management & legal implications of ecommerce economic success factors

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Economic Success Factors

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Economic Success Factors Cost Curves Bundling Critical Mass of Buyers and Sellers Pricing Consumer Characteristics Brokers and Disintermediarisation

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Costs Curves

Quantity

Co

st

Quantity

Co

st

Physical Products Digital Products

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Bundling More opportunities with EC Pricing becomes critical Eg Telstra

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Critical Mass of Buyers and Sellers To overcome initial high costs Size of market depends on demographics National Competitive Advantage

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Pricing Auctions of unused capacity Price searching reverse auctions prices will be determined by buyers’

willingness to pay rather than production costs

convenience versus price

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Consumer Characteristics EC is more suited to analytical rather than

impulse buyers What about patient buyers?

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Disintermediarisation v’s Brokers Brokers

lower search costs Privacy greater information risk reduction matching supply & demand

Disintermediarisation reduces steps in value chain removes wholesalers and brokers

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Winners ISP’s Portals Software Companies Network Owners Mid-size Manufacturers Technology Suppliers

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Winners (Cont.) Security Providers Electronic Payment Gateways Dedicated Online Companies Conventional Retailers that use online

extensively eMarketplaces Niche manufacturers

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Losers Wholesalers Brokers Salespeople Non-differentiated manufacturers

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Virtual Communities Electronic Communities

Replace Geographical Communities Serves the analytical and patient buyer

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Virtual Communities (Cont.) Types

Communities of Transactions Facilitate Buying and Selling

Communities of Interests Specific Topic or Interest

Communities of Relations Organised Around Certain Life Experiences

Communities of Fantasy Imaginary Environments

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Virtual Communities (Cont.) Creating a Virtual Community Creates a

Market Understand a particular niche industry and its

information needs Build a site that provides that information Set up the site to mirror the steps that a user goes

through in the information gathering and decision making process

Build a community that relies on the site for decision support

Start selling products that fir the decision support process

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Globalisation

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Emergence of Globalisation Greater imports by Industrialised Countries Low labour costs in Third World Countries Improved Telecommunications Growth of Networks Free Trade Agreements Growth of Knowledge & Information economy

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Labour Force Composition USA 1990 - 1996

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Farming

White Collar

Service

Blue Collar

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Advantages of Globalisation Access to larger markets flexibility to employ workers and manufacture

products anywhere 24/7 trade across time zones

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Barriers to Globalisation Legal issues

Regulation Jurisdiction

Market access Telecommunications Infrastructure

Financial Issues Customs and Taxation Money Exchange Differing Currencies

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Barriers to Globalisation (cont.) Trust, Security & Authentication Language Cultural and Social differences Government Support or Interference

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Competitive Advantage

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Traditional Competitors

The firm

New Entrants

Substitute Products

Suppliers Customers

Porter’s 5 forces

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

EC and Porter’s 5 forces Customers

increase in bargaining power due to increase in sellers and products

Suppliers bargaining power decrease due to global competition

Traditional rivals Greater presence due to virtual store fronts

New entrants many new entrants global marketspace

Substitute products more substitute products

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Business Responses to Competition Product differentiation

focussed differentiation data mining

Tight linkages to customers and suppliers switching costs

Low cost producer lower internal costs lower price \ improved quality to customer

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Porter’s Value Chain Model Production consists of a series of activities that

add a margin of value to a firm’s products or services

The added value increases profits, enhances asset value and competitive position

Primary activities Directly related to production and distribution

Support activities Make delivery possible Include organisational structure, HR, technology and

procurement

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Porter’s Value Chain Model Increase profits by:

Increasing steps that involve primary activities Reducing steps that involve support activities Converting support activities to primary

activities

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Use of EC for Competitive Advantage Strategic Systems

FedEx American airlines

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Use of EC for Competitive Advantage Continuous Improvement

Productivity improvement Just-in-time TQM Improved decision making Managing information and knowledge Innovation and creativity Change management Customer service

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Use of EC for Competitive Advantage Business Process Reengineering

Reduced cycle time Employee empowerment (IT enables

decentralised decision making) Knowledge management Customer focussed approach (mass

production changed to mass customisation) Business alliances (General Motors, Ford

and Chrysler) Virtual corporations

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

The Future of EC Improve Transform Redefine

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

The Future of EC (cont.) Improve

New markets Customisation Ordering Delivery (digital products) New sales channels (Disintermediarisation) Demand driven supply Reduced cycle time Customer service (dialogue and feedback) Brand image

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

The Future of EC (Cont.) Transform

The Horizontal Organisation Strategic Agility (Quick Reactions to

Technological Change) Mobile Workforces Cross Functional Systems

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Strategic Systems

Management Systems

Knowledge Systems

Operational Systems

Sales & Marketing

Production Accounting Human resources

Functional Business applications

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

The Future of EC (Cont.) Redefine

New Products Services versus goods The revolution of open source New Business Models (?)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

The Future of EC (Cont.) Redefine (cont.)

Virtual Organisations Integration of the supply chain Human Resource Management Human Capital Online learning Integration

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE

Business strategy and EC Lead Wait Experiment