E-Commerce 06

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Chapter 5

Electronic Commerce in Service Industries

Opening Vignette:Ordering Journals Electronically

How a large university automated the purchasing of magazines and journals, saving $365,000/yearDirect E-Marketing: Buyer-to-seller; orders and paymentsMarket maker charges $5/transaction vs. about $32 (conventional agents)Ordering time reduced by up to 80%Rowe.com—Internet IPO that survived the stock market in the industry

Broker-Based Services

Brokers work as intermediaries between buyers and sellersAgents basically make the marketsAgents provide many servicesMost of the value-added tasks of brokers can be automated

Major electronic agent-based servicesTravelEmploymentReal estateStocks

Electronic auctionsAt-home bankingInsurance

Broker-Based Services (cont.)

Service Industries vs. Manufacturing and Product Retailing

Service IndustriesPure 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 a hotel or a house for sale

Manufacturing and product retailingPhysical delivery cost may be high

Travel and Tourism Services

Any experienced traveler knows that good planning and shopping around can save moneyThe Internet is an ideal place to plan, explore, and arrange almost any tripTravel-related information available at many sites including:

Expedia.com Travelweb.comTravelocity.com Trip.comAsiatravel.com Priceline.com

Travel and Tourism Services (cont.)

Information and booking of airlines, hotels, cars, and even golf coursesFare comparisons360 degree video tours of top destinationsElectronic Travel magazineConverting 200 currencies

Providing mapsPictures of major attractionsInformation about entertainment and ticket purchasing (ticketmaster.com)Tips provided by people that experienced certain situations (like a visa problem)

Services provided:


Special discount informationChat rooms and bulletin boardsShopping for travel accessories and booksExperts’ optionsFrequent flier dealsRestaurant reviewsCurrent status of flights(real time)Driving directions in the US

Travel newsFare tracker (free e-mail alerts on low fares)Major international newsWorldwide business and places locatorSpecial interest vacationsBed and breakfast recommendationsE-mail to intermediaryWeather watch

Services provided:


Auctions, bids, and special salesAmerican airlines (aa.com) auctions tickets during low-volume seasonsCathay (cathaypacific.com) auctions tickets on competitive routesAer Lingus (aerlingus.ie) auctions tickets that expire in 1 or 2 weeksPriceline (priceline.com) asks consumers to specify the price they are willing to pay


Special servicesWireless servicesDirect marketingAlliances and consortiaOther services

Interactive kiosks in hotelsInternet access in hotelsBenefits

Free information is tremendousFree information is accessible anytimeSubstantial discounts

LimitationsNot all people use the InternetIt may take a long time to find what you wantPeople are still reluctant to provide credit card numbers

Corporate Travel: New Business Model

The Impact of EC on the Travel Industry

Porter’s framework of competitive advantage (the five forces)Focus:

EnvironmentCompetitive responsesFirm’s strategy

The industry is clearly transformedTaking away some functions traditionally performed by travel agents


Impacts on the industryMultimedia helps customers understand the productsOffering of lower-cost tripsProviding a more personalized serviceSaving money in a paperless environmentIncreasing the convenience of getting information at homeSupporting a customer-focused strategy (such as targeted advertisement and integration of products); push information to customers


Travel agencies, as we know them today, will disappearOnly their complex value-added activities will not be automatedThese complex activities will be performed by a new breed of intermediariesSurvival strategy

Minor improvements due to process changesBPR with significant improvementsOrganizational transformation


Figure 5-2The Travel Industry Chain

Source: Block and Segev “The Impact of Electronic Commerce on the Travel Industry” Proceedings, HICSS 31, Hawaii © 1997 IEEE.


Intelligent agentsStep 1: turn on PC and enter

Desired destinationDatesAvailable budgetSpecial requirementsDesired entertainment

Step 2: computer dispatches an intelliget agen that “shops around”Step 3: agent attempts to match your requirements with what is available, negotiates with vendorsStep 4: agent returns within minutes with suitable alternatives, modifies as per your wishes, books the vacation

Voice communication with agent

The Employment Placement:Deficiencies of Manual Market

Job marketsEmployers are looking for employees with specific skills, and individuals are looking for jobsVery volatile marketMoved to the InternetMillions of job seekers, hundreds of thousands of jobs

Driving forces of electronic job marketCost—classified ads are expensiveLife cycle—the life of the ads is only days or weeksPlace—most ads are local; nationwide and international ads are more expensiveMinimum information—because of the high cost, the information provided is minimalSearch—Time consuming for individuals to find all relevant newspapers

The Employment Placement:Deficiencies of Manual Market (cont.)


