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Economic Success Factors

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Presentation on theme: "Economic Success Factors"— Presentation transcript:

1 Economic Success Factors

2 Economic Success Factors
Cost Curves Bundling Critical Mass of Buyers and Sellers Pricing Consumer Characteristics Brokers and Disintermediarisation

3 Costs Curves Physical Products Digital Products Cost Cost Quantity

4 Bundling More opportunities with EC Pricing becomes critical
Eg Telstra

5 Critical Mass of Buyers and Sellers
To overcome initial high costs Size of market depends on demographics National Competitive Advantage

6 Pricing Auctions of unused capacity Price searching reverse auctions
prices will be determined by buyers’ willingness to pay rather than production costs convenience versus price

7 Consumer Characteristics
EC is more suited to analytical rather than impulse buyers What about patient buyers?

8 Disintermediarisation v’s Brokers
lower search costs Privacy greater information risk reduction matching supply & demand Disintermediarisation reduces steps in value chain removes wholesalers and brokers

9 Winners ISP’s Portals Software Companies Network Owners
Mid-size Manufacturers Technology Suppliers

10 Winners (Cont.) Security Providers Electronic Payment Gateways
Dedicated Online Companies Conventional Retailers that use online extensively eMarketplaces Niche manufacturers

11 Losers Wholesalers Brokers Salespeople
Non-differentiated manufacturers

12 Virtual Communities Electronic Communities
Replace Geographical Communities Serves the analytical and patient buyer

13 Virtual Communities (Cont.) Types Communities of Transactions
Facilitate Buying and Selling Communities of Interests Specific Topic or Interest Communities of Relations Organised Around Certain Life Experiences Communities of Fantasy Imaginary Environments

14 Virtual Communities (Cont.)
Creating a Virtual Community Creates a Market Understand a particular niche industry and its information needs Build a site that provides that information Set up the site to mirror the steps that a user goes through in the information gathering and decision making process Build a community that relies on the site for decision support Start selling products that fir the decision support process

15 Globalisation

16 Emergence of Globalisation
Greater imports by Industrialised Countries Low labour costs in Third World Countries Improved Telecommunications Growth of Networks Free Trade Agreements Growth of Knowledge & Information economy

17 White Collar Blue Collar Service Farming

18 Advantages of Globalisation
Access to larger markets flexibility to employ workers and manufacture products anywhere 24/7 trade across time zones

19 Barriers to Globalisation
Legal issues Regulation Jurisdiction Market access Telecommunications Infrastructure Financial Issues Customs and Taxation Money Exchange Differing Currencies

20 Barriers to Globalisation (cont.)
Trust, Security & Authentication Language Cultural and Social differences Government Support or Interference

21 Competitive Advantage

22 Traditional Competitors
Porter’s 5 forces Substitute Products New Entrants Traditional Competitors The firm Suppliers Customers

23 EC and Porter’s 5 forces Customers Suppliers Traditional rivals
increase in bargaining power due to increase in sellers and products Suppliers bargaining power decrease due to global competition Traditional rivals Greater presence due to virtual store fronts New entrants many new entrants global marketspace Substitute products more substitute products

24 Business Responses to Competition Product differentiation
focussed differentiation data mining Tight linkages to customers and suppliers switching costs Low cost producer lower internal costs lower price \ improved quality to customer

25 Porter’s Value Chain Model
Production consists of a series of activities that add a margin of value to a firm’s products or services The added value increases profits, enhances asset value and competitive position Primary activities Directly related to production and distribution Support activities Make delivery possible Include organisational structure, HR, technology and procurement

26 Porter’s Value Chain Model Increase profits by:
Increasing steps that involve primary activities Reducing steps that involve support activities Converting support activities to primary activities

27 Use of EC for Competitive Advantage
Strategic Systems FedEx American airlines

28 Use of EC for Competitive Advantage
Continuous Improvement Productivity improvement Just-in-time TQM Improved decision making Managing information and knowledge Innovation and creativity Change management Customer service

29 Use of EC for Competitive Advantage
Business Process Reengineering Reduced cycle time Employee empowerment (IT enables decentralised decision making) Knowledge management Customer focussed approach (mass production changed to mass customisation) Business alliances (General Motors, Ford and Chrysler) Virtual corporations

30 The Future of EC Improve Transform Redefine

31 The Future of EC (cont.) Improve New markets Customisation Ordering
Delivery (digital products) New sales channels (Disintermediarisation) Demand driven supply Reduced cycle time Customer service (dialogue and feedback) Brand image

32 The Future of EC (Cont.) Transform The Horizontal Organisation
Strategic Agility (Quick Reactions to Technological Change) Mobile Workforces Cross Functional Systems

33 Functional Business applications
Strategic Systems Management Systems Knowledge Systems Operational Systems Sales & Marketing Production Accounting Human resources

34 The Future of EC (Cont.) Redefine New Products Services versus goods
The revolution of open source New Business Models (?)

35 The Future of EC (Cont.) Redefine (cont.) Virtual Organisations
Integration of the supply chain Human Resource Management Human Capital Online learning Integration

36 Business strategy and EC
Lead Wait Experiment

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