Summer-DISC 6341© Andrew Schwarz, 2002Slide 1 Lecture 1/Session 2 e-commerce, e-business,...

Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 1

Lecture 1/Session 2Lecture 1/Session 2

e-commerce, e-business, e-commerce, e-business, e-marketplace…enough?e-marketplace…enough?


Introductory Thoughts

Everywhere we turn, it seems like there is a new .com

We are inundated with new terms:– E-business

– E-commerce

– E-marketplace

– And so on…

But, we have also had our portfolio’s hurt when the “dot com bubble” burst…what is going on?


Profile of Domain Names on Internet

.edu0.02%

.net11.73%

.org7.61%

.co.uk11.33%

.com69.31%

Source: domainstats.com


Internet Bankruptcies or Shutdowns by MonthJanuary 2000 to March 2002

1 2 2 1

1317

20

10

22

36

50 49

5659

49

5664 61

4046

3336

21 2319 18 17

Jan-

00

Mar

-00

May

-00

Jul-

00

Sep-

00

Nov

-00

Jan-

01

Mar

-01

May

-01

Jul-

01

Sep-

01

Nov

-01

Jan-

02

Mar

-02

Source: webmergers.com


Unanswered Questions

1. What is e-business, e-market, and e-commerce?

2. Why did everyone think e-markets were so revolutionary?

3. What are some models of e-commerce?

4. What are the benefits of e-business?

5. What is the application of this lecture for you, as a manager, in the digital age?


Question #1Question #1::What is e-business?What is e-business?


What is an e-market?

E-market: A marketplace that is created by computer and communication technologies that link many buyers and sellers

Two types of e-markets– E-commerce: The process of buying and selling goods

and services electronically, involving transactions using the Internet, networks, and other digital technologies

– E-business: The use of Internet and other digital technology for organizational communication and coordination and the management of the firm


Question #2Question #2::Why did everyone thinkWhy did everyone think

e-markets were so e-markets were so revolutionary?revolutionary?


Projected e-market Benefits

1. Shrinkage of information asymmetry

2. Changing relationships

3. Business conducted 24/7

4. Extended global reach of corporation

5. Can reduce transaction costs


Benefit #1:Shrinks Information Asymmetry

Information asymmetry: situation in which the relative bargaining power of two parties in a transaction is determined by one party possessing more information essential to the transaction than the other party– Before the Internet, not easy to shop around– Now, the consumer has a lot of power

The result: disintermediation—no more intermediaries


Benefit #1:Shrinks Information Asymmetry

Disintermediation: the elimination of organization or business process layers responsible for certain intermediary steps in a value chain

Layers of disintermediationManufacturer Distributor Retailer Consumer

Manufacturer Retailer Consumer

Manufacturer Consumer


Benefit #2: Changing Relationships

Reach:How many people a business

an connect with and how many products it can offer those

people

Richness:The depth and

detail of information that

a business can supply to (or can

collect from) a customer

Pre-Internet, firms had to

trade off between

richness and reach

Now, no need to trade off


Benefit #2: Changing Relationships

The web allows firms to create rich relationships with a lot of reach that are uniquely personal to each individual

Personalization is the future of the web– Amazon book recommendations– MyYahoo! Page– Launch!


Other Benefits

3. Business conducted 24/7 Not limited by store hours

4. Extended global reach of corporations But also added complexity

5. Reduced transaction costs Per customer transaction costs significantly

lower


Question #3Question #3::What are some models ofWhat are some models of

e-commerce?e-commerce?


Defining a Business Model

Book definition: An abstraction of what and how the enterprise delivers a product or service, showing how the enterprise creates wealth

But..what are the elements of a business model?


