Mis10 ch10 ppt

4.1 © 2006 by Prentice Hall

10Chapter

Electronic Business and Electronic Business and

E-Commerce E-Commerce

Digital Markets,Digital GoodsDigital Markets,Digital Goods


OBJECTIVES

• Analyze how Internet technology has changed value propositions and business models

• Define electronic commerce and describe how it has changed consumer retailing and business-to-business transactions

• Compare the principal payment systems for electronic commerce

Management Information SystemsManagement Information SystemsChapter 10Chapter 10

The Digital Firm: Electronic Business and Electronic CommerceThe Digital Firm: Electronic Business and Electronic Commerce


10.1 ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE INTERNET

Internet Technology and the Digital Firm

• Information technology infrastructure: The Internet provides a universal and easy-to-use set of technologies and technology standards that can be adopted by all organizations.

• Direct communication between trading partners: Disintermediation removes intermediate layers and streamlines processes.





• Round the clock service: Web sites available to consumers 24 hours

• Extended distribution channels: Outlets created for attracting customers who otherwise would not patronize a firm

• Reduced transaction costs: Costs of searching for buyers declines

Management Information SystemsManagement Information SystemsChapter 10 Chapter 10


Internet Technology and the Digital Firm (Continued)



Business Model:

• Defines an enterprise

• Describes how the enterprise delivers a product or service

• Shows how the enterprise creates wealth

New Business Models and Value Propositions





New Business Model: • In the past information about the products tightly

bundled with physical store value chain

• Because of internet, information is available to everyone. Customers can buy directly from internet bypassing retails stores.

• This unbundling of information creates new business model

New Business Models and Value Propositions





• Information asymmetry: One party in a transaction has more information than the other. The Internet decreases information asymmetry.

• Increases richness: The Internet increases the depth, detail, and scope of information.

• Increases reach: The Internet increases the number of people who can be contacted efficiently.

The Changing Economies of Information





The Changing Economics of Information





• Virtual storefront: Sells goods or services online (Amazon.com)

• Information broker: Provides information on products or services (Edmunds.com,Insweb.com,Kbb.com,Realtor.com

• Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com)

Internet Business Models – (pure play )





• Online marketplace: Provides a trading platform for individuals and firms (eBay.com,priceline.com,ChemConnect.com)

• Content provider: Creates revenue by providing content (WSJ.com, TheStreet.com,GettyImages.com)

• Online service provider: Provides online services, including search service. (Google.com, Xdrive.com,Employease.com,backup.com)



Internet Business Models (Continued)



• Virtual community: Provides an online community to focused groups (Friendster.com, iVillage.com)

• Portal: Provides initial point of entry to Web, specialized content, services (Yahoo.com, MSN.com)

• Specialized portal: Helps users with specific interest(StarMedia.com,Sina.com)



Internet Business Models (Continued)



• The source of revenue for this web sites are through

• Banner-ads

• Pop-up ads




10.2 ELECTRONIC COMMERCE

Categories of Electronic Commerce

• Business-to-customer (B2C): Retailing of products and services directly to individual customers (BarnesandNoble.com,Amazon.com)

• Business-to-business (B2B): Sales of goods and services to other businesses (Grainger.com, Ariba.com,Milacron.com)

• Consumer-to-consumer (C2C): Individuals using the Web for private sales or exchange (eBay.com )




Business-To-Consumer

Direct sales over the web:

• Customer-centered retailing: Closer and more personalized relationship with customers is possible

• Web sites: Provide a corporate-centered portal for the consumer to quickly find information on products, services, prices, orders





• Disintermediation: The elimination of organizations or business process layers responsible for certain intermediary steps in a value chain, reducing costs to the consumer




Business-To-Consumer

Direct sales over the web: (Continued)


The Benefits of Disintermediation to the Consumer





Clickstream tracking tools:

• Collect data on customer activities at Web sites and store them in a log


Interactive Marketing and Personalization



Interactive Marketing


Web Site Visitor Tracking





• Create unique personalized Web pages that display contents and ads for products or services of special interest to each user

• Increased closeness to customer increases value to the customer, while reducing costs of interacting with the customer


Web Personalization




Web Site Personalization





• Compares information gathered about a specific

user’s behavior at a Web site to data about other

customers with similar interests to predict what

the user would like to see next. The software then

makes recommendations to users based on their

assumed interests.


Techniques for web personalization is collaborative filtering

Collaborative filtering:







Blogs

Web based tools for marketing-where individuals

can publish,stories,opinions

Example

Macro media uses web logs to nurture ties with

customer and introduce them to new features in the

software.


• The use of Web sites to provide customers with access to information and answers to questions

• Replacing human call center operators and clerks

• UPS.com: Customer tracking of packages

• Orbitz.com: Customer self-help for organizing and managing a trip

• Dell.com: “My Order Status” facility


Customer self-service:




• Electronic Data Interchange (EDI): Enables the computer-to-computer exchange between two organizations of standard transactions. Currently 80% of B2B e-commerce uses this system.

