Management Information Systems Lecturer: Gareth Jones

Learning Objectives What are the unique features of e-commerce, digital markets, and digital goods? How has Internet technology changed business models? What are the various types of e-commerce, and how has e- commerce changed consumer retailing and business-to-business transactions? What are ethics? Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

photobucket Problem: Building a business model that serves the emerging market for social networking sites. Solutions: Set up a simple, easy to use photo storage site usable at any social networking site. Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Sharing media Photobucket pioneered the concept of linking media from one Web Site to multiple online sites. Demonstrates IT’s role in generating new business models. Illustrates digital technology’s importance in reducing the costs of storing photos and video online. Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

photobucket IS Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

E-Commerce today E-commerce: Use of the Internet and Web to do business; digitally enabled transactions Began in 1995 and grew exponentially; still growing at an annual rate of 25 percent Companies that survived the dot-com bubble burst (around year 2000) and now thrive E-commerce revolution is still in its early stages Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Massive revenue increase! Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

E-Commerce features 1. New global reach 2. Standards 3. Richness 4. Interactivity 5. Information Density 6. Social Technology 7. Digital Markets 8. Disintermediation 9. Digital Goods Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

New Global Reach Global reach The technology reaches across national boundaries, around Earth Effect: Commerce enabled across cultural and national boundaries seamlessly and without modification Marketspace includes, potentially, billions of consumers and millions of businesses worldwide Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Standards Universal standards One set of technology standards: Internet standards Effect: Different computer systems easily communicate with each other (Windows, linux, Mac on IE, Firefox, Safari) Lower market entry costs—costs merchants must pay to bring goods to market Lower consumers’ search costs—effort required to find suitable products Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Richness Richness (means lots of different types of media) Supports video, audio, and text messages Effect: Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Interactivity Interactivity (two- way-communication) The technology works through interaction with the user Effect: Consumers engaged in dialog that dynamically adjusts experience to the individual Consumer becomes co-participant in process of delivering goods to market Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Information Density Information density (a lot of information in a small space) Large increases in information density—the total amount and quality of information available to all market participants Effect: Greater price transparency Greater cost transparency Enables merchants to engage in price discrimination Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Personalisation Personalisation/Customisation Technology permits modification of messages, goods (DELL, Apple, Amazon) Effect Personalized messages can be sent to individuals as well as groups Products and services can be customized to individual preferences Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Social technology Social technology The technology promotes user content generation (Wikis, knowledge sharing) and social networking (MySpace, Facebook, 开心网) Effect New Internet social and business models enable user content creation and distribution, and support social networks Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Digital Markets Digital markets reduce Digital markets enable Search costs (looking for information) Transaction costs (actual sales etc.) Digital markets enable Price discrimination (easy to tell the price difference in two products) Dynamic pricing (easy to respond to market changes) Disintermediation (taking the ‘middle man’ out) Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Disintermediation Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Digital Goods Digital goods Goods that can be delivered over a digital network E.g. Music tracks, video, software, newspapers, books Cost of producing first unit almost entire cost of product: marginal cost of producing 2nd unit is about zero Costs of delivery over the Internet very low Marketing costs remain the same; pricing highly variable Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.) Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Internet Business Models Pure-play models: Internet only businesses (Amazon) Clicks-and-mortar models: Extensions of bricks-and- mortar businesses (online shops that have actual shops like Nike) Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Internet Business Models (II) Digital content, entertainment, and services Ability to deliver digital goods and content has created new alternatives to traditional print and broadcast media Online games (WoW), radio channels (KryKey), films and television (ppv, sopcast), music downloads, and podcasts Communication and Social Networking Some new business models take advantage of Internet’s rich communication capabilities Social networking sites (lots of users, new advertising target audience) Can provide ways for corporate clients to target customers through banner ads and pop-up ads Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Internet Business Models (III) Virtual storefront: Sells physical products directly to consumers or to individual businesses Information broker: Provides product, pricing, and availability information to individuals and businesses (become.com) Transaction broker: Saves users money and time by processing online sales transactions and generating a fee for each transaction (WorldPay, PayPal) Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Internet business models (IV) Online marketplace: Provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those products (Taobao, eBay) Content provider: Creates revenue by providing digital content, such as digital news, music, photos, or video, over the Web (BBC news, CCTV news) Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Discussion What is eBay’s/taobao’s business model and business strategy? What is MySpaces’ strategy- is it useful to businesses? Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Types of e-commerce Business-to-consumer (B2C) Business-to-business (B2B) Consumer-to-consumer (C2C) Mobile (mobile phone) commerce (m-commerce) Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Interactive Marketing Web sites are huge source of details about customer behavior, preferences, buying patterns used to tailor promotions, products, services, and pricing Clickstream tracking tools: Collect data on customer activities at Web sites Used to create personalized Web pages Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Blogging Blogs Customer self-service Personal web pages that contain series of chronological entries by author and links to related Web pages Has increasing influence in politics, news Corporate blogs: New channels for reaching customers, introducing new products and services Customer self-service Web sites and e-mail to answer customer questions or to provide customers with product information Reduces need for human customer-support expert Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

EDI Electronic data interchange (EDI) Computer-to-computer exchange of standard transactions such as invoices, purchase orders Major industries have EDI standards that define structure and information fields of electronic documents for that industry More companies increasingly moving away from private networks to Internet for linking to other firms E.g. Procurement: Businesses can now use Internet to locate most low-cost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, etc. Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

EDI Diagram Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Ethics Principles of right and wrong that individuals use to make choices to guide their behavior Intellectual Property (Copyright) Data collection Privacy Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Key Points E-commerce features E-commerce business models EDI Understanding that you need to think about ethics in IS Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009

Case Study Part 3 How can e-commerce be used by our Chinese Traditional Medicine Company? Management Information Systems (BUS-141 MIS) Thursday, 19 March 2009