Chapter 1 Overview of e-commerce Framework e-commerce

CAS-COD-Prez-Date-CTL Confidential 2 Questions   What is e-commerce?   What are the distinct categories of e- commerce?   How is e-commerce different from traditional commerce?   Why study e-commerce?   What is the e-commerce decision-making process?

CAS-COD-Prez-Date-CTL Confidential 3 Strategic Framework  e-commerce Strategy Process Framing the market Defining the business model Customer interface Market communications Branding, implementation, and evaluation

CAS-COD-Prez-Date-CTL Confidential 4 Strategic Framework  e-commerce Platforms Network infrastructure Convergence of media

CAS-COD-Prez-Date-CTL Confidential 5 What is e-commerce? Exchanged of digitized information Technology-enabled transactions Technology-mediated relationships Intra- and Inter-organizational activities

CAS-COD-Prez-Date-CTL Confidential 6 Definition  e-commerce can be formally defined as…  technology-mediated exchanged between parties (individuals, organizations, or both) as well as the electronically based intra- or inter-organizational activities that facilitate such exchanges.

CAS-COD-Prez-Date-CTL Confidential 7 Distinct Categories B-2-B Business-to-Business (B-2-B) New cooperation, merger, consortiums

CAS-COD-Prez-Date-CTL Confidential 8 Distinct Categories B-2-C Business-to-Consumer (B-2C) Front office frequently tracked

CAS-COD-Prez-Date-CTL Confidential 9 Distinct Categories C-2-C Consumer-to-Consumer (C-2-C) Between and among Auction exchanges

CAS-COD-Prez-Date-CTL Confidential 1010 Distinct Categories C-t-B Consumer-to-Business (C-2-B) Economically motivated or social advocacy

CAS-COD-Prez-Date-CTL Confidential 1 Four Categories of e-commerce B2B B2C C2B C2CConsumers Business And selling to... Business originating from... Business Consumers

CAS-COD-Prez-Date-CTL Confidential 1212 e-commerce / Traditional Commerce Core strategic decisions are technology-based Real-time competitive responsiveness 24 X 7

CAS-COD-Prez-Date-CTL Confidential 1313 Technology-Based Customer Interface Screen-to-face interaction –Monitors –ATMs –PDAs –WAP

CAS-COD-Prez-Date-CTL Confidential 1414 Technology-Based Customer Interface Screen-to-face interaction –  sales –  costs –organizational and technology costs

CAS-COD-Prez-Date-CTL Confidential 1515 Customer Interaction  Customer Time controlled by customer  Seller Entices, influences, and targets Uses history and demographics

CAS-COD-Prez-Date-CTL Confidential 1616 Customer Behavior Third-party measurement firms Extensive tracking capabilities Real-time financial estimates

CAS-COD-Prez-Date-CTL Confidential 1717 Network Economics  Metcalf’s Law the value of a network is “n” squared being the number of nodes on the network  Network economics positive feedback increased returns

CAS-COD-Prez-Date-CTL Confidential 1818 Nontraditional Performance Metrics and Emergent Valuation Models No widely acceptable methods to measure e- commerce business performance Historic measurements not full measurements Some new methods are being devised

CAS-COD-Prez-Date-CTL Confidential 1919 Point Counterpoint: Valuations - Do they or don’t they make sense? Point — Counterpoint Valuations Make Sense Valuations Do Not Make Sense Increased focus on path to profitability and revenue Techniques such as real options valuation yield observed valuations Investors are investing on valuations Network economics and information economics create highly profitable companies Uncertainty leading to wide fluctuations Many companies do not demonstrate profits for a long period of time There is an inconsistency in the valuation of on-line and off-line companies Can be a “bending” of the accounting rules by on-line companies Valuations are based the assumption that the economics of “monetizing” them will remain favorable Many stocks tend to be moved by momentum

CAS-COD-Prez-Date-CTL Confidential 2020 Growth in Number of Internet Users U.S. Online Population Forecasts by Researcher Population (Millions)

CAS-COD-Prez-Date-CTL Confidential 2121 Growth in Number of Internet Users U.S. Online Population Forecasts by Researcher Population (Millions)

CAS-COD-Prez-Date-CTL Confidential 2 Impact 1: Economics of Growth Increasing “speed of adoption” Far outdistances other technology growth Scale and velocity reshapes economic growth

