1 Class 6 Systems Support to Organizational Strategy: Electronic Commerce Asper School of Business 6150 Management of Information Systems & Technology Instructor: Bob Travica April-June 2009 Updated May 2009

Management of Information Systems and Technology Outline Concept of E-Commerce E-Commerce and Strategic Management Business-to-Consumer (B2C) E-Commerce Business-to-Business (B2B) E-Commerce Class activity: IT/IS and Strategic Advantage Messages for Change Leadership

3 Concept of E-commerce Two main domains: - Business-to-Consumer (B2C), retail on the Internet via Web storefronts (Chapters.com; Wine.com, music, electronics)Chapters.comWine.com - Business-to-Business (B2B), buying & selling b/w firms via e-marketplaces (Covisint; Elance.com)CovisintElance.com directly (EDI, linking via private nets or Web; Dell-HP, shipping industry, Cisco-UPS) Definition: E-commerce refers to performing buying and selling operations electronically – fully or in part. Money transfer (e-payment) Yes Invoicing NoProprietary technology Order placing & tracking EDI*Web x ** x x x x Functionality * EDI = Electronic Data Interchange, technology for creating and transferring business electronic documents. ** Not as integrated function, Electronic Fund Transfer (EFT) needed.

Management of Information Systems and Technology E-Commerce is a matter of business strategy and IS strategy as it affects business place and scope, alignment with traditional business, IT, management techniques, and capital investments. E-Commerce and Strategic Management Supply chains turn electronic Supplier Organization Buyer Organization Supplier Organization Consumer

Management of Information Systems and Technology Boom , 2001 crash; pure vs. hybrid models 2006: 3% of all retail in U.S., 0.2% in Canada Firm perspective benefits: - Global reach & 24/7 sales - Savings - Direct marketing & (customer profiling, personalized Web storefronts) - Cross selling (automatic matching of customer profiles) B2C E-commerce Size  Benefits  Costs IS Issues

Management of Information Systems and Technology Scope Benefits Costs  IS Issues B2C E-commerce Firm perspective: - Technology requirements) - Delivery, Logistics - Payment security - Legal boundaries - Competition increase - E-branding Consumer perspective: - IT have-nots - Privacy - Payment anxiety - Recourse uncertainty

Management of Information Systems and Technology B2B E-commerce Scope  Benefits  Costs IS Issues Larger part of e-commerce (2006: 31% US, 1.8% CAN) Firms’ benefits: - Larger market - Savings from efficiencies in supply chain (Cisco-UPS, shipping industry, Dell-HP) - Better coordination in supply chain - Dynamic pricing (auctions) - 24/7 business (via e-marketplaces)

Management of Information Systems and Technology Scope Benefits Costs  IS Issues B2B E-commerce Technology requirements (systems, links, security) Volatile business relationships Losses from increased competition & dynamic pricing Legal boundaries (e.g., anti-monopoly pressures on buyers-driven e-marketplaces) Costs of intermediaries Costs of private networks Inventory Buyer Purchasing Bank Production Scheduling Supplier E-marketplace Sales

Management of Information Systems and Technology Class Activity: IT/IS does or does not matter for strategic advantage?  To provide a competitive advantage, any technology needs to be a) scarce, rare (proprietary, can’t be copied) b) expensive.  Nicholas Carr (2003) claims that IT doesn’t fit either criterion but has become a commodity as electricity, which everyone can afford. Thus, IT enables no competitive differentiation.  Opponents argue that Carr’s analogies are false, management of IT/IS makes a difference, historical process of learning matters, first mover advantage still applies, affordability is not universal…  Working in teams, take (a) the position of Carr, or (b) the opponents, or (c) the middle way, and build your argument on any case/cases we have studied.

Messages for Change Leader Management of Information Systems and Technology Pay attention to e-commerce (B2B, B2C), which increasingly is a necessary part of business, both from the seller and buyer perspective. (Cisco-UPS, E-markets…) Think of using IT creatively to expand the sales processes via direct sales to corporate and individual customers (Dell example). Be flexible in managing the sales processes over time as the market changes (Compaq added direct sales process to its indirect channel, while Dell added indirect sales to his direct channel). The case of e-commerce refutes Carr’s argument by proving that a strategic advantage can still be gained by using commonly available IT innovatively and before others.