Chapter 5 : Electronic Commerce in Service Industries

7/30/2019 Chapter 5 : Electronic Commerce in Service Industries

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Chapter 5

Electronic Commerce in

Service Industries

www.prestonians.webnode.com 1


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Opening Vignette:

Ordering Journals Electronically

How a large university automated thepurchasing of magazines and journals,saving $365,000/year

Direct E-Marketing: Buyer-to-seller; ordersand payments

Market maker charges $5/transaction vs.

about $32 (conventional agents)Ordering time reduced by up to 80%

Rowe.comInternet IPO that survived thestock market in the industry

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Broker-Based Services

Brokers work as intermediaries between buyers andsellers

Agents basically make the markets

Agents provide many services

Most of the value-added tasks of brokers can beautomated

Major electronic agent-based servicesTravel

Employment

Real estate

Stocks

Electronic auctions

At-home banking

Insurance



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Broker-Based Services (cont.)

Service Industries vs. Manufacturing and Product Retailing

Service Industries

Pure EC: substantially reduced cost

Bank and brokerage housesPossible digitation of the entire process

Travel and real estate agents

Viewing an online video clip or seeing photos of ahotel or a house for sale

Manufacturing and product retailing

Physical delivery cost may be highwww.prestonians.webnode.com


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Travel and Tourism Services

Any experienced traveler knows that goodplanning and shopping around can savemoney

The Internet is an ideal place to plan,explore, and arrange almost any trip

Travel-related information available at many

sites including:Expedia.com Travelweb.com

Travelocity.com Trip.com

Asiatravel.com Priceline.com



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Travel and Tourism Services (cont.)

Information andbooking of airlines,

hotels, cars, and evengolf courses

Fare comparisons360 degree video toursof top destinations

Electronic Travelmagazine

Converting 200currencies

Providing maps

Pictures of major

attractionsInformation aboutentertainment andticket purchasing(ticketmaster.com)

Tips provided by peoplethat experienced certainsituations (like a visaproblem)

Services provided:



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Special discountinformation

Chat rooms and bulletinboardsShopping for travelaccessories and books

Experts optionsFrequent flier deals

Restaurant reviewsCurrent status of flights(real time)Driving directions in theUS

Travel news

Fare tracker (free e-mailalerts on low fares)

Major international news

Worldwide business andplaces locator

Special interest vacationsBed and breakfastrecommendationsE-mail to intermediary

Weather watch

Services provided:



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Auctions, bids, and special salesAmerican airlines (aa.com) auctions ticketsduring low-volume seasons

Cathay (cathaypacific.com) auctions tickets oncompetitive routes

Aer Lingus (aerlingus.ie) auctions tickets thatexpire in 1 or 2 weeks

Priceline (priceline.com) asks consumers tospecify the price they are willing to pay



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Special servicesWireless services

Direct marketing

Alliances and consortia

Other servicesInteractive kiosks in hotels

Internet access in hotels

Benefits

Free information istremendousFree information isaccessible anytimeSubstantial discounts

LimitationsNot all people usethe InternetIt may take a longtime to find whatyou want

People are stillreluctant to providecredit cardnumbers



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Corporate Travel: New Business Model

The Impact of EC on the Travel Industry

Porters framework of competitive advantage(the five forces)

Focus:

Environment

Competitive responsesFirms strategy

The industry is clearly transformed

Taking away some functions traditionally

performed by travel agents




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Impacts on the industryMultimedia helps customers understand the products

Offering of lower-cost trips

Providing a more personalized service

Saving money in a paperless environment

Increasing the convenience of getting information athome

Supporting a customer-focused strategy (such astargeted advertisement and integration of products);push information to customers




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Travel agencies, as we know them today, willdisappear

Only their complex value-added activities will

not be automatedThese complex activities will be performedby a new breed of intermediaries

