The E-Commerce Imperative Chapter 1 challenges, issues and strategies

Internet –profoundly change the business world –enabled a new way of conducting commerce e-commerce Electricity and power motor Computer and Internet

Customer relationship management are –the competitive advantage –the bottom–line for market leadership of the information age Customer information is the currency of success in the 21 st century marketplace

Amazon.com –Earth’s biggest bookstore –The real prize Earth’s biggest customer database –Not: name, address, balance –Buying behavior –Shop the WEB The place to find anything customers want to buy online

Amazon’s customer acquisition technique –Selling product –PlanetAll Help 1.5 million members –To keep up important professional and personal contacts –Electronically remind a member of a special occasion 15 millions items happen to be a mouse click away –One stop convenience –Bring buyers, sellers of everything, everywhere

Business-to-Business marketplace –Establish industrial communities-of-interests –Ariba and Commerce One Change from selling procurement software To establishing multi-seller, multi-buyer procurement market-places Owning the customer, the whole customer, is the ultimate prize of 21 st century business

Economies shift –From producer –To consumer The secret is –Customize offerings –One customer at a time Seller Beware

Magic in owning customers –Give them what they want, when and where they want it Key: –Capturing and analyzing info about buying behavior

Knowing what the customers want Buying experience is nothing less than delight –Providing full spectrum of individualized goods and service Concept is simple, implementation is HARD –Internet

Three pillars of any business transformation –Technology, process and people Goal of course: –Understanding how internet changes the world of business –E-commerce is not a single event Is a ongoing journey –Support the complete external business process Information stage (electronic marketing, networking) Negotiation stage (electronic markets) The fulfillment (order process, electronic payment) Satisfaction stage (after sales supports)

Internet & business landscape Industrial age –Automobile, interstate highway Information age –Internet Eliminates the constraints of time and distance Business ubiquity: conduct business everywhere, all the time

From “The network is the computer” –Sun Microsystems’ slogan To “The network is the business” –Company information available worldwide –Business transaction flow friction-free anywhere, anytime to customers, suppliers, and trading partners –Information appliances are business touch points Cell phone, pagers, palm tops, web TV,…

Power shift to the customers Digital economy –IS customer-centric –NOT product centric IMB Global service vs. IBM MAPICS Company engineers customer processes that delight will win

Information is power –Authoritarian society One-way hierarchical Info flow down: One to many –Democracy Matrix forms of communication Many to many

–Industrial age Info flow one way: from producer to customers –Information age Internet provide many to many connection Turn the produce-customer relationship upside down Customer Age –Customer centric –Mass customization (vs. mass production)

EC is –Reengineering end-to-end customer process Complete solution Reducing time Eliminate steps where possible Build consumer communities-of-interest Provide full service consumer process OR someone else will

EC is –Reaching out the ultimate consumer B2B, B2C B2B’s customer –The one who requisitions, received and often recommends –The one who actually place orders (the purchasing agent) Ultimate customer: the only who recommend

Global sales channel NO geographic market territories Global potential and perspective –The net levels the playing field –Daunting task Multiple languages, legal systems and business cultures French ban yahoo.com auction –Expect new entrants from anywhere, anytime –Never rest to compete in the global marketplace

Reduced the cost of buying and selling Company MUST take this opportunity or find itself at a significant competitive disadvantage –Dell vs. Compaq, …. –Variable cost are near ZERO –Potential customers are tremendous –Initial cost is high –Printing and distribution cost are nil

Direct online sales –Simple (see-buy-get) Book –Complex (see-configure-negotiate-contract- fulfill-settle) Dell, Cisco

Direct online sale dramatically “TURN” physical inventory –Dell 1993, sales (2.9 billions) inventory (220 million) 1997, sales (12.3 billions) inventory (233 million) –8 days of inventory 2000, 5 days Aiming for HOURS instead of DAYS

–Wal-Mart Just in time inventory –Outsourcing inventory control directly to its major suppliers in real-time

Converging touch points E-Commerce applications and systems must be available regardless of device or location –Web browser –Customers, suppliers, trading partners’ touch points –Mobile workforce

–Integrate Telephone Call centers Palm top, lap top, cell phone, PDA, fax, pager, IP telephone, , digital postal mail, kiosk –Digital touch points create new sources of customer information Analyze buying behavior Customize offering to individual

Always open for business A web site follows the sun, greeting markets as they arise each day –Demands non-stop systems and network assets –Redundancy, scalability, and fail-safe

