1. 4.1 © 2006 by Prentice Hall 4 Chapter The Digital Firm: Electronic Business and Electronic Commerce

2. 4.2 © 2006 by Prentice Hall OBJECTIVES Analyze how Internet technology has changed value propositions and business models Define electronic commerce and describe how it has changed consumer retailing and business-to- business transactions Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

3. 4.3 © 2006 by Prentice Hall Compare the principal payment systems for electronic commerce Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes Assess the challenges posed by electronic business and electronic commerce and management solutions OBJECTIVES (Continued) Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4. 4.4 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Technology and the Digital Firm Information technology infrastructure: The Internet provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations. Internet provides low cost connectivity Direct communication between trading partners: Disintermediation removes intermediate layers and streamlines processes. Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

5. 4.5 © 2006 by Prentice Hall The Benefits of Disintermediation to the Consumer Figure 4-2 ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

6. 4.6 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Round the clock service: Web sites available to consumers 24 hours Extended distribution channels: Outlets created for attracting customers who otherwise would not patronize a firm Reduced transaction costs: Costs of searching for buyers declines Reduced overheard, inventory, maintenance, etc. Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Internet Technology and the Digital Firm (Continued)

7. 4.7 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Business Model: Defines an enterprise Describes how the enterprise delivers a product or service Shows how the enterprise creates wealth how it adds value, creates something people want New Business Models and Value Propositions Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

8. 4.8 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Virtual storefront: Sells goods or services online (Amazon.com) Information broker: Provides information on products or services (Edmunds.com) Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com) Online marketplace: Provides a trading platform for individuals and firms (eBay.com) Some Internet Business Models Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

9. 4.9 © 2006 by Prentice Hall ELECTRONIC COMMERCE Categories of Electronic Commerce Business-to-customer (B2C): Retailing of products and services directly to individual customers (Wal-Mart.com) Business-to-business (B2B): Sales of goods and services to other businesses (Grainger.com, Ariba.com) Consumer-to-consumer (C2C): Individuals using the Web for private sales or exchange (eBay.com ) B2E Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

10. 4.10 © 2006 by Prentice Hall Electronic Data Interchange (EDI): Enables the computer-to-computer exchange between two organizations of standard transactions. Currently 80% of B2B e-commerce uses this system. EDI is being replaced by more powerful Web-based alternatives. xml,.net, other web-based data communication standards Business-to-Business Electronic Commerce: New Efficiencies and Relationships ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

11. 4.11 © 2006 by Prentice Hall ELECTRONIC COMMERCE Electronic Data Interchange (EDI) Figure 4-5 Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Purchase orders, documents, invoices, etc.

12. 4.12 © 2006 by Prentice Hall ELECTRONIC COMMERCE Private Industrial Networks The largest Web-based form of B2B commerce Fastest growing type of B2B commerce Private B2B extranets that focus on continuous business process coordination between a small key group of companies for collaboration and supply chain management. Wal-Mart uses its own private network to coordinate more than 15,000 suppliers to its stores. Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

13. 4.13 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Information asymmetry: One party in a transaction has more information than the other. The Internet decreases information asymmetry. Increases richness: The Internet increases the depth, detail, and scope of information. Increases reach: The Internet increases the number of people who can be contacted efficiently. The Changing Economies of Information Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

14. 4.14 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM The Changing Economics of Information Figure 4-1 Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

15. 4.15 © 2006 by Prentice Hall Clickstream tracking tools: Collect data on customer activities at Web sites and store them in a log ELECTRONIC COMMERCE Interactive Marketing and Personalization Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

16. 4.16 © 2006 by Prentice Hall Web Site Visitor Tracking Figure 4-3 ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

17. 4.17 © 2006 by Prentice Hall Create unique personalized Web pages for each customer Increased closeness to customer increases value to the customer, while reducing costs of interacting with the customer ELECTRONIC COMMERCE Web Personalization Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

18. 4.18 © 2006 by Prentice Hall ELECTRONIC COMMERCE Electronic Commerce Payment Systems Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

19. 4.19 © 2006 by Prentice Hall Compares information gathered about a specific user’s behavior at a Web site to data about other customers with similar interests to predict what the user would like to see next. The software then makes recommendations to users based on their assumed interests. Amazon.com’s recommended books, music, etc. ELECTRONIC COMMERCE Collaborative filtering: Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

20. 4.20 © 2006 by Prentice Hall ELECTRONIC BUSINESS AND THE DIGITAL FIRM How Intranets Support Electronic Business Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Intranet: a private, internal network using Internet technology

21. 4.21 © 2006 by Prentice Hall ELECTRONIC BUSINESS AND THE DIGITAL FIRM Connectivity: Accessible from most computing platforms Can be tied to internal corporate systems and core transaction databases Platforms for interactive applications Scalable to larger or smaller computing platforms Benefits of Intranets Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

22. 4.22 © 2006 by Prentice Hall ELECTRONIC BUSINESS AND THE DIGITAL FIRM Easy to use, universal standard Web interface Low start-up costs Richer, more responsive information environment than corporate manuals Reduced information distribution costs Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Benefits of Intranets (Continued)

23. 4.23 © 2006 by Prentice Hall ELECTRONIC BUSINESS AND THE DIGITAL FIRM Functional Applications of Intranets Figure 4-8 Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

24. 4.24 © 2006 by Prentice Hall MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS The Internet provides firms with extraordinary opportunities to develop new products and services, new distribution channels, new avenues for marketing and sales, and even entirely new business models, however these opportunities should align with the overall business strategy. Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Management Opportunities:

25. 4.25 © 2006 by Prentice Hall Finding a successful Internet business model Organizational change challenges Trust, Security, and Privacy (using the internet) Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Challenges:

26. 4.26 © 2006 by Prentice Hall Determining how Internet technology can provide value for the business (stay up with current/future technology/opportunities) Managing business process changes (change management) Safeguarding security and privacy (firewalls, encryption, controls, etc.) Solution Guidelines: Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS