Transcript Document 7226207

Electronic Commerce
By
Khalil Matta
Executive Certificate Program
Oct 31, 2001
Understanding eBusiness
The conduct of any business interaction or
transaction on an electronic network between the
firm and its customers, trading partners, external
constituents, and employees.
What
More than transactions
Who
More than customers
Why
More than efficiency
Internet Impact
• Ability to enlarge the world - namely
customer and supply chain
• Ability to shrink the world – make local
talent available anywhere
• Ability to enlarge time by making service,
products and information available 24/7
• Ability to shrink time by making
information available instantaneously
Other Internet Properties
• Distribution Channel
• Transaction Cost Reducer
• Creative Destroyer
Business Models
&
Web Strategies
Business Models
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Brokerage
Advertising
Infomediary
Merchant
Manufacturer
Subscription
Brokerage
Market Makers
• Buy/Sell fulfillment: eTrade and CarsDirect
• Charge buyer or seller a transaction fee
• Auction: ebay, AuctionNet
• fee scaled with the value of transaction
• Reverse Auction: priceline, MyGeek.com
• fee based on the spread between bid and ask price
• Search Agents: MySimon, RoboShopper,
CareerCentral
• referral charge
Advertising Model
• Portals: Yahoo, Excite, AOL
• Success depends on volume (eg. # of eyeballs!!)
• Attention/Incentive Marketing: CyberGold, NetCentives
• pay customers for viewing content or filling forms
• Free Model: FreeMerchant, BlueMountain
• offer customers something for free to increase volumes
• Bargain Discounter: Buy.com
• Sell at or below cost to attract shoppers
Infomediaries
• Consumer Info: eMachines, NetZero
• Sell customer info to merchants (offer consumers freebees)
• Merchant Info: Gomez
• Sell website info to customers
• Recommender System: Deja.com, ePinions
• Monitor user habits and give feedback to merchants
• Registration Model: NYTimes.com
• track user navigation and habits for targeted advertising
Merchant Model
• Virtual Merchant: Amazon, OnSale
• sell list price or auction. Make money on margins
• Catalog Merchant: Chef’s Catalog
• mail order to Web order
• Surf and Turf: Gap, B&N, Borders, Wal*Mart
• Channel conflicts or opportunities??
Manufacturer
• Dell, Cisco
• Compress the distribution channel by eliminating the middle
man
• enhance customer service
• faster response time
• more efficient supply chain
• better customer knowledge
• GE
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E-procurement
Creative Business Destruction
B to E
Partner Support
• Ford
• Product Development
• Auto Hub
Subscription Model
• Wall Street Journal, Consumer Reports, The
Street.com, Forrester Research
• Consumers pay to access the site
• AOL
The Web as a Mediating
Technology
Interconnecting:
• Business-to-Business
• Business-to-Consumer
• Consumer-to-Consumer
• Consumer-to-Business
• Company-to-Employee
Two Different Approaches
• Business-to-Customer
– Aggressive industry player. Primarily retail.
– Gain market and mind share using Internet and Portals
– Primarily Focused on seller-side of supply chain.
– Large scale, mass-market appeal.
– Brand recognition.
– High availability.
• Business-to-Business
– Aggressive industry player. Gain market and mind share.
– Using the Internet and Extranets to capture business community.
– Many business models.
– Security intensive.
– Typically targeted at an industry segment.
Best in Class Do Both!!
On-line Retailing
• Advantages to leverage
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Offer the best products and services
Ability to offer a larger selection
Reduced search costs
Convenience of 24x7
Personalized shopping experience
Availability of product information
Targeted selling & promotions
Buyer rewards/loyalty program
Interaction with others who share common interests
Sales tax savings
• Challenges to address
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Inability to ‘try before you buy’
Delivery delays
Shipping charges
Customer Service Challenges
Requires computer and Web access
Products on Line
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Purchase decision is information- intensive
Product demonstration and atmospherics are unimportant
Selection is vast and stores carry limited selection
Prices and selection change frequently
Retail buying experience is unpleasant
Logistically efficient (volume and value)
Non- perishable
Delayed gratification acceptable
Gift- oriented
Quantifying vulnerability:
Four dimensions of “E- suitability”
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Information- intensity : How much information does the
consumer need to gather in the entire buying process?
