1. The Digital Firm: Electronic Business and Electronic Commerce
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce

2. Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
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

3. Compare the principal payment systems for electronic commerce
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
OBJECTIVES (Continued)
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

4. Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
Corrugated Supplies Case
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

5. Internet Technology and the Digital Firm
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
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.

6. Internet Technology and the Digital Firm (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm (Continued)
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

7. New Business Models and Value Propositions
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
New Business Models and Value Propositions
Business Model:
Defines an enterprise
Describes how the enterprise delivers a product or service
Shows how the enterprise creates wealth.
Example: Selling Books business models (Amazon.com)

8. The Changing Economies of Information
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
The Changing Economies of Information
Information asymmetry: One party in a transaction has more information than the other. The Internet decreases information asymmetry.
Example: Auto retailing sites.
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.

9. The Changing Economics of Information
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
The Changing Economics of Information
Figure 4-1

10. Internet Business Models
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Business Models
Virtual storefront: Sells goods or services online (Amazon.com)
Information broker: Provides information on products or services (Edmunds.com). Generate revenue from advertising, or from directing buyers to sellers
Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com)
Online marketplace: Provides a trading platform for individuals and firms (eBay.com)

11. Internet Business Models (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Business Models (Continued)
Content provider: Creates revenue by providing content (WSJ.com, TheStreet.com). The customer may pay to access the content, or revenue may be generated by selling advertising space (Banner ad).
Online service provider: Provides online services, including search service. (Google.com, Xdrive.com). Generate revenue from subscription or transaction fee, from advertising, or from collecting marketing information from the users.

12. Internet Business Models (Continued)
Virtual community: Provides an online community to focused groups (Friendster.com, iVillage.com).
Social networking sites: are a type of online community which is considered as practice of expanding the number of one’s business by making connections through individuals. It links people and enable them to mine their friends ( and their friends’ friends)
Portal: Provides initial point of entry to Web, specialized content, services (Yahoo.com, MSN.com)

13. Categories of Electronic Commerce
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
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 )

14. Business-To-Consumer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
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

15. Business-To-Consumer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-Commerce: (Continued)
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.
Example: real estate agents, may be replaced by new intermediaries specializing in helping Internet users efficiently obtain product and price information, locate on-line sources of goods and services, or manage or maximize the value of the information captured about them in electronic commerce transactions)

16. The Benefits of Disintermediation to the Consumer
Management Information Systems
Chapter 4
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ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
Figure 4-2

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

18. Web Site Visitor Tracking
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Web Site Visitor Tracking
Figure 4-3

19. Create unique personalized Web pages for each customer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Web Personalization
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

20. Web Site Personalization
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Web Site Personalization
Figure 4-4

21. Collaborative filtering:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Collaborative filtering:
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.

22. Customer self-service:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Customer self-service:
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

23. EDI is being replaced by more powerful Web-based alternatives.
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Business-to-Business Electronic Commerce: New Efficiencies and Relationships
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.

24. Electronic Data Interchange (EDI)
Figure 4-5

25. Management Information Systems Net Marketplaces
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Net Marketplaces : They are sometimes called e-hubs, provide a single digital marketplace based on Internet technology for many different buyers and sellers.
Figure 4-7

26. Four different types of Net Marketplaces:
Distributors: B2B online catalogs provide buyers with access to thousands of parts and other goods (Grainger.com)
2. Procurement platforms: Platforms for purchasing goods and materials and also sourcing, negotiating with suppliers, paying for goods, and making delivery arrangements (Ariba.com)

27. Four different types of Net Marketplaces: (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Four different types of Net Marketplaces: (Continued)
3. 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).
Exchanges are on-line marketplaces where multiple buyers can purchase from multiple sellers using a bid–ask system. E-Steel is an example. Buyers log in and create inquiries, specifying details, terms, and suppliers for the steel they wish to purchase.

28. There are several categories of exchanges
There are several categories of exchanges. Vertical exchanges, also known as industry exchanges, are set up to service specific industries, such as the automobile, forest products, or energy industries.
Horizontal exchanges focus on specific functions that can be found in many different industries, such as Maintenance, Repair, and Operating (MRO) supplies. MRO.com is an example.
4. Industry consortia: Industry-owned Net marketplaces used primarily for long-term sourcing of direct inputs to production (ChemConnect.com)

29. Private Industrial Networks
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Private Industrial Networks
The largest Web-based form of B2B commerce.
A private industrial network, also known as a private exchange, links a firm to its suppliers, distributors, and other key business partners for efficient supply chain management and other collaborative commerce activities. management and collaborative activities.
A private industrial network typically consists of a large firm using an extranet to link to its suppliers and other key business partners
Example: Wal-Mart uses its own private network to coordinate more than 15,000 suppliers to its stores.

