Summer-DISC 6341© Andrew Schwarz, 2002Slide 1 Lecture 1/Session 2 e-commerce, e-business,...
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Transcript of Summer-DISC 6341© Andrew Schwarz, 2002Slide 1 Lecture 1/Session 2 e-commerce, e-business,...
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 1
Lecture 1/Session 2Lecture 1/Session 2
e-commerce, e-business, e-commerce, e-business, e-marketplace…enough?e-marketplace…enough?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 2
Introductory Thoughts
Everywhere we turn, it seems like there is a new .com
We are inundated with new terms:– E-business
– E-commerce
– E-marketplace
– And so on…
But, we have also had our portfolio’s hurt when the “dot com bubble” burst…what is going on?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 3
Profile of Domain Names on Internet
.edu0.02%
.net11.73%
.org7.61%
.co.uk11.33%
.com69.31%
Source: domainstats.com
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 4
Internet Bankruptcies or Shutdowns by MonthJanuary 2000 to March 2002
1 2 2 1
1317
20
10
22
36
50 49
5659
49
5664 61
4046
3336
21 2319 18 17
Jan-
00
Mar
-00
May
-00
Jul-
00
Sep-
00
Nov
-00
Jan-
01
Mar
-01
May
-01
Jul-
01
Sep-
01
Nov
-01
Jan-
02
Mar
-02
Source: webmergers.com
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 5
Unanswered Questions
1. What is e-business, e-market, and e-commerce?
2. Why did everyone think e-markets were so revolutionary?
3. What are some models of e-commerce?
4. What are the benefits of e-business?
5. What is the application of this lecture for you, as a manager, in the digital age?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 6
Question #1Question #1::What is e-business?What is e-business?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 7
What is an e-market?
E-market: A marketplace that is created by computer and communication technologies that link many buyers and sellers
Two types of e-markets– E-commerce: The process of buying and selling goods
and services electronically, involving transactions using the Internet, networks, and other digital technologies
– E-business: The use of Internet and other digital technology for organizational communication and coordination and the management of the firm
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 8
Question #2Question #2::Why did everyone thinkWhy did everyone think
e-markets were so e-markets were so revolutionary?revolutionary?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 9
Projected e-market Benefits
1. Shrinkage of information asymmetry
2. Changing relationships
3. Business conducted 24/7
4. Extended global reach of corporation
5. Can reduce transaction costs
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 10
Benefit #1:Shrinks Information Asymmetry
Information asymmetry: situation in which the relative bargaining power of two parties in a transaction is determined by one party possessing more information essential to the transaction than the other party– Before the Internet, not easy to shop around– Now, the consumer has a lot of power
The result: disintermediation—no more intermediaries
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 11
Benefit #1:Shrinks Information Asymmetry
Disintermediation: the elimination of organization or business process layers responsible for certain intermediary steps in a value chain
Layers of disintermediationManufacturer Distributor Retailer Consumer
Manufacturer Retailer Consumer
Manufacturer Consumer
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 12
Benefit #2: Changing Relationships
Reach:How many people a business
an connect with and how many products it can offer those
people
Richness:The depth and
detail of information that
a business can supply to (or can
collect from) a customer
Pre-Internet, firms had to
trade off between
richness and reach
Now, no need to trade off
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 13
Benefit #2: Changing Relationships
The web allows firms to create rich relationships with a lot of reach that are uniquely personal to each individual
Personalization is the future of the web– Amazon book recommendations– MyYahoo! Page– Launch!
