4.1 © 2006 by Prentice Hall

The Digital Firm: The Digital Firm:

Electronic Business and Electronic Business and Electronic CommerceElectronic Commerce

The Digital Firm: The Digital Firm:

Electronic Business and Electronic Business and Electronic CommerceElectronic Commerce

4.2 © 2006 by Prentice Hall

OBJECTIVES

• Analyze how Internet technology has changed value propositions and business models

• Define electronic commerce and describe how it has changed consumer retailing and business-to-business transactions

The Digital Firm: Electronic Business and The Digital Firm: Electronic Business and Electronic CommerceElectronic Commerce

4.3 © 2006 by Prentice Hall

• Compare the principal payment systems for electronic commerce

• Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes

• Assess the challenges posed by electronic business and electronic commerce and management solutions

OBJECTIVES (Continued)

The Digital Firm: Electronic Business and The Digital Firm: Electronic Business and Electronic CommerceElectronic Commerce

4.4 © 2006 by Prentice Hall

What is E-Commerce ?

E-commerce (electronic commerce or EC) is the buying

and selling of goods and services on the Internet

The Digital Firm: Electronic Business and The Digital Firm: Electronic Business and Electronic CommerceElectronic Commerce

4.5 © 2006 by Prentice Hall

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

Features of E-Commerce

• Information technology infrastructure: The Internet provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations.

• Direct communication between trading partners: Disintermediation removes intermediate layers and streamlines processes.

4.6 © 2006 by Prentice Hall

• Round the clock service: Web sites available to consumers 24 hours

• Extended distribution channels: Outlets created for attracting customers who otherwise would not patronize a firm

• Reduced transaction costs: Costs of searching for buyers declines

Features of E-Commerce

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

4.7 © 2006 by Prentice Hall

• 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)

Internet Business Models

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

4.8 © 2006 by Prentice Hall

• 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)

Internet Business Models (Continued)

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

4.9 © 2006 by Prentice Hall

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 )

4.10 © 2006 by Prentice Hall

Review of E-Commerce

• E-Commerce Concepts• Features of E-Commerce• Internet Business Model• Categories of E-Commerce

4.11 © 2006 by Prentice Hall

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

Features of E-Commerce

• Information technology infrastructure• Direct communication between trading partners• Round the clock service• Extended distribution channels• Reduced transaction costs

4.12 © 2006 by Prentice Hall

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

Internet Business Models

• Virtual storefront• Information broker• Transaction broker• Online marketplace• Content provider• Online service provider• Virtual community• Portal

4.13 © 2006 by Prentice Hall

ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM

Categories of E-Commerce

• Business-to-customer (B2C)

• Business-to-business (B2B)

• Consumer-to-consumer (C2C)

4.14 © 2006 by Prentice Hall

Topic Outline:

• Advantages of E-Commerce• E-Commerce Interactive Marketing• Net Marketplace• EDI• Extranets

ELECTRONIC COMMERCE

4.15 © 2006 by Prentice Hall

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

ELECTRONIC COMMERCE

4.16 © 2006 by Prentice Hall

• 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

Advantages of E-Commerce:

ELECTRONIC COMMERCE

4.17 © 2006 by Prentice Hall

The Benefits of Disintermediation to the Consumer

Figure 4-2

ELECTRONIC COMMERCE

4.18 © 2006 by Prentice Hall

• Web Site Visitor Tracking• Web Personalization• Collaborative Filtering• Customer Self Service

E-Commerce Interactive Marketing

ELECTRONIC COMMERCE

4.19 © 2006 by Prentice Hall

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

What is Web Site Visitor Tracking?

ELECTRONIC COMMERCE

4.20 © 2006 by Prentice Hall

Web Site Visitor Tracking

Figure 4-3

ELECTRONIC COMMERCE

4.21 © 2006 by Prentice Hall

• 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

Web Personalization

ELECTRONIC COMMERCE

4.22 © 2006 by Prentice Hall

Web Site Personalization

Figure 4-4

ELECTRONIC COMMERCE

4.23 © 2006 by Prentice Hall

• Compares information gathered about a specific

user’s 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.

