BM362
Electronic
& Mobile
Commerce
A Lee Gilbert
Information Management Research Centre
Nanyang Business School
Singapore 639798
Agenda
Data Services as Disruption
Course Structure and Conduct
Supply-side: Convergence or Chaos?
Demand-side: Network-based Freedoms
Business Models and New ICT: Web 2.0
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Disruptive Technologies in EC
Clayton Christensen is a Harvard
Business School professor who studies
the impact of new technology on
industry structure, conduct, and
performance.
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Discussion:
Turn to your neighbor and identify two
information technologies that disrupted
the structure of the entertainment
industry at some point in time.
 Which players do you think benefited the
most from this disruption? Who lost?
 How do you think the new technology
altered the way they did business?
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How is Christensen’s theory
relevant to new ICT and
 Communications?
 Book Retailing?
 Publishing?
 Education?
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Amazon.com: Before and After
Most well-known e-commerce company

Conceived by Jeff Bezos in 1994

Opened in July 1995

Four compelling reasons to shop (then)

 Selection (1.1 million titles)
 Convenience (anytime, anywhere)
 Price (high discounts on bestsellers)
 Service (automated order confirmation,
tracking, and shipping information)
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http://uk.biz.yahoo.com/p/a/amzn.html
Amazon.com: Before and After
Revenues and Earnings
What is the story today?
Revenues Earnings
1996 $15.6 Million ($6.24 Million)
1997 $148 Million ($31 Million)
1998 $610 Million ($125 Million)
1999 $1.6 Billion ($720 Million)
2000 $2.7 Billion ($1.4 Billion)
2001 $3.1 B ($567 Million)
2002 $3.9 B ($149 Million)
2003 $5.3 B 35.2 Million
2004 $6.9 B 592 Million
2005 $8.5 B 359 Million
2006 $10.5 B 2.0 ??? 8
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What you can learn from this course
How network technology alters markets
How new entrants use new technology
to alter the dominant business model
How e-business works today, and might
work tomorrow
How m-commerce is similar to and
different from e-business
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Disruption 1: Digitalisation
 The harmonizing effect of being digital
 partitioned disciplines and enterprises find
themselves collaborating, not competing.
 "Digital books never go out of print. They are
always there”
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Disruption 2: Globalisation
 'Information about money has become almost as
important as money itself. '
"Economic progress is largely a process of increasing the
relative contribution of knowledge in the creation of wealth.
Indeed, the new source of wealth is not material, it is information,
knowledge applied to work to create value."
Walter Wriston, former CITIBANK chairman
 Once, nations and borders were able to control the
trade of physical commodities.
Today, a programmer with a $35.00 USB drive in her pocket can
take a plane from New York to Tokyo, and the data is worth, say,
$1 million. What does she declare to Customs?
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Disruption 3: Personalisation
 The goal: one-to-one marketing and "mass
customization," based on
 The end of privacy as we know it
 purchase analysis (card transactions),
 credit history and other financial data
 demographic and psychographic data
 Web Marketing- above plus
 Web-based recommendation engines, “cookies,” and
clickstream analytics
 Business rules-based systems
 Advanced data analytics / warehousing
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Disruption 4: Mobility
 Worldwide, mobile subscribers now
outnumber fixed subscribers (2002)
 Access to higher bandwidth “2.5G / 3G”
services will accelerate demand
 By 2004, more mobile than fixed-line
users will have Internet access
 Next big thing: “anywhere, anytime” and
location-sensitive applications
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Disruption 5: Convergence
 Technological convergence (the network is the
computer) has evolved into the business arena
 In the strategic domain, the term is rapidly
displacing the earlier idea of “synergy”
 With the advent of 2.5 and 3G networks, the
scope for convergence expands geometrically
 When combined with falling barriers to market
entry, convergence will obsolete many of the
premises underlying current business models
 Standards are the key to managing in a
convergent world
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Example: VOIP
How new technology evolves:
Typical Scenario [from Christensen 1997]
1.) Established firms develop Disruptive Technology
2.) Marketing seek reactions from lead customers
3.) Established firms defer introduction of DT, step up
pace of sustaining technological improvement
4.) New companies are formed and new markets for
disruptive technologies are found by trial and error
5.) The new entrants move upmarket, capture share
6.) Established firms belatedly jump on the
bandwagon to defend their customer base
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The Heart of the Internet?
