COM333 – IS3 E-business Strategies

Internet –reduces the marginal costs of information, communication, and distribution almost to zero. –Internet business models offer significant advantages to suppliers and customers on at least one (often more than one) of these areas.

Information: there were an estimated eight hundred million pages on the world wide web in mid Communication: the internet enables customers to talk back in new ways, to make demands of suppliers Distribution: the internet makes the distribution of information all but cost-free. –programming software –digital music formats such as MP3

Effects of Internet on business models. –Everything speeds up. –The ratio of a company’s time spent on customer (both in B2B and B2C) increased dramatically. –As a result of reduced search costs and cheap communication the consumer have far more control in markets than they have had before

Strategic systems development: e- business models –Consider the Internet as a channel for interaction with customers and other businesses –Look at the areas of the business in which Internet and traditional business approaches merge or diverge. –Integrate the Internet operations with current functional areas

Internet as Channel for interaction –Use the Internet channel for information provision only –Use the Internet channel primarily for export markets –Subsume the Internet channel as another channel in the existing business –View the Internet channel as another channel –Set up the Internet channel as a separate business –Develop a mixed system using a number of parallel channels with clear objectives for the contribution from the different channels and the nature of their interaction –Switch fully to the Internet channel, taking out retail outlets.

Look for areas where internet and traditional business approaches Merge or diverge company can set up an Internet spin-off operation that is entirely separate This is viable when –They are willing to exploit new business models and need to free themselves of the constraints of the current operation –The spin-off is not constrained by current technology and earlier legacy operations –They give the spin-off freedom to form alliances, raise capital, and attract new talent.

Integrate Internet operations –They can’t separate digital and physical operations without confusing customers –Senior management is committed to redefining the entire business value proposition –The entire organisation can be mobilised to migrate to an e-business channel

Types of business model for business-to-customer (B2C) operation –e-shops: a single firm selling their products or services online ( –e-malls: a range of businesses share a website for the provision of e- services kelkoo - yahoo shopping - –third-party marketplace: a third party provides Internet marketing and transaction services for other firms –e-procurement: electronic tendering of goods and services –Value chain integrators: offer a range of services across the value chain –Value chain service providers: specialise in a particular function within the value chain, such as electronic payments, inventory management and logistics –Information brokerage: companies that provide information to consumers to help make buying decisions, or to businesses to help business operations –Trust and other services: authenticate the services and products of other companies provided on the Web. Beynon-Davies (2004)

Strategic systems development: The five forces –J. M. Porter (Porter & Millar, 1985) proposed that there were five forces acting to create competition. These were The power of customers The power of suppliers The threat of new entrants The threat of new products and services, and Jostling for power among existing players in the market. –The aim of strategic Internet-based systems development therefore needs to be to examine ways in which Internet-based information systems can be used to reduce or deflect any of these five threats

Strategic systems development: e- business strategies –agora –aggregation –alliance The new media writer Don Tapscott adds two further models –Value chain –Distribution networks.

Agora –the Ancient Greek word for marketplace –An electronic market driven by dynamic pricing and liquidity of goods. –Time is a critical factor –Information is a key factor –Examples lastminute.com. (B2C) PC supplier network RosettaNet (B2B)

Aggregation –Electronic mega-store offering convenient access to a wide selection of goods, together with delivery –Aggregators have little impact on the nature of the good being bought –The success of the model often depends on effective delivery –Information is the critical factor –Examples Amazon ( – B2Cwww.amazon.com

Alliance –Loose affiliation of individuals around one standard or service offer –Value is created by connecting together sympathetic individuals or organisations. –Alliance create intellectual value by sharing knowledge in accordance with a set of agreed rules –Economic value comes from being a member of the alliance. –Communication is the critical factor –Examples The operating system Linux Digital music MP3 Visa

Distributive networks –The exchange of information among creators, users and customers –Business has used the internet to make transparent to its customers information that they could previously only have obtained through employees –This reduces service costs at one level –Increases the complexity of calls which are received –The value derives from the distribution of previously available information to a wider group of people –Examples Federal Express United Parcel Service

Value chain –Constructed by a manufacturer or supplier who uses management of information systems to construct personalised or specific products for customers –The value comes from The communication with customers and the supplier network The management of the information systems between suppliers –Examples Dell Cisco

–The aim of strategic Internet-based systems development needs to be To examine ways in which Internet-based information systems can be used to reduce or eliminate the barriers between the different activities, thus reducing overall cost and increasing overall profit margin.