CAS-COD-Prez-Date-CTL Confidential 2323 Impact 2: Blurring of Industry Boundaries NAICS codes suffer from a blurring of boundaries. Old categories breaking down “Last mile” to consumer homes see a blur of alternative telecommunications networks

CAS-COD-Prez-Date-CTL Confidential 2424 Impact 3: Transformation of Social Structure and Society Transforming –learning –group communications –scientific interchange –how society functions Ubiquitous Website addresses

CAS-COD-Prez-Date-CTL Confidential 2525 Opportunities for Wealth Creation Enormous market capitalization for several New economy players –consumer products –financial markets –middleware enabling commerce –services –advertising

CAS-COD-Prez-Date-CTL Confidential 2626

CAS-COD-Prez-Date-CTL Confidential 2727 Business-to-Business e-commerce Projections, In Millions ( )

CAS-COD-Prez-Date-CTL Confidential 2828

CAS-COD-Prez-Date-CTL Confidential 2929 Internet as Mass Medium — North American Adoption Curves North American Users / Households (MM) * Launch of HBO in 1976 used to estimate the beginning of cable as an entertainment / advertising medium Radio TV CableCommercial Internet 50 Million Users / Households Years to Reach 50 MM Users Radio: 38 years TV: 13 yearsCable*: 10 years Commercial Internet: 5 years Internet Adoption Rates Versus Other Mediums

CAS-COD-Prez-Date-CTL Confidential 3030 Estimated Savings from e-commerce

CAS-COD-Prez-Date-CTL Confidential 3131 E-Commerce Decision-making Process  Identify:   Customer groups to serve   Compelling set of benefits, differentiating “value proposition”   Communication effectiveness   Content –Look and feel –Level of community –Personalization   Organization structure –Business services –Application services   Potential partners –Capabilities   Shareholders   Metrics

CAS-COD-Prez-Date-CTL Confidential 3232 E-Commerce Strategy  Managerial task of e-commerce strategy   Framing the market opportunity   Business model   Customer interface   Market communications and branding   Implementation   Metrics   Valuation

CAS-COD-Prez-Date-CTL Confidential 3 Exhibit 1-5: Where to Play On-Line and Off-Line Fulfillment Systems Customer Interface On-lineOff-line Yahoo! Amazon.com BN.com McDonalds Egghead

CAS-COD-Prez-Date-CTL Confidential 3434 Market Infrastructure  Opportunities and constraints Network infrastructure Media infrastructure Two Forms of Convergence Publics and Policies

CAS-COD-Prez-Date-CTL Confidential 3535 Exhibit 1-6: Media Convergence to a Digital Platform Telephone/DSL Cable Broadcast Radio & TV Satellite Wireless Print (Newspapers and Magazines) Television Radio Music Motion Pictures Digital Convergence Digital Convergence Network Infrastructure Network Infrastructure Media Infrastructure Media Infrastructure

CAS-COD-Prez-Date-CTL Confidential 3636 A Framework for Electronic Commerce Framing the Market Opportunity Business Model Implementation Evaluation: Metrics and Valuation Media Infrastructure Network Infrastructure e-commerce Strategy Market Infrastructure Customer Interface Publics and Politics Market Communications and Branding

CAS-COD-Prez-Date-CTL Confidential 3737 Point Counterpoint: Who will win? Online vs. Offline Point — Counterpoint On-line Will Win Off-line Will Win Off-line companies can’t easily cannibalize their own businesses Off-line companies stock does not allow them to adequately incentivise key new economy talent Off-line companies move too slowly Key elements of business (e.g. business design, strategy, value proposition) are different in the New Economy “innovator’s Dilemma”: Focusing on current customer needs causes companies to divert focus from new technologies Market will not tolerate blue chip companies running loss-making businesses Off-line companies may face a channel conflict Schwab has become a leading player in the on-line brokerage industry Companies with established market leadership have key assets such as relationships with customers, suppliers, deep industry knowledge and experienced management Established companies have deep pockets Off-line companies have established and trusted brands Off-line companies can create spin-out businesses with new culture, processes, funding, etc. There have been other technology revolutions –From 1894 to 1903, there were 20,000 telephone companies that started in the U.S.

CAS-COD-Prez-Date-CTL Confidential 3838 “The Rest...of the Story”