“It’s the TCP/IP Protocol Stack”
Applications
 Web
Applications  Email
 Video/Audio
Middleware
TCP/IP
Services
Access Technologies
 Ethernet (LAN)
TCP/IP  Wireless (LMDS, WiFi,
Network Cellular)
Technology  Cable
Substrate  DSL
 Satellite
Access
Technologies
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Perspectives on Wireless: supply
Phone-centric
 What is a cellphone today, tomorrow?
 Standards: WAP vs. DoCoMo, 2.5 vs. 3G, 4G
Device-centric
 PDA: GSM, Bluetooth, or wireless LAN?
 GameBoy, PSP etc
 RIM Blackberry
Enterprise-centric
 WiFi (802.11x) links to laptop & PDA
 Special-purpose devices (wearables, etc)
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The Hype Cycle: Bluetooth
Web Services
 Low-power interactive digital radio transmission standard,
launched as a licence-free open specification in May
1998 by the Bluetooth Special Interest Group consisting
of Ericsson, IBM, Intel, Nokia and Toshiba.
Mesh
 By 2004, at least 75 percent of new mobile phones shipped
will support direct e-cash via Bluetooth
links to POS and vending machines.
3G
PROMISE -> CHAOS & CLUTTER -> MAINSTREAM
 Early Bluetooth products will command
premium: competition will commoditize
Bluetooth functionality before 2003.
 Bluetooth enables new business models:
direct consumer-to-business e-payment
(POS, ticketing and vending machines)
Source: Gartner and Ericsson
by 2003
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Really Personal Computing
Devices are Shrinking
 Personal digital assistants (PDAs)
 Cellphones
and Connecting!
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Group Discussion point
With your neighbor, identify the features
you would like in your next phone.
 Would the phone do this, or the network?
 Refine these features by identifying the
needs they would meet, and their value.
Enter this in your blog as “New Phones”.
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Course Structure and Conduct
Format: 3 hour seminar, plus self-learning
Deliverables:
1.Immediate: Edventure homepage with your picture,
link to your blog site, personal information use log
2.Weekly: Update online blog to reflect your learning
Post relevant article for discussion to blog
3.Term project (group)
Marks
Project 40%
Participation, discussion, presentation 20%
Final Exam 40%
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What is expected of you
 Attendance plus contribution to seminars
 Your insights on assigned materials
 Bringing new materials to our attention
 Public record of our learning experience
 Teamwork (3-4 persons, peer marking)
 Project Proposal
 Service Design (prototype or simulation)
 Prospectus: Business Model plus Presentation
 Examination (open book, case-based)
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The support you can expect from me
 Illustrating the main ideas in our text
 Bringing in relevant ideas and concepts
 Examining current trends and events
 Guiding your projects toward viability
 Answering questions, in Edventure forums
 Providing feedback on your progress
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TEXT: Mobile Web 2.0 wiki
 Electronic commerce (e-commerce)
 Businesses trading with other businesses and
internal processes
 Electronic business (e-business)
 Term used interchangeably with e-commerce
 The transformation of key business processes
(and the business model) through the use of
Internet technologies
 Mobile Commerce?
