Presentation on theme: "Amazon.com – Not Your Average Bookstore"— Presentation transcript:
1 Amazon.com – Not Your Average Bookstore CHAPTER 3E-BUSINESSOpening CaseAmazon.com – Not Your Average BookstoreThis is a good time to recall the opening case and discuss how Amazon’s e-business strategy disrupted the bookselling industryAmazon.com – Not Your Average BookstoreThere was an interesting article in Business 2.0, July 2006 – The 50 Who Matter Now. Jeff Bezos ranked 42 out of 50. The article offers a different view of Amazon focusing on its needs to be more creative in its business structure. Read the below passage to your students when introducing the Amazon case. This will give your students a different perspective of Amazon and will allow you to initiate a classroom discussion or debate depending on your student’s view of Amazon.“Amazon, the "biggest store on earth," is indeed the biggest non-OEM retailer on the Net. So why does Bezos rank so much lower on the list than representatives from the rest of the Internet's so-called Big Five? As a brand, Amazon is up there with eBay, Google, Microsoft, and Yahoo. But as a business, it has yet to show an ability to keep pace with the rest. Amazon's A9 search engine has not made it a major player in search, and compared with all-virtual retail players like eBay or even Barry Diller's InterActiveCorp, Amazon's physical inventory and infrastructure look increasingly like a ball and chain. Still, Bezos is not to be underestimated. His mantra from day one: Ignore other people's expectations and create a successful business one step at a time. If Bezos has a plan to restore Amazon's reputation as an innovator, he needs to show it soon.”
2 Chapter Three Overview SECTION BUSINESS AND THE INTERNETDisruptive TechnologyEvolution of the InternetAccessing Internet InformationProviding Internet InformationSECTION E-BUSINESSE-Business BasicsE-Business ModelsOrganizational Strategies for E-BusinessMeasuring E-Business SuccessE-Business Benefits and ChallengesNew Trends in E-Business: E-Government and M-CommerceSection 3.1 begins by discussing disruptive technology with the Internet causing complete business disruptionSection 3.1 then focuses on how the Internet began, and how to access and provide information on the InternetSection 3.2 discusses e-business models and how departments can use e-business to enhance performanceAsk your students how many of them have Internet access. How are they accessing the Internet?Soon Internet access will be offered through electrical outletsHow will this type of technology change the way people and businesses use the Internet?
3 BUSINESS AND THE INTERNET SECTION 3.1BUSINESS AND THE INTERNETOne-hour film processing and digital cameras both contributed to the demise of Polaroid, a solid company that had an innovative technology and a captive customer base. The dilemma that faced Polaroid is a dilemma that most organization face – the criteria an organization uses to make business decisions for its present business could possibly create issues for its future business. Essentially, what is best for the current business could ruin it in the long term.In the past few years, e-business seems to have permeated every aspect of daily life. In just a short time, both individuals and organizations have embraced Internet technologies to enhance productivity, maximize convenience, and improve communications globally. This chapter focuses on the disruptive technology, the Internet, and e-business processes that are changing the nature of the buyer-seller relationship, the role of information technology (IT), and organizational structures and tasks. The chapter also discusses the opportunities and advantages found with developing e-businesses. Specific relationships have been developed in the chapter between disruptive technologies and e-businesses.
4 LEARNING OUTCOMES Compare disruptive and sustaining technologies Explain how the Internet caused disruption among businessesDefine the relationship between the Internet and the World Wide Web3.1 Compare disruptive and sustaining technologies.Disruptive technology – a new way of doing things that initially does not meet the needs of existing customersDisruptive technologies redefine the competitive playing fields of their respective markets and tend to open new markets and destroy old onesDisruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologiesSustaining technology – produces an improved product customers are eager to buy, such as a faster car or larger hard driveSustaining technologies tend to provide us with better, faster, and cheaper products in established markets and virtually never lead in markets opened by disruptive technologies3.2 Explain how the Internet caused disruption among businesses.The Internet has completely disrupted the way businesses operate, employees communicate, and products are developed and sold. Here are a few examples:Travel site Expedia.com is now the biggest leisure-travel agency, with higher profit margins then even American Express$35 billion annual online music downloads are wrecking the traditional music businessDell increases profit margins while cutting prices by using the Internet to link suppliers and customerseBay is one of the nation’s top 15 retailers3.3. Define the relationship between the Internet and the World Wide Web.The Internet is a global public network of computer networks that pass information from one to another using common computer protocols. The World Wide Web is a global hypertext system that uses the Internet as its transport mechanism. The World Wide Web operates on the Internet.
5 LEARNING OUTCOMESDescribe the different methods an organization can use to access informationCompare the three different types of service providers3.4 Describe the different methods an organization can use to access information.An organization can use four common tools to access Internet informationIntranet – an internalized portion of the Internet, protected from outside access, that allows an organization to provide access to information and application software to only its employeesExtranet – an intranet that is available to strategic allies (such as customers, suppliers, and partners)Portal – a Web site that offers a broad array of resources and services, such as , online discussion groups, search engines, and online shopping mallsKiosk – a publicly accessible computer system that has been set up to allow interactive information browsing3.5 Compare the three different types of service providers.There are three common forms of service providers including:Internet service provider (ISP) – a company that provides individuals and other companies access to the Internet along with additional related services, such as Web site buildingOnline service provider (OSP) – offers an extensive array of unique services such as its own version of a Web browserApplication service provider (ASP) – a company that offers an organization access over the Internet to systems and related services that would otherwise have to be located in personal or organizational computers
6 DISRUPTIVE TECHNOLOGY How can a company like Polaroid go bankrupt?Digital Darwinism – implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinctionCLASSROOM OPENERGREAT BUSINESS DECISIONS – Edwin Land Develops the Polaroid CameraIn 1937, Edwin Land started a company that made a polarizing plastic and named it Polaroid. The business boomed. Land was taking family pictures on his vacation in 1943 when his three-year-old daughter asked why they had to wait so long to see the developed photographs. Land was struck with the idea of combining the polarization technology with developing films. By 1950, Land had a camera that produced black-and-white images and by 1963, he released a camera that produced color pictures. The Polaroid camera took off and by the late 1960s, it was estimated that 50 percent of American households owned one.If Polaroid executives had used Porter’s Five Forces analysis would they have discovered the threat of substitute products of the digital camera?What could they have done to combat this threat?
