Presentation on theme: "The Digital Firm: Electronic Business and Electronic Commerce"— Presentation transcript:
1 The Digital Firm: Electronic Business and Electronic Commerce Chapter 4The Digital Firm: Electronic Business and Electronic Commerce
2 What are the principal payment systems for electronic commerce? ObjectivesHow has Internet technology changed value propositions and business models?What is electronic commerce? How has electronic commerce changed consumer retailing and business-to-business transactions?What are the principal payment systems for electronic commerce?
3 ObjectivesHow can Internet technology facilitate management and coordination of internal and interorganizational business processes?What are the major managerial and organizational challenges posed by electronic business and electronic commerce?
4 Management Challenges Digitally integrating the enterprise requires a complete change of mind-set.Finding a successful Internet business model.
5 Internet Technology and the Digital Firm Electronic Business, Electronic Commerce, and the Emerging Digital FirmInternet Technology and the Digital FirmThe InternetRapidly becoming infrastructure of choiceUniversal, easy-to-use set of technologies and standardsWeb sites available 24/7Extended distribution channelsReduced transaction costsReduced network and coordination costs
6 New Business Models and Value Propositions Electronic Business, Electronic Commerce, and the Emerging Digital FirmNew Business Models and Value PropositionsPast: Information about products and services bundled with their physical value chainToday: The Internet has unbundled information from traditional value chain, creating new business models
7 New Business Models and Value Propositions Electronic Business, Electronic Commerce, and the Emerging Digital FirmNew Business Models and Value PropositionsInformation AsymmetryOne party has more information essential to the transaction than the other partyThe Internet shrinks information asymmetry
8 New Business Models and Value Propositions Electronic Business, Electronic Commerce, and the Emerging Digital FirmNew Business Models and Value PropositionsRichness and ReachRichness: depth and detail of informationReach: how many people a business can connect with; how many products offered those peopleInternet allows much richer communication with farther reach
9 The changing economics of information Electronic Business, Electronic Commerce, and the Emerging Digital FirmThe changing economics of informationFigure 4-1
10 New Business Models and Value Propositions Electronic Business, Electronic Commerce, and the Emerging Digital FirmNew Business Models and Value PropositionsInternet Business ModelsVirtual storefront: Sells physical products directly to consumers or businesses.Information broker: Provides product pricing and availability information; generates revenue from advertising or directing buyers to sellers.Transaction Broker: Processes online sales transactions for fee.
11 New Business Models and Value Propositions Electronic Business, Electronic Commerce, and the Emerging Digital FirmNew Business Models and Value PropositionsInternet Business ModelsOnline Marketplace: Provides digital environment where buyers and sellers meetContent Provider: Provides digital content, such as news; revenue from fees or advertising salesOnline Service Provider: Provides connectivity; revenue from fees, advertising, or marketing information
12 New Business Models and Value Propositions Electronic Business, Electronic Commerce, and the Emerging Digital FirmNew Business Models and Value PropositionsInternet Business Models (cont.)Virtual Community: Provides online meeting place for people of similar interestsPortal: Provides initial point of entry to the Web, along with specialized content and servicesSyndicator: aggregates content or applications to resell as package to third-party Web sites
13 Categories of Electronic Commerce Business-to-consumer (B2C): Retailing products and services to individual shoppersBusiness-to-business (B2B): Sales of goods and services among businessesConsumer-to-consumer (C2C): Consumers selling directly to consumers
14 Customer-Centered Retailing Electronic CommerceCustomer-Centered RetailingDirect Sales Over the WebDisintermediation: Removal of intermediary steps in a value chain, selling directly to consumers, significantly lowers purchase transaction costsReintermediation: Shifting intermediary function in a value chain to a new source, such as “service hubs”
15 The benefits of disintermediation to the consumer Electronic CommerceThe benefits of disintermediation to the consumerFigure 4-2
16 Customer-Centered Retailing Electronic CommerceCustomer-Centered RetailingInteractive Marketing and PresentationCollection of customer information using Web site auditing tools less expensive than surveys and focus groupsWeb personalization technology customizes content on Web site to individual’s profile and purchase historyWeb sites and marketing shorten sales cycle and reduce time spent in customer education
17 Web site personalization Electronic CommerceWeb site personalizationFigure 4-3
18 Customer-Centered Retailing Electronic CommerceCustomer-Centered RetailingCustomer Self-ServiceWeb-based responses to customer questions cost a fraction of telephone costs for live customer service representationWeb-based customer self-service applications, such as airline flight information sitesTraditional, phone-based customer call centers being integrated with Web
19 Business-to-Business Electronic Commerce Web, Internet streamlining procurement processE-procurement eliminates inefficient, paper-based processesSelling through Web sites, private industrial networks, or Net marketplaces
20 Lightnin Lights Up with the Internet Electronic CommerceWindow on TechnologyLightnin Lights Up with the InternetWhat are the benefits of using Web-based order configuration software?How does this system provide value to Lightnin and its customers?
