E Business+Models Ppt - Presentation Transcript

1. E-Business Models
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Learning Objectives Identify the key components of e-commerce business models. Describe the major B2C business models. Describe the major B2B business models. Recognize business models in other emerging areas of e-commerce. Understand key business concepts and strategies applicable to e-commerce. Components of e-Business Models Business Model Customer value Scope Price Resources Capabilities Implementations

Environment Internet Performance Price Competition Price for books and CDs sold on the Internet less than conventional channel Average 9-16% o Price increments Price change on the Internet is smaller than conventional channel o Price dispersion Substantial differences in price across retailers on the Internet Heterogeneity in consumer awareness Heterogeneity in retailer branding and trust 5. Driving Factors o Lower buyer search costs Promote price competition o Low entry costs or low operational costs o Other factors Tax Shipping and handling fees 6. E-Commerce Business Models o Business model a set of planned activities designed to result in a profit in a marketplace o E-commerce business model a business model that aims to use and leverage the unique qualities of the Internet and the World Wide Web. 7. Eight Key Ingredients of a Business Model Key Questions Business Model Components Value Proposition Why should the customer buy from you? Revenue model How will you earn money? Market opportunity What marketspace do you intent to serve, and what is its size? Competitive environment Who else occupies your intended marketspace? Competitive advantage What special advantages does your firm bring to the marketspace? Market strategy How do you plan to promote your products to attract customer? Organizational development What types of organizational structures within the firm are necessary to carry out the business plan? Management team What kinds of experiences and background are important for the companys leaders to have? 8. Value Position o Defines how a companys product or service fulfills the needs of customers. 4.

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Questions Why will customers choose to do business with your firm instead of another What will your firm provide that other firms do not and cannot?

9. Revenue Model
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Describes how the firm will earn revenue, produce profits, and produce a superior return on invested capital. o E-commerce revenue models include: advertising model subscription model transaction fee model sales model affiliate model 10. Revenue Model o Advertising revenue model a company provides a forum for advertisements and receives fees from advertisers ( Yahoo ) o Subscription revenue model a company offers it users content or services and charges a subscription fee for access to some or all of it offerings ( Consumer Reports or Wall Street Journal ) 11. Revenue Model o Transaction fee revenue model a company receives a fee for enabling or executing a transaction ( eBay or ETrade ) o Sales revenue model a company derives revenue by selling goods, information, or services ( Amazon or DoubleClick ) o Affiliate revenue model a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales ( MyPoints ) 12. Market Opportunity o Market opportunity refers to the companys intended marketspace and the overall potential financial opportunities available to the firm in that market space defined by the revenue potential in each of the market niches where you hope to compete o Marketspace the area of actual or potential commercial value in which a company intends to operate 13. Competitive Environment o Refers to the other companies operating in the same marketplace selling similar products o Influenced by: how many competitors are active how large are their operations the market share of each competitor how profitable these firms are how they price their products 14. Competitive Advantage o Achieved by a firm when it can produce a superior product and/or bring the product to market at a lower price than most, or all, of its competitors o Achieved because a firm has been able to obtain differential access to the factors of production that are denied their competitors -- at least in the short term 15. Competitive Advantage o Asymmetry


