Chapter Three Overview SECTION 3.1 - BUSINESS AND THE INTERNET Disruptive Technology Evolution of the Internet Accessing Internet Information Providing Internet Information SECTION 3.2 - E-BUSINESS E-Business Basics E-Business Models Organizational Strategies for E-Business Measuring E-Business Success E-Business Benefits and Challenges New Trends in E-Business: E-Government and M-Commerce Section 3.1 begins by discussing disruptive technology with the Internet causing complete business disruption Section 3.1 then focuses on how the Internet began, and how to access and provide information on the Internet Section 3.2 discusses e-business models and how departments can use e-business to enhance performance Ask your students how many of them have Internet access. How are they accessing the Internet? Soon Internet access will be offered through electrical outlets How will this type of technology change the way people and businesses use the Internet?

BUSINESS AND THE INTERNET SECTION 3.1 BUSINESS AND THE INTERNET One-hour film processing and digital cameras both contributed to the demise of Polaroid, a solid company that had an innovative technology and a captive customer base. The dilemma that faced Polaroid is a dilemma that most organization face – the criteria an organization uses to make business decisions for its present business could possibly create issues for its future business. Essentially, what is best for the current business could ruin it in the long term. In the past few years, e-business seems to have permeated every aspect of daily life. In just a short time, both individuals and organizations have embraced Internet technologies to enhance productivity, maximize convenience, and improve com­munications globally. This chapter focuses on the disruptive technology, the Internet, and e-business processes that are changing the nature of the buyer-seller relationship, the role of information technology (IT), and organizational structures and tasks. The chapter also discusses the opportunities and advantages found with developing e-businesses. Specific relationships have been developed in the chapter between disruptive technologies and e-businesses.

Disruptive versus Sustaining Technology What do steamboats, transistor radios, and Intel’s 8088 processor all have in common? Disruptive technology – a new way of doing things that initially does not meet the needs of existing customers Sustaining technology – produces an improved product customers are eager to buy

Disruptive versus Sustaining Technology Innovator’s Dilemma - discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers, partners, and stakeholders

The Internet – Business Disruption One of the biggest forces changing business is the Internet Organizations must be able to transform as markets, economic environments, and technologies change Focusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technology Do your students agree that the Internet is an example of a disruptive technology? When it was first introduced would they consider it a form of disruptive technology? CLASSROOM EXERCISE Finding Innovation Innovation, new ideas, and new technology are exciting. It is currently estimated that everything we know technically will represent 1 percent of all technology in 2050. Break your students into groups and ask them to search the Internet for the most exciting form of innovation that is going to hit our market and change our lives over the next ten years. Have your students present their findings to the class and offer a small prize to the winner. A few examples include: Computers that offer smells, click on a perfume and the scent permeates from your computer, movie theatres will offer smells that correspond to the movie Electronic toilets – analyze output and let you know if you getting sick days before the cold actually hits. Great for rest homes and hospitals Planes the size of small ships that offer shopping and restaurants Ships the size of small cities where you can purchase an apartment What's For Dinner? Just Call Your Refrigerator – show your student’s the kitchen of the future http://www.geconsumerproducts.com/pressroom/press_releases/company/company/kitchenoffuture_article_06.htm

The Internet – Business Disruption Estimates predict more than 3 billion Internet users by 2010

EVOLUTION OF THE INTERNET The Internet began as an emergency military communications system operated by the Department of Defense Gradually the Internet moved from a military pipeline to a communication tool for scientists to businesses Internet – computer networks that pass information from one to another using common computer protocols Protocol – standards that specify the format of data as well as the rules to be followed during transmission

Evolution of the World Wide Web

Evolution of the World Wide Web The Internet’s impact on information Easy to compile Increased richness Increased reach Improved content Internet’s Impact on Information Easy to compile - Searching for information on products, prices, customers, suppliers, and partners is faster and easier when using the Internet. Increased richness - refers to the depth and breadth of information transferred between customers and business. Businesses and customers can collect and track more detailed information when using the Internet. Increased reach - refers to the number of people a business can communicate with, on a global basis. Businesses can share information with numerous customers all over the world. Improved content - A key element of the Internet is its ability to provide dynamic relevant content. Buyers need good content descriptions to make informed purchases, and sellers use content to properly market and differentiate themselves from the competition. Content and product description establish the common understanding between both parties to the transaction. As a result, the reach and richness of that content directly affects the transaction.

