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Lecture Slides 7 Introduction to Information Technology E-Business (C) 2006 Jim Janossy and Laura McFall, Information Technology Workbook.

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Presentation on theme: "Lecture Slides 7 Introduction to Information Technology E-Business (C) 2006 Jim Janossy and Laura McFall, Information Technology Workbook."— Presentation transcript:

1 Lecture Slides 7 Introduction to Information Technology E-Business (C) 2006 Jim Janossy and Laura McFall, Information Technology Workbook

2 Slide PowerPoint presentations, podcasts, and web links for readings are available at > IT Workbook Print slides at 6 slides per page Homework, quizzes and final exam are based on slides, lectures, readings and podcasts Course resources

3 Slide Topics Definitions: e-business, value chain, B2B, B2C Internet era I, collapse, era II Marketing selling before the web, now Seven unique features of e-commerce E-commerce business models Internet irritations and dangers

4 Slide Definitions E-business: the use of the internet and web to transact business (limited definition) E-business: any business process empowered by an information system (broader definition) Business processes along the whole value chain

5 Slide Definitions Value chain: the generic value-adding activities of an organization. Manufacturing: purchasing, production processes, packaging, sales and marketing, order processing, customer service, maintenance Internet supports multiple parts of the value chain

6 Slide Types of E-commerce Distinct types of E-commerce B2CB2BC2CP2P Business to consumer is web sales to retail consumers. Largest market in terms of quantity of customers, but only 10% of e- commerce revenue.

7 Slide Distinct types of E-commerce B2CB2BC2CP2P In 2001, was only 1% of the revenue of the entire retail market! There is huge opportunity for growth in B2C! Types of E-commerce

8 Slide Distinct types of E-commerce B2CB2BC2CP2P Business to business is web sales between firms. Total 2001 revenue of $12 trillion but only $700 billion was on web, so LOTS of room to grow! Types of E-commerce

9 Slide Distinct types of E-commerce B2CB2BC2CP2P Types: Inter-business exchanges e-distributors service providers matchmakers infomediaries Types of E-commerce

10 Slide Distinct types of E-commerce B2CB2BC2CP2P Consumer to consumer, auctions such as e-bay.com. Consumer prepares product for sale, relies on market maker for catalog, search engine, payment handling. Types of E-commerce

11 Slide Distinct types of E-commerce B2CB2BC2CP2P Generic market maker functions: product display product discovery product payment Types of E-commerce

12 Slide Distinct types of E-commerce B2CB2BC2CP2P Peer to peer, sharing of files without a central web server, like Napster, Gnutella. May be applied to sharing of other computer resources in future. Types of E-commerce

13 Slide B2C vs. B2B B2C: business-to-consumer 10% B2B: business-to-business 90% B2C is most visible to the majority of the population but it is actually dwarfed by business-to-business transactions B2B via the internet/web is overtaking EDI (electronic data interchange)

14 Slide E-commerce 1994: $ 02000: 60 billion B2C 700 billion B2B 1994: Internet use growing 2300% / yr Enormous changes in firms, markets, consumer behavior Fastest growing type of commerce

15 Slide E-commerce growth 1994: $ 02000: 60 billion B2C 700 billion B2B 2006: 250 billion B2C 5,400 billion B2C 4,000,000,000 web pages exist ,000,000 web pages added daily +420%

16 Slide E-commerce growth 1994: $ 02000: 60 billion B2C 700 billion B2B 2006: 250 billion B2C 5,400 billion B2C 4,000,000,000 web pages now exist 7,000,000 web pages added daily +770%

17 Slide Growth compared to other technologies B2C e-commerce: Radio took 38 years to achieve 30% household penetration ( ) Television took 17 years to achieve 30% household penetration ( ) Web took only 7 years to achieve 30% household penetration ( )

18 Slide Internet Era I 1995 to 2000 Pieces of underlying technology were all in place by 1994; browsers were last piece; Mosaic triggered explosion in users Overly-confident “cowboy” dot.coms Lots of swashbuckling investors Much dot.com activity in B2C area

19 Slide Internet Era I 1995 to Why? Pattern of technological revolutions, as with electricity, telephone, radio, TV, cars 1. Explosion of entrepreneurial activity paves the way (“first mover” start-ups) 2. Retrenchment: weaker, less organized players exit while stronger take over 3. Continued exploitation by established firms

20 Slide /11 Internet Era I II

21 Slide Internet Era I collapse factors 1. Many tech companies profited from Y2K efforts, suffered when clients were Y2K’d 2. Telecomm industry overbuilt capacity 3. Christmas 1999 had less sales growth than expected, shows high tech is hard! 4. Valuations of dot.com’s too high, 400 x earnings (typical companies x); many never showed ANY profit!