Collaborative filtering:

ELECTRONIC COMMERCE

4.24 © 2006 by Prentice Hall

• The use of Web sites to provide customers with access to information and answers to questions

• Replacing human call center operators and clerks

• UPS.com: Customer tracking of packages

• Orbitz.com: Customer self-help for organizing and managing a trip

• Dell.com: “My Order Status” facility

Customer self-service:

ELECTRONIC COMMERCE

4.25 © 2006 by Prentice Hall

A Net Marketplace

Figure 4-7

NET MARKETPLACE

4.26 © 2006 by Prentice Hall

• 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)

Four different types of Net Marketplaces:

NET MARKETPLACE

4.27 © 2006 by Prentice Hall

• Independent exchanges: Third-party Net marketplace

that is primarily transaction-oriented and that connects

many buyers and suppliers for spot purchasing

(Freemarkets.com, GEPolymerland.com)

• Industry consortia: Industry-owned Net marketplaces

used primarily for long-term sourcing of direct inputs

to production (ChemConnect.com)

Four different types of Net Marketplaces: (Continued)

NET MARKETPLACE

4.28 © 2006 by Prentice Hall

• 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.

What is EDI?

E-COMMERCE

4.29 © 2006 by Prentice Hall

Electronic Data Interchange (EDI)

Figure 4-5

E-COMMERCE

4.30 © 2006 by Prentice Hall

A Private Industrial Network

Figure 4-6

E-COMMERCE

4.31 © 2006 by Prentice Hall

What is a 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.

E-COMMERCE

4.32 © 2006 by Prentice Hall

Electronic Commerce Payment Systems

Digital wallets Electronic storage of I.D. and digital cash. Not widely used.

Accumulated balance Used for micro payments. Similar to monthly telephone bills.

Stored value Used for micro payments. Pre-payment of funds, debited on use.

Smart Cards I.D. and credit information stored on a chip attached to a card. Used in Europe.

Digital cash Electronic currency that can be transferred over the Web.

Peer-to-Peer payment Interpersonal transfer of funds such as PayPal.

Digital checking Electronic checks with digital signatures, used most often in B2B commerce.

Electronic billing presentmentand payment

Used by consumers to pay bills online, provided by many banks.

Credit cards The most common form of payment. $50 Limited customer liability.

E-COMMERCE

4.33 © 2006 by Prentice Hall

What is INTRANET?

INTRANET

4.34 © 2006 by Prentice Hall

• Benefits

• Functional applications

• Good examples: CARE and Mitre Corporation

How Intranets Support Electronic Business

INTRANET

4.35 © 2006 by Prentice Hall

• Connectivity: Accessible from most computing platforms

• Can be tied to internal corporate systems and core transaction databases

• Platforms for interactive applications

• Scalable to larger or smaller computing platforms

Benefits of Intranets

INTRANET

4.36 © 2006 by Prentice Hall

• Easy to use, universal standard Web interface

• Low start-up costs

• Richer, more responsive information environment than corporate manuals

• Reduced information distribution costs

Benefits of Intranets (Continued)

INTRANET

4.37 © 2006 by Prentice Hall

• Finance and accounting

• Human resources

• Sales and marketing

• Manufacturing and production

Functional Applications of Intranets

INTRANET

4.38 © 2006 by Prentice Hall

Functional Applications of Intranets

Figure 4-8

INTRANET

4.39 © 2006 by Prentice Hall

• General ledger reporting

• Project costing

• Annual reports

• Budgeting

Finance & Accounting

INTRANET

4.40 © 2006 by Prentice Hall

Company:

• Online publishing of corporate policy

• Job postings and internal job transfers

• Company telephone directories, training

Human Resources

INTRANET

4.41 © 2006 by Prentice Hall

• Healthcare

• Employee savings

• Competency tests

Employees:

Human Resources (Continued)

INTRANET

4.42 © 2006 by Prentice Hall

• Competitor analysis

• Price updates

• Promotional campaigns

• Sales presentations

• Sales contracts

Sales and Marketing

INTRANET

4.43 © 2006 by Prentice Hall

• Quality measurements

• Maintenance schedules

• Design specifications

• Machine outputs

• Order tracking

Manufacturing and Production

INTRANET

4.44 © 2006 by Prentice Hall

THE END