Evolution of the World Wide Web The Internet makes it possible to perform business in ways not previously imaginable It can also cause a digital divide Digital divide – when those with access to technology have great advantages over those without access to technology People living in the village of Siroha, India, must bike five miles to find a telephone. For over 700 million rural people living in India, the digital divide was a way of life, until recently. Media Lab Asia sells telephony and e-mail services via a mobile Internet kiosk mounted on a bicycle, which is known as an “info-thelas.” The kiosk has an onboard computer equipped with an antenna for Internet service and a specially designed all-day battery. Over 2,000 villages have purchased the kiosk for $1,200, and another 600,000 villages are interested What impact does the digital divide have on society? How is MIT’s $100 laptop program going to help the digital divide?

ACCESSING INTERNET INFORMATION Four tools for accessing Internet information Intranet – internalized portion of the Internet, protected from outside access, for employees Extranet – an intranet that is available to strategic allies Portal – Web site that offers a broad array of resources and services Kiosk – publicly accessible computer system that allows interactive information browsing

PROVIDING INTERNET INFORMATION Three common forms of service providers Internet service provider (ISP) –provides individuals and other companies access to the Internet Online service provider (OSP) – offers an extensive array of unique Web services Application service provider (ASP) – offers access over the Internet to systems and related services that would otherwise have to be located in organizational computers Internet service provider (ISP) – a company that provides individuals and other companies access to the Internet along with additional related services, such as Web site building. Many but not all ISPs are telephone companies. ISPs provide services such as Internet transit, domain name registration and hosting, dial-up or DSL access, leased line access, and collocation. ISPs mostly provide access to the Internet and charge a monthly access fee to the consumer. Online service provider (OSP) – offers an extensive array of unique services such as its own version of a Web browser. An OSP offers services such as access to private computer networks and information resources such a bulletin boards, downloadable programs, news articles, chat rooms, and electronic mail services. Application service provider (ASP) – a company that offers an organization access over the Internet to systems and related services that would otherwise have to be located in personal or organizational computers. Software offered using an ASP model is also sometimes called On-demand software. The most limited sense of this business is that of providing access to a particular application program (such as medical billing) using a standard protocol such as HTTP. The need for ASPs has evolved from the increasing costs of specialized software that have far exceeded the price range of small to medium sized businesses. As well, the growing complexities of software have lead to huge costs in distributing the software to end-users. Through ASPs, the complexities and costs of such software can be cut down. In addition, the issues of upgrading have been eliminated from the end-firm by placing the onus on the ASP to maintain up-to-date service.

PROVIDING INTERNET INFORMATION ISPs, OSPs, and ASPs use service level agreements (SLA) which define the specific responsibilities of the service provider and set the customer expectations Review Figure 3.10 for a listing of the top ISPs, OSPs, and ASPs

SECTION 3.2 E-BUSINESS

E-BUSINESS BASICS How do e-commerce and e-business differ? E-commerce – the buying and selling of goods and services over the Internet E-business – the conducting of business on the Internet including, not only buying and selling, but also serving customers and collaborating with business partners

E-BUSINESS MODELS

Business-to-Business (B2B) Electronic marketplace (e-marketplace) – interactive business communities providing a central market where multiple buyers and sellers can engage in e-business activities Electronic marketplaces, or e-marketplaces, present structures for conducting commercial exchange, consolidating supply chains, and creating new sales channels Their primary goal is to increase market efficiency by tightening and automating the relationship between buyers and sellers Existing e-marketplaces allow access to various mechanisms in which to buy and sell almost anything, from services to direct materials