22 Slide Fallacy of the “first mover” notion Common idea in Era I - “first movers” can gain the market, will lose money first, then dominate; but it doesn’t work that way! Reality: being first isn’t enough. You need to have a good business plan, act on it, and need much greater financial strength to develop mature markets

23 Slide Plus… some ideas just aren’t so good! Some innovative ideas sounded good but just weren’t viable (wishful thinking) There are some things that people feel comfortable buying at a distance, and some things people buy in person Some services are handy, some are too much trouble or inconvenient online

24 Slide B2C E-commerce now… is alive and well: “...has moved into the mainstream life of established business concerns that have the market brands and financial muscle required for long-term deployment of e-commerce technologies and methods.”

25 Slide “Established companies” “Bricks and clicks” companies Existing companies with traditionally- developed and serviced markets, traditional products Web adds new dimension to their marketing and customer attraction/retention options “Pure play” are new Web-only companies

26 Slide Need to understand: Relationships between e-commerce e-commerce business interests technology social and legal contexts Suppliers Customers Competitors Partners How do we: locate suppliers and items order discover prices? To understand e-commerce...

27 Slide Need to understand: Relationships between e-commerce e-commerce business interests technology social and legal contexts Suppliers Customers Competitors Partners How do we: market products advertise use brands? To understand e-commerce...

28 Slide Need to understand: Relationships between e-commerce e-commerce business interests technology social and legal contexts How to reduce supply chain costs? How to increase production efficiency? How to tighten relationship with customers? To understand e-commerce...

29 Slide Need to understand: Relationships between e-commerce e-commerce business interests technology social and legal contexts Payment systems Security Marketing B2B Retail To understand e-commerce...

30 Slide Need to understand: Relationships between e-commerce e-commerce business interests technology social and legal contexts Privacy Intellectual property Sovereignty Web governance Fair access Public welfare To understand e-commerce...

31 Slide Amazon.com Founding ideas: Audience expanding (Web growth)Audience expanding (Web growth) Less need to touch and feel books to buy them than many other itemsLess need to touch and feel books to buy them than many other items Large source of supply (2,500 publishers)Large source of supply (2,500 publishers) Largest stores had only 12% of marketLargest stores had only 12% of market Major distributors stock books; no need for local inventoryMajor distributors stock books; no need for local inventory

32 Slide Founding determinations: Market existsMarket exists Books can be sold at a distanceBooks can be sold at a distance No one else owns the source of supplyNo one else owns the source of supply Competition is not unifiedCompetition is not unified Distributors hold inventory; few premises needed, few employees: lower costDistributors hold inventory; few premises needed, few employees: lower cost Amazon.com

33 Slide

34 Slide Compelling factors for customers: Selection: Million titles (books, CDs, DVDs) Convenience: anytime, anywhere,simplified ordering (“1-click”) Price: discounts from regular retail price Service: order confirmation s, notifications of out of stock situations, affiliate (used book) vendors Amazon.com

35 Slide Amazon.com performance

36 Slide Amazon.com Yet despite it’s diversification into other product lines, in 2005 sales of books, CDs and DVDs still accounted for 70% of Amazon sales!

37 Slide Information asymmetry is... Any disparity in relevant market information among the parties in a transaction. Any disparity in relevant market information among the parties in a transaction.

38 Slide Mass marketing Salesforce driven Consumers seen as passive targets Campaigns and brands aimed to influence consumers product perceptions and purchasing behavior Consumers trapped by geographical and social boundaries Information asymmetry Marketing and selling before the web

39 Slide Information asymmetry Consumers unable to search widely for best price and quality Information about… prices costs fees …could be hidden from consumer!

