amazon will remain profitable? </li></ul>
  17. 17. Chapter 2 E-commerce Models
  18. 18. Components of e-commerce Business Models <ul><li>Business Model </li></ul><ul><li>Customer value </li></ul><ul><li>Scope </li></ul><ul><li>Price </li></ul><ul><li>Resources </li></ul><ul><li>Capabilities </li></ul><ul><li>Implementations </li></ul>Environment Internet Performance
  19. 19. E-Commerce Business Models <ul><li>Business model </li></ul><ul><ul><li>a set of planned activities designed to result in a profit in a marketplace </li></ul></ul><ul><li>E-commerce business model </li></ul><ul><ul><li>a business model that aims to use and leverage the unique qualities of the Internet and the World Wide Web. </li></ul></ul>
  20. 20. Eight Key Ingredients of a Business Model Key Questions Business Model Components Value Proposition Why should the customer buy from you? Revenue model How will you earn money? Market opportunity What marketspace do you intent to serve, and what is its size? Competitive environment Who else occupies your intended marketspace? Competitive advantage What special advantages does your firm bring to the marketspace? Market strategy How do you plan to promote your products to attract customer? Organizational development What types of organizational structures within the firm are necessary to carry out the business plan? Management team What kinds of experiences and background are important for the company’s leaders to have?
  21. 21. Value Position <ul><li>Defines how a company’s product or service fulfills the needs of customers. </li></ul><ul><li>Questions </li></ul><ul><ul><li>Why will customers choose to do business with your firm instead of another company? </li></ul></ul><ul><ul><li>What will your firm provide that other firms do not and cannot? </li></ul></ul>
  22. 22. Revenue Model <ul><li>Describes how the firm will earn revenue, produce profits, and produce a superior return on invested capital. </li></ul><ul><li>E-commerce revenue models include: </li></ul><ul><ul><li>advertising model – Yahoo.com </li></ul></ul><ul><ul><li>subscription model –wsj.com </li></ul></ul><ul><ul><li>transaction fee model –ebay.com </li></ul></ul><ul><ul><li>sales model – Doubleclick.net </li></ul></ul><ul><ul><li>affiliate model – Mypoints.com </li></ul></ul>
  23. 23. Revenue Model <ul><li>Advertising revenue model </li></ul><ul><ul><li>a company provides a forum for advertisements and receives fees from advertisers ( Yahoo ) </li></ul></ul><ul><li>Subscription revenue model </li></ul><ul><ul><li>a company offers it users content or services and charges a subscription fee for access to some or all of it offerings ( Consumer Reports or Wall Street Journal ) </li></ul></ul>
  24. 24. Revenue Model <ul><li>Transaction fee revenue model </li></ul><ul><ul><li>a company receives a fee for enabling or executing a transaction ( eBay or E-Trade ) </li></ul></ul><ul><li>Sales revenue model </li></ul><ul><ul><li>a company derives revenue by selling goods, information, or services ( Amazon or DoubleClick) </li></ul></ul><ul><li>Affiliate revenue model </li></ul><ul><ul><li>a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales ( MyPoints ) </li></ul></ul>
  25. 25. Market Opportunity <ul><li>Market opportunity </li></ul><ul><ul><li>refers to the company’s intended marketspace and the overall potential financial opportunities available to the firm in that market space </li></ul></ul><ul><ul><li>defined by the revenue potential in each of the market niches where you hope to compete </li></ul></ul><ul><li>Marketspace </li></ul><ul><ul><li>the area of actual or potential commercial value in which a company intends to operate </li></ul></ul>
  26. 26. Competitive Environment <ul><li>Refers to the other companies operating in the same marketplace selling similar products </li></ul><ul><li>Influenced by: </li></ul><ul><ul><li>how many competitors are active </li></ul></ul><ul><ul><li>how large are their operations </li></ul></ul><ul><ul><li>the market share of each competitor </li></ul></ul><ul><ul><li>how profitable these firms are </li></ul></ul><ul><ul><li>how they price their products </li></ul></ul>
  27. 27. Competitive Advantage <ul><li>Achieved by a firm when it can produce a superior product and/or bring the product to market at a lower price than most, or all, of its competitors </li></ul><ul><li>Achieved because a firm has been able to obtain differential access to the factors of production that are denied their competitors -- at least in the short term </li></ul>
  28. 28. Competitive Advantage <ul><li>Asymmetry </li></ul><ul><ul><li>exists whenever one participant in a market has more resources than other participants </li></ul></ul><ul><li>First mover advantage </li></ul><ul><ul><li>a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service </li></ul></ul>
