E-Commerce Management

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E-Commerce Management 45-869 Fall 2003
Tridas Mukhopadhyay tridas_at_cmu.edu
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Introduction

• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework

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Course Goals

• Primary Goal
• Develop a managerial foundation for Electronic
  Commerce
• Secondary Goals
• Study E-Commerce Applications
• Impact of the Internet on Management

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Whats a Business Model?
Major Components Key Question
Value Proposition Why would customers buy from you?
Revenue Model How do you make money?
Market Opportunity What is your marketspace?
Competitive Environment Who are the competitors?
Competitive Advantage How do you absorb value?
Market Strategy How do you attract customers?
Organizational Development What type of organizational structure?
Management Team What type of leaders?
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Topics

• Strategy Fundamentals
• Strategic Analysis
• Process Redesign
• Digital Products
• e-Retailing
• e-Service
• Business-to-Business E-C
• Supply Chain Management
• Strategies for E-Commerce

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Grading

• 2 Exercises
• Class Participation
• 3 Best Case Reports
• Team Presentation
• Final Exam

• 20 (Individual)
• 10 (Individual)
• 30 (Team)
• 10 (Team)
• 30 (Individual)

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Pedagogy
Professor / TA Students
Lecture Discussion Participation
Case Analysis (4) Report Discuss
Exercise (2) Solve Submit
Team Project Study Present
Final Exam Solve Submit
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Team Presentation

• Analyze an on-line business
• Business model
• Competitive structure
• Value chain / creation
• Strengths/Weaknesses/Opportunities/Threats
• IT Use

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Team Presentation
1. Business Model. What are the products/services
of the chosen business? Which markets? What are
the sources and magnitudes of revenue? What are
the major cost categories? 2. Competitive
Structure. Who are the competitors? Which
competitors tend to dominate the marketplace? Are
new entrants or substitute products/services
likely in the competitive arena? What are the
powers of buyers and suppliers? 3. Value Chain.
What are the primary and secondary activities of
this business? Which of them are critical? How
does it create value for its customers? What role
does the Internet play? 4. SWOT. What are the
critical success factors for this business? What
are its strengths? What are its weaknesses? What
are the future opportunities and threats? 5. IT.
How does it use IT today? What is distinctive
about its IT use? How can it use IT as a
strategic lever? What would be the possible risks
and benefits?
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Introduction

• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework

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What is Electronic Commerce?
Use the Internet, Web or any electronic means to
do the following

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E-Commerce Alternate Perspectives

• Is eCommerce eBusiness?
• Is eCommerce dot-coms?
• Is eCommerce e-tailing?
• Is eCommerce B2B exchanges?

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Does Southwest Airline fit this mold?

• Search and reserve flights
• Click N Save Internet specials
• Special Double Credit for Internet buyers
• Transport passenger reliably
• Receive itinerary and specials by e-mail

Direct Selling
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Has the Web affected the value chain?

• Web revenue 49, over 2.6 billion
• Web tickets costs 0.60, traditional ticket 9
• Over 4 million customers have signed up

Has the Web changed industry structure?

• Online competitors began the web selling method
• Web accounts for 22 of industry sales!
• Customers have changed their expectations

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How about edmunds.com?

• edmunds.com
• Online catalog of new and used cars
• Specs and invoice prices
• Transfer to autobytel.com
• Fill in your choice
• A near-by dealer offers you a deal

Intermediaries
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Has the Web affected the value chain?

• New intermediaries
• Information Intermediaries( Edmunds, KBB)
• Referral Intermediaries (Autobytel, CarPoint)
• On-line info, ordering, financing, insurance,
  warranty
• Auto exchange Covisint to redefine supply chain

Has the Web changed industry structure?

• 60 of new car buyer first go to Web, save 500
• Dealers save about 350 per car
• FordDirect.com, 4200 dealers
• GMBuypower.com, 5000 dealers

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Intra-Organizational
P2P Commerce? M-Commerce?
Types of Electronic Commerce
Business-to-Business Business-to-Government
Business-to-Consumer Consumer-to-Consumer
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Business Customers vs. Consumers
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Introduction

• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework

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Why Electronic Commerce?

• World Wide Web (Ease, ubiquity, platform
  independence)
• Internet Explosion (Commercial and residential)
• Huge Market (Retail, commercial, providers)
• Competitive Pressure (Lower entry barrier)

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World Wide Internet Users by Regions (in millions)
eMarketer 2002
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How are Internet users different from general
population?

• Household Income (Mean 52k vs. 42k)
• Education (College grad 30.5 vs. 27)
• Gender (Female 51.3 vs.Male 48.7)
• High Growth Rate
• Sourcee Marketer 2002

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Possible Benefits of E-Commerce

• Customers

• Suppliers

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So, Why Did the Dot-Coms Crash?

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Introduction

• Course Introduction
• What is E-Commerce?
• Why E-Commerce?
• E-Commerce Framework

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Internet Milestones

• 1970 ARPANET established
• 1974 TCP/IP introduced
• 1980 US Dept of Defense adopts TCP/IP
• 1984 TCP/IP diffuses abroad
• 1988 Internet opened to commercial world
• 1991 WWW introduced
• 1993 Mosaic introduced

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Evolution of E-Commerce

• Inter-Organizational Systems (American Hospital
  Supply)
• Airline Reservation Systems (Sabre and Apollo)
• Electronic Data Interchange (Fortune 1000
  companies)
• The Web and the Internet (Universal)

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A Framework for Electronic Commerce

• Applications
• Supply Chain / Procurement
• Online Marketing / Home Shopping
• Infrastructure
• Security, Authentication, Directories /
• catalogs, Electronic Payment
• Message Transfer
• EDI, e-mail, HTTP
• Content Publishing
• HTML, XML, JAVA, Web
• Networking
• Telecom, Cable, Wireless, Internet, VAN

Business, Public policy, legal privacy issues
Technical standards for documents, security, and
network protocols
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Barriers (?)

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E-Commerce Business Requirements

• Security
• Reliability
• Electronic Payment
• Ubiquity
• Speed
• Ease of Use

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Where is E-Biz today? Gap between perception and
reality.
Realities Perceptions
? 40 Public Internet Companies Profitable 2002 No one is Profitable on the Internet
? B2B volume 3.9 trillion worldwide in 2003 B2B never happened
? Many B2C operations made money in 2002 B2C is a bad idea
? E-Biz investments continue to rise Companies ditched Web
Source Business Week (5/12/03), NY Times
(5/19/03), Wall St. J. (4/28/03).
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Key Points

• Weve only seen the tip of the iceberg
• Some barriers are moving targets
• Back to business fundamentals!