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The Digital Firm: Electronic Business and Electronic Commerce

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Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce British Airways: Faster, Leaner, and Internet Enabled Electronic Business, Electronic Commerce ... – PowerPoint PPT presentation

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Title: The Digital Firm: Electronic Business and Electronic Commerce


1
The Digital Firm Electronic Business and
Electronic Commerce
Chapter 4
2
  • British Airways Faster, Leaner, and Internet
    Enabled

3
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
Internet Technology and the Digital Firm
  • The Internet
  • Rapidly becoming infrastructure of choice
  • Universal, easy-to-use set of technologies and
    standards
  • Web sites available 24/7
  • Extended distribution channels
  • Reduced transaction costs
  • Reduced network and coordination costs

4
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Past Information about products and services
    bundled with their physical value chain
  • Today The Internet has unbundled information
    from traditional value chain, creating new
    business models

5
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Internet Business Model Features
  • Dynamic pricing
  • Banner ad or pop-up ad
  • Information sharing
  • Virtual community
  • Personal web site, on-line discussion group, chat
    room, message board
  • Services
  • E-mail, Messenger, file storage, subscription

6
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Internet Business Models
  • Virtual storefront Sells physical products
    directly to consumers or businesses.
  • Amazon.com, EPM.com
  • Information broker Provides product pricing and
    availability information generates revenue from
    advertising or directing buyers to sellers.
  • Edmunds.com, Kbb.com, Insweb.com,
    IndustrialMall.com
  • Transaction Broker Processes online sales
    transactions for fee.
  • ETRADE.com, Expedia.com

7
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Internet Business Models
  • Online Marketplace Provides digital environment
    where buyers and sellers meet
  • eBay (Dynamic Pricing), Priceline.com,
    ChemConnect.com, Pantellos.com
  • Content Provider Provides digital content, such
    as news revenue from fees or advertising sales
  • WSJ.com, CNN.com, TheStreet.com, Gettyimages.com,
    MP3.com

8
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Internet Business Models
  • Online Service Provider Provides connectivity
    revenue from fees, advertising, or marketing
    information
  • _at_Backup.com, Xdrive.com, Employease.com,
    Salesforce.com
  • Virtual Community Provides online meeting place
    for people of similar interests
  • Motocross.com, iVillage.com (banner ad, pop-up
    ad), Sailnet.com (Latin American)

9
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Internet Business Models (cont.)
  • Portal Provides initial point of entry to the
    Web, along with specialized content and services
  • Yahoo.com, MSN.com, StarMedia.com
  • Syndicator aggregates content or applications to
    resell as package to third-party Web sites
  • ETRADE (Reuters-news, Bridge Info Sys-quotes,
    BigCharts.com-charts)

10
Electronic Commerce
Categories of Electronic Commerce
  • Business-to-consumer (B2C) Retailing products
    and services to individual shoppers
  • Business-to-business (B2B) Sales of goods and
    services among businesses
  • Consumer-to-consumer (C2C) Consumers selling
    directly to consumers

11
Electronic Commerce
Customer-Centered Retailing
  • Direct Sales Over the Web
  • Disintermediation Removal of intermediary steps
    in a value chain, selling directly to consumers,
    significantly lowers purchase transaction costs
  • Reintermediation Shifting intermediary function
    in a value chain to a new source, such as
    service hubs (Ex. Information broker in Table
    4-2)

12
Electronic Commerce
The benefits of disintermediation to the consumer
Figure 4-2
13
Electronic Commerce
Customer-Centered Retailing
  • Interactive Marketing and Presentation
  • Collection of customer information using Web site
    auditing tools less expensive than surveys and
    focus groups.
  • Web personalization technology customizes content
    and banner ads on Web site to individuals
    profile and purchase history.
  • Web sites and marketing shorten sales cycle and
    reduce time spent in customer education.

14
Electronic Commerce
Customer-Centered Retailing
  • Interactive Marketing and Presentation
  • Combine web visitor data with customer data from
    other sources to create detailed profiles of
    individuals.
  • Off-line purchases, customer service records, or
    product registrations.
  • Conduct (incentive-driven) on-line market
    research surveys.
  • Monitor customer discussions about products that
    are taking place through on-line communities and
    message boards.
  • Monitor the online surfing and buying behavior of
    large numbers of customers at many different web
    sites.

15
Electronic Commerce
Customer-Centered Retailing
  • Collection of Customer Information
  • TravelWeb
  • On-line reservation of more than 16,000 hotels in
    138 countries.
  • Track origins of users
  • Track web pages and links which users click to
    learn about customer preferences.
  • Hyatt hotel
  • Japanese users are most interested in resorts
    golf facilities.
  • Shape market strategies to develop
    hospitality-related products.

