The Digital Firm: Electronic Business and Electronic Commerce

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Chapter
The Digital Firm Electronic Business and
Electronic Commerce
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
New Business Models and Value Propositions

• Business Model
• Defines an enterprise
• Describes how the enterprise delivers a product
  or service
• Shows how the enterprise creates wealth

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE
EMERGING DIGITAL FIRM
The Changing Economies of Information

• Lower Search Costs Effort required to find
  suitable products and find all suppliers, prices
  and delivery costs is reduced
• 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.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
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)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
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)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
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 )

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Business-To-Consumer

• Advantages 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

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Business-To-Consumer
Advantages 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
• Example fandango.com

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Interactive Marketing and Personalization

• Clickstream tracking tools
• Collect data on customer activities at Web sites
  and store them in a log

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Web Site Visitor Tracking
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
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

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Web Site Personalization
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Collaborative filtering

• A popular technique for web personalization.
• Compares information gathered about a specific
  users 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.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
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.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Electronic Data Interchange (EDI)
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Types of Net Marketplaces

• Distributors B2B online catalogs provide buyers
  with access to thousands of parts and other goods
  (Grainger.com)
• Procurement platforms Platforms for purchasing
  goods and materials and also sourcing,
  negotiating with suppliers, paying for goods, and
  making delivery arrangements (Ariba.com)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Types of Net Marketplaces (Continued)

• Industry consortia Industry-owned Net
  marketplaces used primarily for long-term
  sourcing of direct inputs to production
  (ChemConnect.com)

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
A Net Marketplace
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE

• Private Industrial Networks
• The largest Web-based form of B2B commerce
• Private B2B extranets that focus on continuous
  business process coordination between a small
  group of companies for collaboration and supply
  chain management. Wal-Mart uses its own private
  network to coordinate more than 15,000 suppliers
  to its stores.

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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC COMMERCE
A Private Industrial Network
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Management Information Systems Chapter 4 The
Digital Firm Electronic Business and Electronic
Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Business Process Integration

• The Internet and collaborative commerce
• Collaborative commerce When firms use the
  Internet to cooperate closely in the development,
  production, and distribution of products and
  services
• GE Plastics maintains an Intranet where its
  customers (selected fabricators) can find
  information on product design and new
  developments.