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- 1. 1 Chapter 5 EC in Service Industries
- 2. 1. Ordering Journals Electronically How a large university automated the purchasing of magazines and journals, saving $365,000/year Direct Marketing: Buyer-to-seller; orders and payments Market maker charges $5/transaction Vs. about $40 (conventional agents) Ordering time reduced by up to 80% 2
- 3. 3 2. Broker-Based Services Brokers work as intermediaries between buyers and sellers Agents basically make the markets Agents provide many services Most of the value-added tasks of brokers can be automated Major electronic agent-based services travel employment real estate stocks electronic auctions at-home banking insurance
- 4. 4 Service Industries Vs. Manufacturing and Product’s Retailing Broker-Based Services (cont.) Service Industries pure EC substantially reduced cost bank and brokerage houses • possible digitization of the entire process travel and real estate agents • viewing an online video clip or seeing photos of a hotel or a house for sale Manufacturing and Product’s Retailing physical delivery cost may be high
- 5. 5 3. Travel and Tourism Services By the year 2000, close to 25 percent of all business-to customer Internet commerce will be related to tourism The Internet is an ideal place to plan, explore, and arrange almost any trip
- 6. 6 Services Provided Information and booking of airlines, hotels, cars, and even golf courses Fare comparisons 360 degree video tours of top destinations Electronic Travel magazine Tips provided by people that experienced certain situations (like a visa problem) Pictures of major attractions Providing maps Information about entertainment and ticket purchasing (such as www.ticketmaster.com) Converting 200 currencies Travel and Tourism Services (cont.)
- 7. Worldwide business and places locator E-mail to intermediary Chat rooms and bulletin boards Major international news Weather watch Experts’ options Shopping for travel accessories and books Special interest vacations Current status of flights (real time) Fare tracker (free e-mail alerts on low fares) Bed and breakfast recommendations Restaurant reviews Special discount information Frequent flier deals Travel news Driving directions in the US Travel and Tourism Services (cont.) 7 © Prentice Hall, 2000
- 8. 8 Benefits and Limitations Limitations Not all people use the Internet It may take a long time to find what you want People are still reluctant to provide credit card numbers Benefits Free information is tremendous Free information is accessible anytime Substantial discounts Travel and Tourism Services (cont.)
- 9. 9 Corporate Travel: New Business Model Corporations have additional special discounts Companies can make arrangements for employees to plan and book their own trips. The Impact of EC on the Travel Industry Porter’s framework of competitive advantage: The five forces impact the competition in any industry i.e. new entrants, substitute products, the bargaining power of buyers, the bargaining power of suppliers and the rivalry of the competing companies in the industry. Focus: Environment, competitive responses, firm’s strategy The industry is clearly transformed by IT. Taking away some functions traditionally performed by travel agents Travel and Tourism Services (cont.)
- 10. 10 Impacts on the industry Travel and Tourism Services (cont.) Multimedia helps customers understand the products Offering of lower-cost trips Providing a more personalized service Saving money in a paperless environment Increasing the convenience of getting information at home Supporting a customer-focused strategy (such as targeted advertisement and integration of products); push information to customers
- 11. 11 Travel agencies, as we know them today, will disappear Only their complex value-added activities will not be automated These complex activities will be performed by a new breed of intermediates Travel and Tourism Services (cont.)
- 12. 12 The Future Travel and Tourism Services (cont.) Collaborative organizational process performed by multiple organizational intelligent agents Acting autonomously Work cooperatively Work collectively to achieve the collective goal Example — How will your next vacation be planned, booked and paid for?
- 13. 13 LECTURE 2 Chapter 5 EC in Service Industries
- 14. 14 The Employment Placement Market Job markets Employers are looking for employees with specific skills, and individuals are looking for a job Very volatile market Moved to the Internet Millions of job seekers, hundred of thousands of jobs
- 15. 15 Shortcomings of the Non-Internet Job Market The Employment Placement Market (cont.) Cost—Classified ads are expensive. Life cycle— Unless renewed, at an additional cost, the life of the ads is only days or weeks. Place— Most ads are local. Nationwide ads are very expensive. International ads are even more expensive. Minimum information— Because of the high cost, the information provided is minimal and may not appeal to some job seekers. Search— It is very time consuming for individuals to find all relevant newspapers. A trip to a library results in finding only major out of town newspapers.
- 16. 16 Finding applicants— Most job seekers, in the pre Internet era, did not place ads about their availability. Some sent unsolicited letters with resumes. This situation made it difficult for companies to find employees with special skills. They had to use employment agencies and pay them high commissions. Matching— It was difficult to match candidates to open jobs as well as to match supply and demand. Lost and dated material— Some applications or letters of response tended to get lost, or arrive late. A letter in a big city may travel two weeks to arrive at a distance of a few blocks. Speed— Communication by mail is slow and so is the processing of a large number of applications. Frequently, employers lose good employees, since by the time the application is processed, the applicant had taken another job. Similarly, applicants accept less desirable jobs because they are afraid to wait too long. The Employment Placement Market (cont.)