participants

exists whenever one participant in a market has more resources than other

First mover advantage a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service 16. Competitive Advantage o Unfair competitive advantage occurs when one firm develops an advantage based on a factor that other firms cannot purchase o Perfect Market a market in which there are no competitive advantages or asymmetries because all firms have equal access to all the factors of production when a company uses its competitive advantage to achieve more advantage in surrounding markets 17. Market Strategy o The plan you put together that details exactly how you intend to enter a new market and attract new customers o Best business concepts will fail if not properly marketed to potential customers 18. Organizational Development o Describes how the company will organize the work that needs to be accomplished o Work is typically divided into functional departments o Move from generalists to specialists as the company grows 19. Management Team o Employees of the company responsible for making the business model work o Strong management team gives instant credibility to outside investors o A strong management team may not be able to salvage a weak business model o Should be able to change the model and redefine the business as it becomes necessary 20. Major Business-to-Consumer (B2C) Business Models 21. Major Business-to-Consumer (B2C) Business Models 22. Major Business-to-Consumer (B2C) Business Models o Portal offers powerful search tools plus an integrated package of content and services typically utilizes a combines subscription/advertising revenues/transaction fee model may be general or specialize (vortal) 23. Major Business-to-Consumer (B2C) Business Models o E-tailer online version of traditional retailer includes virtual merchants (online retail store only) clicks and mortar e-tailers (online distribution channel for a company that also has physical stores) catalog merchants (online version of direct mail catalog) online malls (online version of mall) Manufacturers selling directly over the Web 24. Major Business-to-Consumer (B2C) Business Models o Content Provider information and entertainment companies that provide digital content over the Web typically utilizes an advertising, subscription, or affiliate referral fee revenue model o Transaction Broker processes online sales transactions typically utilizes a transactions feel revenue model 25. Major Business-to-Consumer (B2C) Business Models o Market Creator

uses Internet technology to create markets that bring buyers and sellers together typically utilizes a transaction fee revenue model E.g. Auction English auction Dutch auction Sealed-bid auction Double auction

26. English Auctions The bidders announce their bids until no higher bid is forthcoming going . . . going . . . gone! Ascending-price auctions Typically set a closing time in advance o Minimum bid plus a reserve price o Early buyout price 27. Dutch Auctions o Bidding starts at a high price and drops until a bidder accepts the price Descending price auctions 28. Sealed-Bid Auctions o Bidders submit their bids independently and are usually prohibited from sharing information with each other o First-price sealed-bid auction The winner pays his amount o Second-price sealed-bid auction The winner pays one increment over the second-highest bid received 29. Double Auctions o Buyers and sellers submit bids to an auctioneer o The auctioneer matches the sellers offers to the buyers offer E.g. New York Stock Exchange 30. Major Business-to-Consumer (B2C) Business Models o Service Provider offers services online o Community Provider provides an online community of like-minded individuals for networking and information sharing revenue is generated by referral fee, advertising, and subscription 31. e-Business Models o Dynamic Pricing Models Name-Your-Price Model Comparison-Pricing Model Demand-Sensitive Pricing Model 32. Name-Your-Price Model o Allows customers to state the price they are willing to pay o Priceline.com Demand collect systems Use shopping bot that takes customers bid to the Priceline partners to see whether they will accept the prices for the requested products/services Intelligent agents 33. Comparison-Pricing Model o Allows customers to poll a variety of merchants and find a desired product/service at the lowest price o Mysimon.com Uses intelligent-agent technology Offers discussion groups, customer ratings, and comparison shopping

34. Demand-Sensitive Pricing Model

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Group purchasing Individual buyers to shop in large groups to obtain group discount The more people who buy a product in a single purchase, the lower the cost per person becomes Mercata.com, mobshop.com, demandline.com o How it works Buyers create requests for quotes (RFQs) Purchasing manager monitors all aggregated RFQs Manager negotiates through suppliers. 35. Demand-Sensitive Pricing Model o Price Discrimination

Output Price D1 R1 Q1 P1 D2 R2 Q2 Q P2 Marginal cost

36. Demand-Sensitive Pricing Model

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Benefits to Buyers Reduce product costs Reduce transaction costs o Benefits to Suppliers Enhance revenue with a high-volume sales Reduce sales costs Improve manufacturing efficiency 37. Major Business-to-Business (B2B) Business Models 38. Major Business-to-Business (B2B) Business Models o B2B Hub also known as marketplace/exchange electronic marketplace where suppliers and commercial purchasers can conduct transactions may be a general (horizontal marketplace) or specialized (vertical marketplace) o E-distributor supplies products directly to individual businesses 39. Major Business-to-Business (B2B) Business Models o B2B Service Provider sells business services to other firms o Matchmaker links businesses together charges transaction or usage fees o Infomediary gather information and sells it to businesses 40. Seven Unique Feature of E-Commerce Technology 41. Seven Unique Feature of E-Commerce Technology o Ubiquity Alters industry structure by creating new marketing channels and expanding size of overall market Creates new efficiencies in industry operations and lowers cost of firms sales operations Enables new differentiation strategies o Global Reach Changes industry structure by lowering barriers to entry, but greatly expands market at the same time


efficiencies

Lowers cost of industry and firm operations through production and sales Enables competition on global scale

