1. 1.4: The Business Environment Drives EC
Characteristics in the business environment
A more turbulent environment with more business problems and opportunities
Stronger competition
Need for organisations to make decisions more frequently
A larger scope for decisions because more factors
More information and/or knowledge needed for making decisions.

2. 1.4: The Business Environment Drives EC
Business Pressures
Market (economic), societal, and technological factors have created a highly competitive business environment in which customers are becoming more powerful.
These factors can change quickly, sometimes unpredictably.
Business Critical Response Activities
EC and technology in general, provides organisations with ways to operate their businesses more efficiently by providing services and functions that in the past have been performed by employees at less than optimum efficiencies
Companies must not only take traditional actions such as lowering costs and closing unprofitable facilities, but also introduce innovative actions such as customising, creating new products, or providing superb customer service.

3. Exhibit 1.4 Major Business Pressures and the Role of EC
Categories of business pressures
market (economic)
societal
technological

5. 1.4: The Business Environment Drives EC
Organisational response strategies
Strategic systems for competitive advantage
Continuous improvement efforts
Business process restructuring (BPR)
Employee empowerment
Supply chain improvements
Business alliances
Electronic markets
Agile organisation
Increased efficiencies
Mass customisation

6. 1.4: Organisational Response Strategies
Strategic Systems provide organisations with strategies to increase their market share, better negotiate with suppliers, or stop competitors.
Continuous Improvement Efforts aim to improve a company’s productivity and quality. Examples include:
Improved productivity • Managing enterprise data
Just-in-time (JIT) • Innovation and creativity
Total quality management • Change management
Knowledge management • Customer service

7. 1.4: Organisational Response Strategies
Business Process Restructuring (BPR) refers to the introduction of a major innovation in an organisation’s structure & the way it conducts business.
The major areas in which IT supports BPR are the following;
Reducing cycle time and time to market.
Empowerment of employees and collaborative work
EC allows the decentralisation of decision making and authority via empowerment and distributed systems, but simultaneously supports a centralised control
Supply Chain Improvements
EC can help reduce supply chain delays, reduce inventories, and eliminate other inefficiencies

8. 1.4: Organisational Response Strategies
Business Alliances.  Many companies realise that alliances with other companies, even competitors, can be very beneficial.
Temporary joint venture = companies form a special company for a specific, limited-time mission.
Electronic Markets. Doing business electronically is perhaps most promising strategy that many companies can pursue.
Agile Organisations. Organisations that are able to react to improve productivity, even during times of change, through the appropriate uses of IT and EC.

9. 1.5: EC Business Models Business Plan Business Case Business Model
A written document that identifies the business goals and outlines the plan to achieve them.
Business Case
A written document that is used by managers to gather funding for specific applications for projects.
Its major emphasis is the justification for specific investment.
Business Model
A method of doing business by which a company can generate revenue to sustain itself

10. The Structure of Business Models
1.5: EC Business Models
The Structure of Business Models
A description of the customers to be served and the company’s relationships with these customers (customers’ value proposition)
A description of all products and services the business will offer
A description of the business process required to make and deliver the products and services

11. The Structure of Business Models
1.5: EC Business Models
The Structure of Business Models
A list of the resources required and the identification of which ones are available, which will be developed in-house, and which will need to be acquired
A description of the organisation supply chain, including suppliers and other business partners
A description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability)

12. 1.5: EC Business Models Revenue Models Major revenue models
A revenue model: Description of how the company or an EC project will earn revenue
Major revenue models
Sales
Transaction fees
Subscription fees
Advertising fees
Affiliate fees
Other revenue sources

13. How do e-marketplaces create value? (Amit and Zott 2001)
1.5: EC Business Models
Value proposition
The benefits a company can derive from using EC
How do e-marketplaces create value? (Amit and Zott 2001)
Search and transaction cost efficiency
Complementarities
Lock-in
Novelty

14. 1.5: Exhibit 1.6 Common Revenue Models

15. 1.5: Typical EC Business Models
Online direct marketing
Manufacturer/retailer sells directly to consumers via Internet
Electronic tendering systems
Large organisational buyers issue needs via a reverse auction (lowest bidder wins) hosted by an EC intermediary, which then solicits bids from potential suppliers
Name-your-own-price
A buyer sets the price he is willing to pay and invites sellers to supply the good or service at that price
Find the best price
Customer specifies needs, then an EC intermediary matches the needs against a database, locates the lowest price, and submits the information to the customer.

