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

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?

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?

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.

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

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

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

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

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

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

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

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

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

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

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

Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.16 © 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