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Categories: Electronic Commerce
 Five general e-commerce categories
 Business-to-consumer (B2C)
 Business-to-business (B2B)
 Business processes (rent software & network)
 Consumer-to-consumer (P2P)
 Government-to-business (G2B)
 Supply management / procurement (B2B)
 Units devoted to negotiating purchase transactions
with suppliers
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Categories of Electronic
Commerce (Continued)
 Transaction
 Exchange of value, among separate entities
 Business processes
 Groups of logical, related, and sequential activities
and transactions in which businesses engage
 Telecommuting or telework
 Employee logs in to organisational network instead
of traveling to office to perform tasks
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Electronic Commerce Categories
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Essential Terms and Concepts
 Electronic funds transfers (EFTs)
 Originally called wire transfers
 Electronic transmissions of account exchange
information over private communications networks
 Electronic data interchange (EDI)
 Transmitting computer-readable data in a standard
format to another business
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Essential Terms and Concepts
(Continued)
 Trading partners
 Businesses that engage in EDI with each other
 Value-added network (VAN)
 Independent firm
 Offers connection and transaction-forwarding
services to buyers and sellers engaged in EDI
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Second Electronic Commerce Wave
 Defining characteristics of first wave
 Dominant influence of U.S. businesses
 Extensive use of English language
 Low bandwidth data transmission technologies
 Marginally reliable network technologies
 Unstructured e-mail deployment
 Overreliance on advertising as a revenue source
 Naive optimism regarding busines models
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The Second Wave of Electronic
Commerce (Continued)
 As second wave begins
 Growth of electronic commerce increasingly
international in scope
 Language translation and currency conversion
problems to be solved
 E-mail used as an integral part of marketing and
customer contact strategies
 Mobility matters!
 Personalization penetrates!
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Business Models, Revenue
Models, and Business Processes
Business model
 A structure and set of processes designed
to create value and generate a margin
Revenue model
 Target customers
 Deliver value to those customers
 Capture revenue, from customers
and/or other sources
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Focus on Specific Business
Processes
 Merchandising
 Combination of store design, layout, supply chain,
and product display knowledge
 Commodity item
 Hard to distinguish from similar products or
services provided by other sellers
 Features standardized and well known
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Focus on Specific Business
Processes (Continued)
 Shipping profile
 Collection of attributes that affect how easily a
product can be packaged and delivered
 Value-to-weight ratio
 Can make overall shipping cost a small fraction of
the selling price
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Advantages of Electronic
Commerce
 Can increase sales and decrease costs
 If advertising done well on the Web
 Can get a firm’s promotional message out to
potential customers in every country
 Using e-commerce sales support and order-
taking processes, a business can
 Reduce costs of handling sales inquiries
 Provide price quotes
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Advantages of Electronic
Commerce (Continued)
 Increases purchasing opportunities for buyer
 Negotiating price and delivery terms is easier
 The following cost less to issue and arrive
securely and quickly
 Electronic payments of tax refunds
 Public retirement
 Welfare support
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Disadvantages of Electronic
Commerce
 Difficult to
 Predict return-on-investment
 Integrate existing databases and transaction-
processing software into new software that
enables e-commerce
 Cultural and legal obstacles
 Some products harder to sell online (Why?)
