1. Chapter Three Overview
SECTION BUSINESS AND THE INTERNET
Disruptive Technology
Evolution of the Internet
Accessing Internet Information
Providing Internet Information
SECTION E-BUSINESS
E-Business Basics
E-Business Models
Organizational Strategies for E-Business
Measuring E-Business Success
E-Business Benefits and Challenges
New Trends in E-Business: E-Government and M-Commerce
Section 3.1 begins by discussing disruptive technology with the Internet causing complete business disruption
Section 3.1 then focuses on how the Internet began, and how to access and provide information on the Internet
Section 3.2 discusses e-business models and how departments can use e-business to enhance performance
Ask your students how many of them have Internet access. How are they accessing the Internet?
Soon Internet access will be offered through electrical outlets
How will this type of technology change the way people and businesses use the Internet?

2. BUSINESS AND THE INTERNET
SECTION 3.1
BUSINESS AND THE INTERNET
One-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.

3. 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 customers
Sustaining technology – produces an improved product customers are eager to buy

4. 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 stakeholders

5. The Internet – Business Disruption
One of the biggest forces changing business is the Internet
Organizations must be able to transform as markets, economic environments, and technologies change
Focusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technology
Do 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 EXERCISE
Finding Innovation
Innovation, 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 movie
Electronic toilets – analyze output and let you know if you getting sick days before the cold actually hits. Great for rest homes and hospitals
Planes the size of small ships that offer shopping and restaurants
Ships the size of small cities where you can purchase an apartment
What's For Dinner? Just Call Your Refrigerator – show your student’s the kitchen of the future

6. The Internet – Business Disruption
Estimates predict more than 3 billion Internet users by 2010

7. EVOLUTION OF THE INTERNET
The Internet began as an emergency military communications system operated by the Department of Defense
Gradually the Internet moved from a military pipeline to a communication tool for scientists to businesses
Internet – computer networks that pass information from one to another using common computer protocols
Protocol – standards that specify the format of data as well as the rules to be followed during transmission

8. Evolution of the World Wide Web

9. Evolution of the World Wide Web
The Internet’s impact on information
Easy to compile
Increased richness
Increased reach
Improved content
Internet’s Impact on Information
Easy 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 and
customers 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.

10. Evolution of the World Wide Web
The Internet makes it possible to perform business in ways not previously imaginable
It can also cause a digital divide
Digital divide – when those with access to technology have great advantages over those without access to technology
People 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 interested
What impact does the digital divide have on society?
How is MIT’s $100 laptop program going to help the digital divide?

11. ACCESSING INTERNET INFORMATION
Four tools for accessing Internet information
Intranet – internalized portion of the Internet, protected from outside access, for employees
Extranet – an intranet that is available to strategic allies
Portal – Web site that offers a broad array of resources and services
Kiosk – publicly accessible computer system that allows interactive information browsing

12. PROVIDING INTERNET INFORMATION
Three common forms of service providers
Internet service provider (ISP) –provides individuals and other companies access to the Internet
Online service provider (OSP) – offers an extensive array of unique Web services
Application service provider (ASP) – offers access over the Internet to systems and related services that would otherwise have to be located in organizational computers
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. 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.

13. 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 expectations
Review Figure 3.10 for a listing of the top ISPs, OSPs, and ASPs

14. SECTION 3.2
E-BUSINESS

15. E-BUSINESS BASICS How do e-commerce and e-business differ?
E-commerce – the buying and selling of goods and services over the Internet
E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners

16. E-BUSINESS MODELS

17. 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 activities
Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels
Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers
Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials

18. 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 home
e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops
Business types include:
Brick-and-mortar business
Pure-play business
Click-and-mortar business
Business 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, eBay
Click-and-mortar business – Barnes and Noble

19. Consumer-to-Business (C2B)
Priceline.com is an example of a C2B e-business model
The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices

20. Consumer-to-Consumer (C2C)
Online auctions
Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically
Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins
Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid

21. Consumer-to-Consumer (C2C)
C2C Communities
Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting
Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts
Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan

