THE DIGITAL FIRM: ELECTRONIC COMMERCE AND ELECTRONIC BUSINESS (Laudon & Laudon 4) Chapter vvvv

Internet Technology & Digital Firm FEATURES & CHARACTERISTICS Information Technology Infrastructure: Provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizationsInformation Technology Infrastructure: Provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations Direct communication between trading partners: Disintermediation removes intermediate layers, streamlines processDirect communication between trading partners: Disintermediation removes intermediate layers, streamlines process Round-the-clock service: Web sites available to consumers 24 hours a dayRound-the-clock service: Web sites available to consumers 24 hours a day Extended distribution channels: Outlets created for attracting customers who otherwise would not patronizeExtended distribution channels: Outlets created for attracting customers who otherwise would not patronize Reduced transaction costs: Costs of searching for buyers, sellers, etc. reducedReduced transaction costs: Costs of searching for buyers, sellers, etc. reduced

Business Model: Defines an enterpriseDefines an enterprise Describes how the enterprise delivers a product or serviceDescribes how the enterprise delivers a product or service Shows how the enterprise creates wealthShows how the enterprise creates wealth New Business Models & Value Propositions

4.4 Internet Business Models Virtual storefront: Sells goods, services on-lineVirtual storefront: Sells goods, services on-line Information broker: Provide info on products, pricing, etc.Information broker: Provide info on products, pricing, etc. Transaction broker: Buyers view rates, terms from various sourcesTransaction broker: Buyers view rates, terms from various sources Online Marketplace: Concentrates information from several providersOnline Marketplace: Concentrates information from several providers Content provider: Creates revenue through providing client for a fee, and advertisingContent provider: Creates revenue through providing client for a fee, and advertisingmore

4.5 On-line service provider: Provides service, support for hardware, software productsOn-line service provider: Provides service, support for hardware, software products Virtual community: Chat room, on-line meeting placeVirtual community: Chat room, on-line meeting place Portal: Initial point of entry to Web, specialized content, servicesPortal: Initial point of entry to Web, specialized content, services Syndicator: Aggregate information from several sources sold to other companiesSyndicator: Aggregate information from several sources sold to other companies Auction: Electronic clearinghouse products, prices, change in response to demandAuction: Electronic clearinghouse products, prices, change in response to demand Dynamic pricing: real-time interactions between buyers and sellers determine worth of itemsDynamic pricing: real-time interactions between buyers and sellers determine worth of items Banner ad: Graphic display used for advertising, linked to the advertiser’s Web siteBanner ad: Graphic display used for advertising, linked to the advertiser’s Web site Internet Business Models continued

Information asymmetry: One party in a transaction has more information than the otherInformation asymmetry: One party in a transaction has more information than the other Increases richness: Depth and detail of informationIncreases richness: Depth and detail of information Increases reach: Number of people contactedIncreases reach: Number of people contacted Changing Economies of Information

Richness New levels of richness and reach attainable Reach ENABLERS Explosion of connectivity Dissemination of standards Figure 4-1 The Changing Economics of Information

Categories of Electronic Commerce Business-to-customer (B2C): Retailing of products and services directly to individual customers Business-to-business (B2B): Sales of goods and services among businesses Consumer-to-consumer (C2C): Individuals use Web for private sales or exchange

B2C: Business-To-Customer Customer-centered retailing: Closer, yet more cost-effective relationship with customersCustomer-centered retailing: Closer, yet more cost-effective relationship with customers Web sites: Provide information on products, services, prices, ordersWeb sites: Provide information on products, services, prices, orders Disintermediation: The removal of organizations or business process layers responsible for certain intermediary steps in a value chainDisintermediation: The removal of organizations or business process layers responsible for certain intermediary steps in a value chainDisintermediation: Disintermediation: Reintermediation: The shifting of the intermediary role in a value chain to a new sourceReintermediation: The shifting of the intermediary role in a value chain to a new source

Benefits of Disintermediation to the Consumer Manufacturer DistributorRetailer Customer Cost/ Sweate r $48.50 $40.34 $20.45 B2C: Business-To-Customer

Web Site Personalization Dramatically lower costs B2C: Business-To-Customer

M-Commerce & Next Generation Marketing Mobile commerce (m-commerce): Wireless devices used to conduct both business-to-consumer and business-to-business e-commerce transactions over the InternetWireless devices used to conduct both business-to-consumer and business-to-business e-commerce transactions over the Internet Extend personalization by delivering new value-added services directly to customers at any time and placeExtend personalization by delivering new value-added services directly to customers at any time and place B2C: Business-To-Customer

Customer Personalization Figure 4-4 B2C: Business-To-Customer

B2B: Business-To-Business Electronic Commerce Automation of purchase, sale transactions from business to business Private industrial networks: Coordination between companies for efficient supply chain management and collaborative activitiesPrivate industrial networks: Coordination between companies for efficient supply chain management and collaborative activities Electronic hubs: On-line marketplaces, point- to-point connections, integrated informationElectronic hubs: On-line marketplaces, point- to-point connections, integrated information

A Private Industrial Network Figure 4-5 B2B: Business-To-Business

A Net Marketplace Figure 4-6 B2B: Business-To-Business

Electronic Commerce Payment Systems

Electronic Commerce Information Flows Figure 4-7

Figure 4-8 Functional Applications of Intranets

Unproven business modelsUnproven business models Business process change requirementsBusiness process change requirements Channel conflictsChannel conflicts Legal issuesLegal issues Security and privacySecurity and privacy MANGEMENT CHALLENGES & OPPORTUNITIES

