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For use with Strategic Electronic Marketing: Managing E-Business, 2e

Copyright 2003 South-Western College Publishing

Chapter 1 Slide: 1

Chapter 1: Introduction To E-business



Chapter 1 Slide: 2

Learning Objectives (1)

• Explain what a business model is and how it is used.

• List the technologies that are being used to foster e-business.

• Recommend how a business can use e-business techniques to develop long term marketing relationships.

• Identify the components of a marketing system.



Chapter 1 Slide: 3

Learning Objectives (2)

• List the components of an e-business based marketing system.

• List the components of an e-business value chain.• Explain how and why businesses need to evolve

and change to maintain competitiveness.• Explain the importance of evaluating the ethical

practices of a business and outline an ethical framework for e-business.



Chapter 1 Slide: 4

Vignette: General Electric (1)

www.GE.com Suppliers linked through Extranet

deliver just-in-time. Supplies bid online.

Suppliers linked through Extranet

deliver just-in-time. Supplies bid online.

Web page provides

information and ordering.

Web page provides

information and ordering.

Consumer product delivered through

distributors or shippers.

Consumer product delivered through

distributors or shippers.

Product shipped from inventory or order is routed to

factory.

Product shipped from inventory or order is routed to

factory.

Database monitors equipmentDatabase monitors equipment

Payments are made by online through Web page.

Payments are made by online through Web page.

Customer gathers information and

purchases through Web page.

Customer gathers information and

purchases through Web page.

http://www.ge.com/



Chapter 1 Slide: 5

Vignette: GE (2)

• Thinking Strategically – Explain why Jack Welch would see e-business as

important for GE. – Consider where e-business could have a bigger impact

for GE, in the business-to-business arena or the business-to-consumer arena.

– List reasons why GE has been able to implement a new e-business model so quickly.

– Visit the GE website (www.ge.com). Speculate on the advantages of using a Website to develop and maintain customer relationships.

http://www.ge.com/



Chapter 1 Slide: 6

Changing Nature of Marketing• Capture data electronically at the point of sale and route

that information from the retailer to the supplier and/or the manufacturer.

• Electronically linked distribution systems are speeding products through the channel of distribution and helping to forge strong relationships between firms.

• The World Wide Web is allowing businesses to reach customers around the world rather than just local markets.

• Information on the customer’s shopping behavior is being stored in databases to profile individuals for targeted promotions and customized products.



Chapter 1 Slide: 7

Business Models• New information technologies are allowing

businesses to redesign business models and change business practice– A business model, or commerce model, is the basic

process flow indicating how a business operates. It indicates how business functions are linked together.

• Internet based business models requires fewer hard assets (bricks and mortar assets)– Brick and mortar businesses have tangible physical

assets such a factory, office building, warehouses, etc.



Chapter 1 Slide: 8

What is E-Business

E-business, or electronic business, systems use a number of information technology-based business practices to enhance relationships between the business and the customer. E-business includes changes in marketing communication, distribution systems, and business models.

www.ibm.com/e-business/

http://www.ibm.com/e-business

http://www.ibm.com/e-business



Chapter 1 Slide: 9

What is E-Commerce

• E-Commerce: consists of using electronic information based systems to engage in transactions or commerce online. This includes automating purchasing through Web sites.



Chapter 1 Slide: 10

Table 1.1: E-Business Industry Terms (1)

• Internet: A global network of computer networks that use a common interface for communication.

• World Wide Web: A graphically based Internet standard that allows easy access to information from around the world.

• E-Business: This is the process of using information technology (IT) to support a fuller operation of a business.



Chapter 1 Slide: 11

Table 1.1: E-Business Industry Terms (2)

• E-Commerce: Uses electronic information based systems to engage in transactions or commerce online.

• Extranet: An Internet based connection between a business and its suppliers, distributors, and partners. This is not open to the general public.

• Intranets: Internal private network that use the same types of hardware, software, and connections as the Internet.



Chapter 1 Slide: 12

Four Layers Of The Internet Economy

• Layer one: Internet Infrastructure Layer – Includes companies with products and services that help create an

IP based network infrastructure. • Layer two: Internet Applications Layer

– Builds off of layer one and includes the products and services that make it technologically feasible to perform business activities online.

• Layer three: Internet Intermediary Layer– Allows the investments in infrastructure to turn into business

transactions by facilitating the meeting of buyers and sellers over the Internet.

• Layer four: Internet Commerce Layer – Includes the sales of products and services to consumers or

businesses over the Internet.



Chapter 1 Slide: 13

• How big is the Internet: 500 million users worldwide - 2005 expected 1 billion.

• How much will consumers spend online: 1.8 billion - 2005: 16 billion.