42. Seven Unique Features of E-Commerce Technology

Universal Standards Changes industry structure by lowering barriers to entry and intensifying competition within an industry Lowers costs of industry and firm operations by lowering computing and communications costs Enables broad-scope strategies o Richness Alters industry structure by reducing strength of powerful distribution channels Change industry and firm operations costs by lessening reliance on sales force Enhances post-sale support strategies 43. Seven Unique Features of E-Commerce Technology o Interactivity Alters industry structure by reducing threat of substitutes through enhanced customization Reduces industry and firm costs by lessening reliance on sales force Enable differentiation strategies o Personalization/Customization Alters industry structure by reducing threats of substitutes, raising barriers to entry Reduces value chain costs in industry and firm by lessening reliance on sales forces 44. Seven Unique Features of E-Commerce Technology o Information Density Changes industry structure by weakening powerful sales channels, shifting bargaining power to consumer Reduces industry and firm operations costs by lowering costs of obtaining, processing, and distributing information about suppliers and consumers 45. Case Studies o Should we integrate our Internet business with our traditional business or should we keep the two separate? 46. Seamless Model: Office Depot o Two reasons Existing catalog-sales support an Internet store Existing information systems made it easy to coordinate online stores and physical stores o Customers Benefit Make shopping simple and convenient o Companys Benefit Cheaper to reach customers 47. Seamless Model: Office Depot o Added Value Each customer has its own specialized view of the OfficeDepot.com site authorization Provide additional discount for larger customers if they place order on online o Actually increased the traffic at its physical outlet 48. Joint Venture Model: KB Toy o Reasons Dont have much experience with catalog retailing Tend to focus exclusively on their physical stores o KB Toy and Kbkids.com

KB Toy joined with BrainPlay.com to create Kbkids.com $80 million 49. Joint Venture Model: KB Toy o Operation Separation Kbkids headquarter: Denver KB Toy headquarter: MA Integration Share brand: promotion Customer service Purchasing function 50. Virtual Partnership o Rite Aid and Drugstore.com o Customer benefit Customers can pick up their Drugstore.com prescriptions at their local Rite Aid 51. A Spectrum of Choices Joint Venture Mostly integrated Slightly integrated Moderately integrated Partnership Separate Slightly integrated Moderately integrated Model Brand Management Operation Seamless Fully integrated Fully integrated Fully integrated 52. Decision Process Brand Separation Integration Does the brand extend naturally to the Internet? Yes Will we need to price differently? Yes Management Do we have the skills and experience? Yes Will there be major channel conflict? Yes Does the Internet threaten the current business model? Yes 53. Decision Process Operations Separation Integration Do our distribution systems translate well to the Internet? Yes Do our information systems provide a foundation on which to build? Yes Does either systems constitute a significant competitive advantage? Yes

E business - Presentation Transcript

1. 2. Introduction to e-Business E-Business E-Business is the Integration business with Technology means to say business done through Electronically. E-Commerce

