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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 Objectives How has Internet technology changed value propositions and business models? – 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
Objectives
  • How has Internet technology changed value
    propositions and business models?
  • What is electronic commerce? How has electronic
    commerce changed consumer retailing and
    business-to-business transactions?
  • What are the principal payment systems for
    electronic commerce?

3
Objectives
  • How can Internet technology facilitate management
    and coordination of internal and
    interorganizational business processes?
  • What are the major managerial and organizational
    challenges posed by electronic business and
    electronic commerce?

4
Management Challenges
  • Digitally integrating the enterprise requires a
    complete change of mind-set.
  • Finding a successful Internet business model.

5
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

6
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

7
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Information Asymmetry
  • One party has more information essential to the
    transaction than the other party
  • The Internet shrinks information asymmetry

8
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Richness and Reach
  • Richness depth and detail of information
  • Reach how many people a business can connect
    with how many products offered those people
  • Internet allows much richer communication with
    farther reach

9
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
The changing economics of information
Figure 4-1
10
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.
  • Information broker Provides product pricing and
    availability information generates revenue from
    advertising or directing buyers to sellers.
  • Transaction Broker Processes online sales
    transactions for fee.

11
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
  • Content Provider Provides digital content, such
    as news revenue from fees or advertising sales
  • Online Service Provider Provides connectivity
    revenue from fees, advertising, or marketing
    information

12
Electronic Business, Electronic Commerce, and the
Emerging Digital Firm
New Business Models and Value Propositions
  • Internet Business Models (cont.)
  • Virtual Community Provides online meeting place
    for people of similar interests
  • Portal Provides initial point of entry to the
    Web, along with specialized content and services
  • Syndicator aggregates content or applications to
    resell as package to third-party Web sites

13
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

14
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

15
Electronic Commerce
The benefits of disintermediation to the consumer
Figure 4-2
16
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
    on Web site to individuals profile and purchase
    history
  • Web sites and marketing shorten sales cycle and
    reduce time spent in customer education

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
  • 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
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

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
Before-after diagram of changes in Lightnins
ordering process
Figure 4-4
22
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

23
Electronic Commerce
A private industrial network
Figure 4-5
24
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

25
Electronic Commerce
A Net marketplace
Figure 4-6
26
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

27
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
  • Accumulated balance digital payment systems
    Accumulates micropayment purchases as debit
    balance paid periodically on credit card or
    telephone bills

28
Electronic Commerce
Electronic Commerce Payment Systems
  • Stored value payment system Enables consumers
    to make instant payments based on value stored in
    digital account
  • Digital cash Digital currency that can be used
    for micropayments or larger purchases
  • Peer-to-Peer payment systems Enables payments to
    vendors not set up for credit-card payments

29
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

30
Electronic Commerce
Electronic commerce information flows
Figure 4-7
31
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

32
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
  • Reduced information distribution costs

33
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

34
Electronic Business and the Digital Firm
Functional applications of intranets
Figure 4-8
35
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

36
Management Challenges and Opportunities
Business Process Change Requirements
  • Unproven business models
  • Business process change requirements
  • Channel conflicts
  • Legal issues
  • Trust, security, and privacy

37
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?

38
Chapter 4 Case Study
Can the Music Industry Change Its Tune?
  • Apply the value chain and competitive forces
    models to the music recording industry.
  • What role did the Internet play in changing value
    propositions and the competitive environment? To
    what extent has it been responsible for declining
    CD sales? Explain your answer.

39
Chapter 4 Case Study
Can the Music Industry Change Its Tune?
  • Analyze the response of the music recording
    industry to these changes. What management,
    organization, and technology issues affected this
    response?
  • What is the current business strategy of the
    music industry? Do you think it is viable?
    Explain your answer.
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