Electronic Commerce Business Models and Strategies Minder Chen, Ph.D. Associate Professor of Management Information Systems and Decision Sciences School of Management, George Mason University [email_address]
Net Ready , by Amir Hartman and John Sifonis, McGRaw-Hill, 2000.
Now or Never , by Mary Modahl, Harper Business, 2000
Designing Systems for Internet Commerce by G. Winfield Treese, Lawrence C. Stewart (May 1998) Addison-Wesley Pub Co; ISBN: 0201571676
Net Results: Web Marketing that Works by Rick E. Bruner (Editor), Cybernautics, Usweb Corporation Hayden Books; ISBN: 1568304145
E-Business : Roadmap for Success by Ravi Kalakota, Marcia Robinson, Don Tapscott (June 1999) Addison-Wesley Pub Co (C); ISBN: 0201604809
Customers.Com: How to Create a Profitable Business Strategy for the Internet and Beyond by Patricia B. Seybold (Contributor), R. T. Marshak, Ronni Marshak 1 Ed edition (November 1998) Times Books; ISBN: 0812930371
Net Success : 24 Leaders in Web Commerce Show You How to Put the Web to Work for Your Business by Christina Ford Haylock, Len Muscarella, Ron Schultz, Steve Case (May 1999) Adams Media Corporation; ISBN: 1580621147
Creating the Virtual Store: Taking Your Web Site from Browsing to Buying , by Magdalena Yesil, Published by John Wiley & Sons, November 1, 1996
Understanding Electronic Commerce (Strategic Technology Series) , by David R. Kosiur, Published by Microsoft Press, May 1, 1997.
Electronic commerce is broadly as the ability to execute business activities ( transactions, contracts, and partnership ) over a computer network. The execution of these activities lead to the exchange of goods, services, and money.
Online business activities are changing market dynamics and structures of various industries.
Electronic commerce adds a new dimension " information " to business activities involving information goods, information services, and electronic money.
"[The Internet] will carry us into a new world of low friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low."
-- Bill Gates, The Road Ahead
"Where there is a friction, there is opportunity!"
-- Net Ready.
The Cycle of Electronic Commerce Customers Online Ads Online Orders Standard Orders Access Searches Queries Surfing Distribution Online: soft goods Delivery: hard goods Electronic Customer Support Follow-on Sales Source: Understanding Electronic Commerce (Strategic Technology Series) , by David R. Kosiur, Published by Microsoft Press, May 1, 1997.
Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997. Electronic Commerce
EC and Business Processes Seller Customer Corporate Databases Provide Info Get customer Provide info Fulfill order Support Identify need Find source Evaluate offerings Purchase Maintain, Repair, Operate Phone, fax, e-mail Web site Newsgroups Net communities Web site EDI Web site, phone, fax, e-mail, e-mailing list Credit cards, e-cash P.O.s Demos, reviews Send info Data sheets, catalogs, demos Request info Web surfing Web searches, web ads Deliver soft goods electronically Source: adapted from David Kosiur, Understanding Electronic Commerce, Microsoft Press, 1997.
World Wide Internet Commerce Forester Research, Inc. June 1999
Business Internet Commerce Trends B2C: Business to Consumer B2B: Business to Business Reference: http://cyberatlas.internet.com/
International Data Corporation forecasts that business-to-business e-commerce revenue will jump from $80 billion worldwide in 1998 to $1.1 trillion in 2003. Forrester Research believes that number will go even higher to $1.3 trillion by 2003.
Business-to-Business -- Vertical Industries
Computing and Electronics: For this year, businesses will invest $50 billion in computers and other electronic equipment online. Increase to $319 billion by 2002.
Motor vehicles: Companies will spend $9 billion online to purchase fleets of cars and trucks this year. 2002—grow to $114 billion—more than a 1000% increase.
Online utilities: Online trades of $15 billion in 1999 will grow to $110 billion by 2002.
