Chapter 1: Introduction To E-business For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Learning Objectives (1) Be able to explain what a business model is and how it is used. Gain insight into the technologies that are being used to foster e-business. Determine the size of the Internet economy. Recommend how a business can use e-business techniques to develop long term marketing relationships. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Learning Objectives (2) Identify the components of a marketing system. Identify the components of an e-business based marketing system. Understand how and why businesses need to evolve and change to maintain competitiveness. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Vignette: Dell Computer Company (1) Figure 1.1: Dell’s Business Model Suppliers linked through Extranet deliver just-in-time. Product delivered through independent shippers such as UPS. Web page provides information and ordering. Customer gathers information and purchases through Web page. Dell manufactures customized PC and sell at low price. Payments are made by online through Web page. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Vignette: Dell Computer Company (2) Thinking Strategically Determine if Dell has an advantage over traditional computer sales businesses. Decide if they have an advantage over other on-line sellers. Consider what you would want if you were to purchase a computer. Explain would you feel it is necessary to talk to a “living” person. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Vignette: Dell Computer Company (3) Thinking Strategically Evaluate the Dell Web site (www.dell.com). Determine if this site provides all of the information necessary for you to buy. Determine the importance of the Dell brand name. Explain if the business system that Dell has developed will work for other types of businesses. Explore how Dell develops and maintains relationships between themselves and their customers. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Changing Nature of Marketing Capture data electronically at the point of sale and route that information from the retailer to the supplier and/or the manufacturer. Electronically linked distribution systems are speeding products through the channel of distribution and helping to forge strong relationships between firms. The World Wide Web is allowing businesses to reach customers around the world rather than just local markets. Information on the customer’s shopping behavior is being stored in databases to profile individuals for targeted promotions and customized products. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Business Models New information technologies are allowing businesses to redesign business models and change business practice A business model, or commerce model, is the basic process flow indicating how a business operates. It indicates how business functions are linked together. Internet based business models requires fewer hard assets (bricks and mortar assets) Brick and mortar businesses have tangible physical assets such a factory, office building, warehouses, etc. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Case 1.1: From Egghead to Egghead.com Thinking Strategically Consider the alternative outlets for software, where would look if you were going to purchase software? Determine what is most important to you, the store, the brand name, or the price. Evaluate the Egghead software site (www.egghead.com). Determine if this the type of company you would consider purchasing from. Evaluate the Amazon.com site (www.amazon.com). Decide if you would rather use this brand name site. Determine why you would make that decision. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

What is E-Business E-business, or electronic business, systems use a number of information technology-based business practices to enhance relationships between the business and the customer. E-business includes changes in marketing communication, distribution systems, and business models. www.ibm.com/e-business/ For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

What is E-Commerce E-Commerce: consists of using electronic information based systems to engage in transactions or commerce online. This includes automating purchasing through Web sites. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Table 1.1: E-Business Industry Terms (1) Internet: A global network of computer networks that use a common interface for communication. World Wide Web: A graphically based Internet standard that allows easy access to information from around the world. E-Business: This is the process of using information technology (IT) to support a fuller operation of a business. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Table 1.1: E-Business Industry Terms (2) E-Commerce: Uses electronic information based systems to engage in transactions or commerce online. Extranet: An Internet based connection between a business and its suppliers, distributors, and partners. This is not open to the general public. Intranets: Internal private network that use the same types of hardware, software, and connections as the Internet. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Table 1.2: E-Business Growth and Projections How big is the Internet: 195 million worldwide - 2005 expected 350 million. How much will consumers spend online: 18 billion - 2002: 180 billion. How much will businesses spent online: 180 billion - 2004: 7.3 trillion. http://www.nua.ie/surveys/how_many_online/index.html Numbers are too small. Seen as high as 750 million by 2005. Look at this Christmas. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Marketing Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services that create exchanges that satisfy individual and organizational needs. Relationship marketing implies that business undertake strategies that will hold desirable customers over a long time period. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

A Systems Approach (1) Helps decision-makers look at how all aspects of a strategic business unit (SBU) interact with each other. Systems are seen as being organic in that they must change in response to their environment or face the possibility of becoming extinct. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

A Systems Approach (2) All of the components of a business must work in unison to allow the marketing system to operate in its environment. This system must organize itself and find an advantage over its competitors to ensure long-term sustainability. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

The Traditional Business System Distribution Flow Product Target Customers Communication Price Look at this as a system. Information Flow Payment Flow For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Figure 1.2:The Traditional Marketing System Strategic Plan Strategic Goal Environment: Technological Competitive Political and Legal Social Supply Chain For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

What Are The Business’ Goals? Pure Play Internet? Communicate or Sell? Multi-Channel Sales Approach? Support Brick and Mortar? Hold Current Customers? Enhance Relationship Development? For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

