Your SlideShare is downloading. ×
E commerce market mechanisms
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

E commerce market mechanisms

6,177
views

Published on

Published in: Business, Technology

1 Comment
2 Likes
Statistics
Notes
No Downloads
Views
Total Views
6,177
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
127
Comments
1
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. E-Commerce Market Mechanisms
  • 2. Electronic Marketplaces
    • Markets facilitate exchange of
      • Information
      • Goods
      • Services
      • Payments
    • Markets create economic value for
      • Buyers
      • Sellers
      • Market intermediaries
      • Society at large
  • 3. Electronic Marketplaces (cont.)
    • 3 main functions of markets
      • Matching buyers and sellers
      • Facilitating the exchange of information, goods, services, and payments associated with market transactions
      • Providing an institutional infrastructure
  • 4. NTE Evens the Load
    • National Transportation Exchange (nte.com) is attempting to keep trucks on the road full on both outbound and return trips—uses the Internet to connect shippers with fleet managers who have space to fill
      • Creates spot market
      • Gets information from shippers about their needs and flexibility in dates
      • Works out the best deals for the shippers and the haulers
      • Issues the contract and handles payments
      • The process takes only a few minutes
  • 5. NTE Evens the Load (cont.)
    • NTE collects a commission based on the value of each deal
    • Fleet manager gets extra revenue that they would otherwise have missed out on
    • The shipper gets a bargain price, at the cost of some loss of flexibility
    • NTE reaches down to the level of individual truck drivers and provides a much wider range of services (wireless Internet access)
  • 6. Marketspace Components
    • Marketspace—a marketplace in which sellers and buyers exchange goods and services for money (or for other goods and services), but do so electronically
      • Customers Sellers
      • Goods (physical or digital) Infrastructure
      • Front-end Back-end
      • Intermediaries/business partners
      • Support services
  • 7. Marketspace Components (cont.)
    • Customers
      • Web surfers looking for
        • Bargains
        • customized items
        • Collectors’ items
        • entertainment etc.
      • Organizations account for over 85 percent of EC activities
    • Sellers
      • Hundreds of thousands of storefronts are on the Web
      • Advertising and offering millions of Web sites
      • Sellers can sell
        • Direct from their Web site
        • E-marketplaces
  • 8. Marketspace Components (cont.)
    • Products
      • Physical products
      • Digital products—goods that can be transformed to digital format and delivered over the Internet
    • Infrastructure
      • Hardware
      • Software
      • Networks
  • 9. Marketspace Components (cont.)
    • Front-end business processes include
      • Seller’s portal
      • Electronic catalogs
      • shopping cart
      • Search engine
      • Payment gateway
    • Back-end activities are related to
      • Order aggregation and fulfillment
      • Inventory management
      • Purchasing from suppliers
      • Payment processing
      • Packaging and delivery
  • 10. Marketspace Components (cont.)
    • Intermediary— a third party that operates between sellers and buyers
    • Other business partners—collaborate on the Internet, mostly along the supply chain
    • Support services such as
      • Certification and trust services
      • Knowledge providers
  • 11. Types of Electronic Markets
    • Electronic storefronts—a single company’s Web site where products and services are sold
    • Mechanisms for conducting sales
      • Electronic catalogs Payment gateway
      • Search engine Shipment court
      • Customer services Electronic cart
      • E-auction facilities
    • Electronic malls (e-malls)—an online shopping center where many stores are located
  • 12. Types of Electronic Markets (cont.)
