Chapter 10
E-Commerce: Digital
Markets, Digital Goods
10.1
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
LEARNING OBJECTIVES
• Describe the unique features of e-commerce, digital
markets, and digital goods.
• Analyze how Internet technology has changed value
propositions and business models.
• Describe the various types of e-commerce and how
e-commerce has changed consumer retailing and
business-to-business transactions.
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
LEARNING OBJECTIVES (cont’d)
• Evaluate the role of m-commerce in business and
describe the most important m-commerce
applications.
• Compare the principal payment systems for electronic
commerce.
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Major League Baseball Hits a Home Run with Information Systems
• Problem: Declining revenue from traditional sales
channels, declining customer base, increasing costs.
• Solutions: MLB Web sites and cell phone ticketing enable
electronic ticketing and delivery of online information
and games, which increase sales.
• SAS customer analysis software and Web site tracking
tools help identify good sales prospects.
• Demonstrates IT’s role in reducing cost, opening new
sales channels, and building community with customers.
• Illustrates the emerging digital firm landscape where
businesses can use tools to analyze critical data and
leverage expertise in emerging technologies to offer
services to other businesses.
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
• E-commerce: the use of the Internet and the web to
transact business.
Unique Features of E-commerce:
• Ubiquity: Internet is available everywhere, anytime.
• Global reach: the technology reaches across national
boundaries.
• Universal standards: one set of technology standards.
• Richness: video, audio and text messages are possible.
• Interactivity: the technology works through interaction with
the user.
• Information density: the technology reduces information costs
and raises quality.
• Personalization/customization: the technology allows
personalized messages to be delivered to individuals as well as
groups.
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
Key concepts in E-commerce:
• 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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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
The Benefits of Disintermediation to the Consumer
10.7
Figure 10-2
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Internet Business Models
Business Model:
• Defines an enterprise
• Describes how the enterprise delivers a product
or service
• Shows how the enterprise creates wealth
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Internet Business Models
• Virtual storefront: Sells goods or services online
(Amazon.com)
• Online marketplace: Provides a trading platform
for individuals and firms (eBay.com)
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Internet Business Models (Continued)
• Content provider: Creates revenue by providing
content (WSJ.com, TheStreet.com)
• Online service provider: Provides online services
for individuals and businesses (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)
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Types 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 )
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Interactive Marketing and Personalization
Clickstream tracking tools:
• Collect data on customer activities at Web sites
and store them in a log
10.12
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
Web Site Visitor Tracking
10.13
Figure 10-3
© 2007 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
Web Personalization
• 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
10.14
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods ce
ELECTRONIC COMMERCE
Web Site Personalization
10.15
Figure 10-4
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
• Blogs: Personal Web page that contains a series of
chronological entries by its author, and links to related Web
pages.
• Business-to-business (B2B) electronic commerce:
New efficiencies and relationships
•
•
•
•
•
10.16
EDI
Procurement
Private industrial networks (private exchanges)
Net marketplaces
Exchanges
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Business-to-Business Electronic Commerce: New
Efficiencies and Relationships
• 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 Webbased alternatives.
10.17
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
Electronic Commerce
Electronic Data Interchange (EDI)
Companies use EDI to automate transactions for B2B e-commerce and continuous inventory replenishment. Suppliers can automatically
send data about shipments to purchasing firms. The purchasing firms can use EDI to provide production and inventory requirements and
payment data to suppliers.
Figure 10-5
10.18
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
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.
10.19
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
A Private Industrial Network
10.20
Figure 10-6
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
ELECTRONIC COMMERCE
• Net marketplaces (e-hubs) provide a single
marketplace for many different buyers and
sellers.
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Chapter 10 E-Commerce: Digital Markets, Digital Goods
A Net Marketplace
10.22
Figure 10-7
© 2007 by Prentice Hall
Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
• M-commerce: The use of the Internet for
purchasing goods and services and also for
transmitting messages using wireless mobile
devices
10.23
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce Services and Applications
• Information-based services: Instant messaging,
e-mail, searching for a movie or restaurant using
a cell phone or handheld PDA
• Transaction-based services: Purchasing stocks,
concert tickets, music, or games; searching for
the best price for an item using a cell phone and
buying it in a physical store or on the Web
10.24
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce Services and Applications (Continued)
• Personalized services: Services that anticipate
what a customer wants based on that person’s
location or data profile, such as updated airline
flight information or beaming coupons for nearby
restaurants
10.25
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce Challenges
• Slow data transfer speeds on second-generation
cellular networks, resulting in higher costs to
customer
• Limited memory and power supplies
10.26
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Management Information Systems
Chapter 10 E-Commerce: Digital Markets, Digital Goods
M-Commerce Challenges (Continued)
• More Web sites need to be designed specifically
for small wireless devices.
• Keyboards and screens on cell phones are still
tiny and awkward to use.
10.27
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Management Information Systems
Chapter 4
The Digital Firm: Electronic Business and Electronic Commerce
ELECTRONIC COMMERCE
Electronic Commerce Payment Systems
10.28
Credit cards
The most common form of payment.
Digital wallets
Electronic storage of I.D. and digital cash.
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 presentment
and payment
Used by consumers to pay bills online, provided by many banks.
© 2007 by Prentice Hall