This document discusses various service industries that have been impacted by electronic commerce, including travel/tourism, employment placement, real estate, investing/trading stocks online, cyberbanking/personal finance, billing online, online publishing, knowledge dissemination, and disintermediation/reintermediation. It provides details on how each industry has been transformed through opportunities like online research/booking, electronic job posting/applications, virtual property tours, online trading platforms, digital banking services, electronic bill payment, and distance learning/online education. The roles of intermediaries are changing as well, with some being disintermediated and others taking on new functions as cybermediaries.

1. Chapter 5
Electronic Commerce in
Service Industries
1

2. Opening Vignette:
Ordering Journals Electronically
How a large university automated the
purchasing of magazines and journals,
saving $365,000/year
Direct E-Marketing: Buyer-to-seller; orders
and payments
Market maker charges $5/transaction vs.
about $32 (conventional agents)
Ordering time reduced by up to 80%
Rowe.com—Internet IPO that survived the
stock market in the industry

3. 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. Broker-Based Services (cont.)
Service Industries vs. Manufacturing and Product Retailing
Service Industries
Pure EC: substantially reduced cost
Bank and brokerage houses
Possible digitation 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 retailing
Physical delivery cost may be high

5. Travel and Tourism Services
Any experienced traveler knows that good
planning and shopping around can save
money
The Internet is an ideal place to plan,
explore, and arrange almost any trip
Travel-related information available at many
sites including:
Expedia.com
Travelocity.com
Asiatravel.com
Travelweb.com
Trip.com
Priceline.com

6. Travel and Tourism Services (cont.)
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
Converting 200
currencies
Providing maps
Pictures of major
attractions
Information about
entertainment and
ticket purchasing
(ticketmaster.com)
Tips provided by
people that
experienced certain
situations (like a visa
problem)

7. Travel and Tourism Services (cont.)
Services provided:
Special discount
information
Chat rooms and bulletin
boards
Shopping for travel
accessories and books
Experts’ options
Frequent flier deals
Restaurant reviews
Current status of flights
(real time)
Driving directions in the
US
Travel news
Fare tracker (free e-mail
alerts on low fares)
Major international news
Worldwide business and
places locator
Special interest vacations
Bed and breakfast
recommendations
E-mail to intermediary
Weather watch

8. Travel and Tourism Services (cont.)
Auctions, bids, and special sales
American airlines (aa.com) auctions tickets
during low-volume seasons
Cathay (cathaypacific.com) auctions tickets on
competitive routes
Aer Lingus (aerlingus.ie) auctions tickets that
expire in 1 or 2 weeks
Priceline (priceline.com) asks consumers to
specify the price they are willing to pay

9. Travel and Tourism Services (cont.)
Special services
Wireless services
Direct marketing
Alliances and consortia
Other services
Interactive kiosks in
hotels
Internet access in hotels
Benefits
Free information is
tremendous
Free information is
accessible anytime
Substantial discounts
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

10. Travel and Tourism Services (cont.)
Corporate Travel: New Business Model
The Impact of EC on the Travel Industry
Porter’s framework of competitive advantage
(the five forces)
Focus:
Environment
Competitive responses
Firm’s strategy
The industry is clearly transformed
Taking away some functions traditionally
performed by travel agents

11. Travel and Tourism Services (cont.)
Impacts on the industry
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

12. Travel and Tourism Services (cont.)
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 intermediaries
Survival strategy
Minor improvements due to process changes
BPR with significant improvements
Organizational transformation

13. Figure 5-2
The Travel Industry Chain
Source: Block and Segev “The Impact of Electronic Commerce on the Travel Industry” Proceedings, HICSS 31, Hawaii ©
1997 IEEE.

14. Travel and Tourism Services (cont.)
Intelligent agents
Step 1: turn on PC and enter
Desired destination
Dates
Available budget
Special requirements
Desired entertainment
Step 2: computer dispatches an intelliget agen that
“shops around”
Step 3: agent attempts to match your requirements
with what is available, negotiates with vendors
Step 4: agent returns within minutes with suitable
alternatives, modifies as per your wishes, books the
vacation
Voice communication with agent

15. The Employment Placement:
Deficiencies of Manual Market
Job markets
Employers are looking for employees with
specific skills, and individuals are looking for
jobs
Very volatile market
Moved to the Internet
Millions of job seekers, hundreds of thousands
of jobs

16. The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market
Cost—classified ads are expensive
Life cycle—the life of the ads is only days or
weeks
Place—most ads are local; nationwide and
international ads are more expensive
Minimum information—because of the high cost,
the information provided is minimal
Search—Time consuming for individuals to find all
relevant newspapers

17. The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market (cont.)
Finding applicants—during pre-Internet era, job seekers
did not place ads about their availability making it
difficult for companies to find employees with special
skills
Matching—it was difficult to match candidates to open
jobs, supply and demand
Lost and dated material— some applications or letters of
response tended to get lost, or arrive late
Speed—communication by mail and processing of a
large number of applications is slow; employers lose
good employees, the applicant had taken another job
being afraid to wait too long
Comparisons—difficult for job seekers to compare
monetary value of available positions