Elements of a Business Model

An abstraction of…

what and how the enterprise delivers a product or service,

showing how the enterprise creates wealth

• Mission• Structure• Processes

Revenue generation mechanism

Source: Schwarz and Jayatilaka, 2002


Elements of a Business Model

ElementElement DefinitionDefinition

Mission High-level understanding of the overall vision, strategic goals, and the value proposition, including the basic product or service features

Processes Show the elements and the structure of the business model, including the elements of the value creation process and which requirements they address in the customer process

Structure Determines which roles and agents constitute and comprise a specific Business Community, as well as the focus on industry, customers, and products

Revenue The “bottom line” of the business model

Source: Alt and Zimmerman, 2001


Internet Approaches to Business Models

Virtual Storefront: Sells goods, services on-line (e.g. Amazon.com, wine.com)

Marketplace Concentrator: Concentrates information from several providers (e.g. Shopnow.com)

On-line Exchange: Bid-ask system, multiple buyers, sellers (e.g. E-steel)

Information Broker: Provide info on products and pricing (e.g. Partnet)

Transaction Broker: Buyers view rates, terms from various sources (e.g. E*Trade)



Auction: Electronic clearinghouse products, prices, change in response to demand (e.g. eBay)

Reverse Auction: Buyer sets price, submits to multiple sellers (e.g. priceline)

Aggregator: Group pools orders for volume discount (e.g. mobshop.com)

Digital Product Delivery: Sell, download software, other digital products (e.g. buy.com)

Content Provider: Creates revenue through providing client for a fee, and advertising (e.g. Salon.com)



On-line Service Provider: Provides service, support for hardware, software products (e.g. xdrive.com)

Virtual Community: Chat room, online meeting place (e.g. geocities)

Portal: Initial point of entry to Web, specialized content, services (e.g. Yahoo!)

Syndicator: Aggregate information from several sources sold to other companies (e.g. Screaming Media)


Types of Businesses on the Internet

Pure-play: businesses that exist solely on the Internet

Clicks-and-mortar: businesses that have off and online presences– Also known as clicks-and-bricks

During the early days of e-commerce, predominated by pure-play; now shifting toward clicks-and-mortar or pure-play aligning with clicks-and-bricks


E-Commerce Types

TypeType Selling PartySelling Party Buying PartyBuying Party ExampleExample

B2C Business Consumer B&N

B2B Business Business dgMarket

C2C Consumer Consumer Napster


Question #4Question #4::What are the benefits of e-What are the benefits of e-

business?business?


Benefits of e-business

Beyond previously described benefits of e-markets, e-business (electronically connecting businesses) allow extra benefits to organizations:

1. Creation of intra and extranets

2. Coordination of the supply chain


Benefit #1:Creation of intra and extranets

Intranet: An internal network based on Internet and WWW technology and standards

Contains applications that have documentation pertinent to internal employees within the firm

Typical functional departments– HR

– Finance/Accounting

– Manufacturing/Production

– Sales/Marketing

An Example of An Intranet Systems

ShippingShipping InventoryInventory

Planning & Planning & ForecastingForecasting

Order Order ProcessingProcessing

ProductionProduction

ProcurementProcurementHR PoliciesHR Policies

IntranetIntranet

BenefitsBenefits



Organizational benefits– Connectivity; accessible from most computing

platforms– Can be tied to other systems– Can create interactive applications with text, audio, and

video– Scalable– Easy to use Web interface– Low start up costs– Rich information environment– Reduced info distribution costs



Extranet: Private intranet that is accessible to authorized outsiders

Objective: take certain elements of intranet and open it up to external parties– Customers– Suppliers– Distributors– Logistics services

An Example of An e-business Systems(Combining intra and extranet)

ShippingShipping InventoryInventory

Planning & Planning & ForecastingForecasting

Order Order ProcessingProcessing

ProductionProduction

ProcurementProcurementHR PoliciesHR Policies

E-businessE-business

BenefitsBenefits

CustomersCustomers

SuppliersSuppliers

Logistics Logistics ServicesServices

SuppliersSuppliers


Benefit #2:Coordination of the Supply

Chain With everyone linked electronically, the entire supply chain can be coordinated

Results– Reduction in costs– More responsive customer service– Customer driven production– Global coordination of firm


Question #5Question #5::What is the application of this What is the application of this

lecture for you, as a manager, in lecture for you, as a manager, in the digital age?the digital age?


Top 4 Applications From This Lecture

1. IT can enable new business opportunities Demonstrates ability of IT to create competitive

advantage

2. Technology firms must have a proven business model

3. To change a business process, need to understand corresponding technology processes and vice-versa

4. Extranets place importance upon understanding security, privacy, and legal issues

Summer-DISC 6341© Andrew Schwarz, 2002Slide 1 Lecture 1/Session 2 e-commerce, e-business,...

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