Chapter 14 and Plug-in B11 E-Business CLASSROOM OPENER GREAT BUSINESS DECISIONS – Jeff Bezos Decides to Sell Books over the Internet Jeff Bezos owns 41 percent of Amazon and is estimated to be worth over $900 million. Bezos graduated from Princeton and was the youngest Vice President at Banker’s Trust in New York. Bezos had to make a decision to stay and receive his 1994 Wall Street bonus or leave and start a business on the Internet. “I tried to imagine being eighty years old, looking back on my life. I knew that I would hardly regret having missed the 1994 Wall Street bonus. But having missed being part of the Internet boom – that would have really hurt,” stated Bezos. The first books ordered through Amazon were dispatched in the fall of 1994 (personally packaged by Bezos and his wife). Amazon.com is now the biggest bookstore on the planet. It is the exemplar of electronic business.

Learning Outcomes Compare e-commerce and e-business Compare the four types of e-business models Describe the benefits and challenges associated with e-business 14.1 Compare e-commerce and e-business E-commerce is the buying and selling of goods and services over the Internet. E-commerce refers only to online transactions. E-business is the conducting of business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners. The primary difference between e-commerce and e-business is that e-business also refers to online exchanges of information. For example, a manufacturer allowing its suppliers to monitor production schedules or a financial institution allowing its customers to review their banking, credit card, and mortgage accounts. 14.2 Compare the four types of e-business models Business-to-business (B2B) Applies to businesses buying from and selling to each other over the Internet. Business-to-consumer (B2C) Applies to any business that sells its products or services to consumers over the Internet. Consumer-to-business (C2B) Applies to any consumer that sells a product or service to a business over the Internet. Consumer-to-consumer (C2C) Applies to sites primarily offering goods and services to assist consumers interacting with each other over the Internet. The primary difference between B2B and B2C are the customers; B2B customers are other businesses while B2C markets to consumers. Overall, B2B relations are more complex and have higher security needs; plus B2B is the dominant e-business force, representing 80 percent of all online business. 14.3 Describe the benefits and challenges associated with e-business E-business is the conducting of business on the Internet, not only buying and selling, but also serving customers and collaborating with business partners. E-business benefits include Highly accessible, Increased customer loyalty, Improved information content, Increased convenience, Increased global reach, Decreased cost E-business challenges include Protecting consumers, Leveraging existing systems, Increasing liability, Providing security, Adhering to taxation rules 14.4 Explain the differences among e-shops, e-malls, and online auctions An e-shop is a version of a retail store where customers can shop at any hour of the day without leaving their home or office. An e-mall consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops. An online auction is a place where buyers and sellers come together to auction items and prices are determined dynamically.

E-Business One of the biggest benefits of the Internet is its ability to allow organizations to perform business with anyone, anywhere, anytime. Touch customers Enrich products and services with information Reduce costs Strategic alliances enable businesses to gain competitive advantage(s) through access to partner(s) resources, including markets, technologies, capital, and people Teaming up with another business adds complementary resources and capabilities, enabling participants to grow and expand more quickly and efficiently - especially fast growing companies who rely heavily on outsourcing many areas of their business to extend their technical and operational resources CLASSROOM EXERCISE Where the Internet Really Started Ask students, “How did the Internet (really) get started.” A few responses might include: Al Gore (“Information Superhighway”), or the Department of Defense (ARPANET), or even Bill Gates (Microsoft). For many people, the Internet is the epitome of cutting-edge technology. However, in the nineteenth century, the first “online communications network” was already in place - the telegraph! In addition, at the time, it was just as perplexing, controversial, and revolutionary as the Internet is today. In essence, the telegraph was the first incarnation of the Internet. Ask students to “Imagine an almost instantaneous communication system that would allow people and governments all over the world to send and receive messages about politics, war, illness, and family events. The government has tried and failed to control it.” Was it the Internet? Nope, the humble telegraph fit this bill way back in the 1800s. The parallels between the now-ubiquitous Internet and the telegraph are amazing, offering insight into the ways new technologies can change the very fabric of society within a single generation. Emphasize the history of the telegraph: Begin with the funny story of a mile-long line of monks holding a wire and getting simultaneous shocks in the interest of investigating electricity, and ending with the advent of the telephone (this is the true scenario). Discuss the early “online” pioneers: Samuel Morse, Thomas Edison, and a seemingly endless parade of code-makers, entrepreneurs, and spies who helped ensure the success of this communications revolution. With the invention of the telegraph, the world of communications was forever changed. The telegraph gave rise to creative business practices and new forms of crime. Romances blossomed over its wires. In addition, attitudes toward everything from news gathering to war had to be completely rethought. The saga of the telegraph offers many parallels to that of the Internet in our own time, and is a remarkable episode in the history of technology.