30. A Private Industrial Network
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
A Private Industrial Network
Figure 4-6

31. Electronic Commerce Payment Systems
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Electronic Commerce Payment Systems

32. How Intranets Support Electronic Business
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
How Intranets Support Electronic Business
Benefits
Functional applications
Good examples: CARE and Mitre Corporation

33. Connectivity: Accessible from most computing platforms
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets
Connectivity: Accessible from most computing platforms
Can be tied to internal corporate systems and core transaction databases
Platforms for interactive applications
Scalable to larger or smaller computing platforms

34. Benefits of Intranets (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets (Continued)
Easy to use, universal standard Web interface
Low start-up costs
Richer, more responsive information environment than corporate manuals
Reduced information distribution costs

35. Functional Applications of Intranets
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets
Finance and accounting
Human resources
Sales and marketing
Manufacturing and production

36. Functional Applications of Intranets
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets
Figure 4-8

37. General ledger reporting Project costing Annual reports Budgeting
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Finance & Accounting
General ledger reporting
Project costing
Annual reports
Budgeting

38. Online publishing of corporate policy
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources
Company:
Online publishing of corporate policy
Job postings and internal job transfers
Company telephone directories, training

39. Human Resources (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources (Continued)
Employees:
Healthcare
Employee savings
Competency tests

40. Promotional campaigns Sales presentations Sales contracts
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Sales and Marketing
Competitor analysis
Price updates
Promotional campaigns
Sales presentations
Sales contracts

41. Manufacturing and Production
In manufacturing, information-management issues are highly complex, involving:
massive inventories
capturing and integrating real-time production data flows
The manufacturing function typically uses multiple types of data, including graphics as well as text, which are scattered in many disparate systems.
Developing intranets that integrate manufacturing data under a uniform user interface is more complicated than in other functional areas.
Manufacturing Intranets coordinating the flow of information between controllers, inventory systems, and other components of a production system can make manufacturing information more accessible to different parts of the organization.

42. Manufacturing and Production (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Manufacturing and Production (Continued)
Quality measurements
Maintenance schedules
Design specifications
Machine outputs
Order tracking

43. Business Process Integration
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Business Process Integration
The Internet and collaborative commerce:
Collaborative commerce: When firms use the Internet to cooperate closely in the development, production, and distribution of products and services
GE Plastics maintains an Intranet where its customers (selected fabricators) can find information on product design and new developments.

44. Collaborative Commerce
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Collaborative Commerce
Figure 4-9

45. Management Opportunities:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS
Management Opportunities:
The Internet provides firms with extraordinary opportunities to develop new products and services, new distribution channels, new avenues for marketing and sales, and even entirely new business models.

46. Management Challenges:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS
Management Challenges:
Finding a successful Internet business model
Dot-com stock prices collapsed after many of these companies failed to generate enough revenue to sustain their costly marketing campaigns, infrastructures, and staff salaries, losing money on every sale they made. Business models built around the Internet are new and largely unproven.
Doing business over the Internet is not necessarily more efficient or cost effective than traditional business methods
Businesses that are unclear about their online strategy and its relationship to their overall business strategy –can waste even millions of dollars building and maintain website that fail to deliver the desired results.

47. Management Challenges
(Continued)
Organizational change challenges
Channel conflicts
Using the Web for online sales and marketing may create channel conflict with the firm's traditional channels, especially for less information-intensive products that require physical intermediaries to reach buyers. A company's sales force and distributors may fear that their revenues will drop as customers make purchases directly from the Web or that they will be displaced by this new channel.

48. Management Challenges
(Continued)
Trust, Security, and Privacy
Electronic commerce cannot flourish unless there is an atmosphere of trust among buyers, sellers and other partners involved in online transactions. Since online relationships are more impersonal than those in "brick and mortar" commerce, many consumers remain hesitant to make purchases over the Web from unfamiliar vendors. Consumers also worry about the security and confidentiality of the credit card and other personal data that they supplied over the Internet

49. Solution Guidelines: Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS
Solution Guidelines:
Determining how Internet technology can provide value for the business.
Managing business process changes:Before embarking e-commerce or e-business,initiatives, mangers will need to identify carefully the organizational changes required to make them work.
Safeguarding security and privacy : Firms engaging in e-commerce and e-business need a new security culture and infrastructure that enable them to straddle this fine line