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Electronic commerce (EC) is an emerging concept that describes the buying and selling of products, services and information via computer networks, including the Internet. 4. What Is the Internet? o A network of networks, joining many government, university and private computers together and providing an infrastructure for the use of E-mail, bulletin boards, file archives, hypertext documents, databases and other computational resources o The vast collection of computer networks which form and act as a single huge network for transport of data and messages across distances which can be anywhere from the same office to anywhere in the world. 5. cont o The largest network of networks in the world. o Uses TCP/IP protocols and packet switching . o Runs on any communications substrate. From Dr. Vinton Cerf, Co-Creator of TCP/IP Government Business Consumer Government Business Consumer E-commerce and Broader Internet Applications Source OECD (2000) C2C e.g. action markets C2B e.g. price comparisons C2G e.g. taxes B2C e.g. e-commerce B2B e.g. e-commerce B2G e.g. procurement G2C e.g. information G2B e.g. information G2G e.g. coordination 7. VISION o E-Business will be a secure, flexible and integrated o approach combining the systems and processes that o run core business operations with the simplicity and o reach made possible by Internet technology. o E-Business is the process of using Web technology to o help the streamline processes, improve productivity, o increase efficiencies and enable organizations to o easily communicate with partners, vendors and o customers, connect back-end data systems and o transact commerce in a secure manner. 8. Business Models o A Model is the systematic or structured approach which instruct the ways by following, we can easily perform any respective business activity. o The business model spells out how a company plans to make money and how it is competitively positioned in an industry. 9. Learning Objectives o Identify the key components of e-commerce business models. o Describe the major B2C business models. o Describe the major B2B business models. o Recognize business models in other emerging areas of e-commerce. o Understand key business concepts and strategies applicable to e-commerce. 10. E-Commerce Business Models o Business model a set of planned activities designed to result in a profit in a marketplace o E-commerce business model a business model that aims to use and leverage the unique qualities of the Internet and the World Wide Web. 11. Components of e-Business Models o Business Model o Customer value o Scope o Price o Resources o Capabilities o Implementations 6.

Environment Internet Performance 12. Eight Key Ingredients of a Business Model Key Questions Business Model Components Value Proposition Why should the customer buy from you? Revenue model How will you earn money? Market opportunity What marketspace do you intent to serve, and what is its size? Competitive environment Who else occupies your intended marketspace? Competitive advantage What special advantages does your firm bring to the marketspace? Market strategy How do you plan to promote your products to attract customer? Organizational development What types of organizational structures within the firm are necessary to carry out the business plan? Management team What kinds of experiences and background are important for the companys leaders to have? 13. Value Position o Defines how a companys product or service fulfills the needs of customers. o Questions Why will customers choose to do business with your firm instead of another company? What will your firm provide that other firms do not and cannot? 14. Revenue Model o Describes how the firm will earn revenue, produce profits, and produce a superior return on invested capital. o E-commerce revenue models include: advertising model subscription model transaction fee model sales model affiliate model 15. cont o Advertising revenue model a company provides a forum for advertisements and receives fees from advertisers ( Yahoo ) o Subscription revenue model a company offers it users content or services and charges a subscription fee for access to some or all of it offerings ( Consumer Reports or Wall Street Journal ) 16. cont o Transaction fee revenue model a company receives a fee for enabling or executing a transaction ( eBay or ETrade ) o Sales revenue model a company derives revenue by selling goods, information, or services ( Amazon or DoubleClick ) o Affiliate revenue model a company steers business to an affiliate and receives a referral fee or percentage of the revenue from any resulting sales ( MyPoints ) 17. Market Opportunity o Market opportunity refers to the companys intended marketspace and the overall potential financial opportunities available to the firm in that market space defined by the revenue potential in each of the market niches where you hope to compete o Marketspace the area of actual or potential commercial value in which a company intends to operate 18. Competitive Environment o Refers to the other companies operating in the same marketplace selling similar products o Influenced by:

how many competitors are active how large are their operations the market share of each competitor how profitable these firms are how they price their products 19. Competitive Advantage o Achieved by a firm when it can produce a superior product and/or bring the product to market at a lower price than most, or all, of its competitors o Achieved because a firm has been able to obtain differential access to the factors of production that are denied their competitors -- at least in the short term 20. cont o Asymmetry exists whenever one participant in a market has more resources than other participants o First mover advantage a competitive market advantage for a firm that results from being the first into a marketplace with a serviceable product or service 21. cont o Unfair competitive advantage occurs when one firm develops an advantage based on a factor that other firms cannot purchase o Perfect Market a market in which there are no competitive advantages or asymmetries because all firms have equal access to all the factors of production when a company uses its competitive advantage to achieve more advantage in surrounding markets 22. Market Strategy o The plan you put together that details exactly how you intend to enter a new market and attract new customers o Best business concepts will fail if not properly marketed to potential customers 23. Organizational Development o Describes how the company will organize the work that needs to be accomplished o Work is typically divided into functional departments o Move from generalists to specialists as the company grows 24. Management Team o Employees of the company responsible for making the business model work o Strong management team gives instant credibility to outside investors o A strong management team may not be able to salvage a weak business model o Should be able to change the model and redefine the business as it becomes necessary 25. Major e-Business Models o Business-to-Consumer (B2C) o Business-to-Business (B2B) 26. Business-to-Consumer (B2C) Business Model o B2C (or Extranets) is just web-enabled relationships between existing partners; they tend to be run by a single company seeking to lower the cost of doing business with its current suppliers or individual customers. o Examples? Amazon.com Egghead.com 27. Enterprise User Profiles Workflow Business rules Payment Analytics Internet Firewall Figure: A B2C ebusiness Model Intranet 28. B2C Applications o Electronic storefront o Electronic malls o Advertising online