Business-to-Consumer (B2C) Common B2C e-business models include: e-shop – a version of a retail store where customers can shop any time without leaving their home e-mall – consists of a number of e-shops; it serves as a gateway through which a visitor can access other e-shops Business types include: Brick-and-mortar business Pure-play business Click-and-mortar business Business Types: Brick-and-mortar business - operates in a physical store without an Internet presence. Pure-play (virtual) business - a business that operates on the Internet only without a physical store. Examples include Amazon.com and Expedia.com. Click-and-mortar business – a business that operates in a physical store and on the Internet. Examples include REI and Barnes and Noble. Can you name a company that operates in each of the different business types? Brick-and-mortar business – local book store, college book store (there are not many today) Pure-play business – Amazon.com, eBay Click-and-mortar business – Barnes and Noble

Consumer-to-Business (C2B) Priceline.com is an example of a C2B e-business model The demand for C2B e-business will increase over the next few years due to customer’s desire for greater convenience and lower prices

Consumer-to-Consumer (C2C) Online auctions Electronic auction (e-auction) - Sellers and buyers solicit consecutive bids from each other and prices are determined dynamically Forward auction - Sellers use as a selling channel to many buyers and the highest bid wins Reverse auction - Buyers use to purchase a product or service, selecting the seller with the lowest bid

Consumer-to-Consumer (C2C) C2C Communities Communities of interest - People interact with each other on specific topics, such as golfing and stamp collecting Communities of relations - People come together to share certain life experiences, such as cancer patients, senior citizens, and car enthusiasts Communities of fantasy - People participate in imaginary environments, such as fantasy football teams and playing one-on-one with Michael Jordan

ORGANIZATIONAL STRATEGIES FOR E-BUSINESS Primary business areas taking advantage of e-business include: Marketing/sales Financial services Procurement Customer service Intermediaries

Marketing/Sales Generating revenue on the Internet Online ad (banner ad) - box running across a Web page that contains advertisements Pop-up ad - a small Web page containing an advertisement Associate program (affiliate program) - businesses generate commissions or royalties Viral marketing - a technique that induces Web sites or users to pass on a marketing message Mass customization - gives customers the opportunity to tailor products or services

Marketing/Sales Generating revenue on the Internet (cont.) Personalization - occurs when a Web site can fashion offers that are more likely to appeal to that person Blog - Web site in which items are posted on a regular basis and displayed in reverse chronological order Real simple syndications (RSS) - a Web feed format used for Web syndication of content Podcasting - the distribution of audio or video files, such as radio programs or music videos, over the Internet to play on mobile devices

Marketing/Sales Generating revenue on the Internet (cont.) Search engine optimization (SEO) - a set of methods aimed at improving the ranking of a Web site in search engine listings Spamdexing - uses a variety of deceptive techniques in an attempt to manipulate search engine rankings, whereas legitimate SEO focuses on building better sites and using honest methods of promotion

Financial Services Online consumer payments include: Financial cybermediary Electronic check Electronic bill presentment and payment (EBPP) Digital wallet Online Consumer Payments Financial cybermediary - an Internet-based company that facilitates cybermediary payments over the Internet. PayPal is the best-known example of a financial cybermediary. Electronic check - a mechanism for sending a payment from a checking or savings account. There are many implementations of electronic checks, with the most prominent being online banking. Electronic bill presentment and payment (EBPP) - a system that sends presentment and bills over the Internet and provides an easy-to-use mechanism (such as payment (EBPP) clicking on a button) to pay the bill. EBPP systems are available through local banks or online services such as Checkfree and Quicken. Digital wallet - both software and information—the software provides security for the transaction and the information includes payment and delivery information (for example, the credit card number and expiration date). There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created. Information systems will greatly help the achievement of this goal. As a consumer, which type of payment do you use the most on the Internet? What will be the driving force that changes online consumer payments in the future? Security Ease of use Common formats

