Lecture Six Internet and E-commerce
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Transcript of Lecture Six Internet and E-commerce
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INTERNET AND
E-COMMERCE
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The Internet
The Internet is a worldwide network ofcomputer links linking hundreds of thousandsof individual networks all over the world.
The Internet has a range of capabilities thatorganizations are using to exchangeinformation internally or to communicateexternally with other organizations.
This giant network of networks has becomethe primary infrastructure for both electroniccommerce and electronic business.
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The Internet
The Internet evolved from ARPA!T" whichwas developed in #$%$ by the AdvancedResearch Pro&ect Agency 'ARPA( of the )*+epartment of +efense.
The Internet 'Internet Protocol , IP( addressesare used to identify the systems containing
the information needed.
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The World Wide Web-orld -ide -eb '---( is a system of
universally accepted standards for storing"retrieving" formatting" and displayinginformation using clientserver architecture.
It was developed to allow collaborators inremote sites share their ideas on all aspects of
a common pro&ect.--- is the multimedia part of the Internet.
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The World Wide Web The -eb is a system consisting of an
international distributed collection ofmultimedia /les supported by clients 'users(and servers 'information providers(.
!ach /le is addressed in a consistent mannerusing its )niform Resource 0ocator ')R0(.
The -eb enables you to point and click yourway to thousands of hyper linked web sitesand resources of multimedia information"entertainment" or electronic commerce.
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at t e nternet a esPossible
Electronic Mail (E-Mail) senet Ne!s"ro#$s (%or#&s)'
Chattin"
TelnetE- co&&erce
Teleconerencin" Data conerencin" and*ideoconerencin"
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E-co&&erce De+ned
!,commerce involves digitally enabled
commercial transactions between and amongorganizations and individuals
Digitally enabled transactions include alltransactions mediated by digital technology
Commercial transactions involve theexchange of value across organizational orindividual boundaries in return for products orservices
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E-co&&erce
!,commerce technology includes processes thattouch customers" suppliers" and externalpartners including sales" order taking" delivery"customer service etc.
!,commerce has challenged much traditionalbusiness thinking
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E-b#siness
!,business includes e commerce but also coversinternal processes such as production" inventorymanagement" product development" riskmanagement" etc.
It is primarily the digital enablement of transactionsand processes within a /rm" including informationsystems under the control of the /rm
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,een ni.#e %eat#res o E-co&&erceTechnolo"/ and Their ,i"ni+cance
Is ubi1uitous 'available everywhere" all the time(23ers global reach 'across culturalnational boundaries(2perates according to universal standards 'lowers
market entry for merchants and search costs forconsumers(
Provides information richness 'more powerful sellingenvironment(
Is interactive 'can simulate face,to,face experience" buton global scale(
Increases information density 'amount and 1uality of
information available to all market participants(Permits personalizationcustomization
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*even )ni1ue 4eatures of !,commerce Technology
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Types of !,commerce
Classi+ed b/ nat#re o &arket relationshi$5usiness,to,6onsumer '576(
5usiness,to,5usiness '575(
6onsumer,to,6onsumer '676(
5usiness to government
Classi+ed b/ t/$e o technolo"/ #sed
Peer,to,Peer 'P7P(8obile commerce '8,commerce(
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0#siness-to-Cons#&er (01C)
Involves online businesses attempting to reachindividual consumers
8any types of business models within this
category including online retailers" contentproviders" portals" transaction brokers" serviceproviders" market creators and communityproviders
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0#siness-to-0#siness (010)
Involves businesses focusing on selling to otherbusinesses
Two primary business models within 5759 et marketplaces 'includes e,distributors" e,
procurement companies" exchanges and industryconsortia( Private industrial networks 'includes single /rm
networks and industry,wide networks(
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Cons#&er-to-Cons#&er
Provides a way for consumers tosell to each other" with the help ofan online market maker
e5ay most well,known example
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Classi+cation b/ t/$e o technolo"/
P1P, )ses peer,to,peer technology" whichenables Internet users to share /les andcomputer resources without having to go
through a central -eb server
M- co&&erce- )se of wireless hand helddigital devices such as cell phones to enable
transactions on the -eb
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!,commerce 5usiness 8odels:
Introduction0#siness &odel ; set of planned activities
designed to result in a pro/t in a marketplace
5usiness plan ; document that describes a
/rm<s business model!,commerce business model ; aims to use and
leverage the uni1ue 1ualities of Internet and-eb
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=ey Ingredients of a 5usiness 8odel
> l P iti
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>alue Proposition
+e/nes how a company<s product or service ful/lls theneeds of customers?uestions to ask9
-hy will customers choose to do business with your/rm instead of another@
-hat will your /rm provide that others do not orcannot@
!xamples of successful value propositions include9 Personalizationcustomization
Reduction of product search costs Reduction of price discover costs 4acilitation of transactions by managing product
delivery
R 8 d l
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Revenue 8odel