Driving forces of electronic job market (cont.)Finding applicants—during pre-Internet era, job seekers

did not place ads about their availability making it difficult for companies to find employees with special skills

Matching—it was difficult to match candidates to open jobs, supply and demand

Lost and dated material—some applications or letters of response tended to get lost, or arrive late

Speed—communication by mail and processing of a large number of applications is slow; employers lose good employees, the applicant had taken another job being afraid to wait too long

Comparisons—difficult for job seekers to compare monetary value of available positions


The Internet Job MarketThe Internet offers a perfect environment; it is especially effective for technology-oriented jobs

Job seekersJob offerersRecruiting firmsGovernment agencies and institutions


Find very detailed and timely information on a large number of jobs world-wideQuickly communicate with potential employersPost resumes for large-volume distribution

Search for jobs quickly from any place at any timeObtain several support services at no costFind employer profile & industry guides (valuereports.Com)

The Advantage of the Electronic Job Market For job seekers


Advertise to a large number of job seekersSave on advertisement costsLower the cost of processing (using electronic application forms)Provide greater (‘equal opportunity’) for job seekers

Find highly skilled employeesConduct tests quickly, onlineChange and update ads quicklyFill up positions rapidlyInterviewing from distance

The Advantage of the Electronic Job MarketFor employers


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

Examples of online job servicesLocating jobsWriting and posting resumesCareer planningNewsgroups

Examples of career services on the InternetRecruiters online networkStaffNETGlobal employment networkEmployment opportunitiesIntranet job market

Intelligent agentsIntelligent agents for job seekers (jobsleuth.com)Intelligent agents for employers (resumix.com)

Real Estate

You can view many properties on the screenYou can sort and organize propertiesYou can find detailed information about the propertiesYou can search, compare and apply for loans

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.comMortgage brokers can pass on loan applications over the Net and receive bids from lenders that want to issue the mortgagesTo find mortgage interest rates online use:

Lendingtree.comEloan.comHomeside.com.au

Insurance—auto, home life, health at substantial discount

Insureate.comOrder.comQuotesmith.com

Real Estate (cont.)

Investing and Trading Stocks Online

Online stock tradingCosts between $7 and $29 per transaction (vs. $10 - $35 in traditional brokerage)No waiting on busy telephone linesNo oral communication, less chance for errorsPlace orders from anywhere, any time, day or nightNo biased broker to push youConsiderable amount of free information

Trading Stocks Online (cont.)

Initial public offerings (IPOs)

Spring Street BrewingOffers initial and secondary securities trading over the InternetSee ipo.com

Global stock exchanges—around-the-clock global trading

Related marketsFinancial derivativesCommoditiesMutual funds

Individual investors and day tradingElectronic trading of interest rate derivatives

Swapswire.comForbes.com

Cyberbanking and Personal Finance

Electronic bankingSaves time and money for usersOffers an inexpensive alternative to branch banking

Application Case: Cyberbanking at Wells Fargo

Capabilities of home banking

Get current account balances any timeObtain charge and credit card statementsPay billsDownload account transactionsTransfer money between accounts

Cyberbanking and Personal Finance

International and multiple-currency bankingSome international retail purchasing can be done by credit cardOther transactions may require international banking support

Hong Kong Bank’s HEXAGON provides e-banking in AsiaMark Twain Bank in the U.S. uses e-cash to support trading in 20 foreign currenciesBank of America and other banks offer:

International capital raisingCash managementOther services on an international level

Implementation issues in banking and online stock trading

Securing financial transactionsApplication case: Bank of America Online

Using the extranetBanks provide large business customers with personalized service by allowing them access to the bank’s intranet

Access accountsHistorical transactionsIntranet-based decision-support applications

Cyberbanking and Personal Finance (cont.)


Imaging systems—allow customers to view images of all:

Incoming checksInvoicesOther related online correspondence

Pricing online vs. off-line servicesSome banks offer free services (fee per check or transfer)Some banks charge $5 to $10

Risks—especially in international banking

Banking: 4 scenariosBuilding alliances quickly with banks, software vendors, and information providersEffective outsourcing without neglecting to build in-house skills (customer information systems)Focusing on the profitable customers to provide broad channels for services and productsKeeping a central role in the payment environment


The Future of Online Banking

Three core strategies to pursue 1. Customers Agents—banks unable to achieve

economies of scaleOffer customers the widest possible choicesInclude products from multiple sourcesProvide the customers with integrated information services

2. Product Manufacturers – banks able to achieve economies of scale

Strengthen a trend that can already be seen in a number of product segmentsIn core processing services for small and medium-sized institutions

The Future of Online Banking (cont.)

