1. Chapters 1 & 2 – Wrap up Economics, and Impacts

2. Electronic CommercePrentice Hall © 2006 2 Competition in the Digital Economy Internet ecosystem The business model of the Internet economy web of interrelationships vs. hierarchical differentiation Providing a product or service that is unique personalization The ability to tailor a product, service, or Web content to specific user preferences

3. Electronic CommercePrentice Hall © 2006 3 Competition in the Digital Economy Competitive Factors in the Internet Economy –Lower prices, search costs –Speedy comparisons –Customer service –Barriers to entry are reduced –Virtual partnerships multiply –Market niches abound

4. Electronic CommercePrentice Hall © 2006 4 Competition in the Digital Economy Porter’s Competitive Analysis in an Industry competitive forces model Model, devised by Porter, that says that five major forces of competition determine industry structure and how economic value is divided among the industry players in an industry; the analysis of these forces helps companies develop their competitive strategy

5. Electronic CommercePrentice Hall © 2006 5 Competition in the Digital Economy

6. Electronic CommercePrentice Hall © 2006 6

7. Electronic CommercePrentice Hall © 2006 7 Exhibit 2.6 Porter’s Competitive Forces Model

8. Perfect Competition Many buyers and sellers must be able to enter the market at little or no entry cost (no barriers to entry). Large buyers or sellers are not able to individually influence the market – No Hierarchy The products must be homogeneous (commodities). (For customized products, therefore, there is no perfect competition.) Buyers and sellers must have comprehensive information about the products and about the market participants’ demands, supplies, and conditions. Electronic CommercePrentice Hall © 2006 8

9. What drives EC In the Digital Revolution the economy is based on digital technologies –Digital economy –Internet economy –New economy –Web economy Electronic CommercePrentice Hall © 2006 9

10. Costs TC – Total Cost FC – Fixed Cost VC – Variable Cost AC – Average Cost MC – Marginal Cost –The change in TC because of addition to production level by one unit of goods TC = FC + VC * q AC = TC/q = FC/q + VC Electronic CommercePrentice Hall © 2006 10

11. Costs – Cont’d Electronic CommercePrentice Hall © 2006 11

12. Electronic CommercePrentice Hall © 2006 12 Impacts of EC on Business Processes and Organizations Improving Direct Marketing –Product promotion –New sales channel –Direct savings –Reduced cycle time –Improved customer service –Brand or corporate image Other Impacts on Direct Marketing –Customization –Advertising –Ordering systems –Market operations

13. Electronic CommercePrentice Hall © 2006 13 Exhibit 2.7 The Analysis-of-Impacts Framework

14. Electronic CommercePrentice Hall © 2006 14 Impacts of EC on Business Processes and Organizations Transforming Organizations –Technology and organizational learning: Corporate change must be planned and managed Organizations may have to struggle with different experiments and learn from their mistakes –The changing nature of work Firms are reducing the number of employees down to a core of essential staff and outsourcing whatever work they can to countries where wages are significantly lower

15. Electronic CommercePrentice Hall © 2006 15 Impacts of EC on Business Processes and Organizations Redefining Organizations –New and improved product capabilities –New business models –Improving the supply chain –Impacts on Manufacturing build-to-order (pull system) A manufacturing process that starts with an order (usually customized). Once the order is paid for, the vendor starts to fulfill it –Real-time demand-driven manufacturing –Virtual manufacturing –Assembly lines

16. Electronic CommercePrentice Hall © 2006 16 Exhibit 2.10 Changes in the Supply Chain

17. Electronic CommercePrentice Hall © 2006 17 Impacts of EC on Business Processes and Organizations Redefining Organizations –Impacts on Finance and Accounting E-markets require special finance and accounting systems. Most notable of these are electronic payment systems –Impacts on Human Resource Management and Training EC is changing how people are recruited, evaluated, promoted, and developed EC also is changing the way training and education are offered to employees Companies are cutting training costs by 50% or more, and virtual courses and programs are mushrooming

18. Electronic CommercePrentice Hall © 2006 18 Managerial Issues 1.What about intermediaries? 2.Should we auction? 3.Should we barter? 4.What m-commerce opportunities are available? 5.How do we compete in the digital economy? 6.What organizational changes will be needed?

19. EC, our country and the challenge Low speed internet and infrastructures Filtering Sanctions Liquidity – the state of owning something of a value that can be easily exchanged for cash Early Liquidity Quality Uncertainty and Assurance Electronic CommercePrentice Hall © 2006 19

20. Electronic CommercePrentice Hall © 2006 20 Summary 1.E-marketplaces and their components. 2.The role of intermediaries. 3.The major types of e-marketplaces. 4.Electronic catalogs, search engines, and shopping carts. 5.Types of auctions and their characteristics.

21. Electronic CommercePrentice Hall © 2006 21 Summary 6.The benefits and limitations of auctions. 7.Bartering and negotiating. 8.The role of m-commerce. 9.Competition in the digital economy. 10.The impact of e-markets on organizations.

22. Homework Assignment 2 1.Enter respond.com and send a request for a product or a service. Once you receive replies, select the best deal. You have no obligation to buy. Write a short report on your experience. 2.Enter Dice.com, create an account, submit your resume for a job listing, create a search agent for the job you are looking for. Write a report about the services provided on dice and your experience. Electronic CommercePrentice Hall © 2006 22

23. Homework Assignment 2 – Cont’d 3. Enter bidder-network.com and view all the different types of auction software and auction hosting available. 4. Examine the process used by sorcity.com regarding reverse auctions. Review the process and membership agreements for both buyers and sellers. Check out the demo. Write a report based on your findings. Electronic CommercePrentice Hall © 2006 23

24. Homework Assignment 2 – Cont’d 5. Examine how bartering is conducted online at tradeaway.com. 6. Using Porter’s Model, analyze the chances of success in launching a storefront for selling shoes in Iran. Electronic CommercePrentice Hall © 2006 24