Multisensory appeal : To what extent does the product
evaluation require consumers to engage the senses of
smell, taste, and touch?
Atmospherics : How important is the role of the
physical store environment and the interaction with the
salesperson in the purchase process?
Logistical efficiency : How efficiently can the product
be packed and shipped to individual consumers?
Richness of physical interactions
in buying Process
Channel outcomes of E-commerce
High
Brand Augmentation
Channel Augmentation
• Grocery products
• Consumer electronics
• Garden products
• Appliances/white goods
• Footwear
• Automobiles
• Apparel
• Home furnishings
Channel Proliferation
Low
Channel Disintermediation
• Books
• Travel
• Music and videos
• Computer hardware/software
• Videos
• Personal investing
• Office Supplies
• Prescription drugs
Low
High
Intensity of information in buying process
Applying the “E-radar”
Sensory
fit
Books
Apparel
Atmospherics
fit
Logistical
fit
Informational
fit
The promise of online
shopping…
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Convenience
Choice
Control
Customization
Context
Community
The Challenges of B2C
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Getting customers to visit your site
Enticing site visitors to buy things
Building customer loyalty
Fulfillment
Generating Profits
Whatever happened to:
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Amazon?
Priceline?
E-bay?
Yahoo?
AOL?
The promise of B to B ecommerce
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Managing inventory more efficiently
Adjusting more quickly to customer demand
Getting products to market faster
Cutting the cost of paperwork
Reigning in rogue purchases
Obtaining lower prices on some supplies
Example – IBM as an eBusiness
e-commerce
$15b sold over the web in 1999, run rate of $40/day.
e-procurement
$13 billion procured over Web, saving $750m in costs.
e-supply chain management
Supply/demand planning time – 45 days to 20 days, order cycle time
27-44 days to 2-23 days, rapid response (QuickShip and Custom
QuickShip) revenues from 0 to $1.3b.
e-customer relationship management
52, inquiries handled on Web, saving $750m in support
e-partner relationship management
PartnerCommerce allows 45,000 partners to order, track status, and
get financing and credit online through IBM
Example – IBM as an eBusiness
e-external relationship management
Tailored web sites for press, IT consultants, financial analysts and
shareholders. Investor page – 300,000 page views/month.
e-learning
Online management development programs, learning simulators and
training tools. Savings of $200 million in 1999.
e-product development
Centralized part descriptions for vendors. Collaborative design tools
for software developers. Savings of $175m in 1999.
e-employee relations
IBM intranet gets 11m hits per day, 87% of IBM employees use the
intranet every day. Employee directory, customized news delivery,
performance scorecard for IMB vis-à-vis competitors.
Example: e-Business at Ford Motor Company
New Product Development
Supply Chain
Management
• Auto-exchange web
site with Oracle/Cisco
for online purchasing
from 30,000 suppliers.
Save $8.9b in
purchasing. Generate
$3b in exchange fees.
Employees
Offer 350,000
employees computers
and web access for $5
per month. Move
B2E transactions to
the Net.
Procurement
• OwnerCommection web
site for online help, warranty
service management,
financing status. Cut
customer interaction costs.
• Build cars with”digital
dashboards” – Net access,
location-based GPS services.
Generate ISP, commerce and
subscription fees.
Marketing
• Team up with portal sites
to sense buying preferences.
• Move Ford Credit to
web-based model. Save 15%
in costs.
Sales
Customer Service
• BuyerConnection and MSN
CarPoint for web-based lead
generation and “pull” model of
ordering cars. Save $650/car in
selling costs.
B2B efforts require:
• Negotiation
haggling over prices, delivery and product specifications.
Not so with most consumer sales.
• Integration
Retailers don't have to integrate with their consumer
customers‘ systems. Most companies selling to
businesses do integrate because their systems have to
be able to communicate with those of their customers
without human intervention.