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 14
Other Benefits
3. Business conducted 24/7 Not limited by store hours
4. Extended global reach of corporations But also added complexity
5. Reduced transaction costs Per customer transaction costs significantly
lower
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 15
Question #3Question #3::What are some models ofWhat are some models of
e-commerce?e-commerce?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 16
Defining a Business Model
Book definition: An abstraction of what and how the enterprise delivers a product or service, showing how the enterprise creates wealth
But..what are the elements of a business model?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 17
Elements of a Business Model
An abstraction of…
what and how the enterprise delivers a product or service,
showing how the enterprise creates wealth
• Mission• Structure• Processes
Revenue generation mechanism
Source: Schwarz and Jayatilaka, 2002
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 18
Elements of a Business Model
ElementElement DefinitionDefinition
Mission High-level understanding of the overall vision, strategic goals, and the value proposition, including the basic product or service features
Processes Show the elements and the structure of the business model, including the elements of the value creation process and which requirements they address in the customer process
Structure Determines which roles and agents constitute and comprise a specific Business Community, as well as the focus on industry, customers, and products
Revenue The “bottom line” of the business model
Source: Alt and Zimmerman, 2001
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 19
Internet Approaches to Business Models
Virtual Storefront: Sells goods, services on-line (e.g. Amazon.com, wine.com)
Marketplace Concentrator: Concentrates information from several providers (e.g. Shopnow.com)
On-line Exchange: Bid-ask system, multiple buyers, sellers (e.g. E-steel)
Information Broker: Provide info on products and pricing (e.g. Partnet)
Transaction Broker: Buyers view rates, terms from various sources (e.g. E*Trade)
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 20
Internet Approaches to Business Models
Auction: Electronic clearinghouse products, prices, change in response to demand (e.g. eBay)
Reverse Auction: Buyer sets price, submits to multiple sellers (e.g. priceline)
Aggregator: Group pools orders for volume discount (e.g. mobshop.com)
Digital Product Delivery: Sell, download software, other digital products (e.g. buy.com)
Content Provider: Creates revenue through providing client for a fee, and advertising (e.g. Salon.com)
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 21
Internet Approaches to Business Models
On-line Service Provider: Provides service, support for hardware, software products (e.g. xdrive.com)
Virtual Community: Chat room, online meeting place (e.g. geocities)
Portal: Initial point of entry to Web, specialized content, services (e.g. Yahoo!)
Syndicator: Aggregate information from several sources sold to other companies (e.g. Screaming Media)
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 22
Types of Businesses on the Internet
Pure-play: businesses that exist solely on the Internet
Clicks-and-mortar: businesses that have off and online presences– Also known as clicks-and-bricks
During the early days of e-commerce, predominated by pure-play; now shifting toward clicks-and-mortar or pure-play aligning with clicks-and-bricks
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 23
E-Commerce Types
TypeType Selling PartySelling Party Buying PartyBuying Party ExampleExample
B2C Business Consumer B&N
B2B Business Business dgMarket
C2C Consumer Consumer Napster
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 24
Question #4Question #4::What are the benefits of e-What are the benefits of e-
business?business?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 25
Benefits of e-business
Beyond previously described benefits of e-markets, e-business (electronically connecting businesses) allow extra benefits to organizations:
1. Creation of intra and extranets
2. Coordination of the supply chain
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 26
Benefit #1:Creation of intra and extranets
Intranet: An internal network based on Internet and WWW technology and standards
Contains applications that have documentation pertinent to internal employees within the firm
Typical functional departments– HR
– Finance/Accounting
– Manufacturing/Production
– Sales/Marketing
An Example of An Intranet Systems
ShippingShipping InventoryInventory
Planning & Planning & ForecastingForecasting
Order Order ProcessingProcessing
ProductionProduction
ProcurementProcurementHR PoliciesHR Policies
IntranetIntranet
BenefitsBenefits
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 28
Benefit #1:Creation of intra and extranets
Organizational benefits– Connectivity; accessible from most computing
platforms– Can be tied to other systems– Can create interactive applications with text, audio, and
video– Scalable– Easy to use Web interface– Low start up costs– Rich information environment– Reduced info distribution costs
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 29
Benefit #1:Creation of intra and extranets
Extranet: Private intranet that is accessible to authorized outsiders
Objective: take certain elements of intranet and open it up to external parties– Customers– Suppliers– Distributors– Logistics services
An Example of An e-business Systems(Combining intra and extranet)
ShippingShipping InventoryInventory
Planning & Planning & ForecastingForecasting
Order Order ProcessingProcessing
ProductionProduction
ProcurementProcurementHR PoliciesHR Policies
E-businessE-business
BenefitsBenefits
CustomersCustomers
SuppliersSuppliers
Logistics Logistics ServicesServices
SuppliersSuppliers
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 31
Benefit #2:Coordination of the Supply
Chain With everyone linked electronically, the entire supply chain can be coordinated
Results– Reduction in costs– More responsive customer service– Customer driven production– Global coordination of firm
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 32
Question #5Question #5::What is the application of this What is the application of this
lecture for you, as a manager, in lecture for you, as a manager, in the digital age?the digital age?
Summer-DISC 6341 © Andrew Schwarz, 2002 Slide 33
Top 4 Applications From This Lecture
1. IT can enable new business opportunities Demonstrates ability of IT to create competitive
advantage
2. Technology firms must have a proven business model
3. To change a business process, need to understand corresponding technology processes and vice-versa
4. Extranets place importance upon understanding security, privacy, and legal issues