4.21 ETHICAL AND SOCIAL ISSUES IN THE DIGITAL FIRM Laudon & Laudon 5 Chapter

4.22 Principles of right and wrong Can be used by individuals acting as free moral agents to make choices to guide their behavior Ethics

4.23 Relationship between Ethical, Social, and Political Issues in an Information Society Moral Dimensions

4.24 Computing power doubles every 18 months: Dependence on computer systemsComputing power doubles every 18 months: Dependence on computer systems Rapidly declining data storage costs: Easy maintenance of individual databasesRapidly declining data storage costs: Easy maintenance of individual databases Datamining advances: Analysis of vast quantities of dataDatamining advances: Analysis of vast quantities of data Networking advances and the Internet: Remotely accessing personal dataNetworking advances and the Internet: Remotely accessing personal data Key Technology Trends that Raise Ethical Issues

4.25 Responsibility: Accepting the potential costs, duties, and obligations for decisionsResponsibility: Accepting the potential costs, duties, and obligations for decisions Accountability: Assessing responsibility for decisions made and actions takenAccountability: Assessing responsibility for decisions made and actions taken Liability: Permits individuals to recover damagesLiability: Permits individuals to recover damages Due process: Laws are well-known and understood, with an ability to appeal to higher authoritiesDue process: Laws are well-known and understood, with an ability to appeal to higher authorities Basic Concepts of Ethics

4.26 Golden rule: Do unto others as you would have them do unto youGolden rule: Do unto others as you would have them do unto you Immanuel Kant’s categorical imperative: If an action is not right for everyone to take, then it is not right for anyoneImmanuel Kant’s categorical imperative: If an action is not right for everyone to take, then it is not right for anyone Descartes’ rule of change: If an action cannot be taken repeatedly, then it is not right to be taken at any timeDescartes’ rule of change: If an action cannot be taken repeatedly, then it is not right to be taken at any time Utilitarian principle: Put values in rank order and understand consequences of various courses of actionUtilitarian principle: Put values in rank order and understand consequences of various courses of action Classic Ethical Principles

4.27 Risk aversion principle: Take the action that produces the least harm or incurs the least costRisk aversion principle: Take the action that produces the least harm or incurs the least cost Ethical “no free lunch” rule: All tangible and intangible objects are owned by creator who wants compensation for the workEthical “no free lunch” rule: All tangible and intangible objects are owned by creator who wants compensation for the work Pragmatic Ethical Principles

4.28 Information Rights: Privacy and Freedom in the Internet Age Privacy: Claim of individuals to be left alone, free from surveillance or interference from other individuals, organizations, or the statePrivacy: Claim of individuals to be left alone, free from surveillance or interference from other individuals, organizations, or the state Fair information practices: Set of principles governing the collection and use of information on the basis of U.S. and European privacy lawsFair information practices: Set of principles governing the collection and use of information on the basis of U.S. and European privacy laws

4.29 General Federal Privacy Laws Freedom of Information Act, 1968 Privacy Act of 1974 Electronic Communications Privacy Act of 1986 Computer Matching and Privacy Protection Act of 1988 Computer Security Act of 1987 Federal Managers Financial Integrity Act of 1982

4.30 Cookies Tiny files deposited on a hard driveTiny files deposited on a hard drive Used to identify the visitor and track visits to the Web siteUsed to identify the visitor and track visits to the Web site Web bugs Tiny graphic files embedded in messages and Web pagesTiny graphic files embedded in messages and Web pages Designed to monitor on-line Internet user behaviorDesigned to monitor on-line Internet user behavior Opt-out model / Opt-in model OUT-Informed consent permits the collection of personal informationOUT-Informed consent permits the collection of personal information OUT-Consumer specifically requests for the data not to be collectedOUT-Consumer specifically requests for the data not to be collected IN-Informed consent prohibiting an organization from collecting any personal informationIN-Informed consent prohibiting an organization from collecting any personal information IN-Individual has to approve information collection and useIN-Individual has to approve information collection and use Internet Challenges to Privacy

4.31 P3P Platform for Privacy Preferences ProjectPlatform for Privacy Preferences Project Industry standard designed to give users more control over personal informationIndustry standard designed to give users more control over personal information Technical Solutions

4.32 Technical Solutions

4.33 Under what conditions should the privacy of others be invaded?Under what conditions should the privacy of others be invaded? What legitimizes intruding into others’ lives through unobtrusive surveillance, through market research, or by whatever means? Do we have to inform people that we are eavesdropping?Do we have to inform people that we are eavesdropping? Do we have to inform people that we are using credit history information for employment screening purposes? Ethical Issues

4.34 Intellectual property: Intangible creations protected by lawIntellectual property: Intangible creations protected by law Trade secret: Intellectual work or product belonging to business, not in public domainTrade secret: Intellectual work or product belonging to business, not in public domain Copyright: Statutory grant protecting intellectual property from getting copied for 28 yearsCopyright: Statutory grant protecting intellectual property from getting copied for 28 years Patents: Legal document granting the owner an exclusive monopoly on the ideas behind an invention for 20 yearsPatents: Legal document granting the owner an exclusive monopoly on the ideas behind an invention for 20 years Property Rights

4.35 Maintaining boundaries: Family, work, and leisure: “Do anything anywhere” environment blurring boundaries between work and family time Dependence and vulnerability: No regulatory or standard-setting forces Employment- Trickle-down technology and reengineering job loss: Causes millions of middle-level managers and clerical workers to lose their jobs Equity and access- Increasing racial and social class cleavages: Society of computer literate and skilled, versus computer illiterate and unskilled Quality of Life