18. The Employment Placement:
Deficiencies of Manual Market (cont.)
The Internet Job Market
The Internet offers a perfect environment; it is
especially effective for technology-oriented
jobs
Job seekers
Job offerers
Recruiting firms
Government agencies and institutions

19. The Employment Placement:
Deficiencies of Manual Market (cont.)
The Advantage of the Electronic Job Market
For job seekers
Find very detailed and
timely information on a
large number of jobs
world-wide
Quickly communicate
with potential employers
Post resumes for largevolume distribution
Search for jobs quickly
from any place at any time
Obtain several support
services at no cost
Find employer profile &
industry guides
(valuereports.Com)

20. The Employment Placement:
Deficiencies of Manual Market (cont.)
The Advantage of the Electronic Job Market
For employers
Advertise to a large
number of job seekers
Save on advertisement
costs
Lower the cost of
processing (using
electronic application
forms)
Provide greater (‘equal
opportunity’) for job
seekers
Find highly skilled
employees
Conduct tests quickly,
online
Change and update ads
quickly
Fill up positions rapidly
Interviewing from
distance

21. The Employment Placement:
Deficiencies of Manual Market (cont.)
The Limitations of Electronic Job Markets
Many people do not use the Internet
Security
Privacy
Lack of face-to-face contact
Examples of online job services
Locating jobs
Writing and posting resumes
Career planning
Newsgroups
Examples of career services on the Internet
Recruiters online network
StaffNET
Global employment network
Employment opportunities
Intranet job market
Intelligent agents
Intelligent agents for job seekers (jobsleuth.com)
Intelligent agents for employers (resumix.com)

22. Real Estate
You can view many properties on the screen
You can sort and organize properties
You can find detailed information about the
properties
You can search, compare and apply for
loans

23. Real Estate (cont.)
Real Estate Applications (cont.)
The National Association of Realtors, realtor.com has links to
property listings in all major US cities
To find how much house you can afford, consult:
replace.com
Mortgage brokers can pass on loan applications over the Net
and receive bids from lenders that want to issue the
mortgages
To find mortgage interest rates online use:
Lendingtree.com
Eloan.com
Homeside.com.au
Insurance—auto, home life, health at substantial discount
Insureate.com
Order.com
Quotesmith.com

24. Investing and Trading Stocks Online
Online stock trading
Costs between $7 and $29 per transaction (vs.
$10 - $35 in traditional brokerage)
No waiting on busy telephone lines
No oral communication, less chance for errors
Place orders from anywhere, any time, day or
night
No biased broker to push you
Considerable amount of free information

25. Trading Stocks Online (cont.)
Initial public offerings
(IPOs)
Spring Street Brewing
Offers initial and
secondary securities
trading over the
Internet
See ipo.com
Global stock exchanges—
around-the-clock global
trading
Related markets
Financial derivatives
Commodities
Mutual funds
Individual investors and
day trading
Electronic trading of
interest rate derivatives
Swapswire.com
Forbes.com

26. 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
Capabilities of home
banking
Get current account
balances any time
Obtain charge and
credit card statements
Pay bills
Download account
transactions
Transfer money between
accounts

27. Cyberbanking and Personal Finance
International and multiple-currency banking
Some international retail purchasing can be done by
credit card
Other transactions may require international banking
support
Hong Kong Bank’s HEXAGON provides ebanking in Asia
Mark Twain Bank in the U.S. uses e-cash to
support trading in 20 foreign currencies
Bank of America and other banks offer:
International capital raising
Cash management
Other services on an international level

28. Cyberbanking and Personal Finance (cont.)
Implementation issues in banking and online
stock trading
Securing financial transactions
Application case: Bank of America Online
Using the extranet
Banks provide large business customers
with personalized service by allowing them
access to the bank’s intranet
Access accounts
Historical transactions
Intranet-based decision-support
applications

29. Cyberbanking and Personal Finance (cont.)
Imaging systems—allow customers to view
images of all:
Incoming checks
Invoices
Other related online correspondence
Pricing online vs. off-line services
Some banks offer free services (fee per
check or transfer)
Some banks charge $5 to $10
Risks—especially in international banking

30. Cyberbanking and Personal Finance (cont.)
Banking: 4 scenarios
Building alliances quickly with banks, software
vendors, and information providers
Effective outsourcing without neglecting to
build in-house skills (customer information
systems)
Focusing on the profitable customers to
provide broad channels for services and
products
Keeping a central role in the payment
environment

31. The Future of Online Banking
Three core strategies to pursue
1. Customers Agents—banks unable to achieve economies of
scale
Offer customers the widest possible choices
Include products from multiple sources
Provide the customers with integrated
information services
1. Product Manufacturers – banks able to achieve
economies of scale
Strengthen a trend that can already be seen in a
number of product segments
In core processing services for small and mediumsized institutions

