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Chapter 5

Electronic Commerce in Service Industries
www.prestonians.webnode.com 1 1

Opening Vignette: Ordering Journals Electronically
How a large university automated the purchasing of magazines and journals, saving $365,000/year Direct E-Marketing: Buyer-to-seller; orders and payments Market 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 sellers Agents basically make the markets Agents provide many services Most of the value-added tasks of brokers can be automated

Major electronic agent-based services
Travel Employment Real estate Stocks Electronic auctions At-home banking Insurance


Broker-Based Services (cont.)
Service Industries vs. Manufacturing and Product Retailing
Service Industries
Pure EC: substantially reduced cost Bank and brokerage houses Possible 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 retailing
Physical delivery cost may be high

Travel and Tourism Services
Any experienced traveler knows that good planning and shopping around can save money The Internet is an ideal place to plan, explore, and arrange almost any trip Travel-related information available at many sites including:
Expedia.com Travelocity.com Asiatravel.com Travelweb.com Trip.com Priceline.com


prestonians.Travel and Tourism Services (cont. cars. hotels.com) Tips provided by people that experienced certain situations (like a visa problem) www. and even golf courses Fare comparisons 360 degree video tours of top destinations Electronic Travel magazine Converting 200 currencies Providing maps Pictures of major attractions Information about entertainment and ticket purchasing (ticketmaster.) Services provided: Information and booking of airlines.com .webnode.

) Services provided: Special discount information Chat rooms and bulletin boards Shopping for travel accessories and books Experts‟ options Frequent flier deals Restaurant reviews Current status of flights (real time) Driving directions in the US Travel news Fare tracker (free e-mail alerts on low fares) Major international news Worldwide business and places locator Special interest vacations Bed and breakfast recommendations E-mail to intermediary Weather watch www.Travel and Tourism Services (cont.com .prestonians.webnode.

com) asks consumers to specify the price they are willing to pay www. bids.prestonians.com .Travel and Tourism Services (cont.com) auctions tickets during low-volume seasons Cathay (cathaypacific.ie) auctions tickets that expire in 1 or 2 weeks Priceline (priceline.) Auctions.webnode. and special sales American airlines (aa.com) auctions tickets on competitive routes Aer Lingus (aerlingus.

prestonians.webnode.Travel and Tourism Services (cont.) Special services Wireless services Direct marketing Alliances and consortia Other services Interactive kiosks in hotels Internet access in hotels Limitations Benefits Free information is tremendous Free information is accessible anytime Substantial discounts Not all people use the Internet It may take a long time to find what you want People are still reluctant to provide credit card numbers www.com .

com .) Corporate Travel: New Business Model The Impact of EC on the Travel Industry Porter‟s framework of competitive advantage (the five forces) Focus: Environment Competitive responses Firm‟s strategy The industry is clearly transformed Taking away some functions traditionally performed by travel agents www.Travel and Tourism Services (cont.webnode.prestonians.

push information to customers www.com .) Impacts on the industry Multimedia 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 at home Supporting a customer-focused strategy (such as targeted advertisement and integration of products).prestonians.Travel and Tourism Services (cont.webnode.

prestonians. will disappear Only their complex value-added activities will not be automated These complex activities will be performed by a new breed of intermediaries Survival strategy Minor improvements due to process changes BPR with significant improvements Organizational transformation www.Travel and Tourism Services (cont.webnode.com .) Travel agencies. as we know them today.

HICSS 31.prestonians.Figure 5-2 The Travel Industry Chain Source: Block and Segev “The Impact of Electronic Commerce on the Travel Industry” Proceedings.com .webnode. Hawaii © 1997 IEEE. www.

