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E-Commerce Certificate Program Presentation Paradigms for Analyzing Electronic Commerce


E-Commerce Certificate Program Presentation Paradigms for Analyzing Electronic Commerce Dr. Bert Rosenbloom Rauth Professor of Electronic Commerce Management – PowerPoint PPT presentation

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Title: E-Commerce Certificate Program Presentation Paradigms for Analyzing Electronic Commerce

E-Commerce Certificate Program Presentation Parad
igms for Analyzing Electronic Commerce
  • Dr. Bert Rosenbloom
  • Rauth Professor of
  • Electronic Commerce Management
  • and
  • Senior Research Fellow, Safeguard Scientifics
  • Center for Electronic Commerce Management
  • Drexel University

The dramatic growth of electronic commerce has
begun to raise issues that transcend the
technologies that have spawned it.
Electronic Commerce Management (ECM) is the
emerging business discipline that deals with the
strategic, managerial, and operational issues
associated with the technology of electronic
  • New business opportunities emerging for
  • Changing customer relationships from E-commerce.
  • Developing global strategic alliances among
    electronically linked firms.
  • Managing vast networks of suppliers, customers,
    and intermediaries linked via E-commerce.
  • Impact of E-commerce on organizational culture.
  • Electronic commerce and government regulations,
    especially tax implications.
  • Education and training of the human resources
    needed for E-commerce.
  • Others --- to be discerned in the future.

Conventional business paradigms may not be
adequate for planning, organizing, and
controlling organizations operating in the new
environment of electronic commerce.
New business paradigms may be needed to operate
successfully in the world of E-commerce
  • Many new E-commerce paradigms have already
    emerged. Some of which are discussed here

Ground Rules for Examining Forthcoming E-Commerce
Business Paradigms
  • Mostly just theories or hypotheses at this point
  • Nobody knows yet whether any of them are right
    or wrong
  • Most evidence is anecdotal
  • Experience base is very short -- a couple of
    years at most
  • Rigorous empirical evidence in support or
    non-support of the models is lacking

Disintermediation Paradigm
Elimination of middlemen in distribution
channels Intermediaries become superfluous
because producers gain exposure to vast numbers
of customers in Cyberspace All thats needed is
a Web site Millions of customers have access to
thousands of producers via the Internet. So, who
needs middlemen.
  • Dell Computer 40 million per day

Reintermediation Paradigm Addition of Middlemen
in Distribution Channel Specialized
intermediaries are needed to efficiently link
buyers and sellers together in Cyberspace
  • Amazon .com
  • Autobytel
  • eBay
  • Priceline.com
  • Verticalnet

Average Total Cost Paradigm Conventional vs.
Internet Distribution Channels
Per Unit of Product Sold
Conventional Channel
Units of Products Sold
Per Unit of Product Sold
Internet Channel
Units of Products Sold
Profit After Break-Even Point Paradigm
Conventional vs. Internet Distribution Channels
Conventional Model
Costs Revenues
Sales (units)
Internet Model
Costs Revenues
Sales (units)
Marketing Channel Flows Paradigm Five Flows in
Marketing Channels
  • 1. Product flow
  • 2. Negotiation flow
  • 3. Ownership flow
  • 4. Information flow
  • 5. Promotion flow
  • Internet superb at handling 2,3,4, and 5
    because these can be digitized and moved at
    speed of light.
  • Product flow cannot be digitized and is
    processed (often by humans) and moves at best
    at speed of sound.
  • Product flow may be the Achilles' Heel of

Profits Can Wait Paradigm
  • Why?
  • Because in the world of E-commerce, if the firm
    has earned a profit too soon it is probably
    spending too little to stake its claim by
    establishing infrastructure and customer
    recognition as a destination Internet player

Get on the Internet First Paradigm
  • Its not important to have a perfected or even a
    carefully considered business concept or plan
    to operate on the Net.
  • The same goes for offering an IPO.
  • What is important is to be first because the
    first is the one customers remember.
  • First Mover Advantage

Valuation by Press Release Paradigm
  • Publicity, promotion, and hype generated by the
    dot.com firm its executives, investment bankers,
    and the media create a buzz.
  • Excitement and wild expectations about the firm
    drive up its stocks price drastically.
  • IPO mania creates
  • Stock price of dot.com correlated to news
  • Positive spin must be fostered and maintained.
  • Generating news releases becomes more important
    then substantive progress.