40 Slide Podcast 44: Internet advantages for consumers Search for competing products and competing vendors and prices: easier, more comprehensive “due diligence”Search for competing products and competing vendors and prices: easier, more comprehensive “due diligence” Can learn of other’s experiences with the products and vendorsCan learn of other’s experiences with the products and vendors Disintermediation: better prices because “middlemen” may be eliminatedDisintermediation: better prices because “middlemen” may be eliminated

41 Slide Podcast 45: Internet advantages for sellers Publish larger catalog (more products)Publish larger catalog (more products) Reach consumers all hour, everywhereReach consumers all hour, everywhere Adjust prices instantlyAdjust prices instantly Disintermediation: cut costs, price more competitivelyDisintermediation: cut costs, price more competitively New ways to market, customize offeringsNew ways to market, customize offerings

42 Slide Marketing and selling - now Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization

43 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization “Marketspace” extends everywhere, including mobile. Shopping is 24x7 and shopper costs are reduced. Marketing and selling - now

44 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization Commerce enabled across borders without modification Marketing and selling - now

45 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization One set of communication technology, namely, Internet TCP/IP, HTML, browsers Marketing and selling - now

46 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization Message is not limited to text or audio; video, audio, and text all possible, with visual cues Marketing and selling - now

47 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization Consumer is engaged in a dialog, as a co- participant in discovering goods Marketing and selling - now

48 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization Currency, timeliness, accuracy of information increases; price transparency Marketing and selling - now

49 Slide Altered by 7 unique features of e-commerce Ubiquity Global reach Universal standards RichnessInteractivity Information density Personalization / customization Messages possible to individuals not just groups; dialog can be tailored to appeal to individuals Marketing and selling - now

50 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Everyone would have a computer, web access, quickly Concurrent Era I visions

51 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Friction-free commerce, huge number of suppliers Concurrent Era I visions

52 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Disintermediation; manufacturers deal directly with consumers Concurrent Era I visions

53 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Lots of ways to profit from large new markets and marketing strategies Concurrent Era I visions

54 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Identify groups with different needs and price sensitivities Concurrent Era I visions

55 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Price very low to grab market share, enable low pricing through new efficiencies Concurrent Era I visions

56 Slide Thinking of many was: Universal access Info asymmetry reduced Middlemen disappear Extraordinary profits Easy to segment market Profit from efficiencies Deconstruct traditional distribution Gain visibility fast, “first movers” seek to replace traditional distribution channels Concurrent Era I visions

57 Slide Internet Era II 2001 and onward New technological capabilities E-commerce learns from failures and successes of Era 1 Predictions for the future? The impact of wireless (WiFi) access?

58 Slide Understandings needed Nature of electronic markets E-commerce business models Firm and industry value chains Consumer behavior in e-markets Privacy, regulation, taxation issues

59 Slide Business model Set of planned activities designed to make a profitSet of planned activities designed to make a profit Business models apply to all types of business, not just e-commerceBusiness models apply to all types of business, not just e-commerce 8 ingredients of all business models8 ingredients of all business models Business plan: document describing the business modelBusiness plan: document describing the business model

60 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team All factors of the business model are important to document in a business plan Business plan

61 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team Heart of model. How the product or service fulfills the needs of customers. What is unique? Why use us? Business plan

62 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team How will the business earn revenue, generate profit, produce a return? Business plan

63 Slide Five major E-commerce revenue models Advertising model Subscription model Transaction fee model Sales model Affliliate model Site content and services draw hits. Sell advertising, banners, links. User retention is called “stickiness”. One of earliest models, now copied and diluted.

64 Slide Advertising model Subscription model Transaction fee model Sales model Affliliate model Subscription charge for content or service. Content must have high added value, not readily available elsewhere, no easy substitutes. Five major E-commerce revenue models

65 Slide Advertising model Subscription model Transaction fee model Sales model Affliliate model Fee for enabling or executing a transaction. Like Ebay.com for auction, or E-trade.com for a stock buy or sell. Five major E-commerce revenue models

66 Slide Advertising model Subscription model Transaction fee model Sales model Affliliate model Sell goods. Physical: office supplies, books, crafts, foods, anything that could be sold mail order. Electronic: product is downloaded. Services: software usage is “rented” Five major E-commerce revenue models

67 Slide Advertising model Subscription model Transaction fee model Sales model Affliliate model Referral fee or % commission for steering hits to a site. Maybe give “points” incentive to customers to shop via the site links instead of directly to sites. Five major E-commerce revenue models

68 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team Intended marketspace. Realistic opportunity defined by revenue potential of each niche. Business plan

69 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team How many competitors? How large? Market share? How profitable? Their price? Business plan

70 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team Having a: superior product, lower price, wider market, branding. Business plan

71 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team Plan that shows how you intend to enter a new market and attract customers. Partnering?Advertising?Samples? Business plan

72 Slide Value proposition 2. Revenue model 3. Market opportunity 4. Competitive environment 5. Competitive advantage 6. Market strategy 7. Organizational development 8. Management team Plan that shows how the business is going to be staffed as it grows, and how management leads. Business plan

73 Slide B2C - business to consumer B2B -business to business C2C - consumer to consumer P2P - peer to peer Let’s look at these Internet business models

74 Slide B2C 1. Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider Integrated package of content and services, also ISP. , news, chat rooms, personals, shopping. No longer a “gateway” but a destination.