Travel and Tourism Services (cont.prestonians. modifies as per your wishes.) Intelligent agents Step 1: turn on PC and enter Desired destination Dates Available budget Special requirements Desired entertainment Voice communication with agent www. negotiates with vendors Step 4: agent returns within minutes with suitable alternatives.webnode.com Step 2: computer dispatches an intelliget agen that ―shops around‖ Step 3: agent attempts to match your requirements with what is available. books the vacation .

webnode. hundreds of thousands of jobs www.The Employment Placement: Deficiencies of Manual Market Job markets Employers are looking for employees with specific skills.prestonians. and individuals are looking for jobs Very volatile market Moved to the Internet Millions of job seekers.com .

nationwide and international ads are more expensive Minimum information—because of the high cost.) Driving forces of electronic job market Cost—classified ads are expensive Life cycle—the life of the ads is only days or weeks Place—most ads are local.The Employment Placement: Deficiencies of Manual Market (cont. the information provided is minimal Search—Time consuming for individuals to find all relevant newspapers www.prestonians.com .webnode.

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.The Employment Placement: Deficiencies of Manual Market (cont. or arrive late Speed—communication by mail and processing of a large number of applications is slow. the applicant had taken another job being afraid to wait too long Comparisons—difficult for job seekers to compare monetary value of available positions www.com .) Finding applicants—during pre-Internet era. supply and demand Lost and dated material—some applications or letters of response tended to get lost.) Driving forces of electronic job market (cont.webnode.prestonians. employers lose good employees.

The Employment Placement: Deficiencies of Manual Market (cont.prestonians.com .webnode.) The Internet Job Market The Internet offers a perfect environment. it is especially effective for technology-oriented jobs Job seekers Job offerers Recruiting firms Government agencies and institutions www.

) The Advantage of the Electronic Job Market For job seekers Find very detailed and timely information on a large number of jobs world-wide Quickly communicate with potential employers Post resumes for largevolume distribution Search for jobs quickly from any place at any time Obtain several support services at no cost Find employer profile & industry guides (valuereports.com .The Employment Placement: Deficiencies of Manual Market (cont.Com) www.prestonians.webnode.

online Change and update ads quickly Fill up positions rapidly Interviewing from distance www.) The Advantage of the Electronic Job Market For employers Advertise to a large number of job seekers Save on advertisement costs Lower the cost of processing (using electronic application forms) Provide greater („equal opportunity‟) for job seekers Find highly skilled employees Conduct tests quickly.webnode.prestonians.com .The Employment Placement: Deficiencies of Manual Market (cont.

The Employment Placement: Deficiencies of Manual Market (cont.com) www.) The Limitations of Electronic Job Markets Many people do not use the Internet Security Privacy Lack of face-to-face contact Locating jobs Writing and posting resumes Career planning Newsgroups Recruiters online network StaffNET Global employment network Employment opportunities Intranet job market Examples of online job services Examples of career services on the Internet Intelligent agents Intelligent agents for job seekers (jobsleuth.webnode.com) Intelligent agents for employers (resumix.com .prestonians.

Real Estate You can view many properties on the screen You can sort and organize properties You can find detailed information about the properties You can search.prestonians.webnode. compare and apply for loans www.com .

com Homeside.com Quotesmith.) The National Association of Realtors.com. health at substantial discount www.com Eloan. consult: replace.webnode.Real Estate (cont.com .au Insureate.com Insurance—auto.com has links to property listings in all major US cities To find how much house you can afford.prestonians.com Mortgage brokers can pass on loan applications over the Net and receive bids from lenders that want to issue the mortgages To find mortgage interest rates online use: Lendingtree.) Real Estate Applications (cont. realtor.com Order. home life.

Investing and Trading Stocks Online Online stock trading Costs between $7 and $29 per transaction (vs. $10 .webnode.prestonians. less chance for errors Place orders from anywhere.$35 in traditional brokerage) No waiting on busy telephone lines No oral communication. any time. day or night No biased broker to push you Considerable amount of free information www.com .

com Related markets Financial derivatives Commodities Mutual funds Global stock exchanges— around-the-clock global trading Individual investors and day trading Electronic trading of interest rate derivatives Swapswire.com www.prestonians.Trading Stocks Online (cont.com Forbes.) Initial public offerings (IPOs) Spring Street Brewing Offers initial and secondary securities trading over the Internet See ipo.com .webnode.

prestonians.com .Cyberbanking and Personal Finance Electronic banking Saves time and money for users Offers an inexpensive alternative to branch banking Capabilities of home banking Get current account balances any time Obtain charge and credit card statements Pay bills Download account transactions Transfer money between accounts Application Case: Cyberbanking at Wells Fargo www.webnode.

