1. Economic Success Factors

2. Economic Success Factors
Cost Curves
Bundling
Critical Mass of Buyers and Sellers
Pricing
Consumer Characteristics
Brokers and Disintermediarisation

3. Costs Curves Physical Products Digital Products Cost Cost Quantity

4. Bundling More opportunities with EC Pricing becomes critical
Eg Telstra

5. Critical Mass of Buyers and Sellers
To overcome initial high costs
Size of market depends on demographics
National Competitive Advantage

6. Pricing Auctions of unused capacity Price searching reverse auctions
prices will be determined by buyers’ willingness to pay rather than production costs
convenience versus price

7. Consumer Characteristics
EC is more suited to analytical rather than impulse buyers
What about patient buyers?

8. Disintermediarisation v’s Brokers
lower search costs
Privacy
greater information
risk reduction
matching supply & demand
Disintermediarisation
reduces steps in value chain
removes wholesalers and brokers

9. Winners ISP’s Portals Software Companies Network Owners
Mid-size Manufacturers
Technology Suppliers

10. Winners (Cont.) Security Providers Electronic Payment Gateways
Dedicated Online Companies
Conventional Retailers that use online extensively
eMarketplaces
Niche manufacturers

11. Losers Wholesalers Brokers Salespeople
Non-differentiated manufacturers

12. Virtual Communities Electronic Communities
Replace Geographical Communities
Serves the analytical and patient buyer

13. Virtual Communities (Cont.) Types Communities of Transactions
Facilitate Buying and Selling
Communities of Interests
Specific Topic or Interest
Communities of Relations
Organised Around Certain Life Experiences
Communities of Fantasy
Imaginary Environments

14. Virtual Communities (Cont.)
Creating a Virtual Community Creates a Market
Understand a particular niche industry and its information needs
Build a site that provides that information
Set up the site to mirror the steps that a user goes through in the information gathering and decision making process
Build a community that relies on the site for decision support
Start selling products that fir the decision support process

15. Globalisation

16. Emergence of Globalisation
Greater imports by Industrialised Countries
Low labour costs in Third World Countries
Improved Telecommunications
Growth of Networks
Free Trade Agreements
Growth of Knowledge & Information economy

17. White Collar
Blue Collar
Service
Farming

18. Advantages of Globalisation
Access to larger markets
flexibility to employ workers and manufacture products anywhere
24/7 trade across time zones

19. Barriers to Globalisation
Legal issues
Regulation
Jurisdiction
Market access
Telecommunications Infrastructure
Financial Issues
Customs and Taxation
Money Exchange
Differing Currencies

20. Barriers to Globalisation (cont.)
Trust, Security & Authentication
Language
Cultural and Social differences
Government Support or Interference

21. Competitive Advantage

22. Traditional Competitors
Porter’s 5 forces
Substitute Products
New Entrants
Traditional Competitors
The firm
Suppliers
Customers

23. EC and Porter’s 5 forces Customers Suppliers Traditional rivals
increase in bargaining power due to increase in sellers and products
Suppliers
bargaining power decrease due to global competition
Traditional rivals
Greater presence due to virtual store fronts
New entrants
many new entrants
global marketspace
Substitute products
more substitute products

24. Business Responses to Competition Product differentiation
focussed differentiation
data mining
Tight linkages to customers and suppliers
switching costs
Low cost producer
lower internal costs
lower price \ improved quality to customer

25. Porter’s Value Chain Model
Production consists of a series of activities that add a margin of value to a firm’s products or services
The added value increases profits, enhances asset value and competitive position
Primary activities
Directly related to production and distribution
Support activities
Make delivery possible
Include organisational structure, HR, technology and procurement

26. Porter’s Value Chain Model Increase profits by:
Increasing steps that involve primary activities
Reducing steps that involve support activities
Converting support activities to primary activities

27. Use of EC for Competitive Advantage
Strategic Systems
FedEx
American airlines

28. Use of EC for Competitive Advantage
Continuous Improvement
Productivity improvement
Just-in-time
TQM
Improved decision making
Managing information and knowledge
Innovation and creativity
Change management
Customer service

29. Use of EC for Competitive Advantage
Business Process Reengineering
Reduced cycle time
Employee empowerment (IT enables decentralised decision making)
Knowledge management
Customer focussed approach (mass production changed to mass customisation)
Business alliances (General Motors, Ford and Chrysler)
Virtual corporations

30. The Future of EC
Improve
Transform
Redefine

31. The Future of EC (cont.) Improve New markets Customisation Ordering
Delivery (digital products)
New sales channels (Disintermediarisation)
Demand driven supply
Reduced cycle time
Customer service (dialogue and feedback)
Brand image

32. The Future of EC (Cont.) Transform The Horizontal Organisation
Strategic Agility (Quick Reactions to Technological Change)
Mobile Workforces
Cross Functional Systems

33. Functional Business applications
Strategic Systems
Management Systems
Knowledge Systems
Operational Systems
Sales & Marketing
Production
Accounting
Human resources

34. The Future of EC (Cont.) Redefine New Products Services versus goods
The revolution of open source
New Business Models (?)

35. The Future of EC (Cont.) Redefine (cont.) Virtual Organisations
Integration of the supply chain
Human Resource Management
Human Capital
Online learning
Integration

36. Business strategy and EC
Lead
Wait
Experiment