Service online selling books, toys, computers e-banking (cyber banking) online stock trading online job market, travel, real estate 29. Various B2C Business Model 30. cont 31. cont o Portal offers powerful search tools plus an integrated package of content and services typically utilizes a combines subscription/advertising revenues/transaction fee model may be general or specialize (vortal) 32. cont o E-tailer online version of traditional retailer includes virtual merchants (online retail store only) clicks and mortar e-tailers (online distribution channel for a company that also has physical stores) catalog merchants (online version of direct mail catalog) online malls (online version of mall) Manufacturers selling directly over the Web 33. cont o Content Provider information and entertainment companies that provide digital content over the Web o Transaction Broker processes online sales transactions o Market Creator uses Internet technology to create markets that bring buyers and sellers together 34. cont o Service Provider offers services online o Community Provider provides an online community of like-minded individuals for networking and information sharing revenue is generated by referral fee, advertising, and subscription 35. Business-to-Business (B2B) Business Model o B2B is business-to- business commerce conducted over the Internet (called B2B e-commerce space, or e-marketplaces ) 36. Figure : A B2B Model Banks, Financial Institutions eCredit.com Suppliers o Production materials o Operating goods, services

Invoices, Payment , Clearing Enterprise Customers Logistics Celarix, NTE Transportation, Warehousing 37. B2B Applications Advertising Auctioning Procurement Channel management E-commerce 38. Various (B2B) Business Model 39. cont

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B2B Hub also known as marketplace/exchange electronic marketplace where suppliers and commercial purchasers can conduct transactions may be a general (horizontal marketplace) or specialized (vertical marketplace) o E-distributor supplies products directly to individual businesses 40. cont o B2B Service Provider sells business services to other firms o Matchmaker links businesses together charges transaction or usage fees o Info mediary gather information and sells it to businesses 41. Figure : B2C and B2B Internet Commerce in the U.S. (Source: Forrester Research) Billion 42. How Big is B2B? Figure: The Goldman Sachs B2B Sizing in USA 43. The Magnificent Seven B2B Drivers o Increasing competition and globalization o Growing interactivity o Financial opportunity o Efficiencies and cost savings o Enhanced market and customer reach o Real-time needs o Regulatory and taxation issues 44. Traditional versus E-Business Models? C B C B C: Individual Consumer B: Business 45. Seven Unique Feature of E-Commerce Technology 46. Seven Unique Feature of E-Commerce Technology o Ubiquity Alters industry structure by creating new marketing channels and expanding size of overall market Creates new efficiencies in industry operations and lowers cost of firms sales operations Enables new differentiation strategies o Global Reach Changes industry structure by lowering barriers to entry, but greatly expands market at the same time Lowers cost of industry and firm operations through production and sales efficiencies Enables competition on global scale 47. Seven Unique Features of E-Commerce Technology o Universal Standards Changes industry structure by lowering barriers to entry and intensifying competition within an industry Lowers costs of industry and firm operations by lowering computing and communications costs Enables broad-scope strategies o Richness Alters industry structure by reducing strength of powerful distribution channels Change industry and firm operations costs by lessening reliance on sales force Enhances post-sale support strategies 48. Seven Unique Features of E-Commerce Technology o Interactivity