E-Business Systems E-Business Systems are fostering a number of changes to the marketing system: Customized production. Increasing price pressure resulting in lowering prices. Shorter channels of distribution dominated by facilitators. Non-linear promotions. Electronic transfer of funds. Database information management systems. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

E-Business Systems Shorter Channels Dominated by Facilitators Customized Production Customized Non-Linear Promotion Market-of-One Customer Dynamic Pricing Look at this as a system. Knowledge Management & Data Warehousing Electronic Payments For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

The E-Business System Strategic Plan Strategic Goal Environment: Constant Technological Change Increased Competitive Pressure Weakened Political and Legal Influence Greater Social Acceptance of Change Extranet Supply Chain For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Levels of E-Commitment Brochure Sites Sets up a Web page to promote a business. This can also allow contacts through email and simple product ordering. E-Commerce Allows for purchasing online with automated credit card clearance and links to inventory through databases. E-Business Refocuses business practice to take advantage of new technologies to lower costs, improve value, and respond quickly to environmental change. Costs Costs As commitment level increases, so do costs. Costs ?? For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Table 1.3: Components of an E-Business System (1) Chapter 2: Technological Environment Primer on the technology behind the Internet and the World Wide Web. Chapter 3: Communication How communication is changing over the Internet. Chapter 4: Distribution Looks at the dynamics of change in distribution systems. Chapter 5: Business Models Explores the current business models that are being used on the Internet. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Table 1.3: Components of an E-Business System (2) Chapter 6: Customers Diffusion of innovations and online communities. Chapter 7: Data Collection and Use The collection and use of information to gain competitive advantages. Chapter 8: Strategy Innovative approaches to strategy through e-business value chains. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Table 1.3: Components of an E-Business System (3) Chapter 9: Management This chapter explores the change in management that is required to operate in a dynamic and technical environment. Chapter 10: Political, Legal, and Ethical Issues Explores the changing relationship between businesses, the government, and the individual and the worldwide concerns over privacy, fraud, pornography, and free speech. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Case 1.3: From Computers to Cars (1) Consumer Automotive Business Models Traditional Car Sales Dealer advertises locally to bring in the customer and attempts to close the sale. Customer endures sales pitches, salesperson talking to the manager, and then must arrange insurance and financing if they wish to purchase. www.carsdirect.com CarDirect Sales Model Use Internet for information and offers prices in the lowest 10% of national averages. Customers research cars and contact CarDirect online. CarDirect contacts dealers to negotiate sale. When price is obtained, CarDirect can arrange for insurance, financing, and delivery. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

Case 1.3: From Computers to Cars (2) Thinking Strategically Would you rather purchase cars at a local dealership or online? Why should a dealership sell through CarsDirect.com and not some other online sales system? Why can't a local dealer sell online? What would happen if the auto manufacturers decided to sell online? Take a look at CarsDirect.com (www.carsdirect.com) and then GM's Buy Power site (www.buypower.com). Which site would you most likely to purchase a car from? For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

ALE 1.1: Imaging the Future Imagine if the telephone and television were invented within the last ten years. Decide how companies would need to change to use these new tools. Determine if they would be able to use the same techniques to promote and sell their products. Decide if they would use the same outlets to distribute goods and services. Speculate on whether the relationships between suppliers and producers would be handled in the same way. Decide if companies could be managed in the same manner. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

ALE 1.2: Checking Buyer Behavior (1) For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

ALE 1.2: Checking Buyer Behavior (2) Explain how the e-business techniques outlined in this chapter would effect the shopping activities outlined above. Indicate how this would effect the way you would make your purchases. Determine if a smaller number of local outlets make it more likely that you would shop online. Decide which of these businesses are likely to have links to their suppliers. Explain which of these industries will face the greatest amount of change. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

ALE 1.3: Proposed E-Business Model Draw a business model that would use the components of the e-business system indicated in the chapter. Use the Dell vignette as an example. Include the products and services you plan to offer and how those would be delivered. Explain how that business model works to develop relationships with customers. For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

ALE 1.4: Existing Business Model Outline a business model for an existing business. Indicate how it meets the needs of it’s customers, obtains it supplies, etc. Then draw out how you think this business model should operate using the e-business techniques outlined in this chapter. Explain how you think the business could make the transition from the old business model to the new. Are there any environmental drivers leading this business model to change? What could hinder the move to e-business? For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing

ALE 1.5: Who is Under Threat? Wholesaling: Traditional wholesalers that rely upon sales reps to maintain contact. Travel Agents: Airlines are cutting commissions. Insurance: Customers are able to obtain information online, and will soon be able to compare prices. Car Dealerships: Customers are using the Internet to become informed about their car purchases. What business would you add and why? For use with Strategic Electronic Marketing: Managing E-Business Copyright 2001 South-Western College Publishing