4.1 © 2006 by Prentice Hall 10 Chapter E-Commerce: Digital Market and Digital Goods

4.2 © 2006 by Prentice Hall OBJECTIVES Analyze how Internet technology has changed value propositions and business models Define electronic commerce and describe how it has changed consumer retailing and business-to- business transactions Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.3 © 2006 by Prentice Hall Compare the principal payment systems for electronic commerce Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes Assess the challenges posed by electronic business and electronic commerce and management solutions OBJECTIVES (Continued) Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.4 © 2006 by Prentice Hall Challenge: trillions of product configurations, short lead times, many competitors Solution: Web extranet for order entry, customization, inventory, change orders, and shipping Demonstrates how IT and the Web coordinate the flow of information about orders, production, inventory and shipment Illustrates how systems in the digital firm connect demand, supply, and fulfillment to achieve operational excellence Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Corrugated Supplies Case

4.5 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Technology and the Digital Firm Information technology infrastructure: The Internet provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations. Direct communication between trading partners: Disintermediation removes intermediate layers and streamlines processes. Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.6 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Round the clock service: Web sites available to consumers 24 hours Extended distribution channels: Outlets created for attracting customers who otherwise would not patronize a firm Reduced transaction costs: Costs of searching for buyers declines Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Internet Technology and the Digital Firm (Continued)

4.7 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Business Model: Defines an enterprise Describes how the enterprise delivers a product or service Shows how the enterprise creates wealth New Business Models and Value Propositions Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.8 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Information asymmetry: One party in a transaction has more information than the other. The Internet decreases information asymmetry. Increases richness: The Internet increases the depth, detail, and scope of information. Increases reach: The Internet increases the number of people who can be contacted efficiently. The Changing Economies of Information Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.9 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Virtual storefront: Sells goods or services online (Amazon.com) Information broker: Provides information on products or services (Edmunds.com) Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com) Online marketplace: Provides a trading platform for individuals and firms (eBay.com) Internet Business Models Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.10 © 2006 by Prentice Hall ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Content provider: Creates revenue by providing content (WSJ.com, TheStreet.com) Online service provider: Provides online services, including search service. (Google.com, Xdrive.com) Virtual community: Provides an online community to focused groups (Friendster.com, iVillage.com) Portal: Provides initial point of entry to Web, specialized content, services (Yahoo.com, MSN.com) Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Internet Business Models (Continued)

4.11 © 2006 by Prentice Hall ELECTRONIC COMMERCE Categories of Electronic Commerce Business-to-customer (B2C): Retailing of products and services directly to individual customers (Wal-Mart.com) Business-to-business (B2B): Sales of goods and services to other businesses (Grainger.com, Ariba.com) Consumer-to-consumer (C2C): Individuals using the Web for private sales or exchange (eBay.com ) Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.12 © 2006 by Prentice Hall Business-To-Consumer Advantages of E-commerce: Customer-centered retailing: Closer and more personalized relationship with customers is possible Web sites: Provide a corporate-centered portal for the consumer to quickly find information on products, services, prices, orders ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.13 © 2006 by Prentice Hall Disintermediation: The elimination of organizations or business process layers responsible for certain intermediary steps in a value chain, reducing costs to the consumer Reintermediation: The shifting of the intermediary role in a value chain to a new source, adding additional value to the consumer ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Business-To-Consumer Advantages of E-Commerce: (Continued)

4.14 © 2006 by Prentice Hall The Benefits of Disintermediation to the Consumer Figure 4-2 ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.15 © 2006 by Prentice Hall Clickstream tracking tools: Collect data on customer activities at Web sites and store them in a log ELECTRONIC COMMERCE Interactive Marketing and Personalization Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.16 © 2006 by Prentice Hall Web Site Visitor Tracking Figure 4-3 ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.17 © 2006 by Prentice Hall Create unique personalized Web pages for each customer Increased closeness to customer increases value to the customer, while reducing costs of interacting with the customer ELECTRONIC COMMERCE Web Personalization Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.18 © 2006 by Prentice Hall Web Site Personalization Figure 4-4 ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.19 © 2006 by Prentice Hall Compares information gathered about a specific user’s behavior at a Web site to data about other customers with similar interests to predict what the user would like to see next. The software then makes recommendations to users based on their assumed interests. ELECTRONIC COMMERCE Collaborative filtering: Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.20 © 2006 by Prentice Hall The use of Web sites to provide customers with access to information and answers to questions Replacing human call center operators and clerks UPS.com: Customer tracking of packages Orbitz.com: Customer self-help for organizing and managing a trip Dell.com: “My Order Status” facility ELECTRONIC COMMERCE Customer self-service: Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.21 © 2006 by Prentice Hall Electronic Data Interchange (EDI): Enables the computer-to-computer exchange between two organizations of standard transactions. Currently 80% of B2B e-commerce uses this system. EDI is being replaced by more powerful Web- based alternatives. Business-to-Business Electronic Commerce: New Efficiencies and Relationships ELECTRONIC COMMERCE Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.22 © 2006 by Prentice Hall ELECTRONIC COMMERCE Distributors: B2B online catalogs provide buyers with access to thousands of parts and other goods (Grainger.com) Procurement platforms: Platforms for purchasing goods and materials and also sourcing, negotiating with suppliers, paying for goods, and making delivery arrangements (Ariba.com) Four different types of Net Marketplaces: Net Marketplaces Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.23 © 2006 by Prentice Hall ELECTRONIC COMMERCE Independent exchanges: Third-party Net marketplace that is primarily transaction-oriented and that connects many buyers and suppliers for spot purchasing (Freemarkets.com, GEPolymerland.com) Industry consortia: Industry-owned Net marketplaces used primarily for long-term sourcing of direct inputs to production (ChemConnect.com) Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Net Marketplaces Four different types of Net Marketplaces: (Continued)

4.24 © 2006 by Prentice Hall ELECTRONIC COMMERCE Electronic Data Interchange (EDI) Figure 4-5 Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.25 © 2006 by Prentice Hall ELECTRONIC COMMERCE Private Industrial Networks The largest Web-based form of B2B commerce Private B2B extranets that focus on continuous business process coordination between a small group of companies for collaboration and supply chain management. Wal-Mart uses its own private network to coordinate more than 15,000 suppliers to its stores. Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.26 © 2006 by Prentice Hall ELECTRONIC COMMERCE A Private Industrial Network Figure 4-6 Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.27 © 2006 by Prentice Hall ELECTRONIC COMMERCE A Net Marketplace Figure 4-7 Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce

4.28 © 2006 by Prentice Hall ELECTRONIC COMMERCE Electronic Commerce Payment Systems Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce