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Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.1 © 2005 by Prentice Hall The.

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Presentation on theme: "Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.1 © 2005 by Prentice Hall The."— Presentation transcript:

1 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.1 © 2005 by Prentice Hall The Digital Firm: Electronic Business and Electronic Commerce Chapter 4

2 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.2 © 2005 by Prentice Hall Objectives 1.How has Internet technology changed value propositions and business models? 2.What is electronic commerce? How has electronic commerce changed consumer retailing and business-to-business transactions? 3.What are the principal payment systems for electronic commerce?

3 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.3 © 2005 by Prentice Hall Objectives 4.How can Internet technology facilitate management and coordination of internal and interorganizational business processes? 5.What are the major managerial and organizational challenges posed by electronic business and electronic commerce?

4 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.4 © 2005 by Prentice Hall Management Challenges 1.Digitally integrating the enterprise requires a complete change of mind-set. 2.Finding a successful Internet business model.

5 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.5 © 2005 by Prentice Hall The Internet Rapidly becoming infrastructure of choice Universal, easy-to-use set of technologies and standards Web sites available 24/7 Extended distribution channels Reduced transaction costs Reduced network and coordination costs Electronic Business, Electronic Commerce, and the Emerging Digital Firm Internet Technology and the Digital Firm

6 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.6 © 2005 by Prentice Hall Past: Information about products and services bundled with their physical value chain Today: The Internet has unbundled information from traditional value chain, creating new business models Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

7 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.7 © 2005 by Prentice Hall Information Asymmetry One party has more information essential to the transaction than the other party The Internet shrinks information asymmetry Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

8 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.8 © 2005 by Prentice Hall Richness and Reach Richness: depth and detail of information Reach: how many people a business can connect with; how many products offered those people Internet allows much richer communication with farther reach Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

9 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.9 © 2005 by Prentice Hall Electronic Business, Electronic Commerce, and the Emerging Digital Firm The changing economics of information Figure 4-1

10 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.10 © 2005 by Prentice Hall Internet Business Models Virtual 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. Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

11 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.11 © 2005 by Prentice Hall Internet Business Models Online Marketplace: Provides digital environment where buyers and sellers meet Content Provider: Provides digital content, such as news; revenue from fees or advertising sales Online Service Provider: Provides connectivity; revenue from fees, advertising, or marketing information Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

12 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.12 © 2005 by Prentice Hall Internet Business Models (cont.) Virtual Community: Provides online meeting place for people of similar interests Portal: Provides initial point of entry to the Web, along with specialized content and services Syndicator: aggregates content or applications to resell as package to third-party Web sites Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

13 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.13 © 2005 by Prentice Hall Business-to-consumer (B2C): Retailing products and services to individual shoppers Business-to-business (B2B): Sales of goods and services among businesses Consumer-to-consumer (C2C): Consumers selling directly to consumers Electronic Commerce Categories of Electronic Commerce

14 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.14 © 2005 by Prentice Hall Direct Sales Over the Web Disintermediation: Removal of intermediary steps in a value chain, selling directly to consumers, significantly lowers purchase transaction costs Reintermediation: Shifting intermediary function in a value chain to a new source, such as service hubs Electronic Commerce Customer-Centered Retailing

15 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.15 © 2005 by Prentice Hall Electronic Commerce The benefits of disintermediation to the consumer Figure 4-2

16 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.16 © 2005 by Prentice Hall Interactive Marketing and Presentation Collection of customer information using Web site auditing tools less expensive than surveys and focus groups Web personalization technology customizes content on Web site to individuals profile and purchase history Web sites and marketing shorten sales cycle and reduce time spent in customer education Electronic Commerce Customer-Centered Retailing

17 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.17 © 2005 by Prentice Hall Electronic Commerce Web site personalization Figure 4-3

18 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.18 © 2005 by Prentice Hall Customer Self-Service Web-based responses to customer questions cost a fraction of telephone costs for live customer service representation Web-based customer self-service applications, such as airline flight information sites Traditional, phone-based customer call centers being integrated with Web Electronic Commerce Customer-Centered Retailing

19 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.19 © 2005 by Prentice Hall Web, Internet streamlining procurement process E-procurement eliminates inefficient, paper- based processes Selling through Web sites, private industrial networks, or Net marketplaces Electronic Commerce Business-to-Business Electronic Commerce

20 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.20 © 2005 by Prentice Hall Lightnin Lights Up with the Internet What are the benefits of using Web-based order configuration software? How does this system provide value to Lightnin and its customers? Electronic Commerce Window on Technology