- 17. 17 The Internet Job Market The Employment Placement Market (cont.) The Internet offers a perfect environment; it is especially effective for technology- oriented jobs. Job seekers Job offerers Recruiting firms Government agencies and institutions
- 18. 18 The Advantage of the Electronic Job Market The Employment Placement Market (cont.) For job seekers Ability to find very detailed and timely information on a large number of jobs world-wide Ability to quickly communicate with potential employers Ability to post resumes for large-volume distribution Ability to search for jobs quickly from any place at any time Obtain several support services at no cost • writing resume career development how to interview Find employer profile & industry guides • www.valuereports.com
- 19. 19 For employers Ability to advertise to a large number of job seekers Ability to save on advertisement costs Lower the cost of processing (using electronic application forms) Ability to provide greater ‘equal opportunity’ for job seekers Ability to find highly skilled employees Ability to conduct tests quickly, online Ability to change and update ads quickly Ability to fill up positions rapidly Interviewing from distance The Employment Placement Market (cont.)
- 20. 20 The Limitations of the Electronic Job Markets The Employment Placement Market (cont.) Many people do not use the Internet Security Privacy Lack of face-to-face contact
- 21. 21 Major Services Available on the Net Finding a job Writing and posting resumes Career planning Newsgroups The Intranet Job Market Most companies organize an internal electronic job market Openings are posted for employees to look at, and search engines enable managers to identify talents even if the people were not actively looking for a job change The Employment Placement Market (cont.)
- 22. 22 Cyberbanking and Personal Finance Electronic banking Saves time and money for users Offers an inexpensive alternative to branch banking Application Case: Cyberbanking at Wells Fargo
- 23. 23 Implementation Issues in Banking and Online Trading Cyberbanking and Personal Finance (cont.) Encrypted SSL Session & Digital Certificate Verification Initiated External Firewall B of A Web Server Internal Firewall B of A Application Server Bank of America Security System Logon Screen •User ID •User Password B of A Web Site Customer’s Computer Securing Financial Transactions Application Case: Security at NationsBank
- 24. 24 Using the Extranet Imaging Systems Pricing Online Vs. Offline Services The Future of Banking building alliances quickly with banks, and software vendors, and information providers effective outsourcing without neglecting to build in-house skills, particularly with respect to customer information systems focusing on the profitable customers to provide broad channels for services and products keeping a central role in the payment environment Cyberbanking and Personal Finance (cont.)
- 25. 25 Alternative Strategies for Banking Customers’ Agents— banks unable to achieve economies of scale Offer customers the widest possible choices, including products from multiple sources, and provide the customers with integrated information services Product Manufacturers— banks able to achieve economies of scale It will strengthen a trend that can already be seen in a number of product segments and in core processing services for small and medium sized institutions Integrated Players— banks with a strong brand and position from manufacturing to delivery Many banks will adopt a hybrid strategy, but every player needs to make crucial decisions about which areas are strategically too risky to outsource and which capabilities need to be built up in- house
- 26. 26 Billing Online Automatic transfer of mortgages This method has existed for several years. The payer authorizes its bank to pay the mortgage, including tax escrow payments. Automatic transfer of funds to pay monthly utility bills As of fall 1997, the city of Long Beach has allowed its customers to pay their gas and water bills automatically form their bank accounts. In 1999, many utility companies worldwide, including those in Hong Kong, allow customers to pay from bank accounts, or ATMs.
- 27. 27 Paying bills from online banking account Billing Online (cont.) Consumer Bill Consolidator Billers Phone Credit Card Utility Such payments can be made into any bank account. Many people pay their monthly rent and other bills directly into the payee’s bank accounts.
- 28. 28 A merchant-to-customer direct billing Billing Online (cont.) Under this model, a merchant like American Express posts bills on its Web site, where customers can view and pay them . This means that the customers have to go to many Web sites to pay all their bills. Several utilities in Los Angeles allow customers to pay bills on the utilities’ Web site, charging customers 20 cents per transaction, which is less than the price of a postage stamp.
- 29. 29 Using an intermediary According to this model, a third party like MSFDS (Microsoft and First Data Corporation) consolidates all bills related to each customer in one site, and in a standard format. Collecting a certain commission, this intermediary makes it convenient both for the payee and payer to complete transactions. This model is of interest to vendors such as E*Trade, and Intuit. Personal finance online Available from many banks and other financial institutions, frequently free of charge. Billing Online (cont.)
