OBJECTIVES• Analyze how Internet technology has changed value propositions and business models• Define electronic commerce and describe how it has changed consumer retailing and business-to-business transactions
OBJECTIVES (Continued)• Compare the principal payment systems for electronic commerce• Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes• Assess the challenges posed by electronic business and electronic commerce and management solutions
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Technology and the Digital Firm• Information technology infrastructure: The Internet provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations.• Direct communication between trading partners: Disintermediation removes intermediate layers and streamlines processes.
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRMInternet Technology and the Digital Firm (Continued)• Round the clock service: Web sites available to consumers 24 hours• Extended distribution channels: Outlets created for attracting customers who otherwise would not patronize a firm• Reduced transaction costs: Costs of searching for buyers declines
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM New Business Models and Value PropositionsBusiness Model:• Defines an enterprise• Describes how the enterprise delivers a product or service• Shows how the enterprise creates wealth
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM The Changing Economies of Information• Information asymmetry: One party in a transaction has more information than the other. The Internet decreases information asymmetry.• Increases richness: The Internet increases the depth, detail, and scope of information.• Increases reach: The Internet increases the number of people who can be contacted efficiently.
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Business Models• Virtual storefront: Sells goods or services online (Amazon.com)• Information broker: Provides information on products or services (Edmunds.com)• Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com)• Online marketplace: Provides a trading platform for individuals and firms (eBay.com)
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Business Models (Continued)• Content provider: Creates revenue by providing content (WSJ.com, TheStreet.com)• Online service provider: Provides online services, including search service. (Google.com, Xdrive.com)• Virtual community: Provides an online community to focused groups (Friendster.com, iVillage.com)• Portal: Provides initial point of entry to Web, specialized content, services (Yahoo.com, MSN.com)
Pure E-C Vs Partial E-CPure E-Commerce: all dimensions are digital• Pure online (virtual) organizations• New-economy organization• Sell products or services only onlinePartial E-Commerce: a mix of digital and physical dimensions• Click-and-mortar organizations• Conduct EC activities• Do their primary business in the physical world
ELECTRONIC COMMERCE Categories of Electronic Commerce• Business-to-customer (B2C): Retailing of products and services directly to individual customers (Wal-Mart.com)• Business-to-business (B2B): Sales of goods and services to other businesses (Grainger.com, Ariba.com)• Consumer-to-consumer (C2C): Individuals using the Web for private sales or exchange (eBay.com )
ELECTRONIC COMMERCE Business-To-ConsumerAdvantages of E-commerce:• Customer-centered retailing: Closer and more personalized relationship with customers is possible• Web sites: Provide a corporate-centered portal for the consumer to quickly find information on products, services, prices, orders
ELECTRONIC COMMERCE Business-To-ConsumerAdvantages of E-Commerce: (Continued)• Disintermediation: The elimination of organizations or business process layers responsible for certain intermediary steps in a value chain, reducing costs to the consumer• Reintermediation: The shifting of the intermediary role in a value chain to a new source, adding additional value to the consumer
ELECTRONIC COMMERCEThe Benefits of Disintermediation to the Consumer Figure 8-1
ELECTRONIC COMMERCE Web Personalization• Create unique personalized Web pages for each customer• Increased closeness to customer increases value to the customer, while reducing costs of interacting with the customer
ELECTRONIC COMMERCEWeb Site Personalization Figure 8-2
ELECTRONIC COMMERCE Collaborative filtering:• Compares information gathered about a specific user’s behavior at a Web site to data about other customers with similar interests to predict what the user would like to see next. The software then makes recommendations to users based on their assumed interests.
ELECTRONIC COMMERCE Customer self-service:• The use of Web sites to provide customers with access to information and answers to questions• Replacing human call center operators and clerks• UPS.com: Customer tracking of packages• Orbitz.com: Customer self-help for organizing and managing a trip• Dell.com: “My Order Status” facility
ELECTRONIC COMMERCE Business-to-Business Electronic Commerce: New Efficiencies and Relationships• Electronic Data Interchange (EDI): Enables the computer-to- computer exchange between two organizations of standard transactions. Currently 80% of B2B e-commerce uses this system.• EDI is being replaced by more powerful Web-based alternatives.
ELECTRONIC COMMERCEElectronic Data Interchange (EDI) Figure 8-3
ELECTRONIC COMMERCE Electronic Commerce Payment Systems Credit cards The most common form of payment. $50 Limited customer liability.Digital wallets Electronic storage of I.D. and digital cash. Not widely used.Accumulated balance Used for micro payments. Similar to monthly telephone bills.Stored value Used for micro payments. Pre-payment of funds, debited on use.Smart Cards I.D. and credit information stored on a chip attached to a card. Used in Europe.Digital cash Electronic currency that can be transferred over the Web.Peer-to-Peer payment Interpersonal transfer of funds such as PayPal.Digital checking Electronic checks with digital signatures, used most often in B2B commerce.Electronic billing presentment Used by consumers to pay bills online, provided by many banks.and payment
ELECTRONIC BUSINESS AND THE DIGITAL FIRM Collaborative Commerce Figure 8-7
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Opportunities:The Internet provides firms with extraordinary opportunities todevelop new products and services, new distribution channels,new avenues for marketing and sales, and even entirely newbusiness models.
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Challenges:• Finding a successful Internet business model• Organizational change challenges• Trust, Security, and Privacy
Key factors for success in E-commerce– Selection and value– Performance and service– Look and feel– Advertising and incentives– Personal attention (one-to-one marketing)– Community relationships– Security and reliability