4.1 © 2006 by prentice hall 10 chapter the digital firm: electronic business and electronic...

4.1 © 2006 by Prentice Hall

10Chapter

The Digital Firm: The Digital Firm: Electronic Business Electronic Business

and Electronic and Electronic CommerceCommerce

The Digital Firm: The Digital Firm: Electronic Business Electronic Business

and Electronic and Electronic CommerceCommerce


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

Management Information SystemsManagement Information SystemsChapter 10 Chapter 10

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


• Compare the principal payment systems for electronic commerce

• Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes

• Assess the challenges posed by electronic business and electronic commerce and management solutions

OBJECTIVES (Continued)




• Challenge: trillions of product configurations, short lead times, many competitors

• Solution: Web extranet for order entry, customization, inventory, change orders, and shipping

• Demonstrates how IT and the Web coordinate the flow of information about orders, production, inventory and shipment

• Illustrates how systems in the digital firm connect demand, supply, and fulfillment to achieve operational excellence



Corrugated Supplies Case


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



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




• 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

Figure 4-1




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

• Information broker: Provides information on products or services (Edmunds.com)

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

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

Internet Business Models




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

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

• 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)



Internet Business Models (Continued)


Categories of Electronic Commerce

• Business-to-customer (B2C): Retailing of products and services directly to individual customers (Wal-Mart.com)

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

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




Business-To-Consumer

Advantages of E-commerce:

• 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

• Reintermediation: The shifting of the intermediary role in a value chain to a new source, adding additional value to the consumer



Business-To-Consumer

Advantages of E-Commerce: (Continued)


The Benefits of Disintermediation to the Consumer

Figure 4-2




Clickstream tracking tools:

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

Interactive Marketing and Personalization




Web Site Visitor Tracking

Figure 4-3




• Create unique personalized Web pages for each customer

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

Web Personalization




Web Site Personalization

Figure 4-4




• 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.

Collaborative filtering:




• 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.

• EDI is being replaced by more powerful Web-based alternatives.

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




• Distributors: B2B online catalogs provide buyers with access to thousands of parts and other goods (Grainger.com)

• Procurement platforms: Platforms for purchasing goods and materials and also sourcing, negotiating with suppliers, paying for goods, and making delivery arrangements (Ariba.com)

Four different types of Net Marketplaces:

Net Marketplaces




• Independent exchanges: Third-party Net marketplace

that is primarily transaction-oriented and that connects

many buyers and suppliers for spot purchasing

(Freemarkets.com, GEPolymerland.com)

• Industry consortia: Industry-owned Net marketplaces

used primarily for long-term sourcing of direct inputs

to production (ChemConnect.com)



Net Marketplaces

Four different types of Net Marketplaces: (Continued)


Electronic Data Interchange (EDI)

Figure 4-5




Private Industrial Networks

• 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.




A Private Industrial Network

Figure 4-6




A Net Marketplace

Figure 4-7




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.




• Benefits

• Functional applications

• Good examples: CARE and Mitre Corporation

How Intranets Support Electronic Business




• Connectivity: Accessible from most computing platforms

• Can be tied to internal corporate systems and core transaction databases

• Platforms for interactive applications

• Scalable to larger or smaller computing platforms

Benefits of Intranets




• Easy to use, universal standard Web interface

• Low start-up costs

• Richer, more responsive information environment than corporate manuals

• Reduced information distribution costs



Benefits of Intranets (Continued)


• Finance and accounting

• Human resources

• Sales and marketing

• Manufacturing and production

Functional Applications of Intranets




Functional Applications of Intranets

Figure 4-8




• General ledger reporting

• Project costing

• Annual reports

• Budgeting

Finance & Accounting




Company:

• Online publishing of corporate policy

• Job postings and internal job transfers

• Company telephone directories, training

Human Resources




• Healthcare

• Employee savings

• Competency tests



Employees:

Human Resources (Continued)


• Competitor analysis

• Price updates

• Promotional campaigns

• Sales presentations

• Sales contracts



Sales and Marketing


• Quality measurements

• Maintenance schedules

• Design specifications

• Machine outputs

• Order tracking



Manufacturing and Production


The Internet and collaborative commerce:

• Collaborative commerce: When firms use the Internet to cooperate closely in the development, production, and distribution of products and services

• GE Plastics maintains an Intranet where its customers (selected fabricators) can find information on product design and new developments.

Business Process Integration




Collaborative Commerce

Figure 4-9




The Internet provides firms with extraordinary

opportunities to develop new products and

services, new distribution channels, new avenues

for marketing and sales, and even entirely new

business models.



Management Opportunities:


• Finding a successful Internet business model

• Organizational change challenges

• Trust, Security, and Privacy



Management Challenges:


• Determining how Internet technology can provide value for the business

• Managing business process changes

• Safeguarding security and privacy

Solution Guidelines:



4.1 © 2006 by prentice hall 10 chapter the digital firm: electronic business and electronic...

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