customization

Alters industry structure by reducing threat of substitutes through enhanced

Reduces industry and firm costs by lessening reliance on sales force Enable differentiation strategies o Personalization/Customization Alters industry structure by reducing threats of substitutes, raising barriers to entry Reduces value chain costs in industry and firm by lessening reliance on sales forces 49. Seven Unique Features of E-Commerce Technology o Information Density Changes industry structure by weakening powerful sales channels, shifting bargaining power to consumer Reduces industry and firm operations costs by lowering costs of obtaining, processing, and distributing information about suppliers and consumers 50. Case Studies o Should we integrate Internet business with our traditional business or should we keep the two separate?

E-commerce, digital markets, and digital goods - Presentation Transcript

9 Chapter E-Commerce: Digital Markets, Digital Goods STUDENT LEARNING OBJECTIVES Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o What are the unique features of e-commerce, digital markets, and digital goods? o How has Internet technology changed business models? o What are the various types of e-commerce, and how has e-commerce changed consumer retailing and business-to-business transactions? 3. STUDENT LEARNING OBJECTIVES (continued) o What is the role of m-commerce in business, and what are the most important m-commerce applications? o What are the principal payment systems for electronic commerce? Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 4. 1. 2.

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Problem: Building a business model that serves the emerging market for social networking sites. Solutions: Set up a simple, easy to use photo storage site usable at any social networking site.

Photobucket: The New Face of E-commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 5.

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Photobucket pioneered the concept of linking media from one Web Site to multiple online sites. Demonstrates ITs role in generating new business models. Illustrates digital technologys importance in reducing the costs of storing photos and video

Photobucket: The New Face of E-commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 6. 7. Photobucket: The New Face of E-commerce Essentials of Business Information Systems Chapter 9 ECommerce: Digital Markets, Digital Goods Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods E-Commerce Today E-commerce: Use of the Internet and Web to transact business; digitally enabled transactions Began in 1995 and grew exponentially; still growing at an annual rate of 25 percent Companies that survived the dot-com bubble burst and now thrive

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E-commerce revolution is still in its early stages Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-1 Retail e-commerce revenues have grown exponentially since 1995 and have only recently slowed to a very rapid 25 percent annual increase, which is projected to remain the same until 2010. The Growth of E-Commerce Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Ubiquity Internet/Web technology available everywhere: work, home, etc., anytime. Effect: Marketplace removed from temporal, geographic locations to become marketspace Enhanced customer convenience and reduced shopping costs Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Global reach The technology reaches across national boundaries, around Earth Effect: Commerce enabled across cultural and national boundaries seamlessly and without modification Marketspace includes, potentially, billions of consumers and millions of businesses worldwide Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Universal standards One set of technology standards: Internet standards Effect: Disparate computer systems easily communicate with each other Lower market entry costscosts merchants must pay to bring goods to market Lower consumers search costseffort required to find suitable products Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Richness Supports video, audio, and text messages Effect: Possible to deliver rich messages with text, audio, and video simultaneously to large numbers of people Video, audio, and text marketing messages can be integrated into single marketing message and consumer experience Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Interactivity The technology works through interaction with the user Effect: Consumers engaged in dialog that dynamically adjusts experience to the individual Consumer becomes co-participant in process of delivering goods to market Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Information density

Large increases in information densitythe total amount and quality of information available to all market participants Effect: Greater price transparency Greater cost transparency Enables merchants to engage in price discrimination 15. Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Personalization/Customization Technology permits modification of messages, goods Effect P ersonalized messages can be sent to individuals as well as groups Products and services can be customized to individual preferences 16. Unique Features of E-commerce Technology Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Social technology The technology promotes user content generation and social networking Effect New Internet social and business models enable user content creation and distribution, and support social networks 17. Key Concepts in E-commerce: Digital Markets and Digital Goods In a Global Marketplace Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Digital markets reduce Information asymmetry Search costs Transaction costs Menu costs o Digital markets enable Price discrimination Dynamic pricing Disintermediation 18. Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-2 The typical distribution channel has several intermediary layers, each of which adds to the final cost of a product, such as a sweater. Removing layers lowers the final cost to the consumer. The Benefits of Disintermediation to the Consumer 19. Key Concepts in E-commerce: Digital Markets and Digital Goods In a Global Marketplace Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Digital goods Goods that can be delivered over a digital network E.g. Music tracks, video, software, newspapers, books Cost of producing first unit almost entire cost of product: marginal cost of producing 2 nd unit is about zero Costs of delivery over the Internet very low Marketing costs remain the same; pricing highly variable Industries with digital goods are undergoing revolutionary changes (publishers, record labels, etc.) 20. Internet Business Models Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Pure-play models : Based purely on Internet o Clicks-and-mortar models: Extensions of bricks-and-mortar businesses o Communication and Social Networking