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Economic Forces and
Electronic Commerce
 Economics
 Study of how people allocate scarce resources
 Preconditions for a market
 Potential sellers of a good come into contact with potential
buyers
 A medium of exchange is available
 Information about product and value proposition available
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Transaction Costs
 Total costs that a buyer and seller incur
 Significant components of transaction costs
 Cost of information search and acquisition
 Investment of seller in equipment or to hire skilled
employees to supply product or service to buyer
 Uncertainty, opportunism, and complexity
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The Role of Electronic Commerce
 Businesses and individuals
 Can use electronic commerce to reduce
transaction costs by
 Improving flow of information
 Increasing coordination of actions
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Network Economic Structures
 Network economic structure
 Companies coordinate their strategies, resources,
and skill sets
 Strategic alliances (strategic partnerships)
 Relationships created within the network economic
structure
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Network Economic Structures
(Continued)
 Virtual companies
 Strategic alliances that occur between or among
companies operating on the Internet
 Strategic partners
 Come together as a team for a specific project or
activity
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Network Effects
 Law of diminishing returns
 Most activities yield less value as the amount of
consumption increases
 Network effect
 As more people or organizations participate in a
network
 Value of network to each participant increases
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Value Chains in Electronic
Commerce
 Strategic business unit
 One particular combination of product, distribution
channel, and customer type
 Firm
 Multiple business units owned by a common set of
shareholders
 Industry
 Multiple firms that sell similar products to similar
customers
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Strategic Business Unit Value
Chains
 Value chain
 A way of organizing the activities that each
strategic business unit undertakes
 Primary activities
 Design, produce, promote, market, deliver, and
support the products or services it sells
 Supporting activities
 Human resource management and purchasing
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Value Chain for Strategic Business Unit
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Industry Value Chains
Value system
 Larger stream of activities into which a
particular business unit’s value chain is
embedded
 Also referred to as industry value chain
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Industry Value Chain for Wooden Chair
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SWOT Analysis: Evaluating
Business Unit Opportunities
 SWOT analysis
 Analyst first looks into the business unit to identify
its strengths and weaknesses
 Analyst then reviews operating environment and
identifies opportunities and threats
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SWOT Analysis Questions
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Results of Dell’s SWOT Analysis
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International Nature of
Electronic Commerce
 Companies with established reputations
 Often create trust by ensuring that customers know
who they are
 Can rely on their established brand names to
create trust on the Web
 Customers’ inherent lack of trust in “strangers”
on the Web
 Logical and to be expected
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This Cartoon from The New Yorker
Illustrates Anonymity on the Web
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Language Issues
 To do business effectively in other cultures
 Must adapt to culture
 Researchers have found that
 Customers are more likely to buy products and
services from Web sites in their own language
 Localization
 Translation that considers multiple elements of
local environment
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Culture Issues
 Important element of business trust
 Anticipate how the other party to a transaction will
act in specific circumstances
 Culture
 Combination of language and customs
 Varies across national boundaries
 Varies across regions within nations
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Infrastructure Issues
 Internet infrastructure includes
 Computers and software connected to Internet
 Communications networks over which message
packets travel
 Organization for Economic Cooperation and
Development’s (OECD)
 Statements on Information and Communications
Policy
 Deal with telecommunications infrastructure
development issues
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Infrastructure Issues (Continued)
 Flat-rate access system
 Consumer or business pays one monthly fee for
unlimited telephone line usage
 Contributed to rapid rise of U.S. electronic
commerce
 Targets for technological solutions
 Paperwork and processes that accompany
international transactions
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Parties Involved in a Typical
International Trade Transaction
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Summary
 Commerce
 Negotiated exchange of goods or services
 Electronic commerce
 Application of new technologies to conduct
business more effectively
 First wave of electronic commerce
 Ended in 2000
 Second wave of electronic commerce
 New approaches to integrating Internet
technologies into business processes
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Summary
 Using electronic commerce, businesses have
 Created new products and services
 Improved promotion, marketing, and delivery of
existing offerings
 Global nature of electronic commerce
 Leads to many opportunities and few challenges
 To conduct electronic commerce across
international borders
 You must understand the trust, cultural, and
language legal issues
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Discuss: Seven Web 2.0 Principles
 The Web as Platform
 Harnessing Collective Intelligence
 Data is the Next Intel Inside
 End of the Software Release Cycle
 Lightweight Programming Models
 Software above the Level of a Single Device
 Rich User Experience
en.wikipedia.org/wiki/Web_2
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Assignment: before leaving class
 Form project teams of 3-4 (max)
 Arrange a time and place to discuss
assigned case, design 15-minute
presentation, build it, and rehearse.
 Next session, your team must address:
 What should be the goals of the firm?
 Can the firm deploy new technology to reach
these goals? How? When?
 What user needs can this technology meet?
For which kinds of users? Where?
 What kinds of other resources are needed?
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