Survival strategyMinor improvements due to process changes

BPR with significant improvements

Organizational transformation




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Figure 5-2

The Travel Industry Chain

Source: Block and Segev The Impact of Electronic Commerce on the Travel Industry Proceedings, HICSS 31, Hawaii

1997 IEEE.



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Intelligent agentsStep 1: turn on PC and enter

Desired destinationDates

Available budgetSpecial requirementsDesired entertainment

Step 2: computer dispatches an intelliget agen thatshops aroundStep 3: agent attempts to match your requirements

with what is available, negotiates with vendorsStep 4: agent returns within minutes with suitablealternatives, modifies as per your wishes, books thevacation

Voice communication with agent



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The Employment Placement:

Deficiencies of Manual Market

Job markets

Employers are looking for employees with

specific skills, and individuals are looking forjobs

Very volatile market

Moved to the Internet

Millions of job seekers, hundreds of thousandsof jobs



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Driving forces of electronic job marketCostclassified ads are expensive

Life cyclethe life of the ads is only days orweeks

Placemost ads are local; nationwide andinternational ads are more expensive

Minimum informationbecause of the high cost,the information provided is minimal

SearchTime consuming for individuals to find allrelevant newspapers


Deficiencies of Manual Market (cont.)



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Driving forces of electronic job market (cont.)Finding applicantsduring pre-Internet era, job seekers did

not place ads about their availability making it difficultfor companies to find employees with special skills

Matchingit was difficult to match candidates to openjobs, supply and demand

Lost and dated materialsome applications or letters ofresponse tended to get lost, or arrive late

Speedcommunication by mail and processing of a largenumber of applications is slow; employers lose goodemployees, the applicant had taken another job beingafraid to wait too long

Comparisonsdifficult for job seekers to comparemonetary value of available positions



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The Internet Job Market

The Internet offers a perfect environment; it

is especially effective for technology-orientedjobs

Job seekers

Job offerers

Recruiting firms

Government agencies and institutions



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Find very detailed andtimely information on alarge number of jobsworld-wide

Quickly communicate with

potential employersPost resumes for large-volume distribution

Search for jobs quickly fromany place at any time

Obtain several supportservices at no cost

Find employer profile &

industry guides(valuereports.Com)

The Advantage of the Electronic Job Market

For job seekers



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Advertise to a large

number of job seekersSave on advertisementcosts

Lower the cost ofprocessing (usingelectronic applicationforms)

Provide greater (equalopportunity) for job

seekers

Find highly skilled

employeesConduct tests quickly,online

Change and update ads

quicklyFill up positions rapidly

Interviewing fromdistance

The Advantage of the Electronic Job Market

For employers



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The Limitations of Electronic Job MarketsMany people do not use the InternetSecurityPrivacyLack of face-to-face contact

Examples of online job servicesLocating jobs

Writing and posting resumesCareer planningNewsgroups

Examples of career services on the Internet

Recruiters online network

StaffNET

Global employment networkEmployment opportunities

Intranet job market

Intelligent agents

Intelligent agents for job seekers (jobsleuth.com)

Intelligent agents for employers (resumix.com)



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Real Estate

You can view many properties on the screen

You can sort and organize properties

You can find detailed information about theproperties

You can search, compare and apply for loans



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Real Estate Applications (cont.)The National Association of Realtors, realtor.com has links to

property listings in all major US citiesTo find how much house you can afford, consult:replace.com

Mortgage brokers can pass on loan applications over the Netand receive bids from lenders that want to issue themortgagesTo find mortgage interest rates online use:

Lendingtree.comEloan.com

Homeside.com.auInsuranceauto, home life, health at substantial discountInsureate.comOrder.comQuotesmith.com

Real Estate (cont.)



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Investing and Trading Stocks Online

Online stock trading

Costs between $7 and $29 per transaction (vs.$10 - $35 in traditional brokerage)

No waiting on busy telephone linesNo oral communication, less chance for errors

Place orders from anywhere, any time, day ornight

No biased broker to push you

Considerable amount of free information



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Trading Stocks Online (cont.)