capabilities

Some new business models take advantage of Internets rich communication

Social networking sites Social shopping Can provide ways for corporate clients to target customers through banner ads and

pop-up ads 21. Internet Business Models Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Digital content, entertainment, and services Ability to deliver digital goods and content has created new alternatives to traditional print and broadcast media Online games, radio channels, films and television, music downloads, and podcasts Portal: Supersite that provides comprehensive entry point for huge array of resources and services on the Internet Online syndicators: Aggregate content from multiple sources, package for distribution, and resell to third-party Web sites 22. Internet Business Models Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Virtual storefront: Sells physical products directly to consumers or to individual businesses o Information broker: Provides product, pricing, and availability information to individuals and businesses o Transaction broker: Saves users money and time by processing online sales transactions and generating a fee for each transaction 23. Internet Business Models Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Online marketplace: Provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those products o Content provider: Creates revenue by providing digital content, such as digital news, music, photos, or video, over the Web 24. Internet Business Models Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Social network: Provides an online meeting place where people with similar interests can communicate and find useful information o Portal: Provides initial point of entry to the Web along with specialized content and other services o Service provider: Provides Web 2.0 applications such as photo sharing, video sharing, and usergenerated content as services 25. Interactive Session: Organizations Can eBay Continue Growing? o Read the Interactive Session and then discuss the following questions: What is eBays business model and business strategy? How successful has it been? What are the problems that eBay is currently facing? How is eBay trying to solve these problems? Are these good solutions? Are there any other solutions that eBay should consider? What people, organization, and technology factors play a role in eBays response to its problems? Will eBay be successful in the long run? Why or why not?

Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 26. Interactive Session: People The Allure of MySpace Read the Focus on Organizations and then discuss the following questions: How do businesses benefit from MySpace? How do MySpace members benefit Does MySpace create an ethical dilemma? Why or why not? Do parents and schools objections to MySpace have any merit? Should a site such as MySpace be allowed to operate? Why or why not? Is there anything that MySpace management can do to make the site less controversial?

Electronic Commerce Payment Systems Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 27. Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Toyota set up a MySpace profile for the Yaris to attract the attention of young buyers and gather marketing data. 28. Types of Electronic Commerce Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Business-to-consumer (B2C) o Business-to-business (B2B) o Consumer-to-consumer (C2C) o Mobile commerce (m-commerce) 29. Achieving Customer Intimacy: Interactive Marketing, Personalization, and Self-Service o Interactive marketing and personalization Web sites are bountiful source of details about customer behavior, preferences, buying patterns used to tailor promotions, products, services, and pricing Clickstream tracking tools: Collect data on customer activities at Web sites Used to create personalized Web pages Collaborative filtering: Compares customer data to other customers to make product recommendations Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 30. Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-3 E-commerce Web sites have tools to track a shoppers every step through an online store. Close examination of customer behavior at a Web site selling womens clothing shows what the store might learn at each step and what actions it could take to increase sales. Web Site Visitor Tracking 31. Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-4 Firms can create unique personalized Web pages that display content or ads for products or services of special interest to individual users, improving the customer experience and creating additional value. Web Site Personalization 32. Achieving Customer Intimacy: Interactive Marketing, Personalization, and Self-Service o Blogs P ersonal web pages that contain series of chronological entries by author and links to related Web pages Has increasing influence in politics, news Corporate blogs: New channels for reaching customers, introducing new products and services o Customer self-service


product information

Web sites and e-mail to answer customer questions or to provide customers with Reduces need for human customer-support expert

Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 33. Electronic Commerce and the Internet Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Stonyfield Farms Baby Babble blog provides a channel for the company to talk to customers with young children directly and hear back from them. 34. Business-to-Business Electronic Commerce: New Efficiencies and Relationships o Electronic data interchange (EDI) C omputer-to-computer exchange of standard transactions such as invoices, purchase orders Major industries have EDI standards that define structure and information fields of electronic documents for that industry More companies increasingly moving away from private networks to Internet for linking to other firms E.g. Procurement: Businesses can now use Internet to locate most lowcost supplier, search online catalogs of supplier products, negotiate with suppliers, place orders, etc. Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 35. Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-5 Companies use EDI to automate transactions for B2B e-commerce and continuous inventory replenishment. Suppliers can automatically send data about shipments to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and payment data to suppliers. Electronic Data Interchange (EDI) 36. Business-to-Business Electronic Commerce: New Efficiencies and Relationships o Private industrial networks (private exchanges) L arge firm using extranet to link to its suppliers, distributors and other key business partners Owned by buyer Permits sharing of: Product design and development Marketing Production scheduling and inventory management Unstructured communication (graphics and e-mail) Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 37. Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-6 A private industrial network, also known as a private exchange, links a firm to its suppliers, distributors, and other key business partners for efficient supply chain management and other collaborative commerce activities. A Private Industrial Network 38. Business-to-Business Electronic Commerce: New Efficiencies and Relationships o Net marketplaces (e-hubs) Single market for many buyers and sellers Industry-owned or owned by independent intermediary Generate revenue from transaction fees, other services

Use prices established through negotiation, auction, RFQs, or fixed prices May focus on direct or indirect goods May be vertical or horizontal marketplaces

Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 39. Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-7 Net marketplaces are online marketplaces where multiple buyers can purchase from multiple sellers. A Net Marketplace 40. Business-to-Business Electronic Commerce: New Efficiencies and Relationships o Exchanges I ndependently owned third-party Net marketplaces Connect thousands of suppliers and buyers for spot purchasing Typically provide vertical markets for direct goods for single industry (food, electronics) Proliferated during early years of e-commerce; many have failed Competitive bidding drove prices down and did not offer long-term relationships with buyers or services to make lowering prices worthwhile Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 41. M-Commerce Services and Applications M-Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Although m-commerce represents small fraction of total e-commerce transactions, revenue has been steadily growing Location-based services Banking and financial services Wireless Advertising Games and entertainment 42. Electronic Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods Figure 9-8 M-commerce sales represent a small fraction of total e-commerce sales, but that percentage is steadily growing. (Totals for 20072008 are estimated.) Global M-commerce Revenue 20002009 43. o Cell phones and mobile handhelds Data limitations Display size o Wireless portals (mobile portals) F eature content and services optimized for mobile devices to steer users to information they are most likely to need Accessing Information from the Wireless Web M-Commerce Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods 44. Types of Electronic Payment Systems Electronic Commerce Payment Systems Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Digital wallet S tores credit card and owner identification information and enters the shoppers name, credit card number, and shipping information automatically when invoked to complete a purchase o Micropayment systems: Developed for purchases of less than $10

Accumulated balance digital payment systems A ccumulating debit balance that is paid periodically on credit card or

telephone bills 45. Types of Electronic Payment Systems Electronic Commerce Payment Systems Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Stored value payment systems E nable online payments based on value stored in online digital account May be merchant platforms or peer-to-peer (PayPal) o Digital checking E xtend functionality of existing checking accounts to be used for online payments o Electronic billing presentment and payment systems P aying monthly bills through electronic fund transfers or credit cards 46. Digital Payment Systems for M-Commerce Electronic Commerce Payment Systems Essentials of Business Information Systems Chapter 9 E-Commerce: Digital Markets, Digital Goods o Three types of mobile payment systems in use in Japan Stored value system charged by credit cards or bank accounts Mobile debit cards Mobile credit cards o In the U.S., the cell phone has not yet evolved into a mobile payment system