Saatchi, Seyed Mohsen1 Arab Open University - AOU T171 You, Your Computer and the Net: Learning and living in the information age Session 9

Saatchi, Seyed Mohsen 2 About Module III Understanding e-business Book reference: Blown to Bits, Chapters 1 & 2

Saatchi, Seyed Mohsen3 What this module is about? The aim of this module is To give an appreciation of how the Internet has changed business practices and some of the important issues this rises for society Not much about technology More of academic approach to equip you with the understanding to make sense of rapidly changing field It gives many examples of e-business models in the west It highlights some of the technology involved It will not cover setting up an e-business web page

Saatchi, Seyed Mohsen4 What this module is about? E-business and E-commerce terms They are slightly different In the section 4, the difference will be clear Dont worry about it now

Saatchi, Seyed Mohsen5 What this module is about? By the end of this module, you should be able to do the following 1. Understand the four categories of the on-line business transactions 2. Appreciate the influence that the Internet has had on commerce 3. Explain some basic key e-business concepts 4. Contribute to the debate on the wider implications of e-business 5. Appreciate some of the different factors which make a product successful online

Saatchi, Seyed Mohsen6 What this module is about? 6. Understand the fundamental benefits for a company or organization of being online 7. Show an appreciation of some of the key technologies and technological issues involved in e-business 8. Understand the criteria by which commercial and non-commercial web pages can be evaluated and apply these to specific examples

Saatchi, Seyed Mohsen7 What this module is about? 9. Understand a simple business and technical model for current e-business operations 10. Produce a simple concept proposal for an online organization 11. Compare the practices of different online organizations given a specified set of criteria 12. Find, analyze and evaluate information on the WWW 13. Apply theoretical concepts in the module to real examples

Saatchi, Seyed Mohsen8 The Online Transactions Grid It is a way of classifying the transactions (operations) that take place on the Internet which is used to structure the module This initially takes the form of 2 by 2 grid The classification uses two objects The business The customer Based on these objects, online transactions could be divided into four major types

Saatchi, Seyed Mohsen9 The Online Transactions Grid 1- Business to Business This is the area which many experts think will be the most profitable in the immediate future This is where businesses use the Internet to provide services or products to other businesses 2- Business to customer This is what you might think of as the typical e- commerce model (Type of transactions) Where a business sells products to the customer Example: Amazon.com

Saatchi, Seyed Mohsen10 The Online Transactions Grid Example: The PC manufacturer Dell might provide computers to another business which orders them online This may cause Dell to order microprocessors chips from Intel, so an immediate Internet-based order is sent automatically to Intel Intel might require certain parts, so a further Internet order is sent to one of their providers The Internet acts as a standard communication medium linking all the businesses in the chain together

Saatchi, Seyed Mohsen11 The Online Transactions Grid 3- Customer to Business The Internet changes the way in which customers can interact with business Example It allows a group of customers to get together and buy products in bulk directly from manufactures To achieve a good deal and a cheaper price Cut the profit of the intermediary (middle man) Example: LetsBuyIt.com

Saatchi, Seyed Mohsen12 4- Customer to customer The Internet is about communication, so it facilitates interaction and selling between customers So in this type of transactions, customers could deal directly with each others via the Internet Example: Auction sites, such as eBay.com The Online Transactions Grid

Saatchi, Seyed Mohsen13 The Online Transactions Grid Note: the previous grid focus on commercial transactions Most of the companies exist to make profit But… not all of them! Many organizations that use the Internet are for charities, services, support groups and non- governmental organizations, which are not profitable The grid should be modified and extended beyond commercial interactions Business organization Customer individual

Saatchi, Seyed Mohsen14 The Online Transactions Grid

Saatchi, Seyed Mohsen15 The Online Transactions Grid 1- Organization to Organization (O-2-O) The future area of importance Covered in Section 4 You will examine the following How can the Internet provide a common communication means for organizations? How might this affect the way industries operate? What are the technical issues involved?

