Chapter 5
Electronic Commerce in
Service Industries
1
Opening Vignette:
Ordering Journals Electronically
How a large university automated the
purchasing of magazines and journa...
Broker-Based Services
Brokers work as intermediaries between buyers and
sellers
Agents basically make the markets
Agents p...
Broker-Based Services (cont.)
Service Industries vs. Manufacturing and Product Retailing
Service Industries
Pure EC: subst...
Travel and Tourism Services
Any experienced traveler knows that good
planning and shopping around can save
money
The Inter...
Travel and Tourism Services (cont.)
Services provided:
Information and
booking of airlines,
hotels, cars, and even
golf co...
Travel and Tourism Services (cont.)
Services provided:
Special discount
information
Chat rooms and bulletin
boards
Shoppin...
Travel and Tourism Services (cont.)
Auctions, bids, and special sales

American airlines (aa.com) auctions tickets
during ...
Travel and Tourism Services (cont.)
Special services

Wireless services
Direct marketing
Alliances and consortia
Other ser...
Travel and Tourism Services (cont.)
Corporate Travel: New Business Model
The Impact of EC on the Travel Industry
Porter’s ...
Travel and Tourism Services (cont.)
Impacts on the industry

Multimedia helps customers understand the
products
Offering o...
Travel and Tourism Services (cont.)
Travel agencies, as we know them today, will
disappear
Only their complex value-added ...
Figure 5-2
The Travel Industry Chain

Source: Block and Segev “The Impact of Electronic Commerce on the Travel Industry” P...
Travel and Tourism Services (cont.)
Intelligent agents

Step 1: turn on PC and enter
Desired destination
Dates
Available b...
The Employment Placement:
Deficiencies of Manual Market
Job markets
Employers are looking for employees with
specific skil...
The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market

Cost—classified a...
The Employment Placement:
Deficiencies of Manual Market (cont.)
Driving forces of electronic job market (cont.)
Finding ap...
The Employment Placement:
Deficiencies of Manual Market (cont.)
The Internet Job Market
The Internet offers a perfect envi...
The Employment Placement:
Deficiencies of Manual Market (cont.)
The Advantage of the Electronic Job Market
For job seekers...
The Employment Placement:
Deficiencies of Manual Market (cont.)
The Advantage of the Electronic Job Market
For employers
A...
The Employment Placement:
Deficiencies of Manual Market (cont.)
The Limitations of Electronic Job Markets
Many people do n...
Real Estate
You can view many properties on the screen
You can sort and organize properties
You can find detailed informat...
Real Estate (cont.)
Real Estate Applications (cont.)
The National Association of Realtors, realtor.com has links to
proper...
Investing and Trading Stocks Online
Online stock trading
Costs between $7 and $29 per transaction (vs.
$10 - $35 in tradit...
Trading Stocks Online (cont.)
Initial public offerings
(IPOs)
Spring Street Brewing
Offers initial and
secondary securitie...
Cyberbanking and Personal Finance
Electronic banking
Saves time and
money for users
Offers an
inexpensive
alternative to
b...
Cyberbanking and Personal Finance
International and multiple-currency banking

Some international retail purchasing can be...
Cyberbanking and Personal Finance (cont.)
Implementation issues in banking and online
stock trading
Securing financial tra...
Cyberbanking and Personal Finance (cont.)
Imaging systems—allow customers to view
images of all:
Incoming checks
Invoices
...
Cyberbanking and Personal Finance (cont.)
Banking: 4 scenarios

Building alliances quickly with banks, software
vendors, a...
The Future of Online Banking
Three core strategies to pursue
1. Customers Agents—banks unable to achieve economies of
scal...
The Future of Online Banking (cont.)
Three core strategies to pursue (cont.)
3. Integrated Players—banks with a strong bra...
The Future of Online Banking (cont.)
Personal finance online

Bill paying and e-checks
Tracking bank accounts etc.
Portfol...
Billing Online
Automatic transfer of
mortgages
This method has
existed for several
years
The payer
authorizes its bank
to ...
Billing Online (cont.)
Paying bills from online banking account
Can be made into any bank account
Monthly rent and other b...
Billing Online (cont.)
A merchant-to-customer direct billing
A merchant posts bills on its Web site
Customers can view and...
Billing Online (cont.)
Using an intermediary
A third party consolidates all bills related to each
customer in one site in ...
Online Publishing
The electronic delivery of newspapers,
magazines, news, and other information
through the Internet
Onlin...
Online Publishing (cont.)
Publishing Modes
Newspapers
Magazines
News
Textbooks
Music
Artwork
Video clips
Movies
Online Publishing (cont.)
Publishing Methods
Online archive: digital archive (library
catalogs, bibliographic databases)
N...
Online Publishing (cont.)
Publishing music, videos, and games
Major issue is payment of intellectual property
fees
People-...
Online Publishing (cont.)
Digital delivery of documents—secure
environment
U.S. Postal Service, UPS, Eparcel.com
Encryptio...
Online Publishing (cont.)
Edutainment—combination of:

Education
Entertainment
Games
Goal: encourage students to become
ac...
Online Publishing (cont.)
Electronic books

Frequent updates possible
Contain up-to-the-minute information
Special eBook d...
Knowledge Dissemination
Virtual teaching and online universities

Distance learning and virtual universities
Many universi...
Knowledge Dissemination (cont.)
Online advice and consulting
Medical advice—provide consultation with top
experts
Manageme...
Knowledge Dissemination (cont.)
Online advice and consulting (cont.)
Financial advice— offer extensive financial
advice
Ot...
Disintermediation and
Reintermediation
Change the role of agents to:
Assists in comparison shopping from multiple
sources
...
Disintermediation and
Reintermediation (cont.)
Issues impacting future of intermediaries
The success of intelligent agents...
Disintermediation and
Reintermediation (cont.)
New roles of electronic marketing
intermediaries
To extend what we are fami...
Disintermediation and
Reintermediation (cont.)
Disintermediation in B2B
Exchanges decrease number of calls a sales rep pay...
Managerial Issues
Effectiveness of out-of-town recruitment
Privacy may be in danger
International legal issues may impact ...
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E-Commerce 06

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E-Commerce 06

  1. 1. Chapter 5 Electronic Commerce in Service Industries 1
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 39. Online Publishing (cont.) Publishing Modes Newspapers Magazines News Textbooks Music Artwork Video clips Movies
  40. 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. 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. 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. 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. 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. 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. 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. 47. Knowledge Dissemination (cont.) Online advice and consulting (cont.) Financial advice— offer extensive financial advice Other service online Healthcare Matchmaking Electronic stamps
  48. 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. 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. 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. 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. 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

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