1. The Digital Firm: Electronic Business and Electronic Commerce
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce

2. Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
OBJECTIVES
Analyze how Internet technology has changed value propositions and business models
Define electronic commerce and describe how it has changed consumer retailing and business-to-business transactions

3. Compare the principal payment systems for electronic commerce
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
OBJECTIVES (Continued)
Compare the principal payment systems for electronic commerce
Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes
Assess the challenges posed by electronic business and electronic commerce and management solutions

4. Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
Corrugated Supplies Case
Challenge: trillions of product configurations, short lead times, many competitors
Solution: Web extranet for order entry, customization, inventory, change orders, and shipping
Demonstrates how IT and the Web coordinate the flow of information about orders, production, inventory and shipment
Illustrates how systems in the digital firm connect demand, supply, and fulfillment to achieve operational excellence

5. Internet Technology and the Digital Firm
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm
Information technology infrastructure: The Internet 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 and streamlines processes.

6. Internet Technology and the Digital Firm (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Technology and the Digital Firm (Continued)
Round the clock service: Web sites available to consumers 24 hours
Extended distribution channels: Outlets created for attracting customers who otherwise would not patronize a firm
Reduced transaction costs: Costs of searching for buyers declines

7. New Business Models and Value Propositions
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
New Business Models and Value Propositions
Business Model:
Defines an enterprise
Describes how the enterprise delivers a product or service
Shows how the enterprise creates wealth

8. The Changing Economies of Information
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
The Changing Economies of Information
Information asymmetry: One party in a transaction has more information than the other. The Internet decreases information asymmetry.
Increases richness: The Internet increases the depth, detail, and scope of information.
Increases reach: The Internet increases the number of people who can be contacted efficiently.

9. The Changing Economics of Information
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
The Changing Economics of Information
Figure 4-1

10. Internet Business Models
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Business Models
Virtual storefront: Sells goods or services online (Amazon.com)
Information broker: Provides information on products or services (Edmunds.com)
Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com)
Online marketplace: Provides a trading platform for individuals and firms (eBay.com)

11. Internet Business Models (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM
Internet Business Models (Continued)
Content provider: Creates revenue by providing content (WSJ.com, TheStreet.com)
Online service provider: Provides online services, including search service. (Google.com, Xdrive.com)
Virtual community: Provides an online community to focused groups (Friendster.com, iVillage.com)
Portal: Provides initial point of entry to Web, specialized content, services (Yahoo.com, MSN.com)

12. Categories of Electronic Commerce
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Categories of Electronic Commerce
Business-to-customer (B2C): Retailing of products and services directly to individual customers (Wal-Mart.com)
Business-to-business (B2B): Sales of goods and services to other businesses (Grainger.com, Ariba.com)
Consumer-to-consumer (C2C): Individuals using the Web for private sales or exchange (eBay.com )

13. Business-To-Consumer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-commerce:
Customer-centered retailing: Closer and more personalized relationship with customers is possible
Web sites: Provide a corporate-centered portal for the consumer to quickly find information on products, services, prices, orders

14. Business-To-Consumer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Business-To-Consumer
Advantages of E-Commerce: (Continued)
Disintermediation: The elimination of organizations or business process layers responsible for certain intermediary steps in a value chain, reducing costs to the consumer
Reintermediation: The shifting of the intermediary role in a value chain to a new source, adding additional value to the consumer

15. The Benefits of Disintermediation to the Consumer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
Figure 4-2

16. Interactive Marketing and Personalization
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Interactive Marketing and Personalization
Clickstream tracking tools:
Collect data on customer activities at Web sites and store them in a log

17. Web Site Visitor Tracking
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Web Site Visitor Tracking
Figure 4-3

18. Create unique personalized Web pages for each customer
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Web Personalization
Create unique personalized Web pages for each customer
Increased closeness to customer increases value to the customer, while reducing costs of interacting with the customer

19. Web Site Personalization
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Web Site Personalization
Figure 4-4

20. Collaborative filtering:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Collaborative filtering:
Compares information gathered about a specific user’s behavior at a Web site to data about other customers with similar interests to predict what the user would like to see next. The software then makes recommendations to users based on their assumed interests.

21. Customer self-service:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Customer self-service:
The use of Web sites to provide customers with access to information and answers to questions
Replacing human call center operators and clerks
UPS.com: Customer tracking of packages
Orbitz.com: Customer self-help for organizing and managing a trip
Dell.com: “My Order Status” facility

22. EDI is being replaced by more powerful Web-based alternatives.
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Business-to-Business Electronic Commerce: New Efficiencies and Relationships
Electronic Data Interchange (EDI): Enables the computer-to-computer exchange between two organizations of standard transactions. Currently 80% of B2B e-commerce uses this system.
EDI is being replaced by more powerful Web-based alternatives.