21 Before-after diagram of changes in Lightnin’s ordering process Electronic CommerceBefore-after diagram of changes in Lightnin’s ordering processFigure 4-4
22 Business-to-Business Electronic Commerce Private Industrial NetworkPrivate exchange; typically consists of large firm using extranet to link to its suppliers and business partnersPermits firm and partners to share product design, development, marketing, scheduling, inventory management, and unstructured communicationFastest-growing type of B2B commerce
24 Business-to-Business Electronic Commerce Net MarketplaceE-hub; provides single Internet-based marketplace for many different buyers and sellersIndustry owned or independent intermediariesTransaction oriented; generates revenue from purchase and sales transactions and other services
26 Business-to-Business Electronic Commerce ExchangesThird-party Net marketplaces connecting thousands of suppliers and buyers for spot purchasingProliferated during early years of e-commerceExchanges encouraged competitive bidding, driving prices down; suppliers reluctant to participate
27 Electronic Commerce Payment Systems Digital credit card payment systems: Secure credit card payment over WebDigital wallet: Stores credit card and owner identification, shipping information, to facilitate payment processAccumulated balance digital payment systems: Accumulates micropayment purchases as debit balance paid periodically on credit card or telephone bills
28 Electronic Commerce Payment Systems Stored value payment system: Enables consumers to make instant payments based on value stored in digital accountDigital cash: Digital currency that can be used for micropayments or larger purchasesPeer-to-Peer payment systems: Enables payments to vendors not set up for credit-card payments
29 Electronic Commerce Payment Systems Digital checking: Electronic check with secure digital signatureElectronic billing presentment and payment system: Supports electronic payment for online and physical store purchases after purchase has taken place
30 Electronic commerce information flows Figure 4-7
31 Electronic Business and the Digital Firm How Intranets Support Electronic BusinessConnectivity: accessible from most platformsCan be tied to internal corporate systems and core transaction dataCan create interactive applications with text, audio, and video
32 Electronic Business and the Digital Firm How Intranets Support Electronic BusinessScalable to larger or smaller computing platforms as requirements changeEasy to use, universal Web interfaceLow start-up costsRich, responsive information environmentReduced information distribution costs
33 Electronic Business and the Digital Firm Intranet Applications for Electronic BusinessFinance and Accounting: Integrated view of financial and accounting information onlineHuman Resources: Rapid delivery of information to employees; online publishingSales and Marketing: Collaborative place to coordinate activities of sales forceManufacturing and Production: Distribute manufacturing information to different parts of organization
34 Electronic Business and the Digital Firm Functional applications of intranetsFigure 4-8
35 Electronic Business and the Digital Firm Business Process IntegrationPre-Internet, integration costly and difficultInternet technology less expensive than building enterprise systemsIntranets: improve coordination among internal business processesExtranets: coordinate processes shared with customers and partnersIntranet promotes collaborative commerce
36 Management Challenges and Opportunities Business Process Change RequirementsUnproven business modelsBusiness process change requirementsChannel conflictsLegal issuesTrust, security, and privacy
37 Electronic Business and the Digital Firm Window on OrganizationsCan Online Brokers Survive in Europe?Is providing online financial services over the Internet a viable business model? Why or why not?
38 Can the Music Industry Change Its Tune? Chapter 4 Case StudyCan the Music Industry Change Its Tune?Apply the value chain and competitive forces models to the music recording industry.What role did the Internet play in changing value propositions and the competitive environment? To what extent has it been responsible for declining CD sales? Explain your answer.
39 Can the Music Industry Change Its Tune? Chapter 4 Case StudyCan the Music Industry Change Its Tune?Analyze the response of the music recording industry to these changes. What management, organization, and technology issues affected this response?What is the current business strategy of the music industry? Do you think it is viable? Explain your answer.