75 Slide Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider Online retail store. Convenience of larger selection, shop as needed at home or work, ease of searching and locating vendors. Clicks and mortar (BestBuy) or pure play (I-Tunes, Amazon) B2C

76 Slide Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider Digital news, photos, video, artwork. Almost 15% of total online sales in Revenue from subscription fee. WSJ.com, e-zines. B2C

77 Slide Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider Financial services, travel services, job placement, retail stock transactions. Web vs. phone. Convenience and currency. Revenue per transaction. B2C

78 Slide Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider eBay auctions, or reverse auctions like PriceLine.com, where buyers proactively indicate interest to buy and what they are willing to pay, negotiate, tradeoff, “deal”. B2C

79 Slide Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider Advice and consulting service, grocery shopping like PeaPod, vacation or investment planning. Subscription fees, one-time charge, or commission; micropayments (PayPal) B2C

80 Slide Portal 2. E-tailer 3. Content provider 4. Transaction broker 5. Market creator 6. Service provider 7. Community provider Establish communities of people through a common interest, like parenting, gender, technology forums, like specialized chat rooms, blog sites. B2C

81 Slide Marketplace / Exchange (hub) 2. E-distributor 3. Service provider 4. Matchmaker 5. Infomediary Digital marketplace, Like open air market Horizontal - by product Vertical - by industry Eg., Covisint (auto parts) B2B

82 Slide Marketplace / Exchange (hub) 2. E-distributor 3. Service provider 4. Matchmaker 5. Infomediary Like an e-tailer, but the customer audience is other companies who buy in quantity at wholesale. Catalog online, orders and payment arrangements are more complex. B2B

83 Slide Marketplace / Exchange (hub) 2. E-distributor 3. Service provider 4. Matchmaker 5. Infomediary Traditional Accounting, financial services, HR management, payroll outsourcing. B2B

84 Slide Marketplace / Exchange (hub) 2. E-distributor 3. Service provider 4. Matchmaker 5. Infomediary Transaction broker, hooks buyers up with sellers, much like a real estate broker. Find cheapest shipper, like iShip.com, or other commodity or unique item online; Amazon used book links. B2B

85 Slide Marketplace / Exchange (hub) 2. E-distributor 3. Service provider 4. Matchmaker 5. Infomediary Custodian of customer information, providing it to others as requested. Now also includes firms that gather customer data and provide it to others for marketing. B2B

86 Slide B2C - business to consumer 2. B2B -business to business 3. C2C - consumer to consumer 4. P2P - peer to peer Consumer sells to consumer, facilitated by market creator like eBay.com or Half.com. Profitable. Business models

87 Slide B2C - business to consumer 2. B2B -business to business 3. C2C - consumer to consumer 4. P2P - peer to peer Information sharing between consumers. Runs into legal problems when sharing things that don’t belong to you! Business models

88 Slide Internet dangers Con artists exploiting the gullible, innocent, or “unaware” Real dangers of encouraging naïve users (“newbies”) to reveal too much personal information “The world’s biggest bathroom wall.”

89 Slide Internet dangers Blogs, “community” sites easily exploited by criminals How is this to be prevented?

90 Slide Spam, spoofing, phishing Spam: unsolicited advertising Spoofing: manipulating the apparent sender’s name to make spam look like Phishing: spam that spoofs an address of a bank or organization and asks you to “confirm” account details by entering personal information

91 Slide Opt-in, permission marketing Opt-in: you agree to receive advertising, sales promotions, s from a preferred vendor Permission marketing: a synonym for this phenomenon Term was coined 1997 by Seth Godin in a book of this name

92 Slide Opt-out, dangers Opt-out: offers you a way to stop receiving more of the same Believable from a reputable vendor, especially one you have opted-in with Dangerous to accept the “opt out” button click on spam, since it just confirms that your address is “live”!

93 Slide Internet inequalities “Digital Divide” is the gap between those who can participate meaningfully in the digitized world and those who are isolated from it What are the impacts of lack of access? What are the cultural impacts of modernization?

94 Slide Internet displacements State governments and cities derive a portion of their revenues from sales taxes on goods sold; vendors collect and remit to state Commerce “hides” from state taxes As e-commerce has grown, has negatively affected sales tax revenue

95 Slide

96 Slide End


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