16
Electronic Commerce
Customer-Centered Retailing
  • Web Personalization Technology
  • Amazon.com
  • Retain customer purchase and recommendation data.
  • Recommend products based on purchase history and
    past purchases from other buyers.
  • Bluefly.com
  • Display items that a visitor has recently viewed.
  • Subaru.com
  • Maintenance reminder, configuration of warranty
    repair, notice of recalls and service campaigns,
    service history log, trade-in value calculation,
    link to dealer web site, request a service
    appointment.

17
Electronic Commerce
Web site personalization
Figure 4-3
18
Electronic Commerce
Customer-Centered Retailing
  • Customer Self-Service
  • Web-based responses to customer questions cost a
    fraction of telephone costs for live customer
    service representation
  • Allow interaction at customers convenience
  • Web-based customer self-service applications,
    such as airline flight information sites
  • Traditional, phone-based customer call centers
    being integrated with Web

19
Electronic Commerce
Customer-Centered Retailing
  • Customer Self-Service
  • American, Northwest Flight departure and arrival
    times, seating charts, airport logistics, check
    frequent-flyer miles, and purchase tickets
    on-line.
  • Yamaha Corp. of America Access to technical
    solutions, send email to live technician.
  • UPS, FedEx Track shipment, calculate shipping
    cost, determine time in transit, and arrange for
    package pickup.
  • Lends End Push to talk button to request live
    talk with customer services.

20
Electronic Commerce
Window on Technology
  • Lightnin Lights Up with the Internet
  • What are the benefits of using Web-based order
    configuration software?
  • How does this system provide value to Lightnin
    and its customers?

21
Electronic Commerce
Business-to-Business Electronic Commerce
  • Web, Internet streamlining procurement process
  • E-procurement eliminates inefficient, paper-based
    processes
  • Selling through Web sites, private industrial
    networks, or Net marketplaces

22
Electronic Commerce
Before-after diagram of changes in Lightnins
ordering process
Figure 4-4
23
Electronic Commerce
Business-to-Business Electronic Commerce
  • Private Industrial Network
  • Private exchange typically consists of large
    firm using extranet to link to its suppliers and
    business partners
  • Permits firm and partners to share product
    design, development, marketing, scheduling,
    inventory management, and unstructured
    communication
  • Fastest-growing type of B2B commerce

24
Electronic Commerce
A private industrial network
Figure 4-5
25
Electronic Commerce
Business-to-Business Electronic Commerce
  • Net Marketplace
  • E-hub provides single Internet-based marketplace
    for many different buyers and sellers
  • Industry owned or independent intermediaries
  • Transaction oriented generates revenue from
    purchase and sales transactions and other
    services

26
Electronic Commerce
A Net marketplace
Figure 4-6
27
Electronic Commerce
Business-to-Business Electronic Commerce
  • Different Types of Net Marketplace
  • Direct goods goods used in a production process,
    e.g., sheet steel for auto production.
  • Indirect goods goods not directly involved in a
    production process, e.g., office supplies.
  • Contractual purchasing long-term relationships
    with designated suppliers.
  • Short-term spot purchasing purchase based on
    immediate needs.
  • Vertical markets for specific industries
    automobile, telecommunication, machine tools.
  • Horizontal markets with different industries
    office equipment and transportation.

28
Electronic Commerce
Business-to-Business Electronic Commerce
  • Different Types of Net Marketplace
  • W. W. Grainger Horizontal market for sourcing
    maintenance, repair, and operations (MRO)
    products used in many different industries.
  • Customers benefit from low search cost, low
    transaction cost, wide selection, and low price.
    Grainger earns revenue by charging a markup on
    the products it distributes.

29
Electronic Commerce
Business-to-Business Electronic Commerce
  • Different Types of Net Marketplace
  • Ariba Long-term contractual purchasing of both
    indirect and direct goods.
  • For buyers, Ariba automates sourcing, contract
    management, purchase orders, requisitions,
    business rule enforcement, and payment.
  • For sellers, Ariba provides services for catalog
    creation and content management, order
    management, invoicing, and settlement.

30
Electronic Commerce
Business-to-Business Electronic Commerce
  • Different Types of Net Marketplace
  • Covisint industry-owned vertical market for
    automobile manufacturing. Founded by GM, Ford,
    DaimlerChrysler, Renault, and Nissan.
  • Focus on long-term contract purchasing
    relationships and on providing common networks
    and computing platforms for reducing supply chain
    inefficiencies.
  • Buyers benefit from competitive pricing among
    alternative suppliers.
  • Suppliers benefit from stable long-term
    relationships with large firms.