S.com .Cyberbanking and Personal Finance International and multiple-currency banking Some international retail purchasing can be done by credit card Other transactions may require international banking support Hong Kong Bank‟s HEXAGON provides e-banking in Asia Mark Twain Bank in the U. uses e-cash to support trading in 20 foreign currencies Bank of America and other banks offer: International capital raising Cash management Other services on an international level www.webnode.prestonians.

com .webnode.) Implementation issues in banking and online stock trading Securing financial transactions Application case: Bank of America Online Using the extranet Banks provide large business customers with personalized service by allowing them access to the bank‟s intranet Access accounts Historical transactions Intranet-based decision-support applications www.prestonians.Cyberbanking and Personal Finance (cont.

prestonians.webnode.Cyberbanking and Personal Finance (cont.com . off-line services Some banks offer free services (fee per check or transfer) Some banks charge $5 to $10 Risks—especially in international banking www.) Imaging systems—allow customers to view images of all: Incoming checks Invoices Other related online correspondence Pricing online vs.

) Banking: 4 scenarios Building alliances quickly with banks. software vendors.com .webnode.Cyberbanking and Personal Finance (cont.prestonians. and information providers Effective outsourcing without neglecting to build in-house skills (customer information systems) Focusing on the profitable customers to provide broad channels for services and products Keeping a central role in the payment environment www.

Customers Agents—banks unable to achieve economies of scale Offer customers the widest possible choices Include products from multiple sources Provide the customers with integrated information services 2.webnode. Product Manufacturers – banks able to achieve economies of scale Strengthen a trend that can already be seen in a number of product segments In core processing services for small and medium-sized institutions www.prestonians.com .The Future of Online Banking Three core strategies to pursue 1.

webnode.com . Integrated Players—banks with a strong brand and position from manufacturing to delivery Many banks will adopt a hybrid strategy Every player needs to make crucial decisions about which areas are strategically too risky: To outsource Which capabilities need to be built up in-house www.prestonians.) Three core strategies to pursue (cont.The Future of Online Banking (cont.) 3.

prestonians.webnode.com .) Personal finance online Bill paying and e-checks Tracking bank accounts etc. planning and budgeting www.The Future of Online Banking (cont. Portfolio management Investment tracking Quotes and prices (past and current) Budget organization Record keeping Tax computations Retirement goals.

webnode.prestonians. including tax escrow payments Automatic transfer of funds to pay monthly utility bills Since1997.Billing Online Automatic transfer of mortgages This method has existed for several years The payer authorizes its bank to pay the mortgage.com . the city of Long Beach has allowed its customers to pay their gas and water bills from their bank accounts Many utility companies worldwide provide this option www.

) Paying bills from online banking account Can be made into any bank account Monthly rent and other bills paid directly into the payee’s bank accounts www.webnode.com .prestonians.Billing Online (cont.

Billing Online (cont.) A merchant-to-customer direct billing A merchant posts bills on its Web site Customers can view and pay their bill Customers have to go to many Web sites to pay all their bills Several utilities in Los Angeles allow customers to pay bills on the utilities’ Web site (20 cents per transaction ) www.prestonians.webnode.com .

Billing Online (cont.com www.) Using an intermediary A third party consolidates all bills related to each customer in one site in a standard format Collects a certain commission Makes it convenient to complete transactions E*Trade and Intuit ISPs services Trying to sell customized solutions Do not have adequate billing platforms See moneymain.prestonians.webnode.com .

magazines.webnode.Online Publishing The electronic delivery of newspapers.com .prestonians. or will pay for www. and other information through the Internet Online Publishing Today and Tomorrow Today— mainly used for disseminating information and for conducting sales transactions interactively Tomorrow— include more customized material that the reader will receive free. news.