Initial public offerings(IPOs)

Spring Street Brewing

Offers initial andsecondary securitiestrading over theInternet

See ipo.comGlobal stock exchangesaround-the-clock globaltrading

Related markets

Financial derivatives

Commodities

Mutual funds

Individual investors andday trading

Electronic trading ofinterest rate derivatives

Swapswire.com

Forbes.com



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Cyberbanking and Personal Finance

Electronic banking

Saves time andmoney for users

Offers aninexpensivealternative tobranch banking

Application Case:Cyberbanking at WellsFargo

Capabilities of homebanking

Get current accountbalances any time

Obtain charge and creditcard statements

Pay bills

Download accounttransactions

Transfer money betweenaccounts



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Cyberbanking and Personal Finance

International and multiple-currency bankingSome international retail purchasing can be done bycredit card

Other transactions may require international bankingsupport

Hong Kong Banks HEXAGON provides e-bankingin Asia

Mark Twain Bank in the U.S. uses e-cash to

support trading in 20 foreign currenciesBank of America and other banks offer:

International capital raising

Cash management

Other services on an international levelwww.prestonians.webnode.com


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Implementation issues in banking and onlinestock trading

Securing financial transactions

Application case: Bank of America OnlineUsing the extranet

Banks provide large business customerswith personalized service by allowing them

access to the banks intranetAccess accounts

Historical transactions

Intranet-based decision-support applications

Cyberbanking and Personal Finance (cont.)



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Imaging systemsallow customers to viewimages of all:

Incoming checks

InvoicesOther related online correspondence

Pricing online vs. off-line services

Some banks offer free services (fee per

check or transfer)

Some banks charge $5 to $10

Risksespecially in international banking



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Banking: 4 scenariosBuilding alliances quickly with banks, softwarevendors, and information providers

Effective outsourcing without neglecting tobuild in-house skills (customer informationsystems)

Focusing on the profitable customers to

provide broad channels for services andproducts

Keeping a central role in the paymentenvironment




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The Future of Online Banking

Three core strategies to pursue1. Customers Agentsbanks unable to achieve economies of

scale

Offer customers the widest possible choices

Include products from multiple sourcesProvide the customers with integrated informationservices

2. Product Manufacturers banks able to achieveeconomies of scale

Strengthen a trend that can already be seen in anumber of product segments

In core processing services for small and medium-sizedinstitutions



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The Future of Online Banking (cont.)

Three core strategies to pursue (cont.)

3. Integrated Playersbanks with a strong brand

and position from manufacturing to deliveryMany banks will adopt a hybrid strategy

Every player needs to make crucial decisionsabout which areas are strategically too risky:

To outsourceWhich capabilities need to be built up in-house



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The Future of Online Banking (cont.)

Personal finance onlineBill paying and e-checks

Tracking bank accounts etc.

Portfolio managementInvestment tracking

Quotes and prices (past and current)

Budget organization

Record keepingTax computations

Retirement goals, planning and budgeting



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Billing Online

Automatic transfer ofmortgages

This method has

existed for severalyears

The payerauthorizes its bankto pay themortgage, includingtax escrowpayments

Automatic transfer offunds to pay monthlyutility bills

Since1997, the city ofLong Beach hasallowed its customersto pay their gas andwater bills from their

bank accountsMany utilitycompanies worldwideprovide this option



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Billing Online (cont.)