23. Four different types of Net Marketplaces:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Four different types of Net Marketplaces:
Distributors: B2B online catalogs provide buyers with access to thousands of parts and other goods (Grainger.com)
Procurement platforms: Platforms for purchasing goods and materials and also sourcing, negotiating with suppliers, paying for goods, and making delivery arrangements (Ariba.com)

24. Four different types of Net Marketplaces: (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Net Marketplaces
Four different types of Net Marketplaces: (Continued)
Independent exchanges: Third-party Net marketplace that is primarily transaction-oriented and that connects many buyers and suppliers for spot purchasing (Freemarkets.com, GEPolymerland.com)
Industry consortia: Industry-owned Net marketplaces used primarily for long-term sourcing of direct inputs to production (ChemConnect.com)

25. Electronic Data Interchange (EDI)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Electronic Data Interchange (EDI)
Figure 4-5

26. Private Industrial Networks
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Private Industrial Networks
The largest Web-based form of B2B commerce
Private B2B extranets that focus on continuous business process coordination between a small group of companies for collaboration and supply chain management. Wal-Mart uses its own private network to coordinate more than 15,000 suppliers to its stores.

27. A Private Industrial Network
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
A Private Industrial Network
Figure 4-6

28. A Net Marketplace Management Information Systems Figure 4-7 Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
A Net Marketplace
Figure 4-7

29. Electronic Commerce Payment Systems
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Electronic Commerce Payment Systems
Digital wallets
Electronic storage of I.D. and digital cash. Not widely used.
Accumulated balance
Used for micro payments. Similar to monthly telephone bills.
Stored value
Used for micro payments. Pre-payment of funds, debited on use.
Smart Cards
I.D. and credit information stored on a chip attached to a card. Used in Europe.
Digital cash
Electronic currency that can be transferred over the Web.
Peer-to-Peer payment
Interpersonal transfer of funds such as PayPal.
Digital checking
Electronic checks with digital signatures, used most often in B2B commerce.
Electronic billing presentment
and payment
Used by consumers to pay bills online, provided by many banks.
Credit cards
The most common form of payment. $50 Limited customer liability.

30. How Intranets Support Electronic Business
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
How Intranets Support Electronic Business
Benefits
Functional applications
Good examples: CARE and Mitre Corporation

31. Connectivity: Accessible from most computing platforms
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets
Connectivity: Accessible from most computing platforms
Can be tied to internal corporate systems and core transaction databases
Platforms for interactive applications
Scalable to larger or smaller computing platforms

32. Benefits of Intranets (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Benefits of Intranets (Continued)
Easy to use, universal standard Web interface
Low start-up costs
Richer, more responsive information environment than corporate manuals
Reduced information distribution costs

33. Functional Applications of Intranets
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets
Finance and accounting
Human resources
Sales and marketing
Manufacturing and production

34. Functional Applications of Intranets
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Functional Applications of Intranets
Figure 4-8

35. General ledger reporting Project costing Annual reports Budgeting
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Finance & Accounting
General ledger reporting
Project costing
Annual reports
Budgeting

36. Online publishing of corporate policy
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources
Company:
Online publishing of corporate policy
Job postings and internal job transfers
Company telephone directories, training

37. Human Resources (Continued)
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Human Resources (Continued)
Employees:
Healthcare
Employee savings
Competency tests

38. Promotional campaigns Sales presentations Sales contracts
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Sales and Marketing
Competitor analysis
Price updates
Promotional campaigns
Sales presentations
Sales contracts

39. Manufacturing and Production
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Manufacturing and Production
Quality measurements
Maintenance schedules
Design specifications
Machine outputs
Order tracking

40. Business Process Integration
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Business Process Integration
The Internet and collaborative commerce:
Collaborative commerce: When firms use the Internet to cooperate closely in the development, production, and distribution of products and services
GE Plastics maintains an Intranet where its customers (selected fabricators) can find information on product design and new developments.

41. Collaborative Commerce
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC BUSINESS AND THE DIGITAL FIRM
Collaborative Commerce
Figure 4-9

42. Management Opportunities:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS
Management Opportunities:
The Internet provides firms with extraordinary opportunities to develop new products and services, new distribution channels, new avenues for marketing and sales, and even entirely new business models.

43. Management Challenges:
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS
Management Challenges:
Finding a successful Internet business model
Organizational change challenges
Trust, Security, and Privacy

44. Determining how Internet technology can provide value for the business
Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS
Solution Guidelines:
Determining how Internet technology can provide value for the business
Managing business process changes
Safeguarding security and privacy