    • General stores/malls—large marketspaces that sell all types of products
    • Public portals
    • Specialized stores/malls—sell only one or a few types of products
    • Regional vs. global stores
    • Pure online organizations vs. click-and-mortar stores
    • Types of stores and malls
    • E-marketplaces—online market, usually B2B, in which buyers and sellers negotiate; the three types of e-marketplaces are private , public , consortia
  • 13. E-Marketplaces
    • Private e-marketplaces—online markets owned by a single company:
      • Sell-side—company sells either standard or customized products to qualified companies
      • Buy-side marketplaces—company makes purchases from invited suppliers
    • Public e-marketplaces—B2B markets, usually owned and/or managed by an independent third party, that include many sellers and many buyers (e xchanges)
  • 14. Consortia & Information Portals
    • Consortia—e-marketplaces that deal with suppliers and buyers in a single industry
      • Vertical consortia are confined to one industry
      • Horizontal allow different industries trade there
    • Information portal—a personalized, single point of access through a Web browser to business information inside (and marginally from outside) an organization
      • Publishing portals Commercial portals
      • Personal portals Corporate portals
      • Mobile portals
  • 15. Supply Chains
    • Supply chain—the flow of materials, information, money, and services from raw material suppliers through factories and warehouses to the end customers
      • Includes organizations and processes that create and deliver the following to the end customers:
        • Products
        • Information
        • Services
  • 16. Supply Chains (cont.)
    • A supply chain involves activities that take place during the entire product life cycle
    • It also includes:
      • Movement of information and money and procedures that support the movement of a product or a service
      • The organizations and individuals involved
  • 17. Exhibit 2.3 A Simple Supply Chain
  • 18. Supply Chain Components
    • Upstream supply chain—includes the activities of suppliers (manufacturers and/or assemblers) and their suppliers
    • Internal supply chain—includes all in-house processes used in transforming the inputs received from the suppliers into the organization’s outputs
    • Downstream supply chain — includes all the activities involved in delivering the product to the final customers
  • 19. Types of Supply Chains
    • Integrated make-to-stock
    • Continuous replenishment
    • Build-to-order—model in which a manufacturer begins assembly of the customer’s order almost immediately upon receipt of the order
    • Channel assembly—model in which product is assembled as it moves through the distribution channel
  • 20. Exhibit 2.4 Supply Chains: Integrated & Build-to-Order
  • 21. Value Chain & Value System
    • Value chain—the series of activities a company performs to achieve its goal(s) at various stages of the production process; each activity adds value to the company’s product or service, contributes to profit, and enhances competitive position in the market
    • Value system—a set of value chains in an entire industry, including the value chains of tiers of suppliers, distribution channels, and customers
  • 22. Supply Chain & Value Chain
    • Value chain and the supply chain concepts are interrelated
      • Value chain shows the activities performed by an organization and the values added by each
      • The supply chain shows flows of materials, money, and information that support the execution of these activities
  • 23. Supply Chain & Value Chain (cont.)
    • EC increases the value added by:
      • Introducing new business models
      • Automating business processes
    • EC smoothes the supply chain by:
      • Reducing problems in the flows of material, money, and information
    • EC facilitates the restructuring of business activities and supply chains
  • 24. Intermediation in E-Commerce
    • Intermediaries provide value-added activities and services to buyers and sellers: wholesalers, retailers, infomediaries
    • Roles of intermediaries
      • Search costs—databases on customer preferences
      • Lack of privacy—anonymity of sellers and buyers
      • Incomplete information—gather product information
      • Contract risk—protect sellers against non-payment
      • Pricing inefficiencies—induce appropriate trades
  • 25. E-Distributors on B2B
    • E-distributor—an e-commerce intermediary that connects manufacturers (suppliers) with buyers by aggregating the catalogs of many suppliers in one place—the intermediary’s Web site
    • E-distributors also provide support services
      • Payments
      • Deliveries
      • Escrow services
      • Aggregate buyers’ and or sellers’ orders
  • 26. Disintermediation & Reintermediation
    • Disintermediation—elimination of intermediaries between sellers and buyers
    • Reintermediation—establishment of new intermediary roles for traditional intermediaries that were disintermediated
  • 27. Syndication as an EC Mechanism
    • Syndication—the sale of the same good (e.g., digital content) to many customers, who then integrate it with other offerings and resell it or give it away free
  • 28. Competition in the Internet Ecosystem
    • Competition in the Internet ecosystem (business model of the online economy)
      • Inclusive with low barriers to entry
      • Self-organizing
      • Old rules may no longer apply
    • Competition is tense
      • Lower buyers’ search cost
      • Speedy comparisons
      • Differentiation and personalization
  • 29. Competition in the Internet Ecosystem (cont.)
    • Differentiation — providing a product or service that is unique
    • Personalization—the ability to tailor a product, service, or Web content to specific user preferences
    • Lower prices
  • 30. Competition in the Internet Ecosystem (cont.)