7 Disruptive versus Sustaining Technology What do steamboats, transistor radios, and Intel’s 8088 processor all have in common?Disruptive technology – a new way of doing things that initially does not meet the needs of existing customersSustaining technology – produces an improved product customers are eager to buyWhat do steamboats, transistor radios, and Intel’s 8088 processor all have in common?They are all disruptive technologiesCLASSROOM EXERCISEDisrupting the ClassroomBreak your students into groups and ask them to identify the primary differences between disruptive and sustaining technologies, along with several current examples of eachDisruptive technologies:Disruptive technologies redefine the competitive playing fields of their respective marketsDisruptive technologies tend to open new markets and destroy old onesDisruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high-end competitors and their reigning technologiesSustaining technologies:Sustaining technologies tend to provide us with better, faster, and cheaper products in established marketsSustaining technologies virtually never lead in markets opened by new and disruptive technologies
8 Disruptive versus Sustaining Technology The above figure only displays the top four and bottom four companies. To review the entire figure please refer students to the text.This figure displays companies that are expecting future growth to occur from new investments (disruptive technologies) and companies that are expecting future growth to occur from existing investment (sustaining technologies)Ask your students to list additional companies, not mentioned in the figure, that depend mostly on new investments (disruptive technologies) for profitsAsk your students to list additional companies, not mentioned in the figure, that depend mostly on existing investments (sustaining technologies) for profits
9 Disruptive versus Sustaining Technology Innovator’s Dilemma - discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers, partners, and stakeholdersThe Innovator’s Dilemma is a book by Clayton M. ChristensenCompanies like Xerox, IBM, Sears, and DEC all listened to existing customers, invented aggressively in technology, had their competitive antenna up, and still lost their market-dominate positionsChristensen believes that these companies placed too great an emphasis on satisfying customers’ current needs, while forgetting to adopt new disruptive technology that will meet customers’ future needs, thus causing the companies to eventually fall behindAsk your student to identify several additional companies that fell victim to the innovator’s dilemmaCLASSROOM EXERCISEClayton in the ClassroomShow your student’s the video on MIT highlighting Clayton Christensen
10 Disruptive versus Sustaining Technology CLASSROOM EXERCISECapitalized CompaniesTake each of the nine companies listed above and distribute them to your students either in groups or individuallyAsk your students to determine if the company is still gaining a competitive advantage from its use of disruptive technology?If not, what happened?
11 The Internet – Business Disruption One of the biggest forces changing business is the InternetOrganizations must be able to transform as markets, economic environments, and technologies changeFocusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technologyDo your students agree that the Internet is an example of a disruptive technology?When it was first introduced would they consider it a form of disruptive technology?CLASSROOM EXERCISEFinding InnovationInnovation, new ideas, and new technology are exciting. It is currently estimated that everything we know technically will represent 1 percent of all technology in Break your students into groups and ask them to search the Internet for the most exciting form of innovation that is going to hit our market and change our lives over the next ten years. Have your students present their findings to the class and offer a small prize to the winner.A few examples include:Computers that offer smells, click on a perfume and the scent permeates from your computer, movie theatres will offer smells that correspond to the movieElectronic toilets – analyze output and let you know if you getting sick days before the cold actually hits. Great for rest homes and hospitalsPlanes the size of small ships that offer shopping and restaurantsShips the size of small cities where you can purchase an apartmentWhat's For Dinner? Just Call Your Refrigerator – show your student’s the kitchen of the future
12 The Internet – Business Disruption Estimates predict more than 3 billion Internet users by 2010There were 1 billion Internet users in 2005How will 2 billion additional Internet users change the competitive landscape for businesses over the next few years?Greater access to a larger number of customersMore competitorsLocation and distance becomes a smaller factor for businesses
13 The Internet – Business Disruption The Internet has had an impact on almost every industry including:TravelEntertainmentElectronicsFinancial servicesRetailAutomobilesEducation and trainingIndustry Business Changes Due to TechnologyTravel Travel site Expedia.com is now the biggest leisure-travel agency, with higher profit margins than even American Express. Thirteen percent of traditional travel agencies closed in 2002 because of their inability to compete with online travel.Entertainment The music industry has kept Napster and others from operating, but $35 billion annual online downloads are wrecking the traditional music business. U.S. music unit sales are down 20 percent since The next big entertainment industry to feel the effects of e-business will be the $67 billion movie business.Electronics Using the Internet to link suppliers and customers, Dell dictates industry profits. Its operating margins have risen from 7.3 percent in 2002 to 8 percent in 2003, even as it takes prices to levels where rivals cannot make money.Financial services Nearly every public e-finance company left makes money, with online mortgage service Lending Tree growing 70 percent a year. Processing online mortgage applications is now 40 percent cheaper for customers.Retail Less than 5 percent of retail sales occur online. eBay is on track this year to become one of the nation’s top 15 retailers, and Amazon.com will join the top 40. Wal-Mart’s e-business strategy is forcing rivals to make heavy investments in technology.Automobiles The cost of producing vehicles is down because of SCM and Web-based purchasing. eBay has become the leading U.S. used-car dealer, and most major car sites are profitable.Education and training Cisco saved $133 million last year by moving training sessions to the Internet, and the University of Phoenix online college classes please investors.CLASSROOM EXERCISEBusiness DisruptionBreak your students into groups and assign them each a different industry from aboveAsk them to review Figure 3.4 which displays the Internet’s impact on each industry and have them update how new technologies are changing these industries even further
14 EVOLUTION OF THE INTERNET The Internet began as an emergency military communications system operated by the Department of DefenseGradually the Internet moved from a military pipeline to a communication tool for scientists to businessesInternet – computer networks that pass information from one to another using common computer protocolsProtocol – standards that specify the format of data as well as the rules to be followed during transmissionCLASSROOM EXERCISEWhere the Internet Really StartedAsk students, “How did the Internet (really) get started.” A few responses might include: Al Gore (“Information Superhighway”), or the Department of Defense (ARPANET), or even Bill Gates (Microsoft)Ask students to “Imagine an almost instantaneous communication system that would allow people and governments all over the world to send and receive messages about politics, war, illness, and family events. The government has tried and failed to control it.” Was it the Internet? Nope, the humble telegraph fit this bill way back in the 1800s. The parallels between the now-ubiquitous Internet and the telegraph are amazing, offering insight into the ways new technologies can change the very fabric of society within a single generation.Emphasize the history of the telegraph: Begin with the funny story of a mile-long line of monks holding a wire and getting simultaneous shocks in the interest of investigating electricity, and ending with the advent of the telephone (this is the true scenario)Discuss the early “online” pioneers: Samuel Morse, Thomas Edison, and a seemingly endless parade of code-makers, entrepreneurs, and spies who helped ensure the success of this communications revolutionWith the invention of the telegraph, the world of communications was forever changed. The telegraph gave rise to creative business practices and new forms of crime. Romances blossomed over its wires. In addition, attitudes toward everything from news gathering to war had to be completely rethought. The saga of the telegraph offers many parallels to that of the Internet in our own time, and is a remarkable episode in the history of technology.
