4 The Digital Firm: Electronic Business and Electronic

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Transcript 4 The Digital Firm: Electronic Business and Electronic

Chapter 4

4.1

The Digital Firm: Electronic Business and Electronic Commerce

2006 by Prentice Hall

4.2

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce OBJECTIVES

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Analyze how Internet technology has changed value propositions and business models

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

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce OBJECTIVES (Continued)

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Compare the principal payment systems for electronic commerce

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Evaluate the role of Internet technology in facilitating management and coordination of internal and interorganizational business processes 4.3

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

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4.4

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce Corrugated Supplies Case

• Challenge:

lead times, many competitors

• Solution:

trillions of product configurations, short 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

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4.5

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Technology and the Digital Firm

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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.

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

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4.6

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

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

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Reduced transaction costs: Costs of searching for buyers declines ©

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4.7

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Defines an enterprise Describes how the enterprise delivers a product or service Shows how the enterprise creates wealth.

Example: Selling Books business models (Amazon.com) ©

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4.8

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

Example: Auto retailing sites.

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. ©

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Figure 4-1 ©

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4.10

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS, ELECTRONIC COMMERCE, AND THE EMERGING DIGITAL FIRM Internet Business Models

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Virtual storefront: Sells goods or services online (Amazon.com) Information broker: Provides information on products or services (Edmunds.com). Generate revenue from advertising, or from directing buyers to sellers Transaction broker: Provides online transaction facility (eTrade.com, Expedia.com)

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

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4.11

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Content provider: Creates revenue by providing content (WSJ.com, TheStreet.com). The customer may pay to access the content, or revenue may be generated by selling advertising space (Banner ad) .

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Online service provider: Provides online services, including search service. (Google.com, Xdrive.com). Generate revenue from subscription or transaction fee, from advertising, or from collecting marketing information from the users.

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Internet Business Models (Continued)

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

Social networking sites : are a type of online community which is considered as practice of expanding the number of one’s business by making connections through individuals. It links people and enable them to mine their friends ( and their friends’ friends) 4.12

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

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4.13

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Categories of Electronic Commerce

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

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

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

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4.14

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Business-To-Consumer Advantages of E-commerce:

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

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

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4.15

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Business-To-Consumer Advantages of E-Commerce: (Continued)

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

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

Example: real estate agents, may be replaced by new intermediaries specializing in helping Internet users efficiently obtain product and price information, locate on-line sources of goods and services, or manage or maximize the value of the information captured about them in electronic commerce transactions) ©

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE The Benefits of Disintermediation to the Consumer 4.16

Figure 4-2 ©

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4.17

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Interactive Marketing and Personalization Clickstream tracking tools:

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

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Web Site Visitor Tracking 4.18

Figure 4-3 ©

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4.19

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Web Personalization

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Create unique personalized Web pages for each customer

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

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Web Site Personalization 4.20

Figure 4-4 ©

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4.21

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Collaborative filtering:

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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 .

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Customer self-service:

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

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Replacing human call center operators and clerks

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UPS.com: Customer tracking of packages

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Orbitz.com: Customer self-help for organizing and managing a trip 4.22

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Dell.com: “My Order Status” facility ©

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4.23

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Business-to-Business Electronic Commerce: New Efficiencies and Relationships

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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.

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EDI is being replaced by more powerful Web based alternatives. ©

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Electronic Data Interchange (EDI) 4.24

Figure 4-5 ©

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Net Marketplaces Net Marketplaces : They are sometimes called e-hubs, provide a single digital marketplace based on Internet technology for many different buyers and sellers.

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Figure 4-7 ©

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Four different types of Net Marketplaces: 1.

Distributors: B2B online catalogs provide buyers with access to thousands of parts and other goods (Grainger.com) 2. Procurement platforms: Platforms for purchasing goods and materials and also sourcing, negotiating with suppliers, paying for goods, and making delivery arrangements (Ariba.com) 4.26

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4.27

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Net Marketplaces Four different types of Net Marketplaces: (Continued)

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3. 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).

Exchanges are on-line marketplaces where multiple buyers can purchase from multiple sellers using a bid –ask system. E-Steel is an example. Buyers log in and create inquiries, specifying details, terms, and suppliers for the steel they wish to purchase. ©

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4.28

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There are several categories of exchanges.

Vertical exchanges

, also known as industry exchanges, are set up to service specific industries, such as the automobile, forest products, or energy industries.

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Horizontal exchanges

focus on specific functions that can be found in many different industries, such as M aintenance, R epair, and O perating (MRO) supplies. MRO.com is an example. 4. Industry consortia: Industry-owned Net marketplaces used primarily for long-term sourcing of direct inputs to production (ChemConnect.com) ©

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4.29

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE

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Private Industrial Networks The largest Web-based form of B2B commerce.

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. management and collaborative activities.

A private industrial network typically consists of a large firm using an extranet to link to its suppliers and other key business partners Example: Wal-Mart uses its own private network to coordinate more than 15,000 suppliers to its stores .