22. ORGANIZATIONAL STRATEGIES FOR E-BUSINESS
Primary business areas taking advantage of e-business include:
Marketing/sales
Financial services
Procurement
Customer service
Intermediaries

23. Marketing/Sales Generating revenue on the Internet
Online ad (banner ad) - box running across a Web page that contains advertisements
Pop-up ad - a small Web page containing an advertisement
Associate program (affiliate program) - businesses generate commissions or royalties
Viral marketing - a technique that induces Web sites or users to pass on a marketing message
Mass customization - gives customers the opportunity to tailor products or services

24. 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 person
Blog - Web site in which items are posted on a regular basis and displayed in reverse chronological order
Real simple syndications (RSS) - a Web feed format used for Web syndication of content
Podcasting - the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devices

25. 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 listings
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

26. Financial Services Online consumer payments include:
Financial cybermediary
Electronic check
Electronic bill presentment and payment (EBPP)
Digital wallet
Online Consumer Payments
Financial 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?
Security
Ease of use
Common formats

27. Financial Services Online business payments include:
Electronic data interchange (EDI)
Value-added network (VAN)
Financial EDI (financial electronic data interchange)
Online Business Payments
Electronic 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 security
With supply chain management systems online business payments are automated using EDI

28. Procurement
Maintenance, 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
E-procurement - the B2B purchase and sale of supplies and services over the Internet
Electronic catalog - presents customers with information about goods and services offered for sale, bid, or auction on the Internet
Web-based procurement of maintenance, repair, and operations (MRO) supplies is expected to reach more than $200 billion worldwide by the year 2009
Maintenance, 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 supplies
Equipment
Furniture
Computers

29. Intermediaries
Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-business
Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways

30. MEASURING E-BUSINESS SUCCESS
Most companies measure the traffic on a Web site as the primary determinant of the Web site’s success
However, a large amount of Web site traffic does not necessarily equate to large sales
Many organizations with high Web site traffic have low sales volumes

31. MEASURING E-BUSINESS SUCCESS
Web site traffic analysis can include:
Cookie
Click-through
Banner ad
Interactivity
Web 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 activities
Click-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 advertiser
Banner ad – a small ad on one Web site that advertises the products and services of another business, usually another dot-com business
Interactivity – visitor interactions with the target ad
Analyzing Web site traffic is one way organizations can understand the effectiveness of Web advertising
Ask your students how interactivity is a giant advancement in the advertising industry
Ans: 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 magazine
Interactivity measures allow advertisers to know exactly how long a customer spends viewing an ad
Ask your students about privacy and how do these types of Web traffic analysis tools invade user privacy

32. Web Site Metrics
Clickstream data tracks the exact pattern of a consumer’s navigation through a Web site
Clickstream data can reveal:
Number of pageviews
Pattern of Web sites visited
Length of stay on a Web site
Date and time visited
Number of customers with shopping carts
Number of abandoned shopping carts
Click-stream data can reveal a number of basic data points on how consumers interact with Web sites
Ask your students what an organization can learn from understanding click-stream data
For example, what does number of abandoned shopping carts tell an organization?

33. Web Site Metrics Web site metrics include: Visitor metrics
Exposure metrics
Visit metrics
Hit metrics
Review each section of Figure 3.30 for a detailed listing of visitor, exposure, visit, and hit metrics
CLASSROOM EXERCISE
Measuring Metrics
Break your students into groups and assign each group one of the four categories found in the above Figure
Have your students detail each category explaining how each metric can be used to help an organization improve its operations
Ask your students to share their answers with the class

34. E-BUSINESS BENEFITS AND CHALLENGES
E-business benefits include:
Highly accessible
Increased customer loyalty
Improved information content
Increased convenience
Increased global reach
Decreased cost

35. E-BUSINESS BENEFITS AND CHALLENGES
E-business challenges include:
Protecting consumers
Leveraging existing systems
Increasing liability
Providing security
Adhering to taxation rules

36. 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 government

37. NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE
Mobile commerce - the ability to purchase goods and services through a wireless Internet-enabled device