1. ELC 200 Day 23

2. Agenda Questions from last Class? Assignment 6, 7 & 8 all posted  Assignment 6 due Today Will have them back to you on Monday  Assignment 7 due May 1 @ 12:30PM  Assignment 8 due May 8 @ 8AM EBiz plan and presentations  Due May 8 @ 8AM  More information in assignments section of WebCT Today we will the discussing on Payment systems and start talking about eCommerce Strategies.

3. Person-to-Person Payments Person-to-person (P2P) payments—e- payment schemes (such as paypal.com) that enable the transfer of funds between two individuals  Repaying money borrowed  Paying for an item purchased at online auction  Sending money to students at college  Sending a gift to a family member

4. Global B2B Payments Letters of credit (LC)—a written agreement by a bank to pay the seller, on account of the buyer, a sum of money upon presentation of certain documents TradeCard (tradecard.com)—innovative e-payment method that uses a payment card

5. Electronic Letters of Credit (LC) Benefits to sellers  Credit risk is reduced  Payment is highly assured  Political/country risk is reduced Benefits to the buyer  Allows buyer to negotiate for a lower purchase price  Buyer can expand its source of supply  Funds withdrawn from buyer’s account only after the documents have been inspected by the issuing bank

6. TradeCard Payments TradeCard allows businesses to effectively and efficiently complete B2B transactions whether large or small, domestic or cross-border, or in multiple currencies  Buyers and sellers interact with each other via the TradeCard system  System Checks purchase orders for both parties Awaits confirmation from a logistics company that deliveries have been made and received Authorizes payment completing financial transaction between the buyer and seller

7. E-Checking E-check—the electronic version or representation of a paper check  Eliminate need for expensive process reengineering and takes advantage of the competency of the banking industry  eCheck Secure (from vantaguard.com) and checkfree.com provide software that enables the purchase of goods and services with e-checks  Used mainly in B2B

8. Order Fulfillment: Overview Order fulfillment—all the activities needed to provide customers with ordered goods and services, including related customer services  Back-office operations—the activities that support fulfillment of sales, such as accounting and logistics  Front-office operations—the business processes, such as sales and advertising, that are visible to customers

9. Overview of Logistics Logistics—the operations involved in the efficient and effective flow and storage of goods, services, and related information from point of origin to point of consumption Delivery of materials or services  Right time  Right place  Right cost

10. EC Order Fulfillment Process 1. Payment clearance 2. In-stock availability 3. Arranging shipments 4. Insurance 5. Production (planning, execution) 6. Plant services 7. Purchasing and warehousing 8. Customer contacts 9. Returns (Reverse logistics—movement of returns from customers to vendors) 10. Demand forecast 11. Accounting, billing Steps in the process of order fulfillment

11. Exhibit 10.9 Order Fulfillment and Logistics Systems

12. Order Fulfillment and the Supply Chain Order fulfillment and order taking are integral parts of the supply chain. Flows of orders, payments, and materials and parts need to be coordinated among  Company’s internal participants  External partners The principles of supply chain management must be considered in planning and managing the order fulfillment process

13. Problems in Order Fulfillment Manufacturers, warehouses, and distribution channels were not in sync with the e-tailers High inventory costs Quality problems exist due to misunderstandings Shipments of wrong products, materials, and parts High cost to expedite operations or shipments

14. Problems in Order Fulfillment (cont.) Uncertainties  Major source of uncertainty is demand forecast  Demand is influenced by Consumer behavior Economic conditions Competition Prices Weather conditions Technological developments Customers’ confidence

15. Problems in Order Fulfillment (cont.)  Demand forecast should be conducted frequently with collaborating business partners along the supply chain in order to correctly gauge demand and make plans to meet it  Delivery times depend on factors ranging from machine failures to road conditions  Quality problems of materials and parts (may create production time delays)  Labor troubles (such as strikes) can interfere with shipments

16. Problems in Order Fulfillment (cont.) Order fulfillment problems are created due by lack of coordination and inability or refusal to share information Bullwhip effect—large fluctuations in inventories along the supply chain, resulting from small fluctuations in demand for finished products

17. Solutions to Order Fulfillment Problems Improvements to order taking process  Order taking can be done on EDI, EDI/Internet, or an extranet, and it may be fully automated.  In B2B, orders are generated and transmitted automatically to suppliers when inventory levels fall below certain levels.  Result is a fast, inexpensive, and a more accurate process Web-based ordering using electronic forms expedites the process Makes it more accurate Reduces the processing cost for sellers