Business-to-Business Electronic Commerce: New Efficiencies and Relationships





Electronic Data Interchange (EDI)






Private Industrial Networks or private exchange

• The largest Web-based form of B2B commerce

• Private B2B extranets that focus on continuous

business process coordination between a small group

of companies for collaboration and supply chain

management. Wal-Mart uses its own private network

to coordinate more than 15,000 suppliers to its stores.





Extranets

Private intranets extended to authorized users outside

the company.

B2B use extranets for linking to other business

for purchase and sales transactions.





A Private Industrial Network







• Companies use internet than private network for EDI

Example

• E-Procurement: Platforms for purchasing goods and

materials and also sourcing, negotiating with suppliers,

paying for goods, and making delivery arrangements

(Ariba.com)



A Net Marketplace



-Single digital market place based on Internet technology for

many different buyers and sellers

-Generating revenue from purchase and sale transactions





Types of net marketplace

1.Sells direct goods

2.Sells indirect goods

3.Contractual purchasing based on long-time

4.Short term spot puchasing

5.Vertical markets

6. Horizontal markets





Industry owned Net market place

Focus on long-term contract purchasing relationships and

on providing common networks and computing

platforms for reducing supply chain inefficiencis.

Example – Exostar

This aerospace and defence industry-sponsored Net

Marketplace to connect these companies to their suppliers

and facilitate collaboration on major projects.





Independently owned third-party or Exchanges

Net marketplaces that can connect thousands of suppliers

and buyers for spot purchasing.Many exchanges provide

vartical markets for a single industry, such as

food,electronics.

Eg: FoodTrader.com



A Net Marketplace




10.4 Electronic Commerce Payment Systems

Digital wallets Electronic storage of I.D. and digital cash. Not widely used.

Accumulated balance Used for micro payments. Similar to monthly telephone bills.

Stored value Used for micro payments. Pre-payment of funds, debited on use.

Smart Cards I.D. and credit information stored on a chip attached to a card. Used in Europe.

Digital cash Electronic currency that can be transferred over the Web.

Peer-to-Peer payment Interpersonal transfer of funds such as PayPal.

Digital checking Electronic checks with digital signatures, used most often in B2B commerce.

Electronic billing presentmentand payment

Used by consumers to pay bills online, provided by many banks.

Credit cards The most common form of payment. $50 Limited customer liability.





Electronic Commerce Payment Systems



1.Digital Credit card Payment System

Extends the functionality of Credit card payment for on-line

purchasing. Capability for processing Credit card purchases on

the web.

Authenticating the purchaser's credit card to make sure

that it is valid and arranging for the bank that issued the

credit card to deposit in seller's bank account.






2. Digital wallet

Eliminating the need for entering address and Credit card

information.A digital wallet securely stores Credit card

and owner identification information and provides that

information at an E-Commerce site's “Checkout counter”

A digital wallet enters the shopper's name,credit card

number and shipping information automatically when

invoked to complete the purchase.

Example: Amazon,MSN wallet.






3. Micropayments

Developed for purchases of less than $10,such us downloads of

individual articles or music clips

(a) Accumulated balance digital payment systems

accumulating a debit balance that they must pay periodically on

their credit card or telephone bills

Example

PaymentOne and Trivnet enable consumers to charge small

purchases to their monthly telephone bill.






(b) Stored value payment systems

Enables the consumers to make instant online payments to

merchants and other individuals based on value stored in a

digital account. On-line value systems rely on the value stored in

a consumer's bank or credit card

Example

Ecount offers a prepaid debit account for online purchases

RocketCash






(c) Smart card

Another type of stored value system for micropayments. It is a

plastic card stores digital information.It can store health records,

identification data or telephone number or it can serve as

'electronic purse' in the place of cash.But it needs a Smart card

reader

Example

Mondex and American Express Blue Smart cards.






4. Digital cashAlso known as electronic cash used for micropayments orlarger purchases. Digital cash is currency represented inelectronic form.Exchange money with other e-cash user.

useful for people who do not have credit card and wish tomake web purchases

example

eCoin.net






5.Peer-to-peer payment systems

serve people who want to send money to vendors or individuals who

are not set up to accept credit card payments.

The party sending money uses his credit card to create an account

with the designated payment at a web site dedicated to peer-to-peer

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 physical address)

Example PayPal






6. Digital checking payment systems

Extend the functionality of existing checking accounts sothey can be used for on-line shopping payments.

These checks are encrypted with a digital signature that can be verified and used for payments in E-commerce. It is useful in B2B E-commerce.

ExampleWestern Union MoneyZap






7. Electronic billing presentment and payment systemsused for paying monthly routine bills. They enable users to view their bills electronically and pay them through electronic fund transfers from bank or credit card accounts. These services support payment for on-line and physical store purchases about bills that are due, present the bills, and process the payments

ExampleCheckFree consolidate subscribers bills from various sources so that they can all be paid at one time.

Mis10 ch10 ppt

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