21 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.21 © 2005 by Prentice Hall Electronic Commerce Before-after diagram of changes in Lightnins ordering process Figure 4-4

22 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.22 © 2005 by Prentice Hall Private Industrial Network Private exchange; typically consists of large firm using extranet to link to its suppliers and business partners Permits firm and partners to share product design, development, marketing, scheduling, inventory management, and unstructured communication Fastest-growing type of B2B commerce Electronic Commerce Business-to-Business Electronic Commerce

23 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.23 © 2005 by Prentice Hall Electronic Commerce A private industrial network Figure 4-5

24 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.24 © 2005 by Prentice Hall Net Marketplace E-hub; provides single Internet-based marketplace for many different buyers and sellers Industry owned or independent intermediaries Transaction oriented; generates revenue from purchase and sales transactions and other services Electronic Commerce Business-to-Business Electronic Commerce

25 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.25 © 2005 by Prentice Hall Electronic Commerce A Net marketplace Figure 4-6

26 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.26 © 2005 by Prentice Hall Exchanges Third-party Net marketplaces connecting thousands of suppliers and buyers for spot purchasing Proliferated during early years of e-commerce Exchanges encouraged competitive bidding, driving prices down; suppliers reluctant to participate Electronic Commerce Business-to-Business Electronic Commerce

27 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.27 © 2005 by Prentice Hall Digital credit card payment systems: Secure credit card payment over Web Digital wallet: Stores credit card and owner identification, shipping information, to facilitate payment process Accumulated balance digital payment systems: Accumulates micropayment purchases as debit balance paid periodically on credit card or telephone bills Electronic Commerce Electronic Commerce Payment Systems

28 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.28 © 2005 by Prentice Hall Stored value payment system: Enables consumers to make instant payments based on value stored in digital account Digital cash: Digital currency that can be used for micropayments or larger purchases Peer-to-Peer payment systems: Enables payments to vendors not set up for credit-card payments Electronic Commerce Electronic Commerce Payment Systems

29 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.29 © 2005 by Prentice Hall Digital checking: Electronic check with secure digital signature Electronic billing presentment and payment system: Supports electronic payment for online and physical store purchases after purchase has taken place Electronic Commerce Electronic Commerce Payment Systems

30 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.30 © 2005 by Prentice Hall Electronic Commerce Electronic commerce information flows Figure 4-7

31 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.31 © 2005 by Prentice Hall Connectivity: accessible from most platforms Can be tied to internal corporate systems and core transaction data Can create interactive applications with text, audio, and video Electronic Business and the Digital Firm How Intranets Support Electronic Business

32 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.32 © 2005 by Prentice Hall Scalable to larger or smaller computing platforms as requirements change Easy to use, universal Web interface Low start-up costs Rich, responsive information environment Reduced information distribution costs Electronic Business and the Digital Firm How Intranets Support Electronic Business

33 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.33 © 2005 by Prentice Hall Finance and Accounting: Integrated view of financial and accounting information online Human Resources: Rapid delivery of information to employees; online publishing Sales and Marketing: Collaborative place to coordinate activities of sales force Manufacturing and Production: Distribute manufacturing information to different parts of organization Electronic Business and the Digital Firm Intranet Applications for Electronic Business

34 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.34 © 2005 by Prentice Hall Electronic Business and the Digital Firm Functional applications of intranets Figure 4-8

35 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.35 © 2005 by Prentice Hall Pre-Internet, integration costly and difficult Internet technology less expensive than building enterprise systems Intranets: improve coordination among internal business processes Extranets: coordinate processes shared with customers and partners Intranet promotes collaborative commerce Electronic Business and the Digital Firm Business Process Integration

36 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.36 © 2005 by Prentice Hall Unproven business models Business process change requirements Channel conflicts Legal issues Trust, security, and privacy Management Challenges and Opportunities Business Process Change Requirements

37 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.37 © 2005 by Prentice Hall Can Online Brokers Survive in Europe? Is providing online financial services over the Internet a viable business model? Why or why not? Electronic Business and the Digital Firm Window on Organizations

38 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.38 © 2005 by Prentice Hall 1.Apply the value chain and competitive forces models to the music recording industry. 2.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. Chapter 4 Case Study Can the Music Industry Change Its Tune?

39 Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.39 © 2005 by Prentice Hall 3.Analyze the response of the music recording industry to these changes. What management, organization, and technology issues affected this response? 4.What is the current business strategy of the music industry? Do you think it is viable? Explain your answer. Chapter 4 Case Study Can the Music Industry Change Its Tune?


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