Saatchi, Seyed Mohsen16 The Online Transactions Grid 2- Organization to Individual (O-2-I) A large area of interest and is where most of the activity has been to date Covered in sections 1-3 Such issue would be encountered What products are best suited for delivery online How online organizations can offer enhancements to traditional forms of interaction The way in which the Internet will change existing businesses The new types of organizations which may arise

Saatchi, Seyed Mohsen17 The Online Transactions Grid 3- Individual to Organization (I-2-O) Covered in Section 5 Talks about the following Changes within the organization New consumer models and synchronous technologies

Saatchi, Seyed Mohsen18 The Online Transactions Grid 4- Individual to Individual (I-2-I) An interesting area Covered in Section 6 You will look at issues such as Online auction sites Consumer communities Alternative communities and alternative currencies, which can be used for trading on the Internet

Saatchi, Seyed Mohsen19 The Internet Bubble The rapid development and wide use of the Internet resulted in a rise of many companies Whose business relied exclusively on the Internet (dot-com companies) Due to the rush of people to buy Internet goods (stocks) The prices of such companies rise rapidly (very high) in a very short time With the same speed of rise, the prices of many companies dropped down very quickly Such a case is called the Internet bubble ordot-com boom

Saatchi, Seyed Mohsen20 The Internet Bubble This is the base for a famous prediction by Andy Grove, a former Chief Executive Officer of Intel, when he stated that by 2005 companies will either be Internet companies – or they wont be companies at all Hence, we are entering an era when most business activity will be affected, in one way or another, by the Net

Saatchi, Seyed Mohsen21 Whats different about the Net? The Web offers a global market No need to fit a shop or a showroom for your business

Saatchi, Seyed Mohsen22 Whats different about the Net? The Internet is a paradoxical phenomenon It allows contradictory facts to be true simultaneously In some cases the Web enables smaller businesses to rise, and in others it inhibits them

Saatchi, Seyed Mohsen23 Example There would be no point nowadays in setting up an online bookstore in the Web This business would not be able to compete with the buying power and market presence of companies such as Amazon and Barnes and Noble large companies increase their presence in the market Unless the bookstore was aimed at a very specialist market (special purpose bookstore – new business) small, independent businesses are encouraged Whats different about the Net?

Saatchi, Seyed Mohsen 24 Richness vs. Reach Module 3 – Section 1 Book reference: Blown to Bits, Chapter 3

Saatchi, Seyed Mohsen25 Introduction In this part we will begin to explore the organization-to- individual part of the online transactions grid This represents what many people think of as 'e- commerce' as it covers online companies (e.g. Amazon, CDNow, LastMinute) which sell to consumers AmazonCDNowLastMinute The main ideas covered in this section are Trade off between Richness and reach of Information Standards on the Internet (e-business standards) and their roles Factors that make a product succeed online

Saatchi, Seyed Mohsen26 The Richness vs. Reach model Information Richness is a type of information that has the following aspects A- Bandwidth (or amount of information) B- Customization (of information for individual buyers) C- Interactivity (between seller and buyer) D- Reliability E- Security F- Currency (by which they mean up-to-dateness) Reach of information is defined as 'the number of people who participate in the sharing of that information'

Saatchi, Seyed Mohsen27 The Richness vs. Reach model As a company increases its reach, it necessarily and unavoidably decreases its richness In other words, the richness vs. reach concept means that the richer the information is the less reach it has and vice versa

Saatchi, Seyed Mohsen28 Standards Many standards do not represent the best possible means of achieving a function, but they are good enough and more importantly, they are universal, so they can be used for more than one application. Example: HTML is quite a poor hypertext system When it was first unveiled, many software manufacturers were developing their own software to allow people to produce hypertext files. These would be specific to their software however make specific companies dominate the market