Paying bills from online banking account

Can be made into any bank account

Monthly rent and other bills paid directly intothe payees bank accounts



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A merchant-to-customer direct billing

A merchant posts bills on its Web site

Customers can view and pay their billCustomers have to go to many Web sites topay all their bills

Several utilities in Los Angeles allow customersto pay bills on the utilities Web site (20 centsper transaction )



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Using an intermediary

A third party consolidates all bills related to eachcustomer in one site in a standard format

Collects a certain commissionMakes it convenient to complete transactions

E*Trade and Intuit

ISPs services

Trying to sell customized solutionsDo not have adequate billing platforms

See moneymain.com



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Online Publishing

The electronic delivery of newspapers,magazines, news, and other informationthrough the Internet

Online Publishing Today and TomorrowToday mainly used for disseminatinginformation and for conducting salestransactions interactively

Tomorrow include more customized materialthat the reader will receive free, or will pay for



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Online Publishing (cont.)

Publishing Modes

Newspapers

Magazines

News

Textbooks

Music

ArtworkVideo clips

Movies



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Publishing Methods

Online archive: digital archive (librarycatalogs, bibliographic databases)

New medium: extra comprehensiveness toissue or topic

Publishing intermediation: online directoryfor news services

Dynamic or just-in-time: create content inreal-time and transmit on the fly



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Publishing music, videos, and games

Major issue is payment of intellectual propertyfees

People-to-people (P2P) modelpeople swapfiles

3rd-party organizer may be in violation of

copyright laws (Napster)



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Digital delivery of documentssecureenvironment

U.S. Postal Service, UPS, E-parcel.com

Encryption

Software for digital signature

AuthenticationNotarization



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Edutainmentcombination of:Education

EntertainmentGames

Goal: encourage students to becomeactive learners

Managerial issuesEducational games delivered as CD-ROMs

Distance-learning format



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Electronic booksFrequent updates possible

Contain up-to-the-minute informationSpecial eBook device necessary to view books

See:

Wizap.com

Ebookconnections.comNetlibrary.com



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Knowledge Dissemination

Virtual teaching and online universitiesDistance learning and virtual universitiesMany universities offer limited courses anddegrees, but use innovative teaching methods

and multimedia support

MBA program in Hong KongLectures delivered on interactive TV(iTV), now on the WebStudents decide what and when theyattend the lectureLecture, support material exercises, etc.,provided on the Web



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Knowledge Dissemination (cont.)

Online advice and consulting

Medical adviceprovide consultation with top

expertsManagement consultingprovide accumulatedexpertise from knowledge bases

Legal advicedelivery of legal consultationservices to business has considerableprospects



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Knowledge Dissemination (cont.)

Online advice and consulting (cont.)

Financial advice offer extensive financialadvice

Other service online

Healthcare

MatchmakingElectronic stamps


Disintermediation and


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Reintermediation

Change the role of agents to:

Assists in comparison shopping from multiplesources

Providing total solutions by combining servicesfrom several vendors

Providing certifications and trusted third partycontrol and evaluation systems




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Reintermediation (cont.)

Issues impacting future of intermediariesThe success of intelligent agents

Travel intelligent agentsAgents that support job matching

Agents that interpret resumesThe more intelligent the software agents become,the less human agents will be needed

Customer attitudes and behavior are importantGood experience with online agencies means

fewer customers use human agentsInsurance purchasingStock purchasing

Virtual travel agencies




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New roles of electronic marketingintermediaries

To extend what we are familiar with inphysical markets to the virtual world (e.g.,search services and electronic malls)

To extend payment clearing functions into theInternet (e.g., electronic cash and digitalcredit card services)




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Disintermediation in B2B

Exchanges decrease number of calls a sales rep pays onpurchasing managers

Reengineering marketing and sales organizations is

necessary

Cybermediation

Electronic intermediary (rowe.com)Affects most market functions

Hypermediationhuman/electronic intermediation;may profit greatly from EC



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Managerial Issues

Effectiveness of out-of-town recruitment

Privacy may be in danger

International legal issues may impact servicesmore than products

Ethical issues are prevalent in services

The intermediaries and their roles are changingAlliances for online initiatives are spreadingrapidly

Chapter 5 : Electronic Commerce in Service Industries

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