• How much will businesses spent online: 1.3 trillion - 2005: 4.3-8 trillion.

Table 1.2: E-Business Growth and Projections



Chapter 1 Slide: 14

Marketing• Marketing is the process of planning and

executing the conception, pricing, promotion, and distribution of ideas, goods, and services that create exchanges that satisfy individual and organizational needs.

• Relationship marketing implies that business undertake strategies that will hold desirable customers over a long time period.



Chapter 1 Slide: 15

A Systems Approach (1)

• Helps decision-makers look at how all aspects of a strategic business unit (SBU) interact with each other.

• Systems are seen as being organic in that they must change in response to their environment or face the possibility of becoming extinct.



Chapter 1 Slide: 16

A Systems Approach (2)

• All of the components of a business must work in unison to allow the marketing system to operate in its environment.

• This system must organize itself and find an advantage over its competitors to ensure long-term sustainability.



Chapter 1 Slide: 17

The Traditional Business System

Target Customers

Target Customers

CommunicationCommunication

Information FlowInformation Flow

Payment FlowPayment Flow

ProductProduct

PricePrice

Distribution Flow

Distribution Flow



Chapter 1 Slide: 18

Figure 1.2:The Traditional Marketing System

Environment:TechnologicalCompetitivePolitical and LegalSocial

Strategic Plan

Strategic Plan

Strategic Goal

Strategic Goal

Supply Chain

Supply Chain

TargetCustomers

TargetCustomers

CommunicationCommunication

Information FlowInformation Flow

Payment FlowPayment Flow

ProductProduct

PricePrice

DistributionFlow

DistributionFlow



Chapter 1 Slide: 19

What Are The Business’ Goals?

• Pure Play Internet?– Communicate or Sell?

• Multi-Channel Sales Approach?

• Support Brick and Mortar?– Hold Current Customers?

• Enhance Relationship Development?



Chapter 1 Slide: 20

E-Business SystemsE-Business Systems are fostering a number

of changes to the marketing system:– Customized production. – Increasing price pressure resulting in lowering prices. – Shorter channels of distribution dominated by

facilitators. – Extranet-enhanced supply chain management.– Non-linear promotions.– Electronic transfer of funds.

– Database information management systems.



Chapter 1 Slide: 21

E-Business Systems

Market-of-One Customer

Market-of-One Customer

Customized Non-Linear Promotion

Customized Non-Linear Promotion

Customized Production

Customized Production

Dynamic Pricing

Dynamic Pricing

Shorter Channels Dominated by

Facilitators

Shorter Channels Dominated by

Facilitators

Knowledge Management& Data Warehousing


Electronic PaymentsElectronic Payments



Chapter 1 Slide: 22

The E-Business System

Environment: Constant Technological Change Increased Competitive Pressure Weakened Political and Legal Influence

Greater Social Acceptance of Change

Strategic Plan

Strategic Plan

Strategic Goal

Strategic Goal

Supply Chain

Supply Chain

Market-of-OneCustomer

Market-of-OneCustomer

CustomizedNon-LinearPromotion

CustomizedNon-LinearPromotion

CustomizedProduction

CustomizedProduction

DynamicPricing

DynamicPricing

Shorter ChannelsDominated by

Facilitators

Shorter ChannelsDominated by

Facilitators



Electronic PaymentsElectronic Payments

Extranet



Chapter 1 Slide: 23

E-Business Value Chain (1)

E-business value chains view information technology as part of a business’ overall value chain adding to the competitive advantages of a business

Competitive Advantage Through Stronger Customer

Relationships(Ch 11

Strategy and Business Models)

Marketing/Sales

E-commerce: Lower costs, new market entry.(Ch 6)E-business Promotion(Ch 7)

Management (Ch 10)

Leadership: ManagementIntranets: Lower costs, better communication.Innovativeness: Speed, flexibility, new product ideas

Value Production

Differential Advantages CustomizationDynamic Pricing (Ch 5)

Customer (Ch 8)

Targeting & Support

Databases andCRM(Ch 9)

DistributionInbound Logistics

Extranets: Lowers costs increase speed(Ch 4)

E-Business Communication Platforms (Ch 3)E-Business Technological Infrastructure (Ch 2)



Chapter 1 Slide: 24

International E-business• The United States is expected to account for only

half of the expected global $7 trillion in e-business-facilitated transactions.

• Markets outside of the United States are expected to grow the fastest in areas such as wireless and HDTV delivery of Internet content.

• Cultural barriers to seamless global e-business:– Language differences, currency conversions, shipping

problems, a lack of global brand recognition, differing legal and ethical standards, and a lack of trust in foreign markets.



Chapter 1 Slide: 25

Levels of E-Commitment• Brochure Sites

– Sets up a Web page to promote a business. This can also allow contacts through email and simple product ordering.