Saatchi, Seyed Mohsen29 Standards The proprietary tools may offer a richer environment than HTML, with more functions, but the crucial thing about HTML was that it was universal, easy and free HTML was good enough to meet the needs of most users, so why should they sacrifice a slight gain in functionality if it meant that everyone else would have to buy specific software to read their document? This is another instance of the richness vs. reach trade-off. You can have a very rich, but specific piece of hypertext software, or one which is low in richness, but has a great reach If you want a 'World Wide Web' that is genuinely world wide then it is reach that matters, so HTML won the day

Saatchi, Seyed Mohsen30 Standards From the previous (richness Vs. reach) we find that 1- A very good software that offers lots functionality (rich) but is used by only a small number of people (not reach) 2- A software standard that is not rich (like HTML) in functionality but has a lot of reach

Saatchi, Seyed Mohsen31 Adding Richness and Reach Let us examine how an online business can 'blow up' the richness vs. reach trade-off This can be done by adding richness and reach Example for that is online bookstores (e.g. Amazon.com) Is a very famous online book seller Any one who has bought a book online knows about this company An online bookstore can be accessed by anyone with access to the Internet it potentially has a far greater customer base than any shop or chain of shops (Reach is large)

Saatchi, Seyed Mohsen32 Adding Richness and Reach The online bookstores offer different forms of richness however. These can include (Richness is high) 1- Reviews and exchanges with other readers: For example, before you buy a book from Amazon, you can look at reviews and opinions from other readers about this book 2- Personal recommendations: for example, after you buy a book, the site will recommend other books related to the subject of the book based on some statistics of your previous purchases 3- Customized login screen: for example, for a regular customer, the login page of the website will display a screen that is particular for you (might contain interested books for you)

Saatchi, Seyed Mohsen33 4- Communication: for example, you get regular s from store about books and special offers 5- Interviews and exchanges with authors: for example Amazon can invite authors to special online events in which interested readers can participate Adding Richness and Reach

Saatchi, Seyed Mohsen34 What makes a product likely to succeed online The concept of adding richness and reach in e- business is not restricted to Amazon or book sellers All successful online retailers add richness and reach in some form In this subsection we will look at which products are suitable to be sold online and which are not Electronic Shopping test (ES test): is used to evaluate the success of an online product ES test evaluates the following aspects of a product 1- Product characteristics - this relates to how the product interacts with the human senses (e.g. does it need to be touched or tasted before buying?) Each product has a set of characteristics which relate to the five senses (sight, sound, smell, taste and touch) Currently, online shopping products mainly involve sight and sound. So, product relies on other senses might not be suitable for online purchase

Saatchi, Seyed Mohsen35 What makes a product likely to succeed online 2- Familiarity and confidence - this refers to the familiarity the consumer has with that product and their confidence in it (or the supplier) In other words, Products that people are familiar with and brand names that are well known to people tend to do well online Also, people buy products from a well established supplier because they feel confident. As a result, Internet makes big companies even bigger

Saatchi, Seyed Mohsen36 What makes a product likely to succeed online 3- Consumer attributes - this refers to the type of consumer who is likely to buy that product and their motivations for shopping But simply, this means that there is no point having an excellent online product if the sort of people who would buy it are unlikely to be online Consumers can be divided into many categories and each category behaves differently online There are six categories of consumer A- Social shoppers - these are people who enjoy the social aspect of shopping. They are sometimes called 'recreational shoppers' (unlikely to shop online)

Saatchi, Seyed Mohsen37 What makes a product likely to succeed online B- Experimenters - these are consumers who like to try new things, such as shopping over the Net (likely to shop online) C- Convenience shoppers - these are people who have limited time and do not place shopping as a high priority (likely to shop online) D- Habit-bound die-hards - these are people who do not like to change or try new things. They tend to visit the same shops and buy the same goods (unlikely to shop online) E- Value shoppers - these are people for whom value is the most important characteristic and will go with whatever initiative offers the best value (likely to shop online)

Saatchi, Seyed Mohsen38 What makes a product likely to succeed online F- Ethical shoppers - these are people who place a high value on ethics in their shopping so will buy fair trade coffee for instance and arrange their finances with banks which promote a strong ethical policy (likely to shop online)