E-Business How do e-commerce and e-business differ? E-commerce – the buying and selling of goods and services over the Internet E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners Ask your students to differentiate between e-commerce and e-business E-commerce refers only to online transactions E-business refers to online transactions, serving customers and collaborating with business partners On July 18,2005 media conglomerate News Corp. bought Intermix Media, the company that owns MySpace and about 30 other sites, for $580 million in cash. Los Angeles-based Intermix owns 53% of MySpace and plans to buy the rest. It will become part of News Corp.'s new Fox Interactive Media unit, which was created on July 15, 2005 and also is based in L.A. Since MySpace is a social networking site, why would a business conglomerate such as News Corporation want to purchase it for $580 million?

Industries Using E-Business CLASSROOM EXERCISE E-business Business Ask your students to list the types of companies they want to work for when they graduate List the companies on the board and categorize them by industry Assign each industry to a group, or assign the industry to each individual depending on the company they want to work for, and have the students research how the different industries are using e-business Manufacturing and Retail: RFID, online payments and orders, sales via the Internet, customer service via the Internet Financial: online banking, online mortgages, online loans Telecommunications: Voice over the Internet (VoIP) Healthcare: digital hospitals, pharmacy orders via the Internet Travel: online reservations, Travelocity, Expedia

E-Business Models E-business model – an approach to conducting electronic business on the Internet Can a business operate with more than one e-business model? Yes, eBay and Amazon are prime examples. eBay and Amazon’s e-business models change depending on who is posting the goods for sale and who is buying the goods for sale?

E-Business Models Business to Business Business to Consumer Consumer to Business Consumer to Consumers Business to Bussiness: Samsung selling processors to Apple Business to Consumer: Standard Consumer to Business: Think contractor, consultant Consumer to Consumer: Think Kijijii

E-Business Models This is a new service by Google that allows customers to checkout - Google e-Business http://checkout.google.com/seller/demo.html Business to Business Business to Consumer Consumer to Business Consumer to Consumers

E-Business Models Can you define a business the operates in each segment? B2B: Electronic marketplace, Google search marketing B2C: Progressive insurance, Carfax, Best Buy, Amazon C2B: eBay, Amazon C2C: eBay, Amazon

Business-to-Business (B2B) Electronic marketplace (e-marketplace) interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials

Processing and Fulfillment E-Marketplaces Companies can use their own web sites for B2B commerce or use electronic hubs Electronic hubs OR Exchange Online marketplaces with many buyers and many sellers Avoid point-to-point connections integrated information – one stop shopping for supplier and supplier product information Sellers Buyers Example: Covisint for auto industry, now healthcare, manu and energy http://www.covisint.com/web/guest/home Catalogs Automated purchasing Pricing Processing and Fulfillment

Example E B2B

Business-to-Consumer (B2C) Common B2C e-business models include: e-shop – a version of a retail store where customers can shop at any hour of the day without leaving their home or office e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops Business types: Brick-and-mortar business operates in a physical store without an Internet presence. Pure-play business a business that operates on the Internet only (Amazon) Click-and-mortar business a business that operates in a physical store and on the Internet ( Sears & Canadian Tire) Brick-and-mortar business - operates in a physical store without an Internet presence. Pure-play (virtual) business - a business that operates on the Internet only without a physical store. Examples include Amazon.com and Expedia.com. Click-and-mortar business – a business that operates in a physical store and on the Internet. Examples include REI and Barnes and Noble. Ebay is an e-mall Amazong is both an e-mall and e-shop Can you name a company that operates in each of the different business types? Brick-and-mortar business – local book store, college book store (there are not many today) Pure-play business – Amazon.com, eBay Click-and-mortar business – Barnes and Noble