• E-Commerce– Allows for purchasing online with automated credit

card clearance and links to inventory through databases.

• E-Business– Refocuses business practice to take advantage of new

technologies to lower costs, improve value, and respond quickly to environmental change.

Costs

Costs

Costs ??



Chapter 1 Slide: 26

Table 1.3: Components of an E-Business System (1)

• Chapter 2: Technological Environment– Primer on the technology behind the Internet and the World Wide Web.

• Chapter 2 Appendix: High Technology– A more in-depth primer on technology.

• Chapter 3: Communication– How communication is changing over the Internet.

• Chapter 3 Appendix: Hypermedia design– A guide to tools, techniques, and theory related to designing for

hypermedia.• Chapter 4: Distribution

– Looks at the dynamics of change in distribution systems. • Chapter 5: Value Creation

– Explores the current business models that are being used on the Internet.



Chapter 1 Slide: 27

• Chapter 6: E-Commerce– Explores the current business models that are being used on the Internet.

• Chapter 7: Internet Advertising and Promotion– This chapter illustrates how hypermedia are being used strategically for

advertising and promotion. • Chapter 8: The Customer

– Diffusion of innovations, online consumer behavior, and online communities.• Chapter 9: Data Collection and Use

– The collection and use of information to gain competitive advantages.• Chapter 10: Management

– This chapter explores the change in management that is required to operate in a dynamic and technical environment.

• Chapter 11: Strategy and Business Models– Innovative approaches to strategy through e-business value chains.

Table 1.3: Components of an E-Business System (2)



Chapter 1 Slide: 28

Case 1.1: eBay (1)

• Thinking Strategically – Consider if society is better off because of the

introduction of eBay. – Discuss both sides of this economic welfare

question. – Consider why a government would be interested

in fostering the growth of a business like eBay. – Decide what type of government action would

benefit e-businesses like eBay and what government actions would limit e-businesses.



Chapter 1 Slide: 29

Case 1.1: eBay (2)

• Thinking Strategically – Discuss if it is proper for e-businesses to

capture data on their customer’s shopping behavior and personal profiles.

– Determine how a customer could benefit from an e-businesses use of this data and how a customer could be damaged.



Chapter 1 Slide: 30

Political, Legal, and Ethical Environments

• The political and legal environment:– Represents the rules by which businesses and

society operates. – Social goal is to increase the overall economic

welfare or the net benefits an economic system provides to a society.

• Ethics – The study of how individuals or businesses make

decisions given the consequences of those decisions



Chapter 1 Slide: 31

Exercise 1.1 Imagining the Future

• Imagine if the telephone and television were invented within the last ten years.

• Decide how companies would need to change to use these new tools.

• Determine if they would be able to use the same techniques to promote and sell their products.

• Decide if they would use the same outlets to distribute goods and services.

• Speculate on whether the relationships between suppliers and producers would be handled in the same way.

• Decide if companies could be managed in the same manner.



Chapter 1 Slide: 32

Exercise 1.2 Checking Buyer Behavior (1)

Shopping Activity(Examples)

1: Like the most5: Like the least

# of localoutlets

Shopping for specialtyclothing.Shopping for groceries.Shopping for specialty itemsand gifts.Shopping for computers andsoftware.Shopping for cars.



Chapter 1 Slide: 33

Exercise 1.2 Checking Buyer Behavior (2)

• Explain how the e-business techniques outlined in this chapter would effect the shopping activities outlined above.

• Indicate how this would effect the way you would make your purchases.

• Determine if a smaller number of local outlets make it more likely that you would shop online.

• Decide which of these businesses are likely to have links to their suppliers.

• Explain which of these industries will face the greatest amount of change.



Chapter 1 Slide: 34

Exercise 1.3 Ethical Analysis• Use the following table to evaluate the ethical implications

of e-business practices. List both advantages and disadvantages in each cell. Identify the ethical dilemmas that can be found when the advantages in some cells conflict with the disadvantages in others.

Ethical AnalysisConstituencies

(Who Is Impacted)Privacy Equity &

AccessSocial

WelfareCustomersEmployeesStakeholdersownersCommunity



Chapter 1 Slide: 35

Competitive Exercise 1.4Business Model

• Assume you are going to present a business proposal to a venture capitalist. Your team should outline a system for an existing business.

• Indicate how it currently meets the needs of its customers through its product development, promotion, distribution system, and so forth.

• Draw a plan of how you think this business model should operate using the e-business techniques outlined in this chapter.

• Explain how you think the business could make the transition from the old business model to the new one.

• Determine if there are any environmental drivers leading this business model to change.

• Decide what could hinder the move to e-business.• Outline any ethical concerns that could be raised by this e-business

system.

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