31
Electronic Commerce
Business-to-Business Electronic Commerce
  • Exchanges
  • Third-party Net marketplaces connecting thousands
    of suppliers and buyers for spot purchasing
  • Proliferated during early years of e-commerce
  • Exchanges encouraged competitive bidding, driving
    prices down suppliers reluctant to participate

32
Electronic Commerce
Business-to-Business Electronic Commerce
  • Exchanges
  • Enermetrix Network Online exchange for retail
    natural gas and electricity contracts.
  • FoodTrader.com Automate spot purchases among
    buyers and sellers from over 180 countries in the
    food and agriculture industry.

33
Electronic Commerce
Electronic Commerce Payment Systems
  • Digital credit card payment systems Secure
    credit card payment over Web
  • Digital wallet Stores credit card and owner
    identification, shipping information, to
    facilitate payment process
  • Amazon.com 1-Click, Gator, MSN Wallet, MasterCard
    Wallet, American Onlines Quick Checkout.

34
Electronic Commerce
Electronic Commerce Payment Systems
  • Micropayment Payment for a very small sum of
    money, often less than 10.
  • Accumulated balance digital payment systems
    Accumulates micropayment purchases as debit
    balance paid periodically on credit card or
    telephone bills
  • PaymentOne and Trivnet.

35
Electronic Commerce
Electronic Commerce Payment Systems
  • Stored value payment system Enables consumers
    to make instant payments based on value stored in
    digital account
  • Ecount, RocketCash (aimed at teenagers).
  • Smart Card A credit-card size plastic card that
    stores digital information and that can be used
    for electronic payments in place of cash.
  • Mondex, American Express Blue.

36
Electronic Commerce
Electronic Commerce Payment Systems
  • Digital cash Digital currency that can be used
    for micropayments or larger purchases
  • eCoin.net.
  • Peer-to-Peer payment systems Enables payments to
    vendors not set up for credit-card payments
  • The recipient picks up the payment by visiting
    the web site and supplying information about
    where to send the payment (a bank account or a
    physical address).

37
Electronic Commerce
Electronic Commerce Payment Systems
  • Digital checking Electronic check with secure
    digital signature
  • Electronic billing presentment and payment
    system Supports electronic payment for online
    and physical store purchases after purchase has
    taken place

38
Electronic Commerce
Electronic commerce information flows
Figure 4-7
39
Electronic Business and the Digital Firm
How Intranets Support Electronic Business
  • Connectivity accessible from most platforms
  • Can be tied to internal corporate systems and
    core transaction data
  • Can create interactive applications with text,
    audio, and video

40
Electronic Business and the Digital Firm
How Intranets Support Electronic Business
  • Scalable to larger or smaller computing platforms
    as requirements change
  • Easy to use, universal Web interface
  • Low start-up costs
  • Rich, responsive information environment
  • Product catalogs, employee handbooks, telephone
    directories, and benefit information.
  • Reduced information distribution costs

41
Electronic Business and the Digital Firm
Intranet Applications for Electronic Business
  • Finance and Accounting Integrated view of
    financial and accounting information online
  • Human Resources Rapid delivery of information to
    employees online publishing
  • Sales and Marketing Collaborative place to
    coordinate activities of sales force
  • Manufacturing and Production Distribute
    manufacturing information to different parts of
    organization

42
Electronic Business and the Digital Firm
Functional applications of intranets
Figure 4-8
43
Electronic Business and the Digital Firm
Window on Organizations
  • Can Online Brokers Survive in Europe?
  • Is providing online financial services over the
    Internet a viable business model? Why or why not?

44
Electronic Business and the Digital Firm
Business Process Integration
  • Pre-Internet, integration costly and difficult
  • Internet technology less expensive than building
    enterprise systems
  • Intranets improve coordination among internal
    business processes
  • Extranets coordinate processes shared with
    customers and partners
  • Intranet promotes collaborative commerce

45
Management Challenges and Opportunities
Management Challenges and Opportunities
  • Unproven business models
  • Only 43 of the independent exchanges that were
    operating in the spring of 2000 survived to July
    2002, and less than 200 remained by mid-2003.
  • Heavy outlays for web site maintenance, supply
    chain management, customer service call centers,
    and customer acquisition.
  • Large payroll expense for skilled technical staff
    and additional shipping expense to ensure on-time
    delivery.

46
Management Challenges and Opportunities
Management Challenges and Opportunities
  • Business process change requirements
  • Fail, if badly managed or poorly executed.
  • Channel conflicts
  • Competition between distributors to sell the same
    products or services.
  • Current solutions to offer only partial products
    on web or pay full commission to online sales
    rep.

47
Management Challenges and Opportunities
Management Challenges and Opportunities
  • Legal issues
  • Which law to apply, if company is in Thailand,
    server in Singapore, and buyer in Hungary.
  • Trust, security, and privacy
  • Hesitate to buy from unfamiliar vendors.
  • Security and confidentiality of personal date
    through subscription and credit card transactions.
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