SESSION 4SESSION 4

THE DIGITAL FIRM: THE DIGITAL FIRM: ELECTRONIC COMMERCE ELECTRONIC COMMERCE

AND ELECTRONIC AND ELECTRONIC BUSINESSBUSINESS

Internet Technology and The Digital Firm

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, streamlines process

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Round-the-clock service: Web sites available to consumers 24 hours a day

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

Reduced transaction costs: Costs of searching for buyers, sellers, etc. reduced

Internet Technology and the Digital Firm

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Business Model: Defines an enterprise

Describes how the enterprise delivers a product or service

Shows how the enterprise creates wealth

New Business Models and Value Propositions

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Information asymmetry: One party in a transaction has more information than the other

Increases richness: Depth and detail of information

Increases reach: Number of people contacted

The Changing Economies of Information

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Ric

hn

es

sR

ich

ne

ss New levels of richness and reach attainable

Reach

ENABLERS

Explosion of connectivity

Dissemination of

standards

Figure 4-1

The Changing Economics of Information

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Internet Business Models

• Virtual storefront:Virtual storefront: Sells goods, services Sells goods, services on-lineon-line

• Information broker:Information broker: Provide info on Provide info on products, pricing, etc.products, pricing, etc.

• Transaction broker:Transaction broker: Buyers view rates, Buyers view rates, terms from various sourcesterms from various sources

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

• OnlineOnline Marketplace:Marketplace: Concentrates Concentrates information from several providersinformation from several providers

• Content provider:Content provider: Creates revenue Creates revenue through providing digital contentthrough providing digital content

• On-line service provider:On-line service provider: Provides Provides service, support for hardware, software service, support for hardware, software productsproducts

Internet Business Models

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

• Virtual community:Virtual community: Chat room, on-line Chat room, on-line meeting placemeeting place

• Portal:Portal: Initial point of entry to Web, Initial point of entry to Web, specialized content, servicesspecialized content, services

• Syndicator:Syndicator: Aggregate information from Aggregate information from several sources sold to other companiesseveral sources sold to other companies

Internet Business Models

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

• Dynamic pricing: Dynamic pricing: real-time interactions real-time interactions

betweenbetween buyers and sellersbuyers and sellers determine determine worth of itemsworth of items

• Banner ad:Banner ad: Graphic display used for Graphic display used for advertising, linked to the advertiser’s Web advertising, linked to the advertiser’s Web sitesite

Internet Business Models

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Categories of Electronic Commerce

• Business-to-customer (B2C):Business-to-customer (B2C): Retailing Retailing of products and services directly to of products and services directly to individual customersindividual customers

• Business-to-business (B2B): Business-to-business (B2B): Sales of Sales of goods and services among businessesgoods and services among businesses

• Consumer-to-consumer (C2C):Consumer-to-consumer (C2C): Individuals use Web for private sales or Individuals use Web for private sales or exchangeexchange

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Business-To-Consumer Electronic Commerce

• Customer-centered retailing:Customer-centered retailing: Closer, Closer, yet more cost-effective relationship with yet more cost-effective relationship with customerscustomers

• Disintermediation:Disintermediation: The removal of The removal of organizations or business process layers organizations or business process layers responsible for certain intermediary steps responsible for certain intermediary steps in a value chainin a value chain

• Reintermediation:Reintermediation: The shifting of the The shifting of the intermediary role in a value chain to a new intermediary role in a value chain to a new sourcesource

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Benefits of Disintermediation to the Consumer

Figure 4-2

Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/

Sweater

$48.50

$40.34

$20.45

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Interactive Marketing and Personalization

Web personalization:Web personalization:

• The tailoring of web content directly to a The tailoring of web content directly to a specific userspecific user

• Benefits of using individual sales peopleBenefits of using individual sales peopleat dramatically lower costsat dramatically lower costs

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Web Site Personalization

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

M-Commerce and Next Generation Marketing

Mobile commerce (m-commerce):Mobile commerce (m-commerce):• Wireless devices used to conduct both Wireless devices used to conduct both

business-to-consumer and business-to-business-to-consumer and business-to-business e-commerce transactions over business e-commerce transactions over the Internetthe Internet

• Extend personalization by delivering new Extend personalization by delivering new value-added services directly to value-added services directly to customers at any time and placecustomers at any time and place

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Customer Personalization

Figure 4-4

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Automation of purchase, sale transactions Automation of purchase, sale transactions

from business to business from business to business

• Private industrial networks:Private industrial networks: focus on focus on coordination between companies for efficient coordination between companies for efficient supply chain management and collaborative supply chain management and collaborative activitiesactivities

• Electronic hubs:Electronic hubs: On-line marketplaces, On-line marketplaces, point-to-point connections, integrated point-to-point connections, integrated informationinformation

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

A Private Industrial Network

Figure 4-5

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

A Net Marketplace

Figure 4-6

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Electronic Commerce Payment Systems

SYSTEM DESCRIPTION

CREDIT CARDS SECURE SITE PRESERVES INFORMATION

ELECTRONIC CASH DIGITAL CURRENCY USED FOR MICROPAYMENTS

PERSON-TO-PERSON SEND MONEY TO SITES UNABLE TO USE CREDIT CARDS

DIGITAL WALLET SOFTWARE STORES CREDIT CARD INFORMATION

ELECTRONIC CHECK CHECK WITH ENCRIPTED DIGITAL SIGNATURE

SMART CARD MICROCHIP STORES ELECTRONIC CASH

ELECTRONIC BILL PAYMENT ELECTRONIC FUNDS TRANSFER

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Factors that make a retail web site success

Performance and service

Personalization

Socialization

Look and feel

Incentives

Security and reliability

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM

Unproven business models

Business process change requirements

Channel conflicts

Legal issues

Security and privacy

MANGEMENT CHALLENGES & OPPORTUNITIES

ELECTRONIC COMMERCE, ELECTRONIC BUSINESS, AND THE EMERGING DIGITAL FIRM