  29. 29. Competitive Advantage <ul><li>Unfair competitive advantage </li></ul><ul><ul><li>occurs when one firm develops an advantage based on a factor that other firms cannot purchase </li></ul></ul><ul><ul><li>Brand name </li></ul></ul><ul><li>Perfect Market </li></ul><ul><ul><li>a market in which there are no competitive advantages or asymmetries because all firms have equal access to all the factors of production </li></ul></ul><ul><ul><li>when a company uses its competitive advantage to achieve more advantage in surrounding markets </li></ul></ul>
  30. 30. Market Strategy <ul><li>The plan you put together that details exactly how you intend to enter a new market and attract new customers </li></ul><ul><li>Best business concepts will fail if not properly marketed to potential customers </li></ul>
  31. 31. Organizational Development <ul><li>Describes how the company will organize the work that needs to be accomplished </li></ul><ul><li>Work is typically divided into functional departments </li></ul><ul><li>Move from generalists to specialists as the company grows </li></ul>
  32. 32. Management Team <ul><li>Employees of the company responsible for making the business model work </li></ul><ul><li>Strong management team gives instant credibility to outside investors </li></ul><ul><li>A strong management team may not be able to salvage a weak business model </li></ul><ul><li>Should be able to change the model and redefine the business as it becomes necessary </li></ul>
  33. 33. Major Business-to-Consumer (B2C) Business Models
  34. 34. Major Business-to-Consumer (B2C) Business Models
  35. 35. Major Business-to-Consumer (B2C) Business Models <ul><li>Portal </li></ul><ul><ul><li>offers powerful search tools plus an integrated package of content and services </li></ul></ul><ul><ul><li>typically utilizes a combines subscription/advertising revenues/transaction fee model </li></ul></ul><ul><ul><li>may be general or specialize (vortal) </li></ul></ul>
  36. 36. Major Business-to-Consumer (B2C) Business Models <ul><li>E-tailer </li></ul><ul><ul><li>online version of traditional retailer </li></ul></ul><ul><ul><li>includes </li></ul></ul><ul><ul><ul><li>virtual merchants (online retail store only) </li></ul></ul></ul><ul><ul><ul><li>clicks and mortar e-tailers (online distribution channel for a company that also has physical stores) </li></ul></ul></ul><ul><ul><ul><li>online malls (online version of mall) </li></ul></ul></ul><ul><ul><ul><li>Manufacturers selling directly over the Web </li></ul></ul></ul>
  37. 37. Major Business-to-Consumer (B2C) Business Models <ul><li>Content Provider </li></ul><ul><ul><li>information and entertainment companies that provide digital content over the Web </li></ul></ul><ul><ul><li>typically utilizes an advertising, subscription, or affiliate referral fee revenue model </li></ul></ul><ul><li>Transaction Broker </li></ul><ul><ul><li>processes online sales transactions </li></ul></ul><ul><ul><li>typically utilizes a transactions feel revenue model </li></ul></ul>
  38. 38. Major Business-to-Consumer (B2C) Business Models <ul><li>Market Creator </li></ul><ul><ul><li>uses Internet technology to create markets that bring buyers and sellers together </li></ul></ul><ul><ul><li>typically utilizes a transaction fee revenue model </li></ul></ul><ul><ul><ul><li>E.g. Auction </li></ul></ul></ul><ul><ul><ul><ul><li>English auction </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Dutch auction </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sealed-bid auction </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Double auction </li></ul></ul></ul></ul>
  39. 39. English Auctions <ul><li>The bidders announce their bids until no higher bid is forthcoming </li></ul><ul><ul><li>‘ going . . . going . . . gone!’ </li></ul></ul><ul><ul><li>Ascending-price auctions </li></ul></ul><ul><ul><li>Typically set a closing time in advance </li></ul></ul><ul><li>Minimum bid plus a reserve price </li></ul><ul><li>Early buyout price </li></ul>
  40. 40. Dutch Auctions <ul><li>Bidding starts at a high price and drops until a bidder accepts the price </li></ul><ul><ul><li>Descending price auctions </li></ul></ul>
  41. 41. Sealed-Bid Auctions <ul><li>Bidders submit their bids independently and are usually prohibited from sharing information with each other </li></ul><ul><li>First-price sealed-bid auction </li></ul><ul><ul><li>The winner pays his amount </li></ul></ul><ul><li>Second-price sealed-bid auction </li></ul><ul><ul><li>The winner pays one increment over the second-highest bid received </li></ul></ul>
  42. 42. Double Auctions <ul><li>Buyers and sellers submit bids to an auctioneer </li></ul><ul><li>The auctioneer matches the seller’s offers to the buyer’s offer </li></ul><ul><ul><li>E.g. New York Stock Exchange </li></ul></ul>
  43. 43. Major Business-to-Consumer (B2C) Business Models <ul><li>Service Provider </li></ul><ul><ul><li>offers services online </li></ul></ul><ul><li>Community Provider </li></ul><ul><ul><li>provides an online community of like-minded individuals for networking and information sharing </li></ul></ul><ul><ul><li>revenue is generated by referral fee, advertising, and subscription </li></ul></ul>