    • Customer service is an extremely important competitive factor
    • Some competitive factors are less important as a result of EC:
      • Size of company is no longer significant
      • Geographical location is insignificant
      • Language barriers are being removed
      • Digital products do not have normal wear and tear
  • 31. Competition in the Internet Ecosystem (cont.)
    • EC supports efficient markets and could result in almost perfect competition with these characteristics:
      • Many buyers and sellers must be able to enter the market at no entry cost
      • Large buyers or sellers are not able to individually influence the market
      • The products must be homogeneous
      • Buyers and sellers must have comprehensive information about the products and about the market participants’ demands, supplies, and conditions
  • 32. Porter’s Competitive Analysis
    • Porter’s competitive forces model applied to an industry views 5 major forces of competition that determine the industry’s structural attractiveness
    • These forces, in combination, determine how the economic value created in an industry is divided among the players in the industry
    • Such an industry analysis helps companies develop their competitive strategy
  • 33. Exhibit 2.6: Porter’s Competitive Forces Model
  • 34. Liquidity
    • Liquidity—the need for a critical mass of buyers and sellers
      • The fixed cost of deploying EC can be very high
      • Without a large number of buyers, sellers will not make money
    • Early liquidity—achieving a critical mass of buyers and sellers as fast as possible, before the market-maker’s cash disappears
  • 35. Quality Uncertainty & Assurance
    • Quality uncertainty—the uncertainty of online buyers about the quality of products that they have never seen, especially from an unknown vendor
      • Provide free samples
      • Return if not satisfied
        • Microproduct—a small digital product costing a few cents
      • Insurance, escrow, and other services
  • 36. E-Market Success Factors
    • Product characteristics
      • Type
      • Price
      • Availability of standards and product information
    • Industry characteristics
      • Brokers currently necessary
      • Intelligent systems may replace brokers
    • Seller characteristics
      • Consumers find sellers with the lowest prices
      • Low-volume, higher-profit-margin transactions
    • Consumer characteristics
      • Impulse buyers
      • Patient buyers
      • Analytical buyers
    • Contributors to e-market success
  • 37. Electronic Catalogs
    • Electronic catalogs—the presentation of product information in an electronic form; the backbone of most e-selling sites
    • Evolution of electronic catalogs
      • Merchants—advertise and promote
      • Customers—source of information and price comparisons
      • Consist of product database, directory and search capability and presentation function
      • Replication of text that appears in paper catalogs
      • More dynamic, customized, and integrated
  • 38. Classifications of Electronic Catalogs
    • Dynamics of information presentation—static or dynamic
    • Degree of customization—ready-made or customized
    • Electronic catalogs allow integration of:
      • Order taking and fulfillment
      • Electronic payment
      • Intranet workflow
      • Inventory and accounting system
      • Suppliers’ extranet
      • Relationship to paper catalogs
  • 39. Customized Catalogs
    • Assembled specifically for:
      • A company
      • An individual shopper
    • Customization systems can:
      • Create branded, value-added capabilities
      • Allows user to compose order
      • May include individualized prices, products, and display formats
      • Automatically identify the characteristics of customers based on the transaction records
  • 40. Electronic Catalogs at Boise Cascade
    • Boise Cascade Office Products--$3-billion office products wholesaler of over 200,000 different items
      • They had a 900-page paper catalog that was mailed once each year; minicatalogs tailored to customers’ individual needs
      • The company placed its catalogs online in 1996 (boiseoffice.com)
  • 41. Boise Cascade (cont.)
    • Sales through the Web site:
      • 1997—20 percent
      • 1999—30 percent
      • 2004—80 percent (expected)
    • Production of a single paper catalog took 6 weeks/production of Web catalog takes 1 week
    • Major advantage of customized catalogs is pricing
    • Electronic orders cost 55 percent less to process than paper-based orders
  • 42. Boise Cascade (cont.)