Financial Services Online business payments include: Electronic data interchange (EDI) Value-added network (VAN) Financial EDI (financial electronic data interchange) Online Business Payments Electronic data interchange (EDI) - a standard format for exchanging business data. One way an organization can use EDI is through a value-added network. Value-added network (VAN) - a private network, provided by a third party, for exchanging information through a high-capacity connection. VANs support electronic catalogs (from which orders are placed), EDI-based transactions (the actual orders), security measures such as encryption, and EDI mailboxes. Financial EDI (financial electronic data interchange) is a standard electronic process for B2B market purchase payments. National Cash Management System is an automated clearinghouse that supports the reconciliation of the payments. Why do businesses use different forms of online payments than consumers? Business payments are typically much larger than consumer payments and need additional security With supply chain management systems online business payments are automated using EDI

Procurement Maintenance, repair, and operations (MRO) materials (also called indirect materials) – materials necessary for running an organization but do not relate to the company’s primary business activities E-procurement - the B2B purchase and sale of supplies and services over the Internet Electronic catalog - presents customers with information about goods and services offered for sale, bid, or auction on the Internet Web-based procurement of maintenance, repair, and operations (MRO) supplies is expected to reach more than $200 billion worldwide by the year 2009 Maintenance, repair, and operations (MRO) materials (also called indirect materials) - materials necessary for running an organization but do not relate to the company’s primary business activities. Typical MRO goods include office supplies (such as pens and paper), equipment, furniture, computers, and replacement parts. Name a few types of MRO goods? Office supplies Equipment Furniture Computers

Intermediaries Intermediaries – agents, software, or businesses that bring buyers and sellers together that provide a trading infrastructure to enhance e-business Reintermediation – using the Internet to reassemble buyers, sellers, and other partners in a traditional supply chain in new ways

MEASURING E-BUSINESS SUCCESS Most companies measure the traffic on a Web site as the primary determinant of the Web site’s success However, a large amount of Web site traffic does not necessarily equate to large sales Many organizations with high Web site traffic have low sales volumes

MEASURING E-BUSINESS SUCCESS Web site traffic analysis can include: Cookie Click-through Banner ad Interactivity Web site traffic analysis can include: Cookie – a small file deposited on a hard drive by a Web site containing information about customers and their Web activities Click-through – a count of the number of people who visit one site and click on an advertisement that takes them to the site of the advertiser Banner ad – a small ad on one Web site that advertises the products and services of another business, usually another dot-com business Interactivity – visitor interactions with the target ad Analyzing Web site traffic is one way organizations can understand the effectiveness of Web advertising Ask your students how interactivity is a giant advancement in the advertising industry Ans: Prior to computers there was no way for the advertiser to know if the customer actually read or even looked at an ad in a newspaper or magazine Interactivity measures allow advertisers to know exactly how long a customer spends viewing an ad Ask your students about privacy and how do these types of Web traffic analysis tools invade user privacy

Web Site Metrics Clickstream data tracks the exact pattern of a consumer’s navigation through a Web site Clickstream data can reveal: Number of pageviews Pattern of Web sites visited Length of stay on a Web site Date and time visited Number of customers with shopping carts Number of abandoned shopping carts Click-stream data can reveal a number of basic data points on how consumers interact with Web sites Ask your students what an organization can learn from understanding click-stream data For example, what does number of abandoned shopping carts tell an organization?

Web Site Metrics Web site metrics include: Visitor metrics Exposure metrics Visit metrics Hit metrics Review each section of Figure 3.30 for a detailed listing of visitor, exposure, visit, and hit metrics CLASSROOM EXERCISE Measuring Metrics Break your students into groups and assign each group one of the four categories found in the above Figure Have your students detail each category explaining how each metric can be used to help an organization improve its operations Ask your students to share their answers with the class

E-BUSINESS BENEFITS AND CHALLENGES E-business benefits include: Highly accessible Increased customer loyalty Improved information content Increased convenience Increased global reach Decreased cost

E-BUSINESS BENEFITS AND CHALLENGES E-business challenges include: Protecting consumers Leveraging existing systems Increasing liability Providing security Adhering to taxation rules

NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE E-government - involves the use of strategies and technologies to transform government(s) by improving the delivery of services and enhancing the quality of interaction between the citizen-consumer within all branches of government

NEW TRENDS IN E-BUSINESS: E-GOVERNMENT AND M-COMMERCE Mobile commerce - the ability to purchase goods and services through a wireless Internet-enabled device