+escribes how the /rm will earn revenue"generate pro/ts" and produce a superior returnon invested capital
Terms /nancial model and revenue model often
used interchangeably8a&or types9
Advertising revenue model *ubscription revenue model
Transaction fee revenue model *ales revenue model Aliate revenue model
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8odel
-eb site that o3ers content" servicesandor products also provides a forum foradvertisements and receives fees from
advertisers!xample9 Bahoo.com
8 d l
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8odel
-eb site that o3ers users content orservices charges a subscription fee foraccess to some or all of its o3erings
!xamples9 6onsumer Reports 2nline
BahooC Platinum
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Transaction 4ee Revenue 8odel
6ompany that receives a fee for enablingor executing a transaction
!xamples9
e5ay.com !,Trade.com
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*ales Revenue 8odel
6ompany derives revenue by selling goods"information" or services to customers
!xamples9 Amazon.com
005ean.com Dap.com
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Aliate Revenue 8odel
*ites that steer business to an EaliateFreceive a referral fee or percentage of therevenue from any resulting sales
!xample9 8yPoints.com
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8arket 2pportunityRefers to a company<s intended market
space and the overall potential /nancialopportunities available to the /rm in that
market space8arket space ; the area of actual orpotential commercial value in which acompany intends to operate
Realistic market opportunity is de/ned byrevenue potential in each of market nichesin which company hopes to compete
6 titi
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6ompetitive!nvironment
Refers to the other companies sellingsimilar products and operating in the samemarketspace
InGuenced by9 how many competitors are active how large their operations are what market share for each competitor is how pro/table these /rms are
how they price their products
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6ompetitive AdvantageAchieved when /rm can produce a superior
product andor bring product to market at alower price than most" or all" ofcompetitors.
4irms achieve competitive advantage whenthey are able to obtain di3erential accessto the factors of production that are deniedto competitors
Asymmetry ; when one participant in amarket has more resources than others
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8arket *trategy
A plan that details how a company intendsto enter a new market and attractcustomers
5est business concepts will fail if notproperly marketed to potential customers
2rganizational
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2rganizational+evelopment
+escribes how the company will organizethe work that needs to be accomplished
-ork is typically divided into functional
departments8ove from generalists to specialists as the
company grows
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8anagement Team*trong management team gives instant
credibility to outside investors
A strong management team may not be
able to salvage a weak business model" butshould be able to change the model andrede/ne the business as it becomesnecessary
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!,6ommerce Applications8anufacturing ; 2n line *68
8arketing ; -eb marketing" personalization"customer pro/ling
Investment and 4inance ; Increased eciency egon line stock trading
2n,0ine 5anking,
Auctions
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Adanta"es o E-Co&&erce
*horten Procurement cycles through the use of on,linecatalogues" ordering and payment
6ut costs on materials through competitive bidding
Dain access to world wide markets at a fraction of
traditional costs!nsure product" marketing information and prices are
always up to date
Allow small and medium sized businesses to compete
with large businesses over a common platform
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Adanta"es o E-Co&&erce
Increase of purchasing opportunities for the buyer as italso increases sales opportunities for the seller
Availability of the goods on 7H
!lectronic systems are easier to audit and monitor
than check systemsReduction of trac &ams and environmental pollution
Availability on global scale even in remote areas
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Disadanta"es
6an cause disintermediation which is the processof cutting out the middlemen by by,passingtraditional retail channels 'retail stores and mail,orderhouses( and selling directly to the customer
0ack of insurance available to cover losses due to
hackers destroying /les" stealing inventory" tradesecrets or in&ecting viruses into the systems
Re1uires /rms to rethink their business models andways of interacting with customers
Traditional audit trails change or disappear" makingerror correction" disaster recovery" and applicationtesting more dicult
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Disadanta"es
4ear of customers sending their credit card numbersover the internet and having on,line merchants youhave never met
6ustomers resistance to change and computerphobia
Inability to physically inspect the goods
0ack of clear legal framework
+igital divide problem
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Review ?uestionsJow can a /rm use the internet to achieve
customer intimacy@
Jow has internet technology changedbusiness models@
Jow has ecommerce changed customerretailing and business to business retailing@
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Jow can a /rm use the internet to achievecustomer intimacy@Interactive marketing
Personalization
*elf service
6lick stream trackingJow has internet technology changed
business models@Adding value to existing products and services
6reating new products and services!mergence of many business models egK
storefronts" information brokers" serviceprovidersL
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Jow has ecommerce changed customerretailing and business to business retailing@Internet creates new channels for marketing
and sales
2pportunity for customer support
!nhancing customer intimacy-eb personalization
Reduced transaction cost
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