  • 43. Search Engines
    • Search engine—a computer program that can access a database of Internet resources, search for specific information or keywords, and report the results
    • Software (intelligent) agent—software that can perform routine tasks that require intelligence
  • 44. Search Engines, Intelligent Agents and Shopping Carts
    • E-commerce users use both search engines and intelligent agents
      • Search engines find products or services
      • Software agents conduct other tasks (comparisons)
    • Electronic shopping cart—an order-processing technology that allows customers to accumulate items they wish to buy while they continue to shop
  • 45. Auctions
    • Auction—a market mechanism by which a seller places an offer to sell a product and buyers make bids sequentially and competitively until a final price is reached
    • Auctions deal with products and services for which conventional marketing channels are ineffective or inefficient
  • 46. Limitations of Traditional Auctions
    • Traditional auctions are generally a rapid process
    • It may be difficult for sellers to move goods to the auction site
    • Commissions are fairly high
  • 47. Electronic Auctions
    • Electronic auctions (e-auctions)—auctions conducted online
      • Host sites on the Internet serve as brokers offering:
        • Services for sellers to post their goods for sale
        • Allowing buyers to bid on those items
      • Many sites have certain etiquette rules that must be adhered to in order to conduct fair business
  • 48. Electronic Auctions (cont.)
    • Major online auctions offer:
      • Consumer products
      • Electronic parts
      • Artwork
      • Vacation packages
      • Airline tickets
      • Collectibles
      • Excess supplies and inventories being auctioned off by B2B marketers
  • 49. Dynamic Pricing
    • Dynamic pricing—prices that change based on supply and demand relationships at any given time
    • The four major categories of dynamic pricing are based on the number of buyers and sellers involved:
      • One buyer, one seller
      • One seller, many potential buyers
      • One buyer, many potential sellers
      • Many sellers, many buyers
  • 50. Exhibit 2.8 Types of Dynamic Pricing
  • 51. Dynamic Pricing (cont.)
    • One buyer, one seller uses
      • Negotiation
      • Bargaining
      • Bartering
    • Price will be determined by:
      • Each party’s bargaining power
      • Supply and demand in the item’s market
      • Possibly business environment factors
  • 52. Dynamic Pricing (cont.)
    • One seller, many potential buyers
      • Forward auction—an auction in which a seller entertains bids from buyers
      • English auction—an auction in buyers bid on an item in sequence and the price increases with time
      • Yankee auction—auction of multiple identical items in which bidders can bid for any number of the items offered, and the highest bid wins
  • 53. Dynamic Pricing (cont.)
      • Dutch auction—auction of multiple identical items, with prices starting at a very high level and declining as the auction time passes
      • Free-fall (declining price) auction—a variation of the Dutch auction in which only one item is auctioned at a time; the price starts at a very high level and declines at fixed time intervals, the winning bid is the lowest one when the time expires
  • 54. Exhibit 2.9 English Auction, Ascending Price
  • 55. Dynamic Pricing (cont.)
    • One buyer, many potential sellers
      • Reverse auction (bidding, or tendering system)—auction in which the buyer places an item for bid ( tender ) on a request for quote (RFQ) system, potential suppliers bid on the job, with price reducing sequentially, and the lowest bid wins; primarily a B2B or G2B mechanism
  • 56. Exhibit 2.10 The Reverse Auction Process
  • 57. Dynamic Pricing (cont.)
    • One buyer, many potential sellers (cont.)
      • ” Name-your-own-price” model
      • Consumer-to-business (C2B) model
    • Many sellers, many buyers
      • Double Auction—buyers and their bidding prices and sellers and their asking prices are matched, considering the quantities on both sides
  • 58. Limitations of Electronic Auctions
    • Possibility of fraud—defective goods or receive goods/services without paying
    • Limited participation—invitation only or Open to dealers only
    • Lack of security—C2C auctions sometimes not done in an unencrypted environment
    • Limited software—only a few “complete”or “off-the-shelf” market-enabling solutions
  • 59. Impacts of Auctions
    • Auctions as a coordination mechanism
    • Auctions as a social mechanism to determine a price
    • Auctions as a highly visible distribution mechanism
    • Auctions as a component in e-commerce
  • 60. Reverse Mortgage Auctions in Singapore
    • Homebuyers like to get the lowest possible mortgage rates
      • In Singapore, Dollardex.com uses reverse auctions that are combined with “group purchasing”
    • Dollardex’s first project:
      • Site invited potential buyers to fill out applications on a secure Web site
      • 7 lending banks were invited to bid on the loans
  • 61. Reverse Mortgage Auctions in Singapore (cont.)