The ladder of E-business evolution
Challengers
Transformation
Integration
Incumbents
Exploration
Presence
• Process redesign
• Extended enterprise
• Strategic (VP, E-Biz)
• Process automation
• Department level
• Tactical/in-house
• Basic web site
• Information-only
• Tactical/outsourced
• New businesses
• Industry-level impact
• CEO as leader
Business to Business
E-commerce (B2B)
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Procurement
Supply Chain Management
Customer Relations Management
Product Development
Employee Relationship
PR
Information infrastructure for e-Business
ERP Backbone
Customer-facing Applications
(CRM)
Customers and
Influencers
Resellers and Partners
Supplier-facing Applications
(SCM and ORM)
Partner-facing
Applications (PRM)
Employee-facing
Applications (ERM)
Employees
Suppliers (direct and
Indirect materials)
E-procurement
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Increase # of suppliers
Aggregate buying activity
Standardize buying process
Reduce transaction costs
Increase competition
E-procurement mechanisms
• Auctions – Force suppliers to bid for your
business
• Reverse Auctions – name your price and see if
anyone is willing to take your business for that
price
• Catalogues – Have agents search the web for the
product you want
• Hubs – e-marketplaces
GE
Procurement
Supplier Exchange
Open Exchange
• Demand collaboration
• Inventory reduction
• Transaction efficiency
Customer Exchange
Private Exchange
• Hosted demand and
inventory planning
• Inventory pooling
• Procurement efficiency
• Excess inventory
reduction
S:GELOGO/File.ppt
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Evolution of B2B e-Commerce
Infrastructure/Standards
Closed (EDI)
Open (Web-based)
Nature of transactions
eMarkets
(many to many)
Many-tomany
(Mediated)
Hub
EDI
(1 to 1)
One-toone
(Direct)
Dell, Cisco
(1 to many)
Enter the eMartplace (eHub)
• Electronic hubs (eHubs) are third-party Internetbased intermediaries that specialize in specific
vertical markets or specific functional processes,
host electronic marketplaces, and enable many-tomany transactions among businesses.
• Sources of value creation:
• – Reduced transaction costs
• – Buyer and seller aggregation
• – Improved marketplace liquidity
• – Improved marketplace information
• – Redesigned workflow
Auto-Xchange
Supply Chain Management
• Provide a single view of customer
• Just-in-time buying
• Eliminate steps in the buying/selling process
– Increase response time
– Reduce delivery cost
• Increase flexibility
• Increase information flow
• Better management of cash flow
Dell
The Vision
Moving to one integrated Supply Chain for whole business...
• Demand Management
• Planning & Scheduling
• Logistics
Information
Material/product
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Supply Chain Management
Suppliers
Manufacturin
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Distribution
Transportatio
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Changes the DNA of the Business
Will drive huge impact . . . Real game changers . . .
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Integrated demands, consolidated planning and logistics
Higher service levels with lower working capital
Automated processes drive big productivity
The engine behind e-Business
Huge Opportunity to Reinvent The Business
Customer
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Customer Relations Management
• Improve Customer Satisfaction
– 24/7 availability
– Multi-service capability
• Web
• Telephone
• Personal
– Improve response time
– More accurate response
• Reduce cost
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Help groups
Bulletin boards
Most frequent questions
Eliminate steps in the process
Outsource
Harrah Entertainment – Walgreens
Spare Parts
Features:
• Price & Availability
• Order Information
• Saved Parts Lists
• Advanced Searching
• Order Status
Benefits:
• Most recent prices, availability and status information
• Monitor/track all orders, Personalized product information
• Enhanced accuracy, consistency, and 24 x 7 support
Product Development
• Remove geographic constraints
• Use Best-in-class capability
• Focus on core competencies – increase
outsourcing – reduce costs
• Better information flow
• Eliminate redundancies
• Reduce time to market
• Better after development service
Charles Schwab
B to E e-commerce
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HR - benefits management
Expense reporting
Communications tool
Knowledge Management
Health Canada
Technical
Publications
Features:
• Illustrated Parts Catalog
• Engine Service Manuals
• Online Service Bulletins
and eMail Notifications
• Fleet Highlites
Benefits:
• Search thousands of pages within seconds
• Immediate desktop access and custom searches
• Visual drill-down of diagrams in Illustrated Parts Catalog
Benefit: Engineers spend an hour each day searching
Competitive
Portal Overview
eStrategy
through books & CDs--the CWC does it in seconds
Future
Public Relations
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News Releases
Product Developments
How to
Financial Reporting
Advertising
Abbott Labs
The builders of e-architecture
• Enterprise Management
ERP applications (SAP, Peoplesoft)
• Procurement
ORM applications (Ariba, Commerce One)
• Supply Chain Management
SCM applications (i2 Technologies)
• Customer Relationship Management
CRM applications (Siebel, Silknet)
• Marketing
EMA applications (MarketFirst, Rubric, Annuncio)
• Sales
Sell-side e-commerce applications (Broadvision, OpenMarket)
• Enterprise Applications Integration
EAI applications (BEA Systems, TIBCO, Crossworlds, etc.)