15 Evolution of the World Wide Web World Wide Web (WWW) – a global hypertext system that uses the Internet as its transport mechanismHypertext transport protocol (HTTP) – the Internet standard that supports the exchange of information on the WWWAre the Internet and the WWW synonymous?People often interchange the terms Internet and the World Wide Web, but these terms are not synonymousThe Internet is a global public network of computer networks that pass information from one to another using common computer protocolsThe World Wide Web is a global hypertext system that uses the Internet as its transport mechanismThe World Wide Web operates on the Internet
16 Evolution of the World Wide Web What are the two primary reasons for growth of the WWW?Two events changed the history of the InternetOn August 6, 1991 Tim Berners-Lee built the first Web siteMarc Andreesen built and distributed MosaicCLASSROOM EXERCISEVIDEO INTERVIEWThe big talk at the WWW2006 conference is about the semantic web with its promise of an "intelligent" netPallab Ghosh caught up with Sir Tim Berners-Lee - the man who invented the world wide web back in 1991
17 Evolution of the World Wide Web The Internet’s impact on informationEasy to compileIncreased richnessIncreased reachImproved contentWhat is the difference between information richness and information reach?Information richness refers to the depth and breath of information transferred between customers and businessInstead of a company catalog with a simple text box and perhaps a small photo, the Web allows companies to post 3-dimensional photos, video, customer reviews, newspaper and magazine articles, product comparisons including price, etc.Information reach refers to the number of people a business can communicate with, on a global basisCompanies can now reach customers around the world, not just customers who can physically travel to their storeInternet’s Impact on InformationEasy to compile - Searching for information on products, prices, customers, suppliers, and partners is faster and easier when using the Internet.Increased richness - refers to the depth and breadth of information transferred between customers and business. Businesses andcustomers can collect and track more detailed information when using the Internet.Increased reach - refers to the number of people a business can communicate with, on a global basis. Businesses can share information with numerous customers all over the world.Improved content - A key element of the Internet is its ability to provide dynamic relevant content. Buyers need good content descriptions to make informed purchases, and sellers use content to properly market and differentiate themselves from the competition. Content and product description establish the common understanding between both parties to the transaction. As a result, the reach and richness of that content directly affects the transaction.
18 Evolution of the World Wide Web File formats offered over the WWWFor the reasons discussed in the previous slide, information reach and information richness, companies want to be able to post audio, video, graphic and text files to help run their businessesCLASSROOM EXERCISEFormatting the WebAsk your students their majors – accounting, finance, marketing, management, human resources, information technology, etc.List the different majors on the board and ask them how each one can use the different file formats to improve the way they achieve tasksAccounting – video and audio files for auditsMarketing – all formats for Web site sales and marketing campaignsFinance – video and audio files for training on new tax laws or training new employees how to use the systemsHuman Resources – video and audio files for training and demonstration of sexual harassment or unethical behavior that is not tolerated by the company
19 Evolution of the World Wide Web The Internet makes it possible to perform business in ways not previously imaginableIt can also cause a digital divideDigital divide – when those with access to technology have great advantages over those without access to technologyPeople living in the village of Siroha, India, must bike five miles to find a telephone. For over 700 million rural people living in India, the digital divide was a way of life, until recently. Media Lab Asia sells telephony and services via a mobile Internet kiosk mounted on a bicycle, which is known as an “info-thelas.” The kiosk has an onboard computer equipped with an antenna for Internet service and a specially designed all-day battery. Over 2,000 villages have purchased the kiosk for $1,200, and another 600,000 villages are interestedWhat impact does the digital divide have on society?How is MIT’s $100 laptop program going to help the digital divide?
20 ACCESSING INTERNET INFORMATION Four tools for accessing Internet informationIntranet – internalized portion of the Internet, protected from outside access, for employeesExtranet – an intranet that is available to strategic alliesPortal – Web site that offers a broad array of resources and servicesKiosk – publicly accessible computer system that allows interactive information browsingWhich access methods does your college provide?Intranet – student or faculty and staff sites such as Blackboard or WebCTExtranet – for potential students and partnersPortal – a place where students or faculty and staff can access all of their applications such as registration, billing, grades, Blackboard or WebCT, andKiosk – places around the campus where students can logon to the InternetIf your college does not provide each type of access why might it want to start?What benefits can be added to your college through the use of kiosks or portals?
21 PROVIDING INTERNET INFORMATION Three common forms of service providersInternet service provider (ISP) –provides individuals and other companies access to the InternetOnline service provider (OSP) – offers an extensive array of unique Web servicesApplication service provider (ASP) – offers access over the Internet to systems and related services that would otherwise have to be located in organizational computersInternet service provider (ISP) – a company that provides individuals and other companies access to the Internet along with additional related services, such as Web site building. Many but not all ISPs are telephone companies. ISPs provide services such as Internet transit, domain name registration and hosting, dial-up or DSL access, leased line access, and collocation. ISPs mostly provide access to the Internet and charge a monthly access fee to the consumer.Online service provider (OSP) – offers an extensive array of unique services such as its own version of a Web browser. An OSP offers services such as access to private computer networks and information resources such a bulletin boards, downloadable programs, news articles, chat rooms, and electronic mail services.Application service provider (ASP) – a company that offers an organization access over the Internet to systems and related services that would otherwise have to be located in personal or organizational computers. Software offered using an ASP model is also sometimes called On-demand software. The most limited sense of this business is that of providing access to a particular application program (such as medical billing) using a standard protocol such as HTTP. The need for ASPs has evolved from the increasing costs of specialized software that have far exceeded the price range of small to medium sized businesses. As well, the growing complexities of software have lead to huge costs in distributing the software to end-users. Through ASPs, the complexities and costs of such software can be cut down. In addition, the issues of upgrading have been eliminated from the end-firm by placing the onus on the ASP to maintain up-to-date service.
22 PROVIDING INTERNET INFORMATION Common ISP services include:Web hostingHard-disk storage spaceAvailabilitySupportCommon ISP ServicesWeb hosting. Housing, serving, and maintaining files for one or more Web sites is a widespread offering.Hard-disk storage space. Smaller sites may need only 300 to 500 MB (megabytes) of Web site storage space, whereas other e-business sites may need at least 10 GB (gigabytes) of space or their own dedicated Web server.Availability. To run an e-business, a site must be accessible to customers 24x7. ISPs maximize the availability of the sites they host using techniques such as load balancing and clustering many servers to reach 100 percent availability.Support. A big part of turning to an ISP is that there is limited worry about keeping the Web server running. Most ISPs offer 24x7 customer service.CLASSROOM EXERCISEService PleaseBreak your students into groups and ask them what different types of services are offered from the various ISPsfor a look at the top ten different types of ISP hosting servicesWhich ISPs do your students use?How did they choose their ISP vendor?Which factors would they recommend a friend research when looking for an ISP vendor?
23 PROVIDING INTERNET INFORMATION Wireless Internet service provider (WISP)Wireless Internet service provider (WISP)– an ISP that allows subscribers to connect to a server at designated hotspots or access points using a wireless connectionHow can your college use a WISP to improve service?Which areas do you recommend the WISP be accessible? Just buildings? Outside?What are the additional security threats your college would need to be aware of if it implemented a WISP?The world's largest software maker, Microsoft, has been briefing record companies on its roll out of a portable digital music player, an apparent bid to capture a slice of the market now dominated by the iPod. The proposed device would play digital music and video files and carry wireless technology, enabling users to download music without linking to a computer, according to executives who spoke on condition of anonymity because plans for the player have not been made public.How would Microsoft's new device be used in conjunction with a wireless interest service provider?