      • In a secure electronic room, borrowers and lenders negotiated the deal, 2 days later the borrowers voted for one bank
      • Borrowers negotiated loans 0.5 per-cent less than the regular rate and waiver of the legal fees with United Overseas Bank (UOB)
      • UOB generated $10 million of business
    • Dollardex allows customers to participate in an individual reverse auction if they do not want to join a group
  • 62.
    • Bartering—an exchange of goods and services
      • Bartering exchanges
        • Give your offer to intermediary
        • Intermediary asses value of your product or service in”points”
        • Use “points” to buy what you need
      • Bartering sites must be financially secure
      • Alternative to bartering is to auction surplus and then use the money collected to buy items needed
    Bartering Online
  • 63. Bartering Online (cont.)
    • E-bartering—bartering conducted online, usually by a bartering exchange
    • Bartering exchange—a marketplace in which an intermediary arranges barter transactions
  • 64. Online Negotiating
    • Online negotiation—electronic negotiation, usually done by software (intelligent) agents that perform searches and comparisons; improves bundling and customization of products and services
    • Dynamic prices can be determined by negotiation
    • Negotiated prices result from interactions and bargaining among sellers and buyers
      • Expensive items like cars and real estate
      • Deal with nonpricing terms like payment method and credit
  • 65. Online Negotiating (cont.)
    • Three factors that facilitate negotiated prices
      • Intelligent agents that perform searches and comparisons
      • Computer technology that facilitates negotiation process
      • Products and services that are bundled and customized
  • 66.
    • Mobile computing permits real-time access to information, applications, and tools that, until recently, were accessible only from a desktop computer
    • Mobile commerce (m-commerce)—
    • e-commerce conducted via wireless devices
    • M-business—the broadest definition of
    • m-commerce, in which e-business is conducted in a wireless environment
    Mobile Commerce
  • 67. The Promise of M-Commerce
    • Mobility significantly changes the manner in which people and customers:
      • Interact
      • Communicate
      • Collaborate
    • Mobile applications are expected to change the way we:
      • Live
      • Play
      • Do business
  • 68. The Promise of M-Commerce (cont.)
    • The PC-based Internet culture may change to one based on mobile devices
    • M-commerce creates new business models for EC, notably location-based applications
    • Many large corporations with huge marketing presence are transforming their businesses to include m-commerce-based products and services
      • Microsoft AT&T
      • Intel AOL-Time-Warner
      • Sony
  • 69. I-Mode: Successful Mobile Portal
    • Shopping guides
    • Maps and transportation
    • Ticketing
    • News and reports
    • Personalized movie service
    • Entertainment
    • Dining and reservations
    • Additional services
      • Banking
      • Stock trading
      • Telephone directory searches
      • Dictionary services
      • Horoscopes
    An example of the spread of m-commerce is DoCoMo’s i-Mode; some applications of I-Mode are:
  • 70. Impacts of E-Markets on Business Processes & Organizations
    • Product promotion
    • New sales channel
    • Direct savings
    • Reduced cycle time
    • Customer service
    • Brand or corporate image
    • Customization
    • Advertising
    • Ordering systems
    • Market operations
      • Impacts of e-markets on B2C direct marketing:
  • 71. Exhibit 2.11 Analysis-of-Impacts Framework
  • 72. Transforming Organizations
    • Technology and organizational learning
      • To survive, companies will have to learn and adapt quickly to the new technologies
      • Corporate change must be planned and managed
      • New technologies will require new organizational structures and approaches
  • 73. Transforming Organizations (cont.)
    • The changing nature of work
      • Driven by increased competition in the global marketplace, firms are Reducing the number of employees and Outsourcing whatever work they can to countries where wages are significantly less
      • The upheaval brought on by these changes creates new opportunities and new risks; forces us to think new ways of about jobs, careers, and salaries
  • 74. Transforming Organizations (cont.)