32. The Future of Online Banking (cont.)
Three core strategies to pursue (cont.)
3. Integrated Players—banks with a strong brand
and position from manufacturing to delivery
Many banks will adopt a hybrid strategy
Every player needs to make crucial
decisions about which areas are
strategically too risky:
To outsource
Which capabilities need to be built up inhouse

33. The Future of Online Banking (cont.)
Personal finance online
Bill paying and e-checks
Tracking bank accounts etc.
Portfolio management
Investment tracking
Quotes and prices (past and current)
Budget organization
Record keeping
Tax computations
Retirement goals, planning and budgeting

34. 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
Since1997, the city of
Long Beach has
allowed its customers
to pay their gas and
water bills from their
bank accounts
Many utility
companies worldwide
provide this option

35. Billing Online (cont.)
Paying bills from online banking account
Can be made into any bank account
Monthly rent and other bills paid directly into
the payee’s bank accounts

36. Billing Online (cont.)
A merchant-to-customer direct billing
A merchant posts bills on its Web site
Customers can view and pay their bill
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
(20 cents per transaction )

37. Billing Online (cont.)
Using an intermediary
A third party consolidates all bills related to each
customer in one site in a standard format
Collects a certain commission
Makes it convenient to complete transactions
E*Trade and Intuit
ISPs services
Trying to sell customized solutions
Do not have adequate billing platforms
See moneymain.com

38. 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

39. Online Publishing (cont.)
Publishing Modes
Newspapers
Magazines
News
Textbooks
Music
Artwork
Video clips
Movies

40. Online Publishing (cont.)
Publishing Methods
Online archive: digital archive (library
catalogs, bibliographic databases)
New medium: extra comprehensiveness to
issue or topic
Publishing intermediation: online directory
for news services
Dynamic or just-in-time: create content in
real-time and transmit on the fly

41. Online Publishing (cont.)
Publishing music, videos, and games
Major issue is payment of intellectual property
fees
People-to-people (P2P) model—people swap
files
3rd-party organizer may be in violation of
copyright laws (Napster)

42. Online Publishing (cont.)
Digital delivery of documents—secure
environment
U.S. Postal Service, UPS, Eparcel.com
Encryption
Software for digital signature
Authentication
Notarization

43. Online Publishing (cont.)
Edutainment—combination of:
Education
Entertainment
Games
Goal: encourage students to become
active learners
Managerial issues
Educational games delivered as CDROMs
Distance-learning format

44. Online Publishing (cont.)
Electronic books
Frequent updates possible
Contain up-to-the-minute information
Special eBook device necessary to view books
See:
Wizap.com
Ebookconnections.com
Netlibrary.com

45. Knowledge Dissemination
Virtual teaching and online universities
Distance learning and virtual universities
Many universities offer limited courses and
degrees, but use innovative teaching methods
and multimedia support
MBA program in Hong Kong
Lectures delivered on interactive TV
(iTV), now on the Web
Students decide what and when they
“attend” the lecture
Lecture, support material exercises,
etc., provided on the Web

46. Knowledge Dissemination (cont.)
Online advice and consulting
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

47. Knowledge Dissemination (cont.)
Online advice and consulting (cont.)
Financial advice— offer extensive financial
advice
Other service online
Healthcare
Matchmaking
Electronic stamps

48. Disintermediation and
Reintermediation
Change the role of agents to:
Assists in comparison shopping from multiple
sources
Providing total solutions by combining services
from several vendors
Providing certifications and trusted third party
control and evaluation systems

49. Disintermediation and
Reintermediation (cont.)
Issues impacting future of intermediaries
The success of intelligent agents
Travel intelligent agents
Agents that support job matching
Agents that interpret resumes
The more intelligent the software agents
become, the less human agents will be needed
Customer attitudes and behavior are important
Good experience with online agencies means
fewer customers use human agents
Insurance purchasing
Stock purchasing
Virtual travel agencies

50. Disintermediation and
Reintermediation (cont.)
New roles of electronic marketing
intermediaries
To extend what we are familiar with in physical
markets to the virtual world (e.g., search
services and electronic malls)
To extend payment clearing functions into the
Internet (e.g., electronic cash and digital credit
card services)

51. Disintermediation and
Reintermediation (cont.)
Disintermediation in B2B
Exchanges decrease number of calls a sales rep pays on
purchasing managers
Reengineering marketing and sales organizations is
necessary
Cybermediation
Electronic intermediary (rowe.com)
Affects most market functions
Hypermediation—human/electronic intermediation;
may profit greatly from EC

52. Managerial Issues
Effectiveness of out-of-town recruitment
Privacy may be in danger
International legal issues may impact services
more than products
Ethical issues are prevalent in services
The intermediaries and their roles are changing
Alliances for online initiatives are spreading
rapidly