Challenges facing Suppliers
• Determining core competency – willing to
outsource the rest
• Differentiation
• Low cost producer
• Creative Business destruction/creation
• Thinking Globally vs. Regionally
• How much info to share with customers and
suppliers
• Proactive vs. reactive web strategies
New E-Business Reality
Use e-commerce to focus on and fortify your
core competencies!!!
Design Issues of Virtual Sites
Checklist for an e-business case
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Outline the business problem that will be solved
Identify the business process that will be targeted
Profile the audiences who will be affected
Estimate the business impact (ROI/NPV) that is
expected
Create metrics for measuring this impact
Select technology, vendors, and implementation
partners
Organize the team and define roles
Develop milestones and prototyping/validation strategy
Address implementation hurdles and contingency plans
Architecture: Challenges
• What are the key challenges facing organizations
designing web sites today?
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Time to market
Creating a reliable, maintainable site
Creating scalable site that can easily grow with demand
Creating a dynamic site with data driven content
Integrating data from external systems
Security
Privacy
technology choice
What is Scalability?
• The ability to accommodate more and more
users simply by adding resources to the
system.
Scalability vs. Performance
• Many sites that perform well with a small
number of users do not perform well with a
large number of users
• Many sites that perform adequately with a
small number of users continue to perform
adequately with a large number of users
Scaling Your Web Application
• Scaling Up vs. Scaling Out
– Scale up by moving to bigger hardware or
upgrading existing hardware
– Scale out by adding more hardware to existing
solution
Scaling Up
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Fewer machines to manage
Program one system
Simpler programming model
Only option in some cases
• Cons
– Expensive hardware
– Single point of failure
– Downtime for upgrades
Scaling Out
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More cost effective
No single point of failure
Virtually unlimited growth potential
Easier to add capacity
• Cons
– More complicated programming model
– More machines to manage
Other Design Challenges
• Accurate load simulation
– Volume of hits per second
– Distribution of hits over different site features
• The “Early Adopter” problem
– Some of the technology is immature, but there are
few alternatives
– Need to ignore marketing hype and do proof of
concept to find out what actually works
Privacy
• Have a Privacy policy in place for both your
customers and your employees
• Display policy on website
• Explicitly seek customer input and approval when
using their data
• When in doubt do not share data outside your
organization
• Guaranteed e-delivery
• Rights Management
• Records Management
Security
• Monitor activity and develop audit trails
• Develop backup and Recovery Plans
• Establish a password policy to prevent
unauthorized access to data
• Use latest Encryption key technology to
combat telecommunication fraud
• Use Firewalls to protect internal data from
external hackers
Remember that no site is 100% secure
Other issues to ponder
• Outsource Development
• Use ASPs
Economics of E-commerce
How do we put a value on this stuff?
The New E-conomy - Value Shifts*
Old Economy
Assets
Products
Vertical Integration
Money
Revenue (Size)
Profit / Loss
Fortune 500
New Economy
Information
Services
Virtual Integration
Time
Growth Rate
Market Cap
The Next Big Thing
* Geoffrey Moore, Living on the Fault Line, 2000
New E-conomy Critical Resources
Scarce
Resources
Plentiful
Resources
1. Time
1. Capital
2. Talent
2. Technology
3. Management
attention
3. Outsourced
Service Providers
Developments that will impact
E-commerce
• Technology
– Broadband
– Wireless Technology
– Voice Recognition
• Taxation
• Legislation
• Cultural
Interesting Articles
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The New Growth Engine of the Economy
Leveraging the Web
Impact on traditional Business
Managing the Distribution Channels
Marketing on the Internet
Globalization issues
Taxing the Internet
Privacy Policies
Questions??