Three core strategies to pursue (cont.)3. Integrated Players—banks with a strong

brand and position from manufacturing to delivery

Many banks will adopt a hybrid strategyEvery player needs to make crucial decisions about which areas are strategically too risky:

To outsource Which capabilities need to be built up in-house

The Future of Online Banking (cont.)

Personal finance onlineBill paying and e-checksTracking bank accounts etc.Portfolio managementInvestment trackingQuotes and prices (past and current)Budget organizationRecord keepingTax computationsRetirement goals, planning and budgeting

Billing Online

Automatic transfer of mortgages

This method has existed for several yearsThe payer authorizes its bank to pay the mortgage, including tax escrow payments

Automatic transfer of funds to pay monthly utility bills

Since1997, the city of Long Beach has allowed its customers to pay their gas and water bills from their bank accountsMany utility companies worldwide provide this option

Billing Online (cont.)

Paying bills from online banking account

Can be made into any bank accountMonthly rent and other bills paid directly into the payee’s bank accounts


A merchant-to-customer direct billingA merchant posts bills on its Web siteCustomers can view and pay their billCustomers have to go to many Web sites to pay all their billsSeveral utilities in Los Angeles allow customers to pay bills on the utilities’ Web site (20 cents per transaction )


Using an intermediaryA third party consolidates all bills related to each customer in one site in a standard formatCollects a certain commissionMakes it convenient to complete transactionsE*Trade and Intuit

ISPs servicesTrying to sell customized solutionsDo not have adequate billing platformsSee moneymain.com

Online Publishing

The electronic delivery of newspapers, magazines, news, and other information through the InternetOnline Publishing Today and Tomorrow

Today— mainly used for disseminating information and for conducting sales transactions interactivelyTomorrow— include more customized material that the reader will receive free, or will pay for

Online Publishing (cont.)

Publishing ModesNewspapersMagazinesNewsTextbooksMusicArtworkVideo clipsMovies


Publishing MethodsOnline archive: digital archive (library catalogs, bibliographic databases)New medium: extra comprehensiveness to issue or topic Publishing intermediation: online directory for news servicesDynamic or just-in-time: create content in real-time and transmit on the fly


Publishing music, videos, and gamesMajor issue is payment of intellectual property feesPeople-to-people (P2P) model—people swap files 3rd-party organizer may be in violation of copyright laws (Napster)


Digital delivery of documents—secure environment

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

EncryptionSoftware for digital signatureAuthenticationNotarization


Edutainment—combination of:EducationEntertainmentGamesGoal: encourage students to become active learnersManagerial issues

Educational games delivered as CD-ROMsDistance-learning format


Electronic booksFrequent updates possibleContain up-to-the-minute informationSpecial eBook device necessary to view booksSee:

Wizap.comEbookconnections.comNetlibrary.com

Knowledge Dissemination

Virtual teaching and online universitiesDistance learning and virtual universitiesMany universities offer limited courses and degrees, 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 they “attend” the lectureLecture, support material exercises, etc., provided on the Web

Knowledge Dissemination (cont.)

Online advice and consultingMedical advice—provide consultation with top expertsManagement consulting—provide accumulated expertise from knowledge basesLegal advice—delivery of legal consultation services to business has considerable prospects

Knowledge Dissemination (cont.)

Online advice and consulting (cont.)Financial advice— offer extensive financial adviceOther service online

HealthcareMatchmakingElectronic stamps

Disintermediation and Reintermediation

Change the role of agents to:Assists in comparison shopping from multiple sourcesProviding total solutions by combining services from several vendorsProviding certifications and trusted third party control and evaluation systems

Disintermediation andReintermediation (cont.)

Issues impacting future of intermediariesThe success of intelligent agents

Travel intelligent agentsAgents that support job matchingAgents 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 purchasingVirtual travel agencies

Disintermediation and Reintermediation (cont.)

New roles of electronic marketing intermediaries

To extend what we are familiar with in physical markets to the virtual world (e.g., search services and electronic malls) To extend payment clearing functions into the Internet (e.g., electronic cash and digital credit card services)

Disintermediation andReintermediation (cont.)

Disintermediation in B2BExchanges decrease number of calls a sales rep pays on purchasing managersReengineering marketing and sales organizations is necessary

CybermediationElectronic intermediary (rowe.com)Affects most market functions

Hypermediation—human/electronic intermediation; may profit greatly from EC

Managerial Issues

Effectiveness of out-of-town recruitmentPrivacy may be in dangerInternational legal issues may impact services more than productsEthical issues are prevalent in servicesThe intermediaries and their roles are changingAlliances for online initiatives are spreading rapidly

E-Commerce 06

Education

Transcript of E-Commerce 06