24 PROVIDING INTERNET INFORMATION ISPs, OSPs, and ASPs use service level agreements (SLA) which define the specific responsibilities of the service provider and set the customer expectationsReview Figure 3.10 for a listing of the top ISPs, OSPs, and ASPsWhy is it important to have an SLA?What could happen to a business that did not have an SLA with its ASP?Discuss Figure 3.10 which displays the top ISPs, OSPs, and ASPs
25 OPENING CASE QUESTIONS Amazon How has Amazon used technology to revamp the bookselling industry?Is Amazon using disruptive or sustaining technology to run its business?How is Amazon using intranets and extranets to run its business?How could Amazon use kiosks to improve its business?OPENING CASE QUESTIONSAmazon.com – Not Your Average Bookstore1. How has Amazon used technology to revamp the bookselling industry?Amazon is one of the largest book distributors in the world and one of the most innovative. Using personalization on its Web site, customers are offered suggestions for other titles. Jeff Bezos is using technology to predict what his customers want to buy next before they even know it.2. Is Amazon using disruptive or sustaining technology to run its business?In the beginning Amazon was using disruptive technology to sell its books – the Internet. The Internet is no longer a disruptive technology, but Amazon is still finding ways to use it to disrupt the way it does business.3. How is Amazon using intranets and extranets to run its business?Amazon uses intranets to help its employees perform their jobs, find corporate information, and communicate with each other more effectively. Amazon uses extranets to partner with third-party providers who are interested in selling products through Amazon’s Web site, such as zShops and the Amazon.com Marketplace.4. How could Amazon use kiosks to improve its business?Amazon could place a kiosk outside physical bookstores allowing customers to check Amazon inventory to compare prices prior to making a purchase. Amazon could also place kiosks in airports allowing passengers to browse Amazon’s inventory while waiting for their flight.
26 E-BUSINESS SECTION 3.2 CLASSROOM OPENER GREAT BUSINESS DECISIONS – Jeff Bezos Decides to Sell Books over the InternetJeff Bezos owns 41 percent of Amazon and is estimated to be worth over $900 million. Bezos graduated from Princeton and was the youngest Vice President at Banker’s Trust in New York. Bezos had to make a decision to stay and receive his 1994 Wall Street bonus or leave and start a business on the Internet. “I tried to imagine being eighty years old, looking back on my life. I knew that I would hardly regret having missed the 1994 Wall Street bonus. But having missed being part of the Internet boom – that would have really hurt,” stated Bezos. The first books ordered through Amazon were dispatched in the fall of 1994 (personally packaged by Bezos and his wife). Amazon.com is now the biggest bookstore on the planet. It is the exemplar of electronic business.
27 LEARNING OUTCOMES Compare the four types of e-business models Describe how an organization’s marketing, sales, accounting, and customer service departments can use e-business to increase revenues or reduce costsExplain why an organization would use metrics to determine a Web site’s success3.6. Compare the four types of e-business models.Business-to-business (B2B) Applies to businesses buying from and selling to each other over the Internet.Business-to-consumer (B2C) Applies to any business that sells its products or services to consumers over the Internet.Consumer-to-business (C2B) Applies to any consumer that sells a product or service to a business over the Internet.Consumer-to-consumer (C2C) Applies to sites primarily offering goods and services to assist consumers interacting with each other over the Internet.The primary difference between B2B and B2C are the customers; B2B customers are other businesses while B2C markets to consumers. Overall, B2B relations are more complex and have higher security needs; plus B2B is the dominant e-business force, representing 80 percent of all online business3.7. Describe how an organization’s marketing, sales, accounting, and customer service departments can use e-business to increase revenues or reduce costs.Marketing and sales departments can use Internet marketing strategies such as online ads, associate programs, viral marketing, mass customization, personalization, blogs, and podcasting to increase the company’s visibility. These types of marketing techniques provide an easy way to penetrate a new geographic territory and extend global reach. Large, small, or specialized businesses can use their online sales sites to sell on a worldwide basis with little extra cost.Accounting departments can use e-business to help distribute information with greater convenience and richness than is currently available. They can also offer a variety of online payment methods such as financial cybermediaries, electronic checks, electronic bill presentment and payment, electronic data interchange, financial EDI, and digital wallets.Customer service departments can use e-business to enable customers to help themselves with the communications capability of a traditional customer response system available 24x7 over the Internet.3.8. Explain why an organization would use metrics to determine a Web site’s success.Without metrics there is no way to determine if a Web site is successful. Web site metrics allow an organization to determine the efficiency and effectiveness of its site. Interactivity measures the visitors interactions with the target ad. Such interaction measures include the duration of time the visitor spends viewing the ad, the number of pages viewed, and even the number of repeat visits to the target ad.
28 LEARNING OUTCOMESDescribe e-business along with its benefits and challengesDefine m-commerce and explain how an e-government could use it to increase its efficiency and effectiveness3.9. Describe e-business along with its benefits and challenges.e-business is the conducting of business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners. E-business benefits include:Highly accessibleIncreased customer loyaltyImproved information contentIncreased convenienceIncreased global reachDecreased costE-business challenges include:Protecting consumersLeveraging existing systemsIncreasing liabilityProviding securityAdhering to taxation rules3.10 Define m-commerce and explain how an e-government could use it to increase its efficiency and effectiveness.Mobile commerce, or m-commerce, is the ability to purchase goods and services through a wireless Internet-enabled device. E-government involves the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of government(s). E-governments could use m-commerce to facilitate the exchange of goods and services between the different branches of government and citizens. People could pay their taxes through an m-commerce device or receive a disability payment or social security payment to their m-commerce device making the process of receiving and distributing payments more efficient and effective for everyone.
29 E-BUSINESS BASICS How do e-commerce and e-business differ? E-commerce – the buying and selling of goods and services over the InternetE-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partnersAsk your students to differentiate between e-commerce and e-businessE-commerce refers only to online transactionsE-business refers to online transactions, serving customers and collaborating with business partnersOn July 18,2005 media conglomerate News Corp. (NWS ) bought Intermix Media (MIX ), the company that owns MySpace and about 30 other sites, for $580 million in cash. Los Angeles-based Intermix owns 53% of MySpace and plans to buy the rest. It will become part of News Corp.'s new Fox Interactive Media unit, which was created on July 15, 2005 and also is based in L.A.Since MySpace is a social networking site, why would a business conglomerate such as News Corporation want to purchase it for $580 million?
30 Industries Using E-Business E-BUSINESS BASICSIndustries Using E-BusinessCLASSROOM EXERCISEE-business BusinessAsk your students to list the types of companies they want to work for when they graduateList the companies on the board and categorize them by industryAssign each industry to a group, or assign the industry to each individual depending on the company they want to work for, and have the students research how the different industries are using e-businessManufacturing and Retail: RFID, online payments and orders, sales via the Internet, customer service via the InternetFinancial: online banking, online mortgages, online loansTelecommunications: Voice over the Internet (VoIP)Healthcare: digital hospitals, pharmacy orders via the InternetTravel: online reservations, Travelocity, Expedia
31 E-BUSINESS MODELSE-business model – an approach to conducting electronic business on the InternetCan a business operate with more than one e-business model?Yes, eBay and Amazon are prime examples. eBay and Amazon’s e-business models change depending on who is posting the goods for sale and who is buying the goods for sale?