Consumer-to-Business (C2B) Priceline.com is an example of a C2B e-business model NOT REALLY: demand is still directed by the Consumer; supply provided by the company… nothing new here However, Google AdSense, online advertising, are great examples of C2B Online surveys are also C2B THE CONSUMER: A webmaster/ blogger offering advertising service (through Google Adsense program for example or amazon.com affiliation program) A photographer or a designer offering stock images to companies by selling his artwork through Fotolia or istockphoto for example Any individual answering a poll through a survey site Any individual with connections offering job hiring service by referring someone through referral hiring sites like jobster.com or h3.com THE BUSINESS: Any company which wants to fill a job (through referral hiring sites) Any company needing to advertise online (through Google Adwords program for example) Any advertising agency which needs to buy a stock photo (through microstock sites) Online Ad companies: Individuals can display advertising banners, contextual text ads or any other promotional items on their personal websites. Individuals are directly commissioned to provide an advertising/selling service to companies.    Good article on C2B http://c2b.typepad.com/c2b/c2b_business_model/

How AdSense Works You make your ad spaces available Highest Paying ads appear on your site You get paid You make your website ad spaces available by pasting ad code on your site, and choose where you want the ads to appear. Advertisers bid to show in your ad spaces in a real-time auction. The highest paying ad will show on your site. We handle the process of billing all advertisers and networks for the ads on your site, to make sure you receive your payments.

Consumer-to-Consumer (C2C) Online auctions Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins ( eBay) Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid ( Priceline) eBay is the Internet’s most successful C2C site and is now ranked in the top 15 retailers in the United States Which products or services would they want to purchase using an online auction? Which type of auction would they use? Car Boat Vacation Bicycle Coat DVDs Pet grooming service Dog walking service Wedding catering

C2C

Consumer-to-Consumer (C2C) C2C communities include: Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan BLOGS! Forums around company’s products…

Accessing Internet Information Four tools for accessing Internet information Intranet – internalized portion of the Internet, protected from outside access, for employees only Extranet – an intranet that is available to strategic allies (suppliers, distributors, etc.) Portal – Web site that offers a broad array of resources and services ( yahoo & MSN) Kiosk – publicly accessible computer system that allows interactive information browsing ( used in museums and showrooms) 19

Intranets http://apollo.hal.keane.com/ Using Internet technology to support internal organizational needs Email Document sharing Online repositories of information Remote access to resources (employee’s handbook) Group collaboration Extranet – intranet that is available to authorized outsiders. Example of an Intranet System: http://apollo.hal.keane.com/

Providing Internet Information Three common forms of service providers Internet service provider (ISP) –provides individuals and other companies access to the Internet ( Eastlink, Aliant) Online service provider (OSP) – offers an extensive array of unique Web services and content (gone: American Online- AOL, today: Google) Application service provider (ASP) – offers access over the Internet to systems and related services that would otherwise have to be located in organizational computers: Google Docs 21

Providing Internet Information Common ISP services include: Web hosting Hard-disk storage space Support 22

Providing Internet Information Wireless Internet service provider (WISP) 23

Measuring E-Business Success Most companies measure the traffic on a Web site as the primary determinant of the Web site’s success However, a large amount of Web site traffic does not necessarily equate to large sales Many organizations with high Web site traffic have low sales volumes 24

Measuring E-Business Success Web site traffic analysis can include: Cookie Small file saved on local client machine sent by the business server Click-through Counts the number of users visited a website and clicked on an ad Banner ad 25

Behavioral Metrics Clickstream data tracks the exact pattern of a consumer’s navigation through a Web site Clickstream data can reveal: Number of pageviews Pattern of Web sites visited Length of stay on a Web site Date and time visited Number of customers with shopping carts Number of abandoned shopping carts 26

Web Site Visitor Tracking

Web Site Personalization

More web personalization

Interactive Marketing/Personalization How do web sites know it’s you? Answer: using a “cookie”

How a cookie works A cookie is a tiny file deposited on the user’s computer hard drive when an individual visits certain Web sites; used to identify the visitor and track visits to the Web sites.

Organizational Strategies for E-Business Primary business areas taking advantage of e-business include: Marketing/sales Financial services Procurement Customer service Intermediaries 32

MARKETING/SALES Generating revenue on the Internet: Online ad (banner ad) - box running across a Web page that contains advertisements Pop-up ad - a small Web page containing an advertisement Associate programs - businesses generate commissions or royalties ( e.g. sending potential buyers to Amazon. com) OR Google business model Viral marketing - a technique that induces Web sites or users to pass on a marketing message ( msg in Hotmail) 33

MARKETING/SALES Generating revenue on the Internet: Personalization - occurs when a Web site can fashion offers that are more likely to appeal to that person Blog - Web site in which items are posted on a regular basis and displayed in reverse chronological order Real simple syndications (RSS) - a Web feed format used for Web syndication of content Podcasting - the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devices 34