Brand Equity is Key Paradigm
  • Brand equity has shifted from product names in
    the conventional world to the names of Internet
    firms in the E-commerce world
  • Amazon.com eBay Yahoo AOL Priceline.com Everyb
    ody knows them and everybody goes there. Brand
    equity has evolved into channel equity.
  • Netquity

Market Cap is All That Matters Paradigm Who cares
about sales, earnings, real assets and people.
The only thing that matters is the size of your
market capitalization
Anything Counts as Revenue Paradigm
  • Because profitability for dot.coms is so remote,
    attention focuses on top line or revenue
  • Enormous pressure on firm to show spectacular top
    line growth leads to
  • Booking revenues before actually realized
  • Counting barter as revenue
  • Drastically inflating revenues by adding price of
    goods or services to commissions
  • Priceline.com most recent quarter
  • Reported revenue
    152 million
  • Cost of service
    134 million
  • Net revenues
    18 million

Lifetime Value of Customer Paradigm
  • How much revenue and/or profit will a customer
    generate over the course of a lifetime of doing
    business with you?
  • Old concept----- not new to E-commerce
  • What is new is the use of LVC by Internet firms
    to justify
  • Lack of profits
  • Huge market caps
  • Current users X projected growth X revenue
    produced by each over their lifetimes
  • A Whole Bunch!

Perfect Market Segmentation Paradigm
100 million customers in market
Perfect Market Aggregation (1 product)
Perfect Market Segmentation (100
million different products)
Segmented marketing Niche marketing Micro-marketi
ng One -to-one marketing Relationship building
If we have 4.5 million customers we shouldnt
have one store. We should have 4.5 million
stores . Jeff Bezos, CEO Amazon.com
Its Your Marketing Channels Only Paradigm
  • Marketing Mix Strategic Variables (4Ps)
  • Product Strategy
  • Pricing Strategy
  • Promotional Strategy
  • Place (channel) Strategy
  • Sustainable competitive advantage too difficult
    to achieve with first three Ps
  • Internet provides a new frontier for creating a
    sustainable competitive advantage through the
    fourth P, channel strategy.

Optimum Customer Service Paradigm Customer
tracking and profiling capabilities via the
Internet provide near perfect information about
customer purchasing and usage patterns.
  • Therefore
  • Heavy buyers get heavy service and
  • Light buyers get light service.
  • Heavy service demand customers who
  • dont spend much get cut off.
  • Just ask Fidelity Investments

Channel Conflict Paradigm
  • In the world of E-commerce, new start-ups have a
    huge advantage over firms with established
    conventional marketing channels because they can
    avoid channel conflict.
  • Conventional channels of existing companies
    become baggage when they attempt to sell via
    the Internet. The poster child is
  • Compaq Computer

Convergence Paradigm
  • Amazon.com will not become the Wal-Mart of the
  • Wal-Mart will become the Wal-Mart of the
  • Pure-play Internet firms operating only in
    cyberspace had the early advantage.
  • But long-term future belongs to the bricks and
    mortar, legacy based firms.
  • The old economy firms have the name
    recognition, resources, and infrastructure to
    overwhelm the new kids on the block.
  • Clicks ad Mortar (B2C)
  • Clicks and Smokestacks (B2B)

Convenience and Efficiency Paradigm
  • Business to Consumer Market
  • E-commerce via the Internet must grow
    spectacularly because consumers want
    convenience and Internet shopping provides the
    ultimate in convenience.
  • Caveat
  • How about behavioral motives for shopping?
  • Business to Business Market
  • E-commerce via the Internet will be virtually
    the only way
  • businesses deal with each other because of the
    cost effectiveness and efficiency of the
  • Caveat
  • Non-rational motives also exist in the B-to-B

Variable Cost Pricing Paradigm We lose 50 on
each room but well make it up in volume. Silly
or possible? Answer possible
  • As long as excess capacity exists and price
    charged is above variable unit costs
  • Regular price of hotel room 180
  • Occupancy rate 60
  • Average Fixed Cost 100
  • Average Variable Cost 40
  • Average Total Cost 140.
  • Hotel offers half price on rooms 90
  • Less AVC 40
  • Contribution to FC 50

Internet is a near perfect source for this type
of information Maybe Priceline.com has a bright
Procurement as Competitive Strategy Paradigm
  • Procurement via E-Commerce is the ultimate
    competitive strategy in the B2B space
  • Firms that are linked to all of their suppliers
    electronically have a huge competitive advantage.
  • Greater efficiency , flexibility, speed, as well
    as lower costs.
  • Therefore E-Commerce companies that can help old
    economy companies to link up by providing
    knowledge, technology, and software are hot in
    the B2B space.
  • Ariba
  • Commerce One
  • Verticalnet
  • Can Old Economy firms do it themselves?

Technological Equality Paradigm
  • Internet technology in E-commerce becomes
    virtually equal among firms.
  • Like air conditioning and elevators, everybody
    has them and is expected to have them.
  • Therefore
  • Technology no longer offers any given firm a
    differential advantage
  • Playing field becomes technologically level
    and so firms quest for sustainable competitive
    advantage reverts back to old fashioned
  • For related discussion see Michael Porter,
    What is Strategy? Harvard Business Review.
    (Nov-Dec. l996).

Internet is a Whole New Culture Paradigm Unless
you are
  • Under 30
  • Have virtually no experience
  • Untainted by having worked at a conventional
  • Guaranteed substantial stock options
  • Convinced you are a master of the Web universe
  • You are not suitable to work for, provide
    consulting to, or even mix socially with the
    Internet elite.
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