32 E-BUSINESS MODELSThis is a new service by Google that allows customers to checkout - Google e-Business
33 E-BUSINESS MODELSCan you define a business the operates in each segment?B2B: Electronic marketplace, Google search marketingB2C: Progressive insurance, Carfax, Best Buy, AmazonC2B: eBay, AmazonC2C: eBay, Amazon
34 Business-to-Business (B2B) Electronic marketplace (e-marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activitiesElectronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channelsTheir primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellersExisting e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials
35 Business-to-Consumer (B2C) Common B2C e-business models include:e-shop – a version of a retail store where customers can shop any time without leaving their homee-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shopsBusiness types include:Brick-and-mortar businessPure-play businessClick-and-mortar businessBusiness Types:Brick-and-mortar business - operates in a physical store without an Internet presence.Pure-play (virtual) business - a business that operates on the Internet only without a physical store. Examples include Amazon.com and Expedia.com.Click-and-mortar business – a business that operates in a physical store and on the Internet. Examples include REI and Barnes and Noble.Can you name a company that operates in each of the different business types?Brick-and-mortar business – local book store, college book store (there are not many today)Pure-play business – Amazon.com, eBayClick-and-mortar business – Barnes and Noble
36 Consumer-to-Business (C2B) Priceline.com is an example of a C2B e-business modelThe demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower pricesCLASSROOM EXERCISETrip to a tripHave your students create a trip itinerary for a 7 day trip to Paris with a nice hotel and rental car on Priceline.com and Expeida.comWhich site did they like best?Which site had the best Web site?Which site will they continue to use?
37 Consumer-to-Consumer (C2C) Online auctionsElectronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamicallyForward auction - Sellers use as a selling channel to many buyers and the highest bid winsReverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bideBay is the Internet’s most successful C2C site and is now ranked in the top 15 retailers in the United StatesWhich products or services would they want to purchase using an online auction? Which type of auction would they use?CarBoatVacationBicycleCoatDVDsPet grooming serviceDog walking serviceWedding catering
38 Consumer-to-Consumer (C2C) C2C CommunitiesCommunities of interest - People interact with each other on specific topics, such as golfing and stamp collectingCommunities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiastsCommunities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael JordanIf you could start a new e-business, which community would you address to ensure a successful launch?How would you address the community?
39 ORGANIZATIONAL STRATEGIES FOR E-BUSINESS Primary business areas taking advantage of e-business include:Marketing/salesFinancial servicesProcurementCustomer serviceIntermediariesCLASSROOM EXERCISE“The Competitive Nature of Web Sites”Have students team up with two or three classmates to select and compare Web sites of two retailers that are in the same business (as an example jcrew.com vs. abercrombie.com, or Amazon.com vs. bn.com). Have students use the list of "do's and don'ts" from to compare the two sites, along with other criteria you might like to add. Have students review the range of information resources and services used in the sites and the ways in which they are organized, designed, and presented.The basic question the groups should attempt to answer is how well the sites support the conduct of e-business. After analyzing the sites, have students compare the strengths and weaknesses of the two sites. Students should be able to draw a conclusion as to which one they think does the best job of attracting customers to the Web site and retaining them once they get there. Also, have students comment on how well they think each site…Offers a fast and convenient shopping experienceProvides access to help or additional informationSelects desirable products and displays them and describes them in an attractive and easy-to understand mannerDescribes its method for getting purchases to customers promptlyUses online ads, affiliate programs, viral marketing, and marketing
40 Marketing/Sales Generating revenue on the Internet Online ad (banner ad) - box running across a Web page that contains advertisementsPop-up ad - a small Web page containing an advertisementAssociate program (affiliate program) - businesses generate commissions or royaltiesViral marketing - a technique that induces Web sites or users to pass on a marketing messageMass customization - gives customers the opportunity to tailor products or servicesAn online ad (often called banner ad) is a box running across a Web page that is often used to contain advertisements. The banner generally contains a link to the advertiser’s Web site. Web-based advertising services can track the number of times users click the banner, generating statistics that enable advertisers to judge whether the advertising fees are worth paying. Banner ads are like living, breathing classified ads.A pop-up ad is a small Web page containing an advertisement that appears on the Web page outside of the current Web site loaded in the Web browser. A pop-under ad is a form of a pop-up ad that users do not see until they close the current Web browser screen.Associate programs (affiliate programs) allow businesses to generate commissions or royalties from an Internet site. For example, a business can sign up as an associate of a major commercial site such as Amazon. The business then sends potential buyers to the Amazon site using a code or banner ad. The business receives a commission when the referred customer makes a purchase on Amazon.Viral marketing is a technique that induces Web sites or users to pass on a marketing message to other Web sites or users, creating exponential growth in the message’s visibility and effect. One example of successful viral marketing is Hotmail, which promotes its service and its own advertisers’ messages in every user’s notes. Viral marketing encourages users of a product or service supplied by an e-business to encourage friends to join. Viral marketing is a word-of-mouth type advertising program.Mass customization is the ability of an organization to give its customers the opportunity to tailor its products or services to the customers’ specifications. For example, customers can order M&M’s with customized sayings such as “Marry Me.”
41 Marketing/Sales Generating revenue on the Internet (cont.) Personalization - occurs when a Web site can fashion offers that are more likely to appeal to that personBlog - Web site in which items are posted on a regular basis and displayed in reverse chronological orderReal simple syndications (RSS) - a Web feed format used for Web syndication of contentPodcasting - the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devicesPersonalization occurs when a Web site can know enough about a person’s likes and dislikes that it can fashion offers that are more likely to appeal to that person. Personalization involves tailoring a presentation of an e-business Web site to individuals or groups of customers based on profile information, demographics, or prior transactions. Amazon uses personalization to create a unique portal for each of its customers.A blog (the contraction of the phrase “Web log”) is a Web site in which items are posted on a regular basis and displayed in reverse chronological order. Like other media, blogs often focus on a particular subject, such as food, politics, or local news. Some blogs function as online diaries. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. Since its appearance in 1995, blogging has emerged as a popular means of communication, affecting public opinion and mass media around the world.Real simple syndications (RSS) is a family of Web feed formats used for Web syndication of programs and content. RSS is used by (among other things) news Web sites, blogs, and podcasting, which allows consumers and journalists to have news constantly fed to them instead of searching for it. In addition to facilitating syndication, RSS allows a Web site’s frequent readers to track updates on the site.Podcasting is the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devices and personal computers. Podcasting’s essence is about creating content (audio or video) for an audience that wants to listen when they want, where they want, and how they want. Podcasters’ Web sites also may offer direct download of their files, but the subscription feed of automatically delivered new content is what distinguishes a podcast from a simple download or real-time streaming. Usually, the podcast features one type of show with new episodes either sporadically or at planned intervals such as daily, weekly, etc.
42 Marketing/Sales Generating revenue on the Internet (cont.) Search engine optimization (SEO) - a set of methods aimed at improving the ranking of a Web site in search engine listingsSpamdexing - uses a variety of deceptive techniques in an attempt to manipulate search engine rankings, whereas legitimate SEO focuses on building better sites and using honest methods of promotionSearch engine optimization (SEO) is a set of methods aimed at improving the ranking of a Web site in search engine listings. Search engines display different kinds of listings in the search engine results pages (SERPs), including: pay-per-click advertisements, paid inclusion listings, and organic search results. SEO is primarily concerned with advancing the goals of Web sites by improving the number and position of organic search results for a wide variety of relevant keywords. SEO strategies can increase the number of visitors and the quality of visitors, where quality means visitors who complete the action the site intends (e.g., purchase, sign up, learn something).SEO, or “white hat SEO,” is distinguished from “black hat SEO,” or spamdexing by methods and objectives.Spamdexing uses a variety of deceptive techniques in an attempt to manipulate search engine rankings, whereas legitimate SEO focuses on building better sites and using honest methods of promotion. What constitutes an honest, or ethical, method is an issue that has been the subject of numerous debates.
