Presentation on theme: "1.4: The Business Environment Drives EC"— Presentation transcript:
1 1.4: The Business Environment Drives EC Characteristics in the business environmentA more turbulent environment with more business problems and opportunitiesStronger competitionNeed for organisations to make decisions more frequentlyA larger scope for decisions because more factorsMore information and/or knowledge needed for making decisions.
2 1.4: The Business Environment Drives EC Business PressuresMarket (economic), societal, and technological factors have created a highly competitive business environment in which customers are becoming more powerful.These factors can change quickly, sometimes unpredictably.Business Critical Response ActivitiesEC and technology in general, provides organisations with ways to operate their businesses more efficiently by providing services and functions that in the past have been performed by employees at less than optimum efficienciesCompanies must not only take traditional actions such as lowering costs and closing unprofitable facilities, but also introduce innovative actions such as customising, creating new products, or providing superb customer service.
3 Exhibit 1.4 Major Business Pressures and the Role of EC Categories of business pressuresmarket (economic)societaltechnological
5 1.4: The Business Environment Drives EC Organisational response strategiesStrategic systems for competitive advantageContinuous improvement effortsBusiness process restructuring (BPR)Employee empowermentSupply chain improvementsBusiness alliancesElectronic marketsAgile organisationIncreased efficienciesMass customisation
6 1.4: Organisational Response Strategies Strategic Systems provide organisations with strategies to increase their market share, better negotiate with suppliers, or stop competitors.Continuous Improvement Efforts aim to improve a company’s productivity and quality. Examples include:Improved productivity • Managing enterprise dataJust-in-time (JIT) • Innovation and creativityTotal quality management • Change managementKnowledge management • Customer service
7 1.4: Organisational Response Strategies Business Process Restructuring (BPR) refers to the introduction of a major innovation in an organisation’s structure & the way it conducts business.The major areas in which IT supports BPR are the following;Reducing cycle time and time to market.Empowerment of employees and collaborative workEC allows the decentralisation of decision making and authority via empowerment and distributed systems, but simultaneously supports a centralised controlSupply Chain ImprovementsEC can help reduce supply chain delays, reduce inventories, and eliminate other inefficiencies
8 1.4: Organisational Response Strategies Business Alliances. Many companies realise that alliances with other companies, even competitors, can be very beneficial.Temporary joint venture = companies form a special company for a specific, limited-time mission.Electronic Markets. Doing business electronically is perhaps most promising strategy that many companies can pursue.Agile Organisations. Organisations that are able to react to improve productivity, even during times of change, through the appropriate uses of IT and EC.
9 1.5: EC Business Models Business Plan Business Case Business Model A written document that identifies the business goals and outlines the plan to achieve them.Business CaseA written document that is used by managers to gather funding for specific applications for projects.Its major emphasis is the justification for specific investment.Business ModelA method of doing business by which a company can generate revenue to sustain itself
10 The Structure of Business Models 1.5: EC Business ModelsThe Structure of Business ModelsA description of the customers to be served and the company’s relationships with these customers (customers’ value proposition)A description of all products and services the business will offerA description of the business process required to make and deliver the products and services
11 The Structure of Business Models 1.5: EC Business ModelsThe Structure of Business ModelsA list of the resources required and the identification of which ones are available, which will be developed in-house, and which will need to be acquiredA description of the organisation supply chain, including suppliers and other business partnersA description of the revenues expected (revenue model), anticipated costs, sources of financing, and estimated profitability (financial viability)
12 1.5: EC Business Models Revenue Models Major revenue models A revenue model: Description of how the company or an EC project will earn revenueMajor revenue modelsSalesTransaction feesSubscription feesAdvertising feesAffiliate feesOther revenue sources
13 How do e-marketplaces create value? (Amit and Zott 2001) 1.5: EC Business ModelsValue propositionThe benefits a company can derive from using ECHow do e-marketplaces create value? (Amit and Zott 2001)Search and transaction cost efficiencyComplementaritiesLock-inNovelty
15 1.5: Typical EC Business Models Online direct marketingManufacturer/retailer sells directly to consumers via InternetElectronic tendering systemsLarge organisational buyers issue needs via a reverse auction (lowest bidder wins) hosted by an EC intermediary, which then solicits bids from potential suppliersName-your-own-priceA buyer sets the price he is willing to pay and invites sellers to supply the good or service at that priceFind the best priceCustomer specifies needs, then an EC intermediary matches the needs against a database, locates the lowest price, and submits the information to the customer.
16 1.5: Typical EC Business Models Affiliate marketingAn arrangement whereby a marketing partner (a business, an organisation, or even an individual) refers consumers to the selling company’s Web site and takes a commission on sales from successful referrals.Viral marketingWord-of-mouth marketing in which customers promote a product or service to friends or other people.Group PurchasingQuantity purchasing that enables groups of purchasers to obtain a discount price on the products purchasede-co-opsAnother name for online group purchasing organisations
17 1.5: Typical EC Business Models Online auctionsOnline shoppers make consecutive bids through an EC intermediary and the intermediary awards the product to the highest bidderProduct and service customisationCreation of a product or service according to the buyer’s specifications or needsElectronic marketplaces and exchangesEC intermediaries bring together potential buyers and sellers via the InternetSupply chain improversEC intermediaries who improve the speed and efficiency of existing supply chain relationships.
18 1.5: Typical EC Business Models Value-chain integratorsAggregate information-rich products into more complete package. Eg Carpoint.com provides financing and insuranceValue-chain service providersSpecialise in a supply chain function. Eg UPS.com for logistics or PayPal.com (now part of eBay) for logisticsInformation brokersProvide privacy, trust, matching, search, etc. Eg Google.comBarteringExchange goods via a market maker. Eg Web-barter.comDeep discountingCompanies such as Half.com offer products/services at deep discounting, as much as 50% off the retail price.
19 1.5: Example of Supply Chain Improver Orbis Group changes a linear physical supply chain to an electronic hubTraditional process in the B2B advertising fieldCase 1.5a
20 1.5: Example of Supply Chain Improver Product Bank simplifies this lengthy process by changing the linear flow of products and information to a digitised hubCase 1.5b
21 Benefits to Organisations 1.6: EC BenefitsBenefits to OrganisationsGlobal reachReduced costsSupply chain improvementsExtended operating hours (24/7/365)CustomisationCreation of new business modelsVendor specialisationImproved time-to-marketLower communication costsEfficient procurementImproved customer relationsUp-to-date company materialNo city business permits or feesOther benefits
22 1.6: EC Benefits Benefits to Consumers Ubiquity More products and services choicesCustomised products and servicesCheaper products and services (cost)Instant delivery (speed)Improved information availabilityParticipation in auctionsImproved interactions with others through electronic communitiesNo sales tax
23 1.6: EC Benefits Benefits to Society Telecommuting EC enables more individuals to work at home, thereby reducing pollution and trafficImproved standard of living because the less affluent can afford lower online pricesHomeland securityEC technologies allow for better communication, coordination, information interpretation and information sharing.Improve product availability in developing nations.Wider availability of public services
25 1.8: Networks for ECTask facing each organisation is how to put together the components that will enable the organisation to transform itself to the digital economy and gain competitive advantage by using ECMany employ corporate portalsA major gateway through which employees, business partners, and the public can enter a corporate Web site
27 Managerial Issues Is it real? Why is B2B e-commerce so attractive? There are so many EC failures—how can one avoid them?How do we transform our organisation into a digital one?How should we evaluate the magnitude of business pressures and technological advancement?What should be my company’s strategy toward EC?What are the top challenges of EC?