18. Solutions to Order Fulfillment Problems (cont.) Implementing linkages between order- taking and payment systems can also be helpful in improving order fulfillment Electronic payments can expedite order fulfillment cycle and payment delivery period  Payment processing significantly less expensive  Fraud can be controlled better

19. Inventory Management Improvements Inventories can be minimized by:  Introducing a make-to-order (pull) production process  Providing fast and accurate demand information to suppliers Inventory management can be improved (inventory levels and administrative expenses) can be minimized by:  Allowing business partners to electronically track and monitor orders and production activities  Having no inventory at by digitizing products

20. Automated Warehouses B2C order fulfillment—send small quantities to a large number of individuals  Step 1: retailers contract Fingerhut to stock products and deliver Web orders  Step 2: merchandise stored SKU warehouse  Step 3: orders arrive  Step 4: computer program consolidates orders from all vendors into “pick waves”

21. Automated Warehouses (cont.)  Step 5: picked items moved by conveyors to packing area; computer configures size and type of packing; types special packing instructions  Step 6: conveyer takes packages to scanning station (weighed)  Step 7: scan destination; moved by conveyer to waiting trucks  Step 8: full trucks depart for Post Offices

22. Same Day, Even Same Hour Delivery Role of FedEx and similar shippers  From a delivery to all-logistics  Many services  Complete inventory control  Packaging, warehousing, reordering, etc.  Tracking services to customers

23. Same Day, Even Same Hour Delivery (cont.) Supermarket deliveries  Transport of fresh food to people who are in homes only at specific hours  Distribution systems are critical  Fresh food may be spoiled

24. Partnering Efforts Collaborative commerce among members of the supply chain results in:  Shorter cycle times  Minimal delays and work interruptions  Lower inventories  Less administrative cost  Minimize bullwhip effect problem

25. Order Fulfillment in B2B Using e-marketplaces and exchanges to ease order fulfillment problems Both public and private marketplaces  E-procurement system controlled by one large buyer, suppliers adjust their activities and IS to fit the IS of the buyer  Company-centric marketplace can solve several supply chain problems  Use an extranet  Use a vertical exchange

26. Order Fulfillment in B2B (cont.) Shippers (sellers) Receivers (buyers) Carriers Third-party logistics providers Warehouse companies Vertical e- marketplaces Transportation e-marketplaces Logistics software application vendors Players in B2B fulfillment

27. Handling Returns Necessary for maintaining customer trust and loyalty using:  Return item to place it was purchased  Separate logistics of returns from logistics of delivery  Completely outsource returns  Allow customer to physically drop returned items at collection stations

28. UPS Provides Broad EC Services Electronic tracking of packages Electronic supply chain services for corporate customers by industry including:  Portal page with industry-related information  Statistics Calculators for computing shipping fees Help customers manage electronic supply chains

29. The UPS Strategy (cont.) Improved inventory management, warehousing, and delivery Integration with shipping management system Notify customers by e-mail of:  Delivery status  Expected time of arrival of incoming packages

30. The UPS Strategy (cont.) Representative tools  7 transportation and delivery applications Track packages Analyze shipping history Calculate exact time-in-transit  Downloadable tools Proof of delivery Optimal routing features  Delivery of digital documents  Wireless access to UPS system

31. Summary Crucial factors determining the success of an e-payment method Key elements in securing an e-payment Online credit card players and processes The uses and benefits of purchasing cards Categories and potential uses of smart cards Online alternatives to credit card payments

32. Summary (cont.) E-check processes and involved parties The role of order fulfillment and back-office operations in EC The order fulfillment process Problems in order fulfillment Solutions to order fulfillment problems

33. Chapter 11 E-Strategy, Internet Communities, and Global EC

34. Learning Objectives Describe the importance and essentials of business and EC strategies Describe the strategy planning and formulation process for EC Understand how EC applications are discovered, justified, and prioritized Describe strategy implementation and assessment including the use of metrics Understand EC failures and lessons for success

35. Learning Objectives (cont.) Describe the role and impact of virtual communities on EC Evaluate the issues involved in global EC Analyze the impact of EC on small businesses Describe the relationship between EC and BPR, knowledge management, and virtual corporations Describe the future of EC

36. IBM’s E-Business Strategy The Problem  Need to capture new business opportunities and technologies (like EC)  Develop a business strategy for that purpose  IBM’s current strategy is to transform itself into an e-business in order to provide business value to the corporation and its shareholders  IBM views e-business as being much broader than EC because it: Serves a broader constituency Offers a variety of Web-based processes and transactions

37. IBM’s E-Business Strategy (cont.) The Solution is based on four goals:  Lead IBM’s strategy to transform itself into e- business  Act as a catalyst to help facilitate that transformation  Help business units become more effective in their use of the Internet/intranet Internally With their customers

38. IBM’s E-Business’s Strategy (cont.)  Establish a strategy for the corporate Internet site Including definition of how it should look, “feel” and be navigated Create an online environment most conducive to customers doing business with IBM  Leverage the wealth of e-business transformational case studies within IBM to highlight the potential of e-business to IBM’s customers

39. IBM’s E-Business Strategy (cont.) E-commerce E-care for customers E-care for business partners E-care for influencers E-care for employees E-procurement E-marketing communications IBM focused on seven key initiatives:

40. IBM’s E-Business Strategy (cont.) The Results  Implementation of an e-procurement system that spans IBM globally  Saved IBM almost $5 billion over a 3-year period  Electronic invoicing: Reduces the number of paper invoices Enables fast, competitive tendering from its suppliers

41. IBM’s E-Business Strategy (cont.)  IBM’s evaluation of the procurement process determined where the use of the Web adds value  Identification of more than 20 initiatives to reduce costs and improve purchasing including: Collaboration with suppliers Online purchasing Knowledge-management-based applications

42. E-Strategy: Concepts & Overview Strategy—search for revolutionary actions that will significantly change the current position of a company, shaping its future  Finding the position in a marketplace that best fits the firm’s skills  Company’s choice of new position that must be driven by its ability to find new trade-offs and leverage a new system of complementary activities into sustainable advantage

43. Elements of Strategy Elements of a strategy  Forecasting  Resource allocation  Core competency  Environmental analysis  Company analysis  Business planning

44. Strategic Management Process Model

45. Types of E-Strategies EC strategy (e-strategy)—an organization’s strategy for use of e- commerce or e-business  Click-and-mortar companies that use many EC applications  Click-and-mortar companies that use only one or two EC applications  Click-and-mortar companies that use one EC application that fundamentally changes all their business  Pure-play EC companies

46. Source: adapted from www.mohanbirsawhney.comwww.mohanbirsawhney.com

47. Need for a Strategy Why does a company need an e-strategy?  Fast changes in business and technology means that opportunities and threats can change in a minute  Company must consider EC strategy that includes contingency plans to deal with changes  May be too costly not to have one

48. Charles Schwab’s EC Strategy In 1998 Schwab launched schwab.com—one of the first click-and- mortar stockbrokers  Changed the company pricing structure radically Took a short-term revenue loss Looking toward a long-term strategic gain  EC strategy fit well with company’s overall strategy emphasizing a one-to-one relationship with its customers

49. Charles Schwab (cont.) Schwab had first-mover advantage in securing key partnerships  Schwab and Nextel agreed to build an infrastructure allowing investment opportunities over mobile phones or wireless handheld devices  Initial target was existing off-line customers with incomes over $150,000 a year and who buy and hold  Key benefits: Innovative products Superior service Low fees Cutting-edge technology

50. Charles Schwab (cont.) Partnered with content providers and technology companies to offer:  Large number of financial services online  Community and personalized services Financial model composed of three parts:  The revenue model  The value model  The growth model

51. Charles Schwab (cont.) CyberTrader's services are designed for online, self- directed active traders who use short-term trading strategies to generate current income Cybertrader features include: Nasdaq Level II quotes Direct Access trading capabilities Risk management tools Graphical decision support modules Streaming News Intelligent order routing Direct options routing

52. E-Strategy Landscape Strategy initiation: organization prepares information about its vision,mission,purpose,and the contribution that EC could make to the business Strategy formulation:  Identification of EC applications  Cost-benefit analysis  Risk analysis

53. E-Strategy Landscape (cont.) Strategy implementation:  Organization’s resources are analyzed  A plan is developed for attaining the goals Strategy assessment:  Organization periodically assesses progress toward the strategic goals  Involves the development of EC metrics

54. Exhibit 11.1 The Landscape of EC Strategy

55. Strategy Initiation Strategy initiation—the initial phase of e- strategy in which an organization prepares information about its vision, mission, purpose, and the contribution that EC could make 1.Review the organization’s business and IT vision and mission 2.Generate vision and mission for EC 3.Begin with industry and competitive analysis

56. Industry Assessment What industry is the EC initiative related to? Who are the customers? What are the current practices of selling and buying? Who are the major competitors? (How intense is the competition?) What e-strategies are used, by whom? How is value added throughout the value chain? What are the major opportunities and threats? Are there any metrics or best practices in place? What are the existing and potential partnerships for EC?