16. 1.5: Typical EC Business Models
Affiliate marketing
An arrangement whereby a marketing partner (a business, an organisation, or even an individual) refers consumers to the selling company’s Web site and takes a commission on sales from successful referrals.
Viral marketing
Word-of-mouth marketing in which customers promote a product or service to friends or other people.
Group Purchasing
Quantity purchasing that enables groups of purchasers to obtain a discount price on the products purchased
e-co-ops
Another name for online group purchasing organisations

17. 1.5: Typical EC Business Models
Online auctions
Online shoppers make consecutive bids through an EC intermediary and the intermediary awards the product to the highest bidder
Product and service customisation
Creation of a product or service according to the buyer’s specifications or needs
Electronic marketplaces and exchanges
EC intermediaries bring together potential buyers and sellers via the Internet
Supply chain improvers
EC intermediaries who improve the speed and efficiency of existing supply chain relationships.

18. 1.5: Typical EC Business Models
Value-chain integrators
Aggregate information-rich products into more complete package. Eg Carpoint.com provides financing and insurance
Value-chain service providers
Specialise in a supply chain function. Eg UPS.com for logistics or PayPal.com (now part of eBay) for logistics
Information brokers
Provide privacy, trust, matching, search, etc. Eg Google.com
Bartering
Exchange goods via a market maker. Eg Web-barter.com
Deep discounting
Companies such as Half.com offer products/services at deep discounting, as much as 50% off the retail price.

19. 1.5: Example of Supply Chain Improver
Orbis Group changes a linear physical supply chain to an electronic hub
Traditional process in the B2B advertising field
Case 1.5a

20. 1.5: Example of Supply Chain Improver
Product Bank simplifies this lengthy process by changing the linear flow of products and information to a digitised hub
Case 1.5b

21. Benefits to Organisations
1.6: EC Benefits
Benefits to Organisations
Global reach
Reduced costs
Supply chain improvements
Extended operating hours (24/7/365)
Customisation
Creation of new business models
Vendor specialisation
Improved time-to-market
Lower communication costs
Efficient procurement
Improved customer relations
Up-to-date company material
No city business permits or fees
Other benefits

22. 1.6: EC Benefits Benefits to Consumers Ubiquity
More products and services choices
Customised products and services
Cheaper products and services (cost)
Instant delivery (speed)
Improved information availability
Participation in auctions
Improved interactions with others through electronic communities
No sales tax

23. 1.6: EC Benefits Benefits to Society Telecommuting
EC enables more individuals to work at home, thereby reducing pollution and traffic
Improved standard of living because the less affluent can afford lower online prices
Homeland security
EC technologies allow for better communication, coordination, information interpretation and information sharing.
Improve product availability in developing nations.
Wider availability of public services

25. 1.8: Networks for EC
Task facing each organisation is how to put together the components that will enable the organisation to transform itself to the digital economy and gain competitive advantage by using EC
Many employ corporate portals
A major gateway through which employees, business partners, and the public can enter a corporate Web site

26. 1.8: Exhibit 1.8 The Networked Organisation

27. Managerial Issues Is it real? Why is B2B e-commerce so attractive?
There are so many EC failures—how can one avoid them?
How do we transform our organisation into a digital one?
How should we evaluate the magnitude of business pressures and technological advancement?
What should be my company’s strategy toward EC?
What are the top challenges of EC?