43 Financial Services Online consumer payments include: Financial cybermediaryElectronic checkElectronic bill presentment and payment (EBPP)Digital walletOnline Consumer PaymentsFinancial cybermediary - an Internet-based company that facilitates cybermediary payments over the Internet. PayPal is the best-known example of a financial cybermediary.Electronic check - a mechanism for sending a payment from a checking or savings account. There are many implementations of electronic checks, with the most prominent being online banking.Electronic bill presentment and payment (EBPP) - a system that sends presentment and bills over the Internet and provides an easy-to-use mechanism (such as payment (EBPP) clicking on a button) to pay the bill. EBPP systems are available through local banks or online services such as Checkfree and Quicken.Digital wallet - both software and information—the software provides security for the transaction and the information includes payment and delivery information (for example, the credit card number and expiration date).There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created. Information systems will greatly help the achievement of this goal.As a consumer, which type of payment do you use the most on the Internet?What will be the driving force that changes online consumer payments in the future?SecurityEase of useCommon formats
44 Financial Services Online business payments include: Electronic data interchange (EDI)Value-added network (VAN)Financial EDI (financial electronic data interchange)Online Business PaymentsElectronic data interchange (EDI) - a standard format for exchanging business data. One way an organization can use EDI is through a value-added network.Value-added network (VAN) - a private network, provided by a third party, for exchanging information through a high-capacity connection. VANs support electronic catalogs (from which orders are placed), EDI-based transactions (the actual orders), security measures such as encryption, and EDI mailboxes.Financial EDI (financial electronic data interchange) is a standard electronic process for B2B market purchase payments. National Cash Management System is an automated clearinghouse that supports the reconciliation of the payments.Why do businesses use different forms of online payments than consumers?Business payments are typically much larger than consumer payments and need additional securityWith supply chain management systems online business payments are automated using EDI
45 Electronic trading network Financial ServicesElectronic trading networkWhat do you think are the competitive services offered by Electronic Trading Networks?A recent report has concluded that the providers of Electronic Trading Networks (ETN) are most competitive over, and often share different opinions on, three areas of ETN services:Speed of implementationServices provided, including overall service and integration managementProduct applicability to small and medium-size enterprises
46 ProcurementMaintenance, repair, and operations (MRO) materials (also called indirect materials) – materials necessary for running an organization but do not relate to the company’s primary business activitiesE-procurement - the B2B purchase and sale of supplies and services over the InternetElectronic catalog - presents customers with information about goods and services offered for sale, bid, or auction on the InternetWeb-based procurement of maintenance, repair, and operations (MRO) supplies is expected to reach more than $200 billion worldwide by the year 2009Maintenance, repair, and operations (MRO) materials (also called indirect materials) - materials necessary for running an organization but do not relate to the company’s primary business activities. Typical MRO goods include office supplies (such as pens and paper), equipment, furniture, computers, and replacement parts.Name a few types of MRO goods?Office suppliesEquipmentFurnitureComputers
47 Customer ServiceCustomer service is the business process where the most human contact occurs between a buyer and a sellere-business strategists are finding that customer service via the Web is one of the most challenging and potentially lucrative areas of e-businessThe primary issue facing customer service departments using e-business is consumer protectionWhat benefits can an organization receive from online customer service?Availability 24x7 to help customersDetailed customer service information can cut down on phone calls to the companyMore convenient for the customerHow often do you use online customer service?How can your college use online customer service to help students?
48 Consumer ProtectionIdentity theft is already so common that there are entire units within law enforcement that deal with this issue every dayThere are toll-free numbers, Web sites and documents that clearly define incident response proceduresCLASSROOM EXERCISEProtecting CustomersIdentity theft is rising and there are great examples on the InternetAsk your students to compile a listing of identity theft and phising scams by researching the Internet to find examplesDiscuss all of the examples to help spread awareness to your studentsWhat can a company do to help prevent identity theft and phising scams?
49 Consumer Protection E-business security Encryption Secure socket layer (SSL)Secure electronic transaction (SET)Which type of e-business security would you recommend a business implement? Why?E-Business SecurityEncryption - scrambles information into an alternative form that requires a key or password to decrypt. Encryption is achieved by scrambling letters, replacing letters, replacing letters with numbers, and other ways.Secure socket layer (SSL) - (1) creates a secure and private connection between a client and server computer, (2) encrypts the information, and (3) sends the information over the Internet. SSL is identified by a Web site address that includes an “s” at the end—https.Secure electronic transaction (SET) - a transmission security method that ensures transactions are secure and legitimate. Similar to SSL, SET encrypts information before sending it over the Internet. However, SET also enables customer authentication for credit card transaction. SETs are endorsed by major e-commerce players including MasterCard, American Express, Visa, Netscape, and Microsoft.
50 IntermediariesIntermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-businessReintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new waysDiscuss Figure 3.24 which highlights the different types of intermediariesExplain the relationship between intermediaries and reintermediationReintermediation occurred because of intermediaries
51 MEASURING E-BUSINESS SUCCESS Most companies measure the traffic on a Web site as the primary determinant of the Web site’s successHowever, a large amount of Web site traffic does not necessarily equate to large salesMany organizations with high Web site traffic have low sales volumesAn organization must measure more than just traffic to determine the efficiency and effectiveness of its Web sitesAsk your students what types of things an organization can monitor to determine the efficiency and effectiveness of its Web sitesAns: Revenue generated by Web trafficNumber of new customers acquired by Web trafficReductions in customer service calls resulting from Web trafficThe Yankee Group reports that 66 percent of companies determine Web site success solely by measuring the amount of trafficNew customer acquisition ranked secondRevenue generation ranked third
52 MEASURING E-BUSINESS SUCCESS Web site traffic analysis can include:CookieClick-throughBanner adInteractivityWeb site traffic analysis can include:Cookie – a small file deposited on a hard drive by a Web site containing information about customers and their Web activitiesClick-through – a count of the number of people who visit one site and click on an advertisement that takes them to the site of the advertiserBanner ad – a small ad on one Web site that advertises the products and services of another business, usually another dot-com businessInteractivity – visitor interactions with the target adAnalyzing Web site traffic is one way organizations can understand the effectiveness of Web advertisingAsk your students how interactivity is a giant advancement in the advertising industryAns: Prior to computers there was no way for the advertiser to know if the customer actually read or even looked at an ad in a newspaper or magazineInteractivity measures allow advertisers to know exactly how long a customer spends viewing an adAsk your students about privacy and how do these types of Web traffic analysis tools invade user privacy
53 Web Site MetricsClickstream data tracks the exact pattern of a consumer’s navigation through a Web siteClickstream data can reveal:Number of pageviewsPattern of Web sites visitedLength of stay on a Web siteDate and time visitedNumber of customers with shopping cartsNumber of abandoned shopping cartsClick-stream data can reveal a number of basic data points on how consumers interact with Web sitesAsk your students what an organization can learn from understanding click-stream dataFor example, what does number of abandoned shopping carts tell an organization?