MARKETING/SALES Generating revenue on the Internet: Search engine optimization (SEO) - a set of methods aimed at improving the ranking of a Web site in search engine listings- pay-per-click Spamdexing - uses a variety of deceptive techniques in an attempt to manipulate search engine rankings, whereas legitimate SEO focuses on building better sites and using honest methods of promotion 35

Video SEO video

FINANCIAL SERVICES Online consumer payments include: Financial cybermediary OR P2P payment (e.g. PayPal) Electronic check & Electronic cash Electronic bill presentment and payment (EBPP) Sends bill over the Internet and provides easy-to-use payment Digital wallet (e.g. providing credit card number and its expiry date, used in many online stores such as Amazon) 37

Some Examples of E-commerce Payment Systems Electronic bill payment Pay your bills using your credit card or your bank account All major banks. epost Digital wallet Software that Stores your credit card information securely at the e-Commerce site www.amazon.com E-cash Used instead of cash, cheque or credit card. http://www.internetcash.com/ Peer-to-Peer payments To pay sellers not set up to process credit cards www.paypal.com Demo: sign up on passport system

FINANCIAL SERVICES Online business payments include: Differs from consumers payment because of large purchases and No use of credit cards Electronic data interchange (EDI), standard format for exchanging business data Financial EDI (financial electronic data interchange) – standard for B2B payments 39

Electronic Trading Network FINANCIAL SERVICES Electronic Trading Network 40

PROCURMENT Maintenance, repair, and operations (MRO) materials (also called indirect materials) – materials necessary for running an organization but do not relate to the company’s primary business activities E-procurement - the B2B purchase and sale of supplies and services over the Internet Electronic catalog - presents customers with information about goods and services offered for sale, bid, or auction on the Internet 41

CUSTOMER SERVICE Customer service is the business process where the most human contact occurs between a buyer and a seller e-business strategists are finding that customer service via the Web is one of the most challenging areas of e-business The primary issue facing customer service departments using e-business is consumer protection 42

Consumer Protection 43

Consumer Protection E-business security Encryption Scrambling of info which requires a key to decrypt Secure socket layer (SSL) (1) Creates secure and private connection between a client and server computer (2) encrypts the info (3) sends the info over the Internet ( e.g. websites with https URL) Secure electronic transaction (SET) Similar to SSL but also enables customer authentications for credit card transaction 44

Disintermediation Sell directly to consumers Eliminate the ‘middleman’ Disintermediation: the removal of organizations or business process layers Example of disintermediation: selling a sweater Manufacturer Distributor Retailer Customer Cost $48.50 $40.34 $20.45

Reintermediation Reintermediation: The shifting of the intermediary role to a new source ( e.g. Information Brokers) Auto Dealer Consumer Info Broker (Edmonds.com) Auto Dealer Consumer

INTERMEDIARIES Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-business Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways 47

New Trends in E-Business: E-Government and M-Commerce E-government - involves the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of government 48

New Trends in E-Business: E-Government and M-Commerce 49

New Trends in E-Business: E-Government and M-Commerce Mobile commerce - the ability to purchase goods and services through a wireless Internet-enabled device. 50

E-Business Benefits and Challenges E-Business benefits include: Highly accessible (24/7/365) Increased customer loyalty Improved information content Increased convenience Increased global reach Decreased cost Which benefit would you pick if asked to identify the most important e-business benefit? Would it change depending on the industry? Would it change depending on the company? Would it change depending on the customer? E-Business Benefits Highly Accessible - Businesses can operate 24 hours a day, 7 days a week, 365 days a year Increased Customer Loyalty - Additional channels to contact, respond to, and access customers helps contribute to customer loyalty Improved Information Content- In the past, customers had to order catalogs or travel to a physical facility before they could compare price and product attributes. Electronic catalogs and Web pages present customers with updated information in real-time about goods, services, and prices Increased Convenience - E-business automates and improves many of the activities that make up a buying experience Increased Global Reach - Businesses, both small and large, can reach new markets Decreased Cost - The cost of conducting business on the Internet is substantially smaller than traditional forms of business communication 51

E-Business Benefits and Challenges E-business challenges include: Protecting consumers Providing security Respecting taxation rules Review the figure for a full listing of e-business challenges Which challenge would you pick if asked to identify the most difficult e-business challenge? Would it change depending on the industry? Would it change depending on the company? Would it change depending on the customer? 52