57. Company Assessment The organization investigates its own:  Business strategy  Performance  Customers  Partners It looks at everything that has an impact on its operations  Processes  People  Information flows  Technology support

58. Industry, Company, and Competitive Analysis SWOT analysis—a methodology that surveys the opportunities and threats in the external environment and relates them to the organization’s particular strengths and weaknesses SWOT Analysis  Strengths  Opportunities  Weaknesses  Threats

59. Exhibit 11.2 SWOT Matrix

60. Verizon 1.Top wireless provider in the U.S. serving 49 of the top 50 markets 2.High-speed data network in all major markets 3.Largest provider of local, long distance, data, and broadband services in 2/3 of the top 100 markets in the U.S. 4.Leading print and on-line directory publisher with 2100 in U.S. and 13 other countries 5.Verizon invested 12 billion in 2002 in 400,000 miles of fiber- optic cable. 6.Marketing campaign – brand awareness 1.49 billion dollars in long term debt 2.Lack of international presence 3.Revenue only increased 4 percent since year end 2000. S-O StrategiesW-O Strategies 1.141 million possible investors in Europe, UK, and Germany 2.Strengthening foreign currencies vs dollar- Euro advantages 3.Increased usage in wireless services 4.Small wireless providers are consolidating with larger providers due to increased competition 5.Increased desire for high-speed internet service 1.Expand wireless services into Europe, UK and/or Germany (S1, O1, O3) 2.Expand high speed internet service in Europe, UK and/or Germany (S2,O5) 3.Acquire small domestic wireless providers such as Powertel or Aerial (S1, O4) 4.Invest capital into fiber optic cable to compete with cable companies. (S5, O5) 1.Purchase international wireless providers such as MMO 2 (W2, O4) 2.Offer services to people in Europe to increase revenue due to the difference in foreign currency (W1, O2) S-T StrategiesW-T Strategies 1.New regulatory complaints (new phone # portability) 2.Rising costs of healthcare 3.Global unrest- economic monetary and financial 4.Consumer privacy rights being attacked 5.Weak Consumer spending 6.Decreasing demand for traditional voice lines and fixed lines 7.Increasing overlap of telecommunication territories 8.Increasing competition for providers of web search directories 9.Increasing providers of wireless services 10.Brand recognition 1.Enter into a joint venture with MCI to offer a package deal (S1, T12) 2.Proceed with legal battles to serve local markets to increase traditional voice and fixed lines.(S3, T7) 1.Expand globally in Europe (W2, T7) 2.Liquidate the Telecommunications Services such as fixed lines and traditional lines business to reduce long-term debt. (W1, T6)

61. Competitive Intelligence on the Internet Internet can play a major role as a source of competitive information (competitive intelligence)  Review competitors’ Web sites  Examine publicly available financial documents  Ask the customers—award prizes to those who best describe your competitors’ strengths and weaknesses

62. Competitive Intelligence on the Internet (cont.)  Analyze related discussion groups Find out what people think about a company and its products and competitor's products Reaction to new ideas and products  Use information delivery services Find out what it published on the Internet Known as push technologies  Corporate research companies provide information about your competitors:  Examine chat rooms

63. Issues in Strategy Initiation Advantages  Chance to capture large markets  Establishing a brand name  Exclusive strategic alliances Disadvantages  Cost of developing EC initiative is usually very high  Chance of failure is high  System may be obsolete as compared to second wave arrivals  No support services are available at the beginning To be a first mover or a follower?

64. Should You Have a Separate Online Company? Advantages  Reducing or eliminating internal conflicts  Providing more freedom to management in pricing, advertising, etc.  Can create new brands quickly  Take the e-business to an IPO and make a fortune Disadvantages  May be very costly and risky  Collaboration with off- line business may be difficult  Lose expertise of business functions unless you use close collaboration