Food and agriculture: Expected to be about $3 billion in 1999--$20 billion by 2002.
Pharmaceutical and medical: Forecasted $1 billion this year. Increase 20-fold by 2002.
Source: Business 2.0, March, 1999 re: Forrester Research
Web and EC allows you to integrate three major steps of markting and sales in one medium.
Get Attention Give More Information/ Answer Questions Informing Selling
Transact/ Service Branding
Internet Industry Internet Economy Consulting Content and Activity Electronic Commerce Infrastructure Client/Server Software ISP Network Services Internet Equipment Commerce Instruments Portals Commerce Servers Sports Malls Entertainment Newsfeed Publications System Integration and Design Browsers Web Server Application Servers Security Tools Internet Service Consumer Services Carriers Backbone Router Access Equipment Server Computers
What do you have to offer that the physical world cannot in order to attract customers?
If you make one customer unhappy, he won't tell five friends -- he'll tell 5,000 on newsgroups, list servers, and so on.
"Word of mouth" factor gets amplified on the Net
The shifts of balance of power away from business and toward customer.
- Jeff Bezos
Self Assessment: Customer Caring What do your customers need? What requests do they make of you? How do you respond to customer’s requests? What kind of information can they get from you? What process do they go through? How do you produce and distribute it to them? What are the steps that your customers have to take to complete a purchase transactions? How do they get shipment status? How are exceptions handled? What do you need from customer? What do you know about customer preferences? What information could you use to better target your product and service offerings? What can you do to build relationships? How can you engage customers in an ongoing dialog? How can you continue to provide information, products, and services to reinforce your ongoing relationships?
This collection of themes cyberhoods is populated by a half-million "homesteaders" who get free home pages.
Quick Test for Technographics More Men More Women More Educated Less Educated High Income Low Income Have Children No Children Younger Age Older Laggards Early Adopter Mainstreams Time Number of new users Source: Now or Never, 2000
Technology-Fit: Customer and Product Customer Need for Product Information High Low Customer Demographics Match Poor High Earlier Adopter Second Wave Second Wave Web Laggards Tide Denny's AA FedExp Microsoft Nike Pepsi Jenny Craig Chrysler Source: Forrester Research
Consumers: Everything on the Internet should to be free.
Merchant: How can I make a profit if everything is free.
Free web browsers: Netscape Communicator and Internet Explorer
Free email: Juno, mail.yahoo.com and hotmail.com
Free Internet Access: Freeserve in Britain
Free PC: eMachine and CompuServe; Free-PC
Free web hosting: Geocities, Angelfire, Zoom
Price Year $250 $0 1930 1999 Cost of a 3-minute Long Distance Call Gilder's Law All tangible and intangible items that can be copied adhere to the law of inverted pricing and become cheaper as they improve. Anticipate this cheapness in your pricing strategy and product/service development strategy
Buy-side applications generally consisting of a browser-based self-service front end to ERP and legacy purchasing systems
Corporate procurement aggregates many supplier catalogs into a single “universal” catalog and allows end-user requisitioning from the desktop, facilitating standard procurement for the organization and cutting down on “maverick” purchasing
Purchases made through this system are linked to the back-office ERP or accounting system, cutting time and expense from the transaction and avoiding potential bookkeeping errors
Model yields reduced transaction costs but not lower purchase costs; no impact on size of supplier base, no enablement of dynamic trade; buying organizations must set-up and maintain catalogs for each of their suppliers; too costly and technically demanding for most medium and small-sized businesses.
Marketplace E-Commerce Model Virtual Marketspace Seller A Seller C Seller B EDI HTML & Forms HTML & XML OBI Buyer A Buyer C Buyer B EDI HTML & Forms HTML & XML OBI
Portfolio of Buying & Selling Strategies Big Buyer Big Supplier Direct Sales Small Buyers Small Buyers Size of Buyers and Seller e-Procurement Net Market Small Suppliers Small Suppliers Small Suppliers