  44. 44. e-Business Models <ul><li>Dynamic Pricing Models </li></ul><ul><ul><li>Name-Your-Price Model </li></ul></ul><ul><ul><li>Comparison-Pricing Model </li></ul></ul><ul><ul><li>Demand-Sensitive Pricing Model </li></ul></ul>
  45. 45. Name-Your-Price Model <ul><li>Allows customers to state the price they are willing to pay </li></ul><ul><li>Priceline.com </li></ul><ul><ul><li>Demand collect systems </li></ul></ul><ul><ul><ul><li>Use shopping bot that takes customer’s bid to the Priceline partners to see whether they will accept the prices for the requested products/services </li></ul></ul></ul><ul><ul><li>Intelligent agents </li></ul></ul>
  46. 46. Comparison-Pricing Model <ul><li>Allows customers to poll a variety of merchants and find a desired product/service at the lowest price </li></ul><ul><li>Mysimon.com </li></ul><ul><ul><li>Uses intelligent-agent technology </li></ul></ul><ul><ul><li>Offers discussion groups, customer ratings, and comparison shopping </li></ul></ul>
  47. 47. Demand-Sensitive Pricing Model <ul><li>Group purchasing </li></ul><ul><ul><li>Individual buyers to shop in large groups to obtain group discount </li></ul></ul><ul><ul><ul><li>The more people who buy a product in a single purchase, the lower the cost per person becomes </li></ul></ul></ul><ul><ul><li>Mercata.com, mobshop.com, demandline.com </li></ul></ul><ul><li>How it works </li></ul><ul><ul><li>Buyers create requests for quotes (RFQs) </li></ul></ul><ul><ul><li>Purchasing manager monitors all aggregated RFQs </li></ul></ul><ul><ul><li>Manager negotiates through suppliers. </li></ul></ul>
  48. 48. Major Business-to-Business (B2B) Business Models
  49. 49. Major Business-to-Business (B2B) Business Models <ul><li>B2B Hub </li></ul><ul><ul><li>also known as marketplace/exchange </li></ul></ul><ul><ul><li>electronic marketplace where suppliers and commercial purchasers can conduct transactions </li></ul></ul><ul><ul><li>may be a general (horizontal marketplace) or specialized (vertical marketplace) </li></ul></ul><ul><li>E-distributor </li></ul><ul><ul><li>supplies products directly to individual businesses </li></ul></ul>
  50. 50. Major Business-to-Business (B2B) Business Models <ul><li>B2B Service Provider </li></ul><ul><ul><li>sells business services to other firms </li></ul></ul><ul><li>Matchmaker </li></ul><ul><ul><li>links businesses together </li></ul></ul><ul><ul><li>charges transaction or usage fees </li></ul></ul><ul><li>Infomediary </li></ul><ul><ul><li>gather information and sells it to businesses </li></ul></ul>
  51. 51. Case Studies <ul><li>Should we integrate our Internet business with our traditional business or should we keep the two separate? </li></ul>
  52. 52. Seamless Model: Office Depot <ul><li>Two reasons </li></ul><ul><ul><li>Existing catalog-sales support an Internet store </li></ul></ul><ul><ul><li>Existing information systems made it easy to coordinate online stores and physical stores </li></ul></ul><ul><li>Customers’ Benefit </li></ul><ul><ul><li>Make shopping simple and convenient </li></ul></ul><ul><li>Company’s Benefit </li></ul><ul><ul><li>Cheaper to reach customers </li></ul></ul>
  53. 53. Seamless Model: Office Depot <ul><li>Added Value </li></ul><ul><ul><li>Each customer has its own specialized view of the OfficeDepot.com site </li></ul></ul><ul><ul><ul><li>authorization </li></ul></ul></ul><ul><ul><li>Provide additional discount for larger customers if they place order on online </li></ul></ul><ul><li>Actually increased the traffic at its physical outlet </li></ul>
  54. 54. Joint Venture Model: KB Toy <ul><li>Reasons </li></ul><ul><ul><li>Don’t have much experience with catalog retailing </li></ul></ul><ul><ul><li>Tend to focus exclusively on their physical stores </li></ul></ul><ul><li>KB Toy and Kbkids.com </li></ul><ul><ul><li>KB Toy joined with BrainPlay.com to create Kbkids.com </li></ul></ul><ul><ul><ul><li>$80 million </li></ul></ul></ul>
  55. 55. Joint Venture Model: KB Toy <ul><li>Operation </li></ul><ul><ul><li>Separation </li></ul></ul><ul><ul><ul><li>Kbkids headquarter: Denver </li></ul></ul></ul><ul><ul><ul><li>KB Toy headquarter: MA </li></ul></ul></ul><ul><ul><li>Integration </li></ul></ul><ul><ul><ul><li>Share brand: promotion </li></ul></ul></ul><ul><ul><ul><li>Customer service </li></ul></ul></ul><ul><ul><ul><li>Purchasing function </li></ul></ul></ul>
  56. 56. Virtual Partnership <ul><li>Rite Aid and Drugstore.com </li></ul><ul><li>Customer benefit </li></ul><ul><ul><li>Customers can pick up their Drugstore.com prescriptions at their local Rite Aid </li></ul></ul>
  57. 57. A Spectrum of Choices Joint Venture Mostly integrated Slightly integrated Moderately integrated Partnership Separate Slightly integrated Moderately integrated Model Brand Management Operation Seamless Fully integrated Fully integrated Fully integrated
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