54 Web Site Metrics Web site metrics include: Visitor metrics Exposure metricsVisit metricsHit metricsReview each section of Figure 3.30 for a detailed listing of visitor, exposure, visit, and hit metricsCLASSROOM EXERCISEMeasuring MetricsBreak your students into groups and assign each group one of the four categories found in the above FigureHave your students detail each category explaining how each metric can be used to help an organization improve its operationsAsk your students to share their answers with the class
55 E-BUSINESS BENEFITS AND CHALLENGES E-business benefits include:Highly accessibleIncreased customer loyaltyImproved information contentIncreased convenienceIncreased global reachDecreased costE-Business benefits include:Highly Accessible - Businesses can operate 24 hours a day, 7 days a week, 365 days a yearIncreased Customer Loyalty - Additional channels to contact, respond to, and access customers helps contribute to customer loyaltyImproved Information Content- In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and pricesIncreased Convenience - E-business automates and improves many of the activities that make up a buying experienceIncreased Global Reach - Businesses, both small and large, can reach new marketsDecreased Cost - The cost of conducting business on the Internet is substantially smaller than traditional forms of business communicationWhich benefit would you pick if asked to identify the most important e-business benefit?Would it change depending on the industry?Would it change depending on the company?Would it change depending on the customer?
56 E-BUSINESS BENEFITS AND CHALLENGES E-business challenges include:Protecting consumersLeveraging existing systemsIncreasing liabilityProviding securityAdhering to taxation rulesReview the figure for a full listing of e-business challengesWhich challenge would you pick if asked to identify the most difficult e-business challenge?Would it change depending on the industry?Would it change depending on the company?Would it change depending on the customer?
57 E-BUSINESS BENEFITS AND CHALLENGES There are numerous advantages and limitations in e-business revenue models including:Transaction feesLicense feesSubscription feesValue-added feesAdvertising feesReview Figure 3.27 for a detailed listing of the various advantages and limitations in the e-business revenue modelWhich type of revenue model would an ASP find most lucrative?Which type of revenue model would an ISP find most lucrative?Which type of revenue model would an online auction Web site find most lucrative?Which type of revenue model would an online search engine such as Google find most lucrative?
58 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE E-government - involves the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of governmentThe chapter discussed many ways that businesses are growing and increasing profits through e-businessHow can e-government use some of the trends discussed throughout the chapter to help reduce costs and increase revenue?
59 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE Review the Web site - the official U.S. gateway to all government informationThis Web site is a catalyst for a growing electronic governmentAsk your students to review the following Web sites to further understand the progress being made in e-governmentC2G – eGov.comB2G – lockheedmartin.comG2B – export.govG2C – medicare.govG2G – disasterhelp.gov
60 NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE Mobile commerce - the ability to purchase goods and services through a wireless Internet-enabled deviceCLASSROOM EXERCISEMobile ManiaAsk your students to develop a product or service that could be used in the m-commerce marketA device to download music and videos through wirelessPurchase goods and services through a cell phone
61 OPENING CASE QUESTIONS Amazon What is Amazon’s e-business model?How can Amazon use m-commerce to influence its business?Which metrics could Amazon use to assess the efficiency and effectiveness of Amazon’s Web site?What are some of the business challenges facing Amazon?5. What is Amazon’s e-business model?This is somewhat of a trick question, because the answer is that Amazon.com is a B2B, C2C, and a B2C. Amazon.com does business with other businesses (B2B), such as Borders, Target, and Office Depot. Amazon.com also supports a huge business-to-consumer model with their main Web site interface. Amazon also supports customers doing business with other customers (C2C).6. How can Amazon use m-commerce to influence its business?M-commerce enables consumers to buy on the fly, from handheld devices and mobile phones. Using Amazon.com’s one-click, customers could search for and buy any of Amazon's offerings, from DVDs and CDs to books and toys, and do it anywhere. Which means customers would have the use of shopping in a traditional brick-and-mortar store, use comparative shopping methods, search Amazon.com for its price, and make a purchasing decision accordingly.7. Which metrics could Amazon use to assess the efficiency and effectiveness of Amazon’s Web site?Amazon could use the following metrics to asses its Web site.Click-through – to determine how many customers visit the site from another site, banner-ad – to determine how many customers visit the site from a banner ad on another site, the number of page views to determine the number of pages presented to a visitor, the pattern of Web sites visited, including most frequent exit page and most frequent prior Web site, length of stay on the Web site, dates and times of visits to determine customer spending habits, number of abandoned shopping carts to determine why customers are leaving the site, identified visitors who purchase recommended products to determine if personalization is working8. What are some of the business challenges facing Amazon?There are several challenges facing Amazon including protecting its customers from unsolicited goods and illegal or harmful communication. Amazon offers a number of third-party services and it must ensure those parties are operating as expected. If a customer purchases a product from a third-party seller on Amazon and the goods are never shipped, Amazon is held responsible. It must also deal with security issues such as identity theft if there was a breach in its customer systems since it maintains customer credit card numbers. It must also ensure it is adhering to tax laws.
62 CLOSING CASE ONE eBay – The Ultimate E-Business eBay is one of the only major Internet “pure plays” to consistently make a profit from its inception. What is eBay’s e-business model and why has it been so successful?Other major Web sites, like Amazon.com and Yahoo!, have entered the e-marketplace with far less success than eBay. How has eBay been able to maintain its dominant positioneBay has long been an e-marketplace for used goods and collectibles. Today, it is increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set up shop on eBay?1. eBay is one of the only major Internet “pure plays” to consistently make a profit from its inception. What is eBay’s e-business model and why has it been so successful?eBay began in the C2C space, using the brokerage value model and collecting transaction fees in consumer-to-consumer auctions. Rapid user growth created community, content, and search value streams, which in turn created the critical mass for substantial advertising revenue. B2B followed by offering the Small Business Exchange. In addition, there is nothing that would prevent eBay from licensing its technology in the B2B space, for industry-specific auctions. eBay could potentially expand into the B2C space, providing firms the option of auctioning merchandise directly to consumers using the eBay infrastructure. Finally, while this would be the greatest stretch for eBay, it could choose to move into the C2B space, allowing consumers to “name their own price” for merchandise and services.2. Other major Web sites, like Amazon.com and Yahoo!, have entered the e-marketplace with far less success than eBay. How has eBay been able to maintain its dominant position.The obvious answer is that eBay's first-mover advantage allowed it to dominate the online auction space. eBay also has an excellent reputation for superior customer service. Two priorities dominate eBay's operational strategy: keeping its buyer/seller community happy, and keeping its massive Web site up and running. Consumers flock there because of the great product selection. The result is a juggernaut that has vanquished latecomers, such as Yahoo! Auctions and Amazon Auctions. Both of those operations are still in business, but they have reduced expectations and make relatively small contributions to their parent companies' balance sheets.3. eBay has long been an e-marketplace for used goods and collectibles. Today, it is increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set up shop on eBay?Student’s response should refer to critical mass. The so-called "network effect" has bred a critical mass of customers, a group divided into buyers and sellers. Large and small merchants gravitate to eBay because that is where buyers are clustered.