Online Publishing (cont.) Publishing Modes Newspapers Magazines News Textbooks Music Artwork Video clips Movies www.com .prestonians.webnode.

com .Online Publishing (cont.webnode.) Publishing Methods Online archive: digital archive (library catalogs. bibliographic databases) New medium: extra comprehensiveness to issue or topic Publishing intermediation: online directory for news services Dynamic or just-in-time: create content in real-time and transmit on the fly www.prestonians.

webnode.com .Online Publishing (cont. videos. and games Major issue is payment of intellectual property fees People-to-people (P2P) model—people swap files 3rd-party organizer may be in violation of copyright laws (Napster) www.prestonians.) Publishing music.

prestonians. E-parcel. Postal Service. UPS.) Digital delivery of documents—secure environment U.Online Publishing (cont.com Encryption Software for digital signature Authentication Notarization www.S.com .webnode.

) Edutainment—combination of: Education Entertainment Games Goal: encourage students to become active learners Managerial issues Educational games delivered as CD-ROMs Distance-learning format www.webnode.com .Online Publishing (cont.prestonians.

prestonians.com Netlibrary.com Ebookconnections.com .Online Publishing (cont.) Electronic books Frequent updates possible Contain up-to-the-minute information Special eBook device necessary to view books See: Wizap.webnode.com www.

webnode.com .. now on the Web Students decide what and when they “attend” the lecture Lecture. but use innovative teaching methods and multimedia support MBA program in Hong Kong Lectures delivered on interactive TV (iTV). support material exercises. provided on the Web www.prestonians.Knowledge Dissemination Virtual teaching and online universities Distance learning and virtual universities Many universities offer limited courses and degrees. etc.

prestonians.com .webnode.Knowledge Dissemination (cont.) Online advice and consulting Medical advice—provide consultation with top experts Management consulting—provide accumulated expertise from knowledge bases Legal advice—delivery of legal consultation services to business has considerable prospects www.

) Online advice and consulting (cont.webnode.prestonians.Knowledge Dissemination (cont.com .) Financial advice— offer extensive financial advice Other service online Healthcare Matchmaking Electronic stamps www.

Disintermediation and Reintermediation Change the role of agents to: Assists in comparison shopping from multiple sources Providing total solutions by combining services from several vendors Providing certifications and trusted third party control and evaluation systems www.prestonians.webnode.com .

the less human agents will be needed Customer attitudes and behavior are important Good experience with online agencies means fewer customers use human agents Insurance purchasing Stock purchasing Virtual travel agencies www.Disintermediation and Reintermediation (cont.prestonians.com .) Issues impacting future of intermediaries The success of intelligent agents Travel intelligent agents Agents that support job matching Agents that interpret resumes The more intelligent the software agents become.webnode.

.) New roles of electronic marketing intermediaries To extend what we are familiar with in physical markets to the virtual world (e.. search services and electronic malls) To extend payment clearing functions into the Internet (e.Disintermediation and Reintermediation (cont.prestonians.webnode.com .g. electronic cash and digital credit card services) www.g.

may profit greatly from EC www.prestonians.webnode.com .Disintermediation and Reintermediation (cont.com) Affects most market functions Hypermediation—human/electronic intermediation.) Disintermediation in B2B Exchanges decrease number of calls a sales rep pays on purchasing managers Reengineering marketing and sales organizations is necessary Cybermediation Electronic intermediary (rowe.

webnode.Managerial Issues Effectiveness of out-of-town recruitment Privacy may be in danger International legal issues may impact services more than products Ethical issues are prevalent in services The intermediaries and their roles are changing Alliances for online initiatives are spreading rapidly www.prestonians.com .