      • Digital-Age workers will have to be very flexible—truly secure jobs will be few, many will work from home
      • Digital-Age companies will have to prize its core of essential workers as its most valuable asset—empowering them and providing them with means to expand their knowledge and skill base
  • 75. Redefining Organizations
    • New and improved product capabilities
      • E-markets allow for new products to be created and/or for existing products to be customized in innovative ways
      • Customer profiles and data on customer preferences—source of information for improving products or designing new ones
      • Mass customization enables manufacturers to create specific products for each customer, based on the customer’s exact needs
  • 76. Redefining Organizations (cont.)
    • New business models
      • E-markets affect individual companies, products, entire industries
    • Improving the supply chain
    • Impacts on manufacturing
      • Manufacturing systems changing from mass production lines to demand-driven, just-in-time manufacturing
      • Virtual manufacturing enables global manufacturing plants to run as though they were one in location
  • 77. Exhibit 2.12a Changes in the Supply Chain
  • 78. Exhibit 2.12b Changes in the Supply Chain
  • 79. Redefining Organizations (cont.)
    • Impacts on Manufacturing (cont.)
      • Build-to-Order—the biggest change in manufacturing will be the move to build-to-order systems
        • Manufacturing or assembly will start only after an order is received
        • Will change not only the production planning and control, but also the entire supply chain
  • 80. A New Model for Small Movers
    • When the U.S. economy started to slow down, and fuel prices increased
      • DM & S (a small trucking company with $1.8 million in annual sales) started to lose money
      • A major problem in the trucking industry:
        • Trucks need to move cargos at certain times
        • They may not have a full load causing lost revenue
      • DM & S created a reverse-auction service
        • Small moving companies bid on jobs of moving goods for individuals
        • Customers with flexible moving dates benefit the most
  • 81. Small Movers (cont.)
    • Dickerabid.com cost $15,000 to create:
      • Customers place notice of their job on the site
      • Small truckers start to bid
      • Customers can get huge discounts
      • Truckers can earn money to help cover their fuel expenses
    • During the first few months of operation
      • 4 truckers increased to 20
      • Increased revenues by $14,000
      • The Web site won third place in In c.’s Web innovations in 2000
  • 82. Redefining Organizations (cont.)
    • Impacts on finance and accounting
      • E-markets require special finance and accounting systems—most are electronic payment systems complicated by legal issues and international standards
      • Executing an electronic order triggers back-office transactions
      • These activities must be efficient, synchronized, and fast so the electronic trade will not be slowed down
  • 83. Cisco’s Virtual Close
    • Cisco Systems supplies vast networks that connect computers to the Internet
      • Virtual Close was developed to allow companies to close its accounting records (its “books”) more quickly
      • Cisco is implementing such a system for itself for closing quarterly accounts
        • Used to take up to 10 days; within 4 years it took 2 days—significantly cut its cost
        • By 2002 or 2003 Cisco hopes to close the books with 1 hour’s notice, on any day in the quarter
  • 84. Cisco’s Virtual Close (cont.)
    • Advantages of Virtual Close
      • Companies can become proactive, spotting problems at any time
      • New opportunities can be detected early
      • Enables quick “drill down” analysis, which locates the causes of either poor or excellent performance
      • Brings huge productivity gains related to corporate financial reporting
  • 85. Redefining Organizations (cont.)
    • Impact 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
        • Online distance learning and virtual courses are exploding
        • Companies are cutting training costs by 50 percent or more
  • 86. Redefining Organizations (cont.)
      • New e-learning systems offer two-way video, on-the-fly interaction, application sharing
      • E- learning may be their ticket to corporate survival as changing environments, new technologies, and continuously changing procedures make it necessary for employees to be trained and retrained constantly
  • 87. Managerial Issues
    • How do we compete in the digital economy?
    • What about intermediaries?
    • What organizational changes will be needed?
    • Should we auction?
    • What should be auctioned?
    • Should we have our own auction site or use a third-party site?
    • Should we barter?
    • What m-commerce opportunities are available?
  • 88. Summary
    • E-marketplaces and their components
    • The major types of e-markets
    • Supply chains and value chains
    • The role of intermediation
    • Competition, quality, and liquidity in
    • e-markets
    • Electronic catalogs, search engines, and shopping carts
    • Types of auctions and their characteristics