1. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.1 © 2005 by Prentice Hall The Digital Firm: Electronic Business and Electronic Commerce Chapter 4

2. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.2 © 2005 by Prentice Hall British Airways: Faster, Leaner, and Internet Enabled

3. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.3 © 2005 by Prentice Hall The Internet Rapidly becoming infrastructure of choice Universal, easy-to-use set of technologies and standards Web sites available 24/7 Extended distribution channels Reduced transaction costs Reduced network and coordination costs Electronic Business, Electronic Commerce, and the Emerging Digital Firm Internet Technology and the Digital Firm

4. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.4 © 2005 by Prentice Hall Past: Information about products and services bundled with their physical value chain Today: The Internet has unbundled information from traditional value chain, creating new business models Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

5. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.5 © 2005 by Prentice Hall Internet Business Model Features Dynamic pricing Banner ad or pop-up ad Information sharing Virtual community –Personal web site, on-line discussion group, chat room, message board Services –E-mail, Messenger, file storage, subscription Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

6. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.6 © 2005 by Prentice Hall Internet Business Models Virtual storefront: Sells physical products directly to consumers or businesses. –Amazon.com, EPM.com Information broker: Provides product pricing and availability information; generates revenue from advertising or directing buyers to sellers. –Edmunds.com, Kbb.com, Insweb.com, IndustrialMall.com Transaction Broker: Processes online sales transactions for fee. –E*TRADE.com, Expedia.com Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

7. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.7 © 2005 by Prentice Hall Internet Business Models Online Marketplace: Provides digital environment where buyers and sellers meet –eBay (Dynamic Pricing), Priceline.com, ChemConnect.com, Pantellos.com Content Provider: Provides digital content, such as news; revenue from fees or advertising sales –WSJ.com, CNN.com, TheStreet.com, Gettyimages.com, MP3.com Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

8. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.8 © 2005 by Prentice Hall Internet Business Models Online Service Provider: Provides connectivity; revenue from fees, advertising, or marketing information –@Backup.com, Xdrive.com, Employease.com, Salesforce.com Virtual Community: Provides online meeting place for people of similar interests –Motocross.com, iVillage.com (banner ad, pop-up ad), Sailnet.com (Latin American) Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

9. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.9 © 2005 by Prentice Hall Internet Business Models (cont.) Portal: Provides initial point of entry to the Web, along with specialized content and services –Yahoo.com, MSN.com, StarMedia.com Syndicator: aggregates content or applications to resell as package to third-party Web sites –E*TRADE (Reuters-news, Bridge Info Sys-quotes, BigCharts.com-charts) Electronic Business, Electronic Commerce, and the Emerging Digital Firm New Business Models and Value Propositions

10. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.10 © 2005 by Prentice Hall Business-to-consumer (B2C): Retailing products and services to individual shoppers Business-to-business (B2B): Sales of goods and services among businesses Consumer-to-consumer (C2C): Consumers selling directly to consumers Electronic Commerce Categories of Electronic Commerce

11. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.11 © 2005 by Prentice Hall Direct Sales Over the Web Disintermediation: Removal of intermediary steps in a value chain, selling directly to consumers, significantly lowers purchase transaction costs Reintermediation: Shifting intermediary function in a value chain to a new source, such as “service hubs” (Ex. Information broker in Table 4-2) Electronic Commerce Customer-Centered Retailing

12. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.12 © 2005 by Prentice Hall Electronic Commerce The benefits of disintermediation to the consumer Figure 4-2

13. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.13 © 2005 by Prentice Hall Interactive Marketing and Presentation Collection of customer information using Web site auditing tools less expensive than surveys and focus groups. Web personalization technology customizes content and banner ads on Web site to individual’s profile and purchase history. Web sites and marketing shorten sales cycle and reduce time spent in customer education. Electronic Commerce Customer-Centered Retailing

14. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.14 © 2005 by Prentice Hall Interactive Marketing and Presentation Combine web visitor data with customer data from other sources to create detailed profiles of individuals. –Off-line purchases, customer service records, or product registrations. Conduct (incentive-driven) on-line market research surveys. Monitor customer discussions about products that are taking place through on-line communities and message boards. Monitor the online surfing and buying behavior of large numbers of customers at many different web sites. Electronic Commerce Customer-Centered Retailing

15. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.15 © 2005 by Prentice Hall Collection of Customer Information TravelWeb –On-line reservation of more than 16,000 hotels in 138 countries. –Track origins of users –Track web pages and links which users click to learn about customer preferences. Hyatt hotel –Japanese users are most interested in resort’s golf facilities. –Shape market strategies to develop hospitality-related products. Electronic Commerce Customer-Centered Retailing

16. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.16 © 2005 by Prentice Hall Web Personalization Technology Amazon.com –Retain customer purchase and recommendation data. –Recommend products based on purchase history and past purchases from other buyers. Bluefly.com –Display items that a visitor has recently viewed. Subaru.com –Maintenance reminder, configuration of warranty repair, notice of recalls and service campaigns, service history log, trade-in value calculation, link to dealer web site, request a service appointment. Electronic Commerce Customer-Centered Retailing

17. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.17 © 2005 by Prentice Hall Electronic Commerce Web site personalization Figure 4-3

18. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.18 © 2005 by Prentice Hall Customer Self-Service Web-based responses to customer questions cost a fraction of telephone costs for live customer service representation Allow interaction at customers’ convenience Web-based customer self-service applications, such as airline flight information sites Traditional, phone-based customer call centers being integrated with Web Electronic Commerce Customer-Centered Retailing

19. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.19 © 2005 by Prentice Hall Customer Self-Service American, Northwest: Flight departure and arrival times, seating charts, airport logistics, check frequent-flyer miles, and purchase tickets on-line. Yamaha Corp. of America: Access to technical solutions, send email to live technician. UPS, FedEx: Track shipment, calculate shipping cost, determine time in transit, and arrange for package pickup. Lend’s End: Push to talk button to request live talk with customer services. Electronic Commerce Customer-Centered Retailing

20. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.20 © 2005 by Prentice Hall Lightnin Lights Up with the Internet What are the benefits of using Web-based order configuration software? How does this system provide value to Lightnin and its customers? Electronic Commerce Window on Technology

21. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.21 © 2005 by Prentice Hall Web, Internet streamlining procurement process E-procurement eliminates inefficient, paper- based processes Selling through Web sites, private industrial networks, or Net marketplaces Electronic Commerce Business-to-Business Electronic Commerce

22. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.22 © 2005 by Prentice Hall Electronic Commerce Before-after diagram of changes in Lightnin’s ordering process Figure 4-4

23. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.23 © 2005 by Prentice Hall Private Industrial Network Private exchange; typically consists of large firm using extranet to link to its suppliers and business partners Permits firm and partners to share product design, development, marketing, scheduling, inventory management, and unstructured communication Fastest-growing type of B2B commerce Electronic Commerce Business-to-Business Electronic Commerce

24. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.24 © 2005 by Prentice Hall Electronic Commerce A private industrial network Figure 4-5

25. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.25 © 2005 by Prentice Hall Net Marketplace E-hub; provides single Internet-based marketplace for many different buyers and sellers Industry owned or independent intermediaries Transaction oriented; generates revenue from purchase and sales transactions and other services Electronic Commerce Business-to-Business Electronic Commerce

26. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.26 © 2005 by Prentice Hall Electronic Commerce A Net marketplace Figure 4-6

27. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.27 © 2005 by Prentice Hall Different Types of Net Marketplace Direct goods: goods used in a production process, e.g., sheet steel for auto production. Indirect goods: goods not directly involved in a production process, e.g., office supplies. Contractual purchasing: long-term relationships with designated suppliers. Short-term spot purchasing: purchase based on immediate needs. Vertical markets for specific industries: automobile, telecommunication, machine tools. Horizontal markets with different industries: office equipment and transportation. Electronic Commerce Business-to-Business Electronic Commerce

28. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.28 © 2005 by Prentice Hall Different Types of Net Marketplace W. W. Grainger: Horizontal market for sourcing maintenance, repair, and operations (MRO) products used in many different industries. –Customers benefit from low search cost, low transaction cost, wide selection, and low price. Grainger earns revenue by charging a markup on the products it distributes. Electronic Commerce Business-to-Business Electronic Commerce

29. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.29 © 2005 by Prentice Hall Different Types of Net Marketplace Ariba: Long-term contractual purchasing of both indirect and direct goods. –For buyers, Ariba automates sourcing, contract management, purchase orders, requisitions, business rule enforcement, and payment. –For sellers, Ariba provides services for catalog creation and content management, order management, invoicing, and settlement. Electronic Commerce Business-to-Business Electronic Commerce

30. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.30 © 2005 by Prentice Hall Different Types of Net Marketplace Covisint: industry-owned vertical market for automobile manufacturing. Founded by GM, Ford, DaimlerChrysler, Renault, and Nissan. –Focus on long-term contract purchasing relationships and on providing common networks and computing platforms for reducing supply chain inefficiencies. –Buyers benefit from competitive pricing among alternative suppliers. –Suppliers benefit from stable long-term relationships with large firms. Electronic Commerce Business-to-Business Electronic Commerce

31. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.31 © 2005 by Prentice Hall Exchanges Third-party Net marketplaces connecting thousands of suppliers and buyers for spot purchasing Proliferated during early years of e-commerce Exchanges encouraged competitive bidding, driving prices down; suppliers reluctant to participate Electronic Commerce Business-to-Business Electronic Commerce

32. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.32 © 2005 by Prentice Hall Exchanges Enermetrix Network: Online exchange for retail natural gas and electricity contracts. FoodTrader.com: Automate spot purchases among buyers and sellers from over 180 countries in the food and agriculture industry. Electronic Commerce Business-to-Business Electronic Commerce

33. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.33 © 2005 by Prentice Hall Digital credit card payment systems: Secure credit card payment over Web Digital wallet: Stores credit card and owner identification, shipping information, to facilitate payment process –Amazon.com 1-Click, Gator, MSN Wallet, MasterCard Wallet, American Online’s Quick Checkout. Electronic Commerce Electronic Commerce Payment Systems

34. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.34 © 2005 by Prentice Hall Micropayment: Payment for a very small sum of money, often less than $10. Accumulated balance digital payment systems: Accumulates micropayment purchases as debit balance paid periodically on credit card or telephone bills –PaymentOne and Trivnet. Electronic Commerce Electronic Commerce Payment Systems

35. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.35 © 2005 by Prentice Hall Stored value payment system: Enables consumers to make instant payments based on value stored in digital account –Ecount, RocketCash (aimed at teenagers). Smart Card: A credit-card size plastic card that stores digital information and that can be used for electronic payments in place of cash. –Mondex, American Express Blue. Electronic Commerce Electronic Commerce Payment Systems

36. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.36 © 2005 by Prentice Hall Digital cash: Digital currency that can be used for micropayments or larger purchases –eCoin.net. Peer-to-Peer payment systems: Enables payments to vendors not set up for credit-card payments –The recipient “picks up” the payment by visiting the web site and supplying information about where to send the payment (a bank account or a physical address). Electronic Commerce Electronic Commerce Payment Systems

37. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.37 © 2005 by Prentice Hall Digital checking: Electronic check with secure digital signature Electronic billing presentment and payment system: Supports electronic payment for online and physical store purchases after purchase has taken place Electronic Commerce Electronic Commerce Payment Systems

38. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.38 © 2005 by Prentice Hall Electronic Commerce Electronic commerce information flows Figure 4-7

39. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.39 © 2005 by Prentice Hall Connectivity: accessible from most platforms Can be tied to internal corporate systems and core transaction data Can create interactive applications with text, audio, and video Electronic Business and the Digital Firm How Intranets Support Electronic Business

40. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.40 © 2005 by Prentice Hall Scalable to larger or smaller computing platforms as requirements change Easy to use, universal Web interface Low start-up costs Rich, responsive information environment –Product catalogs, employee handbooks, telephone directories, and benefit information. Reduced information distribution costs Electronic Business and the Digital Firm How Intranets Support Electronic Business

41. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.41 © 2005 by Prentice Hall Finance and Accounting: Integrated view of financial and accounting information online Human Resources: Rapid delivery of information to employees; online publishing Sales and Marketing: Collaborative place to coordinate activities of sales force Manufacturing and Production: Distribute manufacturing information to different parts of organization Electronic Business and the Digital Firm Intranet Applications for Electronic Business

42. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.42 © 2005 by Prentice Hall Electronic Business and the Digital Firm Functional applications of intranets Figure 4-8

43. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.43 © 2005 by Prentice Hall Can Online Brokers Survive in Europe? Is providing online financial services over the Internet a viable business model? Why or why not? Electronic Business and the Digital Firm Window on Organizations

44. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.44 © 2005 by Prentice Hall Pre-Internet, integration costly and difficult Internet technology less expensive than building enterprise systems Intranets: improve coordination among internal business processes Extranets: coordinate processes shared with customers and partners Intranet promotes collaborative commerce Electronic Business and the Digital Firm Business Process Integration

45. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.45 © 2005 by Prentice Hall Unproven business models –Only 43% of the independent exchanges that were operating in the spring of 2000 survived to July 2002, and less than 200 remained by mid-2003. –Heavy outlays for web site maintenance, supply chain management, customer service call centers, and customer acquisition. –Large payroll expense for skilled technical staff and additional shipping expense to ensure on-time delivery. Management Challenges and Opportunities

46. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.46 © 2005 by Prentice Hall Business process change requirements –Fail, if badly managed or poorly executed. Channel conflicts –Competition between distributors to sell the same products or services. –Current solutions to offer only partial products on web or pay full commission to online sales rep. Management Challenges and Opportunities

47. Essentials of Management Information Systems, 6e Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce 4.47 © 2005 by Prentice Hall Legal issues –Which law to apply, if company is in Thailand, server in Singapore, and buyer in Hungary. Trust, security, and privacy –Hesitate to buy from unfamiliar vendors. –Security and confidentiality of personal date through subscription and credit card transactions. Management Challenges and Opportunities