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE A Private Industrial Network 4.30

Figure 4-6 ©

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC COMMERCE Electronic Commerce Payment Systems PAYMENT SYSTEM DESCRIPTION DIGITAL CREDIT CARD PAYMENT DIGITAL WALLET SECURE SERVICES FOR CREDIT CARD PAYMENTS ON INTERNET SOFTWARE STORES CREDIT CARD AND OTHER INFORMATION ACCUMULATED BALANCE PAYMENT SYSTEM ACCUMULATES MICROPAYMENT PURCHASES AS DEBIT BALANCE TO BE PAID PERIODICALLY STORED VALUE PAYMENT SYSTEMS ENABLES CONSUMERS TO MAKE INSTANT PAYMENTS BASED ON VALUE STORED IN DIGITAL ACCOUNT DIGITAL CASH DIGITAL CURRENCY USED FOR MICROPAYMENTS OR LARGER PURCHASES PEER-TO-PEER PAYMENT SYSTEMS SENDS MONEY VIA WEB TO PERSONS OR VENDORS NOT SET UP TO ACCEPT CREDIT CARD PAYMENTS DIGITAL CHECKING PROVIDES ELECTRONIC CHECK WITH SECURE DIGITAL SIGNATURE ELECTRONIC BILLING PRESENTMENT & SUPPORTS ELECTRONIC PAYMENT FOR ONLINE AND PHYSICAL STORE PURCHASES ©

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4.32

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM How Intranets Support Electronic Business

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Benefits

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Functional applications

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Good examples: CARE and Mitre Corporation ©

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4.33

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Benefits of Intranets

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Connectivity: Accessible from most computing platforms

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Can be tied to internal corporate systems and core transaction databases

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Platforms for interactive applications

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Scalable to larger or smaller computing platforms ©

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4.34

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Benefits of Intranets (Continued)

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Easy to use, universal standard Web interface

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Low start-up costs

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Richer, more responsive information environment than corporate manuals

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Reduced information distribution costs ©

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4.35

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Functional Applications of Intranets

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Finance and accounting

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Human resources

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Sales and marketing

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Manufacturing and production ©

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Functional Applications of Intranets 4.36

Figure 4-8 ©

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4.37

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Finance & Accounting

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General ledger reporting

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Project costing

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Annual reports

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Budgeting ©

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4.38

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Human Resources Company:

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Online publishing of corporate policy

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Job postings and internal job transfers

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4.39

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Human Resources (Continued) Employees:

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Healthcare

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Employee savings

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4.40

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Sales and Marketing

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Competitor analysis

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Price updates

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Promotional campaigns

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Sales presentations

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4.41

Manufacturing and Production

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In manufacturing, information-management issues are highly complex, involving:

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massive inventories

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capturing and integrating real-time production data flows The manufacturing function typically uses multiple types of data, including graphics as well as text, which are scattered in many disparate systems. Developing intranets that integrate manufacturing data under a uniform user interface is more complicated than in other functional areas.

Manufacturing Intranets coordinating the flow of information between controllers, inventory systems, and other components of a production system can make manufacturing information more accessible to different parts of the organization.

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4.42

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Manufacturing and Production (Continued)

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Quality measurements

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Maintenance schedules

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Design specifications

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Machine outputs

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4.43

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Business Process Integration The Internet and collaborative commerce:

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

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

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce ELECTRONIC BUSINESS AND THE DIGITAL FIRM Collaborative Commerce 4.44

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4.45

Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Opportunities: 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.

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS Management Challenges: 4.46

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Finding a successful Internet business model

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Dot-com stock prices collapsed after many of these companies failed to generate enough revenue to sustain their costly marketing campaigns, infrastructures, and staff salaries, losing money on every sale they made. Business models built around the Internet are new and largely unproven.

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Doing business over the Internet is not necessarily more efficient or cost effective than traditional business methods

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Businesses that are unclear about their online strategy and its relationship to their overall business strategy website that fail to deliver the desired results.

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4.47

Management Challenges (Continued)

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Organizational change challenges

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Channel conflicts

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Using the Web for online sales and marketing may create channel conflict with the firm's traditional channels, especially for less information-intensive products that require physical intermediaries to reach buyers. A company's sales force and distributors may fear that their revenues will drop as customers make purchases directly from the Web or that they will be displaced by this new channel.

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4.48

Management Challenges (Continued)

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Trust, Security, and Privacy

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Electronic commerce cannot flourish unless there is an atmosphere of trust among buyers, sellers and other partners involved in online transactions. Since online relationships are more impersonal than those in "brick and mortar" commerce, many consumers remain hesitant to make purchases over the Web from unfamiliar vendors. Consumers also worry about the security and confidentiality of the credit card and other personal data that they supplied over the Internet ©

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Management Information Systems Chapter 4 The Digital Firm: Electronic Business and Electronic Commerce MANGEMENT OPPORTUNITIES, CHALLENGES, AND SOLUTIONS 4.49

Solution Guidelines:

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Determining how Internet technology can provide value for the business.

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Managing business process changes :Before embarking e commerce or e-business,initiatives, mangers will need to identify carefully the organizational changes required to make them work.

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Safeguarding security and privacy : Firms engaging in e commerce and e-business need a new security culture and infrastructure that enable them to straddle this fine line ©

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4 The Digital Firm: Electronic Business and Electronic

Transcript 4 The Digital Firm: Electronic Business and Electronic

Chapter 4

The Digital Firm: Electronic Business and Electronic Commerce

• Challenge:

• Solution:

Directory