63 CLOSING CASE ONE eBay – The Ultimate E-Business What are the three different types of online auctions and which one is eBay using?What are the different forms of online payment methods for consumers and business? How might eBay’s customers benefit from the different payment methods?Which metrics would you use if you were hired to assess the efficiency and effectiveness of eBay’s Web site?4. What are the three different types of online auctions and which one is eBay using?Electronic auction - sellers and buyers solicit consecutive bids from each other and prices are determined dynamically.Forward auction - auction that sellers use as a selling channel to many buyers and the highest bid wins.Reverse auction - an auction that buyers use to purchase a product or service, selecting the seller with the lowest bid.eBay provides a forward auction where the highest bid wins.5. What are the different forms of online payment methods for consumers and business? How might eBay’s customers benefit from the different payment methods?Consumer forms of online payments include:Credit card. A financial cybermediary is an Internet-based company that facilitates payments over the Internet. PayPal is the best-known example of a financial cybermediary. An electronic check is a mechanism for sending a payment from a checking or savings account. There are many implementations of electronic checks, with the most prominent being online banking. An electronic bill presentment and payment (EBPP) is a system that sends bills over the Internet and provides an easy-to-use mechanism (such as clicking on a button) to pay the bill. EBPP systems are available through local banks or online services such as Checkfree and Quicken. A digital wallet is both software and information—the software provides security for the transaction and the information includes payment and delivery information (for example, the credit card number and expiration date).Business forms of online payments include:Electronic data interchange (EDI) - a standard format for exchanging business data. One way an organization can use EDI is through a value-added network. A value-added network (VAN) is a private network, provided by a third party, for exchanging information through a high capacity connection. VANs support electronic catalogs (from which orders are placed), EDI-based transactions (the actual orders), security measures such as encryption, and EDI mailboxes.Financial EDI (financial electronic data interchange) - a standard electronic process for B2B market purchase payments. National Cash Management System is an automated clearinghouse that supports the reconciliation of the payments.6. Which metrics would you use if you were hired to assess the efficiency and effectiveness of eBay’s Web site?eBay could use the following metrics to asses its Web site.Click-through – to determine how many customers visit the site from another site, banner-ad – to determine how many customers visit the site from a banner ad on another siteThe average spending per customer, the pattern of Web sites visited, including most frequent exit page and most frequent prior Web site, length of stay on the Web site, dates and times of visits to determine customer spending habits, average number of items posted for auction by a customer, average number of items purchased by a customer, number of inactive customer accounts
64 CLOSING CASE TWO Direct Groceries What type of technology is FreshDirect using—disruptive or sustaining?How could FreshDirect use a kiosk to improve its business?How could FreshDirect use m-commerce to improve its business?1. What type of technology is FreshDirect using—disruptive or sustaining?FreshDirect is using the sustaining technology of the Internet to disrupt the way groceries are sold. Similar to Amazon, FreshDirect is a pure play grocer, only offering its products online. There are a few other online grocery stores currently operating in large cities around the country, however the online grocery business is slow to take off.2. How could FreshDirect use a kiosk to improve its business?FreshDirect could use kiosks strategically placed around the city, such as on commuter trains and busses, that allow customers to place orders on the fly. If a customer was leaving work they could place their order on the train home and have the groceries waiting for them upon their arrival.3. How could FreshDirect use m-commerce to improve its business?FreshDirect could allow their customers to place and pay for orders over their cell phones and PDAs. This would allow customers to order products from anywhere at anytime 24x7.
65 CLOSING CASE TWO Direct Groceries What are the three different types of service providers and which one would FreshDirect use to run its business?What types of information would be contained in FreshDirect’s intranet?What types of information would be contained in FreshDirect’s extranet?Which metrics would you use if you were hired to assess the efficiency and effectiveness of FreshDirect’s Web site?4. What are the three different types of service providers and which one would FreshDirect use to run its business?There are three common forms of service providers including:Internet service provider (ISP) – a company that provides individuals and other companies access to the Internet along with additional related services, such as Web site building.Online service provider (OSP) – offers an extensive array of unique services such as its own version of a Web browser.Application service provider (ASP) – a company that offers an organization access over the Internet to systems and related services that would otherwise have to be located in personal or organizational computers.FreshDirect could use an ISP to host its Website and an ASP to host its payroll system.5. What types of information would be contained in FreshDirect’s intranet?There could be several different types of information stored in FreshDirect’s intranet including employee information such as benefit, employee directory, and vacation tracking, company information such as policies and procedures, financial progress, and corporate vision and goals, and customer information such as number of customers, increased sales, and order information6. What types of information would be contained in FreshDirect’s extranet?FreshDirect’s extranet could offer an extensive amount of information to its suppliers such as order information, inventory information, and payment and invoice information7. Which metrics would you use if you were hired to assess the efficiency and effectiveness of FreshDirect’s Web site?FreshDirect could use the following metrics to asses its Web site.Click-through – to determine how many customers visit the site from another site, banner-ad – to determine how many customers visit the site from a banner ad on another site, the average spending per customer, the pattern of Web sites visited, including most frequent exit page and most frequent prior Web site, length of stay on the Web site, dates and times of visits to determine customer spending habits, correlation between items for recommendations and personalization, average number of items purchased by a customer, number of inactive customer accounts, number of abandoned shopping carts
66 CLOSING CASE THREE How Do You Value Friendster? How could you use e-business metrics to place a value on Friendster?Why would a venture capital company value Friendster at $53 million when the company has yet to generate any revenue?Why would Google be interested in buying Friendster for $30 million when the company has yet to generate any revenueIdentify Friendster’s e-business model and explain how the company can generate revenueExplain the e-business benefits and challenges facing Friendster1. How could you use e-business metrics to place a value on Friendster?Metrics such as number of hits and number of visitors could help determine the size of Friendster’s market for advertising initiatives. Information on visitors such as age and gender could provide marketing target information.2. Why would a venture capital company value Friendster at $53 million when the company has yet to generate any revenue?Since the company has yet to generate a dime in revenue, it is impossible to determine how the VC company estimated Friendster at $53 million. Be sure to ask your students if they would invest in a company that has yet to earn any revenues.3. Why would Google be interested in buying Friendster for $30 million when the company has yet to generate any revenue.Again, since the company has yet to generate a dime in revenue, it is impossible to determine how Google has estimated the value of Friendster at $30 million.4. Identify Friendster’s e-business model and explain how the company can generate revenue.Friendster’s e-business model is C2C and could generate revenue from advertising and marketing. Having an audience of 16 to 30 year olds is an attractive marketing for product manufacturers. Many businesses will pay top dollar to advertise on Friendster. Affiliate marketing programs might also be a viable option for Friendster.5. Explain the e-business benefits and challenges facing Friendster.Friendster has several benefits and its primary is its large customer base. Access to its customer base is coveted by many businesses, hence its large venture capital offers. There are several challenges facing Friendster, the largest is protecting its customers from unsolicited goods and illegal or harmful communication. Such as the many occurrences of social issues on the popular MySpace Web site, Friendster must protect its young clientele from potentially harmful communications. It must also deal with security issues such as identity theft if there was a breach in its customer systems.