- 30. 30 Used when the conventional marketing channels are ineffective or inefficient Offer trading opportunities for both buyers and sellers which are not available in the conventional channels Internet provides much cheaper infrastructure with many more involved sellers and buyers Individual consumers and corporations alike can participate in this rapidly growing and very convenient form of electronic commerce Auctions: From Theory to Practice
- 31. 31 Types of Auctions Auctions: From Theory to Practice (cont.) Auction Type Co-ordination Mechanism Price Discovery Allocation Mechanism Distribution Mechanism Buyer Role Short term acquisition of resources, e.g. for demand peaks, auction as a mechanism to achieve an equilibrium Often experts/ professional collectors trying to acquire rare items at a reasonable price Bargain hunting, gambling motive Bargain hunting, gambling motive; possible side motive: charity Supplier Role Short term allocation of resources, load balance Exposing items for sale to a sufficient breadth of demand, hope for a high price Clearance of inventory Attention, direct sales channel, public relations; possible side motive: charity Auctioneer/ Intermedi- ary Role Often electronic auction without auctioneer Achieve high breadth and depth of the auctions, high trading volume results in high returns, competitive advantage over other auctions Achieve high breadth and depth of the auctions, high trading volume results in high returns, competitive advantage over other auctions Limited role because of 1:n supplier - buyer relation; possible function as service provider for the supplier side
- 32. 32 Limitations of traditional auctions Last only a few minutes for each item sold Give buyers little time to make a decision The bidders do not have much time to examine the goods Exclude many potential bidders May be complicated for sellers to move goods to the auction site Commissions are fairly high (rent, advertising, auctioneer and other employees) Auctions: From Theory to Practice (cont.)
- 33. 33 Electronic Auctions Auctions: From Theory to Practice (cont.) Early auctioning done on local area networks the auctioning of pigs in Taiwan and Singapore the auctioning of flowers in Holland the auctioning of cars in Japan Auctions on the Internet started in 1995 similar to offline auctions, except for the fact that they are done on a computer some last days, others a short time detailed information is available start bidding by sending e-mail or filling out an electronic form names of bidders are kept coded to maintain privacy
- 34. 34 Auctioning methods Yankee method Dutch (Reverse bidding) method “Straight sale” method Examples www.usaweb.com/auction.html ; a directory of sites, search Onsale, eBay, uBid Auctions: From Theory to Practice (cont.) Electronic Auctions
- 35. 35 Benefits For seller • Sells goods efficiently • Sells goods with little action or effort • Creates a greater range of potential buyers • Sells excess inventories quickly via this process For buyers • Gets a huge variety of goods • Finds quality goods for largely discounted prices Limitations Inability to physically see the items Possibility of fraud Less competitive atmosphere may prevail on the Net Benefits and Limitations Auctions: From Theory to Practice (cont.)
- 36. 36 Impacts Parameter Impact of the Web Auctioneer Lower entry barriers, opportunity for direct sales Access rules Customizable, theoretically millions of potential customers can be reached Items auctioned Focused product segments can be auctioned off, the technology extends the complexity of the product description Trading rules The trading rules reflect the lack of a guaranteed service Execution process For digital products the entire trading cycle can be handled on the Web; for physical products the trading process and the physical logistics of the trade objects can be separated, leading to a reduction of costs
- 37. 37 Online Publishing The electronic delivery of newspapers, magazines, news, and other information through the Internet Online Publishing Today and Tomorrow Today— mainly used for disseminating information and for conducting sales transactions interactively Tomorrow— include more customized material that the reader will receive free, or will pay for
- 38. 38 Publishing Modes newspapers, magazines, news, textbooks, music, artwork, video clips, and movies Publishing Methods online archive approach— a digital archive such as library catalogs and bibliographic databases new medium approach— add extra comprehensiveness to any issue or topic publishing intermediation approach— an online directory for news services dynamic or just-in-time approach— create content in real-time and transmitted on the fly Online Publishing (cont.)
- 39. 39 Virtual Teaching and Universities Knowledge Dissemination Many universities are offering limited courses and degrees but use innovative teaching methods and multimedia support MBA program in Hong Kong lectures are delivered as an interactive TV (iTV) students can decide what and when they want to ‘attend’ the lecture lecture, support material, exercises etc. are provided on the Web
- 40. 40 Online Consulting Knowledge Dissemination (cont.) Medical advice— provide consultation with top experts Management consulting— provide accumulated expertise from knowledge bases Legal advice— delivery of legal consultation services to business has considerable prospects Financial advice— offer extensive financial advice Other service online insurance, healthcare, future exchanges, matchmaking, venture capital, finding a college, digital delivery of documents, and electronic stamps