The good news: –“digital sales staff” work around the clock without demanding overtime The sobering news: –E-commerce systems require availability and reliability that can be achieved only through much effort and investment

Reliability –eBay outage 1999, lost 3 – 5 millions revenues in the second quarter Scalability –“stampedes” with breaking news –Speed is important Online shoppers would wait for 8 seconds for a site to download Slow securities-trading site (Trade stocks)

Reduced Time-to-Market Time-to-market –No longer a competitive advantage –A competitive necessity Microsoft –Beta version –Reach market before release –Customers actually involved in product development –Customers prefer what they already known

Time-to-market can and must be successfully managed –Collaborative product development –Knowledge sharing

Enriched buying experience Multimedia presentation of products –Fit an outfit at Lands’ End.com Tools assist customers in buying process –Dell.com help you configure a computer

Chat room –Customer to share their product and service experience Potential buyer can learn Specialty goods –Purchase decision have many dimension –Involve multi-step process –Community-of-interest 大學招生、遊學、留學

B2B: Sharing –product specification –bill of material –product scheduling across suppliers and trading partners in real- time to increase productivity in design, development, and procurement

Customization Cornerstone for building a customer-centric business Interacts electronically with customers –Buying behavior can be analyzed to customize –One-to-one marketing revolution Find solution better fit their need Saving time in searching –Never presenting a huge catalog

–Greater relationship Business know what customer will buy Cross selling –Harvard Business School 入學許可， 豪華學生宿舍 Up-selling –New computer game, luxury video card Demographics Biographics: long term interests of the individual

Self service Customer service with greater satisfaction and reduced cost Frustrated customers –Navigate call center –Intolerable on-hold –A human abruptly told you to call another number Customer will go to the self-service lane on the information highway

Reduced barriers of market entry A benefit and a cause of concern New entrants can be successful –Discover and delivery value to customer Hotmail.com –Reaches 1,000,000 members in 6 month with 50k budget –Reaches 12M in one years –Competitors and replication is sure to follow Requires constant stream of innovation to sustain competitive advantages

Demographics of the internet users Information about income, sex, age and geographic –Early users Young, male, educated –Now Information appliance More normative

Electronic market is much smaller than total consumer market –Not even closer to critical mass –Bandwidth demographic Business Individual bandwidth demographic –Keep it simple and snappy –Track bandwidth trend

Power shift to Communities-of-Interest Customers go communities-of-interest first to explore and discover solution –Yahoo! Chat room vs. U.S. stock trading People having common interest go to share ideas, information, and opinions Customer pull info instead of marketing push

Industrial age –Labor union Information age –Consumer union Consumers go there first to discover and explore solution

Cybermediation The middleman is dead, long live the middleman. Cybermediaries can provide compelling values –Aggregating many and diverse resources around a complete solution via internet

–An airline ticket is not a vacation Focus on the bundles of solutions –Customers needs and requirement Look for ways to aggregate value –Industry portal

Logistics and Physical Distribution Physical aspect of doing business –Often forgotten component in e-commerce discussion Time value for info –Internet: ability to move info around the world at the speed of light Time value of product –Physical distribution channel

Warehouse of info age –Not a holding bin –An assembly plant Fedex: Flying warehouse Factory of the future –Amazon.com take over Fedex? –Fedex take over Amazon.com?

Branding Loyalty and acceptance still have to be EARNED –Enter a credit card number at the “BEST” price site??? –First on the net Brand name on the net –Building loyalty and ultimate trust Convenient, cost-effective, informative, simple, secure, and reliable

When most market behave like the stock market Death of fixed pricing –Coca cola test price base on weather The reality of internet pricing: dynamics –Real-time and global –Interactive and close to perfect info Internet buying decision –Price, availability, perceive quality, and service

Auction everywhere Liquidate surplus goods –Last minute deal and bargains for unsold media time Priceline.com: excessive airline capacity Help company set price on first run goods –Fixed price will fade in the digital economy

Hyper-efficiency BPR, business process reengineering –Internal efficiency Internet streamline business processes –Hyper-efficient supply chains –Value chains of information

Conclusions Manager must know the “look and feel” of –Digital economy –New infrastructure –New way of conducting business and competing –New business models –New rule of competition

Internet –Is NOT a competitive advantage –Is a NECESSITY

Homework 1 Pick an Internet phenomenon which attract you most –Find an example from.tw country domain –Write an one page report Describe the e-commerce site The upside of the e-commerce site The downside of the e-commerce site –upload your report to cu.nsysu.edu.tw